Graham Corporation (GHM) 2003年年度報告「AMEX」.pdf

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1、2 0 0 3 A N N U A L R E P O R TV A C U U M A N D H E A T T R A N S F E R T E C H N O L O G I E S01255 162603 23905 208 5425 185 GRAHAM CORPORATION designs and builds vacuum and heat trans fer equip ment for the process in dus tries through out the world.It is a world wide leader in vac u um tech nol

2、 o gy.The principal mar kets for our equip ment are the chem i cal,pet ro chem i cal,pe tro leum refi ning and elec-tric pow er gen er at ing in dus tries,in clud ing co gen er a tion and geo ther mal plants.Other mar kets served in clude metal re fin ing,pulp and pa per,ship build ing,wa ter heat i

3、ng,re frig er a tion,de sali na tion,food pro cess ing,drugs,heat ing,ventilating and air con di tion ing.Ejectors,liquid ring and dry vacuum pumps,con dens ers,heat ex chang ers and other prod ucts we sell,sold either as com po nents or as com plete systems,are used by our cus tom ers to produce sy

4、nthetic fi bers,chem i cals,pe tro leum prod ucts(in clud ing gas o line),electric power,pro cessed food(in clud ing canned,frozen and dairy prod ucts),phar ma ceu ti cal products,paper,steel,fer til iz ers and nu mer ous oth er prod ucts used ev ery day by people through out the world.C O M P A N Y

5、 P R O F I L EAMEX symbol:GHM Shipments byIndustry FY 2003Consolidated Sales byGeographic Area FY 2003Graham Precision Pumps LimitedSales by Sector FY 2003www.graham-2 0 0 3 A N N U A L R E P O R TUK Operations 11%HVAC 5%Chemicals 26%Fibers 1%Other 29%Fertilizers 1%Refinery 19%Power 15%OEM 5%USA Exp

6、orts 26%USAExcludingExports 63%Power 2%Chemicals 22%Other 10%OEM 18%Pharmaceuticals 11%Basic Metals 3%Plastics&Rubber 5%Oil&GasProduction 29%01255 262603 23910 208 5425 185 To Our Fellow Share hold ersAlvaro CadenaPres i dent and CEOC H I E F E X E C U T I V E O F F I C E R S M E S S A G EG R A H A

7、M C O R P O R A T I O N The recession in Grahams principal markets has per sist ed into 2003.When it reached its apparent bottom,wide-spread concern over political instability in the Middle East brought to a halt virtually all major projects.Activity in nearly every market remained sluggish and,in s

8、ome ar-eas,non-existent.These effects have been felt through out Europe and Latin America,where local or regional con di-tions also contributed to stagnation.For example,so cial and political conditions in Venezuela have dried up orders in what traditionally has been a signifi cant des ti na tion fo

9、r our refi nery and petrochemical equipment.In addition,the heat exchanger market in the USA reached its lowest level in twenty years.Notwithstanding these diffi cult circumstances,Graham Corporation was able to turn a small profi t and take necessary steps to prepare for what we expect to be a stag

10、nant market through FY 2004.Sales for FY 2003 were up 4.2%from the pre vi ous year,yet profi t scarcely surpassed break-even,com pared to net income of$2.3 million in FY 2002.Gross profi t was 19%in FY 2003 versus 21%in FY 2002,in di cat ing the severity of competition under current con di tions.Dur

11、ing these diffi cult times,Graham has con-tin ued to implement its fi ve-year plan.The plan focuses on the strategic intent of leveraging opportunities pre-sented by diffi cult times to position the Company for further growth.We are focusing on organic growth in our product lines as well as strategi

12、c acquisitions and alli-ances.Gra ham Cor po ra tion has a recognized presence in the vac u um area,with major market share in ejectors and con dens ers,but a relatively low profi le in other vacuum tech nol o gies.This presents tre men dous opportunities,which the Com pa ny is prepared to pursue.We

13、 saw FY 2003 as a year of in vest ment.We increased our marketing staff and in tro duced two new prod ucts:the Ecoseal,an en vi ron men tal ly friendly vacuum pump system,and the Monovac,a liquid ring vacuum pump providing higher effi ciency at sig nifi cant ly lower costs.These products open up mar

14、 kets not previously accessible.We have been successful in selling the Ecofreeze condenser and other en vi ron men tal ly friendly products.We now offer a com plete turnkey product,a refrigeration system in-tegrated with Ecofreeze vacuum systems to provide our cus tom ers with single-unit convenienc

15、e and effi ciency.FY 2003 also saw advancement in our man u fac-tur ing tech nol o gies.We are close to completing major condenser jobs for Navy nuclear aircraft carriers.This work has re quired sophisticated manufacturing tech-niques,bringing Graham to a higher level of expertise.We also succeeded

16、with near-site fabrication of several jobs,thereby po si tion ing Graham to meet over seas 01255 362603 23913 208 5425 185“The struc tur al changes undertaken position the company to meet the current competitive situation while leav ing it poised to take advantage when con di tions improve.”G R A H

17、A M C O R P O R A T I O N fab ri ca tion re quire ments when necessary.In the middle of a tough market,Graham booked three large orders;one for Saudi Arabia and two for China,both for eth yl ene and related-process plants.We expect business in FY 2004 to remain fl at.War,other international distract

18、ions and global economic instability each have adversely affected prospects for near-term re cov ery in the ethylene market and other major process markets.Grahams share of the market for our large,high ly engineered products is already high,mak-ing our ability to further infl uence demand limited.S

19、mall prod ucts,on the other hand,offer many op por tu ni ties and rep re sent the focus of our planning.Grahams strategic intent is to enhance and af-fi rm our market position by introducing new products and ex pand ing our markets.Controlling costs is critical.Late in FY 2003,we undertook a restruc

20、turing,which lowered our overhead costs by approximately 20%.We are op ti mis tic that the implementation of cost re duc tions,to geth er with the recent weakening of the dollar,will give us a com pet i tive edge.We welcome the appointment of two new di-rec tors to our Board,Bill Denninger,Senior Vi

21、ce President-Finance and CFO of Barnes Group Inc.and Jim Malvaso,Pres i dent and CEO of The Raymond Corporation.We look forward to benefi ting from their experience and insight.Also in FY 2003,our Vice President of Sales,Joe Gorman,retired after 34 years of contributing to Graham,and our Vice Presid

22、ent and General Counsel,Bill Smith,left to resume private law practice.Bill will continue serving Graham as our outside General Counsel.During FY 2003 our Board of Directors re in stat ed a quar ter ly dividend of$.05 per share.This is a sig nifi cant step that un der scores the strong fi nancial po

23、sition of the Com pa ny and the Boards confi dence in its future.I am disappointed in the extended recession,but pleased that Graham has remained in a very strong fi nan cial po si tion after a recession of three years duration so far.We continue to focus on managing the business for long-term growt

24、h and added value for our sharehold-ers.The adverse market conditions,while moving us to re duce our costs,are also an opportunity for growth.We remain committed to maximizing the return to our share hold ers.Finally,my most sincere appreciation to our em-ployees for their effort and dedication,and

25、to our Board and share hold ers for their support during the year.Sincerely,Alvaro Cadena President and Chief Executive Offi cer01255 462603 23918 208 5425 185 SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF

26、 1934.For the fiscal year ended March 31,2003.nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934.For the transition period from to.Commission File Number 1-8462GRAHAM CORPORATION(Exact name of registrant as specified in its charter)DELAWARE16-1194720(State or oth

27、er jurisdiction of(I.R.S.Employerincorporation or organization)Identification No.)20 Florence Avenue,Batavia,New York14020(Address of Principal Executive Offices)(Zip Code)Registrants telephone number,including Area Code 585-343-2216Securities registered pursuant to Section 12(b)of the Act:Title of

28、ClassName of each exchange on which registeredCommon Stock(Par Value$.10)American Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:Title of ClassCommon Stock Purchase RightsIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13

29、 or 15(d)ofthe Securities Exchange Act of 1934(the Act)during the preceding 12 months(or for such shorter period that theregistrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YesNonIndicate by check mark if disclosure of delinquent file

30、rs pursuant to Item 405 of Regulation S-K is not containedherein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.nIndicate by check mark whether the

31、registrant is an accelerated filer(as defined in Exchange Act Rule 12b-2).YesnNoThe aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30,2002and May 15,2003 was$11,107,528 and$12,030,528 respectively.As of May 15,2003,there were outstanding 1,648,249

32、 shares of common stock,$.10 par value.As of May 15,2003,there were outstanding 1,648,249 common stock purchase rights.Documents Incorporated By Reference(1)Notice of Meeting and Proxy Statement for the 2003 Annual Meeting of Stockholders is incorporated by referenceinto Part III of this filing.An E

33、xhibit Index is located at page 41 of this filing under the sequential numbering system prescribed byRule 0-3(b)of the Act.GRAHAM CORPORATIONForm 10-K IndexPagePART IItem 1Business*1Item 2Properties*4Item 3Legal Proceedings*4Item 4Submission of Matters to a Vote of Security Holders*4PART IIItem 5Mar

34、ket for Companys Common Stock and Related Security Holder Matters*5Item 6Selected Financial Data*6Item 7Managements Discussion and Analysis ofFinancial Condition and Results of Operations*8Item 7AQuantitative and Qualitative Disclosures About Market Risk*14Item 8Financial Statements and Supplementar

35、y Data*15Item 9Changes in and Disagreements with Accountantson Accounting and Financial Disclosure*37PART IIIItem 10Directors and Executive Officers*37Item 11Executive Compensation*37Item 12Security Ownership of Certain Beneficial Ownersand Management*37Item 13Certain Relationships and Related Trans

36、actions*37Item 14Controls and Procedures*37Item 15Principal Accountant Fees and Services*38Item 16Exhibits,Financial Statement Schedules and Reports on Form 8-K*38PART IItem 1.Business(a)General Development of BusinessGraham Corporation(the Company or the Registrant)is a Delaware company incorporate

37、d in 1983.Itis the successor to Graham Manufacturing Co.,Inc.,which was incorporated in 1936.The Companys businessconsists of two segments,one operated by the Company in the United States and one operated by its indirectlywholly-owned subsidiary in the United Kingdom.United States OperationsDuring t

38、he Fiscal Year ended March 31,2003(FY 2002-2003)the Companys U.S.operations consistedof its engineering and manufacturing business in Batavia,NY.The Company is a well-recognized supplier of steam jet ejector vacuum systems,surface condensers forsteam turbines,liquid ring vacuum pumps and compressors

39、,dry pumps and various types of heat exchangers suchas Heliflow and plate and frame exchangers.It possesses expertise in combining these various products intopackaged systems for sale to its customers in a variety of industrial markets,including oil refining,chemical,petrochemical,power,pulp and pap

40、er,other process applications,and shipbuilding.FY 2002-2003 U.S.sales were$44.0 million,an increase of 7%from the previous fiscal year.New orders in FY 2002-2003 were$35.2 million,down 29%from the previous fiscal year.Year-end backlogstood at$24.5 million,compared to$33.1 million on March 31,2002 an

41、d$24.8 million on March 31,2001.The Company recognized as other income in the Fourth Quarter$1.8 million in cancellation fees inconsequence of the termination of certain large condenser contracts for the electric power market.The Companycontinues to view a need for additional power generating capaci

42、ty in the United States as offering potential forsignificant sales to the power-generating market in the years ahead.Over the past year,activity in the power generating market remained depressed,due principally touncertainties over geopolitical situations,residual fallout from the Enron collapse and

