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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, 2025

☐ 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 February 5, 2026, there were outstanding 11,072,780 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, 2025 and March 31, 2025 and for the three and nine months ended December 31, 2025 and 2024


		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	31

Item 4.	Controls and Procedures	32

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	33

Item 6.	Exhibits	34

Signatures		35

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

DECEMBER 31, 2025

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
Net sales	$	56,701		$	47,037		$	178,215		$	150,551
Cost of products sold		43,232			35,351			135,719			113,698
Gross profit		13,469			11,686			42,496			36,853
Other operating expenses and income:
Selling, general and administrative		10,129			9,260			29,315			26,821
Selling, general and administrative – amortization		435			436			1,308			1,309
Other operating income		(219	)		(220	)		(486	)		(946	)
Operating income		3,124			2,210			12,359			9,669
Other expense, net		90			91			334			273
Interest income, net		(169	)		(128	)		(414	)		(442	)
Income before provision for income taxes		3,203			2,247			12,439			9,838
Provision for income taxes		358			659			1,909			2,003
Net income	$	2,845		$	1,588		$	10,530		$	7,835
Per share data
Basic:
Net income	$	0.26		$	0.15		$	0.96		$	0.72
Diluted:
Net income	$	0.25		$	0.14		$	0.95		$	0.71
Weighted average common shares outstanding:
Basic		10,988			10,890			10,967			10,880
Diluted		11,157			11,057			11,108			11,016

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollar amounts in thousands)

(Unaudited)


	Three Months Ended					Nine Months Ended
	December 31,					December 31,
	2025		2024			2025		2024
Net income	$	2,845	$	1,588		$	10,530	$	7,835
Other comprehensive (expense) income:
Foreign currency translation adjustment		72		(208	)		66		(105	)
Defined benefit pension and other postretirement plans net of income tax expense of $48 and $45 for the three months ended December 31, 2025 and 2024, respectively, and $146 and $135 for the nine months ended December 31, 2025 and 2024, respectively		161		151			484		451
Total other comprehensive income		233		(57	)		550		346
Total comprehensive income	$	3,078	$	1,531		$	11,080	$	8,181

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)

(Unaudited)


	December 31, 2025			March 31, 2025
Assets
Current assets:
Cash and cash equivalents	$	22,254		$	21,577
Trade accounts receivable, net of allowances ($360 and $630 at December 31 and March 31, 2025, respectively)		31,704			35,507
Unbilled revenue		57,823			38,494
Inventories		48,523			40,025
Prepaid expenses and other current assets		3,491			4,249
Income taxes receivable		19			1,520
Total current assets		163,814			141,372
Property, plant and equipment, net		57,321			50,649
Prepaid pension asset		6,055			5,950
Operating lease assets		5,587			6,386
Goodwill		26,181			25,520
Customer relationships, net		12,304			13,159
Technology and technical know-how, net		10,383			10,310
Tradenames, net		6,783			6,858
Deferred income tax asset		1,531			1,502
Other assets		2,968			2,404
Total assets	$	292,927		$	264,110
Liabilities and stockholders’ equity
Current liabilities:
Current portion of finance lease obligations	$	23		$	21
Accounts payable		17,509			27,309
Accrued compensation		18,503			19,161
Accrued expenses and other current liabilities		4,530			4,322
Customer deposits		111,984			84,062
Operating lease liabilities		1,460			1,275
Income taxes payable		660			—
Total current liabilities		154,669			136,150
Finance lease obligations		27			44
Operating lease liabilities		4,544			5,514
Deferred income tax liability		74			—
Accrued pension and postretirement benefit liabilities		1,191			1,192
Other long-term liabilities		1,112			1,633
Total liabilities		161,617			144,533
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, 11,162 and 11,077 shares issued and 10,988 and 10,903 shares outstanding at December 31 and March 31, 2025, respectively		1,116			1,107
Capital in excess of par value		35,260			34,616
Retained earnings		104,759			94,229
Accumulated other comprehensive loss		(6,437	)		(6,987	)
Treasury stock (174 shares at December 31 and March 31, 2025)		(3,388	)		(3,388	)
Total stockholders’ equity		131,310			119,577
Total liabilities and stockholders’ equity	$	292,927		$	264,110

