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, 2000
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 November 6, 2000, there were outstanding 1,629,322 shares
of common stock, $.10 per share.
<PAGE>2
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
Unaudited consolidated financial statements of Graham
Corporation (the Company) and its subsidiaries as of September 30,
2000 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, 2000 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,
2000 2000
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 98,000 $ 1,110,000
Investments 4,905,000 4,905,000
Trade accounts receivable 7,197,000 7,593,000
Inventories 5,709,000 6,640,000
Domestic and foreign income taxes
receivable 300,000
Deferred income tax asset 1,526,000 1,644,000
Prepaid expenses and other current assets 483,000 400,000
----------- -----------
19,918,000 22,592,000
Property, plant and equipment, net 10,087,000 10,105,000
Deferred income tax asset 1,941,000 1,862,000
Other assets 26,000 37,000
----------- -----------
$31,972,000 $34,596,000
=========== ===========
</TABLE>
<PAGE>4
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (concluded)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
---- ----
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 1,150,000 $ 2,000,000
Current portion of long-term debt 196,000 286,000
Accounts payable 1,995,000 2,672,000
Accrued compensation 2,584,000 3,228,000
Accrued expenses and other liabilities 740,000 865,000
Customer deposits 823,000 444,000
Domestic and foreign income taxes payable 70,000
Contingent liability 700,000
----------- -----------
7,558,000 10,195,000
Long-term debt 2,025,000 1,948,000
Accrued compensation 807,000 766,000
Deferred income tax liability 31,000 33,000
Other long-term liabilities 12,000 13,000
Accrued pension liability 1,462,000 1,339,000
Accrued postretirement benefits 3,246,000 3,210,000
----------- -----------
Total liabilities 15,141,000 17,504,000
----------- -----------
Shareholders' equity:
Preferred Stock, $1 par value -
Authorized, 500,000 shares
Common stock, $.10 par value -
Authorized, 6,000,000 shares
Issued 1,697,645 shares on September 30,
2000 and 1,690,595 on March 31, 2000 169,000 169,000
Capital in excess of par value 4,537,000 4,521,000
Retained earnings 16,301,000 16,898,000
Accumulated other comprehensive loss (2,173,000) (1,964,000)
----------- -----------
18,834,000 19,624,000
Less:
Treasury Stock (1,161,000) (2,532,000)
Notes receivable from officers and
directors (842,000)
----------- -----------
Total shareholders' equity 16,831,000 17,092,000
----------- -----------
$31,972,000 $34,596,000
=========== ===========
</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,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $11,726,000 $11,659,000 $20,010,000 $20,712,000
----------- ----------- ----------- -----------
Cost and expenses:
Cost of products sold 8,812,000 8,368,000 15,237,000 14,782,000
Selling, general and
administrative 2,444,000 2,423,000 4,751,000 4,721,000
Interest expense 66,000 69,000 140,000 110,000
----------- ----------- ----------- -----------
11,322,000 10,860,000 20,128,000 19,613,000
----------- ----------- ----------- -----------
Income (Loss) before
income taxes 404,000 799,000 (118,000) 1,099,000
Provision (Benefit) for
income taxes 137,000 290,000 (31,000) 409,000
----------- ----------- ----------- -----------
Net income 267,000 509,000 (87,000) 690,000
Retained earnings at
beginning of period 16,544,000 17,912,000 16,898,000 17,731,000
Loss on issuance of
treasury stock (510,000) (510,000)
----------- ----------- ----------- -----------
Retained earnings at
end of period $16,301,000 $18,421,000 $16,301,000 $18,421,000
=========== =========== =========== ===========
Per Share Data:
Basic:
Net income (loss) $.17 $.33 $(.06) $.45
==== ==== ===== ====
Diluted:
Net income (loss) $.16 $.33 $(.06) $.45
==== ==== ===== ====
</TABLE>
<PAGE>6
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net income (loss) $ (87,000) $ 690,000
---------- ----------
Adjustments to reconcile net income to net
cash(used) provided by operating
activities:
Depreciation and amortization 479,000 510,000
Gain on sale of property, plant and
equipment (55,000) (1,000)
(Increase) Decrease in operating assets:
Accounts receivable 334,000 201,000
Inventory, net of customer deposits 1,229,000 966,000
