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, Energy & Process, and Space industries. We design and manufacture custom-engineered vacuum, heat transfer, cryogenic pump and turbomachinery technologies. For the Defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the Energy & Process industries we supply equipment for vacuum, heat transfer, and fluid transfer applications used in oil refining, downstream chemical facilities, fertilizers, ethylene, methanol, edible oil, food & beverage, pulp & paper, and multiple alternative energy applications such as hydrogen, small modular nuclear, concentrated solar and geothermal processes. For the Space industry our equipment is used in propulsion, power and thermal management systems, and for life support systems.

Current wording

We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer, vacuum, and advanced mixing technologies for the Defense, Energy & Process, and Space industries. For the Defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, thermal management, and advanced mixing systems. For the Energy & Process industries, we supply equipment for vacuum, heat transfer, advanced mixing, and fluid transfer applications used in oil refining, downstream chemical facilities, fertilizers, ethylene, methanol, energetics, edible oil, food & beverage, pulp & paper, medical, and multiple alternative energy applications such as hydrogen, small modular nuclear, concentrated solar, lithium extraction, and geothermal processes. For the Space industry, our equipment is used in propulsion, power, thermal management, advanced mixing, and life support systems.

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 Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Current wording

See Note 2 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Previous wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for fiscal 2025 increased $5,305 over fiscal 2024 and reflects the investments we are making in our people, our processes, and our technology. Incremental SG&A from the acquisition of P3 accounted for $776 of this increase. Additionally, SG&A increased $3,987 over the prior year due to increased staffing and performance-based compensation in connection with our growth and strategic initiatives, and $220 due to increased investment in research and development. The increase in SG&A is also due to costs related to the implementation of a new enterprise resource planning ("ERP") system at our Batavia facility of $642, and increased bad debt reserves related to non-U.S. and Space customers of $299 over the prior year. These increases were partially offset by lower professional fees of $336 and lower acquisition related expenses of $306. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental bonus based on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year (the "BN Performance Bonus"). During fiscal 2025 and fiscal 2024, we recorded $4,258 related to the BN Performance Bonus, which includes the applicable employer related payroll taxes.

Current wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for fiscal 2026 increased $4,466 over fiscal 2025 and reflects the investments we are making in our people, our processes, and our technology. SG&A increased $2,608 over the prior year due to increased staffing and performance-based compensation in connection with our growth and strategic initiatives. Acquisition and integration expenses contributed $1,827 to the increase compared to the prior year primarily due to the acquisitions of Xdot and FlackTek in the current year. Additionally, incremental SG&A from the acquisition of FlackTek accounted for $1,081 of this increase. Decreases in ERP implementation costs of $669 and bad debt expense of $994 partially offset these increases. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental bonus based on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year (the "BN Performance Bonus"). During fiscal 2026 and fiscal 2025, we recorded $4,258 related to the BN Performance Bonus, which includes the applicable employer related payroll taxes.

Previous wording

Net income and net income per diluted share for fiscal 2025 were $12,230 and $1.11 per share, respectively, compared with $4,556 and $0.42 per share, respectively, for fiscal 2024. Adjusted net income and adjusted net income per diluted share for fiscal 2025 were $13,716 and $1.24 per share, respectively, compared with $6,796 and $0.63 per share, respectively, for fiscal 2024. See "Non-GAAP Measures" below for important information about these measures and a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Current wording

Net income and net income per diluted share for fiscal 2026 were $12,500 and $1.12 per share, respectively, compared with $12,230 and $1.11 per share, respectively, for fiscal 2025. Adjusted net income and adjusted net income per diluted share for fiscal 2026 were $15,598 and $1.40 per share, respectively, compared with $13,716 and $1.24 per share, respectively, for fiscal 2025. See "Non-GAAP Measures" below for important information about these measures and a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Previous wording

Backlog was $412,335 at March 31, 2025, compared with $390,868 at March 31, 2024. This 5% increase was primarily due to the growth in orders received during fiscal 2025 as discussed above. Approximately 83% of our backlog at March 31, 2025 was to the Defense industry, which we believe provides stability and visibility to our business. For additional information on this key performance indicator see "Orders, Backlog" below.

