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 December 31, 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 February 8, 2000, there were outstanding 1,504,464 shares
of common stock, $.10 per share.
<PAGE>2
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
DECEMBER 31, 1999
PART I - FINANCIAL INFORMATION
Unaudited consolidated financial statements of Graham
Corporation (the Company) and its subsidiaries as of December 31,
1999 and for the three month and nine 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 December 31, 1999 and its
results of operations for the three and nine month periods then
ended.
<PAGE>3
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 16,000 $ 120,000
Investments 4,905,000 4,928,000
Trade accounts receivable 6,220,000 7,580,000
Inventories 6,717,000 6,803,000
Domestic and foreign income taxes
receivable 162,000 73,000
Deferred tax asset 913,000 950,000
Prepaid expenses and other
current assets 483,000 349,000
----------- -----------
19,416,000 20,803,000
Property, plant and equipment, net 10,219,000 10,450,000
Deferred income tax asset 2,201,000 2,673,000
Other assets 45,000 210,000
----------- -----------
$31,881,000 $34,136,000
=========== ===========
</TABLE>
<PAGE>4
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (concluded)
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
---- ----
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt due banks $ 3,006,000
Current portion of long-term debt 406,000 $ 546,000
Accounts payable 1,824,000 2,879,000
Accrued compensation 2,612,000 3,938,000
Accrued expenses and other liabilities 1,161,000 1,043,000
Customer deposits 248,000 408,000
----------- -----------
9,257,000 8,814,000
Long-term debt 247,000 505,000
Accrued compensation 1,090,000 1,095,000
Other long-term liabilities 298,000 303,000
Accrued pension liability 1,520,000 3,519,000
Accrued postretirement benefits 3,254,000 3,188,000
----------- -----------
Total liabilities 15,666,000 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 December 31,
1999 and on March 31, 1999 169,000 169,000
Capital in excess of par value 4,521,000 4,521,000
Retained earnings 16,033,000 17,731,000
Accumulated other comprehensive loss (1,901,000) (3,076,000)
----------- -----------
18,822,000 19,345,000
Less:
Treasury Stock (2,532,000) (2,408,000)
Employee Stock Ownership Plan Loan
Payable (75,000) (225,000)
----------- -----------
Total shareholders' equity 16,215,000 16,712,000
----------- -----------
$31,881,000 $34,136,000
=========== ===========
</TABLE>
<PAGE>5
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Nine Months
ended December 31, ended December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 8,288,000 $14,219,000 $29,000,000 $40,792,000
----------- ----------- ----------- -----------
Cost and expenses:
Cost of products sold 6,485,000 10,255,000 21,266,000 29,083,000
Selling, general and
administrative 2,357,000 3,229,000 7,079,000 9,305,000
Interest expense 58,000 116,000 168,000 237,000
Curtailment loss 1,993,000 1,993,000
----------- ----------- ----------- -----------
10,893,000 13,600,000 30,506,000 38,625,000
----------- ----------- ----------- -----------
Income (Loss) before income
taxes (2,605,000) 619,000 (1,506,000) 2,167,000
Provision (Benefit) for
income taxes (217,000) 216,000 192,000 743,000
----------- ----------- ----------- -----------
Net income (loss) (2,388,000) 403,000 (1,698,000) 1,424,000
Retained earnings at
beginning of period 18,421,000 16,383,000 17,731,000 15,362,000
----------- ----------- ----------- -----------
Retained earnings at end
of period $16,033,000 $16,786,000 $16,033,000 $16,786,000
=========== =========== =========== ===========
Per Share Data:
Basic:
Net income (loss) $(1.57) $.25 $(1.11) $.88
====== ==== ====== ====
Diluted:
Net income (loss) $(1.57) $.25 $(1.11) $.87
====== ==== ====== ====
</TABLE>
<PAGE>6
GRAHAM CORPORATION AND SUBSIDIARIES - CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net income (loss) $(1,698,000) $ 1,424,000
----------- -----------
Adjustments to reconcile net income to
net cash (used) provided by operating activities:
Depreciation and amortization 756,000 785,000
Loss on sale of property, plant and equipment 20,000 5,000
(Increase) Decrease in operating assets:
Accounts receivable 1,366,000 636,000
Inventory, net of customer deposits (96,000) 1,868,000
Prepaid expenses and other current and
non-current assets (202,000) 68,000
Increase (Decrease) in operating liabilities:
Accounts payable, accrued compensation,
accrued expenses and other liabilities (2,520,000) (3,673,000)
Deferred compensation, deferred pension
liability, and accrued postemployment benefits 224,000 307,000
Domestic and foreign income taxes (89,000) (778,000)
Deferred income taxes (5,000)
Other long-term liabilities (5,000) (48,000)
----------- -----------
Total adjustments (546,000) (835,000)
----------- -----------
