GRAHAM CORP

Previous 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, Space, Energy & Process 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 Space industry, our equipment is used in propulsion, power, thermal management, advanced mixing, and for life support 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, 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.

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, Space, Energy & Process 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 Space industry, our equipment is used in propulsion, power, thermal management, advanced mixing, and life support 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, edible oil, food & beverage, pulp & paper, medical, and multiple alternative energy applications such as hydrogen, small modular nuclear ("SMRs"), concentrated solar, lithium extraction, and geothermal processes.

Previous wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for the first quarter of fiscal 2027 increased $3,228, or 33%, over the prior year first quarter. Acquisition and integration expenses contributed $602 of the increase compared to the prior year first quarter. Additionally, incremental SG&A from the acquisition of FlackTek accounted for $1,820 of the increase. The remaining increases primarily reflect investments we are making in our people, our processes, and our technology, which we expect to be approximately $2,500 of incremental costs for fiscal 2027, partially offset by a reduction in costs related to the BN Performance Bonus (defined below). 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 2024, 2025, and 2026, which could range between $2,000 to $4,000 per year (the "BN Performance Bonus"). The BN Performance Bonus is no longer in effect in fiscal 2027. During the first quarter of fiscal 2026, we recorded $1,076 related to the BN Performance Bonus inclusive of applicable payroll taxes and no expense was recorded in the first quarter of fiscal 2027.

Current wording

Selling, general and administrative expenses ("SG&A"), including intangible amortization, for the second quarter of fiscal 2027 increased $3,427, or 34%, over the prior year second quarter. Acquisition and integration expenses contributed $667 of the increase compared to the second quarter of fiscal 2026. Additionally, incremental SG&A from the acquisition of FlackTek accounted for $2,255 of the increase. The remaining increases primarily reflect investments we are making in our people, our processes, and our technology, which we expect to be approximately $2,500 of incremental costs for fiscal 2027, partially offset by a reduction in costs related to the BN Performance Bonus. In connection with the acquisition of Barber-Nichols, LLC ("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 2024, 2025, and 2026, which could range between $2,000 to $4,000 per year (the "BN Performance Bonus"). The BN Performance Bonus is no longer in effect in fiscal 2027. During the second quarter of fiscal 2026, we recorded $1,076 related to the BN Performance Bonus inclusive of applicable payroll taxes and no expense was recorded in the second quarter of fiscal 2027.

Previous wording

The net result of the above is that net income and income per diluted share for the first quarter of fiscal 2027 were $3,912 and $0.33 per share, respectively, compared to $4,595 and $0.42 per share, respectively, for the first quarter of fiscal 2026. Adjusted net income and adjusted net income per diluted share for the first quarter of fiscal 2027 were $5,738 and $0.49 per share, respectively, compared with adjusted net income and adjusted net income per diluted share of $4,938 and $0.45 per share, respectively, for the first quarter of fiscal 2026, an increase of 16% and 9%, respectively. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP (defined below) amount.

Current wording

Net income and income per diluted share for the second quarter of fiscal 2027 were $4,637 and $0.39, respectively, compared with net income and income per diluted share of $3,090 and $0.28, respectively, for the second quarter of fiscal 2026. Adjusted net income and adjusted net income per diluted share for the second quarter of fiscal 2027 were $6,170 and $0.52, respectively, compared with adjusted net income and adjusted net income per diluted share of $3,429 and $0.31, respectively, for the second quarter of fiscal 2026. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP amount.

Previous wording

This Form 10-Q and other documents we file with the Securities and Exchange Commission ("SEC") include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of this Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "can," "may," "intend," "expect," "plan," "goal," "predict," "project," "outlook," "potential," "will," "future," and similar words and expressions.

Current wording

This Form 10-Q and other documents we file with the Securities and Exchange Commission ("SEC") include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements for purposes of this Form 10-Q. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "can," "may," "intend," "expect," "likely," "plan," "goal," "predict," "project," "outlook," "potential," "will," "future," and similar words and expressions.

