© 2021 Graham Corp. 1 NYSE: GHM • June 1, 2021 BNI Acquisition Announcement and Q4FY2021 Teleconference James R. Lines Chief Executive Officer Jeffrey F. Glajch Vice President & Chief Financial Officer Dan Thoren President and Chief Operating Officer Safe Harbor Statement This presentation contains 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. Forward-looking statements are subject t ...

Company Overview - Graham Corporation manufactures custom-fabricated, engineered-to-order products and solutions for defense, energy, and process industries[7] - The company's market capitalization is $158 million with 9.99 million common shares outstanding as of March 18, 2021[8] - Institutional holders own 77% of the company, while insider ownership is 4.4%[8] Financial Performance and Strategy - The company's Q3 FY21 TTM sales were $94.9 million and orders were $120.5 million[18] - Graham is aiming to increase predictable revenue streams by executing defense backlog, focusing on core installed base, and acquiring new products for core and defense markets[22] - The company intends to strengthen financial results and margins by increasing skilled labor, earning sole-source bidding opportunities, standardizing defense manufacturing processes, and acquiring strong performing businesses[23] - Graham expects $20 million to $30 million in annual revenue from penetrating the defense industry[26] - YTD FY21 sales were $71.8 million, compared to $67.5 million in YTD FY20[28] - YTD FY21 diluted EPS was $0.20, compared to $0.13 in YTD FY20[29] Market Outlook and Orders - The company is cautiously optimistic about the market outlook, with an active pipeline in Asia for refining but weakness in North America[42] - In Q3 FY2021, defense industry orders increased by $45.2 million to $52.3 million compared to Q3 FY2020[45]

© 2021 Graham Corp. 1 NYSE: GHM • February 25, 2021 Gabelli 31st Annual Pump, Valve & Water Symposium James R. Lines President & Chief Executive Officer Jeffrey F. Glajch Vice President & Chief Financial Officer Safe Harbor Statement This presentation contains 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. Forward-looking statements are subject to risks, uncertainties and assumptions ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Graham Corporation's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents Graham Corporation's unaudited condensed consolidated financial statements, including statements of income, comprehensive income, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes explaining accounting policies, revenue recognition, investments, and other financial disclosures for the periods ended December 31, 2020 - The financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, and do not include all information required for complete annual statements[25](index=25&type=chunk) - Results for the three and nine months ended December 31, 2020, are not necessarily indicative of the full fiscal year ending March 31, 2021[26](index=26&type=chunk) - Management does not expect any recently issued accounting pronouncements, not yet adopted, to have a material impact on the consolidated financial statements[66](index=66&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement provides a summary of the company's revenues, costs, and net income over specific interim periods Condensed Consolidated Statements of Income (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $27,154 | $25,286 | $71,818 | $67,522 | | Cost of products sold | $20,927 | $21,242 | $56,330 | $53,816 | | Gross profit | $6,227 | $4,044 | $15,488 | $13,706 | | Income before provision for income taxes | $1,368 | $6 | $2,695 | $1,660 | | Net income | $1,060 | $9 | $1,986 | $1,296 | | Basic Net income per share | $0.11 | $0.00 | $0.20 | $0.13 | | Diluted Net income per share | $0.11 | $0.00 | $0.20 | $0.13 | | Dividends declared per share | $0.11 | $0.11 | $0.33 | $0.32 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's net income and other comprehensive income components, such as foreign currency adjustments and pension plan changes Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $1,060 | $9 | $1,986 | $1,296 | | Foreign currency translation adjustment | $261 | $88 | $416 | $(135) | | Defined benefit pension and other postretirement plans net of income tax expense | $205 | $194 | $614 | $583 | | Total other comprehensive income | $466 | $282 | $1,030 | $448 | | Total comprehensive income | $1,526 | $291 | $3,016 | $1,744 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | | :----- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $63,792 | $32,955 | | Investments | $5,500 | $40,048 | | Total current assets | $123,197 | $126,677 | | Total assets | $144,986 | $148,120 | | Total current liabilities | $44,502 | $49,234 | | Total liabilities | $47,653 | $51,396 | | Total stockholders' equity | $97,333 | $96,724 | | Total liabilities and stockholders' equity | $144,986 | $148,120 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for interim periods Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net income | $1,986 | $1,296 | | Net cash provided (used) by operating activities | $670 | $(4,119) | | Net cash provided by investing activities | $33,092 | $2,947 | | Net cash used by financing activities | $(3,350) | $(3,407) | | Net increase (decrease) in cash and cash equivalents | $30,837 | $(4,170) | | Cash and cash equivalents at beginning of period | $32,955 | $15,021 | | Cash and cash equivalents at end of period | $63,792 | $10,851 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines the changes in each component of stockholders' equity over the reported interim periods Stockholders' Equity (April 1, 2020 to Dec 31, 2020, in thousands) | Metric | Balance at April 1, 2020 (in thousands) | Balance at Dec 31, 2020 (in thousands) | | :----- | :------------------------------------ | :----------------------------------- | | Common Stock Par Value | $1,069 | $1,078 | | Capital in Excess of Par Value | $26,361 | $27,193 | | Retained Earnings | $91,389 | $90,083 | | Accumulated Other Comprehensive Loss | $(9,556) | $(8,526) | | Treasury Stock | $(12,539) | $(12,495) | | Total Stockholders' Equity | $96,724 | $97,333 | Stockholders' Equity (April 1, 2019 to Dec 31, 2019, in thousands) | Metric | Balance at April 1, 2019 (in thousands) | Balance at Dec 31, 2019 (in thousands) | | :----- | :------------------------------------ | :----------------------------------- | | Common Stock Par Value | $1,065 | $1,070 | | Capital in Excess of Par Value | $25,277 | $26,057 | | Retained Earnings | $93,847 | $91,900 | | Accumulated Other Comprehensive Loss | $(8,833) | $(8,385) | | Treasury Stock | $(12,390) | $(12,601) | | Total Stockholders' Equity | $98,966 | $98,041 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION](index=10&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles and consolidation policies used in preparing the interim financial statements - The Company's Condensed Consolidated Financial Statements include its wholly-owned foreign subsidiaries in Suzhou, China, and Ahmedabad, India[25](index=25&type=chunk) - The statements are prepared in accordance with GAAP for interim financial information and SEC rules, and do not include all information and notes required for complete financial statements[25](index=25&type=chunk) [NOTE 2 – REVENUE RECOGNITION](index=10&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) This note details the company's policies for recognizing revenue from contracts with customers, including disaggregated sales data Net Sales by Product Line (in thousands) | Product Line | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Heat transfer equipment | $8,165 | $7,062 | $32,145 | $21,394 | | Vacuum equipment | $14,969 | $12,969 | $26,901 | $27,232 | | All other | $4,020 | $5,255 | $12,772 | $18,896 | | **Net sales** | **$27,154** | **$25,286** | **$71,818** | **$67,522** | Net Sales by Geographic Region (in thousands) | Geographic Region | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Asia | $11,211 | $723 | $20,903 | $4,960 | | Canada | $1,874 | $2,666 | $4,804 | $5,910 | | Middle East | $806 | $7,498 | $2,243 | $8,783 | | South America | $2,426 | $808 | $5,238 | $3,284 | | U.S. | $10,716 | $13,409 | $37,406 | $43,589 | | All other | $121 | $182 | $1,224 | $996 | | **Net sales** | **$27,154** | **$25,286** | **$71,818** | **$67,522** | - Backlog (remaining unsatisfied performance obligations) was **$149,736 thousand** as of December 31, 2020[35](index=35&type=chunk) - Approximately **45% to 50% of the backlog** is expected to be recognized as revenue within one year, **20% to 25%** in one to two years, and the remainder beyond two years[35](index=35&type=chunk) [NOTE 3 – INVESTMENTS](index=12&type=section&id=NOTE%203%20%E2%80%93%20INVESTMENTS) This note provides information on the company's short-term investments, including their nature and maturity dates - Investments are certificates of deposits with original maturities greater than three months and less than one year[36](index=36&type=chunk) - All investments held at December 31, 2020, are scheduled to mature on or before March 25, 2021[36](index=36&type=chunk) [NOTE 4 – INVENTORIES](index=12&type=section&id=NOTE%204%20%E2%80%93%20INVENTORIES) This note presents a breakdown of inventory classifications, including raw materials, work in process, and finished products Inventory Classification (in thousands) | Classification | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | | :------------- | :-------------------------- | :-------------------------- | | Raw materials and supplies | $3,389 | $3,061 | | Work in process | $12,386 | $18,018 | | Finished products | $1,688 | $1,212 | | **Total** | **$17,463** | **$22,291** | [NOTE 