This Form 10-K, including 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 aerospace and power generation 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 and other providers of credit;
(2) future business environment, including capital and consumer spending;
(3) competitive factors, including the ability to replace business which may be lost; (4) successful development of turbine component repair processes and/or procurement of new repair process licenses from turbine engine manufacturers and/or the Federal Aviation Administration; (5) metals and commodities price increases and the Company's ability to recover such price increases;
(6) successful development and market introduction of new products and services;
(7) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (8) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (9) 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; (10) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; and (11) the ability to successfully integrate businesses that may be acquired into the Company's operations.

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 both conventional and precision forging, heat-treating, coating, welding, precision component machining and selective plating. The products include conventional and precision forged components, machined forged components, other machined metal components, remanufactured component parts for turbine engines, and selective plating solutions and equipment. The Company's operations are conducted in three business segments: (1) Forged Components 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 build rate for industrial gas turbine engines, (iii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft as well as the engines that power such aircraft, and (iv) anticipated exploration and production activities relative to oil and gas products, etc.

The primary factor that impacts the operating income of all three of the Company's business segments, in a similar manner, is net sales and related production volumes. This is due to the fact that each of the Company's segments 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 segments' 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.

A. Results of Operations

Non-GAAP Financial Measures

Presented below is certain financial information based on our EBITDA and Adjusted EBITDA. References to "EBITDA" mean earnings 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 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;

• Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations; and

• Adjusted EBITDA excludes the cash expense the Company has incurred to acquire businesses.

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, net sales and operating profit, 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 income 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.

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA:

        (Dollars in thousands)                              September 30,
                                                          2012         2011
        Net income                                      $  6,548     $  7,449
        Adjustments:
        Depreciation and amortization expense              6,671        4,386
        Interest expense, net                                438           82
        Income tax provision                               2,852        3,789

        EBITDA                                            16,509       15,706
        Adjustments:
        Inventory purchase accounting adjustments (1)        437          202
        Acquisition transaction-related expenses (2)         407          301
        Equity compensation expense (3)                      892          547
        LIFO provision (4)                                 1,563          479

        Adjusted EBITDA                                 $ 19,808     $ 17,235

(1) Represents accounting adjustments to inventory associated with acquisitions of businesses that were charged to cost of sales when the inventory was sold.

(2) Represents transaction-related costs comprising legal, financial and tax due diligence expenses; and valuation services costs that are required to be expensed as incurred.

(3) Represents the equity based compensation expense recognized by the Company under its 2007 Long-Term Incentive Plan.

(4) Represents the increase in the reserve for inventories for which cost is determined using the last-in, first-out ("LIFO") method.

Net sales in fiscal 2012 increased 16.5% to $125.1 million, compared with $107.4 million in fiscal 2011. Net income in fiscal 2012 was $6.6 million, compared with $7.4 million in fiscal 2011. EBITDA in fiscal 2012 was $16.5 million, or 13.2% of net sales, compared with $15.7 million, or 14.6% of net sales, in the comparable period in fiscal 2011. Adjusted EBITDA in fiscal 2012 was $19.8 million, or 15.8% of net sales, compared with $17.2 million, or 16.1% of net sales, in the comparable period in fiscal 2011. See "Non-GAAP Financial Measures" above for certain information regarding EBITDA and Adjusted EBITDA, including reconciliations of EBITDA and Adjusted EBITDA to net income. As discussed more fully in Note 12 to the consolidated financial statements, the Company completed the purchase of the forging businesses and substantially all related operating assets of QAF and TWF on October 28, 2011 and December 10, 2010, respectively.

Forged Components Group ("Forge Group")

The Forge Group consists of the production, heat-treatment, surface-treatment, non-destructive testing, and machining of both conventional and precision forged components in various steel, titanium and aluminum alloys utilizing a variety of processes for application principally in the aerospace and power generation industries. The Forge Group's results for fiscal 2012 include the results of QAF from the date of its acquisition. The Forge Group's results for fiscal 2011 include the results of TWF from the date of acquisition. Net sales in fiscal 2012 increased 22.3% to $102.9 million, compared with $84.1 million in fiscal 2011. The Forge Group produces forged components for (i) turbine engines that power commercial business and regional aircraft as well as military aircraft and armored military vehicles; (ii) airframe applications for a variety of aircraft;
(iii) industrial gas turbine engines for power generation units; and (iv) other commercial applications. Net sales comparative information for fiscal 2012 and 2011, respectively, is as follows:

