- Third quarter revenue of $25 million; third quarter orders
of $20 million
- Backlog remains strong at $123 million as of December
31
- Reiterating fiscal 2020 revenue guidance of 20% to 26%
growth and revising gross margin to between 21% and 22%
Graham Corporation (NYSE: GHM), a global business that designs,
manufactures and sells critical equipment for the oil refining,
petrochemical and defense industries, today reported financial
results for its third quarter and nine months ended December 31,
2019. Graham’s current fiscal year ends March 31, 2020 (“fiscal
2020”).
Net sales in the third quarter of fiscal 2020 were $25.3 million
compared with $17.2 million in the third quarter of the fiscal year
ended March 31, 2019 (“fiscal 2019”). This year’s third quarter net
income and earnings per share (“EPS”) were breakeven. Last year’s
third quarter net income and EPS were $0.1 million and $0.01,
respectively. Excluding the business of Graham’s commercial nuclear
utility subsidiary which was divested in June 2019, adjusted net
income and adjusted EPS in last year’s third quarter, both of which
are non-GAAP measures, were $0.5 million and $0.05, respectively.
The Company makes important disclosures regarding its use of
non-GAAP measures on the following page of this release.
James R. Lines, Graham’s President and Chief Executive Officer,
commented, “The third quarter results met our revenue expectations,
however, operating profit fell short of expectations due to an
unfavorable project mix in this quarter’s backlog conversion and
lower than typical short cycle orders. We anticipate that the
fourth quarter operating profit will, accordingly, improve as
higher margin backlog is converted and short cycle orders resume
their typical pattern.
“There is an expected step-up in revenue and profitability for
the fourth quarter as we drive toward full year revenue guidance
between $100 and $105 million. Importantly, the bid pipeline
remains strong and margin quality continues to improve when
compared with backlog orders won nine to 15 months back.”
Third Quarter Fiscal 2020 Sales Summary (See accompanying
financial tables for a breakdown of sales by industry and
region)
Consolidated net sales increased by $8.1 million in the third
quarter of fiscal 2020 compared with the prior-year quarter. Sales
to the refining market were up $5.6 million to $12.2 million while
sales to the chemical/petrochemical market were up $3.3 million to
$6.2 million and sales to the other commercial, industrial and
defense markets were up $1.6 million to $6.6 million. These
increases were partially offset by a decrease of $2.4 million to
the power market, primarily attributable to the divested Energy
Steel business.
From a geographic perspective, U.S. sales represented 53% of
consolidated sales in the fiscal 2020 third quarter compared with
83% in the third quarter of fiscal 2019. International sales were
47% of consolidated sales in the fiscal 2020 third quarter,
compared with 17% in the prior-year comparable period.
Fluctuations in Graham’s sales among geographic locations and
industries can vary measurably from quarter-to-quarter based on the
timing and magnitude of projects. Graham does not believe that such
quarter-to-quarter fluctuations are indicative of business trends,
which it believes are more apparent on a trailing twelve month
basis.
Third Quarter Fiscal 2020 Performance Review
($ in millions except per share data)
Q3 FY20
Q3 FY19
Change
Net sales
$
25.3
$
17.2
$
8.1
Gross profit
$
4.0
$
3.7
$
0.3
Gross margin
16.0%
21.8%
Operating loss
$
(0.4)
$
(0.6)
$
0.2
Operating margin
(1.6%)
(3.3%)
Net income
$
0.0
$
0.1
$
(0.1)
Diluted EPS
$
-
$
0.01
Non-GAAP financial measures:
Adjusted operating loss
$
(0.4)
$
(0.1)
$
(0.3)
Adjusted operating margin
(1.6%)
(0.4%)
Adjusted net income
$
0.0
$
0.5
$
(0.5)
Adjusted diluted EPS
$
-
$
0.05
$
(0.05)
Adjusted EBITDA
$
0.2
$
0.7
$
(0.5)
Adjusted EBITDA margin
0.7%
4.5%
Refer to pages 10 and 11 of this press release for
reconciliations to non-GAAP financial measures and other important
disclosures regarding Graham’s use of non-GAAP measures.
