☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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).

As of January 31, ~~2023,~~2024, there were outstanding ~~10,638,041~~10,828,327 shares of the registrant’s common stock, par value $0.10 per share.

As of December 31, ~~2022~~2023 and March 31, ~~2022~~2023 and for the three and nine months ended December 31, ~~2022~~2023 and ~~2021~~2022

NOTE 56 – EQUITY-BASED COMPENSATION:

The 2020 Graham Corporation Equity Incentive Plan, as amended (the "2020 Plan"), ~~as approved by the Company’s stockholders at the annual meeting of stockholders on August 11, 2020,~~ provides for the issuance of ~~422~~722 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, restricted stock units and stock awards to officers, key employees and outside ~~directors. The shares available for issuance under the 2020 Plan include~~directors, including 112 shares that ~~remained~~became available under the ~~Company’s~~2020 Plan from the Company's prior plan, the Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value (the"2000 Plan")~~, at the time the 2020 Plan was adopted.~~. As of August 11, 2020, the effective date of the 2020 Plan, no further awards will be granted under the 2000 Plan. ~~However,~~

13No ~~shares of unvested~~time vesting restricted stock ~~under the 2000 Plan remains subject to the terms of such plan until the time such shares of~~units ("RSUs") or performance based restricted stock ~~vest or are forfeited.~~units ("PSUs") were granted in the three months ended December 31, 2023 and 2022.

The following restricted stock units were granted in the nine months ended December 31, ~~2022:~~2023:

Nine Months Ended

December 31,

2022

Officers

$
186

Directors

37

$
223

~~112~~


	Vest 100% on First		Vest One-Third Per Year		Vest 100% on Third
	Anniversary (1)		Over Three-Year Term (1)		Anniversary (1)
			Officers and		Officers and		Total Shares
Nine months ended December 31,	Directors		Key Employees		Key Employees		Awarded
2023
Time Vesting RSUs	38		40			—	78
Performance Vesting PSUs		—		—	79		79
2022
Time Vesting RSUs	37		56		18		111
Performance Vesting PSUs		—		—	112		112

(1) ~~restricted stock units, granted~~Subject to ~~officers, vest~~ ~~100% on~~ the ~~third anniversary~~terms of the ~~grant date subject to the satisfaction of the performance metrics for the~~ applicable award.~~three-year~~ ~~period.~~ 56 ~~restricted stock units, granted to officers, vest~~ ~~33⅓% per year over a~~ ~~three-year~~ ~~term.~~ 18 ~~restricted stock units, granted to an officer, vest~~ ~~100% on the third anniversary of the grant date.~~ 37 ~~restricted stock units, granted to directors, vest~~ ~~100% on the~~ ~~first year~~ ~~anniversary of the grant date.~~ No ~~restricted stock units were granted in the nine months ended December 31, 2021.~~

No ~~restricted stock awards were granted in the three-month periods ended December 31, 2022 and 2021.~~ ~~162~~ ~~restricted stock awards were granted in the nine-month period ended December 31, 2021.~~ 88 ~~restricted shares were granted to officers in fiscal 2022 that vest~~ ~~100% on the third anniversary of the grant date, subject to the satisfaction of the performance metrics for the applicable three-year period.~~ 54 ~~restricted shares granted to officers and key employees in fiscal 2022 vest~~ ~~33⅓% per year over a~~ ~~three-year~~ ~~term.~~ 20 ~~restricted shares granted to directors in fiscal 2022 vest~~ ~~100% on the~~ ~~first year~~ ~~anniversary of the grant date.~~ No ~~stock option awards were granted in the nine-month periods ended December 31, 2022 and 2021.~~

The Company has an Employee Stock Purchase Plan, as amended (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the lower of the last or first day of the six-month offering period. As of December 31, ~~2022,~~2023, a total of 400 shares of common stock may be purchased under the ESPP.

The Company has recognized equity-based compensation costs as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	December 31,				December 31,				December 31,				December 31,
	2022		2021		2022		2021		2023		2022		2023		2022
Restricted stock awards	$	106	$	260	$	201	$	575	$	77	$	106	$	241	$	201
Restricted stock units		157		—		368		—		256		157		701		368
Employee stock purchase plan		7		9		13		24		44		7		60		13
	$	270	$	269	$	582	$	599	$	377	$	270	$	1,002	$	582

Income tax benefit recognized	$	60	$	59	$	128	$	132	$	84	$	60	$	223	$	128

NOTE 67 – INCOME ~~(LOSS)~~ PER SHARE:

Basic income ~~(loss)~~ per share is computed by dividing net income ~~(loss)~~ by the weighted average number of common shares outstanding for the period. Diluted income ~~(loss)~~ per share is calculated by dividing net income ~~(loss)~~ by the weighted average number

of common shares outstanding and, when applicable, potential common shares outstanding during the period. A reconciliation of the numerators and denominators of basic and diluted income ~~(loss)~~ per share is presented below:


	Three Months Ended					Nine Months Ended					Three Months Ended				Nine Months Ended
	December 31,					December 31,					December 31,				December 31,
	2022		2021			2022		2021			2023		2022		2023		2022
Basic income (loss) per share
Basic income per share
Numerator:
Net income (loss)	$	368	$	(3,730	)	$	848	$	(7,348	)
Net income											$	165	$	368	$	3,216	$	848
Denominator:
Weighted average common shares outstanding		10,611		10,638			10,613		10,507			10,775		10,611		10,709		10,613
Basic income (loss) per share	$	0.03	$	(0.35	)	$	0.08	$	(0.70	)
											$	0.02	$	0.03	$	0.30	$	0.08
Diluted income (loss) per share

Diluted income per share
Numerator:
Net income (loss)	$	368	$	(3,730	)	$	848	$	(7,348	)
Net income											$	165	$	368	$	3,216	$	848
Denominator:
Weighted average common shares outstanding		10,611		10,638			10,613		10,507			10,775		10,611		10,709		10,613
Restricted stock units outstanding		49		—			19		—			145		49		83		19
Weighted average common and potential common shares outstanding		10,660		10,638			10,632		10,507			10,920		10,660		10,792		10,632
Diluted income (loss) per share	$	0.03	$	(0.35	)		0.08	$	(0.70	)
Diluted income per share											$	0.02	$	0.03	$	0.30	$	0.08

NOTE 78 – PRODUCT WARRANTY LIABILITY:

The reconciliation of the changes in the product warranty liability is as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31,						December 31,						December 31,						December 31,
	2022			2021			2022			2021			2023			2022			2023			2022
Balance at beginning of period	$	487		$	449		$	441		$	626		$	638		$	487		$	578		$	441
BN warranty accrual acquired		—			—			—			169
Expense (income) for product warranties		238			19			326			(2	)
Expense for product warranties														63			238			266			326
Product warranty claims paid		(4	)		(35	)		(46	)		(360	)		(7	)		(4	)		(150	)		(46	)
Balance at end of period	$	721		$	433		$	721		$	433		$	694		$	721		$	694		$	721

~~Income of $~~2 ~~for product warranties in the nine months ended December 31, 2021 resulted from the reversal of provisions made that were no longer required due to lower claims experience.~~

The product warranty liability is included in the line item "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets.

NOTE 89 – CASH FLOW STATEMENT:

Interest ~~paid was $722~~and $~~263~~ ~~in the nine-month periods ended December 31, 2022 and 2021, respectively. Income~~income taxes paid ~~for the nine months ended December 31, 2022~~as well as non-cash investing and ~~2021 were $160~~ ~~and $1,388, respectively.~~financing activities are as follows:

~~At December 31, 2022 and 2021, there were $768~~


	For the Nine Months Ended December 31,
	2023		2022
Interest paid	$	726	$	722
Income taxes paid		424		160
Issuance of shares as part of the consideration of the P3 acquisition		2,117		—
Capital purchases recorded in accounts payable		699		768

~~and $~~80, respectively, of capital purchases that were recorded in accounts payable and are not included in the caption "Purchase of property, plant and equipment" in the Condensed Consolidated Statements of Cash Flows.

The $~~59,563~~6,812 of cash utilized for the acquisition of BNP3 Technologies, LLC included cash consideration of $~~61,150~~7,098, net of cash acquired of $~~1,587. Upon completion of the final purchase price allocation and after the adjustments made during the measurement period, the cash utilized for the acquisition was $60,282, including cash consideration of $61,150, net of cash acquired of $868. In the nine months ended December 31, 2021, non-cash activities included the issuance of~~ ~~610~~ ~~treasury shares valued at $8,964, included as part of the consideration for the acquisition.~~

~~In the nine months ended December 31, 2021, non-cash activities included pension adjustments, net of income tax, of $~~68286.

NOTE 910 – COMMITMENTS AND CONTINGENCIES:

The Company has been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in, or accompanying, products made by the Company. The Company is a co-defendant with numerous other defendants in these lawsuits and intends to vigorously defend itself against these claims. The claims in the Company’s current lawsuits are similar to those made in previous asbestos-related suits that named the Company as a defendant, which either were dismissed when it was shown that the Company had not supplied products to the plaintiffs’ places of work or were settled for immaterial amounts. The Company cannot provide any assurances that any pending or future matters will be resolved in the same manner as previous lawsuits.

During the third quarter of fiscal 2024, the Audit Committee of the Board of Directors, with the assistance of external counsel and forensic professionals, concluded an investigation into a whistleblower complaint received regarding Graham India Private Limited ("GIPL"). The investigation identified both evidence supporting the complaint and other misconduct by employees. The other misconduct totaled $150 over a period of four years and was isolated to GIPL. All involved employees have been terminated and the Company has implemented remedial actions, including strengthening its compliance program and internal controls. As a result of the investigation, during the third quarter of fiscal 2024, the statutory auditor and bookkeeper of GIPL tendered their resignations and new firms were appointed. The Company has voluntarily reported the findings of its investigation to the appropriate authorities in India and the U.S. Department of Justice and the Securities and Exchange Commission. Although the resolutions of these matters are inherently uncertain, we do not believe any remaining impact will be material to the Company’s overall consolidated results of operations, financial position, or cash flows. For the first nine months of fiscal 2024 the Company has incurred approximately $750 in costs related to this investigation.

As of December 31, ~~2022,~~2023, the Company was subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business.

Although the outcome of the lawsuits, legal proceedings or potential claims to which the Company is, or may become, a party to cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, management does not believe that the outcomes, either individually or in the aggregate, will have a material ~~adverse~~ effect on the Company’s results of operations, financial position or cash flows.

The Company previously entered into related party operating leases with Ascent Properties Group, LLC ("Ascent"), for two building lease agreements and two equipment lease agreements in Arvada, Colorado. In connection with such leases, the Company made fixed minimum lease payments to the lessor of $243 and $211 during the three months ended December 31, 2023 and 2022, respectively, and $709 and $632 during the nine months ended December 31, 2023 and 2022, respectively. The Company is obligated to make payments of $243 during the remainder of fiscal 2024. Future fixed minimum lease payments under these leases as of December 31, 2023 are $6,028.

NOTE 1011 – INCOME TAXES:

The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for the tax years ~~2018~~2019 through ~~2021~~2022 and examination in state tax jurisdictions for the tax years ~~2017~~2018 through ~~2021~~2022. The Company is subject to examination in the People’s Republic of China for tax years ~~2018~~2019 through ~~2021~~2022 and in India for tax ~~year~~years ~~2018~~2019 through ~~2021~~2022.

There was no liability for unrecognized tax benefits at either December 31, ~~2022~~2023 or March 31, ~~2022.~~2023.

