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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, 2023

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 001-08462

 

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 November 3, 2023, there were outstanding 10,702,731 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, 2023 and March 31, 2023 and for the three and six months ended September 30, 2023 and 2022

 

 

 

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

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4.

Controls and Procedures

27

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 6.

Exhibits

29

 

 

 

Signatures

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

SEPTEMBER 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)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

45,076

 

 

$

38,143

 

 

$

92,645

 

 

$

74,218

 

Cost of products sold

 

 

37,885

 

 

 

32,863

 

 

 

74,477

 

 

 

62,194

 

Gross profit

 

 

7,191

 

 

 

5,280

 

 

 

18,168

 

 

 

12,024

 

Other expenses and income:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,115

 

 

 

5,059

 

 

 

13,134

 

 

 

10,544

 

Selling, general and administrative – amortization

 

 

273

 

 

 

273

 

 

 

547

 

 

 

547

 

Operating income (loss)

 

 

803

 

 

 

(52

)

 

 

4,487

 

 

 

933

 

Other expense (income), net

 

 

94

 

 

 

(62

)

 

 

187

 

 

 

(125

)

Interest expense, net

 

 

55

 

 

 

246

 

 

 

240

 

 

 

403

 

Income (loss) before provision (benefit) for income taxes

 

 

654

 

 

 

(236

)

 

 

4,060

 

 

 

655

 

Provision (benefit) for income taxes

 

 

243

 

 

 

(40

)

 

 

1,009

 

 

 

175

 

Net income (loss)

 

$

411

 

 

$

(196

)

 

$

3,051

 

 

$

480

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

0.04

 

 

$

(0.02

)

 

$

0.29

 

 

$

0.05

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

0.04

 

 

$

(0.02

)

 

$

0.28

 

 

$

0.05

 

Weighted average common shares
  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,699

 

 

 

10,617

 

 

 

10,675

 

 

 

10,614

 

Diluted

 

 

10,810

 

 

 

10,617

 

 

 

10,761

 

 

 

10,618

 

 

See Notes to Condensed Consolidated Financial Statements.

3


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollar amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

411

 

 

$

(196

)

 

$

3,051

 

 

$

480

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(58

)

 

 

(337

)

 

 

(310

)

 

 

(680

)

Defined benefit pension and other postretirement plans net
 of income tax expense of $
47 and $37 for the three months
ended September 30, 2023 and 2022, respectively, and $
93
and $
74 for the six months ended September 30, 2023 and
2022, respectively

 

 

164

 

 

 

131

 

 

 

328

 

 

 

262

 

Total other comprehensive income (loss)

 

 

106

 

 

 

(206

)

 

 

18

 

 

 

(418

)

Total comprehensive income (loss)

 

$

517

 

 

$

(402

)

 

$

3,069

 

 

$

62

 

 

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)

 

 

September 30, 2023

 

 

March 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,800

 

 

$

18,257

 

Trade accounts receivable, net of allowances ($1,887 and $1,841 at September 30 and
   March 31, 2023, respectively)

 

 

28,710

 

 

 

24,000

 

Unbilled revenue

 

 

34,975

 

 

 

39,684

 

Inventories

 

 

27,009

 

 

 

26,293

 

Prepaid expenses and other current assets

 

 

2,850

 

 

 

1,534

 

Income taxes receivable

 

 

774

 

 

 

302

 

      Total current assets

 

 

120,118

 

 

 

110,070

 

Property, plant and equipment, net

 

 

27,122

 

 

 

25,523

 

Prepaid pension asset

 

 

6,251

 

 

 

6,107

 

Operating lease assets

 

 

7,775

 

 

 

8,237

 

Goodwill

 

 

23,523

 

 

 

23,523

 

Customer relationships, net

 

 

10,423

 

 

 

10,718

 

Technology and technical know-how, net

 

 

8,922

 

 

 

9,174

 

Other intangible assets, net

 

 

7,266

 

 

 

7,610

 

Deferred income tax asset

 

 

1,489

 

 

 

2,798

 

Other assets

 

 

239

 

 

 

158

 

Total assets

 

$

213,128

 

 

$

203,918

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

2,000

 

 

$

2,000

 

Current portion of finance lease obligations

 

 

19

 

 

 

29

 

Accounts payable

 

 

13,554

 

 

 

20,222

 

Accrued compensation

 

 

11,357

 

 

 

10,401

 

Accrued expenses and other current liabilities

 

 

6,262

 

 

 

6,434

 

Customer deposits

 

 

59,526

 

 

 

46,042

 

Operating lease liabilities

 

 

1,125

 

 

 

1,022

 

Income taxes payable

 

 

 

 

 

16

 

Total current liabilities

 

 

93,843

 

 

 

86,166

 

Long-term debt

 

 

8,863

 

 

 

9,744

 

Finance lease obligations

 

 

76

 

 

 

85

 

Operating lease liabilities

 

 

6,993

 

 

 

7,498

 

Deferred income tax liability

 

 

48

 

 

 

108

 

Accrued pension and postretirement benefit liabilities

 

 

1,341

 

 

 

1,342

 

Other long-term liabilities

 

 

1,169

 

 

 

2,042

 

Total liabilities

 

 

112,333

 

 

 

106,985

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $1.00 par value, 500 shares authorized

 

 

 

 

 

 

Common stock, $0.10 par value, 25,500 shares authorized, 10,846 and 10,774 shares
     issued and
10,703 and 10,635 shares outstanding at September 30 and March 31, 2023,
     respectively

 

 

1,084

 

 

 

1,075

 

Capital in excess of par value

 

 

29,196

 

 

 

28,061

 

Retained earnings

 

 

80,494

 

 

 

77,443

 

Accumulated other comprehensive loss

 

 

(7,445

)

 

 

(7,463

)

Treasury stock (143 and 138 shares at September 30 and March 31, 2023, respectively)

 

 

(2,534

)

 

 

(2,183

)

Total stockholders’ equity

 

 

100,795

 

 

 

96,933

 

Total liabilities and stockholders’ equity

 

$

213,128

 

 

$

203,918

 

See Notes to Condensed Consolidated Financial Statements.