Graham believes that, when used in conjunction with measures
prepared in accordance with GAAP, adjusted operating loss, adjusted
operating margin (adjusted operating loss as a percentage of sales
excluding Energy Steel), adjusted net income, adjusted diluted EPS,
adjusted EBITDA (defined as consolidated net income before net
interest income, income taxes, depreciation and amortization, and
the operating loss and loss on the sale of Energy Steel) and
adjusted EBITDA margin (adjusted EBITDA as a percentage of sales
excluding Graham’s Energy Steel subsidiary divested in June 2019),
which are non-GAAP measures, help in the understanding of its
operating performance. Moreover, 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 loss, adjusted operating margin, adjusted net income,
adjusted diluted EPS, adjusted EBITDA and adjusted EBITDA margin as
well as reconciliations of operating loss to adjusted operating
loss and reconciliations of net income to adjusted net income and
adjusted EBITDA.
Graham divested its commercial nuclear utility business, which
had been conducted through its Energy Steel subsidiary, during the
first quarter of fiscal 2020. There was no impact on the financial
results during the third quarter of fiscal 2020. However, during
the third quarter of fiscal 2019, results of this business included
sales of $1.8 million, an operating loss of $0.5 million and a net
loss of $0.4 million.
Despite higher sales, overall, fiscal 2020’s third quarter
adjusted operating loss, adjusted net income, and adjusted EBITDA
were unfavorably impacted by a lower gross margin compared with the
prior-year third quarter.
Fiscal 2020’s third quarter gross profit and margin were
unfavorably impacted by the timing of a varying mix of projects
compared with the third quarter of fiscal 2019.
Selling, general and administrative (“SG&A”) expenses were
$4.4 million in the third quarter of fiscal 2020, compared with
$4.3 million in the third quarter of fiscal 2019. The prior-year
quarter included $0.4 million for the divested Energy Steel
business. SG&A as a percent of sales was approximately 18% and
25% in the third quarters of fiscal 2020 and fiscal 2019,
respectively.
For the third quarters of both fiscal 2020 and 2019, Graham’s
effective tax rates were not meaningful due to the proximity of the
results in both periods to breakeven.
Nine Month Year-to-Date Fiscal 2020 Performance
Review
($ in millions except per share data)
YTD FY20
YTD FY19
Change
Net sales
$
67.5
$
68.2
$
(0.7)
Gross profit
$
13.7
$
17.1
$
(3.4)
Gross margin
20.3%
25.1%
Operating profit
$
0.3
$
3.4
$
(3.1)
Operating margin
0.5%
5.0%
Net income
$
1.3
$
4.2
$
(2.9)
Diluted EPS
$
0.13
$
0.43
$
(0.30)
Non-GAAP
financial measures: Adjusted
operating profit
$
1.4
$
5.1
$
(3.7)
Adjusted operating margin
2.2%
8.3%
Adjusted net income
$
2.2
$
5.6
$
(3.4)
Adjusted diluted EPS
$
0.22
$
0.57
$
(0.35)
Adjusted EBITDA
$
3.2
$
7.4
$
(4.2)
Adjusted EBITDA margin
4.8%
12.0%
Energy Steel’s results for the first nine months of fiscal 2020,
including the loss on sale, included sales of $1.3 million, an
operating loss of $1.1 million and a net loss of $0.9 million.
During the first nine months of fiscal 2019, results of this
business included sales of $6.6 million, an operating loss of $1.7
million and a net loss of $1.4 million.
International sales were $23.9 million in the first nine months
of fiscal 2020 and represented 35% of total sales, compared with
$25.4 million, or 37% of sales, in the same prior-year period.
Sales to the U.S. were $43.6 million, or 65% of year-to-date net
sales in fiscal 2020, compared with $42.8 million, or 63% of fiscal
2019 year-to-date net sales.
Overall, fiscal 2020 year-to-date adjusted operating profit,
adjusted net income and adjusted EBITDA were unfavorably impacted
by a lower gross margin compared with the first nine months of the
prior fiscal year.
The decrease in gross profit and margin were due to an
unfavorable project mix in the fiscal 2020 year-to-date period. The
prior-year second quarter included a particularly favorable mix of
projects, benefiting the fiscal 2019 year-to-date period. Excluding
the results of Energy Steel, gross margin was 21% and 28% for the
first nine months of fiscal 2020 and fiscal 2019, respectively.
SG&A in the first nine months of fiscal 2020 was $12.9
million, down 6% or $0.8 million. Excluding Energy Steel, SG&A
was up $0.2 million. As a percent of sales, SG&A was 19% in the
year-to-date fiscal 2020 period, compared with 20% in the same
prior-year period.
