1、 PAGE SPREADS FISCAL YEAR 2020 ANNUAL REPORT COMPANY PROFILE Graham Corporation is a global business that designs,manufactures,and sells critical equipment for the energy,defense and chemical/petrochemical industries.Energy markets include oil refining,cogeneration,and alternative power.For the defe
2、nse industry,our equipment is used in nuclear propulsion power systems for the U.S.Navy.Our global brand is built upon world-renowned engineering expertise in vacuum and heat transfer technology,responsive and flexible service,and unsurpassed quality.We design and manufacture custom-engineered eject
3、ors,vacuum pumping systems,surface condensers and vacuum systems.Our equipment can also be found in other diverse applications,such as metal refining,pulp and paper processing,water heating,refrigeration,desalination,food processing,pharmaceutical,heating,ventilating and air conditioning,and alterna
4、tive energy.Our reach spans the globe and our equipment is installed in facilities from North and South America to Europe,Asia,Africa and the Middle East.Fiscal Year Ended March 31 Fiscal Year Ended March 31 at March 31 Net of cancellations,Fiscal Year Ended March 31 Includes investments,at March 31
5、 Fiscal Year Ended March 31 FINANCIAL HIGHLIGHTS Financial Highlights(Dollars in thousands,except per share data)Fiscal years ended March 31,20202019201820172016Operating PerformanceRevenue90,604$91,831$77,534$91,769$90,039$Gross profit18,148 21,909 16,975 22,157 23,255 Gross profit margin(%)20.0%23
6、.9%21.9%24.1%25.8%Selling,general and administrative16,879 17,878 15,769 14,864 16,565 Goodwill and other impairments-6,449 14,816 -Restructuring charge-316 630 -Operating margin(%)0.7%(2.6)%(18.0)%7.3%9.4%Net(loss)income1,872 (308)(9,844)5,023 6,131 Diluted(loss)earnings per share0.19$(0.03)$(1.01)
7、$0.52$0.61$Weighted average shares outstanding-diluted9,8799,8239,7649,7289,983Year-End Financial Position Total assets148,120$156,270$143,333$151,570$143,131$Long-term debt,including capital lease obligations55 95 55 143 157 Cash,cash equivalents and investments73,003 77,753 76,479 73,474 65,072 St
8、ockholders equity96,724 98,966 103,349 114,110 109,380 Book value per share9.79$10.05$10.58$11.72$11.34$Dividends declared per share0.43$0.39$0.36$0.36$0.33$Other DataWorking capital77,443$79,896$78,105$78,688$74,807$Depreciation and amortization1,968 2,205 2,222 2,326 2,435 Capital expenditures2,41
9、7 2,138 2,051 325 1,153 Backlog112,389$132,127$117,946$82,590$107,963$Number of employees337 337 304 336 368 LETTER TO SHAREHOLDERS Dear Fellow Shareholders,As I think about fiscal 2020,I realize that our results are more complex than what is simply presented in our financial statements and that the
10、 underlying strength of our strategy and the admirable execution by our team is better understood with fuller clarification.In addition,the macro economic environment adds an even greater layer of complexity in understanding not just fiscal 2020,but the future for Graham,which also requires discussi
11、on.While revenue was down 1%to$90.6 million for the fiscal year,we achieved that level despite approximately$7 million of orders that were pushed from the fourth quarter of fiscal 2020 into the first quarter of fiscal 2021 due to the impact of the COVID-19 pandemic.I would also remind you that we di
12、vested our commercial nuclear utility market business in June 2019,which had provided an incremental$7.1 million in revenue from that business in fiscal 2019.This is an unprecedented time given the collapse of crude oil prices driven by the sharp decline in demand that resulted from the COVID-19 pan
13、demic and the oversupply of oil created from exuberant global production.We have built a stable base of business and backlog,a flexible operating structure,and have developed strategic contingencies which we believe help us weather storms of cyclicality like that in which we currently find ourselves
14、.While our order volume was down at the end of fiscal 2020 in large part due to the impact of the COVID-19 pandemic on our markets,particularly in our refining and chemical/petrochemical markets,we ended the year nonetheless with$112 million in high-quality backlog that we believe will support solid
15、 performance for fiscal 2021.Also,as of March 31,2020,backlog for the U.S.Navy stands at$59 million and represents 52%of overall backlog.Success with Our Defense Industry Initiative In last year s letter,I discussed our strategic direction and resource allocation priorities aimed on growing our mark
16、et share in the defense industry,in particular the U.S.Navy.Our U.S.Navy business$0$10$20$30$40$50$60$70$80$90$10020162017201820192020Fiscal YearRevenue by Key End MarketIncludes Commercial Nuclear Utility Market Revenue:divested June 2019Commercial NuclearOtherNavyChemicalRefining and related reven
17、ue streams offer a predictable multiyear base load that has no correlation to our crude oil refining market revenue stream and is considerably less cyclical than our energy and chemical market revenue.We have committed both financial and human capital toward this initiative over the past few years,a
18、nd the result of our teams efforts is that Graham is now involved in three distinct programs:the CVN carrier program,the SSN Virginia class submarine program,and the SSBN Columbia class submarine program.While it has taken some time,we have succeeded in winning orders from all three of these nuclear
19、 propulsion programs.Our strategy is to continue strengthening revenue and financial performance for the U.S.Navy business by deploying resources to:?add new components that we supply to each program;?transform our supplier position from competitively bid to sole source supply;and?expand external gr
20、owth through potential M&A.Our team has executed this strategy well,and we expect it to reshape our cyclical patterns in the future,especially as we consider acquisitions within this end market.Looking forward,we anticipate$20 million to$30 million in organic revenue per year from a combination of c
21、urrent projects under contract and expected future orders.Decisive Actions in Response to COVID-19 The COVID-19 pandemic has been a“black swan”event for the global community and economy.While no one could have anticipated it,management made some strategic decisions and took swift action in response,
22、including:1.Paid all employees full wages and benefits during the most difficult early months of the COVID-19 pandemic when stay at home practices were being implemented globally.We believe this was the right decision for our employees and kept the team strong.2.Retained our highly trained and effec
23、tive work force.We resisted the urge to reduce headcount to improve financial results for near term quarters that would ultimately impede growth when end markets recover.3.Stayed focused on nurturing,evaluating and developing merger and acquisition opportunities.4.Continue to invest in expanding our
24、 installed base strategy,which is a less cyclical and highly profitable revenue stream.5.Continue to invest in talent development to broaden and strengthen our team.When the COVID-19 pandemic initially hit in the U.S.,in order to keep our employees and communities safe we chose to shut down operatio
25、ns for three weeks commencing in mid-March.We began to bring our employees back in April in accordance with OSHA and CDC guidance for workplace safety while COVID-19 persists and,as we entered June 2020,our production returned to 100%capacity.We believe our strong balance sheet,sufficient cash posit
26、ion and our penetration into the defense industry,provides us a solid base for navigating these unusual times.While it would be my preference not to have experienced this,or any black swan event,we believe the decisions and actions we have taken to protect our employees,implement our strategy and ca
27、pitalize on our opportunities will enable Graham to come through this a stronger and better company.Capital Priorities and Acquisition Strategy Our management team and Board of Directors continually discuss and deliberate the uses for cash on our balance sheet.With the quality and size of potential
28、acquisitions in our pipeline,we believe that deploying capital to fund external growth is our most prudent path.While we frequently discuss shareholder dividends and share buybacks,the Board and management are committed to acquisitions that reshape the cyclical nature of Graham and provide a new gro
29、wth platform.I assure you that management and the Board remain disciplined regarding acquisitions and are focused on achieving a strong return on capital and not just earnings accretion.While we have a sense of urgency to accomplish attractive acquisitions,especially during current economic conditio
30、ns,we do not intend to break our financial analysis discipline for defining a value creating acquisition.Let me close by saying,I am humbled by the courage and steadfast commitment of the workforce at Graham for their extraordinary efforts to meet the needs of both our Company and our customers.We h
31、ave a strong leadership team that builds and implements strategic initiatives to expand in new end markets.The Board is focused on our strategy,its execution and creating shareholder value.They also provide clear thinking on the future direction of our end markets and on ways to accelerate our growt
32、h.Everyone at Graham is committed to serving all of our stakeholders,and I wish to thank them all.Lastly,I thank you,our shareholders,for your investment in GHM and the trust you have placed in me,the leadership team,and the Board.Sincerely,James R.Lines President and Chief Executive Officer SEC FOR
33、M 10-K The following Annual Report on Form 10-K for the year ended March 31,2020 was filed with the U.S.Securities and Exchange Commission on June 15,2020.This page is intentionally blank UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO
34、SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31,2020or?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _.Commission File Number 1-8462GRAHAM CORPORATION(Exact name of Registrant as
35、specified in its charter)Delaware16-1194720(State or other jurisdiction ofincorporation or organization)(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
36、registered pursuant to Section 12(b)of the Act:Title of each classTradingSymbol(s)Name of each exchange on which registeredCommon Stock,Par Value$0.10 Per ShareGHMNYSESecurities registered pursuant to Section 12(g)of the Act:Preferred Stock Purchase Rights Indicate by check mark if the Registrant is
37、 a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.YES?NO Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.YES?NO Indicate by check mark whether the Registrant:(1)has filed all reports required to be filed by S
38、ection 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the Registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YES NO?Indicate by check mark whether the Registrant has s
39、ubmitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit such files).YES NO?Indicate by check mark whether the Regis
40、trant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule 12b-2 of the Exchange Act.Large acc
41、elerated filer?Accelerated filer?Non-accelerated filerSmaller reporting companyEmerging growth company?If an emerging growth company,indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pro
42、vided pursuant to Section 13(a)of the Exchange Act.?Indicate by checkmark whether the Registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by
43、the registered public accounting firm that prepared or issued its audit report.?Indicate by checkmark whether the Registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes?No The aggregate market value of the Registrants Common Stock held by non-affiliates of the Registrant,based on the
44、 closing price of the shares of common stock on the NYSE Stock Market on September 30,2019,was$189,547,236.As of June 1,2020,the Registrants Common Stock outstanding was 9,855,963 shares,$0.10 par value.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrants definitive Proxy Statement,to be f
45、iled in connection with the Registrants 2020 Annual Meeting of Stockholders to be held on August 11,2020,are incorporated by reference into Part III,Items 10,11,12,13 and 14 of this filing.2Table of ContentsGRAHAM CORPORATIONAnnual Report on Form 10-KYear Ended March 31,2020PART IPAGEItem 1Business.