     (Dollars in millions)                            Year Ended
                                                    September 30,         Increase
     Net Sales                                     2012        2011      (Decrease)
     Aerospace components for:
     Fixed wing aircraft                          $  52.9     $ 36.3     $      16.6
     Rotorcraft                                      28.2       26.4             1.8
     Components for power generation units           17.1       16.2             0.9
     Commercial product sales and other revenue       4.7        5.2            (0.5 )

     Total                                        $ 102.9     $ 84.1     $      18.8

The increase in net sales of forged components for fixed wing aircraft and rotorcraft during fiscal 2012, compared with fiscal 2011, is principally due to the impact of the acquisition of QAF during the first quarter of fiscal 2012. The increase in net sales of components for power generation units is due to the full year impact in fiscal 2012 of the acquisition of TWF during the first quarter of fiscal 2011.

The Forge Group's aerospace components have both military and commercial applications. Net sales of such components that solely have military applications were $35.5 million in fiscal 2012, compared with $32.5 million in fiscal 2011. This increase is primarily attributable to the acquisition of QAF. Demand for additional military helicopters and related replacement components are the primary drivers of such military sales demand.

The Forge Group's cost of goods sold increased $16.3 million to $81.1 million, or 78.8% of net sales, during fiscal 2012, compared with $64.8 million, or 77.0% of net sales in fiscal 2011. Cost of goods sold as a percentage of net sales reflected an increase in fiscal 2012, compared to fiscal 2011, due to the net impact of the changes in the following components of manufacturing related expenditures:

• The material component of manufacturing costs was approximately 36.3% of net sales during fiscal 2012, compared with 39.1% of net sales in fiscal 2011, due primarily to the mix of product-a higher concentration of products, with lower material content, were sold during the fiscal 2012, compared with fiscal 2011.

• All other manufacturing costs were approximately 42.5% of net sales during fiscal 2012, compared with 37.9% of net sales in the comparable period in fiscal 2011. Labor costs, as a percentage of net sales, were higher principally due to the mix of product-a higher concentration of products with higher labor content were sold during fiscal 2012, compared with the comparable period in fiscal 2011. The Forge Group also experienced a reduction in its labor efficiency during fiscal 2012, compared with fiscal 2011. The following changes in the components of the Forge Group's other manufacturing overhead expenditures during fiscal 2012 compared with fiscal 2011, a portion of which was due to the acquisitions of QAF and TWF, also impacted cost of goods sold:

--------------------------------------------------------------------------------
         (Dollars in millions)                   Year Ended
                                               September 30,          Increase
         Manufacturing expenditures           2012        2011       (Decrease)
         Overhead:
         Utilities                           $   4.7      $ 4.4     $        0.3
         Repairs, maintenance and supplies       4.6        3.4              1.2
         Depreciation                            2.9        1.5              1.4
         Rent                                    0.5        0.0              0.5
         Tooling                                 3.3        2.6              0.7

Manufacturing costs in fiscal 2012, compared with the same period in fiscal 2011, increased due to (i) an increase in manufacturing expenditures required to support the $18.8 million of additional product sales volume for the Forge Group and (ii) an increase in depreciation and rent expense, all of which were primarily attributable to the acquisitions of TWF and QAF. These higher costs were partially offset by a decrease in the price paid for natural gas in fiscal 2012, compared with fiscal 2011.

The Forge Group's selling, general and administrative expenses increased $2.4 million to $8.9 million, or 8.6% of net sales, in fiscal 2012, compared with $6.5 million, or 7.7% of net sales, in fiscal 2011. The increase in selling, general and administrative expenses is principally due to (i) a $1.0 million increase in amortization of intangible assets related to the acquisitions of TWF and QAF and (ii) a $1.2 million increase in relative spending levels due to the impact of the acquisitions of TWF and QAF. The Forge Group's selling, general and administrative expenses in fiscal 2012, before the impact of the amortization of intangible assets, was $6.0 million, or 5.8% of net sales, compared with $4.6 million, or 5.4% of net sales, in fiscal 2011.

