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 September 30, 2023

☐ 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

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.

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.

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.

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.

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