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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-5978
SIFCO Industries, Inc.
(Exact name of registrant as specified in its charter) 
Ohio   34-0553950
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
970 East 64th Street, Cleveland Ohio
 
44103
(Address of principal executive offices)   (Zip Code)
(216) 881-8600
(Registrant’s telephone number, including area code) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Shares SIF NYSE American
The number of the Registrant’s Common Shares, par value $1.00, outstanding at December 31, 2020 was 5,959,229.



Part I. Financial Information
Item 1. Financial Statements
SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
December 31,
  2020 2019
Net sales $ 25,078  $ 26,207 
Cost of goods sold 21,155  22,883 
Gross profit 3,923  3,324 
Selling, general and administrative expenses 3,827  4,208 
Amortization of intangible assets 269  409 
Gain on insurance recoveries (2,495) — 
Operating income (loss) 2,322  (1,293)
Interest expense 165  251 
Foreign currency exchange loss, net
Other loss (income), net 62  (108)
Income (loss) before income tax benefit 2,088  (1,437)
Income tax benefit (905) (95)
Net income (loss) $ 2,993  $ (1,342)
Net income (loss) per share
Basic $ 0.53  $ (0.24)
Diluted $ 0.51  $ (0.24)
Weighted-average number of common shares (basic) 5,691  5,612 
Weighted-average number of common shares (diluted) 5,890  5,612 
See notes to unaudited consolidated condensed financial statements.
2



SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited)
(Amounts in thousands)
Three Months Ended
December 31,
  2020 2019
Net income (loss) $ 2,993  $ (1,342)
Other comprehensive income:
Foreign currency translation adjustment, net of tax $0 and $0, respectively
287  192 
Retirement plan liability adjustment, net of tax $0 and $0, respectively
211  189 
Comprehensive income (loss) $ 3,491  $ (961)
See notes to unaudited consolidated condensed financial statements.
3



SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(Amounts in thousands, except per share data)
 
December 31,
2020
September 30,
2020
  (unaudited)  
ASSETS
Current assets:
Cash and cash equivalents $ 1,180  $ 427 
Receivables, net of allowance for doubtful accounts of $275 and $249, respectively
20,982  23,225 
Other receivables 648  1,547 
Contract asset 11,926  11,997 
Inventories, net 16,563  15,569 
Refundable income taxes 103  103 
Prepaid expenses and other current assets 1,929  2,338 
Total current assets 53,331  55,206 
Property, plant and equipment, net 44,870  44,201 
Operating lease right-of-use assets, net 16,709  17,021 
Intangible assets, net 1,656  1,890 
Goodwill 3,493  3,493 
Other assets 59  137 
Total assets $ 120,118  $ 121,948 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt $ 10,152  $ 7,144 
Revolver 9,147  12,870 
Short-term operating lease liabilities 900  991 
Accounts payable 13,095  14,002 
Accrued liabilities 6,943  8,290 
Total current liabilities 40,237  43,297 
Long-term debt, net of current maturities 3,486  4,606 
Long-term operating lease liabilities, net of short-term 16,003  16,188 
Deferred income taxes 499  1,400 
Pension liability 9,999  10,165 
Other long-term liabilities 753  769 
Shareholders’ equity:
Serial preferred shares, no par value, authorized 1,000 shares
—  — 
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares 5,959 at December 31, 2020 and 5,916 at September 30, 2020
5,959  5,916 
Additional paid-in capital 10,820  10,736 
Retained earnings 45,332  42,339 
Accumulated other comprehensive loss (12,970) (13,468)
Total shareholders’ equity 49,141  45,523 
Total liabilities and shareholders’ equity $ 120,118  $ 121,948 
See notes to unaudited consolidated condensed financial statements.
4



SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited, Amounts in thousands)
Three Months Ended
December 31,
  2020 2019
Cash flows from operating activities:
Net income (loss) $ 2,993  $ (1,342)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,825  1,856 
Amortization of debt issuance cost 26  26 
Gain on insurance proceeds received (2,495) — 
LIFO effect 128  22 
Share transactions under company stock plan 127  150 
Other long-term liabilities 13  (114)
Deferred income taxes (950) (95)
Changes in operating assets and liabilities:
Receivables 2,529  2,664 
Contract assets 71  (152)
Inventories (877) (1,624)
Refundable income taxes —  10 
Prepaid expenses and other current assets 144  (284)
Other assets 77  (351)
Accounts payable 982  (3,314)
Other accrued liabilities (1,620) 1,592 
Accrued income and other taxes 150  (9)
Net cash provided by (used for) operating activities 3,123  (965)
Cash flows from investing activities:
Insurance proceeds received 3,452  3,500 
Capital expenditures (3,710) (2,303)
Net cash provided by (used for) investing activities (258) 1,197 
Cash flows from financing activities:
Payments on long-term debt (238) (336)
Proceeds from revolving credit agreement 23,970  31,809 
Repayments of revolving credit agreement (27,694) (30,714)
Short-term debt borrowings 2,431  981 
Short-term debt repayments (606) (1,891)
Net cash used for financing activities (2,137) (151)
Increase in cash and cash equivalents 728  81 
Cash and cash equivalents at the beginning of the period 427  341 
Effect of exchange rate changes on cash and cash equivalents 25 
Cash and cash equivalents at the end of the period $ 1,180  $ 429 
Supplemental disclosure of cash flow information of operations:
Cash paid for interest $ (106) $ (181)
Cash paid for income taxes, net $ (11) $ (10)
See notes to unaudited consolidated condensed financial statements.
5



SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Shareholders’ Equity
(Unaudited, Amounts in thousands)  
Three Months Ended
December 31, 2020
Common Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Shares Amount
Balance - September 30, 2020 5,916  $ 5,916  $ 10,736  $ 42,339  $ (13,468) $ 45,523 
Comprehensive income —  —  —  2,993  498  3,491 
Performance and restricted share expense —  —  143  —  —  143 
Share transactions under equity based plans 43  43  (59) —  —  (16)
Balance - December 31, 2020 5,959  $ 5,959  $ 10,820  $ 45,332  $ (12,970) $ 49,141 

Three Months Ended 
 December 31, 2019
Common Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Shares Amount
Balance - September 30, 2019 5,777  $ 5,777  $ 10,438  $ 33,148  $ (13,309) $ 36,054 
Comprehensive loss —  —  —  (1,342) 381  (961)
Performance and restricted share expense —  —  155  —  —  155 
Share transactions under equity based plans 86  86  (90) —  —  (4)
Balance - December 31, 2019 5,863  $ 5,863  $ 10,503  $ 31,806  $ (12,928) $ 35,244 

See notes to unaudited consolidated condensed financial statements.
6



SIFCO Industries, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
(Amounts in thousands, except per share data)
1.Summary of Significant Accounting Policies
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 in consolidation.
The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its non-operating subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. 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 for the period. 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 2020 Annual Report on Form 10-K. The year-end consolidated balance sheet data was derived from the audited financial statements and disclosures required by accounting principles generally accepted in the United States ("U.S."). 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.
B. Accounting Policies
A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2020 Annual Report on Form 10-K.
C. Net Income/(Loss) per Share
The Company’s net income and loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net income in the current period, per diluted share reflects the effect of the Company's outstanding restricted shares and performance shares under the treasury method. In the prior period, due to the net loss, zero restricted shares are included in the calculation of diluted earnings per share because the effect would be anti-dilutive. The dilutive effect is as follows:
Three Months Ended
December 31,
  2020 2019
Net Income (loss)
$ 2,993  $ (1,342)
Weighted-average common shares outstanding (basic and diluted) 5,691  5,612 
Effect of dilutive securities:
Restricted shares 161  — 
Performance shares 38  — 
Weighted-average common shares outstanding (basic and diluted) 5,890  5,612 
Net income (loss) per share – basic: $ 0.53  $ (0.24)
Net income (loss) per share – diluted: $ 0.51  $ (0.24)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 219  194 





7



D. Impact of Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. However, in November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)," which defers the effective date for public filers that are considered smaller reporting companies ("SRC"), as defined by the Securities and Exchange Commission, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, the Company does not need to implement ASU 2016-13 until October 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.
In December 2019, ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" was issued to (i) reduce the complexity of the standard by removing certain exceptions to the general principles in Topic 740 and (ii) improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective beginning October 1, 2021. The Company continues to evaluate the effect adopting this ASU will have on the Company's results within the consolidated condensed statements of operations and financial condition.
2.Inventories
Inventories consist of:
December 31,
2020
September 30,
2020
Raw materials and supplies $ 7,294  $ 6,548 
Work-in-process 3,956  3,786 
Finished goods 5,313  5,235 
Total inventories $ 16,563  $ 15,569 
For a portion of the Company's inventory, cost is determined using the last-in, first-out ("LIFO") method. Approximately 48% and 47% of the Company’s inventories at December 31, 2020 and September 30, 2020, respectively, use the LIFO method. An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on the inventory levels and costs existing at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because the actual results may vary from these estimates, calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to adjustments based on the differences between the estimates and the actual results. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories, which are stated at the lower of cost or net realizable value. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,414 and $8,286 higher than reported at December 31, 2020 and September 30, 2020, respectively.
3.    Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
December 31,
2020
September 30,
2020
Foreign currency translation adjustment $ (4,970) $ (5,257)
Retirement plan liability adjustment, net of tax (8,000) (8,211)
Total accumulated other comprehensive loss $ (12,970) $ (13,468)
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4.    Leases
The components of lease expense were as follows:
Three Months Ended
December 31, 2020
Three Months Ended
December 31, 2019
Finance lease expense:
     Amortization of right-of use assets on finance leases $ 16  14 
     Interest on lease liabilities
Operating lease expense: 549  537 
Variable lease cost: 35  39 
Total lease expense $ 601  $ 592 

