☒ 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See ~~definition~~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 ~~30, 2018,~~31, 2024, there were outstanding ~~9,768,026~~10,828,327 shares of the registrant’s common stock, par value ~~$.10~~$0.10 per share.

As of December 31, ~~2017~~2023 and March 31, ~~2017~~2023 and for the ~~Three~~three and ~~Nine-Month Periods Ended~~nine months ended December 31, ~~2017~~2023 and ~~2016~~2022


		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	43

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	1720

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2330

Item 4.	Controls and Procedures	2431

Part II.	OTHER INFORMATION

Item 6.1A.	~~Exhibits~~Risk Factors	2532

Item 6.	Exhibits	33

Signatures		2634

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

DECEMBER 31, ~~2017~~2023

PART I – FINANCIAL INFORMATION

3Item 1. Unaudited Condensed Consolidated Financial Statements

~~Item 1.~~

~~Unaudited Condensed Consolidated Financial Statements~~

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND RETAINED EARNINGS~~

~~(Unaudited)~~

Three Months Ended

Nine Months Ended

December 31,

December 31,

2017

2016

2017

2016

(Amounts in thousands, except per share data)

(Amounts in thousands, except per share data)

Net sales

$
17,281

$
22,654

$
55,356

$
66,145

Cost of products sold

13,696

16,353

43,075

50,723

Gross profit

3,585

6,301

12,281

15,422

Other expenses and income:

Selling, general and administrative

4,007

3,746

11,270

10,462

Selling, general and administrative – amortization

59

58

177

175

Impairment of goodwill and intangible assets

14,816

—

14,816

—

Restructuring charge

—

—

316

630

Interest income

(142
)

(100
)

(455
)

(272
)
Interest expense

3

3

8

7

Total other expenses and income

18,743

3,707

26,132

11,002

(Loss) income before provision for income taxes

(15,158
)

2,594

(13,851
)

4,420

(Benefit) provision for income taxes

(3,536
)

754

(3,174
)

1,198

Net (loss) income

(11,622
)

1,840

(10,677
)

3,222

Retained earnings at beginning of period

109,731

108,655

110,544

109,013

Dividends

(880
)

(876
)

(2,638
)

(2,616
)
Retained earnings at end of period

$
97,229

$
109,619

$
97,229

$
109,619

Per share data

Basic:

Net (loss) income

$
(1.19
)

$
0.19

$
(1.09
)

$
0.33

Diluted:

Net (loss) income

$
(1.19
)

$
0.19

$
(1.09
)

$
0.33

Weighted average common shares outstanding:

Basic

9,768

9,727

9,762

9,709

Diluted

9,768

9,733

9,762

9,714

Dividends declared per share

$
0.09

$
0.09

$
0.27

$
0.27

~~See Notes to Condensed Consolidated Financial Statements.~~

~~GRAHAM CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME~~

~~(Unaudited)~~

Three Months Ended

Nine Months Ended

December 31,

December 31,

2017

2016

2017

2016

(Amounts in thousands)

(Amounts in thousands)

Net (loss) income

$
(11,622
)

$
1,840

$
(10,677
)

$
3,222

Other comprehensive income:

Foreign currency translation adjustment

76

(135
)

216

(283
)
Defined benefit pension and other postretirement plans net of
   income tax expense (benefit) of $(17) and $123, for the
   three months ended December 31, 2017 and 2016,
   respectively, and $169 and $369 for the nine months ended
   December 31, 2017 and 2016, respectively

279

225

619

674

Total other comprehensive income

355

90

835

391

Total comprehensive (loss) income

$
(11,267
)

$
1,930

$
(9,842
)

$
3,613

~~See Notes to Condensed Consolidated Financial Statements.~~

~~GRAHAM CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

December 31,

March 31,

2017

2017

(Amounts in thousands, except per share data)

Assets

Current assets:

Cash and cash equivalents

$
36,159

$
39,474

Investments

38,023

34,000

Trade accounts receivable, net of allowances ($336 and $168 at December 31 and
   March 31, 2017, respectively)

16,555

11,483

Unbilled revenue

10,709

15,842

Inventories

8,899

9,246

Prepaid expenses and other current assets

1,181

681

Income taxes receivable

1,288

—

Total current assets

112,814

110,726

Property, plant and equipment, net

16,098

17,021

Prepaid pension asset

3,110

2,340

Goodwill

1,222

6,938

Permits

1,700

10,300

Other intangible assets, net

3,433

4,068

Other assets

246

177

Total assets

$
138,623

$
151,570

Liabilities and stockholders’ equity

Current liabilities:

Current portion of capital lease obligations

$
105

$
107

Accounts payable

9,386

10,295

Accrued compensation

4,418

5,189

Accrued expenses and other current liabilities

2,722

3,723

Customer deposits

17,814

12,407

Income taxes payable

—

317

Total current liabilities

34,445

32,038

Capital lease obligations

67

143

Deferred income tax liability

736

4,051

Accrued pension liability

534

467

Accrued postretirement benefits

780

761

Other long-term liabilities

126

—

Total liabilities

36,688

37,460

Commitments and contingencies (Note 11)

Stockholders’ equity:

Preferred stock, $1.00 par value, 500 shares authorized

Common stock, $.10 par value, 25,500 shares authorized
   10,579 and 10,548 shares issued and 9,768 and 9,740 shares
   outstanding at December 31 and March 31, 2017, respectively

1,058

1,055

Capital in excess of par value

23,573

23,176

Retained earnings

97,229

110,544

Accumulated other comprehensive loss

(7,599
)

(8,434
)
Treasury stock (811 and 808 shares at December 31 and March 31, 2017, respectively)

(12,326
)

(12,231
)
Total stockholders’ equity

101,935

114,110

Total liabilities and stockholders’ equity

$
138,623

$
151,570

~~See Notes to Condensed Consolidated Financial Statements.~~

~~GRAHAM CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

Nine Months Ended

December 31,

2017

2016

Operating activities:

(Dollar amounts in thousands)

Net (loss) income

$
(10,677
)

$
3,222

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation

1,490

1,571

Amortization

177

175

Amortization of unrecognized prior service cost and actuarial losses

788

1,043

Impairment of goodwill and purchased intangible assets

14,816

—

Stock-based compensation expense

362

433

Loss on disposal or sale of property, plant and equipment

1

1

Deferred income taxes

(3,498
)

10

(Increase) decrease in operating assets:

Accounts receivable

(5,029
)

1,126

Unbilled revenue

5,170

(2,651
)
Inventories

352

1,697

Prepaid expenses and other current and non-current assets

(591
)

(489
)
Income taxes receivable

(1,605
)

1,109

Prepaid pension asset

(770
)

—

Increase (decrease) in operating liabilities:

Accounts payable

(1,005
)

(2,173
)
Accrued compensation, accrued expenses and other current and non-current liabilities

(1,593
)

(558
)
Customer deposits

5,400

6,699

Long-term portion of accrued compensation, accrued pension liability
and accrued postretirement benefits

86

(508
)
Net cash provided by operating activities

3,874

10,707

Investing activities:

Purchase of property, plant and equipment

(543
)

(241
)
Proceeds from disposal of property, plant and equipment

1

—

Purchase of investments

(34,023
)

(39,000
)
Redemption of investments at maturity

30,000

45,000

Net cash (used) provided by investing activities

(4,565
)

5,759

Financing activities:

Principal repayments on capital lease obligations

(78
)

(38
)
Issuance of common stock

—

79

Dividends paid

(2,638
)

(2,616
)
Purchase of treasury stock

(119
)

(29
)
Excess tax deficiency on stock awards

—

(26
)
Net cash used by financing activities

(2,835
)

(2,630
)
Effect of exchange rate changes on cash

211

(231
)
Net (decrease) increase in cash and cash equivalents

(3,315
)

13,605

Cash and cash equivalents at beginning of year

39,474

24,072

Cash and cash equivalents at end of period

$
36,159

$
37,677

~~See Notes to Condensed Consolidated Financial Statements.~~

~~GRAHAM CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

(Amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2023			2022			2023		2022
Net sales	$	43,818		$	39,873		$	136,463	$	114,091
Cost of products sold		34,095			33,646			108,572		95,840
Gross profit		9,723			6,227			27,891		18,251
Other expenses and income:
Selling, general and administrative		8,429			5,284			21,563		15,828
Selling, general and administrative – amortization		383			274			930		821
Operating income		911			669			5,398		1,602
Loss on extinguishment of debt		726			—			726		—
Other expense (income), net		93			(63	)		280		(188	)
Interest expense, net		37			294			277		697
Income before (benefit) provision for income taxes		55			438			4,115		1,093
(Benefit) provision for income taxes		(110	)		70			899		245
Net income	$	165		$	368		$	3,216	$	848
Per share data
Basic:
Net income	$	0.02		$	0.03		$	0.30	$	0.08
Diluted:
Net income	$	0.02		$	0.03		$	0.30	$	0.08
Weighted average common shares outstanding:
Basic		10,775			10,611			10,709		10,613
Diluted		10,920			10,660			10,792		10,632

