Greetings and welcome to the Graham Corporation first quarter 2012 quarterly results. 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, Investor Relations for Graham Corporation. Thank you, Ms. Pawlowski. You may now begin.

Thank you, Jackie and good afternoon everyone. We appreciate your joining us today on Graham's fiscal 2012 first quarter conference call. On the call I have with me today Jim Lines, President and CEO and Jeff Glajch, Chief Financial Officer. Jim and Jeff will be reviewing the results for the quarter, and also provide a review of the company's strategy and outlook. On our website at graham-mfg.com, you will find both the press release as well as supplemental slides that the guys will be talking here today. As you may be aware, we may make some forward-looking statements during this discussion as well as during 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 materially 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 website or at sec.gov. So with that, let me turn it over to Jim to begin the discussion. Jim?

Thank you Debbie. Turning to slide four highlights for the first quarter. I feel we had a very strong first quarter with fiscal 2012. Our traditional sales expanded by 58%. Energy Steel provided $3.9 million in sale. We saw strong sales growth for the Middle East, in particular two projects for Saudi Arabian refineries and for South American refineries. Our sales mix geographically was 55% international, 45% domestic. From an end use market perspective, our sales mix was 48% for oil refining markets and 22% to power generating markets including the nuclear market, 12% for petrochemical markets. For order intake, we had $5.1 million of orders from Energy Steel, for the nuclear market, another 1.8 million within the power market sector for renewable energy and alternative energy markets. $5 million in orders for oil refining markets. Our bidding activity still remains strong and diverse across our market mix. Orders were 37% for power generating markets and 32% for oil refining markets. We had strong margin in the first quarter with gross margin at 32.8% and EBITDA margins of 20%. This was due to a better leverage and higher sales. We also had strong mix of more profitable orders in the quarter and we've converted much of the low margin backlog that went through our sales in Q2, 3 and 4 of last year, pretty much through our backlog now. That's also helping lift margins. Turning to slide five. As you can see our guidance for fiscal 2012 is (inaudible) point is $100 million. We're projecting about 50% international, 50% domestic. Within that projection for fiscal 2012 we are projecting that traditional product growth including the navy will expand by 20 to 25%. And with Energy Steel that yield is about 35% topline expansions for the business, two-thirds is from traditional…

Thank you Jim and good afternoon everyone. As Jim mentioned, we had a strong start to fiscal 2012. Sales in the first quarter were $25 million up $11.6 million or 87% compared with the first quarter last year. Organic growth was 58% of this; the remaining $3.9 million was from Energy Steel. Sales in the first quarter were 45% domestic, 55% international which is slightly closer to more domestic business that was last time. Graham's historical markets continue to be tilted more towards international; however Energy Steel is almost exclusively domestic. EBITDA margins in the quarter was 20% up from 12% last year. Q1 net income was $3 million or $0.30 per share up from $900,000 or $0.09 per share in Q1 last year. And as expected as we've communicated in the past, Energy Steel continues to be accretive to earnings in this quarter as it has since we purchased the business. On the next slide, I'm looking at backlog. Orders in the first quarter were $19 million, up from $8.1 million in the first quarter last year. Included in the first quarter orders were $5.2 million from Energy Steel which continues to add to its backlog. Backlog at the end of June was 85.2 million down from 91.9 at the end of March. Energy Steel's backlog is up to $9.7 million as its orders continue to be strong. Finally, we mentioned on the May call, we have no orders on hold by our customers, the last order which had been on hold for just over $1 million was reinitiated by our customer earlier in the first quarter. On slide 12, gross margin in the first quarter was 32.8% up from 28.8% in the first quarter last year and up sequentially from 30.5% in the fourth quarter of fiscal 2011.…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). One moment please while we pull for questions. Your first question is coming from Rick Hoss of Roth Capital Partners. Rick Hoss – Roth Capital Partners: On Energy Steel, the 4 million or so in sales is there seasonality with the business or it seems to be for this particular quarter it seems to be maybe a little bit lower than the run rate and the growth rate etcetera.