The following table presents the impact of leasing on the consolidated condensed balance sheet.
Classification to the consolidated condensed balance sheets December 31,
2020
September 30,
2020
Assets:
Finance lease assets   Property, plant and equipment, net $ 75  $ 89 
Operating lease assets   Operating lease right-of-use assets, net 16,709  17,021 
Total lease assets $ 16,784  $ 17,110 
Current liabilities:
Finance lease liabilities   Current maturities of long-term debt $ 56  $ 58 
Operating lease liabilities   Short-term operating lease liabilities 900  991 
Non-current liabilities:
Finance lease liabilities   Long-term debt, net of current maturities 14  22 
Operating lease liabilities   Long-term operating lease liabilities, net of short-term 16,003  16,188 
Total lease liabilities $ 16,973  $ 17,259 

Supplemental cash flow and other information related to leases were as follows:
December 31,
2020
December 31,
2019
Other Information
Cash paid for amounts included in measurement of liabilities:
     Operating cash flows from operating leases $ 551  $ 537 
     Operating cash flows from finance leases
     Financing cash flows from finance leases 14  14 
Right-of-use assets obtained in exchange for new lease liabilities:
     Operating leases —  — 
December 31,
2020
September 30,
2020
Weighted-average remaining lease term (years):
     Finance leases 1.4 1.6
     Operating leases 14.9 15.2
Weighted-average discount rate:
     Finance leases 4.7  % 4.8  %
     Operating leases 5.9  % 5.9  %

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Future minimum lease under non-cancellable leases at December 31, 2020 were as follows:
Finance Leases Operating Leases
Year ending September 30,
2021 (excluding the three months ended December 31, 2020) 46  1,392 
2022 21  1,690 
2023 1,624 
2024 —  1,639 
2025 —  1,636 
Thereafter —  17,540 
Total lease payments $ 71  $ 25,521 
Less: Imputed interest (1) (8,618)
Present value of lease liabilities $ 70  $ 16,903 

5.    Debt
Debt consists of: 
December 31,
2020
September 30,
2020
Revolving credit agreement $ 9,147  $ 12,870 
Foreign subsidiary borrowings 7,883  5,759 
Finance lease obligations 70  80 
Other, net of unamortized debt issuance costs $(18) and $(20), respectively
5,685  5,911 
Total debt 22,785  24,620 
Less – current maturities (19,299) (20,014)
Total long-term debt $ 3,486  $ 4,606 
Credit Agreement and Security Agreement of 2018
The Company's asset-based Credit Agreement ("Credit Agreement"), Security Agreement (“Security Agreement”) and Export Credit Agreement (the "Export Credit Agreement") are secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 66.67% of the stock of its first-tier non-U.S. subsidiaries. The $35,000 Credit Agreement consists of (i) a senior secured revolving credit facility with a maximum borrowing of $30,000, and (ii) a revolving commitment through the Export Credit Agreement of $5,000 which lends amounts to the Company on foreign receivables. The Credit Agreement also has an accordion feature, which allows the Company to increase maximum borrowings by up to $10,000 upon consent of the lender under the Credit Agreement (the "Lender") or upon additional lenders joining the Credit Agreement. The Credit Agreement matures on August 6, 2021.
The Credit Agreement contains affirmative and negative covenants and events of defaults. As set forth in the Credit Agreement, the Company is required to maintain a fixed charge coverage ratio ("FCCR") of 1.1:1.0 any time the availability is equal to or less than 12.5% of the revolving commitment. In the event of a default, the Company may not be able to access the revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities. The total collateral at December 31, 2020 and September 30, 2020 was $26,724 and $26,964, respectively and the revolving commitment was $35,000 for both periods. Total availability at December 31, 2020 and September 30, 2020 was $16,767 and $13,284, respectively, which exceed both the collateral and total commitment threshold. Since the availability was greater than the 12.5% of the revolving commitment as of December 31, 2020 and September 30, 2020, the FCCR calculation was not required.
Borrowings will bear interest at the Lender's established domestic rate or LIBOR, plus the applicable margin as set forth in the Credit Agreement. The revolver has a rate based on LIBOR plus 1.5%, which was 1.7% at December 31, 2020 and September 30, 2020, respectively, and the Export Credit Agreement has a rate based on LIBOR plus 1.00% spread, which was 1.2% at December 31, 2020 and September 30, 2020, respectively. The Company also has a commitment fee of 0.25% under the Credit Agreement to be incurred on the unused balance of the revolver.
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The Company's Credit Agreement is set to mature in less than twelve months. As such, the Company’s plan is to refinance. However, there are no guarantees that the refinance will be with similar terms to the current Credit Agreement, and if the refinance does not occur, the Company would not be able to meet its debt obligations.

Foreign subsidiary borrowings
Foreign debt consists of:
December 31,
2020
September 30,
2020
Term loan $ 2,783  $ 2,670 
Short-term borrowings 3,018  2,620 
Factor 2,082  469 
Total debt $ 7,883  $ 5,759 
Less – current maturities $ (5,892) (3,544)
Total long-term debt $ 1,991  $ 2,215 
Receivables pledged as collateral $ 955  $ 1,859 

Interest rates on foreign borrowings are based on Euribor rates which range from 1.0% to 4.2%.

The Company factors receivables from one of its customers. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheets.

Debt issuance costs
The Company incurred debt issuance costs as it pertains to the Credit Agreement in the amount of $212, and incurred additional costs in fiscal 2019 of $75 related to the First and Second Amendments, which is included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $229 and $205 at December 31, 2020 and September 30, 2020, respectively.

Other
On April 10, 2020, the Company entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP Loan”). The PPP Loan to the Company was made through JPMorgan Chase Bank, N.A., a national banking association and the Company’s existing lender. The note has an aggregate principal amount of approximately $5,025, of which $261 was repaid in fiscal 2020 and has a two year term. The interest rate on the PPP Loan is 0.98%, which was deferred for the first six months of the term of the loan. The promissory note evidencing the PPP Loan contains customary events of default. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owed from the Company, and/or filing suit and obtaining judgment against the Company. The loan proceeds were received on April 10, 2020 and were used for payroll, interest on mortgage obligations, rents on leases and utility payments. As of December 31, 2020 and September 30, 2020, the PPP loan balance was $4,764.
PPP Loan recipients can apply for and potentially be granted forgiveness for all or a portion of loans granted under the Paycheck Protection Program. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. Although the Company intends to file for forgiveness, no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part. As of December 31, 2020, the Company continues to wait for further guidance regarding application for the forgiveness for all or a portion of the PPP loan.
6. Income Taxes
On December 27, 2020, the Consolidated Appropriations Act, 2021 (the "Appropriations Act") was enacted in response to the COVID-19 pandemic. The Appropriations Act, among other things temporarily extends through December 31, 2025, certain expiring tax provisions. Additionally, the Appropriations Act enacts new provisions and extends certain provisions originated within the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), enacted on March 27, 2020. The CARES Act included provisions relating to refundable payroll tax credits, deferral of certain payment requirements for the employer portion of Social Security taxes, net operating loss carryback periods and temporarily increasing the amount of net operating losses that corporations can use to offset income, alternative minimum tax ("AMT") credit refunds, modifications to the net
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interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Appropriations Act and CARES Act did not materially affect the Company’s first quarter of fiscal 2021 income tax provision, deferred tax assets and liabilities, or related taxes payable. The Company will continue to assess the implications of these and any new relief provisions on its consolidated condensed financial statements but does not expect the impact to be material.

For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first three months of fiscal 2021 was (43)%, compared with 7% for the same period of fiscal 2020. The decrease in the effective rate was primarily attributable to a discrete tax benefit recorded during the first three months of fiscal 2021 to adjust deferred taxes recorded in Italy, applied against year-to-date income. Additionally, the effective tax rate decreased as a result of changes in jurisdictional mix of income in fiscal 2021 compared to the same period of fiscal 2020. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate. Recent positive evidence related to the potential or partial release of the Company's valuation allowance includes profitable U.S. results, however, there continues to be uncertainty as a result of the ongoing COVID-19 pandemic. As such, the Company has maintained a full valuation allowance on its U.S. net deferred tax assets in the first quarter of fiscal 2021. It is reasonably possible that sufficient positive evidence required to release all, or a portion of the valuation allowance in the U.S. will exist within the next 12 months.

