FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For Quarterly Period Ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________
Commission File Number 1-8462
GRAHAM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1194720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 FLORENCE AVENUE, BATAVIA, NEW YORK 14020
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including Area Code - 716-343-2216
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES __X__ No _____
As of October 21, 1999, there were outstanding 1,516,045 shares
of common stock, $.10 per share.
<PAGE>2
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1999
PART I - FINANCIAL INFORMATION
Unaudited consolidated financial statements of Graham
Corporation (the Company) and its subsidiaries as of September 30,
1999 and for the three month and six month periods then ended are
presented on the following pages. The financial statements have
been prepared in accordance with the company's usual accounting
policies, are based in part on approximations and reflect all
normal and recurring adjustments which are, in the opinion of
management, necessary to a fair presentation of the results of the
interim periods.
This part also includes management's discussion and analysis of
the Company's financial condition as of September 30, 1999 and its
results of operations for the three and six month periods then
ended.
<PAGE>3
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 120,000
Investments $ 4,905,000 4,928,000
Trade accounts receivable 7,404,000 7,580,000
Inventories 5,649,000 6,803,000
Domestic and foreign income taxes
receivable 73,000
Prepaid pension asset 1,216,000
Deferred tax asset 927,000 950,000
Prepaid expenses and other
current assets 340,000 349,000
----------- -----------
20,441,000 20,803,000
Property, plant and equipment, net 10,271,000 10,450,000
Deferred income tax asset 2,191,000 2,673,000
Other assets 2,000 210,000
----------- -----------
$32,905,000 $34,136,000
=========== ===========
</TABLE>
<PAGE>4
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (concluded)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
---- ----
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt due banks $ 2,087,000
Current portion of long-term debt 481,000 $ 546,000
Accounts payable 1,752,000 2,879,000
Accrued compensation 2,778,000 3,938,000
Accrued expenses and other liabilities 667,000 1,043,000
Customer deposits 220,000 408,000
Domestic and foreign income taxes
payable 31,000
----------- -----------
8,016,000 8,814,000
Long-term debt 319,000 505,000
Accrued compensation 1,088,000 1,095,000
Other long-term liabilities 301,000 303,000
Accrued pension liability 1,208,000 3,519,000
Accrued postretirement benefits 3,232,000 3,188,000
----------- -----------
Total liabilities 14,164,000 17,424,000
----------- -----------
Shareholders' equity:
Preferred Stock, $1 par value -
Authorized, 500,000 shares
Common stock, $.10 par value -
Authorized, 6,000,000 shares
Issued 1,690,595 shares on September 30,
1999 and on March 31, 1999 169,000 169,000
Capital in excess of par value 4,521,000 4,521,000
Retained earnings 18,421,000 17,731,000
Accummulated other comprehensive loss (1,827,000) (3,076,000)
----------- -----------
21,284,000 19,345,000
Less:
Treasury Stock (2,418,000) (2,408,000)
Employee Stock Ownership Plan Loan
Payable (125,000) (225,000)
----------- -----------
Total shareholders' equity 18,741,000 16,712,000
----------- -----------
$32,905,000 $34,136,000
=========== ===========
</TABLE>
<PAGE>5
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Six Months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $11,659,000 $11,417,000 $20,712,000 $26,573,000
----------- ----------- ----------- -----------
Cost and expenses:
Cost of products sold 8,368,000 8,164,000 14,782,000 18,828,000
Selling, general and
administrative 2,423,000 3,104,000 4,721,000 6,076,000
Interest expense 69,000 55,000 110,000 121,000
----------- ----------- ----------- -----------
10,860,000 11, 323,000 19,613,000 25,025,000
----------- ----------- ----------- -----------
Income before income taxes 799,000 94,000 1,099,000 1,548,000
Provision for income taxes 290,000 37,000 409,000 527,000
----------- ----------- ----------- ----------
Net income 509,000 57,000 690,000 1,021,000
Retained earnings at
beginning of period 17,912,000 16,326,000 17,731,000 15,362,000
----------- ----------- ----------- -----------
Retained earnings at end
of period $18,421,000 $16,383,000 $18,421,000 $16,383,000
=========== =========== =========== ===========
Per Share Data:
Basic:
Net income $.33 $.04 $.45 $.63
=== ==== ==== ====
Diluted:
Net income $.33 $.04 $.45 $.62
==== ==== ==== ====
</TABLE>
<PAGE>6
