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).

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,~~August 6, 2021, there were outstanding ~~9,768,026~~10,691,411 shares of the registrant’s common stock, par value ~~$.10~~$0.10 per share.

As of ~~December 31, 2017~~June 30, 2021 and March 31, ~~2017~~2021 and for the ~~Three~~three months ended June 30, 2021 and ~~Nine-Month Periods Ended December 31, 2017 and 2016~~2020

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2021			2020
	(Amounts in thousands, except per share data)						(Amounts in thousands, except per share data)						(Amounts in thousands, except per share data)
Net sales	$	17,281		$	22,654		$	55,356		$	66,145		$	20,157		$	16,710
Cost of products sold		13,696			16,353			43,075			50,723			19,243			15,142
Gross profit		3,585			6,301			12,281			15,422			914			1,568
Other expenses and income:
Selling, general and administrative		4,007			3,746			11,270			10,462			4,832			3,902
Selling, general and administrative – amortization		59			58			177			175			91			—
Impairment of goodwill and intangible assets		14,816			—			14,816			—
Restructuring charge		—			—			316			630
Other income														(160	)		(55	)
Interest income		(142	)		(100	)		(455	)		(272	)		(17	)		(94	)
Interest expense		3			3			8			7			39			5
Total other expenses and income		18,743			3,707			26,132			11,002			4,785			3,758
(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
Loss before benefit for income taxes														(3,871	)		(2,190	)
Benefit for income taxes														(745	)		(372	)
Net loss													$	(3,126	)	$	(1,818	)
Per share data
Basic:
Net (loss) income	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33
Net loss													$	(0.31	)	$	(0.18	)
Diluted:
Net (loss) income	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33
Net loss													$	(0.31	)	$	(0.18	)
Weighted average common shares outstanding:
Basic		9,768			9,727			9,762			9,709			10,199			9,895
Diluted		9,768			9,733			9,762			9,714			10,199			9,895
Dividends declared per share	$	0.09		$	0.09		$	0.27		$	0.27		$	0.11		$	0.11

	June 30, 2021			March 31, 2021
	(Amounts in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	19,143		$	59,532
Investments		—			5,500
Trade accounts receivable, net of allowances ($67 and $29 at June 30 and March 31, 2021, respectively)		18,273			17,378
Unbilled revenue		28,533			19,994
Inventories		19,144			17,332
Prepaid expenses and other current assets		1,557			512
Income taxes receivable		1,416			—
Total current assets		88,066			120,248
Property, plant and equipment, net		25,618			17,618
Prepaid pension asset		6,518			6,216
Operating lease assets		9,146			95
Goodwill		22,923			—
Customer relationships		11,751			—
Technology and technical know how		10,058			—
Other intangible assets, net		11,067			—
Other assets		219			103
Total assets	$	185,366		$	144,280
Liabilities and stockholders’ equity
Current liabilities:
Short-term debt obligations	$	2,500		$	—
Current portion of long-term debt		2,000			—
Current portion of finance lease obligations		22			21
Accounts payable		15,124			17,972
Accrued compensation		6,049			6,106
Accrued expenses and other current liabilities		7,421			4,628
Customer deposits		17,034			14,059
Operating lease liabilities		1,081			46
Income taxes payable		—			741
Total current liabilities		51,231			43,573
Long-term debt		18,000			—
Finance lease obligations		28			34
Operating lease liabilities		8,103			37
Deferred income tax liability		906			635
Accrued pension and postretirement benefit liabilities		2,087			2,072
Other long-term liabilities		1,811			—
Total liabilities		82,166			46,351
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized		—			—
Common stock, $0.10 par value, 25,500 shares authorized, 10,874 and 10,748 shares issued and 10,691 and 9,959 shares outstanding at June 30 and March 31, 2021, respectively		1,087			1,075
Capital in excess of par value		27,419			27,272
Retained earnings		85,069			89,372
Accumulated other comprehensive loss		(7,099	)		(7,397	)
Treasury stock (183 and 790 shares at June 30 and March 31, 2021, respectively)		(3,276	)		(12,393	)
Total stockholders’ equity		103,200			97,929
Total liabilities and stockholders’ equity	$	185,366		$	144,280

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

	Three Months Ended
	June 30,
	2021			2020
Operating activities:	(Dollar amounts in thousands)
Net loss	$	(3,126	)	$	(1,818	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation		595			486
Amortization		225			—
Amortization of actuarial losses		219			266
Equity-based compensation expense		353			164
Gain on disposal or sale of property, plant and equipment		—			(4	)
Deferred income taxes		215			282
(Increase) decrease in operating assets:
Accounts receivable		7,319			(1,646	)
Unbilled revenue		(1,426	)		(1,091	)
Inventories		1,857			(361	)
Prepaid expenses and other current and non-current assets		(603	)		(356	)
Income taxes receivable		(2,161	)		(490	)
Operating lease assets		(25	)		37
Prepaid pension asset		(302	)		(210	)
Increase (decrease) in operating liabilities:
Accounts payable		(5,745	)		(4,430	)
Accrued compensation, accrued expenses and other current and non-current liabilities		(1,448	)		709
Customer deposits		(3,074	)		4,094
Operating lease liabilities		35			(37	)
Long-term portion of accrued compensation, accrued pension liability and accrued postretirement benefits		16			32
Net cash used by operating activities		(7,076	)		(4,373	)
Investing activities:
Purchase of property, plant and equipment		(446	)		(338	)
Proceeds from disposal of property, plant and equipment		—			6
Purchase of investments		—			(26,103	)
Redemption of investments at maturity		5,500			40,048
Acquisition of Barber-Nichols, LLC		(59,563	)		—
Net cash (used) provided by investing activities		(54,509	)		13,613
Financing activities:
Increase in short-term debt obligations		2,500			—
Principal repayments on long-term debt		—			(4,599	)
Proceeds from the issuance of long-term debt		20,000			4,599
Principal repayments on finance lease obligations		(5	)		(12	)
Repayments on lease financing obligations		(26	)		—
Payment of debt issuance costs		(150	)		—
Dividends paid		(1,177	)		(1,097	)
Purchase of treasury stock		(41	)		(23	)
Net cash provided (used) by financing activities		21,101			(1,132	)
Effect of exchange rate changes on cash		95			6
Net (decrease) increase in cash and cash equivalents		(40,389	)		8,114
Cash and cash equivalents at beginning of period		59,532			32,955
Cash and cash equivalents at end of period	$	19,143		$	41,069

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY

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

	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, 2021		10,748		$	1,075		$	27,272		$	89,372		$	(7,397	)	$	(12,393	)	$	97,929
Comprehensive loss											(3,126	)		298						(2,828	)
Issuance of shares		135			13			(13	)											—
Forfeiture of shares		(9	)		(1	)		1												—
Dividends											(1,177	)								(1,177	)
Recognition of equity-based compensation expense								353												353
Issuance of treasury stock								(194	)								9,158			8,964
Purchase of treasury stock																	(41	)		(41	)
Balance at June 30, 2021		10,874		$	1,087		$	27,419		$	85,069		$	(7,099	)	$	(3,276	)	$	103,200

	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, 2020		10,689		$	1,069		$	26,361		$	91,389		$	(9,556	)	$	(12,539	)	$	96,724
Comprehensive income											(1,818	)		214						(1,604	)
Issuance of shares		113			11			(11	)											—
Forfeiture of shares		(22	)		(2	)		2												—
Dividends											(1,097	)								(1,097	)
Recognition of equity-based compensation expense								164												164
Purchase of treasury stock																	(23	)		(23	)
Balance at June 30, 2020		10,780		$	1,078		$	26,516		$	88,474		$	(9,342	)	$	(12,562	)	$	94,164

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its ~~(i)~~ wholly-owned ~~foreign subsidiary~~subsidiaries located in Suzhou, China and ~~(ii)~~Ahmedabad, India at June 30, 2021 and March 31, 2021, and its recently acquired wholly-owned ~~domestic~~ subsidiary, Barber-Nichols, LLC ("BN"), located in ~~Lapeer, Michigan.~~Arvada, Colorado at June 30, 2021 and for the period June 1, 2021 through June 30, 2021 (See Note 2). 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~~2021 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, ~~2017.~~2021. 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~~2021 ("fiscal ~~2017"~~2021"). 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~~June 30, 2021 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, ~~2018~~2022 ("fiscal ~~2018"~~2022").

On June 1, 2021, the Company completed its acquisition of Barber-Nichols, LLC ("BN"), a privately-owned designer and manufacturer of turbomachinery products located in Arvada, Colorado that serves the defense and aerospace industry as well as the energy and cryogenic markets. The Company believes this acquisition furthers its growth strategy through market and product diversification, broadens its offerings and strengthens its presence in the defense industry, builds on its presence in the energy markets and adds capabilities in the space industry.

