Rick Hoss – Roth Capital Partners James Bank – Sidoti & Company Chris McCampbell – Stifel Nicolaus George Walsh – Gilford Securities Alex Lanton – Ingalls & Snyder

Thank you for your patience. Your teleconference will begin momentarily. Greetings and welcome to the Graham Corporation Third Quarter 2009 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Ms. Deborah Pawlowski, IR for Graham Corporation. Thank you. Ms. Pawlowski you may begin.

Thank you, and good morning everyone. We appreciate your joining us today on Graham Corporation's third quarter fiscal 2009 financial results call. On the call I have with me today, Jim Lines, President and CEO of Graham Corporation, and Jennifer Condame, Chief Accounting Officer. They will be reviewing the results of the third quarter and progress on the Company's strategies. You should have a copy of the earnings release that was put out this morning and if not, you can access it at the Company website www.graham-mfg.com. As you are aware, we may make some forward-looking statements during the formal discussion, as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties, as well as other factors that could cause actual results to differ from what we stated here today. These risks and uncertainties and other factors are provided in the earnings release, as well as other documents filed by the Company with the Securities and Exchange Commission. These documents can be found at the Company's website or also at www.sec.gov. So, with that, let me turn it over to Jim to begin the discussion.

Thank you, Debbie. As you can see from the release, we had a very strong quarter and based on our outlook expect to end the year on a record note. As I have discussed over the last couple of years, we have seen a steady surge of orders coming from the refinery and petrochemical sectors. We recognized early last year the petrochemical industry was beginning to tail off and the question had always been when would the oil refining market pool. That question was basically answered during the December ended quarter. Because I’m sure, the future is almost on your minds, I will give you what little inside I have and offer my thoughts on that. And Jennifer will cover the results for the quarter and our expectations for the year. That’s not the same that you should discount the results of last nine months but what we believe fiscal 2009 will represents. We are a company that has in effected double than size in the last three years, lot of spending is roof line by using flexible costs to support that growth such as, use of subcontracting, adding contract employees, flexing the use of overtime, and adding some full-time staff. The company has become more efficient with cash management initiatives, and has continued to improve our level of service provided to customers. Also, and very important entering the downturn, is that we have maintained a pristine balance sheet with virtually no debt. Our pension assets are in good shape and we have ample cash for continuing to invest in our company. This is a different company going into a downturn. We are stronger financially, more flexible from a cost and structure perspective, and in a better position to more readily expand after the bottom than we were in 2004.…

Thank you, Jim. For the third quarter of fiscal 2009, which ended December 31, 2008, we reported net sales of $24.7 million, compared with $20.6 million in the third quarter of fiscal 2008. Sales of ejectors, heat exchangers, and pump packages grew considerably, while sales of condensers and aftermarket products were down approximately $1 million on a combined basis. As we are near the peak of the projects we’ve received for refineries over the last year, ejector sales increased 47.7% to $10.3 million, or 41.6% of total net sales in the third quarter, compared with $7 million or 33.8% of total net sales in the third quarter of fiscal 2008. Heat exchanger sales increased 23.9% to $3 million or 12.1% of total net sales in the third quarter, compared with $2.4 million or 11.7% of total net sales in the same period the prior fiscal year. Pump package sales were a $1.8 million or 7.5% of total net sales in the third quarter, compared with approximately $600,000 or 2.9% of total net sales in the third quarter of fiscal 2008. Condensers sales declined 4% in the third quarter to $6.8 million or 27.5% of total net sales, compared with $7.1 million or 34.3% of total net sales in the fiscal 2008 third quarter, as the petrochemical industry slowed during the latter part of 2008. Aftermarket product sales were impacted by the timing of customer requirements for repaired products and decreased 21.8% to $2.8 million or 11.3% of total net sales in the third quarter of fiscal 2009, compared with $3.6 million or 17.3% of total net sales in the prior fiscal year’s third quarter. As a reminder, due to the large magnitude of certain orders and the timing of shipments specifically related to ejectors and condensers, quarter-to-quarter sales fluctuations are…

