美國
證券交易委員會
華盛頓特區20549
表格
(標記一個)
截至2024年6月30日季度結束
或
過渡期從_____________到_____________
委員會檔案編號
（依憑章程所載的完整登記名稱）
(依據所在地或其他管轄區) 的註冊地或組織地點) |
(國稅局雇主識別號碼) 識別號碼) |
(總部辦公地址) |
（郵政編碼） |
(註冊公司之電話號碼，包括區號)
根據法案第12(b)條規定註冊的證券：
每種類別的名稱 |
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交易 標的 |
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每個註冊交易所的名稱 |
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請在核對標記上打勾，確認申報人（1）已在前12個月（或申報人被要求提交此類申報的縮短期間）內提交證券交易所法案第13條或第15(d)條要求申報的所有報告，以及（2）過去90天一直處於此類申報要求的範圍內。
請以勾選標記表示，是否申報人按照Regulation S-t規則405條（本章232.405條）的規定，在過去12個月內或申報人所需申報此類文件的較短期間內提交了每個互動數據文件。
請以核選標記表示登記者是否為大型加速檔案提交者、加速檔案提交者、非加速檔案提交者、較小的報告公司或新興增長公司。請參閱交易所法案第120億2條中對"大型加速檔案提交者"、"加速檔案提交者"、"較小的報告公司"和"新興增長公司"的定義。
大型加速歸檔人 |
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非加速歸檔人 |
☐ |
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小型報告公司 |
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新興成長型企業 |
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如果是新興成長型企業，在符合任何依據證券交易法第13(a)條所提供的任何新的或修改的財務會計準則的遵循的延伸過渡期方面，是否選擇不使用核准記號進行指示。☐
勾選表示申報人是否為外殼公司（定義於交易所法規第1202條）。
是 ☐ 否
截至2024年11月7日，未清償的股份有
格雷厄姆公司及其附屬公司
提交10-Q表格的指数
截至2024年9月30日及2024年3月31日，以及截至2024年9月30日及2023年的三個月份和六個月份
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頁面 |
第一部分 |
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項目一。 |
3 |
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項目二。 |
19 |
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第三項目。 |
29 |
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第四項。 |
30 |
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第二部分。 |
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項目 1A。 |
31 |
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項目二。 |
31 |
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第六項 |
32 |
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33 |
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2
葛蘭姆公司及其附屬公司
表格10-Q
2024年9月30日
第一部分 - 財務信息財務信息
第 1 項。未經審計的簡明騙局合併財務報表
格雷姆公司及其子公司
簡明綜合損益表合併財務報表F操作
(金額以千爲單位，每股數據以美元計)
(未經審計)
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三個月截止 |
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銷售額最高的六個月 |
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9月30日, |
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9月30日, |
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2024 |
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2023 |
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2024 |
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2023 |
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淨銷售額 |
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$ |
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$ |
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$ |
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$ |
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銷售產品成本 |
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毛利潤 |
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其他營業費用和收入: |
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銷售、一般及行政費用 |
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銷售、一般及行政-攤銷 |
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其他經營收入 |
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營業利潤 |
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其他費用，淨額 |
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息稅前利潤淨額 |
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稅前收益 |
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所得稅費用 |
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淨利潤 |
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$ |
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$ |
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$ |
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$ |
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每股數據 |
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基本的： |
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淨利潤 |
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$ |
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$ |
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$ |
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稀釋的： |
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淨利潤 |
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$ |
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$ |
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$ |
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$ |
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加權平均普通股份 |
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基本 |
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攤薄 |
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參見簡明合併財務報表附註。
3
格雷姆公司及其子公司
綜合收益的壓縮綜合財務狀況表綜合收益的情況
（以千美元爲單位）
(未經審計)
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結束於三個月的期間 |
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六個月結束 |
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九月三十日， |
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九月三十日， |
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2024 |
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2023 |
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2024 |
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2023 |
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凈利潤 |
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$ |
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$ |
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$ |
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$ |
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其他綜合收益： |
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外幣兌換調整 |
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( |
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確定福利退休金和其他退休後計劃的凈利潤 |
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綜合收益總額 |
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累計綜合收益 |
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$ |
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$ |
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$ |
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$ |
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參閱簡明合併基本報表附註。
4
葛蘭姆公司及其附屬公司
縮表合併資產負債表
(以千元計算的金額，每股數據除外)
(未經查核)
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2024年9月30日 |
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2024年3月31日 |
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資產 |
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流動資產: |
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現金及現金等價物 |
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$ |
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$ |
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淨交易應收帳款（扣除應收款項減損（$ |
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未開票收入 |
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存貨 |
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預付費用及其他流動資產 |
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所得稅應收 |
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總流動資產 |
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不動產、廠房及設備淨值 |
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預付退休金資產 |
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經營租賃資產 |
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商譽 |
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客戶關係淨額 |
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科技及技術專業知識，淨額 |
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其他無形資產淨值 |
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應付的收入和生產稅 |
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其他資產 |
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資產總額 |
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$ |
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$ |
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負債及股東權益 |
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流動負債： |
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融資租賃負債的當期部分 |
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$ |
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$ |
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應付賬款 |
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應計薪酬 |
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應計費用及其他流動負債 |
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客戶存款。 |
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營業租賃負債 |
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應納所得稅款 |
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流動負債合計 |
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融資租賃負債 |
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營業租賃負債 |
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應計退休金和退休福利負債 |
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其他長期負債 |
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總負債 |
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股東權益： |
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優先股，面額$0.01，授權股數為5,000,000股，發行且流通股數為截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。 |
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0.01 |
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超過票面價值的股本 |
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保留收益 |
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累積其他全面損失 |
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( |
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( |
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庫藏股（ |
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( |
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( |
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股東權益總額 |
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負債和股東權益總額 |
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$ |
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$ |
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參閱簡明合併基本報表附註。
5
葛蘭姆公司及其附屬公司
簡明財務報表現金流量表
（金額以千元計）
(未經查核)
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六個月結束 |
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九月三十日， |
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2024 |
