SIF 10-K & 10-Q changes, risk factors and insider trading

At times, our supplying of products to the U.S. military has been adversely affected by significant changes in U.S. defense and national security budgets. Budget changes that result in a decline in overall spending, program delays, program cancellations or a slowing of new program starts on programs in which we participate could materially adversely affect our business, prospects, financial condition or results of operations. Future levels of expenditures and authorizations for defense-related programs by the U.S. government may decrease, remain constant or shift to programs in areas where we do not currently provide products, thereby reducing the chances that we will be awarded new contracts. Moreover, an extended federal government shutdown resulting from failing to pass budget appropriations, adopt continuing funding resolutions, or raise the debt ceiling, and other budgetary decisions limiting or delaying deferral of government spending, may negatively impact U.S. or global economic conditions, and we could be at risk of program cancellations or other disruptions and nonpayment as a result. When the federal government operates under a continuing resolution, new contract and program starts are restricted and certain of our funding programs may be unavailable, reduced or delayed. Shifting funding priorities or federal budget compromises also could result in reductions in overall defense spending on an absolute or inflation-adjusted basis, which could adversely impact our business.

A substantial portion of SIFCO’s business is conducted with a relatively small number of large direct and indirect customers. In fiscal 2024,2025, one direct customer accounted for approximately 15%18% percent of our consolidated net sales and threetwo direct customers and their direct subcontractors accounted for approximately 41%34% of the Company’s consolidated net sales. A financial hardship experienced by any one of these key customers, the loss of any of them or a reduction in or substantial delay of orders from any of them could have a material adverse effect on our business.

Failure to perform by our subcontractors to perform could materially and adversely affect our contract performance and its ability to obtain future business.

The Sarbanes-Oxley Act, among other things, requires that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. Our testing in the past has previously revealed, as described below, and in the future may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.

As of September 30, 2024,2025, we employed approximately 244259 people (excluding ManiagoCBlade due to its sale in October 2024). We face competition for management and employees from other companies and organizations. If we continue to experience turnover and/or are unable to quickly hire employees and subsequently retain our workforce, or we experience a significant or prolonged work stoppage in such an environment, we may experience increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and our ability to secure new work and our results of operations and financial condition could be adversely affected. Additionally, we are party to a collective bargaining agreement with certain employees at our Cleveland, Ohio facility. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future. If the unionized workers were to engage in a strike or other work stoppage, or if SIFCO is unable to negotiate acceptable collective bargaining agreements with the unions, or if other employees were to become unionized, we could experience a significant disruption of our operations, higher ongoing labor costs and possible loss of customer contracts, which could have an adverse effect on our business and results of operations.

Volatility in the market price of our common stock may prevent youshareholders from being able to sell your shares at or above the price you paid for your shares or at all. The market price of our common stock could fluctuate significantly for various reasons, which include:

In October 2024, the Company sold its European operations in order to streamline operational synergies and refocus on its core aerospace forging business. SIFCO Irish Holdings, Ltd., a wholly owned subsidiary of the Company, entered into a Share Purchase Agreement (the “SPA”) pursuant to which it sold 100% of the share capital of C BladeCBlade S.p.A. Forging & Manufacturing, an Italian joint stock company and wholly-owned subsidiary of the Company (“CBlade”), for cash consideration.

As a result of the planned sale transaction, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of CBlade presented as assets held for sale and discontinued operations, respectively, as of and for the years ended September 30, 20242025 and 2023.2024. All historical statements, amounts and related disclosures have been retrospectively adjusted to conform to this presentation. Refer to Note 2 — Assets Held for Sale and Discontinued Operations of the Notes to Consolidated Financial Statements.

