market value of plan assets; and (12) stable governments, business conditions, laws, regulations and taxes in the economic environments where business is conducted.
The Company and its subsidiaries engage in the production and sale of a variety of metalworking processes, services and products produced primarily to the specific design requirements of its customers. The processes and services include forging, heat-treating, coating, welding, machining and selective electrochemical finishing. The products include forged components, machined forged parts and other machined metal parts, remanufactured component parts for turbine engines, and selective electrochemical finishing solutions and equipment. The Company's operations are conducted in three business segments:
(1) Aerospace Component Manufacturing Group, (2) Turbine Component Services and Repair Group, and (3) Applied Surface Concepts Group. The Company endeavors to plan and evaluate its businesses' 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) anticipated exploration and production activities relative to oil and gas products, etc.
A. Results of Operations
1. Fiscal Year 2008 Compared with Fiscal Year 2007 Net sales from continuing operations in fiscal 2008 increased 16.2% to $101.4 million, compared with $87.3 million in the comparable period in fiscal 2007. Income from continuing operations before income taxes in fiscal 2008 was $8.8 million, compared with $10.3 million in the comparable period in fiscal 2007. Included in the $8.8 million of income from continuing operations before income taxes in fiscal 2008 was (i) $0.5 million of expense related to the business settlement of a product dispute that originated in fiscal 2007, (ii) $0.8 million of expense related to the impairment of a long-lived asset, and
(iii) a LIFO provision of $1.7 million. Included in the $10.3 million of income from continuing operations before income taxes in fiscal 2007 was (i) $0.1 million of expense related to the business settlement of a product dispute that originated in fiscal 2007 and (ii) a LIFO provision of $0.3 million. Income (loss) from discontinued operations, net of tax, which includes both the industrial turbine repair business that was sold in fiscal 2007 and the large aerospace turbine engine component repair business that was sold in fiscal 2006, was income of $0.3 million in fiscal 2008, compared with a $2.0 million loss in the comparable period in fiscal 2007. Included in the $2.0 million loss from discontinued operations in fiscal 2007 were (i) grant income of $2.1 million and
(ii) a loss of approximately $0.8 million from the divestiture in fiscal 2007 of a business and certain related assets, as explained more fully in Notes 4 and 9, respectively, to the Consolidated Financial Statements. Net income in fiscal 2008 was $5.8 million, compared with $6.7 million in the comparable period in fiscal 2007.
Aerospace Component Manufacturing Group ("ACM Group") Net sales in fiscal 2008 increased 20.0% to $72.0 million, compared with $60.0 million in the comparable period of fiscal 2007. For purposes of the following discussion, the ACM Group considers aircraft that can accommodate less than 100 passengers to be small aircraft and those that can accommodate 100 or more passengers to be large aircraft. Net sales of airframe components for small aircraft increased $7.6 million to $38.2 million in fiscal 2008, compared with $30.6 million in the comparable period in fiscal 2007. Net sales of turbine engine components for small aircraft, which consist primarily of business and regional jets, as well as military transport and surveillance aircraft, increased $1.8 million to $19.9 million in fiscal 2008, compared with $18.1 million in the comparable period in fiscal 2007. Net sales of airframe components for large aircraft increased $0.5 million to $7.6 million in fiscal 2008, compared with $7.1 million in the comparable period in fiscal 2007. Net sales of turbine engine components for large aircraft increased $1.3 million to $3.0 million in fiscal 2008, compared with $1.7 million in the comparable period in fiscal 2007. Commercial product sales and other revenues were $3.3 million and $2.5 million in fiscal 2008 and 2007, respectively.
The ACM Group's airframe and turbine engine component products have both military and commercial applications. Net sales of airframe and turbine engine components that solely have military applications were $33.4 million in fiscal 2008, compared with $25.7 million in the comparable period in fiscal 2007. This increase is attributable in part to increased military spending due to ongoing wartime demand such as for additional military helicopters and related replacement components.

