- Third quarter orders of $40 million,
backlog increased to $96 million
- Diluted loss per share of $1.19,
included non-cash impairment charges
- Third quarter revenue of $17
million, adjusted earnings per share were breakeven
- Fiscal 2018 revenue guidance
narrowed to approximately $75 million
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 third quarter and nine months ended
December 31, 2017. Graham’s current fiscal year ends March 31, 2018
(“fiscal 2018”).
Net sales in the third quarter of fiscal 2018 were $17.3
million, compared with net sales of $22.7 million in the third
quarter of the fiscal year ended March 31, 2017 (“fiscal 2017”).Net
loss and diluted loss per share in the fiscal 2018 third quarter
were $11.6 million and $1.19 per share, respectively. Excluding
non-cash charges for goodwill and intangible asset impairments as
well as other related charges and the impact of the tax reform
legislation passed in December 2017, net income and earnings per
share (“EPS”) for the third quarter of fiscal 2018 were breakeven,
compared with $1.8 million, or $0.19 per share for the third
quarter of fiscal 2017.
James R. Lines, Graham’s President and Chief Executive Officer,
commented, “Order levels in the third quarter illustrate signs of
improvement in the end markets we serve, particularly the refining
industry in North America. We believe, however, that it is
premature to anticipate that these are consistent trends. The early
stages of prior energy recoveries were marked with volatility,
including both strong and weak order patterns.”
He continued, “Our commercial nuclear power business has been
unfavorably impacted by general factors affecting that industry
and, as a result, we have recorded impairment and other
nonrecurring charges during this quarter. While we don’t anticipate
growth, we expect to hold this portion of our business steady over
the next few years. Our commercial nuclear power business accounted
for approximately 12% of our revenue in the first nine months of
fiscal 2018.”
Third Quarter Fiscal 2018 Sales Summary(See accompanying
financial tables for a breakdown of sales by industry and
region)
The $5.4 million, or 24%, decline in sales during the fiscal
2018 third quarter compared with the prior-year quarter was broad
based. It included a $2.7 million reduction in sales to the power
market, a $1.7 million decline to the other commercial, industrial
and defense markets, and a $0.9 million reduction to the refining
market.
From a geographic perspective, sales to the Company’s U.S.
market decreased $6.2 million compared with the prior-year third
quarter, partially offset by a $0.8 million increase in sales to
international markets. U.S. sales represented 65% of consolidated
sales in the fiscal 2018 quarter, compared with 77% in the
prior-year third quarter.
Fluctuations in Graham’s sales among geographic locations and
industries can vary measurably from quarter-to-quarter based on the
timing and magnitude of projects. Graham does not believe that such
quarter-to-quarter fluctuations are indicative of business trends,
which it believes are more apparent on a trailing twelve month
basis.
Third Quarter Fiscal 2018 Operating Performance
Review
($ in millions except per share data)
Q3 FY18
Q3 FY17 Change Net sales $ 17.3 $ 22.7 $ (5.4)
Gross profit $ 3.6 $ 6.3 $ (2.7) Gross margin 20.7% 27.8% Operating
(loss) profit $ (15.3) $ 2.5 $ (17.8) Operating margin -88.5% 11.0%
Net (loss) income $ (11.6) $ 1.8 $ (13.4) Diluted EPS $ (1.19) $
0.19 $ (1.38) Adjusted net income $ (0.0) $ 1.8 $ (1.8) Adjusted
diluted EPS $ 0.00 $ 0.19 $ (0.19)
Third quarter fiscal 2018 gross profit was negatively impacted
by lower sales. Gross margin was negatively impacted by a weaker
mix of projects, as well as under-absorption of overhead costs due
to lower sales.
Selling, general and administrative (“SG&A”) expenses of
$4.1 million were $0.3 million higher than the prior-year period.
The increase was attributable to bad debt charges in Graham’s
commercial nuclear power business associated with the Westinghouse
bankruptcy. SG&A as a percent of sales was 24% in the third
quarter of fiscal 2018 compared with 17% in the same prior-year
period.
In the third quarter of fiscal 2018, the Company revalued its
commercial nuclear power business, resulting in a $14.8 million
pre-tax ($12.9 million after tax) non-cash charge for impairment of
goodwill and intangible assets, unfavorably impacting operating
results.
