We are a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems. Our energy and new energy markets include oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities.
Our brands are built upon engineering expertise and close customer collaboration to design, develop, and produce mission critical equipment and systems that enable our customers to meet their economic and operational objectives. Continual improvement of our processes and systems to ensure qualified and compliant equipment are hallmarks of our brand. Our early engagement with customers and support until the end of service life are values upon which our brands are built.
Our corporate headquarters is located in Batavia, New York. We have production facilities co-located with our headquarters in Batavia. Our wholly-owned subsidiary, Barber-Nichols, LLC ("BN"), based in Arvada, Colorado, designs, develops, manufactures and sells specialty turbomachinery products for the aerospace, cryogenic, defense and energy markets (see "Acquisition" below). We also have wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology 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 People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India.
Our current fiscal year (which we refer to as "fiscal 2023") ends March 31, 2023.
We completed the acquisition of BN on June 1, 2021. Founded as a specialty turbomachinery engineering company in 1966, BN grew rapidly from programs that involve complex production and systems integration. By integrating knowledge in rotating equipment, power generation cycles, and electrical management systems, BN has successfully won the design and development of different power, fluid transfer, and propulsion systems used in underwater vehicles among many other accomplishments.
The acquisition of BN changed the composition of our end market mix. For the first quarter of fiscal 2023, sales to the defense and space industries were 45% of our business compared with approximately 25% of sales prior to the acquisition. The remaining 55% of our first quarter fiscal 2023 sales came from the refining, chemical/petrochemical and other commercial markets. These markets represented approximately 75% of our sales prior to the acquisition. BN has outperformed expectations since being acquired.
The BN transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price of $72,014 was comprised of 610 shares of common stock, representing a value of $8,964 at $14.69 per share, and cash consideration of $61,150. The cash consideration was funded through cash on-hand and debt proceeds (See Note 2 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q). The purchase agreement also included a contingent earn-out dependent upon certain financial measures of BN post-acquisition, pursuant to which the sellers were eligible to receive up to $14,000 in additional cash consideration. At June 30, 2021, a liability of $1,900 was recorded for the contingent earn-out. In the second quarter of the fiscal year ended March 31, 2022 (which we refer to as "fiscal 2022"), the earn-out agreement was terminated and the contingent liability was reversed into other operating income, net, on our Condensed Consolidated Statement of Operations. In connection with the termination of this earn-out agreement, we entered into a Performance Bonus Agreement (the "Bonus Agreement") to provide certain employees of BN with performance-based awards considering the BN business results on a stand-alone basis. The purpose of the bonus arrangement is to align a broader number of the BN leadership team with the achievement of BN performance objectives. The Bonus Agreement provides for payments to be made for certain performance-based results of BN for fiscal years ending March 31, 2024, 2025, and 2026 and can range between $2,000 to $4,000 per year.
Highlights for the three months ended June 30, 2022 include:
Net sales for the first quarter of fiscal 2023 were $36,075, up $15,918 or 79% compared with $20,157 for the first quarter of the fiscal 2022. Approximately $8,900 of this increase was due to having three months of BN results in the first quarter of fiscal 2023 compared to one month in fiscal 2022. Additionally, our sales continued to benefit from our diversified
revenue base including strong growth in our energy and chemical/petrochemical aftermarket ("commercial aftermarket") and space market. These increases were partially offset by continued supply chain constraints, which caused a delay in material receipts.
Net income and income per diluted share for the first quarter of fiscal 2023 were $676 and $0.06 per share, respectively, compared with a loss of $3,126 and $0.31 per share, respectively, for the first quarter of fiscal 2022. Adjusted net income and adjusted net income per diluted share for the first quarter of fiscal 2023 were $1,329 and $0.12 per share, respectively, compared with a loss of $2,807 and $0.28 per share, respectively, for the first quarter of fiscal 2022. In the first quarter of fiscal 2023, we completed two first article U.S. Navy projects and are on schedule to complete the remaining first article projects throughout fiscal 2023. See "Non-GAAP Measures" below for a reconciliation of adjusted net income (loss) and adjusted net income (loss) per diluted share to the comparable GAAP amount.
Orders booked in the first quarter of fiscal 2023 were $40,300, compared with $20,900 in the first quarter of fiscal 2022. This increase included $13,700 of additional orders from BN, whose results were only included for one month in the fiscal 2022 first quarter and strong orders from the space industry in the first quarter of fiscal 2023. The remaining $5,700 increase was attributable to the Graham Batavia operations which saw strong demand from its commercial aftermarket and international refinery markets.
Backlog was $260,678 at June 30, 2022, compared with $256,536 at March 31, 2022. This increase was primarily driven by continued growth in our space, commercial aftermarket, and international refinery markets. For more information on this performance indicator see "Orders and Backlog" below.
Cash and cash equivalents at June 30, 2022 were $12,905, compared with $14,741 at March 31, 2022. This decrease was primarily due to cash used in operating activities, primarily for working capital, of $689 and debt payments of $500 in the first quarter of fiscal 2023.
