Greeting, and welcome to the Graham Corporation first quarter 2010 quarterly results conference call. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Miss Deborah Pawlowski, Investor Relation for Graham Corporation. Thank you. Miss Pawlowski, you may now begin.

Thank you and good morning everyone. We appreciate your joining us today on Graham’s fiscal 2010 first quarter financial results call. On the call I have with me today Jim Lines, President and CEO of Graham and Jeff Glajch, Chief Financial Officer. Jim and Jeff will be reviewing the results of the quarter and also provide a review of the company’s strategy and outlook during this contraction in the business cycle. 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’s Web site which is www.graham-mfg.com. In addition, we have posted supplemental slides on the Web site to provide a visual overview of our results. 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 was 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 Web site or also at www.sec.gov. So with that, let me turn it over to Jim to begin the discussion. Jim?

Thank you Debbie, and welcome everyone to our first quarter conference call. This quarter's financial results were excellent. All things considered, sales were off 27% when compared with the first quarter last year but they were in line with our expectation for the quarter. Gross margin in the quarter was unusually high with the level of revenue. We have significant margin lift due to lower costs for materials. Savings in materials looks to have been short term as we have already started to see material costs rise from their lows. Our procurement personnel did quite well, having been optimistic while both costs were declining and suppliers were hungry to win new business. New order environment declined sequentially with new orders at $8.8 million. Quarterly order level has remained erratic during the past year, and we expect it will continue to be unpredictable and erratic for several quarters going forward. We continue to be aggressive to win new business; however, customers just are not making purchase commitments at the moment. On a positive note, new orders through the start of this week were over $5 million for July. Quotation activity is high. We are encouraged about the outlook once the markets do recover. We believe recovery in our markets will be led by the Middle East and Asia followed later by South America. Recovery in North America is hard to predict but it is not currently incite for refining or petrochemical markets. In our Middle East market, there are two projects in Saudi Arabia that have been reactivated. Each is a 400,000-barrel per day refinery requiring substantial amounts of specialized equipment like what Graham designs and manufactures. There are also signs of activity elsewhere in our Middle East markets. China continues to invest in new refining and petrochemical production capacities supported…

Thank you Jim and good morning everyone. I will start with a review of sales and operations activity before moving on to our orders and backlog. Net sales in the first quarter of fiscal 2010 were $20.1 million, a $7.5 million decline compared with $27.6 million in the first quarter of fiscal 2009. This level of sales was consistent with our expectation incorporated in our full year guidance that we provided in May projecting a 30% to 40% sales decline in fiscal 2010. Condenser sales were strong in the first quarter at $5.2 million, 12% above the first quarter of fiscal 2009. These sales were driven by orders that Graham won early last fiscal year. However, sales across all other product categories, ejectors, after market, heat exchangers, and pumps were off a collective 35% in the first quarter of fiscal 2010 compared with last year's first quarter. By industry, as expected we saw a shift away from refining, especially in the United States. Sales to refiners were down to 46% of total sales in the first quarter of fiscal 2010 compared with 52% in the same period last year. 24% of sales were to the chemical and petrochemical industries, up from 19%, and 30% were to the power industry, and other industrial applications up slightly from 29% last year. Graham's sales to the US market in the first quarter of fiscal 2010 declined $8.3 million or 45% to $10.2 million compared with last year's first quarter and represented 51% of total sales. Somewhat offsetting this decrease was a $900,000 increase in international sales to $9.9 million or 49% of total sales. In the quarter we saw an increase in sales to Asia but weakness in all other international markets. As we have mentioned in the past, we do have significant…

Thank you, Jeff. Operator, please open the call for questions.

Thank you. (Operator instructions) Our first question comes from James Bank from Sidoti & Company. James Bank – Sidoti & Company: Hi, good morning.

Good morning, James. James Bank – Sidoti & Company: I knew if I hit star one about ten times, eventually it clicks. Jim, the percentage of backlog that we still have from the US or let’s just call them domestic projects, how much is still represented in the $37 million of backlog you reported this morning?