Thank you, Jennifer. As you may have noted in our press release, Graham’s Board of Directors authorized a stock repurchase program permitting the company to repurchase up to $1 million shares of its common stock. Repurchase program will continue until July 29, 2009, or until such time as we've repurchased $1 million shares. Graham intends to use cash on hand to fund the stock repurchase program. Given the uncertainty and fluctuations in the marketplace, this is a vote of confidence by our Board of Directors in the long-term outlook for the company. This time, we will take your questions now.

Thank you. (Operator Instructions) There are no questions at this time.

Sure your system is working here because I’m sure that James would have a question. Now to you James.

We have a first question from Mr. Rick Hoss with Roth Capital Partners. Please state your question. Rick Hoss – Roth Capital : Good morning. There is an issue about the questions I did try to be a star one or couple times. But obviously got through on the - I think at this time. Question on SG&A, looking forward, are there further reductions available, based on expected decline in top line, are there other things you can do at this point?

There are other things that the company can do to control its expenses or lower its expenses and that will depend upon how we view the short-term and long-term outlooks. Rick Hoss – Roth Capital Partners: Okay. Secondly, regarding the delay of projects it seems like the rationale behind a few of them, at least the Saudi projects I’ve read about is really the – is the oil company wanting to delay just to get the better pricing and I know you talked about that previously on what the expectations of waiting the 12 to 16 months, see a 10% to 15% off. To me that implies that the demand is still there. And that while you’ve seen a rapidly deteriorating order volume or order interest in say the last three months, that - thinking about long-term demand trends, the demand is still there and this is really just a pause as everybody sort of waited out and figures out, what’s going on here, and how do we prepare for it. Any thoughts on that Jim?

I believe your assessed it right Rick. Our understanding is what is more encouraging from customers is they do expect as the supply chain softens, and as you might be aware the metals markets has come down significantly, copper, nickel, carbon steel. Those are off from their size of 6 to 9 months ago, almost 2 and 3 fold. So, that’s eased toward us way into the end-user project cost which is hasn’t yet fully and they expect as the supply chain softens that they can realize cost savings of that order of magnitude. While the underlying reason for the investments really hasn’t changed, the long-term demand growth projections have not changed and they are prepared to wait to let their costs come down and be more sensible and in alignment with the market price for oil, that also has come down appreciably. Rick Hoss – Roth Capital Partners: Okay, so the scenario could be 2010, you have a drastic drop, but the drop happened so quickly that maybe that is the bottom at that point, compared to past cycles where it’s been a lot smoother and as some of these projects come online, maybe things are – is continually deteriorating, beyond and I realize that’s a multi-year outlook, but that’s one scenario that seems to make sense to me.

I don’t dispute your analysis of the situation. This has been a very quick change. Last quarter was seemed as well that the entire market had frozen went into gridlock for credit market issues, the reduction in consumption which is a short-term issue we believe, the cost of the projects not adjusting to the price of oil and these are the situations that will modify or change as time goes on, and the wait and see attitude I can understand from the end-user’s perspective. Rick Hoss – Roth Capital Partners: Okay.

Okay, thank you very much. Rick Hoss – Roth Capital Partners: You are welcome.

Thank you, (Operator Instructions). Our next question is from Mr. James Bank with Sidoti & Company. Please state your question. James Bank – Sidoti & Company: Hi, thank you guys. I was kind of in and out of this conference call with a technical difficulty so I apologize if I asked a question that might have already been asked. Jim, I believe just sort of piggy backing on the last series of questions, listening to Jacobs Engineering last week, excuse me I think it’s earlier this week, crack spreads are actually climbing and again I just wonder if these near-term trends it seems to be so severe looking at your order number. Is it fair to be optimistic, lets call it 8 to 14 months out in refining?