46、3Item 1ARisk Factors.8Item 1BUnresolved Staff Comments.17Item 2Properties.18Item 3Legal Proceedings.18Item 4Mine Safety Disclosures.18PART IIItem 5Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities.19Item 6Selected Financial Data.20Item 7Manage
47、ments Discussion and Analysis of Financial Condition and Results of Operations.21Item 7AQuantitative and Qualitative Disclosures About Market Risk.30Item 8Financial Statements and Supplementary Data.31Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.62Item 9
48、AControls and Procedures.62Item 9BOther Information.62PART IIIItem 10Directors,Executive Officers and Corporate Governance.63Item 11Executive Compensation.63Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.63Item 13Certain Relationships and Relate
49、d Transactions,and Director Independence.63Item 14Principal Accounting Fees and Services.63PART IVItem 15Exhibits,Financial Statement Schedules.64Note:Portions of the Registrants definitive Proxy Statement,to be issued in connection with the Registrants 2020 Annual Meeting of Stockholders to be held
50、 on August 11,2020,are incorporated by reference into Part III,Items 10,11,12,13 and 14 of this Annual Report on Form 10-K.3PART I(Dollar amounts in thousands except per share data)Item 1.BusinessGraham Corporation(we,us,our)is a global business that designs,manufactures and sells critical equipment
51、 for the energy,defense and chemical/petrochemical industries.Our energy markets include oil refining,cogeneration,and alternative power.For the defense industry,our equipment is used in nuclear propulsion power systems for the U.S.Navy.For the chemical and petrochemical industries,our equipment is
52、used in fertilizer,ethylene,methanol and downstream chemical facilities.Grahams global brand is built upon our world-renowned engineering expertise in vacuum and heat transfer technology,responsive and flexible customer service and high quality standards.We design and manufacture custom-engineered e
53、jectors,vacuum pumping systems,surface condensers and vacuum systems.Our equipment can also be found in other diverse applications such as metal refining,pulp and paper processing,water heating,refrigeration,desalination,food processing,pharmaceutical,heating,ventilating and air conditioning.Our cor
54、porate headquarters are located in Batavia,New York.We have production facilities located with our headquarters in Batavia.We also have two wholly-owned foreign subsidiaries,Graham Vacuum and Heat Transfer Technology(Suzhou)Co.,Ltd.(GVHTT),located in Suzhou,China,and Graham India Private Limited(GIP
55、L),located in Ahmedabad,India.GVHTT provides sales and engineering support for us in the Peoples Republic of China and management oversight throughout Southeast Asia.GIPL serves as a sales and market development office focusing on the refining,petrochemical and fertilizer markets.On June 24,2019,we
56、sold our wholly-owned subsidiary,Energy Steel&Supply Co.(Energy Steel),located in Lapeer,Michigan,which served the commercial nuclear utility industry.We were incorporated in Delaware in 1983 and are the successor to Graham Manufacturing Co.,Inc.,which was incorporated in New York in 1936.Our stock
57、is traded on the NYSE under the ticker symbol GHM.Unless indicated otherwise,dollar figures in this Annual Report on Form 10-K are reported in thousands.Our Products,Customers and MarketsOur products are used in a wide range of industrial process applications,primarily in energy markets,including:Pe
58、troleum Refining conventional oil refiningoil sands extraction and upgrading Defense propulsion systems for nuclear-powered aircraft carriers and submarines Chemical and Petrochemical Processingethylene,methanol and nitrogen producing plants fertilizer plantsplastics,resins and fibers plantsdownstre
59、am petrochemical plantscoal-to-chemicals plantsgas-to-liquids plants Power Generation/Alternative Energybiomass plantscogeneration power plantsgeothermal power plantsethanol plantsfossil fuel plants Otheroleo chemical plantsair conditioning and water heating systemsfood processing plantspharmaceutic
60、al plantsliquefied natural gas production facilities4Our principal customers include 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 the original equipment manufacturers
61、 who combine our products with their equipment prior to its sale to end users.Our products are sold by a team of sales engineers we employ directly as well as by independent sales representatives located worldwide.There may be short periods of time,a fiscal year for example,where one customer may ma
62、ke up greater than 10%of our business.However,if this occurs in multiple years,it is usually not the same customer or project over such a multi-year period.One customer accounted for more than 10%of our revenue in the fiscal year ended March 31,2020,which we refer to as fiscal 2020,while a different
63、 customer accounted for more than 10%of our revenue in the fiscal year ended March 31,2019,which we refer to as fiscal 2019.As a result of our diversification efforts to more extensively support the U.S.Navy,we have increased our domestic sales in 2020.Over a business cycle,our domestic sales will g
64、enerally range between 50%and 75%of total sales.The mix of domestic and international sales can vary from year to year.Our backlog at March 31,2020 was$112,389 compared with$132,127 at March 31,2019.Included in the March 31,2019 backlog was$8,039 for the commercial nuclear utility business,which was
65、 sold in June 2019.Our StrengthsOur core strengths include:We have a value-enhancing sales and development platform.We believe our customer-facing platform of sales,project estimating and application engineering are competitive advantages.We have tools and capabilities that we believe allow us to mo
66、ve quickly and comprehensively as customers evaluate how best to integrate our equipment into their facilities.We believe that our early and deep involvement adds significant value to the process and is an important competitive differentiator in the long sales cycle industries we serve.We believe cu
67、stomers need our engineering and fabrication expertise early in the project life cycle to understand how best to specify our equipment.We are renowned for our strong capabilities to handle complex,custom orders.The orders we receive are extremely complex and we believe that our order management plat
68、forms provide another competitive differentiator for our company.In our markets,we believe that order administration,risk management,cost containment,quality and engineering documentation are as important as the equipment itself.We have developed strong order management capabilities to enable us to
69、deliver high quality,engineered-to-order and build-to-spec process-critical equipment in a timely manner.For our customers complex,custom orders we typically manage very rigorous interaction between our project management teams and the end user or its engineering firm,as product design and quality r
70、equirements are finalized once an order is received.Customers supplier selection process begins by assessing these order management capabilities.We maintain a responsive,flexible production environment.We believe our operations platform is adept at handling low volume,high mix orders that are highly
71、 customized fabrications.We also believe that our production environment is much different from a highly engineered standard products business.While certain equipment in a product group may look similar,there are often subtle differences which are required to deliver the desired specification.Also,d
72、uring production it is not uncommon for customer-driven engineering changes to occur that alter the configuration of what had been initially released into production.The markets that we serve demand this flexible operating model.We have the capability to manage outsourced production.Effectively acce
73、ssing the global fabrication supply chain expands our market reach,increases execution capacity and can improve competitiveness.We use this capability for three primary reasons:1.Delivering a lower cost manufacturing option;2.Expanding capacity to execute an order to meet customer timing requirement
74、s and 3.Addressing localized content requirements.We have proven capability to deliver our specialized product designs with outsourced fabrication that is on-time,within budget and that meets our high quality standards.We provide robust after-the-sale technical support.Our engineering and performanc
75、e improvement personnel go to customer sites to audit the performance of our equipment,provide operator training and troubleshoot performance issues.Technical service after a sale is important to our customers as we believe their focus is always on leveraging our equipment to maximize their faciliti
76、es productivity.5We have a highly trained workforce.We maintain a long-tenured,highly skilled and extremely flexible workforce.We have a strong balance sheet.We maintain significant cash and investments on hand,and no bank debt,which we believe provides us with the financial flexibility to pursue ou
77、r business strategy,including growth by acquisition.We have a high-quality credit facility.Our credit facilities provide us with a$35,000 borrowing capacity that is expandable at our option to provide us with up to a total of$60,000 in borrowing capacity.Our StrategyWe intend to strategically levera
78、ge and deploy our assets,including but not limited to,financial,technical,manufacturing and industry know-how,in order to capture expanded market share within the geographies and industries we serve,expand revenue opportunities in adjacent and countercyclical markets and continually improve our resu
79、lts of operations in order to:Generate sustainable earnings growth;Reduce earnings volatility;Improve our operating performance;Generate strong cash flow from operations to reinvest in our business or return to shareholders in the form of ordinarydividends;and Provide an acceptable return to our sha
80、reholders.To accomplish our objectives and maintain strategic focus,we believe that we must:Successfully deploy our corporate assets to expand our market share in the industries we currently serve,access and develop a stronger presence in industries where we do not have a historically strong presenc
81、e,and pursue acquisitions,partnerships and/or other business combinations in order to enter new geographic or industrial markets,new product lines or expand our coverage in existing markets.Identify organic growth opportunities and consummate acquisitions where we believe the strength of the Graham
82、brand will provide us with the ability to expand and complement our core businesses.We intend to extend our existing product lines,move into complementary product lines and expand our global sales presence in order to further broaden our existing markets and reach additional markets.Expand our marke
83、t presence in the U.S.Navys Nuclear Propulsion Program.We will continue to demonstrate our proficiency by successfully executing the complex Nuclear Propulsion Program orders that are currently in our backlog by controlling both cost and risk,providing high-quality custom fabrication to exacting mil
84、itary quality control requirements and through disciplined project management.We intend to continue to be a preferred supplier of equipment to the U.S.Navys Nuclear Propulsion Program for both surface and submarine vessels.Continue to invest in people and capital equipment to meet the long-term dema
85、nd for our products in the oil refining,petrochemical processing and defense industries,especially in emerging geographic markets.Continue to deliver the highest quality products and solutions that enable our customers to achieve their operating objectives.We believe that our high quality and techni
86、cal expertise differentiates us from our competitors and allows us to win new orders based on value.In order to effectively implement our strategy,we also believe that we must continue to invest in and leverage our unique value enhancing differentiators,including:Invest in engineering resources and
87、technology in order to advance our vacuum and heat transfer technology market penetration.Enhance our engineering capacity and capability,especially in connection with product design,in order to more quickly respond to existing and future customer demands and opportunities.Invest in our manufacturin