The Forge Group's operating income decreased $0.1 million to $12.9 million in fiscal 2012, compared with $13.0 million in fiscal 2011. The following is a comparison of operating income on both a LIFO and FIFO basis:

       (Dollars in millions)                       Year Ended
                                                 September 30,         Increase
       Operating Income                         2012        2011      (Decrease)
       Operating income                        $  12.9     $ 13.0     $      (0.1 )
       LIFO expense                                1.6        0.5             1.1

       Operating income without LIFO expense   $  14.5     $ 13.5     $       1.0

The Forge Group's operating income in fiscal 2012 was favorably impacted by the increase in gross profit generated from $20.5 million of additional product sales volumes for TWF and QAF plus the net impact of the other cost of goods sold and selling, general and administrative expense factors noted above.

Turbine Component Services and Repair Group ("Repair Group")

During fiscal 2012, net sales, which consist principally of component repair services (including precision component machining and industrial coatings) for small aerospace turbine engines, decreased 20.6% to $7.2 million, compared with $9.0 million in fiscal 2011. The decrease in net sales during fiscal 2012, compared with fiscal 2011, is attributable to a decrease in product sales volumes.

The Repair Group's cost of goods sold decreased $0.5 million to $7.2 million or 100.4% of net sales in fiscal 2012, compared with $7.7 million or 85.6% of net sales fiscal 2011. Cost of goods sold as a percentage of net sales reflected an increase in fiscal 2012, compared to fiscal 2011, due principally to the Repair Group maintaining a minimum/base cost structure that has a large fixed component that is determined necessary to sustain an operation with relevant capabilities.

During fiscal 2012, the Repair Group's selling, general and administrative expenses were $1.4 million, or 19.3% of net sales, compared with $1.6 million, or 17.5% of net sales, in fiscal 2011. The Repair Group's decrease in selling, general and administrative expenses is principally attributable to $0.2 million of expense related to the impairment of a long-lived asset recognized in fiscal 2011.

Applied Surface Concepts Group ("ASC Group")

Net sales in fiscal 2012 increased 6.1% to $15.0 million, compared with $14.2 million in fiscal 2011. For purposes of the following discussion, (i) product net sales consist of selective plating equipment and solutions and (ii) contract service net sales consist of customized selective plating services. Net sales comparative information for fiscal 2012 and 2011, respectively, is as follows:

               (Dollars in millions)       Year Ended
                                         September 30,          Increase
               Net Sales                2012        2011       (Decrease)
               Product                 $   7.3     $  6.6     $        0.7
               Contract service            7.5        7.4              0.1
               Other                       0.2        0.2              0.0

               Total                   $  15.0     $ 14.2     $        0.8

The increase in product net sales in fiscal 2012, compared with fiscal 2011, is attributed to an increase in net sales volumes of selective plating equipment and solutions, as well as a general price increase implemented at the beginning of the second quarter of fiscal 2012. A portion of the ASC Group's business is conducted in Europe and is denominated in local European currencies. Fluctuations in currency exchange rates during fiscal 2012, compared with fiscal 2011, had a nominal impact on net sales.

The ASC Group's cost of goods sold increased $0.3 million to $8.7 million, or 58.1% of net sales, during fiscal 2012, compared with $8.4 million, or 59.0% of net sales, in fiscal 2011. Cost of goods sold as a percentage of net sales reflected a decrease in fiscal 2012, compared to fiscal 2011, due principally to the following:

• The material component of cost of goods sold was approximately 19.5% of net sales during fiscal 2012, compared with 18.5% of net sales in fiscal 2011, due principally to certain higher commodity prices and the mix of product-a higher concentration of products and contract services, with higher material content, were sold during fiscal 2012, compared with fiscal 2011.

• All other cost of goods sold were approximately 38.6% of net sales during fiscal 2012, compared with 40.5% of net sales in fiscal 2011. The primary reason for the reduction of all other cost of goods sold as a percentage of net sales is the impact of higher sales volumes during fiscal 2012, compared with fiscal 2011, which allowed the ASC Group to favorably leverage the fixed component of its operating cost structure.

The ASC Group's selling, general and administrative expenses were $5.2 million, or 34.8% of net sales, in fiscal 2012, compared with $4.8 million, or 33.7% of net sales in fiscal 2011. The $0.4 million increase is due primarily to an increase in sales promotion efforts and the filling of an open sales position.