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2023		2022		2023			2022
Net income	$	165	$	368	$	3,216		$	848
Other comprehensive income (loss):
Foreign currency translation adjustment		137		161		(173	)		(519	)
Defined benefit pension and other postretirement plans net of income tax expense of $47 and $38 for the three months ended December 31, 2023 and 2022, respectively, and $140 and $112 for the nine months ended December 31, 2023 and 2022, respectively		164		131		492			393
Total other comprehensive income (loss)		301		292		319			(126	)
Total comprehensive income	$	466	$	660	$	3,535		$	722

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

(Unaudited)


	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

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended
	December 31,
	2023			2022
Operating activities:
Net income	$	3,216		$	848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,375			2,611
Amortization of intangible assets		1,487			1,857
Amortization of actuarial losses		632			504
Amortization of debt issuance costs		131			153
Equity-based compensation expense		1,002			582
Loss on extinguishment of debt		726			—
Deferred income taxes		935			232
(Increase) decrease in operating assets, net of acquisition:
Accounts receivable		(11,335	)		(7,755	)
Unbilled revenue		11,213			(8,082	)
Inventories		(4,357	)		(6,801	)
Prepaid expenses and other current and non-current assets		(1,526	)		(500	)
Income taxes receivable		(459	)		(137	)
Operating lease assets		894			913
Prepaid pension asset		(215	)		(488	)
Increase (decrease) in operating liabilities, net of acquisition:
Accounts payable		(3,949	)		5,511
Accrued compensation, accrued expenses and other current and non-current liabilities		2,948			2,116
Customer deposits		16,590			18,776
Operating lease liabilities		(825	)		(802	)
Long-term portion of accrued compensation, accrued pension and postretirement benefit liabilities		—			(592	)
Net cash provided by operating activities		19,483			8,946
Investing activities:
Purchase of property, plant and equipment		(5,193	)		(2,394	)
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		(11,967	)		(2,394	)
Financing activities:
Borrowings of short-term debt obligations		13,000			5,000
Principal repayments on debt		(22,522	)		(8,517	)
Payment of debt exit costs		(752	)		—
Repayments on financing lease obligations		(224	)		(205	)
Payment of debt issuance costs		(241	)		(122	)
Issuance of common stock		225			—
Purchase of treasury stock		(57	)		(22	)
Net cash used by financing activities		(10,571	)		(3,866	)
Effect of exchange rate changes on cash		(39	)		(212	)
Net (decrease) increase in cash and cash equivalents		(3,094	)		2,474
Cash and cash equivalents at beginning of period		18,257			14,741
Cash and cash equivalents at end of period	$	15,163		$	17,215

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED DECEMBER 31, 2023

(Amounts in thousands)

(Unaudited)


	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

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED DECEMBER 31, 2022

(Amounts in thousands)

(Unaudited)


	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, 2022		10,801		$	1,080		$	27,770		$	77,076		$	(6,471	)	$	(2,961	)	$	96,494
Comprehensive income (loss)											676			(212	)					464
Forfeiture of shares		(32	)		(3	)		3												—
Recognition of equity-based compensation expense								114												114
Purchase of treasury stock																	(21	)		(21	)
Balance at June 30, 2022		10,769			1,077			27,887			77,752			(6,683	)		(2,982	)		97,051
Comprehensive loss											(196	)		(206	)					(402	)
Forfeiture of shares		(11	)		(1	)		1												—
Recognition of equity-based compensation expense								198												198
Issuance of treasury stock								(237	)								356			119
Balance at September 30, 2022		10,758			1,076			27,849			77,556			(6,889	)		(2,626	)		96,966
Comprehensive income											368			292						660
Recognition of equity-based compensation expense								270												270
Balance at December 31, 2022		10,758		$	1,076		$	28,119		$	77,924		$	(6,597	)	$	(2,626	)	$	97,896

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except per share data)

NOTE 1 – BASIS OF PRESENTATION:

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its ~~(i)~~ wholly-owned ~~foreign subsidiary~~subsidiaries located in Arvada, Colorado, Suzhou, China and ~~(ii)~~Ahmedabad, India at December 31, 2023 and March 31, 2023, and its recently acquired wholly-owned ~~domestic~~ subsidiary, P3 Technologies, LLC ("P3"), located in ~~Lapeer, Michigan.~~Jupiter, Florida (See Note 2) at December 31, 2023. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule ~~10-01~~8-03 of Regulation S-X, each as promulgated by the U.S. Securities and Exchange Commission. The Company's Condensed Consolidated Financial Statements do not include all information and notes required by GAAP for complete financial statements. The unaudited Condensed Consolidated Balance Sheet as of March 31, ~~2017~~2023 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, ~~2017.~~2023. For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~2023 ("fiscal ~~2017"~~2023"). In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included in the Company's Condensed Consolidated Financial Statements.

The Company's results of operations and cash flows for the three and nine months ended December 31, ~~2017~~2023 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, ~~2018~~2024 ("fiscal ~~2018"~~2024").

NOTE 2 – ACQUISITION:

On November 9, 2023, the Company completed its 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. The Company believes this acquisition furthers its growth strategy, further diversifies its market and product offerings, and broadens its turbomachinery solutions. P3 will be managed through the Company's Barber-Nichols, LLC ("BN") subsidiary and is highly complementary to BN's technology and enhances its turbomachinery solutions.

This 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 $10,494 was comprised of 125 shares of the Company's common stock, representing a value of $2,117 at a price of $16.85 per share, and cash consideration of $7,098, subject to certain potential adjustments, including a customary working capital adjustment. As of December 31, 2023, there was a $761 receivable accrued related to such working capital adjustment. The cash consideration was funded through borrowings on the Company's 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 consideration. At December 31, 2023, a liability of $2,040 was recorded for the contingent earn-out. Acquisition related costs of $274 were expensed in the three and nine months ended December 31, 2023, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

The cost of the acquisition was allocated to the assets acquired and liabilities assumed based upon their estimated fair value at the date of acquisition and the amount exceeding the fair value of $1,565 was recorded as goodwill, which is deductible for tax purposes. The following table summarizes the preliminary purchase price allocation of the assets acquired and liabilities assumed:


	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

The fair value of acquisition-related intangible assets includes customer relationships, technology and technical know-how, and tradename. The tradename is included in the line item "Other intangible assets, net" in the Condensed Consolidated Balance Sheets. The fair value of customer relationships was calculated using an income approach, specifically the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs. The fair value of tradename and technology and technical know-how were both calculated using a Relief from Royalty method, which develops a market based royalty rate used to reflect the after tax royalty savings attributable to owning the intangible asset.

Customer relationships and tradename are amortized in selling, general and administrative expense on a straight line basis over their estimated useful lives of eight years and three years respectively. Technology and technical know-how is amortized in cost of products sold on a straight line basis over its estimated useful life of ten years.

The Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2023 includes net sales of P3 of $1,027 and net income of $176. The following unaudited pro forma information presents the consolidated results of operations of the Company as if the P3 acquisition had occurred at the beginning of each of the fiscal periods presented:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2023		2022		2023		2022
Net sales	$	44,186	$	40,651	$	140,019	$	116,628
Net income		464		340		4,554		499
Loss per share
Basic	$	0.04	$	0.03	$	0.42	$	0.05
Diluted	$	0.04	$	0.03	$	0.42	$	0.05

The unaudited pro forma information presents the combined operating results of Graham Corporation and P3 with the results prior to the acquisition date adjusted to include the pro forma impact of the adjustment of depreciation of fixed assets based on the preliminary purchase price allocation, the adjustment to interest expense reflecting the cash paid in connection with the acquisition, including acquisition-related expenses, at the Company’s weighted average interest rate, amortization expense related to the fair value adjustments for intangible assets, non-recurring acquisition-related costs and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory tax rate.

The unaudited pro forma results are presented for illustrative purposes only. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the acquisition occurred as of the beginning of each of the periods presented, nor does the pro forma data intend to be a projection of results that may be obtained in the future.

