10-Q 1 ghm-20231231.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended December 31, 2023

or

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

For the transition period from _____________ to ___________

Commission File Number 001-08462

 

GRAHAM CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

16-1194720

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

20 Florence Avenue, Batavia, New York

14020

(Address of principal executive offices)

(Zip Code)

585-343-2216

(Registrant's telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $0.10 Per Share

 

GHM

 

NYSE

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

  ☐

Accelerated filer

  ☒

Non-accelerated filer

  ☐

 

Smaller reporting company

Emerging growth company

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No

As of January 31, 2024, there were outstanding 10,828,327 shares of the registrant’s common stock, par value $0.10 per share.

 

 


 

Graham Corporation and Subsidiaries

Index to Form 10-Q

As of December 31, 2023 and March 31, 2023 and for the three and nine months ended December 31, 2023 and 2022

 

 

 

Page

Part I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

3

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

31

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 6.

Exhibits

33

 

 

 

Signatures

34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

DECEMBER 31, 2023

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

43,818

 

 

$

39,873

 

 

$

136,463

 

 

$

114,091

 

Cost of products sold

 

 

34,095

 

 

 

33,646

 

 

 

108,572

 

 

 

95,840

 

Gross profit

 

 

9,723

 

 

 

6,227

 

 

 

27,891

 

 

 

18,251

 

Other expenses and income:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

8,429

 

 

 

5,284

 

 

 

21,563

 

 

 

15,828

 

Selling, general and administrative – amortization

 

 

383

 

 

 

274

 

 

 

930

 

 

 

821

 

Operating income

 

 

911

 

 

 

669

 

 

 

5,398

 

 

 

1,602

 

Loss on extinguishment of debt

 

 

726

 

 

 

 

 

 

726

 

 

 

 

Other expense (income), net

 

 

93

 

 

 

(63

)

 

 

280

 

 

 

(188

)

Interest expense, net

 

 

37

 

 

 

294

 

 

 

277

 

 

 

697

 

Income before (benefit) provision for income taxes

 

 

55

 

 

 

438

 

 

 

4,115

 

 

 

1,093

 

(Benefit) provision for income taxes

 

 

(110

)

 

 

70

 

 

 

899

 

 

 

245

 

Net income

 

$

165

 

 

$

368

 

 

$

3,216

 

 

$

848

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.02

 

 

$

0.03

 

 

$

0.30

 

 

$

0.08

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.02

 

 

$

0.03

 

 

$

0.30

 

 

$

0.08

 

Weighted average common shares
  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,775

 

 

 

10,611

 

 

 

10,709

 

 

 

10,613

 

Diluted

 

 

10,920

 

 

 

10,660

 

 

 

10,792

 

 

 

10,632

 

 

See Notes to Condensed Consolidated Financial Statements.

3


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

165

 

 

$

368

 

 

$

3,216

 

 

$

848

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

137

 

 

 

161

 

 

 

(173

)

 

 

(519

)

Defined benefit pension and other postretirement plans net
 of income tax expense of $
47 and $38 for the three months
ended December 31, 2023 and 2022, respectively, and $
140
and $
112 for the nine months ended December 31, 2023 and
2022, respectively

 

 

164

 

 

 

131

 

 

 

492

 

 

 

393

 

Total other comprehensive income (loss)

 

 

301

 

 

 

292

 

 

 

319

 

 

 

(126

)

Total comprehensive income

 

$

466

 

 

$

660

 

 

$

3,535

 

 

$

722

 

 

See Notes to Condensed Consolidated Financial Statements.