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 $72,014 was comprised of 610 shares of the Company's common stock, representing a value of $8,964 at a price of $14.69 per share, and cash consideration of $61,150, subject to certain potential adjustments, including a customary working capital adjustment. The cash consideration was funded through cash on-hand and debt proceeds (See Note 15). The purchase agreement also includes a contingent earn-out dependent upon certain financial measures of BN post-acquisition, in which the sellers are eligible to receive up to $14,000 in additional cash consideration. As of June 30, 2021, a liability of $1,900 was recorded for the contingent earn-out. If achieved, the earn-out will be payable in fiscal year 2025 and will be treated as additional purchase price. The fair value of the contingent consideration liability was based on an option pricing model using a Monte Carlo simulation and is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in earnings before income tax, depreciation and amortization estimates and discount rates. This is considered a Level 3 liability in the fair value hierarchy. In addition, BN and Ascent Properties Group, LLC, a related party, entered into a nine year operating lease agreement for an office and manufacturing building in Arvada, Colorado. This lease has a monthly payment in the amount of $40 with a 3% yearly escalation. Acquisition related costs of $169 were expensed in the first quarter of fiscal 2022 and are included in Selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

The cost of the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition and the amount exceeding the fair value of $22,923 was recorded as goodwill, which is not deductible for tax purposes. As the values of certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained, including, but not limited to, the finalization of the valuation of intangible assets, the final reconciliation and confirmation of tangible assets and the settlement of the contingent payment. The valuation of acquisition-related intangible assets will be finalized within twelve months of the close of the acquisition. The fair value of acquisition-related intangible assets includes customer relationships, technology and technical know-how, backlog and trade name. Backlog and trade name are included in the line item "Other intangible assets, net" in the Condensed Consolidated Balance Sheet. Customer relationships were valued using an income approach, specifically the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs. Trade name and technology and technical know-how were both valued 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. The fair value of backlog was determined using a net realizable value

methodology, and was computed as the present value of the expected sales attributable to backlog less the remaining costs to fulfill the backlog. Changes to the preliminary valuation may result in material adjustments to the fair value of assets and liabilities acquired.

The purchase price was allocated to specific intangible assets on a preliminary basis as follows:

Technology and technical know-how and customer relationships are amortized in selling, general and administrative expense on a straight line basis over their estimated useful lives. Backlog is amortized in cost of products sold over the projected conversion period based on management estimates at time of purchase. Intangible amortization was $225 for the three months ended June 30, 2021. The estimated annual amortization expense is as follows:

The following table summarizes the preliminary allocation of the cost of the acquisition to the assets acquired and liabilities assumed as of the close of the acquisition:

The Condensed Consolidated Statement of Operations for the three months ended June 30, 2021 includes net sales from BN of $3,471. The following unaudited pro forma information presents the consolidated results of operations of the Company as if the BN acquisition had occurred at the beginning of each of the fiscal periods presented:

The unaudited pro forma information presents the combined operating results of Graham Corporation and BN, 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 income reflecting the cash paid in connection with the acquisition, including acquisition-related expenses, at the Company’s weighted average interest income rate, interest expense and loan origination fees at the Company’s current 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.

The Company recognizes revenue on contracts when or as it satisfies a performance obligation by transferring control of the product to the customer. For contracts in which revenue is recognized 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:

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 ~~contracts with~~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 ~~planned manufacturing process~~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 ~~excess~~revenue and the related costs incurred for shipping and handling are included in cost of ~~four weeks (which approximates 575 direct labor hours) using~~products sold.

Revenue on the ~~percentage-of-completion method. The~~ majority of the ~~Company's~~Company’s contracts, as measured by number of contracts, is recognized upon shipment to the customer. Revenue on larger contracts, which are fewer in number but represent the majority of revenue, is recognized ~~under this methodology.~~over time. However, in the three months ended June 30, 2020, revenue recognized over time was lower than revenue recognized upon shipment due to limited production on large contracts as a result of the COVID-19 pandemic. Revenue from contracts that is recognized upon shipment accounted for approximately 35% and 60% of revenue for the three-month periods ended June 30, 2021 and 2020, respectively, and revenue from contracts that is recognized over time accounted for approximately 65% and 40% of revenue for the three-month periods ended June 30, 2021 and 2020. 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~~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 ~~not accounted for using the percentage-of-completion method~~that is recognized ~~utilizing~~over time and exceeds the completed contract method. The majority of the Company's contracts (as opposed to revenue) have a planned manufacturing process 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 upon substantial completion or shipmentamount that has been billed to the customer. ~~Substantial completion~~Unbilled revenue is ~~consistently defined~~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.

Contract liabilities at ~~least 95% complete with regard to direct labor hours. Customer acceptance is generally required throughout the construction process~~June 30, and March 31, 2021 include $1,335 and $1,603, 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 Condensed Consolidated Balance Sheets, includes corresponding balances at June 30, and March 31, 2021, respectively. Revenue recognized in the three months ended June 30, 2021 that was included in the contract liability balance at March 31, 2021 was $7,115. Changes in the net contract liability balance during the three-month period ended June 30, 2021 were impacted by a $8,539 increase in contract assets, of which $6,397 was due to contract progress and the acquisition of BN’s contract assets of $7,068 offset by invoicing to customers of $4,926. In addition, contract liabilities increased $2,975 driven by revenue ~~is recognized.~~recognized in the current period that was included in the contract liability balance at March 31, 2021 offset by new customer deposits of $4,042 and the acquisition of BN’s contract liabilities of $6,048.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were ~~$1,141~~$3,308 and ~~$971~~$3,747 at ~~December 31, 2017~~June 30, and March 31, ~~2017,~~2021, respectively.

Incremental costs to obtain a contract consist of sales employee and agent commissions. Commissions paid to employees and sales agents are capitalized when paid and amortized to selling, general and administrative expense when the related revenue is recognized. Capitalized costs, net of amortization, to obtain a contract were $96 and $39 at June 30, and March 31, 2021, respectively, and are included in the line item "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets. The related amortization expense was $10 in each of the three months ended June 30, 2021 and 2020.

The Company’s remaining unsatisfied performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company also refers to this measure as backlog. As of June 30, 2021, the Company had remaining unsatisfied performance obligations of $235,938. The Company expects to recognize revenue on approximately 45% to 50% of the remaining performance obligations within one year, 25% to 35% in one to two years and the remaining beyond two years.

NaN investments were held by the Company at June 30, 2021. Investments, if any, consist of certificates of deposits with financial institutions. All investments have original maturities of greater than three months and less than one year and are classified as held-to-maturity, as the Company believes it has the intent 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.~~

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.

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

	June 30,		March 31,
	2021		2021
Raw materials and supplies	$	4,053	$	3,490
Work in process		13,396		12,196
Finished products		1,695		1,646
Total	$	19,144	$	17,332

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives. Intangible amortization expense for each of the three-month periods ended December 31, 2017 and 2016 was $45. Intangible amortization expense for each of the nine-month periods ended December 31, 2017 and 2016 was $135. As of December 31, 2017, amortization expense is estimated to be $45 for the remainder of fiscal 2018 and $180 in each of the fiscal years ending March 31, 2019, 2020, 2021 and 2022.

During the third quarter of fiscal 2018, the Company performed its annual goodwill and intangible asset impairment review. The Company assesses impairment by comparing the fair value of its reporting units and intangible assets to their related carrying value. Accounting Standards Update No. 2015-07, “Fair Value Measurement (Topic 820), establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets of liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 – Valuations determined from quoted prices for similar assets of liabilities in active markets, quoted prices for identical instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

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.

The Company estimated the fair value of intangible assets and goodwill of its commercial nuclear power business related to the December 2010 acquisition of Energy Steel & Supply Co. (“Energy Steel”) using the income approach. Under the income approach, the fair value of the business is calculated based on the present value of estimated future cash flows. Cash flow projections are based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy outlined above. 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 Electric Company which resulted in the stoppage of work at the Summer, SC nuclear facility. As a result, in the third quarter of fiscal 2018 the Company recorded impairment losses of $8,600, $500, and $5,716 for permits, tradename and goodwill, respectively.