5 – EQUITY-BASED COMPENSATION](index=12&type=section&id=NOTE%205%20%E2%80%93%20EQUITY-BASED%20COMPENSATION) This note describes the company's equity incentive plans and the related compensation costs recognized - The 2020 Graham Corporation Equity Incentive Plan was approved, authorizing **422 shares** for various equity awards, replacing the 2000 Plan[39](index=39&type=chunk) Equity-Based Compensation Costs (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Restricted stock awards compensation costs | $312 | $308 | $783 | $709 | | ESPP compensation costs | $15 | $11 | $38 | $22 | [NOTE 6 – INCOME PER SHARE](index=13&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20PER%20SHARE) This note provides the calculation of basic and diluted net income per share for the reported periods Income Per Share | Metric | 3 Months Ended Dec 31, 2020 | 3 Months Ended Dec 31, 2019 | 9 Months Ended Dec 31, 2020 | 9 Months Ended Dec 31, 2019 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (Numerator, in thousands) | $1,060 | $9 | $1,986 | $1,296 | | Basic weighted average common shares outstanding (in thousands) | 9,977 | 9,884 | 9,950 | 9,874 | | Basic income per share | $0.11 | $0.00 | $0.20 | $0.13 | | Diluted weighted average common shares outstanding (in thousands) | 9,977 | 9,888 | 9,950 | 9,877 | | Diluted income per share | $0.11 | $0.00 | $0.20 | $0.13 | [NOTE 7 – PRODUCT WARRANTY LIABILITY](index=13&type=section&id=NOTE%207%20%E2%80%93%20PRODUCT%20WARRANTY%20LIABILITY) This note details the changes in the company's product warranty liability, including expenses and claims paid Product Warranty Liability (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Balance at beginning of period | $308 | $348 | $359 | $366 | | Expense for product warranties | $28 | $67 | $23 | $96 | | Product warranty claims paid | $(21) | $(3) | $(67) | $(50) | | Balance at end of period | $315 | $412 | $315 | $412 | [NOTE 8 – CASH FLOW STATEMENT](index=14&type=section&id=NOTE%208%20%E2%80%93%20CASH%20FLOW%20STATEMENT) This note provides supplemental disclosures for the cash flow statement, including non-cash activities and taxes paid - Interest paid was **$9 thousand** for both nine-month periods ended December 31, 2020 and 2019[46](index=46&type=chunk) - Income taxes paid for the nine months ended December 31, 2020 and 2019 were **$51 thousand** and **$27 thousand**, respectively[46](index=46&type=chunk) - Non-cash activities included the issuance of treasury stock valued at **$87 thousand** (2020) and **$49 thousand** (2019) to the ESPP[46](index=46&type=chunk) [NOTE 9 – EMPLOYEE BENEFIT PLANS](index=14&type=section&id=NOTE%209%20%E2%80%93%20EMPLOYEE%20BENEFIT%20PLANS) This note outlines the net costs associated with the company's pension and postretirement benefit plans Employee Benefit Plan Costs (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net pension cost | $49 | $25 | $149 | $74 | | Net postretirement benefit cost | $11 | $12 | $33 | $37 | - The Company made no contributions to its defined benefit pension plan during the nine months ended December 31, 2020, and expects no contributions for the balance of fiscal 2021[48](index=48&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=14&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses potential future obligations and legal proceedings that could impact the company's financial position - The Company is a defendant in lawsuits alleging personal injury from asbestos exposure, which it intends to vigorously defend[52](index=52&type=chunk) - Management believes the outcomes of current and potential legal proceedings will not have a material adverse effect on the Company's results of operations, financial position, or cash flows[54](index=54&type=chunk) [NOTE 11 – INCOME TAXES](index=15&type=section&id=NOTE%2011%20%E2%80%93%20INCOME%20TAXES) This note provides information on the company's income tax exposure, including examination periods and unrecognized tax benefits - The Company is subject to U.S. federal examination for tax years **2016-2019** and state tax jurisdictions for **2015-2019**[55](index=55&type=chunk) - There was no liability for unrecognized tax benefits at December 31, 2020, or March 31, 2020[56](index=56&type=chunk) [NOTE 12 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS](index=15&type=section&id=NOTE%2012%20%E2%80%93%20CHANGES%20IN%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note details the changes in components of accumulated other comprehensive loss, such as pension and foreign currency items Accumulated Other Comprehensive Loss (April 1, 2020 to Dec 31, 2020, in thousands) | Component | Balance at April 1, 2020 (in thousands) | Net current-period other comprehensive income (in thousands) | Balance at Dec 31, 2020 (in thousands) | | :-------- | :------------------------------------ | :------------------------------------------------------- | :----------------------------------- | | Pension and Other Postretirement Benefit Items | $(9,472) | $614 | $(8,858) | | Foreign Currency Items | $(84) | $416 | $332 | | **Total** | **$(9,556)** | **$1,030** | **$(8,526)** | Accumulated Other Comprehensive Loss (April 1, 2019 to Dec 31, 2019, in thousands) | Component | Balance at April 1, 2019 (in thousands) | Net current-period other comprehensive income (loss) (in thousands) | Balance at Dec 31, 2019 (in thousands) | | :-------- | :------------------------------------ | :---------------------------------------------------------------- | :----------------------------------- | | Pension and Other Postretirement Benefit Items | $(8,947) | $583 | $(8,364) | | Foreign Currency Items | $114 | $(135) | $(21) | | **Total** | **$(8,833)** | **$448** | **$(8,385)** | [NOTE 13 – DEBT](index=16&type=section&id=NOTE%2013%20%E2%80%93%20DEBT) This note describes the company's debt arrangements, including revolving credit facilities and compliance with covenants - On December 2, 2020, the Company entered a new **$22 million** revolving credit facility with JPMorgan Chase Bank, N.A., expandable to **$37 million**, replacing the previous facility[59](index=59&type=chunk) - The Company amended its letter of credit facility with HSBC Bank USA, N.A. on October 28, 2020, increasing it from **$14 million to $15 million**[62](index=62&type=chunk) - The Company was in compliance with all debt covenants as of December 31, 2020[61](index=61&type=chunk) [NOTE 14 – OTHER EXPENSE](index=16&type=section&id=NOTE%2014%20%E2%80%93%20OTHER%20EXPENSE) This note explains the components of other expenses, including losses from asset sales, bad debt, and inventory write-downs - "Other expense" for the nine months ended December 31, 2019, included a **$87 thousand loss** on the sale of Energy Steel & Supply Co., a **$98 thousand bad debt charge**, and a **$338 thousand inventory write-down**[64](index=64&type=chunk) [NOTE 15 – ACCOUNTING AND REPORTING CHANGES](index=16&type=section&id=NOTE%2015%20%E2%80%93%20ACCOUNTING%20AND%20REPORTING%20CHANGES) This note discusses the evaluation of new accounting pronouncements and their expected impact on financial statements - Management evaluates new accounting pronouncements from FASB, SEC, and other bodies[65](index=65&type=chunk) - No recently issued accounting pronouncements, not yet adopted, are expected to have a material impact on the Company's consolidated financial statements[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Graham Corporation's financial performance, condition, and operational results for the three and nine months ended December 31, 2020 [Overview](index=18&type=section&id=Overview) This section provides a general description of Graham Corporation's business, products, and global operations - Graham Corporation designs, manufactures, and sells critical equipment for the energy, defense, and chemical/petrochemical industries[67](index=67&type=chunk) - The company's global brand is built on engineering expertise in vacuum and heat transfer technology, responsive service, and high-quality standards[68](index=68&type=chunk) - Operations include headquarters and production in Batavia, NY, and wholly-owned foreign subsidiaries in Suzhou, China (GVHTT) and Ahmedabad, India (GIPL)[69](index=69&type=chunk) [Highlights](index=18&type=section&id=Highlights) This section summarizes key financial and operational achievements and challenges for the reported periods Financial Highlights | Metric | 3 Months Ended Dec 31, 2020 | 3 Months Ended Dec 31, 2019 | 9 Months Ended Dec 31, 2020 | 9 Months Ended Dec 31, 2019 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $27,154 | $25,286 | $71,818 | $67,522 | | Net income | $1,060 | $9 | $1,986 | $1,296 | | Diluted EPS | $0.11 | $0.00 | $0.20 | $0.13 | | Gross profit margin | 23% | 16% | 22% | 20% | | Operating margin | 5% | (2)% | 3% | 0% | - Orders booked in Q3 FY21 were **$61,753 thousand**, significantly up from **$20,057 thousand** in Q3 FY20[71](index=71&type=chunk) - Backlog reached a record **$149,736 thousand** at December 31, 2020, up from **$112,389 thousand** at March 31, 2020[71](index=71&type=chunk) - COVID-19 pandemic impacted production in Q1 and Q3 FY21, leading to reduced staffing and adverse effects on sales and earnings[71](index=71&type=chunk) [Forward-Looking Statements](index=19&type=section&id=Forward-Looking%20Statements) This section cautions readers about the inherent uncertainties and risks associated with future-oriented statements in the report - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors[73](index=73&type=chunk) - Undue reliance should not be placed on forward-looking statements, and the company undertakes no obligation to update them, except as required by law[75](index=75&type=chunk) [Current Market