NOTE 1112 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

The changes in accumulated other comprehensive loss by component for the nine months ended December 31, ~~2022~~2023 and ~~2021~~2022 are as follows:

Pension and
Other
Postretirement
Benefit Items

Foreign
Currency
Items

Total

Balance at April 1, 2022

$
(6,970
)

$
499

$
(6,471
)
Other comprehensive loss before reclassifications

—

(519
)

(519
)
Amounts reclassified from accumulated other comprehensive
loss

393

—

393

Net current-period other comprehensive income (loss)

393

(519
)

$
(126
)
Balance at December 31, 2022

$
(6,577
)

$
(20
)

$
(6,597
)


	Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2023	$	(7,470	)	$	7		$	(7,463	)
Other comprehensive income before reclassifications		—			(173	)		(173	)
Amounts reclassified from accumulated other comprehensive loss		492			—			492
Net current-period other comprehensive income (loss)		492			(173	)		319
Balance at December 31, 2023	$	(6,978	)	$	(166	)	$	(7,144	)

Pension and
Other
Postretirement
Benefit Items

Foreign
Currency
Items

Total

Balance at April 1, 2021

$
(7,698
)

$
301

$
(7,397
)
Other comprehensive income before reclassifications

68

201

269

Amounts reclassified from accumulated other comprehensive
loss

563

—

563

Net current-period other comprehensive income

631

201

832

Balance at December 31, 2021

$
(7,067
)

$
502

$
(6,565
)


	Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2022	$	(6,970	)	$	499		$	(6,471	)
Other comprehensive income before reclassifications		—			(519	)		(519	)
Amounts reclassified from accumulated other comprehensive loss		393			—			393
Net current-period other comprehensive income (loss)		393			(519	)	$	(126	)
Balance at December 31, 2022	$	(6,577	)	$	(20	)	$	(6,597	)

The reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended December 31, ~~2022~~2023 and ~~2021~~2022 are as follows:


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss								Affected Line Item in the Condensed Consolidated Statements of Income	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Condensed Consolidated Statements of Income
	Three Months Ended									Three Months Ended
	December 31,									December 31,
	2022				2021					2023			2022
Pension and other postretirement benefit items:
Amortization of actuarial loss	$	(169	)	(1)	$	(270	)	(1)	Loss before benefit for income taxes	$	211	(1)	$	169	(1)	Income before benefit for income taxes
Tax effect											47			38		(Benefit) provision for income taxes
		(38	)			(60	)		Benefit for income taxes	$	164		$	131		Net income
	$	(131	)		$	(210	)		Net loss

Details about Accumulated Other
Comprehensive Loss Components

Amount Reclassified from
Accumulated Other
Comprehensive Loss

Affected Line Item in the Condensed
Consolidated Statements of Income

Nine Months Ended

December 31,

2022

2021

Pension and other postretirement benefit items:

Amortization of actuarial loss

$
(505
)
(1)

$
(725
)
(1)

Loss before benefit for income taxes

(112
)

(162
)

Benefit for income taxes

$
(393
)

$
(563
)

Net loss


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item in the Condensed Consolidated Statements of Income
	Nine Months Ended
	December 31,
	2023			2022
Pension and other postretirement benefit items:
Amortization of actuarial loss	$	632	(1)	$	505	(1)	Income before benefit for income taxes
Tax effect		140			112		(Benefit) provision for income taxes
	$	492		$	393		Net income

(1)

These accumulated other comprehensive loss components are included within the computation of pension and other postretirement benefit costs.

NOTE ~~12 – LEASES:~~

The Company leases certain manufacturing facilities, office space, machinery and office equipment. An arrangement is considered to contain a lease if it conveys the right to use and control an identified asset for a period of time in exchange for consideration. If it is determined that an arrangement contains a lease, then a classification of a lease as operating or finance is determined by evaluating the five criteria outlined in the lease accounting guidance at inception. Leases generally have remaining terms of ~~one year~~ to ~~five years~~, whereas leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets. The depreciable life of leased assets related to finance leases is limited by the expected term of the lease, unless there is a transfer of title or purchase option that the Company believes is reasonably certain of exercise. ~~Certain leases include options to renew or terminate. Renewal options are exercisable per the discretion of the Company and vary based on the nature of each lease.~~ The term of the lease includes renewal periods only if the Company is reasonably certain that it will exercise the renewal option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the cost of moving to another location, the cost of disrupting operations, whether the purpose or location of the leased asset is unique and the contractual terms associated with extending the lease. The Company’s lease agreements do not contain any residual value guarantees or any material restrictive covenants and the Company does not sublease to any third parties. As of December 31, 2022, the Company did not have any material leases that have been signed but not commenced.

Right-of-use ("ROU") lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments in exchange for that right of use. Finance lease ROU assets and operating lease ROU assets are included in the line items "Property, plant and equipment, net" and "Operating lease assets", respectively, in the Condensed Consolidated Balance Sheets. The current portion and non-current portion of finance and operating lease liabilities are all presented separately in the Condensed Consolidated Balance Sheets.

The Company previously entered into related party operating leases with Ascent Properties Group, LLC ("Ascent"), for an office and manufacturing building in Arvada, Colorado, as well as machinery and equipment. During the third quarter of fiscal 2023, the Company entered into another lease with Ascent for another manufacturing building in Arvada, Colorado. In connection with such leases, the Company made fixed minimum lease payments to the lessor of $~~211~~ ~~and $632~~ ~~during the three and nine-month periods ended December 31, 2022, respectively, and is obligated to make payments of $211~~ ~~during the remainder of fiscal 2023. Future fixed minimum lease payments under these leases as of December 31, 2022 are $6,738~~.

The discount rate implicit within the Company’s leases is generally not readily determinable, and therefore, the Company uses an incremental borrowing rate in determining the present value of lease payments based on rates available at commencement.

~~The weighted average remaining lease term and discount rate for finance and operating leases are as follows:~~

December 31,

December 31,

2022

2021

Finance Leases

Weighted-average remaining lease term in years

0.67

1.67

Weighted-average discount rate

10.67
%

10.67
%

Operating Leases

Weighted-average remaining lease term in years

7.22

7.72

Weighted-average discount rate

3.25
%

3.27
%

~~The components of lease expense are as follows:~~

Three Months Ended

Nine Months Ended

December 31,

December 31,

2022

2021

2022

2021

Finance lease cost:

Amortization of right-of-use assets

$
5

$
5

$
15

$
15

Interest on lease liabilities

—

1

2

4

Operating lease cost

355

384

1,026

924

Short-term lease cost

6

3

11

18

Total lease cost

$
366

$
393

$
1,054

$
961

~~Operating lease costs during the nine months ended December 31, 2022 and 2021 were included within cost of sales and selling, general and administrative expenses.~~

~~As of December 31, 2022, future minimum payments required under non-cancelable leases were:~~

Operating
Leases

Finance
Leases

Remainder of 2023

$
301

$
6

2024

1,293

11

2025

1,298

—

2026

1,309

—

2027

1,349

—

2028 and thereafter

4,328

—

Total lease payments

9,878

17

Less – amount representing interest

1,111

1

Present value of net minimum lease payments

$
8,767

$
16

~~NOTE~~ 13 – DEBT:

On ~~June 1, 2021, the Company entered into a $20,000five-year~~ ~~term loan with Bank of America. The term loan requires~~ ~~monthly~~ ~~principal payments of $167~~ through June 1, 2026, with the remaining principal amount plus all interest due on the maturity date. The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus ~~1.50%, subject to a~~ ~~0.00% floor.~~

~~Long term debt is comprised of the following:~~

December 31,

March 31,

2022

2022

Bank of America term loan

$
15,000

$
18,500

Less: unamortized debt issuance costs

(816
)

(122
)

14,184

18,378

Less: current portion

2,000

2,000

Total

$
12,184

$
16,378

~~As of December 31, 2022, future minimum payments required were as follows:~~

Remainder of 2023

$
500

2024

2,000

2025

2,000

2026

10,500

2027

—

2028 and thereafter

—

Total

$
15,000

~~On June 1, 2021,~~October 13, 2023, the Company terminated its revolving credit facility ~~agreement~~and repaid its term loan with ~~JPMorgan Chase~~ Bank ~~N.A.~~of America and entered into a new five-year revolving credit facility with Wells Fargo Bank, ~~of America~~National Association ("Wells Fargo") that ~~provided~~provides a $~~30,000~~35,000 line of credit ~~including~~and automatically increases to $50,000 upon the Company satisfying specified covenants (the "New Revolving Credit Facility"). The additional $15,000 will automatically be available upon (a) the Company achieving a minimum consolidated EBITDA, as defined in the agreement, of $15,000, computed on a trailing twelve month basis, for three consecutive quarters and (b) a minimum liquidity (consisting of cash and borrowing availability under the New Revolving Credit Facility) for the Company of at least $7,500. The New Revolving Credit Facility has a $25,000 sub-limit for letters of credit and ~~bank guarantees, expandable at~~ the ~~Company's option and~~Company may request the ~~bank's approval at any time~~issuance of cash secured letters of credit in an aggregate amount of up to $~~40,000~~7,500. As of December 31, ~~2022 and March 31, 2022,~~2023, there was $03,000 borrowed and $666 letters of credit outstanding on the ~~line~~New Revolving Credit Facility.

Long term debt as of ~~credit. Amounts outstanding~~March 31, 2023 was comprised of the following:


	March 31,
	2023
Bank of America term loan	$	12,500
Less: unamortized debt issuance costs		(756	)
		11,744
Less: current portion		2,000
Total	$	9,744

The New Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of Wells Fargo, which require the Company to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and (ii) a consolidated fixed charge coverage ratio of at least 1.20:1.00, in both cases computed in accordance with the definitions and requirements specified in the New Revolving Credit Facility. As of December 31, 2023, the Company was in compliance with the financial covenants of the New Revolving Credit Facility.

Borrowings under the ~~facility agreement~~New Revolving Credit Facility bear interest at a rate equal to, ~~BSBY~~at the Company’s option, either (i) a forward-looking term rate based on the secured overnight financing rate ("SOFR") for the applicable interest period, subject to a floor of 0.0% per annum or (ii) a base rate determined by reference to the highest of (a) the rate of interest per annum publicly announced by the Lender as its prime rate, (b) the federal funds rate plus0.50% per annum and (c) one-month term SOFR plus 1.00% per annum, subject to a floor of 1.00% per annum, plus, in each case, an applicable margin. The applicable margins range between (i) 1.25% per annum and 2.50% per annum in the case of any term SOFR loan and (ii) 0.25% per annum and 1.50%~~, subject to~~ per annum in the case of any base rate loan, in each case based upon the Company’s then-current consolidated total leverage ratio; provided, however, for a period of one year following the closing date, the applicable margin shall be set at 1.25% per annum in the case of any term SOFR loan and 0.25%~~0.00% floor.~~ per annum in the case of any base rate loan. As of December 31, ~~2022,~~2023, the ~~BSBY~~SOFR rate was ~~3.95916~~5.34%. ~~Outstanding~~

The Company is required to pay a quarterly commitment fee on the unused portion of the New Revolving Credit Facility during the applicable quarter at a per annum rate also determined by reference to the Company’s then-current consolidated total leverage ratio, which fee ranges between 0.10% per annum and 0.20% per annum; provided, however, for a period of one year following the closing date, the quarterly commitment fee will be set at 0.10% per annum. Any outstanding letters of credit that are cash secured will bear a fee equal to the daily amount available to be drawn under ~~this agreement~~such letters of credit multiplied by 0.65% per annum. Any outstanding letters of credit issued under the New Revolving Credit Facility will bear a fee equal to the daily amount drawn under such letters of credit multiplied by the applicable margin for term SOFR loans. As of December 31, 2023, the amount available under the New Revolving Credit Facility was $31,333, subject to the interest and leverage covenants.

In connection with the termination of the old revolving credit facility and term loan with Bank of America, the Company paid $752 in exit costs and recognized an extinguishment charge of $726.

As of December 31, 2023, $2,284 letters of credit remain outstanding with Bank of America and are cash secured. These outstanding letters of credit are subject to a fee of ~~1.50~~0.60% per ~~annum of the outstanding undrawn amount of each letter of credit that is not secured by cash and~~ ~~0.60% of each letter of credit that is secured by cash. Amounts available for borrowing under the revolving credit facility are subject to an unused commitment fee of~~ ~~0.25~~%.annum. As of December 31, ~~2022, there was~~2023, $~~5,954~~4,781 letters of credit ~~outstanding with Bank of America.~~

~~Under the original Bank of America term loan agreement and revolving credit facility, the Company covenanted to maintain a maximum total leverage ratio, as defined in such agreements, of~~ ~~3.0~~ ~~to 1.0, with an allowable increase to~~ ~~3.25~~ to ~~1.0~~ following an acquisition for a period of twelve months following the closing of the acquisition. In addition, the Company covenanted to maintain a minimum fixed charge coverage ratio, as defined in such agreements, of ~~1.2~~ to ~~1.0~~ ~~and minimum margined assets, as defined in such agreements, of~~ ~~100~~% of total amounts outstanding on the revolving credit facility, including letters of credit. At December 31, 2021, the Company was out of compliance with its bank agreement covenants and was granted a waiver for noncompliance by Bank of America.

