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What changed in GRAHAM CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GRAHAM CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+335 added−281 removedSource: 10-K (2023-06-08) vs 10-K (2022-06-09)

Top changes in GRAHAM CORP's 2023 10-K

335 paragraphs added · 281 removed · 199 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

109 edited+65 added−28 removed127 unchanged
Biggest changeWe design and manufacture custom-engineered vacuum, heat transfer, pump and turbomachinery technologies. Our corporate headquarters is located in Batavia, New York. We have production facilities co-located with our headquarters in Batavia. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN") is based in Arvada, Colorado (see "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd.
Biggest changeOur wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops and manufactures specialty turbomachinery products for the aerospace, cryogenic, defense and energy markets (see "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India.
Although interest rates have increased and are expected to increase further, inflation may continue. Further, increased interest rates could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the market price of our common stock.
Although interest rates have increased and are expected to increase further, inflation may continue. Further, increased interest rates could have a negative effect on the securities markets generally which may, in turn, have a material and adverse effect on the market price of our common stock.
Open orders are reviewed continuously through communications with customers. If it becomes evident to us 15 that a project is delayed well beyond its original shipment date, management will move the project into "placed on hold" (i.e., suspended) category. Furthermore, if a project is cancelled by our customer, it is removed from our backlog.
Open orders are reviewed continuously through communications with 15 customers. If it becomes evident to us that a project is delayed well beyond its original shipment date, management will move the project into "placed on hold" (i.e., suspended) category. Furthermore, if a project is cancelled by our customer, it is removed from our backlog.
Any determination by our Board of Directors regarding dividends will depend on a variety of factors, including our future financial performance, organic growth opportunities, general economic conditions and financial, competitive, regulatory, and other factors, many of which are beyond our control. There can be no guarantee that we will pay dividends in the future.
Any determination by our Board of Directors regarding dividends in the future will depend on a variety of factors, including our future financial performance, organic growth opportunities, general economic conditions and financial, competitive, regulatory, and other factors, many of which are beyond our control. There can be no guarantee that we will pay dividends in the future.
The results of operations and future prospects of our Chinese subsidiary may be adversely affected by, among other things, changes in China's political, economic and social conditions, including as a result of the COVID-19 pandemic, changes in the relationship between China and its western trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of existing laws and 14 regulations, changes in foreign exchange regulations, measures that may be introduced to control inflation, such as interest rate increases and changes in the rates or methods of taxation.
The results of operations and future prospects of our subsidiary in China may be adversely affected by, among other things, changes in China's political, economic and social conditions, including as a result of the COVID-19 pandemic, changes in the relationship between China and its western trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of existing laws and regulations, changes in foreign exchange regulations, measures that may be introduced to control inflation, such as interest rate increases and changes in the rates or methods of taxation.
For example, our equipment is installed in facilities that operate dangerous processes and the misapplication, improper installation or failure of our equipment may result in exposure to potentially hazardous substances, personal injury or property damage. In addition, BN produces certain products in large quantities which could also expose us to potential product liability claims.
For example, our equipment is installed in facilities that operate dangerous processes and the misapplication, improper installation or failure of our equipment may result in exposure to potentially hazardous substances, personal injury or property damage. In addition, BN produces certain products in large quantities which could also expose us to potential product warranty and liability claims.
For our customers’ complex, custom orders we typically manage very rigorous interaction between our project management teams and the end user or its engineering firm, as product design and quality requirements are finalized. Customer supplier selection process begins by assessing these order management capabilities. • We maintain a responsive, flexible production environment.
For our customers’ complex, custom orders we typically manage very rigorous interaction between our project management teams and the end user or its engineering firm, as product design and quality requirements are finalized. Customers' supplier selection process begins by assessing these order management capabilities. • We maintain a responsive, flexible production environment.
In addition, our current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that increase their ability to address the needs of our customers. 12 Moreover, customer buying patterns can change if customers become more price sensitive and accepting of lower cost suppliers.
In addition, our current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that increase their ability to address the needs of our customers. Moreover, customer buying patterns can change if customers become more price sensitive and accepting of lower cost suppliers.
Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies. Strength of the U.S. dollar compared with the Euro or Asian currencies may put us in a less competitive position.
Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies. Strength of the U.S. dollar compared with the Euro, India, or Asian currencies may put us in a less competitive position.
An inflationary environment can increase our cost of labor, as well as our other operating costs, which may have a material adverse impact on our financial results. In addition, economic conditions could impact and reduce the number of customers who purchase our products 9 or services as credit becomes more expensive or unavailable.
An inflationary environment can increase our cost of labor, as well as other operating costs, which may have a material and adverse impact on our financial results. In addition, economic conditions could impact and reduce the number of customers who purchase our products or services as credit becomes more expensive or unavailable.
Any of the foregoing could have a material adverse effect on our business and results of operations. In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products infringe upon their intellectual property rights.
Any of the foregoing could have a material adverse effect on our business and results of operations. 17 In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products infringe upon their intellectual property rights.
In addition, changes in demand could result from increased competition from local Chinese manufacturers who have cost advantages or who may be preferred suppliers for Chinese end users. Also, Chinese commercial laws, regulations and interpretations applicable to non-Chinese owned market participants, such as us, are continually changing.
In addition, changes in demand could result from increased competition from local Chinese manufacturers who have cost advantages or who may be preferred suppliers for Chinese end users. Also, China's commercial laws, regulations and interpretations applicable to non-Chinese owned market participants, such as us, are continually changing.
Our bylaws provide for a classified Board of Directors, with only approximately one-third of our Board elected each year. This provision makes it more difficult to effect a change of control because at least two annual stockholder meetings are necessary to replace a majority of our directors. • Our bylaws contain advance notice requirements .
Our bylaws provide for a classified Board of Directors, with only approximately one-third of our Board elected each year. This provision makes it more difficult to effect a change of control because at least two annual stockholder meetings are necessary to replace a majority of our directors. 19 • Our bylaws contain advance notice requirements .
Our Products, Customers and Markets We manufacture critical, custom-engineered products with high quality and reliability including: • Defense Power plant systems - ejectors, surface condensers Torpedo ejection & power systems - turbines, alternators, regulators, pumps, blowers Thermal management systems - pumps, blowers, electronics • Space Rocket propulsion systems - turbopumps, fuel pumps Cooling systems - pumps, compressors, fans, blowers Life support systems - fans, pumps, blowers • Energy Heat transfer & vacuum systems - ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles Power generation systems - turbines, generators, compressors, pumps Thermal management systems - pumps, blowers, electronics • Chemical and Petrochemical Processing Heat transfer & vacuum systems - ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles Our products are used in a wide range of applications, including: • Defense Aircraft carrier program (CVN) Virginia fast-attack submarine program (SSN) Columbia and Ohio ballistic submarine program (SSBN) U.S.
Our Products, Customers and Markets We manufacture critical, custom-engineered products with high quality and reliability including: • Defense Power plant systems - ejectors, surface condensers Torpedo ejection, propulsion & power systems - turbines, alternators, regulators, pumps, blowers Thermal management systems - pumps, blowers, drive electronics • Space Rocket propulsion systems - turbopumps, fuel pumps Cooling systems - pumps, compressors, fans, blowers Life support systems - fans, pumps, blowers • Energy Heat transfer & vacuum systems - ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles Power generation systems - turbines, generators, compressors, pumps Thermal management systems - pumps, blowers, electronics • Chemical and Petrochemical Processing Heat transfer & vacuum systems - ejectors, process condensers, surface condensers, liquid ring pumps, heat exchangers, nozzles Our products are used in a wide range of applications, including: 3 • Defense Aircraft carrier program (CVN) Virginia fast-attack submarine program (SSN) Columbia and Ohio ballistic submarine program (SSBN) U.S.
Navy projects in excess of our insurance coverage and at a level which is higher than our commercial projects. A claim related to one of these projects could have an adverse impact on our financial results. New technology used by the ships for the U.S.
Navy projects in excess of our insurance coverage and at a level which is higher than our commercial projects. A claim related to one of these projects could have an adverse impact on our financial results. 10 New technology used by the ships for the U.S.
Because our customers are unable to predict the length of the time period for the economic viability of their plants, there has been more of a focus on relative importance of cost versus quality which looks at short-term costs instead of total long-term cost of operations.
Because our customers are unable to predict the length of the time period for the economic 12 viability of their plants, there has been more of a focus on relative importance of cost versus quality which looks at short-term costs instead of total long-term cost of operations.
We could issue shares of preferred stock with voting and conversion rights that adversely affect the voting power of the holders of our common stock, or that have the effect of delaying or preventing a change in control of our company. 18 • Only a minority of our directors may be elected in a given year .
We could issue shares of preferred stock with voting and conversion rights that adversely affect the voting power of the holders of our common stock, or that have the effect of delaying or preventing a change in control of our company. • Only a minority of our directors may be elected in a given year .
In the future, should we again be out of compliance with our bank agreement, there can be no assurance that we would be able to obtain additional waivers or renegotiate our credit facilities in a timely manner, on acceptable terms or at all.
In the future, should we be out of compliance with our bank agreement, there can be no assurance that we would be able to obtain additional waivers or renegotiate our credit facilities in a timely manner, on acceptable terms or at all.
Our Chinese subsidiary is subject to laws and regulations applicable to foreign investment in China. There are uncertainties regarding the interpretation and enforcement of laws, rules and policies in China. The Chinese legal system is based on written statutes, and prior court decisions have limited precedential value.
Our subsidiary in China is subject to laws and regulations applicable to foreign investment in China. There are uncertainties regarding the interpretation and enforcement of laws, rules and policies in China. The legal system in China is based on written statutes, and prior court decisions have limited precedential value.
Threats to these systems, and the laws and regulations 17 governing security of data, including personal data, on information systems and otherwise held by companies is evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect information systems and data and complying with new cybersecurity regulations.