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2023 |
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營業活動： |
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凈利潤 |
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$ |
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$ |
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調整以協調凈利潤與經營活動提供的淨現金 |
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折舊 |
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營業無形資產攤銷 |
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資產損益攤銷 |
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債務發行成本攤銷 |
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股權報酬費用 |
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條件性考慮變動的公允價值 |
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推延所得稅 |
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營業資產的增加（減少），扣除收購後的淨變動： |
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應收帳款 |
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( |
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未開票收入 |
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( |
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存貨 |
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( |
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預付費用和其他流動和非流動資產 |
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( |
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( |
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所得稅應收 |
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( |
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經營租賃資產 |
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預付退休金資產 |
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( |
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營運負債增加(減少)，扣除收購交易後： |
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應付賬款 |
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( |
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應付薪酬、應付費用及其他流動及非流動項目 |
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( |
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客戶存款。 |
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應納所得稅款 |
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( |
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營業租賃負債 |
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( |
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長期應計報酬、應計退休金及 |
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經營活動產生的淨現金流量 |
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投資活動： |
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購入不動產、廠房及設備 |
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固定資產出售所得 |
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購併P3 Technologies, LLC |
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投資活動所使用之淨現金 |
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融資活動: |
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償還債務本金 |
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還款融資租賃負債 |
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發行普通股股票 |
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買回庫藏股 |
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籌資活動所使用之淨現金 |
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匯率變動對現金的影響 |
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現金及現金等價物淨增加 |
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期初現金及現金等價物餘額 |
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期末現金及現金等價物 |
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$ |
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$ |
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請參閱簡明合併財務報表中的說明。
6
格雷厄姆公司和子公司
股東權益變動簡明合併財務報表
（以千美元爲單位）
(未經審計)
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普通股 |
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資本金 |
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累積的 |
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總計 |
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Par |
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超額收益 |
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留存收益 |
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綜合 |
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國庫 |
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股東權益 |
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股份 |
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數值 |
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票面價值 |
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收益 |
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損失 |
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股票 |
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股權 |
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2024年4月1日的餘額 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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綜合收益 |
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股份發行 |
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— |
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股權補償費用的認定 |
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購買庫存股 |
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2024年6月30日餘額 |
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綜合收益 |
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股份發行 |
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股權激勵成本的確認 |
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購買庫存股 |
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|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
2024年9月30日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
|
|
普通股 |
|
|
資本進入 |
|
|
|
|
|
累積 |
|
|
|
|
|
總計 |
|
||||||||||
|
|
|
|
|
面值 |
|
|
超過 |
|
|
已保留 |
|
|
全面 |
|
|
財政部 |
|
|
股東 |
|
|||||||
|
|
股票 |
|
|
價值 |
|
|
面值 |
|
|
收益 |
|
|
損失 |
|
|
股票 |
|
|
股權 |
|
|||||||
截至2023年4月1日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
綜合收益（虧損） |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
發行股票 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
沒收股份 |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
對基於股權的認可 |
|
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|
|
|
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|
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|
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|||||||
發行庫存股 |
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|
|
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|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|||||
購買庫存股票 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||
截至 2023 年 6 月 30 日的餘額 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||
綜合收益 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
發行股票 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
對基於股權的認可 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
截至 2023 年 9 月 30 日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
請參閱簡明合併財務報表中的說明。
7
格雷姆公司及其子公司
簡明合併財務報表附註
(金額以千爲單位，每股數據除外)
(未經審計)
註釋1 - 介紹方式:
graham公司（以下簡稱「公司」）的簡明合併基本報表包括其位於科羅拉多州阿瓦達、中國蘇州和印度艾哈邁達巴德的全資子公司，截至2024年9月30日和3月31日，以及其最近收購的位於佛羅里達州朱庇特的全資子公司P3 Technologies，有限責任公司（「P3」）（請參見注釋2）。簡明合併基本報表已根據美國普遍公認的會計原則（「GAAP」）編制，用於中期財務信息，並根據美國證券交易委員會制定的10-Q表格和S-X條例8-03的規定的說明。公司的簡明合併基本報表不包括GAAP要求的完整基本報表的所有信息和註釋。所示的截至2024年3月31日的未經審計的簡明合併資產負債表來源於截至2024年3月31日的公司審計的合併資產負債表。有關詳細信息，請參閱公司截至2024年3月31日結束的財政年度10-k表格中包含的合併財務報表和註釋（「2024財年」）。在管理層的意見中，已包括在公司的簡明合併基本報表中被認爲對公正展示必要的所有調整，包括正常循環應計。
公司截至2024年9月30日結束的三個月和六個月的經營業績和現金流量並不一定預示着當前財年的結果，當前財年截至2025年3月31日結束（「2025財年」）。
註釋2 - 收購：
2023年11月9日，公司完成了對P3的收購，P3是一家位於佛羅里達州朱庇特的私人定製渦輪機工程、產品開發和製造業務，爲太空、新能母基、國防和醫療行業提供服務。公司認爲此次收購推進了其增長策略，進一步多元化了其市場和產品供應，並擴大了其渦輪機解決方案。P3將通過該公司的Barber-Nichols，LLC（「BN」）子公司進行管理，與BN的技術高度補充，並增強其渦輪機解決方案。
該交易被視爲企業合併，要求在收購日期將所得資產和承擔的負債按其公允價值確認。購買價格爲$
2023年11月9日的餘額 |
|
$ |
|
|
公允價值變動 |
|
|
|
|
付款 |
|
|
|
|
2024年3月31日結存餘額 |
|
|
|
|
公允價值變動 |
|
|
( |
) |
付款 |
|
|
|
|
2024年6月30日餘額 |
|
|
|
|
公允價值變動 |
|
|
( |
) |
付款 |
|
|
|
|
2024年9月30日的餘額 |
|
$ |
|
未實現收益概值變動包含在損益表的其他營業收入中。
對收購成本按其預計概值的基礎分攤給已獲取資產和承擔的負債，並且超過$
8
向公司的客戶提供的產品和服務。
|
|
11月9日， |
|
|
|
|
2023 |
|
|
獲得的資產: |
|
|
|
|
現金及現金等價物 |
|
$ |
|
|
交易應收賬款，減去準備金 |
|
|
|
|
未開票的營業收入 |
|
|
|
|
存貨 |
|
|
|
|
預付款項和其他流動資產 |
|
|
|
|
固定資產、設備淨值 |
|
|
|
|
經營租賃資產 |
|
|
|
|
商譽 |
|
|
|
|
客戶關係 |
|
|
|
|
技術及專業知識 |
|
|
|
|
商標 |
|
|
|
|
獲取的總資產 |
|
|
|
|
負債承擔: |
|
|
|
|
應計報酬 |
|
|
|
|
客戶存款 |
|
|
|
|
經營租賃負債 |
|
|
|
|
承擔的總負債 |
|
|
|
|
購買價格 |
|
$ |
|
|
收購相關無形資產的公允價值包括客戶關係、技術與專業技能，以及商標。商標包含在簡明合併資產負債表中其他無形資產淨額項目中。客戶關係的公允價值是使用收入法計算的，具體使用了多期超額收入方法，其中包括關於保留率、新客戶增長和客戶相關成本的假設。商標、技術和專業技能的公允價值均是使用免除版稅法計算的，該方法開發了一個市場基準版稅率，用於反映持有無形資產帶來的淨版稅節省。
客戶關係和商標按照直線法攤銷在銷售、一般和管理費用中，分別攤銷期限爲八年和三年。技術和專業技能按照直線法攤銷在產品銷售成本中，其預計使用壽命爲十年。
截至2024年6月30日的三個月內，賣方收到了美元
截至2024年9月30日的三個月和六個月的簡明合併經營報表包括P3的淨銷售額 $
|
|
三個月截止 |
|
|
銷售額最高的六個月 |
|
||||||||||
|
|
9月30日, |
|
|
9月30日, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
淨銷售額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
淨利潤 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
每股收益 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
基本 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
攤薄 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
未經審計的專項進度信息展示了公司和P3的合併運營結果，調整收購日期之前的結果，以包括根據初步購買價格分配調整折舊固定資產的專項影響，調整與收購有關的現金支出，包括公司的加權平均利率，攤銷費用與無形資產的公允價值調整有關，非經常性的與收購有關的成本，以及利潤的影響稅收在使用適用的法定稅率進行專項調整。
9
未經審計的前瞻性財務數據僅供參考。這些前瞻性財務數據並不意味着表明如果收購發生在每個期間的開始時將實際獲得的結果，也不打算將前瞻性數據視爲未來可能實現的結果的預測。
注3 - 營業收入確認:
公司根據合同足以滿足的績效義務，通過將產品的控制權轉移給客戶來確認營業收入。對於按裝運確認收入的合同，通常在產品裝運時轉移控制權，所有權轉移，所有權重大風險轉移，公司有收款權利及所有權獎勵轉移給客戶時確認收入。對於按時間確認收入的合同，通常公司創建一項對公司沒有替代用途的資產時轉移控制權，公司對迄今爲止完成的績效有可執行收款權利。
下表列出公司按產品線和地域板塊細分的營業收入:
|
|
三個月截止 |
|
|
銷售額最高的六個月 |
|
||||||||||
|
|
9月30日, |
|
|
9月30日, |
|
||||||||||
市場 |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
煉油業務 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
化工/石化 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
國防股 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
從事衛星、空間運輸系統、戰略、先進打擊和防禦系統的研究、設計、開發、工程和製造。 Space提供網絡化的態勢感知，並整合複雜的空間和全球地面系統，幫助客戶收集、分析和安全地分發關鍵情報數據。Space 還負責支持重要國家安全系統的各種機密系統和服務。 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
其他 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
淨銷售額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