Balance Sheet Remains Strong
Cash, cash equivalents and investments at December 31, 2019 were
$69.9 million, compared with $73.8 million at September 30, 2019
and $77.8 million at March 31, 2019. The decrease at the end of
December was primarily due to timing of working capital
fluctuations.
Cash used by operations in the first nine months of fiscal 2020
was $4.1 million, compared with cash provided by operations of $8.5
million in the first nine months of fiscal 2019. The decrease was
primarily the result of the timing of changes in working capital
and lower net income.
Capital expenditures were $1.4 million in the first nine months
of fiscal 2020 compared with $1.5 million in the first nine months
of fiscal 2019. The Company continues to expect capital
expenditures for fiscal 2020 to be between $2.5 million and $2.8
million, the majority of which are expected to be used for
productivity enhancements.
Dividend payments were $3.2 million and $2.9 million in the
first nine months of fiscal 2020 and fiscal 2019, respectively.
Graham had neither borrowings under its credit facility, nor any
long-term debt outstanding, at December 31, 2019.
Backlog and Orders Impacted by Timing
Backlog at the end of the third quarter of fiscal 2020 continues
to be strong at $122.9 million, compared with $127.8 million at the
end of the trailing quarter. The decrease primarily relates to
timing of customer order releases.
The Company believes 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, 2019 was
approximately:
- 52% for U.S. Navy projects
- 30% for refinery projects
- 13% for chemical/petrochemical projects
- 5% for power projects and other industrial applications
The expected timing for the Company’s backlog to convert to
sales is as follows:
55% to 60%
10% to 15%
25% to 35%
Orders were $20.0 million in the third quarter of fiscal 2020,
compared with $23.2 million in the prior-year third quarter. The
global refining industry and other commercial, industrial and
defense markets contributed increases of $1.6 million and $3.7
million, respectively, which were offset by $6.8 million of lower
orders from the chemical/petrochemical industry. Orders in the
fiscal 2019 quarter included $1.4 million for the divested Energy
Steel business. In the fiscal 2020 third quarter, orders from U.S.
customers were $15.5 million, or 77% of total orders, and orders
from international markets were $4.5 million, or 23%. This compares
with 50% from the U.S. and 50% from international markets in the
third quarter of fiscal 2019.
The comparison of orders in the first nine months of fiscal 2020
versus the same prior-year period is impacted by timing of customer
order releases. Excluding Energy Steel, orders in the first nine
months of fiscal 2020 were $64.7 million, compared with $71.9
million in the first nine months of fiscal 2019 on the same
basis.
Graham believes that the balance between domestic and
international orders, as well as orders by industry, will continue
to be variable between quarters.
Reiterating FY 2020 Revenue Guidance, Lowering FY 2020 Gross
Margin Guidance
Based on its near-term order outlook and operating performance
for the first three quarters, Graham is updating its fiscal 2020
guidance which excludes the divested Energy Steel business, as
follows:
- Revenue anticipated to be between $100 million and $105
million. For fiscal 2019, consolidated revenue excluding Energy
Steel was $83.5 million.
- Gross margin expectations between 21% and 22%, with the
reduction caused by project mix
- SG&A expense expected to be between $17 million and $17.5
million
- Effective tax rate anticipated to be approximately 20%
Mr. Lines noted, “It is important to point out that the above
guidance includes fulfillment of a short cycle naval order that is
in backlog. We are confident that this order will be completed,
however, due to its size, if we are unable to complete it during
the quarter, revenue will likely fall below the lower range of
guidance.”
He concluded, “Our pipeline continues to be very active as our
customers plan their capacity expansion and upgrade projects.
Additionally, we believe we are gaining traction with our
initiatives to expand our revenue opportunities derived from our
installed base, penetrate new geographic markets, and broaden our
revenue from the U.S. Navy. Further, we anticipate continued
productivity improvements and margin expansion. We expect that the
results of these initiatives will continue to differentiate Graham
and drive revenue and margin growth in fiscal 2021.”
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 and first nine months
of fiscal 2020, 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 today
through Wednesday, February 5, 2020. To listen to the archived
call, dial (412) 317-6671 and enter conference ID number 13697518.
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, 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’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,” “look towards” 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 and productivity, customer preferences, changes in
market conditions in the industries in which it operates, 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 its operations in
China, India 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.