88、g operations to improve productivity where needed and identify out-sourced capacity to complement our growth strategies.6Accelerate our ability to quickly and efficiently bid on available projects through our ongoing implementation of front-end bid automation and design processes.Invest in resources
89、 to further serve the U.S.Navy in our core competency areas of engineering and manufacturing,where our commercial capabilities meet U.S.Navy requirements.Implement and expand upon our operational efficiencies through ongoing refinement of our flexible manufacturing flow model as well as achievement
90、of other cost efficiencies.Focus on improving quality to eliminate errors and rework,thereby reducing lead time and enhancing productivity.Further develop a cross-trained,flexible workforce able to adjust to variable product demands by our customers.COVID-19 Pandemic Impact In March 2020,the outbrea
91、k of COVID-19 was declared a global pandemic.The COVID-19 pandemic began affecting our business,our customers businesses,and the markets we serve in the fourth quarter of our fiscal 2020.Additionally,the COVID-19 pandemic has impacted the already volatile oil industry and markets.The pandemic has im
92、pacted both our capital equipment sales as well as our short cycle business.Our proactive measures in response to the COVID-19 pandemic included approximately three weeks of limited production at our facility in Batavia,New York beginning in late March 2020.As of June 2020,we are nearing our pre-COV
93、ID-19 pandemic headcount in our factory,subject to numerous new health and safety protocols as recommended by our federal and local authorities,including requiring appropriate personal protective equipment to be worn by everyone onsite,social distancing markers,staggered employee breaks and meetings
94、 to reduce group gatherings,expanded hygiene practices,and barriers as appropriate to separate workers based on our plant layout configuration.We have deployed numerous laptop computers to our sales,engineering,quality,supply chain,finance,and administrative personnel to facilitate remote work.We ar
95、e limiting external visitors to our Batavia facility and those few that are being allowed must be pre-approved.As we have and continue to implement pandemic response measures,workforce safety and employee well-being continue to be top priorities and we remain committed to the service of our customer
96、s and suppliers.For further information on the risks posed to our business from the COVID-19 pandemic,see Item 1A-Risk Factors below,and our discussion of COVID-19 throughout this report.CompetitionOur business is highly competitive.The principal bases on which we compete include technology,price,pe
97、rformance,reputation,delivery,and quality.Our competitors listed in alphabetical order by market include:NORTH AMERICAMarketPrincipal CompetitorsRefining vacuum distillationCroll Reynolds Company,Inc.;Gardner Denver,Inc.;GEA Wiegand GmbHChemicals/petrochemicalsCroll Reynolds Company,Inc.;Gardner Den
98、ver,Inc.;Schutte KoertingTurbomachinery Original Equipment Manufacturer(OEM)refining,petrochemicalDonghwa Entec Co.,Ltd.;KEMCO;Oeltechnik GmbHTurbomachinery OEM power and power producerHoltec;KEMCO;Maarky Thermal Systems;Thermal Engineering International(USA),Inc.Navy Nuclear Propulsion Program/Defe
99、nseDC Fabricators;Joseph Oat;PCC;Triumph Aerospace;XylemINTERNATIONALMarketPrincipal CompetitorsRefining vacuum distillationEdwards,Ltd.;Gardner Denver,Inc.;GEA Wiegand GmbH;Korting Hannover AGChemicals/petrochemicalsCroll Reynolds Company,Inc.;Edwards,Ltd.;Gardner Denver,Inc.;GEA Wiegand GmbH;Korti
100、ng Hannover AG;Schutte Koerting7Turbomachinery OEM refining,petrochemicalChem Process Systems;Donghwa Entec Co.,Ltd.;Hangzhou Turbine Equipment Co.,Ltd.;KEMCO;Mazda(India);Oeltechnik GmbHTurbomachinery OEM power and power producerChem Process Systems;Holtec;KEMCO;Mazda(India);SPX Heat Transfer;Therm
101、al Engineering InternationalIntellectual PropertyOur success depends in part on our ability to protect our proprietary technologies.We rely on a combination of patent,copyright,trademark,trade secret laws and contractual confidentiality provisions to establish and protect our proprietary rights.We a
102、lso depend heavily on the brand recognition of the Graham name in the marketplace.Availability of Raw MaterialsHistorically,we have not been materially adversely impacted by the availability of raw materials.Working Capital PracticesOur business does not require us to carry significant amounts of in
103、ventory or materials beyond what is needed for work in process.We negotiate progress payments from our customers on our large projects to finance costs incurred.We do not provide rights to return goods,or payment terms to customers that we consider to be extended in the context of the industries we
104、serve.We do provide for warranty claims.Environmental MattersWe believe that we are in material compliance with applicable existing environmental laws and regulations.We do not anticipate that our compliance with federal,state and local laws regulating the discharge of material in the environment or
105、 otherwise pertaining to the protection of the environment will have a material adverse effect upon our capital expenditures,earnings or competitive position.SeasonalityNo material part of our business is seasonal in nature.However,our business is highly cyclical in nature as it depends on the willi
106、ngness of our customers to invest in major capital projects.Research and Development ActivitiesDuring fiscal 2020,fiscal 2019 and the fiscal year ended March 31,2018,we spent$3,353,$3,538 and$3,211,respectively,on research and development(R&D)activities.The majority of our R&D is application specifi
107、c to help solve our customers problems in order to improve efficiencies,address challenging environments or caustic materials,or redesign for form and function.We may be engineering new products and services for our customers.We also continually look to improve existing products and services.Employe
108、esAs of March 31,2020,we had 337 employees.We believe that our relationship with our employees is good.Available Information We maintain a website located at www.graham-.On our website,we provide a link to the Securities and Exchange Commissions(the SEC)website that contains the reports,proxy statem
109、ents and other information we file electronically.We do not provide this information on our website because it is more cost effective for us to provide a link to the SECs website.Printed copies of all documents we file with the SEC are available free of charge for any stockholder who makes a request
110、.Such requests should be made to our Corporate Secretary at our corporate headquarters.The other information found on our website is not part of this or any other report we file with,or furnish to,the SEC.8Item 1A.Risk Factors Our business and operations are subject to numerous risks,many of which a
111、re described below and elsewhere in this Annual Report on Form 10-K.If any of the events described below or elsewhere in this Annual Report on Form 10-K occur,our business and results of operations could be harmed.Additional risks and uncertainties that are not presently known to us,or which we curr
112、ently deem to be immaterial,could also harm our business and results of operations.Risks related to the impact of the COVID-19 pandemic:Our business,financial condition and results of operations have been and may continue to be adversely affected by global public health pandemics,including the recen
113、t COVID-19 pandemic.Our business,financial condition and results of operations have been and may continue to be adversely affected if the COVID-19 pandemic,or another global health crisis,impacts our employees,suppliers,customers,financing sources or others ability to conduct business or negatively
114、affects consumer and business confidence or the global economy.The COVID-19 health crisis has affected large segments of the global economy,including the markets we operate in.The COVID-19 pandemic began affecting our business in the fourth quarter of fiscal 2020.In response to the COVID-19 pandemic
115、,beginning in late March 2020,we had limited production at our facility in Batavia,New York,with only a small staff present,which significantly reduced our production capabilities for approximately three weeks.As of June 2020,we are now nearing the pre-COVID-19 headcount of our production workforce
116、and have applied numerous new health and safety protocols for those working onsite.The pandemic and any additional preventative or protective actions that governments or we may take in response to the COVID-19 pandemic may have a material adverse effect on our business or our suppliers,distribution
117、channels,and customers,including business shutdowns or disruptions for an indefinite period of time,reduced operations,restrictions on shipping,fabricating or installing products,reduced consumer demand or customers ability to make payments.We have and may continue to experience additional operating
118、 costs due to increased challenges with our workforce(including as a result of illness,absenteeism or government orders),implementing further precautionary measures to protect the health of our workforce,increased project cancellations or projects put on hold,access to supplies,capital,and fundament
119、al support services(such as shipping and transportation).Any resulting financial impact cannot be fully estimated at this time,but may materially affect our business,financial condition or results of operations.The extent to which the COVID-19 pandemic affects our results will depend on future devel
120、opments,which are highly uncertain and cannot be predicted,including new information which may emerge concerning the severity of COVID-19 and the actions to contain the pandemic or treat its impact,among others.The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Ite
121、m 1A-Risk Factors,any of which could have a material adverse effect on us.The situation surrounding the COVID-19 pandemic and its impact is changing rapidly and additional impacts may arise that we are presently unaware of.The COVID-19 pandemic may disrupt and cause delays in our supply chains,and s
122、uch disruptions could adversely affect our results of operations and financial performance.The raw materials that we source come from a wide variety of domestic and international suppliers.Global sourcing of many of the products we sell is an important factor in our financial results.It is possible
123、that the ongoing COVID-19 pandemic could cause a disruption in our supply chain.If that supply chain is disrupted for an extended period of time,including due to the COVID-19 pandemic or another global health crisis,our ability to meet customer requirements and achieve our financial performance may
124、be affected.We cannot at this time predict the impact of the COVID-19 pandemic on our supply chain,but we are maintaining ongoing communications with our suppliers to monitor their status.Any disruption to our supply chain could negatively impact our operations and financial performance.Disruption t
125、o the global oil markets and resulting substantial price decline,including from the impact of the COVID-19 pandemic,could adversely affect our customers and our own results of operations and financial performance.Our business,consolidated results of operations and financial condition,or that of our
126、customers,may be adversely affected by significant decreases in demand for oil resulting from global restrictions on travel,work from home practices,and the significant reduction in industrial and commercial activity,or an increase in operating costs as a result of the global business disruption res
127、ulting from the COVID-19 pandemic or that may result from a future global health crisis.Global oil markets have recently experienced significant volatility and dramatic decreases in prices due to decreased demand during the COVID-19 pandemic resulting from government-led“stay-at-home”orders and soci
