Greetings, and welcome to the Graham Corporation Fourth Quarter Fiscal Year-End 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Graham Corporation. Thank you. You may now begin.

Thank you, Christine, and good morning everyone. We certainly appreciate your time here today with the Graham Corporation’s fourth quarter and fiscal year 2012 conference call. On the call, I have Jim Lines, President and CEO, and Jeff Glajch, Chief Financial Officer. Jim and Jeff will be reviewing the results of the quarter and for the full year and also provide a review of the company’s strategy and outlook. There are slides on the company website that accompany the conversation today. If you do not have them you can find them and the press release at graham-mfg.com. As you may be aware, we may make some forward-looking statements during this 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 which 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 the call over to Jim to begin the discussion. Jim?

Thank you, Debbie. Good morning everyone and welcome. Please turn your attention to slide four, steps taken during the downturn to expand our company and diversify the markets served, has enable us to move quickly of the bottom of the cycle and generate $103 million of sales in fiscal 2012. Sales increased 39% compared to fiscal 2011, sales year-on-year increase sharply and are up $29 million by adding the nuclear energy market through the acquisition of Energy Steel and the contribution from the naval nuclear propulsion program. Also, our traditional markets provided approximately 25% greater sales in 2012 versus 2011. The 2004 through 2009 expansion cycle, where sales compound annual growth rate was 22%, had been principally driven by oil refining and petrochemical markets. As we entered this next expansion cycle, the markets driving our growth are broader and more diverse. We believe this diversity and the projected strength in our traditional markets can yield a higher growth rate this cycle. Please turn to slide five. The light order pattern from the second quarter of fiscal 2011 through the third quarter of fiscal 2012 due to soft market conditions inevitably shows up in future quarter sales. We began to experience this during the fourth quarter where sales were $20.3 million, and it does carry into the first half of fiscal 2013. Also an extension of the production schedule and delivery requirements for the large order for the navy has delayed conversion of that order to sales. We also will see that throughout 2013 where sales from the navy order will be below our original planning basis. Please turn to slide six. 2012 was a terrific year demonstrating the value of the steps taken in the downturn to strengthen and diversify our company. Organic sales expanded $17 million or approximately 25%. Energy Steel added $12 million greater sales than in 2011. Sales were split fairly evenly with 54% being domestic, please recall that Energy Steel and the work we are doing for the U.S. Navy are virtually 100% domestic. And 46% of our sales were to the international markets where we had increases in sales to the Middle East. We also had a stout power market segment that represented 28% of full year sales and with our focus in renewable energy such as geothermal and biomass to energy. And from the addition of nuclear energy with the acquisition of Energy Steel, clearly we have a very strong power market segment within our business. Our sales increased 39%. Net income expanded 80% and came in at $1.06 earnings per diluted share versus $0.59 in fiscal 2011. The two to one drop down is typical of the leverage in our company. Let me pass it over to Jeff now for greater detail on the financial results. Jeff?

Thanks, Jim, and good morning everyone. As Jim mentioned revenue in Q4 was down $5.6 million, partly driven by the extension of the navy project timeline as well as timing of conversion of orders from Energy Steel. The lower revenue and utilization adversely affected margins and EPS. In addition, we took a $0.04 per share charge in Q4 to resolve a disagreement with the IRS relating to R&D tax credits from fiscal 2008 and prior. As a follow up on the R&D tax credit issues we also had tax years 2009 and 2010 separately in dispute with the IRS. Subsequent to the end of the fiscal year we have settled those two years and there will be a small charge of $37,000 in Q1 of fiscal ’13 to settle those years. Now that they are resolved, we have no further disputes with the IRS. No further items in dispute with the IRS. Over the course of the years covered, even after the charges taken to earnings, we have benefited well over $1 million in R&D tax credits. One last point, in fiscal 2011-2012 R&D tax credit generated -- have benefitted Graham by about $0.01 to $0.02 per share. Currently the law has not been extended so we will see if we have additional benefit in fiscal ’13. On to slide nine. Gross margins in the fourth quarter were similar to those in the third quarter, below the levels that we have seen in the first half of the year. SG&A spending is down in Q4 driven by the lower sales level. This lower spending is despite our continued focus to add key resources in engineering to take advantage of what we believe is a long-term growth in our markets. Operating margins are down again driven by the lower revenue and…