The ~~Amended and Restated 2000~~2020 Graham Corporation Equity Incentive Plan ~~to Increase Shareholder Value,~~(the (the "2020 Plan"), as approved by the Company’s stockholders at the Annual Meeting on ~~July 28, 2016,~~August 11, 2020, provides for the issuance of ~~up to 1,375~~422 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, restricted stock ~~awards~~units and ~~performance~~stock awards to officers, key employees and outside ~~directors: provided, however, that no more than 467~~directors. The shares available for issuance include 112 remaining available shares under the Company’s prior plan, the Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value (the"2000 Plan"). As of August 11, 2020, the effective date of the 2020 Plan, 0 further awards will be granted under the 2000 Plan. However, 33 stock options and 104 shares of common stock may be used for awards other than stock options. Stock options may be granted at prices not less than the fair market value at the date of grant and expire no later than ten years after the date of grant.

Nounvested restricted stock under the 2000 Plan remains subject to the terms of such plan until the time it is no longer outstanding.

Restricted stock awards ~~were~~ granted in the three-month periods ended ~~December 31, 2017~~June 30, 2021 and ~~2016. Restricted stock awards granted in the nine-month periods ended December 31, 2017~~2020 were 135 and ~~2016 were 59 and 82,~~113, respectively. Restricted shares of 3070 and 4354 granted to officers in fiscal ~~2018~~2022 and fiscal ~~2017,~~2021, respectively, vest 100% on the third anniversary of the grant date subject to the satisfaction of the performance metrics for the applicable three-year period. Restricted shares of 2245 and 3138 granted to officers and key employees in fiscal ~~2018~~2022 and fiscal ~~2017,~~2021, respectively, vest 33⅓% per year over a three-year term. Restricted shares of 720 and 821 granted to directors in fiscal ~~2018~~2022 and fiscal ~~2017,~~2021, respectively, vest 100% on the first year anniversary of the grant date. NoNaN stock option awards were granted in the three-month ~~or nine-month~~ periods ended ~~December 31, 2017~~June 30, 2021 and ~~2016 December 31, 2017 and 2016.~~2020.

During the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016,~~2020, the Company recognized ~~stock-based~~equity-based compensation costs related to ~~stock option and~~ restricted stock awards of ~~$213~~$337 and ~~$200,~~$155, respectively. The income tax benefit recognized related to ~~stock-based~~equity-based compensation was ~~$24~~$75 and ~~$70~~$38 for the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016,~~2020, respectively. During the nine months ended December 31, 2017 and 2016, the Company recognized stock-based compensation costs related to stock option and restricted stock awards of $362 and $427, respectively. The income tax benefit recognized related to stock-based compensation was $77 and $151 for the nine months ended December 31, 2017 and 2016, respectively.

The Company has an Employee Stock Purchase Plan (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the ~~(i)~~(1) last, ~~(ii)~~(2) first or ~~(iii)~~(3) lower of the last or first day of the six-month offering period. A total of 200 shares of common stock may be purchased under the ESPP. ~~In each of~~During the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016,~~2020, the Company recognized ~~stock-based~~equity-based compensation costs of ~~$0 related to the ESPP~~$16 and ~~$0 of related tax benefits. During the nine months ended December 31, 2017 and 2016, the Company recognized stock-based compensation costs of $0 and $6,~~$9, respectively, related to the ESPP and $0$4 and $2, respectively, of related tax benefits.

Basic ~~(loss) income~~loss per share is computed by dividing net ~~(loss) income~~loss by the weighted average number of common shares outstanding for the period. Diluted ~~(loss) income~~loss per share is calculated by dividing net ~~(loss) income~~loss by the weighted average number of common shares outstanding and, when applicable, potential common shares outstanding during the period. A reconciliation of the numerators and denominators of basic and diluted ~~(loss) income~~loss per share is presented below:

Three Months Ended

Nine Months Ended

December 31,

December 31,

2017

2016

2017

2016

Basic (loss) income per share

Numerator:

Net (loss) income

$
(11,622
)

$
1,840

$
(10,677
)

$
3,222

Denominator:

Weighted average common shares outstanding

9,768

9,727

9,762

9,709

Basic (loss) income per share

$
(1.19
)

$
.19

$
(1.09
)

$
.33

Diluted income per share

Numerator:

Net (loss) income

$
(11,622
)

$
1,840

$
(10,677
)

$
3,222

Denominator:

Weighted average common shares outstanding

9,768

9,727

9,762

9,709

Stock options outstanding

—

6

—

5

Weighted average common and potential common
shares outstanding

9,768

9,733

9,762

9,714

Diluted (loss) income per share

$
(1.19
)

$
.19

$
(1.09
)

$
.33

	Three Months Ended
	June 30,
	2021			2020
Basic loss per share
Numerator:
Net loss	$	(3,126	)	$	(1,818	)
Denominator:
Weighted average common shares outstanding		10,199			9,895
Basic loss per share	$	(0.31	)	$	(0.18	)

Diluted loss per share
Numerator:
Net loss	$	(3,126	)	$	(1,818	)
Denominator:
Weighted average common shares outstanding		10,199			9,895
Stock options outstanding		—			—
Weighted average common and potential common shares outstanding		10,199			9,895
Diluted loss per share	$	(0.31	)	$	(0.18	)

None of the options to purchase 33 and 37 shares of common stock ~~which totaled 69~~at June 30, 2021 and 2020, respectively, were included in the computation of diluted loss per share ~~for the three and nine months ended December 31, 2017~~ as the ~~effect~~affect would be anti-dilutive due to the net ~~loss~~losses in the periods. Options to purchase a total of 16 shares of common stock were outstanding at December 31, 2016 but were not included in the above computation of diluted income per share in the three and nine-month periods ended December 31, 2016 given their exercise prices as they would not be dilutive upon issuance.

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

Income of ~~$59~~$16 and $19 for product warranties in the ~~nine months ended December 31, 2017 and the income of $81 in the~~ three months ended ~~December 31, 2016~~June 30, 2021 and 2020, respectively, resulted from the reversal of provisions made that were no longer required due to lower claims experience.

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

Interest paid was ~~$8 and $7~~$5 in each of the ~~nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2021 and ~~2016.~~2020. Income taxes paid (refunded) for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016~~2020 were ~~$1,801~~$1,243 and ~~$104,~~$(164), respectively.

At June 30, 2021 and ~~2016, non-cash activities included the issuance of treasury stock valued at $63 and $107, respectively, to the Company’s Employee Stock Purchase Plan.~~

~~At December 31 2017 and 2016, respectively,~~2020, there were ~~$29~~$285 and ~~$31~~$48, respectively, of capital purchases that were recorded in accounts payable and are not included in the caption "Purchase of property, plant and equipment" in the Condensed Consolidated Statements of Cash Flows.

The cash utilized for the acquisition of BN of $59,563 includes the cash consideration of $61,150, net of cash acquired of $1,587. In the three months ended June 30, 2021, non-cash activities included the issuance of 610 treasury shares valued at $8,964 as part of the consideration for the acquisition of BN.

The Company made 0 contributions to its defined benefit pension plan during the ~~nine~~three months ended ~~December 31, 2017 of $52~~June 30, 2021 and does ~~not~~0t expect to make any contributions to the plan for the balance of fiscal ~~2018.~~2022.

The Company paid no0 benefits related to its postretirement benefit plan during the ~~nine~~three months ended ~~December 31, 2017.~~June 30, 2021. The Company expects to pay benefits of approximately ~~$83~~$72 for the balance of fiscal ~~2018.~~2022.

The components of net periodic benefit cost other than service cost are included in the line item "Other income" in the Condensed Consolidated Statements of Operations.

The Company self-funds the medical insurance coverage it provides to its U.S. based ~~employees.~~employees in certain locations. The Company maintains a stop loss insurance policy in order to limit its exposure to claims. The liability of ~~$134~~$152 and ~~$174~~$184 on ~~December 31, 2017~~June 30, 2021 and March 31, ~~2017,~~2021, respectively, related to the self-insured medical plan is primarily based upon claim history and is included in the caption ~~“Accrued compensation”~~"Accrued compensation" as a current liability in the Condensed Consolidated Balance Sheets.

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

As of ~~December 31, 2017,~~June 30, 2021, the Company was subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business.

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

The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for the tax years ~~2015~~2017 through ~~2017~~2020 and examination in state tax jurisdictions for the tax years ~~2013~~2016 through ~~2017.~~2020. The Company is subject to examination in the People’s Republic of China for tax years ~~2014~~2017 through ~~2016.~~2020 and in India for tax year 2019 through 2020.

There was no0 liability for unrecognized tax benefits at either ~~December 31, 2017~~June 30, 2021 or March 31, ~~2017.~~

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act, which is effective on January 1, 2018, significantly revises the U.S. tax code by, among other changes, lowering the corporate income tax rate from 35% to 21%, requiring a one-time transition tax on accumulated foreign earnings of certain foreign subsidiaries that were previously tax deferred and creating new taxes on certain foreign sourced earnings. At December 31, 2017, the Company has not completed its accounting for the tax effects of the Tax Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax.