Current wording

Orders booked in fiscal 2026 were $359,442 compared to $231,112 in fiscal 2025, an increase of $128,330, or 56%. As a result, backlog reached a record $532,637 at March 31, 2026, compared with $412,235 at March 31, 2025. Approximately 85% of our backlog at March 31, 2026 was to the Defense industry, which we believe provides stability and visibility to our business. The increase in orders was primarily in the Defense and Space markets, as programs continue to ramp and those markets continue to exhibit strong tail-winds. Energy & Process orders were down 6% compared with prior year levels, as strong demand in New Energy offset continued delays in large capital projects and slower Aftermarket orders. Total Aftermarket orders for fiscal 2026 were $36,572 compared to $48,462 in fiscal 2025. Incremental orders from FlackTek contributed $3,530 to the overall increase. Note that our orders tend to be lumpy given the nature of our business (i.e. large capital projects) and in particular, orders to the Defense industry, which span multiple years and can be significantly larger in size. As of late we are seeing momentum in the Defense, small modular nuclear and cryogenics markets, however the timing of large capital project orders in our traditional Energy & Process markets has pushed out due to geopolitical uncertainty. For fiscal 2026, our book-to-bill ratio was 1.5x. For additional information on this key performance indicator see "Orders, Backlog and Book-to-Bill Ratio" below.

Previous wording

Cash and cash equivalents at March 31, 2025 was $21,577, compared with $16,939 at March 31, 2024. This increase was primarily due to cash provided by operating activities of $24,316, partially offset by capital expenditures of $18,957 as we continue to invest in process improvement and longer-term growth opportunities. Capital expenditures for fiscal 2025 included costs for the construction of a new 30,000 square foot manufacturing facility on our Batavia, NY campus, and the purchase of production and automated welding equipment to be used in that facility, and was primarily funded by one of our larger Defense customers. Additionally, during fiscal 2025 we purchased a plot of land adjacent to our BN campus in Arvada, CO, in order to support organic growth, and began construction of a cryogenic (liquid hydrogen, oxygen, and methane) testing facility near our P3 subsidiary to enhance our capabilities and allow us to provide quality assurance testing for our customers.

Current wording

Cash and cash equivalents at March 31, 2026 was $6,580, compared with $21,577 at March 31, 2025, a decrease of $14,997. This decrease was primarily due to cash provided by operating activities of $15,933 and cash provided by financing activities of $11,956, which were more than offset by capital expenditures of $16,054 and cash used to acquire Xdot and FlackTek, net of cash acquired, of $27,285. Capital expenditures were made as we continue to invest in process improvement and longer-term growth opportunities. Capital expenditures for fiscal 2026 included costs for the construction of a new 30,000 square foot manufacturing facility to enhance and expand Defense production capabilities at our Batavia, NY campus, construction of a cryogenic propellant testing facility near P3 in FL, expansion of our Radiographic Testing ("RT") facility to enhance and accelerate Defense production at our Batavia, NY facility, and investments in production capacity and capabilities at our Arvada, CO facility, supporting infrastructure to increase throughput and meet accelerating Defense and Space customer schedules.

Previous wording

Defense - 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 due to geopolitical tensions, the projected build schedule of submarines, aircraft carriers and undersea propulsion and power systems, and the solutions we provide. We also don't believe that changes made by the new U.S. presidential administration will materially impact our Defense business. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors, and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics, and power systems. We have built a leading position, and in some instances a sole source position, for certain systems and equipment for the Defense industry.

Current wording

Defense - 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 due to geopolitical tensions, and the projected build schedule of submarines, aircraft carriers and undersea propulsion and power systems that we provide solutions for. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors, and controllers for various fluid and thermal management systems used in Department of War (also known as 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, which helps protect us from outside competition. We believe that we have become a strategic supplier to the Defense industry through our ability to provide quality products and meet our customers accelerated delivery schedules, which in turn may lead to awards for components on new programs, as well as additional content on the programs we already supply.

Previous wording

Energy & Process - 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. 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 & Process aftermarket orders primarily from the domestic market as our customers continue to maintain and invest in the facilities they currently operate. Although these orders remained strong in fiscal 2025, the recent decrease in oil prices combined with the economic uncertainty caused by the increase in tariffs may impact future order volumes.