In the first quarter of fiscal 2022, $1,177 was returned to shareholders as dividends compared with $0 in the first quarter of fiscal 2023. In the fourth quarter of fiscal 2022, we suspended our dividend in accordance with the terms of our credit agreement with Bank of America. There can be no guarantee that we will pay dividends in the future, which will depend on a variety of factors, including our future financial performance, organic growth and acquisition opportunities, general economic conditions and other factors, many of which are beyond our control.
At June 30, 2022, we had $0 outstanding on our line of credit. We believe availability under our line of credit, along with our cash balances, provide us adequate financial flexibility to meet our obligations.
Cautionary Note Regarding Forward-Looking Statements
This 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 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact are forward-looking statements for purposes of this report. 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. Forward-looking statements are indicated by words such as "anticipate," "believe," "continue," "could," "estimate," "may," "intend," "expect," "predict," "project," "potential," "should," "will," and similar words and expressions.
Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements including, but not limited to, those described in the "Risk Factors" section in Item 1A of our Annual Report on Form 10-K for fiscal 2022 and elsewhere in this report. Undue reliance should not be placed on our forward-looking statements. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Quarterly Report on Form 10-Q (the "Form 10-Q") completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
All forward-looking statements included in this Form 10-Q are made only as of the date indicated or as of the date of this Form 10-Q. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
Demand for our equipment and systems for the defense industry is expected to remain strong and continue to expand, based on defense budget plans, the projected procurement of submarines, aircraft carriers and undersea propulsion and power systems and the solutions we provide. In addition to U.S. Navy applications, we also provide specialty pumps, turbines, compressors and controllers for various fluid and thermal management systems used in Department of Defense radar, laser, electronics and power systems. We have built a leading position, and in some instances, a sole source position, for certain systems and equipment for the defense industry.
Our traditional energy markets are undergoing significant transition. While we expect that fossil fuels will continue to be an important component in the global energy industry for many years to come, there are significant changes in the priorities for capital investments by our customers and the regions in which those investments are being made. We expect that the systemic changes in the energy markets, which are influenced by the increasing use by consumers of alternative fuels, will lead to demand growth for fossil-based fuels that is less than the global growth rate. We also anticipate that future investment by refiners in renewable fuels (e.g., renewable diesel), in existing refineries (e.g., to expand feedstock processing flexibility and to improve conversion of oil to refined products) to gain greater throughput, or to build new capacity (e.g., integrated refineries with petrochemical products capabilities), will continue to drive demand for our products and services. The timing and catalyst for a recovery in these markets (crude oil refining and chemical/petrochemical) remains uncertain. Accordingly, we believe that in the near term the quantity of projects available for us to compete for will remain low and that new project pricing will remain challenging.
Of note, over the last year we have experienced an increase in our energy and chemical aftermarket orders, primarily from the domestic market. Aftermarket orders have historically been a leading indicator of future capital investment by our customers in their facilities for upgrades and expansions. As such we believe there is the possibility of a cyclical upturn in the next twelve months following several years of reduced capital spending in a low oil price environment. We do not expect the next cycle to be as robust as years past due to the factors discussed above.
The alternative and clean energy opportunities for our heat transfer, power production and fluid transfer systems are expected to continue to grow. We assist in designing, developing and producing equipment for hydrogen production, distribution and fueling systems, concentrated solar power and storage, and small modular nuclear systems. We are positioning the Company to be a more significant contributor as these markets continue to develop.
We believe that chemical and petrochemical capital investment will continue to decouple from energy investment. Over the long term, we expect that population growth, an expanding global middle class and an increasing desire for improved quality of life and access to consumer products will drive increased demand for industrial goods within the plastics and resins value chain along with fertilizers or related products. As such, we expect investment in new global chemical and petrochemical capacity will improve and drive growth in demand for our products and services.
Our turbomachinery, pumps and cryogenic products and market access provide revenue and growth potential in the commercial space/aerospace markets. The commercial space market has grown and evolved rapidly, and we provide rocket engine turbo pump systems and components for many of the launch providers. We expect that in the long term extended space exploration will become more prevalent, and we anticipate that our thermal/fluid management and environmental control and life support system turbomachinery will play important roles. We are also participating in future aerospace power and propulsion system development through supply of fluid and thermal management systems components. Small power dense systems are imperative for these applications and we believe our technology and expertise will enable us to achieve sales growth in this market as well. For the first quarter of fiscal 2023, sales to the space industry represented 18% of our sales compared to 4% in the first quarter of fiscal 2022.
The chart below illustrates our strategy to increase our participation in the defense and space markets. The defense market comprised 74% of our total backlog at June 30, 2022. We believe this diversification is especially beneficial when our refining and process markets are weak, as is presently the case.
To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q.
Total assets excluding cash and cash equivalents $ 171,308 $ 166,223
Selling, general and administrative expenses are referred to as "SG&A".
