Basis of Presentation
|9 Months Ended|
Dec. 31, 2021
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Basis of Presentation||
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 December 31, 2021 and March 31, 2021, and its recently acquired wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), located in Arvada, Colorado at December 31, 2021 and for the period June 1, 2021 through December 31, 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 and nine months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2022 ("fiscal 2022"). The three-month period ended December 31, 2021 is also referred to as “the third quarter”.
Going Concern - The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company determined that as of December 31, 2021, it did not meet its financial covenants required by its loan agreement to maintain a maximum total leverage ratio of 3.25 to 1.0, nor did it maintain a minimum fixed charge coverage ratio of 1.2 to 1.0. On February 4, 2022, management obtained a waiver from Bank of America waiving their right to call the debt immediately due and payable as of December 31, 2021. As a term of receiving the waiver, until such time as Bank of America has received all required financial information with respect to the Company for the period ending on or about March 31, 2022, and such financial information confirms to the Bank of America's satisfaction that no default exists at such time, the Company will not permit the principal balance outstanding under the line of credit with Bank of America to exceed $15,000. Absent a waiver or an amendment of the loan agreement, the Company anticipates that it will not meet these covenants as of March 31, 2022, which would be an event of default. Violation of its covenants under the loan agreement provides the bank with the option to accelerate the maturity of the term loan under the loan agreement, which carries a balance of $19,000 as of December 31, 2021 and the revolving credit facility, which has a principal balance outstanding of $9,750 as of December 31, 2021. If the Company's lenders accelerate the maturity of the term loan and the revolving credit facility, the Company does not have sufficient cash to repay the outstanding debt. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that these financial statements were issued.
In response to these conditions, management has begun to actively engage in negotiations with the bank regarding amendments to its term loan and its revolving credit facility and related financial covenants. However, this plan has not been finalized and is not within the Company's control, and therefore cannot be deemed probable. As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from the outcome of this uncertainty.
The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef