Graham Corporation (NYSE:GHM), a global business that designs,
manufactures and sells critical equipment for the oil refining,
petrochemical, power and defense industries, today reported
financial results for its second quarter ended September 30, 2016.
Graham’s current fiscal year ends March 31, 2017 (“fiscal
2017”).
Net sales in the second quarter were $21.1 million, compared
with net sales of $22.8 million in the second quarter of the fiscal
year ended March 31, 2016 (“fiscal 2016”). Net income in the
second quarter was $1.3 million, or $0.13 per diluted share,
compared with $2.0 million, or $0.20 per diluted share, in the
prior year’s second quarter.
James R. Lines, Graham’s President and Chief Executive Officer,
commented, “During this quarter we benefited from conversion of
certain larger nuclear market orders that had been in
backlog. However, we are continuing to experience difficult
energy-related market conditions, not only causing delays and
pricing pressure for major project work but short cycle projects as
well. These factors, along with low capacity utilization
within our operations, resulted in lower comparative margins on a
year-over-year basis. Despite the difficult operating
environment, we continue to execute profitably and maintain our
commitment to Graham’s longer-term growth objectives.”
Second Quarter Fiscal 2017 Sales Review
(See accompanying financial tables for a breakdown of sales by
industry and region)
Weak energy market conditions continued to impact total sales in
the second quarter of fiscal 2017. Highlighting the
importance of Graham’s diversification strategy, sales to the power
market were up to $6.1 million compared with $3.0 million in the
second quarter of fiscal 2016. However, this growth and
market diversification were offset by the decline in sales to other
markets. From a geographic perspective, sales to the U.S.,
Asia and other regions were positive compared with the prior-year’s
second quarter, while sales to the Middle East were down.
Fluctuations in Graham’s sales among geographic locations and
industries can vary measurably from quarter-to-quarter based on the
timing and magnitude of projects. Graham does not believe
that such quarter-to-quarter fluctuations are indicative of
business trends, which it believes are more apparent on a trailing
twelve month basis.
Second Quarter Fiscal 2017 Operating Performance
Review
|
|
|
|
|
|
|
|
($ in millions) |
Q2 FY17 |
|
Q2 FY16 |
|
Change |
|
% Change |
Net sales |
$ |
21.1 |
|
|
$ |
22.8 |
|
|
$ |
(1.7 |
) |
|
|
(7 |
%) |
Gross profit |
$ |
5.0 |
|
|
$ |
7.1 |
|
|
$ |
(2.1 |
) |
|
|
(30 |
%) |
Gross
margin |
|
23.7 |
% |
|
|
31.3 |
% |
|
|
|
|
Operating profit |
$ |
1.8 |
|
|
$ |
2.9 |
|
|
$ |
(1.1 |
) |
|
|
(39 |
%) |
Operating
margin |
|
8.3 |
% |
|
|
12.7 |
% |
|
|
|
|
Net income |
$ |
1.3 |
|
|
$ |
2.0 |
|
|
$ |
(0.7 |
) |
|
|
(34 |
%) |
Diluted
EPS |
$ |
0.13 |
|
|
$ |
0.20 |
|
|
$ |
(0.07 |
) |
|
|
(35 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter gross profit and margin were impacted by lower
margin orders from backlog, fewer short cycle sales and reduced
production volume which resulted in under-absorption of
overhead.
Selling, general and administrative (“SG&A”) expenses
declined 26% to $3.2 million, principally due to the favorable
impact of $0.8 million of insurance proceeds as well as lower
compensation expenses and the impact of other cost reductions.
SG&A as a percent of sales was 15% in the second quarter
of fiscal 2017 compared with 19% in the same prior-year
period.
To complete its restructuring program initiated in the first
quarter of fiscal 2017, the Company incurred an additional
restructuring charge of $75,000 in the second quarter. As
previously announced, the program resulted in a 10% headcount
reduction and is anticipated to generate approximately $2.7 million
of annual cost savings, of which roughly $2.0 million is expected
to be realized during fiscal 2017.
During the second quarter of fiscal 2017, Graham had an
effective tax rate of 30%. The effective tax rate in the
second quarter of fiscal 2016 was 33%.
The decline in net income in the second quarter of fiscal 2017
reflects lower revenue and gross margin, offset in part by reduced
SG&A.
Excluding a $0.05 million, net of tax, nonrecurring
restructuring charge recorded in the fiscal 2017 second quarter,
adjusted net income, a number not prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”), was $1.4 million
or $0.14 per diluted share. Graham believes that, when used
in conjunction with measures prepared in accordance with GAAP,
adjusted net income helps in the understanding of its operating
performance. See the attached tables for additional important
disclosures regarding Graham’s use of adjusted net income as well
as a reconciliation of GAAP net income to non-GAAP adjusted net
income.
The comparison of Adjusted EBITDA reflects the same factors:
|
|
|
|
|
|
|
|
($ in millions) |
Q2 FY17 |
|
Q2 FY16 |
|
Change |
|
% Change |
Adjusted EBITDA |
$ |
2.4 |
|
|
$ |
3.5 |
|
|
$ |
(1.1 |
) |
|
|
(31 |
%) |
Adjusted
EBITDA margin |
|
11.4 |
% |
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, Adjusted EBITDA (consolidated net
income before interest expense and income, income taxes,
depreciation and amortization and a nonrecurring restructuring
charge) and Adjusted EBITDA margin (Adjusted EBITDA as a percentage
of sales), which are non-GAAP measures, help in the understanding
of its operating performance. Graham’s credit facility also
contains ratios based on EBITDA. See the attached tables for
additional important disclosures regarding Graham’s use of Adjusted
EBITDA and Adjusted EBITDA margin as well as a reconciliation of
net income to Adjusted EBITDA.
First Half Fiscal 2017 Review
|
|
|
|
|
|
|
|
($ in millions) |
YTD FY17 |
|
YTD FY16 |
|
Change |
|
% Change |
Net sales |
$ |
43.5 |
|
|
$ |
50.4 |
|
|
$ |
(6.9 |
) |
|
|
(14 |
%) |
Gross profit |
$ |
9.1 |
|
|
$ |
15.2 |
|
|
$ |
(6.1 |
) |
|
|
(40 |
%) |
Gross
margin |
|
21.0 |
% |
|
|
30.1 |
% |
|
|
|
|
Operating profit |
$ |
1.7 |
|
|
$ |
6.3 |
|
|
$ |
(4.6 |
) |
|
|
(74 |
%) |
Operating
margin |
|
3.8 |
% |
|
|
12.5 |
% |
|
|
|
|
Net income |
$ |
1.4 |
|
|
$ |
4.3 |
|
|
$ |
(2.9 |
) |
|
|
(68 |
%) |
Diluted
EPS |
$ |
0.14 |
|
|
$ |
0.43 |
|
|
$ |
(0.29 |
) |
|
|
(67 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International sales were $11.8 million in the first six months
of fiscal 2017 and represented 27% of total sales, compared with
$17.6 million, or 35% of sales, in the same prior-year period.
Sales to the U.S. were $31.7 million, or 73%, of net first
half sales in fiscal 2017 compared with $32.8 million, or 65%, of
fiscal 2016 first half net sales.
The decrease in gross profit was primarily due to lower volume.
The decrease in gross margin was impacted by volume as well
as the mix of lower margin orders from backlog and
under-utilization of production facilities.
SG&A in the fiscal 2017 first half was $6.8 million, down
23% or $2.1 million. As a percent of sales, SG&A was 16%
in the first half of fiscal 2017 compared with 18% in the same
prior-year period. This decrease included the favorable
impact of $0.8 million of insurance proceeds in the second
quarter.
Excluding a $0.4 million net of tax, nonrecurring restructuring
charge recorded in the first half of fiscal 2017, adjusted net
income, a non-GAAP number, was $1.8 million or $0.19 per diluted
share. Graham believes that, when used in conjunction with
measures prepared in accordance with GAAP, adjusted net income
helps in the understanding of its operating performance. See
the attached tables for additional important disclosures regarding
Graham’s use of adjusted net income as well as a reconciliation of
GAAP net income to non-GAAP adjusted net income.
The comparison of Adjusted EBITDA reflects the same factors:
|
|
|
|
|
|
|
|
($ in millions) |
YTD FY17 |
|
YTD FY16 |
|
Change |
|
% Change |
Adjusted EBITDA |
$ |
3.5 |
|
|
$ |
7.5 |
|
|
$ |
(4.0 |
) |
|
|
(54 |
%) |
Adjusted
EBITDA margin |
|
7.9 |
% |
|
|
14.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the attached tables for additional important disclosures
regarding Graham’s use of Adjusted EBITDA and Adjusted EBITDA
margin as well as a reconciliation of net income to Adjusted
EBITDA.
Balance Sheet Remains Strong
Cash, cash equivalents and investments at September 30, 2016
were $66.3 million, up $1.2 million from the end of fiscal
2016.
Cash provided by operations in the first half of fiscal 2017 was
$3.3 million, compared with $7.7 million in the first half of
fiscal 2016. The reduction was primarily due to lower net
income and timing of working capital cash flows.
