10-Q

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

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

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.

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).

As of August 3, 2023, there were outstanding 10,702,920 shares of the registrant’s common stock, par value $0.10 per share.

As of June 30, 2023 and March 31, 2023 and for the three months ended June 30, 2023 and 2022

NOTE 2 – 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
	June 30,
Market	2023		2022
Refining	$	6,867	$	7,875
Chemical/Petrochemical		6,041		5,875
Defense		22,817		9,800
Space		4,822		6,462
Other Commercial		7,022		6,063
Net sales	$	47,569	$	36,075


Geographic Area
Asia	$	5,902	$	4,248
Canada		899		997
Middle East		1,049		459
South America		27		1,461
U.S.		38,141		28,169
All other		1,551		741
Net sales	$	47,569	$	36,075

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 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 the 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
	June 30,
	2023			2022

Revenue recognized over time		81	%		65	%


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)


		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	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	26

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	27

Item 6.	Exhibits	28

Signatures		29


	Three Months Ended
	June 30,
	2023		2022
Net sales	$	47,569	$	36,075
Cost of products sold		36,592		29,331
Gross profit		10,977		6,744
Other expenses and income:
Selling, general and administrative		7,019		5,485
Selling, general and administrative – amortization		274		274
Operating income		3,684		985
Other expense (income), net		93		(63	)
Interest expense, net		185		157
Income before provision for income taxes		3,406		891
Provision for income taxes		766		215
Net income	$	2,640	$	676
Per share data
Basic:
Net income	$	0.25	$	0.06
Diluted:
Net income	$	0.25	$	0.06
Weighted average common shares outstanding:
Basic		10,653		10,610
Diluted		10,719		10,630


	Three Months Ended
	June 30,
	2023			2022
Net income	$	2,640		$	676
Other comprehensive income (loss):
Foreign currency translation adjustment		(252	)		(343	)
Defined benefit pension and other postretirement plans net of income tax expense of $47 and $37, respectively		164			131
Total other comprehensive loss		(88	)		(212	)
Total comprehensive income	$	2,552		$	464


	June 30, 2023			March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	24,662		$	18,257
Trade accounts receivable, net of allowances ($1,878 and $1,841 at June 30 and March 31, 2023, respectively)		29,544			24,000
Unbilled revenue		34,467			39,684
Inventories		25,490			26,293
Prepaid expenses and other current assets		2,675			1,534
Income taxes receivable		509			302
Total current assets		117,347			110,070
Property, plant and equipment, net		25,910			25,523
Prepaid pension asset		6,179			6,107
Operating lease assets		8,071			8,237
Goodwill		23,523			23,523
Customer relationships, net		10,571			10,718
Technology and technical know-how, net		9,048			9,174
Other intangible assets, net		7,438			7,610
Deferred income tax asset		1,792			2,798
Other assets		149			158
Total assets	$	210,028		$	203,918
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt	$	2,000		$	2,000
Current portion of finance lease obligations		26			29
Accounts payable		15,085			20,222
Accrued compensation		10,334			10,401
Accrued expenses and other current liabilities		5,706			6,434
Customer deposits		56,016			46,042
Operating lease liabilities		1,114			1,022
Income taxes payable		62			16
Total current liabilities		90,343			86,166
Long-term debt		9,303			9,744
Finance lease obligations		77			85
Operating lease liabilities		7,278			7,498
Deferred income tax liability		1			108
Accrued pension and postretirement benefit liabilities		1,337			1,342
Other long-term liabilities		1,968			2,042
Total liabilities		110,307			106,985
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized		—			—
Common stock, $0.10 par value, 25,500 shares authorized, 10,818 and 10,774 shares issued and 10,675 and 10,635 shares outstanding at June 30 and March 31, 2023, respectively		1,082			1,075
Capital in excess of par value		28,641			28,061
Retained earnings		80,083			77,443
Accumulated other comprehensive loss		(7,551	)		(7,463	)
Treasury stock (143 and 138 shares at June 30 and March 31, 2023, respectively)		(2,534	)		(2,183	)
Total stockholders’ equity		99,721			96,933
Total liabilities and stockholders’ equity	$	210,028		$	203,918


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐


	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