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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 September 30, 2021

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 1-8462

 

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 October 22, 2021, there were outstanding 10,638,041 shares of the registrant’s common stock, par value $0.10 per share.

 

 

 


 

Graham Corporation and Subsidiaries

Index to Form 10-Q

As of September 30, 2021 and March 31, 2021 and for the three and six months ended September 30, 2021 and 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

 

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

SEPTEMBER 30, 2021

PART I – FINANCIAL INFORMATION

Item 1.Unaudited Condensed Consolidated Financial Statements

 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands, except per share data)

 

 

(Amounts in thousands, except per share data)

 

Net sales

 

$

34,146

 

 

$

27,954

 

 

$

54,303

 

 

$

44,664

 

Cost of products sold

 

 

30,703

 

 

 

20,261

 

 

 

49,946

 

 

 

35,403

 

Gross profit

 

 

3,443

 

 

 

7,693

 

 

 

4,357

 

 

 

9,261

 

Other expenses and income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

4,973

 

 

 

4,253

 

 

 

9,805

 

 

 

8,155

 

Selling, general and administrative – amortization

 

 

274

 

 

 

 

 

 

365

 

 

 

 

Other operating income, net

 

 

(1,102

)

 

 

 

 

 

(1,102

)

 

 

 

Operating (loss) income

 

 

(702

)

 

 

3,440

 

 

 

(4,711

)

 

 

1,106

 

Other income

 

 

(145

)

 

 

(54

)

 

 

(305

)

 

 

(109

)

Interest income

 

 

(14

)

 

 

(26

)

 

 

(31

)

 

 

(120

)

Interest expense

 

 

129

 

 

 

3

 

 

 

168

 

 

 

8

 

(Loss) income before benefit for income taxes

 

 

(672

)

 

 

3,517

 

 

 

(4,543

)

 

 

1,327

 

(Benefit) expense for income taxes

 

 

(180

)

 

 

773

 

 

 

(925

)

 

 

401

 

Net (loss) income

 

$

(492

)

 

$

2,744

 

 

$

(3,618

)

 

$

926

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.05

)

 

$

0.27

 

 

$

(0.35

)

 

$

0.09

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.05

)

 

$

0.27

 

 

$

(0.35

)

 

$

0.09

 

Weighted average common shares

  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,681

 

 

 

9,977

 

 

 

10,442

 

 

 

9,936

 

Diluted

 

 

10,681

 

 

 

9,977

 

 

 

10,442

 

 

 

9,936

 

Dividends declared per share

 

$

0.11

 

 

$

0.11

 

 

$

0.22

 

 

$

0.22

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

3


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

Net (loss) income

 

$

(492

)

 

$

2,744

 

 

$

(3,618

)

 

$

926

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(35

)

 

 

146

 

 

 

93

 

 

 

155

 

Defined benefit pension and other postretirement plans net

of income tax expense of $72 and $63 for the three months

ended September 30, 2021 and 2020, respectively, and $121

and $124 for the six months ended September 30, 2021 and

2020, respectively

 

 

251

 

 

 

204

 

 

 

421

 

 

 

409

 

Total other comprehensive income

 

 

216

 

 

 

350

 

 

 

514

 

 

 

564

 

Total comprehensive (loss) income

 

$

(276

)

 

$

3,094

 

 

$

(3,104

)

 

$

1,490

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

4


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

September 30, 2021

 

 

March 31, 2021

 

 

 

(Amounts in thousands, except per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,463

 

 

$

59,532

 

Investments

 

 

 

 

 

5,500

 

Trade accounts receivable, net of allowances ($62 and $29 at September 30 and

   March 31, 2021, respectively)

 

 

27,878

 

 

 

17,378

 

Unbilled revenue

 

 

29,035

 

 

 

19,994

 

Inventories

 

 

17,722

 

 

 

17,332

 

Prepaid expenses and other current assets

 

 

2,193

 

 

 

512

 

Income taxes receivable

 

 

2,149

 

 

 

 

      Total current assets

 

 

95,440

 

