We appreciate you joining Graham's year end earnings call and also to join in our discussion about Barber-Nichols, a $70 million transformative acquisition we closed today.
We first engaged with BNI at a time when they were ramping up calendar 2018 at $40 million, up from $30 million a year earlier.
Over the ensuing two years, it was wonderful to observe the planning and forecasting processes and importantly their ability to deliver forecasted results culminating in $56 million of revenue for calendar year 2020.
Importantly, the acquisition of Barber-Nichols is a catalyst for immediate improvement in revenue and profitability with top line expanding approximately 50% due to the addition of BNI for the 10 months in fiscal 2022 that we own them and it provides a terrific platform for follow-on organic and acquisitive growth.
Moreover, Graham's organic defense revenue reached 25% of consolidated sales and was in the mid $20 million range for fiscal 2021.
We expect modest growth in fiscal 2022 and then move into the mid $40 million range by fiscal 2025.
Complemented by Barber-Nichols defense revenue, we believe the combination will quickly approach $100 million in defense sales.
This strategy has been 10% to 15% of sales.
Today, we need to grow our capacity within our production workforce by 20% in Batavia.
Fourth quarter sales were $25.7 million.
Defense sales were strong at $6.5 million.
Also and importantly 15% to 20% of sales were due to our success penetrating the price sensitive segment of the refining market.
Earnings per share was $0.04 with net income at $400,000.
On March 31, cash was $65 million of which approximately $40 million was used for the acquisition of Barber-Nichols.
Backlog on March 31 was $137.6 million with $104 million for the defense market and acquiring Barber-Nichols approximately $100 million of backlog was added effective today.
Nearly $240 million multi-year backlog is a valuable asset for Graham.
Year-over-year revenue increased to 11% and gross profit 14%.
Alan Smith and the operations team performed remarkably in achieving full year revenue of $97.5 million.
Due to COVID-19, full year throughput capacity was at 85% as an average of what our production workforce could produce if unaffected by lost time due to COVID.
Here too profitability and margins were under pressure due to under-absorption caused by 15% lower throughput and also strategic decisions to hold personnel at pre-COVID levels.
We had strong defense bookings of $69 million for the year.
We do have a terrific backlog that at March 31, as I said earlier was $137.6 million, up $25 million year-over-year.
Importantly, and again Barber-Nichols adds roughly $100 million into our backlog bringing the combined total to just under $240 million.
$40 million of Barber-Nichols backlog is expected to contribute to fiscal 2022 revenue for the 10 months we own them.
40% to 45% of our organic backlog is expected to convert into revenue during fiscal 2022.
Full year revenue range is $130 million to $140 million with $45 million to $48 million from Barber-Nichols and the remainder being organic revenue.
Adjusted EBITDA is expected to be between $7 million and $9 million.
Graham's defense revenues in the mid $20 million range with growth anticipated to yield more than $40 million of revenue by fiscal 2025.
I am pleased by our success in winning work and previously underserved price focus segments of the energy and petrochemicals markets that represented 15% of sales fiscal '19 through '21.
It's also worth noting $7 million of new orders were secured during the month of May from the crude oil refining market.
It will increase the size of Graham by 60% on a pro forma basis and immediately accelerates our diversification strategy.
We expect to see 10 months of revenue in fiscal 2022 or approximately 50% growth.
BNI expands our defense business from $24 million in fiscal 2021 to a run rate of approximately $65 million to $70 million currently.
Barber-Nichols also has a $10 million in the aerospace business which is mostly related to the space industry.
As Jim mentioned with a backlog of $100 million in addition to Graham's backlog of $137 million, we have a combined backlog of nearly $240 million of which 80% is in defense and aerospace.
As part of the deal, the owners of Barber-Nichols wanted some skin in the game, so approximately $9 million in Graham shares were part of the purchase consideration.
This represent 610,000 shares or approximately a 6% increase in shares outstanding.
Finally Barber-Nichols brings a strong management team, led by Dan Thoren who has nearly 30 years of Barber-Nichols, 24 of which as its President.
Graham paid $70 million made up of $61 million of cash and $9 million of stock for 610,000 shares.
Out of the $61 million, $41 million was in cash from our balance sheet and we entered into a $20 million term loan for the remainder.
This leaves us with over $20 million of cash, so our net debt position is zero, but it gives us flexibility to go after future organic and M&A investments.
There is an earn out provision based on fiscal 2024, essentially the third year of the deal, which will allow up to $14 million in additional cash payments.
The earn out has a threshold, which if met would kick in at $8.75 million of EBITDA in fiscal 2024 and provide a $7 million payout.
If the EBITDA achieved that year is $11 million, the payout increases to a maximum level of $14 million.
We have entered into a new bank relationship with Bank of America and it includes a $20 million term loan, which I mentioned earlier as well as a $30 million revolver.
We also have a $10 million accordion feature available on top of that $30 million revolver.
We continue to have a relationship with HSBC now with the $7.5 million cash secured facility for certain bank guarantees in geographies where they have a strong presence.
They have over 150 employees, which is double what they had just four or five years ago.
They recently completed construction of a 43,000 square foot state-of-the-art manufacturing plant.
Barber-Nichols is a team of about 150 engineers, machiners, inspectors, technicians, and support personnel that engineer and build specialty pump, turbine and compressor systems that are used in the highly sophisticated applications like submarines, rockets, physics research facilities, advanced power plants and thermal management systems.
I came from a large aerospace company with 5,000 employees at my location.
I walked into BNI when it had 35 people and I was amazed that these 35 people were doing what my company was doing with 5,000, albeit at a much smaller scale.
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That early experience in 1997 through 2000 set us up well for the new space companies that have been busy developing commercial space launch services over the last 10 years.
When I first joined BNI, we used generation one variable frequency drive to push 3,600 RPM motors to 5,000 RPM.
Since then we have driven pumps to 30,000 RPM and compressors to over 100,000 RPM.
With Dan Thoren in the Chief Operating Officer role, working with both Matt and Alan, the talent pool is now nearly 500 person combined organization that is deep and very strong.
For fiscal 2021, Graham was approximately $100 million of revenue with an end market breakdown of 41% to refining, 25% to defense industries, 24% to chemical and petrochemical markets and 10% to various other end markets.
A pro forma projection of fiscal 2022 following the BNI acquisition is for revenue to be between $130 million and $140 million comprised of 45% for defense, 26% for refining, 16% for chemical and petrochemical end markets, 6% to aerospace and 7% to other end markets served by the combined entity.
And that fiscal 2022 revenue is expected to be approximately 50% stronger than without Barber-Nichols.

Summary:
Fourth quarter sales were $25.7 million.
Earnings per share was $0.04 with net income at $400,000.
40% to 45% of our organic backlog is expected to convert into revenue during fiscal 2022.
Full year revenue range is $130 million to $140 million with $45 million to $48 million from Barber-Nichols and the remainder being organic revenue.
A pro forma projection of fiscal 2022 following the BNI acquisition is for revenue to be between $130 million and $140 million comprised of 45% for defense, 26% for refining, 16% for chemical and petrochemical end markets, 6% to aerospace and 7% to other end markets served by the combined entity.