10-K/A

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-K/A

Amendment No. 1

(Mark One)

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

For the fiscal year ended

March 31

, 2024

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

For the transition period from _____________ to ___________.

Commission File Number

001-08462

GRAHAM CORPORATION

(Exact name of Registrant as specified in its charter)


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)

Registrant’s telephone number, including area code

585-343-2216

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.10 Per Share	GHM	NYSE

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐

☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐

☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

YES

☒ NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §

240.10D-1(b). ☐

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule

12b-2

of the Act). Yes ☐ No ☒

The aggregate market value of the Registrant’s Common Stock held by

non-affiliates

of the Registrant, based on the closing price of the shares of common stock on the NYSE Stock Market on September 30, 2023, was approximately $168.0 million.

As of June 5, 2024, the number of shares of the Registrant’s Common Stock outstanding was 10,870,564 shares.

EXPLANATORY NOTE

Graham Corporation (the “Company”) is filing this Amendment No.1 on Form

10-K/A

to its Annual Report on Form

10-K

for the fiscal year ended March 31, 2024 (the “Original Filing”), which was filed with the Securities and Exchange Commission (“SEC”) on June 7, 2024, solely for the purpose of adding the conformed signature of Deloitte & Touche LLP to the Report of Independent Registered Public Accounting Firm included in Item 8 and Part 9A of Part II of the Original Filing (the “Audit Reports”). The signed Audit Reports were received by the Company prior to the Original Filing being filed with the SEC, but the conformed signature in the Audit Reports was inadvertently omitted from the Original Filing.

Pursuant to Rule

12b-15

of the Securities Exchange Act of 1934, as amended, this Amendment No. 1 contains the complete text of Item 15. Exhibits, Financial Statement Schedules and certifications of the Company’s Principal Executive Officer and Principal Financial Officer required under Items 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, dated as of the date of this Amendment.

Except as expressly set forth in this Amendment No. 1, no other changes have been made to the Original Filing, and this Form

10-K/A

does not modify, amend or update in any way any of the financial or other information contained in the Original Filing. This Form

10-K/A

does not reflect events that may have occurred subsequent to the filing date of the Original Filing.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS


Consolidated Financial Statements:	Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 00034)		3

Consolidated Statements of Operations for the years ended March 31, 2024, 2023 and 2022		5

Consolidated Statements of Comprehensive Income (Loss) for the years ended March 31, 2024, 2023 and 2022		6

Consolidated Balance Sheets as of March 31, 2024 and 2023		7

Consolidated Statements of Cash Flows for the years ended March 31, 2024, 2023 and 2022		8

Consolidated Statements of Changes in Stockholders’ Equity for the years ended March 31, 2024, 2023 and 2022		9

Notes to Consolidated Financial Statements		10

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Graham Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Graham Corporation and subsidiaries (the “Company”) as of March 31, 2024 and 2023; the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended March 31, 2024 and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 7, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition — Over time Revenue – Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

The Company recognizes a majority of its 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 primarily utilizes an input method based upon a ratio of direct labor hours incurred to date to management’s estimate of the total direct labor hours to be incurred at completion on each contract or an input method based upon a ratio of direct costs incurred to date to management’s estimate of total costs to be incurred at the completion of each contract. Revenue from contracts that is recognized over time accounted for approximately 77% of revenue in fiscal 2024.

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We identified revenue associated with certain

in-process

contracts recognized over time utilizing an input method as a critical audit matter because of the judgments necessary for management to estimate total direct labor hours or costs, at completion. An extensive audit effort and a high degree of auditor judgment was required when performing audit procedures to audit management’s estimates of total direct labor hours or total costs at completion used to recognize revenue over time and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimate of total direct labor hours or total costs, at completion, for

in-process

contracts recognized over time included the following, among others:

•

We tested the effectiveness of controls over management’s estimate of total direct labor hours or total costs at completion for

in-process

contracts recognized over time.

•

Performed a risk assessment over the contract population which included analyzing the population using various characteristics of audit interest

•

We tested the mathematical accuracy of management’s calculation of revenue recognized over time.

•

For a selection of

in-process

contracts with customers that were recognized over time utilizing an input method, we performed the following procedures, among others:

Evaluated whether the contracts were properly included in management’s calculation of revenue recognized over time based on the terms and conditions of each contract.

Evaluated the reasonableness and consistency of the methodology used by management to estimate total direct labor hours or total costs at completion for each contract and tested the mathematical accuracy of such estimate.

Evaluated the direct labor hours or costs estimate by obtaining original estimates and any change orders, testing direct labor hours or costs completed to date, observing the work sites and inspecting the progress to completion as of fiscal year end, and performing corroborating inquiries with the Company’s project managers and engineers regarding the estimates of total direct labor hours or total costs at completion.

•

We evaluated management’s ability to estimate total direct labor hours or total costs at completion accurately by comparing actual direct labor hours or costs incurred to management’s historical estimates for a selection of similar contracts that were completed in fiscal year 2024.

/s/

DELOITTE

& TOUCHE LLP

Rochester, New York

June 7, 2024

We have served as the Company’s auditor since 1993.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except per share data)


	Years Ended March 31,
	2024		2023			2022
Net sales	$	185,533	$	157,118		$	122,814
Cost of products sold		144,948		131,710			113,685

Gross profit		40,585		25,408			9,129

Operating expenses and income:
Selling, general and administrative		32,217		23,063			20,386
Selling, general and administrative—amortization		1,366		1,095			913
Other operating expense (income), net		80		—			(827	)

Operating income (loss)		6,922		1,250			(11,343	)
Other expenses and income:
Loss on extinguishment of debt		726		—			—
Other expense (income), net		374		(250	)		(527	)
Interest expense, net		248		939			400

Total other expenses and income		1,348		689			(127	)

Income (loss) before provision (benefit) for income taxes		5,574		561			(11,216	)
Provision (benefit) for income taxes		1,018		194			(2,443	)