Thanks, Jeff. It is encouraging that orders lifted back to the peak 2008 and came in at $106 million. In fiscal 2010 where orders reached $108 million, that included the large $25 million plus order for the U.S. Navy. Therefore the underlying core business was about $80 million. Quarterly order rates were soft during the past several quarters but bidding activity remained high. We had commented during the past few conference calls that the bidding pipeline had been building and we had a number of projects closed in our fourth quarter where bookings came in at $42 million. I am pleased with where we are entering this next phase in our markets. Our traditional oil refining and petrochemical markets are improving. The benefit of a strong power market segment is clear, and the work for the U.S. navy continues to proceed well with considerable upside to take on more of that type of work. Please go the next slide. Looking at the fourth quarter in great detail, please note the power segment was approximately 30%, with Energy Steel adding just under $13 million. Orders from our traditional markets were just under $30 million, and notably approximately $9 million was for ethylene-producing facilities, suggesting that petrochemical activity appears to be picking up. I would also like to point out that with the improved health in our markets, order selection and price management discipline, did yield improved margins on average -- improved margins on average for orders won in the fourth quarter versus the margin of our backlog entering the fourth quarter. Next slide. As we think about our markets, our traditional markets oil refining and petrochem, think about it geographically, we see a strong projected demand coming out of Asia in oil refining, petrochemicals, fertilizer, power generation. We are anticipating a…

(Operator Instructions) Our first question is from Mark Tobin with Roth Capital Partners. Please proceed with your question.

Good morning, this is Joe Bess filing in for Mark. My first question, Jim, is in your press release you talked about first half of 2013 kind of mirroring what the back half of 2012 looked like. That would imply that the back half of 2013 would see a meaningful growth. Can you speak a little bit more about that and is that due primarily to some larger naval shipments being expected in the back half?

Not so much tied to that. If you look at the order pattern and going back to the first and second quarters of fiscal 2012, that begins to bleed through as revenue in Q4, Q1 and Q2. Again, inevitably, softer bookings show up in lighter sales and that’s showing up in the first half of the year. The strong bookings we had in our fourth quarter supplemented with the conversion of the navy order, began to expand sales and profitability of the business in the second half. But we are expecting levelized revenue from the Navy orders throughout the year and principally the third and fourth quarters have benefitted by what we see it in our pipeline of new orders to win and also the strong fourth quarter bookings that we had of $42 million.

Okay. And then with regards to your guy’s margin that you, or with the pricing of contracts that we received in fourth quarter, is that what you are seeing right now in the first quarter of 2013 and you are expecting these sort of levels to continue from here on or do you think this is just sort of irregular?

No, I don’t necessarily think it was a point in time pick up in margins. I do believe our markets as a whole are becoming more active, are becoming healthier and more projects are available at any given point in time. That provides the opportunity to be a little more discerning on order selection and also stick with our firm priced discipline because there is options to select the better of the orders that are available. And that’s how we saw 2005, ’06 and ’07 play out. So we are applying that same discipline and experiences that we had and anecdotally the fourth quarter did have a step up in margins and I don’t necessarily feel that was just an occurrence in the fourth quarter.

Okay. And then last question. You talk about the opportunities in your pipeline, can you give a little bit of more color around that and any sort of size around the contract that you are bidding on right now and any potential timing of any key orders that could fall into 2013.