It’s a typical environment to provide short-term outlook. I know you might think two or three quarters out is in short-term, but from our view it’s still is a little unclear to us, again being advised that our customers are prepared to wait 6 to 18 months as the supply chain softens that makes it less clear for us to predict the turnaround. There will be a turnaround. You are right the crack spreads are widening. I think we are seeing refiners move more toward the production of diesel, which comes into the crack spread. Diesel is more valuable today than gasoline that does have potentially a positive effect on how a refiner will require our equipment or have to modify existing facilities to produce more diesel versus gasoline. However, at this point in time providing a quantified view as to when the markets will recover is difficult. But again I go back to long-term, the demand trend line - we don’t believe it’s difference long-term and while we are in this downturn, I view this has an opportunity what a company does during the downturn, makes the difference when the markets recover. We are going to be aggressive in this downturn to continue to improve our company, to strengthen our sales organization, and use the strength of our balance sheet where appropriate to expand our market reach, expand our products. This is an opportunity for a company prepares to go into a downturn and I believe we are very prepared for the downturn. James Bank – Sidoti & Company: Okay, very good. Sort of, jumping across couple of questions here let me go into this one. With the share repurchase I think that’s why there is some favor to the stock today. Is that only be in the reason I am asking this is because you decide to split the stock and I think you are able to do it, fairly not this price. But it seems a big counterintuitive to have a share purchase program so quickly in place. Is that really a function of you does haven’t seen any good deals out there?

Well the deal values will be coming down we believe, as this downturn goes forward. We also looked at what our cash is, what our expected cash flow from operations will be, and we felt at the Board level, this was a strong position by the Board to just two to three repurchase program to show the confidence the Board has in our company and the long-term outlooks. James Bank - Sidoti & Company: Okay. I guess quasi guidance for SG&A cost next year this is $13 to $14 million seems a bit elevated, what’s behind that?

Well, what’s behind it is, again I view this downturn is not a time to pullback. I view this downturn as an opportunity to be with our customers to strengthen our sales organization to reach new markets to expand our presence and use this as an opportunity. I think we did one thing well during the last downturn, which was 2000, or 1998 through 2004 as we went out and we strengthened our brand and we defined the brand. We went out with a multi-passage marketing program to strengthen our relationships, to position the company to capture more market share during the downturn. So I think pulling back in G&A, although possible is not the right strategy entering the downturn with our customer base. James Bank - Sidoti & Company: Okay, terrific. And last question, It seems like only three or four months ago I think you guys are running at, I know arguably 105 to 115% capacity including the sub-contract work. The other market that you mentioned, I think there is some fertilizer manufacturing nuclear was one. I know you guys are able to get into those markets, you were turning a lot of that business in ways you are taking the more possible refining work. How quickly could you switch into that? And I know I’m looking at short-term, long-term lot for an year but how quickly can you switch into that? Should refining maybe not come back, until potentially fiscal 2011, 2012?

For the fertilizer market, as an example we maintain our presence in that market. It wasn’t much being invested in the fertilizer market during 2005 through 2008. We have remained clearly in the market, close to our customers. We have fertilizer opportunities in the pipeline that we would expect to capture. And that’s a market we have won in before. We haven’t moved away from it. It’s an important market, other adjacent petrochemical markets, we’ve remain to present in those markets and haven’t really changed. It was so much demand coming from all the markets 2005 through 2008, we were using our resources as appropriately as we could but did not abandon those markets. I think that’s an important point, we did not abandon those markets. James Bank -Sidoti & Company: Okay. Right fair enough, great thank you. That’s all I have.

Thanks James.

Thank you. Our next question is from Mr, Chris McCampbell with Stifel Nicolaus. Please state your question. Chris McCampbell – Stifel Nicolaus: Hi, Jim thanks for taking my question.

Good morning Chris. Chris McCampbell – Stifel Nicolaus: Good morning. How sensitive are you all to, I guess the price paid in regards to share repurchase and things like it almost a sense of urgency with six month window for repurchasing a $1 million shares?