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(Unaudited)


	Nine Months Ended
	December 31,
	2025			2024
Operating activities:
Net income	$	10,530		$	7,835
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,670			2,712
Amortization of intangible assets		1,507			1,663
Bad debt reserves		(369	)		—
Amortization of actuarial losses		630			586
Equity-based compensation expense		1,727			1,204
Gain on disposal or sale of property, plant and equipment		(38	)		—
Change in fair value of contingent consideration		(486	)		(946	)
Deferred income taxes		(39	)		(91	)
(Increase) decrease in operating assets, net of acquisition:
Accounts receivable		4,169			9,394
Unbilled revenue		(19,308	)		(9,879	)
Inventories		(8,474	)		(5,628	)
Prepaid expenses and other current and non-current assets		4			(1,665	)
Income taxes receivable		1,501			(46	)
Operating lease assets		1,011			965
Prepaid pension asset		(105	)		(175	)
Increase (decrease) in operating liabilities, net of acquisition:
Accounts payable		(6,690	)		3,914
Accrued compensation, accrued expenses and other current and non-current liabilities		(551	)		(1,380	)
Customer deposits		27,830			21,000
Income taxes payable		562			(646	)
Operating lease liabilities		(995	)		(948	)
Long-term portion of accrued compensation, accrued pension and postretirement benefit liabilities		(2	)		4
Net cash provided by operating activities		16,084			27,873
Investing activities:
Purchase of property, plant and equipment		(13,482	)		(13,800	)
Proceeds from disposal of property, plant and equipment		154			—
Acquisitions, net of cash acquired		(895	)		(170	)
Net cash used by investing activities		(14,223	)		(13,970	)
Financing activities:
Borrowings of debt obligations		8,000			—
Principal repayments on debt		(8,000	)		—
Repayments on financing lease obligations		(251	)		(237	)
Issuance of common stock		458			334
Tax withholdings related to net share settlements of restricted stock units and awards		(1,532	)		(854	)
Net cash used by financing activities		(1,325	)		(757	)
Effect of exchange rate changes on cash		141			(39	)
Net increase in cash and cash equivalents		677			13,107
Cash and cash equivalents at beginning of period		21,577			16,939
Cash and cash equivalents at end of period	$	22,254		$	30,046

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollar 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, 2025		11,077	$	1,107	$	34,616		$	94,229	$	(6,987	)	$	(3,388	)	$	119,577
Comprehensive income									4,595		212						4,807
Stock awards vested		73		7		(1,539	)										(1,532	)
Recognition of equity-based compensation expense						532											532
Balance at June 30, 2025		11,150	$	1,114	$	33,609		$	98,824	$	(6,775	)	$	(3,388	)	$	123,384
Comprehensive income									3,090		105						3,195
Issuance of shares		12		2		456											458
Recognition of equity-based compensation expense						553											553
Balance at September 30, 2025		11,162	$	1,116	$	34,618		$	101,914	$	(6,670	)	$	(3,388	)	$	127,590
Comprehensive income									2,845		233						3,078
Recognition of equity-based compensation expense						642											642
Balance at December 31, 2025		11,162	$	1,116	$	35,260		$	104,759	$	(6,437	)	$	(3,388	)	$	131,310


