- Record backlog at $118 million, full
year orders of $112 million
- Fourth quarter revenue of $22
million; diluted earnings per share of $0.09
- Expecting fiscal 2019 revenue
between $90 million and $95 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 fourth quarter and fiscal year ended
March 31, 2018 (“fiscal 2018”).
Net sales in the fourth quarter of fiscal 2018 were $22.2
million, compared with net sales of $25.6 million in the fourth
quarter of the fiscal year ended March 31, 2017 (“fiscal 2017”).
Net income in the fiscal 2018 fourth quarter was $0.8 million, or
$0.09 per diluted share, compared with $1.8 million, or $0.18 per
diluted share, in the prior-year fourth quarter.
Net sales for the full year of fiscal 2018 were $77.5 million,
compared with $91.8 million in fiscal 2017. Fiscal 2018 net loss
was $9.8 million, or a loss of $1.01 per diluted share, compared
with net income of $5.0 million, or $0.52 per diluted share, in
fiscal 2017. Excluding restructuring charges, non-cash charges for
goodwill and intangible asset impairments as well as other related
charges and the impact of the U.S. Tax Cuts and Jobs Act tax reform
legislation passed in December 2017, net income for fiscal 2018 was
$1.8 million, or $0.18 per diluted share, compared with $5.5
million, or $0.56 per diluted share in fiscal 2017 on a comparable
basis.
James R. Lines, Graham’s President and Chief Executive Officer,
commented, “Our fourth quarter fiscal 2018 orders were $43.5
million, reflecting the highest level since our fourth quarter of
fiscal 2015. This contributed to full year orders of $112 million.
The composition of our resulting year-end backlog of $118 million
gives us confidence in our expectations for fiscal 2019.”
He continued, “Fiscal 2018 was another challenging year due to
weak order levels in fiscal 2017 that totaled $66 million. We
believe that fiscal 2018 was the trough of the downturn. Throughout
the prolonged cyclical downturn which began in late 2014, we
continued to make investments in our business processes, focusing
on lead time reduction and first pass yield quality, as well as
other continuous improvement and performance management
initiatives. We expect that these investments will serve us well
and help drive profitability as we enter a growth cycle.”
Fourth Quarter Fiscal 2018 Sales Summary
See accompanying financial tables for a breakdown of sales by
industry and region)
The $3.4 million, or 13%, decline in sales during the fiscal
2018 fourth quarter compared with the prior-year quarter included
significant variation by industry. It included a $3.9 million
increase in sales to the refining market, offset by a $3.2 million
reduction in sales to the chemical/petrochemical market, a $1.6
million decline to the power market, and a $2.5 million reduction
to the other commercial, industrial and defense markets.
From a geographic perspective, sales to the Company’s U.S.
market decreased $5.3 million compared with the prior-year fourth
quarter, partially offset by a $1.9 million increase in sales to
international markets. U.S. sales represented 66% of consolidated
sales in the fiscal 2018 quarter, compared with 78% in the
prior-year fourth quarter.
Fluctuations in Graham’s sales among geographic locations and
industries can vary measurably from quarter-to-quarter based on the
timing and magnitude of projects. Graham does not believe that such
quarter-to-quarter fluctuations are indicative of business trends,
which it believes are more apparent on a trailing twelve month
basis.
Fourth Quarter Fiscal 2018 Operating Performance
Review
($ in millions except per share data)
Q4
FY18 Q4 FY17 Change Net sales $
22.2 $ 25.6 $ (3.4 ) Gross profit $ 5.0 $ 6.7 $ (1.7 ) Gross margin
22.8 % 26.3 % Operating profit $ 0.9 $ 2.5 $ (1.6 ) Operating
margin 3.8 % 9.8 % Net income $ 0.8 $ 1.8 $ (1.0 ) Diluted EPS $
0.09 $ 0.18 $ (0.09 ) Non-GAAP financial measure: Adjusted
net income $ 0.6 $ 1.8 $ (1.2 ) Adjusted diluted EPS $ 0.07 $ 0.18
$ (0.11 )
Fourth quarter fiscal 2018 gross profit was negatively impacted
by lower sales. Gross margin was negatively impacted by a weaker
mix of projects including a non-repeating atypical project during
the fourth quarter of fiscal 2017, as well as under-absorption of
overhead costs due to lower sales.
