Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

A. Principles of Consolidation

The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. For the Company’s other non-U.S. subsidiaries, the functional currency is the local currency. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements.

These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2011 Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. Certain prior period amounts may have been reclassified in order to conform to current period classifications.

Net Income per Share

B. Net Income per Share

The Company’s net income per basic share has been computed based on the weighted-average number of common shares outstanding. Net income per diluted share reflects the effect of the Company’s outstanding stock options, restricted shares and performance shares under the treasury stock method. The dilutive effect of the Company’s stock options, restricted shares and performance shares were as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2012		2011		2012		2011
Net income	$	2,441	$	2,064	$	5,351	$	5,265
Weighted-average common shares outstanding (basic)		5,328		5,276		5,311		5,267
Effect of dilutive securities:
Stock options		12		44		19		39
Restricted shares		6		5		6		5
Performance shares		7		0		7		0
Weighted-average common shares outstanding (diluted)		5,353		5,325		5,343		5,311
Net income per share – basic	$	0.46	$	0.39	$	1.01	$	1.00
Net income per share – diluted	$	0.46	$	0.39	$	1.00	$	0.99

Outstanding share awards relating to approximately 147 and 132 weighted average shares were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2012 and 2011, respectively, and outstanding share awards relating to approximately 147 and 121 weighted average shares were excluded from the calculation of diluted earnings per share for the nine months ended June 30, 2012 and 2011, respectively, as the impact of including such share awards in the calculation of diluted earnings per share would have had an anti-dilutive effect.

Derivative Financial Instruments

C. Derivative Financial Instruments

The Company uses an interest rate swap agreement to reduce risk related to variable-rate debt, which is subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. At June 30, 2012, the Company held an interest rate swap agreement with a notional amount of $8,500. Cash flows related to the interest rate swap agreement are included in interest expense. The Company’s interest rate swap agreement and its variable-rate term debt are based upon LIBOR. During the first nine months of fiscal year 2012, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note interest risk. The following table reports the effects of the mark-to-market valuation of the Company’s interest rate swap agreement at June 30, 2012:

Interest rate swap agreement market value adjustment	$	(85	)
Tax effect of interest rate swap agreement market value adjustment		32
Net interest rate swap agreement market value adjustment	$	(53	)