Sure. One of the things that we had experienced, it happens during the downturn, is the order sizes were smaller on average. We are seeing the order size began to become larger and that does have a benefit of getting more leverage out of our engineering resources per dollar of order value. So we are seeing larger orders and more of them. If we think about just stepping through the markets we are serving, we are expecting some business to be awarded in 2013 for the naval nuclear propulsion program. They can vary between $0.5 million to $3 million or $4 million. And there is a couple of those that we’re hoping we will break and we will be successful on in the coming year. In the refining space there is a lot of good opportunities in the $2 million to $5 million value range. China, U.S., South America, Middle East, areas that we have been successful in securing that work. For our condenser business there is a lot of activity in the renewable energy, as well as in the petrochem and refining market. And if I would point to the fourth quarter bookings of $42 million, within that was $9 million of condenser orders that were for ethylene plants. An ethylene plant has an average selling price of the condenser orders of somewhere between $2 million and $5 million. So as we see that begin to become more active, we can expect more of that type of opportunity to become available and hopefully we can secure it. So a long-winded answer to an easy question. We are seeing the order size increase and the number of orders expand, both very good.

Our next question comes from the line of Chase Jacobson with William Blair. Please proceed with your question. Chase Jacobson - William Blair & Company: Hi, good morning. Just quickly, Jim, you mentioned when you were talking about the guidance to reach the high end, it would be pretty critical to see the conversion of the Navy project and the Westinghouse project. I just want to make sure that that’s just based -- that comment is based on the natural progression of those projects and has nothing has to do with either regulatory or funding issues. Is that correct?

That’s correct. Chase Jacobson - William Blair & Company: Okay.

We are not seeing anything in the marketplace to suggest those orders are at risk. It’s just the pace at which they are -- the pace that which we are allowed to execute them. Chase Jacobson - William Blair & Company: Okay. Good. And then I would just take my shot here at the margin and pricing question. Can you may be just give a little bit of color on how the pricing had looked in the last six months, in the second half of the year compared to the first quarter of the year, you know long-term are getting better like U.S. petrochem. I know you can be more selective but at the same time are you seeing your competitors maybe be more aggressive to take advantage if markets that have been weaker?

One -- just general comment I will make about our competitors. They disappoint me in that they don’t recognize the market environment and they don’t change their pricing patterns. We are different from our competition and we do that. So we have seen our competition really change in regard to bottom of the cycle, top of the cycle. It appears to us they have standard pricing formulas that they use, whereas we don’t allow a standard pricing formula, we price situationally and opportunistic where we can. In general we are seeing the profitability of our smaller business, the business that we refer to as short-cycle which is about one third of our business on average, that margin has begun to improve. That’s particularly through price strategy. Those are quick turn orders and we put in place some price strategies there that have helped. In regard to the larger projects, the two-thirds of our business, and that’s our situational price discipline, understanding what the situation is, being opportunistic where we can and being aggressive where we must. But on average we are seeing that come up compared to six to 12 months ago in terms of the average margin of what we are winning versus what's in backlog. At the start of the fourth quarter what we won is a bit up from what the average of the backlog was going into the fourth quarter. Chase Jacobson - William Blair & Company: Okay. That’s helpful. When you look at your pipeline, can you give us any color around how much of the pipeline is related to, I guess Greenfield projects versus upgrades or expansions or changing feedstock or replacement, anything like that?

Sure. It does get a little foggy with respect to Brownfield, Greenfield, particularly in Asia. And quite honestly, we don’t really care because the size of the opportunity is really no different. Whether they are expanding a Brownfield site for additional 200,000 barrels per day or they are building a Greenfield. What tends to come in play is one moves faster than the other. The expansion moves faster than the Greenfield. But if I thought about it just in an overall comment, and China in particular is new capacity with some expansion, so some Brownfield. And elsewhere in Asia and in South America they are really expansions of existing sites but I would categorize them as new capacity. They are not revamps in a classic sense, they are added capacity. I guess that’s a better way to describe it. Chase Jacobson - William Blair & Company: Okay. That’s helpful. And then the last question I will ask is just about Energy Steel. You know it’s good to see you break into the China nuclear market. It looks like there is a lot more opportunities there. Any opportunity in any other international markets for that business at this point?

Well, certainly yes. And I will just take us back to a few conference calls ago. There is a lot of opportunity in the nuclear market. What we have elected to do is focus on where we thought we could win, where we could win quickly and win profitably. So we are taking our usual disciplined and measured approach. But to answer your question, there is a lot of opportunity out there globally. We still need to develop strategies to be successful for some of those opportunities.