The Company remeasured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and provisionally recorded an income tax benefit of $1,575 related to such remeasurement in the third quarter of fiscal 2018. The Company is still analyzing certain aspects of the Tax Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) of our foreign subsidiary that has previously been deferred from U.S. income taxes. The Company recorded a provisional amount for its one-time transition liability of its foreign subsidiary resulting in additional income tax expense of $137 in the third quarter of fiscal 2018. The Company has not yet completed its calculation of the total post-1986 foreign E&P for the foreign subsidiary. The transition tax is based in part on the amount of those earnings held in cash and other specified assets. The amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets.

The changes in accumulated other comprehensive loss by component for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016~~2020 are as follows:

The reclassifications out of accumulated other comprehensive loss by component for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2021 and ~~2016~~2020 are as follows:

~~In each~~The Company leases certain manufacturing facilities, office space, machinery and office equipment. An arrangement is considered to contain a lease if it conveys the right to use and control an identified asset for a period of time in exchange for consideration. If it is determined that an arrangement contains a lease, then a classification of a lease as operating or finance is determined by evaluating the five criteria outlined in the lease accounting guidance at inception. Leases generally have remaining

terms of one year to five years, whereas leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets. The depreciable life of leased assets related to finance leases is limited by the expected term of the ~~second quarter~~lease, unless there is a transfer of ~~fiscal 2018~~title or purchase option that the Company believes is reasonably certain of exercise. Certain leases include options to renew or terminate. Renewal options are exercisable per the discretion of the Company and vary based on the nature of each lease. The term of the lease includes renewal periods only if the Company is reasonably certain that it will exercise the renewal option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the cost of moving to another location, the cost of disrupting operations, whether the purpose or location of the leased asset is unique and the ~~first half~~contractual terms associated with extending the lease. The Company’s lease agreements do not contain any residual value guarantees or any material restrictive covenants and the Company does not sublease to any third parties. As of ~~fiscal 2017,~~June 30, 2021, the Company did not have any material leases that have been signed but not commenced.

Right-of-use (“ROU”) lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets represent the Company’s ~~workforce was aligned with market conditions by reducing~~right to use an underlying asset for the ~~number~~lease term and lease liabilities represent the Company’s obligation to make payments in exchange for that right of ~~management, office~~use. Finance lease ROU assets and manufacturing positions. As a result, restructuring charges of $316 and $630 were recognized in the nine months ended December 31, 2017 and 2016, respectively. The restructuring charges included severance and related employee benefit costs. The chargesoperating lease ROU assets are included in the ~~caption “Restructuring Charge” in the Condensed Consolidated Statements of Income~~line items “Property, plant and ~~Retained Earnings. The reconciliation of the changes in the restructuring reserve is as follows:~~

~~The liability of $100~~equipment, net” and ~~$120 at December 31, 2017 and March 31, 2017~~“Operating lease assets”, respectively, ~~is included in the caption “Accrued Compensation”~~ in the Condensed Consolidated Balance Sheets. The current portion and non-current portion of finance and operating lease liabilities are all presented separately in the Condensed Consolidated Balance Sheets.

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

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

Operating lease costs during the three months ended June 30, 2021 and 2020 were included within cost of sales and selling, general and administrative expenses.

As of June 30, 2021, future minimum payments required under non-cancelable leases are:

On June 1, 2021, the Company entered into a $20,000 five-year term loan with Bank of America. The term loan requires monthly principal payments of $167 through June 1, 2026, with the remaining principal amount plus all interest due on the maturity date. The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus 1.50%, subject to a 0.00% floor. In addition, on June 1, 2021, the Company terminated its revolving credit facility agreement with JPMorgan Chase Bank, N.A. and entered into a revolving credit facility with Bank of America that provides a $30,000 line of credit, including letters of credit and bank guarantees, expandable at the Company’s option and the bank’s approval at any time up to $40,000. As of June 30, 2021, the Company had $2,500 outstanding on the line of credit. The agreement has a five-year term. Amounts outstanding under the facility agreement bear interest at a rate equal to BSBY plus 1.50%, subject to a 0.00% floor. As of June 30, 2021, the BSBY rate was 0.0558%. Outstanding letters of credit under the agreement are subject to a fee of 1.50% per annum of the outstanding undrawn amount of each letter of credit that is not secured by cash and 0.6% of each letter of credit that is secured by cash. The upfront fee for both the term loan and revolving credit facility was 0.20% of the committed facilities and amounts available for borrowing under the revolving credit facility are subject to an unused commitment fee of 0.25%. Under the term loan agreement and revolving credit facility, the Company covenants to maintain a maximum total leverage ratio, as defined in such agreements, of 3.0 to 1.0 and a minimum fixed charge coverage ratio, as defined in such agreements, of 1.20 to 1.0 and minimum margined assets, as defined in such agreements, of 100% of total amounts outstanding on the revolving credit facility, including letters of credit.

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

Letters of credit outstanding as of June 30, 2021 and March 31, 2021 were $8,711 and $11,567, respectively.

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

In ~~May 2014,~~December 2019, the FASB issued Accounting Standards Update ("ASU") ~~2014-09, "Revenue from Contracts with Customers." This~~No. 2019-12, “Simplifying the Accounting for Income Taxes.” The amended guidance ~~establishes~~simplifies the accounting for income taxes, eliminating certain exceptions to the general income tax 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~~effort to reduce the ~~consideration to which the company expects to be entitled in exchange for those goods~~cost and ~~services.~~complexity of application. 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 presented in accordance with the new standard and (2) a modified retrospective approach where theamended guidance is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 "Revenue from Contracts with Customers: Deferral 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 Obligations and Licensing," which clarifies the identifying performance obligations 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 approach in the first quarter of its fiscal year ending March 31, 2019. The Company has developed a project plan and is currently reviewing its contracts and evaluating the impact of the guidance on its revenue. The Company currently believes that the most significant impact of adopting the guidance will 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 established in the new standards. The Company is in the process of implementing changes to its business processes, systems and controls to support the recognition and disclosure requirements under the new guidance. See Note 2 for a description of the Company’s current revenue recognition policy.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory," which simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for public business entities for fiscal years beginning after December 15, ~~2016, and~~2020, including interim periods within those fiscal years. The guidance requires application on either a prospective, retrospective or modified retrospective basis, contingent on the income tax exception being applied. The Company adopted the new guidance, ~~in the first quarter of fiscal 2018.~~on a prospective basis, on April 1, 2021. The adoption of this ASU did not have a material impact on the Company’s ~~Consolidated Financial Statements.~~

~~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.

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.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.

On August 10, 2021, the Company announced that its Board of Directors has appointed Daniel J. Thoren as its President and Chief Executive Officer, effective August 31, 2021. Mr. Thoren will also join the Board of Directors upon assuming the new role. He will succeed James R. Lines, who plans to retire from the Company and step down from the Board of Directors. The Company will incur a one-time charge for the separation of James R. Lines that will be recorded in the second quarter of fiscal year 2022.

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

We are a global business that designs, manufactures and sells critical equipment for the defense, energy ~~defense~~ and chemical/petrochemical industries. ~~Our energy markets include oil refining, cogeneration, nuclear and alternative power.~~ For the defense industry our equipment is used in nuclear propulsion power systems and for ~~the U.S. Navy.~~undersea propulsion and power systems. Our energy markets include oil refining, cogeneration, and alternative power. For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities. We also are a provider of specialized systems and equipment for the aerospace and space industries.

~~Graham’s~~Our global brand is built upon ~~world-renowned~~ engineering expertise ~~in vacuum~~ and ~~heat transfer technology, responsive~~close customer collaboration to design, develop, and ~~flexible~~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 ~~and high quality standards. We design and manufacture custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. We~~life are also a leading nuclear code accredited fabrication and specialty machining company. We supply components used inside reactor vessels and outside containment vessels of nuclear power facilities. 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.values upon which our brand is built.

Our corporate headquarters are located in Batavia, New York. We have production facilities co-located with our headquarters in ~~Batavia and also at our~~Batavia. We have a wholly-owned subsidiary, ~~Energy Steel & Supply Co. ("Energy Steel"), located~~Barber-Nichols, LLC, based in ~~Lapeer, Michigan.~~Arvada, Colorado, that designs, develops, manufactures and sells turbomachinery products for the aerospace, cryogenic, defense and energy markets (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~~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 and fertilizer markets in India.

Our current fiscal year (which we refer to as ~~“fiscal 2018”~~"fiscal 2022") ends March 31, ~~2018.~~2022.