Net sales in fiscal 20242025 increased 20.4%,6.5%, or $13.5$5.2 million, to $79.6$84.8 million, compared with $66.1$79.6 million in fiscal 2023. Higher demand in the commercial space market and the timing of shipments and contract approvals across most markets contributed to the increase in deliveries in fiscal 2024 from fiscal 2023.2024. Fixed wing aircraft sales increased $1.8$9.6 million compared with the same period last year primarily due to thehigher 787demand program.across most programs. Rotorcraft sales increaseddecreased $0.9$0.2 million in fiscal 20242025 compared to the same period in fiscal 20232024 primarily due to thetiming Sikorskyof H60 and Blackhawk programs, partially offset by declines in salesorders in the Bell/BoeingH-60 Osprey V22 components.program. Commercial space products increaseddecreased by $8.6$8.2 million year-over-year due to higherreduced demandprocurement foractivity staged-combustionin enginethe components.commercial space market. One key customer, significantly scaled back orders as they manage excess inventory. Energy components for power generation units decreasedincreased $0.3$0.7 million compared with the same period last year due to lower demandgrowth in the steam turbine markets. Commercial products and other revenue increased by $2.5$3.3 million in fiscal 20242025 compared to fiscal 2023,2024, primarilymostly due to timing of orders related to munitions programs.

Commercial net sales were 52.4%43.5% of total net sales and military net sales were 47.6%56.5% of total net sales in fiscal 2024,2025, compared with 41.5%52.4% and 58.5%,47.6%, respectively, in fiscal 2023.2024. Commercial net sales increaseddecreased $14.4$4.8 million to $41.8$36.9 million in fiscal 2024,2025, compared to $27.4$41.7 million in fiscal 20232024 primarily due to higherreduced demandprocurement activity in the commercial space market,market asdue wellto asreasons increasesnoted in build rates in the commercial aerospace industry.above. Military net sales decreasedincreased $0.8$10.0 million to $47.9 million in fiscal 2025, compared to $37.9 million in fiscal 2024, compared to $38.7 million in fiscal 20232024 primarily due to V22 and C130increased demand reductions,across partially offset by higher demand in certain rotorcraft and munitionmost programs.

Cost of goods sold (“COGS”) increased by $10.9$0.6 million, or 17.4%,0.8%, to $73.7$74.2 million, or 92.5%87.5% of net sales, during fiscal 2024,2025, compared with $62.7$73.7 million, or 94.9%,92.5%, of net sales during fiscal 2023.2024. The increase was primarily due to increasedhigher sales volume, coupled with higher labor costs of $1.3 million and other manufacturing and overhead costs of $1.4 million, primarily consisting of supplies, outside processing fees and insurance. Current year results include $1.4 million of idle expense and less than $0.1 million of expense associated with net realizable value (“NRV”) compared with prior year costs of $2.1 million and $0.9 million, respectively, which partially offset theby increases in COGS in fiscal 2024. Additionally, fiscal 2023 results included $1.5$3.0 million of Employee Retention Credit (“ERC”) benefit that did not reoccur in fiscal 2024.benefit.

Gross profit increased by $2.6$4.6 million, to $6.0$10.6 million during fiscal 2024,2025, compared with $3.3$6.0 million in fiscal 2023.2024. Gross margin percent of sales was 7.5%12.5% during fiscal 2024,2025, compared with 5.1%7.5% in fiscal 2023,2024, primarily due to the increases inhigher sales volume and COGSimproved discussedmargin, aboveas andwell theas impact$3.0 ofmillion favorableERC mixbenefit of products sold, particularly due to growth in the commercial space market.recognized.

The Company’s effective tax rate in fiscal 20242025 was (0.4)%24.7% compared with (0.2)%0.4% in fiscal 2023.2024. The decrease in the effective tax rate in fiscal 20242025 is primarily attributable to changes in jurisdictional mix of income and increase in Ireland income tax expense as a result of the sale of Italian business in fiscal 20242025 compared with the same period in fiscal 2023.2024. 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.

NetLoss lossfrom continuing operations was $8.6$0.9 million during fiscal 20242025 compared with $10.5a loss from continuing operations of $8.6 million in fiscal 20232024 due to higher sales volumes and gross margins improvements coupled with lower SG&A expenses, partially offset by higherlower interest expense.expense attributable to lower average debt outstanding during the period and the net benefit recognized of $3.3 million related to ERC.