Net Income (loss)	$	4,556	$	367		$	(8,773	)

Per share data:
Basic:
Net income (loss)	$	0.42	$	0.03		$	(0.83	)

Diluted:
Net income (loss)	$	0.42	$	0.03		$	(0.83	)

Average common shares outstanding:
Basic		10,743		10,614			10,541
Diluted		10,844		10,654			10,541
Dividends declared per share	$	—	$	—		$	0.33

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollar amounts in thousands)


	Years Ended March 31,
	2024			2023			2022
Net income (loss)	$	4,556		$	367		$	(8,773	)

Other comprehensive income (loss):
Foreign currency translation adjustment		(244	)		(492	)		198
Defined benefit pension and other postretirement plans, net of income tax provision (benefit) of $194, $(149), and $209, for the years ended March 31, 2024, 2023 and 2022, respectively		694			(500	)		728

Total other comprehensive income (loss)		450			(992	)		926

Total comprehensive income (loss)	$	5,006		$	(625	)	$	(7,847	)

See Notes to Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)


	March 31,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	16,939		$	18,257
Trade accounts receivable, net of allowances ($79 and $1,841 at March 31, 2024 and 2023, respectively)		44,400			24,000
Unbilled revenue		28,015			39,684
Inventories		33,410			26,293
Prepaid expenses and other current assets		3,561			1,836

Total current assets		126,325			110,070
Property, plant and equipment, net		32,080			25,523
Prepaid pension asset		6,396			6,107
Operating lease assets		7,306			8,237
Goodwill		25,520			23,523
Customer relationships		14,299			10,718
Technology and technical know-how, net		11,065			9,174
Other intangible assets, net		7,181			7,610
Deferred income tax asset		2,983			2,798
Other assets		724			158

Total assets	$	233,879		$	203,918

Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt	$	—		$	2,000
Current portion of finance lease obligations		20			29
Accounts payable		20,788			20,222
Accrued compensation		16,800			10,401
Accrued expenses and other current liabilities		6,666			6,434
Customer deposits		71,987			46,042
Operating lease liabilities		1,237			1,022
Income taxes payable		715			16

Total current liabilities		118,213			86,166
Long-term debt		—			9,744
Finance lease obligations		65			85
Operating lease liabilities		6,449			7,498
Accrued pension and postretirement benefit liabilities		1,254			1,342
Other long-term liabilities		2,332			2,150

Total liabilities		128,313			106,985

Commitments and contingencies (Notes 8 and 17)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized
Common stock, $.10 par value, 25,500 shares authorized; 10,993 and 10,774 shares issued and 10,850 and 10,635 shares outstanding at March 31, 2024 and 2023, respectively		1,099			1,075
Capital in excess of par value		32,015			28,061
Retained earnings		81,999			77,443
Accumulated other comprehensive loss		(7,013	)		(7,463	)
Treasury stock (143 and 138 shares at March 31, 2024 and 2023, respectively)		(2,534	)		(2,183	)

Total stockholders’ equity		105,566			96,933

Total liabilities and stockholders’ equity	$	233,879		$	203,918

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)


	Years Ended March 31,
	2024			2023			2022
Operating activities:
Net income (loss)	$	4,556		$	367		$	(8,773	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation		3,275			3,511			3,077
Amortization		2,157			2,476			2,522
Virgin Orbit reserves		95			3,050			—
Amortization of unrecognized prior service cost and actuarial losses		843			672			996
Amortization of debt issuance costs		131			212			—
Equity-based compensation expense		1,279			806			809
(Gain) loss on disposal or sale of property, plant and equipment		(5	)		—			23
Change in fair value of contingent consideration		80			—			(1,900	)
Loss on extinguishment of debt		726			—			—
Deferred income taxes		(472	)		(120	)		(3,233	)
(Increase) decrease in operating assets:
Accounts receivable		(20,724	)		1,520			(2,055	)
Unbilled revenue		11,855			(14,228	)		1,550
Inventories		(6,220	)		(9,919	)		3,483
Income taxes receivable		998			139			(1,208	)
Prepaid expenses and other current and non-current assets		(2,199	)		(97	)		(340	)
Operating lease assets		1,212			1,206			1,059
Prepaid pension asset		(287	)		(651	)		(1,207	)
Increase (decrease) in operating liabilities:
Accounts payable		401			3,467			(3,238	)
Accrued compensation, accrued expenses and other current and non-current liabilities		6,011			2,654			1,164
Customer deposits		25,572			20,526			5,523
Operating lease liabilities		(1,119	)		(1,049	)		(962	)
Long-term portion of accrued compensation, accrued pension liability and accrued postretirement benefits		(45	)		(628	)		491

Net cash provided (used) by operating activities		28,120			13,914			(2,219	)

Investing activities:
Purchase of property, plant and equipment		(9,226	)		(3,749	)		(2,324	)
Proceeds from disposal of property, plant and equipment		44			—			—
Redemption of investments at maturity		—			—			5,500
Acquisition of P3 Technologies, LLC, net of cash acquired		(6,812	)		—			—
Acquisition of Barber-Nichols, LLC, net of cash acquired		—			—			(60,282	)

Net cash used by investing activities		(15,994	)		(3,749	)		(57,106	)

Financing activities:
Principal repayments on debt		(25,500	)		(11,000	)		(39,750	)
Proceeds from the issuance of debt		13,000			5,000			58,250
Principal repayments on finance lease obligations		(29	)		(23	)		(21	)
Repayments on lease financing obligations		(287	)		(275	)		(225	)
Payment of debt exit costs		(752	)		—			—
Payment of debt issuance costs		(241	)		(122	)		(271	)
Issuance of common stock		476			—			—
Dividends paid		—			—			(3,523	)
Purchase of treasury stock		(58	)		(21	)		(41	)