Threats to these systems, and the laws and regulations governing security of data, including personal data, on information systems and otherwise held by companies is evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect information systems and data and complying with new cybersecurity regulations.
The operations of our Chinese subsidiary may be adversely affected by China’s evolving economic, political and social conditions . We conduct our business in China primarily through our wholly-owned Chinese subsidiary.
The operations of our subsidiary in China may be adversely affected by China’s evolving economic, political and social conditions. We conduct our business in China primarily through our wholly-owned subsidiary.
Our competitors listed in alphabetical order by market include: North America Market Principal Competitors Navy Nuclear Propulsion Program / Defense DC Fabricators; Joseph Oat; PCC; Triumph Aerospace; Xylem Refining vacuum distillation Croll Reynolds Company, Inc.; Gardner Denver, Inc.; GEA Wiegand GmbH Chemicals/petrochemicals Croll Reynolds Company, Inc.; Gardner Denver, Inc.; Schutte Koerting Turbomachinery OEM – defense and aerospace/space Ametek, Inc., Concepts NREC; Curtis Wright; Honeywell; Kratos Defense & Security Solns Turbomachinery OEM – refining, petrochemical Donghwa Entec Co., Ltd..; KEMCO; Oeltechnik GmbH Turbomachinery OEM – power and power producer Holtec; KEMCO; Maarky Thermal Systems; Thermal Engineering International (USA), Inc. international Market Principal Competitors Refining vacuum distillation Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Hannover AG Chemicals/petrochemicals Croll Reynolds Company, Inc.; Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Hannover AG; Schutte Koerting Turbomachinery OEM – refining, petrochemical Chem Process Systems; Donghwa Entec Co., Ltd.; Hangzhou Turbine Equipment Co., Ltd.; KEMCO; Mazda (India); Oeltechnik GmbH Turbomachinery OEM – power and power producer Chem Process Systems; Holtec; KEMCO; Mazda (India); SPX Heat Transfer; Thermal Engineering International 6 Intellectual Property Our success depends in part on our ability to protect our proprietary technologies.
Our competitors listed in alphabetical order by market include: North America Market Principal Competitors Navy Nuclear Propulsion Program / Defense DC Fabricators; Joseph Oat; PCC; Triumph Aerospace; Xylem Refining vacuum distillation Croll Reynolds Company, Inc.; Gardner Denver, Inc.; GEA Wiegand GmbH Chemicals/petrochemicals Croll Reynolds Company, Inc.; Gardner Denver, Inc.; Schutte Koerting Turbomachinery OEM – defense and aerospace/space Ametek, Inc., Concepts NREC; Curtiss Wright; Florida Turbine Technologies; Honeywell; Kratos Defense & Security Solns Turbomachinery OEM – refining, petrochemical Donghwa Entec Co., Ltd..; KEMCO; Oeltechnik GmbH Turbomachinery OEM – power and power producer Holtec; KEMCO; Maarky Thermal Systems; Thermal Engineering International (USA), Inc. international Market Principal Competitors Refining vacuum distillation Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Hannover AG Chemicals/petrochemicals Croll Reynolds Company, Inc.; Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Hannover AG; Schutte Koerting Turbomachinery OEM – refining, petrochemical Chem Process Systems; Donghwa Entec Co., Ltd.; Hangzhou Turbine Equipment Co., Ltd.; KEMCO; Mazda (India); Oeltechnik GmbH Turbomachinery OEM – power and power producer Chem Process Systems; Holtec; KEMCO; Mazda (India); SPX Heat Transfer; Thermal Engineering International Intellectual Property Our success depends in part on our ability to protect our proprietary technologies.
In addition, if the counter-parties to such exchange contracts do not fulfill their obligations to deliver the contractual foreign currencies, we could be at risk for fluctuations, if any, required to settle the obligation. Any of the foregoing could adversely affect our business and results of operations. At March 31, 2022, we held no forward foreign currency exchange contracts.
In addition, if the counter-parties to such exchange contracts do not fulfill their obligations to deliver the contractual foreign currencies, we could be at risk for fluctuations, if any, required to settle the obligation. Any of the foregoing could adversely affect our business and results of operations. At March 31, 2023, we held no forward foreign currency exchange contracts.
The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC. 8 Ite m 1A. Risk Factors Our business and operations are subject to numerous risks, many of which are described below and elsewhere in this Annual Report on Form 10-K.
The other information found on our website is not part of this or any other report we file with, or furnish to, the SEC. Ite m 1A. Risk Factors Our business and operations are subject to numerous risks, many of which are described below and elsewhere in this Form 10-K.
For example, the government of India has set out criteria for foreign investments in India, including requirements with respect to downstream investments by Indian companies owned or controlled by foreign entities and the transfer of ownership or control of Indian companies in certain industries. These requirements may adversely affect our ability to operate our Indian subsidiary.
For example, the government of India has set out criteria for foreign investments in India, including requirements with respect to downstream investments by companies in India which are owned or controlled by foreign entities and the transfer of ownership or control of companies in India in certain industries. These requirements may adversely affect our ability to operate our Indian subsidiary.
Although we have long-term relationships with many of our end use customers and with many engineering, procurement and construction companies, the project management requirements, pricing levels and costs to support each customer and customer type are often different.
Although we have long-term relationships with many of our customers and with many engineering, procurement and construction companies, the project management requirements, pricing levels and costs to support each customer and customer type are often different.
Our foreign operations and sales could be adversely affected as a result of: • nationalization of private enterprises and assets; • political or economic instability in certain countries and regions, such as the ongoing instability throughout the Middle East and/or portions of the former Soviet Union; • the global economic impact as a result of the COVID-19 pandemic or future global health concerns; • political relationships between the U.S. and certain countries and regions; • differences in foreign laws, including difficulties in protecting intellectual property and uncertainty in enforcement of contract rights; • the possibility that foreign governments may adopt regulations or take other actions that could directly or indirectly harm our business and growth strategy; • credit risks; • currency fluctuations; • tariff and tax increases; • export and import restrictions and restrictive regulations of foreign governments; • shipping products during times of crisis or war; • our failure to comply with U.S. laws regarding doing business in foreign jurisdictions, such as the Foreign Corrupt Practices Act; or • other factors inherent in maintaining foreign operations.
Our foreign operations and sales could be adversely affected as a result of: • nationalization of private enterprises and assets; • trade policies incentivizing domestic trade over international trade; • political or economic instability in certain countries and regions, such as the ongoing instability throughout the Middle East and/or portions of the former Soviet Union; • the global economic impact as a result of the COVID-19 pandemic or future global health concerns; • political relationships between the U.S. and certain countries and regions; • differences in foreign laws, including difficulties in protecting intellectual property and uncertainty in enforcement of contract rights; • the possibility that foreign governments may adopt regulations or take other actions that could directly or indirectly harm our business and growth strategy; 13 • credit risks; • currency fluctuations; • tariff and tax increases; • export and import restrictions and restrictive regulations of foreign governments; • shipping products during times of crisis or war; • our failure to comply with U.S. laws regarding doing business in foreign jurisdictions, such as the Foreign Corrupt Practices Act; or • other factors inherent in maintaining foreign operations.
Provisions contained in our certificate of incorporation and bylaws could impair or delay stockholders ' ability to change our management and could discourage takeover transactions that some stockholders might consider to be in their best interests.
Provisions contained in our certificate of incorporation and bylaws could impair or delay stockholders' ability to change our management and could discourage takeover transactions that some stockholders might consider to be in their best interests.
The size of our contracts with the U.S. Navy may produce volatility in short term financial results. We believe our strategy to increase the penetration of U.S. Navy related opportunities, which are often much larger contracts than our commercial contracts, can, on occasion, be delayed before or during the revenue recognition cycle.
Navy may produce volatility in short term financial results. 9 We believe our strategy to increase the penetration of U.S. Navy related opportunities, which are often much larger contracts than our commercial contracts, can, on occasion, be delayed before or during the revenue recognition cycle.
If any of the events described below or elsewhere in this Annual Report on Form 10-K occur, our business and results of operations could be harmed. Additional risks and uncertainties that are not presently known to us, or which we currently deem to be immaterial, could also harm our business and results of operations.
If any of the events described below or elsewhere in this Form 10-K occur, our business and results of operations could be harmed. Additional risks and uncertainties that are not presently known to us, or which we currently deem to be immaterial, could also harm our business and results of operations.
The extent to which our operations may be impacted by the COVID-19 pandemic or any global health situation will depend largely on future developments which are highly uncertain and we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows.
The extent to which our operations may be impacted by any global health situation will depend largely on future developments which are highly uncertain and we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows.
In our markets, we believe that order administration, risk management, cost containment, quality and engineering 4 documentation are as important as the equipment itself. We have developed order management capabilities to enable us to deliver high quality, engineered-to-order and build-to-spec process-critical equipment in a timely manner.
In our markets, we believe that order administration, risk management, cost containment, quality control and engineering documentation are as important as the equipment itself. We have developed order management capabilities to enable us to deliver high quality, engineered-to-order, as well as build-to-spec, process-critical equipment in a timely manner.
A representative list of our customers include: Aerojet Rocketdyne, Air Liquide, Applied Research Laboratory, Aramco, Bechtel Plant Machinery Inc., Boeing, CERN, China State-owned Refiners, Cummins, DuPont, Dow Chemical, General Atomics, General Dynamics, General Electric, ExxonMobil, Fluor Corporation, Jacobs Engineering Group Inc., Kairos Power, Koch Fertilizer ENID LLC, Lockheed Martin, MHI Compressor International Corporation, NASA, Newport News Shipbuilding, Northrop Grumman, Oak Ridge National Laboratory, Raytheon Technologies, SAIC, Sierra Space, U.S.