The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy, and various state and local jurisdictions.
7.Retirement Benefit Plans
The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of net periodic benefit cost of the Company’s defined benefit plans are as follows:
Three Months Ended
December 31,
  2020 2019
Service cost $ 26  $ 85 
Interest cost 175  208 
Expected return on plan assets (355) (376)
Amortization of net loss 211  188 
Net periodic cost $ 57  $ 105 
During the three months ended December 31, 2020 and 2019, the Company made $0 and $188 in contributions, respectively, to its defined benefit pension plans. The Company anticipates making $296 additional cash contributions to fund its defined benefit pension plans for the balance of fiscal 2021 and will use carryover balances from previous periods that have been available for use as a credit to reduce the amount of cash contributions that the Company is required to make to certain defined benefit plans in fiscal 2021. The Company's ability to elect to use such carryover balance will be determined based on the actual funded status of each defined benefit pension plan relative to the plan's minimum regulatory funding requirements. The Company does not anticipate making cash contributions above the minimum funding requirement to fund its defined benefit pension plans during the balance of fiscal 2021.
8.Stock-Based Compensation
The Company has awarded performance and restricted shares under the Company's 2007 Long-Term Incentive Plan ("2007 Plan") and the Company's 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further amended, the "2016 Plan"). The aggregate number of shares that may be awarded by the Company under the 2016 Plan is 1,196 shares, less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2016 Plan may be made in multiple forms, including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such award is exercisable no later than ten years from the date of the grant.
The performance shares that have been awarded under both plans generally provide for the vesting of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 200% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives. Beginning in fiscal 2020, the maximum share that may be achieved was reduced to 150% of target.
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With respect to such performance shares, compensation expense is being accrued based on the probability of meeting the performance target. The Company is currently recognizing compensation expense for one of its tranches of awards where it has concluded it is probable that the performance criteria for that award will be met, while the Company is not currently recognizing compensation expense for two tranches of awards where it had concluded that it is not probable that the performance criteria for those awards will be met. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of the grant. The vesting of such shares is determined at the end of the performance period.
The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.
In fiscal 2021, the Company granted 120 shares under the 2016 Plan to certain key employees. The awards were split into two tranches, 71 performance shares and 49 shares of time-based restricted shares, with a grant date fair value of $3.74 per share. The awards vest over three years.
If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 572 shares that remain available for award at December 31, 2020. If any of the outstanding share awards are ultimately earned and vest at greater than the target number of shares, up to a maximum of 200% or 150% of such target, then a fewer number of shares would be available for award.
Stock-based compensation under the 2016 Plan was $143 and $155 during the first three months of fiscal 2021 and 2020, respectively. As of December 31, 2020, there was $656 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan. The Company expects to recognize this cost over the next 1.6 years.
9.Revenue
The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and other military applications; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications.

The following table represents a breakout of total revenue by customer type:
Three Months Ended
December 31,
2020 2019
Commercial revenue $ 10,753  $ 10,191 
Military revenue 14,325  16,016 
Total $ 25,078  $ 26,207 

The following table represents revenue by the various components:
Three Months Ended
December 31,
Net Sales 2020 2019
Aerospace components for:
Fixed wing aircraft $ 9,790  $ 11,335 
Rotorcraft 7,731  6,848 
Energy components for power generation units 6,462  2,658 
Commercial product and other revenue 1,095  5,366 
Total $ 25,078  $ 26,207 





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The following table represents revenue by geographic region based on the Company's selling operation locations:
Three Months Ended
December 31,
Net Sales 2020 2019
North America 19,766  23,776 
Europe 5,312  2,431 
Total $ 25,078  $ 26,207 

In addition to the disaggregated revenue information provided above, approximately 58% and 61% of total net sales as of December 31, 2020 and 2019, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time. 

Contract Balances
The following table contains a roll forward of contract assets and contract liabilities for the period ended December 31, 2020:
Contract assets - Beginning balance, October 1, 2020 $ 11,997 
Additional revenue recognized over-time 14,520 
Less amounts billed to the customers (14,591)
Contract assets - Ending balance, December 31, 2020 $ 11,926 
Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2020 $ (636)
Payments received in advance of performance obligations (155)
Performance obligations satisfied 66 
Contract liabilities (included within Accrued liabilities) - Ending balance, December 31, 2020 $ (725)

There were no impairment losses recorded on contract assets as of December 31, 2020 and September 30, 2020.

Remaining performance obligations
As of December 31, 2020, the Company has $81,533 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.
10.    Commitments and Contingencies
In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters; however, it does not believe any such matters are material to its financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is possible that the Company’s future operating results could be affected by future costs of litigation.

A subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange"), is currently a defendant in a lawsuit filed by Avco Corporation (“Avco”) in the Pennsylvania State Court, which was filed in August 2019, alleging that certain forged pistons delivered by the Orange plant failed to meet material specifications required by Avco.  Avco also sued Arconic, Inc. (“Arconic”), which was the raw material supplier. No specific amount of damages was claimed by Avco and discovery has only recently begun. Orange disputes the allegations made by Avco and has made cross claims against Arconic.  Previously, Orange was a defendant with respect to the same action in the United States District Court for the District of Rhode Island, which action was dismissed in connection with the movement of the matter to Pennsylvania State Court. Although the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, the Company has not recorded a charge, as the Company has not deemed it probable and does not have a reasonable basis on which to establish an estimate.


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The Company is a defendant in a purported class action lawsuit filed in the Superior Court of California, County of Orange, which was filed in August 2017, arising from employee wage-and-hour claims under California law for alleged meal period, rest break, hourly and overtime wage calculation, timely wage payment and necessary expenditure indemnification violations; failure to maintain required wage records and furnish accurate wage statements; and unfair competition. A settlement has been reached and the Company received preliminary court approval on July 13, 2020, following a brief delay caused by COVID-19 closures and restrictions. Class action notices were sent at the end of September and there were no objections to the settlement. On February 4, 2021, the court issued a tentative ruling to grant final approval. The final approval hearing is scheduled for April 16, 2021. The Company previously recorded an estimated loss of $315, which was determined to be an adequate reserve to cover the settlement.

During fiscal 2020, the Company received notice from the International Association of Machinists and Aerospace Workers Union that they were disclaiming all interest in representing certain hourly employees at the Company’s Cleveland facility. Subsequently, the International Brotherhood of Boilermakers Union filed a petition to represent this same group of hourly employees. A mail ballot election took place in June 2020 and the National Labor Relations Board certified the International Brotherhood of Boilermakers as the elected representative of the Company’s hourly production employees.  The Company’s obligations will be more fully understood following the ratification of a collective bargaining agreement.

In the first quarter of fiscal 2021, the insurance claim related to the fire on December 26, 2018 at the Orange location was finalized with the Company's insurance carrier. The Company continues to work diligently to restore the final two of the six presses damaged in the fire, which both continue to be on track to be completed by the end of the second quarter of fiscal 2021; however, no assurances can be made that the restoration will be completed within such timeframe. Restoration of the building structure is nearly complete.

Having finalized the claim with its insurance carrier, proceeds in the amount of $3,148 was received in December 2020. As noted in the table below, $3,099 was recognized within the consolidated condensed statements of operations and the balance was separately designated to the landlord for the continued restoration of the damaged building as prescribed under the lease arrangement. The Company has business interruption insurance coverage, of which $546 of the amount received was reflected within the cost of goods sold line within the consolidated condensed statement of operations.
Balance sheet (Other receivables):
September 30, 2020 $ 1,547 
Cash proceeds (3,998)
Capital expenditures (equipment) 2,495 
Other expenses 58 
Business interruption 546 
December 31, 2020 $ 648 

The tables below reflect how the proceeds received impacted the consolidated condensed statements of operations for the three months ended December 31, 2020 and 2019, respectively.
Three Months Ended
December 31, 2020
Balance without insurance proceeds Insurance recoveries Balance with insurance proceeds
Cost of goods sold $ 21,759  (604) $ 21,155 
Gain on insurance proceeds received $ —  (2,495) $ (2,495)
Income (loss) before income tax (benefit) expense $ (1,011) (3,099) $ 2,088 

Three Months Ended
December 31, 2019
Balance without insurance proceeds Insurance recoveries Balance with insurance proceeds
Cost of goods sold $ 24,053  (1,170) $ 22,883 
Income (loss) before income tax (benefit) expense $ (2,607) (1,170) $ (1,437)


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The following table demonstrates the total settlement amount since December 26, 2018:
Total Claim
Property & damage ** $ 20,364 
Extra expense & mitigation expense 4,404 
Business interruption 2,932 
$ 27,700 
**$3,640 of total was directed to Landlord for the restoration of the building as prescribed by the lease arrangement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain various forward-looking statements and includes assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides this cautionary statement identifying important economic, political and technological factors, among others, the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business conditions in general, and on the demand for product in the A&E industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks, the financial markets and other providers of credit; (2) the future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost at comparable margins; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations; (11) cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners; (12) our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations; (13) the ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers; (16) our ability to realize amounts in our backlog; (17) investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings; (18) extraordinary or force majeure events affecting the business or operations of our business; and (19) the impact of the novel COVID-19 pandemic and related impact on the global economy, which may exacerbate the above factors and/or impact our results of operations and financial condition.