 

4


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

(Unaudited)

 

 

December 31, 2023

 

 

March 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,163

 

 

$

18,257

 

Trade accounts receivable, net of allowances ($1,834 and $1,841 at December 31 and
   March 31, 2023, respectively)

 

 

35,666

 

 

 

24,000

 

Unbilled revenue

 

 

28,671

 

 

 

39,684

 

Inventories

 

 

31,078

 

 

 

26,293

 

Prepaid expenses and other current assets

 

 

4,011

 

 

 

1,534

 

Income taxes receivable

 

 

745

 

 

 

302

 

      Total current assets

 

 

115,334

 

 

 

110,070

 

Property, plant and equipment, net

 

 

29,027

 

 

 

25,523

 

Prepaid pension asset

 

 

6,322

 

 

 

6,107

 

Operating lease assets

 

 

7,626

 

 

 

8,237

 

Goodwill

 

 

25,087

 

 

 

23,523

 

Customer relationships, net

 

 

14,584

 

 

 

10,718

 

Technology and technical know-how, net

 

 

11,254

 

 

 

9,174

 

Other intangible assets, net

 

 

7,378

 

 

 

7,610

 

Deferred income tax asset

 

 

1,734

 

 

 

2,798

 

Other assets

 

 

368

 

 

 

158

 

Total assets

 

$

218,714

 

 

$

203,918

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt obligations

 

$

3,000

 

 

$

 

Current portion of long-term debt

 

 

 

 

 

2,000

 

Current portion of finance lease obligations

 

 

19

 

 

 

29

 

Accounts payable

 

 

16,365

 

 

 

20,222

 

Accrued compensation

 

 

14,726

 

 

 

10,401

 

Accrued expenses and other current liabilities

 

 

5,255

 

 

 

6,434

 

Customer deposits

 

 

63,005

 

 

 

46,042

 

Operating lease liabilities

 

 

1,221

 

 

 

1,022

 

Income taxes payable

 

 

 

 

 

16

 

Total current liabilities

 

 

103,591

 

 

 

86,166

 

Long-term debt

 

 

 

 

 

9,744

 

Finance lease obligations

 

 

72

 

 

 

85

 

Operating lease liabilities

 

 

6,760

 

 

 

7,498

 

Deferred income tax liability

 

 

61

 

 

 

108

 

Accrued pension and postretirement benefit liabilities

 

 

1,341

 

 

 

1,342

 

Other long-term liabilities

 

 

3,133

 

 

 

2,042

 

Total liabilities

 

 

114,958

 

 

 

106,985

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $1.00 par value, 500 shares authorized

 

 

 

 

 

 

Common stock, $0.10 par value, 25,500 shares authorized, 10,971 and 10,774 shares
     issued and
10,828 and 10,635 shares outstanding at December 31 and March 31, 2023,
     respectively

 

 

1,097

 

 

 

1,075

 

Capital in excess of par value

 

 

31,678

 

 

 

28,061

 

Retained earnings

 

 

80,659

 

 

 

77,443

 

Accumulated other comprehensive loss

 

 

(7,144

)

 

 

(7,463

)

Treasury stock (143 and 138 shares at December 31 and March 31, 2023, respectively)

 

 

(2,534

)

 

 

(2,183

)

Total stockholders’ equity

 

 

103,756

 

 

 

96,933

 

Total liabilities and stockholders’ equity

 

$

218,714

 

 

$

203,918

 

 

5


 

See Notes to Condensed Consolidated Financial Statements.

6


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

Nine Months Ended

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

Net income

 

$

3,216

 

 

$

848

 

Adjustments to reconcile net income to net cash provided by operating
   activities:

 

 

 

 

 

 

Depreciation

 

 

2,375

 

 

 

2,611

 

Amortization of intangible assets

 

 

1,487

 

 

 

1,857

 

Amortization of actuarial losses

 

 

632

 

 

 

504

 

Amortization of debt issuance costs

 

 

131

 

 

 

153

 

Equity-based compensation expense

 

 

1,002

 

 

 

582

 

Loss on extinguishment of debt

 

 

726

 

 

 

 

Deferred income taxes

 

 

935

 

 

 

232

 

(Increase) decrease in operating assets, net of acquisition:

 

 

 

 

 

 

Accounts receivable

 

 

(11,335

)

 

 

(7,755

)

Unbilled revenue

 

 

11,213

 

 

 