Capital expenditures were $0.2 million in the first half
compared with $0.5 million in the same prior-year period. The
Company expects capital expenditures for fiscal 2017 to be between
$0.5 to $1 million for the full year. Capital investments are
expected to be used for equipment upgrades and productivity
enhancements.
Dividend payments were $1.7 million for the first half of fiscal
2017, slightly higher than $1.6 million in the prior-year’s first
half.
Graham had neither borrowings under its credit facility, nor any
long-term debt outstanding, at September 30, 2016.
First Half Fiscal 2017 Backlog Continues to Highlight
Importance of Diversification
Backlog at the end of the fiscal 2017 first half was $104
million, up $4.1 million sequentially from the end of the fiscal
2017 first quarter, primarily driven by orders in support of the
U.S. Navy.
The backlog mix by industry at September 30, 2016, validates the
Company’s market diversification strategy and its expanded focus to
increase sales with the U.S. Navy and in the power industry.
Backlog by industry was approximately:
- 16% for refinery projects
- 13% for chemical/petrochemical projects
- 11% for power projects, including nuclear
- 57% for U.S. Navy projects
- 3% for other industrial applications
The expected timing for backlog at quarter end to convert to
sales is as follows:
- Within next 12 months:
50% to
55%
- Within 12 to 24 months:
5% to 10%
- Beyond 24 months:
35% to 40%
Orders in the second quarter of $24.8 million were up 20% from
$20.6 million in the same prior-year period. Orders from U.S.
customers were $18.4 million, or 74%, and orders from international
markets were $6.4 million, or 26%, in the second quarter of fiscal
2017. Three orders in backlog for the refining industry,
valued at $6.9 million, were on hold as of September 30, 2016.
Orders for the first half of fiscal 2017 were $39.4 million,
compared with $44.6 million in the first half of fiscal 2016.
Orders from U.S. customers were $29 million, or 74%, and orders
from international markets were $10.4 million, or 26%, in the first
half of fiscal 2017.
Graham expects that the balance between domestic and
international orders will continue to be variable between quarters,
but that in the long run orders will be relatively balanced between
these geographic markets.
FY 2017 Guidance Update
Mr. Lines stated, “As we progress through fiscal 2017, we gain
confidence in our expected revenue for the year, driven by our
solid backlog. However, gross margin is under pressure due to
a decline in aftermarket and other short cycle sales that
traditionally provide stronger profitability than large project
work. We believe this tendency has short term implications,
though it affected second quarter results as well as our
projections for the remainder of this fiscal year.
Additionally, there are lower margin projects converting to
sales in the fiscal 2017 second half, putting further pressure on
gross margin. As we look forward, we anticipate short cycle
sales, including aftermarket, will improve before major project
sales begin to move upward.”
Graham’s expects its fiscal 2017 performance to be as
follows:
- Revenue is now anticipated to be between $85 and $95
million
- Gross margin is now expected to be between 21% and
23%
- SG&A expense is now expected to be between $15 and $15.5
million, reflecting the favorable impact from second quarter
insurance settlement proceeds
- Effective tax rate is anticipated to be between 30% and
31%
Webcast and Conference Call Graham’s management
will host a conference call and live webcast today at 11:00 a.m.
Eastern Time to review Graham’s financial condition and operating
results for the fiscal 2017 second quarter, as well as its strategy
and outlook. The review will be accompanied by a slide
presentation which will be made available immediately prior to the
conference call on Graham’s website at www.graham-mfg.com under the
heading “Investor Relations.” A question-and-answer session
will follow the formal presentation.
Graham’s conference call can be accessed by calling (201)
689-8560. Alternatively, the webcast can be monitored on
Graham’s website at www.graham-mfg.com under the heading “Investor
Relations.”
A telephonic replay will be available from approximately 2:00
p.m. Eastern Time on the day of the call through Tuesday, November
8, 2016. To listen to the archived call, dial (858) 384-5517,
and enter conference ID number 13645494. A transcript of the
call will be placed on Graham’s website, once available.