The Company has entered into amendment agreements with Bank of America since origination. Under the amended agreements, the Company is not required to comply with the maximum total leverage ratio and the minimum fixed charge coverage ratio covenants contained in the original term loan agreement for the periods ending December 31, 2021 and March 31, June 30 and September 30, 2022. The principal balance outstanding on the line of credit may not exceed $~~15,000, unless letters of credit exceed $11,500, in which case the limit is $17,000~~, until the compliance date. The compliance date is defined as the date on which Bank of America has received all required financial information with respect to the Company for the fiscal year ending March 31, 2023 and no event of default exists. In addition, on or before September 1, 2023 and at all times thereafter, all of the Company's deposit accounts, except certain accounts, will be either subject to a deposit account control agreement or maintained with Bank of America. The Company covenants to maintain EBITDA, as defined in such amendment, of at least ($~~700) for the twelve-month period ending June 30, 2022 and $1,800~~ ~~for the twelve-month period ending September 30, 2022; maintain a total maximum leverage ratio of~~ ~~4.0~~ to ~~1.0~~ ~~for the twelve-month period ending December 31, 2022 and~~ ~~3.0~~ to ~~1.0~~ ~~for the period ending March 31, 2023; and maintain liquidity, as defined in such amendment, of at least $10,000~~ ~~prior to the occurrence of the compliance date and $20,000~~ from and after the occurrence of the compliance date. As of December 31, 2022, the Company was in compliance with the amended financial covenants of its loan agreement. At December 31, 2022, the amount available under the revolving credit facility was $~~9,926, subject to the above liquidity and leverage covenants.~~

~~In connection with the waiver and amendments discussed above, the Company is required to pay a back-end fee of $725~~ to Bank of America payable upon the earliest to occur of (i) any default or event of default, (ii) the last date of availability under the revolving credit facility, and (iii) repayment in full of all principal, interest, fees and other obligations, which may be waived or cancelled if certain criteria are ~~met.~~

~~On June 1, 2021, the Company entered into an agreement to amend its letter of credit facility agreement~~outstanding with HSBC Bank USA, ~~N.A.~~N.A and ~~decreased the Company's line of credit from $15,000~~ ~~to $7,500. Under the amended agreement, the Company incurs an annual facility fee of $~~5 ~~and~~are also cash secured. These outstanding letters of credit are subject to a fee of between 0.75% and 0.85%, depending on the term of the letter of credit. ~~Interest is payable on the principal amounts of unreimbursed letter of credit draws under the facility at a rate of~~ 3~~% plus the bank's prime rate. The Company's obligations under the agreement are secured by cash held with the bank. As of December 31, 2022, there was $6,471~~Total letters ~~of credit outstanding with HSBC. The agreement is subject to an annual renewal by the bank on July 31 of each year.~~

~~Letters~~ of credit outstanding as of December 31, ~~2022~~2023 and March 31, ~~2022~~2023 were $~~12,578~~7,914 and $12,233, respectively.

~~NOTE 14 – OTHER OPERATING EXPENSE (INCOME), NET:~~19

On November 29, 2021, the Company and Jeffrey F. Glajch entered into a Severance and Transition Agreement (the "Agreement") pursuant to which Mr. Glajch agreed to retire from his position the earlier of June 30, 2022 or as of a date upon which the Company and Mr. Glajch otherwise mutually agreed. As a result, each month an expense of $70 ~~is recognized and included in other operating expense (income), net on the Condensed Consolidated Statements of Operations. At December 31, 2021, the related liability of $140~~ ~~was included in Other long-term liabilities in the Condensed Consolidated Balance Sheets.~~

On August 9, 2021, the Company and James R. Lines entered into a Severance and Transition Agreement (the "Transition Agreement") pursuant to which Mr. Lines resigned from his position as the Company’s Chief Executive Officer and as a member of the Company's Board of Directors, and from positions he held with all Company subsidiaries and affiliates, effective as of the close of business on August 31, 2021. The Transition Agreement provides that for a period of 18 months following the separation date, Mr. Lines is paid his base salary as well as health care premiums. As a result, a liability was recorded in the amount of $~~798~~ ~~in Accrued Compensation on the Company’s Condensed Consolidated Balance Sheets and recognized against other operating expense (income), net on the Condensed Consolidated Statements of Operations.~~

During the second quarter ended September 30, 2021, the Company terminated the earn out agreement related to the acquisition of BN (see Note 2), therefore the Company recognized a change in fair value of the contingent liability in the amount of $~~1,900, which was included in other operating expense (income), net on the Company’s Condensed Consolidated Statement of Operations.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollar and share amounts in thousands, except per share data)

Overview

We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. We design and manufacture custom-engineered vacuum, heat transfer, pump and turbomachinery technologies. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management ~~systems primarily for the U.S. Navy.~~systems. For the space industry, our equipment is used in propulsion, power and energy management systems and for life support systems. ~~Our~~We supply equipment for vacuum, heat transfer and fluid transfer applications used in energy and new energy markets ~~include~~including oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ammonia, ethylene, methanol and downstream chemical facilities.

Our brands are built upon our engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives. Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand. Our early engagement with customers and support until the end of service life are values upon which our brands are built.

Our corporate headquarters is ~~co-located~~located with our production facilities in Batavia, New York, where surface condensers and ejectors are designed, engineered, and manufactured. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the space, aerospace, cryogenic, defense and energy ~~markets (see~~markets. In November 2023, we acquired P3 Technologies, LLC ("P3"), located in Jupiter, Florida (See "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us ~~in the People's Republic of China and management oversight~~ throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical, edible oils, and fertilizer markets in India and the ~~middle east.~~Middle East.

~~Our current~~We refer to our fiscal year, which ends March 31, 2024, as fiscal 2024. Likewise, we refer to our fiscal year that ended March 31, 2023 ("and March 31, 2022, as fiscal ~~2023").~~2023 and fiscal 2022, respectively.

Acquisition

WeOn November 9, 2023, we completed ~~the~~our acquisition of P3, a privately-owned custom turbomachinery engineering, product development, and manufacturing business located in Jupiter, Florida that serves the space, new energy and medical industries. We believe this acquisition furthers our growth strategy, further diversifies our market and product offerings, and broadens our turbomachinery solutions. P3 will be managed through BN ~~on June 1, 2021, which changed the composition of our end market mix. For the nine months ended December 31, 2022, sales~~and is highly complementary to ~~the defense~~BN's technology and space industries were 53% of our business compared with approximately 25% of sales prior to the acquisition. The remaining 47% of our third quarter fiscal 2023 sales came from the refining, chemical/petrochemical and other commercial markets. These markets represented approximately 75% of our sales prior to the acquisition.enhances its turbomachinery solutions.

~~The BN transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date.~~ The purchase price ~~of $72,014~~for P3 was $10,494 and was comprised of ~~610~~125 shares of our common stock, representing a value of ~~$8,964~~$2,117 at ~~$14.69~~a price of $16.85 per share, and cash consideration of ~~$61,150.~~$7,098, subject to certain potential adjustments, including a customary working capital adjustment. The cash consideration was funded through borrowings on our line of credit. The purchase agreement included a contingent earn-out dependent upon certain financial measures of P3 post-acquisition, in which the sellers are eligible to receive up to $3,000 in additional cash ~~on-hand~~consideration. Acquisition related costs of $274 were expensed in the three and ~~debt proceeds (See~~nine months ended December 31, 2023, and are included in selling, general and administrative expenses ("SG&A") in the Condensed Consolidated Statement of Operations. See Note 2 to the Condensed Consolidated Financial Statements included in Item 1 ~~of Part I of~~in this Quarterly Report on Form 10-Q). The purchase agreement also included a contingent earn-out dependent upon certain financial measures of BN post-acquisition, pursuant to which the sellers were eligible to receive up to $14,000 in10-Q for additional ~~cash consideration. At June 30, 2021, a liability of $1,900 was recorded~~information.

Summary

Highlights for the ~~contingent earn-out. In~~three months ended December 31, 2023 include:

•

Net sales for the ~~second~~third quarter of fiscal 2024 were $43,818, up $3,945, or 10% compared with $39,873 for the third quarter of fiscal 2023. During the quarter, P3 added $1,027 to revenue primarily to the space industry. Excluding P3, organic growth was 7% over the prior year. This increase was primarily due to sales to the defense industry, which increased $2,643 versus the prior year ~~ended March 31, 2022~~period primarily due to an improved mix of higher margin defense projects, increased direct labor, better execution, the timing of material receipts, and improved pricing. Net sales for the quarter also benefited from continued growth in commercial aftermarket sales of approximately $3,000 in comparison to the prior year period, which is included in our refining and chemical/petrochemical markets. Partially offsetting these increases was a $579 decline in space sales primarily due to the timing of projects, as well as the loss of Virgin Orbit Holding, Inc. ("~~fiscal 2022"~~Virgin Orbit")~~, the earn-out agreement was terminated and the contingent liability was reversed into other operating expense (income), net, on our Condensed Consolidated Statement of Operations.~~ as a customer in April 2023 due to its Chapter 11 bankruptcy partially offset by revenue from P3.

•

In connection with the ~~termination~~acquisition of ~~this earn-out agreement,~~BN, we entered into a Performance Bonus Agreement ~~(the "Bonus Agreement")~~ to provide ~~certain~~ employees of BN with a supplemental performance-based ~~awards~~award based on the achievement of BN performance objectives for fiscal years ending March 31, 2024, 2025, and 2026 ~~and~~which can range between $2,000 to $4,000 per ~~year.~~

~~Summary~~

~~Highlights for the three months ended December 31, 2022 include:~~

•

~~Net sales of $39,873 for~~year (the "BN Performance Bonus"). During the third quarter of fiscal ~~2023 increased $11,099 or 39% over~~2024, we recorded $1,264 related to the ~~prior year period across~~BN Performance Bonus. Additionally, during the third quarter of fiscal 2024 we recorded costs/charges in connection with the refinancing of our ~~diversified revenue base. This increase included growth in our defense market~~debt and acquisition of ~~$5,089 due to improved execution~~P3 of $744 and the timing of the achievement of project milestones, growth in our commercial space market of $2,061 as newly awarded programs continued to ramp up and growth in our refining market of $2,539 due to continued strength in our commercial aftermarket.$274, respectively.

•

Net income and ~~net~~ income per diluted share for the third quarter of fiscal ~~2023~~2024 were ~~$368~~$165 and ~~$0.03~~$0.02 per share, respectively, compared with ~~a loss~~net income and income per diluted share of ~~$3,730~~$368 and ~~$0.35~~$0.03 per share, respectively, for the third quarter of fiscal ~~2022. This increase over the prior year was driven by an improved mix of sales related to higher margin projects (commercial space and aftermarket)~~

and improved execution. Results for the third quarter of fiscal 2022 included the impact of first article U.S. Navy project labor and material cost overruns. In the third quarter of fiscal 2023, we completed an additional first article U.S. Navy project, and remain on schedule to complete the remaining first article projects by the end of the second quarter of our fiscal year ended March 31, 2024 ("fiscal 2024"). During the first nine months of fiscal 2023, we shipped four first article units.

•

2023. Adjusted net income and adjusted net income per diluted share for the third quarter of fiscal ~~2023~~2024 were ~~$857~~$2,424 and ~~$0.08~~$0.22 per share, respectively, compared with an adjusted ~~loss~~net income and adjusted ~~loss~~net income per diluted share of ~~$2,903~~$857 and ~~$0.27~~$0.08 per share, respectively, for the third quarter of fiscal ~~2022.~~2023. See "Non-GAAP Measures" below for a reconciliation of adjusted net income ~~(loss)~~ and adjusted net income ~~(loss)~~ per diluted share to the comparable GAAP amount.

•

Orders booked in the third quarter of fiscal ~~2023~~2024 were ~~$20,044~~a record $123,267 compared to ~~$67,964~~$20,044 in the third quarter of fiscal ~~2022.~~2023. This ~~decrease~~increase was primarily due to ~~project timing and the variable order patterns~~follow-on orders for ~~our larger energy, space and defense customers. For the first nine months of fiscal 2023, orders were $151,863 and our ratio of orders to net sales was 133%. We believe the repeat~~critical U.S. Navy ~~orders received during the year validates the investments we made, our position as a key supplier~~programs related to the Columbia Class submarine and Ford Class carrier programs. These defense ~~industry, and our customer’s confidence in our execution. Additionally,~~ orders ~~continued~~are expected to be ~~strong~~recognized in revenue beginning in the ~~commercial aftermarket which increased 6% during the third~~fourth quarter of fiscal ~~2023.~~2025 through early 2030 and validates our key role in these strategic programs. For additional information on this key performance indicator, see "Orders and Backlog" below.

•

Backlog was $399,244 at December 31, 2023, compared with $293,671 at December 31, ~~2022, compared with $313,340 at September 30,~~ 2022. This ~~decrease~~increase was primarily ~~due to the lower amount of orders~~driven by growth in our defense and chemical/petrochemical markets. Backlog acquired from P3 Technologies was $6,225. during the third quarter of fiscal ~~2023. 80% of our backlog at December 31, 2022 was to the defense industry, which we believe provides stability and visibility to our business.~~2024. For additional information on this key performance indicator see "Orders and Backlog" below.

•

Cash and cash equivalents at December 31, ~~2022~~2023 was ~~$17,215,~~$15,163, compared with ~~$14,122~~$18,257 at ~~September 30, 2022.~~March 31, 2023. This ~~increase~~decrease was primarily due to cash ~~provided by operating activities~~used to acquire P3 of ~~$9,344, partially offset by~~$6,812, capital expenditures of $5,193 related to our growth initiatives, as well as net repayments of debt of ~~$5,000 and $1,200~~$9,522. These uses of ~~capital expenditures as we invest in longer-term growth opportunities. Cash provided~~cash were primarily funded by cash flow from operating activities ~~includes~~of $19,483 being driven by higher profitability and a ~~$7,750 customer deposit received for material purchases on~~reduction in working capital as a ~~long-term~~result of the change in payment terms related to large defense ~~contract that will be paid over~~customers during the ~~next twelve~~nine months ~~as materials are received.~~and stronger financial discipline.