Jeffrey Glajch, Graham’s Vice President and Chief Financial
Officer, commented, “The charges for impairment of goodwill and
intangible assets, as well as other charges associated with our
commercial nuclear power business, were prompted by several
factors. These include the culmination of the 2017 Westinghouse
bankruptcy which eventually resulted in the stoppage of two of four
new nuclear reactor construction projects, and the increasingly
intense competitiveness of energy sources in the U.S. which has
resulted in a reduction in spending on existing nuclear plants.
Moreover, as pricing continues to drop, several of our competitors
are better positioned than us due to their vertical integration.
After several initial years of satisfactory financial performance
by our nuclear power business, market conditions over recent years
made it more challenging, culminating in its revaluation.”
Also during the fiscal 2018 third quarter, Graham recorded a
$1.4 million favorable adjustment to income taxes upon adoption of
the new federal tax reform act. That adjustment included $2.0
million related to and a partial offset against the after tax
impairment charges noted above. The adjustment also included a $0.6
million charge relating to deferred tax assets.
Adjusted net income and non-GAAP diluted EPS remove impairment
charges of $12.9 million after tax, the bad debt charges in
SG&A associated with the Westinghouse bankruptcy of $0.2
million after tax, and a $1.4 million tax benefit for adoption of
new federal tax rates resulting from the tax reform legislation
passed in December 2017, all described above.
To summarize, the decrease in adjusted net income and non-GAAP
diluted EPS during the third quarter compared with the prior-year
quarter was primarily due to lower sales and weaker project
mix.
Adjusted EBITDA ($ in millions)
Q3
FY18 Q3 FY17 Change Adjusted EBITDA $ 0.4 $ 3.1 $
(2.7) Adjusted EBITDA margin 2.1% 13.6%
Adjusted EBITDA (defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization, impairment of goodwill and intangible assets, a bad
debt charge associated with the Westinghouse bankruptcy, and
restructuring charges where applicable) during the fiscal 2018
third quarter was also negatively impacted by the factors discussed
above.
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, adjusted net income, non-GAAP
diluted EPS, Adjusted EBITDA 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 net income, non-GAAP diluted EPS, Adjusted EBITDA and
Adjusted EBITDA margin as well as a reconciliation of net income to
Adjusted EBITDA.
Nine Month Year-to-Date Fiscal 2018 Review
($ in millions except per share data)
YTD FY18
YTD FY17 Change Net sales $ 55.4 $ 66.1 $
(10.7) Gross profit $ 12.3 $ 15.4 $ (3.1) Gross margin 22.2% 23.3%
Operating (loss) profit $ (14.3) $ 4.2 $ (18.5) Operating margin
-25.8% 6.3% Net (loss) income $ (10.7) $ 3.2 $ (13.9) Diluted EPS $
(1.09) $ 0.33 $ (1.42) Adjusted net income $ 1.2 $ 3.7 $ (2.5)
Adjusted diluted EPS $ 0.12 $ 0.38 $ (0.26)
Year-to-date sales decreased 16% compared with the same fiscal
2017 year-to-date period. International sales increased to $18.2
million in the first nine months of fiscal 2018 and represented 33%
of total sales, compared with $17.0 million, or 26% of sales, in
the same prior-year period. Sales to the U.S. were $37.2 million,
or 67%, of year-to-date net sales in fiscal 2018 compared with
$49.2 million, or 74% of fiscal 2017 same period net sales.
The decrease in gross profit was due to lower volume resulting
from the 16% reduction in sales when compared with the same
prior-year period.
SG&A in the year-to-date fiscal 2018 period was $11.4
million, up $0.8 million. As a percent of sales, SG&A was 21%
for year-to-date fiscal 2018 compared with 16% in the same
prior-year period. The increase in SG&A was principally related
to the benefit of insurance proceeds received in the prior
year.
The fiscal 2018 year-to-date operating results were impacted by
the $14.8 million pre-tax ($12.9 million after tax) non-cash charge
for impairment of goodwill and intangible assets recognized in the
third quarter, as described previously.
The year-to-date operating results included $0.3 million and
$0.6 million of pre-tax restructuring charges for severance costs
in fiscal 2018 and 2017, respectively.
The year-to-date fiscal 2018 results were also impacted by the
$1.4 million favorable adjustment to income taxes upon
implementation of the tax reform legislation adopted in December
2017. As noted above, that adjustment included $2.0 million related
to, and a partial offset against, the after tax impairment charges.
The adjustment also included a $0.5 million charge relating to
deferred tax assets.
