Greetings and welcome to the Graham Corporation third quarter fiscal year 2013 financial results conference call. (Operator Instructions) It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Graham Corporation.

Good morning, everyone. We certainly appreciate you joining us here today for the Graham Corporation third quarter fiscal year 2013 conference call. On the call, we have Jim Lines, President and CEO; and Jeff Glajch, Chief Financial Officer. Jim and Jeff will be reviewing the results of the quarter and then we'll handle the Q&A session afterwards. They will going, talking to the slide that you should have, and if you don't, you can get them on the company's website 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 with other documents filed by the company with Securities and Exchange Commission. You can find these documents at the company's website or at sec.gov. So with that, let me turn the call over to Jim to begin the discussion.

Thank you, Debbie, and welcome to our third quarter results and outlook update conference call. Please refer to Slide 3. Our strategic plan is to double revenue and exceed $200 million of the peak of this next cycle. Very deliberate actions were taken in the past few years to expand our execution capacity, diversified markets served, in particular the addition of a strong power market leg, and the planned growth of revenue from the defense market; and to strengthen our brand and position in Graham's traditional refining of petrochemical markets. We will remain committed to improving our selling and operating models that are suited for engineered-to-order products and serving global energy markets. Turning to Slide 4. Sales in the third quarter were $25.6 million, up 5.4% for the same quarter of last year. International sales represented 55% of total sales, as sales to international markets expanded 37% to $14.2 million. Sales to the Middle East, specifically Saudi Arabia expanded $4 million compared to last year due to conversion of large refining and petrochemical market projects in our backlog. Sales to Asia were up $2 million, primarily due to three refining projects for China that are in production now. U.S. sales were down $2.5 million compared to the same quarter last year due to delays in fabrication caused by the customers for a large order for an aircrafts carrier, also delays in the U.S. based nuclear power facilities projects and orders for existing U.S. based nuclear plants. Gross profit was up 10.3% to $7.1 million, with gross margin in the quarter at 27.8%. Operating margin was 11.6% of sales, excluding $975,000 related to a reserve reversal connected Energy Steel. Jeff, will review this in greater detail in subsequent slides. We had a strong quarter from a cash generation standpoint with $8.7…

Thank you, Jim, and good morning, everyone. As you turn to Slide 7, SG&A was $3.2 million in the third quarter. However, this included a $975,000 benefit from the reversal of a contingent earn-out provision related to the Energy Steel acquisition. Adjusting for this item, SG&A was $4.2 million, up from $3.8 million last year. Let me provide a little color regarding the Energy Steel provision reversal. We purchased Energy Steel in December 2010 for $18 million and provided the seller with the ability to earn two additional payments of $1 million each based on the business achieving a $4 million EBITDA level in each of the first two calendar years after the acquisition. The calculation of this $4 million EBITDA allow for a handful of adjustments based on changes made in the business post-acquisition. For calendar year 2011, the earn-out threshold was achieved and we made the payment to the seller in January of 2012. For calendar year 2012, the earn-out was not achieved. We had expected the earn-out to be achieved, however, due to a combination of slow orders in the first half of this fiscal year, specifically the quarters ending in June and September, combined with some timing delays around a couple of larger projects, the threshold was not achieved. Despite not achieving the threshold earn-out in calendar year 2012, we continue to be quite pleased with the Energy Steel acquisition. Let me provide a few metrics as we look back at the first two years of owning the business. Final purchase price all-in, including the payment of the first earn-out as well as a post-closing working capital adjustment ended up at $18.5 million. Our purchase price to average EBITDA was approximately 5.5. The cash flow continues to be strong in this business and we have returned…

Thank you, Jeff. And for your reference, I am referring now to Slide 12. Orders continued to improve on a sequential and trailing 12 month basis. We had $112 million in orders for the past 12 months and that compares to $91 million the same period one year-ago. Our markets continue to improve albeit at a slower pace than we wish to see. There has been a clear hesitancy by customers to commit to a final investment decision during the past several quarters. We are viewing that to be a reflection of the underlying demand, but more a measured pace by the customers, as they commit their capital to these projects. As mentioned during the past several conference calls that our pipeline of bidding activity supports our enthusiasm for the direction of our markets. During the past 12 months, the aggregate total of our bidding activity is $800 million to $900 million for our traditional markets, the traditional Graham prior to Energy Steel's acquisition. That does compare to $300 million to $400 million in the fiscal 2004 timeframe, just ahead of the massive expansion in our markets we experienced during the fiscal 2005 through fiscal 2009 period. We continue to believe quarterly order expansion is a timing issue rather than a market health issue. And steps taken to develop internal capacity and to be ready for a surge of business will enable us to achieve our goal of doubling the revenue level for Graham as we reach the next peak of this cycle. On to Slide 13. Our backlog remains healthy at just over $90 million. We expect 75% to 85% of current backlog converts over the next 12 months, as our bidding pipeline moves toward a steady pace of purchase decisions, we expect backlogs to begin to expand. As…

(Operator Instructions) Our first question comes from the line of Chase Jacobson with William Blair.

The first thing I wanted to ask is about the revenue push-outs, something that we've been dealing with for a couple of quarters here, and I know it's not in your control. But can you just remind us, how much of the backlog is related to those projects right now? And then, as you look forward, I know your visibility is really limited to what's in your contract and what the customer tells you. But is there a way to get more comfortable with the schedules on those? And how do you plan for that going forward, given that this has happened a couple of time times now?

Of the $90 million in backlog, roughly, Chase, about a third are these long life projects, the Navy project for the carrier program and the new build nuclear projects here in the U.S. We took those orders strategically, because they've opened us up for entering new markets. They are challenging. We've been in the nuclear market. I'll speak the nuclear market first. We've been in the nuclear market in our past up through the mid 90s, so we have familiarity with the way those projects flow. While frustrating, we are not surprised about the pace at which we are able to execute the current orders for the four reactors in U.S. There's a lot of engineering activity that still is ongoing by the process licensor or the contractor that affects releases into fabrication. We have to wait until engineering has frozen and we're authorized to move to the next step. That has some unpredictability toward regrettably. What we do is, we stay focused on standing alongside of the customer, helping them resolve these issues, being out there ready to answer technical questions. Our focus is getting back on track, getting these projects built, shipped and money collected. But to a large degree we're at the mercy of how the engineering firm releases that work into production. The same is true of the carrier order. Now, we're mindful to be aware that this does affect our financial performance and it does affect our cost basis. And when appropriate, we go back to the customer and look for recovery of the impact of those delays on our business. However, from your vantage point and vantage point of the investor, it can yield to some disappointment in a particular quarter, when revenue was projected to be higher. But ultimately, because these projects in…

It sounds like some of that will just have to deal with. But in that answer you mentioned that you sometimes go back to customer and look for some recoveries here. Looking at the cash flow, was any of the improvement in cash flow because of items like that, where you went back and try to recover some of the cost?

Not at all. But the cash flow was simply our operations and improvement in working capital in the quarter as well as, obviously, the impact of earnings.

Just one other question, Jim, if I could. The trailing 12 months bids that you gave is pretty impressive, when you compare it to last cycle. Can you give us some idea of what that means or bids outstanding now? And then, when you look at that $800 million to $900 million compared to last cycle, how much of that is because of entering new markets versus an increase in the core markets, and is that a function of a larger number of projects or just low to your dollar projects?

To my best answer, there are different questions there. The size of the pipeline compared to the $300 million to $400 million in the 2004-ish timeframe, I just want to be clear to everyone, that is core Graham. That is not nuclear, that is not necessarily new navy work, that's traditional Graham. So that was a timestamp of how we looked in going into the last expansion cycle compared to how we see that today. It was up roughly toward maybe 2.5x. So to us that's been the catalyst for our underlying enthusiasm that we've had over last several calls. And for bidding it and the projects have some viability to that and then they appear too. It's a timing issue. And you've heard us on the last several calls, be rather enthused about our pipeline. And I also want to be candid, a part of that lift, between $300 million to $400 million, to $800 million to $900 million has to do with the step change in the cost of raw materials. Probably, on a comparative basis, the cost of our product is up between 35% and 60%, depending upon metallurgy. So that's part of the lift. The rest really is our strategy to be more expensive in the markets we cover and the customers that we're accessing. And our customers as well are helping, as they look for more exotic alloys to improve the life of the equipment they're buying, elevating the cost of the equipment. So all-in-all timestamp-to-timestamp we're really excited about the size of this pipeline compared to where we were sitting at the start of the last expansion cycle. In terms of what's viable, and I'll try to answer it this way, as we think about what we would consider a more active and to close over the next two or three quarters, it's probably somewhere around 25% to 35% of that number. Now, I want to provide a caveat. We just closed an order yesterday, and that order was suppose to close in 2008, it was suppose to close in February of 2012, it was suppose to close in December of 2012, at 5 o'clock yesterday it closed. So we're seeing this hesitancy of our customers to make their final investment decision. However, again, the underlying demand seems to be there, and it's timing, Chase. And hopefully that clarifies and answers the two or three questions that you raised.

