UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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Large accelerated filer |
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Accelerated filer |
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☒ |
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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
As of August 6, 2021, there were outstanding
Graham Corporation and Subsidiaries
Index to Form 10-Q
As of June 30, 2021 and March 31, 2021 and for the three months ended June 30, 2021 and 2020
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Page |
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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 |
20 |
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Item 3. |
27 |
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Item 4. |
27 |
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Part II. |
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Item 1A. |
29 |
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Item 2. |
29 |
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Item 6. |
31 |
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33 |
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2
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 2021
PART I – FINANCIAL INFORMATION
Item 1.Unaudited Condensed Consolidated Financial Statements
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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June 30, |
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2021 |
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2020 |
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(Amounts in thousands, except per share data) |
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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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— |
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Other income |
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( |
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( |
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Interest income |
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( |
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( |
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Interest expense |
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Total other expenses and income |
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Loss before benefit for income taxes |
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( |
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Benefit for income taxes |
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( |
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( |
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Net loss |
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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 loss |
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$ |
( |
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$ |
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Diluted: |
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Net loss |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Dividends declared per share |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
3
GRAHAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
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Three Months Ended |
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June 30, |
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2021 |
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2020 |
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(Amounts in thousands) |
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Net loss |
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$ |
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$ |
( |
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Other comprehensive income: |
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Foreign currency translation adjustment |
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Defined benefit pension and other postretirement plans net of income tax expense of $ ended June 30, 2021 and 2020, respectively |
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Total other comprehensive income |
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Total comprehensive loss |
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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
(Unaudited)
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June 30, 2021 |
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March 31, 2021 |
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(Amounts in thousands, except per share data) |
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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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Investments |
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— |
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Trade accounts receivable, net of allowances ($ March 31, 2021, respectively) |
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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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— |
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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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— |
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Customer relationships |
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— |
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Technology and technical know how |
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— |
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Other intangible assets, net |
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— |
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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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Short-term debt obligations |
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$ |
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$ |
— |
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Current portion of long-term debt |
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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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— |
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Total current liabilities |
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Long-term debt |
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— |
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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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— |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ issued and respectively |
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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
(Unaudited)
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Three Months Ended |
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June 30, |
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2021 |
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2020 |
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Operating activities: |
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(Dollar amounts in thousands) |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used by operating activities: |
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Depreciation |
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Amortization |
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— |
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Amortization of actuarial losses |
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Equity-based compensation expense |
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Gain on disposal or sale of property, plant and equipment |
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— |
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( |
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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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Unbilled revenue |
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( |
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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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( |
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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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( |
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Accrued compensation, accrued expenses and other current and non-current liabilities |
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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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Long-term portion of accrued compensation, accrued pension liability and accrued postretirement benefits |
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Net cash used by operating activities |
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( |
) |
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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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Proceeds from disposal of property, plant and equipment |
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— |
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Purchase of investments |
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— |
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( |
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Redemption of investments at maturity |
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Acquisition of Barber-Nichols, LLC |
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( |
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— |
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Net cash (used) provided by investing activities |
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( |
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Financing activities: |
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Increase in short-term debt obligations |
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— |
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Principal repayments on long-term debt |
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— |
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( |
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Proceeds from the issuance of long-term 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 lease financing 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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— |
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Dividends paid |
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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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Net cash provided (used) by financing activities |
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( |
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Effect of exchange rate changes on cash |
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Net (decrease) increase 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
(Unaudited)
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Common Stock |
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Capital in |
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Accumulated Other |
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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, 2021 |
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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 loss |
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( |
) |
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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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Dividends |
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( |
) |
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( |
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Recognition of equity-based compensation expense |
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Issuance of treasury stock |
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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, 2021 |
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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 Other |
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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, 2020 |
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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 |
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( |
) |
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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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Dividends |
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( |
) |
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( |
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Recognition of equity-based compensation expense |
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Purchase of treasury stock |
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( |
) |
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( |
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Balance at June 30, 2020 |
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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 Suzhou, China and Ahmedabad, India at June 30, 2021 and March 31, 2021, and its recently acquired wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), located in Arvada, Colorado at June 30, 2021 and for the period June 1, 2021 through June 30, 2021 (See Note 2). 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, 2021 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, 2021. 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, 2021 ("fiscal 2021"). 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, 2021 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2022 ("fiscal 2022").
NOTE 2 – ACQUISITION:
On June 1, 2021, the Company completed its acquisition of Barber-Nichols, LLC ("BN"), a privately-owned designer and manufacturer of turbomachinery products located in Arvada, Colorado that serves the defense and aerospace industry as well as the energy and cryogenic markets. The Company believes this acquisition furthers its growth strategy through market and product diversification, broadens its offerings and strengthens its presence in the defense industry, builds on its presence in the energy markets and adds capabilities in the space industry.
This transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price of $
The cost of the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition and the amount exceeding the fair value of $
8
methodology, and was computed as the present value of the expected sales attributable to backlog less the remaining costs to fulfill the backlog. Changes to the preliminary valuation may result in material adjustments to the fair value of assets and liabilities acquired.
The purchase price was allocated to specific intangible assets on a preliminary basis as follows:
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Fair Value Assigned |
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Weighted Average Amortization Period |
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At June 30, 2021 |
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Intangibles subject to amortization: |
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Customer relationships |
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$ |
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Technology and technical know how |
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Backlog |
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$ |
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Intangibles not subject to amortization: |
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Tradename |
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$ |
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Technology and technical know-how and customer relationships are amortized in selling, general and administrative expense on a straight line basis over their estimated useful lives. Backlog is amortized in cost of products sold over the projected conversion period based on management estimates at time of purchase. Intangible amortization was $
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Annual Amortization |
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Remainder of 2022 |
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$ |
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2023 |
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2024 |
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2025 |
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2026 |
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2027 and thereafter |
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Total intangible amortization |
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$ |
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The following table summarizes the preliminary allocation of the cost of the acquisition to the assets acquired and liabilities assumed as of the close of the acquisition:
9
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June 1, |
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2021 |
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Assets acquired: |
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Cash and cash equivalents |
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$ |
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Accounts receivable |
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Unbilled revenue |
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Inventory |
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Other current assets |
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Property, plant & equipment |
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Operating lease asset |
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Goodwill |
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