Graham Corporation (GHM) 2008年年度報告「AMEX」.pdf

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1、2008 AnnuAl RepoRt2008 AnnuAl RepoRtGraham Corporationredefining GrahamGraham Corporation AMeX symbol:GHMWith world-renowned engineering expertise in vacuum and heat transfer technology,Graham Corporation is a global designer,manufacturer and supplier of ejectors,pumps,condensers,vacuum systems and

2、heat exchangers.over the past 72 years,Graham Corporation has built a reputation for top quality,reliable products and high-standards of customer service.Sold either as components or complete system solutions,the principal markets for Grahams equipment are the petrochemical,oil refining and electric

3、 power generation our vision is to be a world-class leader in the design and manufacture of engineered-to-order products for the process industries.table of Contents letter to Stockholders 2 I Core Advancement 4 I Optimizing Operations 6 I Officers and Board of Directors 7 I our products 8 I Stockho

4、lder Information Inside back coverr Bob Hagen,Jr.Sales Manager30 years with GrahamMore than just a sales team,we are consultative experts that our customers,both large and small,seek out and rely on for the development of engi-neered-to-order solutions to improve the throughput,efficiency,and reliab

5、ility of their own processes.industries,including cogeneration and geothermal plants.Graham equipment can be found in diverse applications,such as metal refining,pulp and paper processing,ship-building,water heating,refrigeration,desalination,food processing,drugs,heating,ventilating and air conditi

6、oning.Grahams reach spans the globe.Its equipment is installed in facilities from north and South America to europe,Asia,Africa and the Middle east.Leon ChenGeneral Manager in China 2 years with Graham The Graham brand is known and respected in China.We have a significant opportunity to grow sales i

7、n China.Our team in Suzhou is making solid headway developing relationships and positioning Graham to take advantage of planned refinery investments in China.Mary Jo MatlaManager Quality Assurance33 years with GrahamA strong quality assurance program,with a focus on con-tinuous improvement,will lead

8、 to less rework and ultimately increase capacity and bottom line profitability.Jennifer CondameController16 years with GrahamOur financial discipline over the past two years has resulted in a significant reduction of our cash con-version cycle and working capital requirements.I believe our organizat

9、ion is financially well-posi-tioned to seize the growth opportunities that are ahead of us.$0$200$400$600$800$1,000$1,200$1,4003/03$0$200$400$600$800$1,000$1,200$1,4003/033/04Graham CorporationFiscal year ending March 31.tIndex.toties lhistorical fact.Five-Year Financial Highlights(in thousands,exce

10、pt per share data)2008 2007 2006 2005 2004Performance for Fiscal Years ended March 31Revenue$86,428$65,822$55,208$41,333$37,508Gross profit 34,162 16,819 15,959 7,540 5,890Gross profit margin(%)39.5%25.6%28.9%18.2%15.7%Selling,general and administrative 13,074 10,806 10,505 7,746 7,859Diluted earnin

11、gs(loss)per share from continuing operations$2.98$1.17$0.77$0.07$(0.20)Weighted average shares outstanding-diluted 5,042 4,925 4,668 4,292 4,117Year-End Financial Position at March 31 Total assets$70,711$48,878$40,556$33,529$35,740Long-term debt 36 56 30 44 93Stockholders equity 48,536 30,654 27,107

12、 16,578 18,102Book value per share$9.73$6.31$5.66$3.91$4.37Other Data Working capital at March 31$36,998$20,119$16,779$11,204$11,652Depreciation for years ended March 31 862 874 775 768 793Capital expenditures for years ended March 31 1,027 1,637 1,048 224 249Orders for years ended March 31 107,102

13、86,540 66,225 49,857 33,826Backlog at March 31$75,662$54,184$33,083$22,376$13,48204 05 06 07 08 Revenue($in millions)$37.5$41.3$55.2$65.8$86.404 05 06 07 08 Income(Loss)from Continuing Operations($in millions)($0.8)$0.3$3.6$5.8$15.02008 Revenue by Industries2008 Revenue by Geographic MarketGraham Co

14、rporation 2008 Annual Report 1 Oil Refining 43%Chemical/Petrochemical 31%Other Industrial and Commercial Applications 24%Power 2%United States 54%Asia 15%Middle East 12%Other 12%Canada 7%04 05 06 07 08 Orders($in millions)$33.8$49.9$66.2$86.5$107.104 05 06 07 08 Backlog($in millions)$13.5$22.4$33.1$

15、54.2$75.7Letter to StockholdersIn fiscal 2008,we were not only successful in redefining and building a stronger organization for the future,we delivered record-setting financial results.As we move forward,an even more effective and efficient organization is emerging.Defining our vision,and the steps

16、 necessary to achieve it,has been one of the most exciting developments within our organization over the past two years.I also was pleased with the value that our dedicated employees created in fiscal 2008 for our stockholders through their tireless hard work and a single-minded commitment to our cu

17、stomers.Important measures,across all of our opera-tional and administrative functions,were implemented over the past year.These measures centered on improving our sustainability and scalability while at the same time aligning our resources in order to better position us to achieve our operating and

18、 strategic objectives.Through this process,we believe we will create both short-and long-term value for our stockholders.Fiscal 2008 ReviewBy every important measure,fiscal 2008 was the most success-ful in Grahams 72-year history.We set new records for revenue,earnings,new customer orders and backlo

19、g.When compared with our solid performance in fiscal 2007,which also represented a record year,fiscal 2008 revenue increased 31%,new orders ex-panded 24%and year-end backlog reached$75.7 million,a 40%increase compared with the prior fiscal year-end.We continually met our operating and strategic obje

20、ctives throughout the year,which directly contributed to our strong bottom-line results,with net income of$15.0 million,representing$2.98 in earnings per diluted share.Financial discipline also strengthened our position in fiscal 2008.A continued focus on improving our working capital utilization re

21、sulted in excellent cash flow available for funding both our capital investment and operating needs.Operating cash flow generated during the year was$19.7 million.I also am proud to confirm that in fiscal 2008 we became fully compliant with Sarbanes-Oxley Section 404.We believe that this achievement

22、 validates the robustness of our internal controls,the transparency of our financial reporting system and the strength of our gover-nance practices.In order to enhance stockholder value and improve the liquidity of Grahams stock,we completed a 5-for-4 stock split in January 2008,raising the number o

23、f common shares outstanding to approximately 5.0 million.At the same time,we raised the divi-dend per common share,post-split,to$0.03 from$0.02.Both of these initiatives reflect the Board of Directors confidence in our future.Although fiscal 2008 was a record year,I steadfastly believe there is sign

24、ificantly more we can accomplish to allow Graham to achieve even higher revenue and profitability levels.We are early in the business improvement process to reshape and redefine Gra-ham and have more improvements planned improvements that we expect will drive Graham to even higher levels of performa

25、nce.Redefining GrahamOur vision is simple:To be a world-class leader in the design and manufacture of engineered-to-order products for the process industries.Driving this vision is a simple theme of understand-ing and satisfying the current and future needs of our existing and potential customers.I

26、am confident that through company-wide investment and continuous improvement initiatives,we can reshape and redefine Graham to become the preferred supplier of our products and services for our customers,a challenging and rewarding place to work for our employees and a solid investment for our stock

27、holders.Our People ProcessCreating a performance mind-set in every employee,from managers to welders,has begun to take hold.Our goal is to enable our employees to recognize the role that they each play in achiev-ing our operating and strategic goals,and align their rewards with Grahams successes.By

28、linking the employee appraisal process and reward systems to our corporate objectives,we expect to increase the pace of improvement within Graham,which in turn we expect will allow us to more rapidly advance toward our goals.We intend to continue to invest in our employees to make Graham more suc-ce

29、ssful and better able to readily respond to business challenges.Our Production ProcessThe Graham Production System,or GPS,is our low-volume/high-mix,flexible-manufacturing platform.GPS enables timely produc-tion of high quality engineered-to-order products.We strive to continuously improve GPS in or

30、der to increase throughput,enable greater flexibility,ensure quality control and achieve higher levels of predictability and reliability in operations planning.Ultimately,our objective is to meet our customers delivery schedules 100%of the time.Capital investments made over the last two years to imp

31、rove productivity,expand capacity and shorten lead times have already produced tangible results,as evidenced by our fiscal 2008 operat-ing performance.However,we believe there is still significantly more we can do to improve operating performance and expand production capacity.We anticipate spending

32、$2.0 million in capi-tal investments in fiscal 2009,two-thirds of which we intend to utilize to achieve productivity gains.Creating Scalability with TechnologyInvestment in our information technology platforms remains a key factor in our ability to adequately scale our engineering processes to suppo

33、rt our growth plans.In fiscal 2008,we increased engineering capacity through automation,achieving,among other things,a 25%increase in engineering capacity for surface condensers.Similar investments are ongoing for our ejector product line,and we expect comparable or even greater engineer-ing capacit

34、y gains in fiscal 2009 as we continue to develop and implement our intelligent design software system.As personnel resources permit,other products will undergo similar investments to expand engineering capacity and reduce lead times.Additional-ly,ongoing business system improvements in administrativ

35、e areas are intended to increase the flow of real-time information to sup-port prompt management decisions and lower transaction costs.As Graham expands its reach geographically and gains additional market share,investment in information technology will remain in the forefront to help ensure that pr

36、ofitable growth is realized.Geographic DiversificationThe geographic diversification of our markets is imperative to our ability to organically grow our top-line revenue.In fiscal 2008,54%of sales were for domestic customers while 46%were destined for international markets.We strongly believe that t

37、he Graham brand is established and well recognized in the Middle East,Asia and South America.Moreover,based on our under-standing of capital investment plans in the international energy markets,we anticipate that our geographic sales mix will become more weighted toward international markets over th

38、e next 3 to 5 years,with up to 60%of our revenue derived from international sales within such time frame.We also believe that our business model for Asia,and specifically in China,has evolved over the past two years to be more effective,allowing us to win incremental business and generate higher lev

39、els of profitability.In fiscal 2009,we intend to continue to invest talent and resources to develop a broader customer base in order to generate greater sales both from China,where our operations are based,and throughout Asia.Reducing CyclicalityOver the past three years,the strong energy industry m

40、arkets led to solid growth in demand for our products and services.Notably,we have grown our base of less cyclical sales by approximately 50%and expanded the gross profit from that segment of the busi-ness by 75%during the same time period.That effort is important because it increases our fixed base

41、 of revenue and profits.We expect that coupling growth and gross profit gains from our less cyclical products with initiatives to gain greater market share in international markets will improve the profitability of our Company throughout market cycles.Driving Growth and SustainabilityOur goal is to