Selling, general and administrative (“SG&A”) expenses of
$4.1 million were relatively flat compared with the prior-year
period. SG&A as a percent of sales was 19% in the fourth
quarter of fiscal 2018 compared with 16% in the same prior-year
period.
During the fourth quarter of fiscal 2018, Graham had an
effective tax rate of 16%, benefiting from the U.S. Tax Cuts and
Jobs Act and favorable year-end tax adjustments. Adjusted net
income for the fiscal 2018 fourth quarter noted in the table above
removes the favorable impact of adopting the new tax legislation.
The effective tax rate in the fourth quarter of fiscal 2017 was
31%.
To summarize, the decrease in net income and diluted EPS during
the fourth quarter compared with the prior-year quarter was
primarily due to lower sales and weaker project mix.
EBITDA ($ in millions)
Q4 FY18 Q4
FY17 Change EBITDA $ 1.4 $ 3.1 $ (1.7 ) EBITDA margin
6.3 % 12.1 %
EBITDA (defined as consolidated net income before interest
expense and income, income taxes, and depreciation and
amortization) during the fiscal 2018 fourth quarter was unfavorably
impacted by the factors discussed above.
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, EBITDA and EBITDA margin (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 EBITDA and EBITDA margin as well as a reconciliation of net
income to EBITDA.
Full Year Fiscal 2018 Review
($ in millions except per share data)
FY18 FY17 Change Net sales $
77.5 $ 91.8 $ (14.3 ) Gross profit $ 17.3 $ 22.2 $ (4.9 ) Gross
margin 22.4 % 24.1 % Operating (loss) profit $ (13.4 ) $ 6.7 $
(20.1 ) Operating margin -17.3 % 7.3 % Net (loss) income $ (9.8 ) $
5.0 $ (14.8 ) Diluted EPS $ (1.01 ) $ 0.52 $ (1.53 )
Non-GAAP financial measures: Adjusted operating profit $ 2.0 $ 7.3
$ (5.3 ) Adjusted operating margin 2.5 % 8.0 % Adjusted net income
$ 1.8 $ 5.5 $ (3.7 ) Adjusted diluted EPS $ 0.18 $ 0.56 $ (0.38 )
Full year sales decreased 16% compared with fiscal 2017.
International sales increased to $25.6 million in fiscal 2018 and
represented 33% of total sales, compared with $22.6 million, or 25%
of sales in fiscal 2017. Sales to the U.S. were $51.9 million, or
67% of net sales in fiscal 2018, compared with $69.2 million, or
75% of fiscal 2017 net sales.
The decrease in gross profit and gross margin was due to lower
volume resulting from the 16% reduction in sales when compared with
the prior year as well as a large non-repeating atypical order
which converted in the second half of fiscal 2017.
SG&A in fiscal 2018 was $15.6 million, up $0.8 million. As a
percent of sales, SG&A was 20% for fiscal 2018 compared with
16% in the prior year. The increase in SG&A was principally
related to the benefit of insurance proceeds received in the prior
year.
The fiscal 2018 operating results were impacted by a $14.8
million pre-tax ($12.0 million after tax) non-cash charge for
impairment of goodwill and intangible assets as well as a related
$0.3 million charge, all recognized in the third quarter. The full
year operating results also included $0.3 million and $0.6 million
of pre-tax restructuring charges for severance costs in fiscal 2018
and 2017, respectively. Excluding those atypical items, adjusted
operating profit was $2.0 million and $7.3 million in fiscal 2018
and 2017, respectively.
Fiscal 2018 results were also impacted by a $0.8 million
favorable adjustment to income taxes upon implementation of the tax
reform legislation adopted in December 2017. That adjustment
included $0.8 million of expense for adjusting the rates on the
deferred tax liability associated with the Energy Steel acquisition
offset by a benefit of $1.6 million for other tax items.