Fiscal 2018 year-to-date adjusted net income and non-GAAP
diluted EPS excluded $12.9 million net of tax impairment charges,
$0.2 million net of tax bad debt charges associated with the
revaluation of the Company’s commercial nuclear power business,
$0.2 million net of tax for a nonrecurring restructuring charge and
$1.4 million tax benefit for adoption of the new federal tax rates
as a result of the tax reform legislation adopted in December 2017.
Fiscal 2017 year-to-date adjusted net income and non-GAAP diluted
EPS excluded $0.4 million net of tax for a nonrecurring
restructuring charge.
To summarize, the decrease in adjusted net income and non-GAAP
diluted EPS during the nine month year-to-date period compared with
the prior-year period was primarily due to lower sales and weaker
project mix.
Adjusted EBITDA ($ in millions)
YTD
FY18 YTD FY17 Change Adjusted EBITDA $ 2.8 $ 6.5
$ (3.7) Adjusted EBITDA margin 5.0% 9.9%
Adjusted EBITDA was impacted by the factors discussed above.
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, adjusted net income, non-GAAP
diluted EPS, Adjusted EBITDA 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 net income, non-GAAP diluted EPS, Adjusted EBITDA and
Adjusted EBITDA margin as well as a reconciliation of net income to
Adjusted EBITDA.
Seeking Opportunities to Effectively Utilize Available
Capital
Cash, cash equivalents and investments at December 31, 2017 were
$74.2 million, up $0.7 million from March 31, 2017. The increase
resulted primarily from positive operating cash flow and minimal
capital expenditures during the first nine months of fiscal
2018.
Fiscal 2018 year-to-date cash provided by operations was $3.9
million, compared with $10.7 million year-to-date in fiscal 2017.
The decrease was primarily the result of timing of working capital
utilization and lower net income.
Fiscal 2018 year-to-date capital expenditures were $0.5 million,
compared with $0.2 million year-to-date in fiscal 2017. The Company
has lowered its anticipated capital expenditures for fiscal 2018 to
be between $1.5 million and $2.5 million. The majority of the
Company’s capital investments during fiscal 2018 are expected to be
used for productivity enhancements, information technology upgrades
and other items.
Dividend payments were $2.6 million in the first nine months of
both fiscal 2018 and 2017.
Graham had neither borrowings under its credit facility, nor any
long-term debt outstanding, at December 31, 2017.
Orders and Backlog Strengthened
Driven by the refining industry in North America, orders grew to
$40.5 million in the third quarter of fiscal 2018, up $22.8 million
over the prior-year’s third quarter. Orders from U.S. customers
were $19.1 million, or 47% of total orders, and orders from
international markets were $21.4 million, or 53%. More than 80% of
the international orders were from Canada. The fiscal 2018 third
quarter orders included $27.6 million, or 68% of the total, for
refining markets.
Orders for the first nine months of fiscal 2018 were $68.7
million, compared with $57.1 million in the first nine months of
fiscal 2017. Such increase was driven by the refining industry,
which was up $19.1 million. Orders from U.S. customers were $42.0
million, or 61%, and orders from international markets were $26.7
million, or 39%, in the first nine months of fiscal 2018. Nearly
75% of international orders were from Canada. This compares with
69% U.S. and 31% international in the first nine months of fiscal
2017.
Graham expects that the balance between domestic and
international orders, as well as orders by industry, will continue
to be variable between quarters.
Backlog at the end of the third quarter of fiscal 2018 was $96.2
million, up from $73.0 million and $82.6 million at the end of the
previous quarter and from the end of fiscal 2017, respectively.
While refinery backlog increased significantly, the Company
continues to believe that its backlog mix by industry highlights
the success of its diversification strategy to increase sales to
the U.S. Navy. Backlog by industry at December 31, 2017 was
approximately:
- 51% for U.S. Navy projects
- 35% for refinery projects
- 6% for power projects, including
nuclear
- 4% for chemical/petrochemical
projects
- 4% for other industrial
applications
The expected timing for the Company’s backlog to convert to
sales is as follows:
- Within next 12 months: 55% to 60%
- Within 12 to 24 months: 5% to 10%
- Beyond 24 months: 25% to 35%
Narrowing FY 2018 Guidance
The Company is narrowing its fiscal 2018 guidance:
- Revenue anticipated to be approximately
$75 million
- Gross margin expected to be between 21%
and 22%
- SG&A expense expected to be between
$15.0 and $15.5 million
- Effective tax rate anticipated to be
between 24% and 26%, excluding the tax impact of the impairment
charges and implementation of the tax reform legislation
Mr. Lines concluded. “We now have clearer visibility on the
remainder of fiscal 2018, causing us to tighten our guidance around
our previously provided ranges. Looking forward into fiscal 2019,
we anticipate that our current backlog will favorably impact our
fiscal first half, especially with regards to refining and U.S.