128、al distancing initiatives and a geopolitical imbalance of supply.Demand for some of our products is dependent on the level of expenditures by our customers in the oil and gas industry.Accordingly,continued volatility or downturns in the oil markets,and potential project cancellations,could materiall
129、y and adversely impact our financial condition or results of operations.9The COVID-19 pandemic may impact businesses differently across various regions.We operate and compete globally.The response to the COVID-19 pandemic by domestic and foreign governments has been and may continue to be varied and
130、 those differences may impact our competitiveness.Our operating subsidiaries are located in China and India,and those countries responses to the COVID-19 pandemic have varied from the United States response.There are uncertain political climates in the regions where our subsidiaries operate,and gove
131、rnmental action in those regions may result in the temporary closure or limited operations of our subsidiaries.Government assistance during a pandemic may also differ between private and public companies,which may provide an advantage to one compared with another.This may affect our competitive posi
132、tion and could disrupt the market access and success of our business compared with other current or new competitors.This impact could have a material adverse impact on our financial condition or results of operation.COVID-19 disruption could impact our management team due to illness from the pandemi
133、c.Our business has specialized management,technical and sales personnel who may become unavailable for an extended period or lost due to the effect of COVID-19 or another pandemic.The COVID-19 pandemic may significantly disrupt our workforce if a significant percentage of our employees are unable to
134、 work due to illness or quarantines.In addition,COVID-19-related illness could impact members of our Board of Directors,resulting in absenteeism from meetings of the directors or committees of directors,making it more difficult to convene the quorums of the full Board of Directors or its committees
135、needed to conduct meetings for the management of our affairs.Any of the loss of personnel or disruption in management as described above could have a material adverse impact on our business and results of operations.Risks related to our business:The markets we serve include the petroleum refining an
136、d petrochemical industries.These industries are both highly cyclical in nature and dependent on the prices of crude oil and natural gas as well as on the differential between the two prices.As a result,volatility in the prices of oil and natural gas may negatively impact our operating results.A subs
137、tantial portion of our revenue is derived from the sale of our products to companies in the chemical,petrochemical,and petroleum refining industries,or to firms that design and construct facilities for these industries.These industries are highly cyclical and have historically experienced severe dow
138、nturns.The prices of crude oil and natural gas have historically been very volatile,as evidenced by the extreme volatility in oil prices over the past few years and,in particular,the recent volatility related to the COVID-19 pandemic.During times of significant volatility in the market for crude oil
139、 or natural gas,our customers often refrain from placing orders until the market stabilizes and future demand projections are clearer.If our customers refrain from placing orders with us,our revenue would decline and there could be a material adverse effect on our business and results of operations.
140、We believe that over the long-term,demand for our products will expand in the petrochemical,petroleum refining and power generating industries.A sustained deterioration in any of the industries we serve would materially harm our business and operating results because our customers would not likely h
141、ave the resources necessary to purchase our products,nor would they likely have the need to build additional facilities or improve existing facilities.As we have seen in the recent past,a cyclical downturn can occur suddenly and result in extremely different financial performance sequentially from q
142、uarter to quarter or on an annual comparative basis due to an inability to rapidly adjust costs.The relative costs of oil,natural gas,nuclear power,hydropower and numerous forms of alternative energy production may have a material adverse impact on our business and operating results.Global and regio
143、nal energy supply comes from many sources,including oil,natural gas,coal,hydro,nuclear,solar,wind,geothermal and biomass,among others.A cost or supply shift among these sources could negatively impact our business opportunities going forward and the profitability of those opportunities.A demand shif
144、t,where technological advances favor the utilization of one or a few sources of energy may also impact the demand for our products.If demand shifts in a manner that increases energy utilization outside of our traditional customer base or expertise,our business and financial results could be material
145、ly adversely affected.In addition,governmental policy can affect the relative importance of various forms of energy sources.For example,non-fossil based sources may require and often receive government tax incentives to foster investment.If these incentives become more prominent,our business and res
146、ults of operations could suffer.A transition toward different types of energy may have a material adverse impact on our business and operating results.Changes in consumer demand,including some driven by governmental and political preferences,toward electric,compressed natural gas,hydrogen vehicles a
147、nd other alternative energy may impact our business.We have products which can support certain technologies,while other technologies will not require our equipment.A significant change in demand for oil based products may have a material adverse impact on our business.10Our business is highly compet
148、itive.If we are unable to successfully implement our business strategy and compete against entities with greater resources than us or against competitors who have a relative cost advantage,we risk losing market share to current and future competitors.We encounter intense competition in all of our ma
149、rkets.Some of our present and potential competitors may have substantially greater financial,marketing,technical or manufacturing resources.Our competitors may also be able to respond more quickly to new technologies or processes and changes in customer demands and they may be able to devote greater
150、 resources towards the development,promotion and sale of their products.Certain competitors may also have a cost advantage compared to us due to their geography or changes in relative currency values and may compete against us based on price.This may affect our ability to secure new business and mai
151、ntain our level of profitability.In addition,our current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that increase their ability to address the needs of our customers.Moreover,customer buying patterns can cha
152、nge if customers become more price sensitive and accepting of lower cost suppliers.If we cannot compete successfully against current or future competitors,our business will be materially adversely affected.A change in our end use customers,our markets,or a change in the engineering procurement and c
153、onstruction companies serving our markets could harm our business and negatively impact our financial results.Although we have long-term relationships with many of our end use customers and with many engineering,procurement and construction companies,the project management requirements,pricing level
154、s and costs to support each customer and customer type are often different.Our customers have historically focused on the quality of the engineering and product solutions which we have provided to them.As our markets continue to grow,and new market opportunities expand,we could see a shift in pricin
155、g as a result of facing competitors with lower production costs,which may have a material adverse impact on our results of operations and financial results.Because our customers are unable to predict the length of the time period for the economic viability of their plants,there has been more of a fo
156、cus on relative importance of cost versus quality which looks at short-term costs instead of total long-term cost of operations.A change in the structure of our markets;the relationships between engineering and procurement companies,original equipment suppliers,others in the supply chain and any of
157、their relationships with the end users could harm our business and negatively impact our financial results.There are strong and long-standing relationships throughout the supply chain between the many parties involved in serving the end user of our products.A change in the landscape between engineer
158、ing and procurement companies,original equipment suppliers,others in the supply chain,including disruptions in the supply chain due to the COVID-19 pandemic,and/or with the end users could have a material adverse effect on our business and results of operations.These changes might occur through acqu
159、isitions or other business partnerships and could have a material impact on our business and negatively impact our financial results.The loss of,or significant reduction or delay in,purchases by our largest customers could reduce our revenue and adversely affect our results of operations.While we ma
160、y have only one customer represent over 10%of revenue in any one year,a small number of customers have accounted for a substantial portion of our historical net sales.For example,sales to our top ten customers,who can vary each year,accounted for 48%,41%and 41%of consolidated net sales in fiscal 202
161、0,fiscal 2019 and fiscal 2018,respectively.We expect that a limited number of customers will continue to represent a substantial portion of our sales for the foreseeable future.The loss of any of our major customers,a decrease or delay in orders or anticipated spending by such customers,or a delay i
162、n the production of existing orders could materially adversely affect our revenues and results of operations.We may experience customer concentration risk related to strategic growth for U.S.Navy projects.We believe our strategy to increase the penetration of U.S.Navy related opportunities may lead
163、to U.S.Navy related projects consistently being greater than 10%of our total revenue.While these projects are spread across multiple contractors for the U.S.Navy,the end customer for these projects is the same.This concentration of business could add additional risk to us should there be a disruptio
164、n,short or long term,in the funding for these projects or our participation in the U.S.Navy Nuclear Propulsion program.The size of our contracts with the U.S.Navy may produce volatility over the short term financial results.We believe our strategy to increase the penetration of U.S.Navy related oppo
165、rtunities,which are often much larger contracts than our commercial contracts,may impact our ability to effectively provide accurate investor guidance for our near term financial results.These contracts can,on occasion,be delayed before or during the revenue recognition cycle.If we are unable to rea
166、llocate the resources to other projects,we may see an increase in unpredictable(greater)volatility in our near term financial results.11A large percentage of our sales occur outside of the U.S.As a result,we are subject to the economic,political,regulatory and other risks of international operations
167、.For fiscal 2020,36%of our revenue was from customers located outside of the U.S.Moreover,through our subsidiaries,we maintain a sales office in China and a sales and market development office in India.We believe that revenue from the sale of our products outside the U.S.will continue to account for
168、 a significant portion of our total revenue for the foreseeable future.We intend to continue to expand our international operations to the extent that suitable opportunities become available.Our foreign operations and sales could be adversely affected as a result of:nationalization of private enterp