Current wording

Energy & Process - 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. Accordingly, as of late we are seeing the timing of large capital project orders in our traditional Energy & Process markets being pushed out due to volatility in gas prices, tariffs, and geopolitical uncertainty, which has caused customers to delay capital investment. 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 several years we have experienced an increase in our Energy & Process Aftermarket orders primarily from the domestic market as our customers continue to maintain and invest in the facilities they currently operate and we expect that trend to continue for the foreseeable future.

Previous wording

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.

Current wording

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 reactors ("SMRs"), bio-energy products, and geothermal power generation. As a result of increased energy demands driven by population growth, crypto-currency mining, and artificial intelligence ("AI") data centers, we have seen an increase in activity and orders related to SMRs which we expect to continue for the foreseeable future. We believe we are positioned to be a significant contributor as these markets continue to develop.

Previous wording

We intend to stay competitive in our traditional Energy & Process 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.

Current wording

We intend to stay competitive in our traditional Energy & Process markets by investing in technology. One example of this is 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 $50,000 over the next 5 to 10 years.

Previous wording

Space - 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 in this market can be uncertain and may negatively impact our business.

Current wording

Space - 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 full life-cycle support for rocket engine turbopump systems and components to many of the industry leading launch providers for satellites. We expect that over 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 in this market can be uncertain due to high dependency on launch provider commercialization, timing, and success.

Previous 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 March 31, 2025.

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 85% of our total backlog at March 31, 2026.

Previous wording

The following tables provides our net sales by product line and geographic region including the percentage of total sales and change in comparison to the prior year for each category and period presented:

Current wording

The following tables provide our net sales by market and geographic region including the percentage of total sales and change in comparison to the prior year for each category and period presented:

Previous wording

Domestic sales as a percentage of aggregate sales were 81% for fiscal 2025 compared to 84% in fiscal 2024. Sales to the Defense industry were 58% for fiscal 2025 compared to 54% for fiscal 2024. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from year to year 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 85% for fiscal 2026 compared to 81% in fiscal 2025. Sales to the Defense industry were 60% for fiscal 2026 compared to 58% for fiscal 2025. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from year to year 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, Backlog and Book-to-Bill Ratio" below.

Previous wording

The increase in SG&A, including intangible amortization, for fiscal 2025 reflects the investments we are making in our people, our processes, and our technology. Incremental SG&A from the acquisition of P3 accounted for $776 of this increase. Additionally, SG&A increased over the prior year due to increased staffing in connection with our growth and strategic initiatives, and due to increased investment in research and development. The increase in SG&A is also due to costs related to the implementation of a new ERP system at our Batavia facility, and increased bad debt reserves related to non-U.S. and Space customers over the prior year. These increases were partially offset by lower professional fees and lower P3 acquisition related expenses. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental performance-based bonus based on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year plus any applicable employer related taxes. This bonus is in addition to the normal employee bonus program at BN and will expire after fiscal 2026 and totaled $4,258 for fiscal 2025 and fiscal 2024 each year including applicable employer related payroll taxes.

Current wording

SG&A, including intangible amortization, for fiscal 2026 increased $4,466 over fiscal 2025 and reflects the investments we are making in our people, our processes, and our technology. SG&A increased $2,608 over the prior year due to increased staffing and performance-based compensation in connection with our growth and strategic initiatives. Acquisition and integration expenses contributed $1,827 to the increase compared to the prior year primarily due to the acquisitions of Xdot and FlackTek in the current year. Additionally, incremental SG&A from the acquisition of FlackTek accounted for $1,081 of this increase. Decreases in ERP implementation costs of $669 and bad debt expense of $994 partially offset these increases. In connection with the acquisition of BN, we entered into a Performance Bonus Agreement to provide employees of BN with a supplemental bonus based on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which can range between $2,000 to $4,000 per year. During fiscal 2026 and fiscal 2025, we recorded $4,258 related to the BN Performance Bonus, which includes the applicable employer related payroll taxes.

Previous wording

Other operating (income) expense, net represents the change in fair value of the P3 contingent earn-out liability and was income of $1,215 in fiscal 2025 compared to expense of $80 in fiscal 2024. The change in fair value was due to delayed orders/projects that extended beyond the earnout period.