Cash andCash, cash equivalents increasedand restricted cash decreased to $0.5 million at September 30, 2025 compared with $1.7 million at September 30, 20242024. compared with $21 thousand at September 30, 2023. As of September 30, 2024 and 2023, theThe Company also had cash and cash equivalents related to its businessdiscontinued held for saleoperations (i.e., CBlade) of $1.0 millionnil and $0.3$1.0 million, September 30, 2025 and 2024, respectively, which are included in Currentcurrent assets of business held for sale in the audited consolidated balance sheets. As of September 30, 20242025 and 2023,2024, cash included financing proceeds for capital investment and a nominal amount of the Company’s cash and cash equivalents were in the possession of its non-U.S. holding company subsidiary.

With the sale of the CBlade manufacturing operations located in Maniago, Italy, the Company expects to increaseincreased its cash on hand from the proceeds, which will bewas used to repay a portion of its outstanding debt balances and for general operational needs. Historically, the cash flows from the Company’s CBlade business represented a material portion of the consolidated results of operations, financial condition and cash flows. Although future contributions from the CBlade business will ceaseceased with the execution of the sale transaction, the Company believes that its streamlined operations and lower overall costs will allow management to focus on domestic growth opportunities. However, thereThere is no guarantee that the Company’s continuing operations will sufficiently replace the liquidity and cash flows previously provided by CBlade’s operations. For details regarding the sale of CBlade, refer to Note 2 — Assets Held for Sale and Discontinued Operations of the Notes to Consolidated Financial Statements.

We believe that our existing cash will be sufficient to finance our continued operations, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months. In order to support and achieve our future growth plans, we may need or advantageously seek to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our loan agreement or seek additional financing. The Company’s liquidity could be negatively affected if the Company is unable to obtain capital, byif customers extendingextend payment terms to the Companyterms, and/or the decrease inif demand for our products.products decline. The Company and management will continue tomonitor assess and actively manageits liquidity needs. For details regarding our debt agreements, see Note 6 — Debt of the Notes to Consolidated Financial Statements.

The Company’s operating activities usedprovided $3.8$0.1 million of cash in fiscal 2023.2025, compared with $2.6 million of cash used in fiscal 2024. The cash usedprovided by operating activities in fiscal 20232025 was primarily due to net operating loss of $10.5$0.9 million, adjusted for non-cash items such as change in NRV reserve $1.1 million, and LIFO benefit of $0.3$8.7 million, partially offset by depreciation and amortization of $5.1 million, equity based compensation of $0.3 million and sourcesuses of working capital of $2.4$7.6 million. The sourceuse of cash from working capital of $2.4$7.6 million was primarily due to increase in accounts payablereceivable duedecreasing, toreflecting improved collections and timing of paymentsbillings, inventories increased, accounts payables and loweraccrued inventoriesliabilities duedecreased to extended raw material lead times, partially offset by higher accounts receivable due to increased sales atas the endCompany ofreduced theoutstanding fiscalobligations year.and normalized payment cycles.

Cash used for investing activities was $0.5 million in fiscal 2025, compared with $2.0 million in fiscal 2024, compared with $1.1 million in fiscal 2023.2024. Fiscal 20242025 and fiscal 20232024 expenditures were used primarily for manufacturing enhancement and maintenance. Capital commitments atas of September 30, 20242025 were $0.3$0.1 million. The Company anticipates the total fiscal 20252026 capital expenditures will be within the range of $2.0$1.0 million to $3.0$2.0 millionmillion. These expenditures are expected to relate primarily to projects aimed at improving production capabilities, expanding product offering, and will relate principally to the further enhancement of production and product offering capabilities andachieving operating cost reductions.efficiencies.

Cash providedused byfor financing activities was $6.3$14.0 million in fiscal 20242025 compared to cash provided by financing activities of $4.9$6.3 million in fiscal 2023.2024. The year-over-year increasedecrease in cash from financing was primarily related to the higher proceedsrepayments receivedon fromour revolving credit line and the relateddebt partyrefinancing and repayment of the promissory note and funds drawn from the revolving credit facility, net of payments made, during fiscal 2024.2025.

Future cash flows from the Company’s operations may be used to pay down outstanding debt amounts. 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 its loan and security agreement as described in Note 6 — Debt of the Notes to Consolidated Financial Statements for its domestic locations.Statements.