NOTE 3 – REVENUE RECOGNITION:

The Company recognizes revenue on ~~all~~ contracts ~~with~~when or as it satisfies a ~~planned manufacturing process in excess of four weeks (which approximates 575 direct labor hours) using the percentage-of-completion method. The majority~~performance obligation by transferring control of the ~~Company's~~product to the customer. For contracts in which revenue is recognized ~~under this methodology.~~upon shipment, control is generally transferred when products are shipped, title is transferred, significant risks of ownership have transferred, the Company has rights to payment, and rewards of ownership pass to the customer. For contracts in which revenue is recognized over time, control is generally transferred as the Company creates an asset that does not have an alternative use to the Company and the Company has an enforceable right to payment for the performance completed to date.

The following table presents the Company’s revenue disaggregated by product line and geographic area:


	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

A performance obligation represents a promise in a contract to provide a distinct good or service to a customer. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferred products. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized as the performance obligation is satisfied. In certain cases, the Company may separate a contract into more than one performance obligation, while in other cases, several products may be part of a fully integrated solution and are bundled into a single performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods underlying each performance obligation. The Company has made an accounting policy election to exclude from the measurement of the contract price all taxes assessed by government authorities that are collected by the Company from its customers. The Company does not adjust the contract price for the effects of a financing component if the Company expects, at contract inception, that the period between when a product is transferred to a customer and when the customer pays for the product will be one year or less. Shipping and handling fees billed to the customer are recorded in revenue and the related costs incurred for shipping and handling are included in cost of products sold.

The Company recognizes revenue over time when contract performance results in the creation of a product for which the Company does not have an alternative use and the contract includes an enforceable right to payment in an amount that corresponds directly with the value of the performance completed. To measure progress towards completion on performance obligations for which revenue is recognized over time the Company utilizes an input method based upon a ratio of direct labor hours incurred to date to management’s estimate of the total labor hours to be incurred on each contract, an input method based upon a ratio of total contract costs incurred to date to management’s estimate of the total contract costs to be incurred or an output method based upon completion of operational milestones, depending upon the nature of the contract. The Company has established the systems and procedures essential to developing the estimates required to account for ~~contracts using the percentage-of-completion method. The percentage-of-completion method is determined~~performance obligations over time. These procedures include monthly review by ~~comparing actual labor~~management of costs incurred, ~~to a specific date to management's estimate~~progress towards completion, identified risks and opportunities, sourcing determinations, changes in estimates of ~~the total labor~~costs yet to be incurred, ~~on each contract or completion~~availability of ~~operational milestones assigned to each contract. Contracts in progress are reviewed monthly~~materials, and execution by ~~management, and sales~~subcontractors. Sales and earnings are adjusted in current accounting periods based on revisions in the contract value due to pricing changes and estimated costs at completion. Losses on contracts are

recognized immediately when evident to management.

Revenue on ~~contracts not accounted for using~~ the ~~percentage-of-completion method is recognized utilizing the completed contract method. The~~ majority of the ~~Company's~~Company’s contracts, ~~(as opposed to revenue) have a planned manufacturing process~~as measured by number of ~~less than four weeks and the results reported under this method do not vary materially from the percentage-of-completion method. The Company recognizes revenue and all related costs on these~~ contracts, is recognized upon ~~substantial completion or~~ shipment to the customer. ~~Substantial completion~~Revenue on larger contracts, which are fewer in number but represent the majority of revenue, is ~~consistently defined~~recognized over time. The following table presents the Company's revenue percentages disaggregated by revenue recognized over time or upon shipment:


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2023			2022			2023			2022

Revenue recognized over time		76	%		80	%		77	%		73	%
Revenue recognized at shipment		24	%		20	%		23	%		27	%

The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable, unbilled revenue (contract assets) and customer deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Unbilled revenue represents revenue on contracts that is recognized over time and exceeds the amount that has been billed to the customer. Unbilled revenue is separately presented in the Condensed Consolidated Balance Sheets. The Company may have an unconditional right to payment upon billing and prior to satisfying the performance obligations. The Company will then record a contract liability and an offsetting asset of equal amount until the deposit is collected and the performance obligations are satisfied. Customer deposits are separately presented in the Condensed Consolidated Balance Sheets. Customer deposits are not considered a significant financing component as they are generally received less than one year before the product is completed or used to procure specific material on a contract, as well as related overhead costs incurred during design and construction.

Net contract assets (liabilities) consisted of the following:


	December 31, 2023			March 31, 2023			Change			Change due to amounts acquired			Change due to revenue recognized		Change due to invoicing customers/ additional deposits

Unbilled revenue (contract assets)	$	28,671		$	39,684		$	(11,013	)	$	302		$	72,629	$	(83,944	)
Customer deposits (contract liabilities)		(63,005	)		(46,042	)		(16,963	)		(389	)		23,355		(39,929	)
Net contract (liabilities) assets	$	(34,334	)	$	(6,358	)	$	(27,976	)

Contract liabilities at ~~least 95% complete with regard to direct labor hours. Customer acceptance is generally required throughout the construction process~~December 31, and March 31, 2023 include $13,337 and $6,092, respectively, of customer deposits for which the Company has ~~no further material obligations under its contracts after~~an unconditional right to collect payment. Trade accounts receivable, as presented on the ~~revenue is recognized.~~Condensed Consolidated Balance Sheets, includes corresponding balances at December 31, and March 31, 2023, respectively.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were ~~$1,141~~$2,992 and ~~$971~~$2,542 at December 31, ~~2017~~ and March 31, ~~2017,~~2023, respectively.

~~NOTE 3 – INVESTMENTS:~~

~~Investments consist~~The Company’s remaining unsatisfied performance obligations represent a measure of ~~certificates~~the total dollar value of ~~deposits with financial institutions. All investments have original maturities~~work to be performed on contracts awarded and in progress. The Company also refers to this measure as backlog. As of ~~greater than three months and less than one year and are classified as held-to-maturity, as~~December 31, 2023, the Company ~~believes it has~~had remaining unsatisfied performance obligations of $399,244. The Company expects to recognize revenue on approximately 40% of the ~~intent~~remaining performance obligations within one year, 25% to 30% in one to two years and ~~ability to hold~~ the securities to maturity. Investments are stated at amortized cost which approximates fair value. All investments held by the Company at December 31, 2017 are scheduled to mature on or before May 31, 2018.remaining beyond two years.

NOTE 4 – INVENTORIES:

Inventories are stated at the lower of cost or ~~market,~~net realizable value, using the average cost method. Unbilled revenue in the Condensed Consolidated Balance Sheets represents revenue recognized that has not been billed to customers on contracts accounted for on the percentage-of-completion method. For contracts accounted for on the percentage-of-completion method, progress payments are netted against unbilled revenue to the extent the payment is less than the unbilled revenue for the applicable contract. Progress payments exceeding unbilled revenue are netted against inventory to the extent the payment is less than or equal to the inventory balance relating to the applicable contract, and the excess is presented as customer deposits in the Condensed Consolidated Balance Sheets.

Major classifications of inventories are as follows:


	December 31,		March 31,
	2023		2023
Raw materials and supplies	$	3,787	$	4,344
Work in process		25,064		20,554
Finished products		2,227		1,395
Total	$	31,078	$	26,293

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

On October 13, 2023, the Company terminated its revolving credit facility and repaid its term loan with Bank of America and entered into a new five-year revolving credit facility with Wells Fargo Bank, National Association ("Wells Fargo") that provides a $35,000 line of credit 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 the Company may request the issuance of cash secured letters of credit in an aggregate amount of up to $7,500. As of December 31, 2023, there was $3,000 borrowed and $666 letters of credit outstanding on the New Revolving Credit Facility.

