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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, 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 1-08462

 

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 October 27, 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 September 30, 2020 and March 31, 2020 and for the Three and Six-Month Periods Ended September 30, 2020 and 2019  

 

 

 

Page

Part I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

4

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

 

 

 

Item 4.

Controls and Procedures

23

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

24

 

 

 

Item 6.

Exhibits

25

 

 

 

Signatures

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

 

GRAHAM CORPORATION AND SUBSIDIARIES

FORM 10-Q

SEPTEMBER 30, 2020

PART I – FINANCIAL INFORMATION

3


 

Item 1.

Unaudited Condensed Consolidated Financial Statements

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands, except per share data)

 

 

(Amounts in thousands, except per share data)

 

Net sales

 

$

27,954

 

 

$

21,643

 

 

$

44,664

 

 

$

42,236

 

Cost of products sold

 

 

20,261

 

 

 

16,695

 

 

 

35,403

 

 

 

32,574

 

Gross profit

 

 

7,693

 

 

 

4,948

 

 

 

9,261

 

 

 

9,662

 

Other expenses and income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

4,253

 

 

 

3,847

 

 

 

8,155

 

 

 

8,403

 

Selling, general and administrative – amortization

 

 

 

 

 

 

 

 

 

 

 

11

 

Other expense

 

 

 

 

 

 

 

 

 

 

 

523

 

Other income

 

 

(54

)

 

 

(87

)

 

 

(109

)

 

 

(174

)

Interest income

 

 

(26

)

 

 

(363

)

 

 

(120

)

 

 

(762

)

Interest expense

 

 

3

 

 

 

4

 

 

 

8

 

 

 

7

 

Total other expenses and income

 

 

4,176

 

 

 

3,401

 

 

 

7,934

 

 

 

8,008

 

Income before provision for income taxes

 

 

3,517

 

 

 

1,547

 

 

 

1,327

 

 

 

1,654

 

Provision for income taxes

 

 

773

 

 

 

342

 

 

 

401

 

 

 

367

 

Net income

 

$

2,744

 

 

$

1,205

 

 

$

926

 

 

$

1,287

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.27

 

 

$

0.12

 

 

$

0.09

 

 

$

0.13

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.27

 

 

$

0.12

 

 

$

0.09

 

 

$

0.13

 

Weighted average common shares

  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,977

 

 

 

9,883

 

 

 

9,936

 

 

 

9,869

 

Diluted

 

 

9,977

 

 

 

9,885

 

 

 

9,936

 

 

 

9,872

 

Dividends declared per share

 

$

0.11

 

 

$

0.11

 

 

$

0.22

 

 

$

0.21

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

4


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

Net income

 

$

2,744

 

 

$

1,205

 

 

$

926

 

 

$

1,287

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

146

 

 

 

(136

)

 

 

155

 

 

 

(223

)

Defined benefit pension and other postretirement plans net

of income tax expense of $63 and $54 for the three months

ended September 30, 2020 and 2019, respectively, and

$124 and $109 for the six months ended September 30, 2020

and 2019, respectively

 

 

204

 

 

 

195

 

 

 

409

 

 

 

389

 

Total other comprehensive income

 

 

350

 

 

 

59

 

 

 

564

 

 

 

166

 

Total comprehensive income

 

$

3,094

 

 

$

1,264

 

 

$

1,490

 

 

$

1,453

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

5


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,

 

 

March 31,

 

 

 

2020

 

 

2020

 

 

 

(Amounts in thousands, except per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,356

 

 

$

32,955

 

Investments

 

 

5,500

 

 

 

40,048

 

Trade accounts receivable, net of allowances ($41 and $33 at September 30 and

   March 31, 2020, respectively)

 

 

19,276

 

 

 

15,400

 

Unbilled revenue

 

 

13,691

 

 

 

14,592

 

Inventories

 

 

20,615

 

 

 

22,291

 

Prepaid expenses and other current assets

 

 

1,378

 

 

 

906

 

Income taxes receivable

 

 

322

 

 

 

485

 

Total current assets

 

 

123,138

 

 

 

126,677

 

Property, plant and equipment, net

 

 

17,327

 

 

 

17,587

 

Prepaid pension asset

 

 

3,881

 

 

 

3,460

 

Operating lease assets

 

 

171

 

 

 

243

 

Other assets

 

 

105

 

 

 

153

 

Total assets

 

$

144,622

 

 

$

148,120

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of finance lease obligations

 

$

26

 

 

$

40

 

Accounts payable

 

 

11,669

 

 

 

14,253

 

Accrued compensation

 

 

5,082

 

 

 

4,453

 

Accrued expenses and other current liabilities

 

 

3,867

 

 

 

3,352

 

Customer deposits

 

 

24,838

 

 

 

26,983

 

Operating lease liabilities

 

 

110

 

 

 

153

 

Total current liabilities

 

 

45,592

 

 