Net Cash Provided By (Used For) Discontinued Operations

Net cash from discontinued operations are presented in the consolidated statements of cash flows as summarized operating, investing and financing cash flows, as well as the impact of exchange rate changes on cash. The Company’s operating activities from discontinued operations provided $1.4 million ofno cash in fiscal 2024,2025, compared with $2.4$1.4 million of cash provided by fiscal 20232024 primarily driven by net income from discontinued operations and changes in working capital. Cash usedprovided for investing activities from discontinued operations was $1.4 million and $1.3$14.4 million in fiscal 20242025 and 2023,cash respectively,use of $1.4 million in 2024, related to proceeds received from its sale and outlays for capital expenditures. Cash provided by financing activities from discontinued operations was $1.1$0.4 million in fiscal 20242025 compared to $2.0$1.1 million of cash used in fiscal 2023,2024, attributable to proceeds from new borrowings and loan payments, respectively.

The Company evaluates obsolete and excess inventory on a quarterly basis. The Company maintains a formal policy, which requires at a minimum, that amounts are written down based on an analysis of the age of the inventory. In addition, if the Company learns of specific obsolescence, other than that identified by the aging criteria, an additional write down will be recognized. Specific obsolescence may arise due to a technological or market change or based on cancellation of an order. Management’s judgment is necessary in determining the proper write down for obsolete and excess inventory. For the portion of the Company’s inventory not valued at LIFO, inventory is valued at FIFO and stated at the lower of cost or net realizable value. The Company evaluates net realizable value on a quarterly basis. See Note 3 — InventoriesInventories, net of the Notes to Consolidated Financial Statements for further discussion.

SIFCO performed its annual test as of July 31, 2024. Goodwill existed at one of the Company’s reporting units, Cleveland, Ohio as of July 31, 2024 and September 30, 2024. No impairment charge was identified in connection with the annual goodwill impairment test with respect to the Cleveland reporting unit. Refer to Note 4 — Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements.

SIFCO’s total backlog as of MarchJune 31,30, 2026 was $157.7$164.2 million, compared with total backlog of $129.2$130.4 million as of MarchJune 31,30, 2025. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the aerospace markets was the primary contributor to the increased bookings. Backlog information may not be indicative of future sales.

Three Months Ended MarchJune 31,30, 2026 compared with Three Months Ended MarchJune 31,30, 2025

Net sales comparative information for the secondthird quarter of fiscal 2026 and 2025 is as follows:

Net sales for the secondthird quarter of fiscal 2026 increased $7.4$4.0 million to $26.4$26.1 million, compared with $19.0$22.1 million in the comparable period of fiscal 2025. The increase is driven by higher production volumes and favorable pricing, partially offset by the impact of customer-supplied raw materials. Under these arrangements, the Company does not recognize revenue for materials provided by customers, resulting in lower reported net sales relative to comparable programs utilizing company-procured materials. Fixed wing sales increaseddecreased $1.9$0.5 million compared with the same period last year, primarily due to timing across most programs, including the F-15 and C-130 and increased market share in the F-35CV programs. Rotorcraft sales increased compared with the same period last year primarily due to the timing of orders for CH53KV-22 Osprey and CH47UH-60 ChinookBlack Hawk programs. Commercial space products increaseddecreased by $0.2$1.1 million due to timing of orders in the commercial space market. Net sales for the energy components for power generation units decreased by $0.6$0.3 million, primarily due to lower customer demand. Commercial products and other revenue increased $1.5$3.5 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Commercial net sales and military net sales were 31.9%26.7% and 68.1%,73.3%, respectively, of total net sales in the secondthird quarter of fiscal 2026, compared with 43.7%39.3% and 56.3%,60.7%, respectively, in the comparable period in fiscal 2025. Commercial net sales increaseddecreased $0.1$1.7 million to $8.4$7.0 million in the secondthird quarter of fiscal 2026, compared with $8.3$8.7 million in the comparable period of fiscal 2025, primarily due to higher demand in the commercial aerospace market, partially offset by reduced procurement of components the Company provides for the power generation and commercial space market partially offset by higher demand in the commercial aerospace market. Military net sales increased by $7.3$5.7 million to $18.0$19.1 million in the secondthird quarter of fiscal 2026, compared with $10.7$13.4 million in the comparable period of fiscal 2025, primarily due to increased demand across multiple programs, such as munitions, CH47V-22 Osprey and CH53K.UH-60 Black Hawk.