Our next question comes from the line of Jason Ursaner with CJS Securities.

Just generally on the order wins, last quarter you had characterized it as a good quarter and it would have been very good if the oil sands order hadn't slid. So just in terms of the sort of a win year progression of the business, should we be looking at it as if last quarter was really a $30 million order quarter, and it's a pretty significant slowdown the $20 million in the third quarter or is it the hesitancy, is it more of a stable flat environment you just haven't seen that second half pick up that maybe you'd expect it earlier in the year?

Jason, we would characterize it as flattish with higher probability of going higher than going lower.

And in the prepared remarks, in the press release it is mentioned the chem and petrochem market only accounted for $2.5 million of orders. I'm not sure how much of that was domestic. But just in general, how should we look at that number versus some of the commentary you guys have been making on this renaissance of U.S. production with low cost natural gas feedstock.

I'll share with you how we're looking at it. We're looking at it very bullishly. We do believe that the North American petrochem renaissance has traction. We've looked at the various projects that are available. And I can share with you that there's probably 12 to 18 projects at various stages, and I don't believe all of them will go ahead. But we're actively bidding, we're actively in conversations with at least half of those projects. Some have not moved to the point of being bid yet. The projects have seemed to be pacing faster than others as the ammonia/urea. The fertilizer market seems to be moving more quickly than the classic petrochem, ethylene and other petrochemical processes. So we are expecting to see some projects come forward and be closed over the next two to three quarters that are in the fertilizer market. And we expect to see maybe one or two petrochem projects close as well. We don't think it gets hot and very active for another six to 18 months. But what's important is, in our conversations with the end-user or the process licensor or the EPC, project seems real, they have a earnest pace to them, and it's coming. So we think about it very bullishly. We think about it as part of our growth strategy. And what's also desirable is it's on our home court, in North America. And we didn't have that activity last cycle. So we're pretty excited about it. We think it's real. We still think its a few quarters away. Are there derailers, possibly. But we think there will be good amount of that work coming and we view kind of capitalize on it, Jason.

And then, I want to jump to SG&A for a second. One of the key messages from the cycle point slide had been that you're investing in the middle of a company ahead of revenue, to be in a position to take advantage of these opportunities. And I think last quarter you guys had mentioned that this bidding being closer to the $5 million range. Obviously, there is a variable component that's tied to commissions, and revenue didn't come in quite where expected. But directionally, how should we be thinking about this quarter's SG&A, after the adjustment versus that $5 million figure? And is there any delay on the investments you're making internally to the long-term platform, just given what you're seeing in the market?

Jason, I think the $5 million SG&A may have been a question in the last quarter, and our expectation was being at that $5 million level was probably a little high. We didn't expect to be at that $5 million level. So there may been have a little mystery occasion there. And I think if you look at this quarter for SG&A, it's kind of in line with we're at. I would think as we go forward, we've kind of targeted in general to have a 15-ish, maybe a little higher than that SG&A range as a percent of sales. And I think that's a good way to look at it. So if you're targeting at sales level of 15%, 16% perhaps of SG&A going forward is probably a good number. And that, certainly when we get to the $5 million, I think we would but you'll have to kind of get to math where you'll be seeing revenue numbers in the lower 30s to be consistently at the $5 million SG&A level.

And just last question on the Energy Steel adjustment, just want to make sure I understand the contrary. So you mentioned the total price was 18.5 and that you paid an average of five-and-a-half times EBITDA. So if the first year was achieved though, I guess that would have made it worse, almost four-and-a-half. So it doesn't need to be running closer to seven times on the current year to average out. I mean, is that the right way to interpret that comment?

Jason, couple of things. First off, the first year was achieved. I'm not sure I necessarily characterize it as four-and-a-half. And again, the threshold was four and we achieved four. And the second year it was not achieved, so by deduction it would be lower than the first year. This is based on the calendar years, which is different than the fiscal years. And the first quarter of this past calendar year, which was the last quarter of last fiscal year, we expected to do better in this current quarter. So on a fiscal year basis, I think characterizing the acquisition at seven times EBITDA would probably be too high in number. Again, there is a little bit of conflict between fiscal year and calendar year here. I think if you're looking at a fiscal year basis, I think ranging between five and six for both of the years would be a fair way to characterize it, kind of where we're at. So yet there was a drop calendar year over calendar year, or fiscal year over fiscal year drop isn't quite as significant as the calendar year over calendar year drop, it was just timing.