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 full life-cycle support for rocket engine turbopump systems and components, as well as advanced mixing systems to many of the industry leading launch providers and 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 and advanced mixing systems 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.

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, as well as advanced mixing systems, to many of the industry leading 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 and advanced mixing systems 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

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 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 and we expect that trend to continue for the foreseeable future.

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 likely 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 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 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 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.

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, 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

As illustrated below, we have succeeded over the last several years with our strategy to increase our participation in the Defense market, which comprised 84% of our total backlog at June 30, 2026.

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, 2026.

Previous wording

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

Current wording

*Note: "FYE" refers to fiscal year ended March 31. For more information on this key performance indicator see "Orders, Backlog, and Book-to-Bill Ratio" below.

Previous wording

The following tables provide our net sales by market and geographic region including the percentage of total and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:

Current wording

The following tables provide our net sales by product line and geographic region including the percentage of total and change in comparison to the prior year for each category and period presented. Percentages may not sum to the total due to rounding:

Previous wording

Net sales for the first quarter of fiscal 2027 were $71,342, up $15,855, or 29% compared with the first quarter of fiscal 2026, reflecting the strength of our diversified revenue base as well as the acquisition of FlackTek, which added $6,551 to net sales in the quarter. The increase for the quarter was across multiple markets, including an $11,848, or 40%, increase in sales in the Defense market, primarily due to timing of project milestones, as well as new programs and growth in existing programs. Sales to the Space market increased $2,909, or 86%, over the prior year first quarter, due to new programs and the ramp up of existing programs, as well as the FlackTek acquisition. Sales to the Energy & Process markets increased $1,098, or 5%, as increases in Aftermarket sales and contributions from FlackTek were partially offset by push outs on large capital project activity. Aftermarket sales to the Energy & Process and Defense markets of $9,671 remained strong, increasing 20% over the prior year first quarter.

Current wording

Net sales for the first six months of fiscal 2027 increased $19,588, or 16%, from the first six months of fiscal 2026. The increase was across multiple markets, including a $16,925, or 24%, increase in sales in the Defense market, primarily due to timing of project milestones, as well as new programs, growth in existing programs, and the FlackTek acquisition. Sales to the Space market increased $5,283, or 72%, over the prior year period, due to new programs and the ramp up of existing programs, as well as the FlackTek acquisition. Sales to the Energy & Process markets decreased $2,620, or 6%, primarily due to push outs on large capital project activity, partially offset by growth in New Energy markets, which increased $2,232, or 150%, from the prior year period, as well as the FlackTek acquisition. Aftermarket sales to the Energy & Process and Defense markets of $18,232 increased 8% from the prior year period.

Previous wording

Domestic sales as a percentage of net sales increased to 90% in the first quarter of fiscal 2027 compared with 83% in the first quarter of fiscal 2026. These sales were primarily to the U.S. Defense market, which represented 58% of net sales for the first quarter of fiscal 2027 compared to 53% in the prior year period. 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, Backlog, and Book-to-Bill Ratio" below.

Current wording

Domestic sales as a percentage of aggregate sales were 92% for the first six months of fiscal 2027 compared with 83% in the prior year period. These sales were primarily to the U.S. Defense market, which represented 62% of net sales for the first six months of fiscal 2027 compared to 58% in the prior year period. Sales to customers outside of the U.S., which predominately are in the Energy & Process markets, of $11,828 were down $8,266 or 41% compared with the first six months of fiscal 2026 and primarily related to decreases in our Asia markets. 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, Backlog, and Book-to-Bill Ratio" below.

