UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from _____________ to ___________
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 3, 2023, there were outstanding
Graham Corporation and Subsidiaries
Index to Form 10-Q
As of June 30, 2023 and March 31, 2023 and for the three months ended June 30, 2023 and 2022
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Part I. |
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Item 1. |
3 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
25 |
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Item 4. |
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Part II. |
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Item 1A. |
27 |
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Item 6. |
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29 |
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2
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 2023
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
(Unaudited)
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Three Months Ended |
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June 30, |
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2023 |
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2022 |
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Net sales |
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$ |
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$ |
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Cost of products sold |
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Gross profit |
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Other expenses and income: |
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Selling, general and administrative |
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Selling, general and administrative – amortization |
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Operating income |
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Other expense (income), net |
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( |
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Interest expense, net |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Per share data |
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Basic: |
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Net income |
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$ |
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$ |
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Diluted: |
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Net income |
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$ |
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$ |
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Weighted average common shares |
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Basic |
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Diluted |
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See Notes to Condensed Consolidated Financial Statements.
3
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollar amounts in thousands)
(Unaudited)
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Three Months Ended |
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June 30, |
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2023 |
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2022 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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( |
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Defined benefit pension and other postretirement plans net |
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Total other comprehensive loss |
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( |
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( |
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Total comprehensive income |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
4
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
(Unaudited)
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June 30, 2023 |
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March 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Trade accounts receivable, net of allowances ($ |
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Unbilled revenue |
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Inventories |
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Prepaid expenses and other current assets |
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Income taxes receivable |
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Total current assets |
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Property, plant and equipment, net |
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Prepaid pension asset |
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Operating lease assets |
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Goodwill |
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Customer relationships, net |
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Technology and technical know-how, net |
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Other intangible assets, net |
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Deferred income tax asset |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
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$ |
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Current portion of finance lease obligations |
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Accounts payable |
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Accrued compensation |
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Accrued expenses and other current liabilities |
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Customer deposits |
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Operating lease liabilities |
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Income taxes payable |
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Total current liabilities |
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Long-term debt |
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Finance lease obligations |
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Operating lease liabilities |
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Deferred income tax liability |
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Accrued pension and postretirement benefit liabilities |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Capital in excess of par value |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Treasury stock ( |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
5
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
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Three Months Ended |
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June 30, |
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2023 |
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2022 |
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Operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided (used) by operating |
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Depreciation |
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Amortization of intangible assets |
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Amortization of actuarial losses |
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Amortization of debt issuance costs |
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Equity-based compensation expense |
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Deferred income taxes |
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(Increase) decrease in operating assets: |
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Accounts receivable |
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( |
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( |
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Unbilled revenue |
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( |
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Inventories |
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( |
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Prepaid expenses and other current and non-current assets |
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( |
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( |
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Income taxes receivable |
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( |
) |
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( |
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Operating lease assets |
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Prepaid pension asset |
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( |
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( |
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Increase (decrease) in operating liabilities: |
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Accounts payable |
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( |
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Accrued compensation, accrued expenses and other current and non-current |
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( |
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( |
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Customer deposits |
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( |
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Operating lease liabilities |
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( |
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( |
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Long-term portion of accrued compensation, accrued pension and |
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( |
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( |
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Net cash provided (used) by operating activities |
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( |
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Investing activities: |
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Purchase of property, plant and equipment |
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( |
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( |
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Net cash used by investing activities |
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( |
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( |
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Financing activities: |
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Principal repayments on debt |
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( |
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( |
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Proceeds from the issuance of debt |
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Principal repayments on finance lease obligations |
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( |
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( |
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Repayments on financing lease obligations |
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( |
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( |
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Payment of debt issuance costs |
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( |
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Purchase of treasury stock |
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( |
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( |
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Net cash used by financing activities |
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( |
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( |
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Effect of exchange rate changes on cash |
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( |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
6
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollar amounts in thousands)
(Unaudited)
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Common Stock |
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Capital in |
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Accumulated |
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Total |
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Par |
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Excess of |
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Retained |
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Comprehensive |
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Treasury |
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Stockholders' |
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Shares |
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Value |
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Par Value |
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Earnings |
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Loss |
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Stock |
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Equity |
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Balance at April 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Comprehensive income (loss) |
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( |
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Issuance of shares |
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( |
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— |
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Forfeiture of shares |
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( |
) |
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( |
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— |
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Recognition of equity-based |
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Issuance of treasury stock |
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( |
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— |
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Purchase of treasury stock |
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( |
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( |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Common Stock |
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Capital in |
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Accumulated |
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Total |
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Par |
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Excess of |
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Retained |
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Comprehensive |
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Treasury |
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Stockholders' |
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Shares |
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Value |
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Par Value |
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Earnings |
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Loss |
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Stock |
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Equity |
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Balance at April 1, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Comprehensive income (loss) |
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( |
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Forfeiture of shares |
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( |
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( |
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— |
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Recognition of equity-based |
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Purchase of treasury stock |
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( |
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( |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
7
GRAHAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except per share data)
NOTE 1 – BASIS OF PRESENTATION:
Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its wholly-owned subsidiaries located in Arvada, Colorado, Suzhou, China and Ahmedabad, India at June 30 and March 31, 2023. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, each as promulgated by the U.S. Securities and Exchange Commission. The Company's Condensed Consolidated Financial Statements do not include all information and notes required by GAAP for complete financial statements. The unaudited Condensed Consolidated Balance Sheet as of March 31, 2023 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, 2023. For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023 ("fiscal 2023"). In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included in the Company's Condensed Consolidated Financial Statements.
The Company's results of operations and cash flows for the three months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2024 ("fiscal 2024").
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:
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Three Months Ended |
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June 30, |
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Market |
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2023 |
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2022 |
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Refining |
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$ |
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$ |
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Chemical/Petrochemical |
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Defense |
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Space |
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Other Commercial |
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Net sales |
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$ |
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$ |
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Geographic Area |
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Asia |
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$ |
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$ |
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Canada |
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Middle East |
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South America |
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U.S. |
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All other |
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Net sales |
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$ |
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$ |
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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
8
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.
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Three Months Ended |
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June 30, |
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2023 |
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2022 |
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Revenue recognized over time |
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% |
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% |
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