地域板塊 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
亞洲 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
加拿大 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
中東 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
南美洲 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
美國交易法案交易所 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
其他全部 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
淨銷售額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
履行義務代表合同中對客戶提供獨特商品或服務的承諾。公司在雙方獲得批准和承諾、確定雙方權利、確定付款條款、合同具有商業實質和收款能力可能的情況下覈算合同。交易價格反映公司預期交付產品後有權獲得的代價金額。合同的交易價格分配給每個獨立的履行義務，並且隨着履行義務的滿足而確認收入。在某些情況下，公司可能將一個合同分爲多個履行義務，而在其他情況下，幾種產品可能是完全集成解決方案的一部分，被捆綁成單個履行義務。如果合同分爲多個履行義務，公司會根據承諾商品的預估獨立標準銷售價格，在各履行義務間分配總交易價格。公司已做出會計政策選項，將公司向客戶收取的政府機構徵收的所有稅款排除在合同價格的測量之外。如果公司在合同簽訂時預計產品交付給客戶至客戶支付產品之間的期間將在一年或更短，則公司不會調整合同價格以反映融資成分的影響。向客戶收取的運輸和處理費用記錄在收入中，而用於運輸和處理的相關成本計入產品銷售成本。
The 公司在合同履行導致產品製造，且公司沒有其他用途的情況下，將營業收入分期確認，合同具有可執行的支付權利，支付金額與完成得到的價值直接對應。公司爲衡量按時間確認營業收入的履約義務的完成進度，利用基於迄今發生的直接勞動小時與管理層對每份合同預計總勞動小時的比率的輸入法，基於迄今發生的總合同成本與管理層對預計總合同成本的比率的輸入法，或者根據運營里程碑完成的產出法，具體取決於合同性質。公司已建立起必要的系統和程序，用以開發出用於按時間確認履約義務的估計。這些程序包括管理層每月審查已發生的成本、完成進度、已確定的風險和機會、採購決策、尚待發生成本的估計變化、材料的可獲性以及分包商執行情況。銷售和收入將根據當前會計進行調整。
10
periods based on revisions in the contract value due to pricing changes and estimated costs at completion. Losses on contracts are recognized immediately when evident to management. Revenue on 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 represent the majority of revenue, is recognized over time.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue recognized over time |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Revenue recognized at shipment |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable, unbilled revenue (contract assets) and customer deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Unbilled revenue represents revenue on contracts that is recognized over time and exceeds the amount that has been billed to the customer. Unbilled revenue is separately presented in the Condensed Consolidated Balance Sheets. The Company may have an unconditional right to payment upon billing and prior to satisfying the performance obligations. The Company will then record a contract liability and an offsetting asset of equal amount until the deposit is collected and the performance obligations are satisfied. Customer deposits are separately presented in the Condensed Consolidated Balance Sheets. Customer deposits are not considered a significant financing component as they are generally received less than one year before the product is completed or used to procure specific material on a contract, as well as related overhead costs incurred during design and construction.
Net contract assets (liabilities) consisted of the following:
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
|
Change |
|
|
|
Change due to revenue recognized |
|
|
Change due to invoicing customers/ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Unbilled revenue - contract assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
( |
) |
||||
Customer deposits - contract liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net contract (liabilities) assets |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Contract liabilities at September 30 and March 31, 2024 include $
Receivables billed but not paid under retainage provisions in the Company’s customer contracts were $
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 September 30, 2024, the Company had remaining unsatisfied performance obligations of $
NOTE 4 – INVENTORIES:
Inventories are stated at the lower of cost or net realizable value, using the average cost method.
11
Major classifications of inventories are as follows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Raw materials and supplies |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished products |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
NOTE 5 – INTANGIBLE ASSETS:
Intangible assets are comprised of the following:
|
Weighted Average Amortization Period |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|||
At September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|||
Intangibles subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|||
Customer relationships |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Technology and technical know-how |
|
|
|
|
|
|
|
|
|
||||
Backlog |
|
|
|
|
|
|
|
|
|
||||
Tradename |
|
|
|
|
|
|
|
|
|
||||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Intangibles not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|||
Tradename |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
Weighted Average Amortization Period |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|||
At March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|||
Intangibles subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|||
Customer relationships |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Technology and technical know-how |
|
|
|
|
|
|
|
|
|
||||
Backlog |
|
|
|
|
|
|
|
|
|
||||
Tradename |
|
|
|
|
|
|
|
|
|
||||
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Intangibles not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|||
Tradename |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Intangible amortization was $
12
|
|
Annual Amortization |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 and thereafter |
|
|
|
|
Total intangible amortization |
|
$ |
|
|
|
|
|
|
|
NOTE 6 – EQUITY-BASED COMPENSATION:
The 2020 Graham Corporation Equity Incentive Plan, as amended (the "2020 Plan"), provides for the issuance of
|
|
Vest |
|
|
Vest Per Year |
|
|
Vest |
|
|
|
|||
|
|
Anniversary (1) |
|
|
Over |
|
|
Anniversary (1) |
|
|
|
|||
|
|
|
|
|
Officers and |
|
|
Officers and |
|
|
Total Shares |
|||
Six months ended September 30, |
|
Directors |
|
|
Key Employees |
|
|
Key Employees |
|
|
Awarded |
|||
2024 |
|
|
|
|
|
|
|
|
|
|
|
|||
Time Vesting RSUs |
|
|
|
|
|
|
|
|||||||
Performance Vesting PSUs |
|
|
|
|
|
|
|
|
|
|||||
2023 |
|
|
|
|
|
|
|
|
|
|
|
|||
Time Vesting RSUs |
|
|
|
|
|
|
|
|
||||||
Performance Vesting PSUs |
|
|
|
|
|
|
|
|
|
|||||
The Company has an Employee Stock Purchase Plan, as amended (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to
The Company has recognized equity-based compensation costs, which is primarily included in selling, general and administrative costs, as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Restricted stock awards |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit recognized |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 7 – INCOME PER SHARE:
Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted income per share is calculated by dividing net income by the weighted average number of common shares outstanding
13
and, when applicable, potential common shares outstanding during the period.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Basic income per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted income per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common and |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 8 – PRODUCT WARRANTY LIABILITY:
The reconciliation of the changes in the product warranty liability is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expense for product warranties |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product warranty claims paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The product warranty liability is included in the line item accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.
NOTE 9 – CASH FLOW STATEMENT:
Interest and income taxes paid as well as non-cash investing and financing activities are as follows:
|
|
For the Six Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income taxes paid |
|
|
|
|
|
|
||
Capital purchases recorded in accounts payable |
|
|
|
|
|
|
||
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company has been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in, or accompanying, products made by the Company or from exposure to asbestos at the Company facilities. 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 most of 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 believes that the resolution of these asbestos-related lawsuits will not have a
14
material adverse effect on the Company's financial position or results of operations. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these asbestos-related lawsuits could have a material adverse impact on the Company's financial position and the results of operations.
During the third quarter of fiscal 2024, the Audit Committee of the Board of Directors, with the assistance of external counsel and forensic professionals, concluded an investigation into a whistleblower complaint received regarding its wholly-owned subsidiary Graham India Private Limited ("GIPL"). The investigation identified evidence supporting the complaint and other misconduct by employees. The other misconduct totaled $
As of September 30, 2024, the Company was subject to the claims noted above, as well as other potential claims that have arisen in the ordinary course of business. Although the outcome of the lawsuits, legal proceedings or potential claims to which the Company is, or may become, a party to cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, management does not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on the Company’s results of operations, financial position or cash flows.
The Company previously entered into operating leases with Ascent Properties Group, LLC, a limited liability company of which our Chief Executive Officer holds a majority interest, for two building lease agreements and two equipment lease agreements in Arvada, Colorado. In connection with such leases, the Company made fixed minimum lease payments to the lessor of $
NOTE 11 – INCOME TAXES:
The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for the tax years and examination in state tax jurisdictions for the tax years . The Company is subject to examination in the People’s Republic of China for tax years and in India for tax years .
