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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, 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 January 31, 2022, 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 December 31, 2021 and March 31, 2021 and for the three and nine months ended December 31, 2021

 

 

 

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

21

 

 

 

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 5.

Other Information

33

 

 

 

Item 6.

Exhibits

34

 

 

 

Signatures

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

DECEMBER 31, 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

 

 

Nine Months Ended

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

(Amounts in thousands, except per share data)

 

 

(Amounts in thousands, except per share data)

 

 

Net sales

 

$

28,774

 

 

$

27,154

 

 

$

83,077

 

 

$

71,818

 

 

Cost of products sold

 

 

28,213

 

 

 

20,927

 

 

 

78,159

 

 

 

56,330

 

 

Gross profit

 

 

561

 

 

 

6,227

 

 

 

4,918

 

 

 

15,488

 

 

Other expenses and income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

4,729

 

 

 

4,936

 

 

 

14,534

 

 

 

13,091

 

 

Selling, general and administrative – amortization

 

 

274

 

 

 

 

 

 

639

 

 

 

 

 

Other operating income, net

 

 

140

 

 

 

 

 

 

(962

)

 

 

 

 

Operating (loss) income

 

 

(4,582

)

 

 

1,291

 

 

 

(9,293

)

 

 

2,397

 

 

Other income

 

 

(111

)

 

 

(55

)

 

 

(416

)

 

 

(164

)

 

Interest income

 

 

(12

)

 

 

(23

)

 

 

(43

)

 

 

(143

)

 

Interest expense

 

 

132

 

 

 

1

 

 

 

300

 

 

 

9

 

 

(Loss) income before benefit provision for income taxes

 

 

(4,591

)

 

 

1,368

 

 

 

(9,134

)

 

 

2,695

 

 

(Benefit) provision for income taxes

 

 

(861

)

 

 

308

 

 

 

(1,786

)

 

 

709

 

 

Net (loss) income

 

$

(3,730

)

 

$

1,060

 

 

$

(7,348

)

 

$

1,986

 

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.35

)

 

$

0.11

 

 

$

(0.70

)

 

$

0.20

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.35

)

 

$

0.11

 

 

$

(0.70

)

 

$

0.20

 

 

Weighted average common shares
  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,638

 

 

 

9,977

 

 

 

10,507

 

 

 

9,950

 

 

Diluted

 

 

10,638

 

 

 

9,977

 

 

 

10,507

 

 

 

9,950

 

 

Dividends declared per share

 

$

0.11

 

 

$

0.11

 

 

$

0.33

 

 

$

0.33

 

 

 

See Notes to Condensed Consolidated Financial Statements.

3


GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

 

Net (loss) income

 

$

(3,730

)

 

$

1,060

 

 

$

(7,348

)

 

$

1,986

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

108

 

 

 

261

 

 

 

201

 

 

 

416

 

 

Defined benefit pension and other postretirement plans net
 of income tax expense of $
60 and $61 for the three months
 ended December 31, 2021 and 2020, respectively, and $
182 
 and $
185 for the nine months ended December 31, 2021 and
 2020, respectively

 

 

210

 

 

 

205

 

 

 

631

 

 

 

614

 

 

Total other comprehensive income

 

 

318

 

 

 

466

 

 

 

832

 

 

 

1,030

 

 

Total comprehensive (loss) income

 

$

(3,412

)

 

$

1,526

 

 

$

(6,516

)

 

$

3,016

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

4


GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

December 31, 2021

 

 

March 31, 2021

 

 

 

(Amounts in thousands, except per share data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,991

 

 

$

59,532

 

Investments

 

 

 

 

 

5,500

 

Trade accounts receivable, net of allowances ($176 and $29 at December 31 and
   March 31, 2021, respectively)

 

 

36,650

 

 

 

17,378

 

Unbilled revenue

 

 

24,930

 

 

 

19,994

 

Inventories

 

 

20,428

 

 

 

17,332

 

Prepaid expenses and other current assets

 

 

1,905

 

 

 

512

 

Income taxes receivable

 

 

2,670

 

 

 

 

      Total current assets

 

 

100,574

 

 

 

120,248

 

Property, plant and equipment, net

 

 

25,218

 

 

 

17,618

 

Prepaid pension asset

 

 

7,121

 

 

 

6,216

 

Operating lease assets

 

 

8,708

 

 

 

95

 

Goodwill

 

 

22,823

 

 

 

 

Customer relationships

 

 

11,456

 

 

 

 

Technology and technical know-how

 

 

9,805

 

 

 

 

Other intangible assets, net

 

 

10,173

 

 

 

 

Other assets

 

 

202

 

 

 

103

 

Total assets

 

$

196,080

 

 

$

144,280

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt obligations

 

$

9,750

 

 

$

 

Current portion of long-term debt

 

 

2,000

 

 

 

 

Current portion of finance lease obligations

 

 

23

 

 

 

21

 

Accounts payable

 

 

14,650

 

 

 