A representative list of our customers include: Aerojet Rocketdyne, Air Liquide, Applied Research Laboratory at Pennsylvania State University, Aramco, Bechtel Plant Machinery Inc., Blue Origin, Boeing, CERN, China State-owned Refiners, Cummins, DuPont, Dow Chemical, General Atomics, General Dynamics, ExxonMobil, Fluor Corporation, Jacobs Engineering Group Inc., Kairos Power, Koch Fertilizer ENID LLC, Lockheed Martin, MHI Compressor International Corporation, NASA, Newport News Shipbuilding, Northrop Grumman, Oak Ridge National Laboratory, Raytheon Technologies, SAIC, Sierra Space, U.S.
On our website, we provide a link to the SEC website that contains the reports, proxy statements and other information we file electronically. Printed copies of all documents we file with the SEC are available free of charge for any stockholder who makes a request. Such requests should be made to our Corporate Secretary at our corporate headquarters.
On our website, we provide links that contain the reports, proxy statements and other information we file electronically with the SEC. Printed copies of all documents we file with the SEC are available free of charge for any stockholder who makes a request. Such requests should be made to our Corporate Secretary at our corporate headquarters.
Changes in U.S. and foreign governments’ trade policies have resulted and may continue to result in tariffs on imports into, and exports from, the U.S. Over the past few years, the U.S. imposed tariffs on imports from several countries, including China, Canada, the European Union and Mexico.
Changes in U.S. and foreign governments’ trade policies have resulted and may continue to result in tariffs on imports into, and exports from, the U.S. In the past, the U.S. imposed tariffs on imports from several countries, including China, Canada, the European Union and Mexico.
Our dedicated global health and safety function is executed through our business unit safety committees to ensures that employees are trained on best practices to create a safe and healthy workplace for all. Corporate Governance and Available Information We maintain a website located at www.grahamcorp.com.
Our dedicated global health and safety function is executed through our business unit safety committees to ensure that employees are trained and understand our best practices to create a safe and healthy workplace for all. Corporate Governance and Available Information We maintain a website located at www.grahamcorp.com.
For example, sales to our top ten customers, who can vary each year, accounted for 42%, 63% and 48% of consolidated net sales in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. We expect that a limited number of customers will continue to represent a substantial portion of our sales for the foreseeable future.
For example, sales to our top ten customers, who can vary each year, accounted for 46%, 42% and 63% of consolidated net sales in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. We expect that a limited number of customers will continue to represent a substantial portion of our sales for the foreseeable future.
Our future success may be affected by our current and future indebtedness. Under our loan agreements, as of March 31, 2022, we had $18,500 outstanding under our term loan with Bank of America, N.A ("Bank of America"). We may borrow additional funds in the future to support our growth and working capital needs.
Our future success may be affected by our current and future indebtedness. Under our loan agreements, as of March 31, 2023, we had $12,500 outstanding under our term loan with Bank of America, N.A. ("Bank of America"). We may borrow additional funds in the future to support our growth and working capital needs.
We have tools and capabilities that we believe allow us to move quickly and comprehensively to meet the unique needs of our customers. We believe that our early and deep involvement adds significant value to the process and is an important competitive differentiator in the long sales cycle industries we serve.
We have tools and 4 capabilities that we believe allow us to move quickly and comprehensively to meet the unique needs of our customers. We believe that our early and deep involvement in our customers' projects adds significant value and is an important competitive differentiator in the long sales cycle industries we serve.
The majority of our R&D is funded by our customers and is specific to help solve our customers’ problems in order to improve efficiencies, address challenging environments or caustic materials, or redesign for form and function. Additionally, we may be engineering new products and services for our customers.
The majority of our R&D is funded by our customers and is specific to help solve our customers’ problems in order to improve efficiencies, address challenging environments, or redesign for form and function. Additionally, we may be engineering new products and services for our customers and investing to improve existing products and services.
We may also have limited legal recourse in the event we encounter patent or trademark infringers, which could have a material adverse effect on our business and results of operations. Uncertainties with respect to the Chinese legal system may adversely affect the operations of our Chinese subsidiary.
We may also have limited legal recourse in the event we encounter patent or trademark infringers, which could have a material adverse effect on our business and results of operations. Uncertainties with respect to the legal system in China may adversely affect the operations of our subsidiary in that country.
We have foreign operations and a percentage of our sales occur outside of the U.S. As a result, we are subject to the economic, political, regulatory and other risks of international operations. For fiscal 2022, 20% of our revenue was from customers located outside of the U.S.
We have foreign operations and a percentage of our sales occur outside of the U.S. As a result, we are subject to the economic, political, regulatory and other risks of international operations. For fiscal 2023, 19% of our revenue was from customers located outside of the U.S.
While we may enter into currency exchange rate hedges from time to time to mitigate these types of fluctuations, we cannot remove all fluctuations or hedge all exposures and our earnings are impacted by changes in currency exchange rates.
While we may enter into currency exchange rate hedges from time to time to mitigate these types of fluctuations, we cannot remove all fluctuations or hedge all exposures and our earnings could be adversely impacted by changes in currency exchange rates.
We encourage every one of our team members to form deeper relationships with those around them based on mutual respect, dignity, and understanding. • Engagement: to encourage productive conversations within our organization, we have implemented employee surveys. • Development: We believe that employee development is vital to our continued success, and we support the development of our employees through programs such as our internal weld school training, our partnerships for external weld training, our tuition assistance program, and management training classes. • Health and Safety: We are dedicated to ensuring the health and safety of our team members by supporting the whole person.
We encourage every one of our team members to form deeper relationships with those around them based on mutual respect, dignity, and understanding. • Engagement: to encourage productive conversations within our organization, we have implemented employee surveys and an active engagement committee. • Development: We believe that employee development is vital to our continued success, and we support the development of our employees through programs such as our internal weld school training, our partnerships for external weld training, our tuition assistance program, our apprenticeship program, our external partnership with community colleges, and our management training and six sigma training classes. • Health and Safety: We are dedicated to ensuring the health and safety of our team members by supporting the whole person.
Adverse economic or specific project conditions can lead to a project being placed on hold or cancelled by our customers. We had no projects cancelled in fiscal 2022 or in fiscal 2021. Similarly, we had no projects on hold at March 31, 2022.
Adverse economic or specific project conditions can lead to a project being placed on hold or cancelled by our customers. We had one project cancelled in fiscal 2023 and no projects cancelled in fiscal 2022 or fiscal 2021. We had no projects on hold at March 31, 2023.
We are subject to foreign currency fluctuations which may adversely affect our operating results. We are exposed to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which we sell our products to the extent that such sales are not based in U.S. dollars.
We are subject to foreign currency fluctuations which may adversely affect our operating results. We are exposed to the risk of currency fluctuations between the U.S. dollar and the currencies of the countries in which we sell our products to the extent that such sales are not based in U.S. dollars - primarily the Chinese RMB and India INR.
We have and may continue to experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), implementing further precautionary measures to protect the health of our workforce, increased project cancellations or projects put on hold, access to supplies, capital, and fundamental support services (such as shipping and transportation).
As a result of public health crises, we may experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), implement further precautionary measures to protect the health of our workforce, experience increased project cancellations or projects put on hold, and reduced access to supplies, capital, and fundamental support services (such as shipping and transportation).
We believe customers need our engineering and fabrication expertise early in the project life cycle to understand how best to utilize our equipment. • We are known for our strong capabilities to handle complex, custom orders . The orders we receive are extremely complex.
We believe customers need our engineering and fabrication expertise early in a project life cycle to understand how best to utilize our equipment in the optimization of their systems. • We are known for our strong capabilities to handle complex, custom orders . The orders we receive are extremely complex.
Navy torpedoes 3 Refueling and overhaul replacement equipment • Space Virgin Orbit's LauncherOne program Relativity Space's Aeon program Various commercial space propulsion, fluid and heat transfer applications • Energy conventional oil refining oil sands extraction and upgrading ethanol plants cogeneration power plants geothermal and biomass power plants concentrated solar power small modular reactor development hydrogen fuel cell power • Chemical and Petrochemical Processing ethylene, methanol and nitrogen producing plants urea and fertilizer plants plastics, resins and fibers plants downstream petrochemical plants coal-to-chemicals plants gas-to-liquids plants • Cryogenic Fluid Processes superconducting cable and magnet cooling space simulation chambers hydrogen production, transportation, distribution, fueling Our principal customers include tier one and tier two suppliers to the defense and aerospace industry, large engineering companies that build installations for companies in the energy and process industries (or Engineering Procurement Contractors (“EPCs”), and original equipment manufacturers ("OEM").
Navy torpedoes Refueling and overhaul replacement equipment • Space NASA xEMU next-generation space suit and commercial derivatives Relativity Space's Aeon program Various commercial space propulsion, fluid and heat transfer applications • Energy conventional oil refining oil sands extraction and upgrading ethanol plants cogeneration power plants geothermal and biomass power plants concentrated solar power molten salt reactor development small modular nuclear reactor development hydrogen fuel cell power zero-emission aviation • Chemical and Petrochemical Processing ethylene, methanol and nitrogen producing plants urea and fertilizer plants plastics, resins and fibers plants downstream petrochemical plants coal-to-chemicals plants gas-to-liquids plants • Cryogenic Fluid Processes superconducting cable and magnet cooling space simulation chambers hydrogen production, transportation, distribution, fueling Our principal customers include tier one and tier two suppliers to the defense and aerospace industry, refineries, petrochemical plants, large engineering companies that build installations for companies in the energy and process industries (or Engineering Procurement Contractors (“EPCs”), and original equipment manufacturers ("OEM").
Navy, and Virgin Orbit. Our products are sold by a team of sales engineers whom we employ directly. Two customers each accounted for more than 10% of our revenue in the fiscal year ended March 31, 2022 ("Fiscal 2022"). As a result of our diversification efforts to more extensively support the U.S.
Navy, and United Launch Alliance. Our products are sold by a team of sales engineers whom we employ directly. Two customers each accounted for more than 10% of our revenue in the fiscal year ended March 31, 2023 ("Fiscal 2023"). As a result of our diversification efforts to more extensively support the U.S.