ABOUT GRAHAM CORPORATION
Graham is a global business that designs, manufactures and sells
critical equipment for the energy, defense and
chemical/petrochemical industries. Energy markets include oil
refining, cogeneration, nuclear and alternative power. For
the defense industry, the Company’s equipment is used in nuclear
propulsion power systems for the U.S. Navy. Graham’s global
brand is built upon world-renowned engineering expertise in vacuum
and heat transfer technology, responsive and flexible service and
unsurpassed quality. Graham designs and manufactures
custom-engineered ejectors, vacuum pumping systems, surface
condensers and vacuum systems. Graham is also a leading
nuclear code accredited fabrication and specialty machining
company. Graham supplies components used inside reactor
vessels and outside containment vessels of nuclear power
facilities. Graham’s equipment can also be found in other
diverse applications such as metal refining, pulp and paper
processing, water heating, refrigeration, desalination, food
processing, pharmaceutical, heating, ventilating and air
conditioning. Graham’s reach spans the globe and its
equipment is installed in facilities from North and South America
to Europe, Asia, Africa and the Middle East. Graham routinely
posts news and other important information on its website,
www.graham-mfg.com, where additional comprehensive information on
Graham Corporation and its subsidiaries can be found.
Safe Harbor Regarding Forward Looking
Statements This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties
and assumptions and are identified by words such as “expects,”
“estimates,” “confidence,” “projects,” “typically,” “outlook,”
“anticipates,” “believes,” “appears,” “could,” “opportunities,”
“seeking,” “plans,” “aim,” “pursuit,” and other similar
words. All statements addressing operating performance,
events, or developments that Graham Corporation expects or
anticipates will occur in the future, including but not limited to,
expected expansion and growth opportunities within its domestic and
international markets, anticipated revenue, the timing of
conversion of backlog to sales, market presence, profit margins,
tax rates, foreign sales operations, its ability to improve cost
competitiveness, customer preferences, changes in market conditions
in the industries in which it operates, changes in commodities
prices, the effect on its business of volatility in commodities
prices, changes in general economic conditions and customer
behavior, forecasts regarding the timing and scope of the economic
recovery in its markets, its acquisition and growth strategy and
the expected performance of Energy Steel & Supply Co. and its
operations in China, are forward-looking statements. Because
they are forward-looking, they should be evaluated in light of
important risk factors and uncertainties. These risk factors and
uncertainties are more fully described in Graham Corporation's most
recent Annual Report filed with the Securities and Exchange
Commission, included under the heading entitled “Risk
Factors.”
Should one or more of these risks or uncertainties materialize,
or should any of Graham Corporation's underlying assumptions prove
incorrect, actual results may vary materially from those currently
anticipated. In addition, undue reliance should not be placed
on Graham Corporation's forward-looking statements. Except as
required by law, Graham Corporation disclaims any obligation to
update or publicly announce any revisions to any of the
forward-looking statements contained in this news release.
FINANCIAL TABLES FOLLOW.
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Consolidated Statements of
Operations—Unaudited |
(Amounts in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
September
30, |
|
September
30, |
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
% Change |
|
|
2016 |
|
|
|
2015 |
|
% Change |
Net
sales |
$ |
21,126 |
|
|
$ |
22,798 |
|
|
(7 |
%) |
|
$ |
43,491 |
|
|
$ |
50,415 |
|
|
(14 |
%) |
Cost of
products sold |
|
16,116 |
|
|
|
15,663 |
|
|
3 |
% |
|
|
