false 2020 Q1 0000716314 --03-31 Non-accelerated Filer P1Y P3M 0.3333 P1Y false false false P3Y 0.3333 P3Y 0000716314 2020-04-01 2020-06-30 xbrli:shares 0000716314 2020-07-28 iso4217:USD 0000716314 2019-04-01 2019-06-30 iso4217:USD xbrli:shares 0000716314 2020-06-30 0000716314 2020-03-31 0000716314 2019-03-31 0000716314 2019-06-30 0000716314 us-gaap:CommonStockMember 2020-03-31 0000716314 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0000716314 us-gaap:RetainedEarningsMember 2020-03-31 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000716314 us-gaap:TreasuryStockMember 2020-03-31 0000716314 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0000716314 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0000716314 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0000716314 us-gaap:TreasuryStockMember 2020-04-01 2020-06-30 0000716314 us-gaap:CommonStockMember 2020-06-30 0000716314 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0000716314 us-gaap:RetainedEarningsMember 2020-06-30 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0000716314 us-gaap:TreasuryStockMember 2020-06-30 0000716314 us-gaap:CommonStockMember 2019-03-31 0000716314 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000716314 us-gaap:RetainedEarningsMember 2019-03-31 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000716314 us-gaap:TreasuryStockMember 2019-03-31 0000716314 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-03-31 0000716314 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-03-31 0000716314 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0000716314 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0000716314 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0000716314 us-gaap:TreasuryStockMember 2019-04-01 2019-06-30 0000716314 us-gaap:CommonStockMember 2019-06-30 0000716314 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000716314 us-gaap:RetainedEarningsMember 2019-06-30 0000716314 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000716314 us-gaap:TreasuryStockMember 2019-06-30 0000716314 us-gaap:PensionPlansDefinedBenefitMember 2020-04-01 2020-06-30 0000716314 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-04-01 2020-06-30 0000716314 ghm:HeatTransferEquipmentMember 2020-04-01 2020-06-30 0000716314 ghm:HeatTransferEquipmentMember 2019-04-01 2019-06-30 0000716314 ghm:VacuumEquipmentMember 2020-04-01 2020-06-30 0000716314 ghm:VacuumEquipmentMember 2019-04-01 2019-06-30 0000716314 ghm:AllOtherProductLinesMember 2020-04-01 2020-06-30 0000716314 ghm:AllOtherProductLinesMember 2019-04-01 2019-06-30 0000716314 srt:AsiaMember 2020-04-01 2020-06-30 0000716314 srt:AsiaMember 2019-04-01 2019-06-30 0000716314 country:CA 2020-04-01 2020-06-30 0000716314 country:CA 2019-04-01 2019-06-30 0000716314 us-gaap:MiddleEastMember 2020-04-01 2020-06-30 0000716314 us-gaap:MiddleEastMember 2019-04-01 2019-06-30 0000716314 srt:SouthAmericaMember 2020-04-01 2020-06-30 0000716314 srt:SouthAmericaMember 2019-04-01 2019-06-30 0000716314 country:US 2020-04-01 2020-06-30 0000716314 country:US 2019-04-01 2019-06-30 0000716314 ghm:AllOtherCountriesMember 2020-04-01 2020-06-30 0000716314 ghm:AllOtherCountriesMember 2019-04-01 2019-06-30 xbrli:pure 0000716314 ghm:CustomerDepositsMember 2020-06-30 0000716314 ghm:CustomerDepositsMember 2020-03-31 0000716314 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2020-06-30 0000716314 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2020-03-31 0000716314 srt:MinimumMember 2020-07-01 2020-06-30 0000716314 srt:MaximumMember 2020-07-01 2020-06-30 0000716314 srt:MinimumMember 2021-07-01 2020-06-30 0000716314 srt:MaximumMember 2021-07-01 2020-06-30 0000716314 2022-07-01 2020-06-30 0000716314 srt:MaximumMember 2020-06-30 0000716314 srt:MinimumMember 2020-04-01 2020-06-30 0000716314 srt:MaximumMember 2020-04-01 2020-06-30 0000716314 ghm:TwoThousandIncentivePlanMember srt:MaximumMember us-gaap:StockCompensationPlanMember 2020-06-30 0000716314 ghm:TwoThousandIncentivePlanMember srt:MaximumMember us-gaap:RestrictedStockMember 2020-06-30 0000716314 us-gaap:EmployeeStockOptionMember 2020-04-01 2020-06-30 