Prepaid expenses and other current and
non-current assets (91,000) (1,249,000)
Increase (Decrease) in operating
liabilities:
Accounts payable, accrued compensation,
accrued expenses and other liabilities (2,065,000) (2,929,000)
Accrued compensation, accrued pension
liability, and accrued postemployment
benefits 200,000 (55,000)
Domestic and foreign income taxes 369,000 105,000
Other long-term liabilities (2,000)
Deferred income taxes (15,000)
---------- ----------
Total adjustments 385,000 (2,454,000)
---------- ----------
Net cash provided (used) by operating
activities 298,000 (1,764,000)
---------- ----------
</TABLE>
<PAGE>7
GRAHAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (concluded)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Investing activities:
Purchase of property, plant and equipment (786,000) (256,000)
Proceeds from sale of property, plant and
equipment 293,000 1,000
Purchase of investments (904,000)
Proceeds from maturity of investments 906,000
---------- ----------
Net cash used by investing activities (493,000) (253,000)
---------- ----------
Financing activities:
Increase (Decrease) in short-term debt (850,000) 2,084,000
Proceeds from issuance of long-term debt 8,934,000
Principal repayments on long-term debt (8,922,000) (165,000)
Issuance of common stock 23,000
Sale of treasury stock 12,000
Purchase of treasury stock (10,000)
---------- ----------
Net cash (used) provided by financing
activities (803,000) 1,909,000
---------- ----------
Effect of exchange rate on cash (14,000) (12,000)
---------- ----------
Net decrease in cash and equivalents (1,012,000) (120,000)
Cash and equivalents at beginning of 1,110,000 120,000
period
---------- ----------
Cash and equivalents at end of period $ 98,000 $ 0
========== ==========
</TABLE>
<PAGE>8
GRAHAM CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL INFORMATION
SEPTEMBER 30, 2000
------------------------------------------------------------------------
NOTE 1 - INVENTORIES
------------------------------------------------------------------------
Major classifications of inventories are as follows:
<TABLE>
<CAPTION>
9/30/00 3/31/00
------- -------
<S> <C> <C>
Raw materials and supplies $1,399,000 $1,627,000
Work in process 4,486,000 6,045,000
Finished products 1,548,000 1,304,000
---------- ----------
7,433,000 8,976,000
Less - progress payments 1,724,000 2,336,000
---------- ----------
$5,709,000 $6,640,000
========== ==========
</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,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings (loss)
per share
Numerator:
Net income (loss) $ 267,000 $ 509,000 $ (87,000) $ 690,000
---------- ---------- ---------- ----------
Denominator:
Weighted common shares
outstanding 1,590,000 1,520,000 1,547,000 1,520,000
Share equivalent units
(SEU) outstanding 11,000 11,000 11,000 8,000
---------- ---------- ---------- ----------
Weighted average shares
and SEU's outstanding 1,601,000 1,531,000 1,558,000 1,528,000
---------- ---------- ---------- ----------
Basic earnings (loss)
per share $.17 $.33 $(.06) $.45
==== ==== ===== ====
</TABLE>
<PAGE>9
------------------------------------------------------------------------
NOTE 2 - EARNINGS PER SHARE: (concluded)
------------------------------------------------------------------------
<TABLE>
Three months Six months
ended September 30, ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Diluted earnings (loss)
per share
Numerator:
Net income (loss) $ 267,000 $ 509,000 $ (87,000) $ 690,000
---------- ---------- ---------- ----------
Denominator:
Weighted average shares
and SEU's outstanding 1,601,000 1,531,000 1,558,000 1,528,000
Stock options
outstanding 17,000 3,000 4,000
Contingently issuable
SEU's 8,000 7,000
---------- ---------- ---------- ----------
Weighted average common
and potential common
shares outstanding 1,618,000 1,542,000 1,558,000 1,539,000
---------- ---------- ---------- ----------
Diluted earnings (loss)
per share $.16 $.33 $(.06) $.45
==== ==== ===== ====
</TABLE>
Options to purchase 46,500 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, 8,250 shares at $11.33, and 9,000
shares at $11 were not included in the computation of diluted
earnings per share for the three month period in fiscal year 2001
because the options' exercise price was greater than the average
market price of the common shares.