42、more than double our revenue over the next several years through organic sales growth,the addition of new products through potential acquisitions and the implementation of organi-zational changes.At the onset of fiscal 2009,we believe that we are well positioned to achieve our goal.The quantity and

43、quality of projects in our backlog is high.With our operations improve-ment initiatives,productivity enhancements to expand capacity,disciplined sales processes and steadfast dedication,we expect to deliver 15%to 20%top-line growth in fiscal 2009,with gross margin in the upper 30%range.More importan

44、tly,I believe that in the long-term,our strong brand,talented team,financial and operating strength will not only enable us to consistently grow our profits,but will also position us as a world leader in the design and manufacture of engineered-to-order products for the process industries.I hope you

45、 share my enthusiasm for redefining and growing Graham.It is an exciting time both for our employees and for our stockholders.As I reflect back with pride on our fiscal 2008 accomplishments,I congratulate and thank each of our team members for meeting the high expectations set for the year.In additi

46、on,I extend my gratitude to our customers for their respect and to our suppliers and service providers for their support during this period of growth,express my appreciation to the Board of Directors for their counsel,and thank our stockholders for their continued confidence in Grahams exciting stor

47、y.With kind regards,James R.LinesPresident and Chief Executive OfficerJune 13,2008Graham Corporation 2008 Annual Report 2 I 3 Fiscal 2008 Financial HighlightsOur success in fiscal 2008 was highlighted by record-setting revenue,higher profitability and improved cash management,resulting in significan

48、t growth in stockholder value.Revenue for the year was$86.4 million,a 31%increase compared with rev-enue of$65.8 million the prior fiscal year.Our gross profit margin increased to 40%,up from 26%,and operating margin improved to 24%compared with 9%in fiscal 2007.Net income for fiscal 2008 was$15.0 m

49、illion,or$2.98 per diluted share,more than double the net income of$5.8 million,or$1.17 per diluted share,in fiscal 2007.Of significant importance is that year-over-year,we gained operating leverage as a direct result of the meaningful improve-ments that have been implemented to date.In fiscal 2008,

50、81%of each contribution margin dollar(i.e.,sales less direct material and labor costs)dropped down to profit before income taxes compared with 38%in fiscal 2007.Material and labor costs,the largest components of our costs,were 35%and 22%,respectively,of sales in fiscal 2008.By realizing even greater

51、 leverage from our human resources in the future,we believe that we can generate higher earnings.Fiscal 2008 marked the best financial performance in our Companys 72-year history.For four consecutive years,we have achieved double-digit,top-line growth,with a per annum average growth rate in excess o

52、f 23%.Of equal importance,we implemented a number of changes throughout our organization,including improved financial management procedures,technology upgrades and human resource enhancements.The changes enabled us to achieve our fiscal 2008 results and are the basis from which we intend to continue

53、 to reap benefits in the years to come.Dan HarveySenior Human Resources Manager1 year with GrahamWe are increasing the value of Grahams most important resource,its people,by providing the training and tools necessary to drive future change.Core AdvancementIn fiscal 2008,we were able to shorten our c

54、ash conversion cycle(i.e.,the amount of time from inventory inception to accounts receivable collection)to 31 days,a 20-day improvement compared with fiscal 2007.Additionally,we reduced our operat-ing working capital needs to support sales to 3%in fiscal 2008,down from 8%in the prior fiscal year.As

55、a result of our inventory reduction efforts and our ability to accelerate progress payments,we were able to finance sales growth completely by cash generated from operations.At fiscal 2008 year-end,our cash and short-term investments were$36.8 million,a 144%increase compared with the fiscal 2007 yea

56、r-end.Through the hard work and diligence of our employees,we successfully completed the requirements for compliance under Sarbanes-Oxley Section 404 status this year.We received very minor comments and no significant deficiencies or material weaknesses.In fiscal 2008,before the current sub-prime ma

57、rket disruptions,we were also able to negotiate our most favorable loan agreement to date,a three-year,$30 million loan facility.We expect that this new banking agreement will support our continued sales growth in fiscal 2009 and beyond,as well as provide available financing for growth opportunities

58、 when they arise.J.Ronald HansenVice President Finance and Administration and Chief Financial OfficerJulie MellonCredit Manager10 years with GrahamIn order to maintain our lead-ership position in a dynamic international marketplace and establish strong relation-ships with our international customers

59、,we intend to stay ahead of our competition by proactively addressing cultur-al,language and time barriers without compromising responsible credit and financing policies.Human Resource InitiativesWe recognized that in order to meet our growth objectives over the next few years,we would need to suppl

60、ement our workforce through the addition of experienced personnel while aligning employee performance and the reward system with our corporate goals.We recruited a Senior Human Resources Manager with experience in larger manufacturing environments.To further enhance our management team,we proactivel

61、y recruited addi-tional outside talent with a broad array of backgrounds,including a Vice President of Operations,Manager of Manufacturing and Continuous Improvement,and an Information Technology Senior Manager.We have a good blend of talented employees,some rich in the experience of Graham and othe

62、rs trained in leading manu-facturing environments elsewhere.Over the past year,we implemented a comprehensive perfor-mance management process to align each of Grahams employ-ees performance to our shared business objectives.A revamped incentive system,which is directly linked to our desired outcomes

63、,will help ensure the entire organization is working in unison.For employees to embrace change and positively contribute to the overall success,they must possess the necessary skills and training to succeed.Employee development efforts in lean manufacturing,quick response training and financial mana

64、gement have been put into place within the past year.A change management team was also put into place to further support these policy and process changes.Within Grahams manufacturing facility,essential activities,like machining and welding,take place every day.We continue to focus on lowering our wo

65、rkers compensation costs and mak-ing Graham a safer place for our employees to work.We have a strong safety program in place,and in fiscal 2008,lost time for accidents was 127 days,reduced from 250 days the previous fiscal year.Our workers compensation modification score,or days lost to accidents to

66、 total hours worked,was well below the New York State average for comparable manufacturers.Information Technology Improvements Grahams reputation rests on our ability to manufacture and deliver high-quality,engineered-to-order products to customers around the world.Expanding our reach in order to ac

67、hieve the next level requires a strong information technology platform.A significant portion of our information technology spending in fiscal 2008 was directed towards effectively utilizing resources to improve engineering productivity.This was accomplished through the automation of our proprietary

68、engineering know-how,specifi-cally through 3-D modeling,capturing engineering intelligence through a rules-based framework and greater automation of mechanical design.In fiscal 2008,our information technology staff released the first version of newly developed engineering best practice soft-ware whi

69、ch increased engineering productivity on the surface,barometric and process condenser product lines by at least 25%.In addition to dramatic time-savings,the engineering automation application improves the performance and quality of our engineer-ing drawings,allows for faster reaction to customer cha

70、nge orders,reduces cycle time and introduces greater predictability across the entire operation.Development work has begun to expand this software application to the ejector product lines as well.We ended fiscal 2008 with a clear strategy for our future and plan to invest over 50%of our fiscal 2009

71、capital expenditures on information technology.Additional information technology objec-tives for fiscal 2009 include improving the sales process by using technologies such as web conferencing to reduce costs;continuing to build intellectual property using the engineering automation software;supporti

72、ng increased operational capacity through plant automation;and providing on-demand data availability to im-prove our internal decision capabilities.We will continue working to put a secure and robust architecture in place to enable organic growth and integrate business opportunities as they arise.An

73、ne LeverSenior Manager of Information Technology2 years with GrahamThrough the standardiza-tion of our design software system,we have improved engineering productivity over the past two years,and in the coming year,we will focus on building a best-in-class IT infrastructure to improve the scalabilit

74、y of all aspects of our business.Joe AliassoBusiness Unit Manager Major Equipment15 years with GrahamWe reduced the time needed to engineer a condenser 25%by implementing rules-based design software,and we intend to leverage these gains across all of our product lines.Graham Corporation 2008 Annual

75、Report 4 I 5 Over its long history,Graham Corporation has built a well-respected and trusted brand name.To our customers in the process industries,such as oil refining and petrochemical production,the Graham name represents the highest standards in product quality,equipment reliability and customer

76、service.Kimberly DentonManager of Manufac-turing and Continuous Improvement2 years with GrahamWe continue to improve the Graham Production System by developing the tools,templates and repeatable processes nec-essary to yield consistent results in our manufac-turing facility.During this time of unpre

77、cedented capital investment by world-wide energy and chemical markets,the demand for our products,primarily our condenser and ejector system products,has been greater than our manufacturing capacity can meet.In order to capitalize on the surging demand and capture an even greater share of the global

78、 projects,we have taken a three-pronged approach at expanding capacity while controlling our fixed cost structure.We effectively expanded production capacity under our Optimizing Operationsexisting roof line through capital investment,outsourced non-core manufacturing,and importantly,we continued to

79、 improve the Graham Production System(GPS),a manufacturing platform that supports flexible production of our engineered-to-order products.Predictability,Reliability and RepeatabilityBecause our product offering results in low volume but high mix,or variability in design,we developed GPS as a flexibl

80、e manufacturing flow to reduce lead time and increase throughput in our facility.By improving our production processes,we are fostering greater predictability of product schedules,reliability of results throughout the manufacturing flow and repeatability of the efficient and effective process.As a r

81、esult,we expanded capacity,improved quality and service and positively impacted profitability.We have accomplished a significant amount of change in a short period of time through our commitment to improve GPS,but more importantly,I believe we are still in the early stages of elevating our operating

82、 performance and fully realizing the productivity gains and opportunities available.Capital Investment PlanOver the past two years,our capital expenditures related to operations included upgrading equipment with newer technolo-gies and expanding automation through the operation.Welding,a critical fu

83、nction in the fabrication of condenser and ejector systems,with more advanced welding equipment has had an increase in weld completion rates,improved weld quality and has enabled greater versatility and flexibility in production plan-ning.Even with a limited pool of skilled welders,we were able to i

84、ncrease our welding capacity while appreciably reducing our defect rate.Alan E.SmithVice President OperationsJohn Klein Plant Superintendent35 years with GrahamThe longevity and experience of our manu-facturing employees gives our production team leaders the flexibility to reduce bottlenecks and imp

85、rove our lead times and throughput.We immediately benefited from the addition of a new plasma burning table,which is able to burn steel plates three to nine times faster and results in an approximate 30%improvement in throughput for this work center.Investments in a CNC machine,a multi-axis milling

86、machine,enabled us to consolidate the opera-tions of three machines,reduce set-up time by 50%and decrease cycle time for parts processed by this machine by 25%to 45%.Overall,with the addition of these two pieces of equipment,our production lead time was reduced by an average of two weeks.We plan in

87、fiscal 2009 to spend approximately$0.5 million in capital on machinery that will further enhance productivity and expand manufacturing capacity.Our goal is to continue to increase throughput by reducing the lead times associated with machining operations that are currently outsourced,thereby increas