 

 

120,248

 

Property, plant and equipment, net

 

 

25,336

 

 

 

17,618

 

Prepaid pension asset

 

 

6,819

 

 

 

6,216

 

Operating lease assets

 

 

9,016

 

 

 

95

 

Goodwill

 

 

22,823

 

 

 

 

Customer relationships

 

 

11,603

 

 

 

 

Technology and technical know how

 

 

9,932

 

 

 

 

Other intangible assets, net

 

 

10,656

 

 

 

 

Other assets

 

 

211

 

 

 

103

 

Total assets

 

$

191,836

 

 

$

144,280

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term debt obligations

 

$

4,000

 

 

$

 

Current portion of long-term debt

 

 

2,000

 

 

 

 

Current portion of finance lease obligations

 

 

22

 

 

 

21

 

Accounts payable

 

 

16,139

 

 

 

17,972

 

Accrued compensation

 

 

8,156

 

 

 

6,106

 

Accrued expenses and other current liabilities

 

 

5,511

 

 

 

4,628

 

Customer deposits

 

 

21,941

 

 

 

14,059

 

Operating lease liabilities

 

 

1,131

 

 

 

46

 

Income taxes payable

 

 

 

 

 

741

 

Total current liabilities

 

 

58,900

 

 

 

43,573

 

Long-term debt

 

 

17,500

 

 

 

 

Finance lease obligations

 

 

23

 

 

 

34

 

Operating lease liabilities

 

 

7,958

 

 

 

37

 

Deferred income tax liability

 

 

1,455

 

 

 

635

 

Accrued pension and postretirement benefit liabilities

 

 

1,945

 

 

 

2,072

 

Other long-term liabilities

 

 

2,203

 

 

 

 

Total liabilities

 

 

89,984

 

 

 

46,351

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $1.00 par value, 500 shares authorized

 

 

 

 

 

 

Common stock, $0.10 par value, 25,500 shares authorized, 10,810 and 10,748 shares

     issued and 10,638 and 9,959 shares outstanding at September 30 and March 31, 2021,

     respectively

 

 

1,081

 

 

 

1,075

 

Capital in excess of par value

 

 

27,339

 

 

 

27,272

 

Retained earnings

 

 

83,400

 

 

 

89,372

 

Accumulated other comprehensive loss

 

 

(6,883

)

 

 

(7,397

)

Treasury stock (172 and 790 shares at September 30 and March 31, 2021,  respectively)

 

 

(3,085

)

 

 

(12,393

)

Total stockholders’ equity

 

 

101,852

 

 

 

97,929

 

Total liabilities and stockholders’ equity

 

$

191,836

 

 

$

144,280

 

See Notes to Condensed Consolidated Financial Statements.

5


GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Operating activities:

 

(Dollar amounts in thousands)

 

Net (loss) income

 

$

(3,618

)

 

$

926

 

Adjustments to reconcile net (loss) income to net cash used by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,399

 

 

 

972

 

Amortization

 

 

1,009

 

 

 

 

Amortization of actuarial losses

 

 

455

 

 

 

533

 

Equity-based compensation expense

 

 

330

 

 

 

494

 

Gain on disposal or sale of property, plant and equipment

 

 

13

 

 

 

3

 

Change in fair value of contingent consideration

 

 

(1,900

)

 

 

 

Deferred income taxes

 

 

693

 

 

 

191

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,289

)

 

 

(3,820

)

Unbilled revenue

 

 

(1,944

)

 

 

901

 

Inventories

 

 

3,278

 

 

 

1,808

 

Prepaid expenses and other current and non-current assets

 

 

(1,233

)

 

 

(456

)

Income taxes receivable

 

 

(2,894

)

 

 

163

 

Operating lease assets

 

 

432

 

 

 

75

 

Prepaid pension asset

 

 

(603

)

 

 

(421

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(4,477

)

 

 

(2,544

)

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

   liabilities

 

 

779

 

 

 

1,214

 

Customer deposits

 

 

1,835

 

 

 

(2,285

)