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 ~~fiscal 2018~~Wells Fargo, which require the Company to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and ~~the first half~~(ii) a consolidated fixed charge coverage ratio of fiscal 2017, the Company’s workforce was aligned with market conditions by reducing the number of management, office and manufacturing positions. As a result, restructuring charges of $316 and $630 were recognizedat least 1.20:1.00, in the nine months ended December 31, 2017 and 2016, respectively. The restructuring charges included severance and related employee benefit costs. The charges are included in the caption “Restructuring Charge” in the Condensed Consolidated Statements of Income and Retained Earnings. The reconciliation of the changes in the restructuring reserve is as follows:

~~The liability of $100 and $120 at December 31, 2017 and March 31, 2017 respectively, is included in the caption “Accrued Compensation” in the Condensed Consolidated Balance Sheets.~~

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission, the Emerging Issues Task Force, the American Institute of Certified Public Accountants or any other authoritative accounting bodies to determine the potential impact they may have on the Company's consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." This guidance establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers. The guidance requires companies to apply a five-step model when recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The guidance also includes a comprehensive set of disclosure requirements regarding revenue recognition. The guidance allows two methods of adoption: (1) a full retrospective approach where historical financial information is presentedboth cases computed in accordance with the ~~new standard~~definitions and ~~(2)~~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 New Revolving Credit Facility bear interest at a ~~modified retrospective approach where~~rate equal to, at the ~~guidance is applied~~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 ~~most current period presented~~highest of (a) the rate of interest per annum publicly announced by the Lender 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 ~~financial statements. In August 2015, the FASB issued ASU No 2015-14 "Revenue from Contracts with Customers: Deferral~~case of the Effective Date," which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," to clarify the implementation guidance on principal versus agent. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligationsany term SOFR loan and ~~Licensing," which clarifies the identifying performance obligations~~(ii) 0.25% per annum and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients," which clarifies the implementation guidance related to collectability, presentation of sales tax, noncash consideration, contract modifications and completed contracts at transition. The Company plans to adopt these standards using the modified retrospective approach1.50% per annum in the ~~first quarter~~case of ~~its fiscal~~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 ~~ending March 31, 2019. The Company has developed a project plan and is currently reviewing its contracts and evaluating~~following the ~~impact of~~closing date, the ~~guidance on its revenue. The Company currently believes that the most significant impact of adopting the guidance will~~applicable margin shall be the timing of revenue recognition. The Company believes that revenue on the majority of its contracts will continue to be recognized upon shipment while revenue on its larger contracts are expected to be recognized over time as these contracts meet specific criteria establishedset at 1.25% per annum in the ~~new standards.~~ 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%.

The Company is inrequired to pay a quarterly commitment fee on the ~~process~~unused portion of ~~implementing changes~~the New Revolving Credit Facility during the applicable quarter at a per annum rate also determined by reference to ~~its business processes, systems~~the Company’s then-current consolidated total leverage ratio, which fee ranges between 0.10% per annum and ~~controls~~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 ~~support~~ the ~~recognition and disclosure requirements~~daily amount available to be drawn under such letters of credit multiplied by 0.65% per annum. Any outstanding letters of credit issued under the ~~new guidance. See Note 2~~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 ~~a description~~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 ~~Company’s current revenue recognition policy.~~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.

~~In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement~~As of ~~Inventory," which simplifies the subsequent measurement~~December 31, 2023, $2,284 letters of ~~inventory by requiring inventory~~credit remain outstanding with Bank of America and are cash secured. These outstanding letters of credit are subject to ~~be measured at the lower~~a fee of ~~cost~~0.60% per annum. As of December 31, 2023, $4,781 letters of credit are outstanding with HSBC Bank USA, N.A and ~~net realizable value. Net realizable value is the estimated selling prices in the ordinary course~~are also cash secured. These outstanding letters of ~~business, less reasonably predictable costs~~credit are subject to a fee of ~~completion, disposal,~~between 0.75% and transportation. This ASU is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted the new guidance in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact0.85%, depending on the ~~Company’s Consolidated Financial Statements.~~ term of the letter of credit. Total letters of credit outstanding as of December 31, 2023 and March 31, 2023 were $7,914 and $12,233, respectively.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. This ASU retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting guidance. As a result, the effect of leases on the consolidated statement of comprehensive income and the consolidated statement of cash flows is largely unchanged from previous generally accepted accounting principles. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company believes the adoption of this ASU may have a material impact on its assets and liabilities due to the addition of right-of-use assets and lease liabilities to its Consolidated Balance Sheet, however, it does not expect the guidance to have a material impact on its Consolidated Statement of Income or Consolidated Statement of Cash Flows.

In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. The Company adopted the new guidance in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on the Company’s Consolidated Financial Statements.19

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230)", which clarifies the presentation and classification of eight specific issues on the cash flow statement. This ASU is effective for public businesses for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not expect the adoption of this ASU will have a material effect on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715)", which amended its guidance related to the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amended guidance requires the service cost component be disaggregated from the other components of net benefit cost. The service cost component of expense is required to be reported in the income statement in the same line item as other compensation costs within income from operations. The other components of net benefit cost are required to be presented separately from the service cost component outside of income from operations. This ASU is effective for public businesses for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of this ASU will have on its Consolidated Financial Statements.

~~Management does not expect any other recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company's consolidated financial statements.~~

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

We are a global ~~business that designs, manufactures~~leader in the design and ~~sells~~manufacture of mission critical ~~equipment~~fluid, power, heat transfer and vacuum technologies for the defense, space, energy ~~defense~~ and ~~chemical/petrochemical~~process industries. ~~Our energy markets include oil refining, cogeneration, nuclear~~We design and ~~alternative power.~~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. For the space industry, our equipment is used in propulsion, power and energy management systems and for ~~the U.S. Navy.~~life support systems. We supply equipment for vacuum, heat transfer and fluid transfer applications used in energy and new energy markets 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.

~~Graham’s global brand is~~Our brands are built upon ~~world-renowned~~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 located with our production facilities in ~~vacuum and heat transfer technology, responsive and flexible service and high quality standards. We design and manufacture custom-engineered ejectors, vacuum pumping systems,~~Batavia, New York, where surface condensers and ~~vacuum systems. We~~ejectors are ~~also a leading nuclear code accredited fabrication~~designed, engineered, and ~~specialty machining company. We supply components used inside reactor vessels and outside containment vessels of nuclear power facilities.~~manufactured. Our equipment can also be found in other diverse applications such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, and heating, ventilating and air conditioning.

~~Our corporate headquarters are located in Batavia, New York. We have production facilities co-located with our headquarters in Batavia and also at our~~ wholly-owned subsidiary, ~~Energy Steel & Supply Co.~~Barber-Nichols, LLC ("~~Energy Steel"~~BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the space, aerospace, cryogenic, defense and energy markets. In November 2023, we acquired P3 Technologies, LLC ("P3"), located in ~~Lapeer, Michigan.~~Jupiter, Florida (See "Acquisition" below). We also have a wholly-owned foreign ~~subsidiary,~~subsidiaries, Graham Vacuum and Heat Transfer Technology ~~(Suzhou)~~ Co., Ltd. ("GVHTT"), located in Suzhou, ~~China.~~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.

~~Our current~~We refer to our fiscal year, ~~(which~~which ends March 31, 2024, as fiscal 2024. Likewise, we refer to ~~as “fiscal 2018”) ends~~our fiscal year that ended March 31, ~~2018.~~2023 and March 31, 2022, as fiscal 2023 and fiscal 2022, respectively.

On November 9, 2023, we completed 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 and is highly complementary to BN's technology and enhances its turbomachinery solutions.

~~Highlights~~The purchase price for P3 was $10,494 and was comprised of 125 shares of our common stock, representing a value of $2,117 at a price of $16.85 per share, and cash consideration of $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 consideration. Acquisition related costs of $274 were expensed in the three and nine months ended December 31, ~~2017~~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 in this Quarterly Report on Form 10-Q for additional information.

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”~~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.

All statements other than statements of historical fact are forward-looking statements for purposes of this 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. ~~Such~~Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "can," "may," "intend," "expect," "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 ~~include,~~that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements including, but ~~are~~ not limited to, those described in the ~~risks and uncertainties identified by us under the heading~~ "Risk Factors" section in Item 1A of our Annual Report on Form 10-K for fiscal ~~2017.~~

~~Forward-looking statements may also include, but are not limited to, statements about:~~

•~~sources of revenue and anticipated revenue, including the contribution from anticipated growth;~~

•~~expectations regarding achievement of revenue and profitability expectations;~~

•~~plans for future products and services and for enhancements to existing products and services;~~

Forward-looking statements are usually accompanied by words such as "anticipate," "believe," "estimate," "may," "might," "intend," "interest," "appear," "expect," "suggest," "plan," "encourage," "potential", "view" and similar expressions. Actual results could differ materially from historical results or those implied by the forward-looking statements contained in this report.

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.

AsDemand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on defense budget plans, accelerated ship build schedules due to geopolitical tensions, the projected 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 ~~result~~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 the increasing use by consumers of ~~volatility~~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. The timing and catalyst for a recovery in ~~crude oil and natural gas prices, and~~this market remains uncertain. Accordingly, we believe that in the near term ~~price uncertainty,~~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 few years we have experienced an increase in our ~~global~~ energy ~~markets~~and chemical aftermarket orders, primarily from the domestic market. Aftermarket orders have historically been in a ~~contracted state for the past three years. In response to the market conditions,~~leading indicator of future capital investment by our customers in their facilities for upgrades and expansions. However, if a capital investment upturn were to occur, we do not expect the ~~downstream~~next cycle to be as robust as years past due to the factors discussed above.