43、 speculation about theactual electricity supply/demand imbalance.The Company will continue to pursue this market,although it willcontinue to do so at a reduced pace,pending indications of improvement in the market.The Company continuesto see significant activity in the cogeneration market,where Grah

44、am is a major supplier of condensers.The Company sees the chemical market as entering a recovery.Petrochemical demand is expected to grow4.5%per year through 2010,requiring additional capacity.Several contracts for new world-scale ethylene plantshave been awarded to engineering and construction comp

45、anies,something not seen in the last two to three years.Activity in the refining sector remained robust and Graham again obtained several large crude oil vacuumdistillation orders for domestic and foreign destinations.The Company remains in the forefront of thistechnology,backed by many years of exp

46、erience and by its continuous research and development effort.Therefinery market is expected to remain active,with the implementation of the Clean Air Act requiring low sulfurfuels.Small turbine exhaust condensers and ejector systems often are required for these upgrades,with largervacuum systems re

47、placed when the vacuum tower is optimized.The Company has furnished equipment forupgrades of oil sands and heavy oil production facilities in Canada and Latin America,respectively.Further suchexpansions in Canada in the near term are considered likely if oil prices remain stable at a favorable level

48、.Currentoil prices continue to drive offshore exploration and production,presenting opportunities for Grahams UKsubsidiary in the supply of specialized vacuum equipment.For smaller products such as liquid ring vacuum pumps,small standard ejectors,Heliflows,and plate heatexchangers,which are suscepti

49、ble to domestic economic conditions,the downturn in market conditions wasnoticeable during the past Fiscal Year.The economy is showing signs of recovery and the Company is executingstrategies to increase its market share.The Companys U.S.export sales represented 29.5%of U.S.sales in FY 2002-2003,com

50、pared to 24.3%ofU.S.sales in the previous year.Export sales reflected a prolonged recession in Asia and Latin America.However,the Asian markets for the Companys products have demonstrated early signs of recovery.Now that oil prices1appear to have stabilized and significant mergers in the oil industr

51、y have been completed,the consensus in theindustry is that opportunities in the refinery markets are expected to increase.The Company had 281 employees in the United States as of March 31,2003.United Kingdom OperationsDuring FY 2002-2003,the Companys U.K.operations were undertaken by its indirectly

52、wholly-ownedsubsidiary,Graham Precision Pumps Limited(GPPL)in Congleton,Cheshire,England.GPPL is wholly-ownedby Graham Vacuum&Heat Transfer Limited,which in turn is wholly-owned by the Company.Graham Vacuumand Heat Transfer Limited has no employees.GPPL manufactures liquid ring vacuum pumps,rotary p

53、iston pumps,oil sealed rotary vane pumps,atmospheric air operated ejectors and complete vacuum pump systems that are factory assembled with self-supporting structure.Sales for FY 2002-2003 stood at$6,850,000,a decrease of 8%compared with the previous year.Thisperformance reflects among other factors

54、 reduced sales of pump packages and spare parts.New orders for GPPL in FY 2002-2003 were$7.2 million,up 18%from the previous fiscal year.Year endbacklog stood at$1.3 million,compared to$1.2 million on March 31,2002 and$3.4 million on March 31,2001.The 2001 year-end backlog included a$1.2 million ord

55、er,the largest in GPPLs history.GPPL increased sales of pumps to the offshore oil-drilling market by 50%over the previous year.TheCompany anticipates continued opportunity in this market as long as oil prices remain at current levels,whichdrive additional offshore oil exploration.In addition,dry pum

56、p sales increased slightly over the prior year.NewEuropean environmental laws are expected to result in increased opportunities for sales of dry pumps.Thecompany views these areas as significant opportunities in the face of a generally depressed European economy.GPPL employed 61 people on March 31,2

57、003.Capital ExpendituresThe Companys capital expenditures for FY 2002-2003 amounted to$943,000.Of this amount,$800,000was for the U.S.business and$143,000 was for the U.K.business.(b)Financial Information About Segments(1)Segments and(2)Information as to Lines of BusinessGraham Corporation operates

58、in only one industry segment which is the design and manufacture of vacuumand heat transfer equipment.Further geographical segment information is set forth in Note 14 to the ConsolidatedFinancial Statements on pages 32-35 of the Annual Report on Form 10-K.(c)Narrative Description of Business(1)Busin

59、ess Done and Intended to be DonePrincipal Products and MarketsThe Company designs and manufactures vacuum and heat transfer equipment,primarily custom built.Itsproducts include steam jet ejector vacuum systems,surface condensers for steam turbines,liquid ring vacuumpumps and compressors,dry vacuum p

60、umps and various types of heat exchangers including helical coilexchangers marketed under the registered name Heliflow and plate and frame exchangers.These productsfunction to produce a vacuum or to condense steam or otherwise transfer heat,or any combination of these tasks.All of the products named

61、,other than the pumps,accomplish these results without involving any moving parts.Grahams products are available in all metals and in many non-metallic and corrosion resistant materials as well.This equipment is used in a wide range of industrial process applications:power generation facilities,incl

62、uding fossil fuel plants and nuclear plants as well as cogeneration plants and geothermal power plants that2harness naturally occurring thermal energy;petroleum refineries;chemical plants;pharmaceutical plants;plasticsplants;fertilizer plants;breweries and titanium plants;liquified natural gas produ

63、ction;soap manufacturing;airconditioning systems;food processing plants and other process industries.Among these the principal markets forthe Companys products are the chemical,petrochemical,petroleum refining,and electric power generatingindustries.The Companys equipment is sold by a combination of

64、 direct company sales engineers andindependent sales representatives located in over 40 major cities in the United States and abroad.Status of Publicly Announced New Products or SegmentsThe Company has no plans for new products or for entry into new industry segments that would require theinvestment

65、 of a material amount of the Companys assets or that otherwise is material.Sources and Availability of Raw MaterialsThe Company experienced no serious material shortages in FY 2002-2003.Material Patents,TrademarksThe Company holds no material patents,trademarks,licenses,franchises or concessions the

66、 loss of whichwould have a materially adverse effect upon the business of the Company.Seasonal VariationsNo material part of the Companys business is seasonal.Working Capital PracticesThe Companys business does not require it to carry significant amounts of inventory,or of materials beyondwhat is ne

67、eded for work in progress.The Company does not provide rights to return goods,or payment terms tocustomers that would be considered extended in the context of the practices of its industries.Principal CustomersThe Companys principal customers include the large chemical,petroleum and power companies,

68、which areend users of the Companys equipment in their manufacturing and refining processes,as well as large engineeringcontractors who build installations for such companies and others.No material part of the Companys business is dependent upon a single customer or on a few customers,theloss of any

69、one or more of whom would have a materially adverse effect on the Companys business.Nocustomer of the Company or group of related customers regularly accounts for as much as 10%of the Companysconsolidated annual revenue.Order BacklogBacklog of unfilled orders at March 31,2003 was$25,069,000 compared

70、 to$33,871,000 at March 31,2002and$27,665,000 at March 31,2001.The backlog contains$7,186,000 in orders that will likely not be shipped inthe next twelve months.Government ContractsNo material portion of the Companys business is subject to renegotiation of profits or termination ofcontract or subcon

71、tracts at the election of the government.CompetitionThe Companys business is highly competitive and a substantial number of companies having greaterfinancial resources are engaged in manufacturing similar products.However,the Company believes it is one ofthe leading manufacturers of steam jet ejecto

72、rs.3Research ActivitiesDuring the fiscal years ended March 31,2003,2002,and 2001 the Company spent approximately$187,000,$248,000 and$250,000,respectively,on research activities relating to the development of new products or theimprovement of existing products.Environmental MattersThe Company does n

73、ot anticipate that compliance with federal,state and local provisions,which have beenenacted or adopted regulating the discharge of material in the environment or otherwise pertaining to theprotection of the environment,will have a material effect upon the capital expenditures,earnings and competiti

74、veposition of the Company and its subsidiaries.(d)Financial Information About Geographic AreasThe information called for under this Item is set forth in Note 14 to Consolidated Financial Statements,onpages 32-35 of this Annual Report on Form 10-K.Item 2.PropertiesUnited States:The Companys corporate

75、 headquarters is located at 20 Florence Avenue,Batavia,New York,consisting of a 45,000 square foot building.The Companys manufacturing facilities are also located in Batavia,consisting of approximately thirty-three acres and containing about 204,000 square feet in several connectedbuildings,includin

76、g 162,000 square feet in manufacturing facilities,48,000 square feet for warehousing and a6,000 square-foot building for product research and development.Additionally the Company leases U.S.sales offices in Los Angeles and Houston.United Kingdom:The Companys U.K.subsidiary,Graham Precision Pumps Lim

77、ited,owns a 41,000square-foot manufacturing facility located on 15 acres in Congleton,Cheshire,England.Assets of the Company with a book value of$29,980,000 have been pledged to secure certain domesticlong-term borrowings.Short and long-term borrowings of the Companys United Kingdom subsidiary are s

78、ecuredby assets of the subsidiary,which have a book value of$673,000.Item 3.Legal ProceedingsNot applicable.Item 4.Submission of Matters to a Vote of Security HoldersNo matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of theCompanys security holder

79、s.4PART IIItem 5.Market for Registrants Common Stock and Related Security Holder Matters(a)The information called for under this Item is set forth under Item 8,Financial Statements andSupplementary Data,in the Statement of Quarterly Financial Data appearing on page 35 of this Annual Reporton Form 10

80、-K.(b)On May 15,2003,there were approximately 400 holders of the Companys common stock.This figureincludes stockholders of record and individual participants in security position listings who have not objected tothe disclosure of their names;it does not,however,include individual participants in sec

81、urity position listingswho have objected to disclosure of their names.On May 15,2003,the closing price of the Companys commonstock on the American Stock Exchange was$7.95 per share.(c)The Company resumed payment of a regular quarterly dividend on October 1,2002,paying a dividendof$.05 per share.The

82、same dividend was paid on January 2,2003 and April 7,2003.Restrictions on dividendsare described in Note 5 to the Consolidated Financial Statements included in this Report.(d)Equity Compensation Plan Information(c)Number of securities remaining available(a)for future issuanceNumber of securities(b)u

83、nder equityto be issued uponWeighted-averagecompensation plansexercise ofexercise price of(excludingoutstanding options,outstanding options,securities reflectedPlan categorywarrants and rightswarrants and rightsin column(a)Equity compensation plans approved bysecurity holders*225,973$11.87128,750Equ

84、ity compensation plans not approved bysecurity holders*00Total*225,973$11.87128,7505Item 6.Selected Financial DataGraham Corporation Ten Year Review2003(1)2002(1)2001(1)2000(1)1999(1)Operations:Net Sales*$49,378,000$47,396,000$44,433,000$38,728,000$52,978,000Gross Profit*9,350,00010,077,0009,796,000

85、9,964,00014,872,000Income(Loss)From ContinuingOperations*133,0002,305,000195,000(833,000)2,369,000Dividends*254,000Common Stock:Basic Earnings(Loss)From ContinuingOperations Per Share*.081.40.12(.55)1.48Diluted Earnings(Loss)FromContinuing Operations Per Share*.081.38.12(.55)1.46Dividends Per Share*