All options to purchase shares of common stock at various
exercise prices were excluded from the computation of diluted loss
per share for the six month period in fiscal year 2001 as the
effect would be antidilutive due to the net loss for the period.
-------------------------------------------------------------------------
NOTE 3 - CASH FLOW STATEMENT
-------------------------------------------------------------------------
Actual interest paid was $142,000 and $94,000 for the six
months ended September 30, 2000 and 1999, respectively. In
addition, actual income taxes refunded were $385,000 for the six
months ended September 30, 2000 and actual income taxes paid were
$304,000 for the six months ended September 30, 1999.
<PAGE>10
-------------------------------------------------------------------------
NOTE 3 - CASH FLOW STATEMENT (concluded)
-------------------------------------------------------------------------
Non-cash activities during the six months ended September 30,
2000 included capital expenditures totaling $2,000 which were
financed through the issuance of capital leases. In addition,
certain officers and directors purchased treasury stock from the
Company in which the individuals paid cash equal to the par value
of the shares and a note receivable was recorded by the Company for
the remaining balance due on the purchase of the shares.
During the six months ended September 30, 1999, non cash
activities 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 $180,000 and $1,787,000 for the
three months ended September 30, 2000 and 1999, respectively.
Other comprehensive income (loss) for the three months ended
September 30, 2000 and 1999 included foreign currency translation
adjustments of $(87,000) and $87,000, respectively. Total
comprehensive income (loss) for the six months ended September 30,
2000 and 1999 was $(296,000) and $1,939,000, respectively. Other
comprehensive income (loss) for the six months ended September 30,
2000 and 1999 included foreign currency translation adjustments of
$(209,000) and $58,000, 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,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales from external
customers
U.S. $11,071,000 $10,660,000 $18,484,000 $18,714,000
U.K. 655,000 999,000 1,526,000 1,998,000
----------- ----------- ----------- -----------
Total $11,726,000 $11,659,000 $20,010,000 $20,712,000
=========== =========== =========== ===========
</TABLE>
<PAGE>11
-------------------------------------------------------------------------
NOTE 5 - SEGMENT INFORMATION (concluded)
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Intersegment sales
U.S. $ 9,000 $ 160,000 $ 18,000 $ 160,000
U.K. 575,000 291,000 769,000 545,000
----------- ----------- ----------- -----------
Total $ 584,000 $ 451,000 $ 787,000 $ 705,000
=========== =========== =========== ===========
Segment net income
(loss)
U.S. $ 271,000 $ 569,000 $ (133,000) $ 802,000
U.K. (1,000) (172,000) (34,000) (224,000)
----------- ----------- ----------- -----------
Total segment net
income 270,000 397,000 (167,000) 578,000
=========== =========== =========== ===========
Elimination of
intercompany profit
in inventory (3,000) 112,000 80,000 112,000
----------- ----------- ----------- -----------
Net income $ 267,000 $ 509,000 $ (87,000) $ 690,000
=========== =========== =========== ===========
</TABLE>
<PAGE>12
GRAHAM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 2000
Results of Operations
---------------------
Sales increased 1% in the second quarter of fiscal year 2001
compared to 2000. Sales for the second quarter increased 2% in the
United States and decreased 5% in the United Kingdom compared to
2000. Sales for the six months ended September 30, 2000 were down
2% 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 the United States is
attributable to uneven shipment schedules among the four quarters
of the year due to customer requirements. The decline in the
United Kingdom was due primarily to a decrease in the foreign
exchange rate. An increase in sales is anticipated for the
remainder of the year and annual sales are forecasted to exceed
sales for fiscal year 2000.
Cost of sales as a percent of sales for the second quarter 2001
increased slightly to 75% compared to 72% a year ago. In the
United States, cost of sales as a percent of sales was 77% compared
to 73% for the same quarter last year. In the United Kingdom, cost
of sales as a percent of sales for the quarter was 68% compared to
81% last year. For the six months, cost of sales as a percent of
sales climbed to 76% compared to 71% in fiscal year 2000. For the
six month period in the United States, the cost of sales percentage
was 78% compared to 72% for the same period last year while in the
United Kingdom it declined from 78% to 71%. The increases in the
United States are due to product mix as direct costs for
rectangular condensers exceed direct costs for the smaller,
circular condensers. The United Kingdom percentages are also
product mix as prior year sales consisted of significant projects
which were material intensive.