169、rises and assets;political or economic instability in certain countries and regions,such as the ongoing instability throughout the Middle East and/or portions of the former Soviet Union;the global economic impact as a result of the COVID-19 pandemicpolitical relationships between the U.S.and certain
170、 countries and regions;differences in foreign laws,including difficulties in protecting intellectual property and uncertainty in enforcement of contract rights;the possibility that foreign governments may adopt regulations or take other actions that could directly or indirectly harm our business and
171、 growth strategy;credit risks;currency fluctuations;tariff and tax increases;export and import restrictions and restrictive regulations of foreign governments;shipping products during times of crisis or war;our failure to comply with U.S.laws regarding doing business in foreign jurisdictions,such as
172、 the Foreign Corrupt Practices Act;orother factors inherent in maintaining foreign operations.The impact of potential changes in customs and trade policies and tariffs imposed by the U.S.and those imposed in response by other countries,including China,as well as rapidly changing trade relations,coul
173、d materially and adversely affect our business and results of operations.The U.S.government has made proposals that are intended to address trade imbalances,which include encouraging increased production in the United States.These proposals could result in increased customs duties and the renegotiat
174、ion of some U.S.trade agreements.Changes in U.S.and foreign governments trade policies have resulted and may continue to result in tariffs on imports into,and exports from,the U.S.Over the past few years,the U.S.imposed tariffs on imports from several countries,including China,Canada,the European Un
175、ion and Mexico.In response,China,Canada and the European Union have proposed or implemented their own tariffs on certain exports from the U.S.into those countries.Tariffs affecting our products and product components,including raw materials we use,particularly high-end steel and steel related produc
176、ts,may add significant costs to us and make our products more expensive.As a result,our products could become less attractive to customers outside the U.S.due to U.S.import tariffs on our raw materials and our profit margins would be negatively impacted.Accordingly,continued tariffs may weaken relat
177、ionships with certain trading partners and may adversely affect our financial performance and results of operations.When beneficial to us,we may consider alternate sourcing options,including off shore subcontracting,in order to minimize the impact of the tariffs.Because we conduct aspects of our bus
178、iness in China through our subsidiary,potential reductions in trade with China and diminished relationships between China and the U.S.,including as a result of the recent COVID-19 pandemic,as well as the continued escalation of tariffs,could have a material adverse effect on our business and results
179、 of operations.12Global demand growth could be led by emerging markets,which could result in lower profit margins and increased competition.The increase in global demand could be led by emerging markets.If this is the case,we may face increased competition from lower cost suppliers,which in turn cou
180、ld lead to lower profit margins on our products.Customers in emerging markets may also place less emphasis on our high quality and brand name than do customers in the U.S.and certain other industrialized countries where we compete.If we are forced to compete for business with customers that place le
181、ss emphasis on quality and brand recognition than our current customers,our results of operations could be materially adversely affected.Climate change and greenhouse gas regulations may affect our customers investment decisions.Due to concern over the risk of climate change,a number of countries ha
182、ve adopted,or are considering the adoption of,regulatory frameworks to reduce greenhouse gas emissions.These restrictions may affect our customers abilities and willingness to invest in new facilities or to re-invest in current operations.These requirements could impact the cost of our customers pro
183、ducts,lengthen project implementation times,and reduce demand for hydrocarbons,as well as shift hydrocarbon demand toward lower-carbon sources.Any of the foregoing could adversely impact the demand for our products,which in turn could have an adverse effect on our business and results of operations.
184、The operations of our Chinese subsidiary may be adversely affected by Chinas evolving economic,political and social conditions.We conduct our business in China primarily through our wholly-owned Chinese subsidiary.The results of operations and future prospects of our Chinese subsidiary may be advers
185、ely affected by,among other things,changes in Chinas political,economic and social conditions,including as a result of the COVID-19 pandemic,changes in the relationship between China and its western trade partners,changes in policies of the Chinese government,changes in laws and regulations or in th
186、e interpretation of existing laws and regulations,changes in foreign exchange regulations,measures that may be introduced to control inflation,such as interest rate increases and changes in the rates or methods of taxation.In addition,changes in demand could result from increased competition from lo
187、cal Chinese manufacturers who have cost advantages or who may be preferred suppliers for Chinese end users.Also,Chinese commercial laws,regulations and interpretations applicable to non-Chinese owned market participants,such as us,are continually changing.These laws,regulations and interpretations c
188、ould impose restrictions on our ownership or the operation of our interests in China and have a material adverse effect on our business and results of operations.Intellectual property rights are difficult to enforce in China and India,which could harm our business.Chinese commercial law is relativel
189、y undeveloped compared with the commercial law in many of our other major markets and limited protection of intellectual property is available in China as a practical matter.Similarly,proprietary information may not be afforded the same protection in India as it is in our other major markets with mo
190、re comprehensive intellectual property laws.Although we take precautions in the operations of our subsidiaries to protect our intellectual property,any local design or manufacture of products that we undertake could subject us to an increased risk that unauthorized parties will be able to copy or ot
191、herwise obtain or use our intellectual property,which could harm our business.We may also have limited legal recourse in the event we encounter patent or trademark infringers,which could have a material adverse effect on our business and results of operations.Uncertainties with respect to the Chines
192、e legal system may adversely affect the operations of our Chinese subsidiary.Our Chinese subsidiary is subject to laws and regulations applicable to foreign investment in China.There are uncertainties regarding the interpretation and enforcement of laws,rules and policies in China.The Chinese legal
193、system is based on written statutes,and prior court decisions have limited precedential value.Because many laws and regulations are relatively new and the Chinese legal system is still evolving,the interpretations of many laws,regulations and rules are not always uniform.Moreover,the relative inexpe
194、rience of Chinas judiciary in many cases creates additional uncertainty as to the outcome of any litigation,and the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas.Finally,enforcement of existing laws or contracts based on existi
195、ng law may be uncertain and sporadic.For the preceding reasons,it may be difficult for us to obtain timely or equitable enforcement of laws ostensibly designed to protect companies like ours,which could have a material adverse effect on our business and results of operations.Regulation of foreign in
196、vestment in India may adversely affect the operations of our Indian subsidiary.Our subsidiary in India is subject to laws and regulations applicable to foreign investment in India.India regulates ownership of Indian companies by foreign entities.These regulations may apply to our funding of our Indi
197、an operating subsidiary.For example,the government of India has set out criteria for foreign investments in India,including requirements with respect to downstream investments by Indian companies owned or controlled by foreign entities and the transfer of ownership or control of Indian companies in
198、certain industries.These requirements may adversely affect our ability to operate our Indian subsidiary.There can be no assurance that we will be able to obtain any required approvals for future acquisitions,investments or operations in India,or that we will be able to obtain such approvals on satis
199、factory terms.13Changes in U.S.and foreign energy policy regulations could adversely affect our business.Energy policy in the U.S.and in the other countries where we sell our products is evolving rapidly and we anticipate that energy policy will continue to be an important legislative priority in th
200、e jurisdictions where we sell our products.It is difficult,if not impossible,to predict the changes in energy policy that could occur,as they may be related to changes in political administration,public policy or other factors.The elimination of,or a change in,any of the current rules and regulation
201、s in any of our markets could create a regulatory environment that makes our end users less likely to purchase our products,which could have a material adverse effect on our business.Government subsidies or taxes,which favor or disfavor certain energy sources compared with others,could have a materi
202、al adverse effect on our business and operating results.Efforts to reduce large U.S.federal budget deficits could result in government cutbacks or shifts in focus in defense spending or in reduced incentives to pursue alternative energy projects,resulting in reduced demand for our products,which cou
203、ld harm our business and results of operations.Our business strategy calls for us to continue to pursue defense-related projects as well as projects for end users in the alternative energy markets in the U.S.In recent years,the U.S.federal government has incurred large budget deficits.In the event t
204、hat U.S.federal government defense spending is reduced or alternative energy related incentives are reduced or eliminated in an effort to reduce federal budget deficits,projects related to defense or alternative energy may become less plentiful.The impact of such reductions could have a material adv
205、erse effect on our business and results of operations,as well as our growth opportunities.U.S.Navy orders are subject to annual government funding.A disruption in funding could adversely impact our business.One of our growth strategies is to increase our penetration of U.S.Navy-related opportunities
206、.Projects for the U.S.Navy and its contractors generally have a much longer order-to-shipment time period than our commercial orders.The time between the awarding of an order to the completion of shipment can take three to seven years.Annual government funding is required to continue the production
207、of this equipment.Disruption of government funding,short or long term,could impact the ability for us to continue our production activity on these orders.For example,the recent emergency spending bills related to the COVID-19 pandemic could compound the uncertainty already present in government fund
208、ed programs.Since this business is expected to increase as a percentage of our overall business,such a disruption,should it occur,could adversely impact the sales and profitability of our business.Changes in the competitive environment for U.S.Navy procurement could adversely impact our ability to g
209、row this portion of our business.Over the past few years,we have expanded our business and the opportunities where we bid related to U.S.Navy projects.This has increased our market share and caused an adverse share position for some of our competitors for these products.Competitor response to our ma