Previous wording

Changes in SG&A expense, including amortization expense, for the first quarter of fiscal 2027 versus the comparable prior year period are as follows:

Current wording

Changes in SG&A expense, including amortization expense, for the three and six months ending September 30, 2026 versus the comparable prior year periods are as follows:

Previous wording

The increase in SG&A is primarily driven by the incremental SG&A from the acquisition of FlackTek, which accounted for $1,820 of the increase, and acquisition and integration expenses, which contributed $602 of the increase compared to the prior year first quarter. The remaining increases in SG&A expenses primarily reflect investments we are making in our people, our processes, and our technology, which we expect to be approximately $2,500 of incremental costs for fiscal 2027, partially offset by a reduction to the BN Performance Bonus. In connection with the acquisition of Barber-Nichols, LLC ("BN"), we entered into a Performance Bonus

Current wording

The increase in SG&A expense, including intangible amortization, is primarily driven by the incremental SG&A from the acquisition of FlackTek, which accounted for $2,255 of the increase in the second quarter and $4,075 of the increase in the first six months of fiscal 2027 compared to the prior year periods. The remaining increases in SG&A expenses primarily reflect increases in acquisition and integration expenses, as well as investments we are making in our people, our processes, and our technology, which we expect to be approximately $2,500 of incremental costs for fiscal 2027, partially offset by a reduction to the BN Performance Bonus. 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 on the achievement of BN performance objectives for fiscal 2024, 2025, and 2026, which could range between $2,000 to $4,000 per year. The BN Performance Bonus is no longer in effect in fiscal 2027. During the three and six months ended September 30, 2025, we recorded $1,076 and $2,153, respectively, related to the BN Performance Bonus inclusive of applicable payroll taxes and no expense was recorded in the three and six months ended September 30, 2026.

Previous wording

Our effective tax rate in the first quarter of fiscal 2027 was 6.5%, compared with 8.3% in the first quarter of fiscal 2026. The lower effective tax rates in the first quarter of fiscal 2027 and fiscal 2026 in comparison to the statutory rate were primarily due to the discrete tax benefit recognized in those periods related to the vesting of restricted stock units and the Company's improved stock price in comparison to when those units were granted. Additionally, the fiscal 2027 first quarter effective tax rate is lower than the same period of fiscal 2026 due to a higher mix of pre-tax income in lower tax-rate jurisdictions. Our effective tax rate for fiscal 2027 is expected to be between 18% and 20%, 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 2027 was 22%, compared with 27% in the second quarter of fiscal 2026. Our effective tax rate for the first six months of fiscal 2027 was 16%, compared with 17% for the first six months of fiscal 2026. 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, changes in tax laws, as well as the timing of discrete tax items, primarily related to the vesting of restricted stock awards. The lower effective tax rates in the first six months of fiscal 2027 and fiscal 2026 in comparison to the statutory rate were primarily due to the discrete tax benefit recognized in those periods related to the vesting of restricted stock units and the Company's improved stock price in comparison to when those units were granted. The decrease in our effective tax rate for current year periods compared to the prior year periods is primarily due to the enactment of the OBBB discussed above.

Previous wording

Net income and income per diluted share for the first quarter of fiscal 2027 were $3,912 and $0.33 per share, respectively, compared to net income and income per diluted share of $4,595 and $0.42 per share, respectively, for the first quarter of fiscal 2026. Adjusted net income and adjusted net income per diluted share for the first quarter of fiscal 2027 were $5,738 and $0.49 per share, respectively, compared with adjusted net income and adjusted net income per diluted share of $4,938 and $0.45 per share, respectively, for the first quarter of fiscal 2026, an increase of 16% and 9%, respectively. Similarly, adjusted EBITDA (defined below) for the first quarter of fiscal 2027 was $8,750 compared to $6,838 for the same period of fiscal 2026, an increase of 28%. See "Non-GAAP Measures" below for a reconciliation of adjusted net income, adjusted net income per diluted share, and adjusted EBITDA to the comparable GAAP amount.

Current wording

Net income and income per diluted share for the first six months of fiscal 2027 were $8,549 and $0.73, respectively, compared with net income of $7,685 and $0.69, respectively, for the first six months of fiscal 2026. Adjusted net income and adjusted net income per diluted share for the first six months of fiscal 2027 were $11,908 and $1.01, respectively, compared with adjusted net income of $8,367 and $0.75, respectively, for the first six months of fiscal 2026. See "Non-GAAP Measures" below for a reconciliation of adjusted net income and adjusted net income per diluted share to the comparable GAAP (defined below) measure.

