GRAHAM CORP

Previous wording

We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. We design and manufacture custom-engineered vacuum, heat transfer, cryogenic pump and turbomachinery products. 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.

Current wording

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.

Previous wording

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, subject to certain potential adjustments, including a customary working capital adjustment. The cash consideration was funded through borrowings on our line of credit. The purchase agreement included a contingent earn-out dependent upon certain financial measures of P3 post-acquisition, in which the sellers are eligible to receive up to $3,000 in additional cash consideration. See Note 2 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the first quarter ended June 30, 2024 (the "Form 10-Q") for additional information.

Current wording

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.

Previous wording

Gross profit and margin for the first quarter of fiscal 2025 was $12,368 and 24.8%, respectively. The 170 basis point improvement in gross profit margin over the comparable period of fiscal 2024 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 defense sales, and better execution and pricing on defense contracts. Additionally, first quarter fiscal 2025 gross profit benefited $480 due to a $2,100 grant received from BlueForge Alliance to reimburse us for the cost of our defense welder training programs in Batavia and related equipment. BlueForge Alliance is a nonprofit, neutral integrator that supports the U.S. Navy’s Submarine Industrial Base Initiatives.

Current wording

Gross profit and margin for the second quarter of fiscal 2025 was 12,799 and 23.9%, respectively. The 790 basis point improvement in gross profit margin over the comparable period of fiscal 2024 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. Additionally, second quarter fiscal 2025 gross profit benefited $435 due to 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. The BlueForge Alliance is a nonprofit, neutral integrator that supports the United States ("U.S.") Navy's Submarine Industrial Base Initiatives.

Previous wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for the first quarter of fiscal 2025 increased $1,981 over the same period of fiscal 2024 and reflects the investments we are making in our operations, our employees, and our technology. 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 the fiscal years ending March 31, 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year (the "BN Performance Bonus"). During the first quarter of fiscal 2025, we recorded $1,076 related to the BN Performance Bonus, a $309 increase over the prior year. The remainder of the increase in SG&A is primarily due to costs related to the implementation of a new enterprise resource planning ("ERP") system at our Batavia facility, as well as additional costs related to P3, professional services fees, and increased research and development investment.

Current wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for the second quarter of fiscal 2025 increased $2,772 over the same period of fiscal 2024 and reflects the investments we are making in our operations, our employees, and our technology. 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 the fiscal years ending March 31, 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year (the "BN Performance Bonus). During the second quarter of fiscal 2025, we recorded $1,076 related to the BN Performance Bonus, a $274 increase over the prior year. The remainder of the increase in SG&A is primarily due to costs related to the implementation of a new enterprise resource planning ("ERP") system at our Batavia facility and additional costs related to P3, as well as increased professional services fees, research and development investment, and personnel costs in connection with our growth and strategic initiatives.

Previous wording

Orders booked in the first quarter of fiscal 2025 were $55,767 or 112% of net sales for the quarter. As a result, backlog increased $5,907 during the quarter to $396,775 at June 30, 2024. Orders for the first quarter of fiscal 2025 benefited from follow-on orders for the second option year of alternators and regulators for the MK48 Mod 7 Heavyweight 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 first quarter of fiscal 2025 increased 4% to $8.2 million compared with the prior-year period. Subsequent to the end of the quarter, we were awarded a contract to provide the cryogenic thermal conditioning pumps for engine startup on a space launch vehicle and a contract to provide the MK19 Air Turbine Pump assembly for the Columbia-class submarine, which is a new program for us. These orders, combined with the MK48 order discussed above, totaled over $65,000. For more information on this key performance indicator see "Orders and Backlog" below.

Current wording

Orders booked in the second quarter of fiscal 2025 increased to $63,678 compared with $36,464 in the second quarter of fiscal 2024. This increase was primarily in the defense and space markets and included an order received 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. Additionally, after-market orders for the refining and petrochemical markets for the second quarter of fiscal 2025 increase 11% to $12,741 compared with the prior-year period. For more information on this key performance indicator see "Orders and Backlog" below.