88、ing our in-house capacity and profitability.We believe a market differentiator can be speed.As we continue to reduce lead time and accelerate work across the Company,we intend to continue to put distance between Graham and its competitors.Aligning ResourcesAs the production area continues to make st

89、rides in reducing manufacturing lead times,the timeliness and flow of information becomes even more critical.We are taking steps to help ensure our information technology infrastructure supports our growth plans.We intend to improve the flow of information to the production facility by upgrading our

90、 information technology capabilities and linking manufacturing directly with engineering,purchasing and production planning.Throughout fiscal 2009,we plan to update manufacturing techniques,processes and tools in order to help maximize our production capabilities and workforce resources.There is a s

91、trong current demand for our products and services.We want to satisfy more of that demand,and intend to do so as we continue with disciplined investments in the areas constraining growth.Corporate OfficersJames R.LinesPresident and Chief Executive Officer24 years with GrahamJ.Ronald HansenVice Presi

92、dent Finance and Administrationand Chief Financial Officer15 years with GrahamAlan E.SmithVice President Operations15 years with GrahamBoard of DirectorsStanding left to right:Gerard T.Mazurkiewicz(1,3)Director since 2007Tax PartnerDopkins&Company,LLPJames R.LinesDirector since 2006President and Chi

93、ef Executive OfficerJerald D.Bidlack(1,2,3,4)ChairmanDirector since 1985PresidentGriffin Automation,Inc.James J.Malvaso(1,2,4)Director since 2003President and Chief Executive OfficerThe Raymond CorporationSeated left to right:H.Russel Lemcke(1,2)Director since 1996PresidentH.Russel Lemcke Group,Inc.

94、Helen H.Berkeley(2,3)Director since 1998Private InvestorCornelius S.Van Rees(2,3,4)Corporate SecretaryDirector since 1969Retired PartnerThacher Proffitt&Wood,Attorneys-at-Law1-Audit Committee2-Compensation Committee3-Employee Benefits Committee4-Nominating CommitteeAlan E.SmithVice President Operati

95、onsGraham Corporation 2008 Annual Report 6 I 7 Rob SmithBusiness Unit Manager Aftermarket and Balance Products15 years with GrahamOur team devoted to servicing the aftermarket needs of our customers allows us to capitalize on the continuing expansion of the robust refining and petrochemical markets.

96、Craig BruckerDistrict Sales Manager,Houston and Alberta32 years with GrahamThe quality of our equipment that is engineered-to-order for our customers is in very high demand because of the significant growth of economies around the world.Business Units Product Description ApplicationsCondensers Surfa

97、ce and direct contact condensers handle steam from a Oil refineries Cogeneration power plants turbine that drives a compressor or pump and can manage Petrochemical processing Geothermal power plants steam from a turbine-generator for power generation.Power plants Ejectors Ejectors are placed in sing

98、le or multiple stages with process Oil refineries Steel mills condensers to create vacuum in order to change pressure in Petrochemical processing Edible oil production plants a process.Fertilizer production plants Pumps Mechanical vacuum pumps can be independent or part of an Pharmaceutical Petroche

99、mical processing ejector system to create vacuum for a process.production plants Power generation plants Seawater deaeration Ground water remediation Food production plants Heat Exchangers:Used to heat,cool,condense or boil fluids.Clean steam generators Supercritical water oxidationHeliflow Compress

100、ors Cryogenic vaporizationPlate Exchangers Seal cooling devices Waste heat recoveryMicroMix Vent condensers Water heaters Natural gas heaters Cooling tower isolation Boiler blowdown Heat pumps Process sample coolers Thermal storage systems Aftermarket:Consultative problem solving and replacement.All

101、 heat transfer and vacuum products and systems.Spare Parts Geothermal power plant condenser being installed at a site in Southeast Asia producing 50 MW of electrical power.Surface condenser and liquid ring pump package for an 80 MW combined cycle power plant in California.Ejector system installation

102、 for heavy crude oil deep cut vacuum distillation at a site in Asia that recently commenced operation.8 Graham Corporation 2008 Annual Report The following Annual Report on Form 10-K for the year ended March 31,2008was filed with the U.S.Securities and Exchange Commission on June 3,2008This Page Int

103、entionally Left BlankUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-KANNUAL REPORTPURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the year ended March 31,

104、2008ORnTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromto.Commission file number 1-8462GRAHAM CORPORATION(Exact name of registrant as specified in its charter)DELAWARE16-1194720(State or Other Jurisdiction ofIncorporation or Organiz

105、ation)(I.R.S.EmployerIdentification No.)20 Florence Avenue,Batavia,New York14020(Address of Principal Executive Offices)(Zip Code)Registrants telephone number,including area code 585-343-2216Securities registered pursuant to Section 12(b)of the Act:Title of each className of each exchange on which r

106、egisteredCommon Stock(Par Value$.10)American Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:Title of ClassCommon Stock Purchase RightsIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes nNo Indicate by chec

107、k mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of theAct.Yes nNo Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Actof1934duringthepreceding 12months(orforsuchs

108、horterperiod thattheregistrantwasrequiredtofilesuchreports),and(2)has been subject to such filing requirements for the past 90 days.Yes No nIndicate bycheck mark ifdisclosure ofdelinquent filerspursuant toItem 405ofRegulation S-Kisnotcontained herein,and willnotbe contained,to the best of registrant

109、s knowledge,in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.nIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer or a non-accelerated filer,or a smallerreporting compan

110、y.See definition of“accelerated filer,”“large accelerated filer,”and“smaller reporting company”in Rule 12b-2 of theExchange Act.(Check one):Large accelerated filer nAccelerated filer Non-accelerated filer nSmaller reporting company n(Do not check if a smaller reporting company)Indicate by check mark

111、 whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes nNo The aggregate market value of thevoting stock held by non-affiliates of the Registrant as of September 30,2007,the last business day ofthe Companys most recently completed second fiscal quarter,was$145,506,248.Th

112、e market value calculation was determined using theclosing price of the Registrants Common Stock on September 28,2007,as reported on the American Stock Exchange.For purposes of theforegoing calculation only,all directors,officers and the Employee Stock Ownership Plan of the registrant have been deem

113、ed affiliates.AsofMay30,2008,the registrant had outstanding 4,990,356sharesofcommon stock,$.10parvalue,and4,990,356common stockpurchase rights.Documents Incorporated By ReferencePortions of the registrants definitive Proxy Statement,to be filed in connection with the registrants 2008 Annual Meeting

114、ofStockholders,is incorporated by reference into Part III,Items 10,11,12,13 and 14 of this filing.Table of ContentsGRAHAM CORPORATIONAnnual Report on Form 10-KYear Ended March 31,2008PagePART IItem 1Business.1Item 1ARisk Factors.5Item 1BUnresolved Staff Comments.9Item 2Properties.9Item 3Legal Procee

115、dings.10Item 4Submission of Matters to a Vote of Security Holders.10PART IIItem 5Market for Registrants Common Equity,Related Stockholder Matters and IssuerPurchases of Equity Securities.10Item 6Selected Financial Data.11Item 7Managements Discussion and Analysis of Financial Condition and Results of

116、Operations.12Item 7AQuantitative and Qualitative Disclosures About Market Risk.21Item 8Financial Statements and Supplementary Data.22Item 9Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure.50Item 9AControls and Procedures.50Item 9BOther Information.50PART IIIItem 10

117、Directors,Executive Officers and Corporate Governance.51Item 11Executive Compensation.51Item 12Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters.51Item 13Certain Relationships and Related Transactions,and Director Independence.51Item 14Principal Accounting

118、 Fees and Services.52PART IVItem 15Exhibits and Financial Statement Schedules.52Note:Portions of the registrants definitive proxy statement,to be issued in connection with the registrants 2008Annual Meeting of Stockholders to be held on July 31,2008,have been incorporated by reference intoPart III,I

119、tems 10,11,12,13 and 14 of this Annual Report on Form 10-K.PART I(Dollar amounts in thousands except per share data).Item 1.Business.Graham Corporation(“Graham,”the“Company,”“we,”“us”or“our”)designs,manufactures and sellscustom-built vacuum and heat transfer equipment to customers worldwide.Our prod

120、ucts include steam jet ejectorvacuum systems,surface condensers for steam turbines,vacuum pumps and compressors,various types of heatexchangers,including helical coil heat exchangers marketed under the Heliflow name,and plate and frameexchangers.Our products produce a vacuum,condense steam or transf

121、er heat,or perform a combination of thesetasks.Our products are available in a variety of metals and non-metallic corrosion resistant materials.Our products are used in a wide range of industrial process applications,including:petroleum refineries;chemical and petrochemical plants;fertilizer plants;

122、power generation facilities,such as fossil fuel,nuclear,cogeneration and geothermal power plants;pharmaceutical plants;plastics plants;liquefied natural gas production facilities;soap manufacturing plants;air conditioning systems;food processing plants;and other process industries.We were incorporat

123、ed in Delaware in 1983 and are the successor to Graham Manufacturing Co.,Inc.,whichwas incorporated in 1936.Our principal business location is in Batavia,New York.We also maintain a wholly-owned subsidiary,Graham Vacuum and Heat Transfer Technology(Suzhou)Co.,Ltd.located in Suzhou,China.Asof March 3

124、1,2008,we had 281 full-time employees.Our Fiscal 2008 HighlightsHighlights for our fiscal year ended March 31,2008,which we refer to as fiscal 2008,include:Net income and income per diluted share forfiscal2008,were$15,034and$2.98compared with net incomeof$5,761 and income per diluted share of$1.17 f

125、or fiscal year ended March 31,2007,which we refer to asfiscal 2007.Net income for fiscal 2008 was a record high.Net sales for fiscal 2008 of$86,428 were up 31%compared with net sales of$65,822 for fiscal 2007.Fiscal2008 net sales were a record high.Orders placed with usin fiscal 2008of$107,102 were

126、up 24%compared with fiscal 2007,when orders were$86,540.Orders received in fiscal 2008 were a record high.Backlog grew to$75,662 on March 31,2008,representing a 40%increase compared with March 31,2007,when our backlog was$54,184.Backlog as of March 31,2008 was a record high.Gross profit and operatin

127、g margins for fiscal 2008 were 40%and 24%compared with 26%and 9%,respectively,for the year ended March 31,2007.Gross profit margin and operating margin percentages forfiscal 2008 were record highs.1 Cash and short-term investments at year-end fiscal 2008 were$36,793,compared with$15,051 as ofMarch 3

128、1,2007,up 144%.Cash and investments on hand at March 31,2008 were a record high.We believe the principal market drivers that have led to increased capital spending by our customers and thatare contributing to our sales growth include:Global consumption of crude oil is estimated to expand significant

129、ly over the next decade.There is a shortage of global oil refining capacity,which is being addressed through refinery upgrades,revamps and expansions.Known supplies of sweet crude oil are being depleted.Sour crude sources are identified and believed to beplentiful.There is a differential in raw mate

130、rial prices for sweet and sour crude oil.To lower production costs,manyrefineries are upgrading facilities in order to be able to process sour crude oil,which requires an upgrade ofvacuum and heat transfer equipment of the types we design and manufacture.Expanding middle class in Asia is driving inc

131、reasing demand for power,refinery and petrochemicalproducts.The high cost of natural gas in North America and Europe is leading to the construction of new petro-chemical plants in the Middle East,where natural gas is plentiful and less expensive.There is an increased need in certain regions for geot

132、hermal electrical power plants to meet increasedelectricity demand.Refineries in the United States are being upgraded to process synthetic crude oil from the Alberta oil sandsregion of Canada.Our Customers and MarketsOur principal customers include large chemical,petrochemical,petroleum refining and

133、 power generatingindustries,which are end users of our products in their manufacturing,refining and power generation processes,large engineering companies that build installations for companies in such industries,and original equipmentmanufacturers,who combine our products into their equipment prior

134、 to its sale to end users.Our products are sold using a combination of sales engineers we employ directly and independent salesrepresentatives located worldwide.No part of our business is dependent on a single customer or a few customers,thelossofwhichwouldseriouslyharm ourbusiness,oroncontracts ors

135、ubcontracts that are subjecttorenegotiationor termination by a governmental agency.Forty to fifty percent of our revenue is generated from foreign sales,and we believe that revenue from the saleof our products outside the United States will continue to account for a significant portion of our total

136、revenue forthe foreseeable future.We have invested significant resources in developing and maintaining ourinternational salesoperations and presence,and we intend to continue to make such investments in the future.As a result of theexpansion of our presence in Asia,we expect that the Asian market wi

137、ll continue to account for an increasingpercentage of our revenue.A breakdown of our net sales by geographic area for fiscal 2008,2007 and 2006 is contained in Note 13 to ourconsolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.We presentlyhave no plans t

138、o enter any new industry segments that would require the investment of a material amount of ourassets or that we would otherwise consider to be material.Our StrengthsOur core strengths are as follows:We have strong brand recognition.Over the past 72 years,we believe that we have built a reputation f

139、or topquality,reliable products and high standards of customer service.We have also established a large installed2application base.Asa result,the Graham name iswell knownnot only byourexisting customers,butalso bymany of our potential customers.We believe that such recognition of the Graham brand al

140、lows us tocapitalize on market opportunities in both existing and potential markets.We engineer and manufacture high quality products and systems that address the particular needs of ourcustomers.With over 72 years of engineering expertise,we believe that we are well respected for ourknowledge in va

141、cuum and heat transfer technologies.We maintain strict quality control and manufacturingstandards in order to manufacture products of the highest quality.We have a global presence.Our products are used worldwide,and we have sales representatives located inmajor cities throughout the world.We believe

142、 that we have a solid reputation and strong relationships with our existing customer base,as wellas with our key suppliers.We have a strong balance sheet with significant cash and investments,and minimal debt.We have a highquality credit facility,which allows for a$30,000 borrowing capacity.Our Stra

143、tegyWe intend to continue to grow our business and improve our results of operations by utilizing the followingcore strategies:Capitalize on the strength of the Graham brand in order to win more business in our traditional markets andenter other markets.Continue toinvestinengineering resourcesandtec

144、hnology inordertoadvance ourvacuum and heat transfertechnology market penetration.Invest resources to meet the growing demand for our products in the oil refining,petrochemical processingand power generating industries,especially in emerging markets.Specifically,we intend to establish sales,engineer

145、ing and manufacturing capabilities in Asiawherewe believeestimates of demand for oil and oil by-products will continue to increase.Delivering products and solutions that enable our customers to achieve their operating objectives.Provide products and services to our customers that differentiate us fr

146、om our competitors,and which allowsus to win new orders based on value.Expand our margins by implementing and expanding upon our operational efficiencies through a flexiblemanufacturing flow model and other cost efficiencies.Enhance our engineering and manufacturing capacities,especially in connecti

147、on with the design of ourproducts,in order to be able to more quickly respond to existing and future customer demands.Accelerate our bids on available contracts by implementing front-end bid automation and design processes.Expand our global sales presence in order to further broaden our existing mar

148、kets and reach additionalmarkets.Examine acquisition and organic growth opportunities to expand and complement our core business,including opportunities to extend our existing product lines and opportunities to move into complementaryproduct lines.3CompetitionOur business is highly competitive.The p

149、rincipal basis on which we compete include technology,price,performance,reputation,delivery,and quality.We haveseveral competitors in ourprimary markets which are listedbelow:NORTH AMERICAMarketCompetitorsRefining vacuum distillationGardner DenverChemicals/PetrochemicalsCroll Reynolds;Schutte Koerti

150、ng;Gardner DenverTurbomachinery Original Equipment Manufacturer(“OEM”)refining,petrochemicalAmbassador;Yuba;KreugerTurbomachinery OEM power and power producerHoltec;Babcock;Thermal Engineering;Yuba;KreugerHVACAlfa Laval;APV;ITT;AmbassadorINTERNATIONALMarketCompetitorsRefining vacuum distillationGard

151、ner Denver;GEA Jet Pump;Korting Hannover;EdwardsChemicals/PetrochemicalsCroll Reynolds;Schutte Koerting;Gardner Denver;GEA JetPump;Korting Hannover;EdwardsTurbomachinery OEM refining,petrochemicalDonghwa-Entec;Bumwoo;Oiltechnik;Kreuger;variouslocal fabricatorsTurbomachinery OEM power and power produ

152、cerHoltec;Babcock;Thermal Engineering;Yuba;KreugerIntellectual PropertyOur success depends in part on our proprietary technology.We rely on a combination of patent,copyright,trademark,trade secret laws and confidentiality provisions to establish and protect our proprietary rights.We alsodepend heavi

153、ly on the brand recognition of the Graham name in the marketplace.Availability of Raw MaterialsAlthough shortages of certain materials can from time to time affect our ability to meet delivery requirementsfor certain orders,historically,we have not been materially adversely impacted by the availabil

154、ity of raw materials.Working Capital PracticesOur business does not require us to carry significant amounts of inventory or materials beyond what is neededforworkinprogress.Wedonotproviderightstoreturngoods,orpayment terms tocustomers that weconsider tobeextended in the context of the industries we

155、serve.Environmental MattersWe believe that we are in material compliance with existing environmental laws and regulations.We do notanticipate that our compliance with federal,state and local laws regulating the discharge of material in theenvironmentorotherwisepertaining totheprotectionoftheenvironm

156、entwillhaveamaterial effectuponourcapitalexpenditures,earnings or competitive position.SeasonalityNo material part of our business is seasonal in nature.4Research ActivitiesDuring fiscal 2008,fiscal 2007 and fiscal 2006,we spent approximately$3,579,$3,581 and$3,136,respectively,on research and devel

157、opment activities relating to the development of new products and services,or the improvement of existing products and services.Information Regarding Our International SalesThe revenue from the sale of our products outside the United Sates has accounted for a significant portion ofour total revenue

158、during our last three fiscal years.Approximately 46%,50%and 50%of our revenues in fiscal2008,2007 and 2006,respectively,resulted from revenues from foreign sales.Revenue attributed to sales in Asiaconstituted approximately 15%,17%and16%ofourrevenues infiscal 2008,2007and 2006,respectively.Revenueatt

159、ributed to sales in the Middle East constituted approximately 11%,23%and 14%of our revenue in fiscal 2008,2007 and 2006,respectively.Our international sales operations,including those in Asia and in other foreign countries,are subject tonumerous risks.See“Risk Factors”in Item 1A of Part I of this An

160、nual Report on Form 10-K for more information.Available InformationWearesubjecttotheinformational requirements oftheSecuritiesExchange Actof1934and,therefore,wefileperiodic reports,proxy statements and other information with the Securities and Exchange Commission(the“SEC”).The SEC maintains an Inter

161、net website(www.sec.gov)that contains reports,proxy statements and otherinformation for registrants that file electronically.Additionally,such reports may be read and copied at the PublicReference Room of the SEC at 100 F Street NE,Washington,D.C.20549.We maintain an Internet website at www.graham-.

162、Onour website,we make available,free ofcharge,documents we file with the SEC,including our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and any amendments to those reports filed with or furnished to the SEC.The otherinformation found on our website is not pa

163、rt of this or any other report we file with,or furnish to,the SEC.Item 1A.Risk FactorsOur business and operations are subject to numerous risks,many of which are described below and elsewherein this Annual Report on Form 10-K.If any of the events orrisks described below occurormaterialize,our busine

164、ssand results of operations could be seriously harmed.Risks related to our businessThe industries in which we operate are cyclical,and downturns in such industries may adversely affectour operating results.Historically,asubstantialportionofourrevenuehasbeenderivedfromthesaleofourproductstocompaniesi

165、nthe chemical,petrochemical,petroleum refining and power generating industries,or to firms that design andconstruct facilities for these industries.The core industries in which our products are used are,to varying degrees,cyclical and have historically experienced severe downturns.Although we are cu

166、rrently in an upturn of demand forourproductsinthepetrochemical,petroleumrefiningandpowergenerating industries,adownturninoneormoreofthese industries could occur at any time.A deterioration in any of the cyclical industries we serve would harm ourbusiness and operating results because our customers

167、would not likely have the resources necessary to purchase ourproducts nor would they likely have the need to build additional facilities or improve existing facilities.Our international sales operations are subject to uncertainties that could harm our business.We believe that revenue from the sale o

168、f our products outside the United States will continue to account for asignificant portion of our total revenue for the foreseeable future.For fiscal 2008,our sales to geographic regionswere as follows:54%United States;15%Asia;11%Middle East;10%Mexico and South America;57%Canada;and 3%various other

169、regions.Our international sales operations are subject to numerous risks,including:difficulty enforcing agreements through some foreign legal systems;general economic and political conditions in the countries where we sell our products may have an adverseeffect on our sales in those countries;foreig

170、n governments may adopt regulations or take other actions that could directly or indirectly harm ourbusiness and growth strategy;and it may be difficult to enforce intellectual property rights in some foreign countries.The occurrence of any one of the above risks could harm our business and results

171、of operations.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 countriesin which we sell our products to the extent that such sales are not based on U.

172、S.dollars.As such,fluctuations incurrency exchange rates,which cause the value of the U.S.dollar to increase,could have an adverse effect on theprofitability of our business.While we may enter into currency exchange rate hedges from time to time to mitigatethese types offluctuations,we cannot remove

173、 all fluctuations or hedge all exposures and our earnings are impactedbychangesincurrencyexchangerates.AtMarch31,2008and2007,weheldnoforwardforeigncurrencyexchangecontracts.If we fail to introduce enhancements to our existing products or to keep abreast of technological changesin our markets,our bus

174、iness and results of operations could be adversely affected.Althoughtechnologies inthevacuumandheattransferareasarewellestablished,webelieveourfuturesuccessdepends in part on our ability to enhance our existing products and develop new products in order to continue tomeet customer demands.Our failur

175、e to introduce new or enhanced products on a timely and cost-competitive basis,or the development of processes that make our existing technologies or products obsolete,could harm our businessand results of operations.The loss of any key management personnel and our inability to replace them with qua

176、lified managementpersonnel could harm our business.Competition for qualified management in our industry is intense.Many of the companies with which wecompete for management personnel have greater financial and other resources than we do or are located ingeographic areas which may be considered by so

177、me to be more desirable places to live.If we are not able to retainqualified management personnel or if a significant number of them were to leave our employ,our businesscould beharmed.We maintain key person insurance on our President and Chief Executive Officer.Our business is highly competitive.If

178、 we are unable to successfully implement our business strategy,werisk losing market share to current and future competitors.Someofourpresentandpotential competitorsmayhavesubstantiallygreater financial,marketing,technical ormanufacturing resources.Our competitors may also be able to respond more qui

179、ckly to new technologies orprocessesand changes in customer demands.Theymay also be able to devotegreater resources tothe development,promotion and sale of their products than we can.In addition,our current and potential competitors may makestrategic acquisitions or establish cooperative relationshi

180、ps among themselves or with third parties that increasetheir ability to address the needs of our customers.If we cannot compete successfully against current or futurecompetitors,our business will be harmed.6If we are unable to make necessary capital investments or respond to pricing pressures,our bu

181、siness maybe harmed.In order to remain competitive,we need to invest continuously in research and development,manufacturing,customer service and support,and marketing.From time to time we also have to adjust the prices of our products toremain competitive.We may not have available sufficient financi

182、al or other resources to continue to makeinvestments necessary to maintain our competitive position.If third parties infringe our intellectual property or if we were to infringe the intellectual property of thirdparties,we may expend significant resources enforcing or defending our rights or suffer

183、competitiveinjury.Our success depends in part on our proprietary technology.We rely on a combination of patent,copyright,trademark,trade secret laws and confidentiality provisions to establish and protect our proprietary rights.If we failto successfully enforce our intellectual property rights,our c

184、ompetitive position could suffer.We may also berequiredtospendsignificantresourcestomonitorandpoliceourintellectual propertyrights.Similarly,ifweweretoinfringe on the intellectual property rights of others,our competitive position could suffer.Furthermore,othercompanies may develop technologies that

185、 are similar or superior to our technologies,duplicate or reverse engineerour technologies or design around our patents.In some instances,litigation may be necessary to enforce our intellectual property rights and protect ourproprietary information,or to defend against claims by third parties that o

186、ur products infringe their intellectualproperty rights.Any litigation or claims brought by or against us,whether with or without merit,could result insubstantial costs to us and divert the attention of our management,which could harm our business and results ofoperations.In addition,any intellectual

187、 property litigation or claims against us could result in the loss orcompromise of our intellectual property and proprietary rights,subject us to significant liabilities,require us toseek licenses on unfavorable terms,prevent us from manufacturing or selling certain products or require us toredesign

188、 certain products,any of which could harm our business and results of operations.A decrease in supply or increase in cost of the materials used in our products could harm ourprofitability.Any restrictions on the supply or the increase in the cost of the materials used by us in manufacturing ourprodu

189、cts could significantly reduce our profit margins which could harm our results of operations.Any efforts wemay engage in to mitigate restrictions on the supply or price increases of materials by entering into long-termpurchase agreements,byimplementing productivity improvementsorbypassingcostincreas

190、es ontoourcustomersmay not be successful.Our profitability depends largely on the price and continuity of supply of the materials usedin the manufacture of our products,which in many instances are supplied by a limited number of sources.If we are unable to effectively outsource a portion of our prod

191、uction during times when we are experienc-ing strong demand,our results of operations might be adversely affected.In addition,outsourcing maynegatively affect our profit margins.When we experience strong demand for our products,our business strategy calls for us to increase manu-facturing capacity t

192、hrough outsourcing selected fabrication processes.We could experience difficulty in outsourc-ingifcustomersdemandthatourproductsbemanufactured byusexclusively.Furthermore,ourabilitytoeffectivelyoutsource production could be adversely affected by limited worldwide manufacturing capacity.If we are una

193、ble toeffectively outsource our production capacity when circumstances warrant,our results of operations could beadversely affected and we might not be able to deliver products to our customers on a timely basis.In addition,outsourcingtocomplete ourproductsandservicescanincreasethecostsassociatedwit

194、hsuchproductsandservices.If we rely too heavily on outsourcing and are not able to increase our own production capacity during times whenthere is high demand for our products and services,our margins may be negatively effected.7We face potential liability from asbestos exposure and similar claims.We

195、 are a defendant in several lawsuits alleging illnesses from exposure to asbestos or asbestos-containingproducts and seeking unspecified compensatory and punitive damages.We cannot predict with certainty theoutcome of these lawsuits or whether we could become subject to any similar,related or additi

196、onal lawsuits in thefuture.Inaddition,because some ofour products are used in systems that handle toxic orhazardous substances,anyfailure or alleged failure of our products in the future could result in litigation against us.Any litigation broughtagainst us,whether with or without merit,could result

197、 in substantial costs to us as well as divert the attention of ourmanagement,which could harm our business and results of operations.Risks related to operating a subsidiary in ChinaThe operations of our Chinese subsidiary may be adversely affected by Chinas evolving economic,politi-cal and social co

198、nditions.We conduct our business in China primarily through our wholly-owned Chinese subsidiary.The results ofoperations and future prospects of our Chinese subsidiary are subject to evolving economic,political and socialdevelopments in China.In particular,the results of operations of our Chinese su

199、bsidiary may be adversely affectedby,among other things,changes in Chinas political,economic and social conditions,changes in policies of theChinese government,changes in laws and regulations or in the interpretation of existing laws and regulations,changes in foreign exchange regulations,measures t

200、hat may be introduced to control inflation,such as interest rateincreases,and changes in the rates or methods of taxation.Intellectual property rights are difficult to enforce in China.Chinesecommercial lawisrelativelyundevelopedcompared tothecommercial lawinmanyofourothermajormarkets and limited pr

201、otection of intellectual property is available in China as a practical matter.Although weintend to take precautions in the operations of our Chinese subsidiary to protect our intellectual property,any localdesignormanufacture ofproductsthatweundertake inChinacouldsubjectustoanincreasedriskthatunauth

202、orizedparties will be able to copy or otherwise obtain or use our intellectual property,which could harm our business.Wemay also have limited legal recourse in the event we encounter patent or trademark infringers.Uncertainties with respect to the Chinese legal system may adversely affect the operat

203、ions of our Chinesesubsidiary.Our Chinese subsidiary is subject to laws and regulations applicable to foreign investment in China.There areuncertainties regarding the interpretation and enforcement of laws,rules and policies in China.The Chinese legalsystem is based on written statutes,and prior cou

204、rt decisions have limited precedential value.Because many lawsand regulations are relatively new and the Chinese legal system is still evolving,the interpretations of many laws,regulationsandrulesarenotalwaysuniform.Moreover,therelativeinexperience ofChinasjudiciary inmanycasescreates additional unc

205、ertainty as to the outcome of any litigation,and the interpretation of statutes and regulationsmay be subject to government policies reflecting domestic political changes.Finally,enforcement of existing lawsor contracts based on existing law may be uncertain and sporadic.For the preceding reasons,it

206、 may be difficult forus to obtain swift and equitable enforcement of laws ostensibly designed to protect companies like ours.Risks related to the ownership of our common stockProvisions contained in our certificate of incorporation,bylaws and our stockholder rights plan couldimpair or delay stockhol

207、ders ability to change our management and could discourage takeover transac-tions that our stockholders might consider to be in their best interests.Provisions of our certificate of incorporation and bylaws,as well as our stockholder rights plan,could impedeattempts by our stockholders to remove or

208、replace our management and could discourage others from initiating apotential merger,takeover or other change of control transaction,including a potential transaction at a premium8over the market price of our common stock,that our stockholders might consider to be in their best interests.Forexample:

209、We could issue shares of preferred stock with terms adverse to ourcommon stock.Under our certificate ofincorporation,our Board of Directors is authorized to issue shares of preferred stock and to determine therights,preferences and privileges of such shares without obtaining any further approval fro

210、m the holders ofourcommon stock.Wecouldissuesharesofpreferred stockwith voting and conversionrightsthat adverselyaffectthevotingpoweroftheholdersofourcommonstock,orthathavetheeffectofdelayingorpreventingachange in control of our company.We maintain a stockholder rights,or“poison pill,”plan.Our stock

211、holder rights plan has the effect ofdiscouraging any person or group that wishes to acquire 15%or more of our common stock from doing sowithout obtaining our agreement because such acquisition would cause such person or group to suffersubstantial dilution.Such plan may have the effect of discouragin

212、g a change in control transaction that ourstockholders would otherwise consider to be in their best interests.Only a minority of ourdirectors may be elected in a given year.Our bylaws provide for a classified BoardofDirectors,withonlyapproximately one-thirdofourBoardelected eachyear.Thisprovisionmak

213、esitmoredifficult to effect a change of control because at least two annual stockholder meetings are necessary toreplace a majority of our directors.Our bylaws contain advance notice requirements.Our bylaws also provide that any stockholder whowishestobring businessbefore an annual meeting ofourstoc

214、kholders ortonominate candidates for electionas directors at an annual meeting of our stockholders must deliver advance notice of their proposals to usbefore the meeting.Such advance notice provisions may have the effect of making it more difficult tointroduce business at stockholder meetings or nom

215、inate candidates for election as director.Our certificate of incorporation requires supermajority voting to approve a change of control transaction.Seventy-five percent of our outstanding shares entitled to vote are required to approve any merger,consolidation,sale of all or substantially all of our

216、 assets and similar transactions if the other party tosuch transaction owns 5%or more of our shares entitled to vote.In addition,a majority of the shares entitledto vote not owned by such 5%or greater stockholder are also required to approve any such transaction.Amendments to our certificate of inco

217、rporation require supermajority voting.Our certificate of incor-poration contains provisions that make its amendment require the affirmative vote of both 75%of ouroutstanding shares entitled tovote and a majority of the shares entitled to vote not owned by any person whomay hold 50%or more of our sh