The prices of crude oil and natural gas have historically had periods when they have been very volatile, as evidenced by the extreme volatility in oil prices over the past few years such as the volatility related to the COVID-19 pandemic and the Ukraine-Russia war.
The prices of crude oil and natural gas have historically had periods when they have been very volatile, as evidenced by the extreme volatility in oil prices over the past few years, in part due to the COVID-19 pandemic, the Ukraine-Russia war, and macroeconomic impacts.
The value of our backlog as of March 31, 2022 was $256,536. Our backlog can be significantly affected by the timing of large orders. The amount of our backlog at March 31, 2022 is not necessarily indicative of future backlog levels or the rate at which our backlog will be recognized as sales.
The value of our backlog as of March 31, 2023 was $301,734. Our backlog can be significantly affected by the timing of large orders. The amount of our backlog at March 31, 2023 is not necessarily indicative of future backlog levels or the rate at which our backlog will be recognized as sales.
Our manufacturing abilities include the unique capability to fabricate large weldments with special metallurgy to tight tolerances. Additionally, we possess highly specialized manufacturing and electrochemical milling expertise on turbomachinery equipment that allows us to manufacture to tight tolerances. This, combined with our strong quality control with objective quality evidence, provides us a unique competitive advantage.
Our manufacturing abilities include the capability to fabricate to tight tolerances. Additionally, we possess highly specialized manufacturing and electrochemical milling expertise on turbomachinery equipment. This, combined with our strong quality control with objective quality evidence, provides us a unique competitive advantage.
("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us in the People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India.
GVHTT provides sales and engineering support for us in the People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India and the Middle East.
Rising inflation may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.
Macroeconomic impacts, including rising inflation, a slowdown in the economy, or a recession or expectation of a recession, may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.
We accept contracts that contain provisions for a buyer to recover liquidated damages if our delivery is past contractual delivery dates, and such liquidated damages claimed by a customer could adversely affect financial performance.
Certain contracts in our backlog may contain provisions for a buyer to recover liquidated damages if our delivery is past contractual delivery dates, and such liquidated damages claimed by a customer could adversely affect our financial performance.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Many foreign companies, including some of our competitors, are not subject to these prohibitions.
We are subject to the United States Foreign Corrupt Practices Act ("FCPA"), which generally prohibits U.S. companies from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Further, our technology resources may be strained due to an increase in the number of remote users. In addition, defending ourselves against these threats may increase costs or slow operational efficiencies of our business. If any of the foregoing were to occur, it could have a material adverse effect on our business and results of operations.
In addition, defending ourselves against these threats may increase costs or slow operational efficiencies of our business. If any of the foregoing were to occur, it could have a material adverse effect on our business and results of operations.
In the event that U.S. federal government defense spending is reduced or alternative energy related incentives are reduced or eliminated in an effort to reduce federal budget deficits, projects related to defense or alternative energy may become less plentiful.
In the event that U.S. federal government defense spending is reduced or alternative energy related incentives are reduced or eliminated in an effort to reduce federal budget deficits, projects related to defense or alternative energy may decrease demand for our products.
Our pledge to diversity and equality encompasses our commitment to create a work environment which embraces inclusion regardless of race, color, religion, gender, sexual orientation, gender identity, national origin, age, genetic information, marital status, amnesty, pregnancy, childbirth, disability, veteran status, or medical conditions. • Diversity: Our Management recognizes that a diverse workforce and a culture of equity and inclusion helps us compete more effectively, sustain success, and build long-term shareholder value.
Our pledge to diversity and equality encompasses our commitment to create a work environment which embraces inclusion regardless of race, color, religion, gender, sexual 7 orientation, gender identity, national origin, age, genetic information, marital status, pregnancy, childbirth, disability, veteran status, medical conditions, or any protected status. • Diversity: Our Management recognizes that a diverse workforce and a culture of equity and inclusion helps us compete more effectively for talent, sustain success as a business, and build an engaged employee base.
The impact of such reductions could have a material adverse effect on our business and results of operations, as well as our growth opportunities. U.S. Navy orders are subject to annual government funding. A disruption in funding could adversely impact our business. One of our growth strategies is to increase our penetration of U.S. Navy-related opportunities. Projects for the U.S.
The impact of such reductions could have a material adverse effect on our business and results of operations, as well as our growth opportunities. U.S. Navy orders are subject to annual government funding. A disruption in funding or a lapse in funding could materially and adversely impact our business.
Navy and the acquisition of BN, we have increased our concentration in domestic and defense sales in 2022. Domestic sales accounted for 80% of total sales in fiscal 2022, while sales to the defense industry were 51%. Our backlog at March 31, 2022 was $256,536 compared with $137,567 at March 31, 2021.
Navy and the acquisition of BN, we have increased our concentration in domestic and defense sales. Domestic sales accounted for approximately 81% of total sales in fiscal 2023, while sales to the defense industry were 42%. Our backlog at March 31, 2023 was $301,734 compared with $256,536 at March 31, 2022.
We were incorporated in Delaware in 1983 and are the successor to Graham Manufacturing Co., Inc., which was incorporated in New York in 1936. Our stock is traded on the NYSE under the ticker symbol "GHM".
We were incorporated in Delaware in 1983 and are the successor to Graham Manufacturing Co., Inc., which was incorporated in New York in 1936. Our stock is traded on the NYSE under the ticker symbol "GHM". Our fiscal year ends on March 31 of each year. We refer to our fiscal year, which ended March 31, 2023, as fiscal 2023.
If our customers look to foreign competitors to source equipment of the type we manufacture, there could be a material adverse impact on our results of operations and business.
If our customers look to foreign competitors to source equipment of the type we manufacture, there could be a material and adverse impact on our results of operations and business. Our efforts to expand our U.S. Navy business and changes in the competitive environment for U.S.
These laws, regulations and interpretations could impose restrictions on our ownership or the operation of our interests in China and have a material adverse effect on our business and results of operations. Intellectual property rights are difficult to enforce in China and India, which could harm our business.
These laws, regulations and interpretations could impose restrictions on our ownership or the operation of our interests in China and have a material adverse effect on our business and results of operations.
Our operations teams are experienced at handling low volume, high mix orders that are highly customized solutions. We believe that our production environment is much different from a highly engineered standard products business. While certain equipment in a product group may look similar, there are often subtle differences which are required to deliver the desired specification.
Our operations teams are experienced at handling low volume, high mix orders of highly customized solutions. While certain equipment in a product group may look similar, there are often subtle differences which are required to deliver the desired specification.
While these projects are spread across multiple contractors for the U.S. Navy, the end customer for these projects is the same. This concentration of business could add additional risk to us should there be a disruption, short or long term, in the funding for these projects or our participation in the U.S. Navy Nuclear Propulsion program.
This concentration of business could add additional risk to us should there be a disruption, short or long term, in the funding for these projects or our participation in the U.S. Navy Nuclear Propulsion program. The size of our contracts with the U.S.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in certain of the jurisdictions in which we may operate or sell our products.
Many foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in certain of the jurisdictions in which we may operate or sell our products.
We have proven capability to deliver our specialized product designs with outsourced fabrication that is on-time, within budget and that meets our high quality standards. • We provide robust after-the-sale technical support. Our engineering and performance improvement personnel go to customer sites to audit the performance of our equipment, provide operator training and troubleshoot performance issues.
We have proven capability to deliver our specialized product designs with outsourced fabrication that meets our high quality standards. • We provide robust technical support. Our engineering and performance improvement personnel work with our customers to optimize the performance of our equipment, provide operator training and troubleshoot performance issues.
Due to risks in these areas, we cannot provide assurance that we will not incur material costs or liabilities in the future which could adversely affect us. Seasonality No material part of our business is seasonal in nature.
Due to risks in these areas, we cannot provide assurance that we will not incur material costs or liabilities in the future, which could adversely affect us. Seasonality No material part of our business is seasonal in nature. However, our energy business is highly cyclical as it depends on the willingness of our customers to invest in major capital projects.
We are committed to conducting our business in accordance with applicable laws, rules and regulations. Compliance with governmental regulations did not have a material impact on our financial results during fiscal 2022, and is not expected to have, a material impact on our capital expenditures, results of operations or competitive position.
Compliance with governmental regulations did not have a material impact on our financial results during fiscal 2023, and is not expected to have, a material impact on our capital expenditures, results of operations or competitive position.
Risks Related to the Impacts of Macroeconomic Events Our business, financial condition and results of operations have been and may continue to be adversely affected by global public health issues, including the recent COVID-19 pandemic.
Our business, financial condition and results of operations have been and may continue to be adversely affected by public health issues, including the recent COVID-19 pandemic. Our business, financial condition and results of operations have been and in the future may be adversely affected as a result of a global health crisis, such as the COVID-19 pandemic.
Disruptions in our supply chain, especially for an extended period of time, could impact our ability to meet customer requirements and our financial performance could be materially and adversely impacted.
Reliance on our suppliers for these products exposes us to volatility in the prices and availability of these materials. Disruptions in our supply chain, especially for an extended period of time, could impact our ability to meet customer requirements and our financial performance could be materially and adversely impacted.
Navy procurement could adversely impact our ability to grow this portion of our business. Over the past few years, we have expanded our business and the opportunities where we bid related to U.S. Navy projects. This has increased our market share and caused an adverse share position for some of our competitors for these products.
Navy procurement could materially and adversely impact our ability to grow this portion of our business. Over the past few years, we have expanded our business and the opportunities where we bid related to U.S. Navy projects.
To help offset this impact, we support the development of our employees through programs such as our internal weld school training and our partnerships with community colleges and other external weld training programs. • We have the unique capability to manufacture to tight tolerances.
We support the development of our employees through programs such as our internal weld school, our partnerships with community colleges and other external training programs. We continually strive to enhance our corporate culture, develop our employees and improve employee engagement. • We have the capability to manufacture to tight tolerances.