Operating lease liabilities

 

 

(387

)

 

 

(75

)

Long-term portion of accrued compensation, accrued pension liability

   and accrued postretirement benefits

 

 

420

 

 

 

63

 

Net cash used by operating activities

 

 

(8,702

)

 

 

(2,258

)

Investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,227

)

 

 

(797

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

 

6

 

Purchase of investments

 

 

 

 

 

(31,603

)

Redemption of investments at maturity

 

 

5,500

 

 

 

66,151

 

Acquisition of Barber-Nichols, LLC

 

 

(59,563

)

 

 

 

Net cash (used) provided by investing activities

 

 

(55,290

)

 

 

33,757

 

Financing activities:

 

 

 

 

 

 

 

 

Increase in short-term debt obligations

 

 

4,000

 

 

 

 

Principal repayments on long-term debt

 

 

(500

)

 

 

(4,599

)

Proceeds from the issuance of long-term debt

 

 

20,000

 

 

 

4,599

 

Principal repayments on finance lease obligations

 

 

(10

)

 

 

(24

)

Repayments on lease financing obligations

 

 

(91

)

 

 

 

Payment of debt issuance costs

 

 

(150

)

 

 

 

Dividends paid

 

 

(2,353

)

 

 

(2,195

)

Purchase of treasury stock

 

 

(41

)

 

 

(23

)

Net cash provided (used) by financing activities

 

 

20,855

 

 

 

(2,242

)

Effect of exchange rate changes on cash

 

 

68

 

 

 

144

 

Net (decrease) increase in cash and cash equivalents

 

 

(43,069

)

 

 

29,401

 

Cash and cash equivalents at beginning of period

 

 

59,532

 

 

 

32,955

 

Cash and cash equivalents at end of period

 

$

16,463

 

 

$

62,356

 

 

See Notes to Condensed Consolidated Financial Statements.

6


 

GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(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, 2021

 

 

10,748

 

 

$

1,075

 

 

$

27,272

 

 

$

89,372

 

 

$

(7,397

)

 

$

(12,393

)

 

$

97,929

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,126

)

 

 

298

 

 

 

 

 

 

 

(2,828

)

Issuance of shares

 

 

135

 

 

 

13

 

 

 

(13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(9

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,177

)

 

 

 

 

 

 

 

 

 

 

(1,177

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

353

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

 

 

(194

)

 

 

 

 

 

 

 

 

 

 

9,158

 

 

 

8,964

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41

)

 

 

(41

)

Balance at June 30, 2021

 

 

10,874

 

 

 

1,087

 

 

 

27,419

 

 

 

85,069

 

 

 

(7,099

)

 

 

(3,276

)

 

 

103,200

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(492

)

 

 

216

 

 

 

 

 

 

 

(276

)

Issuance of shares

 

 

27

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(91

)

 

 

(9

)

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,177

)

 

 

 

 

 

 

 

 

 

 

(1,177

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

Issuance of treasury stock

 

 

 

 

 

 

 

 

 

 

(63

)

 

 

 

 

 

 

 

 

 

 

191

 

 

 

128

 

Balance at September 30, 2021

 

 

10,810

 

 

$

1,081

 

 

$

27,339

 

 

$

83,400

 

 

$

(6,883

)

 

$

(3,085

)

 

$

101,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2020

 

 

10,689

 

 

$

1,069

 

 

$

26,361

 

 

$

91,389

 

 

$

(9,556

)

 

$

(12,539

)

 

$

96,724

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,818

)

 

 

214

 

 

 

 

 

 

 

(1,604

)

Issuance of shares

 

 

113

 

 

 

11

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(22

)

 

 

(2

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,097

)

 

 

 

 

 

 

 

 

 

 

(1,097

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

164

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Balance at June 30, 2020

 

 

10,780

 

 

 

1,078

 

 

 

26,516

 

 

 

88,474

 

 

 

(9,342

)

 

 

(12,562

)

 

 

94,164

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,744

 

 

 

350

 

 

 

 

 

 

 

3,094

 

Issuance of shares