Current wording

Other operating (income) expense, net primarily represents the change in fair value of contingent earn-out liabilities related to acquisitions and was income of $621 in fiscal 2026 compared to income of $1,215 in fiscal 2025. The change in fair value was primarily due to delayed orders/projects that extended beyond the earnout period.

Previous wording

Net interest (income) expense for fiscal 2025 was income of $583 compared to expense of $248 in fiscal 2024. This increase in net interest income was due to our strong cash position and lower debt levels compared to the prior year.

Current wording

Net interest (income) expense for fiscal 2026 was income of $257 compared to income of $583 in fiscal 2025. This decrease in net interest income was due to increased interest expense in fiscal 2026 from debt borrowings for our acquisition of FlackTek.

Previous wording

Our effective tax rate for fiscal 2025 was 21% compared with 18% for fiscal 2024. This increase was primarily due to higher pre-tax income in fiscal 2025, which diluted the impact of tax credits on our effective tax rate, partially offset by higher discrete tax benefits recognized in fiscal 2025 related to the vesting of restricted stock awards compared to fiscal 2024. Our effective tax rate for fiscal 2026 is expected to be approximately 20% to 22%.

Current wording

Our effective tax rate for fiscal 2026 was 15% compared with 21% for fiscal 2025. This decrease was primarily due to higher research and development tax credits and higher discrete tax benefits related to the vesting of restricted stock units and awards compared to fiscal 2025, partially offset by the impact of the enactment of the OBBB discussed above. Our effective tax rate for fiscal 2027 is expected to be approximately 18% to 20%.

Previous wording

The net result of the above is that net income and net income per diluted share for fiscal 2025 were $12,230 and $1.11 per share, respectively, compared with $4,556 and $0.42 per share, respectively, for fiscal 2024. Adjusted net income and adjusted net income per diluted share for fiscal 2025 were $13,716 and $1.24 per share, respectively, compared with $6,796 and $0.63 per share, respectively, for fiscal 2024. See "Non-GAAP Measures" below for important information about these measures and a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Current wording

The net result of the above is that net income and net income per diluted share for fiscal 2026 were $12,500 and $1.12 per share, respectively, compared with $12,230 and $1.11 per share, respectively, for fiscal 2025. Adjusted net income and adjusted net income per diluted share for fiscal 2026 were $15,598 and $1.40 per share, respectively, compared with $13,716 and $1.24 per share, respectively, for fiscal 2025. See "Non-GAAP Measures" below for important information about these measures and a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Previous wording

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.

Current wording

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, we exclude 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.

Previous wording

Acquisition & integration (income) expense are incremental costs that are directly related to and as a result of the P3 acquisition or the subsequent accounting for the contingent earn-out liability. 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 relate primarily to consulting costs (training, data conversion, and project management) incurred in connection with the ERP system being implemented throughout our Batavia, NY facility in order to enhance efficiency and productivity and are not expected to recur once the project is completed. Debt amendment costs consist of accelerated write-offs of unamortized deferred debt issuance costs and discounts, prepayment penalties, and attorney fees in connection with the amendment of our credit facility. The Employee Retention Tax Credit reflects payroll tax amounts recovered due to COVID-19 relief programs and is not expected to recur in the future.

Current wording

Acquisition & integration expense (income) are incremental costs that are directly related to, and as a result of, acquisition related activity or the subsequent accounting for the contingent earn-out liabilities. 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 relate primarily to consulting costs (training, data conversion, and project management) incurred in connection with the ERP system being implemented at 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

Capital expenditures for fiscal 2025 were $18,957 versus $9,226 in fiscal 2024. Capital expenditures for fiscal 2025 were primarily for machinery and equipment, land, buildings, and leasehold improvements to support our growth and productivity improvement initiatives and included expenditures related to the construction of a new 30,000 square foot manufacturing facility to enhance and expand Defense production capabilities at our Batavia, NY facility, which is primarily being funded by a $13,500 strategic grant from one of our Defense customers. Additionally, during fiscal 2025 we began construction of a cryogenic propellant (LH2, LOX, LCH4) testing facility near P3 in Florida and made an opportunistic land purchase near the BN campus in Colorado to support future growth. Capital expenditures for fiscal 2026 are expected to be between $15,000 and $18,000 of which approximately half is related to the completion of the Batavia Defense expansion and cryogenic testing facility. Additionally, during fiscal 2025, we received a $2,200 strategic investment from a major Defense customer to support the implementation of new Radiographic Testing (“RT”) equipment at our Batavia, NY facility. We intend to contribute an additional $1,400 towards this project for a total project cost of $3,600. This expansion is expected to be completed in the third quarter of fiscal 2026. The remaining capital expenditures for fiscal 2026 are discretionary. 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 each year as we continue to invest in our business in order to support our long-term organic growth goals.