Conditions](index=19&type=section&id=Current%20Market%20Conditions) This section analyzes the external economic and industry factors influencing the company's commercial and defense markets - Commercial markets (energy and petrochemical) are experiencing a slowdown due to crude oil oversupply and reduced demand from the COVID-19 pandemic, leading to fewer projects and challenging pricing[78](index=78&type=chunk) - The defense industry, specifically the U.S. Navy, has not been adversely affected by the COVID-19 pandemic and constitutes **70% of the total backlog** at December 31, 2020[81](index=81&type=chunk)[82](index=82&type=chunk) - Long-term, the company expects population growth and increased demand for industrial goods to drive investment in new global chemical and petrochemical capacity[79](index=79&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, including sales, gross profit, and net income Key Financial Metrics (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $27,154 | $25,286 | $71,818 | $67,522 | | Gross profit | $6,227 | $4,044 | $15,488 | $13,706 | | Gross profit margin | 23% | 16% | 22% | 20% | | SG&A expense | $4,936 | $4,441 | $13,091 | $12,855 | | Net income | $1,060 | $9 | $1,986 | $1,296 | | Diluted income per share | $0.11 | $0.00 | $0.20 | $0.13 | [Sales Performance](index=21&type=section&id=Sales%20Performance) This section analyzes the company's net sales, disaggregated by product line and geographic region, and factors affecting them - Net sales for Q3 FY21 increased **7% to $27,154 thousand**, and for the first nine months of FY21 increased **6% to $71,818 thousand**[86](index=86&type=chunk)[88](index=88&type=chunk) - International sales increased by **38% in Q3 FY21** and **44% in the first nine months of FY21**, while domestic sales decreased by **20%** and **14%** respectively[86](index=86&type=chunk)[88](index=88&type=chunk) - Sales in Q3 FY21 were reduced by approximately **$900 thousand** due to COVID-19 related employee absences[87](index=87&type=chunk) [Gross Profit and SG&A](index=21&type=section&id=Gross%20Profit%20and%20SG%26A) This section discusses trends in gross profit margins and selling, general, and administrative expenses - Gross profit margin for Q3 FY21 was **23%** (up from **16%** in Q3 FY20), and for the first nine months of FY21 was **22%** (up from **20%** in FY20)[89](index=89&type=chunk)[90](index=90&type=chunk) - The increase in gross profit was driven by a better mix of projects and increased outsourced production for two Asian projects[89](index=89&type=chunk)[91](index=91&type=chunk) - SG&A expenses increased by **$495 thousand** in Q3 FY21 and **$236 thousand** in the first nine months of FY21, primarily due to higher commissions related to two Asian projects[92](index=92&type=chunk) [Interest Income/Expense & Tax Rate](index=22&type=section&id=Interest%20Income/Expense%20%26%20Tax%20Rate) This section details the company's interest income and expense, along with the effective income tax rate for the periods Interest Income and Expense (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Interest income | $23 | $318 | $143 | $1,080 | | Interest expense | $1 | $2 | $9 | $9 | - The significant decrease in interest income is due to significantly lower market investment rates compared to the prior year[93](index=93&type=chunk) - The effective tax rate for the nine months ended December 31, 2020, was **26%**, compared to **22%** for the same period in 2019[94](index=94&type=chunk) [Net Income and EPS](index=22&type=section&id=Net%20Income%20and%20EPS) This section provides an analysis of the company's net income and earnings per share, including any significant contributing factors Net Income and Diluted EPS (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $1,060 | $9 | $1,986 | $1,296 | | Diluted income per share | $0.11 | $0.00 | $0.20 | $0.13 | - Net income and diluted EPS for the first nine months of fiscal 2020 included a loss of **$893 thousand** and **$0.09**, respectively, from the divested commercial nuclear utility business[95](index=95&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, including working capital and financing capacity Liquidity Metrics (in thousands) | Metric | Dec 31, 2020 (in thousands) | Mar 31, 2020 (in thousands) | | :----- | :-------------------------- | :-------------------------- | | Cash and investments | $69,292 | $73,003 | | Working capital | $78,695 | $77,443 | | Working capital ratio | 2.8 | 2.6 | - Net cash provided by operating activities for the first nine months of fiscal 2021 was **$670 thousand**, a significant improvement from cash usage of **$4,119 thousand** in the prior year[96](index=96&type=chunk) - The company believes that cash generated from operations, combined with investments and available financing capacity, will be adequate to meet cash needs and support growth strategies[100](index=100&type=chunk) [Orders