Previous wording

Adjusted net income before interest (income) expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income per diluted share are provided for informational purposes only and are not measures of financial performance under the U.S.'s generally accepted accounting principles ("GAAP").

Current wording

Adjusted net income before interest (income) expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted net income per diluted share are provided for informational purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP").

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, we excluded 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

Adjusted EBITDA excludes charges for depreciation, amortization, interest (income) expense, income taxes, acquisition & integration related expenses (income), equity-based compensation, ERP implementation costs, and other unusual/nonrecurring items. Adjusted net income and adjusted net income per diluted share exclude intangible amortization, acquisition & integration related expenses (income), ERP implementation costs, other unusual/nonrecurring items, and the related tax impacts of those adjustments.

Current wording

Adjusted EBITDA excludes charges for depreciation, amortization, interest (income) expense, income taxes, acquisition and integration expense (income), equity-based compensation, ERP implementation costs, and other unusual/nonrecurring items. Adjusted net income and adjusted net income per diluted share exclude intangible amortization, acquisition and integration expense (income), ERP implementation costs, other unusual/nonrecurring items, and the related tax impacts of those adjustments.

Previous wording

Acquisition & integration expense (income), net are incremental costs that are directly related to, and as a result of, acquisition related activity and the subsequent accounting for the contingent earn-out liabilities. These costs (income) may include, among other things, professional, consulting, travel expenses, 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 at 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 expense (income), net are incremental costs that are directly related to, and as a result of acquisition related activity and the subsequent accounting for contingent earn-out liabilities. These costs (income) may include, among other things, professional, consulting, travel expenses, 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

Capital expenditures for the first quarter of fiscal 2027 were $2,609 compared to $7,004 for the comparable period in fiscal 2026 due to timing of major capital expenditure projects. Capital expenditures for the first quarter of fiscal 2027 relate to machinery and equipment, buildings, and leasehold improvements to support our growth and productivity improvement initiatives.

Current wording

Capital expenditures for the first six months of fiscal 2027 was $4,855 compared to $11,148 for the comparable period in fiscal 2026. Capital expenditures for fiscal 2027 relate to machinery and equipment, as well as for buildings and leasehold improvements to support our growth and productivity improvement initiatives.

Previous wording

Capital expenditures for fiscal 2027 are expected to be between $18,000 and $22,000 and relate to continued investing in automation, advanced manufacturing capacity and capabilities, our technology, and strategic growth initiatives intended to support long-term scalable growth and margin expansion, and are expected to generate returns on invested capital above 20%. We estimate that our maintenance capital spend is approximately $2,500 per year. 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

Capital expenditures for fiscal 2027 are expected to be between $15,000 and $20,000 and relate to the continued investing in automation, advanced manufacturing capacity and capabilities, our technology, and strategic growth initiatives intended to support long-term scalable growth and margin expansion, and are expected to generate returns on invested capital above 20%. During the second quarter of fiscal 2027 we began construction of a new 30,000 square foot manufacturing facility adjacent to our BN campus on land that was purchased several years ago and is expected to be completed in the second quarter of fiscal 2028. We estimate that our maintenance capital spend is approximately $2,500 per year. 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.

Previous wording

On April 14, 2026, we entered into a Securities Purchase Agreement with certain accounts advised by T. Rowe Price Investment Management, Inc. pursuant to which we agreed to sell an aggregate of 600 shares of common stock, par value $0.10 per share for $83.36 per share, based upon the 20-day average closing price of the Company's common stock on the New York Stock Exchange on April 13, 2026, for aggregate gross proceeds of $50,000. We utilized $13,000 of the proceeds for debt repayment and are expected to utilize the remaining proceeds to help fund future investment in organic and inorganic growth opportunities.