Previous wording

Cash and cash equivalents at June 30, 2024 were $21,611, compared with $16,939 at March 31, 2024. This increase was primarily due to cash provided by operating activities of $8,716, partially offset by $2,978 of capital expenditures as we continue to invest in process improvement and longer-term growth opportunities. Cash flow from operations during the quarter was primarily driven by cash net income and a reduction in working capital as a result of strong cash management and favorable contract terms.

Current wording

Cash and cash equivalents at September 30, 2024 were $32,318, compared with $16,939 at March 31, 2024. This increase was primarily due to cash provided by operating activities of $22,649, partially offset by capital expenditures of $6,464 as we continue to invest in process improvement and longer-term growth opportunities. Cash flow from operations during the quarter was primarily driven by cash net income and a reduction in working capital as a result of strong cash management and favorable contract terms.

Previous wording

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 some instances a sole source position, for certain systems and equipment for the defense industry.

Current wording

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.

Previous wording

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 remains uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging. 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 other regions of 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.

Current wording

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.

Previous wording

As illustrated below, we have succeeded over the last several years with our strategy to increase our participation in the defense market as opportunities for growth in our legacy refining and petrochemical markets diminished. The defense market comprised 83% of our total backlog at June 30, 2024.

Current wording

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.

Previous wording

*Note: "FYE" refers to fiscal year ended March 31. For additional information on this key performance indicator see "Orders and Backlog" below.

Current wording

*Note: "FYE" refers to fiscal year ended March 31

Previous wording

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

Current wording

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.

Previous wording

Net sales for the first quarter of fiscal 2025 were $49,951, up $2,382, or 5% compared with $47,569 for the first quarter of fiscal 2024. Approximately $1,578 of this increase was due to the acquisition of P3. Additionally, the increase over the prior year was due to a $6,277 or 28% increase in sales to the defense industry, primarily due to better execution, improved pricing, and increased direct labor. These increases were partially offset by a $3,137 decrease in "Other" sales due to project timing across multiple markets and customers. Aftermarket sales to the refining, chemical/petrochemical, and defense markets of $7.8 million remained strong but were $3.0 million lower than the prior year record levels.

Current wording

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.

Previous wording

Domestic sales as a percentage of net sales increased to 82% in the first quarter of fiscal 2025 compared with 80% in the first quarter of fiscal 2024. These sales were primarily to the U.S. defense market, which represented 58% of net sales for the first quarter of fiscal 2025. 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.

Current wording

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.

Previous wording

Changes in SG&A expense, including amortization expense, for the three months ending June 30, 2024 versus the comparable prior year period is as follows:

Current wording

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:

Previous wording

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 $304 to SG&A expense over the prior year, which includes amortization of customer relationship and tradename intangibles.

Current wording

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.

Previous wording

Our effective tax rate in the first quarter of fiscal 2025 was 10.0%, compared with 22.5% in the first quarter of fiscal 2024. This decrease was primarily due to a discrete tax 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 quarter 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. Our expected effective tax rate for fiscal 2025 is 20% to 22%, as the impact of these discrete tax items on our effective tax rate will lessen over the course of the year.

Current wording

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.

Previous wording

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, 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.

Current wording

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 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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Net cash provided by operating activities for the first quarter of fiscal 2025 was $8,716, which was consistent with the comparable period in fiscal 2024. Cash provided by operating activities over the last seven quarters has benefited approximately $23,000 from net customer deposits received on 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.

Current wording

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.

Previous wording

Capital expenditures for the first quarter of fiscal 2025 were $2,978 compared to $1,499 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 includes expenditures related to the expansion of defense production capabilities at our Batavia facility, which is primarily being funded by a $13,500 strategic investment from one of our defense customers. Capital expenditures for fiscal 2025 are expected to be approximately $10,000 to $15,000 as we continue to invest in process improvements and longer-term growth opportunities. 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.

Current wording

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.