For the three month and six month periods, selling, general and
administrative expenses increased 1% from the same periods in
fiscal year 2000. Selling, general and administrative expenses as
a percent of sales for the quarters ended September 30, 2000 and
1999 remained stable at 21%. For the six month period, selling,
general and administrative expenses increased to 24% from 23% last
year. These increases are primarily attributable to marketing
expenses incurred in the United States in accordance with the
Company's strategic plan.
Interest expense for the second quarter of the current year was
consistent with the prior year period. However, interest expense
increased 27% for the six month period as compared to the same
period in fiscal year 2000. This increase is reflective of higher
levels of borrowing in the United States throughout the first half
of the year compared to the first half of fiscal year 2000.
The effective income tax rates for the second quarter and six
month period in fiscal year 2001 were 34% and 26%, respectively,
compared with the 2000 effective tax rates of 36% and 37% for the
same periods.
<PAGE>13
Financial Condition
-------------------
The financial condition of the Company has remained stable and
strong during fiscal year 2001. Working capital of $12,360,000 at
September 30, 2000 compares to $12,397,000 at March 31, 2000. This
working capital decrease reflects a decline in current assets of
$2,674,000 and a decrease in current liabilities of $2,637,000.
The decrease in current assets related primarily to significant
declines in cash and inventory. The decrease in cash is due to
paydowns on short-term debt while the decline in inventory is
attributable to the shipment of a large project that was in process
at March 31, 2000. The decrease in current liabilities reflects
the paydown of short-term debt, the decline in accounts payable
which is attributable to timing of purchases and a decrease in the
contingent liability due to the settlement of the Batavia landfill
claim. The current ratio at September 30, 2000 is 2.6 compared to
2.2 at March 31, 2000.
Net cash provided from operating activities for the six months
was $298,000. Net loss, adjusted for depreciation and
amortization, provided for $392,000 of operating cash. Net cash
used in investing activities for the first half of the year was
$493,000. Capital expenditures were $786,000 compared to $256,000
for the same period last year. Proceeds from the sale of capital
assets were used to finance a portion of the capital purchases.
There were no major commitments for capital expenditures as of
September 30, 2000. Net cash used in financing activities of
$803,000 was due primarily to paydowns on short-term debt.
Management expects that the cash flow from operations and lines
of credit will provide sufficient resources to fund the fiscal year
2001 cash requirements.
Total long-term debt decreased $13,000 due to scheduled
paydowns on bank debt and capital leases offset by an increase in
borrowing on the United States line of credit. The long-term debt
to equity ratio remains unchanged at 13% at September 30, 2000
compared to fiscal year end 2000 and the total liabilities to
assets ratio is 47% compared to 51% at March 31, 2000.
Shareholders' Equity decreased $261,000 from March 31, 2000.
This decrease is attributable to a net loss of $87,000, other
comprehensive loss of $209,000 and the sale of treasury stock which
reduced treasury stock and retained earnings by $1,371,000 and
$510,000, respectively. This treasury stock transaction also
resulted in the recording of a note receivable of $842,000 which is
classified as a reduction of shareholders' equity.
New Orders and Backlog
----------------------
New orders for the second quarter were $11,524,000 compared to
$10,174,000 for the same period last year. Prior to intercompany
eliminations, new orders in the United States were $10,267,000
compared to $9,334,000 for the same period in fiscal 2000. New
orders in the United Kingdom were $1,585,000 compared to $1,149,000
for the same quarter last year.
<PAGE>14
New Orders and Backlog (concluded
---------------------------------
For the first half of the fiscal year new orders were
$23,948,000 compared to $17,502,000 for the comparable six month
period of fiscal 2000. Prior to eliminations, new orders in the
United States were $22,028,000 for the six month period compared to
$15,872,000 for the same period last year and new orders in the
United Kingdom were $2,684,000 compared to $2,253,000 in fiscal
2000. The current level of new order activity is due to
significant orders obtained for rectangular condensers and ejector
systems. Management is optimistic that the core markets the
Company serves are beginning to rebound and anticipates increased
demand for its products in the refinery industry in light of the
recent oil shortage.