Fiscal 2018 adjusted net income and non-GAAP diluted EPS
excluded $12.0 million of net-of-tax impairment charges, $0.2
million of net-of-tax bad debt charges associated with the
revaluation of the Company’s commercial nuclear power business,
$0.2 million for a net-of-tax nonrecurring restructuring charge and
a $0.8 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 adjusted net income and non-GAAP diluted EPS
excluded $0.4 million net-of-tax for a nonrecurring restructuring
charge.
To summarize, the decrease in adjusted net income and non-GAAP
diluted EPS during the year compared with the prior year was
primarily due to lower sales and weaker project mix.
Adjusted EBITDA ($ in
millions)
FY18 FY17 Change Adjusted EBITDA $
4.2 $ 9.6 $ (5.4 ) Adjusted EBITDA margin 5.4 % 10.5 %
Adjusted EBITDA (defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization, nonrecurring restructuring charges, impairment of
goodwill and intangible assets, and a charge associated with the
revaluation of the nuclear business) was impacted by the factors
discussed above.
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, Adjusted operating profit,
Adjusted operating margin, 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 operating profit, Adjusted operating margin, Adjusted
net income, non-GAAP diluted EPS, Adjusted EBITDA and Adjusted
EBITDA margin as well as reconciliations from GAAP measures.
Solid Balance Sheet Provides Financial Flexibility to Pursue
Business Strategy
Cash, cash equivalents and investments at March 31, 2018 were
$76.5 million, up $3.0 million from March 31, 2017. The increase
resulted primarily from positive operating cash flow.
Cash provided by operations in fiscal 2018 was $8.5 million,
compared with $12.4 million in fiscal 2017. The decrease was
primarily the result of timing of working capital utilization and
lower net income.
Capital expenditures were $2.1 million in fiscal 2018 compared
with $0.3 million in fiscal 2017. The Company expects capital
expenditures for fiscal 2019 to be between $2 million and $2.5
million, the majority of which are expected to be used for
productivity enhancements.
Dividend payments were $3.5 million in both fiscal 2018 and
2017.
Graham had neither borrowings under its credit facility, nor any
long-term debt outstanding, at March 31, 2018.
Orders and Backlog Demonstrate Early Signs of Cyclical
Recovery
Driven by the U.S. Navy as well as the refining industry in
North America, total orders grew to $43.5 million in the fourth
quarter of fiscal 2018, compared with $9.0 million in the
prior-year fourth quarter. The fiscal 2017 fourth quarter was
unfavorably impacted by $6.5 million of order cancellations. Orders
from U.S. customers in the fiscal 2018 fourth quarter were $35.1
million, or 81% of total orders, and orders from international
markets were $8.4 million, or 19%. The fiscal 2018 fourth quarter
orders included $24.5 million, or 56% of the total, from other
commercial, industrial and defense markets, which includes the U.S.
Navy.
Orders for fiscal 2018 were $112.2 million, up 70% compared with
$66.1 million in fiscal 2017. The increase was driven by the
refining industry, which was up $29.4 million, as well as the other
commercial, industrial and defense markets, which were up $19
million. Orders from U.S. customers in fiscal 2018 were $77.1
million, or 69%, and orders from international markets were $35.1
million, or 31%. In fiscal 2017, 74% of orders were from U.S.
customers and 26% were international.
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 fiscal 2018 was a record $117.9 million, up
from $96.2 million and $82.6 million at the end of the previous
quarter and from the end of fiscal 2017, respectively.
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 March 31,
2018 was approximately:
- 56% for U.S. Navy projects
- 30% for refinery projects
- 5% for power projects, including
nuclear
- 5% 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: 20% to 25%
- Beyond 24 months: 15% to 25%
Outlook and FY 2019 Guidance
Graham is announcing its fiscal 2019 guidance, as follows:
- Revenue anticipated to be between $90
million and $95 million
- Gross margin expected to be between 24%
and 25%
- SG&A expense expected to be between
$18 and $18.75 million
- Effective tax rate anticipated to be
between 20% and 22%
Mr. Lines concluded, “Strong order levels during the past two
quarters provide a solid foundation for anticipated revenue growth
in fiscal 2019 of 16% to 22% compared with fiscal 2018. Margin for
recent orders is superior to fiscal 2017 orders and, when
considered in conjunction with our operational improvements, this
gives us confidence in our expected fiscal 2019 gross margin range.