There was
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of projected pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations. In addition, the Company continues to explore tax planning opportunities that may have a material impact on its effective tax rate. The Company's effective tax rate as of the second quarter of 2025 was
15
NOTE 12 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:
The changes in accumulated other comprehensive loss by component for the three and six months ended September 30, 2024 and 2023 are as follows:
|
|
Pension and |
|
|
Foreign |
|
|
Total |
|
|||
Balance at April 1, 2024 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss before reclassifications |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at June 30, 2024 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income before reclassifications |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Balance at September 30, 2024 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Pension and |
|
|
Foreign |
|
|
Total |
|
|||
Balance at April 1, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
$ |
( |
) |
|
Balance at June 30, 2023 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss before reclassifications |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at September 30, 2023 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The reclassifications out of accumulated other comprehensive loss by component for the three and six months ended September 30, 2024 and 2023 are as follows:
Details about Accumulated Other |
|
Amount Reclassified from |
|
|
|
Affected Line Item in the Condensed |
||||||
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
|
||
Pension and other postretirement benefit items: |
|
|
|
|
|
|
|
|
|
|
||
Amortization of actuarial loss |
|
$ |
|
(1) |
|
$ |
|
(1) |
|
Income before benefit for income taxes |
||
Tax effect |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
||
|
|
$ |
|
|
|
$ |
|
|
|
Net income |
||
16
Details about Accumulated Other |
|
Amount Reclassified from |
|
|
|
Affected Line Item in the Condensed |
||||||
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
|
||
Pension and other postretirement benefit items: |
|
|
|
|
|
|
|
|
|
|
||
Amortization of actuarial loss |
|
$ |
|
(1) |
|
$ |
|
(1) |
|
Income before benefit for income taxes |
||
Tax effect |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
||
|
|
$ |
|
|
|
$ |
|
|
|
Net income |
||
NOTE 13 – 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
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
Borrowings under the New Revolving Credit Facility bear interest at a rate equal to, at the Company’s
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
As of September 30, 2024, $
On July 15, 2024, the Company and Wells Fargo entered into an amendment to the New Revolving Credit Facility, which increased the maximum aggregate principal amount of indebtedness of Foreign Subsidiaries and Non-Guarantor Subsidiaries, as defined in the New Revolving Credit Facility, allowed under the New Revolving Credit Facility from $
Total letters of credit outstanding as of September 30, 2024 and March 31, 2024 were $
17
NOTE 14 – ACCOUNTING AND REPORTING CHANGES:
In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"), the Securities and Exchange Commission, the Emerging Issues Task Force, the American Institute of Certified Public Accountants or any other authoritative accounting bodies to determine the potential impact they may have on the Company's consolidated financial statements.
In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280)," which requires companies to enhance 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.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollar and share amounts in thousands, except per share data)
Overview
We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry, our equipment is used in propulsion, power and energy management systems and for life support systems. We supply equipment for vacuum, heat transfer and fluid transfer applications used in energy and new energy markets including oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ammonia, ethylene, methanol and downstream chemical facilities.
Our brands are built upon engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives. Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand. Our early engagement with customers and support until the end of service life are values upon which our brands are built.
Our corporate headquarters is located with our production facilities in Batavia, New York, where surface condensers and ejectors are designed, engineered, and manufactured for the defense, energy, and petrochemical industries. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the space, aerospace, cryogenic, defense, and energy markets. In November 2023, we acquired P3 Technologies, LLC ("P3"), located in Jupiter, Florida (See "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us throughout Southeast Asia. GIPL provides sales and engineering support for us in India and the Middle East.
Our fiscal year ends on March 31 of each year. We refer to our fiscal year, which ends March 31, 2025, as fiscal 2025. Likewise, we refer to our fiscal year that ended March 31, 2024 and March 31, 2023 as fiscal 2024 and fiscal 2023, respectively.
Acquisition
On November 9, 2023, we completed our acquisition of P3, a privately-owned custom turbomachinery engineering, product development, and manufacturing business located in Jupiter, Florida that serves the space, new energy, defense, and medical industries. We believe this acquisition advances our growth strategy, further diversifies our market and product offerings, and broadens our turbomachinery solutions. P3 will be managed through BN and is highly complementary to BN's technology and enhances its turbomachinery solutions.
The purchase price for P3 was $11,238 and was comprised of 125 shares of our common stock, representing a value of $1,930, and cash consideration of $7,268. The cash consideration was funded through borrowings on our line of credit. The purchase agreement included a contingent earn-out dependent upon certain financial measures of P3 post-acquisition, in which the sellers are eligible to receive up to $3,000 in additional cash consideration. See Note 2 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the second quarter ended September 30, 2024 (the "Form 10-Q") for additional information.
Summary
Highlights for the three months ended September 30, 2024 include:
19
Cautionary Note Regarding Forward-Looking Statements
This Form 10-Q and other documents we file with the Securities and Exchange Commission ("SEC") include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of this Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "can," "may," "intend," "expect," "plan," "goal," "predict," "project," "outlook," "potential," "will," and similar words and expressions.
Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements including, but not limited to, those described in the "Risk Factors" section in Item 1A of our Annual Report on Form 10-K for fiscal 2024 and elsewhere in the reports we file with the SEC. Undue reliance should not be placed on our forward-looking statements. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
All forward-looking statements included in this Form 10-Q are made only as of the date indicated or as of the date of this Form 10-Q. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
20
Current Market Conditions
Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on defense budget plans, accelerated ship build schedules, increased geopolitical tensions, the projected build schedule of submarines, aircraft carriers and undersea propulsion and power systems and the solutions we provide. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors, and controllers for various fluid and thermal management systems used in U.S. Department of Defense radar, laser, electronics, and power systems. We have built a leading position, and in most instances a sole source position, for certain systems and equipment for the defense industry.
Our traditional energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the global energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made. We expect that the systemic changes in the energy markets, which are influenced by the increasing use by consumers of alternative fuels and government policies to stimulate their usage, will lead to demand growth for fossil-based fuels that is less than the global growth rate. The timing and catalyst for a recovery in this market remain uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging. Additionally, we believe that the majority of new capital investment orders in our traditional energy markets will be outside the U.S. such as India and the Middle-East. Finally, over the last few years we have experienced an increase in our energy and chemical aftermarket orders primarily from the domestic market as our customers continue to maintain and invest in the facilities they currently operate. We expect this trend to continue for the foreseeable future.
Over the long-term, we expect that population growth, an expanding global middle class, and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers and related products. As such, we expect investment in new global chemical and petrochemical capacity will improve and drive growth in demand for our products and services.
We intend to stay competitive in our traditional energy and chemical/petrochemical markets by investing in technology such as our NextGen steam ejector nozzle, which has been engineered to reduce steam consumption, lower operating costs, and increase system capacity, allowing refineries and process plants to enhance throughput while minimizing their carbon footprint. We estimate that the total market opportunity for our NextGen nozzle exceeds $50 million over the next 5 to 10 years.
Our turbomachinery, pumps, and cryogenic products and market access provide revenue and growth potential in the commercial space/aerospace markets. The commercial space market has grown and evolved rapidly, and we provide rocket engine turbopump systems and components to many of the launch providers for satellites. We expect that in the long-term, extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market. Sales and orders to the space industry are variable in nature and many of our customers, who are key players in the industry, have yet to achieve profitability and may be unable to continue operations without additional funding. As a result, future revenue and growth to this market can be uncertain and may negatively impact our business.
The alternative and clean energy opportunities for our heat transfer, power production and fluid transfer systems are expected to continue to grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, small modular nuclear systems, bioenergy products, and geothermal power generation with lithium extraction. We are positioning the Company to be a more significant contributor as these markets continue to develop.