Rick this is Jeff. There is a little bit of seasonality really around the when facilities are shut down and when they start back up. The 4 million was actually in line with what we expected for this quarter but there was a little bit of seasonality.

But that get to that as well, with the floods in Nebraska there were two delayed shipments that were outside of Energy Steel's control due to the inability of the utility to come in for mandatory inspections before progressing with further production on the orders. We didn’t have control over that but it did affect the overall revenue in the quarter for Energy Steel. Rick Hoss – Roth Capital Partners: Okay, that makes sense, thank you for that. And then what are hearing about the NRC reviews. I think they finished it up and if I read correctly there's quite a bit of suggestions for facility improvements and additional infrastructure safety etcetera. What are you hearing from your customer?

Well the report is relatively new but what is encouraging to us is the findings that relate to additional safety measures around secondary cooling and extent of the ability of the plan to operate with an electrical power outage. We think both of those initiatives should create demand for Energy Steel and Graham products. Rick Hoss – Roth Capital Partners: Okay, and then Jim we have focused on bigger picture, more the cycle thinking about where the company traditionally you have visibility for several years out as you are starting work on projects. I know it’s a two-three year type of process where you start the proposals in engineering and go from there. What is your visibility into? How many years out are you confident in cyclical recovery and a growth trajectory for demand for your products?

What's really great about our sales model is that you're inferring we do get involved very earlydur4ing project conflict and initial front end engineering design work before a project is fund, there is a great deal of bidding activity that we're involved in that relates to that type of work. I have made comments on prior conference calls that does feel to us as itself back in 2003 and 2004, with respect to how the process of beginning circulates through the pipeline and its continuing to build on a number of projects announcements have at the inflection point, pretty strongly, primarily the Asian markets. These are all encouraging signs. So as I said in prior conference calls, it feels to me and our sales management team that its like it was back in the 2003-2004 timeframe and the quality of the remark there most importantly is it's just a matter of time before that converts to real bidding activity in orders and then translates into sales. So we feel pretty confident about the longer term view as we did in 2003 and 4, its less clear to us this quarter and next quarter but our view on long-term is very optimistic. Rick Hoss – Roth Capital Partners: Okay, and if we were to graph out the demand from the last cycle, it almost looks (inaudible) financial to a certain degree. Are you expecting a similar type of pattern to where it starts out slowly, then it builds and accelerates and accelerates and then we hit peak?

Well there is always that possibility that the past plays out again. One of the things that we observed in the last cycle is too many projects came too quickly and the supply chain couldn’t handle it and that escalated overall cost to the owner. And then invariably and quite honestly I prefer to see it plays a little more slowly so we can capitalize and take more market share of the available opportunities (inaudible). How it actually rolls out, we'll actually have to watch and see but we are encouraged in general by the amount of bidding activity and the type of bidding activity suggesting that there is a multi-year expansion at some point here in the future. Rick Hoss – Roth Capital Partners: Okay, and then last question, with additional work coming from Asia and China, what does that do to gross margin?

It does have an effect to put pressure on gross margin. Now in view of that as we indicated back in the late 2008-2009 timeframe we felt we were going to experience margin pressure due to our sale mix becoming more internationally waited. The management team focused on gaming capacity and improvement productivity to defend our margin having given sales dollars to cost and productivity improvements while comparatively the price pressure is there. So we've done some things to prepare the business for those headwinds but there is margin pressure internationally but we have not stood still in response to it. Rick Hoss – Roth Capital Partners: So it shouldn’t be something that would deviate from the historical trend of within the cycle you have revenue growth and you have gross margin expansion simultaneously.

That's correct and what we have said is as we go into the hotter periods of the next expansion, we would expect the upper end of our gross margin range to be in the mid-to upper 30s whereas before as you might recall, we did eclipse 40%. We're going to go out at it again with the same figure but we do expect it to be in that mid to upper 30 ranges at the next peak. But in higher volume. Rick Hoss – Roth Capital Partners: And with that hotter period as you determine then we would also potentially have gross rates above the 20-25% organic that you're implying with your fiscal '12 guidance.

We implied that the traditional product growth rate might be above 25%. That's what the question was?