Current wording

Net capital expenditures for fiscal 2026 were $15,780 compared to $18,957 in fiscal 2025. Capital expenditures for fiscal 2026 were primarily for machinery and equipment, as well as for buildings and leasehold improvements to support our growth and productivity improvement initiatives and were primarily related to the following:

Previous wording

At March 31, 2025, approximately $4,659 of our $21,577 cash and cash equivalents was used to secure our letters of credit and $4,607 of our cash was held by our subsidiaries in China and India.

Current wording

At March 31, 2026, approximately $830 of our $6,580 cash and cash equivalents was used to secure our letters of credit and $3,934 of our cash was held by our subsidiaries in China and India.

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 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 March 31, 2025, 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 0.5x.

Current wording

The 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 Revolving Credit Facility. As of March 31, 2026, we were in compliance with the financial covenants of the Revolving Credit Facility and our leverage ratio as calculated in accordance with the terms of the Revolving Credit Facility was 0.8x.

Previous wording

The New Revolving Credit Facility contains terms that may, under certain circumstances 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 fiscal 2025 and currently have no intention to pay dividends for the foreseeable future.

Current wording

The Revolving Credit Facility contains terms that may, under certain circumstances 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 fiscal 2026 or fiscal 2025 and currently have no intention to pay dividends for the foreseeable future. There can be no guarantee that we will pay dividends in the future.

Previous wording

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

Previous wording

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.

Current wording

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. Over the long-term, our goal is to have a book-to-bill ratio of 1.1x, which can vary significantly from quarter to quarter given the nature of our business. Since fiscal 2020, our annual book-to-bill ratio has ranged from 0.9x to 1.5x.

Previous wording

Orders to the U.S. represented 82% of total orders for fiscal 2025 compared to 86% for the prior year. These orders were primarily to the Defense market, which are U.S. based, and tend to be lumpy given their large size and are long-term in nature.

Current wording

Orders to the U.S. represented 96% of total orders for fiscal 2026 compared to 82% for the prior year. These orders were primarily to the Defense market, which are U.S. based, and tend to be lumpy given their large size and are long-term in nature.

Previous wording

Backlog was $412,335 at March 31, 2025, an increase of 5% compared with $390,868 at March 31, 2024. We expect to recognize revenue on approximately 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

Backlog was a record $532,637 at March 31, 2026, an increase of 29% compared with $412,335 at March 31, 2025. The acquisition of FlackTek contributed $6,100 of this increase. We expect to recognize revenue on approximately 35% to 40% of the backlog within one year, 20% to 25% 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

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, the U.S. Department of Justice, and the SEC and will continue to cooperate with those authorities. 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 was over a period of four years, was not deemed to be material, and was isolated to a few employees. All involved employees have been terminated or are no longer with the Company 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, the U.S. Department of Justice, and the SEC and will continue to cooperate with those authorities. 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

We recognize revenue on all contracts when control of the product is transferred to the customer. Control is generally transferred when products are shipped, title is transferred, significant risks of ownership have transferred, we have rights to payment, and rewards of ownership pass to the customer. Customer acceptance may also be a factor in determining whether control of the product has transferred. Although revenue on the majority of our contracts, as measured by number of contracts, is recognized upon shipment to the customer, revenue on larger contracts, which are fewer in number but generally represent the majority of revenue, is recognized over time as these contracts meet specific criteria in ASC 606. Revenue from contracts that is recognized upon shipment accounted for approximately 20% of revenue in fiscal 2025. Revenue from contracts that is recognized over time accounted for approximately 80% of revenue in fiscal 2025. We recognize revenue over time when contract performance results in the creation of a product for which we do not have an alternative use and the contract includes an enforceable right to payment in an amount that corresponds directly with the value of the performance completed. To measure progress towards completion on performance obligations for which revenue is recognized over time the Company utilizes an input method based upon a ratio of direct labor hours incurred to date to management’s estimate of the total labor hours to be incurred on each contract, or cost incurred to date to management's estimate of the total cost to be incurred on each contract, or an output method based upon completion of operational milestones, depending upon the nature of the contract.