In addition, our loan agreement with Bank of America contains terms that restrict our ability to declare or pay dividends.
The terms of our loan agreement restrict our ability to pay dividends, and we may not be able to pay dividends in the future. Our loan agreement with Bank of America contains terms that restrict our ability to declare or pay dividends.
For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems. Our energy and new energy markets include oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities.
For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems. We supply equipment for vacuum, heat transfer and fluid transfer applications used in energy and new energy markets including oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen.
The COVID-19 health crisis has affected large segments of the global economy, including the markets we operate in, disrupted global supply chains, resulted in significant travel and transport restrictions, and created significant disruption of the financial markets.
A public health crisis has affected, and could affect in the future, large segments of the global economy, including the markets we operate in, disrupting global supply chains, resulting in significant travel and transport restrictions, and creating significant disruption of the financial markets.
Competitor response to our market penetration is possible. Our customers may also raise concerns about their supplier concentration issues and the risk exposure related to this concentration. As the U.S.
In addition, our increased market share has caused an adverse share position for some of our competitors for these products. Competitor response to our market penetration is possible. Our customers may also raise concerns about their supplier concentration issues and the risk exposure related to this concentration. As the U.S.
Executed effectively, we believe our strategies will create more enduring, recurring opportunities and profitable growth. Competition Our business is highly competitive. The principal bases on which we compete include technology, price, performance, reputation, delivery, and quality.
Competition Our business is highly competitive. The principal bases on which we compete include technology, price, performance, reputation, delivery, and quality.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, with the acquisition of BN we obtained a 43,000 square feet manufacturing plant, which is part of their 96,000 square foot facility in Arvada, Colorado which is leased. We also lease approximately 1,500 square feet for a sales office in Houston, Texas and GVHTT leases an approximately 4,900 square foot sales and engineering office in Suzhou, China.
Biggest changeWe also lease approximately 1,500 square feet for a sales office in Houston, Texas and GVHTT leases a 4,900 square foot sales and engineering office in Suzhou, China. GIPL serves as a sales and market development office and leases approximately 800 square feet in Ahmedabad, India.
Legal Proceedings The information required by this Item 3 is contained in Note 16 to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K and is incorporated herein by reference. Item 4 . Mine Safety Disclosures Not applicable. 20 PART II (Amounts in thousands, except per share data)
Legal Proceedings The information required by this Item 3 is contained in Note 16 to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K and is incorporated herein by reference. Item 4 . Mine Safety Disclosures Not applicable. 21 PART II (Amounts in thousands, except per share data)
Item 2. Pr operties Our corporate headquarters, located at 20 Florence Avenue, Batavia, New York, consists of a 45,000 square foot building.
Item 2. Pr operties Our corporate headquarters, located at 20 Florence Avenue, Batavia, New York, consists of a 43,000 square foot office building.
However, we anticipate that additional manufacturing space will be needed within the next year or two in order to support BN growth, and we believe we will be able to obtain additional space on commercially reasonable terms. Item 3 .
However, we anticipate that additional manufacturing space will be needed over the next several years in order to support growth at both BN and Graham Mfg., and we believe we will be able to obtain or build additional space on commercially reasonable terms. Item 3 .
Our manufacturing facilities, also located in Batavia, consist of approximately 42 acres and contain about 260,000 square feet in several buildings, including 206,000 square feet in manufacturing facilities, 48,000 square feet for warehousing and a 6,000 square-foot building for product research and development.
Our manufacturing campus located in Batavia, New York, consists of approximately 270,000 square feet in capacity across several buildings, including 208,000 square feet in manufacturing facilities, 56,000 square feet for warehousing and a 6,000 square foot building for product research and development, all of which we own.
GIPL, located in Ahmedabad, India, serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets. We lease a sales and marketing office of approximately 777 square feet in Ahmedabad, India. We believe that our properties are generally in good condition, are well maintained, and are suitable and adequate to carry on our business.
We believe that our properties are generally in good condition, are well maintained, and are suitable and adequate to carry on our business.
Added
Our BN operation is located in Arvada, Colorado and its campus consists of approximately 101,000 square feet in capacity across several buildings, including 79,000 square feet in manufacturing facilities, 18,000 square feet of office space and 4,000 square feet for warehousing, all of which are leased.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Board of Directors declared dividends per share of $0.11 for each of the first three quarters of fiscal 2022. In fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
Biggest changeIn fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE exchange under the symbol "GHM". As of June 2, 2022, there were 10,603 shares of our common stock outstanding that were held by approximately 131 stockholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE exchange under the symbol "GHM". As of June 2, 2023, there were 10,676 shares of our common stock outstanding held by approximately 289 stockholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes our results of operations for the periods indicated: Year Ended March 31, 2022 2021 Net sales $ 122,814 $ 97,489 Gross profit $ 9,129 $ 20,469 Gross profit margin 7.4 % 21.0 % SG&A expense (1) $ 21,299 $ 17,471 SG&A as a percent of sales 17.3 % 17.9 % Net (loss) income $ (8,773 ) $ 2,374 Diluted (loss) income per share $ (0.83 ) $ 0.24 Total assets $ 183,691 $ 144,280 Total assets excluding cash, cash equivalents and investments $ 168,950 $ 79,248 (1) Selling, general and administrative expense is referred to as "SG&A." Fiscal 2022 Compared with Fiscal 2021 Sales for fiscal 2022 were $122,814, up 26% as compared with sales of $97,489 for fiscal 2021.
Biggest changeThe following table summarizes our results of operations for the periods indicated: Year Ended March 31, 2023 2022 Net sales $ 157,118 $ 122,814 Gross profit $ 25,408 $ 9,129 Gross profit margin 16.2 % 7.4 % SG&A expense (1) $ 24,158 $ 21,299 SG&A as a percent of sales 15.4 % 17.3 % Net income (loss) $ 367 $ (8,773 ) Diluted income (loss) per share $ 0.03 $ (0.83 ) Total assets $ 203,918 $ 183,691 (1) Selling, general and administrative expense is referred to as "SG&A." Fiscal 2023 Compared with Fiscal 2022 The following tables provides our net sales by product line and geographic region including the percentage of total sales and change in comparison to the prior year for each category and period presented: Year Ended March 31, Change Market 2023 % 2022 % $ % Refining $ 27,270 17 % $ 24,406 20 % $ 2,864 12 % Chemical/Petrochemical 21,950 14 % 15,955 13 % 5,995 38 % Space 21,180 13 % 5,744 5 % 15,436 269 % Defense 65,327 42 % 62,189 51 % 3,138 5 % Other 21,391 14 % 14,520 12 % 6,871 47 % Net sales $ 157,118 100 % $ 122,814 100 % $ 34,304 28 % Geographic Region United States $ 127,519 81 % $ 97,718 80 % $ 29,801 30 % International 29,599 19 % 25,096 20 % 4,503 18 % Net sales $ 157,118 100 % $ 122,814 100 % $ 34,304 28 % Net sales for fiscal 2023 were $157,118, an increase of 28% from fiscal 2022 and was across our diversified revenue base.
We believe that the most critical accounting estimates used in the preparation of our consolidated financial statements relate to labor hour estimates, total cost, and establishment of operational milestones which are used to recognize revenue over time, accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, accounting for business combinations and intangible assets, and accounting for pensions and other postretirement benefits.
We believe that the most critical accounting estimates used in the preparation of our consolidated financial statements relate to labor hour estimates, total cost, and establishment of operational milestones which are used to recognize revenue over time, accounting 33 for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, accounting for business combinations and intangible assets, and accounting for pensions and other postretirement benefits.
Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the aerospace, cryogenic, defense and energy markets (see "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India.
Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops and manufactures specialty turbomachinery products for the aerospace, cryogenic, defense and energy markets (see "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India.
Over the long term, we expect that population growth, an expanding global middle class and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers or related products.
Over the long-term, we expect that population growth, an expanding global middle class, and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers and related products.
The long-term 31 expected rate of return on plan assets is based on the plan’s asset allocation, historical returns and expectations as to future returns that are expected to be realized over the estimated remaining life of the plan liabilities that will be funded with the plan assets.
The long-term expected rate of return on plan assets is based on the plan’s asset allocation, historical returns and expectations as to future returns that are expected to be realized over the estimated remaining life of the plan liabilities that will be funded with the plan assets.
The expected return on plan assets assumption of 5.5% used in accounting for our pension plan is determined by evaluating the mix of investments that comprise plan assets and external forecasts of future long-term investment returns.
The expected return on plan assets assumption of 5.50% used in accounting for our pension plan is determined by evaluating the mix of investments that comprise plan assets and external forecasts of future long-term investment returns.
The cash consideration was funded through cash on-hand and debt proceeds (See Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K).
The cash consideration was funded through cash on-hand and debt proceeds (See Note 2 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K).
We believe that cash generated from operations, combined with the liquidity provided by available financing capacity under our credit facility, will be adequate to meet our cash needs for the immediate future. 29 Stockholders' Equity The following discussion should be read in conjunction with our consolidated statements of changes in stockholders' equity that can be found in Item 8 of Part II of this Annual Report on Form 10-K.
We believe that cash generated from operations, combined with the liquidity provided by available financing capacity under our credit facility, will be adequate to meet our cash needs for the immediate future. 30 Stockholders' Equity The following discussion should be read in conjunction with our consolidated statements of changes in stockholders' equity that can be found in Item 8 of Part II of this Annual Report on Form 10-K.
As discussed above under the heading "Critical Accounting Policies", we recognize a majority of our revenue using an over-time recognition method. The key estimate for the over-time recognition model is total labor, total cost and operational milestones to be incurred on each contract and to the extent that these estimates changes, it may significantly impact revenue recognized in each period.
As discussed above under the heading "Critical Accounting Policies", we recognize a majority of our revenue using an over-time recognition method. The key estimate for the over-time recognition model is total labor, total cost and operational milestones to be incurred on each contract and to the extent that these estimates change, it may significantly impact revenue recognized in each period.