We completed the acquisition of Barber-Nichols, LLC ("BN") on June 1, 2021. BN was founded as a turbomachinery engineering company in 1966. BN has grown rapidly from programs that involve complex production and system integration. BN is located in Arvada, Colorado, a suburb of Denver. BN uses a combination of knowledge in rotating equipment, power generation cycles, and electrical management systems and has participated in the design and development of different power and propulsion systems used in underwater vehicles.

The acquisition of BN is expected to change the composition of the Company’s future end market mix. We expect approximately 45%-50% of our business for the last ten months of fiscal 2022, after the acquisition, to provide equipment to the U.S. Navy. We expect the energy market to be 35%-40% of sales and the aerospace and other markets to be 10%-15% of sales.

The transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price of $72,014 was comprised of 610 shares of the Company’s common stock, representing a value of $8,964 at $14.69 per share, and cash consideration of $61,150, subject to certain potential adjustments, including a customary working capital adjustment. The cash consideration was funded through cash on-hand and debt proceeds (See Note 15). The purchase agreement with respect to the acquisition also includes a contingent earn-out dependent upon certain financial measures of BN post-acquisition, pursuant to which the sellers are eligible to receive up to $14,000 in additional cash consideration. As of June 30, 2021, a liability of $1,900 was recorded for the contingent earn-out. If achieved, the earn-out will be payable in fiscal year 2025 and will be treated as additional purchase price. Acquisition related costs of $169 were expensed in the first quarter of fiscal 2022 and are included in Selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

Highlights for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2021 include:

This report and other documents we file with the Securities and Exchange Commission 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.

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 factors include, but are not limited to, the risks and uncertainties identified by us under the heading "Risk Factors" 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," "contemplate," "continue," "could," "estimate," "may," "might," "intend," "interest," "appear," "expect," "suggest," "plan," "predict," "project," "encourage," ~~"potential", "view"~~"potential," "should," "view," "will," and similar expressions. Actual results could differ materially from historical results or those implied by the forward-looking statements contained in this report.

Undue reliance should not be placed on our forward-looking statements. 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.

Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand based on the planned procurement of submarines, aircraft carriers and undersea propulsion and power systems. Submarines, both Virginia and Columbia classes, are considered critical to national defense. We do not anticipate demand for our equipment and systems will abate and is actually reported to continue to increase in the coming years. With the addition of revenue from the BN acquisition, consolidated revenue for the U.S. Navy is projected to be $60 million to $70 million in the current fiscal year, with growth expected in subsequent years. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, and compressors and controllers for various fluid and thermal management systems used in DoD radar, laser, electronics and power systems. We have built a leading position, and in some instances, sole sourcing position, for certain systems and equipment supporting the confidence we have in near term outlook.

The energy and petrochemical markets continue to be impacted by demand disruption caused by the COVID-19 global pandemic. Western energy markets are further impacted by alternative energy growth with reduced reliance of fossil-based fuels. This, we believe, has caused our crude oil refining customers to reduce sustaining or MRO spending and dramatically scale back strategic growth investment. Our western energy and crude oil refining customers are not expected to return to previous levels of investment in the near term, though we are seeing some improvements compared with the second half of last year. Within our emerging or developing markets, we anticipate new capacity investment will occur in the latter half of the current fiscal year. This market needs local refining capacity to meet local demand for petroleum products.

We continue to believe that the energy markets, in particular crude oil refining, simultaneous with the above-described reduction in demand, are undergoing a more fundamental evolution. We believe that systemic changes in the energy markers are occurring and that such changes are being driven, in part, by the increasing use by consumers of alternative fuels in lieu of fossil fuels. As a result, ~~of volatility in~~we anticipate demand growth for fossil-based fuels will be less than the global GDP growth rate. Accordingly, we expect that crude oil refiners will focus new investments toward the installed base, and ~~natural gas prices,~~that inefficient refineries will close and ~~near term price uncertainty, our global energy markets have been~~new refining capacity will be co-located where fuels and petrochemicals are produced. We also anticipate that future investment by refiners in ~~a contracted state for the past three years. In response~~renewable fuels (e.g., renewable diesel), in existing refineries (e.g., to ~~the market conditions, our customers in the downstream energy sector have sharply reduced capital spending in each~~expand feedstock processing flexibility and to improve conversion of ~~the last three years. This impacted not only~~oil to refined products), to gain greater throughput, or to build new capacity ~~but also revamping~~(e.g., integrated refineries with petrochemical products capabilities) will continue to drive demand for our products and ~~turnaround~~services.

We expect Asian investment in chemical/petrochemical new capacity will return during the next 12-18 months while our Western integrated energy companies with petrochemical production assets will continue to limit capital investment. The timing and catalyst for ~~routine maintenance. Oil prices have risen over the past six months from $45 to over $60 per barrel. As~~ a ~~result, certain projects where our equipment is utilized have begun to proceed, however, it is not clear whether a sustained capital spending~~ recovery in our commercial 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~~(crude oil refining and chemical/petrochemical ~~markets is that fundamentals will drive increasing demand. These fundamentals include rising populations, strong emerging market economic growth, and overall global economic expansion, which~~markets) remains uncertain. Accordingly, we believe ~~will result~~that 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~~quantity of projects available for us to compete for will be fewer and that the pricing environment will remain challenging.

The alternative and clean energy opportunities for our heat transfer, power production and fluid transfer systems are expected to ~~remain volatile from quarter~~continue to ~~quarter.~~ grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, and small modular nuclear systems. While this business is small currently, we believe that we are positioning the Company to be a more significant contributor as these markets continue to develop.

We believe in the near and medium terms that chemical and petrochemical capital investment will continue to decouple from energy investment. Over the long term, we expect that population growth, an expanding global middle class and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers or related products. Consequently, when global economies return to stable growth, we expect investment in new global chemical and petrochemical capacity will resume and that such investments will drive growth in demand for our products and services.

BN products and market access provide revenue and growth potential in the commercial space/aerospace markets. As the commercial space market has grown and evolved rapidly, BN has provided rocket engine turbopump systems and components for many of the launch providers. We expect that extended space travel will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. BN is also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications and we believe our technology and expertise will allow us to participate in this market as well.

The chart below shows the impact of our successful diversification strategy. ~~Nearly 60%~~The defense market comprised 80% of our total backlog at June 30, 2021. We believe this diversification is especially beneficial when our commercial markets are weak, as ~~of December 31, 2017~~ is ~~from markets not served by us in~~presently the ~~Fiscal 2007-2009 time frame.~~case.

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

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:

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2021			2020
Net sales	$	17,281		$	22,654		$	55,356		$	66,145		$	20,157		$	16,710
Gross profit	$	3,585		$	6,301		$	12,281		$	15,422		$	914		$	1,568
Gross profit margin		21	%		28	%		22	%		23	%		5	%		9	%
SG&A expense ⁽¹⁾	$	4,066		$	3,804		$	11,447		$	10,637
SG&A expenses ⁽¹⁾													$	4,923		$	3,902
SG&A as a percent of sales		24	%		17	%		21	%		16	%		24	%		23	%
Net (loss) income	$	(11,622	)	$	1,840		$	(10,677	)	$	3,222
Diluted (loss) income per share	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33
Net loss													$	(3,126	)	$	(1,818	)
Diluted loss per share													$	(0.31	)	$	(0.18	)
Total assets	$	138,623		$	148,328		$	138,623		$	148,328		$	185,366		$	146,106
Total assets excluding cash, cash equivalents and investments	$	64,441		$	75,651		$	64,441		$	75,651		$	166,223		$	78,934

The ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2018~~2022 Compared With the ~~Third~~First Quarter ~~and First Nine Months~~

Sales for the ~~third~~first quarter of fiscal ~~2018~~2022 were ~~$17,281,~~$20,157, a ~~24% decrease as compared with~~21% increase from sales of ~~$22,654~~$16,710 for the ~~third~~first quarter of fiscal ~~2017.~~2021. Our domestic sales, as a percentage of aggregate ~~product~~ sales, were ~~65%~~69% in the ~~third~~first quarter of fiscal ~~2018~~2022 compared with ~~77%~~56% in the ~~third~~first quarter of fiscal ~~2017.~~2021. Domestic sales increased $4,456 in the first quarter of fiscal 2022, or 47% year-over-year, ~~decreased $6,160, or 35%.~~primarily due to the acquisition of BN, which contributed $3,415 in the quarter for the one month that we owned the company. International sales ~~increased $787,~~decreased $1,009, or ~~15%~~14%, in the ~~third~~first quarter of fiscal ~~2018~~2022 compared with the ~~third~~first quarter of fiscal ~~2017.~~2021. Sales in the three months ended ~~December 31, 2017~~June 30, 2021 were ~~31%~~23% to the refining industry, ~~24%~~23% to the chemical and petrochemical industries, ~~10%~~35% for the defense (U.S. Navy) industry, 4% to ~~the power industry, including the nuclear market,~~space, and ~~35%~~15% to other commercial and industrial ~~applications, including the U.S. Navy.~~applications. Sales in the three months ended ~~December 31, 2016~~June 30, 2020 were ~~28%~~16% to the refining industry, ~~19%~~48% to the chemical and petrochemical industries, ~~19% to~~21% for the ~~power~~defense (U.S. Navy) industry ~~including the nuclear market,~~ and ~~34%~~