218、ares unless the proposed amendment was previously recommended to ourstockholdersbyanaffirmativevoteof75%ofourBoard.Thisprovisionmakesitmoredifficulttoimplementa change to our certificate of incorporation that stockholders might otherwise consider to be in their bestinterests without approval of our

219、Board.Amendments to our bylaws require supermajority voting.Although our Board of Directors is permitted toamend our bylaws at any time,our stockholders may only amend our bylaws upon the affirmative vote ofboth 75%ofouroutstanding sharesentitled tovote and a majority ofthe sharesentitled tovote not

220、 ownedbyany person who owns50%or more of our shares.This provision makes it more difficult for our stockholdersto implement a change they may consider to be in their best interests without approval of our Board.Item 1B.Unresolved Staff CommentsNot applicable.Item 2.PropertiesOur corporate headquarte

221、rs,located at 20 Florence Avenue,Batavia,New York,consists of a 45,000 squarefoot building.Our manufacturing facilities,also located in Batavia,consist of approximately thirty-three acres andcontain about 216,000 square feet in several connected buildings,including 162,000 square feet in manufacturi

222、ng9facilities,48,000 square feet for warehousing and a 6,000 square-foot building for product research anddevelopment.Additionally,we lease a U.S.sales office in Houstonand our Chinese subsidiary leases a sales and engineeringoffice in Suzhou,China.We believe that our properties are generally in goo

223、d condition,are well maintained,and are suitable andadequate to carry on our business.Item 3.Legal ProceedingsThis information required by thisItem 3is set forthin Note 14 toour consolidated financial statements includein Item 8 of Part II of the Annual Report on Form 10-K and is incorporated herein

224、 by reference.Item 4.Submission of Matters to a Vote of Security HoldersNomatters weresubmitted tooursecurity holders foravoteduringthe fourthquarter ofthe fiscalyear coveredby this Annual Report on Form 10-K.PART II(Dollar amounts in thousands,except per share data)Item 5.Market For Registrants Com

225、mon Equity,Related Stockholder Matters and Issuer Purchases ofEquity SecuritiesOurcommon stock is traded on the American Stock Exchange under the symbol“GHM”.AsofMay 30,2008,therewere 4,990,356 shares of our common stock outstanding that were held by approximately 162 stockholders ofrecord.The follo

226、wing table shows the high and low per share prices of our common stock for the periods indicated,asreported by the American Stock Exchange.The table takes into account the effect of our five-for-four stock split inthe nature of a dividend,which became effective January 3,2008.HighLowFiscal year 2008

227、First quarter.$22.80$12.60Second quarter.36.6020.33Third quarter.60.9631.64Fourth quarter.50.3028.00Fiscal year 2007First quarter.$18.40$14.01Second quarter.15.4812.88Third quarter.14.2010.04Fourth quarter.13.6010.14Subjecttothe rightsofanypreferred stockwemaythenhaveoutstanding,theholdersofourcommo

228、n stockareentitled to receive dividends as may be declared from time to time by our Board of Directors out of funds legallyavailable forthepayment ofdividends.Wehavedeclared cashdividendsof$.02pershareorgreater onourcommonstock quarterly since July 25,2002.On October 26,2007,our Board of Directors a

229、pproved an increase in thequarterly cash dividend to$.03 per share effective for the dividend payable on January 2,2008.There can be noassurance that we will pay cash dividends in any future period or that the level of cash dividends paid by us willremain constant.The senior credit facility to which

230、 we are a party contains provisions pertaining to the maintenance of aminimum total liabilities to tangible net worth ratio as well as restrictions on the payment of dividends tostockholders and incurrence of additional long-term debt.The facility also limits the payment of dividends tostockholders

231、to$1,200 per year.10We did not sell any equity securities during the period covered by this Annual Report on Form 10-K.Item 6.Selected Financial Data20082007(1)2006(1)2005(1)(2)2004(1)(2)GRAHAM CORPORATION FIVE YEAR SUMMARY OFSELECTED FINANCIAL DATA(Amounts in thousands,except per share data)Operati

232、ons:Net Sales.$86,428$65,822$55,208$41,333$37,508Gross Profit.34,16216,81915,9597,5405,890Gross Profit Percentage.40%26%29%18%16%Income(Loss)From Continuing Operations.15,0345,7613,586296(832)Dividends.493387367334327Common stock:Basic Earnings(Loss)From Continuing Operationsper Share.$3.03$1.18$.79

233、$.07$(.20)Diluted Earnings(Loss)From Continuing OperationsPer Share.2.981.17.77.07(.20)Stockholders Equity Per Share.9.736.315.663.914.37Dividend Declared Per Share.10.08.08.08.08Market Price Range of Common StockHigh.60.9618.4020.807.124.68Low.12.6010.046.624.282.82Average Common Shares Outstanding

234、 Diluted.5,0424,9254,6684,2924,117Financial data at March 31:Cash and Cash Equivalents and Investments.$36,793$15,051$10,988$2,717$5,763Working Capital.36,99820,11916,77911,20411,652Capital Expenditures.1,0271,6371,048224249Depreciation.862874775768793Total Assets.70,71148,87840,55633,52935,740Long-

235、Term Debt,Including Capital LeaseObligations.3656304493Stockholders Equity.48,53630,65427,10716,57818,102(1)Per share data has been adjusted to reflect a five-for-four stock split declared on October 26,2007.(2)Per share data has been adjusted to reflect a two-for-one stock split declared on July 28

236、,2005.11Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations(Dollar amounts in thousands,except per share data)OverviewHighlights for our fiscal year ended March 31,2008,which we refer to as fiscal 2008,include:Net income and income per diluted share forfiscal2

237、008,were$15,034and$2.98compared with net incomeand income per diluted share of$5,761 and$1.17 for fiscal year ended March 31,2007,which we refer to asfiscal 2007.Net income for fiscal 2008 was a record high.Net sales for fiscal 2008 of$86,428 were up 31%compared with$65,822 for fiscal 2007.Fiscal 20

238、08 netsales were a record high.Orders placed with usin fiscal 2008of$107,102 were up 24%compared with fiscal 2007,when orders were$86,540.Orders received in fiscal 2008 were a record high.Backlog grew to$75,662 on March 31,2008,representing a 40%increase compared with March 31,2007,when our backlog

239、was$54,184.Backlog as of March 31,2008 was a record high.Gross profit and operating margins for fiscal 2008 were 40%and 24%compared with 26%and 9%,respectively,for the year ended March 31,2007.Gross profit margin and operating margin percentages forfiscal 2008 were record highs.Cash and short-term i

240、nvestments at year-end fiscal 2008 were$36,793,compared with$15,051 as ofMarch 31,2007,up 144%.Cash and investments on hand at March 31,2008 were a record high.We are a global designer and manufacturer of custom-engineered ejectors,liquid ring pump packages,condensersandheatexchangers.Ourequipmentis

241、usedincritical applications inthepetrochemical,oilrefineryandelectric power generation industries,including cogeneration and geothermal plants.Our equipment can also befound in diverse applications,such as metal refining,pulp and paper processing,shipbuilding,water heating,refrigeration,desalination

242、,soap manufacturing,food processing,pharmaceuticals,heating,ventilating and airconditioning.Our corporate offices and production facilities are located in Batavia,New York.Additionally,we have awholly-owned foreign subsidiary located in Suzhou,China.Our subsidiary in China serves to support sales or

243、dersfrom Asia and provides engineering support and supervision of subcontracted fabrication.We believe the principal market drivers that have led to increased capital spending by our customers and thatare contributing to our sales growth include:Global consumption of crude oil is estimated to expand

244、 significantly over the next decade.There is a shortage of global oil refining capacity,which is being addressed through refinery upgrades,revamps and expansions.Known supplies of sweet crude oil are being depleted.Sour crude sources are identified and believed to beplentiful.There is a differential

245、 in raw material prices for sweet and sour crude oil.To lower production costs,manyrefineries are upgrading facilities in order to be able to process sour crude oil,which requires an upgrade ofvacuum and heat transfer equipment of the types we design and manufacture.Expanding middle class in Asia is

246、 driving increasing demand for power,refinery and petrochemicalproducts.The high cost of natural gas in North America and Europe is leading to the construction of new petro-chemical plants in the Middle East,where natural gas is plentiful and less expensive.12 There is an increased need in certain r

247、egions for geothermal electrical power plants to meet increasedelectricity demand.Refineries in the United States are being upgraded to process synthetic crude oil from the Alberta oil sandsregion of Canada.Lookingahead tofiscal2009,we believetheglobal refineryand petrochemical markets weservewill c

248、ontinueto be strong and could remain strong for the next several years.Refinery capacity continues to expand worldwidewithanestimated increase ofthree tofourbillion barrelsperannuminthe nextthree tofiveyearsbeingnecessary tokeep up with projected demand.For example,the number of passenger cars and l

249、ight commercial vehicles sold inChina over the next four years is estimated to increase fifty percent.Refinery utilization rates are estimated to be attheir highest levels in twenty-five years.We anticipate demand for energy and petrochemical products abroad willcontinue for the next several years b

250、ecause countries with large populations,such as China and India,areexperiencing significant economic growth at the same time drivers such as environmental regulations,change incrude supplies and development of alternative energy sources are affecting both the supply and demand of energyand petrochem

251、ical products.Looking beyondthe current“super-cycle”,we believe therewill begrowthpotential inemerging market opportunities,such as coal-to-liquids,gas-to-liquids and other emerging technologies,such asbiodiesel,ethanolandwaste-to-energy,whichmayofferbothtopandbottomlinegrowthinourfuture.Inadditiont

252、ogrowing revenue from major project work,we believewe can continue to grow our heat exchanger and aftermarketbusinesses.Forward Looking StatementsThis Annual Report onForm10-Kand other documents we filewith the Securities and Exchange Commissioninclude“forward-looking statements”within the meaning o

253、f Section 27A of the Securities Act of 1933,asamended,and Section 21E of the Securities Exchange Act of 1934,as amended.These statements involve known and unknown risks,uncertainties and other factors that may cause actualresults to be materially different from any future results implied by the forw

254、ard-looking statements.Such factorsinclude,but are not limited to,the risks and uncertainties identified by us under the heading“Risk Factors”inItem 1A of this Annual Report on Form 10-K.Forward-looking statements may also include,but are not limited to,statements about:the current and future econom

255、ic environments affecting us and the markets we serve;sources of revenue and anticipated revenue,including the contribution from the growth of new products,services and markets;plans for future products and services and for enhancements to existing products and services;estimates regarding our liqui