We really haven’t had discussions around the boundaries for the purchase price - repurchase price. So I really don’t have much to offer at this time on that. Chris McCampbell –with Stifel Nicolaus: Okay and I guess just in regards to Keller obviously, trying to buy-back 1 million shares with the stock at, 10 bucks. There is an expectation of purchasing the stock at this price, there is not waiting for a lower price or something on those lines. I guess is what I’m trying to get to.

That’s accurate. Chris McCampbell –Stifel Nicolaus: Okay, and in regards to the acquisition strategy, are there particular candidates that you had your eye on? Or is there a nature trying to fill that you are just kind of waiting for possibility of situations coming to provision?

We have an acquisition strategy that addresses the areas that we believe we could expand our market share or increase the level of the products that we are providing into a given sales channel or enter new markets. So we’re looking at the energy market, where we currently are and how we can leverage our brand, leverage our sales channel to maximize what we can pull out of that market. Chris McCampbell –Stifel Nicolaus: Do you think there is some situations that could help us with that strategy in the near-term or is this something that may not see anything happen in that next 6 – 12 months?

I think this is a time and as we enter into a downturn that is possibly going to be some very good opportunities for a company like Graham that’s well positioned to take advantage of those opportunities. Chris McCampbell – Stifel Nicolaus : Okay. Well I appreciate that. You have to keep your cards close to vessel. Thanks for the color.

Thanks Chris.

Before we go to the next speaker, if there are any of you out those that are having difficultly getting into the queue, please just shoot me an e-mail real fast at dpawlowski @keiadvisors.com. Thank you.

Thank you, our next question is from Mr. Alex Lanton with Ingalls & Snyder. Please state your question. Alex Lanton – Ingalls & Snyder: Hi, yes, I was one of the persons who has having a hard time getting into the queue. I pushed star 1 twice got two prompts and still wasn’t in the queue. So, we had to call in to the operator to activate it.

I Apologize Alex for the technical difficulties. Alex Lanton – Ingalls & Snyder: The questions, first, I did a quick calculation based on what you said about 28 to 31% gross margin and a 35% reduction in sales. Unless if we assume a $100 million in sales we take that down to $65 million use a mid range gross margin $29.5, that’s $19 million and then subtract $14 million in SG&A that’s about $5 million in operating profit about 8%. Is that the kind of thing you are thinking of at, if sales are off 35% let’s say? That level of profitability..

The envelope modelings Alex Lanton – Ingalls & Snyder: Yeah, very quick.

The information I gave you. Alex Lanton – Ingalls & Snyder: Yes. So..

We would expect to manage our costs roughly within alignment of what you’ve been given or what you’ve estimated, trying to drive that profitability higher than what you would back into from that the quick calculation Alex Lanton - Ingalls & Snyder: Okay. Secondly, what you described in terms of the reason for some of these cancellations and so on. It’s kind of a deflationary scenario, isn’t that I mean if the opposite of people ordering quickly in order to avoid price increases. And, is it really that or is there another component just a reduction in the oil price for these countries causing their cash flow to go down and just not being able to afford those investments at this time is that a factor in that too?

That probably is. I’d sort of frame it this way. Thinking about where oil was in 2004 when the expansion actually began. It was in the $30 to $40 per barrel range. Alex Lanton – Ingalls & Snyder: Right.

Back at that point in time. And there was a very large wave of opportunities that were coming at that time, what occurred however was, the supply chain tightened, materials escalated, costs to the end-user escalated two fold, Alex Lanton – Ingalls & Snyder: Right

Probably to 1.75 and 2 Alex Lanton – Ingalls & Snyder: Right.