(Operator Instructions) Our next question comes from the line of Joe Mondillo with Sidoti. Please proceed with your question. Joe Mondillo - Sidoti & Company: Good morning, Jim and Jeff. First question, just real quick, in terms of the Navy orders, how much of that $25 million is left and what are expecting in ’13?

Of the Navy order about, in rough numbers, 70% to 75% is left. Well, we have -- and our financial plan is converting about 25% to 30% of that order. We are aware there could potentially be a change order coming from the Navy. That could slow that down. No impact other than delayed revenue conversion. We would expect to change order for that and additional money for the change order because there’s different scope, change in scope. But that gives you a sense for what our plan is, but as we indicated, conversion of that backlog to sales has been no predictable. Joe Mondillo - Sidoti & Company: Okay. And in terms of the Navy potentially coming in and changing the order, how are you looking at that 20% to 30% versus that possibility of them coming in. If they do come in, will there we downside to the guidance or?

Well, we have modeled some of that into our planning scenarios and reflect that generally in our guidance that we have given. So we have not -- I guess I will phrase it differently, our guidance is not overly aggressive and isn’t necessarily predicated on the Navy order according to plan. The Navy order going to plan or maybe above plan pushes us up to the upside through the upside. But we have come out with a balanced initial guidance that reflects all the moving parts that are in our business. Joe Mondillo - Sidoti & Company: Okay. And just switching to oil refining opportunities. Where has a lot of that being coming from or at least, I guess, the orders in the fourth quarter seem to be pretty strong. Where are you seeing the strength there?

Well, we have picked up a couple of nice orders in the fourth quarter that were for China. And we announced yesterday another order for China for the refining market. So we have picked up $8-$9ish million of new orders for the Chinese refinery market in the last two months. We have some work coming up outside of the China market as well as inside the China market over the next six months. In Alberta in the U.S., for revamps. There is some bid activity in South America and in the Middle East and elsewhere in Asia that we would expect to see closed over the next six to nine months. So geographically in the refining market we are seeing a pretty healthy environment for project activity. Joe Mondillo - Sidoti & Company: Okay. Sort of all around geographically?

Yes. Joe Mondillo - Sidoti & Company: All right. And then in terms of, could you just address -- and I don’t know if you have opinion on this or sort of a viewpoint, but in terms of oil prices coming down so aggressively over the last month or so, how are you sort of looking in that affecting your refining customers and what are they saying?

Well, we are watching that and so is our customer base. I would sort of draw a contrast to where we were in 2003 and 2004. And if we thought about where oil was at that point in time, it was between $25 and $30 per barrel. And we had the strongest investment wave in refining space in my career at Graham which is almost 30 years, as oil went from that start point up to the 60s and go to about where it is today. You know as we hear from our refining customers depending upon what they are refining, you don’t necessarily need a $100 per barrel to be profitable. They model their investments for the long-term and what we are hearing, the modeling below the market price today in general. So I am not overly -- this is a long viewed answer, not a this week answer. What's happening, demand is increasing globally. Investments have to be made to keep up with that demand. Feedstock is less expensive for low cost, obviously low cost poor quality crude, that drives investments by our refiners to be able to process the crude oil that’s less expensive. So I think as oil vacillates, it may move down further. I am not overly concerned about it because the long-term view is demand has to be satisfied through incremental capacity, and that’s not abating, demand is not abating globally. Joe Mondillo - Sidoti & Company: Okay. Great. And then last question just in terms of, you know the balance sheet is still pretty strong with a healthy cash position. I am just wondering sort of your updated thoughts on the cash position and potential uses of cash.

Well, we have two principal uses of our capital. While we have one use, which is grow our business. The two avenues to grow our business are to invest to drive organic growth and to invest to drive growth through acquisition. We have an acquisition program that’s active. We will be as methodical and as disciplined as we were with the Energy Steel acquisition. And with regard to investments for organic growth, we will make those as we feel appropriate and we are assured of the demand profile from the markets we are expanding into. But a use of our capital is to grow our business with improved levels of sustained earnings -- to provide improved level of sustained earnings. Joe Mondillo - Sidoti & Company: And what is the -- how is the pipeline for acquisitions and just how, I guess, challenging maybe, in these sort of volatile and uncertain times?