Rick, are you there? Jackie? Hello?

Yes, he's no longer in queue.

Okay, as we model the recovery, we tend to think of our traditional product growth rate as it was last time somewhere in the upper teens to the mid-20s depending on what year the overall growth rate through the last cycle was about 25-26%. We see a great opportunity here as well in this next expansion where that's possible. To achieve a traditional product growth rate above that, that is possible, but we'll have to see how the project paces as well as our ability to gain capacity within our organization to execute at that higher level.

We do have Mr. Rick Hoss back into queue.

Sorry Rick if I didn’t actually answer your question. Rick? Rick Hoss – Roth Capital Partners: You guys hear me at all?

Yes, we can hear you now. Rick Hoss – Roth Capital Partners: Yes, I think you answered that, I got disconnected for some reason. It was basically you are implying with your fiscal '12 guidance here implying a growth rate of 20 to 25 and with your comments you described the cycle as having a hotter period of it and so my question was, well does that hotter period imply a growth rate higher than the 20 to 25 that you're currently doing out there with guidance, and I think you answered as yes, there is a potential for that to happen.

I did, yes.

Thank you, our next question is coming from Joe Mondillo of Sidoti & Company. Joe Mondillo – Sidoti & Company : My first question was just a sort of a follow-up on two questions earlier. One, how much did that order that you sort of lost some of it and actually still do the fluming in Nebraska, how much did that account for and the other follow-up was, do you know anything specifically how you're going to benefit from the suggestions of the new regulations that the NSC has put out there specifically within your business or is it just sort of it sounds positive there's going to be more regulation out there and it sounds like potentially that you're stapling at a benefit from.

The first question the push out was between $0.25 and $30 million. That's still out of the first question and will be realized in the second quarter due to the flooding at two utilities in Nebraska. With regard to the NRC regulations and if we defer back to the 9/11 timeframe when new regulations came out. It takes about 12 to 18 months before they get into the supply chain. Qualitatively what we're reading is it should create demand for Energy Steel and Graham products. We need to learn more what specifically needs to be done, what these the high level comments are around additional cooling, secondary cooling and to be able to operate from longer period of time with a loss of power and we can envision that will drive demand for Graham and Energy Steel products. To think about it, it's too premature. Joe Mondillo – Sidoti & Company : Okay, my second question has to do with a sort of backlog and what that looks like. What percent of the backlog are you expecting to hit in fiscal '12?

I think we said 85 to 90% of that would go over the next 12 months and typically, for this year we're probably thinking about roughly 75% of that would go over the next nine months. $0.25 a total. Joe Mondillo – Sidoti & Company : Okay, okay. And so looking at the rest of the backlog, what kind of margins are you seeing in your fiscal '13 backlog?

The fiscal '13 backlog is primarily the navy contracts. I don't really want to disclose that margin. But I would qualify that it's comparable to the average margin of Graham that's not extraordinary on the upside or the downside. Joe Mondillo – Sidoti & Company : Okay and then seeing that you brought up a navy, my next question I guess has to do with that. How much of the 95 to 105 million of sales guidance is associated with the navy this year?

Ball park around 10%. Joe Mondillo – Sidoti & Company : Okay. And then how much leftover I guess of that navy contract are we going to see following this year?

We have more than half of it left exiting 2012 and of what's left the majority of it we'll book in 2013 but that will be a piece of it goes into 2014 also. Joe Mondillo – Sidoti & Company : All right and can you remind how much that total contract was?

It was in excess of $25 million. Joe Mondillo – Sidoti & Company : And if you could just talk about the relationship with the navy, I think you said in your prepared remarks, that really since its gone well, have you seen any new orders or how do you foresee that relationship going forward?

Sure, we've had the navy, two of their ship yards and a couple of their procurement contractors come through and do audits of Graham and in each case the comments were very positive around employment engagements, the company's focus on safety, the professionalism of the management team and the way in which the company has executed the navy order we have now has received very high praise from the buyer. We have secured engineering only orders for initial concept engineering on some submarine work so that suggests to us that we're progressing in the right direction, we're demonstrating to the navy that we are a credible supplier, highly capable supplier to execute the very complicated orders and it's all moving very well from my standpoint. Joe Mondillo – Sidoti & Company : Okay and that secured engineering work is sort of new work that you received in the first quarter?