The Company is engaged in the production of forgings and machined components primarily for the A&E markets. The processes and services provided by the Company include forging, heat-treating, machining, subassembly, and test. The Company operates under one business segment.

The Company endeavors to plan and evaluate its business operations while taking into consideration certain factors including the following: (i) the projected build rate for commercial, business and military aircraft, as well as the engines that power such aircraft; (ii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft; and (iii) the projected build rate and repair for industrial turbines.
The Company operates within a cost structure that includes a significant fixed component. Therefore, higher net sales volumes are expected to result in greater operating income because such higher volumes allow the business operations to better leverage the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales and related production volumes.





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A. Results of Operations
Overview
The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and other military applications; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications.

Fire Restoration
In the first quarter of fiscal 2021, the insurance claim related to the fire on December 26, 2018 at the Orange location was finalized with the Company's insurance carrier. The Company continues to work diligently to restore the final two of the six presses damaged in the fire, which both continue to be on track to be completed by the end of the second quarter of fiscal 2021; however, no assurances can be made that the restoration will be completed within such timeframe. Restoration of the building structure is nearly complete.
Having finalized the claim with its insurance carrier, proceeds in the amount of $3.1 million was received in December 2020. The $3.1 million was recognized within the consolidated condensed statements of operations and the balance was separately designated to the landlord for the continued restoration of the damaged building as prescribed under the lease arrangement. The Company has business interruption insurance coverage, of which $0.5 million of the amount received was reflected within the cost of goods sold line within the consolidated condensed statement of operations.

For further detail of how the consolidated condensed statements of operations and balance sheets were impacted for the three months ended, refer to Note 10, Commitments and Contingencies.

COVID-19
Since being recognized by the World Health Organization as a pandemic, the novel coronavirus ("COVID-19") outbreak continues to be widespread in the United States and other countries in which we operate. Capital markets and economies worldwide have been negatively impacted by COVID-19 and it is still unclear how lasting and deep the economic impacts will be, specifically with the commercial aerospace industry. During the three months ended December 31, 2020, the COVID-19 pandemic had mixed effects on the Company’s results of operations. The Company continues to actively take measures to reduce costs by furloughing and laying off certain employees from one of its plant locations where reduced sales of commercial aerospace products have occurred, and it may continue to have adverse effects. As such, the Company continues to actively monitor and find ways to mitigate the impact of the pandemic on its operations and consider its ability to pivot its operations and the industries served.

Backlog of Orders
SIFCO’s total backlog at December 31, 2020 was $81.5 million, compared with $119.5 million as of December 31, 2019. Orders may be subject to modification or cancellation by the customer with limited charges. Sales in the A&E markets continue to be impacted by the COVID-19 pandemic, which has created increased pressure in these markets. If the COVID-19 pandemic continues to have a material impact on the A&E markets, including with regards to our more significant customers, it could materially affect our business and results of operations. Backlog may decline as customers adjust orders in response to the ongoing COVID-19 pandemic and its impact on their operations. Backlog information may not be indicative of future sales.
Three Months Ended December 31, 2020 compared with Three Months Ended December 31, 2019

Net Sales
Net sales comparative information for the first three months of fiscal 2021 and 2020 is as follows:
(Dollars in millions) Three Months Ended
December 31,
Increase/ (Decrease)
Net Sales 2020 2019
Aerospace components for:
Fixed wing aircraft $ 9.8  $ 11.3  $ (1.5)
Rotorcraft 7.7  6.8  0.9 
Energy components for power generation units 6.5  2.7  3.8 
Commercial product and other revenue 1.1  5.4  (4.3)
Total $ 25.1  $ 26.2  $ (1.1)

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Net sales for the first three months of fiscal 2021 decreased $1.1 million to $25.1 million, compared with $26.2 million in the comparable period of fiscal 2020. Commercial products and other revenue decreased $4.3 million in the first three months of fiscal 2021 compared to the same period in fiscal 2020, primarily due to timing of orders for the Hellfire II missile program. The energy components for power generation units increased by $3.8 million primarily due to customer order increases. Fixed wing aircraft sales decreased $1.5 million due to timing of customer orders and a decrease in build rates in certain commercial programs, partially offset by increased military programs. The increase in rotorcraft sales is primarily due to increased shipments relating to certain military programs.
Commercial net sales were 42.9% of total net sales and military net sales were 57.1% of total net sales in the first three months of fiscal 2021, compared with 38.9% and 61.1%, respectively, in the comparable period in fiscal 2020. Military net sales decreased by $1.7 million to $14.3 million in the first three months of fiscal 2021, compared with $16.0 million in the comparable period of fiscal 2020, primarily due to the timing of orders for the Hellfire II missile program.  Commercial net sales increased $0.6 million to $10.8 million in the first three months of fiscal 2021, compared with $10.2 million in the comparable period of fiscal 2020 primarily due to an increase in energy components sales for power generation due to increased customer orders partially offset by decreased build rates in certain commercial programs.
Cost of Goods Sold
Cost of goods sold decreased by $1.7 million, or 7.6%, to $21.2 million, or 84.4% of net sales, during the first three months of fiscal 2021, compared with $22.9 million or 87.3% of net sales, in the comparable period of fiscal 2020. The decrease was due primarily to cost controlling measures and the non-recurrence of the one-time pension withdrawal liability charge of $0.8 million incurred in the prior year. Another contributing factor to the decrease was the Company received insurance recoveries related to business interruption of $0.5 million, which partially mitigated the $0.4 million of unabsorbed costs incurred from its Orange location due to reduced production.
Gross Profit
Gross profit increased $0.6 million to $3.9 million during the first three months of fiscal 2021, compared with $3.3 million in the comparable period of fiscal 2020. Gross margin percent of sales was 15.6% during the first three months of fiscal 2021, compared with 12.7% in the comparable period in fiscal 2020. The increase in gross profit was primarily due to the reduced cost of goods sold as outlined above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3.8 million, or 15.3% of net sales during the first three months of fiscal 2021, compared with $4.2 million, or 16.1% of net sales in the comparable period of fiscal 2020. The decrease in selling, general and administrative expenses is due to the continued cost reduction efforts by management in response to COVID-19 and other effects of the COVID-19 pandemic and its impact on operations such as lower wages related to a first quarter furlough at one location and less travel expense, partially offset by higher legal and professional costs and commissions.
Amortization of Intangibles
Amortization of intangibles was $0.3 million in the first three months of fiscal 2021, compared with $0.4 million in the comparable period of fiscal 2020.
Other/General
The Company recorded income before taxes of $2.1 million in the first three months of fiscal 2021, compared with a loss before taxes of $1.4 million in the first three months of fiscal 2020.

In the first three months ended December 31, 2020, results included a $2.5 million gain on insurance recoveries, compared to none in the comparable period.

Interest expense was $0.2 million in the first three months of fiscal 2021, compared to $0.3 million in the first three months of fiscal 2020.









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The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first three months of both fiscal 2021 and 2020:
  Weighted Average
Interest Rate
Three Months Ended
December 31,
Weighted Average
Outstanding Balance
Three Months Ended
December 31,
  2020 2019 2020 2019
Revolving credit agreement 1.5  % 3.6  % $ 10.8 million $ 15.8 million
Foreign term debt 3.0  % 2.4  % $ 7.1 million $ 5.9 million
Other debt 0.9  % 0.9  % $ 5.8 million $ 1.0 million
Income Taxes
The Company’s effective tax rate through the first three months of fiscal 2021 was (43)%, compared with 7% for the same period of fiscal 2020. The decrease in the effective rate was primarily attributable to a discrete tax benefit recorded during the first three months of fiscal 2021 to adjust deferred taxes recorded in Italy, applied against year-to-date income. Additionally, the effective tax rate decreased as a result of changes in jurisdictional mix of income in fiscal 2021 compared with the same period of fiscal 2020. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.
Net Income (Loss)
Net income was $2.9 million during the first three months of fiscal 2021, compared with a net loss of $1.3 million in fiscal 2020, respectively. The increase in income is primarily due to higher gross profit, attributed to continued cost saving activities, insurance recoveries received in the first three months of fiscal 2021, the favorable tax benefit as described above, and lower selling, general and administrative expenses.