34,370 |
|
|
|
35,243 |
|
|
(2 |
%) |
Gross
profit |
|
5,010 |
|
|
|
7,135 |
|
|
(30 |
%) |
|
|
9,121 |
|
|
|
15,172 |
|
|
(40 |
%) |
Gross
margin |
|
23.7 |
% |
|
|
31.3 |
% |
|
|
|
21.0 |
% |
|
|
30.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Other expenses and
income: |
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
3,118 |
|
|
|
4,187 |
|
|
(26 |
%) |
|
|
6,716 |
|
|
|
8,767 |
|
|
(23 |
%) |
Selling,
general and administrative – amortization |
|
59 |
|
|
|
59 |
|
|
0 |
% |
|
|
117 |
|
|
|
117 |
|
|
0 |
% |
Restructuring charge |
|
75 |
|
|
|
- |
|
NA |
|
|
630 |
|
|
|
- |
|
NA |
Operating profit |
|
1,758 |
|
|
|
2,889 |
|
|
(39 |
%) |
|
|
1,658 |
|
|
|
6,288 |
|
|
(74 |
%) |
Operating
margin |
|
8.3 |
% |
|
|
12.7 |
% |
|
|
|
3.8 |
% |
|
|
12.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
(85 |
) |
|
|
(53 |
) |
|
60 |
% |
|
|
(172 |
) |
|
|
(105 |
) |
|
64 |
% |
Interest
expense |
|
2 |
|
|
|
1 |
|
|
100 |
% |
|
|
4 |
|
|
|
4 |
|
|
0 |
% |
Income before provision
for income taxes |
|
1,841 |
|
|
|
2,941 |
|
|
(37 |
%) |
|
|
1,826 |
|
|
|
6,389 |
|
|
(71 |
%) |
Provision for income
taxes |
|
544 |
|
|
|
965 |
|
|
(44 |
%) |
|
|
444 |
|
|
|
2,052 |
|
|
(78 |
%) |
Net
income |
$ |
1,297 |
|
|
$ |
1,976 |
|
|
(34 |
%) |
|
$ |
1,382 |
|
|
$ |
4,337 |
|
|
(68 |
%) |
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
0.13 |
|
|
$ |
0.20 |
|
|
(35 |
%) |
|
$ |
0.14 |
|
|
$ |
0.43 |
|
|
(67 |
%) |
Diluted: |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
0.13 |
|
|
$ |
0.20 |
|
|
(35 |
%) |
|
$ |
0.14 |
|
|
$ |
0.43 |
|
|
(67 |
%) |
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
9,724 |
|
|
|
10,078 |
|
|
|
|
9,699 |
|
|
|
10,116 |
|
|
Diluted |
|
9,728 |
|
|
|
10,083 |
|
|
|
|
9,704 |
|
|
|
10,125 |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
share |
$ |
0.09 |
|
|
$ |
0.08 |
|
|
|
$ |
0.18 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Consolidated Balance
Sheets—Unaudited |
(Amounts in thousands, except per share data) |
|
|
|
|
|
September 30, |
|
March 31, |
|
|
2016 |
|
|
|
2016 |
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
31,274 |
|
|
$ |
24,072 |
|
Investments |
|
35,000 |
|
|
|
41,000 |
|
Trade
accounts receivable, net of allowances ($32 and $91 at |
|
|
|
September
30 and March 31, respectively) |
|
18,411 |
|
|
|
12,730 |
|
Unbilled
revenue |
|
10,099 |
|
|
|
11,852 |
|
Inventories |
|
7,861 |
|
|
|
10,811 |
|
Prepaid
expenses and other current assets |
|
1,358 |
|
|
|
613 |
|
Income
taxes receivable |
|
1,255 |
|
|
|
1,652 |
|
Total
current assets |
|
105,258 |
|
|
|
102,730 |
|
Property, plant and
equipment, net |
|
17,813 |
|
|
|
18,747 |
|
Goodwill |
|
6,938 |
|
|
|
6,938 |
|
Permits |
|
10,300 |
|
|
|
10,300 |
|
Other intangible
assets, net |
|
4,158 |
|
|
|
4,248 |
|
Other assets |
|
180 |
|
|
|
168 |
|
Total assets |
$ |
144,647 |
|
|
$ |
143,131 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Current
portion of capital lease obligations |
$ |
54 |
|
|
$ |
55 |
|
Accounts
payable |
|
6,247 |
|
|
|
10,325 |
|
Accrued
compensation |
|
4,747 |
|
|
|
5,317 |
|
Accrued
expenses and other current liabilities |
|
4,450 |
|
|
|
3,826 |
|
Customer
deposits |
|
13,684 |
|
|
|
8,400 |
|
Total
current liabilities |
|
29,182 |
|
|
|
27,923 |
|
Capital lease
obligations |
|
138 |
|
|
|
157 |
|
Accrued
compensation |
|
46 |
|
|
|
- |
|
Deferred income tax
liability |
|
3,850 |
|
|
|
3,546 |
|
Accrued pension
liability |
|
977 |
|
|
|
1,338 |
|
Accrued postretirement
benefits |
|
802 |
|
|
|
787 |
|
Total liabilities |
|
34,995 |
|
|
|
33,751 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Preferred
stock, $1.00 par value, 500 shares authorized |
|
- |
|
|
|
- |
|
Common
stock, $.10 par value, 25,500 shares authorized |
|
|
|
10,542
and 10,468 shares issued and 9,726 and 9,646 |
|
|
|
shares
outstanding at September 30 and March 31, |
|
|
|
respectively |
|
1,054 |
|
|
|
1,047 |
|
Capital
in excess of par value |
|
22,608 |
|
|
|
22,315 |
|
Retained
earnings |
|
108,655 |
|
|
|
109,013 |
|
Accumulated other comprehensive loss |
|
(10,375 |