Navy work. Our pipeline remains active and we are well prepared for
the eventual recovery of our energy markets. Additionally, we
remain diligent in our search for potential strategic acquisitions
to enhance our growth.”
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 its financial condition
and operating results for the third quarter fiscal 2018, 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 2:00 p.m. ET on the
day of the teleconference through Thursday, February 8, 2018. To
listen to the archived call, dial (412) 317-6671 and enter
conference ID number 13675055. 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 and other international locations, 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
Third Quarter Fiscal 2018
Consolidated Statements of Operations –
Unaudited
(Amounts in thousands, except per share
data)
Three Months Ended Nine Months
Ended December 31, December 31,
2017 2016 % Change 2017
2016 % Change Net sales $ 17,281
$ 22,654 (24%)
$ 55,356 $
66,145 (16%) Cost of products sold 13,696
16,353 (16%) 43,075 50,723 (15%) Gross profit 3,585
6,301 (43%) 12,281 15,422 (20%) Gross margin 20.7% 27.8% 22.2%
23.3% Other expenses and income: Selling, general and
administrative 4,007 3,746 7% 11,270 10,462 8% Selling, general and
administrative – amortization 59 58 2% 177 175 1% Impairment of
goodwill and intangible assets 14,816 - N/A 14,816 - N/A
Restructuring charge - - N/A 316 630
(50%)
Operating (loss) profit (15,297)
2,497 (713%)
(14,298) 4,155
(444%) Operating margin (88.5%) 11.0% (25.8%) 6.3% Interest
income (142) (100) 42% (455) (272) 67% Interest expense 3
3 0% 8 7 14% (Loss) income before provision
for income taxes (15,158) 2,594 (684%) (13,851) 4,420 (413%)
(Benefit) provision for income taxes (3,536) 754
(569%) (3,174) 1,198 (365%)
Net (loss) income
$ (11,622) $ 1,840 (732%)
$
(10,677) $ 3,222 (431%) Per share data:
Basic: Net (loss) income $ (1.19) $ 0.19 (726%) $ (1.09) $ 0.33
(430%) Diluted: Net (loss) income $ (1.19) $ 0.19 (726%) $ (1.09) $
0.33 (430%) Weighted average common shares outstanding:
Basic 9,768 9,727 9,762 9,709 Diluted 9,768 9,733 9,762 9,714
Dividends declared per share $ 0.09 $ 0.09 $ 0.27 $ 0.27
N/A: Not Applicable
Graham Corporation
Third Quarter Fiscal 2018
Consolidated Balance Sheets –
Unaudited
(Amounts in thousands, except per share
data)
December 31, March 31,
2017 2017 Assets Current assets: Cash and cash
equivalents $ 36,159 $ 39,474 Investments 38,023 34,000 Trade
accounts receivable, net of allowances ($336 and $168
at December 31 and March 31, 2017,
respectively)
16,555 11,483 Unbilled revenue 10,709 15,842 Inventories 8,899
9,246 Prepaid expenses and other current assets 1,181 681 Income
taxes receivable 1,288 - Total current assets 112,814
110,726 Property, plant and equipment, net 16,098 17,021 Prepaid
pension asset 3,110 2,340 Goodwill 1,222 6,938 Permits 1,700 10,300
Other intangible assets, net 3,433 4,068 Other assets 246
177
Total assets $ 138,623 $
151,570 Liabilities and stockholders’
equity Current liabilities: Current portion of capital lease
obligations $ 105 $ 107 Accounts payable 9,386 10,295 Accrued
compensation 4,418 5,189 Accrued expenses and other current
liabilities 2,722 3,723 Customer deposits 17,814 12,407 Income
taxes payable - 317 Total current liabilities 34,445
32,038 Capital lease obligations 67 143 Deferred income tax
liability 736 4,051 Accrued pension liability 534 467 Accrued
postretirement benefits 780 761 Other long-term liabilities 126
-
Total liabilities 36,688
37,460 Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized - - Common