Non-GAAP Financial Measures
Presented below is certain financial information based on the Company's EBITDA and Adjusted EBITDA. References to “EBITDA” mean earnings (losses) from continuing operations before interest, taxes, depreciation and amortization, and references to “Adjusted EBITDA” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and Adjusted EBITDA.

Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance and liquidity, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a substitute for analysis of the Company's results of operations as reported in accordance with GAAP. Some of these limitations include:
Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness;
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements;
The omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and
Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss), net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.

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The following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA:
Dollars in thousands Three Months Ended
  December 31,
  2020 2019
Net income (loss) $ 2,993  $ (1,342)
Adjustments:
Depreciation and amortization expense 1,825  1,856 
Interest expense, net 165  251 
Income tax benefit (905) (95)
EBITDA 4,078  670 
Adjustments:
Foreign currency exchange loss, net (1)
Other income, net (2) 62  (108)
Gain on insurance recoveries (3) (2,495) — 
Equity compensation (4) 143  155 
LIFO impact (5) 128  22 
Adjusted EBITDA $ 1,923  $ 740 
(1)Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated.
(2)Represents miscellaneous non-operating income or expense, such as pension costs or grant income.
(3)Represents the difference between the insurance proceeds received for the damaged property and the carrying values shown on the Company's books for the assets that were damaged in the fire at the Orange location.
(4)Represents the equity-based compensation expense recognized by the Company under the 2016 Plan due to granting of awards, awards not vesting and/or forfeitures.
(5)Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method.
B. Liquidity and Capital Resources
Historically, the main sources of liquidity have been cash flows from operations and borrowings under our Credit Agreement. However, the ongoing impact of the COVID-19 pandemic (and the rapidly changing U.S. and global market and economic conditions due to the COVID-19 outbreak) remain uncertain, with the commercial aerospace market continuing to be impacted by the global disruption in travel and, further, the pandemic and responses to the continued spread of the pandemic causing continued interruptions to the business of our customers and suppliers, which in turn is likely to impact our business, operations and results as well as our liquidity and capital resources. The Company's liquidity could be negatively affected by customers extending payment terms to the Company and/or the decrease in demand for our products as a result of the impact of the COVID-19 on the commercial airline industry. As the impact of the COVID-19 pandemic on the economy and the Company's operations continues to evolve, the Company and management will continue to assess liquidity needs.
Cash and cash equivalents was $1.2 million at December 31, 2020 and $0.4 million at September 30, 2020. At December 31, 2020, $0.8 million of the Company’s cash and cash equivalents were in the possession of its non-U.S. subsidiaries. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.
Operating Activities
The Company’s operating activities provided $3.1 million of cash in the first three months of fiscal 2021, compared with usage of cash of $1.0 million in the first three months of fiscal 2020. The cash provided in fiscal 2021 was primarily due to net income of $2.9 million and $1.4 million decrease in working capital, partially offset by $1.2 million in non-cash items, such as gain on insurance recovery and deferred income taxes, depreciation and amortization, equity based compensation, and LIFO effect. The cash provided from working capital was primarily due to decrease in receivables due to customer collections and decreased accrued liabilities.
The Company’s operating activities used $1.0 million of cash in the first three months of fiscal 2020. The cash used by operating activities in the first three months of fiscal 2020 was primarily due to an increase in working capital of $1.4 million and net loss of $1.3 million, partially offset by $1.8 million of non-cash items such as depreciation and amortization of $1.9 million, and other non-cash items, such as equity based compensation, deferred income taxes and LIFO effect. The use of cash
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from working capital was primarily due to increase in inventories and payments to suppliers, partially offset by decreased receivables resulting from collections.

Investing Activities
Cash used for investing activities was $0.3 million in the first three months of fiscal 2021, which includes $3.5 million of insurance recovery on the damaged property related to the fire at the Orange location, compared with cash provided for investing activities of $1.2 million in the first three months of fiscal 2020. Capital expenditures were $3.7 million, of which $3.2 million related to the continued restoration of the Orange location as a result of the fire. In addition to the $3.7 million spent for capital expenditures during the first three months of fiscal 2021, $1.6 million was committed for future capital expenditures as of December 31, 2020. The Company anticipates that the total fiscal 2021 capital expenditures will be within the range of $2.5 million to $4.5 million (exclusive of fire related expenditures) and will relate principally to the further enhancement of production and product offering capabilities and operating cost reductions. Separate from the amounts given above, the Company anticipates incurring additional costs in fiscal 2021 of approximately $1.0 million to $1.5 million in capital expenditures at the Orange location as the result of the fire and resulting damage that took place. These costs are expected to be offset by the insurance proceeds received.
Financing Activities
Cash used by financing activities was $2.1 million in the first three months of fiscal 2021, compared with cash used by financing activities of $0.2 million in the first three months of fiscal 2020.
The Company had net repayments from the revolver under the Credit Agreement of $3.7 million in the first three months of fiscal 2021 and net borrowings of $1.1 million in the first three months of fiscal 2020.
Under the Company's Credit Agreement, the Company is subject to certain customary loan covenants regarding availability as discussed in Note 5, Debt. The availability at December 31, 2020 was $16.8 million. If availability had fallen short, the Company would be required to meet the fixed charge coverage ratio ("FCCR") covenant, which must not be less than 1.1 to 1.0. In the event of a default, we may not be able to access our revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities. Because the availability was greater than the 12.5% of the Revolving Commitment as of December 31, 2020, the FCCR calculation was not required.
As the Company’s Credit Agreement is asset-based, a sustained significant decrease in revenue in the U.S. or excessive aging of the underlying receivables as a result of the impact of the COVID-19 pandemic could materially affect the collateral capacity limitation of the availability under the Credit Agreement and could impact our ability to comply with covenants in our Credit Agreement.
Future cash flows from the Company’s operations may be used to pay down amounts outstanding under the Credit Agreement and its foreign related debts. The Company believes it has adequate cash/liquidity available to finance its operations from the combination of (i) the Company’s expected cash flows from operations and (ii) funds available under the Credit Agreement for its domestic locations. The Company was able to defer payments for certain debt obligations at its Maniago location to provide Maniago with sufficient liquidity.  The Company's current Credit Agreement is set to mature within the next twelve months. As such, the Company’s plan is to refinance. However, there are no guarantees that the refinance will be with similar terms to the current Credit Agreement, and if the refinance does not occur, the Company would not be able to meet its debt obligations.

Additionally, the credit and capital markets has seen significant volatility. Tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement, in the event the Company seeks additional liquidity sources as a result of the continued impact of COVID-19. Capital market uncertainty and volatility, together with the Company’s market capitalization and status as a smaller reporting company could also negatively impact our ability to obtain equity financing.

D. Impact of Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical
21



information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. However, in November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)," which defers the effective date for public filers that are considered smaller reporting companies ("SRC"), as defined by the Securities and Exchange Commission, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, the Company does not need to implement until October 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.

In December 2019, ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" was issued to (i) reduce the complexity of the standard by removing certain exceptions to the general principles in Topic 740 and (ii) improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective beginning October 1, 2021. The Company is currently in the process of evaluating the impact of adoption of the rules on the Company's financial condition, results of operations and disclosure.
Item 4. Controls and Procedures
As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of December 31, 2020 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective, as a result of the continuing existence of the material weakness in the Company's internal controls over financial reporting described in Item 9A of the Company's 2020 Annual Report on Form 10-K.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. 
The following material weakness related to our control environment existed as of December 31, 2020.
Insufficient review of specific controls associated with revenue, inventory and income taxes at the Maniago location.

The control environment deficiencies described above could have resulted in a failure to prevent or detect a material misstatement in our financial statements due to the omission of information or inappropriate conclusions regarding information required to be recorded, processed, summarized, and reported in the Company’s SEC reports. Notwithstanding the identified material weakness, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting
Management and the Company's Board of Directors are committed to improving the Company's overall system of internal controls over financial reporting.

To address the material weakness identified in our control environment, the Company is taking the following actions to remediate the material weakness:
Using a risk-based approach, management will implement additional monitoring controls through increased oversight and training local management to execute additional controls in detecting material errors.
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External resources with specialized knowledge and expertise, where appropriate, will be engaged and utilized and additional review controls will be instituted to prevent and detect material errors on a timely basis.

With the oversight of senior management and the Company's Board of Directors, the Company continues to take steps and additional measures to remediate the underlying causes of the identified material weakness, including but not limited to (i) engaging subject matter experts on an as need basis to assist management in generating accurate, transparent, and timely financial information, and (ii) continue to strengthen organizational structure including holding individuals accountable for their internal control responsibilities.

Although we continue to make meaningful progress on our remediation plan during fiscal year 2021, we cannot estimate how long it will take to complete the process or the costs of actions required. There is no assurance that the aforementioned plans will be sufficient and that additional steps may not be necessary.