15% to other commercial and industrial ~~applications, including the U.S. Navy. Fluctuations~~applications. The three months ended June 30, 2020 were heavily impacted by our decision to shut down operations while continuing to support our employees. We operated at approximately 50% capacity during this time. 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. 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 was 21% compared with 28% for the third quarter of fiscal 2017. Gross profit for the third quarter of fiscal 2018 decreased 43% compared with fiscal 2017, to $3,585 from $6,301. Gross profit was impacted by lower sales and ~~margins were impacted by a weaker mix of projects and less cost absorption.~~

~~Our gross profit~~operating margin for the first ~~nine months~~quarter of fiscal ~~2018 was 22%~~2022 were 5% and (19%), respectively, compared with ~~23%~~9% and (14%), respectively, for the first ~~nine months~~quarter of fiscal ~~2017.~~2021. Gross profit for the first ~~nine months~~quarter of fiscal ~~2018~~2022 decreased ~~20%~~ compared with fiscal ~~2017,~~2021, to ~~$12,281~~$914 from ~~$15,422. The decrease in gross profit was~~$1,568, due to mix, including projects with lower ~~volume.~~

SG&A expenses as a percent of sales for the ~~three and nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2021 and 2020 were 24% and ~~21%~~23%, respectively. SG&A expenses in the ~~third~~first quarter of fiscal ~~2018~~2022 were ~~$4,066,~~$4,923, an increase of $262, or 7%, compared with the third quarter of fiscal 2017 SG&A expenses of $3,804, due 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 in the first nine months of fiscal 2018 were $11,447, an increase of $810, or 8%,$1,021 compared with the first ~~nine months~~quarter of fiscal ~~2017~~2021 SG&A expenses of ~~$10,637. This increase was principally related to~~$3,902. The addition of BN, including the ~~benefit~~impact 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,purchase price amortization, accounted for $587 or ~~2%, lower.~~

During the third quarter of 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 reductions is expected to be $1,500. Approximately half of the ~~savings should be realized in fiscal 2018.~~

increase. The remaining increase was due to acquisition-related and organizational development costs.

Interest income for the ~~three and nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2021 and 2020 was ~~$142~~$17 and ~~$455, respectively,~~$94, respectively. The decrease in interest income was due to lower market investment rates compared with ~~$100~~rates during the prior year period as well as less cash and ~~$272, respectively,~~investments after the BN acquisition. Interest expense was $39 for the ~~same periods~~quarter ended ~~December 31, 2016. Interest expense~~June 30, 2021, compared with $5 for the ~~three and nine-month periods~~quarter ended ~~December 31, 2017~~June 30, 2020. The increase was ~~$3 and $8, respectively, compared~~due to the interest on the term debt which was entered into in conjunction with ~~$3 and $7, respectively, for~~ the ~~same periods ended December 31, 2016.~~aforementioned acquisition.

~~The reduction in the year-to-date~~Our 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)~~2022 was 19%, compared with ~~$1,840 and $0.19, respectively, for~~17% in the ~~third~~first quarter of fiscal ~~2017. Excluding impairment~~2021.

Net loss and other related charges for our commercial nuclear business as well as the gain from implementation of the Tax Act, net income and income per diluted share for the third quarter of fiscal 2018 were ($1) and $0.00, respectively, and were $1,840 and $0.19 in the third quarter of fiscal 2017. Net (loss) income and (loss) incomeloss per diluted share for the first ~~nine months~~quarter of fiscal ~~2018~~2022 were ~~($10,677)~~$3,126 and ~~($1.09),~~$0.31, respectively, compared with ~~net income of $3,222~~$1,818 and income per diluted share of $0.33 for the first nine months of fiscal 2017. Excluding the items noted above as well as restructuring charges in each year, net income and income per diluted share for the first nine months of fiscal 2018 were $1,168 and $0.12,$0.18, respectively, ~~and were $3,663 and $0.38~~ in the first ~~nine months~~quarter of fiscal ~~2017.~~

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

Net cash ~~generated~~used by operating activities for the first ~~nine months~~quarter of fiscal ~~2018~~2022 was ~~$3,874, compared~~$7,076 which was comparable with ~~$10,707~~$4,373 of cash used for the first ~~nine months~~quarter of fiscal ~~2017.~~2021. The ~~decrease~~increase in cash ~~generation year over year~~utilization was ~~attributable~~primarily due to ~~lower earnings, an increase~~decreases in ~~accounts receivable, an increase in~~customer deposits, accrued compensation and income taxes, ~~receivable and a smaller decrease in inventories,~~ partly offset by ~~higher unbilled revenue.~~a decrease in accounts receivable.

Dividend payments and capital expenditures in the first ~~nine months~~quarter of fiscal ~~2018~~2022 were ~~$2,638~~$1,177 and ~~$543,~~$446, respectively, compared with ~~$2,616~~$1,097 and ~~$241,~~$338, respectively, for the first ~~nine months~~quarter of fiscal ~~2017.~~2021.

Capital expenditures for fiscal ~~2018~~2022 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 capital expenditures are expected$3,500 to ~~be for productivity-enhancing machinery and equipment, with the remaining amounts expected to be used for information technology upgrades and other items.~~$4,000.

Cash and investments were ~~$74,182~~$19,143 on ~~December 31, 2017~~June 30, 2021 compared with ~~$73,474~~$65,032 on March 31, ~~2017, up $708.~~2021, down $45,889, primarily due to the BN acquisition.

We invest net cash generated from operations in excess of cash held for near-term needs in short-term, or 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 is used to securitize our outstanding letters of credit, which reduces our cost on those letters of credit. Approximately ~~95%~~70% of our cash and investments are held in the U.S. The remaining 5%30% is invested in our China operations.

~~Our~~On June 1, 2021, we entered into a $20,000 five-year term loan with Bank of America. The term loan requires monthly principal payments of $167 through June 1, 2026, with the remaining principal amount plus all interest due on the maturity date. The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus 1.50%, subject to a 0.00% floor. The BSBY rate at June 30, 2021 was 0.0558%. In addition, on June 1, 2021, we terminated our revolving credit facility agreement with JPMorgan Chase Bank, N.A. and entered into a revolving credit facility with ~~JP Morgan Chase~~Bank of America that provides ~~us with~~ a $30,000 line of credit, ~~of $25,000,~~ including letters of credit and bank ~~guarantees. In addition,~~guarantees, expandable at our ~~JP Morgan Chase~~option and the bank’s approval at any time up to $40,000. The agreement ~~allows us~~has a five-year term. Amounts outstanding under the facility agreement bear interest at a rate equal to ~~increase~~BSBY plus 1.50% per annum of the outstanding undrawn amount of each letter of credit that is not secured by cash and 0.6% of each commercial letter of credit that is secured by cash, subject to a 0.00% floor. Outstanding letters of credit under the agreement are subject to a fee of 1.50%. The upfront fee for both the term loan and revolving credit facility was 0.20% of the committed facilities and amounts available for borrowing under the revolving credit facility are subject to an unused commitment fee of 0.25%. Under the term loan agreement and revolving credit facility, we covenant to maintain a maximum total leverage ratio, as defined in such agreements, of 3.0 to 1.0 and a minimum fixed charge coverage ratio, as defined in such agreements, of 1.20 to 1.0 and minimum margined assets, as defined in such agreements, of 100% of total amounts outstanding on the revolving credit facility, including letters of credit.

On June, 1, 2021, we entered into an agreement to amend and restate our letter of credit facility agreement with HSBC Bank USA, N.A. and decreased our line of credit ~~at our discretion, up~~from $15,000 to ~~another $25,000, for total availability~~$7,500. Under the amended agreement, we incur an annual facility fee of ~~$50,000. Borrowings under this credit facility are secured by all of our assets. We also have a $5,000 unsecured line~~$5 and outstanding letters of credit ~~with HSBC, N.A.~~ are subject to a fee of between 0.75% and 0.85%, depending on the term of the letter of credit. Interest is payable on the principal amounts of unreimbursed letter of credit draws under the facility at a rate of 3% plus the bank’s prime rate.