Net cash (used) provided by financing activities		(13,391	)		(6,441	)		14,419

Effect of exchange rate changes on cash		(53	)		(208	)		115

Net (decrease) increase in cash and cash equivalents		(1,318	)		3,516			(44,791	)
Cash and cash equivalents at beginning of year		18,257			14,741			59,532

Cash and cash equivalents at end of year	$	16,939		$	18,257		$	14,741

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended March 31, 2024, 2023 and 2022

(Dollar and share amounts in thousands)


	Common Stock						Capital in						Accumulated Other						Total
				Par			Excess of			Retained			Comprehensive			Treasury			Stockholders’
	Shares			Value			Par Value			Earnings			Loss			Stock			Equity
Balance at March 31, 2021		10,748		$	1,075		$	27,272		$	89,372		$	(7,397	)	$	(12,393	)	$	97,929
Comprehensive income (loss)											(8,773	)		926						(7,847	)
Issuance of shares		164			16			(16	)											—
Forfeiture of shares		(111	)		(11	)		11												—
Dividends											(3,523	)								(3,523	)
Recognition of equity-based compensation expense								809												809
Purchase of treasury stock																	(41	)		(41	)
Issuance of treasury stock								(306	)								9,473			9,167

Balance at March 31, 2022		10,801			1,080			27,770			77,076			(6,471	)		(2,961	)		96,494
Comprehensive income (loss)											367			(992	)					(625	)
Issuance of shares		17			—			—												—
Forfeiture of shares		(44	)		(5	)		5												—
Recognition of equity-based compensation expense								806												806
Purchase of treasury stock																	(21	)		(21	)
Issuance of treasury stock								(520	)								799			279

Balance at March 31, 2023		10,774			1,075			28,061			77,443			(7,463	)		(2,183	)		96,933
Comprehensive income (loss)											4,556			450						5,006
Issuance of shares		229			25			2,674									(293	)		2,406
Forfeiture of shares		(10	)		(1	)		1												—
Recognition of equity-based compensation expense								1,279												1,279
Purchase of treasury stock																	(58	)		(58	)

Balance at March 31, 2024		10,993		$	1,099		$	32,015		$	81,999		$	(7,013	)	$	(2,534	)	$	105,566

See Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended March 31, 2024, 2023 and 2022

(Amounts in thousands, except per share data)

Note 1 - The Company and Its Accounting Policies:

Graham Corporation, and its operating subsidiaries, (together, the “Company”), is a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. The Company acquired Barber-Nichols, LLC (“BN”) in June 2021. The accompanying Consolidated Financial Statements include BN at March 31, 2024, 2023 and for the period June 1, 2021 through March 31, 2024. The Company acquired P3 Technologies, LLC (“P3”) in November 2023. The accompanying Consolidated Financial Statements include P3 at March 31, 2024 and for the period of November 9, 2023 through March 31, 2024. The Company’s significant accounting policies are set forth below.

The Company’s fiscal years ended March 31, 2024, 2023 and 2022 are referred to as “fiscal 2024,” “fiscal 2023” and “fiscal 2022,” respectively.

Principles of consolidation and use of estimates in the preparation of consolidated financial statements

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, BN, located in Arvada, CO, P3, located in Jupiter, FL, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd., located in China, and Graham India Private Limited (“GIPL”), located in India. All intercompany balances, transactions and profits are eliminated in consolidation.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the related revenues and expenses during the reporting period. Actual amounts could differ from those estimated.

Translation of foreign currencies

Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at currency exchange rates in effect at year end and revenues and expenses are translated at average exchange rates in effect for the year. Gains and losses resulting from foreign currency transactions are included in results of operations. The Company’s sales and purchases in foreign currencies are not material to the overall consolidated financial statements. Therefore, foreign currency transaction gains and losses have not historically impacted the Company’s financial results materially. Gains and losses resulting from translation of the foreign subsidiaries balance sheets are included in a separate component of stockholders’ equity. Translation adjustments are not adjusted for income taxes since they relate to an investment, which is permanent in nature.

Revenue recognition

The Company accounts for revenue in accordance with Accounting Standard Codification 606, “Revenue from Contracts with Customers” (“ASC 606”).

The Company recognizes revenue on all contracts when control of the product is transferred to the customer. 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. Customer acceptance may also be a factor in determining whether control of the product has transferred. Although revenue on the majority of the 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 generally represent the majority of revenue, is recognized over time as these contracts meet specific criteria in ASC 606.

Unbilled revenue (contract assets) in the Consolidated Balance Sheets represents revenue recognized that has not been billed to customers on contracts in which revenue is recognized over time. All progress payments exceeding unbilled revenue are presented as customer deposits (contract liabilities) in the Consolidated Balance Sheets.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid, short-term investments with maturities at the time of purchase of three months or less.

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Trade Accounts receivable, net of allowances

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The provision for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional provisions in the future.

Shipping and handling fees and costs

Shipping and handling fees billed to the customer are recorded in Net sales and the related costs incurred for shipping and handling are included in Cost of products sold.

Inventories

Inventories are stated at the lower of cost or net realizable value, using the average cost method.

Property, plant, equipment and depreciation

Property, plant and equipment are stated at cost net of accumulated depreciation. Major additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Depreciation is provided based upon the estimated useful lives, or lease term if shorter, under the straight-line method. Estimated useful lives range from approximately three to eight years for office equipment, eight to 25 years for manufacturing equipment, eight years for land improvements, 40 years for buildings and improvements, and leasehold improvements are depreciated over the remaining term of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations.

Business combinations

The Company records its business combinations under the acquisition method of accounting. Under the acquisition method of accounting, the Company allocates the purchase price of each acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition. The fair value of identifiable intangible assets is based upon detailed valuations that use various assumptions made by management. Any excess of the purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Direct acquisition-related costs are expensed as incurred.

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Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination.

Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators arise. Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than its carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, the Company can elect to forgo the qualitative assessment and perform the quantitative test. If the qualitative assessment indicates that the quantitative analysis should be performed, or if management elects to bypass a qualitative assessment, the Company then evaluates goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill.

Intangible Assets

Acquired intangible assets other than goodwill consist of backlog, customer relationships, technology and technical

know-how

and tradenames. Backlog and trade names are included in the line item Other intangible assets, net in the Consolidated Balance Sheet. The Company amortizes a portion of its Technology and technical

know-how,

tradenames, and Customer relationships in Selling, general and administrative expense on a straight line basis over each of their estimated useful lives of eight to twenty years. Backlog and a portion of Technology and technical

know-how

are amortized in Cost of products sold over the projected conversion period of four to ten years which is based on management estimates at the time of purchase. All other intangibles have indefinite lives and are not amortized.

Impairment of long-lived assets

The Company assesses the impairment of definite-lived long-lived assets or asset groups when events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that are considered in deciding when to perform an impairment review include: a significant decrease in the market price of the asset or asset group; a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction; a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50%.

Recoverability potential is measured by comparing the carrying amount of the asset or asset group to its related total future undiscounted cash flows. If the carrying value is not recoverable through related cash flows, the asset or asset group is considered to be impaired. Impairment is measured by comparing the asset or asset group’s carrying amount to its fair value. When it is determined that useful lives of assets are shorter than originally estimated, and no impairment is present, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives.

Goodwill and intangible assets with indefinite lives are tested annually for impairment. The Company assesses goodwill for impairment by comparing the fair value of its reporting units to their carrying amounts. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill within the reporting unit is less than its carrying value. Fair values for reporting units are determined based on a weighted combination of the market approach and the income approach using discounted cash flows. Indefinite lived intangible assets are assessed for impairment by comparing the fair value of the asset to its carrying value.

Other Long-Term Assets

Other long-term assets include service based cloud computing software implementation costs of $361. Upon implementation completion, these costs will be amortized over the expected term of the hosting arrangement on a straight line basis.

Product warranties

The Company estimates the costs that may be incurred under its product warranties and records a liability in the amount of such costs at the time revenue is recognized. The reserve for product warranties is based upon past claims experience and ongoing evaluations of any specific probable claims from customers. A reconciliation of the changes in the product warranty liability is presented in Note 7.

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Research and development

Research and development costs are expensed as incurred. The Company incurred estimated research and development costs of $3,944 in fiscal 2024 and research and development costs of $4,144 and $3,845 in fiscal 2023 and fiscal 2022, respectively. Research and development costs are included in the line item Cost of products sold and Selling, general and administrative in the Consolidated Statements of Operations.

Income taxes

The Company recognizes deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using currently enacted tax rates. The Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred income tax assets and records a valuation allowance to reduce deferred income tax assets to an amount that represents the Company’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized.

The Company accounts for uncertain tax positions using a “more likely than not” recognition threshold. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective resolution of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. These tax positions are evaluated on a quarterly basis. It is the Company’s policy to recognize any interest related to uncertain tax positions in interest expense and any penalties related to uncertain tax positions in selling, general and administrative expense.

The Company files federal and state income tax returns in several U.S. and

non-U.S.

domestic and foreign 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.

Equity-based compensation

The Company records compensation costs related to equity-based awards based on the estimated fair value of the award on the grant date. Compensation cost is recognized in the Company’s Consolidated Statements of Operations over the applicable vesting period. The Company uses the Black-Scholes valuation model as the method for determining the fair value of its stock option awards. For service and performance based restricted stock awards and restricted stock units, the fair market value of the award is determined based upon the closing value of the Company’s stock price on the grant date. The fair market value of market-based performance restricted stock awards is determined using the Monte Carlo valuation model. The amount of equity-based compensation expense recognized during a period is based on the portion of the awards that ultimately vest.

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Income (loss) per share data

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding and, when applicable, potential common shares outstanding during the period.

A reconciliation of the numerators and denominators of basic and diluted income (loss) per share is presented below:


	Year ended March 31,
	2024		2023		2022
Basic income (loss) per share:
Numerator:
Net income (loss)	$	4,556	$	367	$	(8,773	)

Denominator:
Weighted average common shares outstanding		10,743		10,614		10,541

Basic income (loss) per share	$	0.42	$	0.03	$	(0.83	)

Diluted income (loss) per share:
Numerator:
Net income (loss)	$	4,556	$	367	$	(8,773	)

Denominator:
Weighted average common shares outstanding		10,743		10,614		10,541
Restricted stock units outstanding		101		40		—

Weighted average common and potential common shares outstanding		10,844		10,654		10,541

Diluted income (loss) per share	$	0.42	$	0.03	$	(0.83	)

None of the options to purchase shares of common stock which totaled 33 shares in fiscal 2022, were included in the computation of diluted loss per share as the affect would be anti-dilutive given their exercise price as they would not be dilutive upon issuance or due to the net loss in the fiscal year.

Cash flow statement

Interest and income taxes paid as well as

non-cash

investing and financing activities are as follows:


	Year ended March 31,
	2024		2023			2022
Interest paid	$	823	$	1,026		$	417
Income taxes paid		425		185			2,012
Pension and other post retirement income (loss) adjustments, net of income tax		694		(500	)		728
Issuance of treasury stock to the Employee Stock Purchase Plan (See Note 13)		—		279			204
Capital purchases recorded in accounts payable		620		483			177
Issuance of treasury shares as part of the consideration of the acquisition		1,930		—			8,964

Accumulated other comprehensive income (loss)

Comprehensive income (loss) is comprised of net income and other comprehensive income or loss items, which are accumulated as a separate component of stockholders’ equity. For the Company, other comprehensive income or loss items include foreign currency translation adjustments and pension and other postretirement benefit adjustments.