We received it in the fourth and the first quarter. I've got smaller orders but they only really move the needle but they are more foundation orders that lay the stepping stone to the larger orders. Joe Mondillo – Sidoti & Company : Right, understood. I guess one of my last questions has to do with the chemical processing market. Could you just give us a little color on what's going on there and why that's been fairly stable for you guys? Is that just a macro factor or sort of what's going on there?

Well actually the petrochemical activity we have in sales and our bookings has been for the international markets, primarily in Asia where they have continued to build, not the same pace as the mid 2000 but they have continued to build (inaudible) which to us is a nice indicator of the early stages of the next recovery and we think that recovery will be led by the Asian and middle eastern economies but more importantly another aspect of the that relatively recently has been strengthening and the domestic petrochemical market tied to the natural gas finds and as you may know the primary feedstock to the US petrochemical industry is natural gas. The cost of the feedstock now has come down appreciably so we are seeing some early stage bid work on reactivating some petrochemical plants in the US that were shut down due to high cost of natural gas in the early 2000s. So that's very encouraging sign. We see that's longer term very beneficial to us and we're seeing some early stages of traction there with some initial bid work. Joe Mondillo – Sidoti & Company : Okay, so the past three quarters where you've been sort of floating around that 3 million ranges, international growth is still very strong but you haven't seen a rebound because the growth in the US hasn’t been there but you are sort of expecting that could rebound in the future. Is that correct?

Yes and moreover the pace of the expansion in the Asian or international markets is not one that it suggests it’s a full petrochemical market recovery but we think that in the future. Joe Mondillo – Sidoti & Company : Okay, understood. And then real finely, just coming back to sort of my question on margin, just generally speaking on the backlog, is it sort of a progressively improved margin profile as you go out quarter-to-quarter in the future?

With our type of sale process, the margins in our backlog or the margins for any given order can vary greatly. On prior conference call I think it was two calls ago the question came up and I indicated that the average margin of our backlog was in excess of margin for sales being realized that suggested that we would see margin lift in coming quarters. You saw that in Q1 and the quality of the backlog was higher, it was converted in the sales. So we are seeing an improvement in Q1 and we expect that improvement to carry into Q2 as we covert more profitable orders from our backlog into sales. Joe Mondillo – Sidoti & Company : Has pricing changed at all in the orders that you're receiving?

As a general comment I would say no. I don't think the market has fully recovered where the pricing really has had meaningfully improved.

Thank you. (Operator Instructions). Our next question is coming from Dick Ryan of Dougherty. Dick Ryan – Dougherty: Say Jim, moving beyond kind of the engineering work with the navy and some of the submarine business. Is certification complete or nearing completion to get the necessary clearances?

Yes, I don't think that's deterrence in winning future work. I think we'll have to point now where we're considered a for all intent and purposes a qualified supplier and we'll be bidding on new construction for sub work. Dick Ryan – Dougherty: Sorry I was just looking for my timing so that, that looks like that's been take care of. You talked about the north American refining but I think in your earlier comments you have something about new construction, new nuclear construction with energy. Can you talk a little bit about what you're seeing now?

Well we did see immediately after the Fukushima incident was a couple of projects in the US went on hold. What we have seen though is projects that were used in the AP 1000 reactor technology are still advancing. Well, we're bidding a couple of those projects. Our real litmus test will be, will those projects move to procurement and our sense is yes. And we'll know a little bit more over the second half of the year.

Yes Dick they need to ultimately those facilities which are in South Carolina and Georgia need to get licensing approved before they can move forward in their licensing approval process right now. Dick Ryan – Dougherty: Are you agnostic to the nuclear design or are you kind of tied with the AP 1000 with (inaudible) house or how do you view that (inaudible).