Our next question comes from the line of Joe Bess with Roth Capital Partners.

I was hoping to go back and talk a little bit more about the bids outstanding that you guys have. Taking as a midpoint, $350 million, just for clarifying, did you say that you're expecting about $212 million of that to be awarded in the next three quarters?

That would be correct. That's a 25% to 35%.

Then what are you guys taking percentage of that and that as well as your competitors?

And when I provide the caveat of that example of the order we won yesterday, we thought it was going to close several quarters ago and that stock would close each quarter between now and back several quarters, so things do move to the right. But basically from our sales management judgment, we've identified that order of magnitude is planned to close in that timeframe. Do I expect it all will close? No. Do I expect something we don't have on the radar should mean to come in? Yes. And of course, as you said we will not get it all.

And then can you talk about what percentage of that it would you say is your core competency? And then also compare where you guys typical are viewing as win rate versus what it was back in 2004?

The number that we've given you and the two timestamps that we've shown, the $300 million to $400 million in the 2004 timeframe or $800 million or $900 million of core-type Graham business or bids today, if we look at our historical, this will be row capture rate. So it might be different to what you would ordinarily hear from us as a real capture rate. But we do track our raw capture rate. And depending upon where we are in the economic cycle historically, our business has converted about one and ten, to one and six somewhere, around one and eight, as immediate.

And then when you compare that to the last cycle and compare that to this cycle, where you're in new markets. Are you anticipating December to kind of down, because you're kind of penetrating new markets that you don't have much history in?

My judgment on that would be I don't expect our capture rate to materially become different. What could potentially occur is the margin potential is different, and we've talked about that.

And then are you able to give a little bit of a color on this $212 million that you're expecting? What color it kind of breaks down terms of industry?

These are rough numbers. 40% of that is for the refining market, about another 35% of it is from our pretrochem, which includes ethylene, ammonia/urea and other petrochemical projects. And then maybe a 15%-ish is power, and the remainder comes from the host of other markets we serve.

And the thinking about the orders that have been delayed, where these shipments are you expecting to hit in the fiscal '14? And is this being pushed out into what you would think, it looks likes the fiscal '15?

We're talking primarily about three projects that are very long-life projects. The carrier order from first revenue to last revenue is three to three-and-a-half years is now going to be more like four or four-and-a-half years, because of these delays. And then for the large orders secured at Energy Steel for new nuclear plants, the revenue cycle on those projects were projected to be between two and two-and-a-half years and it's probably going to be between two-and-a-half and three-and-a-half years.

Our next question comes from the line of Joe Mondillo with Sidoti & Company. Joe Mondillo - Sidoti & Company: Just a follow-up on sort of trailing 12 month bids. Could you give us an idea and how that's trended over the last several quarters? Has that trailing 12 months ramped up from 500 number, sort of how is that trending?

No, it's actually been at that level for much of the last several quarters when you heard the enthusiasm from us about our pipeline. It's been elevated for about a year. Joe Mondillo - Sidoti & Company: So how is that translated into any gross margin expansion in the orders? Is it still, since these bids aren't been translated yet, is sort of the gross margin, the pricing is still stable at the moment?

I think it's the latter. It's not a strong enough buying environment yet to get to the margin lift we customarily expect as our markets improved. It has gotten better, but it's not where we expected to go one or two years forward. Joe Mondillo - Sidoti & Company: Your oil refining orders continue to ramp up pretty strong, up 40% sequentially. Where is that coming from exactly, geographically?

Sure, if we look at the third quarter orders, refining segment in particular, it was a very large order for oil sands. We also secured some orders for the U.S. refining market and from Latin America, and from China. From traditional markets with the exception of oil sands is beginning to become active. Joe Mondillo - Sidoti & Company: So a majority in North America, but also demand elsewhere?

Right. Joe Mondillo - Sidoti & Company: So in terms of the petrochem market, it sounds like, I mean, you're giving an awful big range, sort of six to 18 months. It sounds like you have a ton of projects out there that are sort of bidding, in the process of bidding, and engineering. Is it just a case and point where you really don't know when it's going to happen and it could essentially happen in three to six months? You're just not positive. And we could see a flood of orders at some point, is that possible?