Fair value measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. The accounting standard for fair value 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. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

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Level 1 – Valuations based on quoted prices in active markets for identical assets or 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 or 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 availability of observable inputs can vary and is affected by a wide variety of factors, including, the type of asset/liability, whether the asset/liability is established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, assumptions are required to reflect those that market participants would use in pricing the asset or liability at the measurement date.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of sales and expenses during the reporting period. Actual results could differ materially from those estimates.

Accounting and reporting changes

In the normal course of business, management evaluates all new Accounting Standards Updates and other accounting pronouncements issued by the Financial Accounting Standards Board, Securities and Exchange Commission, or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Consolidated Financial Statements. Other than those discussed below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s Consolidated Financial Statements.

In November 2023, the FASB issued ASU

2023-07, Segment

Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. The ASU enhances disclosure of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker, extend certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions. The amendments are effective for the Company in years beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

In December 2023, the FASB issued ASU

2023-09, Income

Taxes (Topic 740)-Improvements to Income Tax Disclosures. The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

Note 2—Acquisition

On November 9, 2023, the Company completed its acquisition of P3, a privately-owned custom turbomachinery engineering, product development, and manufacturing business located in Jupiter, FL that serves the space, new energy, defense, and medical industries. The Company believes this acquisition advances its growth strategy, further diversifies its market and product offerings, and broadens its turbomachinery solutions. P3 will be managed through the Company’s Barber-Nichols, LLC subsidiary and is highly complementary to BN’s technology and enhances its turbomachinery solutions.

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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 $11,238 was comprised of 125 shares of the Company’s common stock, representing a value of $1,930, and cash consideration of $7,098, subject to certain potential adjustments, including a customary working capital adjustment. The cash consideration was funded through borrowings on the Company’s line of credit. The purchase agreement included a contingent

earn-out

dependent upon certain financial measures of P3 post-acquisition, in which the sellers are eligible to receive up to $3,000 in additional cash consideration. At November 9, 2023, a liability of $2,040 was recorded for the contingent

earn-out.

A rollforward of the P3 contingent

earn-out

liability since the date of acquisition is as follows:


Balance at November 9, 2023	$	2,040
Change in fair value		80
Payments		—

Balance at March 31, 2024	$	2,120

The change in fair value of the contingent

earn-out

liability was included in Other operating (income) expense, net in the Consolidated Statements of Operations. Acquisition and integration costs of $352 were expensed in the year ended March 31, 2024, and are included in Selling, general and administrative expenses in the Consolidated Statement of Operations.

The cost of the acquisition was allocated to the assets acquired and liabilities assumed based upon their estimated fair value at the date of acquisition and the amount exceeding the fair value of $1,997 was recorded as goodwill, which is deductible for tax purposes. Goodwill generated in the acquisition is related to P3’s assembled workforce, synergies between Graham’s other operations and P3 that are expected to occur as a result of the combined engineering knowledge, the ability of each of the operations to leverage each other’s technology solutions, and Graham’s ability to utilize acquired management knowledge in providing complementary product offerings to the Company’s customers. The following table summarizes the final purchase price allocation of the assets acquired and liabilities assumed:

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	Before Adjustment of Preliminary Allocation of Purchase Price November 9, 2023		Adjustments			After Adjustment of Final Allocation of Purchase Price March 31, 2024
Assets acquired:
Cash and cash equivalents	$	286	$	—		$	286
Trade accounts receivable, net of allowances		465					465
Unbilled revenue		302					302
Inventories		443		365			808
Prepaid expenses and other current assets		93					93
Property, plant & equipment, net		542					542
Operating lease assets		130					130
Goodwill		1,565		432			1,997
Customer relationships		4,400					4,400
Technology and technical know-how		2,500					2,500
Tradename		300					300
Deferred income tax asset		53		(53	)		—

Total assets acquired		11,079		744			11,823
Liabilities assumed:
Accrued compensation		62					62
Customer deposits		389					389
Operating lease liabilities		134					134

Total liabilities assumed		585		—			585

Purchase price	$	10,494	$	744		$	11,238

The fair value of acquisition-related intangible assets includes customer relationships, technology and technical

know-how,

and tradename. The tradename is included in the line item “Other intangible assets, net” in the Consolidated Balance Sheets. The fair value of customer relationships was calculated using an income approach, specifically the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs. The fair value of tradename and technology and technical

know-how

were both calculated using a Relief from Royalty method, which develops a market based royalty rate used to reflect the after tax royalty savings attributable to owning the intangible asset.

Customer relationships and tradename are amortized in Selling, general and administrative expense on a straight line basis over their estimated useful lives of eight years and three years respectively. Technology and technical

know-how

is amortized in Cost of products sold on a straight line basis over its estimated useful life of ten years.

The Consolidated Statement of Operations for the year ended March 31, 2024 includes net sales of P3 of $2,206 and net income of $24. The following unaudited pro forma information presents the consolidated results of operations of the Company as if the P3 acquisition had occurred at the beginning of each of the fiscal periods presented:


	For the Year Ended
	March 31,
	2024		2023
Net sales	$	189,089	$	160,376
Net income (loss)		5,949		(21	)
Earnings per share
Basic	$	0.55	$	0.00
Diluted	$	0.54	$	0.00

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

non-recurring

acquisition-related costs and the impact of income taxes on the pro forma adjustments utilizing the applicable statutory tax rate.

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

Note 3 – Revenue Recognition:

The following tables present the Company’s net sales disaggregated by market and geographic area:


	Year ended March 31,
Market	2024		2023		2022
Refining	$	29,087	$	27,270	$	24,406
Chemical/Petrochemical		20,893		21,950		15,955
Defense		99,493		65,327		62,189
Space		13,282		21,180		5,744
Other Commercial		22,778		21,391		14,520

Net sales	$	185,533	$	157,118	$	122,814


	Year ended March 31,
Geographic Area	2024		2023		2022
Asia	$	15,144	$	16,040	$	13,687
Canada		4,229		4,464		3,583
Middle East		2,568		2,914		2,489
South America		733		3,021		1,972
U.S.		155,908		127,519		97,718
All other		6,951		3,160		3,365

Net sales	$	185,533	$	157,118	$	122,814

The final destination of products shipped is the basis used to determine net sales by geographic area. No sales were made to the terrorist sponsoring nations of Cuba, Iran, North Korea or Syria.