Joe, this is Jeff. I guess, I will contrast it to when we were looking for Energy Steel which was during the calendar year 2009-2010 period, which for other reasons was volatile. It’s not a big issue from a volatility standpoint. We are not overly concerned about everything else that is going on. There are a number of opportunities in the pipeline as they were in that time period. And it’s really just a matter of making sure that we work our way through those opportunities, understand what makes sense for Graham and make sure we get a fit as we did with Energy Steel. We feel that the extra time that we took to ensure that we found the right candidate in Energy Steel has proven itself very nicely since we have acquisition them, and we would like to go down the same path with the next opportunity.

Our next question comes from the line of George Walsh with Gilford Securities. Please proceed with your question.

Jim, I wonder if I could amplify the previous question on a macro besides the oil but also with the current outlook for more of a slowdown on a global basis and concerns of financial institutions in Europe etcetera and banks. Do you see that having any impact on the type of orders that you are building up here in terms of their execution? And anything about how that could affect financing relative to the clients you are doing these big projects for?

I think that factors into the overall equation. It hasn’t been an impediment at this point in time. Many of our customers, certainly in international markets, are state owned businesses. And of the multinationals that we work with, they are well capitalized, although they do need financing for their projects. The fundamentals for making the investments are right. The demand is not changing. So we are very optimistic about that. And what I can share you with you is we have a very strong conviction in the direction of our markets. While in the middle of the downturn still today, with some uncertainty as you spoke to, we are still making investments in our infrastructure to capitalize on what we firmly believe will be a strong wave of opportunity over a multiyear expansion and we are getting out in front of it. We weren’t able to do that last time but we are able to do it this time. So we are quite, with conviction, going forward with our investment. We are keeping our eye on the fragility of our markets and the investment climate, the credit market, but we are certain that the underlying macroeconomics of demand are expanding and that demand has to be satisfied. And to us it’s just a timing issue but we are going to be ready for that time.

Yeah. Well, I agree with that, Jim, and I think you are -- I think two interesting slides relative to the presentation in that, for a small company you’re positioned to take advantage of the backlog that you have built up and also relative to be able to handle any delays or changes in the demand outlook, you know short-term effect in the cycle. But slide 14 was very interesting relative to your backlog growth, that speaks well to your positioning of the company and also the balance sheet. That’s remained very strong for “small company.” And I think that speaks well for your position to take advantage in the future what you are looking at as you are saying there, you can eventually get to that $200 million level. And just with reference to that, if and when you get to that type of level, do you see a significant margin expansion or you’d more or less be at this kind of 30% gross margin level when you get up to that kind of revenue stream?

I would expect, George, it would be bounded as it’s currently bounded as it’s currently bounded today. I think about our margins as bottom of the cycle, being in mid to upper 20s. Top of the cycle mid to upper 30s, I would expect just to be bounded by that. Sure the cycle of the market is on a trough to peak. I don’t -- where we are looking and what we think the operating model and the sales model require for the strategies that we have to acquire or expand into new markets, provides a similar profile to what Graham historically or what Graham has been in the last four or five years.

Okay. And just one specific question, your depreciation and amortization for fiscal year 2013, any estimate on that?

In fiscal ’12 it was, our depreciation and amortization was about $2 million. Over $2 million. I wouldn’t expect a dramatic change in that. Maybe a little bit up in depreciation and amortization perhaps down a little bit. We have a little bit of amortization related to the Energy Steel acquisition slip into fiscal ’12 so that will go -- there will still be some there but some of it will go away. So I don’t see a huge change there, maybe a little bit of a step-up, but relatively small.

Okay. But still good EBITDA and cash flow there?

Absolutely.

Our next question comes from the line of Tom Lewis with High Road Value Research. Please proceed with your question.

Hey, good morning. Just wanted to ask one question, kind of follow-up on your comment about corrective pricing behavior at this point in the cycle. I was wondering if you could elaborate on the extent to which it -- how important is it to have the low -- to be the low bidder. I would think that with some of the particular, some of the more highly engineered things that you do, you don’t necessarily have to be the low bidder to win the business. Could you talk, flesh that out for us?