0000716314 ghm:TwoThousandIncentivePlanMember us-gaap:EmployeeStockOptionMember 2020-04-01 2020-06-30 0000716314 us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2020-04-01 2020-06-30 0000716314 us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2019-04-01 2019-06-30 0000716314 srt:OfficerMember ghm:PerformanceVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2020-04-01 2020-06-30 0000716314 srt:OfficerMember ghm:PerformanceVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2019-04-01 2019-06-30 0000716314 ghm:OfficersAndKeyEmployeesMember ghm:TimeVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2020-04-01 2020-06-30 0000716314 ghm:OfficersAndKeyEmployeesMember ghm:TimeVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2019-04-01 2019-06-30 0000716314 srt:DirectorMember ghm:TimeVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2020-04-01 2020-06-30 0000716314 srt:DirectorMember ghm:TimeVestedRestrictedStockMember us-gaap:RestrictedStockMember ghm:TwoThousandIncentivePlanMember 2019-04-01 2019-06-30 0000716314 us-gaap:EmployeeStockOptionMember ghm:TwoThousandIncentivePlanMember 2019-04-01 2019-06-30 0000716314 us-gaap:StockCompensationPlanMember 2020-04-01 2020-06-30 0000716314 us-gaap:StockCompensationPlanMember 2019-04-01 2019-06-30 0000716314 ghm:EmployeeStockPurchasePlanMember 2020-04-01 2020-06-30 0000716314 ghm:EmployeeStockPurchasePlanMember 2020-06-30 0000716314 ghm:EmployeeStockPurchasePlanMember 2019-04-01 2019-06-30 0000716314 us-gaap:PensionPlansDefinedBenefitMember 2019-04-01 2019-06-30 0000716314 us-gaap:PensionPlansDefinedBenefitMember 2020-06-30 0000716314 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-04-01 2019-06-30 0000716314 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-06-30 0000716314 us-gaap:EarliestTaxYearMember us-gaap:DomesticCountryMember 2020-04-01 2020-06-30 0000716314 us-gaap:EarliestTaxYearMember us-gaap:StateAndLocalJurisdictionMember 2020-04-01 2020-06-30 0000716314 us-gaap:EarliestTaxYearMember us-gaap:ForeignCountryMember us-gaap:StateAdministrationOfTaxationChinaMember 2020-04-01 2020-06-30 0000716314 us-gaap:LatestTaxYearMember us-gaap:DomesticCountryMember 2020-04-01 2020-06-30 0000716314 us-gaap:LatestTaxYearMember us-gaap:StateAndLocalJurisdictionMember 2020-04-01 2020-06-30 0000716314 us-gaap:LatestTaxYearMember us-gaap:ForeignCountryMember us-gaap:StateAdministrationOfTaxationChinaMember 2020-04-01 2020-06-30 0000716314 us-gaap:ForeignCountryMember us-gaap:MinistryOfFinanceIndiaMember 2020-04-01 2020-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-03-31 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-31 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2020-04-01 2020-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-04-01 2020-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-06-30 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2020-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-31 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2019-04-01 2019-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-04-01 2019-06-30 0000716314 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0000716314 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0000716314 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember ghm:AccumulatedDefinedBenefitPlansAdjustmentNetActuarialGainLossesMember 2020-04-01 2020-06-30 0000716314 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember ghm:AccumulatedDefinedBenefitPlansAdjustmentNetActuarialGainLossesMember 2019-04-01 2019-06-30 0000716314 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-04-01 2020-06-30 0000716314 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-04-01 2019-06-30 0000716314 ghm:EnergySteelAndSupplyCompanyMember 2019-06-24 2019-06-24 0000716314 ghm:EnergySteelAndSupplyCompanyMember 2020-01-01 2020-03-31 0000716314 ghm:WestinghouseElectricCompanyMember 2020-01-01 2020-03-31 0000716314 us-gaap:AccountingStandardsUpdate201613Member 2020-06-30 0000716314 us-gaap:AccountingStandardsUpdate201814Member 2020-06-30 0000716314 us-gaap:AccountingStandardsUpdate201912Member 2020-06-30