86、.15Financial Data:Working Capital*12,779,00013,812,00011,162,00012,397,00011,989,000Capital Expenditures*943,000688,0001,124,000711,0001,189,000Depreciation*1,004,000955,000926,000998,000983,000Total Assets*38,280,00043,704,00036,608,00034,596,00034,136,000Long-Term Debt*127,000150,000682,0001,948,0

87、00505,000Shareholders Equity*18,793,00019,636,00017,137,00017,092,00016,712,000(1)The financial data presented for 2003-1998 is for the respective twelve months ended March 31.The financialdata presented for 1997 is for the three month transition period ended March 31,1997.The financial datapresente

88、d for 1996-1993 is for the respective twelve months ended December 31.6Graham Corporation Ten Year Review1998(1)1997(1)19961995(2)1994(2)1993Operations:Net Sales*$56,206,000$14,257,000$51,487,000$50,501,000$46,467,000$44,592,000Gross Profit*18,083,0004,080,00015,463,00013,257,00012,153,00011,661,000

89、Income(Loss)From ContinuingOperations*3,766,000621,0003,102,0001,361,0009,000481,000Dividends*Common Stock:Basic Earnings(Loss)FromContinuing Operations Per Share2.27.391.96.86.01.31Diluted Earnings(Loss)FromContinuing Operations Per Share2.21.381.93.86.01.31Dividends Per Share*Financial Data:Workin

90、g Capital*12,459,00010,300,0008,239,0007,093,0006,819,0007,075,000Capital Expenditures*1,400,000237,0001,291,000204,000412,000513,000Depreciation*905,000249,000892,000927,0001,027,0001,349,000Total Assets*37,030,00031,224,00030,494,00029,499,00029,927,00041,388,000Long-Term Debt*859,0002,764,0001,44

91、2,0003,303,0005,161,0006,102,000Shareholders Equity*17,775,00012,538,00011,915,0008,426,0007,045,00014,793,000(2)Per share data has been adjusted to reflect a three-for-two stock split on July 25,1996.7Item 7.Managements Discussion and Analysis of Financial Condition and Results of OperationsGraham

92、Corporation consists of two operating segments as determined by geographic areas(USA:GrahamCorporation,UK:Graham Vacuum and Heat Transfer,Limited and its wholly-owned subsidiary,GrahamPrecision Pumps,Ltd.).Certain statements contained in this document,including within this Managements Discussion and

93、 Analysisof Financial Condition and Results of Operations,that are not historical facts,constitute Forward-LookingStatements within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-lookingstatements,in general,predict,forecast,indicate or imply future results,performance o

94、r achievements andgenerally use words so indicative.The Company wishes to caution the reader that numerous important factorswhich involve risks and uncertainties,including but not limited to economic,competitive,governmental andtechnological factors affecting the Companys operations,markets,products

95、,services and prices,and otherfactors discussed in the Companys filings with the Securities and Exchange Commission,in the future,couldaffect the Companys actual results and could cause its actual consolidated results to differ materially from thoseexpressed in any forward-looking statement made by,

96、or on behalf of,the Company.Analysis of Consolidated OperationsResults of OperationsFor an understanding of the significant factors that influenced the performance during the past three fiscalyears,the following discussion should be read in conjunction with the consolidated financial statements and

97、thenotes to consolidated financial statements presented in this annual report.200320022001USAUKUSAUKUSAUK(In Thousands of Dollars(except share data)Sales*$43,994$6,850$41,115$7,432$40,686$5,375Net Income(Loss)*$186$(96)$1,826$505$224$41Diluted Earnings(Loss)per Share*$0.11$(0.06)$1.09$0.30$0.14$0.03

98、Identifiable Assets*$36,032$6,026$42,446$5,127$35,737$4,665Amounts above are inclusive of intercompany amounts.2003 Compared to 2002Consolidated sales(net of intercompany sales)were$49,378,000 for the fiscal year ended(FYE)March 31,2003.This represents a 4%increase over FYE 2002.Sales from USA opera

99、tions were greater than the prior yearby 7%,primarily due to(1)additional surface condenser shipments while maintaining about an equal level ofsales in other product categories,and(2)maintaining domestic market share comparable to last year whileincreasing export sales about 30%over FYE 2002.The inc

100、reased sales were due to specific refining and electricpower generating projects and not a general recovery in domestic or foreign markets.Sales from UK operations decreased 8%as compared to FYE 2002.In particular,significant reductionscame in sales of pump packages and spare parts.The reduction in

101、spare part sales is due to fewer replacementspurchased by traditional customers.This is due to significant buying in recent prior years.The decline in pumppackage sales is due to the absence of any unusually large order this year.Last year Graham Precision Pumps,Ltd.shipped one order worth about$1,1

102、85,000.UK offshore pump sales were up 50%as compared to FYE 2002.This increase is due to the cost of oil.When oil sells for$12-$15 a barrel,it is economically feasible to drilloffshore.In addition,several offshore oil projects in eastern Russia are developing.The outlook for continuedstrength in thi

103、s market for Graham remains positive.Sales of dry pumps in FYE 2003 were up slightly from FYE2002.The Company remains bullish on future prospects to sell dry pumps.The continued legislation in Europetightening environmental requirements will drive this demand.FYE 2004 is estimated to be another chal

104、lenging year,as the markets Graham serves are projected to remainflat for at least the first half of FYE 2004.8The consolidated gross profit percentage was 19%as compared to 21%for FYE 2002.In the USA,the grossprofit percentage was 16%as compared to 18%for the prior year.This decline was due to the

105、colder wintercausing higher comfort heating charges,greater defined benefit pension costs due to the three year decline in thestock market and higher product warranty costs.The gross profit percent in the UK dropped from 38%to 30%this year.This is attributed to reduced salesvolume and fewer sales in

106、 offshore spare parts.Spare part sales generate significant profit margins.It is believedfewer replacement parts were sold because new pumps were purchased instead.In addition to sales,the grossprofit margin in the UK declined due to greater production overhead costs caused by temporary staffing nee

107、ds.Asa percent of sales,production costs were 27%of sales in FYE 2003 as compared to 21%in FYE 2002.Selling,general and administrative expenses for the current year were down 2%from last year.SG&Aexpenses represented 21%of FYE 2003 sales as compared to 22%for FYE 2002.The decrease in costs is due to

108、lower variable compensation costs.Interest expense decreased 34%in the current year due to reduced interest rates and maintaining a low debtlevel.The provision for income taxes was 31%as compared to 34%for the year ended March 31,2002.The lowereffective rate is due to the impact of the extra territo

109、rial income exclusion benefit from foreign shipments.Consolidated net income for the year was$133,000 or$.08 per diluted share.The Company concluded theyear with both improved operating results and special transactions.Fourth quarter net income was$1,120,000 or$0.67 per diluted share.In January,Grah

110、am reduced its USA workforce ten percent for an annualized reductionof$1,480,000 in employee compensation expense and,accordingly,recognized a before income tax severanceexpense of$658,000.In February,the Company received a cancellation notice on one order worth$2,922,000 forthe electric power indus

111、try,which resulted in a before income tax gain of$1,801,000.The combined beforeincome tax effect of special events on the fourth quarter results was$1,143,000.Net income for FYE 2002 was$2,305,000 or$1.38 per diluted share.The Company took several actions in the current year to reduce costs.Many of

112、the cost saving steps initiatedin FYE 2003 are expected to be realized in the months and years ahead.For example,on February 4,2003,theEmployee Benefits Committee of the Board of Directors irrevocably terminated postretirement medical benefitsfor current employees of USA operations.(Medical benefits

113、 paid to retirees of record as of April 1,2003 areunchanged).As of March 31,2003,the accrued postretirement benefits liability remains on the balance sheetwithout reduction for the actions taken,however,72%of the accrued amount of$3,238,000,or$2,322,000 doesnot represent an obligation(amount owed)to

114、 anyone.The savings gained through curtailing the Plan will berecognized for accounting purposes as income over twelve years,starting in the first quarter of FYE 2004.Othersteps taken include:(1)Graham is working toward expanding its standardized products while maintaining itscustomized products and

115、(2)the Company has increased its emphasis on quantifying the costs of product qualityand correcting the issues.2002 Compared to 2001Consolidated sales(net of intercompany sales)were$47,396,000 for the year ended March 31,2002 ascompared to sales of$44,433,000 for the prior twelve months.Sales from t

116、he USA operation increased about 1%.Surface condenser sales increased about 68%or about$7,000,000 in fiscal year end 2002 due to opportunities inthe electric power industry.The power industry includes sales to merchants,cogeneration and independentproduction facilities.Increased sales in condensers

117、were largely offset by reduced shipments in other productlines.Export shipments,as a percent of total sales,were the lowest they have been since 1990.The broad declinein demand for Grahams USA products is believed to be temporary.Principal reasons for fewer projects underconstruction by contractors

118、in the three major segments the Company serves(refinery,chemical and petrochemi-cal)were:(1)limited capital spending due to poor global economic conditions,(2)the strong US dollar(FYE2003,now eliminated),(3)merger and acquisition activity,(4)revamping of financial infrastructure needs inAsia,and(5)c

119、aution resulting from the war on terrorism.9Sales from UK operations increased about 38%over FYE March 2001,or about$2,000,000.Significantsales increases were achieved in the categories of liquid ring pump packages,offshore pumps,dry pumps andspares.The increased sales in pump packages resulted from

120、 the shipment of one large order valued at about$1,185,000 to South Africa for the petrochemical industry.Going forward,targeting larger orders will be astrategic objective.In FYE 2001 Graham purchased Leybolds dry pump line.Increased dry pump sales in FYE2002 was due to further establishing the pro

121、duct line under Grahams offerings.Spare part sales increased as aresult of the market demand for offshore activity and to the success of the dry pump line.The consolidated gross profit margin was 21%,down from 22%for the prior year and down from a recenthistorical range of about 25-28%.The UK operat

122、ions posted a 38%gross profit,up from 31%for the prior year,due to improved product mix.In FYE 2002 the UK operations significantly increased their sales in offshorepumps and spares.These pumps require high quality standards and special fabrication techniques.Accordingly,they bear a higher profit ma

123、rgin.In the USA the gross profit percent was 18%,down from 20%in FYE March2001.The lower gross profit margin was attributed to depressed selling prices together with greater employmentcosts in the areas of incentive compensation,and medical and workers compensation insurances.Selling,general and adm

124、inistrative expense for the year 2002 was about 22%of sales as compared to about21%for the prior year.USA costs approximated FYE 2001 costs.The 1%increase occurred in the UK andrelated to greater costs for additional sales personnel and more sales commissions and royalty payments on highersales.Inte

125、rest expense for the year 2002 decreased 54%from FYE 2001.Bank debt was about 5%of equity,or$1,050,000,at March 31,2002 as compared to 27%of equity,or$4,709,000 as of March 31,2001.The provision for income taxes for the year 2002 of$1,172,000 approximated statutory rates at 34%ascompared to a net ta

126、x benefit of$221,000 for the FYE 2001.Consolidated net income for the year was$2,305,000 or$1.38 per diluted share.In the fourth quarter ofFYE March 2002,four orders pertaining to the merchant power generating industry were cancelled.Net ofrelated expenses,but before the effect of income taxes,cance

127、llation income of about$3,989,000 was recorded.Net income for FYE 2001 was$195,000 or$.12 per diluted share.Shareholders Equity200320022001(In Thousands of Dollars)USA*$19,727$20,794$18,786UK*2,8432,6612,145Eliminations*(3,777)(3,819)(3,794)$18,793$19,636$17,137Book Value Per Share*$11.40$11.91$10.5