Changes in Internal Control over Financial Reporting and other Remediation
No material changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) occurred during the period covered by this Quarterly Report on Form 10‑Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information
Items 1A, 2, 3, 4 and 5 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this Quarterly Report.
Item 1. Legal Proceedings
In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters and does not believe any such matters are material to its financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is possible that the Company’s future operating results could be affected by future costs of litigation. For a more information regarding our outstanding material legal proceedings, see Note 10, Commitments and Contingencies.
Item 6. (a) Exhibits
The following exhibits are filed with this report or are incorporated herein by reference to a prior filing in accordance with Rule 12b-32 under the Securities and Exchange Act of 1934 (Asterisk denotes exhibits filed with this report.)
Exhibit
No.
Description
2.1
2.2
3.1
3.2
9.1
9.2
9.3
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9.4
9.5*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
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10.20
10.21
14.1
*31.1
*31.2
*32.1
*32.2
*101 The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 filed with the SEC on February 5, 2021, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended December 31, 2020 and 2019, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended December 31, 2020 and 2019, (iii) Consolidated Condensed Balance Sheets at December 31, 2020 and September 30, 2020, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended December 31, 2020 and 2019, (iv) Consolidated Condensed Statements of Shareholders' Equity for the periods December 31, 2020 and 2019, and (v) the Notes to the Consolidated Condensed Financial Statements.
*104 Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained with Exhibit 101

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  SIFCO Industries, Inc.
  (Registrant)
Date: February 5, 2021   /s/ Peter W. Knapper
  Peter W. Knapper
  President and Chief Executive Officer
  (Principal Executive Officer)
Date: February 5, 2021   /s/ Thomas R. Kubera
  Thomas R. Kubera
  Chief Financial Officer
  (Principal Financial Officer)
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VOTING TRUST AGREEMENT

THIS AGREEMENT executed this 27 day of January 2021 effective as of the 1st day of February 2021 (hereinafter referred to as the "Effective Date"), by and between those holders of Common Shares of SIFCO Industries, Inc. who sign this Agreement (hereinafter sometimes collectively called the "Signing Shareholders" and individually called "Signing Shareholder"), and JANICE CARLSON and CHARLES H. SMITH, III, as Trustees and their successors in trust (said named Trustees and their successors being hereinafter called the "Trustees");


WITNESSES THAT:


WHEREAS, each Signing Shareholder represents that he (the masculine pronoun wherever used in this Agreement being intended to include the feminine) owns the number of Common Shares of the Company set opposite his signature below and deems it to be in his best interest to renew, continue and extend the Voting Trust Agreement in effect with respect to his shares of the Company and maintain on deposit hereunder the certificates evidencing his ownership of said shares in order to continue the stability of management of the Company which the Signing Shareholders believe should be continued for the benefit and protection of the Company and its present and future shareholders;

NOW, THEREFORE, the Signing Shareholders hereof agree each with the others, and each for himself and his heirs, administrators, successors and assigns as follows:

1. DEPOSIT OF SHARE CERTIFICATES. As with the Voting Trust Agreements in the past, each Signing Shareholder will continue to deposit with the Trustees a certificate or certificates (hereinafter called "share certificates") for the number of Common Shares of the Company set opposite his signature below, so endorsed or accompanied by such instrument or instruments of transfer as to maintain ownership of said shares in the Trustees.

2. DELIVERY OF TRUST CERTIFICATES. The Trustees have heretofore delivered, or cause to be delivered, to such Signing Shareholder voting trust certificates (hereinafter called "Trust Certificates") for the number of Common Shares so deposited in substantially the form shown in Exhibit A, attached hereto and made a part hereof.

3. TRANSFER OF TRUST CERTIFICATES. Each Trust Certificate issued hereunder and the interest in shares represented thereby shall be transferable only upon the books of the Trustees by the registered holder in person or by attorney upon surrender of the same properly endorsed or accompanied by a properly executed instrument of transfer and upon payment of any transfer taxes payable on such transfer, and in accordance with rules established from time to time for that purpose by the Trustees. Each transfer so made shall vest in the transferee all right and interest of the transferor in and under the Trust Certificate and this Agreement with respect to the number of shares which the endorsement or transfer evidences; and thereupon the Trustees will deliver, or cause to be delivered, to the person or persons entitled, a new Trust Certificate or Certificates for the number or
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numbers of interests in Common Shares of the Company indicated by the endorsement or instrument of transfer. Until such transfer, the Trustees may treat the registered holder of a Trust Certificate as the owner thereof for all purposes whatsoever. The transfer books for the Trust Certificates may be closed by the Trustees at any time prior to the payment or distribution of dividends or for any other purpose. Each transferee of a Trust Certificate issued hereunder shall by the acceptance of a Trust Certificate become a party hereto with like effect as though a Signing Shareholder and shall be embraced within the meaning of the terms "Trust Certificate holder" or "holder of a Trust Certificate" wherever used herein.

4. LOST TRUST CERTIFICATE. The holder of any Trust Certificate shall immediately notify the Trustees of any loss, destruction or mutilation of the same, and the Trustees may, in their discretion, cause a new Trust Certificate to be issued to such holder for the same number of shares either upon the surrender of the mutilated certificate or, in the case of loss or destruction, upon satisfactory proof thereof and the giving of a bond in such form and amount and with such sureties, if any, as the Trustees may require.

5. TITLE AND RIGHTS OF TRUSTEES. Title to all Common Shares of the Company deposited hereunder shall remain vested in the Trustees, and title to any new shares deposited hereunder may be transferred to the Trustees or their nominees on the books of the Company, provided that as holders of such shares the Trustees assume no liability as shareholders of the Company, their interest therein and hereunder being as Trustees only. Nonetheless the Trustees shall, in respect of all shares so held by them, possess and be entitled to exercise, in their discretion, all rights of common shareholders of every kind and character, including, but not limited to, the right to receive dividends on said shares, the right to vote by proxy or otherwise such shares and to take part in or consent in writing or otherwise to any corporate or shareholders' action, including, but not limited to, the adoption of any amended Articles of Incorporation or regulations of the Company or any amendment to such Articles or regulations, the election of directors of the Company, the dissolution of the Company, the merger or consolidation of the Company with any other corporation, the sale or other disposition of all, or substantially all, of the assets of the Company or the creation of any new class of shares having priority over the Common Shares in respect of dividends or liquidating distributions or otherwise; except that they shall not sell, pledge, hypothecate, mortgage or place a lien or charge upon any of the shares deposited hereunder or subject hereto.

6. DIVIDEND AND COMPARABLE RIGHTS OF TRUST CERTIFICATE HOLDER. The registered holder of each Trust Certificate shall be entitled to receive as soon as practicable after the receipt by the Trustees of each dividend on the shares hereunder, the amount of the dividend so received by the Trustees in cash or in kind upon the number of Common Shares specified in each Trust Certificate; provided that the Trustees may, in their discretion, authorize and empower the Company or its dividend disbursing agent to make payment or distribution of such dividend directly to the registered holders of the outstanding Trust Certificates. However, in the event that the Company shall issue any voting shares of the Company by way of a stock split or a stock dividend then such voting shares so issuable with respect to all shares held by the Trustees shall be received and held by the Trustees and shall be deemed for all the purposes of this Agreement to have been deposited hereunder, and the Trustees shall issue to each registered holder of a Trust Certificate an additional Trust Certificate evidencing his appropriate interest in the number of voting shares so
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received and held. For the purposes of this Agreement, no shares having voting rights only in certain events (such as, but not limited to, the occurrence of a default in the payment of preferential dividends) shall be deemed to be voting shares.

7. SUBSCRIPTION RIGHTS. In case any stock or other securities of the Company are offered for subscription to the holders of shares of the Company deposited hereunder, the Trustees, promptly upon receipt of notice of such offer, shall mail or deliver a copy thereof to each registered holder of a Trust Certificate. If at least five (5) days prior to the last day on which such subscription can be made, the Trustee shall receive a request from any Trust Certificate holder to subscribe in his behalf for a stated amount of such stock or securities, together with the sum of money required to pay for the same, the Trustees shall make such subscription and the necessary payment, and upon receiving from the Company the stock or securities so subscribed for, shall issue to such Trust Certificate holder a new Trust Certificate in respect thereof if the same be voting shares, but if the same not be voting shares the Trustees shall mail or deliver the stock or securities received from the Company to the Trust Certificate holder in whose behalf the subscription is made or may instruct the Company to make delivery thereof directly to said Trust Certificate holder; provided, however, that if the aggregate amount of such stock or securities which the Trustees shall be so requested to subscribe for shall exceed the total amount which the Trustees have the right to subscribe for as shareholders of the Company under the terms of the Company's offer, then the Trustees shall first, on behalf of each requesting Trust Certificate holder, subscribe for that amount which, under the terms of the Company's offer, he would have had the right to subscribe for if he had held directly the number of shares represented by his Trust Certificate or Certificates; and any balance of such stock or securities then additionally available for subscription by the Trustees shall be subscribed for on behalf of each additionally requesting Trust Certificate holder in the proportion which the amount of his additional request bears to the total amount of additional requests received by the Trustees.

