Gabelli & Co. 22 nd Annual Pump, Valve & Motor Symposium - PowerPoint PPT Presentation

N Y S E A M E X : G H M Gabelli & Co. 22 nd Annual Pump, Valve & Motor Symposium February 9, 2012 Jeffrey F. Glajch Chief Financial Officer Executing our Strategy ● Driving Sustainable Growth Diversifying Improving Expanding N Y S E A M E X : G H M

Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, statements relating to anticipated revenue, the timing of conversion of backlog to sales, profit margins, foreign sales operations, its strategy to build its global sales representative channel, the effectiveness of automation in expanding its engineering capacity, its ability to improve cost competitiveness, customer preferences, changes in market conditions in the industries in which it operates, changes in general economic conditions and customer behavior and its acquisition strategy are forward-looking statements. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation's most recent Annual and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of Graham Corporation's underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation's forward-looking statements. Except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this presentation. 2

Graham Corporation Founded: 1936; IPO: 1968 NYSE Amex: GHM Recent Price $21.93 Common shares outstanding 9.9 million Market capitalization $217.1 million $26.30 – $14.36 52-week price range Avg. daily trading volume (3 mos.) 66,648 Ownership: ► Institutional 67.9% ► Insider 4.0% ► ESOP 3.2% ► Employee Stock Purchase Plan (ESPP) 40% Participation ► Annual dividend $0.08 Note: Market data as of February 2, 2012; ownership as of most recent filing 3

Our Vision Our vision is to be the world leader in the design and manufacture of ENGINEERED - TO - ORDER (ETO) products for the ENERGY MARKETS Executing our Strategy ● Driving Sustainable Growth 4 Diversifying Improving Expanding

ETO Products and Energy Markets Products Q3 FY2012 TTM Condensers Sales 20% Heat Exchangers $108.9 million 7% Ejectors Pumps 29% 13% Markets Aftermarket Chemical 13% Nuclear Processing 18% 13% Other 20% Refining 38% Power 29% 5

Diversification Drives Recovery Markets and Geography Revenue by Geographic Market Asia 15% Middle 12-Month Revenue East U.S. 18% 52% ($ in millions) Other 15% $106.5* $101.1 $86.4 37% $74.2 $65.8 46% $62.2 $55.2 FY 2010 – FY 2012E 55% 50% FY 2006 – FY 2009 55% 30.8% CAGR 49% 22.4% CAGR Oil refining, petrochemicals, Driven by oil refining Navy and power markets and petrochemical driving growth markets FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY 2012E Domestic Revenue International Revenue * Midpoint of guidance provided on January 27, 2012 ($105-$108 million)

Growth Drivers Power for Chemical and Oil Refining Power Defense Hydrocarbon Industry Generation Processing Industry • Accelerating • Middle class • Aging nuclear • Naval nuclear demand in expansion in power propulsion emerging emerging infrastructure program markets markets • New power • Submarine • Aging • Growing world plants fleet infrastructure in population • International • Aircraft developed • Expanding nuclear power carriers markets addressable expansion • Feedstock opportunities • Alternative changes • Edible oil/oleo- energy • Expanding chemicals • Biomass addressable • Industrial gases • Geothermal opportunities • Solar 7

Differentiators • Specialized manufacturing • Expanding opportunities for capability ETO products in critical applications • Stringent, highly-controlled • Value-based purchasing quality processes decisions • Low-volume / high-mix • High cost of failure business model • Complex order execution • Limited competition • Selling model • Long-term growth trend 8

Major Project Cycle Year 1 Year 2 Year 3 Year 4 Year 5 Concept FEED* EPC Bid Purchase Construction * front end engineering design Graham Competitive Advantage: Early Involvement $150 million pipeline Year 1 Year 2 consistent with past few years Graham establishes competitive advantage during first 24 months… Understanding pipeline, developing design options, identifying decision makers, understanding timing, creating strong relationships to… Gain advantage, optimize margin and win business 9