) |
|
|
(10,676 |
) |
Treasury
stock (816 and 822 shares) |
|
(12,290 |
) |
|
|
(12,319 |
) |
Total stockholders’ equity |
|
109,652 |
|
|
|
109,380 |
|
Total liabilities and stockholders’ equity |
$ |
144,647 |
|
|
$ |
143,131 |
|
|
|
|
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Consolidated Statements of Cash
Flows—Unaudited |
(Amounts in thousands) |
|
|
|
|
|
Six Months Ended September
30, |
|
|
|
2016 |
|
|
|
2015 |
|
Operating
activities: |
|
|
|
|
Net
income |
|
$ |
1,382 |
|
|
$ |
4,337 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation |
|
|
1,048 |
|
|
|
1,126 |
|
Amortization |
|
|
117 |
|
|
|
117 |
|
Amortization of unrecognized prior service cost and actuarial
losses |
|
|
695 |
|
|
|
607 |
|
Stock-based compensation expense |
|
|
234 |
|
|
|
379 |
|
Loss on
disposal or sale of property, plant and equipment |
|
|
1 |
|
|
|
- |
|
Deferred
income taxes |
|
|
21 |
|
|
|
632 |
|
(Increase) decrease in operating assets: |
|
|
|
|
Accounts
receivable |
|
|
(5,754 |
) |
|
|
(4,941 |
) |
Unbilled
revenue |
|
|
1,752 |
|
|
|
10,084 |
|
Inventories |
|
|
2,950 |
|
|
|
3,337 |
|
Prepaid
expenses and other current and non-current assets |
|
|
(751 |
) |
|
|
(401 |
) |
Income
taxes payable/receivable |
|
|
402 |
|
|
|
(2,013 |
) |
Prepaid
pension asset |
|
|
- |
|
|
|
(611 |
) |
Increase
(decrease) in operating liabilities: |
|
|
|
|
Accounts
payable |
|
|
(4,003 |
) |
|
|
(717 |
) |
Accrued
compensation, accrued expenses and other current and
non-current liabilities |
|
|
170 |
|
|
|
(2,831 |
) |
Customer
deposits |
|
|
5,287 |
|
|
|
(1,319 |
) |
Long-term
portion of accrued compensation, accrued pension liability
and accrued postretirement benefits |
|
|
(300 |
) |
|
|
(87 |
) |
Net cash provided by operating activities |
|
|
3,251 |
|
|
|
7,699 |
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
Purchase
of property, plant and equipment |
|
|
(159 |
) |
|
|
(523 |
) |
Proceeds
from disposal of property, plant and equipment |
|
|
- |
|
|
|
3 |
|
Purchase
of investments |
|
|
(24,000 |
) |
|
|
(18,000 |
) |
Redemption of investments at maturity |
|
|
30,000 |
|
|
|
18,000 |
|
Net cash provided (used) by investing
activities |
|
|
5,841 |
|
|
|
(520 |
) |
|
|
|
|
|
Financing
activities: |
|
|
|
|
Principal
repayments on capital lease obligations |
|
|
(20 |
) |
|
|
(27 |
) |
Issuance
of common stock |
|
|
38 |
|
|
|
97 |
|
Dividends
paid |
|
|
(1,740 |
) |
|
|
(1,620 |
) |
Purchase
of treasury stock |
|
|
(30 |
) |
|
|
(3,399 |
) |
Excess
tax (deficiency) benefit on stock awards |
|
|
(20 |
) |
|
|
5 |
|
Net cash used by financing activities |
|
|
(1,772 |
) |
|
|
(4,944 |
) |
Effect of
exchange rate changes on cash |
|
|
(118 |
) |
|
|
(90 |
) |
Net
increase in cash and cash equivalents |
|
|
7,202 |
|
|
|
2,145 |
|
Cash and
cash equivalents at beginning of year |
|
|
24,072 |
|
|
|
27,271 |
|
Cash and
cash equivalents at end of period |
|
$ |
31,274 |
|
|
$ |
29,416 |
|
|
|
|
|
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Adjusted Net Income
Reconciliation—Unaudited |
(Amounts in thousands, except per share data) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
September 30, |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Per Diluted Share |
|
|
Per Diluted Share |
|
|
Per Diluted Share |
|
|
Per Diluted Share |
Net
income |
$ |
1,297 |
|
$ |
0.13 |
|
|
$ |
1,976 |
|
$ |
0.20 |
|
|
$ |
1,382 |
|
$ |
0.14 |
|
|
$ |
4,337 |
|
$ |
0.43 |
|
+
Restructuring charge |
|
75 |
|
|
0.01 |
|
|
|
- |
|
|
- |
|
|
|
630 |
|
|
0.06 |
|
|
|
- |
|
|
- |
|
- Tax
effect |
|
(22 |
) |
|
- |
|
|
|
- |
|
|
- |
|
|
|
(189 |
) |
|
(0.02 |
) |
|
|
- |
|
|
- |
|
Adjusted net
income |
$ |
1,350 |
|
$ |
0.14 |
|
|
$ |
1,976 |
|
$ |
0.20 |
|
|
$ |
1,823 |
|
$ |
0.19 |
|
|
$ |
4,337 |
|
$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measure:
Adjusted net income is defined as GAAP net income excluding a
nonrecurring restructuring charge. Adjusted net income is not a
measure determined in accordance with generally accepted accounting
principles in the United States, commonly known as GAAP.