stock, $.10 par value, 25,500 shares authorized
10,579 and 10,548 shares issued and 9,768
and 9,740 shares outstanding at December 31 and March 31, 2017,
respectively
1,058 1,055 Capital in excess of par value 23,573 23,176 Retained
earnings 97,229 110,544 Accumulated other comprehensive loss (7,599
) (8,434 ) Treasury stock (811 and 808 shares at December 31 and
March 31, 2017, respectively) (12,326 ) (12,231 )
Total
stockholders’ equity 101,935 114,110
Total liabilities and stockholders’ equity $
138,623 $ 151,570
Graham Corporation
Third Quarter Fiscal 2018
Consolidated Statements of Cash Flows -
Unaudited
(Amounts in thousands)
Nine Months Ended
December 31,
2017 2016 Operating activities: Net
(loss) income $ (10,677 ) $ 3,222 Adjustments to reconcile net
(loss) income to net cash provided by operating activities:
Depreciation 1,490 1,571 Amortization 177 175 Amortization of
unrecognized prior service cost and actuarial losses. 788 1,043
Impairment of goodwill and purchased intangible assets 14,816 -
Stock-based compensation expense 362 433 Loss on disposal or sale
of property, plant and equipment 1 1 Deferred income taxes (3,498 )
10 (Increase) decrease in operating assets: Accounts receivable
(5,029 ) 1,126 Unbilled revenue 5,170 (2,651 ) Inventories 352
1,697 Prepaid expenses and other current and non-current assets
(591 ) (489 ) Income taxes receivable (1,605 ) 1,109 Prepaid
pension asset (770 ) - Increase (decrease) in operating
liabilities: Accounts payable (1,005 ) (2,173 ) Accrued
compensation, accrued expenses and other current and non-current
liabilities (1,593 ) (558 ) Customer deposits 5,400 6,699 Long-term
portion of accrued compensation, accrued pension liability and
accrued postretirement benefits 86 (508 )
Net cash provided by operating activities
3,874 10,707 Investing
activities: Purchase of property, plant and equipment (543 )
(241 ) Proceeds from disposal of property, plant and equipment 1 -
Purchase of investments (34,023 ) (39,000 ) Redemption of
investments at maturity 30,000 45,000
Net cash (used) provided by investing activities
(4,565 ) 5,759
Financing activities: Principal repayments on capital lease
obligations (78 ) (38 ) Issuance of common stock - 79 Dividends
paid (2,638 ) (2,616 ) Purchase of treasury stock (119 ) (29 )
Excess tax deficiency benefit on stock awards -
(26 )
Net cash used by financing activities
(2,835 ) (2,630 ) Effect of
exchange rate changes on cash 211 (231 ) Net
(decrease) increase in cash and cash equivalents (3,315 ) 13,605
Cash and cash equivalents at beginning of year 39,474
24,072 Cash and cash equivalents at end of period $
36,159 $ 37,677
Graham Corporation
Third Quarter Fiscal 2018
Adjusted Net Income
Reconciliation—Unaudited
(Amounts in thousands, except per share
data)
Three Months Ended Nine Months
Ended December 31, December 31, 2017
2016 2017 2016 Per
Diluted Share Per Diluted Share Per Diluted Share
Per Diluted Share
Net (loss) income $ (11,622 ) $
(1.19 ) $ 1,840 $ 0.19 $ (10,677 ) $ (1.09 ) $ 3,222 $ 0.33 +
Restructuring charge - - - - 316 0.03 630 0.06 + Impairment of
goodwill and intangible assets 14,816 1.52 - - 14,816 1.52 - - +
Bad debt charge on commercial nuclear power business 280 0.03 - -
280 0.03 - - - Tax effect of above (2,037 ) (0.21 ) - - (2,129 )
(0.22 ) (189 ) (0.01 ) - Impact of new tax law (1,438 )
(0.15 ) (1,438 ) (0.15 )
- -
Adjusted net income $ (1 ) $ 0.00
$ 1,840 $ 0.19 $ 1,168 $ 0.12 $ 3,663 $
0.38
Non-GAAP Financial Measure:
Adjusted net income is defined as GAAP net income excluding a