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

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

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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 performance obligations over time. These procedures include monthly review by management of costs incurred, progress towards completion, identified risks and opportunities, sourcing determinations, changes in estimates of costs yet to be incurred, availability of materials, and execution by subcontractors. Sales and earnings are adjusted on a cumulative

catch-up

basis in current accounting periods based upon revisions in the contract value due to pricing changes and estimated costs at completion. Losses on contracts are recognized immediately when evident to management. Revenue on the majority of the 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 generally represent the majority of revenue, is recognized over time as these contracts meet specific criteria established in ASC 606. The following table presents the Company’s revenue percentages disaggregated by revenue recognized over time or upon shipment:


	Year ended March 31,
	2024			2023			2022
Revenue recognized over time		77	%		74	%		75	%
Revenue recognized at shipment		23	%		26	%		25	%

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

Net contract assets (liabilities) consisted of the following:


	March 31, 2024			March 31, 2023			Change			Change due to amounts acquired			Change due to revenue recognized		Change due to invoicing customers/ additional deposits
Unbilled revenue (contract assets)	$	28,015		$	39,684		$	(11,669	)	$	302		$	97,828	$	(109,799	)
Customer deposits (contract liabilities)		(71,987	)		(46,042	)		(25,945	)		(389	)		29,086		(54,642	)

Net contract (liabilities) assets	$	(43,972	)	$	(6,358	)	$	(37,614	)

Contract liabilities at March 31, 2024 and 2023 include $21,426 and $6,092, respectively, of customer deposits for which the Company has an unconditional right to collect payment. Trade accounts receivable, as presented on the Consolidated Balance Sheets, includes corresponding balances at March 31, 2024 and 2023, respectively.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were $1,875 and $2,542 at March 31, 2024 and 2023, respectively.

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 March 31, 2024, the Company had remaining unsatisfied performance obligations of $390,868. The Company expects to recognize revenue on approximately 35% to 40% of the remaining performance obligations within one year, 25% to 30% in one to two years and the remaining beyond two years.

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Note 4 – Inventories:

Major classifications of inventories are as follows:


	March 31,
	2024		2023
Raw materials and supplies	$	4,396	$	4,344
Work in process		27,065		20,554
Finished products		1,949		1,395

	$	33,410	$	26,293

Note 5 – Property, Plant and Equipment:

Major classifications of property, plant and equipment are as follows:


	March 31,
	2024		2023
Land and land improvements	$	450	$	450
Buildings and leasehold improvements		24,651		23,112
Machinery and equipment		45,391		41,398
Construction in progress		6,699		2,518

		77,191		67,478
Less – accumulated depreciation and amortization		45,111		41,955

	$	32,080	$	25,523

Depreciation expense in fiscal 2024, fiscal 2023 and fiscal 2022 was $3,275, $3,511, and $3,077, respectively.

Note 6 – Intangible Assets:

Intangible assets are comprised of the following:


	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At March 31, 2024
Intangibles subject to amortization:
Customer relationships		8 - 20 years	$	16,200	$	1,901	$	14,299
Technology and technical know-how		10 - 20 years		12,600		1,535		11,065
Backlog		4 years		3,900		3,677		223
Tradename		3 years		300		42		258

			$	33,000	$	7,155	$	25,845

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

			$	6,700	$	—	$	6,700

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	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At March 31, 2023
Intangibles subject to amortization:
Customer relationships		20 years	$	11,800	$	1,082	$	10,718
Technology and technical know-how		20 years		10,100		926		9,174
Backlog		4 years		3,900		2,990		910

			$	25,800	$	4,998	$	20,802

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

			$	6,700	$	—	$	6,700

A portion of Technology and technical

know-how,

tradenames, and Customer relationships are amortized in Selling, general and administrative expense on a straight line basis over each of their estimated useful lives. Backlog and a portion of technology and technical

know-how

are amortized in Cost of products sold over the projected conversion period based on management estimates at time of purchase. Intangible asset amortization was $2,157, $2,476 and $2,522 for fiscal 2024, 2023 and 2022, respectively. The estimated annual amortization expense is as follows:


	Annual Amortization
2025	$	2,218
2026		1,995
2027		1,953
2028		1,895
2029		1,895
2030 and thereafter		15,889

Total intangible amortization	$	25,845

Note 7 – Product Warranty Liability:

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


	Year ended March 31,
	2024			2023
Balance at beginning of year	$	578		$	441
Expense for product warranties		410			364
Product warranty claims paid		(182	)		(227	)

Balance at end of year	$	806		$	578

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

Note 8—Leases:

The Company leases certain manufacturing facilities, office space, machinery and office equipment. An arrangement is considered to contain a lease if it conveys the right to use and control an identified asset for a period of time in exchange for consideration. If it is determined that an arrangement contains a lease, then a classification of a lease as operating or finance is determined by evaluating the five criteria outlined in the lease accounting guidance at inception. Leases generally have remaining terms of one year to five years, whereas leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets. The depreciable life of leased assets related to finance leases is limited by the expected term of the lease, unless there is a transfer of title or purchase option that the Company believes is reasonably certain of exercise. Certain leases include options to renew or terminate. Renewal options are exercisable per the discretion of the Company and vary based on the nature of each lease. The term of the lease includes renewal periods only if the Company is reasonably certain that it will exercise the renewal option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the cost of moving to another location, the cost of disrupting operations, whether the purpose or location of the leased asset is unique and the contractual terms associated with extending the lease. The Company’s lease agreements do not contain any residual value guarantees or any material restrictive covenants and the Company does not sublease to any third parties. As of March 31, 2024, the Company did not have any material leases that have been signed but not commenced.