The ACM Group's selling, general and administrative expenses increased $1.2 million to $4.9 million, or 6.8% of net sales, in fiscal 2008, compared with $3.7 million, or 6.1% of net sales, in the comparable period in fiscal 2007. The $1.2 million increase in selling, general and administrative expenses in fiscal 2008 was principally due to a $0.6 million payment to a customer that was made to achieve an amicable settlement related to a product dispute that originated in fiscal 2007, of which $0.1 million was expensed in fiscal 2007, and that the Company agreed to make as a business gesture of good faith and cooperation without admission of liability. The remaining selling, general and administrative expenses in fiscal 2008 and 2007 were $4.4 million, or 6.1% of net sales, and $3.6 million, or 6.0% of net sales, respectively. The remaining $0.8 million increase in selling, general and administrative expenses in fiscal 2008 compared to the same period in fiscal 2007 was principally due to (i) a $0.3 million increase in variable selling cost principally due to the increase in net sales, (ii) a $0.2 million increase in compensation and related expenses, and (iii) a $0.1 million increase in bad debt expense.
During the fourth quarter of fiscal 2008, the ACM group recorded $0.8 million of expense related the impairment of a long-lived asset.
The ACM Group's operating income in fiscal 2008 was $9.9 million, compared with $10.3 million in the comparable period in fiscal 2007. Included in the $9.9 million of operating income in fiscal 2008 were the aforementioned $1.3 million of expenses related to the amicable settlement of a product dispute and the impairment of a long-lived asset. The $11.2 million of operating income in fiscal 2008, before these $1.3 million of expenses, reflected an improvement relative to fiscal 2007 principally due to the positive impact on margins resulting from higher production and sales volumes in the fiscal 2008, which allowed the ACM Group to leverage its fixed operating cost structure over more units of production and sales. The positive impact of the improved leverage of its fixed operating cost were partially offset by the negative impact of (i) a $1.4 million increase in the LIFO provision and (ii) higher variable labor costs recognized in fiscal 2008, compared to the same period in fiscal 2007. Turbine Component Services and Repair Group ("Repair Group") During fiscal 2008, net sales, which consist principally of component repair services (including precision component machining and industrial coating) for small aerospace turbine engines, increased 10.8% to $14.3 million, compared with $12.9 million in the comparable fiscal 2007 period.
During fiscal 2008, the Repair Group's selling, general and administrative expenses from continuing operations were $1.3 million, or 9.2% of net sales, compared with $1.4 million, or 10.5% of net sales, in the comparable fiscal 2007 period. Included in selling, general and administrative expenses during both fiscal 2008 and 2007 was $0.1 million of bad debt recoveries and, therefore, the remaining selling, general and administrative expenses were $1.4 million, or 9.9% of net sales, and $1.5 million, or 11.2% of net sales, during such periods. The Repair Group's operating results from continuing operations were a loss of $0.3 million in fiscal 2008 compared with income of $0.7 million, in the comparable fiscal 2007 period. Included in the $0.3 million operating loss during fiscal 2008 were (i) the aforementioned $0.1 million of bad debt recovery, (ii) $0.1 million of income from the sale of previously reserved inventory, and (iii) $0.1 million of income related to the renegotiation of a vendor obligation. Despite these favorable items, the reason that operating results did not improve with the higher volumes during fiscal 2008 is due principally to startup costs related to the production launch of a new component repair program and a change in product sales mix to less favorable margin products.
Applied Surface Concepts Group ("ASC Group") Net sales increased 5.3% to $15.1 million, compared with $14.3 million in the comparable fiscal 2007 period. In fiscal 2008, product net sales, consisting of selective electrochemical metal finishing equipment and solutions, increased $0.4 million to $7.5 million, compared with $7.1 million in the same period in fiscal 2007. In fiscal 2008, customized selective electrochemical metal finishing contract service net sales increased $0.3 million to $7.4 million, compared with $7.1 million in the same period in fiscal 2007. A portion of the ASC Group's business is conducted in Europe and is denominated in local European currencies, which have strengthened in relation to the US dollar resulting in a favorable currency impact on net sales in fiscal 2008 of approximately $0.3 million.
The ASC Group's selling, general and administrative expenses decreased $0.1 million to $4.3 million, or 28.7% of net sales, in fiscal 2008, compared with $4.4 million, or 31.0% of net sales in the comparable fiscal 2007 period. The $0.1 million decrease in selling, general and administrative expenses in fiscal 2008 was principally due to a reduction in