Backlog of unfilled orders at September 30, 2000 is $28,180,000
compared to $12,240,000 at this time a year ago and $24,302,000 at
March 31, 2000. Prior to eliminations, current backlog in the
United States of $27,214,000 compares to $23,689,000 at March 31,
2000 and $11,620,000 at September 30, 1999. Current backlog in the
United Kingdom of $1,486,000 compares to $1,198,000 at March 31,
2000 and $857,000 at September 30, 1999. The improved backlog is
reflective of the recent order activity. The current backlog, with
the exception of approximately $6,000,000, 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. 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, 2000, a 1% change in interest rates would impact
annual interest expense by $31,000.
Over the past three years, 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>15
Quantitative and Qualitative Disclosures about Market Risk (concluded)
----------------------------------------------------------------------
Foreign operations produced a net loss in the second quarter
and year-to-date of $1,000 and $34,000, respectively. 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 have no impact on second quarter results and the year-
to-date net loss would be impacted by approximately $3,000.
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, 2000 and 1999 and the respective
quarter end market price per share, 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 $35,000 to $69,000 for 2001 and
$14,000 to $27,000 for 2000. In the second quarter of 2001, the
loss, net of tax benefit, recorded due to the increase in the stock
price was $27,000. Assuming required net income of $500,000 to
award SEU's 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, 2000 market price of the Company's
stock of $11.50 per share, a twenty to forty percent change in the
stock price would positively or negatively impact the Company's
operating results by $45,000 to $89,000 in 2002, $47,000 to $93,000
in 2003 and $49,000 to $97,000 in 2004, 2005 and 2006.
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 the Company in fiscal 2002. The impact of adopting
this statement is not expected to have an adverse effect on the
Company's financial statements.
Forward Looking
---------------
Certain statements contained in this document, that are not
historical facts, constitute "Forward-Looking Statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements, in general, predict, forecast,
indicate or imply future results, performance or achievements and
<PAGE>16
Forward Looking (concluded)
---------------
generally use words so indicative. The Company wishes to caution
the reader that numerous important factors which involve risks and
uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's
operations, markets, products, services and prices, and other
factors discussed in the Company's filing with the Securities and
Exchange Commission, in the future, could affect the Company's
actual results and could cause its actual consolidated results to
differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company.
<PAGE>17
GRAHAM CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 2000
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. See index to exhibits.
b. A Form 8-K was filed on August 23, 2000 and included
Items 5 and 7. No financial statements were required
to be filed as part of the report.
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
J. R. Hansen
Vice President Finance and
Administration / CFO (Principal
Accounting Officer)
Date 11/06/00
<PAGE>18
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.)
Stockholder Rights Plan of Graham Corporation (filed as
Item 5 to Registrant's current report filed on Form 8-K
on August 23, 2000 and Registrant's Form 8-A filed on
September 15, 2000, 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
1990 Annual Meeting of Stockholders 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 Stockholders 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.)
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.)
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Index of Exhibits (cont.)
-------------------------
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.)
Long-Term Stock Ownership Plan of Graham Corporation
(filed on the Registrant's Proxy Statement for its 2000 Annual
Meeting of Stockholders and 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
The 2000 Annual Meeting of Stockholders of Graham
Corporation was held on July 27.
The individuals named below were reelected to serve on
the Company's Board of Directors:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Alvaro Cadena 1,365,244 57,232
Helen H. Berkeley 1,336,664 85,812
H. Russel Lemcke 1,365,754 56,722
</TABLE>
Jerald D. Bidlack, Philip S. Hill and Cornelius S. Van
Rees all continue as directors of the Company.
The proposal to approve the Long-Term Stock Ownership
Plan of Graham Corporation was approved with 721,437 shares
voting for, 183,654 shares voting against, and 11,093 shares
abstaining.
The appointment of Deloitte & Touche LLP as independent
auditors was ratified, with 1,371,939 shares voting for,
42,711 shares voting against, and 7,826 shares abstaining.
<PAGE>20
Index of Exhibits (cont.)
-------------------------
(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.