Nevertheless, Graham believes that providing non-GAAP information
such as Adjusted net income is important for investors and other
readers of Graham's financial statements, as it is used as an
analytical indicator by Graham's management to better understand
operating performance. Because Adjusted net income is a non-GAAP
measure and is thus susceptible to varying calculations, Adjusted
net income, as presented, may not be directly comparable to other
similarly titled measures used by other companies.
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Adjusted EBITDA
Reconciliation—Unaudited |
(Amounts in thousands) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
September 30, |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Net
income |
$ |
1,297 |
|
|
$ |
1,976 |
|
|
$ |
1,382 |
|
|
$ |
4,337 |
|
+ Net
interest income |
|
(83 |
) |
|
|
(52 |
) |
|
|
(168 |
) |
|
|
(101 |
) |
+ Income
taxes |
|
544 |
|
|
|
965 |
|
|
|
444 |
|
|
|
2,052 |
|
+
Depreciation & amortization |
|
583 |
|
|
|
622 |
|
|
|
1,165 |
|
|
|
1,243 |
|
+
Restructuring charge |
|
75 |
|
|
|
- |
|
|
|
630 |
|
|
|
- |
|
Adjusted
EBITDA |
$ |
2,416 |
|
|
$ |
3,511 |
|
|
$ |
3,453 |
|
|
$ |
7,531 |
|
Adjusted
EBITDA margin % |
|
11.4 |
% |
|
|
15.4 |
% |
|
|
7.9 |
% |
|
|
14.9 |
% |
|
|
|
|
|
|
|
|
Non-GAAP Financial Measure:
Adjusted EBITDA is defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization and a nonrecurring restructuring charge.
Adjusted EBITDA margin is Adjusted EBITDA divided by sales.
Adjusted EBITDA and Adjusted EBITDA margin are not measures
determined in accordance with generally accepted accounting
principles in the United States, commonly known as GAAP.
Nevertheless, Graham believes that providing non-GAAP information
such as Adjusted EBITDA and Adjusted EBITDA margin are important
for investors and other readers of Graham's financial statements,
as they are used as analytical indicators by Graham's management to
better understand operating performance. Graham’s credit
facility also contains ratios based on EBITDA. Because
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures
and are thus susceptible to varying calculations, Adjusted EBITDA
and Adjusted EBITDA margin, as presented, may not be directly
comparable to other similarly titled measures used by other
companies.
|
Graham Corporation |
Second Quarter Fiscal 2017 |
Additional Information—Unaudited |
|
|
|
|
|
|
|
|
|
|
|
ORDER & BACKLOG TREND |
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q116 |
Q216 |
Q316 |
Q416 |
FY2016 |
Q117 |
Q217 |
|
|
|
|
Total |
Total |
Total |
Total |
Total |
Total |
Total |
|
|
|
Orders |
$ |
24.0 |
|
$ |
20.6 |
|
$ |
22.3 |
|
$ |
17.1 |
|
$ |
84.0 |
|
$ |
14.6 |
|
$ |
24.8 |
|
|
|
|
Backlog |
$ |
110.1 |
|
$ |
108.1 |
|
$ |
113.2 |
|
$ |
108.0 |
|
$ |
108.0 |
|
$ |
99.9 |
|
$ |
104.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES BY INDUSTRY FY 2017 |
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2017 |
Q1 |
% of |
Q2 |
% of |
|
|
|
|
|
|
|
6/30/16 |
Total |
9/30/16 |