We are pleased to once again be on a growth trajectory.”
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 fourth quarter and 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, June 7, 2018. To listen
to the archived call, dial (412) 317-6671 and enter conference ID
number 13678791. 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
Fourth Quarter Fiscal 2018
Consolidated Statements of
Operations
(Amounts in thousands, except per share
data)
Three Months Ended Year Ended March 31,
March 31, 2018 2017 %
Change 2018 2017 % Change Net sales
$ 22,178 $ 25,624 (13 %)
$
77,534 $ 91,769 (16 %) Cost of products sold
17,129 18,885 (9 %) 60,204
69,608 (14 %) Gross profit 5,049 6,739 (25 %)
17,330 22,161 (22 %) Gross margin 22.8 % 26.3 % 22.4 % 24.1 %
Other expenses and income: Selling, general and
administrative 4,140 4,162 (1 %) 15,410 14,624 5 % Selling, general
and administrative – amortization 59 59 0 % 236 234 1 % Impairment
of goodwill and intangible assets - - N/A 14,816 - N/A
Restructuring charge - - N/A 316
630 (50 %)
Operating profit (loss)
850 2,518 (66 %)
(13,448 ) 6,673 N/A Operating
margin 3.8 % 9.8 % (17.3 %) 7.3 % Interest income (151 )
(114 ) 32 % (606 ) (386 ) 57 % Interest expense 4
3 33 % 12 10 20 % Income
(loss) before provision for income taxes 997 2,629 (62 %) (12,854 )
7,049 N/A Provision (benefit) for income taxes 164
828 (80 %) (3,010 ) 2,026 N/A
Net income (loss) $ 833 $
1,801 (54 %)
$ (9,844 ) $
5,023 N/A Per share data: Basic: Net income
(loss) $ 0.09 $ 0.18 (50 %) $ (1.01 ) $ 0.52
N/A Diluted: Net income (loss) $ 0.09 $ 0.18 (50 %) $
(1.01 ) $ 0.52 N/A Weighted average common shares
outstanding: Basic 9,772 9,738 9,764 9,716 Diluted 9,781 9,753
9,764 9,728 Dividends declared per share $ 0.09 $
0.09 $ 0.36 $ 0.36
N/A: Not Applicable
Graham Corporation
Fourth Quarter Fiscal 2018
Consolidated Balance Sheets
(Amounts in thousands, except per share
data)
March 31, 2018
2017 Assets Current assets: Cash and cash equivalents
$ 40,456 $ 39,474 Investments 36,023 34,000 Trade accounts
receivable, net of allowances ($339 and $168 at March 31, 2018 and
2017, respectively) 17,026 11,483 Unbilled revenue 8,079 15,842
Inventories 11,566 9,246 Prepaid expenses and other current assets
772 681 Income taxes receivable 1,478 -
Total current assets 115,400 110,726 Property, plant and equipment,
net 17,052 17,021 Prepaid pension asset 4,369 2,340 Goodwill 1,222
6,938 Permits 1,700 10,300 Other intangible assets, net 3,388 4,068
Other assets 202 177
Total
assets $ 143,333 $ 151,570
Liabilities and stockholders’ equity Current
liabilities: Current portion of capital lease obligations $ 88 $
107 Accounts payable 16,151 10,295 Accrued compensation 4,958 5,189
Accrued expenses and other current liabilities 2,885 3,723 Customer
deposits 13,213 12,407 Income taxes payable -
317 Total current liabilities 37,295 32,038 Capital lease
obligations 55 143 Deferred income tax liability 1,427 4,051
Accrued pension liability 565 467 Accrued postretirement benefits
642 761
Total liabilities
39,984 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 9,772 and 9,740
shares outstanding at March 31, 2018 and 2017, respectively 1,058
1,055 Capital in excess of par value 23,826 23,176 Retained
earnings 99,011 110,544 Accumulated other comprehensive loss (8,250
) (8,434 ) Treasury stock (807 and 808 shares at March 31, 2018 and
2017, respectively) (12,296 ) (12,231 )
Total
stockholders’ equity 103,349
114,110 Total liabilities and stockholders’
equity $ 143,333 $ 151,570
Graham Corporation
Fourth Quarter Fiscal 2018
Consolidated Statements of Cash
Flows
(Amounts in thousands)
Year Ended March 31, 2018
2017 Operating activities: Net (loss) income $ (9,844
) $ 5,023 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation 1,986 2,092
Amortization 236 234 Amortization of unrecognized prior service