As illustrated below, we have succeeded over the last several years with our strategy to increase our participation in the defense market, which comprised 83% of our total backlog at September 30, 2024.
21
*Note: "FYE" refers to fiscal year ended March 31
Results of Operations
To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the notes to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.
The following table summarizes our results of operations for the periods indicated:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
|
$ |
53,563 |
|
|
$ |
45,076 |
|
|
$ |
103,514 |
|
|
$ |
92,645 |
|
Gross profit |
|
$ |
12,799 |
|
|
$ |
7,191 |
|
|
$ |
25,167 |
|
|
$ |
18,168 |
|
Gross profit margin |
|
|
24 |
% |
|
|
16 |
% |
|
|
24 |
% |
|
|
20 |
% |
SG&A expenses |
|
$ |
9,160 |
|
|
$ |
6,388 |
|
|
$ |
18,434 |
|
|
$ |
13,681 |
|
SG&A as a percent of sales |
|
|
17 |
% |
|
|
14 |
% |
|
|
18 |
% |
|
|
15 |
% |
Net income |
|
$ |
3,281 |
|
|
$ |
411 |
|
|
$ |
6,247 |
|
|
$ |
3,051 |
|
Income per diluted share |
|
$ |
0.30 |
|
|
$ |
0.04 |
|
|
$ |
0.57 |
|
|
$ |
0.28 |
|
The following tables provide our net sales by product line and geographic region including the percentage of total and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:
Second Quarter and First Six Months of Fiscal 2025 Compared with Second Quarter and First Six Months of Fiscal 2024
Net sales for the second quarter of fiscal 2025 increased $8,487, or 19%, compared with the second quarter of fiscal 2024. Incremental revenue from the acquisition of P3 accounted for $859 of this increase. The remainder of this increase was spread across our markets including a $5,779, or 23%, increase in sales to the defense industry, primarily due to new programs, growth in existing programs, and timing. Net sales for the quarter for the refining and chemical/petrochemical markets increased 15% and 24%,
22
respectively, driven by increased sales in India and the timing of larger capital projects, partially offset by lower aftermarket sales and sales in China. Aftermarket sales to the refining, chemical/petrochemical, and defense markets of $9.8 million remained strong but were $1.5 million lower than the prior year record levels.
Domestic sales as a percentage of aggregate sales were 85% in the second quarter of fiscal 2025, comparable to the 86% in the second quarter of fiscal 2024, reflecting our continued presence in the defense industry, which is U.S. based. Sales for the three months ended September 30, 2024 were 58% to the defense industry compared to 56% for the comparable quarter in fiscal 2024.
Net sales for the first six months of fiscal 2025 increased $10,869, or 12%, from the first six months of fiscal 2024. Approximately $2,437 of this increase was due to the acquisition of P3. Additionally, the increase over the prior year was due to a $12,056, or 28%, increase in sales to the defense industry, primarily due to better execution, improved pricing, new programs, growth in existing programs, and increased direct labor. Net sales for the first six months of fiscal 2025 to the refining market increased 18%, driven by increased sales in India and the timing of larger capital projects, partially offset by lower aftermarket sales and sales in China. Aftermarket sales to the refining, chemical/petrochemical, and defense markets of $17,610 remained strong but were $4,553 lower than the prior year record levels. These increases were partially offset by a $3,254 decrease in "Other" sales due to project timing across multiple markets and customers.
Domestic sales as a percentage of aggregate sales were 83% for the first six months of fiscal 2025, comparable to the same period of fiscal 2024, reflecting our continued presence in the defense industry, which is U.S. based. Sales for the six months ended September 30, 2024 were 58% to the defense industry compared to 52% for the comparable quarter in fiscal 2024. Fluctuation in sales among markets, products and geographic locations 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.
Gross profit and margin for the second quarter of fiscal 2025 was $12,799 and 23.9%, respectively. Gross profit and margin for the first six months of fiscal 2025 was $25,167 and 24.3%, respectively. These 790 and 470 basis point improvements in gross profit margin over the comparable quarter and year-to-date periods of fiscal 2024, respectively, reflected increased leverage on fixed overhead costs due to the higher volume of sales discussed above, as well as an improved mix of sales related to higher margin projects, better execution, and improved pricing, partially offset by higher incentive compensation in comparison with the prior year. Additionally, second quarter and the first six months of fiscal 2025 gross profit benefited $435 and $915, respectively, from a $2,100 grant received from the BlueForge Alliance to reimburse us for the cost of our defense welder training programs in Batavia and related equipment. To date we have received $1,098 of funding under this grant.
Changes in SG&A expense, including amortization expense, for the three and six months ending September 30, 2024 versus the comparable prior year period is as follows:
|
|
Change Q2 FY25 vs. Q2 FY24 |
|
|
Change YTD Q2 FY25 vs. YTD Q2 FY24 |
|
||
BN Performance Bonus |
|
$ |
274 |
|
|
$ |
583 |
|
Amortization of intangibles |
|
|
164 |
|
|
|
326 |
|
P3 Technologies |
|
|
207 |
|
|
|
394 |
|
ERP implementation costs |
|
|
205 |
|
|
|
547 |
|
Equity based compensation |
|
|
204 |
|
|
|
260 |
|
Performance-based compensation |
|
|
236 |
|
|
|
112 |
|
Professional fees |
|
|
154 |
|
|
|
373 |
|
Research & development |
|
|
176 |
|
|
|
530 |
|
Personnel costs |
|
|
469 |
|
|
|
901 |
|
All other |
|
|
683 |
|
|
|
727 |
|
Total SG&A change |
|
$ |
2,772 |
|
|
$ |
4,753 |
|
In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental performance-based award based on the achievement of BN performance objectives for fiscal years ending March 31, 2024, 2025 and 2026, which can range between $2,000 and $4,000 per year. The increase in research and development costs reflects the increased level of investment we are making in our products and technology. The increase in ERP implementation costs related to the new ERP system at our Batavia facility. In addition to the above, P3 added $371 and $720 to SG&A expense for the quarter and first six months of fiscal 2025 versus the prior year, respectively, which includes amortization of customer relationship and tradename intangibles. Other increases to SG&A include increases due to normal merit increases as well as increased staffing to support our growth.
Other operating income represents the change in fair value of the P3 contingent earn-out liability and was $596 and $726 for the three and six month periods ended September 30, 2024, respectively, versus $0 for the comparable prior year periods of fiscal 2024.
23
Net interest income for the second quarter and first six months of fiscal 2025 was $153 and $314, respectively, compared to net interest expense of $55 and $240 for the comparable periods of fiscal 2024, respectively. This increase in interest income was due to our strong cash position and lower debt levels versus fiscal 2024.
Our effective tax rate for the second quarter of fiscal 2025 was 24%, compared with 37% in the second quarter of fiscal 2024. Our effective tax rate for the first six months of fiscal 2025 was 18%, compared with 25% for the first six months of fiscal 2024. Our effective tax rate can vary significantly from quarter to quarter depending on the level of projected pre-tax income, the amount of projected income derived from our higher tax rate foreign subsidiaries, as well as the timing of discrete tax items, primarily related to the vesting of restricted stock awards. The decrease in our effective tax rate was primarily due to a discrete benefit recognized in the first quarter of fiscal 2025 related to the vesting of restricted stock awards and the Company's improved stock price over the last year. Additionally, the first six months of fiscal 2025 effective tax rate benefited from a higher mix of income in lower tax rate jurisdictions in fiscal 2025 compared to fiscal 2024. For fiscal 2025, we expect our effective tax rate to be between 20% and 22%, as the impact of these discrete tax items on our full year effective tax rate lessens over the course of the year.