(8,082

)

Inventories

 

 

(4,357

)

 

 

(6,801

)

Prepaid expenses and other current and non-current assets

 

 

(1,526

)

 

 

(500

)

Income taxes receivable

 

 

(459

)

 

 

(137

)

Operating lease assets

 

 

894

 

 

 

913

 

Prepaid pension asset

 

 

(215

)

 

 

(488

)

Increase (decrease) in operating liabilities, net of acquisition:

 

 

 

 

 

 

Accounts payable

 

 

(3,949

)

 

 

5,511

 

Accrued compensation, accrued expenses and other current and non-current
   liabilities

 

 

2,948

 

 

 

2,116

 

Customer deposits

 

 

16,590

 

 

 

18,776

 

Operating lease liabilities

 

 

(825

)

 

 

(802

)

Long-term portion of accrued compensation, accrued pension and
   postretirement benefit liabilities

 

 

 

 

 

(592

)

Net cash provided by operating activities

 

 

19,483

 

 

 

8,946

 

Investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(5,193

)

 

 

(2,394

)

Proceeds from disposal of property, plant and equipment

 

 

38

 

 

 

 

Acquisition of P3 Technologies, LLC, net of cash acquired

 

 

(6,812

)

 

 

 

Net cash used by investing activities

 

 

(11,967

)

 

 

(2,394

)

Financing activities:

 

 

 

 

 

 

Borrowings of short-term debt obligations

 

 

13,000

 

 

 

5,000

 

Principal repayments on debt

 

 

(22,522

)

 

 

(8,517

)

Payment of debt exit costs

 

 

(752

)

 

 

 

Repayments on financing lease obligations

 

 

(224

)

 

 

(205

)

Payment of debt issuance costs

 

 

(241

)

 

 

(122

)

Issuance of common stock

 

 

225

 

 

 

 

Purchase of treasury stock

 

 

(57

)

 

 

(22

)

Net cash used by financing activities

 

 

(10,571

)

 

 

(3,866

)

Effect of exchange rate changes on cash

 

 

(39

)

 

 

(212

)

Net (decrease) increase in cash and cash equivalents

 

 

(3,094

)

 

 

2,474

 

Cash and cash equivalents at beginning of period

 

 

18,257

 

 

 

14,741

 

Cash and cash equivalents at end of period

 

$

15,163

 

 

$

17,215

 

 

See Notes to Condensed Consolidated Financial Statements.

 

7


 

GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

NINE MONTHS ENDED DECEMBER 31, 2023

(Amounts in thousands)

 

(Unaudited)

 

 

 

Common Stock

 

 

Capital in

 

 

 

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

 

 

 

Par

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Par Value

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Equity

 

Balance at April 1, 2023

 

 

10,774

 

 

$

1,075

 

 

$

28,061

 

 

$

77,443

 

 

$

(7,463

)

 

$

(2,183

)

 

$

96,933

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,640

 

 

 

(88

)

 

 

 

 

 

2,552

 

Issuance of shares

 

 

53

 

 

 

8

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(9

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

293

 

 

 

 

 

 

 

 

 

 

 

 

293

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

 

 

 

(294

)

 

 

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57

)

 

 

(57

)

Balance at June 30, 2023

 

 

10,818

 

 

 

1,082

 

 

 

28,641

 

 

 

80,083

 

 

 

(7,551

)

 

 

(2,534

)

 

 

99,721

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

106

 

 

 

 

 

 

517

 

Issuance of shares

 

 

28

 

 

 

2

 

 

 

223

 

 

 

 

 

 

 

 

 

 

 

 

225

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

332

 

 

 

 

 

 

 

 

 

 

 

 

332

 

Balance at September 30, 2023

 

 

10,846

 

 

 

1,084

 

 

 

29,196

 

 

 

80,494

 

 

 

(7,445

)

 

 

(2,534

)

 

 

100,795

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

165

 

 

 

301

 

 

 

 

 

 

466

 