Sure. In general, I think your observation is on the mark. Where we focus our reference is where the application of our equipment is very specialized, the cost of failure to the user is extraordinarily high. The execution of the contracts are extremely complex. And that tends to drive a value-based purchase decision. That’s where we believe we will stay because of, we create a lot of value and we believe we can extract a lot of value through our selling process. But there are times, in particular during the bottom of the cycle where buyers aren’t as discerning as we see them ordinarily. And we saw that the last couple of years, and we saw that in prior down cycles. So it wasn’t a surprise to us. We do smart things to navigate through that down cycle, to fend our market position to expand the market share where we can. But we get through the down cycle into the recovery, buyer behavior tends to normalize to what we like and what we typically do well at. I hope that answers your question.

Our next question comes from the line of Chris McCampbell with Stifel Nicolaus. Please proceed with your question

I am struck by the tone and the confidence you all have relative to where the stock price is right now. And I know that you have tended to keep your powder dry in terms of acquisitions but where are we on share repurchase at this point?

Sure. Chris, this is Jeff. We have a share repurchase program that is in place, it’s been authorized for a couple of years. It has the ability to repurchase up to a million shares, we have repurchased about 360,000 or so. It is a potential use of cash. As Jim mentioned, our main use of cash is to grow the business but it is certainly something that we consider at times particularly if we see, as we have seen here recently a bit of dip in the stock price, we potentially can be opportunistic.

Okay. Well, congrats on the progress guys.

Our next question is a follow up question from George Walsh with Gilford Securities. Please proceed with your question.

Jim, could you just update, just in general or how you are looking at the potential mergers or what you are looking at? And it’s something where you are really not that active at this point or is it something that you are eager to do with the current environment?

It will be fair to indicate over the last four to five quarters, we digested Energy Steel. But we have kept our eyes open, we do have our acquisition programs still active. Now that we have tucked in Energy Steel and we are about a year into that, year and a half into that, we are now more focused on looking externally for growth. But we do have a lot of opportunity with the businesses that we have to grow them. But acquisitions are still, as we had said previously, centered around, engineered to order businesses serving the energy market. Businesses that have a long sales cycle. Businesses that enable us to create what we believe is a lot of value for our customer. And that we believe in exchange we will be rewarded through that with margin or capture ratio. And we are looking again at businesses that are in the size of -- revenue size of $20 million to $60 million. We have looked above that and we have looked below that but we tend to think of that as the right spot for the next acquisition. And it could be in North America or it could expand our footprint outside of North America. But the typical attributes that we are looking for are as I just described which are consistent with as we had described them over the last several years.

Just how -- you know on a, I don’t know, 1 to 10 scale, I am just trying to pin you down a little bit about the emotional factors or the conditions that, is it right, is it just you guys like you said, you just integrated Energy Steel. Are you just really kind of laying back and just, well, if something comes along you will do it or is it something you feel a little bit more the atmosphere is good to pick something up in here?

George, this is Jeff. We are certainly looking, as we deal with Energy Steel, it’s a long process. And I wouldn’t say that we are waiting for something to drop in our lap and I also wouldn’t say that we are urgently feeling like we have to do something immediately. As it was with Energy Steel, it will take some time I suspect, just because we want to make sure we find the right company. Or if the right company were there today then we would move forward very quickly, or we want to make sure we find the right fits for Graham.

Mr. Lines, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you, Christine, and thank you everyone for your time and attention today. Again, we are very pleased with our results for fiscal 2012. We feel our team did a great job to execute a tough business environment and delivered very fine operating results. We are very excited about where we are as we enter fiscal 2013 and in particular as we look beyond 2013 into the height of the recovery a couple of years out. Our company is positioned extraordinarily well, I feel. We are different from where we were when we entered the last expansion cycle in 2005, and we are expecting to capitalize strongly on that growth cycle. And again our intent and our planning is to again double the size of our company. And I look forward to updating you end of July at our annual meeting. Thank you for time, have a great day.

Ladies and gentlemen this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.