Letters of credit outstanding on ~~December 31, 2017~~June 30, 2021 and March 31, ~~2017~~2021 were ~~$7,401~~$8,711 and ~~$8,372,~~$11,567, respectively. The outstanding letters of credit as of ~~December 31, 2017~~June 30, 2021 were issued by ~~JP Morgan Chase, HSBC, as well as~~ Bank of America, ~~(under~~HSBC and residual items from our ~~previous~~prior agreement with JP Morgan. There was $2,500 outstanding on our Bank of America revolving credit ~~facility).~~facilities at June 30, 2021. There were no ~~other~~ amounts outstanding on our ~~credit~~ facilities ~~at December 31, 2017 and~~on March 31, ~~2017. The borrowing rate~~2021, other than letters of credit. Availability under ~~our JP Morgan Chase facility as~~the Bank of ~~December 31, 2017~~America and HSBC lines of credit on June 30, 2021 was ~~the bank’s prime rate, or 4.50%.~~$28,039. Availability under the JP Morgan ~~Chase~~ and HSBC lines of credit ~~was $25,168 and $25,761 at December 31, 2017 and~~on March 31, ~~2017, respectively.~~2021 was $25,433. We believe that cash generated from operations, combined with our investments and available financing capacity under our credit facility, will be adequate both to meet our cash needs for the immediate future and to support our growth strategies.

Management uses orders and backlog as measures of our current and future business and financial performance. Orders for the three-month period ended ~~December 31, 2017~~June 30, 2021 were ~~$40,528~~$20,867 compared with ~~$17,699~~$11,468 for the same period ~~in the prior~~last year, an increase of ~~129%.~~$9,399. Orders represent written communications received from customers requesting us to supply products and/or services. Domestic orders were ~~47%~~74% of total orders, or ~~$19,144,~~$15,402, and international orders were ~~53%~~26% of total orders, or ~~$21,384,~~$5,465, in the ~~current~~first quarter of fiscal 2022 compared with the ~~third~~first quarter of fiscal ~~2017,~~2021 when domestic orders were ~~59%~~28%, or ~~$10,396,~~$3,232, of total orders, and international orders were ~~41%~~72%, or ~~$7,303,~~$8,236, of total orders. ~~Over 80% of the international orders in the third quarter of fiscal 2018 were~~Orders from ~~Canada.~~

~~During the first nine months of fiscal 2018, orders were $68,679, compared with $57,123~~BN for the ~~same period of fiscal 2017, an increase of $11,556, or 20%. For~~one month that we owned BN during 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~~$235,938 at ~~December 31, 2017,~~June 30, 2021, compared with ~~$72,981~~$137,567 at ~~September 30, 2017,~~March 31, 2021, a ~~32% increase.~~72% increase or $98,371. Of the increase, $94,414 was due to our acquisition of BN. Backlog is defined as the total dollar value of orders received for which revenue has not yet been recognized. Approximately ~~55%~~45% to ~~60%~~50% of orders currently in our backlog are expected to be converted to sales within one ~~year, 5% to 10% are expected to ship between 12 and 24 months, and 25% to 35% beyond two years.~~year. The majority of the orders that are expected to convert beyond twelve months are for the defense industry, specifically the U.S. Navy. At ~~December~~June 30, 2021, 80% of our backlog was attributable to U.S. Navy projects, 12% for refinery project work, 3% for chemical and petrochemical projects, 2% for space projects and 3% for other industrial applications. At March 31, ~~2017, 35%~~2021, 76% for U.S. Navy projects, 16% of our backlog was attributable to equipment for refinery project work, 4%6% for chemical and petrochemical projects ~~6% for power projects, including nuclear, 51% for U.S. Navy projects~~ and 4%2% 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,June 30, 2021, we had no projects on hold.

~~Prolonged weakness~~Our defense business continues to be strong. With the acquisition of BN, 80% of our $235,938 backlog is in defense. While much of the defense backlog includes projects with order to shipment of up to five years, we are expecting 45% to 50% of our sales in fiscal 2022 to be from the defense market.

Capital spending in the commercial markets we serve began to decrease during the second half of fiscal 2020 and the pace of activity further materially contracted as COVID-19 became a global pandemic in the fourth quarter of fiscal 2020. Our weak commercial markets continued into fiscal 2021 and we are not seeing a recovery as we enter fiscal 2022. This is particularly evident

in North America. As a result, our overall bidding activity has slowed, and this was clearly evident in fiscal 2021 and impacted our first quarter of fiscal 2022 results. There has also been a shift toward more opportunities in emerging markets.

Near term opportunities in the global energy and petrochemical markets ~~has continued to negatively impact our business in fiscal 2018. Our oil refining 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~~slowed significantly due to the ~~impairment~~combined impact of the COVID-19 pandemic and the geopolitical imbalance of supply, as previously discussed. Although we do not know when the COVID-19 pandemic will end or when the supply imbalance will subside, we expect our ~~goodwill~~energy markets to improve. In addition, we believe the petrochemical markets provide long-term growth opportunities for our products and ~~intangible assets which we recognized in the third quarter.~~services.

~~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 organic growth opportunities as well as acquisitions or other business combinations that we believe will allow us 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~~Our expectations for sales and profitability assume that we ~~serve continues~~are able 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 Batavia, New York and Arvada, Colorado at or near "normal" (pre-COVID-19) capacity throughout fiscal ~~2018.~~2022. We ~~believe~~project that ~~production overhead absorption~~approximately 35% to 40% of our $235,938 June 30, 2021 backlog will ~~be weak,~~convert to sales in the last nine months of fiscal 2022 and 45% to 50% will convert to sales over the next 12 months. We expect the remaining backlog will convert beyond fiscal 2022, which ~~we expect in turn will put continued pressure on gross profit margins in~~includes a combination of U.S. Navy orders that have a long conversion cycle (up to five years) as well as certain commercial orders, the conversion of which has been extended by our ~~fourth quarter.~~customers.

~~SG&A during~~Revenue in fiscal ~~2018~~2022 is expected to be ~~between $15,000~~$130,000 to $140,000, inclusive of $45,000 to $48,000 related to BN for the ten-month period we will own the business in the current fiscal year. We expect to have approximately $2,700 of acquisition related purchase price accounting costs, including intangible asset amortization, to be recognized in fiscal 2022, which will primarily be amortization of intangible assets. Approximately $1,600 will be charged to cost of goods sold and ~~$15,500.~~the remaining $1,100 to SG&A. Inclusive of the purchase accounting costs, we expect gross profit margins to be 17% to 18% of sales and SG&A to be 15% to 16% of sales. Our ~~effective~~expected tax rate ~~during fiscal 2018, excluding~~is 24% to 25%. Adjusted earnings before net interest expense, income taxes, depreciation and amortization for the ~~tax effect of the impairment loss and the one-time impact of the new Tax Act recorded in the third quarter,~~combined business is expected to be ~~between 24% and 26%, which~~approximately $7,000 to $9,000. All of the above expectations are inclusive of BN for the ten-month period we ~~have lowered due to~~will own it during the ~~reduced federal corporate income tax rate. Fiscal 2018 will benefit from the~~current fiscal ~~fourth quarter being taxed at a lower rate.~~ year.

~~We continue to expect operating~~Although cash flow was negative in the first quarter of fiscal ~~2018 will be lower than fiscal 2017. Fiscal 2017~~2022, we expect positive cash flow ~~benefited~~ from operations for the ~~build-up~~remaining nine months of ~~customer deposits.~~

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.

As of ~~December 31, 2017,~~June 30, 2021, 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.

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 and total cost estimates 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,~~overtime recognition model, 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, 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.~~ 2021.

We did not have any off balance sheet arrangements as of ~~December 31, 2017~~June 30, 2021 or March 31, ~~2017,~~2021, other than ~~operating leases and~~ letters of credit.

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 ~~risk.~~

The assumptions applied in preparing the following qualitative and quantitative disclosures regarding foreign currency exchange rate, price risk and project cancellation 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.

International consolidated sales for the first three months ~~and nine months ended December 31, 2017~~of fiscal 2022 were ~~35% and 33%, respectively,~~31% of total sales compared with ~~23% and 26%, respectively,~~44% for the same ~~periods~~period of fiscal ~~2017.~~2021. 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~~2022 and fiscal ~~2017,~~2021, 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).

We have limited exposure to foreign currency purchases. In ~~each of~~ the first three ~~and nine~~ months of fiscal ~~2018,~~2022 and 2021, our purchases in foreign currencies represented approximately 1% and 2% of ~~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~~June 30, 2021 and March 31, ~~2017,~~2021, we held no forward foreign currency contracts.