 

 

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 June 30, 2020

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 1-8462

 

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 July 28, 2020, there were outstanding 9,976,893 shares of the registrant’s common stock, par value $0.10 per share.

 

 

 


 

Graham Corporation and Subsidiaries

Index to Form 10-Q

As of June 30, 2020 and March 31, 2020 and for the three months ended June 30, 2020 and 2019

 

 

 

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

15

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

 

 

 

Item 4.

Controls and Procedures

22

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

22

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

 

 

Item 6.

Exhibits

24

 

 

 

Signatures

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

 

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

JUNE 30, 2020

PART I – FINANCIAL INFORMATION

Item 1.Unaudited Condensed Consolidated Financial Statements

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands, except per share data)

 

Net sales

 

$

16,710

 

 

$

20,593

 

Cost of products sold

 

 

15,142

 

 

 

15,879

 

Gross profit

 

 

1,568

 

 

 

4,714

 

Other expenses and income:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,902

 

 

 

4,556

 

Selling, general and administrative – amortization

 

 

 

 

 

11

 

Other expense

 

 

 

 

 

523

 

Other income

 

 

(55

)

 

 

(87

)

Interest income

 

 

(94

)

 

 

(399

)

Interest expense

 

 

5

 

 

 

3

 

Total other expenses and income

 

 

3,758

 

 

 

4,607

 

(Loss) income before provision for income taxes

 

 

(2,190

)

 

 

107

 

(Benefit) provision for income taxes

 

 

(372

)

 

 

25

 

Net (loss) income

 

$

(1,818

)

 

$

82

 

Per share data

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.18

)

 

$

0.01

 

Diluted:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.18

)

 

$

0.01

 

Weighted average common shares

  outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

9,895

 

 

 

9,855

 

Diluted

 

 

9,895

 

 

 

9,858

 

Dividends declared per share

 

$

0.11

 

 

$

0.10

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

3


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Net (loss) income

 

$

(1,818

)

 

$

82

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

9

 

 

 

(87

)

Defined benefit pension and other postretirement plans net

of income tax expense of $61 and $55, for the three months

ended June 30, 2020 and 2019, respectively

 

 

205

 

 

 

194

 

Total other comprehensive income

 

 

214

 

 

 

107

 

Total comprehensive (loss) income

 

$

(1,604

)

 

$

189

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

4


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

June 30,

 

 

March 31,

 

 

 

2020

 

 

2020

 

 

 

(Amounts in thousands, except per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,069

 

 

$

32,955

 

Investments

 

 

26,103

 

 

 

40,048

 

Trade accounts receivable, net of allowances ($47 and $33 at June 30 and

   March 31, 2020, respectively)

 

 

17,054

 

 

 

15,400

 

Unbilled revenue

 

 

15,683

 

 

 

14,592

 

Inventories

 

 

22,656

 

 

 

22,291

 

Prepaid expenses and other current assets

 

 

1,262

 

 

 

906

 

Income taxes receivable

 

 

975

 

 

 

485

 

Total current assets

 

 

124,802

 

 

 

126,677

 

Property, plant and equipment, net

 

 

17,323

 

 

 

17,587

 

Prepaid pension asset

 

 

3,670

 

 

 

3,460

 

Operating lease assets

 

 

206

 

 

 

243

 

Other assets

 

 

105

 

 

 

153

 

Total assets

 

$

146,106

 

 

$

148,120

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of finance lease obligations

 

$

33

 

 

$

40

 

Accounts payable

 

 

9,713

 

 

 

14,253

 

Accrued compensation

 

 

4,551

 

 

 

4,453

 

Accrued expenses and other current liabilities

 

 

3,963

 

 

 

3,352

 

Customer deposits

 

 

31,082

 

 

 

26,983

 

Operating lease liabilities

 

 

137

 

 

 

153

 

Total current liabilities

 

 

49,479

 

 

 

49,234

 

Finance lease obligations

 

 

50

 

 

 

55

 

Operating lease liabilities

 

 

60

 

 

 

82

 

Deferred income tax liability

 

 

1,017

 

 

 

721

 

Accrued pension liability

 

 

774

 

 

 

747

 

Accrued postretirement benefits

 

 

562

 

 

 

557

 

Total liabilities

 

 

51,942

 

 

 