	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, 2024		10,993	$	1,099	$	32,015		$	81,999	$	(7,013	)	$	(2,534	)	$	105,566
Comprehensive income									2,966		122						3,088
Stock awards vested		50		5		(5	)										—
Recognition of equity-based compensation expense						344											344
Tax withholdings related to settlements of restricted stock														(810	)		(810	)
Balance at June 30, 2024		11,043	$	1,104	$	32,354		$	84,965	$	(6,891	)	$	(3,344	)	$	108,188
Comprehensive income									3,281		281						3,562
Issuance of shares		21		2		332											334
Recognition of equity-based compensation expense						434											434
Tax withholdings related to settlements of restricted stock														(44	)		(44	)
Balance at September 30, 2024		11,064	$	1,106	$	33,120		$	88,246	$	(6,610	)	$	(3,388	)	$	112,474
Comprehensive income (loss)									1,588		(57	)					1,531
Recognition of equity-based compensation expense						426											426
Balance at December 31, 2024		11,064	$	1,106	$	33,546		$	89,834	$	(6,667	)	$	(3,388	)	$	114,431

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share data)

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION:

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its wholly-owned subsidiaries located in Arvada, CO, Jupiter, FL, Suzhou, China and Ahmedabad and Pune, India at December 31 and March 31, 2025. 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 10-01 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, 2025 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, 2025. 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, 2025 ("fiscal 2025"). 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, 2025 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2026 ("fiscal 2026").

NOTE 2 – ACQUISITION:

On October 20, 2025, the Company completed its acquisition of Xdot Bearing Technologies ("Xdot"), a specialized consulting, design, and engineering firm focused on foil bearing technology. Xdot will be integrated into the Barber-Nichols ("BN") business. The purchase price of this transaction was $900, subject to certain potential adjustments including a customary working capital adjustment, and was funded with cash on hand. The purchase agreement included two potential cash contingent earn-outs to be paid on the first and second anniversary of the transaction dependent upon the achievement of certain qualitative milestones totaling $600. As of December 31, 2025, a $514 contingent earn-out liability was recorded. The Company preliminarily recorded goodwill in the amount of $661, as well as an intangible asset for technology and technical know-how in the amount of $650, which will be amortized over 10 years and is deductible for tax purposes. The sales and results of Xdot were immaterial to fiscal 2026. Acquisition related costs were $539 and $643 for the three and nine months ended December 31, 2025 in connection with the Company's acquisitions.

See Note 16 "Subsequent Events" for additional information regarding the Company's acquisition activity.

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	2025		2024		2025		2024
Defense	$	35,283	$	27,023	$	105,568	$	87,014
Energy & Process		18,287		16,193		62,139		52,353
Space		3,131		3,821		10,508		11,184
Net sales	$	56,701	$	47,037	$	178,215	$	150,551


Geographic Region
Asia	$	3,425	$	2,275	$	11,160	$	11,851
Canada		2,744		2,441		9,871		5,102
Middle East		1,402		1,551		4,518		3,328
South America		141		495		592		864
U.S.		48,112		39,675		149,532		126,065
All other		877		600		2,542		3,341
Net sales	$	56,701	$	47,037	$	178,215	$	150,551

A performance obligation represents a promise in a contract to provide a distinct good or service to a customer. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferred products. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when or as the performance obligation is satisfied. In certain cases, the Company may separate a contract into more than one performance obligation, while in other cases, several products may be part of a fully integrated solution and are bundled into a single performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods underlying each performance obligation. The Company has made an accounting policy election to exclude from the measurement of the contract price all taxes assessed by government authorities that are collected by the Company from its customers. The Company does not adjust the contract price for the effects of a financing component if the Company expects, at contract inception, that the period between when a product is transferred to a customer and when the customer pays for the product will be one year or less. Shipping and handling fees billed to the customer are recorded in revenue and the related costs incurred for shipping and handling are included in cost of products sold.