compensation and benefit related expenses attributable to certain salaried support positions that have either been eliminated or, if not eliminated, have not yet been replaced.
The ASC Group's operating income in fiscal 2008 was $1.3 million, compared with $1.0 million in the same period in fiscal 2007. This $0.3 million increase in operating income is principally due to (i) a decrease in selling, general and administrative expenses discussed above and (ii) improved operating margins due to higher sales. These gains were partially offset by (i) rising precious metals commodity costs that could not be fully passed on to customers and (ii) higher compensation expense due to the hiring of additional operations personnel. Corporate Unallocated Expenses
Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other corporate expenses, were $2.0 million in fiscal 2008, compared with $1.7 million in the same period in fiscal 2007. The $0.3 million increase in fiscal 2008 is principally due to an increase in legal and professional expenses related to (i) the Company's long-term strategic planning efforts, including its incentive compensation planning, (ii) its efforts required to achieve initial Sarbanes-Oxley compliance in fiscal 2008, and (iii) professional tax consulting services. These increases were partially offset by a decrease in incentive expense. Other/General
Interest expense from continuing operations was $0.1 million and $0.2 million in fiscal 2008 and 2007, respectively. The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company's revolving credit agreement in fiscal years 2008 and 2007.

                                                       Weighted Average                          Weighted Average
                                                         Interest Rate                          Outstanding Balance
                                                   Year Ended September 30,                  Year Ended September 30,

The Company believes that inflation did not materially affect its results of operations in fiscal 2008 or fiscal 2007, and does not expect inflation to be a significant factor in fiscal 2009.
2. Fiscal Year 2007 Compared With Fiscal Year 2006 In fiscal 2007, the Company and its Irish subsidiary, SIFCO Turbine Components Limited ("SIFCO Turbine"), which is a part of the Company's Turbine Component Services and Repair Group, completed the sale of its industrial turbine engine component repair business and certain related assets ("Industrial Repair Business"). In addition, in fiscal 2006, the Company and SIFCO Turbine completed the sale of its large aerospace turbine engine component repair business and certain related assets ("Large Aero Business"). The combined results of the Company's Industrial Repair and Large Aero Businesses are reported as discontinued operations in the accompanying Consolidated Statements of Operations. Net sales from continuing operations in fiscal 2007 increased 27.2% to $87.3 million, compared with $68.6 million in fiscal 2006. Income from continuing operations in fiscal 2007 was income of $8.8 million, compared with a loss of $0.1 million in fiscal 2006. Income from discontinued operations, net of tax, which includes both the Industrial Repair and Large Aero Businesses, was a loss of $2.0 million in fiscal 2007, compared to income of $1.0 million in fiscal 2006. Included in the $2.0 million loss from discontinued operations in fiscal 2007 was (i) $2.1 million of grant income related to the expiration of certain grants, as explained more fully in Note 4 to the Consolidated Financial Statements in Item 8 and (ii) a loss of approximately $0.8 million from the divestiture of the Industrial Repair Business, as explained more fully in Note 9 to the Consolidated Financial Statements in Item 8. Included in the $1.0 million of income from discontinued operations in fiscal 2006 was a gain of approximately $4.4 million from the divestiture of the Large Aero Business, as explained more fully in Note 9 to the Consolidated Financial Statements in Item 8. Net income in fiscal 2007 was $6.7 million, compared with $1.0 million in fiscal 2006.