GRAHAM CORPORATION AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net income $ 690,000 $ 1,021,000
----------- -----------
Adjustments to reconcile net income to
net cash (used) provided by operating activities:
Depreciation and amortization 510,000 523,000
(Gain)Loss on sale of property, plant
and equipment (1,000) 10,000
(Increase) Decrease in operating assets:
Accounts receivable 201,000 (17,000)
Inventory, net of customer deposits 966,000 4,019,000
Prepaid expenses and other current and
non-current assets (1,249,000) (28,000)
Increase (Decrease) in operating
liabilities:
Accounts payable, accrued compensation,
accrued expenses and other liabilities (2,929,000) (3,771,000)
Accrued compensation, accrued pension
liability, and accrued postemployment benefits (55,000) 158,000
Domestic and foreign income taxes 105,000 (803,000)
Other long-term liabilities (2,000) (42,000)
----------- -----------
Total adjustments (2,454,000) 49,000
----------- -----------
Net cash (used) provided by operating activities (1,764,000) 1,070,000
---------- -----------
Investing activities:
Purchase of property, plant and equipment (256,000) (399,000)
Proceeds from sale of property, plant and
equipment 1,000
Purchase of investments (904,000) (5,654,000)
Proceeds from maturity of investments 906,000 5,291,000
----------- -----------
Net cash used by investing activities (253,000) (762,000)
----------- -----------
Financing activities:
Increase (Decrease) in short-term debt 2,084,000 (40,000)
Proceeds from issuance of long-term debt 5,110,000
Principal repayments on long-term debt (165,000) (5,260,000)
Purchase of treasury stock (10,000) (1,713,000)
----------- -----------
Net cash provided (used) by financing activities 1,909,000 (1,903,000)
----------- -----------
Effect of exchange rate on cash (12,000) 3,000
----------- -----------
Net decrease in cash and equivalents (120,000) (1,592,000)
Cash and equivalents at beginning of period 120,000 1,694,000
----------- -----------
Cash and equivalents at end of period $0 102,000
=========== ===========
</TABLE>
<PAGE>7
GRAHAM CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------
NOTE 1 - INVENTORIES
- -------------------------------------------------------------------------
Major classifications of inventories are as follows:
<TABLE>
<CAPTION>
9/30/99 3/31/99
------- -------
<S> <C> <C>
Raw materials and supplies $1,673,000 $1,945,000
Work in process 3,095,000 5,025,000
Finished products 1,252,000 1,231,000
---------- ----------
6,020,000 8,201,000
Less - progress payments 371,000 1,398,000
---------- ----------
$5,649,000 $6,803,000
========== ==========
</TABLE>
- -------------------------------------------------------------------------
NOTE 2 - EARNINGS PER SHARE:
- -------------------------------------------------------------------------
Basic earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding for the
period. Diluted earnings per share is calculated by dividing net
income by the weighted average number of common and, when
applicable, potential common shares outstanding during the period.
A reconciliation of the numerators and denominators of basic and
diluted earnings per share is presented below:
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share
Numerator:
Net income $ 509,000 $ 57,000 $ 690,000 $1,021,000
---------- ---------- ---------- ----------
Denominator:
Weighted common shares
outstanding 1,520,000 1,586,000 1,520,000 1,617,000
Share equivalent units
(SEU) outstanding 11,000 6,000 8,000 5,000
---------- ---------- ---------- ----------
Weighted average shares
and SEU's outstanding 1,531,000 1,592,000 1,528,000 1,622,000
---------- ---------- ---------- ----------
Basic earnings per share $.33 $.04 $.45 $.63
==== ==== ==== ====
</TABLE>
<PAGE>8
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Diluted earnings per share
Numerator:
Net income $ 509,000 $ 57,000 $ 690,000 $1,021,000
---------- ---------- ---------- ----------
Denominator:
Weighted average shares
and SEU's outstanding 1,531,000 1,592,000 1,528,000 1,622,000
Stock options outstanding 3,000 17,000 4,000 22,000
Contingently issuable SEU's 8,000 4,000 7,000 6,000
---------- ---------- ---------- ----------
Weighted average common
and potential common
shares outstanding 1,542,000 1,613,000 1,539,000 1,650,000
---------- ---------- ---------- ----------
Diluted earnings per share $.33 $.04 $.45 $.62
==== ==== ==== ====
</TABLE>
Options to purchase 55,200 shares of common stock at $21.44 per
share, 9,000 shares at $21.25, 2,250 shares at $17.88, 8,250 shares
at $17, 2,250 shares at $16.13, 26,250 shares at $13.17, 8,250
shares at $11.33, 9,000 shares at $11 and 2,900 at $8.42 were not
included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market
price of the common shares.