17,972

 

Accrued compensation

 

 

7,951

 

 

 

6,106

 

Accrued expenses and other current liabilities

 

 

5,414

 

 

 

4,628

 

Customer deposits

 

 

27,665

 

 

 

14,059

 

Operating lease liabilities

 

 

1,114

 

 

 

46

 

Income taxes payable

 

 

 

 

 

741

 

Total current liabilities

 

 

68,567

 

 

 

43,573

 

Long-term debt

 

 

17,000

 

 

 

 

Finance lease obligations

 

 

17

 

 

 

34

 

Operating lease liabilities

 

 

7,702

 

 

 

37

 

Deferred income tax liability

 

 

977

 

 

 

635

 

Accrued pension and postretirement benefit liabilities

 

 

1,958

 

 

 

2,072

 

Other long-term liabilities

 

 

2,320

 

 

 

 

Total liabilities

 

 

98,541

 

 

 

46,351

 

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, 10,810 and 10,748 shares
     issued and
10,638 and 9,959 shares outstanding at December 31 and March 31, 2021,
     respectively

 

 

1,081

 

 

 

1,075

 

Capital in excess of par value

 

 

27,608

 

 

 

27,272

 

Retained earnings

 

 

78,500

 

 

 

89,372

 

Accumulated other comprehensive loss

 

 

(6,565

)

 

 

(7,397

)

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

 

 

(3,085

)

 

 

(12,393

)

Total stockholders’ equity

 

 

97,539

 

 

 

97,929

 

Total liabilities and stockholders’ equity

 

$

196,080

 

 

$

144,280

 

See Notes to Condensed Consolidated Financial Statements.

5


GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine Months Ended

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

Operating activities:

 

(Dollar amounts in thousands)

 

Net (loss) income

 

$

(7,348

)

 

$

1,986

 

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

 

 

 

 

 

 

Depreciation

 

 

2,232

 

 

 

1,458

 

Amortization

 

 

1,765

 

 

 

 

Amortization of actuarial losses

 

 

725

 

 

 

799

 

Equity-based compensation expense

 

 

599

 

 

 

821

 

Gain on disposal or sale of property, plant and equipment

 

 

22

 

 

 

3

 

Change in fair value of contingent consideration

 

 

(1,900

)

 

 

 

Deferred income taxes

 

 

152

 

 

 

776

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

Accounts receivable

 

 

(10,964

)

 

 

(4,220

)

Unbilled revenue

 

 

2,186

 

 

 

(284

)

Inventories

 

 

579

 

 

 

4,999

 

Prepaid expenses and other current and non-current assets

 

 

(933

)

 

 

(76

)

Income taxes receivable

 

 

(3,423

)

 

 

(119

)

Operating lease assets

 

 

744

 

 

 

116

 

Prepaid pension asset

 

 

(905

)

 

 

(631

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

Accounts payable

 

 

(6,058

)

 

 

1,401

 

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

 

 

465

 

 

 

1,754

 

Customer deposits

 

 

7,553

 

 

 

(8,092

)

Operating lease liabilities

 

 

(663

)

 

 

(116

)

Long-term portion of accrued compensation, accrued pension liability
   and accrued postretirement benefits

 

 

620

 

 

 

95

 

Net cash (used) provided by operating activities

 

 

(14,552

)

 

 

670

 

Investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,909

)

 

 

(1,462

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

 

6

 

Purchase of investments

 

 

 

 

 

(37,103

)

Redemption of investments at maturity

 

 

5,500

 

 

 

71,651

 

Acquisition of Barber-Nichols, LLC

 

 

(59,563

)

 

 

 

Net cash (used) provided by investing activities

 

 

(55,972

)

 

 

33,092

 

Financing activities:

 

 

 

 

 

 

Increase in short-term debt obligations

 

 

9,750

 

 

 

 

Principal repayments on long-term debt

 

 

(1,000

)

 

 

(4,599

)

Proceeds from the issuance of long-term debt

 

 

20,000

 

 

 

4,599

 

Principal repayments on finance lease obligations

 

 

(15

)

 

 

(35

)

Repayments on lease financing obligations

 

 

(157

)

 

 

 

Payment of debt issuance costs

 

 

(150

)

 

 

 

Dividends paid

 

 

(3,524

)

 

 

(3,292

)

Purchase of treasury stock

 

 

(41

)

 

 

(23

)

Net cash provided (used) by financing activities

 

 

24,863

 

 

 

(3,350

)

Effect of exchange rate changes on cash

 

 

120

 

 

 

425

 

Net (decrease) increase in cash and cash equivalents

 

 

(45,541

)

 

 

30,837

 

Cash and cash equivalents at beginning of period

 

 

59,532

 

 

 

32,955

 

Cash and cash equivalents at end of period

 

$

13,991

 

 

$

63,792

 

 

See Notes to Condensed Consolidated Financial Statements.

 

6


GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

NINE MONTHS ENDED DECEMBER 31, 2021

(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