I think the range, it's just from our experience of how the early stages of recovery ramps up. There is some front-leader's they try to get to market first. And as I said earlier, we think that's the fertilizer market within the petrochemical umbrella. The ethylene projects, because of their complexity and their enormity seem to be moving a little bit slower, along with the propane dehydrogenation projects. But it's just our judgment. We don't think it's going to get hot right way. And we would think it becomes more exciting and much more active within that window that we've just described. Now having said that it could be month-seven from now, but our judgment is to six to 18 months based on our experience and based on our view of where these projects are, and the usual way Graham projects these types of things. We're not openly aggressive. I think we're balanced in our approach and you're hearing from us the usual balance of how we view these opportunities. Joe Mondillo - Sidoti & Company: And when you talk about the six to 18 months, is that orders?

That would be orders and the revenues slightly little 12 months after that. Joe Mondillo - Sidoti & Company: And so looking at that $9 million petrochem backlog, do you think that's the bottom here, and maybe we hangout around there for the quarter or two?

I think it could decline over one or two quarters, but then we'll begin to expand as we get into that six to 18 months window. Joe Mondillo - Sidoti & Company: And then just lastly, the revenue delay is like a push, could you quantify how much would get pushed in the 14?

I will say it was about 10% of the quarter sales, little bit above that.

Our next question comes from the line of Brian Rafn with Morgan Dempsey.

Give me a sense, I missed Jim your very opening comments, given you talked about hesitancy, are you seeing the volume of bid quote activity? What's kind of the delta change there? Has it expanded? Is that about the same the last 12 to 18 months? Are you seeing any acceleration in just clearly bids and quotes?

The dollar value of the bids on a trailing 12 months basis has been relatively flat, traveling that $800 million to $900 million range, for about the last year. But I would it's ramped up fairly steadily to go back 12 months, and earlier. It's ramped up from that timeframe. So three years ago to one year ago, it has begun to show some expansion.

When you look at that bid quote activity Jim, talk a little bit about maybe the competitive environment? The numbers of competitors on each project bid? And then your sense, is there been any surrender of margin? You see customers being a little more aggressive on margin of pricing or it's been about the same? Give me a sense of what kind of the competitive bidding environment is?

It's fair to give this a timeframe. We're seeing that margin environment improved, from where it was two years ago, one year ago. We're not seeing it as healthy as it was in 2007 and 2008, nor did we expect it to be that healthy just yet. But directionally it is improving. What we do see from a competitive perspective, Brian, is and this comes down to the pace of which this purchase decisions are being made, when there scanter is very few, it tends to be more hyper competitive. I think we're still on that highly competitive environment now where there is some favor on the buyer side, but as we move into that six to 18 months timeframe, we spoke about it earlier, and more projects are teemed up to be awarded, I expect and as we've seen in the past during that type of situation margins become better.

If you were to the kind of detail a little bit on anyone specific bid quote, and maybe it varies by your different end-markets, how many competitors are you seeing bid these projects?

A general rule of thumb, I know you're focused on it maybe a lot, but let me put that aside for a second. In our core markets, refining a petrochem, there generally are corporate policies, either at the EPC or the end-user that there must be three competitive bids. So it's not uncommon to see Graham plus two. When we go into certain Asian EPC situations, there might be five or six. And when we go into certain highly specialized situations, where we're very differentiated and we have leading technology, it might be just us or one other. So it does vary. But i9 would say in general, when we look at an opportunity, we tend the think of Graham plus two.

Are you guys seeing maybe over the last six to 12 months any changes in your commodity feedstocks, metals?

We've seen a bid of a pullback, a favorable pullback with the reduction in pricing over the last two or three months now. We don't think that's long-lived. We think as the markets become active and demand begins the pickup, those commodities, carbon steel, copper bearing alloys, nickel bearing alloys, should begin to become more expensive. Now having said that, Brian, we don't anticipate that leads to margin erosion. We tend to our supply chain and are people developing the bids do well to keep our costs currents. So we don't typically have margin erosion, as commodities increase.

Given that, Jim, do you guys look to buy forward at all any of these feedstocks, are you going to given that there is some pullback in price?

No. We try to lock down material cost at the time we secure an order. We don't do any kind of hedging around our raw materials, nor do we try to speculate out whether there is something is going up or down. When we bid on projects our price volatility has got a fairly tight timeframe. And our intent is really to match what we bid and not to speculate in the materials market at all.

If you put a number, Jeff, on that pullback what might should be in some of the carbon steels and nickel bearing that? Are you down 10%, 20%, 15%, 5% or what?

We just went through an update on that. So on current, we've seen a pullback on our pressure vessel carbon steel upon on the order of between 5% and 10%. And that can vary whether it's from distribution or from the mill directly, but the blend is that order of magnitude.