The result of the above is that net income and income per diluted share for the second quarter of fiscal 2025 were $3,281 and $0.30, respectively, compared with $411 and $0.04, respectively, for the second quarter of fiscal 2024. Adjusted net income and adjusted net income per diluted share for the second quarter of fiscal 2025 were $3,414 and $0.31, respectively, compared with net income of $754 and $0.07, respectively, for the second quarter of fiscal 2024. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.
Net income and income per diluted share for the first six months of fiscal 2025 were $6,247 and $0.57, respectively, compared with net income of $3,051 and $0.28, respectively, for the first six months of fiscal 2024. Adjusted net income and adjusted net income per diluted share for the first six months of fiscal 2025 were $6,999 and $0.64, respectively, compared with net income of $3,737 and $0.35, respectively, for the first six months of fiscal 2024. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.
Non-GAAP Measures
Adjusted net income before interest (income) expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income per diluted share are provided for informational purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP").
Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, those charges and credits that are not directly related to our operating performance, and are not reflective of our underlying business particularly in light of their unpredictable nature. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income or net income per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income or net income per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share are key metrics used by management and our board of directors to assess the Company’s financial and operating performance and adjusted EBITDA is a basis for a significant portion of management's performance-based compensation.
Adjusted EBITDA excludes charges for depreciation, amortization, interest (income) expense, income taxes, acquisition related (income) expenses, equity-based compensation, ERP implementation costs, and other unusual/nonrecurring items. Adjusted net income and adjusted net income per diluted share exclude intangible amortization, acquisition related (income) expenses, other unusual/nonrecurring items, and the related tax impacts of those adjustments.
A reconciliation of adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income in accordance with GAAP is as follows:
24
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
$ |
3,281 |
|
|
$ |
411 |
|
|
$ |
6,247 |
|
|
$ |
3,051 |
|
Acquisition & integration income |
|
(587 |
) |
|
|
- |
|
|
|
(680 |
) |
|
|
- |
|
Equity-based compensation |
|
434 |
|
|
|
332 |
|
|
|
778 |
|
|
|
625 |
|
ERP implementation costs |
|
205 |
|
|
|
- |
|
|
|
547 |
|
|
|
- |
|
Net interest (income) expense |
|
(153 |
) |
|
|
55 |
|
|
|
(314 |
) |
|
|
240 |
|
Income tax expense |
|
1,016 |
|
|
|
243 |
|
|
|
1,344 |
|
|
|
1,009 |
|
Depreciation & amortization |
|
1,419 |
|
|
|
1,201 |
|
|
|
2,830 |
|
|
|
2,440 |
|
Adjusted EBITDA(1) |
$ |
5,615 |
|
|
$ |
2,242 |
|
|
$ |
10,752 |
|
|
$ |
7,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales |
$ |
53,563 |
|
|
$ |
45,076 |
|
|
$ |
103,514 |
|
|
$ |
92,645 |
|
Net income as a % of revenue |
|
6.1 |
% |
|
|
0.9 |
% |
|
|
6.0 |
% |
|
|
3.3 |
% |
Adjusted EBITDA as a % of revenue |
|
10.5 |
% |
|
|
5.0 |
% |
|
|
10.4 |
% |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Beginning in the fourth quarter of fiscal 2024, adjusted EBITDA no longer excludes the BN Performance Bonus, but now excludes the impact of non-cash equity-based compensation expense in order to be more consistent with market practice. Prior period results have been adjusted to reflect these changes on a comparable basis. The BN Performance Bonus expense was $1,076 and $2,152 for the second quarter and first six months of fiscal 2025, respectively, and $802 and $1,569 for the second quarter and first six months of fiscal 2024, respectively, and will be completed at the end of fiscal year 2026. |
|
||||||||||||||
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
$ |
3,281 |
|
|
$ |
411 |
|
|
$ |
6,247 |
|
|
$ |
3,051 |
|
Acquisition & integration income |
|
(587 |
) |
|
|
- |
|
|
|
(680 |
) |
|
|
- |
|
Amortization of intangible assets |
|
555 |
|
|
|
445 |
|
|
|
1,109 |
|
|
|
891 |
|
ERP implementation costs |
|
205 |
|
|
|
- |
|
|
|
547 |
|
|
|
- |
|
Normalized tax rate(1) |
|
(40 |
) |
|
|
(102 |
) |
|
|
(224 |
) |
|
|
(205 |
) |
Adjusted net income(2) |
$ |
3,414 |
|
|
$ |
754 |
|
|
$ |
6,999 |
|
|
$ |
3,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
GAAP net income per diluted share |
$ |
0.30 |
|
|
$ |
0.04 |
|
|
$ |
0.57 |
|
|
$ |
0.28 |
|
Adjusted net income per diluted share |
$ |
0.31 |
|
|
$ |
0.07 |
|
|
$ |
0.64 |
|
|
$ |
0.35 |
|
Diluted weighted average common shares outstanding |
|
11,024 |
|
|
|
10,810 |
|
|
|
10,995 |
|
|
|
10,761 |
|
|
|
||||||||||||||
(1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the statutory tax rate. |
|
||||||||||||||
(2) Beginning in the fourth quarter of fiscal 2024, adjusted net income no longer excludes the BN Performance Bonus. Prior period results have been adjusted to reflect this change on a comparable basis. The BN Performance Bonus expense, net-of-tax, was $829 and $1,657 for the second quarter and first six months of fiscal 2025, respectively, and $618 and $1,208 for the second quarter and first six months of fiscal 2024, respectively, and will be completed at the end of fiscal year 2026. |
|
||||||||||||||
Acquisition and integration (income) costs are incremental costs that are directly related to and as a result of the P3 acquisition. These costs (income) may include, among other things, professional, consulting and other fees, system integration costs, and contingent consideration fair value adjustments. ERP implementation costs primarily relate to consulting costs (training, data conversion, and
25
project management) incurred in connection with the ERP system being implemented throughout our Batavia, New York facility in order to enhance efficiency and productivity and are not expected to recur once the project is completed.
Liquidity and Capital Resources
The following discussion should be read in conjunction with our Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Cash Flows:
|
|
September 30, |
|
|
March 31, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Cash and cash equivalents |
|
$ |
32,318 |
|
|
$ |
16,939 |
|
Working capital (1) |
|
|
10,397 |
|
|
|
8,112 |
|
Working capital ratio(1) |
|
|
1.1 |
|
|
|
1.1 |
|
Net cash provided by operating activities for the first six months of fiscal 2025 was $22,649 compared with $11,898 for the first six months of fiscal 2024. This increase was primarily a result of higher cash net income and a reduction in working capital. Over the last year, cash flow from operations benefited approximately $21,000 from customer deposits, net of unbilled revenue, primarily from long-term U.S. Navy defense contracts/projects, that will require cash expenditures over the next 12 to 24 months, which could reduce cash flows from operations.
Capital expenditures for the first six months of fiscal 2025 was $6,464 compared to $3,312 for the comparable period in fiscal 2024. Capital expenditures for fiscal 2025 were primarily for machinery and equipment, as well as for buildings and leasehold improvements to support our growth and productivity improvement initiatives and included expenditures related to the expansion of defense production capabilities at our Batavia facility, which is primarily being funded by a $13,500 strategic grant from one of our defense customers. We have increased our expected fiscal 2025 capital expenditures to be in the range of $13,000 to $18,000 from our previous expectations of $10,000 to $15,000 due to a land purchase in Arvada, Colorado and plans to build a cryogenic propellant (LH2, LOX, LCH4) testing facility in Florida to support future growth and customer needs. Approximately half of our planned capital expenditures for fiscal 2025 are discretionary, with the other half being related to the Batavia facility defense expansion. We estimate that our maintenance capital spend is approximately $2,000 per year. However, for the next several years we expect capital expenditures to be approximately 7% to 10% of sales as we continue to invest in our business in order to support our long-term organic growth goals.