•

~~In the third quarter of fiscal~~On October 13, 2023, we ~~did not~~entered into a new, five-year $50,000 revolving credit facility with Wells Fargo Bank, National Association ("Wells Fargo") of which $35,000 is immediately available. We used the proceeds from the facility and cash on hand to pay ~~dividends to shareholders compared with $1,170 of dividends issued in~~down the ~~third quarter of fiscal 2022. In the fourth quarter of fiscal 2022, we suspended our dividend in accordance with the terms~~remaining $11,500 balance of our ~~credit agreement with Bank~~term loan. The new facility will reduce current borrowing rates by approximately 25 basis points to SOFR plus 1.25%, has a maximum total leverage ratio of ~~America. There can be no guarantee that we will pay dividends in the future,~~3.5 to 1, and any determination by our board of directors with respect to dividends will depend on a variety of factors, including our future financial performance, organic growth and acquisition opportunities, general economic conditions and other factors, many of which are beyond our control.

•

~~At December 31, 2022, we had $0 outstanding on our line of credit. We believe cash flow from operations, availability under our line of credit, along with our cash balances, provide~~provides us ~~adequate~~greater financial flexibility to ~~meet~~execute on our obligations. As of December 31, 2022, our bank leverage ratio calculated in accordance with our amended credit agreement was 2.5 and we were in compliance with all financial covenants of that agreement. For additional information see "Liquidity and Capital Resources" below.strategy for growth.

Cautionary Note Regarding Forward-Looking Statements

This report on Form 10-Q (the "Form 10-Q") and other documents we file with the Securities and Exchange Commission ("SEC") include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as ~~amended (the "Exchange Act").~~amended. All statements other than statements of historical fact are forward-looking statements for purposes of this ~~report.~~Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "can," "may," "intend," "expect," ~~"outlook,~~"plan," ~~"plan,~~"goal," "predict," "project," "outlook," "potential," "should," "will," and similar words and expressions.

Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements including, but not limited to, those described in the "Risk Factors" section in Item 1A of our Annual Report on Form 10-K for fiscal ~~2022~~2023 and elsewhere in the reports we file with the SEC. Undue reliance should not be placed on our forward-looking statements. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Quarterly Report on Form 10-Q (the "Form 10-Q") completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

All forward-looking statements included in this Form 10-Q are made only as of the date indicated or as of the date of this Form 10-Q. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

Current Market Conditions

Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on ~~our significant backlog, improved execution, long-standing relationship with the U.S. Navy,~~defense budget plans, accelerated ship build schedules due to geopolitical tensions, the projected ~~procurement~~build schedule of submarines, aircraft carriers and undersea propulsion and power systems and the solutions we provide. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics and power systems. We have built a leading position, and in some instances a sole source position, for certain systems and equipment for the defense industry.

Our traditional energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the global energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made. We expect that the systemic changes in the energy markets, which are influenced by ~~conservation and~~ the increasing use by consumers of alternative fuels and government policies to stimulate their usage, will lead to demand growth for fossil-based fuels that is less than the global growth rate. Currently, opportunities in the energy markets outside North America have been greater than opportunities inside of North America, but opportunities outside of North America are highly competitive and pricing is challenging. In those instances, we have been selective in the opportunities we have pursued in order to ensure we receive the proper returns. Over the long term, we anticipate that future investment by refiners in renewable fuels (e.g., renewable diesel), in existing refineries (e.g., to expand feedstock processing flexibility and to improve conversion of oil to refined products) to gain greater throughput, or to build new capacity (e.g., integrated refineries with petrochemical products capabilities), will continue to drive demand for our products and services. The timing and catalyst for a recovery in ~~these markets (crude oil refining and chemical/petrochemical) remain~~this market remains uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging.

Of note, over the last ~~year~~few years we have experienced an increase in our energy and chemical aftermarket orders, primarily from the domestic market. Aftermarket orders have historically been a leading indicator of future capital investment by our customers in their facilities for upgrades and expansions. ~~As such, we believe there is the possibility of~~However, if a ~~cyclical~~capital investment upturn following several years of reduced capital spending in a low oil price environment. Additionally, the financial performance of some of our larger energy customers has improved as of late, which may provide funding for capital spending. However,were to occur, we do not expect the next cycle to be as robust as years past due to the factors discussed above.

The alternative and clean energy opportunities for our heat transfer, power production and fluid transfer systems are expected to continue to grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, ~~and~~ small modular nuclear ~~systems.~~systems, bioenergy products, and geothermal power generation with lithium extraction. We are positioning the Company to be a more significant contributor as these markets continue to develop.

We believe that chemical and petrochemical capital investment will continue to decouple from energy investment. Over the long term, we expect that population growth, an expanding global middle class, and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers and related products. As such, we expect investment in new global chemical and petrochemical capacity will improve and drive growth in demand for our products and ~~services over the long term.~~services.

Our turbomachinery, pumps and cryogenic products and market access provide revenue and growth potential in the commercial space/aerospace markets. The commercial space market has grown and evolved rapidly, and we provide rocket engine turbo pump systems and components to many of the ~~key players in the industry.~~launch providers for satellites. We expect that in the long term, extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market as well. ~~For the first nine months of fiscal 2023, sales to the space industry represented 12.5% of our sales compared to 0% prior to the BN acquisition. However, sales~~Sales and orders to the space industry are variable in nature and many of our customers, who are key players in the industry, have yet to achieve profitability and may be unable to continue operations without additional ~~funding.~~funding, similar to what occurred to Virgin Orbit. Thus, future revenue and growth toin this market can be uncertain and may negatively impact our business.

~~The chart~~As illustrated below, ~~illustrates~~we have succeeded over the last several years with our strategy to increase our participation in the defense ~~market.~~market as opportunities in our legacy refining and petrochemical markets diminished. The defense market comprised ~~80%~~84% of our total backlog at December 31, 2022 and generally have longer conversion times than our other markets. We believe this strategy shift provides us more stability and visibility and is especially beneficial when our refining and process markets are weak.2023.

*Note: FYE refers to fiscal year ended March 31

~~We have faced,~~31. For additional information on this key performance indicator see "Orders and may continue to face, significant cost inflation, specifically in labor costs, raw materials, and other supply chain costs, due to increased demand for raw materials and resources caused by the broad disruption of the global supply chain associated with the impact of COVID-19. International conflicts or other geopolitical events, including the ongoing war between Russia and the Ukraine, may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, and heightened inflation. Further escalation of geopolitical tensions may also lead to changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain, and consequently our results of operations. In addition, the U.S. federal debt ceiling crisis and central bank monetary policies could result in an economic recession and impact our results of operations. While there could ultimately be a material impact on our operations and liquidity from these events, at the time of this report, the impact could not be determined.Backlog" below.

Results of Operations

To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.

The following table summarizes our results of operations for the periods indicated:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31,						December 31,						December 31,						December 31,
	2022			2021			2022			2021			2023			2022			2023			2022
Net sales	$	39,873		$	28,774		$	114,091		$	83,077		$	43,818		$	39,873		$	136,463		$	114,091
Gross profit	$	6,227		$	561		$	18,251		$	4,918		$	9,723		$	6,227		$	27,891		$	18,251
Gross profit margin		16	%		2	%		16	%		6	%		22	%		16	%		20	%		16	%
SG&A expenses (1)	$	5,558		$	5,003		$	16,649		$	15,173		$	8,812		$	5,558		$	22,493		$	16,649
SG&A as a percent of sales		14	%		17	%		15	%		18	%		20	%		14	%		16	%		15	%
Net income (loss)	$	368		$	(3,730	)	$	848		$	(7,348	)
Diluted income (loss) per share	$	0.03		$	(0.35	)	$	0.08		$	(0.70	)
Total assets	$	207,657		$	196,080		$	207,657		$	196,080
Total assets excluding cash and cash equivalents	$	190,442		$	182,089		$	190,442		$	182,089
Net income													$	165		$	368		$	3,216		$	848
Income per diluted share													$	0.02		$	0.03		$	0.30		$	0.08

(1)

Selling, general and administrative expenses are referred to as "SG&A".

The following tables ~~provides~~provide our net sales by product line and geographic region including the percentage of total and change in comparison to the prior year for each category and period presented:

Third Quarter and First Nine Months of Fiscal 2024 Compared with the Third Quarter and First Nine Months of Fiscal 2023

Net sales for the third quarter of fiscal ~~2023~~2024 were $43,818, up $3,945 or 10%, compared with $39,873 ~~an increase of 39% from~~for the third quarter of fiscal ~~2022 and~~2023. During the quarter, P3 added $1,027 to revenue primarily to the space industry. Excluding P3, organic growth was ~~across our diversified revenue base. The growth in our defense market was due to improved execution and~~7% over the ~~timing of the achievement of project milestones, while the growth in our commercial space market was driven by newly awarded programs, which continue to ramp up. Growth in our refining market~~prior year. This increase was primarily due to ~~strength~~sales to the defense industry, which increased $2,643 versus the prior year period primarily due to an improved mix of higher margin defense projects, increased direct labor, better execution, the timing of material receipts, and improved pricing. Net sales for the quarter also benefited from continued growth in commercial aftermarket sales of approximately $3,000 in comparison to the prior year period, which is included in our ~~commercial aftermarket~~refining and chemical/petrochemical markets. Partially offsetting these increases was a $579 decline in space sales primarily due to the timing of projects, as ~~customers continue to maintain their facilities without making significant capital investments.~~ well as the loss of Virgin Orbit as a customer partially offset by revenue from P3.

Domestic sales as a percentage of ~~net~~aggregate sales ~~remained relatively consistent~~were 84% in the third quarter of fiscal 2024 compared with ~~the prior year at~~ 83% ~~for~~in the third quarter of fiscal 2023, ~~and~~reflecting the increase in our defense industry businesses, which is U.S. based. Sales in the three months ended December 31, 2023 were ~~primarily~~56% to the defense ~~and space markets, which represented~~industry compared to 54% ~~and 9% of net sales, respectively,~~ for the ~~third~~comparable quarter ofin fiscal ~~2023 and are U.S. based.~~2023. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from quarter-to-quarter based on timing and magnitude of ~~projects.~~projects but overall reflects our strategic shift towards the defense industry.

Net sales for the first nine months of fiscal ~~2023~~2024 were ~~$114,091,~~$136,463, an increase of ~~37%~~20% from the first nine months of fiscal ~~2022 and was across our diversified revenue base.~~2023. Approximately ~~$8,900~~$1,027 of this increase was due to ~~having three months of BN results~~the P3 acquisition in the ~~first~~third quarter of fiscal ~~2023 compared~~2024. Excluding P3, organic growth was 19% over the prior year. Additionally, our sales continued to ~~one month in the first quarter of fiscal 2022. Additionally, net sales benefitted~~benefit from strong growth of approximately $10,800 in commercial aftermarket sales ~~of approximately $10,000 in comparison to the prior year,~~ which is included in our refining and chemical/petrochemical ~~markets,~~markets. Partially offsetting this increase was a $3,750 decline in space sales primarily due to the timing of projects, as well as the loss of Virgin Orbit partially offset by revenue from P3. Additionally, sales from our China subsidiary were down approximately $2,000 for the first nine months of fiscal 2024 compared to the prior year due to the slowdown in that market. Sales for the nine months ended December 31, 2023 were 83% to the domestic market compared with 80% in the comparable period in fiscal 2023 and ~~growth~~reflects our strategic shift towards the defense industry. Additionally, sales for the nine months ended December 31, 2023 were 53% for the defense industry compared with 41% for the comparable period in fiscal 2023 and also reflects our ~~commercial space market which was driven by newly awarded programs.~~strategic shift towards the defense industry. See also "Current Market Conditions," above. For additional information on anticipated future sales and our markets, see "Orders and Backlog" below.

Gross profit margin for the third quarter of fiscal ~~2023~~2024 was ~~16%~~22%, compared with 2%16% for the third quarter of fiscal ~~2022.~~2023. Gross profit for the third quarter of fiscal 2024 increased $3,496 or 56%, compared with fiscal 2023, to $9,723. This increase ~~was primarily due to~~reflected the increase in sales discussed above as well as an improved mix of sales related to higher margin ~~projects (commercial space~~defense and ~~aftermarket) and improved~~commercial aftermarket, as well as better execution and pricing on defense contracts, partially offset by higher incentive ~~based compensation. Results for~~compensation in comparison with the third quarter of fiscal 2022 included the impact of first article Navy project labor and material cost overruns. In the third quarter of fiscal 2023, we completed an additional first article U.S. Navy project, and remain on schedule to complete the remaining first article projects by the end of the second quarter of fiscal 2024.prior year.

Gross profit margin for the first nine months of fiscal ~~2023~~2024 was ~~16%~~20%, compared with 6%16% for the first nine months of fiscal 2022. This increase was primarily driven by the same factors impacting the quarter results discussed above. In the first nine months of fiscal 2023, we completed four first article U.S. Navy projects. In addition to the above, the first nine months of fiscal 2023 includes two additional months of operations from BN compared to the first nine months of fiscal 2022.