Cost of goods sold (“COGS”) increased by $3.3$6.5 million, or 19.1%,40.3%, to $20.8$22.7 million, or 78.6%86.9% of net sales, during the secondthird quarter of fiscal 2026, compared with $17.5$16.2 million, or 91.7%73.3% of net sales, in the comparable period of fiscal 2025. The increase is primarily as a result of higher sales volume.volume However,and thea $3.2 million increase in LIFO expense resulting from higher inventory costs and increased purchases. In addition, COGS in the prior year third quarter was partially offsetreduced by a $2.4 million Employee Retention Credit (“ERC”) benefit that did not recur in the impactcurrent period and included a LIFO benefit of customer-supplied$0.4 raw materials, which reduced material costs by the Company (generally neutral impact on gross profit).million.

Gross profit increaseddecreased by $4.1$2.5 million to $5.7$3.4 million in the secondthird quarter of fiscal 2026, compared with $1.6$5.9 million gross profit in the comparable period of fiscal 2025. The marginprior expansionyear wasperiod primarilyincluded drivena $2.4 million ERC benefit recognized within COGS. Excluding the impact of the ERC benefit, gross profit would have decreased by $0.1 million. Higher sales volume, improved pricingpricing, anda more favorable customer and product mix, including increased volumes on higher-margin programs, and improved overhead absorption resulting from higher production volumes,volumes andsubstantially offset the benefitunfavorable impact of pricinga actions.$3.2 million increase in LIFO expense.

Selling, general and administrative (“SG&A”) expenses were $3.0$3.1 million, or 11.3%11.9% of net sales, during the secondthird quarter of fiscal 2026, compared with $2.4$2.6 million, or 12.4%11.9% of net sales, in the comparable period of fiscal 2025. The increase is primarily driven by $0.2 million of environmental reserve and associated legal and professional fees, $0.1$0.5 million in incentive compensation accruals and $0.1 million increase in the provision for expected credit losses.accruals.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreements in the secondthird quarter of fiscal 2026 and 2025:

The Company’s effective tax rate through the secondthird quarter of fiscal 2026 was (13.0122.2)%, compared with (5.9)%1.2% for the same period of fiscal 2025. The change in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2026 compared with the same period of fiscal 2025 along with the Company's transition from a pre-tax loss to a pre-tax income position. 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.

IncomeLoss from continuing operations was $2.7 millionnominal during the secondthird quarter of fiscal 2026, compared with a loss from continuing operationsincome of $1.3$3.3 million in the comparable period of fiscal 2025. The improvementprior isperiod included a net benefit of $2.7 million related to the ERC. The change in results was primarily attributable to increasedthe factors impacting gross profit as noteddiscussed above.

SixNine Months Ended MarchJune 31,30, 2026 compared with SixNine Months Ended MarchJune 31,30, 2025

Net sales comparative information for the first sixnine months of fiscal 2026 and 2025 is as follows:

Net sales for the first sixnine months of fiscal 2026 increased $10.5$14.6 million to $50.4$76.6 million, compared with $39.9$62.0 million in the comparable period of fiscal 2025. The increase was primarily driven by higher volumes in military programs, partially offset by declines in certain commercial markets. Fixed wing sales decreased $0.4$0.9 million compared with the same period last year due to program timing. Rotorcraft sales increased $10.2$12.6 million compared with the same period last year primarily due to the timing of orders in the CH47V-22 Osprey and CH53KUH-60 Black Hawk programs. Commercial space products decreased by $1.1$2.2 million year-over-year due to reduced procurement activity, including one specific customer significantly scaling back orders to manage excess inventory. Net sales for the energy components for power generation units decreased by $1.3$1.5 million due to lower customer demand. Commercial products and other revenue increased $3.1$6.6 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Commercial net sales and military net sales were 33.9%31.5% and 66.1%,68.5%, respectively, of total net sales in the first sixnine months of fiscal 2026, compared with 48.8%45.4% and 51.2%,54.6%, respectively, in the comparable period in fiscal 2025. Commercial net sales decreased $2.4$4.1 million to $17.1$24.1 million in the first sixnine months of fiscal 2026, compared with $19.5$28.2 million in the comparable period of fiscal 2025, reflecting reduced demand in commercial space market and reduced procurement of components the Company provides for the power generation market. Military net sales increased by $12.9$18.7 million to $33.3$52.5 million in the first sixnine months of fiscal 2026, compared with $20.4$33.8 million in the comparable period of fiscal 2025, primarily due to timing of munitions orders, increased demand and pricing across most programs.