Aerospace Component Manufacturing Group ("ACM Group") Net sales in fiscal 2007 increased 36.5% to $60.0 million, compared with $43.9 million in fiscal 2006. The significant increase in the ACM Group's net sales in fiscal 2007 was due to a combination of (i) an increase in volumes resulting from the general strength of demand in the markets which the Company serves and (ii) an increase in product prices principally reflecting the pass-through to customers of the increase in raw material prices incurred by the Company. For purposes of the following discussion, the ACM Group considers aircraft that can accommodate less than 100 passengers to be small aircraft and those that can accommodate 100 or more passengers to be large aircraft. Net sales of airframe components for small aircraft increased $7.2 million to $30.6 million in fiscal 2007, compared with $23.4 million in fiscal 2006. Net sales of turbine engine components for small aircraft, which consist primarily of net sales of turbine engine components for business and regional jets, as well as military transport and surveillance aircraft, increased $6.5 million to $18.1 million in fiscal 2007, compared with $11.6 million in fiscal 2006. Net sales of airframe components for large aircraft increased $2.7 million to $7.1 million in fiscal 2007, compared with $4.4 million in fiscal 2006. Net sales of turbine engine components for large aircraft decreased $0.1 million to $1.7 million in fiscal 2007, compared with $1.8 million in fiscal 2006. Commercial product and non-product sales were $2.5 million and $2.7 million in fiscal 2007 and 2006, respectively.
Included in net sales in fiscal 2007 was $0.7 million related principally to certain product pricing adjustments that were agreed to and recorded in the fourth quarter of fiscal 2007 and that related to customer shipments that occurred during the prior two quarters of fiscal 2007. Such pricing adjustments resulted principally from the finalization, during the fourth quarter of fiscal 2007, of certain ACM Group customer negotiations that were initiated during the first half of fiscal 2007. Of the $0.7 million in fourth quarter pricing adjustments, $0.5 million related to net sales in the third quarter of fiscal 2007 and $0.1 million related to net sales in the second quarter of fiscal 2007. The ACM Group's airframe and turbine engine component products have both military and commercial applications. Net sales of airframe and turbine engine components that solely have military applications were $25.7 million in fiscal 2007, compared with $20.5 million in fiscal 2006. This increase is attributable in part to increased military spending due to ongoing wartime demand such as for additional military helicopters and related replacement components. During fiscal 2007, the ACM Group's selling, general and administrative expense increased $0.5 million to $3.7 million, or 6.1% of net sales, compared with $3.2 million, or 7.3% of net sales, in fiscal 2006. The $0.5 million increase in fiscal 2007 was principally due to (i) an increase in the ACM Group's compensation expense, including incentive compensation, resulting from the hiring of certain additional personnel to support the growth in the ACM Group's business and (ii) variable selling costs resulting from the overall significant increase in net sales and operating income during fiscal 2007 compared with fiscal 2006.
The ACM Group's operating income in fiscal 2007 was $10.3 million, compared with $1.7 million in fiscal 2006. Operating results improved significantly in fiscal 2007 compared with fiscal 2006 due primarily to the positive impact on margins resulting from significantly higher production and net sales volumes in fiscal 2007. The improved margins are due principally to (i) operating efficiencies and the related absorption of the ACM Group's relatively high fixed operating costs over more units of production and sales in fiscal 2007, (ii) improvements in product pricing and (iii) a $1.2 million reduction in the LIFO provision in fiscal 2007 compared with fiscal 2006.
Turbine Component Services and Repair Group ("Repair Group") Net sales from continuing operations in fiscal 2007, which consist principally of component repair services (including precision component machining and industrial coating) for small aerospace turbine engines, increased 4.9% to $12.9 million, compared with $12.3 million in fiscal 2006.
During fiscal 2007, the Repair Group's selling, general and administrative expenses from continuing operations decreased $0.2 million to $1.4 million or 10.5% of net sales, compared with $1.6 million, or 12.7% of net sales, in fiscal 2006. Included in the $1.6 million of selling, general and administrative expenses in fiscal 2006 were $0.1 million of severance and related charges. The Repair Group's operating income from continuing operations in fiscal 2007 was $0.7 million, compared with $0.2 million in fiscal 2006. The improvement in operating income is principally attributable to (i) the aforementioned reduction in selling, general and administrative expenses, (ii) the relative product sales mix - with a larger portion of sales being higher margin product with a lower raw material/higher value-added content and (iii) the consumption of lower cost and/or previously written down inventory.