Graham Corporation Third Quarter
Fiscal 2020 Consolidated Statements of Income -
Unaudited (Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
December 31, December 31,
2019
2018
% Change
2019
2018
% Change
Net sales
$
25,286
$
17,198
47%
$
67,522
$
68,190
(1%)
Cost of products sold
21,242
13,456
58%
53,816
51,079
5%
Gross profit
4,044
3,742
8%
13,706
17,111
(20%)
Gross margin
16.0%
21.8%
20.3%
25.1%
Other expenses and income:
Selling, general and administrative
4,441
4,249
5%
12,844
13,518
(5%)
Selling, general and administrative – amortization
-
59
(100%)
11
178
(94%)
Other expense
-
-
NA
523
-
NA
Operating (loss) profit
(397)
(566)
(30%)
328
3,415
(90%)
Operating margin
(1.6%)
(3.3%)
0.5%
5.0%
Other income
(87)
(206)
(58%)
(261)
(618)
(58%)
Interest income
(318)
(404)
(21%)
(1,080)
(1,044)
3%
Interest expense
2
5
(60%)
9
8
NA
Income before provision for income taxes
6
39
(85%)
1,660
5,069
(67%)
(Benefit) provision for income taxes
(3)
(56)
(95%)
364
824
(56%)
Net income
$
9
$
95
(91%)
$
1,296
$
4,245
(69%)
Per share data:
Basic:
Net income
$
-
$
0.01
NA
$
0.13
$
0.43
(70%)
Diluted:
Net income
$
-
$
0.01
NA
$
0.13
$
0.43
(70%)
Weighted average common shares outstanding:
Basic
9,884
9,832
9,874
9,817
Diluted
9,888
9,845
9,877
9,832
Dividends declared per share
$
0.11
$
0.10
$
0.32
$
0.29
N/A: Not Applicable
Graham Corporation Third Quarter
Fiscal 2020 Consolidated Balance Sheets - Unaudited
(Amounts in thousands, except per share data)
December 31,
March 31,
2019
2019
Assets Current assets: Cash and cash
equivalents
$
10,851
$
15,021
Investments
59,000
62,732
Trade accounts receivable, net of allowances ($35 and $33 at
December 31 and March 31, 2019, respectively)
17,901
17,582
Unbilled revenue
14,321
7,522
Inventories
20,408
24,670
Prepaid expenses and other current assets
1,289
1,333
Income taxes receivable
772
1,073
Assets held for sale
-
4,850
Total current assets
124,542
134,783
Property, plant and equipment, net
16,906
17,071
Prepaid pension asset
4,920
4,267
Operating lease assets
283
-
Other assets
150
149
Total assets
$
146,801
$
156,270
Liabilities and stockholders’ equity
Current liabilities: Current portion of finance lease
obligations
$
47
$
51
Accounts payable
9,253
12,405
Accrued compensation
4,855
5,126
Accrued expenses and other current liabilities
2,835
2,933
Customer deposits
28,816
30,847
Operating lease liabilities
153
-
Liabilities held for sale
-
3,525
Total current liabilities
45,959
54,887
Finance lease obligations
61
95
Operating lease liabilities
122
-
Deferred income tax liability
1,273
1,056
Accrued pension liability
726
662
Accrued postretirement benefits
619
604
Total liabilities
48,760
57,304
Stockholders’ equity: Preferred stock,
$1.00 par value, 500 shares authorized
-
-
Common stock, $.10 par value, 25,500 shares authorized,
10,700 and 10,650 shares issued and 9,884 and 9,843 shares
outstanding at December 31 and March 31, 2019, respectively
outstanding at December 31 and March 31, 2019, respectively
1,070
1,065
Capital in excess of par value
26,057
25,277
Retained earnings
91,900
93,847
Accumulated other comprehensive loss
(8,385)
(8,833)
Treasury stock (816 and 807 shares at December 31 and March
31, 2019, respectively)
(12,601)
(12,390)
Total stockholders’ equity
98,041
98,966
Total liabilities and stockholders’ equity
$
146,801
$
156,270
Graham Corporation Third Quarter
Fiscal 2020 Consolidated Statements of Cash Flows –
Unaudited (Amounts in thousands)
Nine Months Ended December
31,
2019
2018
Operating activities:
Net income
$
1,296
$
4,245
Adjustments to reconcile net income to net cash (used) provided by
operating activities: Depreciation
1,468
1,469
Amortization
11
178
Amortization of unrecognized prior service cost and actuarial
losses
747
655
Equity-based compensation expense
731
797
(Gain) loss on disposal or sale of property, plant and equipment
(2)
30