Issuance of shares for purchase of P3 Technologies, LLC

 

 

125

 

 

 

13

 

 

 

2,104

 

 

 

 

 

 

 

 

 

 

 

 

2,117

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

378

 

 

 

 

 

 

 

 

 

 

 

 

378

 

Balance at December 31, 2023

 

 

10,971

 

 

$

1,097

 

 

$

31,678

 

 

$

80,659

 

 

$

(7,144

)

 

$

(2,534

)

 

$

103,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

8


 

GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

NINE MONTHS ENDED DECEMBER 31, 2022

(Amounts in thousands)

 

(Unaudited)

 

 

 

Common Stock

 

 

Capital in

 

 

 

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

 

 

 

Par

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

Stockholders'

 

 

 

Shares

 

 

Value

 

 

Par Value

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Equity

 

Balance at April 1, 2022

 

 

10,801

 

 

$

1,080

 

 

$

27,770

 

 

$

77,076

 

 

$

(6,471

)

 

$

(2,961

)

 

$

96,494

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

676

 

 

 

(212

)

 

 

 

 

 

464

 

Forfeiture of shares

 

 

(32

)

 

 

(3

)

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

114

 

 

 

 

 

 

 

 

 

 

 

 

114

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(21

)

Balance at June 30, 2022

 

 

10,769

 

 

 

1,077

 

 

 

27,887

 

 

 

77,752

 

 

 

(6,683

)

 

 

(2,982

)

 

 

97,051

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

(206

)

 

 

 

 

 

(402

)

Forfeiture of shares

 

 

(11

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

198

 

 

 

 

 

 

 

 

 

 

 

 

198

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

(237

)

 

 

 

 

 

 

 

 

356

 

 

 

119

 

Balance at September 30, 2022

 

 

10,758

 

 

 

1,076

 

 

 

27,849

 

 

 

77,556

 

 

 

(6,889

)

 

 

(2,626

)

 

 

96,966

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

368

 

 

 

292

 

 

 

 

 

 

660

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

270

 

 

 

 

 

 

 

 

 

 

 

 

270

 

Balance at December 31, 2022

 

 

10,758

 

 

$

1,076

 

 

$

28,119

 

 

$

77,924

 

 

$

(6,597

)

 

$

(2,626

)

 

$

97,896

 

 

See Notes to Condensed Consolidated Financial Statements.

9


 

GRAHAM CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except per share data)

 

NOTE 1 – BASIS OF PRESENTATION:

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its wholly-owned subsidiaries located in Arvada, Colorado, Suzhou, China and Ahmedabad, India at December 31, 2023 and March 31, 2023, and its recently acquired wholly-owned subsidiary, P3 Technologies, LLC ("P3"), located in Jupiter, Florida (See Note 2) at December 31, 2023. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, each as promulgated by the U.S. Securities and Exchange Commission. The Company's Condensed Consolidated Financial Statements do not include all information and notes required by GAAP for complete financial statements. The unaudited Condensed Consolidated Balance Sheet as of March 31, 2023 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, 2023. For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023 ("fiscal 2023"). In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included in the Company's Condensed Consolidated Financial Statements.

The Company's results of operations and cash flows for the three and nine months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2024 ("fiscal 2024").

NOTE 2 – ACQUISITION:

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

This transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price of $10,494 was comprised of 125 shares of the Company's common stock, representing a value of $2,117 at a price of $16.85 per share, and cash consideration of $7,098, subject to certain potential adjustments, including a customary working capital adjustment. As of December 31, 2023, there was a $761 receivable accrued related to such working capital adjustment. The cash consideration was funded through borrowings on the Company's line of credit. The purchase agreement included a contingent earn-out dependent upon certain financial measures of P3 post-acquisition, in which the sellers are eligible to receive up to $3,000 in additional cash consideration. At December 31, 2023, a liability of $2,040 was recorded for the contingent earn-out. Acquisition related costs of $274 were expensed in the three and nine months ended December 31, 2023, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