128、22003 Compared to 2002Shareholders Equity decreased$843,000 or 4%in FYE 2003.The Company recognized a minimumpension liability adjustment net of an income tax benefit,which reduced equity by$1,090,000.This adjustmentwill be reversed if and to the extent the USA defined benefit pension plan investmen

129、ts in stocks and bondsrecover.2002 Compared to 2001Shareholders Equity increased$2,499,000 or nearly 15%for the year 2002 as compared to about 0%forFYE 2001.Ninety-two percent of the increase was due to earnings.Net book value increased to$11.91 per shareat March 31,2002 from$10.52 as of March 31,20

130、01 for a 13%increase in book value per share.10Liquidity and Capital Resources200320022001USAUKUSAUKUSAUK(In Thousands of Dollars)Working Capital*$11,208$1,827$12,408$1,702$10,310$1,125Cash Flow from Operations*$2,117$(220)$4,290$174$90$(912)Cash and Investments*$6,615$48$5,307$90$5,072$59Capital Ex

131、penditures*$800$143$607$81$1,025$99Long-Term Borrowings*$0$0$0$0$545$0Capital Leases*$183$24$173$62$111$1532003 Compared to 2002Consolidated cash flow from operations was$1,897,000 for the year ended March 2003 as compared to$4,464,000 for FYE 2002.Cash flow for the current year was greatly enhanced

132、 by collection of the unusuallylarge trade accounts receivable balance as of March 2002.Receivables were substantially greater than normal dueto fourth quarter FYE 2002 significant customer cancellation fees and progress billings.Offsetting the change inthe accounts receivable balance of$9,758,000 b

133、etween March 31,2002 and 2003 were(1)an increase ininventory,(2)a special payment to the defined benefit pension plan and(3)fewer customer deposits.Inventoryincreased due to the manufacturing stage of USA customer orders,and UK operations increased inventories(andshort-term debt)acquiring dry pump g

134、ear boxes from a supplier who manufactured them under a make andhold program.Customer deposits decreased$4,572,000 this year as compared to FYE 2002 due to the reductionof large projects currently in the manufacturing system.To protect the balance sheet and a bank loan covenant,the Company made an a

135、dditional$1,600,000 payment to the defined benefit pension fund this year.A fourthitem,which reduced working capital this year,was the recognition of$702,000 in accruals relating toterminations and retirements.Capital expenditures are estimated to be$702,000 next year.Depreciation is estimated to be

136、$980,000.2002 Compared to 2001Consolidated cash flow from operations was$4,464,000 for the year 2002 as compared to negative cash flowof$822,000 for FYE 2001.The increase was due to net income of$2,305,000 and other changes in workingcapital items of$2,650,000.At March 31,2002 trade account receivab

137、les were$17,053,000,up$9,099,000 fromMarch 31,2001.This increase significantly related to amounts due on cancelled and suspended electric powergenerating business.Subsequent to March 31,2002,the accounts receivable were collected.Capital expenditures for the year ending March 31,2002 were$688,000(US

138、A,$607,000;UK,$81,000).Depreciation expense for FYE 2002 was$956,000.Orders and BacklogOrders200320022001(In Thousands of Dollars)USA*$35,209$49,423$41,748UK*7,2006,1187,768Eliminations*(1,813)(1,077)(1,542)Consolidated*$40,596$54,464$47,97411Backlog200320022001(In Thousands of Dollars)USA*$24,475$3

139、3,055$24,751UK*1,3481,1803,366Eliminations*(754)(364)(452)Consolidated*$25,069$33,871$27,665USA new orders for the current year were down 29%or$14,214,000 from last year.Surface condensers andspecial ejectors represent 38%of new orders for the current year as compared to 67%for FYE 2002.Orders inthe

140、se two categories decreased in total$19,609,000.For the three years ended March 2002,surface condensersand special ejectors averaged 54%of the total USA orders.Decreased new business in condenser products is dueto lower demand in the merchant power plant market resulting from an adequate short term

141、electric power supply.Decreased orders in special ejector products is due to weakness in the refinery market,which are attributed togeopolitical concerns in Iraq and Venezuela.Graham did partially recover from the decline in condenser andspecial ejector orders with increased activity in vacuum techn

142、ology products due to,what may be,signs of thebeginning of a recovery in the petrochemical market.The Company cannot predict the strength or duration of therecovery.The Company continues to be optimistic about potential orders from Chinese petrochemical projects inspite of the SARS anxiety that is c

143、urrently impacting new order opportunities.UK new orders(measured indollars)were up 18%over FYE 2002.An 8%increase(caused by a weakened US dollar)in the currencyexchange rate played a significant roll in the increase.In FYE 2003,the UK operation introduced a new liquidring pump design that is more e

144、nvironmentally friendly.This new product,trade name,Ecoseal,resulted in 4%ofthe new orders in FYE 2003.The Company believes the growth of this product will continue.As of March 31,2003,the consolidated backlog was$25,069,000,down 26%from FYE 2002.The decreasewas due to fewer new orders in FYE 2003.T

145、he backlog contains about$7,186,000 in orders that will likely notbe shipped in the next twelve months.One order,valued at$5,286,000,bears cancellation fees if/when cancelled.Market Risk(Quantitative and Qualitative Disclosures)The principal market risks(i.e.,the risk of loss arising from changes in

146、 market rates and prices)to whichGraham is exposed are:)interest rates)foreign exchange rates)equity price riskThe assumptions applied in preparing quantitative disclosures regarding interest rate,foreign exchange rateand equity price risk are based upon volatility ranges experienced in relevant his

147、torical periods,managementscurrent knowledge of the business and market place,and managements judgment of the probability of futurevolatility based upon the historical trends and economic conditions of the business.The Company is exposed to interest rate risk primarily through its borrowing activiti

148、es.Managementsstrategy for managing risks associated with interest rate fluctuations is to hold interest bearing debt to theabsolute minimum and carefully assess the risks and rewards for incurring long-term debt.Assuming year ended2003 and 2002 variable rate debt,a 1%change in interest rates would

149、impact annual interest expense by$15,200and$10,500,respectively.Grahams international consolidated sales exposure for the current year approximated 37%of annual salesas compared to 33%for the year 2002.Operating in world markets involves exposure to movements in currencyexchange rates.Currency movem

150、ents can affect sales in several ways,the foremost being the ability tocompetitively compete for orders against competition having a relatively weaker currency.Business lost due tothis cannot be quantified.Secondly,cash can be adversely impacted by the conversion of sales in foreign currencyto U.S.d

151、ollars.The substantial portion of Grahams sales is collected in the sellers currency.In both 2003 and2002,sales in foreign currencies were 1.5%of sales.At certain times,the Company may enter into forward12foreign exchange agreements to hedge its exposure against unfavorable changes in foreign curren

152、cy values onsignificant sales contracts negotiated in foreign currencies.Graham has limited exposure to foreign currency purchases.In both FYE 2003 and 2002,purchases inforeign currencies were 4%of cost of goods sold.At certain times,forward foreign exchange contracts may beutilized to limit currenc

153、y exposure.Foreign operations resulted in a current year loss of$96,000 as compared to income of$505,000 for FYE2002.As currency exchange rates change,translations of the income statements of the UK business into USdollars affects year-over-year comparability of operating results.We do not hedge tra

154、nslation risks because cashflows from UK operations are mostly reinvested in the UK.A 10%change in foreign exchange rates would haveimpacted the UK reported net income by approximately$9,600 for FYE 2003 and$50,500 for the previous year.The Company has a Long-Term Incentive Plan which provides for a

155、wards of share equivalent units(SEU)for outside directors based upon the Companys performance.The outstanding SEUs are recorded at fairmarket value thereby exposing the Company to equity price risk.Gains and losses recognized due to market pricechanges are included in the quarterly results of operat

156、ions.Based upon the SEUs outstanding at March 31,2003and 2002 and an$8 per share price,a 50-75%change in the respective year end market price of the Companyscommon stock would positively or negatively impact the Companys operating results by$66,000 to$99,000 forFYE 2003 and$65,000 to$97,000 in FYE 2

157、002.Assuming required net income is met,and based upon a marketprice of the Companys stock of$8 per share,a 50-75%change in the stock price would positively or negativelyimpact the Companys operating results by$105,000 to$157,000 in 2004,$123,000 to$185,000 in 2005,$143,000 to$219,000 in 2006,$157,0

158、00 to$235,000 in 2007 and$172,000 to$258,000 in 2008.Other MattersIncreases in material and labor costs traditionally have been offset by cost cutting measures and selling priceincreases.Obtaining price increases are largely a factor of supply and demand for Grahams products,whereasinflation factors

159、 can originate from influences outside of the Companys direct global competition.Graham willcontinue to monitor the impact of inflation in order to minimize its effects in future years through sales growth,pricing,product mix strategies,purchasing advantageously,productivity improvements,and cost re

160、ductions.The Companys USA operations are governed by federal environmental laws,principally the ResourceConservation and Recovery Act,the Comprehensive Environmental Response,Compensation and Liability Act(CERCLA),the Clean Air Act,and the Clean Water Act,as well as state counterparts(Environmental

161、Laws).Environmental Laws require that certain parties fund remedial actions regardless of fault,legality or originaldisposal or ownership of the site.Graham is not involved in any environmental remediation projects.Critical Accounting PoliciesThe significant accounting policies are disclosed in Note

162、 1 to the consolidated financial statements.Thefollowing discussion addresses the most critical accounting policies,which are those that are most important tothe portrayal of the financial condition and results,and that require judgment.Revenue RecognitionPercentage-of-CompletionThe Company recogniz

163、es revenue and all related costs on contracts with a duration in excess of three monthsand with revenues of$1,000,000 and greater using the percentage-of-completion method.The percentage-of-completion is determined by relating actual labor incurred to-date to managements estimate of total labor to b

164、eincurred on each contract.Contracts in progress are reviewed monthly,and sales and earnings are adjusted incurrent accounting periods based on revisions in contract value and estimated costs at completion.13Completed ContractContracts with values less than$1,000,000 are accounted for on the complet

165、ed contract method.TheCompany recognizes revenue and all related costs on these contracts upon substantial completion or shipment tothe customer.Substantial completion is consistently defined as at least 95%complete with regard to direct laborhours.Customer acceptance is generally required throughou

166、t the construction process and the Company has nofurther obligations under the contract after the revenue is recognized.Use of EstimatesWe have made a number of estimates and assumptions relating to the reporting of assets and liabilities,thedisclosure of contingent assets and liabilities,and report

167、ed amounts of revenue and expenses in preparing ourfinancial statements in conformity with accounting principles generally accepted in the United States of America.Actual results could differ from these estimates.New Accounting PronouncementsIn FYE March 2003,the Company adopted Statement of Financi

168、al Accounting Standards(SFAS)No.144,Accounting for the Impairment or Disposal of Long-Lived Assets,SFAS No.146,Accounting forCosts Associated with Exit or Disposal Activities and FASB Interpretation No.45(FIN),GuarantorsAccounting and Disclosure Requirements for Guarantees,Including Indirect Guarant

169、ees of Indebtedness ofOthers.There were no affects on the Companys consolidated financial position,results of operations or cashflows resulting from the adoption of these standards.Additionally,the Company has implemented all requireddisclosures of SFAS No.148,Accounting for Stock-Based Compensation