and Backlog](index=23&type=section&id=Orders%20and%20Backlog) This section reports on new orders booked and the total backlog, indicating future revenue potential and market demand Orders Booked (in thousands) | Metric | 3 Months Ended Dec 31, 2020 (in thousands) | 3 Months Ended Dec 31, 2019 (in thousands) | 9 Months Ended Dec 31, 2020 (in thousands) | 9 Months Ended Dec 31, 2019 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Orders booked | $61,753 | $20,057 | $108,195 | $67,698 | - Backlog was a record **$149,736 thousand** at December 31, 2020, with **70%** attributable to the defense industry (U.S. Navy)[103](index=103&type=chunk) - Approximately **45% to 50% of the current backlog** is expected to convert to sales within one year, with the majority of longer-term conversions for the defense industry[103](index=103&type=chunk) [Outlook](index=23&type=section&id=Outlook) This section provides the company's forward-looking projections for revenue, margins, and expenses, considering market conditions - Commercial markets are expected to remain challenged, particularly in North America, with a shift towards more opportunities in emerging markets[104](index=104&type=chunk) - The defense industry (U.S. Navy) backlog increased significantly to **$105,219 thousand** at December 31, 2020, from **$58,843 thousand** at March 31, 2020, with a robust pipeline[104](index=104&type=chunk) Fiscal Year 2021 Projection (in thousands) | Metric | Fiscal Year 2021 Projection (in thousands) | | :----- | :--------------------------------------- | | Revenue | $93,000 - $97,000 | | Gross profit margin | 21% - 22% | | SG&A expenses | $17,250 - $17,750 | | Effective tax rate | 22% - 24% | - The outlook assumes the Batavia production facility operates at or near normal capacity for the last quarter of fiscal 2021 without significant COVID-19 related reductions[107](index=107&type=chunk) [Contingencies and Commitments](index=24&type=section&id=Contingencies%20and%20Commitments) This section discusses potential future obligations and legal proceedings that could impact the company's financial position - The company is a defendant in asbestos-related lawsuits and other legal proceedings[111](index=111&type=chunk)[112](index=112&type=chunk) - Management does not believe the outcomes of these claims will have a material adverse effect on the Company's results of operations, financial position, or cash flows[112](index=112&type=chunk) [Critical Accounting Policies, Estimates, and Judgments](index=24&type=section&id=Critical%20Accounting%20Policies,%20Estimates,%20and%20Judgments) This section highlights the accounting policies that require significant management judgment and estimation - Critical accounting estimates include labor hour estimates and operational milestones for overtime revenue recognition, accounting for contingencies, and accounting for pensions and other postretirement benefits[113](index=113&type=chunk) [Off Balance Sheet Arrangements](index=24&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section discloses any material off-balance sheet transactions or obligations that could affect the company's financial condition - The Company had no off-balance sheet arrangements as of December 31, 2020, or March 31, 2020, other than letters of credit[114](index=114&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Graham Corporation's exposure to various market risks, including foreign currency exchange rates, price risk, and project cancellation risk - Principal market risks include foreign currency exchange rates, price risk, project cancellation risk, and trade policy[115](index=115&type=chunk) - Assumptions for market risk disclosures are based on historical volatility, current market knowledge, and judgment of future volatility[116](index=116&type=chunk) [Foreign Currency](index=25&type=section&id=Foreign%20Currency) This section details the company's exposure to fluctuations in foreign currency exchange rates and its impact on international sales - International consolidated sales were **61%** and **48%** of total sales for the three and nine months ended December 31, 2020, respectively[117](index=117&type=chunk) - The company has limited exposure to foreign currency purchases, representing **0-1%** of cost of products sold in the reported periods[118](index=118&type=chunk) - No forward foreign currency exchange agreements were used or held during the reported periods[118](index=118&type=chunk) [Price Risk](index=25&type=section&id=Price%20Risk) This section discusses the risks associated with competitive pricing pressures and volatility in material costs - The company competes with global manufacturers who may benefit from lower production costs and more favorable economic conditions, leading to competitive pricing pressure[119](index=119&type=chunk) - Volatility in the cost of metals