51,396

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $1.00 par value, 500 shares authorized

 

 

 

 

 

 

Common stock, $0.10 par value, 25,500 shares authorized,

   10,780 and 10,689 shares issued and 9,969 and 9,881 shares

   outstanding at June 30 and March 31, 2020, respectively

 

 

1,078

 

 

 

1,069

 

Capital in excess of par value

 

 

26,516

 

 

 

26,361

 

Retained earnings

 

 

88,474

 

 

 

91,389

 

Accumulated other comprehensive loss

 

 

(9,342

)

 

 

(9,556

)

Treasury stock (811 and 808 shares at June 30 and March 31, 2020,

   respectively)

 

 

(12,562

)

 

 

(12,539

)

Total stockholders’ equity

 

 

94,164

 

 

 

96,724

 

Total liabilities and stockholders’ equity

 

$

146,106

 

 

$

148,120

 

 

See Notes to Condensed Consolidated Financial Statements.

 

5


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

(Dollar amounts in thousands)

 

Net (loss) income

 

$

(1,818

)

 

$

82

 

Adjustments to reconcile net (loss) income to net cash used by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

486

 

 

 

490

 

Amortization

 

 

 

 

 

11

 

Amortization of unrecognized prior service cost and actuarial losses

 

 

266

 

 

 

249

 

Equity-based compensation expense

 

 

164

 

 

 

88

 

Gain on disposal or sale of property, plant and equipment

 

 

(4

)

 

 

 

Loss on sale of Energy Steel & Supply Co.

 

 

 

 

 

87

 

Deferred income taxes

 

 

282

 

 

 

202

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,646

)

 

 

3,088

 

Unbilled revenue

 

 

(1,091

)

 

 

(2,323

)

Inventories

 

 

(361

)

 

 

552

 

Prepaid expenses and other current and non-current assets

 

 

(356

)

 

 

(166

)

Income taxes receivable

 

 

(490

)

 

 

(187

)

Operating lease assets

 

 

37

 

 

 

105

 

Prepaid pension asset

 

 

(210

)

 

 

(218

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(4,430

)

 

 

(5,565

)

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

   liabilities

 

 

709

 

 

 

(1,005

)

Customer deposits

 

 

4,094

 

 

 

(242

)

Operating lease liabilities

 

 

(37

)

 

 

(27

)

Long-term portion of accrued compensation, accrued pension liability

   and accrued postretirement benefits

 

 

32

 

 

 

26

 

Net cash used by operating activities

 

 

(4,373

)

 

 

(4,753

)

Investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(338

)

 

 

(294

)

Proceeds from disposal of property, plant and equipment

 

 

6

 

 

 

 

Proceeds from the sale of Energy Steel & Supply Co.

 

 

 

 

 

602

 

Purchase of investments

 

 

(26,103

)

 

 

(28,651

)

Redemption of investments at maturity

 

 

40,048

 

 

 

32,595

 

Net cash provided by investing activities

 

 

13,613

 

 

 

4,252

 

Financing activities:

 

 

 

 

 

 

 

 

Principal repayments on finance lease obligations

 

 

(12

)

 

 

(10

)

Principal repayments on long-term debt

 

 

(4,599

)

 

 

 

Proceeds from the issuance of long-term debt

 

 

4,599

 

 

 

 

Dividends paid

 

 

(1,097

)

 

 

(988

)

Purchase of treasury stock

 

 

(23

)

 

 

(230

)

Net cash used by financing activities

 

 

(1,132

)

 

 

(1,228

)

Effect of exchange rate changes on cash

 

 

6

 

 

 

(76

)

Net increase (decrease) in cash and cash equivalents, including cash classified within

   current assets held for sale

 

 

8,114

 

 

 

(1,805

)

Net decrease in cash classified within current assets held for sale

 

 

 

 

 

552

 

Net increase (decrease) in cash and cash equivalents

 

 

8,114

 

 

 

(1,253

)

Cash and cash equivalents at beginning of period

 

 

32,955

 

 

 

15,021

 

Cash and cash equivalents at end of period

 

$

41,069

 

 

$

13,768

 

 

6


 

See Notes to Condensed Consolidated Financial Statements.

GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

(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, 2020

 

 

10,689

 

 

$

1,069

 

 

$

26,361

 

 

$

91,389

 

 

$

(9,556

)

 

$

(12,539

)

 

$

96,724

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,818

)

 

 

214

 

 

 

 

 

 

 

(1,604

)

Issuance of shares

 

 

113

 

 

 

11

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(22

)

 

 

(2

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,097

)

 

 

 

 

 

 

 

 

 

 

(1,097

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

164

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Balance at June 30, 2020

 

 

10,780

 

 

$

1,078

 

 

$

26,516

 

 

$

88,474

 

 

$

(9,342

)

 

$

(12,562

)

 

$

94,164

 

 

 

 

 

 

 

 

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, 2019

 

 

10,650

 

 

$

1,065

 

 

$

25,277

 

 

$

93,847

 

 

$

(8,833

)

 

$

(12,390

)

 

$

98,966

 

Cumulative effect of change in

  accounting principle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

 

 

(80

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

82

 

 

 

107

 

 

 

 

 

 

 

189

 

Issuance of shares

 

 

83

 

 

 

8

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares

 

 

(34

)

 

 

(3

)

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(988

)

 

 

 

 

 

 

 

 

 

 

(988

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(230

)

 

 

(230

)

Balance at June 30, 2019

 

 

10,699

 

 

$

1,070

 

 

$

25,360

 

 

$

92,861

 

 

$

(8,726

)

 

$

(12,620

)

 

$

97,945

 

 

 

 

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 foreign subsidiaries located in Suzhou, China and Ahmedabad, India.  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, 2020 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, 2020.  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, 2020 ("fiscal 2020").  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, 2020 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, 2021 ("fiscal 2021").

 

 

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:

 

 

 

 

Three Months Ended

 

 

 

June 30,

 

Product Line

 

2020

 

 

2019

 

Heat transfer equipment

 

$

10,673

 

 

$

7,852

 

Vacuum equipment

 

 

2,551

 

 

 

5,530

 

All other

 

 

3,486

 

 

 

7,211

 

Net sales

 

$

16,710

 

 

$

20,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographic Region

 

 

 

 

 

 

 

 

Asia

 

$

5,163

 

 

$

3,219

 

Canada

 

 

992

 

 

 

1,348

 

Middle East

 

 

449

 

 

 

773

 

South America

 

 

220

 

 

 

359

 

U.S.

 

 

9,438

 

 

 

14,448

 

All other

 

 

448

 

 

 

446

 

Net sales

 

$

16,710

 

 

$

20,593

 

  

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

8


 

price is allocated to each distinct performance obligation and revenue is recognized as the performance obligation is satisfied.  In certain 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.

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 revenue, is recognized over time.  However, in the three months ended June 30, 2020, revenue recognized over time was lower than revenue recognized upon shipment due to limited production on large contracts as a result of the COVID-19 pandemic.  Revenue from contracts that is recognized upon shipment accounted for approximately 60% and 45% of revenue for the three-month periods ended June 30, 2020 and 2019, respectively, and revenue from contracts that is recognized over time accounted for approximately 40% and 55% of revenue for the three-month periods ended June 30, 2020 and 2019, respectively.  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 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.

The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable, unbilled revenue (contract assets) and customer deposits (contract liabilities) on the Condensed Consolidated Balance Sheets.  Unbilled revenue represents revenue on contracts that is recognized over time and exceeds the amount that has been billed to the customer.  Unbilled revenue is separately presented in the Condensed Consolidated Balance Sheets.  The Company may have an unconditional right to payment upon billing and prior to satisfying the performance obligations.  The Company will then record a contract liability and an offsetting asset of equal amount until the deposit is collected and the performance obligations are satisfied.  Customer deposits are separately presented in the Condensed Consolidated Balance Sheets.  Customer deposits are not considered a significant financing component as they are generally received less than one year before the product is completed or used to procure specific material on a contract, as well as related overhead costs incurred during design and construction.