cost and actuarial losses 1,050 1,387 Impairment of goodwill and
intangible assets 14,816 - Stock-based compensation expense 577 627
Loss on disposal or sale of property, plant and equipment 26 4
Deferred income taxes (3,088 ) (884 ) (Increase) decrease in
operating assets: Accounts receivable (5,472 ) 1,127 Unbilled
revenue 7,866 (3,996 ) Inventories (2,311 ) 1,561 Income taxes
receivable/payable (1,794 ) 1,977 Prepaid expenses and other
current and non-current assets (176 ) (111 ) Prepaid pension asset
(1,009 ) (823 ) Increase (decrease) in operating liabilities:
Accounts payable 5,757 78 Accrued compensation, accrued expenses
and other current and non-current liabilities (954 ) 28 Customer
deposits 792 4,010 Long-term portion of accrued compensation,
accrued pension liability and accrued postretirement benefits
53 55
Net cash provided by operating
activities 8,511 12,389
Investing activities: Purchase of property,
plant and equipment (2,051 ) (325 ) Proceeds from disposal of
property, plant and equipment 6 1 Purchase of investments (54,023 )
(55,000 ) Redemption of investments at maturity 52,000
62,000
Net cash (used) provided by
investing activities (4,068 )
6,676 Financing activities: Principal
repayments on capital lease obligations (107 ) (58 ) Issuance of
common stock - 137 Dividends paid (3,517 ) (3,492 ) Purchase of
treasury stock (119 ) (29 ) Excess tax deficiency (benefit) on
stock awards - (19 )
Net cash used by
financing activities (3,743 )
(3,461 ) Effect of exchange rate changes on cash
282 (202 ) Net increase in cash and cash
equivalents 982 15,402 Cash and cash equivalents at beginning of
year 39,474 24,072 Cash and cash
equivalents at end of period $ 40,456 $ 39,474
Graham Corporation
Fourth Quarter Fiscal 2018
Adjusted Net Income
Reconciliation—Unaudited
(Amounts in thousands, except per share
data)
Three Months Ended
Year Ended March 31, March 31, 2018
2017 2018 2017
Per Diluted Share
Per Diluted Share
Per Diluted Share
Per Diluted Share
Net income (loss) $ 833 $ 0.09 $ 1,801 $ 0.18 $ (9,844 ) $
(1.01 ) $ 5,023 $ 0.52 + Restructuring charge - - - - 316 0.03 630
0.06 + Impairment of goodwill and intangible assets - - - - 14,816
1.52 - - + Bad debt charge on commercial nuclear power business - -
- - 280 0.03 - - - Tax effect of above - - - - (2,981 ) (0.31 )
(189 ) (0.02 ) - Impact of new tax law (209 ) (0.02 )
(786 ) (0.08 ) - -
Adjusted net income $ 624 $ 0.07 $
1,801 $ 0.18 $ 1,801 $ 0.18 $ 5,464 $ 0.56
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
Fourth Quarter Fiscal 2018
Adjusted Operating Profit
Reconciliation—Unaudited
(Amounts in thousands)
Three Months Ended
Year Ended March 31, March 31, 2018
2017 2018 2017 Operating profit
(loss) $ 850 $ 2,518 $
(13,448 ) $ 6,673 + Restructuring
charge - - 316 630 + Impairment of goodwill and intangible assets -
- 14,816 - + Bad debt charge on commercial nuclear power business
- - 280 -
Adjusted operating profit $ 850
$ 2,518 $ 1,964 $
7,303 Adjusted operating margin % 3.8 % 9.8 % 2.5 %
8.0 %
Non-GAAP Financial Measure:
Adjusted operating profit is defined as consolidated operating
profit before a nonrecurring restructuring charge, impairment of
goodwill and intangible assets, and a charge associated with the
revaluation of the nuclear business. Adjusted operating margin is
Adjusted operating profit divided by sales. Adjusted operating
profit and Adjusted operating 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
operating profit and Adjusted operating 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. Because Adjusted operating
profit and Adjusted operating margin are non-GAAP measures and are
thus susceptible to varying calculations, Adjusted operating profit
and Adjusted operating margin, as presented, may not be directly
comparable to other similarly titled measures used by other
companies.