5


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(Unaudited)

 

 

Six Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

Net income

 

$

3,051

 

 

$

480

 

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

 

 

 

 

 

 

Depreciation

 

 

1,549

 

 

 

1,724

 

Amortization of intangible assets

 

 

891

 

 

 

1,238

 

Amortization of actuarial losses

 

 

421

 

 

 

336

 

Amortization of debt issuance costs

 

 

119

 

 

 

93

 

Equity-based compensation expense

 

 

625

 

 

 

312

 

Deferred income taxes

 

 

1,162

 

 

 

174

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

Accounts receivable

 

 

(4,947

)

 

 

38

 

Unbilled revenue

 

 

4,620

 

 

 

(5,283

)

Inventories

 

 

(734

)

 

 

(2,560

)

Prepaid expenses and other current and non-current assets

 

 

(1,343

)

 

 

(782

)

Income taxes receivable

 

 

(489

)

 

 

(136

)

Operating lease assets

 

 

589

 

 

 

901

 

Prepaid pension asset

 

 

(144

)

 

 

(325

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

Accounts payable

 

 

(6,451

)

 

 

3,730

 

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

 

 

5

 

 

 

553

 

Customer deposits

 

 

13,503

 

 

 

544

 

Operating lease liabilities

 

 

(529

)

 

 

(840

)

Long-term portion of accrued compensation, accrued pension and
   postretirement benefit liabilities

 

 

 

 

 

(595

)

Net cash provided (used) by operating activities

 

 

11,898

 

 

 

(398

)

Investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(3,312

)

 

 

(1,176

)

Proceeds from disposal of property, plant and equipment

 

 

38

 

 

 

 

Net cash used by investing activities

 

 

(3,274

)

 

 

(1,176

)

Financing activities:

 

 

 

 

 

 

Principal repayments on debt

 

 

(1,020

)

 

 

(3,511

)

Proceeds from the issuance of debt

 

 

 

 

 

5,000

 

Repayments on financing lease obligations

 

 

(147

)

 

 

(136

)

Payment of debt issuance costs

 

 

 

 

 

(122

)

Issuance of common stock

 

 

225

 

 

 

 

Purchase of treasury stock

 

 

(57

)

 

 

(22

)

Net cash (used) provided by financing activities

 

 

(999

)

 

 

1,209

 

Effect of exchange rate changes on cash

 

 

(82

)

 

 

(254

)

Net increase (decrease) in cash and cash equivalents

 

 

7,543

 

 

 

(619

)

Cash and cash equivalents at beginning of period

 

 

18,257

 

 

 

14,741

 

Cash and cash equivalents at end of period

 

$

25,800

 

 

$

14,122

 

 

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)

 

 

 

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, 2023

 

 

10,774

 

 

$

1,075

 

 

$

28,061

 

 

$

77,443

 

 

$

(7,463

)

 

$

(2,183

)

 

$

96,933

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,640

 

 

 

(88

)

 

 

 

 

 

2,552

 

Issuance of shares

 

 

53

 

 

 

8

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(9

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

293

 

 

 

 

 

 

 

 

 

 

 

 

293

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

 

 

 

(294

)

 

 

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57

)

 

 

(57

)

Balance at June 30, 2023

 

 

10,818

 

 

 

1,082

 

 

 

28,641

 

 

 

80,083

 

 

 

(7,551

)

 

 

(2,534

)

 

 

99,721

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

106

 

 

 

 

 

 

517

 

Issuance of shares

 

 

28

 

 

 

2

 

 

 

223

 

 

 

 

 

 

 

 

 

 

 

 

225

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

332

 

 

 

 

 

 

 

 

 

 

 

 

332

 

Balance at September 30, 2023

 

 

10,846

 

 

$

1,084

 

 

$

29,196

 

 

$

80,494

 

 

$

(7,445

)

 

$

(2,534

)

 

$

100,795

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2022

 

 

10,801

 

 

$

1,080

 

 

$

27,770

 

 

$

77,076

 

 

$

(6,471

)

 

$

(2,961

)

 

$

96,494

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

676

 

 

 

(212

)

 

 

 

 

 

464

 

Forfeiture of shares

 

 

(32

)

 

 

(3

)

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

114

 

 

 

 

 

 

 

 

 

 

 

 

114

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(21

)

Balance at June 30, 2022

 

 

10,769

 

 

 

1,077

 

 

 

27,887

 

 

 

77,752

 

 

 

(6,683

)

 

 

(2,982

)

 

 

97,051

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

(206

)

 

 

 

 

 

(402

)

Forfeiture of shares

 

 

(11

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of equity-based
  compensation expense

 

 

 

 

 

 

 

 

198

 

 

 

 

 

 

 

 

 

 

 

 

198

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

(237

)

 

 

 

 

 

 

 

 

356

 

 

 

119

 

Balance at September 30, 2022