I don’t have that statistic at my figure tips. James Bank – Sidoti & Company: Okay. Well, I guess, what I am trying to get at is the high price inflationary worked -- clearly it worked in your favor with the gross margin in the first quarter here. Is that more or less work through or is there still some of that still in that $37 million?

We’ve only still have in that $37 million sales that will be for the US market. The margin improvement that we enjoyed in our first quarter wasn’t so much tied to geographic sales mix, but more tied to the fact that the raw materials market had a rapid decline and our procurement team was able to take advantage of that and come in well below our costs that we have estimated for those projects. We’ve saw materials hit the floor and remain there for few months, December through March. And our procurement team as they were buying the materials for the projects where revenue would be recognized in the first quarter did a great job to take advantage and be opportunistic at that time. So it wasn’t geographic related, in my opinion, it was more the timing of where materials were. James Bank – Sidoti & Company: Okay. And also – well, I guess then that would imply that it’s probably not repeatable given your guidance.

We don’t believe so. Now having said that we are going to be aggressive in the market with our suppliers. There are times when there is capacity available at a given supplier where we are seeing them come off market pricing. And our procurement team – I am expecting them to be disciplined as they were in the first quarter and to take advantage of those opportunities. But we are not projecting and we would not recommend in your modeling to look at our first quarter margin as being sustainable. James Bank – Sidoti & Company: Right. (inaudible) this question in regard to the guidance to even go toward the high end of your guidance by, one assume, $70 million in sales (inaudible) in SG&A, and go to the higher range for your gross margin guidance. I am still hitting single digit earnings per share September, December, and March quarters this year. This is somewhat draconian and obviously it grows to a different point, you guys did in the first quarter. Am I reading this correctly?

James, this is Jeff. Yes, you are. James Bank – Sidoti & Company: Okay, fair enough. The tax rate, Jeff, this is one for your please. The tax rate for the full year, I thought we’re looking for 34%, but maybe with the first quarter’s 30%, should I take it down a little bit?

Yes, I think the tax rate for the year we are looking to be in the 30% to 31% range. James Bank – Sidoti & Company: Okay. Is that something I should probably use in out years as well?

Depending on how you are viewing the out years. I think if you are viewing the out years with a similar level of profitability as this year, then, yes. If you are viewing them with lower profitability, you could probably take it down a point or two. If you are viewing them with higher profitability, you could probably take it up a point or two. James Bank – Sidoti & Company: Okay, okay. And then looking at fiscal 2011, the SG&A, I guess – what you are guiding toward this year? Is this more or less fixed? Could we assume $13 million to $14 million in spend for fiscal 2011?

Yes, I think it’s going to be to some extend a function of the top line. Clearly, if it’s been similar to where we are at, I think that’s the fair assessment. Again, similar to my comments on taxes, if you go up a little or down a little bit, it could be a little bit of a swing there. But I think that’s a fair assessment as a first path. James Bank – Sidoti & Company: Okay. And then last question, when you guys used the word measurably, and I am not trying to put you on the spot here, but I guess a measurable volatility that you are expecting orders, is it something that would like what happened throughout fiscal ’09? Let me plug it in here, I think we had $27 million in June, then $17 million and down to $8 million and back up to $20 million. Now we are kind of back down to $8 million. Is that kind of volatility we should expect?

Regrettably, yes. James Bank – Sidoti & Company: That’s all I have. Thank you very much for your time.

You are welcome, James.

Thank you. Our next question is coming from Dick Ryan from Dougherty & Company. Dick Ryan – Dougherty & Company: Good morning. Just a couple of questions on the backlog, 85% ships over the next 12 months, can you give a little perspective as to how much might ship in the reminder of FY ’10?

We have again Dick.

The majority of it will. There is a little carry over into FY ’11. The majority ships in FY ’10 with the exception of the $4.2 million that is on suspension. The timing of that when they are realized to proceed is not clear, but we would expect conversion of the majority of the $37 million less the $4 million on suspension in fiscal 2010. Dick Ryan – Dougherty & Company: Okay. My next question is if you could give us status or an update of the $4.2 million, what – is that either moving to the left or to the right?