We’re not aligned with any particular technology at all it provides opportunity for us. We think the passive cooling technology of AP 1000 is putting them at this point in a position to move forward with no reactor designs for new plant construction but from a demand, creating demand for Energy Steel and/or Graham with our traditional products, we are agnostic. Dick Ryan – Dougherty: Any international opportunities developing it for Energy Steel?

Nothing meaningful, we've done submissionary work to understand the activity in China. That will be a longer term process to get ourselves in a position to capitalize on that. Well having said that, I do expect this opportunity to win some smaller orders for Chinese reactors but to meaningfully move the needle if you will, I think that's a longer-term process for us. There's a fair amount of missionary work that has to be done to capitalize on that more fully. Dick Ryan – Dougherty: Okay, and can you tell me Jim on oil fans projects which you're seeing there from a bidding perspective?

Sure, actually when we went into the downturn you might recall that we indicated that the upgraders which is where Graham traditionally have provided its products, we wouldn’t expect to see activity in the upgrading side of the oil sands until around 2012. We've begun to see and we are involved in a couple of projects that are kicking off, we're re-kicking off that were idled at the start of the downturn. So those are very encouraging signs, these are pretty large projects for us and we are seeing initial engineering work get restarted. We don't feel procurement is in the next one or two quarters but what's really good is the moving ahead and everyone's more optimistic. And secondarily as you might recall that we've moved into the extraction side which we have not done in before which has had more consistent levels of investment throughout the downturn whereas upgrading was actually put on a pause for a couple of years. And in general we are seeing new vitality and we're also hearing from our US refiner customers that they are again considering revamp projects to consider their refinery to be able to process the crude oil as being produced from the oil sands.

Thank you. Our next question is coming from George Walsh of Gilford Securities. George Walsh – Gilford Securities : Jim could you discuss the psychology of that your customers going forward. I mean it looks like they are all moving forward with projects and there's no real (inaudible) out there in the markets you're seeing. I mean there's one that was the motor on hold, you don't in an event situation any more. I guess that was related to the, as you mentioned just before the Energy Steel business. So it seems like they all feel that the economy is helping us, that they want to just keep moving forward with their projects.

To gaining a sense from the contractors and from the end users that we've turned the corner. There still is some skittishness as to how positive the outlook is more near term, next one or two quarters, three or four quarters, but longer-term without question the view of our customer base is that it's getting much better.

We have a follow-up question coming from Joe Mondillo of Sidoti & Company. Joe Mondillo – Sidoti & Company: Hey Jim, I just wanted to address the gross margins again. So you held your guidance at 29 to 32% and you were at 33% this quarter and almost 31% the fourth quarter. So I am just wondering are you expecting those margins to fall again later in the year or what will enter sort of keeping that guidance from maintaining that guidance?

Following the guidance that we have given, that would imply that the second half of the year will have margin pressure versus Q4 to Q1 and possibly to Q2. Joe Mondillo – Sidoti & Company: Okay, is that just a product mix issue or just still working off low backlog or what?

I would call it more the just the environment in which we are selling into still is not as healthy as we would like it to be and is still a very aggressive marketplace with not enough projects moving ahead at the same time giving the supply chains, giving us some pricing power. We need to see that to actually begin to have improved margins. So it's still early in the recovery.

Thank you. (Operator Instructions). Our next question is coming from John Sturges of Oppenheimer & Company. John Sturges – Oppenheimer & Company : I am just curious about the 41 million, is that unencumbered the 41 million from prefunding from customers?

Yes John. While we still have a significant customer deposit balance we also have a significant unbilled revenue which are projects that are in process that haven't been fully build yet. If you move back a few quarters you would have seen that the two of those were out of since the customer deposit number was significantly higher than the unbilled revenue. If you look at it now, you'll see them pretty much the same number. So the answer is yes, it's unnumbered. John Sturges – Oppenheimer & Company : So, all eternity comes by, you're free to go with that capital.

Correct. And of course we do have the flexibility. We do have a pretty significant line of credit available with Banc of America, if we ever needed that flexibility.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Thank you. We appreciate your time this afternoon. We feel we had a very strong first quarter. We are optimistic about the full year and the long-term recovery in our markets and we look forward to updating you during our next call in October. Thanks.

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