Current wording

We recognize revenue on all contracts when control of the product is transferred to the customer. Control is generally transferred when products are shipped, title is transferred, significant risks of ownership have transferred, we have rights to payment, and rewards of ownership pass to the customer. Customer acceptance may also be a factor in determining whether control of the product has transferred. Although revenue on the majority of our contracts, as measured by number of contracts, is recognized upon shipment to the customer, revenue on larger contracts, which are fewer in number but generally represent the majority of revenue, is recognized over time as these contracts meet specific criteria in ASC 606. Revenue from contracts that is recognized upon shipment accounted for approximately 18% of revenue in fiscal 2026. Revenue from contracts that is recognized over time accounted for approximately 82% of revenue in fiscal 2026. We recognize revenue over time when contract performance results in the creation of a product for which we do not have an alternative use and the contract includes an enforceable right to payment in an amount that corresponds directly with the value of the performance completed. To measure progress towards completion on performance obligations for which revenue is recognized over time the Company utilizes an input method based upon a ratio of direct labor hours incurred to date to management’s estimate of the total labor hours to be incurred on each contract, or cost incurred to date to management's estimate of the total cost to be incurred on each contract, or an output method based upon completion of operational milestones, depending upon the nature of the contract.

Previous wording

Business Combinations and Intangible Assets. Assets and liabilities acquired in a business combination are recorded at their estimated fair values at the acquisition date. The fair value of identifiable intangible assets is based upon detailed valuations that use various assumptions made by management. Goodwill is recorded when the purchase price exceeds the estimated fair value of the net identifiable tangible and intangible assets acquired. Definite lived intangible assets are amortized over their estimated useful lives and are assessed for impairment if certain indicators are present. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to impairment testing annually or earlier if an event or change in circumstances indicates that the fair value of a reporting unit or the indefinite lived asset may have been reduced below its carrying value.

Current wording

Goodwill and Intangible Assets. Definite lived intangible assets are amortized over their estimated useful lives and are assessed for impairment if certain indicators are present. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to impairment testing annually or earlier if an event or change in circumstances indicates that the fair value of a reporting unit or the indefinite lived asset may have been reduced below its carrying value. We make assumptions in establishing the carrying value, fair value, and, if applicable, the estimated lives of our goodwill and intangible assets.

Previous wording

During fiscal 2024, we completed the acquisition of P3 for an aggregate purchase price of $11,238. We identified and assigned value to identifiable intangible assets of customer relationships, technology and technical know-how and trade name, and estimated the useful lives over which these intangible assets would be amortized. The estimates of fair values of these identifiable intangible assets were based upon the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs, as well as a Relief from Royalty method, which develops a market based royalty rate used to reflect the after tax royalty savings attributable to owning the intangible asset. The fair value estimates resulted in identifiable intangible assets, in the aggregate, of $7,200. The resulting goodwill, in the aggregate, from this acquisition was $1,997. For more information on these matters, see the notes to consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

Current wording

During fiscal 2026, we completed the acquisitions of Xdot and FlackTek for an aggregate preliminary purchase price of $37,922, subject to certain potential adjustments, including customary working capital adjustments. We identified and assigned value to identifiable intangible assets of customer relationships, technology and technical know-how and trade name, and estimated the useful lives over which these intangible assets would be amortized. The estimates of fair values of these identifiable intangible assets were based upon the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs, as well as a Relief from Royalty method, which develops a market based royalty rate used to reflect the after tax royalty savings attributable to owning the intangible asset. The fair value estimates resulted in identifiable intangible assets, in the aggregate, of $24,050. The resulting goodwill, in the aggregate, from these acquisitions was $12,558. For more information on these matters, see the notes to consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.