170、 Transition Disclosure and thosedisclosures required by the aforementioned standards in the Notes to the Consolidated Financial Statements.SFAS No.144,Accounting for the Impairment or Disposal of Long-Lived Assets supercedes SFASNo.121,Accounting for the Impairment of Long-Lived Assets and for Long-

171、Lived Assets to Be Disposed Of.SFAS No.144 retains the basic requirements of SFAS No.121 regarding when to record an impairment loss andprovides additional guidance on how to measure an impairment loss.SFAS No.144 excludes goodwill andintangibles not being amortized from its scope.SFAS No.144 also s

172、upercedes the provisions of AccountingPrinciples Board(APB)Opinion No.30,Reporting the Results of Operations,pertaining to discontinuedoperations.SFAS No.146,Accounting for Costs associated with Exit or Disposal Activities addresses therecognition,measurement,and reporting of costs that are associat

173、ed with exit and disposal activities and nullifiesEITF 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to exit an Activity(including Certain Costs Incurred in a Restructuring).Under SFAS No.146,the cost associated with an exit ordisposal activity is recognized in

174、 the periods in which it is incurred rather than at the date the Company commitsto the exit plan.SFAS No.148,Accounting for Stock-Based Compensation Transition Disclosure amends SFASNo.123,Accounting for Stock-Based Compensation to provide alternative methods of transition to the SFASNo.123 fair val

175、ue method of accounting for stock-based compensation.SFAS No.148 also amends thedisclosure provisions of SFAS No.123 and APB Opinion No.28,Interim Financial Reporting,to requiredisclosure in the summary of significant accounting policies of the effects of an entitys accounting policy withrespect to

176、stock-based employee compensation on reported net income and earnings per share in annual andinterim financial statements.FIN 45,Guarantors Accounting and Disclosure Requirements for Guarantees,Including Indirect Guaran-tees of Indebtedness of Others clarifies and elaborates on the requirement for e

177、ntities to recognize a liability andprovide disclosures relating to the fair value of the obligation undertaken in a guarantee.Under FIN 45,theCompany will record a liability at the inception of a transaction representing the fair value of the guarantee andmaintain such liability until it is relieve

178、d of the obligation to stand ready to perform.The interpretation doesnot apply to guarantees such as insurance bonds and bank standby letters of credit.Item 7A.Quantitative and Qualitative Disclosures About Market RiskIncluded in Item 7,Managements Discussion and Analysis Market Risk.14Item 8.Financ

179、ial Statements and Supplementary Data(Financial Statements,Notes to Financial Statements,Quarterly Financial Data)CONSOLIDATED STATEMENTS OF OPERATIONSYear Ended March 31,200320022001Net sales*$49,378,000$47,396,000$44,433,000Costs and expenses:Cost of products sold*40,028,00037,319,00034,637,000Sel

180、ling,general and administrative*10,202,00010,439,0009,494,000Interest expense*99,000150,000328,000Other income*(1,801,000)(3,989,000)Other expense*658,00049,186,00043,919,00044,459,000Income(Loss)before income taxes*192,0003,477,000(26,000)Provision(Benefit)for income taxes*59,0001,172,000(221,000)N

181、et income*$133,000$2,305,000$195,000Per Share DataBasic:Net income*$.08$1.40$.12Diluted:Net income*$.08$1.38$.12See Notes to Consolidated Financial Statements.15CONSOLIDATED BALANCE SHEETSMarch 31,20032002AssetsCurrent assets:Cash and cash equivalents*$217,000$2,901,000Investments*6,446,0002,496,000

182、Trade accounts receivable,net*7,295,00017,053,000Inventories*10,341,0008,342,000Domestic and foreign income taxes receivable*259,000Deferred income tax asset*1,846,0001,218,000Prepaid expenses and other current assets*367,000377,00026,771,00032,387,000Property,plant and equipment,net*9,808,0009,726,

183、000Deferred income tax asset*1,610,0001,585,000Other assets*91,0006,000$38,280,000$43,704,000Liabilities and Shareholders EquityCurrent liabilities:Short-term debt*$1,524,000$1,050,000Current portion of long-term debt*80,00085,000Accounts payable*4,629,0004,333,000Accrued compensation*3,283,0004,444

184、,000Accrued expenses and other liabilities*2,344,0001,100,000Customer deposits*2,132,0006,704,000Domestic and foreign income taxes payable*859,00013,992,00018,575,000Long-term debt*127,000150,000Accrued compensation*244,000680,000Deferred income tax liability*49,00041,000Other long-term liabilities*

185、76,00011,000Accrued pension liability*1,761,0001,398,000Accrued postretirement benefits*3,238,0003,213,000Total liabilities*19,487,00024,068,000Shareholders equity:Preferred stock,$1 par value Authorized,500,000 sharesCommon stock,$.10 par value Authorized,6,000,000 sharesIssued,1,716,572 shares in

186、2003 and in 2002*172,000172,000Capital in excess of par value*4,757,0004,757,000Retained earnings*18,767,00018,888,000Accumulated other comprehensive loss*(2,990,000)(2,178,000)20,706,00021,639,000Less:Treasury stock(68,323 shares in 2003 and 2002)*(1,161,000)(1,161,000)Notes receivable from officer

187、s and directors*(752,000)(842,000)Total shareholders equity*18,793,00019,636,000$38,280,000$43,704,000See Notes to Consolidated Financial Statements.16CONSOLIDATED STATEMENTS OF CASH FLOWSYear Ended March 31,200320022001Operating activities:Net income*$133,000$2,305,000$195,000Adjustments to reconci

188、le net income to net cash provided(used)by operating activities:Depreciation and amortization*911,000956,000948,000(Gain)Loss on sale of property,plant and equipment*16,000(19,000)(51,000)Loss on sale of investments*28,000(Increase)Decrease in operating assets:Accounts receivable*9,940,000(9,089,000

189、)(489,000)Inventories,net of customer deposits*(6,392,000)6,817,000(2,342,000)Domestic and foreign income taxes receivable/payable*(1,117,000)1,347,000(107,000)Prepaid expenses and other current and non-currentassets*(24,000)139,000(139,000)Increase(Decrease)in operating liabilities:Accounts payable

190、,accrued compensation,accruedexpenses and other current and non-current liabilities(53,000)1,395,000739,000Accrued compensation,accrued pension liability andaccrued postretirement benefits*(1,500,000)239,000126,000Deferred income taxes*(17,000)346,000298,000Total adjustments*1,764,0002,159,000(1,017

191、,000)Net cash provided(used)by operating activities*1,897,0004,464,000(822,000)Investing activities:Purchase of property,plant and equipment*(943,000)(688,000)(1,124,000)Proceeds from sale of property,plant and equipment*24,000160,000293,000Purchase of investments*(23,636,000)(5,975,000)Redemption o

192、f investments at maturity*19,800,0008,377,000Collection of notes receivable from officers and directors*90,000Net cash provided(used)by investing activities*(4,665,000)1,874,000(831,000)Financing activities:Increase(Decrease)in short-term debt*357,000(3,122,000)2,207,000Proceeds from issuance of lon

193、g-term debt*4,795,0004,785,00017,504,000Principal repayments on long-term debt*(4,905,000)(5,472,000)(18,988,000)Issuance of common stock*146,00054,000Dividends paid*(172,000)Sale of treasury stock*12,000Net cash provided(used)by financing activities*75,000(3,663,000)789,000Effect of exchange rate o

194、n cash*9,000(20,000)Net increase(decrease)in cash and equivalents*(2,684,000)2,675,000(884,000)Cash and cash equivalents at beginning of year*2,901,000226,0001,110,000Cash and cash equivalents at end of year*$217,000$2,901,000$226,000See Notes to Consolidated Financial Statements.17CONSOLIDATED STAT

195、EMENTS OF CHANGES IN SHAREHOLDERS EQUITYNotesAccumulatedReceivableCapital inOtherfrom OfficersCommon StockExcess ofRetainedComprehensiveTreasuryandShareholdersSharesPar ValuePar ValueEarningsLossStockDirectorsEquityBalance at March 31,2000*1,690,595$169,000$4,521,000$16,898,000$(1,964,000)$(2,532,00

196、0)$17,092,000Net income*195,000195,000Foreign currency translationadjustment*(224,000)(224,000)Total comprehensive loss(29,000)Issuance of shares*7,0501,00053,00054,000Stock option tax benefit*8,0008,000Notes receivable from officersand directors for thepurchase of treasury stock*(7,000)(510,000)1,3

197、71,000$(842,000)12,000Balance at March 31,2001*1,697,645170,0004,575,00016,583,000(2,188,000)(1,161,000)(842,000)17,137,000Net income*2,305,0002,305,000Foreign currency translationadjustment*10,00010,000Total comprehensiveincome*2,315,000Issuance of shares*18,9272,000144,000146,000Stock option tax b

198、enefit*38,00038,000Balance at March 31,2002*1,716,572172,0004,757,00018,888,000(2,178,000)(1,161,000)(842,000)19,636,000Net income*133,000133,000Foreign currency translationadjustment*278,000278,000Minimum pension liabilityadjustment,net of incometax of$587,000.*(1,090,000)(1,090,000)Total comprehen

199、sive loss(679,000)Dividends*(254,000)(254,000)Collection of notes receivablefrom officers and directors*90,00090,000Balance at March 31,2003*1,716,572$172,000$4,757,000$18,767,000$(2,990,000)$(1,161,000)$(752,000)$18,793,000See Notes to Consolidated Financial Statements.18Notes To Consolidated Finan

200、cial StatementsNote 1 The Company and Its Accounting Policies:Graham Corporation and its subsidiaries are primarily engaged in the design and manufacture of vacuumand heat transfer equipment used in the chemical,petrochemical,petroleum refining,and electric powergenerating industries and sell to cus

201、tomers throughout the world.The Companys significant accounting policiesfollow.Principles of consolidation and use of estimates in the preparation of financial statementsThe consolidated financial statements include the accounts of the Company and its wholly-owned domesticand foreign subsidiaries.Al

202、l significant intercompany balances,transactions and profits are eliminated inconsolidation.The preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the reporte

203、damounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements,as well as the related revenues and expenses during the reporting period.Actual amounts could differfrom those estimated.Certain amounts in prior periods have been reclassifi

204、ed to conform to the current presentation.Translation of foreign currenciesAssets and liabilities of foreign subsidiaries are translated into U.S.dollars at currency exchange rates ineffect at year end and revenues and expenses are translated at average exchange rates in effect for the year.Gainsand

205、 losses resulting from foreign currency transactions are included in results of operations.The Companys salesand purchases in foreign currencies are minimal,therefore,foreign currency transaction gains and losses are notsignificant.Gains and losses resulting from translation of foreign subsidiary ba

206、lance sheets are included in aseparate component of shareholders equity.Translation adjustments are not adjusted for income taxes since theyrelate to an investment which is permanent in nature.Revenue recognitionPercentage-of-CompletionThe Company recognizes revenue and all related costs on contract

207、s with a duration in excess of three monthsand with revenues of$1,000,000 and greater using the percentage-of-completion method.The percentage-of-completion is determined by relating actual labor incurred to-date to managements estimate of total labor to beincurred on each contract.Contracts in prog

208、ress are reviewed monthly,and sales and earnings are adjusted incurrent accounting periods based on revisions in contract value and estimated costs at completion.Completed ContractAll contracts with revenue of less than$1,000,000 are accounted for using the completed contract method.The Company reco