Current wording

On April 14, 2026, we entered into a Securities Purchase Agreement with certain accounts advised by T. Rowe Price Investment Management, Inc. pursuant to which we agreed to sell an aggregate of 600 shares of common stock, par value $0.10 per share for $83.36 per share, based upon the 20-day average closing price of the Company's common stock on the New York Stock Exchange on April 13,

Previous wording

On April 14, 2026, we entered into a Securities Purchase Agreement with certain accounts advised by T. Rowe Price Investment Management, Inc. pursuant to which we agreed to sell an aggregate of 600 shares of common stock, par value of $0.10 per share for $83.36 per share, based upon the 20-day average closing price of the Company's common stock on the New York Stock Exchange on April 13, 2026, for aggregate gross proceeds of $50,000. We utilized $13,000 of the proceeds for debt repayment and are expected to utilize the remaining proceeds to help fund future investment in organic and inorganic growth opportunities. As a result, Cash and cash equivalents at June 30, 2026 were $26,953, compared with $6,580 at March 31, 2026. Net cash used by operating activities was $12,650 during the first quarter of fiscal 2027, primarily due to the timing of billing and collection of accounts receivable and unbilled revenue and customer deposits, as well as the payment of fiscal 2026 bonuses during the quarter, including the BN Performance Bonus of $4,300, partially offset by cash net income.

Current wording

2026, for aggregate proceeds of $50,000. We utilized $13,000 of the proceeds for debt repayment and are expected to utilize the remaining proceeds to help fund future investment in organic and inorganic growth opportunities.

Previous wording

Cash and cash equivalents were $26,953 at June 30, 2026 compared with $6,580 at March 31, 2026, up $20,373 primarily due to cash provided by financing activities, partially offset by cash used by operations as discussed above. At June 30, 2026, approximately $394 of our cash and cash equivalents is used to secure our letters of credit and $5,862 of our cash is held by our China and India subsidiaries.

Current wording

Cash and cash equivalents were $71,427 at September 30, 2026 compared with $6,580 at March 31, 2026, an increase of $64,847 primarily due to cash provided by financing activities of $34,473 and cash provided by operations of $34,070. At September 30, 2026, approximately $343 of our cash and cash equivalents is used to secure our letters of credit and $4,804 of our cash is held by our China and India subsidiaries.

Previous wording

On October 13, 2023, we entered into a five-year revolving credit facility with Wells Fargo that provides a $50,000 line of credit (the "Revolving Credit Facility"). Simultaneous with the close of the FlackTek acquisition on January 23, 2026, we amended our Revolving Credit Facility to increase the limit to $80,000. As of June 30, 2026, there were no borrowings and $5,520 letters of credit outstanding on the Revolving Credit Facility and the amount available to borrow was $74,480, subject to interest and leverage covenants.

Current wording

On October 13, 2023, we entered into a five-year revolving credit facility with Wells Fargo that provides a $50,000 line of credit (the "Revolving Credit Facility"). Simultaneous with the close of the acquisition of FlackTek on January 23, 2026, the Company amended the Revolving Credit Facility to increase the line of credit to $80,000. As of September 30, 2026, there were no borrowings and $5,264 letters of credit outstanding on the Revolving Credit Facility and the amount available to borrow was $74,736, subject to interest and leverage covenants.

Previous 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 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 Revolving Credit Facility. As of June 30, 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 0.4x.

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 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 Revolving Credit Facility. As of September 30, 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 0.3x.

Previous wording

The 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 three months ended June 30, 2026 or during fiscal 2026 and we currently have no intention to pay dividends for the foreseeable future. There can be no guarantee that we will pay dividends in the future.