Net contract assets (liabilities) consisted of the following:

 

 

 

June 30, 2020

 

 

March 31, 2020

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unbilled revenue (contract assets)

 

$

15,683

 

 

$

14,592

 

 

$

1,091

 

Customer deposits (contract liabilities)

 

 

(31,082

)

 

 

(26,983

)

 

 

(4,099

)

      Net contract liabilities

 

$

(15,399

)

 

$

(12,391

)

 

$

(3,008

)

Contract liabilities at June 30, 2020 and March 31, 2020 include $8,823 and $3,660, respectively, of customer deposits for which the Company has an unconditional right to collect payment.  Trade accounts receivable, as presented on the Condensed Consolidated Balance Sheets, includes corresponding balances at June 30, 2020 and March 31, 2020, respectively.  Revenue recognized in the three months ended June 30, 2020 that was included in the contract liability balance at March 31, 2020 was $7,350.  Changes in the net contract liability balance during the three-month period ended June 30, 2020 were impacted by a $1,091 increase in contract assets, of which $1,751 was due to contract progress offset by invoicing to customers of $660.  In addition, contract liabilities increased $4,099 driven by revenue recognized in the current period that was included in the contract liability balance at March 31, 2020 offset by new customer deposits of $11,449.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were $2,926 and $2,016 at June 30, 2020 and March 31, 2020, respectively.

9


 

 

Incremental costs to obtain a contract consist of sales employee and agent commissions.  Commissions paid to employees and sales agents are capitalized when paid and amortized to selling, general and administrative expense when the related revenue is recognized.  Capitalized costs, net of amortization, to obtain a contract were $72 and $45 at June 30, 2020 and March 31, 2020, respectively, and are included in the line item "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets.  The related amortization expense was $10 and $46 in the three months ended June 30, 2020 and 2019, respectively.

The Company’s remaining unsatisfied performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.  The Company also refers to this measure as backlog.  As of June 30, 2020, the Company had remaining unsatisfied performance obligations of $107,220.  The Company expects to recognize revenue on approximately 70% to 75% of the remaining performance obligations within one year, 15% to 20% in one to two years and the remaining beyond two years.

 

 

NOTE 3 – INVESTMENTS:

Investments consist of certificates of deposits with financial institutions.  All investments have original maturities of greater than three months and less than one year and are classified as held-to-maturity, as the Company believes it has the intent and ability to hold the securities to maturity.  Investments are stated at amortized cost which approximates fair value.  All investments held by the Company at June 30, 2020 are scheduled to mature on or before September 24, 2020.

 

 

NOTE 4 – INVENTORIES:

Inventories are stated at the lower of cost or net realizable value, using the average cost method.

Major classifications of inventories are as follows:

 

 

 

 

June 30,

 

 

March 31,

 

 

 

2020

 

 

2020

 

Raw materials and supplies

 

$

3,149

 

 

$

3,061

 

Work in process

 

 

18,283

 

 

 

18,018

 

Finished products

 

 

1,224

 

 

 

1,212

 

Total

 

$

22,656

 

 

$

22,291

 

 

 

NOTE 5 – EQUITY-BASED COMPENSATION:

The Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value, as approved by the Company’s stockholders at the Annual Meeting on July 28, 2016, provides for the issuance of up to 1,375 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, stock awards and performance awards to officers, key employees and outside directors; provided, however, that no more than 467 shares of common stock may be used for awards other than stock options.  Stock options may be granted at prices not less than the fair market value at the date of grant and expire no later than ten years after the date of grant.

  Restricted stock awards granted in the three-month periods ended June 30, 2020 and 2019 were 113 and 83, respectively.  Restricted shares of 54 and 40 granted to officers in fiscal 2021 and fiscal 2020, respectively, vest 100% on the third anniversary of the grant date subject to the satisfaction of the performance metrics for the applicable three-year period.  Restricted shares of 38 and 28 granted to officers and key employees in fiscal 2021 and fiscal 2020, respectively, vest 33⅓% per year over a three-year term.  Restricted shares of 21 and 15 granted to directors in fiscal 2021 and fiscal 2020, respectively, vest 100% on the first year anniversary of the grant date.  No stock option awards were granted in the three-month periods ended June 30, 2020 and 2019.  

During the three months ended June 30, 2020 and 2019, the Company recognized equity-based compensation costs related to restricted stock awards of $155 and $87, respectively.  The income tax benefit recognized related to equity-based compensation was $38 and $20 for the three months ended June 30, 2020 and 2019, respectively.       

The Company has an Employee Stock Purchase Plan (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the (1) last, (2) first or (3) lower of the last or first day of the six-month offering period.  A total of 200 shares of common stock may be purchased under the ESPP.  During the three months