SG&A expense including amortization for the third quarter of fiscal 2023 was $5,558 compared to $5,003 for the third quarter of fiscal 2022. This increase was due to higher incentive compensation, partially offset by cost savings and deferred initiatives. These efforts included reducing the use of outside sales agents, cost management, and delayed hiring of non-critical positions. Additionally, the third quarter of fiscal 2022 included $111 of acquisition and integration costs incurred in connection with the BN acquisition. As a result, SG&A expense as a percentage of sales in the third quarter of fiscal 2023 was 14% of sales compared with 17% of sales in the prior year period.

~~SG&A expense including amortization~~2023. Gross profit for the first nine months of fiscal ~~2023 was $16,649 up $1,476~~2024 increased $9,640 or 53%, compared with ~~$15,173 for the first nine months of fiscal 2022. Approximately $1,400 of this increase was due to having two additional months of BN results in the first nine months of~~ fiscal 2023, ~~compared~~ to $27,891. This increase reflected the ~~prior year period,~~increase in sales discussed above as well as an improved mix of sales related to higher ~~incentive compensation. These increases were~~margin defense and commercial aftermarket sales, as well as better execution and pricing on defense contracts, partially offset by ~~cost savings and deferred initiatives, which included reducing~~higher incentive compensation in comparison with the ~~use of outside sales agents, cost management and delayed hiring of non-critical positions. Additionally,~~prior year.

Changes in SG&A expense for the ~~first~~three and nine months ~~of fiscal 2022 included $373 of acquisition and integration costs incurred in connection with~~ending December 31, 2023 versus the ~~BN acquisition. As a result, SG&A expense as a percentage of sales in the first nine months of fiscal 2023 was 15% of sales compared with 18% of sales in the~~comparable prior year ~~period.~~period are as follows:


	Change Q3 FY24 vs. Q3 FY23		Change YTD Q3 FY24 vs. YTD Q3 FY23
BN Performance Bonus	$	1,264	$	2,833
Professional fees		750		1,081
Performance-based compensation		399		414
Acquisition costs		274		274
Amortization of intangibles		109		109
Equity based compensation		107		420
ERP implementation costs		56		56
P3 Technologies		49		49
All other		246		608
Total SG&A change	$	3,254	$	5,844

During the second quarter of fiscal 2022, we terminated the BN contingent earn-out agreement and the contingent liability of $1,900 was reversed into other operating expense (income), net, on our Condensed Consolidated Statement of Operations.

In connection with the ~~termination~~acquisition of ~~this earn-out agreement,~~BN, we entered into a Performance Bonus Agreement to provide ~~certain~~ employees of BN with a supplemental performance-based ~~awards~~award based on ~~results~~the achievement of BN performance objectives for fiscal years ending March 31, 2024,

2025, and ~~2026. Additionally,~~2026 which can range between $2,000 to $4,000 per year (the "BN Performance Bonus"). The increase in professional fees over the ~~second~~prior year periods primarily relates to the increasing complexity in our business associated with our growth and ~~third quarters of fiscal 2022 we incurred $798 and $140, respectively, of severance costs~~our international operations including the investigation by our Board’s Audit Committee related to GIPL. See Note 10 to the ~~departure of our former Chief Executive Officer~~Condensed Consolidated Financial Statements included in Item 1 in this Quarterly Report on Form 10-Q and ~~former Chief Financial Officer, which was also recorded into other operating expense (income), net.~~

the "Commitments and Contingencies" section below.

Net interest expense for the third quarter of fiscal ~~2023~~2024 was ~~$294~~$37 compared to ~~$120~~$294 in the third quarter of fiscal ~~2022~~2023 primarily due to ~~an increase in interest rates since~~lower debt levels compared to the ~~third quarter of fiscal 2022,~~prior year partially offset by ~~lower debt levels of $14,566 due to repayments made since the third quarter of fiscal 2022.~~higher interest rates.

Net interest expense for the first nine months of fiscal ~~2023~~2024 was ~~$697~~$277 compared to ~~$257~~$697 in the first nine months of fiscal ~~2022~~2023 primarily due to ~~the borrowings related~~lower debt levels compared to the ~~BN acquisition, as well as increased~~prior year partially offset by higher interest ~~rates since the time of the acquisition.~~rates.

~~Our effective tax rate in the third quarter of fiscal 2023 was 16%, compared with 19% in the third quarter of fiscal 2022.~~ Our effective tax rate for the first nine months of fiscal ~~2023~~2024 was 22%~~, compared~~ consistent with ~~20% for~~ the first nine months of fiscal ~~2022. This increase was primarily due to discrete tax expense recognized in the first quarter of fiscal 2023 related to the vesting of restricted stock awards.~~2023. Our ~~expected~~ effective tax rate for fiscal ~~2023~~2024 is ~~approximately~~expected to be between 22% and 23% ~~due to an expected higher mix of income in higher tax rate jurisdictions.~~.

The net result of the above is that net income and ~~earnings~~income per diluted share for the third quarter of fiscal ~~2023~~2024 were $165 and $0.02, respectively, compared with $368 and $0.03, ~~per share, respectively, compared with a loss of $3,730 and $0.35 per share,~~ respectively, for the third quarter of fiscal ~~2022.~~2023. Adjusted net income and adjusted net income per diluted share for the third quarter of fiscal ~~2023~~2024 were ~~$857~~$2,424 and ~~$0.08~~$0.22 per share, respectively, compared with ~~a loss of $2,903~~$857 and ~~$0.27 per share,~~$0.08, respectively, for the third quarter of fiscal ~~2022. See "Non-GAAP Measures" below for a reconciliation of adjusted net income (loss) and adjusted net income (loss) per diluted share to the comparable GAAP amount.~~2023.

Net income and ~~net~~ income per diluted share for the first nine months of fiscal ~~2023~~2024 were $3,216 and $0.30, respectively, compared with $848 and $0.08, ~~per share, respectively, compared with a loss of $7,348 and $0.70 per share,~~ respectively, for the first nine months of fiscal ~~2022.~~2023. Adjusted net income and adjusted net income per diluted share for the first nine months of fiscal ~~2023~~2024 were $7,369 and $0.68, respectively, compared with $2,511 and $0.24, ~~per share, respectively, compared with a loss of $6,353 and $0.60 per share,~~ respectively, for the first nine months of fiscal ~~2022.~~2023. See "Non-GAAP Measures" below for a reconciliation of adjusted net income ~~(loss)~~ and adjusted net income ~~(loss)~~ per diluted share to the comparable GAAP amount.

Non-GAAP Measures

Adjusted earnings ~~(loss)~~ before net interest expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, ~~(loss),~~ and adjusted net income ~~(loss)~~ per diluted share are provided for information purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP"). Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, those charges and credits that are not directly related to operating performance, and that are not a helpful measure of the performance of our underlying business particularly in light of their unpredictable nature. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income ~~(loss)~~ or net income ~~(loss)~~ per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income ~~(loss)~~ or net income ~~(loss)~~ per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income ~~(loss)~~ and adjusted net income ~~(loss)~~ per diluted share are key metrics used by management and our board of directors to assess the Company’s financial and operating performance and adjusted EBITDA is a basis for a portion of management's performance-based compensation.

Adjusted EBITDA excludes charges for depreciation, amortization, ~~net~~ interest expense, taxes, acquisition related expenses, the BN Performance Bonus, debt amendment costs, ERP implementation costs, and other unusual/nonrecurring expenses. Adjusted net income ~~(loss)~~ and adjusted net income ~~(loss)~~ per diluted share excludes intangible amortization, BN Performance Bonus, acquisition related expenses, debt amendment costs, ERP implementation costs, and other unusual/nonrecurring ~~expenses and the related tax impacts of those adjustments.~~expenses.

A reconciliation of adjusted EBITDA, adjusted net income, ~~(loss),~~ and adjusted net income ~~(loss)~~ per diluted share to net income ~~(loss)~~ in accordance with GAAP is as follows:

2825


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2023			2022			2023			2022
Net income	$	165		$	368		$	3,216		$	848
Acquisition & integration costs		274			-			274			54
BN Performance Bonus		1,264			-			2,833			-
Debt amendment costs		744			-			744			194
ERP Implementation costs		56			-			56			-
Net interest expense		37			294			277			697
Income taxes		(110	)		70			899			245
Depreciation & amortization		1,422			1,506			3,862			4,468
Adjusted EBITDA	$	3,852		$	2,238		$	12,161		$	6,506
Adjusted EBITDA as a % of revenue		8.8	%		5.6	%		8.9	%		5.7	%


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2023			2022			2023			2022
Net income	$	165		$	368		$	3,216		$	848
Acquisition & integration costs		274			-			274			54
Amortization of intangible assets		596			619			1,487			1,857
BN Performance Bonus		1,264			-			2,833			-
Debt amendment costs		744			-			744			194
ERP Implementation costs		56			-			56			-
Normalize tax rate(1)		(675	)		(130	)		(1,241	)		(442	)
Adjusted net income	$	2,424		$	857		$	7,369		$	2,511

GAAP net income per diluted share	$	0.02		$	0.03		$	0.30		$	0.08
Adjusted net income per diluted share	$	0.22		$	0.08		$	0.68		$	0.24
Diluted weighted average common shares outstanding		10,920			10,660			10,792			10,632

(1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the statutory tax rate of 23%.

29Acquisition and Integration Costs are incremental costs that are directly related to the P3 acquisition. These costs may include, among other things, professional, consulting and other fees, system integration costs, and fair value adjustments relating to contingent consideration. In connection with the acquisition of BN, we entered into the BN Performance Bonus agreement to provide employees of BN with a supplemental performance-based award based on the achievement of BN performance objectives for fiscal years ending March 31, 2024, 2025, and 2026 which can range between $2,000 to $4,000 per year. Debt Amendment Costs consists of accelerated write-offs of unamortized deferred debt issuance costs and discounts, prepayment penalties and attorney fees in connection with the amendment of our credit facility in October 2023. ERP Implementation Costs relate to consulting costs incurred in connection with the new ERP system being implemented throughout our Batavia, N.Y. facility in order to enhance efficiency and productivity and are not expected to reoccur once the project is completed.

Liquidity and Capital Resources

The following discussion should be read in conjunction with our Condensed Consolidated Balance Sheets and Statements of Cash Flows:


	December 31,			March 31,			December 31,		March 31,
	2022			2022			2023		2023
Cash and cash equivalents	$	17,215		$	14,741		$	15,163	$	18,257
Working capital (1)		26,398			27,796			11,743		23,904
Working capital ratio(1)		1.3			1.5			1.1		1.3
Working capital excluding cash and cash equivalents		9,183			13,055
Working capital excluding cash and cash equivalents as a percent of net sales(2)		6.0	%		10.6	%

(1)

Working capital equals current assets minus current liabilities. Working capital ratio equals current assets divided by current liabilities.

~~(2)~~

~~Working capital excluding cash and investments as a percent of net sales is based upon trailing twelve month sales, including BN pre-acquisition sales.~~

Net cash provided by operating activities for the first nine months of fiscal ~~2023~~2024 was ~~$8,946~~$19,483 compared with ~~$14,552 of cash used by operating activities~~$8,946 for the first nine months of fiscal ~~2022. This increase was primarily due to higher~~2023. The cash ~~net income~~provided by operations during the first nine months of fiscal ~~2023~~2024 was higher than the comparable prior year period primarily as ~~well as lower net~~a result of higher profitability and a reduction in working capital ~~levels. In~~as a result of the ~~third quarter of fiscal 2023 we collected a $7,750 customer deposit~~change in payment terms related to ~~material purchases for a~~ large ~~U.S. Navy order that will be paid over~~defense customers during the ~~next twelve~~nine months ~~as materials are received. Net repayment of debt~~and stronger financial discipline.

Capital expenditures for the first nine months of fiscal ~~2023 was $3,517 compared to a net borrowing of $28,735 for~~2024 were $5,193 versus $2,394 over the comparable period in fiscal ~~2022 primarily due to the cash used for the acquisition of BN of $59,563.~~

Dividend payments and capital expenditures in the first nine months of fiscal 2023 were $0 and $2,394, respectively, compared with $3,524 and $1,909, respectively, for the first nine months of fiscal 2022. In the fourth quarter of fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America. There can be no guarantee that we will pay dividends in the future and any determination by our board of directors with respect to dividends will depend on a variety of factors, including our future financial performance, organic growth and acquisition opportunities, general economic conditions and other factors, many of which are beyond our control.2023. Capital expenditures for fiscal ~~2023~~2024 are expected to be ~~approximately $3,000~~between $8,000 to ~~$4,000. Our fiscal 2023~~$10,000. Fiscal 2024 capital expenditures are expected to be primarily for machinery and equipment, as well as for buildings and leasehold improvements to fund our growth and ~~cost~~productivity improvement ~~initiatives.~~initiatives and includes expenditures related to the expansion of production capabilities at our Batavia facility, which is being funded by one of our defense customers. The majority of our planned capital expenditures are discretionary. We estimate that our maintenance capital spend is approximately $2,000 per year.