The alternative and clean energy ~~sector have sharply reduced~~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, small modular nuclear 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 ~~spending~~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 ~~each~~new global chemical and petrochemical capacity will improve and drive growth in demand for our products and 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 ~~last three years. This impacted not only new capacity, but~~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 ~~revamping~~participating in future aerospace power and ~~turnaround~~propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for ~~routine maintenance. Oil prices~~these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market as well. Sales and orders to the space industry are variable in nature and many of our customers, who are key players in the industry, have ~~risen~~yet to achieve profitability and may be unable to continue operations without additional funding, similar to what occurred to Virgin Orbit. Thus, future revenue and growth in this market can be uncertain and may negatively impact our business.

As illustrated below, we have succeeded over the ~~past six months from $45~~last several years with our strategy to ~~over $60 per barrel. As a result, certain projects where~~increase our ~~equipment is utilized have begun to proceed, however, it is not clear whether a sustained capital spending recovery~~participation in the defense market as opportunities in our ~~markets has begun.~~

Capital spending in the nuclear market for both new capacity and to maintain existing facilities continues to trend downward. Capital spending in the nuclear market is down 25% to 35% compared with 3 to 4 years ago, according to a report from the Nuclear Energy Institute. Additionally, the March 2017 bankruptcy filing by Westinghouse Electric Company (“Westinghouse”) and the decision to cease building the two new reactors located in Summer, South Carolina has dramatically impacted the health of the

~~domestic nuclear market. The contracted capital spending within the commercial nuclear power market has had the effect of measurably reducing new orders and consequently reducing our sales.~~

~~Our long-term view for the~~legacy refining and petrochemical markets ~~is that fundamentals will drive increasing demand. These fundamentals include rising populations, strong emerging~~diminished. The defense market ~~economic growth, and overall global economic expansion, which we believe will result in capital investment necessary to satisfy increasing global energy demand.~~

Our naval nuclear propulsion market has demand tied to aircraft carrier and submarine vessel construction schedules of the primary shipyards who service the U.S. Navy. We expect growth in our naval nuclear propulsion business based on our strategic actions to increase our market share and expected demand. For more information, refer to the heading "Strategy and Outlook" within this Item 2 of this Quarterly Report on Form 10-Q.

~~In the near term, given the current market conditions, new order levels are expected to remain volatile from quarter to quarter.~~

~~The chart below shows the impact~~comprised 84% of our ~~diversification strategy. Nearly 60% of our~~total backlog ~~as of~~at December 31, ~~2017 is from markets not served by us in the Fiscal 2007-2009 time frame.~~2023.

Backlog Mix Illustrating Impact of Diversification Strategies
Backlog ($ million) at FYE*

*Note: FYE refers to fiscal year ended March 3131. For additional information on this key performance indicator see "Orders and Backlog" below.

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 ~~Quarterly Report on~~ Form 10-Q.

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

(1)

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

Three Months Ended

Nine Months Ended

December 31,

December 31,

2017

2016

2017

2016

Net sales

$
17,281

$
22,654

$
55,356

$
66,145

Gross profit

$
3,585

$
6,301

$
12,281

$
15,422

Gross profit margin

21
%

28
%

22
%

23
%
SG&A expense ⁽¹⁾

$
4,066

$
3,804

$
11,447

$
10,637

SG&A as a percent of sales

24
%

17
%

21
%

16
%
Net (loss) income

$
(11,622
)

$
1,840

$
(10,677
)

$
3,222

Diluted (loss) income per share

$
(1.19
)

$
0.19

$
(1.09
)

$
0.33

Total assets

$
138,623

$
148,328

$
138,623

$
148,328

Total assets excluding cash, cash equivalents and investments

$
64,441

$
75,651

$
64,441

$
75,651

The following tables 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:

⁽¹⁾

~~Selling, general and administrative expense is referred to as~~ “~~SG&A~~”.

~~The~~ Third Quarter and First Nine Months of Fiscal ~~2018~~2024 Compared ~~With~~with the Third Quarter and First Nine Months

of Fiscal ~~2017~~2023

~~Sales~~Net sales for the third quarter of fiscal ~~2018~~2024 were ~~$17,281, a 24% decrease as~~$43,818, up $3,945 or 10%, compared with ~~sales of $22,654~~$39,873 for the third quarter of fiscal ~~2017. Our domestic~~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 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 as a customer partially offset by revenue from P3.

Domestic sales as a percentage of aggregate ~~product~~ sales were ~~65%~~84% in the third quarter of fiscal ~~2018~~2024 compared with ~~77%~~83% in the third quarter of fiscal ~~2017. Domestic sales year-over-year decreased $6,160, or 35%. International sales increased $787, or 15%,~~2023, reflecting the increase in ~~the third quarter of fiscal 2018 compared with the third quarter of fiscal 2017.~~our defense industry businesses, which is U.S. based. Sales in the three months ended December 31, ~~2017~~2023 were ~~31%~~56% to the ~~refining~~defense industry ~~24%~~compared to 54% for the ~~chemical and petrochemical industries, 10% to the power industry, including the nuclear market, and 35% to other commercial and industrial applications, including the U.S. Navy. Sales~~comparable quarter in the three months ended December 31, 2016 were 28% to the refining industry, 19% to the chemical and petrochemical industries, 19% to the power industry, including the nuclear market, and 34% to other commercial and industrial applications, including the U.S. Navy. Fluctuationsfiscal 2023. Fluctuation in sales among markets, products and geographic locations ~~can vary measurably~~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 2024 were $136,463, an increase of 20% from the first nine months of fiscal 2023. Approximately $1,027 of this increase was due to the P3 acquisition in the third quarter of fiscal 2024. Excluding P3, organic growth was 19% over the prior year. Additionally, our sales continued to benefit from strong growth of approximately $10,800 in commercial aftermarket sales which is included in our refining and chemical/petrochemical 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 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 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.

Sales for the first nine months of fiscal 2018 were $55,356, a decrease of $10,789, or 16% compared with sales of $66,145 for the first nine months of fiscal 2017. The decrease in fiscal 2018 year-to-date sales was due to weaker domestic sales. Our domestic sales, as a percentage of aggregate product sales, were 67% in the first nine months of fiscal 2018 compared with 74% in the same period in fiscal 2017. Domestic sales decreased $11,900, or 24%, while international sales increased by $1,111, or 7%. International sales accounted for 33% and 26% of total sales for the first nine months of fiscal 2018 and fiscal 2017, respectively. Sales in the first nine months of fiscal 2018 were 25% to the refining industry, 30% to the chemical and petrochemical industries, 14% to the power industry, including the nuclear market, and 31% to other commercial and industrial applications, including the U.S. Navy. Sales in the first nine months of fiscal 2017 were 31% to the refining industry, 22% to the chemical and petrochemical industries, 23% to the power industry, including the nuclear market, and 24% to other commercial and industrial applications, including the U.S. Navy.

~~Our gross~~Gross profit margin for the third quarter of fiscal ~~2018~~2024 was ~~21%~~22%, compared with ~~28%~~16% for the third quarter of fiscal ~~2017.~~2023. Gross profit for the third quarter of fiscal ~~2018 decreased 43%~~2024 increased $3,496 or 56%, compared with fiscal ~~2017,~~2023, to ~~$3,585 from $6,301. Gross profit was impacted by lower~~$9,723. This increase reflected the increase in sales ~~and margins were impacted by a weaker~~discussed above as well as an improved mix of ~~projects~~sales related to higher margin defense and ~~less cost absorption.~~commercial aftermarket, as well as better execution and pricing on defense contracts, partially offset by higher incentive compensation in comparison with the prior year.

~~Our gross~~Gross profit margin for the first nine months of fiscal ~~2018~~2024 was ~~22%~~20%, compared with ~~23%~~16% for the first nine months of fiscal ~~2017.~~2023. Gross profit for the first nine months of fiscal ~~2018 decreased 20%~~2024 increased $9,640 or 53%, compared with fiscal ~~2017,~~2023, to ~~$12,281 from $15,422. The decrease~~$27,891. This increase reflected the increase in ~~gross profit was due~~sales discussed above as well as an improved mix of sales related to ~~lower volume.~~higher margin defense and commercial aftermarket sales, as well as better execution and pricing on defense contracts, partially offset by higher incentive compensation in comparison with the prior year.

Changes in SG&A ~~expenses as a percent of sales~~expense for the three and ~~nine-month periods ended~~nine months ending December 31, ~~2017 were 24%~~2023 versus the comparable prior year 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

In connection with the acquisition of BN, we entered into a 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 ~~21%, respectively. SG&A expenses~~2026 which can range between $2,000 to $4,000 per year (the "BN Performance Bonus"). The increase in professional fees over the prior year periods primarily relates to the increasing complexity in our business associated with our growth and our international operations including the investigation by our Board’s Audit Committee related to GIPL. See Note 10 to the Condensed Consolidated Financial Statements included in Item 1 in this Quarterly Report on Form 10-Q and the "Commitments and Contingencies" section below.