Cash and cash equivalents were $32,318 at September 30, 2024 compared with $16,939 at March 31, 2024, up $15,379 primarily due to cash provided by operations, offset by capital expenditures. At September 30, 2024, $4,890 of our cash and cash equivalents was used to secure our letters of credit and $3,816 of our cash was held by foreign subsidiaries.
On October 13, 2023, we terminated our revolving credit facility and repaid our term loan with Bank of America, and entered into a new five-year revolving credit facility with Wells Fargo that provides a $35,000 line of credit that automatically increases to $50,000 upon the Company satisfying specified covenants, which were satisfied during the second quarter of fiscal 2025 (the "New Revolving Credit Facility"). As of September 30, 2024, there were no borrowings and $6,847 letters of credit outstanding on the New Revolving Credit Facility and the amount available to borrow was $43,152, subject to interest and leverage covenants.
The New Revolving Credit Facility contains customary terms and conditions, including representations and warranties and affirmative and negative covenants, as well as financial covenants for the benefit of Wells Fargo, which require us to maintain (i) a consolidated total leverage ratio not to exceed 3.50:1.00 and (ii) a consolidated fixed charge coverage ratio of at least 1.20:1.00, in both cases computed in accordance with the definitions and requirements specified in the New Revolving Credit Facility. As of September 30, 2024, we were in compliance with the financial covenants of the New Revolving Credit Facility and our leverage ratio as calculated in accordance with the terms of the New Revolving Credit Facility was 0.6x.
The New Revolving Credit Facility contains terms that may, under certain circumstances as defined in the agreement, restrict our ability to declare or pay dividends. Any determination by our Board of Directors regarding dividends in the future will depend on a variety of factors, including our future financial performance, organic and inorganic growth opportunities, general economic conditions, and financial, competitive, regulatory, and other factors, many of which are beyond our control. We did not pay any dividends during the six months ended September 30, 2024, or during fiscal 2024 and currently have no intention to pay dividends for the foreseeable future.
We did not have any off-balance sheet arrangements as of September 30, 2024 and 2023, other than letters of credit incurred in the ordinary course of business.
We believe that cash generated from operations combined with the liquidity provided by our New Revolving Credit Facility, will be adequate to meet our cash needs for the immediate future.
26
Orders and Backlog
In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure our financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures provided by other companies. Orders represent written communications received from customers requesting us to provide products and/or services. Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.
The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales.
Given that each of orders, backlog, and book-to-bill ratio is an operational measure and that the Company's methodology for calculating orders, backlog and book-to-bill ratio does not meet the definition of a non-GAAP measure, as that term is defined by the SEC, a quantitative reconciliation for each is not required or provided.
The following tables provides our orders by market and geographic region including the percentage of total orders and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:
Orders booked in the second quarter of fiscal 2025 were $63,678 or 1.2x net sales for the quarter. Orders booked for the six-month were $119,445 or 1.2x net sales for the period. As a result, backlog increased $10,234 (3%) during the quarter and $16,141 (4%) for the first six month of fiscal 2025 to $407,009 at September 30, 2024. Orders for the second quarter of fiscal 2025 benefited from a contract to provide the cryogenic pumps for a space launch vehicle and contract to provide the MK19 Air Turbine Pump for the U.S. Navy Columbia-class submarine, which is a new program for the Company. In addition to the above, orders for the first six months of fiscal 2025 included follow-on orders for the second option year of alternators and regulators for the U.S. Navy MK48 Torpedo program, as well as an order for three surface condenser systems for the world's first net-zero carbon emissions integrated ethylene cracker and derivatives site located in North America. Additionally, after-market orders for the refining and petrochemical markets for the second quarter and first six months of fiscal 2025 were approximately $12,741 and $20,953, respectively, representing an 11% and 8% increase over the prior-year, respectively. Orders for the first six months of fiscal 2024 included $22,000 related to a strategic investment and follow-on orders from a major defense customer and $9,100 for a vacuum distillation system for a refinery in India.
Orders to the U.S. represented 74% of total orders for the first six months of fiscal 2025 compared to 81% for the prior year. These orders were primarily to the defense market which are U.S. based.
The following table provides our backlog by market, including the percentage of total backlog, for each category and period presented. Percentages may not sum to the total due to rounding:
27
|
|
September 30, |
|
|
|
|
September 30, |
|
|
|
Change |
|
|||||||||
Market |
|
2024 |
|
% |
|
|
2023 |
|
% |
|
$ |
|
|
% |
|
||||||
Refining |
|
$ |
30,653 |
|
|
8 |
% |
|
$ |
29,116 |
|
|
9 |
% |
$ |
1,537 |
|
|
|
5 |
% |
Chemical/Petrochemical |
|
|
21,633 |
|
|
5 |
% |
|
|
13,705 |
|
|
4 |
% |
|
7,928 |
|
|
|
58 |
% |
Space |
|
|
18,180 |
|
|
4 |
% |
|
|
7,263 |
|
|
2 |
% |
|
10,917 |
|
|
|
150 |
% |
Defense |
|
|
327,438 |
|
|
80 |
% |
|
|
250,732 |
|
|
80 |
% |
|
76,706 |
|
|
|
31 |
% |
Other |
|
|
9,105 |
|
|
2 |
% |
|
|
12,527 |
|
|
4 |
% |
|
(3,422 |
) |
|
|
-27 |
% |
Total backlog |
|
$ |
407,009 |
|
|
100 |
% |
|
$ |
313,343 |
|
|
100 |
% |
$ |
93,666 |
|
|
|
30 |
% |
We expect to recognize revenue on approximately 35% to 45% of the backlog within one year, 30% to 40% in one to two years and the remaining beyond two years. The majority of the orders that are expected to convert beyond twenty-four months are for the defense industry, specifically the U.S. Navy that have a long conversion cycle (up to six years).
Outlook
We are providing the following updated fiscal 2025 outlook ($ in thousands):
|
New Guidance |
|
Previous Guidance |
Net Sales |
$200,000 to $210,000 |
|
$200,000 to $210,000 |
Gross Profit |
23% - 24% of sales |
|
22% - 23% of sales |
SG&A Expenses (Including Amortization)(1) |
17% - 18% of sales |
|
16.5% - 17.5% of sales |
Tax Rate |
20% to 22% |
|
20% to 22% |
Adjusted EBITDA(2) |
$18,000 to $21,000 |
|
$16,500 to $19,500 |
Capital Expenditures |
$13,000 to $18,000 |
|
$10,000 to $15,000 |
|
|
|
|
(1) Includes approximately $6,500 to $7,500 of BN Performance Bonus, equity-based compensation, and ERP conversion costs included in SG&A expense. |
|||
(2) Excludes net interest expense, income taxes, depreciation and amortization from net income, as well as approximately $2,000 to $3,000 of equity-based compensation and ERP conversion costs included in SG&A expense and approximately $700 of acquisition & integration income, net. |
|||
See "Cautionary Note Regarding Forward-Looking Statement" and "Non-GAAP Measures" above for additional information about forward-looking statements and non-GAAP measures. We have not reconciled non-GAAP forward-looking adjusted EBITDA to its most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.
We have made significant progress with the advancements in our business, which puts us on schedule in achieving our fiscal 2027 goals of 8% to 10% average annualized organic revenue growth and adjusted EBITDA margins in the low to mid-teens.
Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, do not experience significant global health related disruptions, and assumes no further impact from any other unforeseen events.
Contingencies and Commitments
We have been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in or accompanying our products or from exposure to asbestos at the Company's facilities. We are a co-defendant with numerous other defendants in these lawsuits and intend to vigorously defend ourselves against these claims. The claims in most of 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. We believe that the resolution of these asbestos-related lawsuits will not have a material adverse effect on our financial position or results of operations. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these asbestos-related lawsuits could have a material adverse impact on our financial position and results of operations.