Net cash (used) provided by operating
activities (2,244,000) 589,000
----------- -----------
Investing activities:
Purchase of property, plant and equipment (494,000) (690,000)
Proceeds from sale of property, plant and
equipment 7,000 5,000
Purchase of marketable securities (904,000) (6,407,000)
Proceeds from maturity of marketable securities 906,000 10,987,000
----------- -----------
Net cash (used) provided by investing activities (485,000) 3,895,000
----------- -----------
Financing activities:
Increase (Decrease) in short-term debt 3,007,000 (40,000)
Proceeds from issuance of long-term debt 5,950,000
Principal repayments on long-term debt (255,000) (6,238,000)
Purchase of treasury stock (125,000) (1,713,000)
----------- -----------
Net cash provided (used) by financing activities 2,627,000 (2,041,000)
----------- -----------
Effect of exchange rate on cash (2,000)
----------- -----------
Net increase (decrease) in cash and equivalents (104,000) 2,443,000
Cash and equivalents at beginning of period 120,000 1,694,000
----------- ----------
Cash and equivalents at end of period $ 16,000 $ 4,137,000
=========== ===========
</TABLE>
<PAGE>7
GRAHAM CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION
DECEMBER 31, 1999
- -------------------------------------------------------------------------
NOTE 1 - INVENTORIES
- -------------------------------------------------------------------------
Major classifications of inventories are as follows:
<TABLE>
<CAPTION>
12/31/99 3/31/99
-------- -------
<S> <C> <C>
Raw materials and supplies $ 1,801,000 $ 1,945,000
Work in process 3,997,000 5,025,000
Finished products 1,309,000 1,231,000
----------- -----------
7,107,000 8,201,000
Less - progress payments 390,000 1,398,000
----------- -----------
$ 6,717,000 $ 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 Nine months
ended December 31, ended December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings (loss)
per share
Numerator:
Net income (loss) $(2,388,000) $ 403,000 $(1,698,000) $1,424,000
----------- ---------- ----------- ----------
Denominator:
Weighted common shares
outstanding 1,510,000 1,585,000 1,517,000 1,607,000
Share equivalent units
(SEU) outstanding 11,000 5,000 9,000 5,000
----------- ---------- ----------- ----------
Weighted average shares
and SEU's outstanding 1,521,000 1,590,000 1,526,000 1,612,000
----------- ---------- ----------- ----------
Basic earnings (loss)
per share $(1.57) $.25 $(1.11) $.88
====== ==== ====== ====
</TABLE>
<PAGE>8
<TABLE>
<CAPTION>
Three months Nine months
ended December 31, ended December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Diluted earnings (loss)
per share
Numerator:
Net income (loss) $(2,388,000) $ 403,000 $(1,698,000) $1,424,000
----------- ---------- ----------- ----------
Denominator:
Weighted average shares
and SEU's outstanding 1,521,000 1,590,000 1,526,000 1,612,000
Stock options outstanding 4,000 16,000
Contingently issuable
SEU's 6,000 5,000
----------- ---------- ----------- ----------
Weighted average common
and potential common
shares outstanding 1,521,000 1,600,000 1,526,000 1,633,000
---------- ---------- ----------- ----------
Diluted earnings (loss)
per share $(1.57) $.25 $(1.11) $.87
====== ==== ====== ====
</TABLE>
All options to purchase shares of common stock at various
exercise prices were excluded from the computation of diluted loss
per share as the effect would be antidilutive due to the quarterly
and year-to-date net loss.
- -------------------------------------------------------------------------
NOTE 3 - CASH FLOW STATEMENT
- -------------------------------------------------------------------------
Actual interest paid was $166,000 and $240,000 for the nine
months ended December 31, 1999 and 1998, respectively. In
addition, actual income taxes paid were $398,000 and $1,444,000 for
the nine months ended December 31, 1999 and 1998, respectively.
Non-cash activities during the nine months ended December 31,
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 loss was $2,462,000 and $509,000 for the
three months ended December 31, 1999 and 1998, respectively. Other
comprehensive loss for the three months ended December 31, 1999 and
1998 included foreign currency translation adjustments of $74,000
and $45,000, respectively. In addition, other comprehensive loss
for the three months ended December 31, 1998 included a minimum
pension liability adjustment of $867,000.
<PAGE>9
- -------------------------------------------------------------------------
NOTE 4 - COMPREHENSIVE INCOME (concluded)
- -------------------------------------------------------------------------
Total comprehensive income (loss) for the nine months ended
December 31, 1999 and 1998 was $(523,000) and $547,000,
respectively. Other comprehensive income (loss) for the nine
months ended December 31, 1999 and 1998 included foreign currency
translation adjustments of $(16,000) and $(10,000), respectively.
