Graham(GHM) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales for Q3 fiscal 2025 were $47,037, up 7% compared to Q3 fiscal 2024, with an 11% increase in defense industry sales and a 64% increase in chemical/petrochemical market sales[76] - Gross profit for Q3 fiscal 2025 was$ 11,686, with a gross profit margin of 24.8%, reflecting a 260 basis point improvement over the same period in fiscal 2024[76] - Net income for Q3 fiscal 2025 was $1,588, or$ 0.14 per diluted share, compared to net income of $165, or$ 0.02 per diluted share, in Q3 fiscal 2024[76] - For the first nine months of fiscal 2025, net sales increased by $14,088 million, or 10%, compared to the same period in fiscal 2024[93] - Net income for the three months ended December 31, 2024, was$ 1,588 million, representing a significant increase from $165 million in the same period of 2023[106] - Adjusted net income for the first nine months of fiscal 2025 was$ 8,965 million, up from $5,188 million in the first nine months of fiscal 2024[107] Orders and Backlog - Orders booked in Q3 fiscal 2025 decreased to$ 24,786 from $123,267 in Q3 fiscal 2024, primarily due to a record level of orders in the prior year[76] - Backlog was$ 384,701 at December 31, 2024, down from $390,868 at March 31, 2024, mainly due to the timing of orders in the defense market[76] - Total orders for the third quarter of fiscal 2025 decreased to$ 24,786 million, down 80% from $123,267 million in the prior year[121] - The backlog as of December 31, 2024, was$ 384,701 million, a decrease of 4% from $399,244 million in the prior year[123] - The company expects to recognize revenue on approximately 45% to 50% of the backlog within one year and 35% to 40% in one to two years[123] - Orders to the U.S. represented 76% of total orders for the first nine months of fiscal 2025, down from 88% in the prior year[122] Cash and Capital Expenditures - Cash and cash equivalents increased to$ 30,046 at December 31, 2024, compared to $16,939 at March 31, 2024, driven by cash provided by operating activities of$ 27,873[76] - Capital expenditures for the first nine months of fiscal 2025 were $13,800 million, significantly higher than$ 5,193 million in the comparable period of fiscal 2024[111] - The company expects fiscal 2025 capital expenditures to be in the range of $15,000 to$ 19,000 million, up from previous expectations of $10,000 to$ 15,000 million[111] - Capital expenditures for fiscal 2025 are projected to be between $15,000 to$ 19,000 million, up from previous guidance of $13,000 to$ 18,000 million[124] Market Outlook - The company expects strong demand for defense equipment due to defense budget plans and increased geopolitical tensions[82] - The company anticipates continued growth in alternative and clean energy markets, particularly in hydrogen production and geothermal power generation[87] - The NextGen steam ejector nozzle is projected to have a market opportunity exceeding $50 million over the next 5 to 10 years[85] - The company anticipates achieving 8% to 10% average annualized organic revenue growth by fiscal 2027[125] Expenses and Financial Ratios - SG&A expenses increased by$ 884 million in the third quarter of fiscal 2025 compared to the same quarter in fiscal 2024, driven by higher personnel costs and research and development investments[96] - Net interest income for the first nine months of fiscal 2025 was $442 million, compared to net interest expense of$ 277 million in the same period of fiscal 2024[98] - The effective tax rate for the first nine months of fiscal 2025 was 20%, a decrease from 22% in the same period of fiscal 2024[99] - The book-to-bill ratio is used to track growth prospects, calculated as net orders divided by net sales[119] Risk Factors - The company is facing significant cost inflation in labor, raw materials, tariffs, and supply chain costs due to increased demand and global supply chain disruptions[139] - Geopolitical events, including the Russia-Ukraine war and the Israel-Hamas conflict, may further increase supply chain costs and affect business operations[139] - Foreign currency exchange rate fluctuations decreased cash balances by $39 million primarily due to the strengthening of the U.S. dollar[135] Dividends and Debt - The company did not pay any dividends during the first nine months of fiscal 2025 and has no intention to pay dividends for the foreseeable future[115] - The company had no borrowings on its new$ 50,000 million revolving credit facility as of December 31, 2024, with $7,202 million in letters of credit outstanding[113] - As of December 31, 2024, the company had no variable rate debt outstanding on its New Revolving Credit Facility[140] - The company evaluates the use of interest rate derivatives to manage exposure to interest rate movements as part of its risk management activities[140]