The purchase agreement with respect to the acquisition also included a contingent earn-out dependent upon certain financial measures of BN post-acquisition, pursuant to which the sellers were eligible to receive up to $14,000 in additional cash consideration. At June 30, 2021, a liability of $1,900 was recorded for the contingent earn-out.
The purchase agreement also included a contingent earn-out dependent upon certain financial measures of BN post-acquisition, pursuant to which the sellers were eligible to receive up to $14,000 in additional cash consideration. At June 30, 2021, a liability of $1,900 was recorded for the contingent earn-out.
Non-GAAP Measures Adjusted earnings before net interest expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income, and adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP").
Non-GAAP Measures Adjusted net income (loss) before net interest expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income (loss), and adjusted net income (loss) per diluted share are provided for information purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP").
GVHTT provides sales and engineering support for us in the People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India.
GVHTT provides sales and engineering support for us in the People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India and the Middle East.
In addition, the Company covenanted to maintain a minimum fixed charge coverage ratio, as defined in such agreements, of 1.2 to 1.0 and minimum margined assets, as defined in such agreements, of 100% of total amounts outstanding on the revolving credit facility, including letters of credit.
In addition, we covenanted to maintain a minimum fixed charge coverage ratio, as defined in such agreements, of 1.2 to 1.0 and minimum margined assets, as defined in such agreements, of 100% of total amounts outstanding on the revolving credit facility, including letters of credit.
Although we believe that our customers differentiate our products on the basis of our manufacturing quality and engineering experience and excellence, among other things, such lower production costs and more favorable economic conditions mean that our competitors are able to offer products similar to ours at lower prices.
Although we believe that our customers differentiate our products on the basis of our manufacturing quality, engineering experience, and customer service, among other things, such lower production costs and more favorable economic conditions mean that our competitors are able to offer products similar to ours at lower prices.
The Company covenants to maintain EBITDA, as defined in such amendment, of at least ($700) for the twelve-month period ending June 30, 2022 and $1,800 for the twelve-month period ending September 30, 2022; maintain a total maximum leverage ratio of 4.0 to 1.0 for the twelve-month period ending December 31, 2022 and 3.0 to 1.0 for the period ending March 31, 2023; and maintain liquidity, as defined in such amendment, of at least $10,000 prior to the occurrence of the compliance date and $20,000 from and after the occurrence of the compliance date.
We covenanted to maintain EBITDA, as defined in such amendment, of at least ($700) for the twelve-month period ending June 30, 2022 and $1,800 for the twelve-month period ending September 30, 2022; maintain a total maximum leverage ratio of 4.0 to 1.0 for the twelve-month period ending December 31, 2022 and 3.0 to 1.0 for the period ending March 31, 2023; and maintain liquidity, as defined in such amendment, of at least $10,000 prior to the occurrence of the compliance date and $20,000 from and after the occurrence of the compliance date.
This management's discussion and analysis of financial condition and results of operations for the fiscal year ended March 31, 2022 omits a comparative discussion regarding the fiscal year ended March 31, 2021 versus the fiscal year ended March 31, 2020.
This management's discussion and analysis of financial condition and results of operations omits a comparative discussion regarding the fiscal year ended March 31, 2022 versus the fiscal year ended March 31, 2021.
Under the original term loan agreement and revolving credit facility, the Company covenants to maintain a maximum total leverage ratio, as defined in such agreements, of 3.0 to 1.0, with an allowable increase to 3.25 to 1.0 following an acquisition for a period of twelve months following the closing of the acquisition.
Under the original term loan agreement and revolving credit facility, we covenanted to maintain a maximum total leverage ratio, as defined in such agreements, of 3.0 to 1.0, with an allowable increase to 3.25 to 1.0 for a period of twelve months following the closing of an acquisition.
We also anticipate that future investment by refiners in renewable fuels (e.g., renewable diesel), in existing refineries (e.g., to expand feedstock processing flexibility and to improve conversion of oil to refined products) to gain greater throughput, or to build new capacity (e.g., integrated refineries with petrochemical products capabilities), will continue to drive demand for our products and services.
Over the long-term, we anticipate that future investment by refiners in renewable fuels (e.g., renewable diesel), in existing refineries (e.g., to expand feedstock processing flexibility and to improve conversion of oil to refined products) to gain greater throughput, or to build new capacity (e.g., integrated refineries with petrochemical products capabilities), will continue to drive demand for our products and services.
In fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
In the fourth quarter of fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
In addition, on or before September 1, 2022 and at all times thereafter, all of our deposit accounts, except certain foreign subsidiary accounts, will be either subject to a deposit account control agreement or maintained with Bank of America.
In addition, on or before September 1, 2023 and at all times thereafter, all of our deposit accounts, except certain accounts, will be either subject to a deposit account control agreement or maintained with Bank of America.
We expect that the systemic changes in the energy markets, which are influenced by the increasing use by consumers of alternative fuels, will lead to demand growth for fossil-based fuels that is less than the global growth rate.
We expect that the changes in the energy markets, which are influenced by conservation and the increasing use of alternative fuels, will lead to demand growth for fossil-based fuels that is less than the global growth rate.
Our traditional energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made.
While we expect that fossil fuels will continue to be an important component in the global energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made.
The compliance date is defined as the date on which Bank of America has received all required financial information for the fiscal year ending March 31, 2023 and no event of default exists.
The compliance date is defined as the date on which Bank of America has received all required financial information with respect to us for the fiscal year ending March 31, 2023 and no event of default exists.
Under the amended agreement, the Company is not required to comply with the maximum total leverage ratio and the minimum fixed charge coverage ratio covenants contained in the original term loan agreement for the periods ending December 31, 2021 and March 31, June 30 and September 30, 2022.
Under the amended agreements, we were not required to comply with the maximum total leverage ratio and the minimum fixed charge coverage ratio covenants contained in the original term loan agreement for the periods ending December 31, 2021 and March 31, June 30 and September 30, 2022.
A reduction in the rate of return of 50 basis points, with other assumptions held constant, would have increased fiscal 2022 net periodic pension expense by approximately $210. 32 During fiscal 2022 and fiscal 2021, the pension plan released liabilities for vested benefits of certain participants through the purchase of nonparticipating annuity contracts with a third-party insurance company.
A reduction in the rate of return of 50 basis points, with other assumptions held constant, would have increased fiscal 2023 net periodic pension expense by approximately $197. During fiscal 2023 and fiscal 2022, the pension plan extinguished liabilities for vested benefits of certain participants through the purchase of nonparticipating annuity contracts with a third-party insurance company.
On June 1, 2021, we entered into a five-year revolving credit facility with Bank of America that provides a $30,000 line of credit, including letters of credit and bank guarantees, expandable at our option and the bank's approval at any time up to $40,000. As of March 31, 2022, there was no amount outstanding on the line of credit.
On June 1, 2021, we entered into a five-year revolving credit facility with Bank of America that provided a $30,000 line of credit, including letters of credit and bank guarantees, expandable at our option and the bank's approval at any time up to $40,000. As of March 31, 2023, there was $0 outstanding on the line of credit.
A reduction in the discount rate of 50 basis points, with all other assumptions held constant, would have increased fiscal 2022 net periodic benefit expense for our defined benefit pension plans and other postretirement benefit plan by approximately $351 and $0.1, respectively.
A reduction in the discount rate of 50 basis points, with all other assumptions held constant, would have increased fiscal 2023 net periodic benefit expense for our defined benefit pension plans and other postretirement benefit plan by approximately $290 and $0.2, respectively.
We did not have any off-balance sheet arrangements as of March 31, 2022 and 2021, other than letters of credit incurred in the ordinary course of business.
We did not have any off-balance sheet arrangements as of March 31, 2023 other than letters of credit incurred in the ordinary course of business.
These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income (loss) or net income (loss) per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
As a result of these transactions, in fiscal 2022 and fiscal 2021, the projected benefit obligation and plan assets each decreased $1,279 and $1,477, respectively.
As a result of these transactions, in fiscal 2023 and fiscal 2022, the projected benefit obligation and plan assets each decreased $1,383 and $1,279, respectively.
(2) Working capital ratio equals current assets divided by current liabilities. We use the above ratios to assess our liquidity and overall financial strength. Net cash used by operating activities for fiscal 2022 was $2,219, compared with $1,722 for fiscal 2021.
(2) Working capital ratio equals current assets divided by current liabilities. We use the above ratios to assess our liquidity and overall financial strength. Net cash provided by operating activities for fiscal 2023 was $13,914 compared with $2,219 of cash used by operating activities for fiscal 2022.
There can be no guarantee that we will pay dividends in the future and will depend on a variety of factors, including our future financial performance, organic growth opportunities, general economic conditions and other factors, many of which are beyond our control.
There can be no guarantee that we will pay dividends in the future and any determination by our board of directors with respect to dividends will depend on a variety of factors, including our future financial performance, organic growth and acquisition opportunities, general economic conditions and other factors, many of which are beyond our control.
A hypothetical one percentage point (100 basis points) change in the BSBY rate on the $18,500 of variable rate debt outstanding at March 31, 2022 would have an impact of approximately $185 on our interest expense for fiscal 2022. 34
A hypothetical one percentage point (100 basis points) change in the BSBY rate on the $12,500 of variable rate debt outstanding at March 31, 2023 would have an impact of approximately $125 on our interest expense for fiscal 2023. 36
The commercial space market has grown and evolved rapidly, and BN has provided rocket engine turbo pump systems and components for many of the launch providers. We expect that in the long term extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles.
The commercial space market has grown and evolved rapidly, and we provide rocket engine turbopump systems and components to many of the key players in the industry. We expect that in the long-term, extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles.
We believe this diversification is especially beneficial when our commercial markets are weak, as is presently the case. 25 Results of Operations For an understanding of the significant factors that influenced our performance, the following discussion should be read in conjunction with our consolidated financial statements and the notes to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.