8. DISSOLUTION OF COMPANY. In the event of the dissolution or total or partial liquidation of the Company, whether voluntary or involuntary, the Trustees shall receive the moneys, securities, rights or property to which the holders of shares of the Company deposited hereunder are entitled and shall distribute the same among the registered holders of the Trust Certificates in proportion to their interests as shown by the Trustees' books, or the Trustees may in their discretion deposit the same with any bank or trust company doing business in Cleveland, Ohio, with instructions to distribute the same as above provided, and upon such deposit all further obligations or liabilities of the Trustees in respect of the moneys, securities, rights or property so deposited shall cease.

9. REORGANIZATION OF COMPANY. In the event the Company is merged into or consolidated with another corporation or all or substantially all of the assets of the Company are transferred to another corporation, then and thereafter the term "Company" for all purposes of this Agreement shall be taken to include such other corporation, and the Trustees shall receive and hold under this Agreement any voting shares of such other corporation received on account of the stock held hereunder prior to such merger, consolidation or transfer. Trust Certificates issued and outstanding under this Agreement at the time of such merger, consolidation, or transfer may remain outstanding or the Trustees may, in their discretion, substitute for such Trust Certificates new Trust Certificates in appropriate form, the term "shares" as used herein shall be taken to include any stock
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which may be received by the Trustees in lieu of all or any part of the shares of the Company theretofore deposited hereunder.

10. ACTION BY TRUSTEES. No action will be taken without the agreement of both Trustees. In the event the Trustees are unable to come to agreement, the issue will be decided by a vote of all the Trust Certificate holders, with a simple majority necessary for passage.

11. RECEIPTS AND SAFEKEEPING. Janice Carlson, or such other person, either corporate or individual, as the Trustees may from time to time appoint for the purpose, shall have the authority and responsibility as agent of the Trustees for receiving and safekeeping share certificates, securities and other property or money deposited with or from time to time held by the Trustees. Such person shall also be responsible for issuing Voting Trust Certificates to the shareholders and notifying the Company's transfer agent of any changes of records with respect to dividends.

12. PRIVILEGES AND RESPONSIBILITIES OF TRUSTEES. In voting the shares deposited hereunder or in doing any act with respect to the control or management of the Company or its affairs or in otherwise acting hereunder, the Trustees shall exercise their best judgment; but they assume no responsibility in respect to any action taken by them or their agents, and no Trustee shall incur any responsibility for any error or deed of commission or omission except for his own willful misconduct. No Trustee shall be required to give any bond or other security for the discharge of his duties. Any Trustee may act as a director or officer of the Company or of any affiliated company and may vote for himself as such director or officer, and he or any company or firm with which he may be connected as shareholder, director, officer or partner or otherwise may contract with the Company or with any company or firm affiliated with it or be or become pecuniary interested in any matter or action to which the same may be a party or in which the same may in any way be interested as fully as though he were not a Trustee. Any Trustee may be a holder of or interested in Trust Certificates issued hereunder.

13. SUCCESSOR TRUSTEES. Each Signing Shareholder shall, after his signature, add the last initial of the ancestor of such Signing Shareholder who was a child of Charles H. Smith, Sr. A Trustee may only be removed by a writing signed by a majority in interest of the Certificate holders who are issue (including children by adoption), spouse or spouse of issue of the same child of Charles H. Smith, Sr. as the original named Trustee or the Trustee with respect to whom the Trustee is a successor. Any Trustee may resign in writing. Any such resignation or removal shall take effect at a time fixed in the writing not less than thirty (30) days after the same is delivered to the other Trustees or Trustee, or at such earlier time as shall be accepted by all of the Trustees. Upon any such resignation, removal or the death or incapacity of a Trustee to act, the vacancy so occurring shall be filled by a person elected by the majority in interest of the Certificate holders who are issue (including children by adoption), spouse or spouse of issue of the same child of Charles H. Smith, Sr. as the original named Trustee. Such election shall be made at a meeting called by the remaining Trustees or Trustee for that purpose by notice given to each Certificate holder eligible to vote not less than ten (10) nor more than thirty (30) days prior thereto. Each and every successor Trustee elected in accordance with this paragraph shall have the powers, duties, privileges, responsibilities and authority of an original Trustee named herein. No Trustee shall be liable for the acts or omissions of any predecessor Trustee.

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14. PERIOD OF TRUST. This Agreement shall continue in force for a period of two (2) years from the date first above written unless sooner terminated as hereinafter provided, and may be extended for an additional period of not more than two (2) years by depositing with the Trustees on or before the expiration of the original two (2) year period either (a) an agreement of extension, which may be executed in one instrument or in several counterparts, signed by the holders of Trust Certificates representing not less than eighty-five percent (85%) of the shares deposited hereunder, or (b) a certificate signed by the Secretary of the meeting, certifying that at a meeting duly called and held for the purpose of considering such extension, at a place in Cuyahoga County, Ohio, specified in a notice given either by the Trustees, or a Trust Certificate holder, not less than ten (10) nor more than thirty (30) days prior to such meeting to each Trust Certificate holder hereunder, the holders of Trust Certificates representing not less than eighty-five percent (85%) of the shares deposited hereunder voted in favor of said extension. Such extension of this Agreement shall be binding upon all Trust Certificate holders. Any Trust Certificate holder shall, during reasonable business hours, have access to the books of the Trustees containing the record of the name and addresses of Trust Certificate holders and the number of shares represented by their certificates.

15. EARLY TERMINATION. At any time during the original two (2) year period, or any extension thereof, the Trustees may terminate this trust by notice to the certificate holders, which notice shall provide for the time and manner of delivery of certificates for shares of stock of the Company upon surrender of the Trust Certificates.

16. PARTIAL RETURN OF SHARES. At any time or times before the termination of this trust, the Trustees may return any number of shares of the Company deposited with them to a Trust Certificate holder or holders free and clear of the trust, provided that the following procedure shall be observed. The Trustees shall first notify all the Trust Certificate holders in writing of the number of shares which they intend to return. Within thirty (30) days after the receipt of such notice, each Trust Certificate holder who wishes any of his shares to be returned to him shall surrender his Trust Certificate or Certificates to the Trustees for cancellation in an amount equivalent to the number of shares he wishes returned. If the total number of shares for which Trust Certificates are so surrendered within such thirty (30) days is not more than the total number of shares the Trustees have decided to return, they shall cancel each Trust Certificate so surrendered in an amount equivalent to the number of shares to be returned to the holder of that certificate and shall cause a stock certificate or certificates for that number of shares of stock of the Company to be issued and delivered to him or his nominee. If the total number of shares for which Trust Certificates are so surrendered within such thirty (30) days is more than the total number of shares the Trustees have decided to return, they shall cancel each Trust Certificate so tendered in an amount equivalent to that proportion of the number of shares requested by that holder which the number of shares they have decided to return bears to the total number of shares requested by all Trust Certificate holders who tender their Trust Certificates. In no event before termination of the trust shall the Trustees return any shares to a certificate holder who has not tendered his Trust Certificate for cancellation.

17. AMENDMENTS. If at any time the Trustees shall deem it desirable to amend this Agreement in any respect, they shall submit such amendment to the Trust Certificate holders for their approval at a meeting of such holders which shall be called for that purpose, notice of which shall be given not less than ten (10) nor more than thirty (30) days prior to such meeting, and shall
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state that the purpose of the meeting is to consider the amendment of this Agreement and shall be accompanied by a copy of the proposed amendment. If at such meeting the proposed amendment, or any modification thereof, shall be approved by the affirmative vote, given in person or by proxy, of the holders of Trust Certificates representing eighty-five percent (85%) or more of the shares then deposited under this Agreement, a certificate to that effect shall be signed by the Secretary of the meeting and filed with the Trustees. Upon such approval and the filing of said certificate, the amendment as so approved shall be and become a part of this Agreement and shall be binding upon all Trust Certificate holders with like force and effect as if originally incorporated herein.

18. DELIVERY OF SHARES ON TERMINATION.

(a) Upon termination of this Agreement, whether by expiration of time or the act of the Trustees as hereinabove provided, the Trustees shall deliver to each Trust Certificate holder upon surrender of his Trust Certificates accompanied, if required by the Trustees, by properly executed transfers thereof to the Trustees and upon payment by such holder of any and all transfer taxes payable on such transfer, a certificate or certificates for Common Shares of the stock of the Company either registered in the name of the Trust Certificate holder or endorsed in blank or for transfer to the name of such holder or his nominee for the number of shares represented by the Trust Certificate or Certificates so surrendered.

(b) In case, on or after the termination of this Agreement, the Trustees shall deposit with any bank or trust company in Cuyahoga County, Ohio, share certificates either properly endorsed in blank or registered in the names of holders of Trust Certificates hereunder, each for the number of Common Shares of the Company represented by a Trust Certificate outstanding, with authority in
writing to the bank or trust company to deliver said share certificates in exchange for Trust Certificates when and as surrendered for exchange as hereinabove provided and shall give not less than ten (10) days notice thereof to all Trust Certificate holders affected thereby, then all further liability of the Trustees, and each of them, for the delivery of share certificates in exchange for Trust Certificates or otherwise hereunder shall cease.