- ------------------------------------------------------------------------
NOTE 3 - CASH FLOW STATEMENT
- ------------------------------------------------------------------------
Actual interest paid was $94,000 and $122,000 for the six
months ended September 30, 1999 and 1998, respectively. In
addition, actual income taxes paid were $304,000 and $1,319,000 for
the six months ended September 30, 1999 and 1998, respectively.
Non-cash activities during the six months ended September 30,
1999 included the reversal of a minimum pension liability
adjustment, net of a $510,000 tax benefit, totaling $1,191,000
which had been recognized in the previous year.
- -------------------------------------------------------------------------
NOTE 4 - COMPREHENSIVE INCOME
- -------------------------------------------------------------------------
Total comprehensive income was $1,787,000 and $91,000 for the
three months ended September 30, 1999 and 1998, respectively.
Other comprehensive income for the three months ended September 30,
1999 and 1998 included foreign currency translation adjustments of
$87,000 and $34,000 respectively. Total comprehensive income for
the six months ended September 30, 1999 and 1998 was $1,939,000 and
<PAGE>9
- -------------------------------------------------------------------------
NOTE 4 - COMPREHENSIVE INCOME (concluded)
- -------------------------------------------------------------------------
$1,056,000, respectively. Other comprehensive income for the six
months ended September 30, 1999 and 1998 included foreign currency
translation adjustments of $58,000 and $35,000, respectively. In
addition, other comprehensive income for the three month and six
month periods ended September 30, 1999 included a minimum pension
liability adjustment of $1,191,000.
- -------------------------------------------------------------------------
NOTE 5 - SEGMENT INFORMATION
- -------------------------------------------------------------------------
The Company's business consists of two operating segments based
upon geographic area. The United States segment designs and
manufactures heat transfer and vacuum equipment and the operating
segment located in the United Kingdom manufactures vacuum
equipment. Operating segment information is presented below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales from external customers
U.S. $10,660,000 $10,499,000 $18,714,000 $24,440,000
U.K. 999,000 918,000 1,998,000 2,133,000
----------- ----------- ----------- -----------
Total $11,659,000 $11,417,000 $20,712,000 $26,573,000
=========== =========== =========== ===========
Intersegment sales
U.S. $ 160,000 $ 160,000
U.K. 291,000 $ 345,000 545,000 $ 685,000
----------- ----------- ----------- -----------
Total $ 451,000 $ 345,000 $ 705,000 $ 685,000
=========== =========== =========== ===========
Segment net income (loss)
U.S. $ 569,000 $ 59,000 $ 802,000 $ 966,000
U.K. (172,000) (2,000) (224,000) 55,000
----------- ----------- ----------- -----------
Total segment net income 397,000 57,000 578,000 1,021,000
Elimination of intercompany
profit in inventory 112,000 112,000
----------- ----------- ----------- -----------
Net income $ 509,000 $ 57,000 $ 690,000 $ 1,021,000
=========== =========== =========== ===========
</TABLE>
<PAGE>10
GRAHAM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
Results of Operations
- ---------------------
Sales increased 2% in the second quarter of fiscal year 2000
compared to 1999. Sales for the second quarter increased 3% in the
United States and increased 2% in the United Kingdom compared to
1999. Sales for the six months ended September 30, 1999 were down
23% and 10% in the United States and the United Kingdom,
respectively, compared to sales for the same period last year. The
decline in sales for the six month period in both the United States
and the United Kingdom is attributable to the ongoing recession in
the Company's export markets, as well as, delayed capital spending
in certain market segments due to merger activity.
Cost of sales as a percent of sales for the second quarter 2000
has remained constant at 72% compared to a year ago. Cost of sales
as a percent of sales was 73% in the United States for both three
month periods ended September 30, 1999 and 1998. In the United
Kingdom, cost of sales as a percent of sales for the quarter was
81% compared to 70% last year. For the six months, cost of sales
as a percent of sales was 71% for both the current year and prior
year periods. For the six month period in the United States, the
cost of sales percentage remained unchanged at 72% while in the
United Kingdom it was 78% compared to 70% for the same period last
year. The United Kingdom percentages are reflective of increased
material costs due primarily to product mix.