209、gnizes revenue and all related costs on these contracts upon substantial completion orshipment to the customer.Substantial completion is consistently defined as at least 95%complete with regard todirect labor hours.Customer acceptance is generally required throughout the construction process and the

210、Company has no further obligations under the contract after the revenue is recognized.Shipping and handling fees and costsShipping and handling fees billed to the customer are classified as revenue and the related costs incurred forshipping and handling are included in cost of goods sold.19Investmen

211、tsInvestments consist primarily of fixed-income debt securities with maturities of beyond three months.Allinvestments are classified as held-to-maturity as the Company has the positive intent and ability to hold thesecurities to maturity.The investments are stated at amortized cost which approximate

212、s fair value.All theinvestments mature within one year.InventoriesInventories are stated at the lower of cost or market.Cost is determined on the first-in,first-out method.Progress payments for orders are netted against inventory to the extent the payment is less than the inventorybalance relating t

213、o the applicable contract.Progress payments that are in excess of the corresponding inventorybalance are presented as customer deposits in the Consolidated Balance Sheets.Property,plant and depreciationProperty,plant and equipment are stated at cost net of accumulated depreciation and amortization.M

214、ajoradditions and improvements are capitalized,while maintenance and repairs are charged to expense as incurred.Depreciation and amortization are provided based upon the estimated useful lives under the straight line method.Estimated useful lives range from approximately five to twenty-five years fo

215、r office and manufacturing equipmentand forty years for buildings and improvements.Upon sale or retirement of assets,the cost and relatedaccumulated depreciation are removed from the accounts and any resulting gain or loss is included in the resultsof operations.Impairment losses are recognized when

216、 the carrying value of an asset exceeds its fair value.TheCompany regularly assesses all of its long-lived assets for impairment.No such impairment losses were requiredin 2003,2002 or 2001.Product warrantiesIn November 2002,the Financial Accounting Standards Board(FASB)issued Interpretation No.45,Gu

217、arantors Accounting and Disclosure Requirements for Guarantees,Including Indirect Guarantees ofIndebtedness of Others.This Interpretation elaborates on the existing disclosure requirements for mostguarantees in interim and annual financial statements and changes the accounting for obligations undert

218、aken inissuing guarantees.The disclosure requirements,which are applicable to the Company with regard to productwarranties,are effective for financial statements of interim or annual periods ending after December 15,2002.The Company provides a liability for product warranty claims at the time revenu

219、e is recognized.The reservefor product warranties is based upon past claims experience and ongoing evaluations of any specific probableclaims from customers.A reconciliation of the changes in the product warranty liability is presented in Note 4 ofthe Notes to Consolidated Financial Statements.Incom

220、e taxesThe Company recognizes deferred income tax assets and liabilities for the expected future tax consequencesof events that have been recognized in the Companys financial statements or tax returns.Deferred income taxassets and liabilities are determined based on the difference between the financ

221、ial statement and tax bases ofassets and liabilities using currently enacted tax rates.The Company evaluates the available evidence about futuretaxable income and other possible sources of realization of deferred income tax assets and records a valuationallowance to reduce deferred income tax assets

222、 to an amount that represents the Companys best estimate of theamount of such deferred income tax assets that more likely than not will be realized.Stock-based compensationIn 2003,the Company adopted Statement of Financial Accounting Standards(SFAS)No.148,Accounting for Stock-Based Compensation Tran

223、sition and Disclosure.This standard provides alternativemethods of transition for a voluntary change to the fair value based method of accounting for stock-basedemployee compensation.Additionally,the standard also requires prominent disclosures in the Companys20financial statements about the method

224、of accounting used for stock-based employee compensation,and the effectof the method used when reporting financial results.The Company accounts for stock-based compensation in accordance with SFAS No.123,Accounting forStock-Based Compensation.As permitted by SFAS No.123,the Company continues to meas

225、ure compensationfor such plans using the intrinsic value based method of accounting,prescribed by Accounting Principles Board(APB),Opinion No.25,Accounting for Stock Issued to Employees.Accordingly,compensation cost for stockoptions is measured as the excess,if any,of the quoted market price of the

226、Companys stock at the date of grantover the amount an employee must pay to acquire the stock.Compensation cost for share equivalent units isrecorded based on the quoted market price of the Companys stock at the end of the period.Under the intrinsic value method,no compensation expense has been recog

227、nized for its stock option plans.Had compensation cost for the Companys two stock option plans been determined based on the fair value at thegrant date for awards under those plans in accordance with the optional methodology prescribed under SFASNo.123,the Companys net income and net income per shar

228、e would have been the pro forma amounts indicatedbelow:200320022001Net income*As reported$133,000$2,305,000$195,000Stock-based employee compensation cost net ofrelated tax benefits*69,000151,000115,000Pro forma net income*$64,000$2,154,000$80,000Basic income per share*As reported$.08$1.40$.12Pro for

229、ma$.04$1.30$.05Diluted income per share*As reported$.08$1.38$.12Pro forma$.04$1.29$.05The weighted average fair value of the options granted during 2003,2002,and 2001 is estimated as$2.88,$5.85,and$5.15,respectively,using the Black Scholes option pricing model with the following weighted averageassu

230、mptions:200320022001Expected life*5 years5 years5 yearsVolatility*50.00%50.72%44.04%Risk-free interest rate*2.81%4.75%5.78%Dividend yield*2.35%0%0%Per share dataBasic earnings per share is computed by dividing net income by the weighted average number of commonshares outstanding for the period.Commo

231、n shares outstanding includes share equivalent units which arecontingently issuable shares.Diluted earnings per share is calculated by dividing net income by the weightedaverage number of common and,when applicable,potential common shares outstanding during the period.Areconciliation of the numerato

232、rs and denominators of basic and diluted earnings per share is presented below.21200320022001Basic earnings per shareNumerator:Net income*$133,000$2,305,000$195,000Denominator:Weighted common shares outstanding*1,648,0001,639,0001,588,000Share equivalent units(SEU)outstanding*15,00011,00011,000Weigh

233、ted average shares and SEUs outstanding*1,663,0001,650,0001,599,000Basic earnings per share*$.08$1.40$.12Diluted earnings per shareNumerator:Net income*$133,000$2,305,000$195,000Denominator:Weighted average shares and SEUs outstanding*1,663,0001,650,0001,599,000Stock options outstanding*9,00020,0001

234、4,000Contingently issuable SEUs*1,000Weighted average common and potential common sharesoutstanding*1,672,0001,671,0001,613,000Diluted earnings per share*$.08$1.38$.12Options to purchase shares of common stock,which totaled 136,000,138,350 and 116,500 in 2003,2002and 2001,respectively,were not inclu

235、ded in the computation of diluted earnings per share as the effect would beanti-dilutive.Cash flow statementThe Company considers all highly liquid investments with a maturity of three months or less whenpurchased to be cash equivalents.Actual interest paid was$97,000 in 2003,$161,000 in 2002,and$31

236、9,000 in 2001.In addition,actualincome taxes paid(refunded)were$1,194,000 in 2003,$(521,000)in 2002,and$(376,000)in 2001.Non cash activities during 2003,2002,and 2001 included capital expenditures totaling$76,000,$112,000and$93,000,respectively,which were financed through the issuance of capital lea

237、ses.In addition,in 2003 aminimum pension liability adjustment,net of an income tax benefit,was recognized totaling$1,090,000 anddividends of$82,000 were recorded but not paid.Accumulated other comprehensive lossComprehensive income(loss)is comprised of net income and other comprehensive income or lo

238、ss items,which are reflected as a separate component of equity.For the Company,other comprehensive income or lossitems include a foreign currency translation adjustment and a minimum pension liability adjustment.Accounting and Reporting ChangesOn April 1,2002,the Company adopted Statement of Financi

239、al Accounting Standards(SFAS)No.144,Accounting for the Impairment or Disposal of Long-Lived Assets.There was no effect on the Companysconsolidated financial position,results of operations or cash flows resulting from the adoption of SFAS No.144during fiscal year 2003.In June 2002,the Financial Accou

240、nting Standards Board(FASB)issued SFAS No.146,Accounting forCosts Associated with Exit or Disposal Activities.This Statement was effective for exit or disposal activitiesinitiated after December 31,2002.The Company adopted SFAS No.146 effective January 1,2003.During thefourth quarter of fiscal year

241、2003,the Company restructured its US workforce and offered one-time termination22benefits to the terminated employees.The liability for these termination benefits was recognized in accordancewith SFAS No.146 and the related charge is included in the caption Other Income in the 2003 ConsolidatedState

242、ment of Operations.In December 2002,the FASB issued SFAS No.148 Accounting for Stock-Based Compensation Transition and Disclosure.This Statement amends SFAS No.123,Accounting for Stock-Based Compensa-tion to provide alternative methods of transition for an entity that changes to the fair value based

243、 method ofaccounting for stock-based employee compensation and changes the disclosure requirements.This statement waseffective for financial statements for fiscal years ending after December 15,2002.The Company adopted SFASNo.148 effective January 1,2003.The Company currently has no plans to volunta

244、rily change to the fair valuemethod,however,the necessary disclosure requirements of SFAS No.148 are presented in Note 1 of the Notes toConsolidated Financial Statements.Note 2 Inventories:Major classifications of inventories are as follows:20032002Raw materials and supplies*$2,417,000$2,257,000Work

245、 in process*14,968,00013,322,000Finished products*1,937,0001,724,00019,322,00017,303,000Less progress payments*8,907,0008,871,000inventory reserve*74,00090,000$10,341,000$8,342,000Note 3 Property,Plant and Equipment:Major classifications of property,plant and equipment are as follows:20032002Land*$2

246、89,000$281,000Buildings and improvements*10,884,00010,635,000Machinery and equipment*17,341,00016,454,000Construction in progress*8,0008,00028,522,00027,378,000Less accumulated depreciation and amortization*18,714,00017,652,000$9,808,000$9,726,000Note 4 Product Warranty Liability:The reconciliation

247、of the changes in the product warranty liability is as follows:20032002Balance at beginning of year*$182,000$137,000Expense for product warranties*641,000284,000Product warranty claims paid*(231,000)(239,000)Balance at end of year*$592,000$182,000The increase in expense for product warranties does n

248、ot represent an upward trend and relates to provisionsfor specific claims that were under negotiation at year end.23Note 5 Leases:The Company leases equipment and office space under various operating leases.Rent expense applicable tooperating leases was$159,000,$123,000,and$150,000 in 2003,2002,and

249、2001,respectively.Property,plant and equipment include the following amounts for leases which have been capitalized.20032002Machinery and equipment*$1,835,000$1,663,000Less accumulated amortization*1,390,0001,132,000$445,000$531,000Amortization of machinery and equipment under capital lease amounted

250、 to$167,000,$149,000,and$133,000 in 2003,2002,and 2001,respectively,and is included in depreciation expense.As of March 31,2003,future minimum payments required under non-cancelable leases are:OperatingCapitalLeasesLeases2004*$118,000$101,0002005*93,00054,0002006*39,00052,0002007*18,00034,0002008*1,

251、0008,000Total minimum lease payments*$269,000249,000Less amount representing interest*42,000Present value of net minimum lease payments*$207,000Note 6 Debt:Short-Term Debt Due BanksThe Company and its subsidiaries had short-term borrowings outstanding as follows:20032002Borrowings of United Kingdom