COGS increased by $2.2$8.7 million, or 5.8%,16.2%, to $39.6$62.3 million, or 78.5%81.4% of net sales, during the first sixnine months of fiscal 2026, compared with $37.4$53.6 million, or 93.7%86.5% of net sales, in the comparable period of fiscal 2025. The increase in COGS was primarily attributable to higher production and sales volumes.volumes and a $4.4 million increase in LIFO expense resulting from higher inventory costs and increased purchases. As a percentage of net sales, COGS decreased, reflecting improved overhead absorption on higher volumesvolumes, pricing actions, and thean impactincrease of pricingcustomer actions.supplied material. Prior year included a $2.4 million ERC benefit in COGS which was not repeated in the current year.

Gross profit increased $8.4$5.9 million to $10.9$14.3 million in the first sixnine months of fiscal 2026, compared with $2.5$8.4 million gross profit in the comparable period of fiscal 2025. The prior year period included a $2.4 million ERC benefit recognized within COGS. Excluding the impact of the ERC benefit, gross profit would have increased by $8.3 million. The increase was primarily driven by higher sales volumes, favorable product mix, and improved pricing.pricing, partially offset by LIFO expense noted above. Gross margin also increased, reflecting the benefit of these factors, as well as improved cost absorption and impact of cost drivers noted above.

SG&A expenses were $5.6$8.7 million, or 11.2%11.4% of net sales, during the first sixnine months of fiscal 2026, compared with $5.2$7.8 million, or 13.0%12.6% of net sales, in the comparable period of fiscal 2025. The increase in SG&A expenses was primarily driven by$0.7 million increase in incentive compensation and $0.4 million related to environmental reserve and associated legal and professional fees as discussed in Note 10 — Commitments and Contingencies of the notes to unaudited consolidated condensed financial statements, $0.2 million increase in incentive compensation and $0.1 million in severance-related costs, partially offset by $0.3 million in lower legal and professional and consulting fees.statements.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first sixnine months of both fiscal 2026 and 2025:

Interest expense for the sixnine months ended reflects the impact of a provision within the Company's Loan Agreement that requires interest be calculated on a specified minimum borrowing level, regardless of actual outstanding borrowings. As average borrowings during the period were below threshold, the Company incurred interest expense in amounts in excess of the actual debt outstanding. As a result, the Company's effective interest rate was higher than would be expected based solely on the stated contractual rates applied to its outstanding borrowings. Excluding the impact to this provision, the Company's effective interest rate for the period would have been approximately 9.9%,9.8%, compared to the reported rate of 15.7%.13.9%. The impact of this provision may continue in future periods to the extent that outstanding borrowings remain below the specified minimum level.

The Company’s effective tax rate through the first sixnine months of fiscal 2026 was 2.2%,2.7%, compared with (2.237.2)% for the same period of fiscal 2025. The change in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2026 compared with the same period of fiscal 2025, as well as the Company's transition from a pre-tax loss to a pre-tax income position. 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.

Income from continuing operations was $4.4 million during the first sixnine months of fiscal 2026, compared with a loss of $3.7$0.4 million in the comparable period of fiscal 2025 is due to higher sales volumes and gross margin improvements as referenced above. The prior year net loss includes a net benefit of $2.7 million related to ERC that did not repeat in the current period.

Cash and cash equivalents were $0.3$0.1 million and $0.5 million as of MarchJune 31,30, 2026 and September 30, 2025, respectively. A nominal amount of the Company’s cash and cash equivalents were in the possession of its non-U.S. holding company subsidiary, and certain distributions from which to the Company may be subject to adverse tax consequences.