Selling, general and administrative expenses decreased 22% from
the second quarter of 1999. For the six months ended September 30,
1999, selling, general and administrative expenses are also down
22% as compared to the same period in fiscal year 1999. These
decreases are primarily attributable to the downsizing of the
workforce in the United States and reduced selling expenses due to
stringent cost controls and lower sales levels. Selling, general
and administrative expenses as a percent of sales remained stable
at 23% for both the current and prior year six month periods.
Interest expense increased 25% for the second quarter and
decreased 9% for the six month period as compared to the same
periods in fiscal year 1999. The increase in the second quarter is
due to additional short term borrowings in the United States while
the decline for the six month period is reflective of long term
debt paydowns in both the United States and the United Kingdom.
The effective income tax rates for the second quarter and six
month period in fiscal year 2000 were 36% and 37%, respectively,
which are relatively consistent with the 1999 effective tax rates
of 39% and 34% for the same periods.
<PAGE>11
Financial Condition
- -------------------
The financial condition of the Company has remained stable and
strong during fiscal year 2000. Working capital of $12,425,000 at
September 30, 1999 compares to $11,989,000 at March 31, 1999. This
working capital increase reflects a decrease in current assets of
$362,000 and a decrease in current liabilities of $798,000. The
decrease in current assets related primarily to a significant
decline in inventory as several large projects were completed at
September 30, as well as, slight decreases in cash and accounts
receivable. These decreases were offset by a prepaid pension asset
due to the funding of the United Kingdom pension plan. The
decrease in current liabilities reflects the decline in accounts
payable which is attributable to timing of purchases and a decrease
in accrued compensation and accrued expenses as significant
payments were made in the first half of fiscal year 2000. These
decreases were offset by additional short-term borrowing. The
current ratio at September 30, 1999 is 2.55 compared to 2.36 at
March 31, 1999.
Net cash used from operating activities for the six months was
$1,764,000. Net income, adjusted for depreciation and
amortization, provided for $1,200,000 of operating cash. This was
offset by payments of certain benefits accrued in the prior year
and the funding of the United Kingdom pension plan. Net cash used
in investing activities for the first half of the year of $253,000
was utilized for capital expenditures which were $256,000 compared
to $399,000 for the same period last year. There were no major
commitments for capital expenditures as of September 30, 1999.
Additional capital expenditures of approximately $300,000 are
anticipated for the remainder of the fiscal year. Net cash
provided from financing activities of $1,909,000 was due to an
increase in short-term debt used to finance working capital needs.
Management expects that the cash flow from operations and lines
of credit will provide sufficient resources to fund the fiscal year
2000 cash requirements.
Total long-term debt decreased $251,000 due to scheduled
paydowns on bank debt and capital leases. The long-term debt to
equity ratio is 4% at September 30, 1999 compared to 6% at March
31, 1999 and the total liabilities to assets ratio is 43% compared
to 51% for the same respective periods.
Shareholders' Equity increased $2,029,000 from March 31, 1999.
This increase is primarily attributable to net income of $690,000
and other comprehensive income of $1,249,000. Ninety-five percent
of the other comprehensive income was attributable to a minimum
pension liability adjustment.
New Orders and Backlog
- ----------------------
New orders for the second quarter were $10,174,000 compared to
$10,139,000 for the same period last year. Prior to intercompany
eliminations, new orders in the United States were $9,334,000
compared to $8,791,000 for the same period in 1999. New orders in
the United Kingdom were $1,149,000 compared to $1,592,000 for the
same quarter last year.
<PAGE>12
New Orders and Backlog (concluded)
- ----------------------------------
For the first half of the fiscal year new orders were
$17,502,000 compared to $21,301,000 for the comparable six month
period of 1999. Prior to eliminations, new orders in the United
States were $15,872,000 for the six month period compared to
$18,670,000 for the same period last year and new orders in the
United Kingdom were $2,253,000 compared to $3,173,000 in 1999. The
current level of new order activity is reflective of the economic
downturn in the Company's export markets. Management is optimistic
that the Asian economies will rebound in the near future and that
the refinery industry will need to upgrade facilities resulting in
new orders in this market.