Energy Steel Acquisition (Dec. 2010) Nuclear Power Focused Superior quality processes are barrier to entry • Custom critical equipment fabricator • Nuclear-quality raw material supplier • N, NPT, NS, U, and R Stamps and Certificates of Authorizations Opportunities • Increase market penetration with existing nuclear power plants • Integrate engineering and design expertise with certified manufacturing process • New power plant designs: 4-6 new plants expected by 2018* • Significant addressable opportunities per plant 10 * World Nuclear Association 2009 Report

Financial Performance DIVERSIF Y IN G IMP ROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 11

Raised the Floor on Margins ($ in millions) $106.5 ** $101.1 $86.4 $74.2 $65.8 $62.2 $55.2 $51.8 $48.9 $46.4 $46.8 * $34.9 $40.7 $41.1 $44.5 $40.3 $41.0 $37.5 $41.3 FY1993 FY1994 FY1995 FY1996 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E 3.6% 4.5% 7.7% 10.1% 11.1% 7.0% 3.3% 1.6% (1.3)% (0.7)% (3.3)% 1.4% 11.3% 10.5% 25.4% 27.0% 17.9% 15.0% EBITDA Margin * 1997 was a three-month transition year and is excluded from this comparison; 1996 reflects a 12-month period ** Midpoint of guidance provided on January 27, 2011 ($105-$108) *** $19.3 million attributable to Energy Steel Note: See supplemental slides for EBITDA reconciliation and other important disclaimers regarding EBITDA. 12

Profitable Through Downturn ($ in millions) Net Income $17.5 $15.0 $10.1 $6.4 $6.4 $5.8 YTD FY2012 FY07 FY08 FY09 FY10 FY11 $0.58** $1.49 $1.71 $0.64 $0.64* $1.01 Earnings per Share * Excludes $0.5 million, or $0.05 per diluted share, in acquisition costs ** Includes R&D tax credit of $0.16 Note: All earnings per share amounts adjusted for stock splits 13

Q3 FY2012: Solid Start Revenue ($ in millions) $33.6 $25.9 $25.0 $24.3 EPS $19.2 $0.55 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 $0.30 $0.27 EBITDA Margin* $0.16 $0.13 26.3% 20.0% 17.1% Q3 Q4 Q1 Q2 Q3 13.0% 12.1% FY11* FY11 FY12 FY12 FY12 * See supplemental slides for EBITDA reconciliation and other important disclaimers regarding EBITDA. Q3 Q4 Q1 Q2 Q3 ** Q3 FY11 excludes acquisition costs FY11** FY11 FY12 FY12 FY12 14

Strong Cash Position Cash, Cash Equivalents and Investments ($ in millions) No bank Energy Steel: all cash debt at $58.6* $18 million 12/31/11 acquisition $46.2 $44.5 $43.1 $36.8 3/31/08 3/31/09 3/31/10 3/31/11 12/31/11 Cash available for acquisitions and organic growth * Excludes $16 million in unusually high upfront and near-term customer advances utilized to lock in raw material costs 15

Solid Core Backlog Strength ($ in millions) Orders Backlog $108.3 $107.1 $94.3 $91.1 $73.9 $75.7 $72.6 $64.4 $63.2 $50.0 $41.0 $24.1 $48.3 $50.1 $48.5 $44.3 03/31/08 3/31/09 3/31/10 3/31/11 12/31/11 03/31/08 3/31/09 3/31/10 3/31/11 12/31/11 Reflect major multi-year projects, including U.S. Navy and major Middle East refineries Executing our Strategy ● Driving Sustainable Growth 16 Diversifying Improving Expanding

Strategy & Outlook DIVERSIF Y IN G IMP ROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 17

Strategic Priorities  Advance market share in oil refining and petrochemical markets  Gain share in Asia and South America  Maintain strong position in Middle East  Continue to dominate North American market  Expand Energy Steel capabilities to increase sales and profit  Exploit synergies of Graham engineering and fabrication capabilities  Aggressively pursue sales to U.S. nuclear utilities  Capitalize on opportunities in new construction  Continue to develop Naval Nuclear Propulsion Program sales channel  Continue to evaluate acquisitions Executing our Strategy ● Driving Sustainable Growth 18 Diversifying Improving Expanding