210、rket penetration is possible.Our customers may also raise concerns about their supplier concentration issues and the risk exposure related to this concentration.As the U.S.Navy is looking to expand its fleet,there is also a risk that their facilities,their supply chain or our supply chain for raw ma
211、terials,may not be able to support this expansion.This could adversely impact our ability to grow this portion of our business.Contract liabilities for large U.S.Navy contracts may be beyond our normal insurance coverage and a claim could have an adverse impact on our financial results.We are dilige
212、nt at managing ongoing risks related to projects and the requirements of our customers.Our history at managing risk provides significant evidence that our exposure and risk are minimal.In addition,we secure business insurance coverage to minimize the impact of a major failure or liability related to
213、 our customers.Due to certain U.S.government procurement policies,we may take on the risk of a liability for large U.S.Navy projects in excess of our insurance coverage and at a level which is higher than our commercial projects.A claim related to one of these projects could have an adverse impact o
214、n our financial results.New technology used by the ships for the U.S.Navy may delay projects and may impact our ability to grow this portion of our business.Certain U.S.Navy vessels are implementing new technologies,unrelated to any of the equipment that we provide.If there is a complication or dela
215、y to any ship caused by this new technology,it may delay the procurement and fabrication of future vessels,which could have a negative impact on our business.Lapses in U.S.government appropriations have,and any future lapses could disrupt U.S.export processing and related procedures and,as a result,
216、may materially and adversely affect our revenue,results of operations and business.Recently,the U.S.experienced lapses in federal appropriations,which have had,in the past,a short-term effect on our business.Any such future lapse(each,a Government Shutdown)could negatively affect our ability to ship
217、 finished products to customers.We rely on federal government personnel,who are not able to perform their duties during a Government Shutdown,to conduct routine business processes related to the inspection and delivery of our products,process export licenses for us and perform other services for us
218、that,when disrupted,may prevent us from timely shipping products outside the U.S.If we are unable to timely 14ship our products outside the U.S.,there could be a material adverse impact on our results of operations and business.Moreover,our inability to ship products,or the perception by customers t
219、hat we might not be able to timely ship our products in the future,may cause such customers to look to foreign competitors to fulfill their demand.If our customers look to foreign competitors to source equipment of the type we manufacture,there could be a material adverse impact on our results of op
220、erations and business.Near-term income statement impact from competitive contracts could adversely affect our operating results.During weaker market periods,we may choose to be more aggressive in pricing certain competitive projects to protect or gain market share or to increase the utilization of o
221、ur facilities.In these situations,it is possible that an incrementally profitable order,while increasing contribution,may be unprofitable from an accounting perspective when including fixed manufacturing costs.In these situations,we are required to recognize the financial loss at the time of order a
222、cceptance,or as soon as our cost estimates are updated,whichever occurs first.It is possible we may accumulate losses either on a large project or more than one project such that,in a short time period,for example,a reporting quarter,these losses may have a meaningful impact on the earnings of the p
223、eriod.Our operating results could be adversely affected by customer contract cancellations and delays.The value of our backlog as of March 31,2020 was$112,389.Our backlog can be significantly affected by the timing of large orders.The amount of our backlog at March 31,2020 is not necessarily indicat
224、ive of future backlog levels or the rate at which our backlog will be recognized as sales.Although historically the amount of modifications and terminations of our orders has not been material compared with our total contract volume,customers can,and sometimes do,terminate or modify their orders.Thi
225、s generally occurs more often in times of end market or capital market turmoil.As evidence of this,we had orders totaling$24,361 cancelled during the downturn between fiscal 2015 through fiscal 2017,but had no cancellations in fiscal years 2018 and 2019.In fiscal year 2020,we had two cancellations t
226、otaling$3,165 and two projects on hold,totaling$562.We cannot predict whether cancellations will occur or accelerate in the future,and the ongoing COVID-19 pandemic may increase the risk of such cancellations.Although certain of our contracts in backlog may contain provisions allowing for us to asse
227、ss cancellation charges to our customers to compensate us for costs incurred on cancelled contracts,cancellations of purchase orders or modifications made to existing contracts could substantially and materially reduce our backlog and,consequently,our future sales and results of operations.Moreover,
228、delay of contract execution by our customers can result in volatility in our operating results.Our current backlog contains a number of large orders from the U.S.Navy.In addition,we are continuing to pursue business in this end market which offers large multi-year projects which have an added risk p
229、rofile beyond that of our historic customer base.A delay,long-term extension or cancellation of any of these projects could have a material adverse effect on our business and results of operations.An extended downturn could adversely impact the financial stability of our customers and increase the r
230、isk of uncollectable accounts receivables.Our customers participate in cyclical markets,such as petroleum refining,petrochemical and alternate energy.The financial strength of our customers can be impacted by a severe or lengthy downturn in these markets,including any downturn related to the COVID-1
231、9 pandemic.This could lead to additional risk in our ability to collect outstanding accounts receivables.We attempt to mitigate this risk with the utilization of progress payments for many projects,but certain industries,end markets and geographies are not as willing to make progress payments.Certai
232、n projects require a small portion of the total payments to be held until the customers facility is fully operational,which can be in excess of one year beyond our delivery of equipment to them.This additional time may add risk to our ability to collect on the outstanding accounts receivables.Our ex
233、posure to fixed-price contracts and the timely completion of such contracts could negatively impact our results of operations.A substantial portion of our sales is derived from fixed-price contracts,which may involve long-term fixed price commitments by us to our customers.While we believe our contr
234、act management processes are strong,we nevertheless could experience difficulties in executing large contracts,including but not limited to,estimating errors,cost overruns,supplier failures and customer disputes.To the extent that any of our fixed-price contracts are delayed,our subcontractors fail
235、to perform,contract counterparties successfully assert claims against us,the original cost estimates in these or other contracts prove to be inaccurate or the contracts do not permit us to pass increased costs on to our customers,our profitability may decrease or losses may be incurred which,in turn
236、,could have a material adverse effect on our business and results of operations.For our U.S.Navy projects,these fixed priced contracts have order to shipment periods which can exceed five years.This additional time-based risk,which we believe is manageable,nevertheless increases the likelihood of co
237、st fluctuation,which could have a material adverse effect on our business and results of operation.15Given our size and specialization of our business,if we lose any member of our management team and we experience difficulty in finding a qualified replacement,our business could be harmed.Competition
238、 for qualified management and key technical and sales personnel in our industry is intense.Moreover,our technology is highly specialized,and it may be difficult to replace the loss of any of our key technical and sales personnel.Many of the companies with which we compete for management and key tech
239、nical and sales personnel have greater financial and other resources than we do or are located in geographic areas which may be considered by some to be more desirable places to live.If we are not able to retain any of our key management,technical or sales personnel,it could have a material adverse
240、effect on our business and results of operations.During certain high demand periods,there can be a shortage of skilled production workers,especially those with high-end welding capabilities.We could experience difficulty hiring or replacing those individuals,which could adversely affect our business
241、.Our fabrication processes require highly skilled production workers,especially welders.Welding has not been an educational field that has been popular over the past few decades as manufacturing has moved overseas.While we have an in-house weld training program,if we are unable to retain,hire or tra
242、in an adequate number of individuals with high-end welding capability,this could adversely impact our ability to achieve our financial objectives.In addition,if demand for highly skilled production workers were to significantly outstrip supply,wages for these skilled workers could dramatically incre
243、ase in our and related industries and that could affect our financial performance.Furthermore,should we not be able to expand our production workforce,we would expect to increase the amount of outsourced fabrication which is likely to result in higher costs and lower margins.Our acquisition strategy
244、 may not be successful or may increase business risk.The success of our acquisition strategy will depend,in part,on our ability to identify suitable companies or businesses to purchase and then successfully negotiate and close acquisition transactions.In addition,our success depends in part on our a
245、bility to integrate acquisitions and realize the anticipated benefits from combining the acquisition with our historical business,operations and management.We cannot provide any assurances that we will be able to complete any acquisitions and then successfully integrate the business and operations o
246、f those acquisitions without encountering difficulties,including unanticipated costs,issues or liabilities,difficulty in retaining customers and supplier or other relationships,failure to retain key employees,diversion of our managements attention,failure to integrate information and accounting syst
247、ems or establish and maintain proper internal control over financial reporting.Moreover,as part of the integration process,we must incorporate an acquisitions existing business culture and compensation structure with our existing business.We also need to utilize key personnel who may be distracted f
248、rom the core business.If we are not able to efficiently integrate an acquisitions business and operations into our organization in a timely and efficient manner,or at all,the anticipated benefits of the acquisition may not be realized,or it may take longer to realize these benefits than we currently
249、 expect,either of which could have a material adverse effect on our business or results of operations.If we become subject to product liability,warranty or other claims,our results of operations and financial condition could be adversely affected.The manufacture and sale of our products exposes us t