The ASC Group's operating income in fiscal 2012 was $1.1 million, compared with $1.0 million in fiscal 2011.

Corporate Unallocated Expenses

Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other expenses that are not related to and, therefore, not allocated to the business segments, were $3.2 in fiscal 2012, compared with $2.9 million in fiscal 2011. The $0.3 million increase is due to a $0.2 million increase in legal and professional expenses principally to support the acquisition of QAF, a $0.3 million increase in the Company's long-term equity incentive plan expense, partially offset by a $0.3 million decrease in the Company's annual cash incentive plan expense.

Interest expense was $0.5 million in fiscal 2012, compared to $0.1 million in fiscal 2011. As described more fully in note 6 to the consolidated financial statements included in Item 8, in connection with the October 2011 acquisition of the QAF business, the Company borrowed $12.4 million from its revolving credit agreement and $10.0 million on a term note, and issued a $2.4 million promissory note to the seller of the QAF business. The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company's debt agreement in fiscal 2012 and 2011:

                                            Weighted Average                        Weighted Average
                                              Interest Rate                       Outstanding Balance
                                        Year Ended September 30,                Year Ended September 30,
                                         2012                2011               2012                2011
Revolving credit agreement                    1.3 %             1.3 %      $ 11.9 million       $ 4.0 million
Term note                                     2.9 %             N/A        $  9.0 million                 N/A
Promissory note                               2.0 %             N/A        $  2.3 million                 N/A

Other income, net consists principally of $0.4 million of rental income earned from the lease of the Cork, Ireland facility.

The Company believes that inflation did not materially affect its results of operations in either fiscal 2012 or 2011, and does not expect inflation to be a significant factor in fiscal 2013.

Income Tax Provision

The Company's effective tax rate in fiscal 2012 was 30%, compared to 34% in fiscal 2011, and differs from the U.S. federal statutory rate due primarily to
(i) the impact of U.S. state and local taxes, (ii) domestic production activities deduction, (iii) application of tax credits, and (iv) the recognition of federal income taxes on undistributed earnings of non-U.S. subsidiaries.

B. Liquidity and Capital Resources

Cash and cash equivalents increased to $7.2 million at September 30, 2012, compared with $6.4 million at September 30, 2011, At September 30, 2012, essentially all of the $7.2 million of the Company's cash and cash equivalents are in the possession of its non-U.S. subsidiaries for purposes of (i) funding the respective subsidiary businesses' current operations outside the U.S. and
(ii) to fund potential future investment outside the U.S. In the future, if the Company determines that there is no longer a need to maintain such cash within its non-U.S. operations, it may elect to distribute such cash to its U.S. operations. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.

The Company's operating activities provided $9.8 million of cash in fiscal 2012 compared with $10.2 million in fiscal 2011. The $9.8 million of cash provided by operating activities in fiscal 2012 was primarily due to (i) net income of $6.6 million, (ii) $8.7 million from the net impact of such non-cash items as depreciation and amortization expense, deferred taxes, equity compensation expense and LIFO expense and (iii) a $1.1 million decrease in accounts receivable. These items were partially offset by a $6.1 million increase in inventories. These changes in the components of working capital do not reflect the impact of the opening balance sheet related to the acquisition of QAF and were due primarily to factors resulting from normal business conditions of the Company, including (i) building inventory in response to customer demand,
(ii) the relative timing of collections from customers and (iii) the relative timing of payments to suppliers and tax authorities.

Capital expenditures were $3.5 million in fiscal 2012 compared with $3.3 million in fiscal 2011. Capital expenditures during fiscal 2012 consisted of $2.9 million by the Forge Group, $0.2 million by the ASC Group and $0.4 million by the Repair Group. In addition to the $3.5 million expended during fiscal 2012, $0.2 million has been committed as of September 30, 2012. The Company anticipates that total fiscal 2013 capital expenditures will be within the range of $4.0 to $5.0 million and will relate principally to the further enhancement of production and product offering capabilities across all three of the Company's business groups.

In the fourth quarter of fiscal 2012, the Company declared a special cash dividend of $0.20 per common share, which will result in a cash expenditure of $1.1 million during first quarter of fiscal 2013.

As described more fully in note 12 to the consolidated financial statements included in Item 8, the Company acquired a forging business in October 2011 for approximately $24.8 million at closing. The acquisition was financed by borrowing