Cash and cash equivalents were ~~$17,215~~$15,163 at December 31, ~~2022~~2023 compared with ~~$14,741~~$18,257 at March 31, ~~2022,~~2023, as cash provided by operating activities was used to fund capital expenditures, ~~and~~net repayment of ~~debt.~~debt of $9,522, and the cash consideration used in the acquisition of P3 of $6,812. At December 31, ~~2022,~~2023, approximately ~~$6,625~~$7,247 of our cash and cash equivalents was used to secure our letters of credit and ~~$3,028~~$1,724 of our cash was held by our China and India subsidiaries.

On ~~June 1, 2021,~~October 13, 2023, we ~~entered into a $20,000 five-year~~terminated our revolving credit facility and repaid our term loan with Bank of America. The term loan requires monthly principal payments of $167 through June 1, 2026, with the remaining principal amount plus all interest due on the maturity date. The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus 1.50%, subject to a 0.00% floor.

~~On June 1, 2021, we~~America and entered into a new five-year revolving credit facility with Wells Fargo Bank, ~~of America~~National Association ("Wells Fargo") that ~~provided~~provides a ~~$30,000~~$35,000 line of credit ~~including letters of credit~~ and ~~bank guarantees, expandable at our option and~~automatically increases to $50,000 upon the bank's approval at any time up to $40,000. As of December 31, 2022, there was $0 outstanding on the line of credit. Amounts outstanding under the facility agreement bear interest at a rate equal to BSBY plus 1.50%, subject to a 0.00% floor. As of December 31, 2022, the BSBY rate was 3.95916%Company satisfying specified covenants (the "New Revolving Credit Facility"). As of December 31, ~~2022,~~2023, there was ~~$5,954~~$3,000 borrowed and $666 letters of credit outstanding ~~with Bank of America.~~on the New Revolving Credit Facility and the amount available to borrow was $31,333, subject to interest and leverage covenants.

~~Under~~The New Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the ~~original term loan agreement and revolving credit facility, we covenanted~~benefit of Wells Fargo, which require us to maintain (i) a ~~maximum~~consolidated total leverage ratio ~~as defined in such agreements, of 3.0~~not to ~~1.0, with an allowable increase to 3.25 to 1.0 for~~exceed 3.50:1.00 and (ii) a ~~period of twelve months following the closing of an acquisition. In addition, we covenanted to maintain a minimum~~consolidated fixed charge coverage ratio as defined in such agreements, of 1.2 to 1.0 and minimum margined assets, as defined in such agreements, of 100% of total amounts outstanding on the revolving credit facility, including letters of credit. At December 31, 2021, we were out of compliance with our bank agreement covenants and were granted a waiver for noncompliance by Bank of America.

We entered into amendment agreements with Bank of America since origination. Under the amended agreements, we were not required to comply with the maximum total leverage ratio and the minimum fixed charge coverage ratio covenants contained in the original term loan agreement for the periods ending December 31, 2021 and March 31, June 30 and September 30, 2022. The principal

balance outstanding on the line of credit may not exceed $15,000, unless letters of credit exceed $11,500, in which case the limit is $17,000, until the compliance date. The compliance date is defined as the date on which Bank of America has received all required financial information with respect to us for the fiscal year ending March 31, 2023 and no event of default exists. In addition, on or before September 1, 2023 and at all times thereafter, all of our deposit accounts, except certain accounts, will be either subject to a deposit account control agreement or maintained with Bank of America. We covenant to maintain EBITDA, as defined in such amendment, of at least ~~($700) for~~1.20:1.00, in both cases computed in accordance with the ~~twelve-month period ending June 30, 2022~~definitions and ~~$1,800 for~~requirements specified in the twelve-month period ending September 30, 2022; maintain a total maximum leverage ratio of 4.0 to 1.0 for the twelve-month period ending December 31, 2022 and 3.0 to 1.0 for the period ending March 31, 2023; and maintain liquidity, as defined in such amendment, of at least $10,000 prior to the occurrence of the compliance date and $20,000 from and after the occurrence of the compliance date.New Revolving Credit Facility. As of December 31, ~~2022,~~2023, we were in compliance with the ~~amended~~ financial covenants of ~~our loan agreement~~the New Revolving Credit Facility and our leverage ratio as calculated in accordance with the terms of the ~~credit facility~~New Revolving Credit Facility was ~~2.5. At December 31, 2022, the amount available under the revolving credit facility was $9,926 subject to the above liquidity and leverage covenants.~~0.6x.

Borrowings under the New Revolving Credit Facility bear interest at a rate equal to, at our option, either (i) a forward-looking term rate based on the secured overnight financing rate ("SOFR") for the applicable interest period, subject to a floor of 0.0% per annum or (ii) a base rate determined by reference to the highest of (a) the rate of interest per annum publicly announced by Wells Fargo as its prime rate, (b) the federal funds rate plus 0.50% per annum and (c) one-month term SOFR plus 1.00% per annum, subject to a floor of 1.00% per annum, plus, in each case, an applicable margin. The applicable margins range between (i) 1.25% per annum and 2.50% per annum in the case of any term SOFR loan and (ii) 0.25% per annum and 1.50% per annum in the case of any base rate loan, in each case based upon our then-current consolidated total leverage ratio; provided, however, for a period of one year following the closing date, the applicable margin shall be set at 1.25% per annum in the case of any term SOFR loan and 0.25% per annum in the case of any base rate loan. As of December 31, 2023, the SOFR rate was 5.34%.

In connection with the ~~waiver and amendments discussed above, we are required to pay a back-end fee~~termination of ~~$725 to Bank of America payable upon~~ the ~~earliest to occur of (i) any default or event of default, (ii) the last date of availability under the~~old revolving credit facility and ~~(iii) repayment~~term loan with Bank of America, the Company paid $752 in ~~full~~exit costs and recognized an extinguishment charge of ~~all principal, interest, fees and other obligations, which may be waived or cancelled if certain criteria are met.~~$726.

See Note 13 to the Condensed Consolidated Financial Statements included in Item 1 in this Quarterly Report on Form 10-Q for additional information.

We did not have any off-balance sheet arrangements as of December 31, 2023 and 2022, other than letters of credit incurred in the ordinary course of business.

We believe that cash generated from operations combined with the liquidity provided by ~~available financing capacity under~~ our ~~credit facility,~~New Revolving Credit Facility will be adequate to meet our cash needs ~~for the immediate future.~~and fund our long-term strategic growth objectives.

Orders and Backlog

In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure the Company's financial performance and results of operations; orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures

provided by other companies. Orders represent written communications received from customers requesting us to provide products and/or services. Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales.

Given that each of orders, backlog and book-to-bill ratio is an operational measure and that the Company's methodology for calculating these measures does not meet the definition of a non-GAAP measure, as that term is defined by the SEC, a quantitative reconciliation for each is not required or provided.

The following tables ~~provides~~provide our orders by product line and geographic region including the percentage of total and change in comparison to the prior year for each category and period presented:

~~Management uses~~Orders booked the three-month period ended December 31, 2023 were $123,267, an increase of $103,223 over the comparable period of fiscal 2023. Orders booked for the nine-month period ended December 31,2023 were $227,665, an increase of $75,802 over the comparable period of fiscal 2023. These increases were primarily related to large defense orders ~~and backlog as measures of our current and future business and financial performance. Orders represent written communications~~ received ~~from customers requesting us to provide products and/or services. Orders booked~~ in the third quarter of fiscal 2024. For the nine-month period ended December 31, 2023, ~~were $20,044 compared to $67,964 in the third quarter of fiscal 2022. This decrease~~our book-to-bill ratio was ~~primarily due to project timing and the variable nature of order patterns for our larger energy, space and defense customers.~~

~~For~~1.7x. Orders during the first nine months of ~~fiscal 2023,~~2024 included the following:

•

Approximately $103,233 in defense orders which were ~~$151,863 compared~~primarily related to ~~$120,215~~follow-on orders for critical U.S. Navy programs related to the ~~first nine months~~Columbia Class submarine and Ford Class carrier programs. These defense orders are expected to be recognized in revenue beginning in the fourth quarter of fiscal ~~2022. Our ratio~~2025 through early fiscal 2030.

•

$22,000 of the defense orders related to a strategic investment and follow-on orders from a major defense customer. These orders include $13,500 to expand and enhance our Batavia, N.Y. production capabilities, primarily for machinery and equipment, in order to support the U.S. Navy's shipbuilding schedule.

•

$9,100 for a vacuum distillation system for a refinery in India.

•

Approximately $27,000 of aftermarket orders to ~~net sales for~~ the ~~first nine months~~refining and chemical/petrochemical markets.

•

$1,094 increase in space industry orders which is primarily due to continued growth in this business, as well as the acquisition of ~~fiscal 2023 was 133%.~~ P3 partially offset by a decline due to the Virgin Orbit bankruptcy.

We believe the ~~increased level of~~ repeat U.S. Navy orders and strategic investment received ~~during the year~~ validates the investments we made, our position as a key supplier to the defense industry and our ~~customer’s~~customer's confidence in our execution. Additionally, we believe the strong aftermarket orders continued to be strong in the commercial aftermarket, which increased approximately $7,300 during the first nine months of fiscal 2023 compared to the prior year and is included in the refining and chemical/petrochemical markets above. This increase was offset byare significant because they historically have been a ~~lower level of larger capital projects as our energy and chemical customers continue to defer such investment to future periods. We believe there is the possibility~~leading indicator of a cyclical upturn in ~~energy and chemical~~ capital project ~~orders following several years of reduced capital spending.~~orders. However, we do not expect the next cycle to be as robust as years past due to the factors discussed above under "Current Market Conditions." The increase in space orders for the first nine months of fiscal 2023 over the comparable prior year period was due to newly awarded programs as well as having an additional two months of BN operations included in the results for the first nine months of fiscal 2023.

Orders to the ~~United States~~U.S. represented ~~81%~~95% of total orders for the third quarter of fiscal 2024 compared to 40% in the third quarter of the prior year. Orders to the U.S. represented 88% of total orders for the first nine months of fiscal ~~2023 and is relatively consistent with~~2024 compared to 81% in the comparable prior ~~year.~~year period. These orders were primarily to the defense ~~and space markets,~~market which ~~represented 58% and 8% of orders, respectively, and~~ are U.S. based.

The following table provides our backlog by ~~product line,~~market, including the percentage of total backlog, for each category and period presented:


	December 31,					December 31,					Change
Market	2023		%			2022		%			$			%
Refining	$	27,428		7	%	$	26,255		9	%	$	1,173			4	%
Chemical/Petrochemical		14,815		5	%		10,996		5	%		3,819			35	%
Space		11,059		3	%		12,492		4	%		(1,433	)		-11	%
Defense		334,455		84	%		234,485		80	%		99,970			43	%
Other		11,487		3	%		9,443		3	%		2,044			22	%
Total backlog	$	399,244		100	%	$	293,671		100	%	$	105,573			36	%

Backlog was $399,244 at December 31, 2023, an increase of 36% compared with $293,671 at December 31, ~~2022, an increase~~2022. We expect to recognize revenue on approximately 40% of ~~14% compared with $256,537 at March 31, 2022. Backlog is defined as~~ the ~~total dollar value of orders received for which revenue has not yet been recognized. Approximately 40% to 50% of orders currently in our~~ backlog ~~are expected to be converted to sales~~ within one year, ~~and 20%~~25 to 30% ~~after~~in one ~~year but within~~to two years and the remaining beyond two years. The majority of the orders that are expected to convert beyond ~~twelve~~twenty-four months are for the defense industry, specifically the U.S. Navy that have a long conversion cycle ~~(up~~(generally up to six years). During the third quarter of fiscal 2024, backlog acquired from P3 Technologies was $6,225. During the second quarter of fiscal 2024, we shipped the last of the first article units related to the Columbia Class submarine and Ford Class carrier programs. While we expect to continue to have first article programs in our backlog as we win new programs and applications, the amount as a percentage of total backlog should be reduced moving forward.

Outlook

~~Our objective is to leverage~~We are providing the following fiscal 2024 outlook reflecting our ~~engineering know-how and depth of application experience to identify more opportunities for our products and technologies in our targeted markets. The following is our expectations for fiscal 2023:~~current expectations:


Net Sales		$175 million to $185 million
Gross Profit		~20% of sales
SG&A Expenses(1)		~16-17% of sales
Tax Rate		22% to 23%
Adjusted EBITDA(2)		$15 million to $16 million

(1) Includes approximately $4.5 million to $5 million of BN Performance Bonus, P3 acquisition and integration, and ERP conversion costs included in SG&A expense.
(2) Excludes approximately $4.5 million to $5 million of BN Performance Bonus, P3 acquisition and integration, and ERP conversion costs included in SG&A expense and approximately $0.7 million of debt extinguishment charges.

See ~~“Cautionary~~"Cautionary Note Regarding Forward-Looking ~~Statements”~~Statements" and "Non-GAAP Measures" above for additional information about forward-looking statements and non-GAAP measures. We have not reconciled non-GAAP forward-looking Adjusted EBITDA to its most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.