We believe this strategy shift provides us more stability and visibility and is especially beneficial when our refining and petrochemical markets are weak. 26 Results of Operations For an understanding of the significant factors that influenced our performance, the following discussion should be read in conjunction with our consolidated financial statements and the notes to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.
Revenue from contracts that is recognized upon shipment accounted for approximately 25% of revenue in fiscal 2022. Revenue from contracts that is recognized over time accounted for approximately 75% of revenue in fiscal 2022.
Revenue from contracts that is recognized upon shipment accounted for approximately 26% of revenue in fiscal 2023. Revenue from contracts that is recognized over time accounted for approximately 74% of revenue in fiscal 2023.
The discount rate assumption for fiscal 2022 was 3.21% for our defined benefit pension plans and 2.34% for our other postretirement benefit plan.
The discount rate assumption for fiscal 2023 was 3.66% for our defined benefit pension plans and 3.32% for our other postretirement benefit plan.
Such information is located in Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 . Acquisition We completed the acquisition of BN on June 1, 2021.
Such information is located in Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 . Our fiscal year ends on March 31 of each year. We refer to our fiscal year, which ended March 31, 2023, as fiscal 2023.
There can be no guarantee that we will pay dividends in the future and will depend on a variety of factors, including our future financial performance, organic growth opportunities, general economic conditions and other factors, many of which are beyond our control. • At March 31, 2022, we had $0 outstanding on our line of credit.
There can be no guarantee that we will pay dividends in the future, and any determination by our board of directors with respect to 24 dividends will depend on a variety of factors, including our future financial performance, organic growth and acquisition opportunities, general economic conditions and other factors, many of which are beyond our control. • At March 31, 2023, we had $0 outstanding on our line of credit and $10,016 available to be drawn under our line of credit subject to financial covenants under our credit facility.
Liquidity and Capital Resources The following discussion should be read in conjunction with our consolidated statements of cash flows and consolidated balance sheets appearing in Item 8 of Part II of this Annual Report on Form 10-K: March 31, 2022 2021 Cash and investments $ 14,741 $ 65,032 Working capital (1) 27,796 76,675 Working capital ratio (2) 1.5 2.8 Working capital excluding cash and investments 13,055 11,643 Working capital excluding cash and investments as a percent of net sales 10.6 % 11.9 % (1) Working capital equals current assets minus current liabilities.
Liquidity and Capital Resources The following discussion should be read in conjunction with our consolidated statements of cash flows and consolidated balance sheets appearing in Item 8 of Part II of this Annual Report on Form 10-K: March 31, 2023 2022 Cash and cash equivalents $ 18,257 $ 14,741 Working capital (1) 23,904 27,796 Working capital ratio (2) 1.3 1.5 (1) Working capital equals current assets minus current liabilities.
Amounts outstanding under the facility agreement bear interest at a rate equal to BSBY plus 1.50%, subject to a 0.00% floor. As of March 31, 2022, the BSBY rate was 0.130830%.
Amounts outstanding under the facility agreement bear interest at a rate equal to BSBY plus 1.50%, subject to a 0.00% floor. As of March 31, 2023, the BSBY rate was 4.92%. As of March 31, 2023, there was $5,874 letters of credit outstanding with Bank of America.
In addition, cash can be adversely impacted by the conversion of sales made by us in a foreign currency to U.S. dollars. In fiscal 2022, substantially all sales by us and our wholly owned subsidiaries, for which we were paid, were denominated in the local currency of the respective subsidiary (U.S. dollars or Chinese RMB).
In fiscal 2023, substantially all sales by us and our wholly owned subsidiaries, for which we were paid, were denominated in the local currency of the respective subsidiary (U.S. dollars, Chinese RMB, or India INR).
A reconciliation of adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share to net income (loss) in accordance with GAAP is as follows: Year Ended March 31, 2022 2021 Net (loss) income $ (8,773 ) $ 2,374 Acquisition related inventory step-up expense 95 - Acquisition & integration costs 562 - Change in fair value of contingent consideration (1,900 ) - CEO and CFO transition costs 1,182 - Debt amendment costs 278 - Net interest expense (income) 400 (156 ) Income taxes (2,443 ) 893 Depreciation & amortization 5,599 1,945 Adjusted EBITDA $ (5,000 ) $ 5,056 Adjusted EBITDA margin % -4.1 % 5.2 % 27 Year Ended March 31, 2022 2021 Net income (loss) $ (8,773 ) $ 2,374 Acquisition related inventory step-up expense 95 - Acquisition & integration costs 562 - - Amortization of intangible assets 2,522 - Change in fair value of contingent consideration (1,900 ) - CEO and CFO transition costs 1,182 - Debt amendment costs 278 - Normalize tax rate to 20% (1) (548 ) - Adjusted net income (loss) $ (6,582 ) $ 2,374 Adjusted diluted earnings per share $ (0.62 ) $ 0.24 (1) Applies a normalized tax rate of 20% to non-GAAP adjustments above, which are each pre-tax.
A reconciliation of adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share to net income (loss) in accordance with GAAP is as follows: 28 Year Ended March 31, 2023 2022 Net income (loss) $ 367 $ (8,773 ) Acquisition related inventory step-up expense - 95 Acquisition & integration costs 54 562 Change in fair value of contingent consideration - (1,900 ) CEO and CFO transition costs - 1,182 Debt amendment costs 194 278 Net interest expense 939 400 Income taxes 194 (2,443 ) Depreciation & amortization 5,987 5,599 Adjusted EBITDA $ 7,735 $ (5,000 ) Adjusted EBITDA as a % of revenue 4.9 % (4.1 %) Year Ended March 31, 2023 2022 Net income (loss) $ 367 $ (8,773 ) Acquisition related inventory step-up expense - 95 Acquisition & integration costs 54 562 Amortization of intangible assets 2,476 2,522 Change in fair value of contingent consideration - (1,900 ) CEO and CFO transition costs - 1,182 Debt amendment costs 194 278 Normalize tax rate (1) (572 ) (548 ) Adjusted net income (loss) $ 2,519 $ (6,582 ) GAAP diluted net income (loss) per share $ 0.03 $ (0.83 ) Adjusted diluted net income (loss) per share $ 0.24 $ (0.62 ) Diluted weighted average common shares outstanding 10,654 10,541 (1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the statutory tax rate of 21%.
We have limited exposure to foreign currency purchases. In fiscal 2022, our purchases in foreign currencies represented 5% of the cost of products sold. At certain times, we may enter into forward foreign currency exchange agreements to hedge our exposure against potential unfavorable changes in foreign currency values on significant sales and purchase contracts negotiated in foreign currencies.
At certain times, we may enter into forward foreign currency exchange agreements to hedge our exposure against potential unfavorable changes in foreign currency values on significant sales and purchase contracts negotiated in foreign currencies. Forward foreign currency exchange contracts were not used in fiscal 2023 and as of March 31, 2023, we held no forward foreign currency contracts.
Forward foreign currency exchange contracts were not used in fiscal 2022 and as of March 31, 2022, we held no forward foreign currency contracts. Price Risk Operating in a global marketplace requires us to compete with other global manufacturers which, in some instances, benefit from lower production costs and more favorable economic conditions.
Price Risk Operating in a global marketplace requires us to compete with other global manufacturers which, in some instances, benefit from lower production costs and more favorable economic conditions.
The net losses incurred in fiscal 2022 were primarily due to our strategic decision to take on additional costs in order to meet our customers delivery schedules. We estimate that these strategic decisions, as well as material cost increases for first article projects impacted our results by over $10,000.
Navy project labor and material cost overruns due to our strategic decision to take on additional costs in order to meet our customer's delivery schedules. We estimate that these strategic decisions for first article projects impacted our results in fiscal 2022 by over $10,000. In fiscal 2023, we completed four first article U.S.
Consequently, when global economies return to stable growth, we expect investment in new global chemical and petrochemical capacity will resume and that such investments will in turn drive growth in demand for our products and services. BN products and market access provide revenue and growth potential in the commercial space/aerospace markets.
As such, we expect investment in new global chemical and petrochemical capacity will improve and drive growth in demand for our products and services over the long-term. Our turbomachinery, pumps, and cryogenic products and market access provide revenue and growth potential in the commercial space/aerospace markets.
Net loss and loss per diluted share for fiscal 2022, were $8,773 and $0.83, respectively, compared with net income and income per diluted share of $2,374 and $0.24, respectively, for fiscal 2021.
Adjusted net income and adjusted net income per diluted share for fiscal 2023 were $2,519 and $0.24 per share, respectively, compared with a loss of $6,582 and $0.62 per share, respectively, for fiscal 2022.
As of March 31, 2022, we had $18,500 outstanding on our term loan, $0 outstanding on our revolving credit facility and no interest rate derivatives outstanding. See ''Debt'' in Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information about our outstanding debt.
See ''Debt'' in Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information about our outstanding 35 debt.
The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus 1.50%, subject to a 0.00% floor.
The term loan requires monthly principal payments of $167 through June 1, 2026, with the remaining principal amount plus all interest due on the maturity date. The interest rate on the term loan is the applicable Bloomberg Short-Term Bank Yield Index ("BSBY"), plus 1.50%, subject to a 0.00% floor.
The BN transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date.
The BN transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price of $72,014 was comprised of 610 shares of common stock, representing a value of $8,964 at $14.69 per share, and cash consideration of $61,150.
Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.
We have not reconciled non-GAAP forward-looking Adjusted EBITDA to its most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliation would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable.
We believe that the amounts recorded in the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K related to revenue, contingencies, pensions, other postretirement benefits and other matters requiring the use of estimates and judgments are reasonable, although actual outcomes could differ materially from our estimates.