Current wording

The 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, 2026, or during fiscal 2026 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

In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure the Company’s financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures provided by other companies. Orders represent definitive agreements with customers to provide products and/or services. Backlog is defined as the total dollar value of orders received for which revenue has not yet been recognized. Total backlog can include both funded and unfunded orders under government contracts. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

Current wording

In addition to the non-GAAP measures discussed above, management uses the following key performance metrics to analyze and measure the Company's financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance and these may not be comparable with measures provided by other companies. Orders represent definitive agreements with customers to provide products and/or services. Backlog is defined as the total dollar value of orders received for which revenue has not yet been recognized. Total backlog can include both funded and unfunded orders under government contracts. Approximately 85% of our Defense backlog is funded. Management believes tracking orders and backlog are useful as it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.

Previous wording

Orders booked in the first quarter of fiscal 2027 were $95,850 or 1.3x net sales for the quarter. Orders for the first quarter of fiscal 2027 included $61,828 of new and follow-on orders to the Defense market to support the U.S. Navy's Columbia and Virginia Class Submarine programs, as well as to provide mission-critical hardware for the MK48 Mod 7 Heavyweight Torpedo. We believe this order activity supports our position as a trusted supplier to the U.S. Navy and allied defense programs. Space orders for the first quarter of fiscal 2027 totaled $14,366 or 2.3x net Space sales for the quarter. Aftermarket orders for the Energy & Process and Defense markets remained strong in the first quarter of fiscal 2027, increasing 5% to $10,899. Orders for large capital projects for the Energy & Process market remained slow during the quarter. FlackTek contributed $13,150 to orders during the quarter, or 2.0x net FlackTek sales. 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.

Current wording

Orders for the first six months of fiscal 2027 decreased $39,547, or 19%, compared to the first six months of fiscal 2026. Aftermarket orders for the Energy & Process and Defense markets remained strong in the second quarter of fiscal 2027, and were $18,312, increasing 91%, or $8,708, compared to the second quarter of fiscal 2026. Space orders for the first six months of fiscal 2027 totaled $24,985, or 2.0x net Space sales for the period. Aftermarket orders for the Energy & Process and Defense markets for the first six months of fiscal 2027 were $29,211, increasing 46%, or $9,267, compared to the prior year period. Orders in the Energy & Process markets for the second quarter of fiscal 2027 increased $181, or 1%, compared to the second quarter of fiscal 2026, as orders for large capital projects for the Energy & Process market remained slow during the three and six month periods ended September 30, 2026, partially offsetting increases in Aftermarket orders in Energy & Process. 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.

Previous wording

Orders to the U.S. represented 96% of total orders for the first quarter of fiscal 2027 compared to 97% in the first quarter of fiscal 2026. These orders were primarily to the defense market which represented 65% of orders for the first quarter of fiscal 2027 and are U.S. based.

Current wording

Orders to the U.S. represented 90% of total orders for the first six months of fiscal 2027 compared to 97% for the prior year. These orders were primarily to the Defense market which represented 61% of orders for the first six months of fiscal 2027 and are U.S. based. The increase in International orders during the second quarter of fiscal 2027 was primarily due to a large vacuum system order for an oil refinery in Venezuela.

Previous wording

Backlog was $557,217 at June 30, 2026, a 15% increase over the prior year period. 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).

Current wording

Backlog was at $561,276 at September 30, 2026, a 12% increase over the prior year period. We expect to recognize revenue on approximately 30% to 35% 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

Based upon the results for the first quarter of fiscal 2027, as well as our expectations for the remainder of the fiscal year, we are reiterating our full year fiscal 2027 guidance provided earlier this year as follows ($ in thousands):

Current wording

Based upon the results for the second quarter of fiscal 2027, as well as our expectations for the remainder of the fiscal year, we are updating our full year fiscal 2027 guidance provided earlier this year as follows ($ in thousands):

Previous wording

Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, do not experience any global disruptions, and experience no impact from any other unforeseen events.

Current wording

Our expectations for sales and profitability assume that we will be able to operate our production facilities at planned capacity, have access to our global supply chain including our subcontractors, do not experience any global disruptions, and experience no further impact from any other unforeseen events.