In addition, other comprehensive income (loss) for the nine months
ended December 31, 1999 and 1998 included a minimum pension
liability adjustment of $1,191,000 and $(867,000), respectively.
- -------------------------------------------------------------------------
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 Nine Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales from external
customers
U.S. $ 7,227,000 $13,051,000 $25,941,000 $37,491,000
U.K. 1,061,000 1,168,000 3,059,000 3,301,000
----------- ----------- ----------- -----------
Total $ 8,288,000 $14,219,000 $29,000,000 $40,792,000
=========== =========== =========== ===========
Intersegment sales
U.S. $ 1,000 $ 161,000
U.K. 235,000 $ 201,000 780,000 $ 886,000
----------- ----------- ----------- -----------
Total $ 236,000 $ 201,000 $ 941,000 $ 886,000
=========== =========== =========== ===========
Segment net income (loss)
U.S. $ (452,000) $ 474,000 $ 350,000 $ 1,440,000
U.K. (1,908,000) (71,000) (2,132,000) (16,000)
----------- ----------- ----------- -----------
Total segment net income
(loss) (2,360,000) 403,000 (1,782,000) 1,424,000
Elimination of
intercompany profit
in inventory (28,000) 84,000
----------- ----------- ----------- -----------
Net income (loss) $(2,388,000) $ 403,000 $(1,698,000) $ 1,424,000
=========== =========== =========== ===========
</TABLE>
<PAGE>10
- -------------------------------------------------------------------------
NOTE 6 - CURTAILMENT LOSS
- -------------------------------------------------------------------------
In October 1999, management commenced the process to terminate
the defined benefit pension plan in the United Kingdom. At
December 31, 1999, the curtailment loss resulting from the plan
termination was estimated at $1,993,000. This charge is presented
separately in the Consolidated Statement of Operations. A
valuation allowance has been established for the full amount of the
tax benefit associated with this loss until the benefit is
determined to be realizable. Management anticipates that final
actuarial calculations relating to the plan termination will be
completed by March 31, 2000. It is estimated that the final amount
of the curtailment loss could be 19% more or less than the loss
recognized in the third quarter. Employees may participate in a
defined contribution plan which has replaced this plan.
<PAGE>11
GRAHAM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
December 31, 1999
Results of Operations
- ---------------------
Sales declined 42% in the third quarter of fiscal year 2000
compared to the same period in the previous year. Sales for the
third quarter decreased 45% in the United States and declined 5% in
the United Kingdom compared to fiscal year 1999. Sales for the
nine months ended December 31, 1999 were less than sales for the
same period last year by 29%. Sales in the United States decreased
30% while sales in the United Kingdom decreased 8% from the same
period last year. The decreased sales, which is primarily
attributable to the United States operations, is due to the
recession experienced by many of the major market sectors that the
Company serves. These lower sales volumes are a reflection of the
reduced order intake levels over the past twelve months.
Cost of sales as a percent of sales for the third quarter was
78% compared to 72% a year ago. Cost of sales as a percent of
sales for the three month period was 81% in the United States
compared to 73% last year and in the United Kingdom it improved to
66% compared to 71% last year. For the nine months, cost of sales
as a percent of sales increased from 71% a year ago to 73%
currently. In the United States, the cost of sales percentage was
75% compared to 72% last year and in the United Kingdom it
increased to 74% from 70% for the same period last year. The
unfavorable percentages for the three and nine month periods are
due to sales volume being reduced while fixed production costs have
remained relatively stable.
Selling, general and administrative expenses were 27% lower in
the third quarter compared to the same period in fiscal year 1999,
and represented 28% of sales compared to 23% last year. For the
nine month period, selling, general and administrative expenses
declined 24% as compared to fiscal year 1999 and were 24% of sales
compared to 23% in the prior year. The decrease in selling,
general and administrative expenses is attributable to the
downsizing of the workforce in both the United States and the
United Kingdom, as well as, management's continued efforts to
control costs. However, since sales levels have dropped
significantly, selling, general and administrative expenses as a
percent of sales have increased.
Interest expense for the third quarter of fiscal year 2000 was
50% below interest expense for the comparable three month period of
1999 and for the nine month period, interest expense decreased 29%
as compared to 1999. Interest expense in the prior year periods
included interest owed on state franchise and sales tax which was a
one-time expense.
<PAGE>12
Results of Operations (concluded)
- --------------------------------
In the second quarter of fiscal year 1999, the Company
disclosed its intention to terminate the defined benefit pension
plan in the United Kingdom. Accordingly, the third quarter results
reflect the recognition of a curtailment loss of $1,993,000 which
represents the Company's current estimate of the expense to
terminate the plan. The final amount of the loss may vary from the
estimate by approximately 19%.