Loss on sale of Energy Steel & Supply Co
87
-
Deferred income taxes
33
128
(Increase) decrease in operating assets:
Accounts receivable
(438)
3,050
Unbilled revenue
(6,799)
(2,011)
Inventories
4,225
1,813
Prepaid expenses and other current and non-current assets
(7)
(773)
Income taxes receivable
301
770
Operating lease assets
176
-
Prepaid pension asset
(653)
(893)
Increase (decrease) in operating liabilities:
Accounts payable
(3,036)
(8,136)
Accrued compensation, accrued expenses and other current and
non-current liabilities
(299)
946
Customer deposits
(1,938)
6,177
Operating lease liabilities
(101)
-
Long-term portion of accrued compensation, accrued pension
liability and accrued postretirement benefits
79
90
Net cash (used) provided by operating activities
(4,119)
8,535
Investing activities:
Purchase of property,
plant and equipment
(1,389)
(1,471)
Proceeds from disposal of proprerty, plant and equipment
2
-
Proceeds from the sale of Energy Steel & Supply Co
602
-
Purchase of investments
(141,414)
(101,343)
Redemption of investments at maturity
145,146
73,633
Net cash provided (used) by investing activities
2,947
(29,181)
Financing activities:
Principal repayments on
finance lease obligations
(38)
(81)
Issuance of common stock
24
171
Dividends paid
(3,163)
(2,851)
Purchase of treasury stock
(230)
(146)
Net cash used by financing activities
(3,407)
(2,907)
Effect of exchange rate changes on cash
(143)
(228)
Net decrease in cash and cash equivalents, including cash
classified within current assets held for sale
(4,722)
(23,781)
Plus: Net decrease in cash classified within current assets
held for sale
552
-
Net decrease in cash and cash equivalents
(4,170)
(23,781)
Cash and cash equivalents at beginning of period
15,021
40,456
Cash and cash equivalents at end of period
$
10,851
$
16,675
Graham Corporation Third Quarter
Fiscal 2020 Adjusted Net Income Reconciliation -
Unaudited (Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
December 31, December 31,
2019
2018
2019
2018
Per DilutedShare Per DilutedShare
Per DilutedShare Per DilutedShare
Net income
$
9
$
-
$
95
$
0.01
$
1,296
$
0.13
$
4,245
$
0.43
+ Loss on sale of commercial nuclear utility business
-
-
-
-
87
0.01
-
-
+ Operating loss of commercial nuclear utility business
-
-
502
0.05
1,016
0.10
1,683
0.17
- Tax effect of above
-
-
(95)
(0.01)
(203)
(0.02)
(314)
(0.03)
Adjusted net income
$
9
$
-
$
502
$
0.05
$
2,196
$
0.22
$
5,614
$
0.57
Non-GAAP Financial Measure:
Adjusted net income is defined as GAAP net income excluding the
operating loss and loss on the sale of the commercial nuclear
utility business. 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 2020 Adjusted Operating Profit Reconciliation -
Unaudited (Amounts in thousands)
Three Months Ended Nine Months
Ended December 31, December
31,
2019
2018
2019
2018
Operating (loss) profit
$
(397)
$
(566)
$
328
$
3,415
+ Loss on sale of commercial nuclear utility business
-
-
87
-
+ Operating loss of commercial nuclear utility business
-
502
1,016
1,683
Adjusted operating (loss) profit
$
(397)
$
(64)
$
1,431
$
5,098
Adjusted operating margin %
-1.6%
-0.4%
2.2%
8.3%
Non-GAAP Financial Measure:
Adjusted operating (loss) profit is defined as consolidated
operating (loss) profit before the operating loss and loss on the
sale of the commercial nuclear utility business. Adjusted operating
margin is Adjusted operating (loss) profit divided by sales
excluding sales of the commercial nuclear utility business.
Adjusted operating (loss) 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 (loss) 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 (loss) profit and Adjusted operating
margin are non-GAAP measures and are thus susceptible to varying
calculations, Adjusted operating (loss) profit and Adjusted
operating margin, as presented, may not be directly comparable to
other similarly titled measures used by other companies.