252、subsidiary under line of credit at banksrate plus 11/2%*$1,524,000$1,050,000The United Kingdom subsidiary has a revolving credit facility agreement which provides a line of credit of1,070,000 pounds sterling($1,691,000 at the March 31,2003 exchange rate)including letters of credit throughJune 30,200

253、3.The interest rate is the banks rate plus 11/2%.The banks base rate was 3.75%and 4%atMarch 31,2003 and 2002,respectively.The United Kingdom operations had available unused lines of credit of$17,000 at March 31,2003.The United Kingdom short-term bank borrowings are collateralized by assets of theUni

254、ted Kingdom subsidiary which have a book value of$673,000 at March 31,2003.The United States operationdoes not provide a corporate guarantee or any security for the United Kingdom revolving credit facility.Theweighted average interest rate on short-term borrowings in 2003 and 2002 was 3.5%and 4.4%,r

255、espectively.24Long-Term DebtThe Company and its subsidiaries had long-term borrowings outstanding as follows:20032002Capital lease obligations(Note 5)*$207,000$235,000Less:current amounts*80,00085,000$127,000$150,000The United States revolving credit facility agreement provides a line of credit of u

256、p to$13,000,000 includingletters of credit,through October 31,2005.The agreement allows the Company to borrow at prime minus avariable percentage based upon certain financial ratios.The Company was able to borrow at a rate of prime minus75 basis points at March 31,2003 and prime minus 125 basis poin

257、ts at March 31,2002.The agreement allows the Company at any time to convert balances outstanding not less than$2,000,000 andup to$9,000,000 into a two-year term loan.Under this conversion feature which is available through October2005,the Company may convert the principal outstanding on the revolvin

258、g line of credit to a two-year term loan.The banks prime rate was 4.25%and 4.75%at March 31,2003 and 2002,respectively.The United Statesoperations had available unused lines of credit of$11,756,000 at March 31,2003.With the exception of capital leases,there are no long-term debt payment requirements

259、 over the next fiveyears.The Company is required to pay commitment fees of 1/4%on the unused portion of the domestic revolvingcredit facility.No other financing arrangements require compensating balances or commitment fees.The loan agreements contain provisions pertaining to the maintenance of minim

260、um working capitalbalances,tangible net worth and financial ratios as well as restrictions on the payment of cash dividends toshareholders and incurrence of additional long-term debt.In addition,the United States operations cannot makeany loans or advances exceeding$500,000 to any affiliates without

261、 prior consent of the bank.Note 7 Financial Instruments and Derivative Financial InstrumentsConcentrations of Credit Risk:Financial instruments that potentially subject the Company to concentrations of credit risk consistprincipally of cash,cash equivalents,investments,and trade accounts receivable.

262、The Company places its cash,cash equivalents,and investments with high credit quality financial institutions and actively evaluates the creditworthiness of these financial institutions.Concentrations of credit risk with respect to trade accounts receivableare limited due to the large number of custo

263、mers comprising the Companys customer base and their geographicdispersion.At March 31,2003 and 2002,the Company had no significant concentrations of credit risk.Letters of Credit:The Company has entered into standby letter of credit agreements with financial institutions relating to theguarantee of

264、future performance on certain contracts.At March 31,2003 and 2002,the Company wascontingently liable on outstanding standby letters of credit aggregating$1,394,000 and$558,000,respectively.Foreign Exchange Risk Management:The Company,as a result of its global operating and financial activities,is ex

265、posed to market risks fromchanges in foreign exchange rates.In seeking to minimize the risks and/or costs associated with such activities,the Company may utilize foreign exchange forward contracts with fixed dates of maturity and exchange rates.The Company does not hold or issue financial instrument

266、s for trading or other speculative purposes and onlycontracts with high quality financial institutions.If the counterparties to the exchange contracts do not fulfill theirobligations to deliver the contracted foreign currencies,the Company could be at risk for fluctuations,if any,25required to settl

267、e the obligation.At March 31,2003 and 2002,there were no foreign exchange forward contractsheld by the Company.Fair Value of Financial Instruments:The estimates of the fair value of financial instruments are summarized as follows:Investments The fair value of investments at March 31,2003 and 2002 ap

268、proximated the carryingvalue.Short-term debt The carrying value of short-term debt approximates fair value due to the short-term maturity of this instrument.Long-term debt The carrying values of credit facilities with variable rates of interest approximatefair values.Note 8 Income Taxes:An analysis

269、of the components of pre-tax income(loss)is presented below:200320022001United States*$305,000$2,751,000$(81,000)United Kingdom*(113,000)726,00055,000$192,000$3,477,000$(26,000)The provision(benefit)for income taxes consists of:Current:Federal*$36,000$695,000$(555,000)State*41,000131,00036,00077,000

270、826,000(519,000)Deferred:Federal*26,000111,000274,000State*(27,000)14,00011,000United Kingdom*(17,000)221,00013,000(18,000)346,000298,000Total provision(benefit)for income taxes*$59,000$1,172,000$(221,000)26The reconciliation of the provision(benefit)calculated using the United States federal tax ra

271、te with theprovision for income taxes presented in the financial statements is as follows:200320022001Provision(Benefit)for income taxes at federal rate*$65,000$1,182,000$(9,000)Difference between foreign and U.S.tax rates*4,000(29,000)(1,000)State taxes*100,00035,000Charges not deductible for incom

272、e tax purposes*72,00059,00029,000Recognition of tax benefit generated by extraterritorial incomeexclusion*(79,000)(121,000)Recognition of tax benefit generated by foreign salescorporation*(98,000)Tax credits*(3,000)(14,000)(11,000)Reversal of tax reserve*(172,000)Other*(5,000)6,000Provision(Benefit)

273、for income taxes*$59,000$1,172,000$(221,000)The deferred income tax asset(liability)recorded in the Consolidated Balance Sheets results fromdifferences between financial statement and tax reporting of income and deductions.A summary of thecomposition of the deferred income tax asset follows:20032002

274、UnitedUnitedUnitedUnitedStatesKingdomStatesKingdomDepreciation*$(781,000)$(49,000)$(628,000)$(36,000)Accrued compensation*402,000446,000Accrued pension liability*631,000436,000Accrued postretirement benefits*1,319,0001,309,000Compensated absences*537,000563,000Inventories*208,000107,0001,00067,000Wa

275、rranty liability*231,00071,000Restructuring reserve*152,000Liquidated damages liability*41,000Foreign loss carryforwards*699,000644,000New York State investment tax credit*138,000107,000Other*94,00079,000(5,000)2,972,000757,0002,384,000670,000Less:Valuation allowance*(322,000)(292,000)Deferred incom

276、e tax asset*$2,972,000$435,000$2,384,000$378,000Deferred income taxes include the impact of foreign net operating loss carryforwards which may be carriedforward indefinitely and investment tax credits which expire from 2008 to 2018.A valuation allowance of$322,000 at March 31,2003 is deemed adequate

277、 to reserve for the foreign net loss carryforwards which are notconsidered probable of realization.The Company does not provide for additional U.S.income taxes on undistributed earnings consideredpermanently invested in its United Kingdom subsidiary.At March 31,2003,such undistributed earnings total

278、ed$1,221,000.It is not practicable to determine the amount of income taxes that would be payable upon theremittance of assets that represent those earnings.27Note 9 Employee Benefit Plans:Retirement PlansThe Company has a qualified defined benefit plan covering employees in the United States which i

279、s non-contributory.Benefits are based on the employees years of service and average earnings for the five highestconsecutive calendar years of compensation for the ten year period preceding retirement.The Companys fundingpolicy for the plan is to contribute the amount required by the Employee Retire

280、ment Income Security Act of1974.The components of pension cost are:200320022001Service cost-benefits earned during the period*$398,000$372,000$352,000Interest cost on projected benefit obligation*892,000826,000768,000Expected return on assets*(759,000)(908,000)(884,000)Amortization of:Transition ass

281、et*(44,000)(44,000)(44,000)Unrecognized prior service cost*4,000Actuarial loss*81,000Net pension cost*$572,000$246,000$192,000The actuarial assumptions are:Discount rate used to determine projected benefit obligation*63/4%71/4%71/4%Rate of increase in compensation levels*3%3%3%Expected rate of retur

282、n on plan assets*9%9%9%Changes in the Companys benefit obligation,plan assets and funded status for the pension plan arepresented below:20032002Change in the benefit obligationProjected benefit obligation at beginning of year*$12,388,000$11,619,000Service cost*361,000335,000Interest cost*892,000826,

283、000Plan amendments*58,000Actuarial loss*1,170,00012,000Benefit payments*(407,000)(404,000)Projected benefit obligation at end of year*$14,462,000$12,388,000Change in fair value of plan assetsFair value of plan assets at beginning of year*$8,517,000$10,268,000Actual return on plan assets*(1,207,000)(

284、1,294,000)Employer contribution*1,995,000Benefit and administrative expense payments*(407,000)(457,000)Fair value of plan assets at end of year*$8,898,000$8,517,0002820032002Funded statusFunded status at end of year*$(5,564,000)$(3,872,000)Unrecognized transition obligation*(60,000)(103,000)Unrecogn

285、ized prior service cost*51,000(2,000)Unrecognized actuarial loss*5,326,0002,309,000Net amounts recognized*$(247,000)$(1,668,000)The Company recognized an additional minimum pension liability for the underfunded defined benefit plan.The additional minimum pension liability is equal to the excess of t

286、he accumulated benefit obligation over planassets and the accrued liability.Amounts recognized in the Consolidated Balance Sheets consist of the following:20032002Accrued benefit liability*$(1,975,000)$(1,668,000)Intangible asset*51,000Deferred tax asset*587,000Accumulated other comprehensive income

287、*1,090,000$(247,000)$(1,668,000)The current portion of the pension liability as of March 31,2003 and 2002 is included in the captionAccrued Compensation and the long-term portion is separately presented in the Consolidated Balance Sheets.Assets of the United States plan consist primarily of equity s

288、ecurities at March 31,2003 and 2002.Theunrecognized net asset at transition is being amortized over the remaining service lives of the participants whichapproximates 19 years.The Company has a Supplemental Executive Retirement Plan which provides retirement benefits associatedwith wages in excess of

289、 the legislated qualified plan maximums.Pension expense recorded in 2003,2002,and2001 related to this plan was$27,000,$26,000,and$0,respectively.At March 31,2003 and 2002,the relatedliability was$145,000 and$118,000,respectively,and is included in the caption Accrued Pension Liability inthe Consolid

290、ated Balance Sheets.The Company has defined contribution plans covering substantially all employees.Company contributionsto the domestic plan are based on the profitability of the Company and amounted to$0,$669,000,and$43,000 in2003,2002,and 2001,respectively.Company contributions to the United King

291、dom plan are based on apercentage of base salary which varies with the participants age.Company contributions were$120,000,$73,000and$69,000 in 2003,2002 and 2001,respectively.The Company has a deferred compensation plan that allows certain key employees to defer a portion of theircompensation.The p

292、rincipal and interest earned on the deferred balances are payable upon retirement.Theaccrued compensation liability under this plan was$561,000 and$647,000 at March 31,2003 and 2002,respectively.Other Postretirement BenefitsIn addition to providing pension benefits,the Company has a United States pl

293、an which provides health carebenefits for eligible retirees and eligible survivors of retirees.29The components of postretirement benefit cost are:200320022001Service cost benefits earned during the period*$50,000$50,000$51,000Interest cost on accumulated benefit obligation*182,000180,000176,000Amor