The Company recognizes revenue over time when contract performance results in the creation of a product for which the Company does 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, an input method based upon a ratio of total contract costs incurred to date to management’s estimate of the total contract costs to be incurred or an output method based upon completion of operational milestones, depending upon the nature of the contract. The Company has established the systems and procedures essential to developing the estimates required to account for performance obligations over time. These procedures include monthly review by management of costs incurred, progress towards completion, identified risks and opportunities, sourcing determinations, changes in estimates of costs yet to be incurred, availability of materials, and execution by subcontractors. Sales and earnings are adjusted in current accounting periods based on revisions in the contract value due to pricing changes and estimated costs at completion. Losses on contracts are recognized immediately when evident to management. Revenue on the majority of the Company's contracts, as measured by number of contracts, is recognized upon shipment to the customer. Revenue on larger contracts, which are fewer in number but represent the majority of revenue, is recognized over time. The following table presents the Company's revenue percentages disaggregated by revenue recognized over time or upon shipment:


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2025			2024			2025			2024

Revenue recognized over time		79	%		75	%		81	%		79	%
Revenue recognized at shipment		21	%		25	%		19	%		21	%

The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable, unbilled revenue (contract assets) and customer deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Unbilled revenue represents revenue

on contracts that is recognized over time and exceeds the amount that has been billed to the customer. Unbilled revenue is separately presented in the Condensed Consolidated Balance Sheets. The Company may have an unconditional right to payment upon billing and prior to satisfying the performance obligations. The Company will then record a contract liability and an offsetting asset of equal amount until the deposit is collected and the performance obligations are satisfied. Customer deposits are separately presented in the Condensed Consolidated Balance Sheets. Customer deposits are not considered a significant financing component as they are generally received less than one year before the product is completed or used to procure specific material on a contract, as well as related overhead costs incurred during design and construction.

Net contract assets (liabilities) consisted of the following:


	December 31, 2025			March 31, 2025			Change			Change due to revenue recognized		Change due to invoicing customers/ additional deposits

Unbilled revenue - contract assets	$	57,823		$	38,494		$	19,329		$	93,028	$	(73,699	)
Customer deposits - contract liabilities		(111,984	)		(84,062	)		(27,922	)		58,165		(86,087	)
Net contract (liabilities) assets	$	(54,161	)	$	(45,568	)	$	(8,593	)

Contract liabilities at December 31, and March 31, 2025 include $7,506 and $12,315, respectively, of customer deposits for which the Company has an unconditional right to collect payment. Trade accounts receivable, as presented on the Condensed Consolidated Balance Sheets, includes corresponding balances at December 31, and March 31, 2025, respectively.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were $2,506 and $1,999 at December 31, and March 31, 2025, respectively.

The Company’s remaining unsatisfied performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company also refers to this measure as backlog. As of December 31, 2025, the Company had remaining unsatisfied performance obligations of $515,633. The Company expects to recognize revenue on approximately 35% to 40% of the remaining performance obligations within one year, 25% to 30% in one to two years and the remaining beyond two years.

NOTE 4 – INVENTORIES:

Inventories are stated at the lower of cost or net realizable value, using the average cost method. Major classifications of inventories are as follows:


	December 31,		March 31,
	2025		2025
Raw materials and supplies	$	5,818	$	5,859
Work in process		40,147		32,579
Finished products		2,558		1,587
Total	$	48,523	$	40,025

NOTE 5 – INTANGIBLE ASSETS:

Intangible assets are comprised of the following:


	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At December 31, 2025
Intangibles subject to amortization:
Customer relationships	8 - 20 years	$	16,200	$	3,896	$	12,304
Technology and technical know-how	10 - 20 years		13,250		2,867		10,383
Tradename	3 years		300		217		83
		$	29,750	$	6,980	$	22,770

Intangibles not subject to amortization:
Goodwill	Indefinite	$	26,181	$	—	$	26,181
Tradename	Indefinite		6,700		—		6,700
		$	32,881	$	—	$	32,881


	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At March 31, 2025
Intangibles subject to amortization:
Customer relationships	8 - 20 years	$	16,200	$	3,041	$	13,159
Technology and technical know-how	10 - 20 years		12,600		2,290		10,310
Backlog	4 years		3,900		3,900		—
Tradename	3 years		300		142		158
		$	33,000	$	9,373	$	23,627

Intangibles not subject to amortization:
Goodwill	Indefinite	$	25,520	$	—	$	25,520
Tradename	Indefinite		6,700		—		6,700
		$	32,220	$	—	$	32,220

Intangible amortization was $510 and $554 for the three months ended December 31, 2025 and 2024, respectively, and $1,507 and $1,663 for the nine months ended December 31, 2025 and 2024, respectively. The estimated annual future amortization expense by fiscal year is as follows:


	Annual Amortization
Remainder of 2026	$	515
2027		2,018
2028		1,960
2029		1,960
2030		1,960
2031 and thereafter		14,357
Total intangible amortization	$	22,770

NOTE 6 – EQUITY-BASED COMPENSATION:

The 2020 Graham Corporation Equity Incentive Plan, as amended (the "2020 Plan"), provides for the issuance of 722 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, restricted stock units and stock awards to officers, key employees and outside directors, including 112 shares that became available under the 2020 Plan from the Company’s prior plan, the Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value (the "2000 Plan"). As of August 11, 2020, the effective date of the 2020 Plan, no further awards will be granted under the 2000 Plan.

Five time vesting restricted stock units ("RSUs") and no performance based restricted stock units ("PSUs") were awarded in the three months ended December 31, 2025. No RSUs or PSUs were awarded in the three months ended December 31, 2024. The following restricted stock units were awarded in the nine months ended December 31, 2025 and 2024:


	Vest 100% on First		Vest One-Third Per Year		Vest 100% on Third
	Anniversary (1)		Over Three-Year Term (1)		Anniversary (1)
			Officers and		Officers and		Total Shares
Nine months ended December 31,	Directors		Key Employees		Key Employees		Awarded
2025
Time Vesting RSUs	11		22			—	33
Performance Vesting PSUs		—		—	42		42
2024
Time Vesting RSUs	18		29		8		55
Performance Vesting PSUs		—		—	62		62

(1)Subject to the terms of the applicable award.

The Company has an Employee Stock Purchase Plan, as amended (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the lower of the last or first day of the six-month offering period. As of December 31, 2025, a total of 88 shares of common stock remain available to be purchased under the ESPP.

The Company has recognized equity-based compensation costs, which is primarily included in selling, general and administrative costs, as follows:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
Restricted stock awards	$	—	$	—	$	—	$	33
Restricted stock units		599		392		1,605		1,074
Employee stock purchase plan		43		34		122		97
	$	642	$	426	$	1,727	$	1,204

Income tax benefit recognized	$	148	$	98	$	396	$	277

NOTE 7 – INCOME PER SHARE:

Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted income per share is calculated by dividing net income by the weighted average number of common shares outstanding

and, when applicable, potential common shares outstanding during the period. A reconciliation of the numerators and denominators of basic and diluted income per share is presented below:


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
Basic income per share
Numerator:
Net income	$	2,845	$	1,588	$	10,530	$	7,835
Denominator:
Weighted average common shares outstanding		10,988		10,890		10,967		10,880
Basic income per share	$	0.26	$	0.15	$	0.96	$	0.72

Diluted income per share
Numerator:
Net income	$	2,845	$	1,588	$	10,530	$	7,835
Denominator:
Weighted average common shares outstanding		10,988		10,890		10,967		10,880
Restricted stock units outstanding		169		167		141		136
Weighted average common and potential common shares outstanding		11,157		11,057		11,108		11,016
Diluted income per share	$	0.25	$	0.14	$	0.95	$	0.71

NOTE 8 – PRODUCT WARRANTY LIABILITY:

The reconciliation of the changes in the product warranty liability is as follows:


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
Balance at beginning of period	$	737		$	637		$	786		$	806
Expense for product warranties		144			151			162			199
Product warranty claims paid		(18	)		(27	)		(85	)		(244	)
Balance at end of period	$	863		$	761		$	863		$	761

The product warranty liability is included in the line item accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

NOTE 9 – CASH FLOW STATEMENT:

Interest and income taxes paid as well as non-cash investing and financing activities are as follows:


	For the Nine Months Ended
	December 31,
	2025		2024
Interest paid	$	183	$	243
Income taxes paid		117		2,826
Capital purchases recorded in accounts payable		855		1,587

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

The Company has been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in, or accompanying, products made by the Company or from exposure to asbestos at the Company's facilities. The Company is a co-defendant with numerous other defendants in these lawsuits and intends to vigorously defend itself against these claims. The claims in most of the Company’s current lawsuits are similar to those made in previous asbestos-related suits that named the Company as a defendant, which either were dismissed when it was shown that the Company had not supplied products to the plaintiffs’ places of work

or were settled for immaterial amounts. The Company believes that the resolution of these asbestos-related lawsuits will not have a material adverse effect on the Company's financial position or results of operations. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these asbestos-related lawsuits could have a material adverse impact on the Company's financial position and the results of operations.

During the third quarter of fiscal 2024, the Audit Committee of the Board of Directors, with the assistance of external counsel and forensic professionals, concluded an investigation into a whistleblower complaint received regarding its wholly-owned subsidiary Graham India Private Limited ("GIPL"). The investigation identified evidence supporting the complaint and other misconduct by employees. The other misconduct 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 the Company has implemented remedial actions, including strengthening its 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. The Company has voluntarily reported the findings of its investigation to the appropriate authorities in India, the U.S. Department of Justice, and the Securities and Exchange Commission 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 the Company’s overall consolidated results of operations, financial position, or cash flows.

As of December 31, 2025, the Company was subject to the claims noted above, as well as other potential claims that have arisen in the ordinary course of business. Although the outcome of the lawsuits, legal proceedings or potential claims to which the Company is, or may become, a party to cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, management does not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on the Company’s results of operations, financial position or cash flows.

The Company has entered into operating leases with companies in which our Executive Chairman holds a majority interest for buildings, equipment, and storage units located in Arvada, Colorado. In connection with such leases and rental agreements, the Company made fixed minimum lease payments to the lessor of $256 and $248 during the three months ended December 31, 2025 and 2024, respectively, and $762 and $742 during the nine months ended December 31, 2025 and 2024, respectively. The Company is obligated to make payments of $256 during the remainder of fiscal 2026. Future fixed minimum lease payments under these leases as of December 31, 2025 are $4,039.

NOTE 11 – INCOME TAXES:

The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for the tax years 2021 through 2024 and examination in state tax jurisdictions for the tax years 2020 through 2024. The Company is subject to examination in the People’s Republic of China for tax years 2021 through 2024 and in India for tax years 2021 through 2024.

There was no liability for unrecognized tax benefits at either December 31, 2025 or March 31, 2025.

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of projected pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, business reorganizations, settlements with taxing authorities and foreign currency fluctuations. In addition, the Company continues to explore tax planning opportunities that may have a material impact on its effective tax rate.

The Company's effective tax rate for the third quarter of fiscal 2026 was 11%, compared with 29% in the third quarter of fiscal 2025. The effective tax rate for the first nine months of fiscal 2026 was 15%, compared with 20% for the first nine months of fiscal 2025. The decrease in our effective tax rate for the third quarter of fiscal 2026 was primarily due to higher than expected research and development tax credits. The decrease in our effective tax rate for the nine month period of fiscal 2026 was primarily due to a higher discrete tax benefit recognized in the first quarter of fiscal 2026 related to the vesting of restricted stock awards and the Company's improved stock price over the last year and the higher than expected research and development tax credits recognized in the third quarter of fiscal 2026, partially offset by the impact of the enactment of the One Big Beautiful Bill Act ("OBBB") on July 4, 2025.

NOTE 12 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

The changes in accumulated other comprehensive loss by component for the three and nine months ended December 31, 2025 and 2024 are as follows:


	Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2025	$	(6,671	)	$	(316	)	$	(6,987	)
Other comprehensive income before reclassifications		—			50			50
Amounts reclassified from accumulated other comprehensive loss		162			—			162
Net current-period other comprehensive income		162<

GRAHAM CORP 10-Q