In our follow up with our customers that we do routinely to assess the quality of the backlog, they’ve only been able to indicate that they are still on suspension. We are projecting they would be released and revenue realized in 2011, but it’s hard for them to predict and they are not able to give us reliable indications of when the projects will reactivate unfortunately. But they are not cancelled. Dick Ryan – Dougherty & Company: Okay. And nothing else’s cancelled, I think you said in Q1. Anything else to put on suspension, but obviously not, this $4.2 million was the same from the first quarter, correct?

It was actually slightly different. It was $4.4 million at the end of the fourth quarter. We did have one project that was about just under $0.25 million that had been on hold and has been released back in the active status. Dick Ryan – Dougherty & Company: Okay. Okay. On the share buyback, what’s left under the program?

The program actually was set to expire – actually had expired in the last day or two, but has been extended by our Board for another 12 months. So there were 1 million total shares less the 303,000 that’s already been bought back. So there are just under 700,000 shares available to be repurchased. Dick Ryan – Dougherty & Company: Okay. And as you look over the next year or two years, if the sales mix shifts more internationally, and I think, Jeff, you talked about the tax rate going forward. But if that shift more internationally, what could that do to margin expectations, if anything?

Well, we’ve indicated that the 40%-ish gross margin that we had most of last year and in our first quarter, regardless of geographic sales mix, wasn’t going to be sustainable. We would project in an up cycle mid to upper 30s, the gross margin; and near the bottom of the cycle, mid to low 20s for gross margin. Dick Ryan – Dougherty & Company: Okay. Any significant price pressure going on, on the competitive side, Jim?

Yes, we are all very hungry. There aren’t many projects where the buyers are stepping to the table, and we are seeing a very aggressive pricing by everyone. And we are seeing that the buyers using that to their advantage, so there is price pressure. Dick Ryan – Dougherty & Company: Okay. Great. Thank you.

Dick, this is Jeff Glajch. I just want to clarify one thing on the backlog. I want to make sure that as you are thinking through this, you are thinking through it correctly and that we’ve stated it correctly. When we said that the backlog was $37 million at the end of the quarter and that 85% of that is expected to ship in the next 12 months, that’s 85% of the $37 million, not of the $37 million minus what’s on hold. Dick Ryan – Dougherty & Company: 85% of the $37 million?

Yes. Inherent in the $37 million is that $4.2 million that’s on hold. But our 85% numbers off the $37 million, not the $37 million less the $4.2 million. Dick Ryan – Dougherty & Company: Okay, great. Thanks, Jeff.

You are welcome.

Thank you. The next question is coming from Greg Garner from Singular Research. Greg Garner – Singular Research: Good morning.

Hi, Greg. Greg Garner – Singular Research: Hi, just a quick clarification as a follow up for that last question, regarding the backlog. The $37 million, 85% of which is going to be shipped in the next year, that $4.2 million – you mentioned that that maybe shipped and most likely would be turned to an order in fiscal year ’10 to ship in fiscal year ’11. Is that correct what you said before?

They are orders currently on our backlog. We would project that if customers release the projects and revenue would be recognized in 2011. Of the 15% of the backlog that we indicated would not ship in the next 12 months is the $4.2 million. Greg Garner – Singular Research: Okay. I understand that. I just wanted to get the timing for when you believe it would turn into revenues, but it looks like it’s probably going to be fiscal year ’11 event, okay. For the – you mentioned the excellent quotation activity. Is there any way to quantify that relative to what it has – the level of quotation activity in the last couple of quarters. I just want to get a sense for -- this activity is a result of projects that come back to your for a better price or looking for – or are there a lot of new projects out there that they are just several years in advance they want to get pricing on. Can you give us a little color on that?

A metric that we monitor continually is the level or the value of outstanding firm quotations, and we classify our firm quotation as a project that we feel will move to equipment purchase. The aggregate value of the firm quotations -- and we’ve mentioned this on prior conference calls -- really hasn’t changed appreciably over the last 12 months to 18 months. It’s been running at around $250 million consistently, maybe down 10%, but back up to the $250 million on average. So we hadn’t really noticed a discernible difference throughout the cycle and the value of our aggregate firm quotations. But I wanted to – and I have mentioned this before – we are not clear, it’s hard to predict when the buyers step to the table to make purchase commitments. But we are very busy and our sales management (inaudible) areas keeping up with all the activity. Greg Garner – Singular Research: Okay. And is there quite a bit more activity in the areas that you believe are going to recover more quickly?