Our primary requirements for liquidity and capital resources besides our growth initiatives, are working capital, capital expenditures, principal and interest payments on our outstanding debt, fulfilling obligations under our loan agreements, and other general corporate needs. Historically, the main sources of liquidity of the Company have been cash flows from operations and borrowings under our debt agreements. As of MarchJune 31,30, 2026, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The Company's primary cash requirements consist of obligations related to outstanding debt and lease payments, operating and capital purchase commitments, and contributions to our defined benefit and contribution plans. These requirements are expected to be funded through a combination of cash on hand, cash generated from operations, and availability under the Company's credit facilities. For additional information regarding the Company’s contractual obligations, including leases and noncancellable purchase commitments, see Note 11 — Leases and Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended September 30, 2025 (the “2025 Annual Report”). Additionally, refer to Note 9 — Retirement Benefit Plans of the Notes to Consolidated Financial Statements in the Company’s 2025 Annual Report for more information related to the Company’s pension and defined contribution plans.

Net cash provided by operating activities was $5.2$3.4 million for the first sixnine months of fiscal 2026, compared to net cash used of $1.0$0.6 million in the first sixnine months of fiscal 2025. The increase was primarily driven by improved operating results, with net income of $4.4 million compared to a net loss of $3.7$0.4 million in the prior year period. Non-cash adjustments included $2.1$4.4 million of LIFO expense and $3.1 million of depreciation and amortization and $1.2 million of LIFO expense in the current period, partially offset by a $0.6$0.7 million decrease in related inventory valuation accounts. Changes in working capital resulted in a net use of cash of approximately $2.2$8.3 million during the period. This use was primarily driven by increases in operating assets, including a $3.1$9.6 million increase in inventories, $3.0 million increase in accounts receivable, $3.3 million increase in inventories, and a $1.7$1.3 million increase in contract assets, reflecting higher business activity and the timing of billings and production. These uses were partially offset by increases in operating liabilities, including a $4.4$3.1 million in accounts payable and $1.8 million increase in contract liabilities and a $1.3 million increase in accounts payable,liabilities, reflecting the timing of customer advance paymentspayments, timing of raw material receipts and vendor disbursements.

In contrast, during the sixnine months of fiscal 2025, operating activities used $1.0$0.6 million of cash, primarily due to net loss of $3.7$0.4 million, partially offset by of $2.4$3.9 million depreciation and amortization and $0.3$0.5 million related to inventory valuation accounts. Changes in working capital resulted in a net use in cash, primarily driven by decreases in accounts payable and accrued liabilities due to timing of payments, increases in prepaid expenses related to deferred financing costs associated with the refinancing of the revolving credit facility, decreases in contract liabilities due to satisfaction of performance obligations, and increase in inventories due to timing of raw material receipts. These uses were partially offset by a decrease in accounts receivable, reflecting the timing of customer receipts and billings.

During the first sixnine months of fiscal 2026 and 2025, cash used for investing activities was $0.2$0.5 million and $0.3 million, respectively, attributable to capital expenditures. Capital commitments as of MarchJune 31,30, 2026 were $0.4$0.6 million. The Company anticipates that the remaining fiscal 2026 capital expenditures will be within the range of $1.0$0.5 million to $1.4$0.7 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Cash used for financing activities was $5.6$3.7 million in the first sixnine months of fiscal 2026, compared with $13.1$13.4 million in the first sixnine months of fiscal 2025. The year-over-year decrease in cash used fromfor financing was primarily related to lower repayments on debt obligations during fiscal 2026.2026 versus prior year included the refinancing of debt.

Refer to Note 5 — Debt of the notes to unaudited consolidated condensed financial statements for details regarding our financing activities during the sixnine months ended MarchJune 31,30, 2026.

ASU 2024-01 was adopted during the sixnine months ended MarchJune 31,30, 2026. Refer to Note 1 — Summary of Significant Accounting Policies for further detail. Additionally, the Company’s significant accounting policies and procedures are explained in the Management’s Discussion and Analysis section of the Company’s 2025 Annual Report.