Graham Corporation (GHM)

F1Q13 Earnings Call

July 26, 2012 2:00 PM ET

Executives

Deborah Pawlowski – IR

Jim Lines – President and CEO

Jeff Glajch – VP-Finance and CFO

Analysts

Chase Jacobson – William Blair

Dick Ryan – Dougherty

Joseph Mondillo – Sidoti and Company

Jason Ursaner – CJS Securities

Chris McCampbell – Southwest Securities

Tom Spiro – Spiro Capital

Presentation

Operator

Compare to:
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» Graham Corporation's CEO Discusses F1Q 2012 Results - Earnings Call Transcript

Greetings and welcome to the Graham Corporation First Quarter Fiscal Year 2013 Financial Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) as a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Graham Corporation. Thank you, you may begin.

Deborah Pawlowski

Thank you, Laura, and good afternoon everyone. We certainly appreciate your time here today with the Graham Corporation on our first quarter and fiscal year 2013 conference call. On the call today, I have Jim Lines, President and CEO; and Jeff Glajch, Chief Financial Officer. Jim and Jeff will be reviewing the results of the quarter and for the full-year and also provide a review of the company’s strategy and outlook. There are slides on the company website that accompany their conversation today. If you do not have them, you can find them and the press release at graham-mfg.com.

If you may be aware, we may make some forward-looking statements during this discussion as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties as well as other factors which could cause actual results to differ materially from what was stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found at the company’s website or at sec.gov.

So with that, let me turn the call over to Jim to begin the discussion. Jim?

Jim Lines

Thanks, Debbie. Good afternoon, and thank you for joining us for our first quarter fiscal 2013 conference call. First quarter results, if probably go along on the slides, please turn to slide four. First quarter results were in line with expectations for both revenue and income. We generated $22.5 million of revenue and $1.4 million in net income. The first quarter and for that matter the first half will be similar to last year’s third and fourth quarters. That is due to order rates during the first, second and third quarters of fiscal 2012 that averaged $21.5 million. Sales from the refining industry are down $6.8 million in the quarter, while up sequentially $800,000.

Refining market sales still have a difficult comparison during the first half of this year due to the conversion of large Middle East refining project at the same period last year. An important aspect of this sales by industry chart is the even distribution across current key markets. In the past, we were heavily weighted in refining, which is still very important to us; however with the strategies we undertook to diversify there is improved market balance.

Please turn to slide five. Sales to the U.S. are up 12.5% due to sales from energy steel which are principally for the U.S. nuclear energy market and those for the U.S. naval aircraft carrier program or U.S. based employee sales. Here two strategies implemented to diversify continue to have a positive impact on our business.

Sales in the Canada were up $2.9 million due to the conversion of oil and sands order in backlog. Middle East sales were down due to this period last year including conversion of large refinery project in that region. We do expect strong sales going forward to U.S. end users, sales to international markets such as Asia, the Middle East, South America will vary greatly from period to period due to the size and frequency of certain orders.

Please turn to slide six. We do believe growth rate this cycle would exceed that of the 2004 through 2009 period. This is due to expanded opportunities from nuclear energy and the Naval Nuclear Propulsion Program growth strategies that we undertook. Neither of these were implemented during the last cycle. We are in the early stages of this recovery, and progress toward full recovery in our markets is slow. Nonetheless, we are very positive about growth available from our markets as recovery takes firm hold. Bouncing off the bottom through to the midpoint of our current guidance, yields are 21% of compound annual growth rate. This is similar to last cycle overall; however, the current cycle is in a tepid early stage. I really like what the management has done to diversify and develop internal capacity for what I feel will provide stronger growth this cycle as we enter into a full recovery in our markets.

Please turn to slide seven. Orders in the first quarter weren’t where we expected; however, a few projects pushed into this current quarter. We had identified approximately $7 million of North American refining projects that were projected to close in the first quarter that pushed into this quarter or our third quarter. We did have one of those orders close early in July and the other two are still available to us hopefully closing this current quarter, if not by Q3. Quarter bookings were $19.7 million. I am encouraged by the level of bidding activity and the quality of bid work we are involved in. That has always been a good leading indicator for eventual new orders.

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