Backlog of unfilled orders at September 30, 1999 is $12,240,000
compared to $22,965,000 at this time a year ago and $15,438,000 at
March 31, 1999. Current backlog in the United States of
$11,620,000 compares to $14,624,000 at March 31, 1999 and
$21,532,000 at September 30, 1998. Current backlog in the United
Kingdom of $857,000 compares to $1,127,000 at March 31, 1999 and
$1,575,000 at September 30, 1998. The current backlog is scheduled
to be shipped during the next twelve months and represents orders
from traditional markets in the Company's established product
lines.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
The Company is exposed to changes in interest rates, foreign
currency exchange rates and equity prices which may adversely
impact its results of operations and financial position. The
Company is exposed to interest rate risk primarily through its
borrowing activities and short-term investments. Risk associated
with interest rate fluctuations on debt is managed by holding
interest bearing debt to the absolute minimum and assessing the
risks and benefits for incurring long-term debt. Based upon
variable rate debt outstanding at September 30, 1999, a 1% change
in interest rates would impact annual interest expense by one
thousand dollars. To manage interest rate risk in regards to short-
term investments, the Company invests primarily in fixed rate
instruments and holds investments to maturity.
Historically, Graham's international consolidated sales
exposure approximates fifty percent of annual sales. Operating in
world markets involves exposure to movements in currency exchange
rates. Currency movements can affect sales in several ways.
Foremost, the ability to competitively compete for orders against
competition having a relatively weaker currency. Business lost due
to this cannot be quantified. Secondly, redemption value of sales
can be adversely impacted. The substantial portion of Graham's
sales are collected in U.S. dollars. The Company enters into
forward foreign exchange agreements to hedge its exposure against
unfavorable changes in foreign currency values on significant sales
contracts negotiated in foreign currencies. Graham uses
derivatives for no other reason.
<PAGE>13
Quantitative and Qualitative Disclosures about Market Risk (concluded)
- ----------------------------------------------------------------------
The loss from foreign operations reduced both Graham's second
quarter and year-to-date net income by 25%. As currency exchange
rates change, translations of the income statements of our U.K.
business into U.S. dollars affects year-over-year comparability of
operating results. The Company does not hedge translation risks
because cash flows from U.K. operations are mostly reinvested in
the U.K. A 10% change in foreign exchange rates would impact
second quarter and year-to-date net income by approximately $20,000
and $25,000, respectively.
The Company has a Long-Term Incentive Plan which provides for
awards of share equivalent units (SEU) for outside directors based
upon the Company's performance. The outstanding SEU's are recorded
at fair market value thereby exposing the Company to equity price
risk. Gains and losses recognized due to market price changes are
included in the quarterly results of operations. Based upon the
SEU's outstanding at September 30, 1999 and 1998 and the quarter
end market price per share ($6.31 and $11.25 at September 30, 1999
and 1998, respectively), a twenty to forty percent change in the
respective quarter end market price of the Company's common stock
would positively or negatively impact the Company's second quarter
operating results by $24,000 to $47,000 for 2000 and $24,000 to
$48,000 for 1999. In the second quarter of 2000, the income, net
of tax, recorded due to the decrease in the stock price was not
significant. Assuming the net income target of $500,000 is met and
SEU's are granted to the five outside directors in accordance with
the plan over the next five years, based upon the September 30,
1999 market price of the Company's stock of $6.31 per share, a
twenty to forty percent change in the stock price would positively
or negatively impact the Company's operating results by $34,000 to
$67,000 in 2001, $36,000 to $71,000 in 2002 and $38,000 to $75,000
in 2003, 2004 and 2005.
Year 2000 Readiness
- -------------------
The Company has completed its year 2000 readiness program.
This program included the following phases: identifying affected
software, hardware, and manufacturing and telecommunication
equipment and assessing the impact of the year 2000 issue; hardware
and software remediation; testing; surveying the year 2000
readiness of customers and suppliers; and developing a contingency
plan. The cost of the program was insignificant. Although the
Company believes its internal operations are year 2000 compliant,
it cannot assure anyone that its customers, suppliers or
governmental agencies will be ready.
<PAGE>14
Accounting Standard Changes
- ---------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts, and derivatives utilized for hedging activities.