250、o potential product liability claims,including those that may arise from failure to meet product specifications,misuse or malfunction of our products,design flaws in our products,or use of our products with systems not manufactured or sold by us.For example,our equipment is installed in facilities t
251、hat operate dangerous processes and the misapplication,improper installation or failure of our equipment may result in exposure to potentially hazardous substances,personal injury or property damage.Provisions contained in our contracts with customers that attempt to limit our damages may not be enf
252、orceable or may fail to protect us from liability for damages and we may not negotiate such contractual limitations of liability in certain circumstances.Our insurance may not cover all liabilities and our historical experience may not reflect liabilities we may face in the future.Our risk of liabil
253、ity may increase as we manufacture more complex or larger projects.We also may not be able to continue to maintain such insurance at a reasonable cost or on reasonable terms,or at all.Any material liability not covered by provisions in our contracts or by insurance could have a material adverse effe
254、ct on our business and financial condition.Furthermore,if a customer suffers damage as a result of an event related to one of our products,even if we are not at fault,they may reduce their business with us.We may also incur significant warranty claims which are not covered by insurance.In the event
255、a customer ceases doing business with us as a result of a product malfunction or defect,perceived or actual,or if we incur significant warranty costs in the future,there could be a material adverse effect on our business and results of operations.If third parties infringe upon our intellectual prope
256、rty or if we were to infringe upon the intellectual property of third parties,we may expend significant resources enforcing or defending our rights or suffer competitive injury.Our success depends in part on our proprietary technology.We rely on a combination of patent,copyright,trademark,trade secr
257、et laws and confidentiality provisions to establish and protect our proprietary rights.If we fail to successfully enforce our intellectual property rights,our competitive position could suffer.We may also be required to spend significant resources to monitor 16and police our intellectual property ri
258、ghts.Similarly,if we were found to have infringed upon the intellectual property rights of others,our competitive position could suffer.Furthermore,other companies may develop technologies that are similar or superior to our technologies,duplicate or reverse engineer our technologies or design aroun
259、d our proprietary technologies.Any of the foregoing could have a material adverse effect on our business and results of operations.In some instances,litigation may be necessary to enforce our intellectual property rights and protect our proprietary information,or to defend against claims by third pa
260、rties that our products infringe upon their intellectual property rights.Any litigation or claims brought by or against us,whether with or without merit,could result in substantial costs to us and divert the attention of our management,which could materially harm our business and results of operatio
261、ns.In addition,any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights,subject us to significant liabilities,require us to seek licenses on unfavorable terms,prevent us from manufacturing or selling certain
262、products or require us to redesign certain products,any of which could have a material adverse effect on our business and results 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
263、 the U.S.dollar and the currencies of the countries in which we sell our products to the extent that such sales are not based on U.S.dollars,and volatility in foreign currency exchange rates has generally increased in connection with the COVID-19 pandemic.Currency movements can affect sales in sever
264、al ways,the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies.Strength of the U.S.dollar compared with the Euro or Asian currencies may put us in a less competitive position.At the outset of the COVID-19 pandemic,the U
265、.S.dollar saw relative strengthening in relation to the Euro and Asian currencies,however,as the pandemic has continued,the relative strength of the U.S.dollar has increased in volatility.Business lost due to competition for orders against competitors using a relatively weaker currency cannot be qua
266、ntified.In addition,cash can be adversely impacted by the conversion of sales made by us in a foreign currency to U.S.dollars.While we may enter into currency exchange rate hedges from time to time to mitigate these types of fluctuations,we cannot remove all fluctuations or hedge all exposures and o
267、ur earnings are impacted by changes in currency exchange rates.In addition,if the counter-parties to such exchange contracts do not fulfill their obligations to deliver the contractual foreign currencies,we could be at risk for fluctuations,if any,required to settle the obligation.Any of the foregoi
268、ng could adversely affect our business and results of operations.At March 31,2020,we held no forward foreign currency exchange contracts.Security threats and other sophisticated computer intrusions could harm our information systems,which in turn could harm our business and financial results.We util
269、ize information systems and computer technology throughout our business.We store sensitive data,proprietary information and perform engineering designs and calculations on these systems.Threats to these systems,and the laws and regulations governing security of data,including personal data,on inform
270、ation systems and otherwise held by companies is evolving and adding layers of complexity in the form of new requirements and increasing costs of attempting to protect information systems and data and complying with new cybersecurity regulations.Information systems are subject to numerous and evolvi
271、ng cybersecurity threats and sophisticated computer crimes,which pose a risk to the stability and security of our information systems,computer technology,and business.Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information systems
272、and computer technology to sophisticated and targeted measures known as advanced persistent threats.The techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.A
273、 failure or breach in security could expose our company as well as our customers and suppliers to risks of misuse of information,compromising confidential information and technology,destruction of data,production disruptions and other business risks which could damage our reputation,competitive posi
274、tion and financial results of our operations.Further,our technology resources may be strained due to the increase in the number of remote users in response to the COVID-19 pandemic.In addition,defending ourselves against these threats may increase costs or slow operational efficiencies of our busine
275、ss.If any of the foregoing were to occur,it could have a material adverse effect on our business and results of operations.We face potential liability from asbestos exposure and similar claims that could result in substantial costs to us as well as divert attention of our management,which could have
276、 a material adverse effect on our business and results of operations.We are a defendant in a number of lawsuits alleging illnesses from exposure to asbestos or asbestos-containing products and seeking unspecified compensatory and punitive damages.We cannot predict with certainty the outcome of these
277、 lawsuits or whether we could become subject to any similar,related or additional lawsuits in the future.In addition,because some of our products are used in systems that handle toxic or hazardous substances,any failure or alleged failure of our products in the future could result in litigation agai
278、nst us.For example,a claim could be made under various regulations for the adverse consequences of environmental contamination.Any litigation brought against us,whether with or without merit,could result in substantial costs to us as well as divert the attention of our management,which could have a
279、material adverse effect on our business and results of operations.17Many of our large international customers are nationalized or state-owned businesses.Any failure to comply with the United States Foreign Corrupt Practices Act could adversely impact our competitive position and subject us to penalt
280、ies and other adverse consequences,which could harm our business and results of operations.We are subject to the United States Foreign Corrupt Practices Act,which generally prohibits U.S.companies from engaging in bribery or making other prohibited payments to foreign officials for the purpose of ob
281、taining or retaining business.Many foreign companies,including some of our competitors,are not subject to these prohibitions.Corruption,extortion,bribery,pay-offs,theft and other fraudulent practices occur from time-to-time in certain of the jurisdictions in which we may operate or sell our products
282、.While we strictly prohibit our employees and agents from engaging in such conduct and have established procedures,controls and training to prevent such conduct from occurring,it is possible that our employees or agents will engage in such conduct and that we might be held responsible.If our employe
283、es or other agents are alleged or are found to have engaged in such practices,we could incur significant costs and suffer severe penalties or other consequences that may have a material adverse effect on our business,financial condition and results of operations.Provisions contained in our certifica
284、te of incorporation and bylaws could impair or delay stockholders ability to change our management and could discourage takeover transactions that some stockholders might consider to be in their best interests.Provisions of our certificate of incorporation and bylaws could impede attempts by our sto
285、ckholders to remove or replace our management and could discourage others from initiating a potential merger,takeover or other change of control transaction,including a potential transaction at a premium over the market price of our common stock,that our stockholders might consider to be in their be
286、st interests.Such provisions include:We could issue shares of preferred stock with terms averse to our common stock.Under our certificate of incorporation,our Board of Directors is authorized to issue shares of preferred stock and to determine the rights,preferences and privileges of such shares wit
287、hout obtaining any further approval from the holders of our common stock.We could issue shares of preferred stock with voting and conversion rights that adversely affect the voting power of the holders of our common stock,or that have the effect of delaying or preventing a change in control of our c
288、ompany.Only a minority of our directors may be elected in a given year.Our bylaws provide for a classified Board of Directors,with only approximately one-third of our Board elected each year.This provision makes it more difficult to effect a change of control because at least two annual stockholder
289、meetings are necessary to replace a majority of our directors.Our bylaws contain advance notice requirements.Our bylaws also provide that any stockholder who wishes to bring business before an annual meeting of our stockholders or to nominate candidates for election as directors at an annual meeting
290、 of our stockholders must deliver advance notice of their proposals to us before the meeting.Such advance notice provisions may have the effect of making it more difficult to introduce business at stockholder meetings or nominate candidates for election as director.Our certificate of incorporation r
291、equires 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 assets and similar transactions if the other party to such transaction owns
292、 5%or more of our shares entitled to vote.In addition,a majority of the shares entitled to vote not owned by such 5%or greater stockholder are also required to approve any such transaction.Amendments to our certificate of incorporation require supermajority voting.Our certificate of incorporation co