and other materials can impact the company's ability to reflect these changes in its pricing[119](index=119&type=chunk) [Project Cancellation and Project Continuation Risk](index=25&type=section&id=Project%20Cancellation%20and%20Project%20Continuation%20Risk) This section addresses the risks of project cancellations or delays and the company's strategies to mitigate these impacts - The company mitigates project cancellation risk by structuring contracts to maximize the likelihood that progress payments cover incurred costs[120](index=120&type=chunk) - As of December 31, 2020, two projects totaling **$562 thousand** were on hold by customers[120](index=120&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Graham Corporation's disclosure controls and procedures and reports no material changes to internal control over financial reporting, despite the operational adjustments due to the COVID-19 pandemic - The President and CEO and VP-Finance & Administration and CFO concluded that disclosure controls and procedures were effective in all material respects as of December 31, 2020[121](index=121&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter, despite most administrative employees working remotely due to COVID-19[122](index=122&type=chunk) [Conclusion regarding the effectiveness of disclosure controls and procedures](index=25&type=section&id=Conclusion%20regarding%20the%20effectiveness%20of%20disclosure%20controls%20and%20procedures) This section states the management's assessment of the effectiveness of the company's disclosure controls and procedures - Disclosure controls and procedures were evaluated and deemed effective in all material respects by the principal executive and financial officers[121](index=121&type=chunk) [Changes in internal control over financial reporting](index=26&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This section reports on any material changes in the company's internal control over financial reporting during the period - There has been no material change to internal control over financial reporting during the quarter[122](index=122&type=chunk) - The company is continually monitoring and assessing the COVID-19 pandemic's impact on internal controls to minimize effects on their design and operating effectiveness[122](index=122&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides updates on risk factors, lists exhibits, and includes official signatures for the report [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, primarily highlighting the adverse and ongoing impact of global public health pandemics, specifically COVID-19, on Graham Corporation's business operations, financial condition, and results - The COVID-19 pandemic has adversely affected and may continue to affect the company's business, financial condition, and results of operations[125](index=125&type=chunk) - The pandemic led to reduced staffing, increased operating costs, project delays/cancellations, and challenges with the global supply chain[125](index=125&type=chunk)[126](index=126&type=chunk) - The full financial impact of the pandemic is uncertain and depends on future developments regarding its severity and containment[126](index=126&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including material contracts, certifications from principal officers, and interactive data files in XBRL format - Exhibits include Credit Agreement with JPMorgan Chase Bank, N.A., Letter Agreement with HSBC Bank USA, N.A., and various certifications (Rule 13a-14(a)/15d-14(a) and Section 1350)[129](index=129&type=chunk) - Interactive Data Files (XBRL) are also included as exhibits[129](index=129&type=chunk) [Signatures](index=29&type=section&id=Signatures) This section contains the official signature block, confirming the filing of the report on behalf of Graham Corporation by its Vice President-Finance & Administration and Chief Financial Officer - The report was signed by Jeffrey Glajch, Vice President-Finance & Administration and Chief Financial Officer[132](index=132&type=chunk) - The signing date of the report was February 1, 2021[132](index=132&type=chunk)

Graham Corp (NYSE:GHM) Q3 2021 Results Earnings Conference Call January 28, 2021 11:00 AM ET Company Participants Christopher Gordon - Investor Relations, Kei Advisors Jeffrey Glajch - Vice President, Finance and Administration, Chief Financial Officer and Corporate Secretary Alan Smith - Vice President and General Manager James Lines - President and Chief Executive Officer Conference Call Participants Theodore O'Neill - Litchfield Hills John Franzreb - Sidoti & Company, LLC Brett Kearney - Gabelli Funds Th ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | Trading | | | --- | --- | --- | | Title of each class | Symbol(s) | Name of each exchange on which registered | | Common Stock, Par Value $0.10 Per Share | GHM | NYSE | For the tran ...