~~Our results for~~We have made significant progress with the ~~first nine months of fiscal 2023 were in-line with~~advancements in our expectations and give us confidence we will be able to achieve our full year guidance. Fiscal 2022 and year-to-date fiscal 2023 results were impacted by our large, lower margin, first article U.S. Navy projects andbusiness, which we believe ~~this negative impact will continue through~~puts us on schedule in achieving our fiscal 2027 goals of 8% to 10% average annualized organic revenue growth and Adjusted EBITDA margins in the end of the second quarter of 2024 when the last of these larger first article projects is completed. We expect repeat orders for these larger U.S. Navy projects will be at higher margins through increased pricing and better execution.low to mid-teens.

Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, ~~and~~ do not experience significant ~~COVID-19-related~~global health related disruptions, and assumes no further impact from Virgin Orbit or any other unforeseen events.

~~Contingencies~~Commitments and ~~Commitments~~Contingencies

We have been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in or accompanying our products. We are a co-defendant with numerous other defendants in these lawsuits and intend to vigorously defend ourselves against these claims. The claims in our current lawsuits are similar to those made in previous asbestos lawsuits that named us as a defendant. Such previous lawsuits either were dismissed when it was shown that we had not supplied products to the plaintiffs’ places of work, or were settled by us for immaterial amounts.

During the third quarter of fiscal 2024, the Audit Committee of the Board of Directors, with the assistance of external counsel and forensic professionals, concluded an investigation into a whistleblower complaint received regarding GIPL. The investigation identified both evidence supporting the complaint and other misconduct by employees. The other misconduct totaled $150 over a period of four years and was isolated to GIPL. All involved employees have been terminated and we have implemented remedial actions, including strengthening our compliance program and internal controls. As a result of the investigation, during the third quarter of fiscal 2024, the statutory auditor and bookkeeper of GIPL tendered their resignations and new firms were appointed. We have voluntarily reported the findings of our investigation to the appropriate authorities in India and the U.S. Department of Justice and the Securities and Exchange Commission. Although the resolutions of these matters are inherently uncertain, we do not believe any remaining impact will be material to our overall consolidated results of operations, financial position, or cash flows. For the first nine months of fiscal 2024 we incurred approximately $750 in costs related to this investigation.

As of December 31, ~~2022,~~2023, we are subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business. Although the outcome of the lawsuits, legal proceedings or potential claims to which we are or may become a party cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, we do not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on our results of operations, financial position or cash flows.

See Note 10 to the Condensed Consolidated Financial Statements included in Item 1 in this Quarterly Report on Form 10-Q for additional information.

Critical Accounting Policies, Estimates, and Judgments

Our unaudited condensed consolidated financial statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions. We believe that the most critical accounting estimates used in the preparation of our condensed consolidated financial statements relate to labor hour estimates, total cost, and establishment of operational milestones which are used to recognize revenue over time, accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, accounting for business combinations and intangible assets, and accounting for pensions and other postretirement benefits. For further information, refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8 "Financial Statements and Supplementary Data" included in our Annual Report on Form 10-K for the year ended March 31, ~~2022.~~2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks (i.e., the risk of loss arising from market changes) to which we are exposed are foreign currency exchange rates, price risk, and interest rate risk.

The assumptions applied in preparing the following qualitative and quantitative disclosures regarding foreign currency exchange rate, price risk and interest rate risk are based upon volatility ranges experienced by us in relevant historical periods, our current knowledge of the marketplace, and our judgment of the probability of future volatility based upon the historical trends and economic conditions of the markets in which we operate.

Foreign Currency

International consolidated sales for the first nine months of fiscal ~~2023~~2024 were ~~20%~~17% of total sales compared with ~~22%~~20% for the same period of fiscal ~~2022.~~2023. Operating in markets throughout the world exposes us to movements in currency exchange rates. Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies. Business lost due to competition for orders against competitors using a relatively weaker currency cannot be quantified. In addition, cash can be adversely impacted by the conversion of sales made by us in a foreign currency to U.S. dollars. In each of the first nine months of fiscal ~~2023~~2024 and fiscal ~~2022,~~2023, substantially all sales by us and our wholly-owned subsidiaries, for which we were paid, were denominated in the local currency of the respective subsidiary (U.S. dollars, Chinese RMB or India INR). For the first nine months of fiscal ~~2023,~~2024, foreign currency exchange rate fluctuations reduced our cash balances by ~~$212~~$39 primarily due to the strengthening of the U.S. ~~dollar relative to the Chinese RMB and India INR.~~

dollar.

We have limited exposure to foreign currency purchases. In the first nine months of fiscal ~~2023,~~2024, our purchases in foreign currencies represented approximately 9%4% of the cost of products sold. At certain times, we may enter into forward foreign currency exchange agreements to hedge our exposure against potential unfavorable changes in foreign currency values on significant sales and purchase contracts negotiated in foreign currencies. Forward foreign currency exchange contracts were not used in the periods being reported in this Form 10-Q and as of December 31, ~~2022~~2023 and March 31, ~~2022,~~2023, we held no forward foreign currency contracts.

Price Risk

Operating in a global marketplace requires us to compete with other global manufacturers which, in some instances, benefit from lower production costs and more favorable economic conditions. Although we believe that our customers differentiate our products on the basis of our manufacturing quality, engineering experience, and customer service, among other things, such lower production costs and more favorable economic conditions mean that our competitors are able to offer products similar to ours at lower prices. In extreme market downturns, such as we recently experienced, we typically see depressed price levels. Additionally, we have faced, and may

continue to face, significant cost inflation, specifically in labor costs, raw materials, and other supply chain costs due to increased demand for raw materials and resources caused by the broad disruption of the global supply chain, including those associated with the impact of COVID-19. International conflicts or other geopolitical events, including the ~~ongoing war between Russia~~2022 Russian invasion of Ukraine and the ~~Ukraine,~~Israel-Hamas war, may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, and heightened inflation. Further escalation of geopolitical tensions may also lead to changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain, and consequently our results of operation. While there could ultimately be a material impact on our operations and liquidity, at the time of this report, the impact could not be determined.

Interest Rate Risk

In ~~connection with the BN acquisition,~~order to fund our strategic growth objectives, including acquisitions, we ~~entered into a $20,000 five-year term loan and a five-year~~borrow funds under our revolving credit facility ~~with Bank of America. The term loan and revolving credit facility bear~~that bears interest ~~rates that are tied to BSBY, plus 1.50%, subject to~~at a ~~0.00% floor.~~variable rate. As part of our risk management activities, we evaluate the use of interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements. As of December 31, ~~2022,~~2023, we had ~~$15,000 outstanding on our term loan, $0~~$3,000 of variable rate debt outstanding on our revolving credit facility and no interest rate derivatives outstanding. See ''Debt'' in Note 13 to the Unaudited Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information about our outstanding debt. A hypothetical one percentage point (100 basis points) change in the BSBY rate on the ~~$15,000~~$3,000 of variable rate debt outstanding at December 31, ~~2022~~2023 would have an impact of approximately ~~$150~~$30 on our interest expense for fiscal ~~2023.~~2024.

Item 4. Controls and Procedures

Conclusion regarding the effectiveness of disclosure controls and procedures

Our President and Chief Executive Officer (our principal executive officer) and Vice President - Finance ~~& Administration~~ and Chief Financial Officer (our principal financial officer) each have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, and as of such date, our President and Chief Executive Officer and Vice President - Finance ~~& Administration~~ and Chief Financial Officer concluded that our disclosure controls and procedures were effective in all material respects.

Changes in internal control over financial reporting

Other than the events discussed under the section entitled ~~Barber-Nichols~~P3 Technologies Acquisition below, there has been no change to our internal control over financial reporting during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting.

~~Barber-Nichols~~P3 Technologies Acquisition

On ~~June 1, 2021,~~November 9, 2023, we acquired ~~Barber-Nichols,~~P3 Technologies, LLC, a privately-owned ~~designer~~custom turbomachinery engineering, product development and ~~manufacturer of turbomachinery products for the aerospace, cryogenic, defense and energy markets,~~manufacturing business located in ~~Arvada, Colorado.~~Jupiter, Florida. For additional information regarding the acquisition, refer to Note 2 to the Condensed Consolidated Financial Statements included in Item 1 in this Quarterly Report on Form 10-Q and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 2 in this Quarterly Report on Form 10-Q. Based on the recent completion of this acquisition and, pursuant to the Securities and Exchange Commission’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of the effectiveness of internal control over financial reporting as of the end of the period covered by this report does not include ~~Barber-Nichols,~~P3 Technologies, LLC. We plan to include ~~Barber-Nichols,~~P3 Technologies, LLC in our annual assessment for the fiscal year ending March 31, ~~2023.~~2025.

PART II - OTHER INFORMATION

Item 1A. Risk Factors

~~There~~If we fail to successfully integrate the operations of P3 Technologies, LLC, our financial condition and results of operations could be adversely affected.

On November 9, 2023, we acquired P3 Technologies, LLC, a privately-owned custom turbomachinery engineering, product development, and manufacturing business that serves the space, new energy and medical industries. We cannot provide any assurances that we will be able to integrate the operations of P3 Technologies, LLC without encountering difficulties, including unanticipated costs, difficulty in retaining customers and supplier or other relationships, failure to retain key employees, diversion of management's attention, failure to integrate our information and accounting systems or establish and maintain proper internal control over financial reporting, any of which would harm our business and results of operations.

Furthermore, we may not realize the revenue and net income that we expect to achieve or that would justify our investment in P3 Technologies, LLC, and we may incur costs in excess of what we anticipate. To effectively manage our expected future growth, we must continue to successfully manage our integration of P3 Technologies, LLC and continue to improve our operational systems, internal procedures, accounts receivable and management, financial and operational controls. If we fail in any of these areas, our business and results of operations could be harmed.

Our acquisition of P3 Technologies, LLC might subject us to unknown and unforeseen liabilities.

P3 Technologies, LLC may have ~~been no material changes~~unknown liabilities, including, but not limited to, product liability, workers' compensation liability, tax liability and liability for improper business practices. Although we are entitled to indemnification from the ~~risk factors previously disclosed in Part I - Item 1A~~seller of ~~the Company's Form 10-K~~P3 Technologies, LLC for these and other matters, we could experience difficulty enforcing those obligations or we could incur material liabilities for the ~~fiscal year ended March 31, 2022.~~past activities of P3 Technologies, LLC. Such liabilities and related legal or other costs could harm our business or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Dividend Policy

We do not currently pay a cash dividend on our common stock. ~~Our credit facility with Bank of America contains certain provisions that restrict our payment of cash dividends.~~ Any future determination by our board of directors regarding dividends will depend on a variety of factors, including our compliance with the terms of ~~the~~our revolving credit ~~agreement,~~facility, organic growth and acquisition opportunities, future financial performance, general economic conditions and financial, competitive, regulatory, and other factors, many of which are beyond our control. There can be no guarantee that we will pay dividends in the future.

3532

Item 6. Exhibits

INDEX OF EXHIBITS


(10)	Material Contracts

*	10.1	Credit Agreement, dated as of October 13, 2023, by and among Graham Corporation, as borrower, and Wells Fargo Bank, National Association, as lender, is incorporated herein by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K dated October 13, 2023.

(31)	Rule 13a-14(a)/15d-14(a) Certifications

+	31.1	Certification of Principal Executive Officer

++	31.2	Certification of Principal Financial Officer

(32)	Section 1350 Certification

+	32.1	Section 1350 Certifications

(101)	Interactive Data File

+	101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

+	101.SCH	Inline XBRL Taxonomy Extension Schema ~~Document~~

+	~~101.CAL~~	~~Inline XBRL Taxonomy Extension Calculation~~With Embedded Linkbase ~~Document~~

+	~~101.DEF~~	~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~

+	~~101.LAB~~	~~Inline XBRL Taxonomy Extension Label Linkbase Document~~

+	~~101.PRE~~	~~Inline XBRL Taxonomy Extension Presentation Linkbase Document~~Documents



(104)		Cover Page Interactive Data File embedded within the Inline XBRL document

	+ ++ #*	Exhibit filed with this report Exhibit furnished with this report ~~Management contract~~Certain schedules of this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission or ~~compensation plan~~its staff a copy of the omitted schedules upon request.

3633

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.


