10-Q

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

☐ 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

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.

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.

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.

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.

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