Over that timeframe. That was satisfactory while oil was increasing, however, as oil has dropped off, the ROI on the investment is challenged and until the supply chain softens and the cost come down and they will, they need to decide when to reevaluate these projects and get back on stream with them. But long-term they need to satisfy the demand. I view this as a short-term situation my long-term view has not changed. Alex Lanton – Ingalls & Snyder: Okay. This is the first time I’ve been on your conference call. I don’t have a clear idea of where you stand in the industry or the particular products that you sell and I know that really interested in, your share of a huge market including a lot of things that you don’t sell. We are just looking at your severed markets can use a idea of your share of that and who your competitors are? And also perhaps some idea of how you expect to fair during this downturn vis-à-vis competitors. Are there some smaller ones that will drop out and so on?

Okay, just very briefly talking about the key markets. Refining or the vacuum distillation type applications, we believe we have a leading market share in North America. We would believe our market share to be between 50% and 75%. Globally we believe the market share is between 35% and 50%. We have European competition, and we have a North American competitor for that market sector. Also… Alex Lanton – Ingalls & Snyder: Who is that competitor?

Gardner Denver. Alex Lanton – Ingalls & Snyder: Okay. And this is what specific product.

Hey you know Alex, why don’t we followup with you because a lot of this information is provided in our investor presentation. Alex Lanton – Ingalls & Snyder: Sure, then you can send that to me then?

Yeah, I’ll send that to you and I’ll followup on later today. Alex Lanton – Ingalls & Snyder: Okay great.

Thanks.

Thanks Alex. Alex Lanton – Ingalls & Snyder: Thank you.

(Operator Instructions) Our next question is from Mr. George Walsh with Gilford Securities. Please state your question.

Jim, I do want to amplify just the comments that you’ve made one in terms of from managing the downturn, but also the way you manage the - obviously very good part of the cycle in terms of the way you manage that balance sheet. And then I think that’s extremely important and from an investment perspective now for companies we are in the edge of the balance sheet I believe. If lot of companies that built up a lot of debt and short-term debt that is getting them into lot of problems in a very good position here with cash and it’s three fold that helps you with the balance sheet at this point to manage the downturn to be able do moves like the buyback and do potential mergers and acquisitions. The one I’d like to focus on, I guess is, if we could a little bit more as the merger and acquisition element in that, what are the real possibilities there that you say you do mentioned the goals still that you have of possibly doubling the size of the company over the next several years. Obviously, now the growth - near-term in the cycle is less agreeable to that as opposed to maybe feeling there is some maybe larger opportunities for you in this area. What are the factors that would help speed that up in terms of things you are doing? Or are you just kind of sit back and see how things develop in various markets are you more focused on adding to markets that you are in – or really approaching certain new markets to get into different parts of the cycle.

George Walsh – Gilford Securities.: Okay. And would it be such a thing that you are looking for? Would it be a series of relative to your own size, smaller acquisitions or something that would be comparable to your size? Just even if the pipeline of things you are looking at, is there a variety of sizes?

In the past George, on prior conference calls, I framed it with an upside of - again, we depend on the valuation, but sales up to as high as 80 million, but thinking in terms of 40 to 60 million could be very fine companies that are below the $40 million. It really will depend upon the fit and the valuation. George Walsh – Gilford Securities.: Okay, and then most of these I guess are private companies?

Yes. George Walsh – Gilford Securities.: Okay, and would there be a geographic diversification in terms of that?

That’s a part of our criteria that we are evaluating as to wait to complement and expand our market region, strengthen the company for future years. George Walsh – Gilford Securities.: Okay, all right. Very good, well, just once again, it’s the cycle is a cycle it’s a cyclical business, but once again, I do want to commend you on the management and that, that’s a strong balance sheet you have there right now. And I think it’s very importantly as you go into this part of the cycle. So, thanks a lot.

Thank you George.

Thank you. There are no questions in the queue at this time.

Well I thank everyone for their time this morning and your interest in our company. We’ll continue to update you on our progress, both with the internal improvements, the market outlook, and our external growth strategies on future conference calls. Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.