(c) At any annual or special meeting of the shareholders of the Company and after termination of this Agreement, the Trustees may, but shall not be required to, vote any shares of the Company then standing in their names on the books of the Company deliverable to the holders of Trust Certificates who shall not have presented their Trust Certificates for exchange as hereinabove provided.

19. NOTICE. Each notice provided for in this Agreement shall be in writing and signed by the person giving the same or his duly authorized representative, except that a parent or guardian may sign for a minor child, and a notice by the Trustees shall be signed by not less than a majority of the Trustees then qualified to act; and each such notice shall either be delivered personally to the person to whom it is addressed or shall be mailed to him, postage prepaid, to his last known residence address, provided that personal delivery to a parent or guardian of a minor child shall be sufficient delivery to the child, and further provided that a notice to any one Trustee shall be sufficient notice to all, unless only one Trustee has received the notice and that Trustee has the same initial after his signature as does the person giving the notice.

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20. PARTIAL INVALIDITY. The invalidity or nonenforceability of any term or provision of this Agreement or of the Trust Certificates shall not in any way impair or affect the balance thereof, which shall remain in full force and effect.

21. OHIO LAW. This Agreement and the Trust Certificates shall be construed in accordance with and shall be governed by the laws of the State of Ohio.

22. EXECUTION. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute but one and the same instrument. This Agreement shall inure to the benefit of, and be binding upon, all persons executing it and their respective heirs, executors, administrators, legatees and assigns.

IN WITNESS WHEREOF, the Trustees have signed this Voting Trust Agreement as of the day and year first above written, and the Signing Shareholders have become parties hereto in the manner hereinbefore provided.

/s/ Janice G. Carlson
Janice G. Carlson
/s/ Charles H. Smith III
Charles H. Smith III

                        

















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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023
Number of
Shareholder Shares

PNC, and its successors, as trustee of the Rhea D. Smith Trust
for the benefit of CH Smith III dated December 8, 1981 as amended
and restated on September 16, 1989

By: /s/ Shawn Zurat                                      121,678
Shawn Zurat, Vice President

PNC, and its successors, as trustee of the Charles H. Smith, Jr. Irrevocable
Trust for the benefit of CH Smith III dated September 5, 1990.

By: /s/ Shawn Zurat                                     57,067
Shawn Zurat, Vice President

PNC, and its successors, as trustee of the Rhea D. Smith Trust
for the benefit of D Dowell dated December 8, 1981 as amended
and restated on September 16, 1989

By: /s/ Shawn Zurat                                     121,678
Shawn Zurat, Vice President

PNC, and its successors, as trustee of the Charles H. Smith, Jr. Irrevocable
Trust for the benefit of D Dowell dated September 5, 1990.

By: /s/ Shawn Zurat                                     57,067
Shawn Zurat, Vice President

PNC, and its successors, as trustee of the Rhea D. Smith Trust
for the benefit of H Smith dated December 8, 1981 as amended
and restated on September 16, 1989

By: /s/ Shawn Zurat                                     121,678
Shawn Zurat, Vice President

PNC, and its successors, as trustee of the Charles H. Smith, Jr. Irrevocable
Trust for the benefit of H Smith dated September 5, 1990.

By: /s/ Shawn Zurat                                     57,068
Shawn Zurat, Vice President
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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023
Number of
Shareholder Shares
/s/ C. H. Smith, III                                     43,766
C. H. Smith, III


/s/ Jennifer Woodhouse                                 17,092
Jennifer Woodhouse

/s/ Jennifer Woodhouse                                  1,000
Jennifer Woodhouse, cust Henry J Woodhouse

/s/ Jennifer Woodhouse                                  1,000
Jennifer Woodhouse, cust Ethan M Woodhouse


/s/ C. Jason Smith                                     18,959
C. Jason Smith


/s/ Hilda D Smith                                     10,000
Hilda D Smith




















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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023
Number of
Shareholder Shares

/s/ Deborah Dowdell                                      57,541
Deborah Dowdell

/s/ Adam Morris                                     16,113
Adam Morris

/s/ Adam Morris                                      400
Maksim Morris (Cust. UGM Ohio)

/s/ Molly D. Trappe                                     14,863
Molly D. Trappe

/s/ Molly D. Trappe                                      900
Taylor Trappe (Cust. UGM Ohio)



























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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023


Number of
Shareholder Shares

/s/ Hudson D. Smith                                     66,820
Hudson D. Smith

/s/ Deborah Ann Smith                                  6,255
Deborah Ann Smith

/s/ Hudson D. Smith, Jr.                                 25,000
Hudson D. Smith, Jr.

/s/ Hudson D. Smith, Jr.                                  1,700
Peyton Smith (Cust. UGM)

/s/ Hudson D. Smith, Jr.                                  1,700
Charlotte Smith (Cust. UGM)

/s/ Hudson D. Smith, Jr.                                  1,700
Whitney Ann Smith (Cust. UGM)

/s/ Cynthia R. Champ                                     25,000
Cynthia R. Champ

/s/ Cynthia R. Champ                                      1,700
Elise Day Champ (Cust. UGM Ohio)
/s/ Cynthia R. Champ                                      1,700
William Champ (Cust. UGM Ohio)

/s/ Cynthia R. Champ                                      1,700
Hudson G. Champ (Cust. UGM Ohio)

/s/ C. Halle Nagel                                     25,000
C. Halle Nagel






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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023

Number of
Shareholder Shares


/s/ Jeffrey P. Gotschall                                 219,323
Jeffrey P. Gotschall


/s/ Dianne S. Gotschall                                  400
Dianne S. Gotschall


/s/ Judith Gotschall                                      29,715
Judith Gotschall


/s/ Andrew Gotschall                                      29,715
Andrew Gotschall


/s/ Andrew Gotschall                                      700
Addison Gotschall (Cust. UGM Ohio)


/s/ Charles Gotschall                                      29,715
Charles Gotschall


/s/ Craig Ramsey                                     27,240
Craig Ramsey


/s/ Alison Weston                                     27,240
Alison Weston







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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023
Number of
Shareholder Shares


/s/ Janice G. Carlson                                     177,174
Janice G. Carlson


/s/ Christie Lennen                                      34,925
Christie Lennen


/s/ Christie Lennen                                      17,800
Colton Lennen (Cust)


/s/ Christie Lennen                                      6,400
Kelby Lennen (Cust)


/s/ David Fulcher                                      31,075
David Fulcher


/s/ David Fulcher                                      17,500
Jessica Fulcher (Cust)


/s/ David Fulcher                                      6,100
Alyssa Fulcher (Cust)















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VOTING TRUST AGREEMENT
FROM FEBRUARY 1, 2021 TO JANUARY 31, 2023

Number of
Shareholder Shares


/s/ Laura Gifford                                     187,818
Laura Gifford Trustee for L. Gifford Trust



/s/ Robert Gifford, Jr                                      27,400
Robert Gifford, Jr



/s/ Terry G. Gifford                                        28,200
Terry G. Gifford


























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VOTING TRUST AGREEMENT
FEBRUARY 1, 2021 TO JANUARY 31, 2023

Number of
Shareholder Shares


Charles Henry Smith, Sr. Foundation                              913


/s/ Laura Gifford
Laura Gifford, Trustee







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Exhibit 31.1
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
RULE 13A-14(A) / 15D-14(A)
I, Peter W. Knapper, certify that:
1.I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: February 5, 2021   /s/ Peter W. Knapper
  Peter W. Knapper
  President and Chief Executive Officer


Exhibit 31.2
CERTIFICATION
OF THE CHIEF FINANCIAL OFFICER
RULE 13A-14(A) / 15D-14(A)
I, Thomas R. Kubera, certify that:
1.I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 5, 2021   /s/ Thomas R. Kubera
  Thomas R. Kubera
  Chief Financial Officer
 


Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of SIFCO Industries, Inc. (“Company”) on Form 10-Q for the quarter ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 5, 2021 /s/ Peter W. Knapper
Peter W. Knapper
President and Chief Executive Officer
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by SIFCO Industries, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that SIFCO Industries, Inc. specifically incorporates it by reference.
A signed original of this written statement required by Section 906 has been provided to SIFCO Industries, Inc. and will be retained by SIFCO Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of SIFCO Industries, Inc. (“Company”) on Form 10-Q for the quarter ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 5, 2021 /s/ Thomas R. Kubera
Thomas R. Kubera
Chief Financial Officer
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by SIFCO Industries, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that SIFCO Industries, Inc. specifically incorporates it by reference.
A signed original of this written statement required by Section 906 has been provided to SIFCO Industries, Inc. and will be retained by SIFCO Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.