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, responsive and flexible service, and engineering experience and excellence, 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 market downturns, we typically experience depressed price levels. Moreover, the~~The cost of metals and other materials used in our products ~~have experienced~~can experience significant ~~volatility. Such factors, in addition to the global effects of the ongoing~~ volatility, and ~~disruption of the capital and credit markets, have resulted~~as such, can impact our ability to reflect this volatility in ~~downward demand and pricing pressure on~~ our ~~products.~~

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 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 ~~December 31, 2017,~~June 30, 2021, we had noprojects on hold.

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

~~There~~Other than the events discussed under the section entitled Barber-Nichols 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.

On June 1, 2021, we acquired Barber-Nichols, LLC, a privately-owned designer and manufacturer of turbomachinery products for the aerospace, cryogenic, defense and energy markets, located in Arvada, Colorado. 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 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 form the date of acquisition, the scope of our assessment of the effectiveness of internal control over financial reporting as of the end of the period covered by this report does not include Barber-Nichols, LLC.

We are in the process of implementing our internal control structure over the Barber-Nichols, LLC acquisition and we expect that this effort will be completed during the fiscal year ending March 31, 2023.

Except as stated below, there have been no material changes from the risk factors previously disclosed in Part 1 – Item 1A of the Company’s Form 10-K for the fiscal year ended March 31, 2021.

If we fail to successfully integrate the operations of Barber-Nichols, LLC, our financial condition and results of operations could be adversely affected.

On June 1, 2021, we acquired Barber-Nichols, LLC, which provides products to the aerospace, cryogenic and defense and energy markets. We cannot provide any assurances that we will be able to integrate the operations of Barber-Nichols, 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 Barber-Nichols, 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 Barber-Nichols, 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 Barber-Nichols, LLC might subject us to unknown and unforeseen liabilities.

Barber-Nichols, 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 Barber-Nichols, LLC for these and other matters, we could experience difficulty enforcing those obligations or we could incur material liabilities for the past activities of Barber-Nichols, LLC. Such liabilities and related legal or other costs could harm our business or results of operations.

During the first quarter of fiscal 2021, we directly withheld shares for tax withholding purposes from restricted stock awarded to officers that vested during the period. Common stock repurchases in the quarter ended June 30, 2021 were as follows:

Other than the issuance of securities previously disclosed in the Company’s Form 8-K filed with the Securities and Exchange Commission on June 3, 2021, we did not sell any securities during the first quarter ended June 30, 2021 that were not registered under the Securities Act of 1933, as amended.

On June 1, 2021, in connection with the Company entering into a revolving credit facility with Bank of America, the Company terminated its revolving credit facility agreement with JPMorgan Chase Bank, N.A. ("JPMorgan") dated as of December 2, 2020, that had provided a $22,000 line of credit, expandable at the Company’s option and upon JPMorgan’s approval at any time up to $37,000, including a $7,000 commitment for letters of credit and bank guarantees. The agreement with JPMorgan had a one-year term. There were no early termination penalties and there were letters of credit outstanding of $1,750, the last of which expires on August 31, 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	16-1194720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

20 Florence Avenue, Batavia, New York	14020
(Address of principal executive offices)	(Zip Code)

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

		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	43

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2327

Item 4.	Controls and Procedures	2427

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6.	Exhibits	2531

Signatures		2633

	Fair Value Assigned		Weighted Average Amortization Period
At June 30, 2021
Intangibles subject to amortization:
Customer relationships	$	11,800	20 years
Technology and technical know how		10,100	20 years
Backlog		3,800	4 years
	$	25,700
Intangibles not subject to amortization:
Tradename		7,400	Indefinite
	$	7,400

	Annual Amortization
Remainder of 2022	$	2,240
2023		2,427
2024		1,758
2025		1,321
2026		1,122
2027 and thereafter		16,607
Total intangible amortization	$	25,475

	June 1,
	2021
Assets acquired:
Cash and cash equivalents	$	1,587
Accounts receivable		8,154
Unbilled revenue		7,068
Inventory		3,669
Other current assets		409
Property, plant & equipment		8,037
Operating lease asset		9,026
Goodwill		22,923
Backlog		3,800
Customer relationships		11,800
Technology and technical know how		10,100
Tradename		7,400
Total assets acquired		93,973
Liabilities assumed:
Accounts payable		2,736
Accrued compensation		1,341
Other current liabilities		665
Customer deposits		6,048
Operating lease liabilities		9,066
Other long term liabilities		2,103
Total liabilities assumed		21,959
Purchase price	$	72,014

	Three Months Ended
	June 30,
Product Line	2021		2020
Heat transfer equipment	$	6,764	$	10,673
Vacuum equipment		4,219		2,551
Fluid systems		1,808		—
Power systems		1,663		—
All other		5,703		3,486
Net sales	$	20,157	$	16,710


Geographic Region
Asia	$	3,509	$	5,163
Canada		1,208		992
Middle East		612		449
South America		242		220
U.S.		13,894		9,438
All other		692		448
Net sales	$	20,157	$	16,710

	June 30, 2021			March 31, 2021			Change

Unbilled revenue (contract assets)	$	28,533		$	19,994		$	8,539
Customer deposits (contract liabilities)		(17,034	)		(14,059	)		(2,975	)
Net contract liabilities	$	11,499		$	5,935		$	5,564

	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

	Pension and Other Postretirement Benefit Items			Foreign Currency Items		Total			Pension and Other Postretirement Benefit Items			Foreign Currency Items		Total
Balance at April 1, 2017	$	(8,439	)	$	5	$	(8,434	)
Balance at April 1, 2021									$	(7,698	)	$	301	$	(7,397	)
Other comprehensive income before reclassifications		—			216		216			—			128		128
Amounts reclassified from accumulated other comprehensive loss		619			—		619			170			—		170
Net current-period other comprehensive income		619			216		835			170			128		298
Balance at December 31, 2017	$	(7,820	)	$	221	$	(7,599	)
Balance at June 30, 2021									$	(7,528	)	$	429	$	(7,099	)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss								Affected Line Item in the Condensed Consolidated Statements of Income and Retained Earnings
	Three Months Ended
	December 31,
	2017				2016
Pension and other postretirement benefit items:
Amortization of actuarial loss	$	(262	)	⁽¹⁾	$	(348	)	⁽¹⁾	Income before provision for income taxes
		17				(123	)		Provision for income taxes
	$	(279	)		$	(225	)		Net income

	Operating Leases		Finance Leases
Remainder of 2022	$	1,002	$	19
2023		1,265		26
2024		1,123		11
2025		1,135		—
2026		1,169		—
2027 and thereafter		4,856		—
Total lease payments		10,550		56

Less – amount representing interest		1,366		6
Present value of net minimum lease payments	$	9,184	$	50


Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program

4/01/2020 – 4/30/2020	--	--	--	--
5/01/2020 – 5/31/2020	2	$14.85	--	--
6/01/2020 – 6/30/2020	1	$14.17	--	--
Total	3	$14.60	--	--


(10)	Material Contracts

	10.1	Unit Purchase Agreement, dated as of June 1, 2021, between Graham Corporation, Graham Acquisition I, LLC, BNI Holdings, Inc., and certain other parties thereto is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 1, 2021.

	10.2	Earn-Out Agreement dated as of June 1, 2021, between Graham Acquisition I, LLC and BNI Holdings, Inc. is incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 1, 2021.

	10.3	Loan Agreement, dated as of June 1, 2021, between Graham Corporation and Bank of America, N.A. is incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K dated June 1, 2021.

	10.4	Agreement, dated as of June 2, 2021, between Graham Corporation and HSBC Bank USA, N.A. is incorporated herein by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K dated June 1, 2021.

#	10.5	Employment Agreement, dated as of June 1, 2021, between Graham Corporation and Daniel Thoren is incorporated herein by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K dated June 1, 2021.
#
	10.6	Graham Corporation Annual Stock-Based Long-Term Incentive Award Plan for Senior Executives in effect for the fiscal year ending March 31, 2022 is incorporated herein by reference from Exhibit 99.1 to the Company’s Current Report on Form 8-K dated May 26, 2021.


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

+	31.1	Certification of Principal Executive Officer

+	31.2	Certification of Principal Financial Officer

(32)	Section 1350 Certification

+	32.1	Section 1350 Certifications

(101)	Interactive Data File

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

+	101.SCH	Inline XBRL Taxonomy Extension Schema Document

+	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

+	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

+	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

+	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document



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

	+ #	Exhibit filed with this report

		Management contract or compensation plan


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