Graham Corporation Third Quarter
Fiscal 2020 Adjusted EBITDA Reconciliation - Unaudited
(Amounts in thousands)
Three Months Ended Nine Months
Ended December 31, December
31,
2019
2018
2019
2018
Net income
$
9
$
95
$
1,296
$
4,245
+ Net interest income
(316)
(399)
(1,071)
(1,036)
+ Income taxes
(3)
(56)
364
824
+ Depreciation & amortization
488
548
1,479
1,647
+ Loss on sale of commercial nuclear utility business
-
-
87
-
+ Operating loss of commercial nuclear utility business
-
502
1,016
1,683
Adjusted EBITDA
$
178
$
690
$
3,171
$
7,363
Adjusted EBITDA margin %
0.7%
4.5%
4.8%
12.0%
Non-GAAP Financial Measure:
Adjusted EBITDA is defined as consolidated net income before
interest expense and income, income taxes, depreciation and
amortization, and the operating loss and loss on the sale of the
commercial nuclear utility business. Adjusted EBITDA margin is
adjusted EBITDA divided by sales excluding sales of the commercial
nuclear utility business. 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 2020 Additional Information - Unaudited
ORDER & BACKLOG TREND
($ in millions)
Q119 Q219 Q319
Q419 FY2019 Q120 Q220 Q320
Total Total Total Total
Total Total Total Total Orders
$
22.0
$
34.4
$
23.2
$
21.6
$
101.2
$
15.1
$
32.6
$
20.0
Backlog
$
114.9
$
127.8
$
133.7
$
132.1
$
132.1
$
117.2
$
127.8
$
122.9
SALES BY INDUSTRY FY 2020 ($ in
millions)
FY 2020 Q1
% of
Q2
% of
Q3
% of
6/30/19
Total
9/30/19
Total
12/31/19
Total
Refining
$
7.5
36%
$
6.3
29%
$
12.2
49%
Chemical/ Petrochemical
$
7.1
35%
$
10.5
48%
$
6.2
24%
Power
$
1.4
7%
$
0.5
3%
$
0.3
1%
Other Commercial, Industrial and Defense
$
4.6
22%
$
4.3
20%
$
6.6
26%
Total
$
20.6
$
21.6
$
25.3
SALES BY INDUSTRY FY 2019
($ in millions)
FY
2019 Q1
% of
Q2
% of
Q3
% of
Q4
% of
FY2019
% of
6/30/18
Total
9/30/18
Total
12/31/18
Total
3/31/19
Total
Total
Refining
$
19.8
67%
$
9.7
45%
$
6.6
39%
$
9.6
41%
$
45.6
50%
Chemical/ Petrochemical
$
3.0
10%
$
3.8
18%
$
2.9
17%
$
7.4
31%
$
17.1
18%
Power
$
3.1
10%
$
2.1
10%
$
2.7
15%
$
2.0
8%
$
9.9
11%
Other Commercial, Industrial and Defense
$
3.7
13%
$
5.8
27%
$
5.0
29%
$
4.6
20%
$
19.1
21%
Total
$
29.6
$
21.4
$
17.2
$
23.6
$
91.8
Graham Corporation Third Quarter
Fiscal 2020 Additional Information - Unaudited
(Continued)
SALES BY REGION FY 2020 ($ in
millions)
FY 2020 Q1
% of
Q2
% of
Q3
% of
6/30/19
Total
9/30/19
Total
12/31/19
Total
United States
$
14.4
70%
$
15.7
73%
$
13.4
53%
Middle East
$
0.8
4%
$
0.5
2%
$
7.5
30%
Asia
$
3.2
16%
$
1.0
5%
$
0.7
3%
Other
$
2.2
10%
$
4.4
20%
$
3.7
14%
Total
$
20.6
$
21.6
$
25.3
SALES BY REGION FY 2019
($ in millions)
FY
2019 Q1
% of
Q2
% of
Q3
% of
Q4
% of
FY2019
% of
6/30/18
Total
9/30/18
Total
12/31/18
Total
3/31/19
Total
Total
United States
$
13.5
46%
$
15.0
70%
$
14.3
83%
$
16.6
70%
$
59.4
65%
Middle East
$
0.4
1%
$
0.5
2%
$
0.8
5%
$
0.9
4%
$
2.6
3%
Asia
$
2.7
9%
$
1.9
9%
$
1.0
6%
$
4.7
20%
$
10.2
11%
Other
$
13.0
44%
$
4.0
19%
$
1.1
7%
$
1.4
6%
$
19.6
21%
Total
$
29.6
$
21.4
$
17.2
$
23.6
$
91.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200129005270/en/
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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