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Right-of-use

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

non-current

portion of finance and operating lease liabilities are all presented separately in the Consolidated Balance Sheets.

The Company previously entered into operating leases with Ascent Properties Group, LLC (“Ascent”), a limited liability company of which our Chief Executive Officer holds a majority interest, for an office and manufacturing building in Arvada, CO as well as machinery and equipment. During fiscal 2023, the Company entered into an additional lease with Ascent for another manufacturing building in Arvada, CO. In connection with such leases, the Company made fixed minimum lease payments to the lessor of $952, $843 and $707 in fiscal 2024, 2023 and 2022, respectively. Future minimum lease payments under these leases as of March 31, 2024 are $5,785.

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:


	March 31,
	2024			2023
Finance Leases
Weighted-average remaining lease term in years		3.83			4.45
Weighted-average discount rate		7.75	%		7.98	%

Operating Leases
Weighted-average remaining lease term in years		5.93			7.00
Weighted-average discount rate		3.30	%		3.25	%

The components of lease expense are as follows:


	Year Ended March 31,
	2024		2023
Finance lease cost:
Amortization of right-of-use assets	$	13	$	24
Interest on lease liabilities		8		4
Operating lease cost		1,478		1,394
Short-term lease cost		27		17

Total lease cost	$	1,526	$	1,439

Operating lease costs during fiscal 2024, fiscal 2023 and fiscal 2022 were included within Cost of sales and Selling, general and administrative expenses.

As of March 31, 2024, future minimum payments required under

non-cancelable

leases are:


	Operating Leases		Finance Leases
2025	$	1,468	$	26
2026		1,324		26
2027		1,353		26
2028		1,390		21
2029 and thereafter		2,940		—

Total lease payments		8,475		99
Less – amount representing interest		789		14

Present value of net minimum lease payments	$	7,686	$	85

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ROU assets obtained in exchange for new operating lease liabilities were $149 and $1,169 in fiscal 2024 and fiscal 2023, respectively.

Note 9 - Debt:

On October 13, 2023, the Company terminated its revolving credit facility and repaid its term loan with Bank of America and entered into a new five-year revolving credit facility with Wells Fargo Bank, National Association (“Wells Fargo”) that provides a $35,000 line of credit and automatically increases to $50,000 upon the Company satisfying specified covenants (the “New Revolving Credit Facility”). The additional $15,000 will automatically be available upon (a) the Company achieving a minimum consolidated EBITDA, as defined in the agreement, of $15,000, computed on a trailing twelve month basis, for three consecutive quarters and (b) a minimum liquidity (consisting of cash and borrowing availability under the New Revolving Credit Facility) for the Company of at least $7,500. The New Revolving Credit Facility has a $25,000

sub-limit

for letters of credit and the Company may request the issuance of cash secured letters of credit in an aggregate amount of up to $7,500. As of March 31, 2024 , there was $0 borrowed and $1,890 letters of credit outstanding on the New Revolving Credit Facility.

Long term debt is comprised of the following:


	March 31,
	2023
Bank of America term loan	$	12,500
Less: unamortized debt issuance costs		(756	)

		11,744
Less: current portion		2,000

Total	$	9,744

The New Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of Wells Fargo, which require the Company to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and (ii) a consolidated fixed charge coverage ratio of at least 1.20:1.00, in both cases computed in accordance with the definitions and requirements specified in the New Revolving Credit Facility. As of March 31, 2024, the Company was in compliance with the financial covenants of the New Revolving Credit Facility.

Borrowings under the New Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) a forward-looking term rate based on the secured overnight financing rate (“SOFR”) for the applicable interest period, subject to a floor of 0.0% per annum or (ii) a base rate determined by reference to the highest of (a) the rate of interest per annum publicly announced by the Lender as its prime rate, (b) the federal funds rate plus 0.50% per annum and

term SOFR plus 1.00% per annum, subject to a floor of 1.00% per annum, plus, in each case, an applicable margin. The applicable margins range between (i) 1.25% per annum and 2.50% per annum in the case of any term SOFR loan and (ii) 0.25% per annum and 1.50% per annum in the case of any base rate loan, in each case based upon the Company’s then-current consolidated total leverage ratio; provided, however, for a period of one year following the closing date, the applicable margin shall be set at 1.25% per annum in the case of any term SOFR loan and 0.25% per annum in the case of any base rate loan. As of March 31, 2024, the SOFR rate was 5.34%.

The Company is required to pay a quarterly commitment fee on the unused portion of the New Revolving Credit Facility during the applicable quarter at a per annum rate also determined by reference to the Company’s then-current consolidated total leverage ratio, which fee ranges between 0.10% per annum and 0.20% per annum; provided, however, for a period of one year following the closing date, the quarterly commitment fee will be set at 0.10% per annum. Any outstanding letters of credit that are cash secured will bear a fee equal to the daily amount available to be drawn under such letters of credit multiplied by 0.65% per annum. Any outstanding letters of credit issued under the New Revolving Credit Facility will bear a fee equal to the daily amount drawn under such letters of credit multiplied by the applicable margin for term SOFR loans. As of March 31, 2024, the amount available under the New Revolving Credit Facility was $33,110, subject to the interest and leverage covenants.

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

As of March 31, 2024, $1,592 letters of credit remain outstanding with Bank of America and are cash secured. These outstanding letters of credit are subject to a fee of 0.60% per annum. As of March 31, 2024, $4,780 letters of credit are outstanding with HSBC Bank USA, N.A and are cash secured. These outstanding letters of credit are subject to a fee of between 0.75% and 0.85% per annum, depending on the term of the letter of credit. As of March 31, 2024, $180 letters of credit are outstanding with China Construction Bank and are cash secured. Additionally, we have a 10,000 RMB bank guaranty line of credit with China Citic Bank Co. LTD which had $0 letters of credit outstanding at March 31, 2024. Outstanding letters of credit under this agreement are subject to a fee of 0.60% per annum. Total letters of credit outstanding as of March 31, 2024 and March 31, 2023 were $8,442 and $12,842, respectively.