294、tization of prior service cost*(87,000)(87,000)(87,000)Net postretirement benefit cost*$145,000$143,000$140,000The assumptions used to develop the accrued postretirement benefit obligation were:200320022001Discount rate*63/4%71/4%71/4%Medical care cost trend rate*8%81/2%7%The medical care cost trend

295、 rate used in the actuarial computation ultimately reduces to 41/2%in 2010 andsubsequent years.This was accomplished using 1/2%decrements for the years 2004 through 2010.Changes in the Companys benefit obligation,plan assets and funded status for the plan are as follows:20032002Change in the benefit

296、 obligationProjected benefit obligation at beginning of year*$2,650,000$2,567,000Service cost*50,00050,000Interest cost*182,000180,000Participant contributions*35,00030,000Actuarial(gain)loss*63,000(2,000)Benefit payments*(154,000)(175,000)Projected benefit obligation at end of year*$2,826,000(1)$2,

297、650,000Change in fair value of plan assetsFair value of plan assets at beginning of year*$0$0Employer contribution*119,000145,000Participants contributions*35,00030,000Benefit payments*(154,000)(175,000)Fair value of plan assets at end of year*$0$0Funded statusFunded status at end of year*$(2,826,00

298、0)$(2,650,000)Unrecognized prior service cost*(522,000)(609,000)Unrecognized actuarial gain*(35,000)(99,000)Net amounts recognized*$(3,383,000)(1)$(3,358,000)(1)On February 4,2003,the Employee Benefits Committee of the Board of Directors of the Board of Directorsirrevocably terminated postretirement

299、 health care benefits for current US employees,however,benefitspayable to retirees of record on April 1,2003 remained unchanged.The accrued postretirement benefitliability included in the Consolidated Balance Sheet at March 31,2003 does not reflect the reduced obligationto plan participants due to t

300、he plan curtailment and negative plan amendment,which is approximately$2,322,000.The liability will be reduced and the related income will be recognized over the next 12 years.The current portion of the postretirement benefit obligation is included in the caption Accrued Compensa-tion and the long-t

301、erm portion is separately presented in the Consolidated Balance Sheets.30Assumed medical care cost trend rates could have a significant effect on the amounts reported for thepostretirement benefit plan.However,due to the caps imposed on the Companys share of the premium costs,aone percentage point c

302、hange in assumed medical care cost trend rates would not have a significant effect on thetotal service and interest cost components or the postretirement benefit obligation.Note 10 Stock Compensation Plans:The 2000 Graham Corporation Incentive Plan to Increase Shareholder Value provides for the issu

303、ance of upto 150,000 shares of common stock in connection with grants of incentive stock options and non-qualified stockoptions to officers,key employees and outside directors.The options may be granted at prices not less than thefair market value at the date of grant and expire no later than ten ye

304、ars after the date of grant.The 1995 Graham Corporation Incentive Plan to Increase Shareholder Value provides for the issuance of upto 192,000 shares of common stock in connection with grants of incentive stock options and non-qualified stockoptions to officers,key employees and outside directors.Th

305、e options may be granted at prices not less than thefair market value at the date of grant and expire no later than ten years after the date of grant.The Company has a Long-Term Incentive Plan which provides for awards of share equivalent units foroutside directors based upon the Companys performanc

306、e.Each unit is equivalent to one share of the Companyscommon stock.Share equivalent units are credited to each outside directors account for each of the first five fullfiscal years of the directors service when the profit target of$500,000 is met.The share equivalent units arepayable in cash or stoc

307、k upon retirement.The cost of performance units earned and charged to pre-tax incomeunder this Plan in 2003,2002,and 2001 was$0,$50,000,and$0,respectively.Information on options under the Companys plans is as follows:WeightedOptionSharesAveragePriceUnderExerciseRangeOptionPriceOutstanding at March 3

308、1,2000*$6.58-21.44182,250$13.54Granted*$11.0031,000$11.00Exercised*$6.58-8.42(7,050)$7.71Expired*$21.44(8,700)$21.44Outstanding at March 31,2001*$6.58-21.44197,500$13.00Granted*$11.70-12.1037,750$11.77Exercised*$6.58-8.08(18,927)$7.66Expired*$8.00-21.44(18,150)$18.45Outstanding at March 31,2002*$7.5

309、0-21.44198,173$12.78Granted*$7.5032,000$7.50Cancelled*$21.44(4,200)$21.44Outstanding at March 31,2003*$7.50-21.44225,973$11.87At March 31,2003,the options outstanding had a weighted average remaining contractual life of 6.42 years.There were 224,773 options exercisable at March 31,2003 which had a w

310、eighted average exercise price of$11.84.The remaining options are exercisable at a rate of 20 percent per year from the date of grant.Theoutstanding options expire May 2003 to October 2012.Options available for future grants were 128,750 atMarch 31,2003 and 156,550 at March 31,2002.Note 11 Sharehold

311、er Rights Plan:On July 27,2000 the Company adopted a Shareholder Rights Plan.Under the Plan,as of September 11,2000,one share Purchase Right(Right)is attached to each outstanding share of Common Stock.When and if31the Rights become exercisable,each Right would entitle the holder of a share of Common

312、 Stock to purchase fromthe Company one one-hundredth(1/100)interest in a share of Series A Junior Participating preferred stock,at aprice of$45.00 per one one-hundredth(1/100)interest in a share of preferred stock,subject to adjustment.TheRights become exercisable upon certain events:(i)if a person

313、or group of affiliated persons acquires 15%or moreof the Companys outstanding Common Stock;or(ii)if a person or group commences a tender offer for 15%ormore of the Companys outstanding Common Stock.The Company may redeem the Rights for$.01 per Right at any time prior to the acquisition by a person o

314、rgroup of affiliated persons of beneficial ownership of 15%or more of the Companys outstanding common stock(Acquiring Person).In the event that any person or group of affiliated persons become an Acquiring Person,each holder of aRight other than Rights beneficially owned by the Acquiring Person will

315、 have the right to receive upon exercise anumber of shares of Common Stock having a market value of twice the purchase price of the Right.In the eventthat the Corporation is acquired in a merger or other business combination transaction or fifty percent(50%)ormore of its consolidated assets or earni

316、ng power is sold,each holder of a Right will have the right to receive,upon exercise,a number of shares of common stock of the acquiring corporation that at the time of suchtransaction will have a market value of two(2)times the purchase price of the Right.Note 12 Other Income and Expense:During fis

317、cal year 2003,an order from a customer in the electric power generating industry that waspreviously suspended was cancelled.The contract for the cancelled order entitled the Company to a cancellationcharge of$2,155,000,which was paid to the Company in March 2003.This income,net of costs incurred on

318、thecontract of$354,000,is presented in the caption Other Income in the 2003 Consolidated Statement ofOperations.In January 2003,the workforce in the United States was restructured by eliminating positions at the staff andsenior management levels in an effort to reduce costs.As a result,a restructuri

319、ng charge of$658,000 wasrecognized,which included severance and related employee benefit costs.This charge is also included in thecaption Other Expense in the 2003 Consolidated Statement of Operations.As of March 31,2003,the liabilityincluded in the Consolidated Balance Sheet related to this restruc

320、turing is$390,000.In January 2002,the Company received notice from a customer to cancel four orders for the electric powergenerating industry.The contracts for the cancelled orders entitled the Company to cancellation chargesamounting to$4,168,000 which was paid to the Company in April 2002.This inc

321、ome,net of costs incurred onthe contracts of$179,000,is presented separately in the caption Other Income in the 2002 ConsolidatedStatement of Operations.Note 13 Related Party Transactions:In April 2000,the Board of Directors adopted a Long-Term Stock Ownership Plan to encourage officers anddirectors

322、 to broaden their equity ownership in the Company.The Board authorized the sale under the Plan of upto 160,000 shares of the Companys common stock that was held as treasury stock.Of the amount authorized,eligible participants purchased 117,800 shares at fair market value.The eligible participants pa

323、id cash equal tothe par value of the shares and a note receivable was recorded by the Company for the remaining balance due onthe purchase of the shares.The notes receivable are fixed rate interest bearing notes with a term of ten years.Thenotes are repayable in equal quarterly installments beginnin

324、g June 30,2002.The notes,which are full recoursenotes,contain certain provisions which grant a security interest to the Company in the shares and any proceedsfrom the sale of the shares.Note 14 Segment Information:The Companys business consists of two operating segments based upon geographic area.Th

325、ese segmentswere determined based upon the manner in which financial information is used by management in operating theCompany.The United States segment designs and manufactures heat transfer and vacuum equipment.Heat32transfer equipment includes surface condensers,Heliflows,water heaters and variou

326、s types of heat exchangers.Vacuum equipment includes steam jet ejector vacuum systems and liquid ring vacuum pumps.These products aresold individually or combined into package systems for use in several industrial markets.The Company alsoservices and sells spare parts for its equipment.The operating

327、 segment located in the United Kingdommanufactures vacuum equipment which includes liquid ring vacuum pumps,Dryflo pumps,piston pumps,ejectors and complete vacuum pump systems.Intersegment sales represent intercompany sales made based upon a competitive pricing structure.Allintercompany profits in i

328、nventory are eliminated in the consolidated accounts and are included in the eliminationscaption below.In computing segment net income or loss,corporate expenses incurred by the United Statessegment have been charged to the United Kingdom segment on a management fee basis.Operating segmentinformatio

329、n is presented below:200320022001Sales to external customers:U.S.*$43,960,000$41,085,000$40,665,000U.K.*5,418,0006,311,0003,768,000Total*$49,378,000$47,396,000$44,433,000Intersegment sales:U.S.*$34,000$30,000$21,000U.K.*1,432,0001,121,0001,607,000Total*$1,466,000$1,151,000$1,628,000Interest income:U

330、.S.*$32,000$77,000$342,000U.K.*Total*$32,000$77,000$342,000Interest expense:U.S.*$46,000$89,000$294,000U.K.*53,00061,00034,000Total*$99,000$150,000$328,000Depreciation and amortization:U.S.*$704,000$774,000$776,000U.K.*207,000182,000172,000Total*$911,000$956,000$948,000Income tax provision(benefit):

331、U.S.*$54,000$964,000$(199,000)U.K.*(17,000)221,00013,000Total*$37,000$1,185,000$(186,000)Segment net income(loss):U.S.*$186,000$1,826,000$224,000U.K.*(96,000)505,00041,000Total*$90,000$2,331,000$265,00033200320022001Segment assets:U.S.*$36,032,000$42,446,000$35,737,000U.K.*6,026,0005,127,0004,665,00

332、0Total*$42,058,000$47,573,000$40,402,000Expenditures for long-lived assets:U.S.*$800,000$607,000$1,025,000U.K.*143,00081,00099,000Total*$943,000$688,000$1,124,000The operating segment information above is reconciled to the consolidated totals as follows:200320022001Net salesTotal sales for operating

333、 segments*$50,844,000$48,547,000$46,061,000Elimination of intersegment sales*(1,466,000)(1,151,000)(1,628,000)Net sales*$49,378,000$47,396,000$44,433,000Income tax provision(benefit)Total segment income tax provision(benefit)*$37,000$1,185,000$(186,000)Eliminations*22,000(13,000)(35,000)Provision(Benefit)for income taxes*$59,000$1,172,000$(221,000)Net incomeTotal segment net income*$90,000$2,331,0