Net interest expense for the third quarter of fiscal 2024 was $37 compared to $294 in the third quarter of fiscal ~~2018 were $4,066, an increase of $262, or 7%,~~2023 primarily due to lower debt levels compared ~~with~~to the ~~third quarter~~prior year partially offset by higher interest rates.

Net interest expense for the first nine months of fiscal ~~2017 SG&A expenses of $3,804, due~~2024 was $277 compared to bad debts in the commercial nuclear power market. Excluding the commercial nuclear power market bad debts, SG&A expenses were $3,832, or 22% of sales in the third quarter of fiscal 2018. SG&A expenses$697 in the first nine months of fiscal ~~2018 were $11,447, an increase~~2023 primarily due to lower debt levels compared to the prior year partially offset by higher interest rates.

Our effective tax rate for the first nine months of ~~$810, or 8%, compared~~fiscal 2024 was 22% consistent with the first nine months of fiscal 2017 SG&A expenses of $10,637. This increase was principally related to the benefit of insurance proceeds of $759 received in the prior year and the $234 bad debt in the commercial nuclear power market in the current three-month period, as described below. Excluding these two items, SG&A expenses were $183, or 2%, lower.

~~During the third quarter of~~2023. Our effective tax rate for fiscal 2018, we performed our annual goodwill and intangible asset impairment review. We estimated the fair value of intangible assets and goodwill of our commercial nuclear power business related to the December 2010 acquisition of Energy Steel & Supply Co. (“Energy Steel”). The impairment review indicated that the fair value of the permits, tradename and goodwill of the business were substantially lower than the carrying value due to reduced investment from the U.S. nuclear power market, the strength of the Energy Steel brand relative to larger more vertically integrated suppliers, and the bankruptcy of Westinghouse which resulted in the stoppage of work at the Summer, SC nuclear facility. As a result, in the third quarter of fiscal 2018 we recorded impairment losses of $8,600, $500, and $5,716 for permits, tradename and goodwill, respectively. The total impairment charge was $14,816 before taxes and $12,852 after taxes. Additionally, we incurred a $46 revenue reversal, and a $234 bad debt charge, related to the bankruptcy of Westinghouse and the stoppage of work at the Summer, SC nuclear facility. The total before and after tax cost of these two charges was $280 and $208, respectively. Additionally, we recognized a gain of $1,416 related to the revaluation of deferred tax liabilities, which were impacted by the reduction in federal income tax rates from the Tax Act. The deferred tax gain of $1,438 included $2,034 for adjusting the rates on the deferred tax liability of the Energy Steel acquisition offset by a charge of $596 for other tax items.

Prior to the third quarter, in the first half of fiscal 2018, we incurred a pre-tax restructuring charge of $316 ($224 after tax) for severance costs related to certain headcount reductions. In the first half of fiscal 2017, we incurred a pre-tax restructuring charge of fiscal 2017 was $630 ($441 after tax) related to certain headcount reductions. The reduction in headcount in the first half of fiscal 2018 was approximately 6% of our global workforce. The annual savings from these reductions2024 is expected to be ~~$1,500. Approximately half~~between 22% and 23%.

The net result of the ~~savings should be realized in fiscal 2018.~~

Interest income for the three and nine-month periods ended December 31, 2017 was $142 and $455, respectively, compared with $100 and $272, respectively, for the same periods ended December 31, 2016. Interest expense for the three and nine-month periods ended December 31, 2017 was $3 and $8, respectively, compared with $3 and $7, respectively, for the same periods ended December 31, 2016.

The reduction in the year-to-date effective tax rate from 28% in the second quarter to 23% in the third quarter as well as in the first nine months of fiscal 2018 was due primarily to adjustments related to the Tax Act. The effective tax rates for the comparable three and nine month periods of fiscal 2017 were 29% and 27%, respectively.

Net (loss) income and (loss) income per diluted share for the third quarter of fiscal 2018 were ($11,622) and ($1.19), compared with $1,840 and $0.19, respectively, for the third quarter of fiscal 2017. Excluding impairment and other related charges for our commercial nuclear business as well as the gain from implementation of the Tax Act,above is that net income and income per diluted share for the third quarter of fiscal ~~2018~~2024 were ~~($1)~~$165 and ~~$0.00,~~$0.02, respectively, compared with $368 and ~~were $1,840 and $0.19 in~~$0.03, respectively, for the third quarter of fiscal ~~2017. Net (loss)~~2023. Adjusted net income and ~~(loss)~~adjusted net income per diluted share for the ~~first nine months~~third quarter of fiscal ~~2018~~2024 were ~~($10,677)~~$2,424 and ~~($1.09),~~$0.22 per share, respectively, compared with ~~net income of $3,222~~$857 and ~~income per diluted share of $0.33~~$0.08, respectively, for the ~~first nine months~~third quarter of fiscal ~~2017. Excluding the items noted above as well as restructuring charges in each year, net~~2023.

Net income and income per diluted share for the first nine months of fiscal ~~2018~~2024 were ~~$1,168~~$3,216 and ~~$0.12,~~$0.30, respectively, compared with $848 and ~~were $3,663 and $0.38 in~~$0.08, respectively, for the first nine months of fiscal ~~2017.~~2023. Adjusted net income and adjusted net income per diluted share for the first nine months of fiscal 2024 were $7,369 and $0.68, respectively, compared with $2,511 and $0.24, respectively, for the first nine months of fiscal 2023. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Non-GAAP Measures

Adjusted earnings before net interest expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income 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 or net income 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 or net income per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income and adjusted net income 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, interest expense, taxes, acquisition related expenses, the BN Performance Bonus, debt amendment costs, ERP implementation costs, and other unusual/nonrecurring expenses. Adjusted net income and adjusted net income per diluted share excludes intangible amortization, BN Performance Bonus, acquisition related expenses, debt amendment costs, ERP implementation costs, and other unusual/nonrecurring expenses.

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


	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%.

Acquisition 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 ~~Condensed Consolidated~~ Statements of Cash Flows:


	December 31,		March 31,
	2023		2023
Cash and cash equivalents	$	15,163	$	18,257
Working capital (1)		11,743		23,904
Working capital ratio(1)		1.1		1.3

December 31,

March 31,

2017

2017

Cash and investments

$
74,182

$
73,474

Working capital

78,369

78,688

Working capital ratio⁽¹⁾

3.3

3.5

Working capital excluding cash and investments

4,187

5,214

⁽¹⁾

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

(1)

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

Net cash ~~generated~~provided by operating activities for the first nine months of fiscal ~~2018~~2024 was ~~$3,874,~~$19,483 compared with ~~$10,707~~$8,946 for the first nine months of fiscal ~~2017.~~2023. The ~~decrease in~~ cash ~~generation year over year was attributable to lower earnings, an increase in accounts receivable, an increase in income taxes receivable and a smaller decrease in inventories, partly offset~~provided by ~~higher unbilled revenue.~~

~~Dividend payments and capital expenditures in~~operations during the first nine months of fiscal ~~2018 were $2,638~~2024 was higher than the comparable prior year period primarily as a result of higher profitability and ~~$543, respectively, compared with $2,616~~a reduction in working capital as a result of the change in payment terms related to large defense customers during the nine months and ~~$241, respectively,~~stronger financial discipline.

Capital expenditures for the first nine months of fiscal ~~2017.~~

2024 were $5,193 versus $2,394 over the comparable period in fiscal 2023. Capital expenditures for fiscal ~~2018~~2024 are expected to be between approximately $1,500 and $2,500. We have a capital project for approximately $1,500 which will be completed in the next few months, however, it is not clear whether the payments will occur in this fiscal year or early in next fiscal year. Approximately 80% of our fiscal 2018$8,000 to $10,000. Fiscal 2024 capital expenditures are expected to be primarily for ~~productivity-enhancing~~ machinery and equipment, ~~with~~as well as for buildings and leasehold improvements to fund our growth and productivity improvement initiatives and includes expenditures related to the ~~remaining amounts expected to be used for information technology upgrades and other items.~~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 ~~investments~~cash equivalents were ~~$74,182 on~~$15,163 at December 31, ~~2017~~2023 compared with ~~$73,474 on~~$18,257 at March 31, ~~2017, up $708.~~

~~We invest net~~2023, as cash generated from operations in excess of cash held for near-term needs in short-term, less than 365 days, certificates of deposit, money market accounts or U.S. government instruments, generally with maturity periods of up to 180 days. Our money market account isprovided by operating activities was used to ~~securitize our outstanding letters~~fund capital expenditures, net repayment of ~~credit, which reduces our cost on those letters~~debt of ~~credit. Approximately 95%~~$9,522, and the cash consideration used in the acquisition of P3 of $6,812. At December 31, 2023, approximately $7,247 of our cash and ~~investments are~~cash equivalents was used to secure our letters of credit and $1,724 of our cash was held ~~in the U.S. The remaining 5% is invested in~~by our China ~~operations.~~ and India subsidiaries.