During the third quarter of fiscal 2024, the Audit Committee of the Board of Directors, with the assistance of external counsel and forensic professionals, concluded an investigation into a whistleblower complaint received regarding GIPL. The investigation identified evidence supporting the complaint and other misconduct by employees. The other misconduct total $150 over a period of four years and was isolated to GIPL. All involved employees have been terminated and we have implemented remedial actions, including strengthening our compliance program and internal controls. As a result of the investigation, during the third quarter of fiscal 2024, the statutory auditor and bookkeeper of GIPL tendered their resignations and new firms were appointed. We have voluntarily reported the findings of our investigation to the appropriate authorities in India and the U.S. Department of Justice and the SEC. Although the resolutions of
28
these matters are inherently uncertain, we do not believe any remaining impact will be material to our overall consolidated results of operations, financial position, or cash flows.
As of September 30, 2024, we are subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business. Although the outcome of the lawsuits, legal proceedings or potential claims to which we are or may become a party cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, we do not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on our results of operations, financial position or cash flows. See Note 10 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.
Critical Accounting Policies, Estimates, and Judgments
Our Unaudited Condensed Consolidated Financial Statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions. We believe that the most critical accounting estimates used in the preparation of our Unaudited Condensed Consolidated Financial Statements relate to labor hour estimates, total cost, and establishment of operational milestones which are used to recognize revenue over time, accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, accounting for business combinations and intangible assets, and accounting for pensions and other postretirement benefits. There have been no material changes to the aforementioned critical accounting policies and estimates. 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, 2024.
New Accounting Pronouncements
In the normal course of business, management evaluates all new Accounting Standards Updates and other accounting pronouncements issued by the Financial Accounting Standards Board, SEC, or other authoritative accounting bodies to determine the potential impact they may have on the Company's Unaudited Condensed Consolidated Financial Statements. Other than those discussed in the Unaudited Condensed Consolidated Financial Statements, 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 Unaudited Condensed Consolidated Financial Statements. For discussion of the newly issued accounting pronouncements see Note 14 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The principal market risks (i.e., the risk of loss arising from market changes) to which we are exposed are foreign currency exchange rates, price risk, and interest rate risk.
The assumptions applied in preparing the following qualitative and quantitative disclosures regarding foreign currency exchange rate, price risk and interest rate risk are based upon volatility ranges experienced by us in relevant historical periods, our current knowledge of the marketplace, and our judgment of the probability of future volatility based upon the historical trends and economic conditions of the markets in which we operate.
Foreign Currency
International consolidated sales for the first six months of fiscal 2025 were 18% of total sales. 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 the first six months of fiscal 2025, substantially all sales by us and our wholly-owned subsidiaries, for which we were paid, were denominated in the local currency of the respective subsidiary (U.S. dollars, Chinese RMB or India INR). For the first six months of fiscal 2025, foreign currency exchange rate fluctuations increased our cash balances by $41 primarily due to the weakening of the U.S. dollar.
We have limited exposure to foreign currency purchases. In the first six months of fiscal 2025, our purchases in foreign currencies represented approximately 6% of the cost of products sold. At certain times, we may enter into forward foreign currency exchange rate 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 rate contracts were not used in the periods being reported in this Form 10-Q and as of September 30, 2024 and March 31, 2024, we held no forward foreign currency contracts.
Price Risk
Operating in a global market place requires us to compete with other global manufacturers which, in some instances, benefit from lower production costs and more favorable economic conditions. Although we believe that our customers differentiate our products on the basis of our manufacturing quality, engineering experience, and customer service, among other things, such lower production costs and more favorable economic conditions mean that our competitors are able to offer products similar to ours at lower prices. In extreme
29
market downturns, we typically see depressed price levels. Additionally, we have faced, and may continue to face, significant cost inflation, specifically in labor costs, raw materials, and other supply chain costs due to increased demand for raw materials and resources caused by the broad disruption of the global supply chain. International conflicts or other geopolitical events, including the 2022 Russian invasion of Ukraine and the Israel-Hamas war, may further contribute to increased supply chain costs due to shortages in raw materials, increased costs for transportation and energy, disruptions in supply chains, and heightened inflation. Further escalation of geopolitical tensions may also lead to changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain, and consequently our results of operations. While there could ultimately be a material impact on our operations and liquidity, at the time of this report, the impact could not be determined.
Interest Rate Risk
In order to fund our strategic growth objectives, including acquisitions, from time to time we may borrow funds under our New Revolving Credit Facility that bears interest at a variable rate. As part of our risk management activities, we evaluate the use of interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements. As of September 30, 2024, we had no variable rate debt outstanding on our New Revolving Credit Facility and no interest rate derivatives outstanding. See "Debt" in Note 13 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information about our outstanding debt.
Item 4. Controls and Procedures
Conclusion regarding the effectiveness of disclosure controls and procedures
Our President and Chief Executive Officer (our principal executive officer) and Vice President - Finance and Chief Financial Officer (our principal financial officer) each have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q. Based on such evaluation, and as of such date, our President and Chief Executive Officer and Vice President - Finance and Chief Financial Officer concluded that our disclosure controls and procedures were effective in all material respects.
Changes in internal control over financial reporting
Other than the events discussed under the section entitled "P3 Technologies, LLC Acquisition" below, there has been no change to our internal control over financial reporting during the quarter covered by this Form 10-Q that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.
P3 Technologies, LLC Acquisition
On November 9, 2023, we acquired P3, a privately-owned custom turbomachinery engineering, product development, and manufacturing business that serves the space, new energy, defense, and medical industries. For additional information regarding the acquisition, refer to Note 2 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q and Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2 in this Form 10-Q. Based on the recent completion of this acquisition and, pursuant to the SEC's guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of the effectiveness of internal control over financial reporting as of the end of the period covered by this report does not include P3.
We are in the process of implementing our internal control structure over P3 and we expect that this effort will be completed during the fiscal year ending March 31, 2025.
30
PART II - OTHER INFORMATION
Item 1A. Risk Factors
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, 2024.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Purchase of Equity Securities by the Issuer
During the second quarter of fiscal 2025, 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 September 30, 2024 were as follows:
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 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
7/01/2024-7/31/2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
8/01/2024-8/31/2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
9/01/2024-9/30/2024 |
|
1 |
|
|
$ |
31.84 |
|
|
|
— |
|
|
|
— |
|
|
|
|
1 |
|
|
$ |
31.84 |
|
|
|
— |
|
|
|
— |
|
|
Dividend Policy
Our revolving credit facility with Wells Fargo contains terms that may, under certain circumstances as defined in the agreement, restrict our ability to declare or pay dividends. Any determination by our Board of Directors regarding dividends in the future will depend on a variety of factors, including our future financial performance, organic and inorganic growth opportunities, general economic conditions and financial, competitive, regulatory, and other factors, many of which are beyond our control. We did not pay any dividends during the six months ended September 30, 2024 or during fiscal 2024 and we currently have no intention to pay dividends for the foreseeable future.
31
Item 6. Exhibits
INDEX OF EXHIBITS
(10) |
|
Material Contracts |
||
|
|
|
||
|
|
10.1 |
||
|
|
|
||
(31) |
|
Rule 13a-14(a)/15d-14(a) Certifications |
||
|
|
|
|
|
+ |
|
31.1 |
||
|
|
|
|
|
+ |
|
31.2 |
||
|
|
|
|
|
(32) |
|
Section 1350 Certification |
||
|
|
|
|
|
++ |
|
32.1 |
||
|
|
|
|
|
(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 Exhibit furnished with this report |
|
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
GRAHAM CORPORATION
|
||
By: |
|
|
/s/ CHRISTOPHER J. THOME |
|
|
|
Christopher J. Thome |
|
|
|
Vice President-Finance, Chief Financial Officer, |
|
|
|
Chief Accounting Officer, and Corporate Secretary |
|
|
|
(On behalf of the Registrant and as Principal Financial Officer) |
|
|
|
|
Date: November 8, 2024
33