Graham Corporation
Fourth Quarter Fiscal 2018
Adjusted EBITDA
Reconciliation—Unaudited
(Amounts in thousands)
Three Months Ended
Year Ended March 31, March 31, 2018
2017 2018 2017 Net income (loss)
$ 833 $ 1,801 $ (9,844
) $ 5,023 + Net interest income (147 ) (111 )
(594 ) (376 ) + Income taxes 164 828 (3,010 ) 2,026 + Depreciation
& amortization 555 580 2,222 2,326 + Restructuring charge - -
316 630 + Impairment of goodwill and intangible assets - - 14,816 -
+ Bad debt charge on commercial nuclear power business -
- 280 -
Adjusted EBITDA $ 1,405 $
3,098 $ 4,186 $
9,629 Adjusted EBITDA margin % 6.3 % 12.1 % 5.4 %
10.5 %
Non-GAAP Financial Measure:
Adjusted EBITDA is defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization, a nonrecurring restructuring charge, impairment of
goodwill and intangible assets, and a charge associated with the
revaluation of the nuclear business. 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
Fourth Quarter Fiscal 2018
Additional
Information—Unaudited
ORDER & BACKLOG TREND ($ in millions)
Q117 Q217 Q317 Q417
FY2017 Q118 Q218 Q318 Q418
FY2018 Total
Total 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 $ 43.5 $ 112.2 Backlog
$ 99.9 $ 104.0 $ 99.1 $
82.6 $ 82.6 $ 72.9 $ 73.0
$ 96.2 $ 117.9 $ 117.9
SALES BY INDUSTRY FY 2018 ($ in millions)
FY
2018 Q1 % of Q2 % of Q3 %
of Q4 % of FY2018 % of
6/30/17 Total
9/30/17 Total
12/31/17 Total 3/31/18
Total Total Refining
$ 3.6 18 % $ 4.7
28 % $ 5.4 31 % $ 7.9 35
% $ 21.6 28 % Chemical/ Petrochemical
$ 7.2 34 % $ 5.7
33 % $ 4.2 24 % $ 3.6 16
% $ 20.7 27 % Power $ 4.0
19 % $ 1.9 11 % $ 1.7
10 % $ 3.2 14 % $ 10.8
14 % Other Commercial, Industrial and Defense
$ 6.1 29 % $ 4.9
28 % $ 6.0 35 % $ 7.4 35
% $ 24.4 32 % Total $
20.9 $ 17.2 $ 17.3
$ 22.1 $ 77.5
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
Fourth Quarter Fiscal 2018
Additional
Information—Unaudited
(Continued)
SALES BY REGION FY 2018 ($ in millions)
FY
2018 Q1 % of Q2 % of Q3 %
of Q4 % of FY2018 % of
6/30/17 Total
9/30/17 Total 12/31/17
Total 3/31/18
Total Total United States $ 14.8
71 % $ 11.1 65 % $ 11.3 65 % $
14.7 66 % $ 51.9 67 % Middle East $ 0.9
4 % $ 1.0 6 % $ 1.0 6 % $ 0.9
4 % $ 3.8 5 % Asia $ 3.4 16 % $
2.6 15 % $ 2.3 13 % $ 1.9 9 %
$ 10.2 13 % Other $ 1.8 9 % $ 2.5
14 % $ 2.7 16 % $ 4.6 21 %
$ 11.6 15 % Total $ 20.9 $ 17.2
$ 17.3 $ 22.1
$ 77.5
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: https://www.businesswire.com/news/home/20180531005118/en/
Graham CorporationJeffrey F. Glajch, 585-343-2216Vice
President – Finance and CFOjglajch@graham-mfg.comorKei Advisors
LLCDeborah K. Pawlowski / Karen L. HowardPhone: 716-843-3908
/ 716-843-3942dpawlowski@keiadvisors.com /
khoward@keiadvisors.com
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