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Note 10 - Financial Instruments and Derivative Financial Instruments:

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and trade accounts receivable. The Company places its cash, cash equivalents with high credit quality financial institutions, and evaluates the credit worthiness of these financial institutions on a regular basis. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their geographic dispersion. At March 31, 2024 and 2023, the Company had no significant concentrations of credit risk.

Letters of Credit

The Company has entered into standby letter of credit agreements with financial institutions relating to the guarantee of future performance on certain contracts. At March 31, 2024 and 2023, the Company was contingently liable on outstanding standby letters of credit aggregating $8,442 and $12,842, respectively.

Fair Value of Financial Instruments

The estimates of the fair value of financial instruments are summarized as follows:

Cash and cash equivalents

: The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturity of these instruments and are considered Level 1 assets in the fair value hierarchy.

Short-term and long-term debt

: The carrying values of credit facilities with variable rates of interest approximates fair values and is considered a Level 2 liability in the fair value hierarchy.

Note 11 – Income Taxes:

An analysis of the components of income (loss) before provision (benefit) for income taxes is presented below:


	Year ended March 31,
	2024		2023			2022
United States	$	5,077	$	(66	)	$	(11,954	)
Asia		497		627			738

Income (loss) before provision (benefit) for income taxes	$	5,574	$	561		$	(11,216	)

The provision (benefit) for income taxes consists of:


	Year ended March 31,
	2024			2023			2022
Current:
Federal	$	1,133		$	37		$	(31	)
State		100			204			72
Foreign		257			73			749

		1,490			314			790

Deferred:
Federal		(419	)		(89	)		(2,648	)
State		88			(82	)		(155	)
Foreign		(106	)		93			(423	)
Changes in valuation allowance		(35	)		(42	)		(7	)

		(472	)		(120	)		(3,233	)

Total provision (benefit) for income taxes	$	1,018		$	194		$	(2,443	)

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The reconciliation of the provision (benefit) calculated using the U.S. federal tax rate with the provision (benefit) for income taxes presented in the consolidated financial statements is as follows:


	Year ended March 31,
	2024			2023			2022
Provision (benefit) for income taxes at federal rate	$	1,170		$	118		$	(2,355	)
State taxes		156			92			(96	)
Charges not deductible for income tax purposes		54			26			147
Stock based compensation		(8	)		114			—
Research and development tax credits		(327	)		(240	)		(295	)
Valuation allowance		(35	)		(42	)		(7	)
Effect of foreign tax rate		26			27			31
Nondeductible fringe benefits		30			44			—
162(m)		105			—			—
Foreign withholding tax		—			—			138
Foreign-derived intangible income deduction		(134	)		—			(2	)
Global intangible low-taxed income		(20	)		55			—
Other		1			—			(4	)

Provision (benefit) for income taxes	$	1,018		$	194		$	(2,443	)

The net deferred income tax asset (liability) recorded in the Consolidated Balance Sheets results from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the Company’s net deferred income tax asset (liability) follows:


	March 31,
	2024			2023
Depreciation	$	(2,931	)	$	(3,117	)
Accrued compensation		237			309
Goodwill		(607	)		(224	)
Prepaid pension asset		(1,399	)		(1,355	)
Accrued pension liability		232			245
Accrued postretirement benefits		68			79
Compensated absences		531			567
Inventories		2,541			(10	)
Warranty liability		182			135
Accrued expenses		600			1,276
Equity-based compensation		328			230
Allowance for doubtful accounts		18			422
Operating lease assets		(1,694	)		(1,894	)
Operating lease liabilities		1,784			1,963
Acquisition costs		180			142
Intangible assets		187			236
New York State investment tax credit		1,030			1,066
Research and development tax credit		2,771			1,243
Research and development credit carryforward		—			367
Net operating loss carryforwards		182			2,205
Capital loss carryforward		4,211			4,211
Other		(238	)		(129	)

		8,213			7,967
Less: Valuation allowance		(5,241	)		(5,277	)

Total	$	2,972		$	2,690

Deferred income taxes include the impact of state investment tax credits of $236, which expire from 2025 to 2037 and state investment tax credits of $794, which have an unlimited carryforward period.

In assessing the realizability of deferred tax assets, management considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the consideration of the weight of both positive and negative evidence, management determined that a portion of the deferred tax assets as of March 31, 2024 and 2023 related to certain state investment tax credits and the capital loss related to Energy Steel would not be realized, and recorded a valuation allowance of $5,241 and $5,277, respectively.

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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 tax years 2020 through 2023 and examination in state tax jurisdictions for tax years 2019 through 2023. The Company is subject to examination in the People’s Republic of China for tax years 2020 through 2023 and in India for tax years 2018 through 2022. The liability for unrecognized tax benefits was $0 at each of March 31, 2024 and 2023.

Note 12 – Employee Benefit Plans:

Retirement Plans

The Company has a qualified defined benefit plan covering Batavia based employees hired prior to January 1, 2003, which is

non-contributory.

Benefits are based on the employee’s years of service and average earnings for the five highest consecutive calendar years of compensation in the

ten-year

period preceding retirement. The Company’s funding policy for the plan is to contribute the amount required by the Employee Retirement Income Security Act of 1974, as amended.

The components of pension (benefit) cost are:


	Year ended March 31,
	2024			2023			2022
Service cost during the period	$	252		$	333		$	373
Interest cost on projected benefit obligation		1,312			1,185			1,147
Expected return on assets		(1,851	)		(2,169	)		(2,727	)
Amortization of:

Amendment: SEC Form 10-K/A filed by Graham Corporation