Previous wording

Cash and cash equivalents were $21,611 at June 30, 2024 compared with $16,939 at March 31, 2024, up $4,672 primarily due to cash provided by operations, offset by capital expenditures as discussed above. At June 30, 2024, approximately $5,692 of our cash and cash equivalents is used to secure our letters of credit and $3,160 of our cash is held by our China and India operations.

Current wording

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.

Previous wording

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 (the "New Revolving Credit Facility"). As of June 30, 2024, there were no borrowings and $5,737 letters of credit outstanding on the New Revolving Credit Facility and the amount available to borrow was $29,263, subject to interest and leverage covenants.

Current wording

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.

Previous wording

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 requires 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 June 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.

Current wording

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.

Previous wording

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 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 three months ended June 30, 2024 or during fiscal 2024 and we currently have no intention to pay dividends for the foreseeable future.

Current wording

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.

Previous wording

We believe that cash generated from operations, combined with the liquidity provided by available financing capacity under our New Revolving Credit Facility, will be adequate to meet our cash needs for the immediate future.

Current wording

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.

Previous wording

The following table 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:

Current wording

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:

Previous wording

Orders booked in the first quarter of fiscal 2025 were $55,767 or 112% of net sales for the quarter. As a result, backlog increased $5,907 during the quarter to $396,775 at June 30, 2024. Orders for the first quarter of fiscal 2025 benefited from follow-on orders for the second option year of alternators and regulators for the MK48 Mod 7 Heavyweight 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 first quarter of fiscal 2025 increased 4% to $8.2 million compared with the prior-year period. Orders for the first quarter of fiscal 2024 included $22,000 related to a strategic investment and follow-on orders from a major defense customer. Subsequent to the end of the quarter, in the second quarter of fiscal 2025, we were awarded a contract to provide the cryogenic thermal conditioning pumps for engine startup on a space launch vehicle and a contract to provide the MK19 Air Turbine Pump assembly for the Columbia-class submarine, which is a new program for us. These orders, combined with the MK48 order discussed above, totaled over $65,000.

Current wording

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.

Previous wording

Orders to the U.S. represented 65% of total orders for the first quarter of fiscal 2025 compared to 77% in the first quarter of the prior year. These orders were primarily to the defense market which represented 51% of orders and are U.S. based.

Current wording

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.

Previous wording

Backlog was $396,775 at June 30, 2024, a 23% increase over the prior year period. We expect to recognize revenue on approximately 35% to 45% of the backlog within one year, 25% to 30% 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).

Current wording

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).

Previous wording

We are providing the following fiscal 2025 outlook ($ in thousands):

Current wording

We are providing the following updated fiscal 2025 outlook ($ in thousands):

Previous wording

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

Current wording

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.

Previous wording

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 totaled $150 over a period of four years and was isolated to GIPL. All involved employees have been terminated and we have implemented remedial actions, including strengthening our compliance program and internal controls. As a result of the investigation, during the third quarter of fiscal 2024, the statutory auditor and bookkeeper of GIPL tendered their resignations and new firms were appointed. We have voluntarily reported the findings of our investigation to the appropriate authorities in India and the U.S. Department of Justice and the SEC. Although the resolutions of these matters are inherently uncertain, we do not believe any remaining impact will be material to our overall consolidated results of operations, financial position, or cash flows.

Current wording

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 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.

Previous wording

As of June 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 Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.

Current wording

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.

Previous wording

Our Condensed Consolidated Financial Statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions. We believe that the most critical accounting estimates used in the preparation of our Condensed Consolidated Financial Statements relate to labor hour estimates, total cost, and establishment of operational milestones, which are used to recognize revenue over time, accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, accounting for business combinations and intangible assets, and accounting for pensions and other postretirement benefits. For further information, refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8 "Financial Statements and Supplementary Data" included in our Annual Report on Form 10-K for the year ended March 31, 2024.

Current wording

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.

Previous wording

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 Condensed Consolidated Financial Statements. Other than those discussed in the 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 Condensed Consolidated Financial Statements. For discussion of the newly issued accounting pronouncements see Note 14 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for additional information.

Current wording

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.