			GRAHAM CORPORATION
By:			/s/ Christopher J. Thome
			Christopher J. Thome
			Vice President-Finance and Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)

Date: February ~~6, 2023~~5, 2024

3734


Delaware	16-1194720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20 Florence Avenue, Batavia, New York	14020
(Address of principal executive offices)	(Zip Code)


	December 31, 2023			March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	15,163		$	18,257
Trade accounts receivable, net of allowances ($1,834 and $1,841 at December 31 and March 31, 2023, respectively)		35,666			24,000
Unbilled revenue		28,671			39,684
Inventories		31,078			26,293
Prepaid expenses and other current assets		4,011			1,534
Income taxes receivable		745			302
Total current assets		115,334			110,070
Property, plant and equipment, net		29,027			25,523
Prepaid pension asset		6,322			6,107
Operating lease assets		7,626			8,237
Goodwill		25,087			23,523
Customer relationships, net		14,584			10,718
Technology and technical know-how, net		11,254			9,174
Other intangible assets, net		7,378			7,610
Deferred income tax asset		1,734			2,798
Other assets		368			158
Total assets	$	218,714		$	203,918
Liabilities and stockholders’ equity
Current liabilities:
Short-term debt obligations	$	3,000		$	—
Current portion of long-term debt		—			2,000
Current portion of finance lease obligations		19			29
Accounts payable		16,365			20,222
Accrued compensation		14,726			10,401
Accrued expenses and other current liabilities		5,255			6,434
Customer deposits		63,005			46,042
Operating lease liabilities		1,221			1,022
Income taxes payable		—			16
Total current liabilities		103,591			86,166
Long-term debt		—			9,744
Finance lease obligations		72			85
Operating lease liabilities		6,760			7,498
Deferred income tax liability		61			108
Accrued pension and postretirement benefit liabilities		1,341			1,342
Other long-term liabilities		3,133			2,042
Total liabilities		114,958			106,985
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized		—			—
Common stock, $0.10 par value, 25,500 shares authorized, 10,971 and 10,774 shares issued and 10,828 and 10,635 shares outstanding at December 31 and March 31, 2023, respectively		1,097			1,075
Capital in excess of par value		31,678			28,061
Retained earnings		80,659			77,443
Accumulated other comprehensive loss		(7,144	)		(7,463	)
Treasury stock (143 and 138 shares at December 31 and March 31, 2023, respectively)		(2,534	)		(2,183	)
Total stockholders’ equity		103,756			96,933
Total liabilities and stockholders’ equity	$	218,714		$	203,918


	December 31, 2022			March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	17,215		$	14,741
Trade accounts receivable, net of allowances ($71 and $87 at December 31 and March 31, 2022, respectively)		35,019			27,645
Unbilled revenue		33,509			25,570
Inventories		24,077			17,414
Prepaid expenses and other current assets		1,899			1,391
Income taxes receivable		590			459
Total current assets		112,309			87,220
Property, plant and equipment, net		25,248			24,884
Prepaid pension asset		7,547			7,058
Operating lease assets		8,530			8,394
Goodwill		23,523			23,523
Customer relationships, net		10,866			11,308
Technology and technical know-how, net		9,300			9,679
Other intangible assets, net		7,955			8,990
Deferred income tax asset		2,212			2,441
Other assets		167			194
Total assets	$	207,657		$	183,691
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt	$	2,000		$	2,000
Current portion of finance lease obligations		17			23
Accounts payable		22,532			16,662
Accrued compensation		10,823			7,991
Accrued expenses and other current liabilities		5,204			6,047
Customer deposits		44,300			25,644
Operating lease liabilities		1,008			1,057
Income taxes payable		27			—
Total current liabilities		85,911			59,424
Long-term debt		12,184			16,378
Finance lease obligations		—			11
Operating lease liabilities		7,759			7,460
Deferred income tax liability		127			62
Accrued pension and postretirement benefit liabilities		1,665			1,666
Other long-term liabilities		2,115			2,196
Total liabilities		109,761			87,197
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized		—			—
Common stock, $0.10 par value, 25,500 shares authorized, 10,758 and 10,801 shares issued and 10,611 and 10,636 shares outstanding at December 31 and March 31, 2022, respectively		1,076			1,080
Capital in excess of par value		28,119			27,770
Retained earnings		77,924			77,076
Accumulated other comprehensive loss		(6,597	)		(6,471	)
Treasury stock (147 and 164 shares at December 31 and March 31, 2022, respectively)		(2,626	)		(2,961	)
Total stockholders’ equity		97,896			96,494
Total liabilities and stockholders’ equity	$	207,657		$	183,691


	Nine Months Ended						Nine Months Ended
	December 31,						December 31,
	2022			2021			2023			2022
Operating activities:
Net income (loss)	$	848		$	(7,348	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Net income							$	3,216		$	848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,611			2,232			2,375			2,611
Amortization of intangible assets		1,857			1,765			1,487			1,857
Amortization of actuarial losses		504			725			632			504
Amortization of debt issuance costs		153			—			131			153
Equity-based compensation expense		582			599			1,002			582
Gain on disposal or sale of property, plant and equipment		—			22
Change in fair value of contingent consideration		—			(1,900	)
Loss on extinguishment of debt								726			—
Deferred income taxes		232			152			935			232
(Increase) decrease in operating assets:
(Increase) decrease in operating assets, net of acquisition:
Accounts receivable		(7,755	)		(10,964	)		(11,335	)		(7,755	)
Unbilled revenue		(8,082	)		2,186			11,213			(8,082	)
Inventories		(6,801	)		579			(4,357	)		(6,801	)
Prepaid expenses and other current and non-current assets		(500	)		(933	)		(1,526	)		(500	)
Income taxes receivable		(137	)		(3,423	)		(459	)		(137	)
Operating lease assets		913			744			894			913
Prepaid pension asset		(488	)		(905	)		(215	)		(488	)
Increase (decrease) in operating liabilities:
Increase (decrease) in operating liabilities, net of acquisition:
Accounts payable		5,511			(6,058	)		(3,949	)		5,511
Accrued compensation, accrued expenses and other current and non-current liabilities		2,116			465			2,948			2,116
Customer deposits		18,776			7,553			16,590			18,776
Operating lease liabilities		(802	)		(663	)		(825	)		(802	)
Long-term portion of accrued compensation, accrued pension and postretirement benefit liabilities		(592	)		620			—			(592	)
Net cash provided (used) by operating activities		8,946			(14,552	)
Net cash provided by operating activities								19,483			8,946
Investing activities:
Purchase of property, plant and equipment		(2,394	)		(1,909	)		(5,193	)		(2,394	)
Redemption of investments at maturity		—			5,500
Acquisition of Barber-Nichols, LLC		—			(59,563	)
Proceeds from disposal of property, plant and equipment								38			—
Acquisition of P3 Technologies, LLC, net of cash acquired								(6,812	)		—
Net cash used by investing activities		(2,394	)		(55,972	)		(11,967	)		(2,394	)
Financing activities:
Borrowings of short-term debt obligations		5,000			9,750			13,000			5,000
Principal repayments on debt		(8,517	)		(1,015	)		(22,522	)		(8,517	)
Proceeds from the issuance of debt		—			20,000
Payment of debt exit costs								(752	)		—
Repayments on financing lease obligations		(205	)		(157	)		(224	)		(205	)
Payment of debt issuance costs		(122	)		(150	)		(241	)		(122	)
Dividends paid		—			(3,524	)
Issuance of common stock								225			—
Purchase of treasury stock		(22	)		(41	)		(57	)		(22	)
Net cash (used) provided by financing activities		(3,866	)		24,863
Net cash used by financing activities								(10,571	)		(3,866	)
Effect of exchange rate changes on cash		(212	)		120			(39	)		(212	)
Net increase (decrease) in cash and cash equivalents		2,474			(45,541	)
Net (decrease) increase in cash and cash equivalents								(3,094	)		2,474
Cash and cash equivalents at beginning of period		14,741			59,532			18,257			14,741
Cash and cash equivalents at end of period	$	17,215		$	13,991		$	15,163		$	17,215


	Common Stock						Capital in					Accumulated Other						Total
				Par			Excess of			Retained		Comprehensive			Treasury			Stockholders'
	Shares			Value			Par Value			Earnings		Loss			Stock			Equity
Balance at April 1, 2023		10,774		$	1,075		$	28,061		$	77,443	$	(7,463	)	$	(2,183	)	$	96,933
Comprehensive income (loss)											2,640		(88	)					2,552
Issuance of shares		53			8			(8	)										—
Forfeiture of shares		(9	)		(1	)		1											—
Recognition of equity-based compensation expense								293											293
Issuance of treasury stock								294								(294	)		—
Purchase of treasury stock																(57	)		(57	)
Balance at June 30, 2023		10,818			1,082			28,641			80,083		(7,551	)		(2,534	)		99,721
Comprehensive income											411		106						517
Issuance of shares		28			2			223											225
Recognition of equity-based compensation expense								332											332
Balance at September 30, 2023		10,846			1,084			29,196			80,494		(7,445	)		(2,534	)		100,795
Comprehensive income											165		301						466
Issuance of shares for purchase of P3 Technologies, LLC		125			13			2,104											2,117
Recognition of equity-based compensation expense								378											378
Balance at December 31, 2023		10,971		$	1,097		$	31,678		$	80,659	$	(7,144	)	$	(2,534	)	$	103,756


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐
~~Non-accelerated filer~~	☒	Smaller reporting company	☒
Emerging growth company	☐


		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2320

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3330

Item 4.	Controls and Procedures	3431

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	3532

Item 6.	Exhibits	3633

Signatures		3734


	June 1
	2021
Assets acquired:
Cash and cash equivalents	$	868
Accounts receivable, net of allowances		8,074
Unbilled revenue		7,068
Inventories		3,549
Prepaid expenses and other current assets		476
Property, plant & equipment, net		8,037
Operating lease assets		9,026
Goodwill		23,523
Customer relationships		11,800
Technology and technical know-how		10,100
Other intangibles, net		10,600
Total assets acquired		93,121
Liabilities assumed:
Accounts payable		1,842
Accrued compensation		1,341
Accrued expenses and other current liabilities		707
Customer deposits		6,048
Operating lease liabilities		9,066
Other long-term liabilities		2,103
Total liabilities assumed		21,107
Purchase price	$	72,014


	November 9,
	2023
Assets acquired:
Cash and cash equivalents	$	286
Trade accounts receivable, net of allowances		465
Unbilled revenue		302
Inventories		443
Prepaid expenses and other current assets		93
Property, plant & equipment, net		542
Operating lease assets		130
Goodwill		1,565
Customer relationships		4,400
Technology and technical know-how		2,500
Tradename		300
Deferred income tax asset		53
Total assets acquired		11,079
Liabilities assumed:
Accrued compensation		62
Customer deposits		389
Operating lease liabilities		134
Total liabilities assumed		585
Purchase price	$	10,494


	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At December 31, 2022
Intangibles subject to amortization:
Customer relationships	20 years	$	11,800	$	934	$	10,866
Technology and technical know-how	20 years		10,100		800		9,300
Backlog	4 years		3,900		2,645		1,255
		$	25,800	$	4,379	$	21,421

Intangibles not subject to amortization:
Tradename	Indefinite	$	6,700	$	—	$	6,700
		$	6,700	$	—	$	6,700


	Annual Amortization
Remainder of 2023	$	619
2024		1,782
2025		1,318
2026		1,095
2027		1,095
2028 and thereafter		15,512
Total intangible amortization	$	21,421


	Annual Amortization
Remainder of 2024	$	671
2025		2,217
2026		1,995
2027		1,953
2028		1,895
2029 and thereafter		17,785
Total intangible amortization	$	26,516


	Operating Leases		Finance Leases
Remainder of 2023	$	301	$	6
2024		1,293		11
2025		1,298		—
2026		1,309		—
2027		1,349		—
2028 and thereafter		4,328		—
Total lease payments		9,878		17

Less – amount representing interest		1,111		1
Present value of net minimum lease payments	$	8,767	$	16


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
Product Line	2022		2021		2022		2021
Refining	$	6,497	$	3,958	$	21,940	$	14,894
Chemical/Petrochemical		3,927		3,047		15,606		11,132
Defense		21,687		16,598		46,342		43,475
Space		3,510		1,449		14,278		3,466
Other Commercial		4,252		3,722		15,925		10,110
Net sales	$	39,873	$	28,774	$	114,091	$	83,077


Geographic Region
Asia	$	4,226	$	1,493	$	12,729	$	10,485
Canada		557		924		3,261		3,011
Middle East		621		628		1,766		2,202
South America		649		242		2,509		720
U.S.		33,163		24,737		91,657		64,832
All other		657		750		2,169		1,827
Net sales	$	39,873	$	28,774	$	114,091	$	83,077


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
Market	2023		2022		2023		2022
Refining	$	7,638	$	6,497	$	21,794	$	21,940
Chemical/Petrochemical		4,130		3,927		14,536		15,606
Defense		24,330		21,687		72,265		46,342
Space		2,931		3,510		10,528		14,278
Other Commercial		4,789		4,252		17,340		15,925
Net sales	$	43,818	$	39,873	$	136,463	$	114,091


Geographic Region
Asia	$	4,016	$	4,226	$	12,898	$	12,729
Canada		1,116		557		3,107		3,261
Middle East		501		621		2,219		1,766
South America		65		649		264		2,509
U.S.		36,822		33,163		113,567		91,657
All other		1,298		657		4,408		2,169
Net sales	$	43,818	$	39,873	$	136,463	$	114,091