293、ntains provisions that make its amendment require the affirmative vote of both 75%of our outstanding shares entitled to vote and a majority of the shares entitled to vote not owned by any person who may hold 50%or more of our shares unless the proposed amendment was previously recommended to our sto
294、ckholders by an affirmative vote of 75%of our Board.This provision makes it more difficult to implement a change to our certificate of incorporation that stockholders might otherwise consider to be in their best interests without approval of our Board.Amendments to our bylaws require supermajority v
295、oting.Although our Board of Directors is permitted to amend our bylaws at any time,our stockholders may only amend our bylaws upon the affirmative vote of both 75%of our outstanding shares entitled to vote and a majority of the shares entitled to vote not owned by any person who owns 50%or more of o
296、ur shares.This provision makes it more difficult for our stockholders to implement a change they may consider to be in their best interests without approval of our Board.Item 1B.Unresolved Staff CommentsNot applicable.18Item 2.PropertiesOur corporate headquarters,located at 20 Florence Avenue,Batavi
297、a,New York,consists of a 45,000 square foot building.Our manufacturing facilities,also located in Batavia,consist of approximately 33 acres and contain about 260,000 square feet in several buildings,including 206,000 square feet in manufacturing facilities,48,000 square feet for warehousing and a 6,
298、000 square-foot building for product research and development.Additionally,we lease an approximately 1,500 square foot U.S.sales office in Houston,Texas and GVHTT leases an approximately 4,900 square foot sales and engineering office in Suzhou,China.In fiscal 2019,the Company established Graham Indi
299、a Private Limited(GIPL)as a wholly-owned subsidiary.GIPL,located in Ahmedabad,India,serves as a sales and market development office focusing on the refining,petrochemical and fertilizer markets.We lease a sales and marketing office of approximately 777 square feet in Ahmedabad,India.We believe that
300、our properties are generally in good condition,are well maintained,and are suitable and adequate to carry on our business.Item 3.Legal ProceedingsThe information required by this Item 3 is contained in Note 18 to our consolidated financial statements included in Item 8 of Part II of this Annual Repo
301、rt on Form 10-K and is incorporated herein by reference.Item 4.Mine Safety DisclosuresNot applicable.19PART II(Amounts in thousands,except per share data)Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is traded on the
302、 NYSE exchange under the symbol GHM.As of June 1,2020,there were 9,855,963 shares of our common stock outstanding that were held by approximately 134 stockholders of record.Subject to the rights of any preferred stock we may then have outstanding,the holders of our common stock are entitled to recei
303、ve dividends as may be declared from time to time by our Board of Directors out of funds legally available for the payment of dividends.Our Board of Directors declared dividends per share of$0.10 for the first quarter of fiscal 2020 and$0.11 in each of the second,third and fourth quarters of fiscal
304、2020.While we anticipate that we will continue to pay quarterly cash dividends in the future,there can be no assurance that we will pay such dividends in any future period or that the level of cash dividends paid by us will remain constant.Our senior credit facility contains provisions pertaining to
305、 the maintenance of a maximum funded debt to earnings before interest expense,income taxes,depreciation and amortization,or EBITDA,ratio and a minimum level of earnings before interest expense and income taxes to interest ratio as well as restrictions on the payment of dividends to stockholders.The
306、facility limits the payment of dividends to stockholders to 25%of net income if our funded debt to EBITDA ratio is greater than 2.0 to 1.As of March 31,2020 and May 31,2020 we did not have any funded debt outstanding.More information regarding our senior credit facility can be found in Note 9 to the
307、 Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.20Item 6.Selected Financial DataGRAHAM CORPORATION FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA(Amounts in thousands,except per share data)(for fiscal years ended March 31)2020 2019 2018 2017 2016 Ope
308、rations:Net sales.$90,604$91,831$77,534$91,769$90,039 Gross profit.18,148 21,909 16,975 22,157 23,255 Gross profit percentage.20.0%23.9%21.9%24.1%25.8%Net income(loss)(1).1,872 (308)(9,844)5,023 6,131 Cash dividends.4,250 3,834 3,517 3,492 3,296 Common stock:Basic earnings(loss)from continuing opera
309、tions per share.$0.19$(0.03)$(1.01)$0.52$0.61 Diluted earnings(loss)from continuing operations per share.0.19 (0.03)(1.01)0.52 0.61 Stockholders equity per share.9.79 10.05 10.58 11.72 11.34 Dividends declared per share.0.43 0.39 0.36 0.36 0.33 Market price range of common stock.High.23.77 28.98 24.
310、03 24.99 25.25 Low.11.07 19.00 17.97 17.11 14.39 Average common shares outstanding diluted.9,879 9,823 9,764 9,728 9,983 Financial data at March 31:Cash and cash equivalents and investments.$73,003$77,753$76,479$73,474$65,072 Working capital.77,443 79,896 78,105 78,688 74,807 Capital expenditures.2,
311、417 2,138 2,051 325 1,153 Depreciation.1,957 1,968 1,986 2,092 2,201 Total assets.148,120 156,270 143,333 151,570 143,131 Long-term debt,including capital lease obligations.55 95 55 143 157 Stockholders equity.96,724 98,966 103,349 114,110 109,380(1)Net(loss)income in fiscal 2019 includes a loss fro
312、m goodwill and other impairments of$5,320,which is net of an income tax benefit of$1,129.Net(loss)income in fiscal 2018 includes a loss from impairment of goodwill and intangible assets of$12,014,which is net of an income tax benefit of$2,802.21Item 7.Managements Discussion and Analysis of Financial
313、 Condition and Results of Operations (Amounts in thousands,except per share data)Overview We are a global business that designs,manufactures and sells critical equipment for the energy,defense and chemical/petrochemical industries.Our energy markets include oil refining,cogeneration,and alternative
314、power.For the defense industry,our equipment is used in nuclear propulsion power systems for the U.S.Navy.For the chemical and petrochemical industries,our equipment is used in fertilizer,ethylene,methanol and downstream chemical facilities.Grahams global brand is built upon our world-renowned engin
315、eering expertise in vacuum and heat transfer technology,responsive and flexible service and high quality standards.We design and manufacture custom-engineered ejectors,vacuum pumping systems,surface condensers and vacuum systems.Our equipment can also be found in other diverse applications such as m
316、etal refining,pulp and paper processing,water heating,refrigeration,desalination,food processing,pharmaceutical,and heating,ventilating and air conditioning.Our corporate headquarters are located in Batavia,New York.We have production facilities co-located with our headquarters in Batavia.We also ha
317、ve wholly-owned foreign subsidiaries,Graham Vacuum and Heat Transfer Technology(Suzhou)Co.,Ltd.(GVHTT),located in Suzhou,China and Graham India Private Limited(GIPL),located in Ahmedabad,India.GVHTT provides sales and engineering support for us in the Peoples Republic of China and management oversig
318、ht throughout Southeast Asia.GIPL serves as a sales and market development office focusing on the refining,petrochemical and fertilizer markets.On June 24,2019,we sold our wholly-owned subsidiary,Energy Steel&Supply Co.(Energy Steel),located in Lapeer,Michigan,which served the commercial nuclear uti
319、lity industry.This managements discussion and analysis of financial condition and results of operations for the fiscal year ended March 31,2020 omits a comparative discussion regarding the fiscal year ended March 31,2018.Such information is located in Item 7 Managements Discussion and Analysis of Fi
320、nancial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 31,2019.Key ResultsKey results for our fiscal year ended March 31,2020,which we refer to as fiscal 2020 include:Net sales for fiscal 2020 were$90,604,down 1%compared with$91,831 for the fisc
321、al year ended March 31,2019,which we refer to as fiscal 2019.Included in our fiscal 2020 and 2019 sales were$1,276 and$8,336,respectively,for the aforementioned commercial nuclear utility business which was sold in June 2019.Net income and income per diluted share for fiscal 2020,were$1,872 and$0.19
322、,respectively,compared with net(loss)and(loss)per diluted share of($308)and($0.03),respectively,for fiscal 2019.Included in net income and income per diluted share for fiscal 2020 was a loss of($893)for our commercial nuclear utility business.For fiscal 2019,included in net income and income per dil
323、uted share were$5,320 and$0.54,respectively,for an impairment charge.In addition,for fiscal 2019,excluding the impairment charge,there was an after tax operating loss of($1,459)for our commercial nuclear utility business.Operating cash flow for fiscal 2020 was$1,239,down from$7,917 in fiscal 2019.Ne
324、t orders received in fiscal 2020 were$80,034 compared with fiscal 2019,when net orders received were$101,241.Included in the fiscal 2020 and 2019 orders were$2,996 and$11,019,respectively,for the divested commercial nuclear utility business.Backlog on March 31,2020 was$112,389 compared with backlog
325、of$132,127 on March 31,2019.Included in the fiscal 2019 backlog was$8,039 from the commercial nuclear utility business.Gross profit and operating margins for fiscal 2020 were 20.0%and 0.7%,respectively,compared with 23.9%and(2.6%),respectively,for fiscal 2019.In fiscal 2020,$4,250 was returned to sh
326、areholders as dividends compared with$3,834 in fiscal 2019.22Cash and cash equivalents and short-term investments at March 31,2020 were$73,003 compared with$77,753 as of March 31,2019,a decrease of$4,750.At March 31,2020,we had a solid balance sheet that was free of bank debt and which we believe pr
327、ovides us with the financial flexibility to pursue our business and acquisition strategies.Forward-Looking StatementsThis report and other documents we file with the Securities and Exchange Commission(SEC)include forward-looking statements within the meaning of Section 27A of the Securities Act of 1
328、933,as amended,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 actual results to be materially different from any future results implied by the forward-looking statements.Such factors in
329、clude,but are not limited to,the risks and uncertainties identified by us under the heading Risk Factors in Item 1A of Part I and elsewhere in this Annual Report on Form 10-K.Forward-looking statements may also include,but are not limited to,statements about:the impacts of,and risks caused by,the CO
330、VID-19 pandemic on our business operations,our customers and our markets;the current and future economic environments,including the volatility associated with the COVID-19 pandemic,affecting us and the markets we serve;expectations regarding investments in new projects by our customers;sources of re
331、venue and anticipated revenue,including the contribution from anticipated growth;expectations regarding achievement of revenue and profitability;plans for future products and services and for enhancements to existing products and services;our operations in foreign countries;political instability in
332、regions in which our customers are located;tariffs and trade relations between the United States and its trading partners;our ability to affect our growth and acquisition strategy;our ability to maintain or expand work for the U.S.Navy;our ability to successfully execute our existing contracts;estim
333、ates regarding our liquidity and capital requirements;timing of conversion of backlog to sales;our ability to attract or retain customers;the outcome of any existing or future litigation;andour ability to increase our productivity and capacity.Forward-looking statements are usually accompanied by words such as anticipate,believe,contemplate,continue,could,estimate,may,might,intend,interest,appear,
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