~~Our~~On October 13, 2023, we terminated our revolving credit facility and repaid our term loan with Bank of America and entered into a new five-year revolving credit facility with ~~JP Morgan Chase~~Wells Fargo Bank, National Association ("Wells Fargo") that provides ~~us with~~ a $35,000 line of credit and automatically increases to $50,000 upon the Company satisfying specified covenants (the "New Revolving Credit Facility"). As of ~~$25,000, including~~December 31, 2023, there was $3,000 borrowed and $666 letters of credit and bank guarantees. In addition, our JP Morgan Chase agreement allows us to increase the line of credit, at our discretion, up to another $25,000, for total availability of $50,000. Borrowings under this credit facility are secured by all of our assets. We also have a $5,000 unsecured line of credit with HSBC, N.A. Letters of credit outstanding on the New Revolving Credit Facility and the amount available to borrow was $31,333, subject to interest and leverage covenants.

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 us 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, ~~2017~~2023, we were in compliance with the financial covenants of the New Revolving Credit Facility and ~~March~~our leverage ratio as calculated in accordance with the terms of the New Revolving Credit Facility was 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, ~~2017 were $7,401~~2023, the SOFR rate was 5.34%.

In connection with the termination of the old revolving credit facility and ~~$8,372, respectively. The outstanding letters~~term loan with Bank of ~~credit~~America, the Company paid $752 in exit costs and recognized an extinguishment charge of $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, ~~2017 were issued by JP Morgan Chase, HSBC, as well as Bank of America (under our previous credit facility). There were no~~2023 and 2022, other amounts outstanding on our credit facilities at December 31, 2017 and March 31, 2017. The borrowing rate under our JP Morgan Chase facility as of December 31, 2017 was the bank’s prime rate, or 4.50%. Availability under the JP Morgan Chase and HSBC linesthan letters of credit ~~was $25,168 and $25,761 at December 31, 2017 and March 31, 2017, respectively.~~ incurred in the ordinary course of business.

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

Orders and Backlog

In addition to the ~~immediate~~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 ~~to support our growth strategies.~~financial performance and these may not be comparable with measures

O~~rders and Backlog~~

~~Orders for the three-month period ended December 31, 2017 were $40,528 compared with $17,699 for the same period in the prior year, an increase of 129%.~~provided by other companies. Orders represent written communications received from customers requesting us to ~~supply~~provide products and/or services. Domestic orders were 47% of total orders, or $19,144, and international orders were 53% of total orders, or $21,384, in the current quarter compared with the third quarter of fiscal 2017, when domestic orders were 59%, or $10,396, of total orders, and international orders were 41%, or $7,303, of total orders. Over 80% of the international orders in the third quarter of fiscal 2018 were from Canada.

During the first nine months of fiscal 2018, orders were $68,679, compared with $57,123 for the same period of fiscal 2017, an increase of $11,556, or 20%. For the first nine months of fiscal 2018, refining orders increased by $19,121, power orders increased $812, chemical and petrochemical decreased by $6,167 and other commercial and industrial applications, including the U.S. Navy, decreased by $2,210. See “Current Market Conditions” above for additional information.

~~Backlog was $96,246 at December 31, 2017, compared with $72,981 at September 30, 2017, a 32% increase.~~ Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. ~~Approximately 55%~~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 ~~60%~~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, ~~currently~~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 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:

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 received in the third quarter of fiscal 2024. For the nine-month period ended December 31, 2023, our ~~backlog~~book-to-bill ratio was 1.7x. Orders during the first nine months of 2024 included the following:

•

Approximately $103,233 in defense orders which were primarily related to follow-on orders for critical U.S. Navy programs related to the Columbia Class submarine and Ford Class carrier programs. These defense orders are expected to be ~~converted~~recognized in revenue beginning in the fourth quarter of fiscal 2025 through early fiscal 2030.

•

$22,000 of the defense orders related to ~~sales~~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 the 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 P3 partially offset by a decline due to the Virgin Orbit bankruptcy.

We believe the repeat U.S. Navy orders and strategic investment received validates the investments we made, our position as a key supplier to the defense industry and our customer's confidence in our execution. Additionally, we believe the strong aftermarket orders are significant because they historically have been a leading indicator of a cyclical upturn in capital project 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."

Orders to the U.S. represented 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 2024 compared to 81% in the comparable prior year period. These orders were primarily to the defense market which are U.S. based.

The following table provides our backlog by 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. We expect to recognize revenue on approximately 40% of the backlog within one year, 5%25 to ~~10% are expected~~30% in one to ~~ship between 12~~two years and ~~24 months, and 25% to 35%~~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. At December 31, 2017, 35%~~Navy that have a long conversion cycle (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

We are providing the following fiscal 2024 outlook reflecting our 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 Note Regarding Forward-Looking 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 ~~backlog was attributable~~control or not readily predictable.

We have made significant progress with the advancements in our business, which we believe puts us on schedule in achieving our fiscal 2027 goals of 8% to ~~equipment for refinery project work, 4% for chemical~~10% average annualized organic revenue growth and petrochemical projects, 6% for power projects, including nuclear, 51% for U.S. Navy projects and 4% for other industrial applications. At December 31, 2016, 17% of our backlog was attributed to equipment for refinery project work, 14% for chemical and petrochemical projects, 9% for power projects, 57% for U.S. Navy projects and 3% for other industrial applications. At December 31, 2017, we had no projects on hold.

~~Strategy and Outlook~~

~~Prolonged weakness~~Adjusted EBITDA margins in the ~~global energy markets has continued~~low to ~~negatively impact our business in fiscal 2018.~~ mid-teens.

Our ~~oil refining~~expectations for sales and chemical market customer spending has started to improve compared with last year, but this will have no effect on our fiscal 2018 sales. We anticipate that the nuclear power market will continue to be weak and unpredictable during the next few years, and this determination led to the impairment of our goodwill and intangible assets which we recognized in the third quarter.

Despite the current downturn, we continue to believe in the long-term potential of the energy markets we serve. We intend to expand our participation and market share. We believe this anticipated long-term strength will support our strategy to significantly grow our business when the energy markets begin to recover. We have invested in capacity to serve our commercial, refining and chemical/petrochemical customers, as well as to expand the work we do for the U.S. Navy. In addition to these organic growth

~~opportunities, we continue to look for acquisitions or other business combinations~~profitability assume that we ~~believe~~ will ~~allow us~~be able to ~~expand our presence in both our existing and ancillary markets. We are focused on growing our business, reducing earnings volatility, and further diversifying our business and product lines.~~

The prolonged contraction in the energy markets we serve continues to cause near-term uncertainty, affecting our outlook for fiscal 2018. We expect revenue in fiscal 2018 to be approximately $75,000.

~~We expect gross profit margin in fiscal 2018 to be in the 21% to 22% range. We are experiencing the impact of lower pricing from orders received over the past year and the under-utilization of~~operate our production facilities ~~in fiscal 2018. We believe that production overhead absorption will be weak, which we expect in turn will put continued pressure on gross profit margins in~~at planned capacity, have access to our ~~fourth quarter.~~global supply chain including our subcontractors, do not experience significant global health related disruptions, and assumes no further impact from Virgin Orbit or any other unforeseen events.

~~SG&A during fiscal 2018 is expected to be between $15,000~~Commitments and $15,500. Our effective tax rate during fiscal 2018, excluding the tax effect of the impairment loss and the one-time impact of the new Tax Act recorded in the third quarter, is expected to be between 24% and 26%, which we have lowered due to the reduced federal corporate income tax rate. Fiscal 2018 will benefit from the fiscal fourth quarter being taxed at a lower rate. Contingencies

~~We continue to expect operating cash flow in fiscal 2018 will be lower than fiscal 2017. Fiscal 2017 cash flow benefited from the build-up of customer deposits.~~

~~Contingencies and Commitments~~

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, ~~2017,~~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 ~~under the percentage-of-completion method, fair value estimates of identifiable tangible and intangible assets acquired in business combinations,~~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, ~~2017.~~ 2023.