Financial Performance - Net sales for the first quarter of fiscal 2021 were $16,710, down 19% compared to $20,593 for the first quarter of fiscal 2020[64] - Net loss for the first quarter of fiscal 2021 was ($1,818), resulting in a diluted loss per share of ($0.18), compared to a net income of $82 and diluted income per share of $0.01 in the first quarter of fiscal 2020[64] - Gross profit margin for the first quarter of fiscal 2021 was 9%, down from 23% in the first quarter of fiscal 2020[64] - Orders booked in the first quarter of fiscal 2021 were $11,468, compared to $15,089 in the first quarter of fiscal 2020[64] - SG&A expenses for the first quarter of fiscal 2021 were $3,902, a decrease of $665 compared to $4,567 in the first quarter of fiscal 2020[64] - The effective tax rate in the first quarter of fiscal 2021 was 17%, compared to 23% in the first quarter of fiscal 2020[64] - Cash flow was negative in Q1 fiscal 2021, but positive cash flow from operations is expected for the remainder of the fiscal year[96] Sales and Backlog - Domestic sales decreased by $5,010, or 35%, in the first quarter of fiscal 2021, while international sales increased by $1,127, or 18%[64] - The backlog was $107,220 at June 30, 2020, compared to $112,389 at March 31, 2020[64] - Backlog as of June 30, 2020, was $107,220 million, down 5% from $112,389 million at March 31, 2020, with 70% to 75% expected to convert to sales within one year[90] - The company anticipates defense programs in backlog will generate $20 million to $25 million in annual revenue in fiscal 2021 and beyond[91] Cash and Investments - Cash and short-term investments at June 30, 2020, were $67,172, down from $73,003 at March 31, 2020[64] - Cash and investments decreased to $67,172 million as of June 30, 2020, from $73,003 million on March 31, 2020[86] - The company had a $25,000 million revolving credit facility with JP Morgan Chase, which can be increased to $50,000 million if needed[88] Future Projections and Plans - Fiscal 2021 revenue is projected to be between $90,000 million and $95,000 million, with a gross profit margin of 20% to 22%[95] - Production capability was approximately 50% of normal in Q1 fiscal 2021 due to COVID-19, but the company expects to operate at near normal capacity for the remaining quarters[93] - The company expects growth in its naval nuclear propulsion business due to strategic actions to increase market share, with 51% of total backlog related to U.S. Navy defense[64] - The company plans to continue seeking organic growth opportunities and potential acquisitions to expand its market presence[92] Dividend and Capital Expenditures - Dividend payments in Q1 fiscal 2021 were $1,097 million, up from $988 million in Q1 fiscal 2020, while capital expenditures increased to $338 million from $294 million[84]

Financial Performance - Net sales for Q3 FY2020 were $25,286, a 47% increase compared to $17,198 in Q3 FY2019[82] - Net income for Q3 FY2020 was $9, down from $95 in Q3 FY2019, with diluted income per share remaining at $0[82] - Net income for the first nine months of fiscal 2020 was $1,296 million, a decrease of 69% compared to $4,245 million in the same period of fiscal 2019[103] - Revenue for fiscal 2020 is expected to be approximately $100,000 million to $105,000 million, excluding the commercial nuclear utility business sold in the first quarter of fiscal 2020[116] Orders and Backlog - Orders booked in Q3 FY2020 were $20,057, compared to $23,169 in Q3 FY2019, reflecting a decrease in commercial nuclear business orders[82] - Backlog at December 31, 2019, was $122,899, down from $127,765 at September 30, 2019[82] - Orders for the three-month period ended December 31, 2019, were $20,057 million, down 13% from $23,169 million in the same period last year[110] - Backlog decreased by 4% to $122,899 million at December 31, 2019, compared to $127,765 million on September 30, 2019[113] - Domestic orders accounted for 55% of total orders in the first nine months of fiscal 2020, compared to 64% in the same period of fiscal 2019[111] Profitability and Margins - Gross profit margin for Q3 FY2020 was 16%, down from 22% in Q3 FY2019, while gross profit increased to $4,044 from $3,742[87][97] - Gross profit margin for fiscal 2020 is expected to be in the range of 21% to 22%, down from 23.9% in fiscal 2019[117] Expenses and Investments - SG&A expenses for Q3 FY2020 were $4,441, an increase from $4,308 in Q3 FY2019, primarily due to investments in sales and support[99][100] - Capital expenditures for fiscal 2020 are projected to be between $2,500 million and $2,800 million, with 75% to 80% allocated for machinery and equipment[105] Cash and Investments - Cash and short-term investments at December 31, 2019, were $69,851, down from $77,753 on March 31, 2019[87] - Cash and investments decreased to $69,851 million on December 31, 2019, from $77,753 million on March 31, 2019, a decline of $7,902 million[106] - Approximately 95% of cash and investments are held in the U.S., with the remaining 5% invested in China operations[107] Market Outlook - The company expects order activity to improve over the next several fiscal quarters despite variability in new order levels[91] - The long-term outlook for the global energy and petrochemical markets supports growth plans, driven by rising populations and economic expansion[89] Taxation - The effective tax rate for the first nine months of fiscal 2020 was 22%, compared to 16% in the same period of fiscal 2019[102] Sales Distribution - Domestic sales accounted for 53% of total sales in Q3 FY2020, down from 83% in Q3 FY2019, while international sales surged by 313%[95]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or Commission File Number 1-8462 GRAHAM CORPORATION (Exact name of registrant as specified in its charter) Delaware 16-1194720 (State or other jurisdiction of incorporation or organization) 20 Florence Avenue, Batavia, New York 14020 (Address of principal executive offices) (Zip ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ___________ Commission File Number 1-8462 GRAHAM CORPORATION (Exact name of registrant as specified in its charter) Emerging growth company ☐ ...