Yes, yes. The Middle East, South America, Asia. Yes. Greg Garner – Singular Research: And before you’ve mentioned that margins in China were not the best, but it certainly seemed like that’s a good revenue growth area. How should I look at gross margins on this international versus domestic? Should I perceive international margins on the gross margin side to be a couple of percentage points lower?

That’s a fair model to use. Yes. Greg Garner – Singular Research: Okay, thanks. And congratulations for the procurement team, they obviously did a good job.

It did. And thank you. Greg Garner – Singular Research: Sure. Thank you.

Thank you. Our next question is coming from Michael Heberts [ph] from Maxgens Asset Management [ph]. Michael Heberts – Maxgens Asset Management: Hi, Jim. Quick question -- two quick questions for you, first of all, can you give us some sense of the seven orders you’ve gotten out of China, what kind of a close ratio you have, in other words, essentially how many quotes does that represent?

For the seven that we won and these are large ejector systems for a particular service in a refinery, vacuum distillation application. We’ve made quotations on 12 projects that have proceeded in that time frame and we won seven counting the order that was announced yesterday. So, slightly over 60%. Michael Heberts – Maxgens Asset Management: Second question, a couple of times you briefly referenced acquisitions as a strategy for growth. Can you give us any further color on what you might be looking for there?

Sure. This is Jeff. We have laid out our acquisition thought process and really what we are looking for is one or two avenues, either a geographic expansion. Right now all of our manufacturing is here in Western New York, and we believe there is advantage to us to having – potentially having local manufacturing in other parts of the world, superficially Asia, the Middle East, and maybe more specifically China or India. So that’s one of our legs we are looking at. The other leg is more of a product line expansion to be able to offer our customers a broader array of products into a similar customer set that we have now. So those are the two avenues we are looking down. We are very active there. But what we are also seeing – we still think we are early in the process and we are very patient. Michael Heberts – Maxgens Asset Management: Thank you.

Sure.

Thank you. Our next question is coming from Rich Hoss from Roth Capital Partners. Rich Hoss – Roth Capital Partners: Hi, good morning gentlemen.

Good morning, Rich.

Hi, Rich. Rich Hoss – Roth Capital Partners: Question on the geographic distribution, we obviously saw a significant shift away from the United States, which I think you have been fairly vocal about with the expectations that Asia and then international events will shift to become the majority of your revenues at least in the next several years. There has been quite a bit of industry news out lately. Just two days ago China National Offshore announcing plans to extend a refinery with Shell, I was hoping you could just give us a little bit more appreciation for the opportunity in China not only from the size perspective but also from a -- how quickly something like this could ramp and obviously we would see it in bookings and backlog but as far as your expectations for how something could start to contribute in the fiscal time frame I guess you could.

We are excited about the opportunities in China and the magnitude of those opportunities over an extended period of time. We believe China will continue to invest in its refining capacity along with its petrochemical producing capacity. We have seen that in a given year not more than three or four projects move together. There is just a supply chain constraint there whether it is the EPC, the technical process license source in China, we have not seen much more than that. So that sort of gives us a frame of the amount of business that would be available in a given year to win if history repeats itself going forward and I do not see supply chain dynamics changing where that three to four becomes ten in a given year for refining. Outside of refining in petrochemicals, we are seeing the Chinese customers evaluate and go ahead with integrated refineries, which would couple the refinery with the petrochemical producing plant increasing the scope for Graham ethylene plants, other petrochemical producing plants that adds greater opportunity for those three to four projects that are moving together and also China is involved in new fertilizer plant construction and other petrochemical producing plants such as cold liquids is another. So China represents a very large opportunity for us. Speaking specifically about refining we do not see it as much more than three or four projects in a given year.

Okay and along with Jeff’s commentary couple of minutes ago regarding acquisitive targets, would you consider something in the power generation and if so would it be limited to US or would it also be potential to a Chinese firm or a new product that was targeted in China?