The First Quarter of Fiscal 2023 Compared with the First Quarter of Fiscal 2022
Sales for the first quarter of fiscal 2023 were $36,075, an increase of $15,918 or 79% from sales of $20,157 for the first quarter of fiscal 2022. Approximately $8,900 of this increase was due to having three months of BN results in the first quarter of fiscal 2023 compared to one month in fiscal 2022. Additionally, our sales continued to benefit from our diversified revenue base including strong growth in commercial aftermarket and the space market. These increases were partially offset by continued supply chain constraints, which caused a delay in material receipts and related shipments. Domestic sales as a percentage of aggregate sales were 78% in the first quarter of fiscal 2023 compared with 69% in the first quarter of fiscal 2022 reflecting the increase in our defense and space industry businesses which is all U.S. based. Sales in the three months ended June 30, 2022 were 22% to the refining industry, 16% to the chemical and petrochemical industries, 27% for the defense (U.S. Navy) industry, 18% to space, and 17% to other commercial and industrial applications. Sales in the three months ended June 30, 2021 were 23% to the refining industry, 23% to the chemical and petrochemical industries, 35% for the defense (U.S. Navy) industry, 4% to space, and 15% to other commercial and industrial applications. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from quarter-to-quarter based on timing and magnitude of projects. See also "Current Market Conditions," above. For additional information on anticipated future sales and our markets, see "Orders and Backlog" below.
Gross profit margin for the first quarter of fiscal 2023 was 19%, compared with 5% for the first quarter of fiscal 2022. Gross profit for the first quarter of fiscal 2023 increased compared with fiscal 2022, to $6,744 from $914. These increases were primarily due to an improved mix of sales related to higher margin projects (space and commercial aftermarket) and improved execution on completed contracts, partially offset by higher incentive compensation. In the first quarter of fiscal 2023, we completed and shipped two first article U.S. Navy projects and are on schedule to complete the remaining first article projects throughout fiscal 2023. In addition to the above, first quarter fiscal 2023 includes three months of operations from BN compared to one month in the first quarter of fiscal 2022.
SG&A expense including amortization for the first quarter of fiscal 2023 was $5,759, up 17%, or $836, compared with $4,923 for the first quarter of fiscal 2022. Approximately $1,400 of this increase was due to having three months of BN results in the first quarter of fiscal 2023 compared to one month in fiscal 2022, partially offset by cost savings and deferral initiatives. These efforts included reducing the use of outside sales agents and delayed hiring. As a result, SG&A expense as a percentage of sales in the first quarter of fiscal 2023 was 16% of sales compared with 24% of sales in the comparable period in fiscal 2022.
Net interest expense for the first quarter of fiscal 2023 was $157 compared to $22 in the first quarter of fiscal 2022 primarily due to increased borrowings related to the BN acquisition, as well as increased interest rates since the first quarter of 2022.
Our effective tax rate in the first quarter of fiscal 2023 was 24%, compared with 19% in the first quarter of fiscal 2022. This increase was primarily due to discrete tax expense recognized in the first quarter of fiscal 2023 related to the vesting of restricted stock awards. Our expected effective tax rate for fiscal 2023 is 21% to 22% as the impact of these discrete tax items on our effective tax rate lessens over the course of fiscal 2023.
Net income and income per diluted share for the first quarter of fiscal 2023 were $676 and $0.06 per share, respectively, compared with a loss of $3,126 and $0.31 per share, respectively, for the first quarter of fiscal 2022. Adjusted net income and adjusted net income per diluted share for the first quarter of fiscal 2023 were $1,329 and $0.12 per share, respectively, compared with a loss of $2,807 and $0.28 per share, respectively, for the first quarter of fiscal 2022. See "Non-GAAP Measures" below for a reconciliation of adjusted net income (loss) and adjusted net income (loss) per diluted share to the comparable GAAP amount.
Adjusted earnings (loss) before net interest expense, income taxes, depreciation and amortization ("EBITDA"), adjusted net income (loss), and adjusted net income (loss) per diluted share are provided for information purposes only and are not measures of financial performance under accounting principles generally accepted in the U.S. ("GAAP"). Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company. In particular, those charges and credits that are not directly related to operating performance, and that are not a helpful measure of the performance of our underlying business particularly in light of their unpredictable nature. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for net income (loss) or net income (loss) per diluted share determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to net income (loss) or net income (loss) per diluted share determined in accordance with GAAP. Adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per diluted share are key metrics used by management and our board of directors to assess the Company's financial and operating performance and adjusted EBITDA is a basis for a portion of management's performance-based compensation.
Adjusted EBITDA excludes charges for depreciation, amortization, interest expense, taxes, other acquisition related expenses, and other unusual/nonrecurring expenses. Adjusted net income (loss) and adjusted net income (loss) per diluted share excludes intangible amortization, other costs related to the acquisition, and other unusual/nonrecurring expenses.
A reconciliation of adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share to net income (loss) in accordance with GAAP is as follows:
Adjusted diluted earnings (loss) per share $ 0.12 $ (0.28 )
(1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the full fiscal year expected effective tax rate.
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