 

49,234

 

Finance lease obligations

 

 

45

 

 

 

55

 

Operating lease liabilities

 

 

53

 

 

 

82

 

Deferred income tax liability

 

 

988

 

 

 

721

 

Accrued pension liability

 

 

800

 

 

 

747

 

Accrued postretirement benefits

 

 

567

 

 

 

557

 

Total liabilities

 

 

48,045

 

 

 

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 9,977 and 9,881 shares

   outstanding at September 30 and March 31, 2020, respectively

 

 

1,078

 

 

 

1,069

 

Capital in excess of par value

 

 

26,866

 

 

 

26,361

 

Retained earnings

 

 

90,120

 

 

 

91,389

 

Accumulated other comprehensive loss

 

 

(8,992

)

 

 

(9,556

)

Treasury stock (803 and 808 shares at September 30 and March 31, 2020,

   respectively)

 

 

(12,495

)

 

 

(12,539

)

Total stockholders’ equity

 

 

96,577

 

 

 

96,724

 

Total liabilities and stockholders’ equity

 

$

144,622

 

 

$

148,120

 

 

See Notes to Condensed Consolidated Financial Statements.

 

6


 

GRAHAM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

(Dollar amounts in thousands)

 

Net income

 

$

926

 

 

$

1,287

 

Adjustments to reconcile net income to net cash used by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

972

 

 

 

980

 

Amortization

 

 

 

 

 

11

 

Amortization of actuarial losses

 

 

533

 

 

 

498

 

Equity-based compensation expense

 

 

494

 

 

 

412

 

Gain on disposal or sale of property, plant and equipment

 

 

3

 

 

 

 

Loss on sale of Energy Steel & Supply Co.

 

 

 

 

 

87

 

Deferred income taxes

 

 

191

 

 

 

119

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,820

)

 

 

5,287

 

Unbilled revenue

 

 

901

 

 

 

(5,514

)

Inventories

 

 

1,808

 

 

 

990

 

Prepaid expenses and other current and non-current assets

 

 

(456

)

 

 

109

 

Income taxes receivable

 

 

163

 

 

 

233

 

Operating lease assets

 

 

75

 

 

 

138

 

Prepaid pension asset

 

 

(421

)

 

 

(435

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(2,544

)

 

 

(4,721

)

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

   liabilities

 

 

1,214

 

 

 

(268

)

Customer deposits

 

 

(2,285

)

 

 

(1,116

)

Operating lease liabilities

 

 

(75

)

 

 

(64

)

Long-term portion of accrued compensation, accrued pension liability

   and accrued postretirement benefits

 

 

63

 

 

 

52

 

Net cash used by operating activities

 

 

(2,258

)

 

 

(1,915

)

Investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(797

)

 

 

(679

)

Proceeds from disposal of property, plant and equipment

 

 

6

 

 

 

 

Proceeds from the sale of Energy Steel & Supply Co.

 

 

 

 

 

602

 

Purchase of investments

 

 

(31,603

)

 

 

(82,414

)

Redemption of investments at maturity

 

 

66,151

 

 

 

83,232

 

Net cash provided by investing activities

 

 

33,757

 

 

 

741

 

Financing activities:

 

 

 

 

 

 

 

 

Principal repayments on finance lease obligations

 

 

(24

)

 

 

(25

)

Principal repayments on long-term debt

 

 

(4,599

)

 

 

 

 

Proceeds from the issuance of long-term debt

 

 

4,599

 

 

 

 

 

Dividends paid

 

 

(2,195

)

 

 

(2,075

)

Purchase of treasury stock

 

 

(23

)

 

 

(230

)

Net cash used by financing activities

 

 

(2,242

)

 

 

(2,330

)

Effect of exchange rate changes on cash

 

 

144

 

 

 

(187

)

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

   current assets held for sale

 

 

29,401

 

 

 

(3,691

)

Net decrease in cash classified within current assets held for sale

 

 

 

 

 

552

 

Net increase (decrease) in cash and cash equivalents

 

 

29,401

 

 

 

(3,139

)

Cash and cash equivalents at beginning of period

 

 

32,955

 

 

 

15,021

 

Cash and cash equivalents at end of period

 

$

62,356

 

 

$

11,882

 

See Notes to Condensed Consolidated Financial Statements.

 

7


 

 

GRAHAM CORPORATION AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

(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

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,744

 

 

 

350

 

 

 

 

 

 

 

3,094

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,098

)

 

 

 

 

 

 

 

 

 

 

(1,098

)

Recognition of equity-based

  compensation expense

 

 

 

 

 

 

 

 

 

 

330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

330

 

Issuance of treasury stock

 

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

67

 

 

 

87

 

Balance at September 30, 2020

 

 

10,780

 

 

$

1,078

 

 

$

26,866

 

 

$

90,120

 

 

$

(8,992

)

 

$

(12,495

)

 

$

96,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)