The cost of the acquisition was allocated to the assets acquired and liabilities assumed based upon their estimated fair value at the date of acquisition and the amount exceeding the fair value of $1,565 was recorded as goodwill, which is deductible for tax purposes. The following table summarizes the preliminary purchase price allocation of the assets acquired and liabilities assumed:

10


 

 

 

November 9,

 

 

 

2023

 

Assets acquired:

 

 

 

  Cash and cash equivalents

 

$

286

 

  Trade accounts receivable, net of allowances

 

 

465

 

  Unbilled revenue

 

 

302

 

  Inventories

 

 

443

 

  Prepaid expenses and other current assets

 

 

93

 

  Property, plant & equipment, net

 

 

542

 

  Operating lease assets

 

 

130

 

  Goodwill

 

 

1,565

 

  Customer relationships

 

 

4,400

 

  Technology and technical know-how

 

 

2,500

 

  Tradename

 

 

300

 

  Deferred income tax asset

 

 

53

 

Total assets acquired

 

 

11,079

 

Liabilities assumed:

 

 

 

  Accrued compensation

 

 

62

 

  Customer deposits

 

 

389

 

  Operating lease liabilities

 

 

134

 

Total liabilities assumed

 

 

585

 

Purchase price

 

$

10,494

 

The fair value of acquisition-related intangible assets includes customer relationships, technology and technical know-how, and tradename. The tradename is included in the line item "Other intangible assets, net" in the Condensed Consolidated Balance Sheets. The fair value of customer relationships was calculated using an income approach, specifically the Multi Period Excess Earnings method, which incorporates assumptions regarding retention rate, new customer growth and customer related costs. The fair value of tradename and technology and technical know-how were both calculated using a Relief from Royalty method, which develops a market based royalty rate used to reflect the after tax royalty savings attributable to owning the intangible asset.

Customer relationships and tradename are amortized in selling, general and administrative expense on a straight line basis over their estimated useful lives of eight years and three years respectively. Technology and technical know-how is amortized in cost of products sold on a straight line basis over its estimated useful life of ten years.

The Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2023 includes net sales of P3 of $1,027 and net income of $176. The following unaudited pro forma information presents the consolidated results of operations of the Company as if the P3 acquisition had occurred at the beginning of each of the fiscal periods presented:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

44,186

 

 

$

40,651

 

 

$

140,019

 

 

$

116,628

 

Net income

 

 

464

 

 

 

340

 

 

 

4,554

 

 

 

499

 

Loss per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.03

 

 

$

0.42

 

 

$

0.05

 

Diluted

 

$

0.04

 

 

$

0.03

 

 

$

0.42

 

 

$

0.05

 

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

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

11


 

NOTE 3 – REVENUE RECOGNITION:

The Company recognizes revenue on contracts when or as it satisfies a performance obligation by transferring control of the product to the customer. For contracts in which revenue is recognized upon shipment, control is generally transferred when products are shipped, title is transferred, significant risks of ownership have transferred, the Company has rights to payment, and rewards of ownership pass to the customer. For contracts in which revenue is recognized over time, control is generally transferred as the Company creates an asset that does not have an alternative use to the Company and the Company has an enforceable right to payment for the performance completed to date.

The following table presents the Company’s revenue disaggregated by product line and geographic area:

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

Market

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Refining

 

$

7,638

 

 

$

6,497

 

 

$

21,794

 

 

$

21,940

 

Chemical/Petrochemical

 

 

4,130

 

 

 

3,927

 

 

 

14,536

 

 

 

15,606

 

Defense

 

 

24,330

 

 

 

21,687

 

 

 

72,265

 

 

 

46,342

 

Space

 

 

2,931

 

 

 

3,510

 

 

 

10,528

 

 

 

14,278

 

Other Commercial

 

 

4,789

 

 

 

4,252

 

 

 

17,340

 

 

 

15,925

 

Net sales

 

$

43,818

 

 

$

39,873

 

 

$

136,463

 

 

$

114,091

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographic Region