Total |
|
|
|
|
|
|
Refining |
$ |
7.2 |
|
|
32 |
% |
$ |
6.7 |
|
|
32 |
% |
|
|
|
|
|
|
Chemical/ Petrochemical |
$ |
5.2 |
|
|
23 |
% |
$ |
5.1 |
|
|
24 |
% |
|
|
|
|
|
|
Power |
$ |
4.7 |
|
|
21 |
% |
$ |
6.1 |
|
|
29 |
% |
|
|
|
|
|
|
Defense and Other Industrial |
$ |
5.3 |
|
|
24 |
% |
$ |
3.2 |
|
|
15 |
% |
|
|
|
|
|
|
Total |
$ |
22.4 |
|
|
$ |
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES BY INDUSTRY FY 2016 |
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2016 |
Q1 |
% of |
Q2 |
% of |
Q3 |
% of |
Q4 |
% of |
FY2016 |
% of |
|
6/30/15 |
Total |
9/30/15 |
Total |
12/31/15 |
Total |
3/31/16 |
Total |
|
Total |
Refining |
$ |
7.8 |
|
|
28 |
% |
$ |
7.2 |
|
|
32 |
% |
$ |
6.2 |
|
|
36 |
% |
$ |
7.8 |
|
|
35 |
% |
$ |
29.0 |
|
|
32 |
% |
Chemical/ Petrochemical |
$ |
11.3 |
|
|
41 |
% |
$ |
7.3 |
|
|
32 |
% |
$ |
4.8 |
|
|
28 |
% |
$ |
6.0 |
|
|
27 |
% |
$ |
29.4 |
|
|
33 |
% |
Power |
$ |
3.7 |
|
|
13 |
% |
$ |
3.0 |
|
|
13 |
% |
$ |
2.7 |
|
|
16 |
% |
$ |
5.2 |
|
|
23 |
% |
$ |
14.6 |
|
|
16 |
% |
Defense and Other Industrial |
$ |
4.8 |
|
|
18 |
% |
$ |
5.3 |
|
|
23 |
% |
$ |
3.6 |
|
|
20 |
% |
$ |
3.3 |
|
|
15 |
% |
$ |
17.0 |
|
|
19 |
% |
Total |
$ |
27.6 |
|
|
$ |
22.8 |
|
|
$ |
17.3 |
|
|
$ |
22.3 |
|
|
$ |
90.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES BY REGION FY 2017 |
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2017 |
Q1 |
% of |
Q2 |
% of |
|
|
|
|
|
|
|
6/30/16 |
Total |
9/30/16 |
Total |
|
|
|
|
|
|
United States |
$ |
16.3 |
|
|
73 |
% |
$ |
15.4 |
|
|
73 |
% |
|
|
|
|
|
|
Middle East |
$ |
1.0 |
|
|
4 |
% |
$ |
0.5 |
|
|
2 |
% |
|
|
|
|
|
|
Asia |
$ |
3.1 |
|
|
14 |
% |
$ |
1.2 |
|
|
6 |
% |
|
|
|
|
|
|
Other |
$ |
2.0 |
|
|
9 |
% |
$ |
4.0 |
|
|
19 |
% |
|
|
|
|
|
|
Total |
$ |
22.4 |
|
|
$ |
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES BY REGION FY 2016 |
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2016 |
Q1 |
% of |
Q2 |
% of |
Q3 |
% of |
Q4 |
% of |
FY2016 |
% of |
|
6/30/15 |
Total |
9/30/15 |
Total |
12/31/15 |
Total |
3/31/16 |
Total |
|
Total |
United States |
$ |
17.6 |
|
|
64 |
% |
$ |
15.2 |
|
|
67 |
% |
$ |
10.8 |
|
|
62 |
% |
$ |
13.4 |
|
|
60 |
% |
$ |
57.0 |
|
|
63 |
% |
Middle East |
$ |
3.3 |
|
|
12 |
% |
$ |
3.8 |
|
|
17 |
% |
$ |
1.7 |
|
|
10 |
% |
$ |
2.2 |
|
|
10 |
% |
$ |
11.0 |
|
|
12 |
% |
Asia |
$ |
2.9 |
|
|
11 |
% |
$ |
0.8 |
|
|
3 |
% |
$ |
1.6 |
|
|
9 |
% |
$ |
3.6 |
|
|
16 |
% |
$ |
8.9 |
|
|
10 |
% |
Other |
$ |
3.8 |
|
|
13 |
% |
$ |
3.0 |
|
|
13 |
% |
$ |
3.2 |
|
|
19 |
% |
$ |
3.1 |
|
|
14 |
% |
$ |
13.1 |
|
|
15 |
% |
Total |
$ |
27.6 |
|
|
$ |
22.8 |
|
|
$ |
17.3 |
|
|
$ |
22.3 |
|
|
$ |
90.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For more information contact:
Jeffrey F. Glajch
Vice President - Finance and CFO
Phone: (585) 343-2216
jglajch@graham-mfg.com
Deborah K. Pawlowski / Karen L. Howard
Kei Advisors LLC
Phone: (716) 843-3908 / (716) 843-3942
dpawlowski@keiadvisors.com / khoward@keiadvisors.com
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