We absolutely would consider something in the power generation area and geographically we would not be limited to the US, it could certainly be outside of the US.

Okay. Could you say that if you were looking at extending your product offering through a product targeted at power gen, would it be more likely to occur in the US?

I do not think we would so that, it could go either way.

I think you have been fairly clear about indicating the desire to spend your capacity in China for more of your refining products but looking at power gen, I was curious to see if they would be focused in China as well or if it is just sort of regionally agnostic?

We are regionally agnostic. Obviously if we look at a US (inaudible) we would certainly want a situation where we could export also but we are agnostic on where that actually occurs.

Okay, thank you gentlemen.

Welcome.

Thank you. (Operator instructions) Our next question is coming from George Walsh from Gilford Securities.

Jim, I was wondering if you could speak a bit of the motivations in the macro decision making for the purchased commitments of clients and customers in relation to – you are seeing it now with what is impacting them is raw material cost and perhaps the crack spread between sweet and sour crudes or any other macro factors that the current status then maybe think they change in the future to motivate them.

George what we see in the US market in particular for the refining sector is a number of things are affecting investment decisions, one being a reduction in demand another being consistent with reduction in demand utilization levels for US refineries has dropped from low 90s to low 80s and projected to go further into the upper 70s over the next 12 to 18 months. Also the spreads, many of the refiners had made significant investments to see stock diversity to be able to process poorer quality, lower cost sour crudes, the spread or the differential between sweet and sour has narrowed and in some cases there is no difference and that is affecting their profitability, and also lastly and very largely is the energy policy that is being contemplated which may be punitive to refiners, refiners that process sour crudes, refiners that have emissions, large emissions of carbon. So, there are several variables that are affecting investment positions in the US. If we move outside the US and look at the Middle East or Asia that is more triggered we felt by the costs of the projects coming down. We have seen in Saudi Arabia a couple of project announcements have come up where they are proceeding now with two or three refineries in Saudi Arabia linked to a reduction in the cost to build the plant. One was noted to be about a 20% reduction from $12 billion to under $10 billion. And we had mentioned in prior conference calls, our customers were moving to put projects on hold six to nine, twelve months ago while they expected costs to come down and they have seen costs come down, we think at the inflection point and are starting to come up and hopefully that is the catalyst to get back into investing.

Jim, is that mostly raw material or they are actually getting them re-bid a bit because there is competition for work, there is lower margin from the part of engineers and others involved in the project?

There are two factors. One of course is as you said raw materials, secondly to their advantage there is a scarcity of major project work available right now, maybe one or two at a given point in time versus going back 12, 18 months ago where there were many, many available at a given time. So they are being opportunistic in negotiating with the EPCs and negotiating with the equipment suppliers to get very good pricing. So not only has raw material costs come down they are also being more aggressive with their procurement strategies to know what they cost further.

All right, very good. Do you think if something like the energy policy like (inaudible) I do not want to say dies or some people -- if it really does not go through that would have a major impact for the refineries that they will know what they, they will have a better idea what they are facing in the future?

Yes, that would help.

Because even Valero on their call, they were quite adamant that they felt that this was not a good policy and it was very punitive for them.

That is correct. Yes.

Also with M&A, I was just curious one of the outlines you gave for parameters was a revenue stream of about $60 million, how do you look at that, is that something where you are looking – obviously you are looking at other cyclical companies and businesses, is that something where that is peak revenue or that would be the current run rate or just how do you view that?

This is Jeff, I think the $60 million that you commented on is really – we are looking at a range in up to $60 million not that we would not go above that or go below the bottom part of our range which we suggested in the past to be maybe $20 million but we are looking at kind of at a steady state but that would not be a peak number or that would not be a low number but an average type number.

Okay, very good. Once again congratulations on managing well in a tough quarter.

Thank you George.

Thanks.

Thanks. At this time we have no further questions, I would like to turn the call back over to Mr. Lines then for any closing comments.

Thank you everyone for your interest and your questions and we look forward to updating you after the second quarter. Thank you.

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