Anything, as you guys talked about the ramp up of almost $200 million in sales the potential. Have you done any incremental hiring SG&A engineers, big plant guys within the last say a quarter or two?

Yes. We're still building for the search of work that we anticipate is coming, Brian. We've added into the operations area with direct labor. We've picked a point, where we want to exit this fiscal year at and we have picked a point where we want to exit fiscal '14 at from a direct labor standpoint and from an indirect standpoint to support where we see the growth going in out years. So we are still building. Now, we're being measured on that. We're not getting too far ahead of ourselves to affect profitability in near-term, meaningfully, but we are investing for our growth.

Our next question comes from the line of Joe Mondillo with Sidoti & Company. Joe Mondillo - Sidoti & Company: I just have two follow-up questions. The first one, could you just talk about the breakdown of the bidding activity compared to the order activity that you're seeing right now? Is there any difference?

In terms of, Joe, end-user markets or geographic markets? Joe Mondillo - Sidoti & Company: End-markets.

No, not really. With the exception of we're expecting in again that's six to 18 months out to begin to see growth in the petrochemical bookings and growth in our backlog aligned with the petrochemicals market. Joe Mondillo - Sidoti & Company: So the petrochem as a percent of your total orders is quite small now. Is it larger percent in terms of the bidding activity? Are we at the early stages of these projects? And more petrochem sort of bidding activity coming around to figure out what the costs are of these projects that maybe coming down the line in 18 to 24 months? Or is it still pretty early and is it quite in fact very similar to the order activity?

The answer is the award activity for petrochemicals is down in comparison to the bidding activity and the future award activity that we would anticipate. Joe Mondillo - Sidoti & Company: So the bidding activity of petrochem is similar as a total compared to what the order trends are looking like?

I guess, it's sort of alike. But I think the pipeline is beginning to expand through the percentage of our quarterly bookings at our two petrochem. Joe Mondillo - Sidoti & Company: And then I just wanted to clarify the bid to quo activity and your win rate. You mentioned earlier in the call or in the Q&A, that on average it's between 1.6 and 1.12 or 1.10. So around 1.8, but then you were talking on the last gentleman's question, you were referring to on most projects there is three bidders, so that wouldn't say to me that it's sort of one and three, so just to clarify that for me?

Sure. There are three bidders. However, going into most projects, I think we are the lead bidder. And we secure a fair percentage. It's not one-third, one-third, one-third, in terms of the real capture rate. We tend to capture more than one-third of the opportunities that close. Joe Mondillo - Sidoti & Company: So that 25% to 30% awarded over the next three quarters, we should essentially look at that as that you could potentially acquire up to 30% to 40%?

You could think about it that way. But again, we had that the caveat that not all projects go ahead. They push to the right. But that's also balanced by some projects that we don't have on the radar screen that come very quickly and get closed in the quarter. But I think you're generally thinking about it fairly.

There is a follow-up question from Brian Rafn of Morgan Dempsey.

Certainly you talked about sequestration and some of the issues with Chuck Hagel as Sec Def. Has that at all impacted the CVN-79 John F. Kennedy or the Virginia fast-attack sub programs? Morgan Dempsey: Certainly you talked about sequestration and some of the issues with Chuck Hagel as Sec Def. Has that at all impacted the CVN-79 John F. Kennedy or the Virginia fast-attack sub programs?

We can't identify where it's affected the CVN-79 as it would relate to Graham, because we've materially secured what we're going after. There's couple of smaller projects coming up that we'll potentially bid on. With regard to the Virginia program and the bidding activity, a response to that was we've seen some of former bids where there has been requests for us to extend our bid validity two or three times. So therefore, yes. But we're seeing some affect in postponing purchase decisions tied to that.

And then on the fleet ballistic next-generation beyond the Ohio class sub, anything on the boomer subs for next generation? Morgan Dempsey: And then on the fleet ballistic next-generation beyond the Ohio class sub, anything on the boomer subs for next generation?

That's in the second stage of detailed engineering. The first prototype awards are not expected to be until sometime in calendar, '14 or early '15.

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 everyone for your time this morning. Again, we appreciate your questions and the detail with which we went over the outlook through your questioning. As you can appreciate, we're very enthused about where we're going, of the strategy that we've developed to grow Graham. We set our target to double the size of Graham, plus this current cycle through both focusing on organic expansion, and deploying our capital for strategic acquisitions. And we look forward t our updating you on future conference calls. Thank you.

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.