Applied Surface Concepts Group ("ASC Group") Net sales of the ASC Group increased 16.2% to $14.3 million in fiscal 2007, compared with net sales of $12.3 million in fiscal 2006. In fiscal 2007, product net sales, consisting of selective electrochemical finishing equipment and solutions, increased 11.4% to $7.1 million, compared with $6.3 million in fiscal 2006. In fiscal 2007, customized selective electrochemical finishing contract service net sales increased 21.5% to $7.1 million, compared with $5.8 million in fiscal 2006.
During fiscal 2007, the ASC Group's selling, general and administrative expenses decreased $0.3 million to $4.4 million, or 31.0% of net sales, compared with $4.7 million, or 38.4% of net sales, in fiscal 2006. The principal reason for the $0.3 million decrease in selling, general and administrative expenses in fiscal 2007 as compared to fiscal 2006 was the reduction in headcount and related expenses, which was partially offset by $0.1 million of severance and related charges incurred in fiscal 2007.
The ASC Group's operating income in fiscal 2007 was $1.0 million, compared with an operating loss of $0.6 million in fiscal 2006. Operating results improved principally due to (i) the positive impact on margins of the significantly higher net sales volumes in fiscal 2007, while maintaining a relatively fixed cost structure, compared with fiscal 2006 and (ii) the aforementioned $0.3 million reduction in selling, general and administrative expenses. Corporate Unallocated Expenses
Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other corporate expenses, were $1.7 million in fiscal 2007 compared $1.6 million in fiscal 2006. During fiscal 2007, a $0.3 million reduction in compensation expense due principally to a management restructuring (after the sale of the Large Aero Business of the Repair Group's business that occurred in fiscal 2006) was offset by a $0.4 million increase in incentive expense related to payments earned as a result of (i) the successful completion of certain strategic initiatives and (ii) the Company's significantly improved operating results in fiscal 2007. Legal and professional expenses related to the sale of the Company's Industrial Repair Business that were charged to corporate unallocated expenses in the first two quarters of fiscal 2007 were reclassified in the third quarter of fiscal 2007 to loss on sale of business, which is included in income (loss) from discontinued operations, net of tax. Other/General
Interest expense from continuing operations was $0.2 million in fiscal 2007, compared with a nominal amount in fiscal 2006. The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company's credit agreements in fiscal years 2007 and 2006.

                                                       Weighted Average                           Weighted Average
                                                         Interest Rate                          Outstanding Balance
                                                   Year Ended September 30,                   Year Ended September 30,
Credit Agreement                                     2007               2006                  2007                   2006
Revolving credit agreement                              8.8 %             8.4 %           $1.4 million           $0.7 million
Debt purchase agreement (1)                             N/A               4.6 %                    N/A           $0.7 million

(1) Debt purchase agreement was with an Irish bank and was paid off during the third quarter of fiscal 2006. Interest expense related to this debt is included in income
(loss) from discontinued operations.

During fiscal 2007, in addition to recognizing at statutory rates the utilization of $3.6 million of the Company's available U.S. net operating loss carry forwards, the Company (i) provided $1.8 million of U.S. deferred income taxes on the undistributed earnings of its non-U.S. subsidiaries that are available for distribution as of September 30, 2007; (ii) reversed a substantial portion of the valuation allowance previously established against its net deferred tax assets and, accordingly, recognized a U.S. deferred income tax benefit of approximately $3.0 million, as explained more fully in Note 6 to the Consolidated Financial Statements in Item 8; and (iii) recognized the benefit of the excess tax basis of the Company's property, plant and equipment of $0.7 million. The Company's total non-U.S. income tax provision was $0.1 million.

B. Liquidity and Capital Resources
Cash and cash equivalents increased to $10.4 million at September 30, 2008, compared with $5.5 million at September 30, 2007. At September 30, 2008, $5.5 million of the Company's cash and cash equivalents are 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 statutory restriction, adverse tax consequences or other limitations.
The Company's operating activities provided $9.7 million of cash (of which $9.8 million was provided by continuing operations) in fiscal 2008, compared with $4.4 million of cash used by operating activities (of which $1.1 million was used for continuing operations) in fiscal 2007. The $9.8 million of cash . . .