nonrecurring restructuring charge, impairment of goodwill and
intangible assets, a charge associated with the revaluation of the
nuclear business and the impact of the new tax law. 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
Third Quarter Fiscal 2018
Adjusted EBITDA
Reconciliation—Unaudited
(Amounts in thousands)
Three Months Ended Nine Months
Ended December 31, December 31, 2017
2016 2017 2016 Net (loss)
income $ (11,622 ) $ 1,840
$ (10,677 ) $ 3,222 + Net
interest income (139 ) (97 ) (447 ) (265 ) + Income taxes (3,536 )
754 (3,174 ) 1,198 + Depreciation & amortization 556 581 1,667
1,746 + Restructuring charge - - 316 630 + Impairment of goodwill
and intangible assets 14,816 - 14,816 - + Bad debt charge on
commercial nuclear power business 280 -
280 -
Adjusted EBITDA $
355 $ 3,078 $
2,781 $ 6,531 Adjusted EBITDA
margin % 2.1 % 13.6 % 5.0 % 9.9 %
Non-GAAP Financial Measure:
Adjusted EBITDA is defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization, impairment of goodwill and intangible assets, a
charge associated with the revaluation of the nuclear business, and
a nonrecurring restructuring charge. In the fiscal 2018 periods
presented, Adjusted EBITDA also includes a charge associated with
the revaluation of the nuclear business 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
Third Quarter Fiscal 2018
Additional
Information—Unaudited
ORDER & BACKLOG TREND
($ in millions)
Q117 Q217 Q317 Q417 FY2017
Q118 Q218 Q318 Total
Total Total Total
Total Total Total
Total Orders $ 14.6 $ 24.8 $ 17.7
$ 9.0 $ 66.1 $ 11.1 $ 17.1 $
40.5 Backlog $ 99.9 $ 104.0 $ 99.1 $
82.6 $ 82.6 $ 72.9 $ 73.0 $ 96.2
SALES BY INDUSTRY FY 2018 ($ in millions)
FY 2018 Q1 % of Q2 % of
Q3 % of 6/30/17
Total 9/30/17 Total
12/31/17 Total Refining $ 3.6
18% $ 4.7 28% $ 5.4 31% Chemical/
Petrochemical $ 7.2 34% $ 5.7 33%
$ 4.2 24% Power $ 4.0 19% $ 1.9
11% $ 1.7 10% Other Commercial, Industrial and
Defense $ 6.1 29% $ 4.9 28% $
6.0 35% Total $ 20.9 $ 17.2
$ 17.3
SALES BY
INDUSTRY FY 2017 ($ in millions)
FY 2017
Q1 % of Q2 % of Q3 % of
Q4 % of FY2017 % of
6/30/16 Total 9/30/16
Total 12/31/16 Total
3/31/17 Total
Total Refining $ 7.2 32% $ 6.7
32% $ 6.3 28% $ 4.0 15% $ 24.2
26% Chemical/ Petrochemical $ 5.2 23% $
5.1 24% $ 4.3 19% $ 6.9 27%
$ 21.5 23% Power $ 4.7 21% $ 6.1
29% $ 4.4 19% $ 4.8 19% $
20.0 22% Other Commercial, Industrial and Defense $
5.3 24% $ 3.2 15% $ 7.7 34%
$ 9.9 39% $ 26.1 28% Total $
22.4 $ 21.1 $ 22.7
$ 25.6 $ 91.8
Third Quarter Fiscal 2018
Additional
Information—Unaudited
(Continued)
SALES BY REGION FY 2018
($ in millions)
FY 2018 Q1 % of Q2 % of
Q3 % of 6/30/17
Total 9/30/17 Total
12/31/17 Total United States $ 14.8
71% $ 11.1 65% $ 11.3 65% Middle
East $ 0.9 4% $ 1.0 6% $ 1.0
6% Asia $ 3.4 16% $ 2.6 15%
$ 2.3 13% Other $ 1.8 9% $ 2.5
14% $ 2.7 16% Total $ 20.9
$ 17.2 $ 17.3
SALES BY REGION FY 2017 ($ in millions)
FY 2017 Q1 % of Q2 % of
Q3 % of Q4 % of FY2017 %
of 6/30/16 Total
9/30/16 Total 12/31/16
Total 3/31/17 Total
Total United States $ 16.3 73%
$ 15.4 73% $ 17.5 77% $ 20.0
78% $ 69.2 75% Middle East $ 1.0
4% $ 0.5 2% $ 0.8 3% $ 0.9
4% $ 3.2 4% Asia $ 3.1 14%
$ 1.2 6% $ 1.6 7% $ 1.8
7% $ 7.7 8% Other $ 2.0 9% $ 4.0
19% $ 2.8 13% $ 2.9 11% $
11.7 13% Total $ 22.4 $ 21.1
$ 22.7 $ 25.6
$ 91.8
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180201005126/en/
Graham CorporationJeffrey F. Glajch, 585-343-2216Vice
President – Finance and CFOjglajch@graham-mfg.comorKei Advisors
LLCDeborah K. Pawlowski / Karen L. Howard716-843-3908 /
716-843-3942dpawlowski@keiadvisors.com /
khoward@keiadvisors.com
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