It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. Management is evaluating the impact this statement
may have on the Company's financial statements.
Other Matters
- -------------
In the third quarter of fiscal year 2000, management commenced
the process to terminate the defined benefit pension plan in the
United Kingdom. When the effect of the likely plan termination is
determinable, it will be recognized in earnings. It is anticipated
that a significant one-time charge to earnings will be recognized
in the quarter ending December 31, 1999. Employees will be given
an opportunity to participate in a defined contribution plan.
<PAGE>15
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1999
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. See index to exhibits.
b. No reports on Form 8-K were filed during the quarter
ended September 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GRAHAM CORPORATION
/s/J.R. Hansen
____________________________________
J. R. Hansen
Vice President Finance and
Administration / CFO (Principal
Accounting Officer)
Date 10/21/99
<PAGE>16
INDEX OF EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession
Not applicable.
(4) Instruments defining the rights of security holders, including
indentures
(a) Equity securities
The instruments defining the rights of the holders of
Registrant's equity securities are as follows:
Certificate of Incorporation, as amended of Registrant
(filed as Exhibit 3(a) to the Registrant's annual report
on Form 10-K for the fiscal year ended December 31,
1989, and incorporated herein by reference.)
By-laws of registrant, as amended (filed as Exhibit
3.2(ii) to the Registrant's annual report on Form 10-K
for the fiscal year ended March 31, 1998, and is
incorporated herein by referenced.)
Shareholder Rights Plan of Graham Corporation (filed as
Exhibit (4) to Registrant's current report filed on Form
8-K on February 26, 1991, as amended by Registrant's
Amendment No. 1 on Form 8 dated June 8, 1991, and
incorporated herein by reference.)
(b) Debt securities
Not applicable.
(10) Material Contracts
1989 Stock Option and Appreciation Rights Plan of Graham
Corporation (filed on the Registrant's Proxy Statement for its
1991 Annual Meeting of Shareholders and incorporated herein by
reference.)
1995 Graham Corporation Incentive Plan to Increase
Shareholder Value (filed on the Registrant's Proxy Statement
for its 1996 Annual Meeting of Shareholders and incorporated
herein by reference.)
Graham Corporation Outside Directors' Long-Term Incentive
Plan (filed as Exhibit 10.3 to the Registrant's annual report
on Form 10-K for the fiscal year ended March 31, 1998, and is
incorporated herein by reference.)
<PAGE>17
Index to Exhibits (concluded)
- -------------------------
Employment Contracts between Graham Corporation and Named
Executive Officers (filed as Exhibit 10.4 to the Registrant's
annual report on Form 10-K for the fiscal year ended March 31,
1998, and is incorporated herein by reference.)
Senior Executive Severance Agreements with Named Executive
Officers (filed as Exhibit 10.5 to the Registrant's annual
report on Form 10-K for the fiscal year ended March 31, 1998,
and is incorporated herein by reference.)
(11) Statement re-computation of per share earnings
Computation of per share earnings is included in Note 2 of the
Notes to Financial Information.
(15) Letter re-unaudited interim financial information
Not applicable.
(18) Letter re-change in accounting principles
Not Applicable.
(19) Report furnished to security holders
None.
(22) Published report regarding matters submitted to vote of
security holders
None.
(23) Consents of experts and counsel
Not applicable.
(24) Power of Attorney
Not applicable.
(27) Financial Data Schedule
Financial Data Schedule is included herein as Exhibit 27
of this report.
(99) Additional exhibits
None.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Graham
Corporation consolidated balance sheet and consolidated statement of operations
and retained earnings and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 4,905
<RECEIVABLES> 7,450
<ALLOWANCES> 46
<INVENTORY> 5,649
<CURRENT-ASSETS> 20,441
<PP&E> 26,571
<DEPRECIATION> 16,300
<TOTAL-ASSETS> 32,905
<CURRENT-LIABILITIES> 8,016
<BONDS> 319
0
0
<COMMON> 169
<OTHER-SE> 18,572
<TOTAL-LIABILITY-AND-EQUITY> 32,905
<SALES> 20,712
<TOTAL-REVENUES> 20,712
<CGS> 14,782
<TOTAL-COSTS> 14,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 1,099
<INCOME-TAX> 409
<INCOME-CONTINUING> 690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690
<EPS-BASIC> .45
<EPS-DILUTED> .45
</TABLE>