256、dity and capital requirements;our ability to attract or retain customers;the outcome of any existing or future litigation;and our ability to increase our productivity and capacity.Forward-looking statements are usually accompanied by words such as“anticipate,”“believe,”“estimate,”“may,”“intend,”“exp

257、ect”and similar expressions.Actual results could differ materially from historical results orthose implied by the forward-looking statements contained in this report.Undue reliance should not be placed on these forward-looking statements.Except as required by law,weundertake no obligation to update

258、or announce any revisions to forward-looking statements contained in this report,whether as a result of new information,future events or otherwise.13Results of OperationsFor an understanding of the significant factors that influenced our performance,the following discussionshould be read in conjunct

259、ion with our consolidated financial statements and the notes to our consolidated financialstatements included in this Annual Report on Form 10-K.The following table summarizes our results of operations for the periods indicated:200820072006Year Ended March 31,Net sales.$86,428$65,822$55,208Net incom

260、e.$15,034$5,761$3,586Diluted income per share.$2.98$1.17$0.77Identifiable assets.$70,711$48,878$40,556Fiscal 2008 Compared with Fiscal 2007Sales for fiscal 2008 were$86,428,a 31%increase,as compared with sales of$65,822 for fiscal 2007.Ninety-two percent of the increase in sales in fiscal 2008 compa

261、red with fiscal 2007 came from ejector and sparepart sales,which were primarily sold to the refinery market.Of the 92%,75%related to ejectors and the balancerelated to spare parts.Export sales accounted for 46%and 50%of total sales for fiscal 2008 and fiscal 2007,respectively.Export sales year-over-

262、year increased$6,731,or 21%.The increase in export sales came from Asia,South America and Canada.Sales for fiscal 2008 were 43%to the refining industry,31%to the chemical andpetrochemical industries and 26%to other industrial applications,including electrical power.Sales in fiscal 2007were 35%to the

263、 refining industry,39%to the chemical and petrochemical industries and 26%to other industrialapplications,including electrical power.We divide our products into five broadly defined classifications:ejectors,condensers,aftermarket,heat exchangers and pump packages.Sales for these categories in fiscal

264、 2008 were 42%,25%,18%,12%and 3%,respectively.For fiscal 2007 sales,by the same respective categories,were 33%,29%,17%,14%and 7%.These saleschanges byproduct categories reflect the timing ofordersplaced with usand are notindicative of buying pattern changes in the markets we serve.For additional inf

265、ormation on future sales and ourmarkets,see“Orders and Backlog”below.Our gross profit percentage for fiscal 2008 was 40%compared with 26%for fiscal 2007.Gross profit dollarsfor fiscal 2008 increased 103%compared with fiscal 2007.Gross profit percentage and dollars increased primarilydue to improved

266、product mix achieved by increased selectivity on orders accepted,improved engineering andmanufacturing efficiencies and greater leveraging of manufacturing costs.Our improved operating efficienciesenabled us to achieve greater sales volume in fiscal 2008 without increasing proportionally our cost of

267、 productssold.We believe we will continue to increase capacity through outsourcing and improving operating efficiencies,and that these efforts will contribute to sales growth in fiscal 2009 and beyond.Selling,general and administrative(“SG&A”)expenses for fiscal 2008 and 2007 were 15%and 16%of sales

268、,respectively.The decline,expressed as a percentage of sales,was due to greater sales in fiscal 2008.Actual costs infiscal 2008increased$2,268,or21%,compared with fiscal 2007.SG&Aexpensesincreased due to greater variablecosts(e.g.,sales commissions,variable compensation)related to higher sales and n

269、et income.Interest income for fiscal 2008 and 2007 was$1,026 and$516,respectively.Increased interest incomefollowed increases in investments of 144%.Interest expense was$10 in both fiscal 2008 and 2007.Our effective tax rate in fiscal 2008 was 32%,compared with an effective tax rate of 12%for fiscal

270、 2007.Theeffective tax rate for fiscal 2008 was less than the statutory rate of approximately 34%due to the qualifiedproduction activities deduction and research and development tax credit(R&D).We anticipate the effective tax ratefor fiscal 2009 will be 33%.The fiscal 2007 effective tax rate reflect

271、ed the benefit of$1,607 in research anddevelopment tax credits.The total credit recognized represented qualifying R&Dexpenditures for fiscal years199914to 2007.The R&D tax credit recognized in fiscal 2008 was$234 and represented the approximate magnitude of theamount of credit that we expect under c

272、urrent R&D tax law going forward.Netincome forfiscal2008and2007was$15,034and$5,761,respectively.Incomeperdilutedsharewas$2.98and$1.17 for the respective periods.Fiscal 2007 Compared with Fiscal 2006Sales for fiscal 2007 were$65,822,a 19%increase,as compared with$55,208 for fiscal 2006.Fifty-twoperce

273、nt of this increase came from greater export sales.The growth in export sales primarily came from the MiddleEast and Asia,and involved both petrochemical and refinery projects.Sales in all product categories(e.g.,heatexchangers,ejectors,condensers,vacuum pumps and aftermarket)increased compared with

274、 fiscal 2006,but thegreatest dollar value increases came from sales of ejectors,heat exchangers and vacuum pumps.Our heat exchanger products are:Heliflows,plate exchangers,desuperheaters and water heaters.Increasedheat exchanger sales accounted for 31%of the increased sales.Heat exchanger sales in f

275、iscal 2007 were led upwardby Heliflows and plate exchanger sales.Heat exchanger sales grew due to a broad based strategic effort,whichincluded training,changing the supplier who provided the basic materials used to build plate exchangers,manufacturing efficiencies gained through the implementation o

276、f lean procedures,the introduction of softwaremarketing tools and the addition of an expanded agency network.Increased ejector sales in fiscal 2007 accountedfor26%ofthe increased sales and weredue toincreased activity fromthe refinery industryfor oil refinery upgradesand capacity expansion projects.

277、Increased vacuum pump sales accounted for 28%of the increased sales and camefrom domestic refinery applications.The remaining 15%increase in sales,compared with fiscal 2006,came fromsingle digit gains in the other products we sell.Our gross profit percentage for fiscal 2007 was 26%compared with 29%f

278、or fiscal 2006.Gross profitpercentage decreased primarily due togreater material costsinfiscal2007.Material costs,expressedasapercent ofsales,were 43%and 37%for fiscal 2007 and 2006,respectively.Gross profit dollars increased 5%in fiscal 2007 ascompared with fiscal 2006,as a result of greater sales

279、volume.SG&Aexpensesfor fiscal 2007 were 16%of sales compared to 19%for fiscal 2006.The decline,expressed asa percentage of sales,was due to greater sales in fiscal 2007.Actual costs increased$301 in fiscal 2007 or 3%compared with fiscal 2006.SG&A expense increased in fiscal 2007 due to the additiona

280、l costs of operating ourChinese subsidiary,which was formed in May 2006.Interest income for fiscal 2007 and 2006 was$516 and$316,respectively.Increased interest income in fiscal2007 followed increases in investments.Investments were$13,676 and$10,418 for fiscal 2007 and 2006,respectively.Interest ex

281、pense was$10 for fiscal 2007 compared with$17 for fiscal 2006.Interest expense decreased due toreduced debt and a reduction in the applicable interest rate under our banking facility on a year-over-year basis.In fiscal 2007,our effective tax rate was 12%compared with an effective tax rate of 38%for

282、fiscal 2006.Thefiscal 2006 rate approximated the statutory rate.The fiscal 2007 effective tax rate reflected the benefit of$1,607 inR&Dtaxcredits.Thetotal credit recognized infiscal2007representedqualifying expendituresforfiscalyears1999to 2007.Net income for fiscal 2007 and 2006 was$5,761 and$3,586

283、,respectively.Income per diluted sharewas$1.17and$0.77 for the respective periods.Stockholders EquityThe following discussion should be read in conjunction with our consolidated statements of changes instockholders equity:Fiscal 2008Fiscal 2007Fiscal 2006$48,536$30,654$27,10715Fiscal 2008 Compared w

284、ith Fiscal 2007Stockholdersequityincreased$17,882,or58%,infiscal2008compared withfiscal2007.Eighty-fourpercentof this increase was due to the increase in net income,15%was due to stock options exercised,and 1%was for allother reasons.In October 2007,we increased our dividend per share from 10 cents

285、per share per annum to 12 cents.Dividends paid in fiscal 2008 increased 27%,or$106,due to this increase and due to additional shares outstanding.It is our objective to continue to increase stockholders value by taking steps to increase the liquidity of our commonstock,whichcouldinclude additional st

286、ocksplitswhenand ifwebelieveitisinthe Companysbestinterest todosoand depending on market conditions.On March 31,2008,our net book value was$9.73,up 54%over March 31,2007.Fiscal 2007 Compared with Fiscal 2006Stockholders equity increased$3,547,or 13%,in fiscal 2007 compared with fiscal 2006.In Septem

287、ber 2006,the Financial Accounting Standards Board(“FASB”)issued SFAS No.158,Employers Accounting for DefinedBenefit Pension and Other Postretirement Plans.This pronouncement required,as of March 31,2007,that wemeasure the prepaid assets and liabilities appearing on our balance sheet pertaining to ou

288、r defined benefitpostretirement plans under the projected benefit obligation method and adjust asset and/or liability valuationchanges through accumulated other comprehensive loss,which is a component of stockholders equity.The neteffect of this accounting changewasa reduction in stockholders equity

289、 of$2,373.Offsetting this reduction wasnetincome forfiscal2007of$5,761.Thesetwoitemsaccounted for96%ofthe change inStockholdersequity infiscal2007 compared with fiscal 2006.As of March 31,2007,our net book value per share increased to$6.31,up 13.1%from March 31,2006.Liquidity and Capital ResourcesTh

290、e following discussion should be read in conjunction with our consolidated statements of cash flows andconsolidated balance sheets:20082007March 31,Working capital.$36,998$20,119Working capital ratio(1).2.82.2Long-term debt(capital leases).$36$56Long-term debt/capitalization(2).0.0%0.2%Long-term lia

291、bilities/capitalization(3).3.7%5.2%1)Working capital ratio equals current assets divided by current liabilities.2)Long-term debt/capitalization equals long-term debt divided by stockholders equity plus long-term debt.3)Long-term liabilities/capitalization equals total liabilities minus current liabi

292、lities divided by stockholdersequity plus long-term debt.16As of March 31,2008,contractual and commercial obligations for the next five fiscal years ending March 31and thereafter are as follows:TotalLess Than1 Year1?3Years3?5YearsThereafterPayments Due by PeriodCapital lease obligations.$63$24$39$Op

293、erating leases(1).38812616696Pension and postretirement benefits(2).3,6293,629Accrued compensation.30371232Accrued pension liability.271271Total.$4,654$3,850$476$96$2321)For additional information,see Note 5 to the consolidated financial statements.2)Amounts represent anticipated contributions durin