We believe that the amounts recorded in the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K related to revenue, contingencies, pensions, other postretirement benefits and other matters requiring the use of estimates and judgments are reasonable, although actual outcomes could differ materially from our estimates. 34 New Accounting Pronouncements In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board, the Securities and Exchange Commission, the Emerging Issues Task Force, the American Institute of Certified Public Accountants or any other authoritative accounting body to determine the potential impact they may have on our consolidated financial statements.
Aftermarket orders have historically been a leading indicator of future capital investment by our customers in their facilities for upgrades and expansions.
Of note, during fiscal 2023, we have experienced an increase in our aftermarket orders to the refining and petrochemical markets, primarily from the domestic market. Aftermarket orders have historically been a leading indicator of future capital investment by our customers in their facilities for upgrades and expansions.
Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand. Our early engagement with customers and support until the end of service life are values upon which our brands are built. Our corporate headquarters are located in Batavia, New York. We have production facilities co-located with our headquarters in Batavia.
Our early engagement with customers and support until the end of service life are values upon which our brands are built. Our corporate headquarters is located with our production facilities in Batavia, New York, where surface condensers and ejectors are designed, engineered, and manufactured.
The term loan and revolving credit facility bear interest rates that are tied to BSBY, plus 1.50%, subject to a 0.00% floor. As part of our risk management activities, we evaluate the use of interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements.
As part of our risk management activities, we evaluate the use of interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements. As of March 31, 2023, we had $12,500 outstanding on our term loan, $0 outstanding on our revolving credit facility and no interest rate derivatives outstanding.
For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities. Our brands are built upon engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives.
Our brands are built upon engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives. Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand.
The claims in our current lawsuits are similar to those made in previous asbestos lawsuits that named us as a defendant. Such previous lawsuits either were dismissed when it was shown that we had not supplied products to the plaintiffs’ places of work, or were settled by us for immaterial amounts.
Such previous lawsuits either were dismissed when it was shown that we had not supplied products to the plaintiffs’ places of work, or were settled by us for immaterial amounts. 32 As of March 31, 2023, we are subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business.
Subsequent to the acquisition, the earn-out agreement was terminated and the contingent liability was reversed into Other operating income, net, on the Company's Consolidated Statement of Operations. Acquisition and integration related costs of $562 were expensed in fiscal 2022 and are included in selling, general and administrative expenses.
In the second quarter of the fiscal 2022, the earn-out agreement was terminated and the contingent liability was reversed into other operating (income) expense, net, on our Consolidated Statement of Operations.
At December 31, 2021, the Company was out of compliance with its bank agreement covenants and was granted a waiver for noncompliance by Bank of America. At March 31, 2022, the amount available under the revolving credit facility was $10,250. On March 31, 2022 and June 7, 2022, we entered into amendment agreements with Bank of America.
At December 31, 2021, we were out of compliance with our bank agreement covenants and were granted a waiver for noncompliance by Bank of America. We entered into amendment agreements with Bank of America since origination.
Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies. Business lost due to competition for orders against competitors using a relatively weaker currency cannot be quantified.
Foreign Currency International consolidated sales for fiscal 2023 were 19% of total sales. Operating in markets throughout the world exposes us to movements in currency exchange rates. Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies.
The alternative and clean energy opportunities for our heat transfer, power production and fluid transfer systems are expected to continue to grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, and small modular nuclear systems.
We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, geothermal power and lithium production, and small modular nuclear systems. We are positioning the Company to be a more significant contributor as these markets continue to develop.
In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income determined in accordance with GAAP. Adjusted EBITDA and adjusted net income is a key metric used by management and our board of directors and is the basis for a portion of management's performance-based compensation.
In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income (loss) or net income (loss) per diluted share determined in accordance with GAAP.
For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems. Our energy and new energy markets include oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen.
We design and manufacture custom-engineered vacuum, heat transfer, pump and turbomachinery technologies. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems.
In extreme market downturns, such as we recently experienced, we typically see depressed price levels. Moreover, the cost of metals and other materials used in our products have experienced significant volatility.
In extreme market downturns, such as we recently experienced, we typically see depressed price levels.
Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging. 23 Of note, we have experienced a noticeable increase in our energy and chemical aftermarket orders in fiscal 2022, primarily from the domestic market.
The timing and catalyst for a recovery in these markets (crude oil refining and chemical/petrochemical) remains uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging.
Approximately 35% of our fiscal 2023 capital expenditures are expected to be for machinery and equipment, and 50% for buildings and leasehold improvements to fund our growth initiatives with the remaining amounts expected to be used for other items.
Capital expenditures for fiscal 2024 are expected to be approximately $5,500 to $7,000. Our fiscal 2024 capital expenditures are expected to be primarily for machinery and equipment, as well as for buildings and leasehold improvements to fund our growth and productivity improvement initiatives. The majority of our planned capital expenditures are discretionary.
Small power dense systems are imperative for these applications and we believe our technology and expertise will enable us to achieve sales growth in this market as well. 24 The chart below illustrates our strategy to increase our participation in the defense market. The defense market comprised 76% of our total backlog at March 31, 2022.
We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications, and we believe our technology and expertise will enable us to achieve sales growth in this market as well.
BN has outperformed our expectations during the first ten months of ownership. • Net loss and loss per diluted share for fiscal 2022 were $8,773 and $0.83, respectively, compared with net income and income per diluted share of $2,374 and $0.24, respectively, for fiscal 2021.
The net result of the above is that net income and net income per diluted share for fiscal 2023 were $367 and $0.03 per share, respectively, compared with a loss of $8,773 and $0.83 per share, respectively, for fiscal 2022.
Navy applications, we also provide specialty pumps, turbines, compressors and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics and power systems. We have built a leading position, and in some instances, a sole source position, for certain systems and equipment for the defense/space industry and others.
Navy, the strategic programs we are qualified on, the projected procurement of submarines, aircraft carriers and undersea propulsion and power systems and the solutions we provide. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics and power systems.
We are positioning the Company to be a more significant contributor as these markets continue to develop. We believe in the near and medium-term that chemical and petrochemical capital investment will continue to decouple from energy investment.
We believe that chemical and petrochemical capital investment will continue to decouple from energy investment.
Such factors, in addition to the global effects of the recent volatility and disruption of the capital and credit markets, have resulted in downward demand and pricing pressure on our products. 33 Interest Rate Risk In connection with the BN acquisition, we entered into a $20,000 five-year term loan and a five-year revolving credit facility with Bank of America.
Interest Rate Risk In connection with the BN acquisition, we entered into a $20,000 five-year term loan and a five-year revolving credit facility with Bank of America. The term loan and revolving credit facility bear interest rates that are tied to BSBY, plus 1.50%, subject to a 0.00% floor.
As such we believe there is the possibility of a cyclical upturn in the next twelve to eighteen months following several years of reduced capital spending in a low oil price environment, although not as robust as years past due to the factors discussed above.
As such, we believe there is the possibility of a cyclical upturn following several years of reduced capital spending in a low oil price environment. Additionally, the financial performance of some of our larger energy customers improved during fiscal 2023, which may provide funding for capital spending.
We believe adjusted EBITDA is often a useful measure of a company’s operating performance and is used by management to measure the operating performance of our business. Adjusted EBITDA excludes charges for depreciation, amortization, interest expense, taxes, other acquisition related expenses (income), and other unusual/nonrecurring expenses.
Adjusted EBITDA excludes charges for depreciation, amortization, net interest expense, taxes, acquisition related expenses, and other unusual/nonrecurring expenses. Adjusted net income (loss) and adjusted net income (loss) per diluted share exclude intangible amortization, acquisition related expenses, other unusual/nonrecurring expenses and the related tax impacts of those adjustments.
Management uses adjusted net income and adjusted diluted earnings per share to assess the Company’s consolidated financial and operating performance. Adjusted net income and adjusted diluted earnings per share are provided for informational purposes only and are not a measure of financial performance under GAAP.
Adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per diluted share are key metrics used by management and our board of directors to assess the Company’s financial and operating performance and adjusted EBITDA is a basis for a portion of management's performance-based compensation.
Cash used in operations for fiscal 2022 was $2,219, compared to cash used of $1,722 in fiscal 2021. • In fiscal 2022, $3,523 was returned to shareholders as dividends compared with $4,391 in fiscal 2021. In fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
In the fourth quarter of fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America.
The remaining 44% of our fiscal 2022 sales came from the refining, chemical/petrochemical and other commercial markets. These markets represented 75% of our fiscal 2021 sales. BN has outperformed expectations since being acquired.
For fiscal 2023, sales to the defense and space industries were 55% of our business compared with approximately 25% of sales prior to the acquisition. The remaining 45% of our fiscal 2023 sales came from the refining, chemical/petrochemical and other commercial markets. These markets represented approximately 75% of our sales prior to the acquisition.
Included in backlog at March 31, 2022 was $117,769 from BN. Approximately 40% to 50% of orders currently in our backlog are expected to be converted to sales within one year. At March 31, 2022, approximately 76% of our backlog was attributable to defense (U.S.
Approximately 50% to 55% of orders currently in our backlog are expected to be converted to sales within one year and 25% to 30% after one year but within two years. The majority of the orders that are expected to convert beyond twelve months are for the defense industry, specifically the U.S.
Redirecting resources to defense contracts at our Batavia operation has also impacted our commercial market orders which had to be outsourced. We estimate that the impact of all these factors, along with material cost increases for first article projects, was over $10,000 in fiscal 2022.
Results for fiscal 2022 included the impact of first article Navy project labor and material cost overruns. We estimate that the impact of these labor and material cost increases for first article Navy projects, was over $10,000 in fiscal 2022. In fiscal 2023, we completed four first article U.S.
We believe this, along with our cash balances, provide us adequate financial flexibility to meet our obligations. Current Market Conditions Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on the planned procurement of submarines, aircraft carriers and undersea propulsion and power systems.
For additional information see "Liquidity and Capital Resources" below. Current Market Conditions Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on our significant backlog, improved execution, long-standing relationship with the U.S.

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Other GHM 10-K year-over-year comparisons