~~Off Balance Sheet Arrangements~~

~~We did not have any off balance sheet arrangements as of December 31, 2017 or March 31, 2017, other than operating leases and letters of credit.~~

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 ~~project cancellation~~interest rate risk.

The assumptions applied in preparing the following qualitative and quantitative disclosures regarding foreign currency exchange rate, price risk and ~~project cancellation~~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 ~~three months and~~first nine months ~~ended December 31, 2017~~of fiscal 2024 were ~~35% and 33%, respectively,~~17% of total sales compared with ~~23% and 26%, respectively,~~20% for the same ~~periods~~period of fiscal ~~2017.~~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 ~~three and~~ nine months of ~~each of~~ fiscal ~~2018~~2024 and fiscal ~~2017,~~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 ~~Chinese RMB)~~India INR). For the first nine months of fiscal 2024, foreign currency exchange rate fluctuations reduced our cash balances by $39 primarily due to the strengthening of the U.S. dollar.

We have limited exposure to foreign currency purchases. In ~~each of~~ the first ~~three and~~ nine months of fiscal ~~2018,~~2024, our purchases in foreign currencies represented 1%approximately 4% of the cost of products sold. ~~In the first three and nine months of 2017, our purchases in foreign currencies represented 2% and 3% of cost of products sold, respectively.~~ 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 on in this ~~Quarterly Report on~~ Form 10-Q and as of December 31, ~~2017~~2023 and March 31, ~~2017,~~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, ~~and~~ engineering experience, and ~~excellence,~~customer service, among other things, such lower production costs and more favorable economic conditions mean that ~~certain of~~ our competitors are able to offer products similar to ours at lower prices. In extreme market downturns, such as we recently experienced, we typically ~~experience~~see depressed price levels. ~~Moreover, the~~Additionally, we have faced, and may continue to face, significant cost of ~~metals~~inflation, specifically in labor costs, raw materials, and other supply chain costs due to increased demand for raw materials ~~used in our products have experienced significant volatility. Such factors, in addition to~~and resources caused by the ~~global effects of the ongoing volatility and~~broad disruption of the ~~capital~~global supply chain, including those associated with the impact of COVID-19. International conflicts or other geopolitical events, including the 2022 Russian invasion of Ukraine and ~~credit~~the 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, ~~have resulted in downward demand~~any of which may adversely affect our business and ~~pricing pressure~~supply chain, and consequently our results of operation. While there could ultimately be a material impact on our ~~products.~~operations and liquidity, at the time of this report, the impact could not be determined.

~~Project Cancellation~~Interest Rate Risk

In order to fund our strategic growth objectives, including acquisitions, we borrow funds under our revolving credit facility that bears interest at a variable rate. As part of our risk management activities, we evaluate the use of interest rate derivatives to add stability to interest expense and ~~Project Continuation Risk~~

~~Open orders are reviewed continuously through communications with customers. If it becomes evident~~ to ~~us that a project is delayed well beyond its original shipment date, management will move the project into "placed on hold" (i.e., suspended) category. Furthermore, if a project is cancelled by~~manage our customer, it is removed from our backlog. We attempt to mitigate the risk of cancellation by structuring contracts with our customers to maximize the likelihood that progress payments made to us for individual projects cover the costs we have incurred. As a result, we do not believe we have a significant cash exposure to ~~projects which may be cancelled. At~~interest rate movements. As of December 31, ~~2017,~~2023, we had $3,000 of variable rate debt outstanding on our revolving credit facility and no ~~projects~~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 ~~hold.~~ 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 $3,000 of variable rate debt outstanding at December 31, 2023 would have an impact of approximately $30 on our interest expense for fiscal 2024.

Item 4.~~Control~~s Controls and Procedures

Conclusion regarding the effectiveness of disclosure controls and procedures

Our President and Chief Executive Officer ~~(principal~~(our principal executive officer) and Vice ~~President-Finance & Administration~~President - Finance and Chief Financial Officer ~~(principal~~(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~~President - Finance and Chief Financial Officer concluded that our disclosure controls and procedures were effective in all material respects.

Changes in internal control over financial reporting

~~There~~Other than the events discussed under the section entitled 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.

P3 Technologies Acquisition

On November 9, 2023, we acquired P3 Technologies, LLC, a privately-owned custom turbomachinery engineering, product development and manufacturing business located in 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 P3 Technologies, LLC. We plan to include P3 Technologies, LLC in our annual assessment for the fiscal year ending March 31, 2025.

~~GRAHAM CORPORATION AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~DECEMBER 31, 2017~~

PART II - OTHER INFORMATION

Item 1A. Risk Factors

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 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 seller of P3 Technologies, LLC for these and other matters, we could experience difficulty enforcing those obligations or we could incur material liabilities for the 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. Any future determination by our board of directors regarding dividends will depend on a variety of factors, including our compliance with the terms of our revolving credit 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.

Item 6. Exhibits

INDEX OF EXHIBITS


~~Item 6.~~ (10)	~~Exhibits~~


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


Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒
Emerging growth company	☐


	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At December 31, 2023
Intangibles subject to amortization:
Customer relationships	8 - 20 years	$	16,200	$	1,616	$	14,584
Technology and technical know-how	10 - 20 years		12,600		1,346		11,254
Backlog	4 years		3,900		3,505		395
Tradename	3 years		300		17		283
		$	33,000	$	6,484	$	26,516

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


	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

	Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2016	$	(10,932	)	$	256		$	(10,676	)
Other comprehensive income before reclassifications		—			(283	)		(283	)
Amounts reclassified from accumulated other comprehensive loss		674			—			674
Net current-period other comprehensive income		674			(283	)		391
Balance at December 31, 2016	$	(10,258	)	$	(27	)	$	(10,285	)

	December 31,			March 31,
	2017			2017
	(Amounts in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	36,159		$	39,474
Investments		38,023			34,000
Trade accounts receivable, net of allowances ($336 and $168 at December 31 and March 31, 2017, respectively)		16,555			11,483
Unbilled revenue		10,709			15,842
Inventories		8,899			9,246
Prepaid expenses and other current assets		1,181			681
Income taxes receivable		1,288			—
Total current assets		112,814			110,726
Property, plant and equipment, net		16,098			17,021
Prepaid pension asset		3,110			2,340
Goodwill		1,222			6,938
Permits		1,700			10,300
Other intangible assets, net		3,433			4,068
Other assets		246			177
Total assets	$	138,623		$	151,570
Liabilities and stockholders’ equity
Current liabilities:
Current portion of capital lease obligations	$	105		$	107
Accounts payable		9,386			10,295
Accrued compensation		4,418			5,189
Accrued expenses and other current liabilities		2,722			3,723
Customer deposits		17,814			12,407
Income taxes payable		—			317
Total current liabilities		34,445			32,038
Capital lease obligations		67			143
Deferred income tax liability		736			4,051
Accrued pension liability		534			467
Accrued postretirement benefits		780			761
Other long-term liabilities		126			—
Total liabilities		36,688			37,460
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized
Common stock, $.10 par value, 25,500 shares authorized 10,579 and 10,548 shares issued and 9,768 and 9,740 shares outstanding at December 31 and March 31, 2017, respectively		1,058			1,055
Capital in excess of par value		23,573			23,176
Retained earnings		97,229			110,544
Accumulated other comprehensive loss		(7,599	)		(8,434	)
Treasury stock (811 and 808 shares at December 31 and March 31, 2017, respectively)		(12,326	)		(12,231	)
Total stockholders’ equity		101,935			114,110
Total liabilities and stockholders’ equity	$	138,623		$	151,570

	Gross Carrying Amount		Accumulated Amortization		Impairment Loss		Net Carrying Amount
At December 31, 2017
Intangibles subject to amortization:
Customer relationships	$	2,700	$	1,267	$	—	$	1,433
Intangibles not subject to amortization:
Permits	$	10,300	$	—	$	8,600	$	1,700
Tradename		2,500		—		500		2,000
	$	12,800	$	—	$	9,100	$	3,700
At March 31, 2017
Intangibles subject to amortization:
Customer relationships	$	2,700	$	1,132	$	—	$	1,568
Intangibles not subject to amortization:
Permits	$	10,300	$	—	$	—	$	10,300
Tradename		2,500		—		—		2,500
	$	12,800	$	—	$	—	$	12,800


	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


	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


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


	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


			Material Contracts
~~(31)~~
*	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~~With Embedded Linkbase Documents



(104)		Cover Page Interactive Data File embedded within the Inline XBRL document
+	~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
	+ ++ *
+	~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

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

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


	+	Exhibit filed with this report
Exhibit furnished with this report
		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 its staff a copy of the omitted schedules upon request.


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