294、g fiscal 2009 to our defined benefit pension plan andpostretirement medical benefit plan,which provides healthcare benefits for eligible retirees and eligiblesurvivors of retirees.On February 4,2003,we terminated postretirement healthcare benefits for our U.S.employees.Benefits payable to retirees o

295、f record on April 1,2003 remained unchanged for fiscal 2009.Weexpect to be required to make cash contributions in connection with these plans beyond one year,but suchamountscannot beestimated.The contribution toourdefined benefit pensionplan forfiscal 2009isestimated tobe$3,500.Fiscal 2008 Compared

296、with Fiscal 2007Net cash provided by operating activities for fiscal 2008 was$19,702,compared with$5,193 for fiscal 2007.The increase was due to higher net income,greater utilization of deferred tax assets(thereby reducing cash neededto pay taxes in the current fiscal year)and operating the business

297、 with less operating working capital.Operatingworking capital was lower due to continued reduction in our cash conversion cycle,which was 31 days as ofMarch 31,2008 compared with 51 days as of March 31,2007.The decrease in our cash conversion cycle wasaccomplished through reducing accounts receivabl

298、e and inventory balances during fiscal 2008.Sales in fiscal 2008were managed with an average operating working capital level of 3%of sales compared with 8%in fiscal 2007.We invest net cash generated from operations in excess of cash held for near-term needs in marketablesecurities.Investments are Un

299、ited States government instruments,generally with maturity periods of 91 to120 days.Investments at March 31,2008 and March 31,2007 were$34,681 and$13,676,respectively.Other significant sources of cash for the current year included the issuance of common stock to cover stockoptions exercised,which ra

300、ised$1,116,as compared with$413 in fiscal 2007.In addition,in fiscal 2008 werecognized a$1,473 increase in capital in excess of par value for the income tax benefit realized upon exercise ofstock options in excess of the tax benefit amount recognized pertaining to the fair value of stock option awar

301、dstreated ascompensation expense,compared with$0 for fiscal 2007.All other sources of cash in fiscal 2008equaled$45 compared with$67 in fiscal 2007.Other significant uses of cash for fiscal 2008 included dividend payments of$493 and capital expenditures of$1,027,compared with$387and$1,637,respective

302、ly,forfiscal2007.Infiscal2008,wecontributed$3,000intoourdefined benefit pension plan,compared with$2,500 for fiscal 2007.In fiscal 2008,we repaid$37 in excess ofamounts borrowed for bank borrowings and capitalized leases,as compared with$52 for fiscal 2007.All other usesof cash in fiscal 2008 equale

303、d$17 compared with$0 in fiscal 2007.Capital expenditures in fiscal 2008 were 60%for plant machinery and equipment and 40%was for all other.Fifty-six percent of our capital expenditure spending was for productivity improvements and the balance wasprimarily for capitalized maintenance.Capital expendit

304、ures for fiscal 2009 are expected to be$2,085 and plannedinvestment is believed to be about 34%for machinery and equipment,53%for information technology and 13%forall other.We estimate 68%of our capital budget in fiscal 2009 will support productivity improvements with thebalance primarily for capita

305、lized maintenance projects.17On December 5,2007,we entered into a new revolving credit facility with Bank of America,N.A.thatprovides a line of credit of$30,000,including letters of credit and bank guarantees.Borrowings under our bankfacility are secured by all of our assets.Letters ofcredit outstan

306、ding under our credit facility on March 31,2008 and2007were$11,292and$8,578,respectively.Otherutilization ofourfacilitylimitsatMarch31,2008and2007were$0.Our borrowing rate as of March 31,2008 was Bank of Americas prime rate minus 125 basis points,or 4%.Webelieve that cash generated from operations,c

307、ombined with our investments and available financing capacity underour credit facility,will be adequate to meet our cash needs for the immediate future.The new revolving credit agreement includes several changes compared with our former credit facility,including an increase in the facility capacity

308、limit from$20,000;a maximum annual dividend payout of$1,200compared with$600;elimination of facility sub-limits for borrowings,the issuance of letters of credit or theissuance of bank guarantees on the obligations of our Chinese subsidiary by Bank of Americas Shanghai Chinabranch;expanded use of bor

309、rowings;and a reduction in pricing.Under the new revolving credit agreement,wecovenanted to maintain a ratio of total liabilities,excluding non-current portion of subordinated liabilities,totangible net worth not to exceed 1.35 to 1.We are in compliance with this covenant.Orders and BacklogOrders fo

310、r fiscal 2008 and fiscal 2007 were$107,102 and$86,540,respectively,up 24%.Orders representcommunications received from customers requesting us to supply products and services.We experienced asignificant increase in orders for surface condensers,vacuum pump package and aftermarket orders in fiscal 20

311、08compared with fiscal 2007.Surface condenser orders represented 29%of our orders,vacuum pump packages 8%and aftermarket 21%of our orders for the current fiscal year compared with 27%,4%and 12%for surfacecondenser,vacuum pump package and aftermarket orders,respectively,in fiscal 2007.In dollars,year

312、-over-yearsurface condensers,vacuum pump package and aftermarket orders grew$8,052,$5,545 and$12,913,respectivelyfor fiscal 2008,2007 and 2006.Condenser orders for refinery and petrochemical applications in the Middle East,Canada and China,vacuum pump package orders for domestic refinery capacity ex

313、pansion and aftermarket ordersfor capitalized maintenance projects in the domestic refinery sector accounted for the increases.Domesticorderswere63%,or$67,493,ofourtotal ordersandexportorderswere37%,or$39,609,ofourtotalordersinfiscal2008comparedwithfiscal2007,whendomesticorderswere47%,or$40,693,ofou

314、rtotalordersandexportorderswere53%,or$45,847.Excludingourheatexchangerbusiness,whichrepresented approximately 16%of our domestic orders,our domestic orders were heavily weighted for refinery orders and were attributed torefinery capacity expansion,revamping of refineries to process“heavier”feed stoc

315、ks,and requirements to meetcleaner fuel standards.While overall export orders were down in fiscal 2008 due to order selection criteria,exportrefinery orders from China,South America and Canada were up in fiscal 2008 compared with fiscal 2007.Ordersfrom Canada and South America were driven by greater

316、 use of unconventional fuels(e.g.,heavy oil,high viscosity,and tar sands).China orders were for capacity expansion projects.New petrochemical business was driven largelyfrom the global need to increase capacity and the expansion of emerging alternative energy technologies.Backlog was$75,662 at March

317、 31,2008 compared with$54,184 at March 31,2007,a 40%increase.Backlogisdefinedbyusasthe total dollar value ofordersreceivedforwhichrevenuehasnotyetbeen recognized.Allordersin backlog represent orders from our traditional markets in established product lines.Approximately 11%of orderscurrently in back

318、log is not expected to be converted to sales within the next twelve months.At March 31,2008,approximately 49%of our backlog was attributed to equipment for refinery project work,28%for chemical andpetrochemical projects,and23%forotherindustrialorcommercial applications.AtMarch31,2007,approximately43

319、%of our backlog was for refinery project work,35%for chemical and petrochemical projects,and 22%for otherindustrial or commercial applications.Contingencies and CommitmentsWe have been named as a defendant in certain lawsuits alleging personal injury from exposure to asbestoscontained in our product

320、s.We are a co-defendant with numerous other defendants in these lawsuits and intend tovigorously defend against these claims.The claims are similar to previous asbestos lawsuits that named us as adefendant.Suchpreviouslawsuitseither weredismissedwhenitwasshownthatwehadnotsuppliedproductstothe18plain

321、tiffs places of work or were settled by us for amounts below expected defense costs.Neither the outcome ofthese lawsuits nor the potential for liability can be determined at this time.From time to time in the ordinary course of business,we are subject to legal proceedings and potential claims.As of

322、March 31,2008,other than noted above,we were unaware of any other pending litigation matters.Critical Accounting PoliciesThe discussion and analysis of our financial condition and results of operations are based upon the consol-idated financial statements and the notes to consolidated financial stat

323、ements included in Item 8 of Part II of thisAnnual Report on Form 10-K,which have been prepared in accordance with accounting principles generallyaccepted in the United States.Critical accounting policies are defined as those that reflect significant judgments and uncertainties,and couldpotentially

324、result in materially different results under different assumptions and conditions.Revenue Recognition.Werecognize revenueonallcontracts withaplanned manufacturing processinexcessof four weeks(which approximates 575 direct labor hours)using the percentage-of-completion method.Thepercentage-of-complet

325、ion method is determined by comparing actual labor incurred to a specific date to ourestimate ofthe total labor tobe incurred oneach contract.Contracts inprogressare reviewedmonthly,andsalesandearnings are adjusted in current accounting periods based on revisions in the contract value and estimated

326、materialand labor costs at completion.Losses on contracts are recognized when probable.Revenue oncontracts not accounted forusingthe percentage-of-completion method isrecognized utilizing thecompleted contract method.The majority of the contracts we enter into have a planned manufacturing process of

327、less than four weeks and the results reported under this method do not vary materially from the percentage-of-completion method.We recognize revenue and all related costs on the completed contract method upon substantialcompletion or shipment of products to the customer.Substantial completion is con

328、sistently defined as at least 95%complete with regard to direct labor hours.Customer acceptance is required throughout the construction processand we have no further material obligations under the contracts after the revenue is recognized.Pension and Postretirement Benefits.Defined benefit pension a

329、nd other postretirement benefit costs andobligations are dependent on actuarial assumptions used in calculating such amounts.These assumptions arereviewed annually and include the discount rate,long-term expected rate of return on plan assets,salary growth,healthcare cost trend rate and other econom

330、ic and demographic factors.We base the discount rate assumption forourplansonMoodysorCitigroup PensionLiability IndexAA-ratedcorporate long-term bondyieldrate.Thelong-term expected rate of return on plan assets is based on the plans asset allocation,historical returns and expectationsas to future re

331、turns that are expected to be realized over the estimated remaining life of the plan liabilities that willbefundedwiththe planassets.Thesalary growthassumptionsare determined based onlong-term actual experienceand future and near-term outlook.The healthcare cost trend rate assumptions are based on h

332、istorical cost andpayment data,the near-term outlook,and an assessment of likely long-term trends.Income Taxes.We use the liability method to account for income taxes.Under this method,deferred taxliabilities and assets are recognized for the tax effects of temporary differences between the financia

333、l reporting andtax bases of liabilities and assets measured using the enacted tax rate.Deferred income tax assets and liabilities are determined based on the difference between the financialstatement and tax bases of assets and liabilities using current tax rates.We evaluate available information aboutfuture taxable income and other possible sources of realization of deferred income tax assets and