The effective income tax rates for the third quarter and nine
month period of fiscal year 2000 were 8% and (13%), respectively.
The effective tax rates for the three months and nine months ended
December 31, 1998 were 35% and 34%, respectively. The unusual
effective tax rates for the current year periods are attributable
to the recognition of a 100% valuation allowance against the tax
benefit associated with the curtailment loss mentioned above.
Financial Condition
- -------------------
Working capital of $10,159,000 at December 31, 1999 compares to
$11,989,000 at the end of March. This working capital decline
reflects a decrease in current assets and an increase in current
liabilities of $1,387,000 and $443,000, respectively. The decrease
in current assets related primarily to a decrease in accounts
receivable and inventories which is a reflection of the reduced
sales levels and current business conditions. The increase in
current liabilities is due to an increase in short-term borrowings
offset by a decline in accounts payable and accrued compensation.
Short-term borrowings were required to fund working capital needs.
The decrease in accounts payable is attributable to lower gross
inventory levels while the decrease in accrued compensation is due
to payments made in the first six months of the year and a
reduction in certain employee benefit accruals. The current ratio
at December 31, 1999 is 2.1 compared to 2.36 at March 31, 1999.
Net cash used from operating activities, adjusted for
depreciation and amortization, was $1,488,000 for the nine months
ended December 31, 1999. This cash was utilized primarily for the
funding of the United Kingdom pension plan. Net cash used in
investing activities for the nine months of $485,000 was used for
capital expenditures which were $494,000 compared to $690,000 for
the same period last year. There were no major commitments for
capital expenditures as of December 31, 1999. As noted above, net
cash provided by financing activities of $2,627,000 was due to an
increase in short-term debt.
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 $398,000 due to paydowns on bank
debt and capital leases. Debt ratios have improved slightly with
the long term debt to equity ratio at 4% compared to 6% at
March 31, 1999 and the total liabilities to assets ratio at 49%
compared to 51% at March 31, 1999.
<PAGE>13
New Orders and Backlog
- ----------------------
New orders for the third quarter were $12,061,000 compared to
$8,540,000 for the same period last year. Prior to intercompany
eliminations, new orders in the United States were $10,992,000
compared to $7,729,000 for the same period in fiscal year 1999.
New orders in the United Kingdom were $1,307,000 compared to
$1,393,000 for the same quarter last year.
For the nine month period, new orders were $29,563,000 compared
to $29,841,000 for the comparable nine month period of the prior
year. Prior to eliminations, new orders in the United States were
$26,864,000 compared to $26,398,000 for the same period last year
and new orders in the United Kingdom were $3,560,000 compared to
$4,567,000 in 1999.
Backlog of unfilled orders at December 31, 1999 is $15,992,000
compared to $17,170,000 at this time a year ago and $15,438,000 at
March 31, 1999. Prior to intercompany eliminations, current
backlog in the United States of $15,383,000 compares to $14,624,000
at March 31, 1999 and $16,127,000 at December 31, 1998. Current
backlog in the United Kingdom of $842,000 compares to $1,127,000 at
March 31, 1999 and $1,562,000 at December 31, 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 December 31, 1999, a 1% change in
interest rates would impact annual interest expense by $31,000. 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.
The loss from foreign operations reduced both Graham's third
quarter and year-to-date net income by 397% and 491%, respectively.
<PAGE>14
Quantitative and Qualitative Disclosures about Market Risk (concluded)
- ---------------------------------------------------------------------
This significant reduction was attributable to the $1,993,000
curtailment loss recognized in the third quarter relating to the
termination of the United Kingdom pension plan. 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 third quarter and year-to-date net income by
approximately $191,000 and $216,000, 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 December 31, 1999 and 1998 and the quarter end
market price per share ($6.63 and $7.75 at December 31, 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 third quarter
operating results by $14,000 to $28,000 for 2000 and $17,000 to
$33,000 for 1999. In the third quarter of 2000, the expense, net
of a tax benefit, recorded due to the increase 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
December 31, 1999 market price of the Company's stock of $6.63 per
share, a twenty to forty percent change in the stock price would
positively or negatively impact the Company's operating results by
$24,000 to $48,000 in 2001, $34,000 to $68,000 in 2002, $36,000 to
$72,000 in 2003, and $38,000 to $76,000 in 2004 and 2005.
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
- -------------
On January 14, 2000, the Company announced that Graham
Precision Pumps Limited, the United Kingdom subsidiary, entered
into an agreement with Leybold Vacuum to acquire the ALLex dry pump
product line. Prior to this, the Company sold ALLex dry pumps
under a licensing agreement with Leybold.
<PAGE>15
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
DECEMBER 31, 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 December 31, 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 02/08/00
<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>
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<S> <C>
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<PERIOD-END> DEC-31-1999
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0
0
<COMMON> 169
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