Investor Presentation December 2011 Jeffrey F. Glajch Chief - PowerPoint PPT Presentation

N Y S E A M E X : G H M Investor Presentation December 2011 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 $23.38 Common shares outstanding 9.9 million Market capitalization $231.5 million $26.30 – $14.36 52-week price range Avg. daily trading volume (3 mos.) 56,998 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 November 30, 2011; 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 H1 FY2012 Sales Condensers $58.6 million 17% Heat Exchangers 6% Ejectors Pumps 32% 14% Markets Aftermarket Chemical 12% Nuclear Processing 19% 12% Other 19% Refining 41% Power 28% 5

Diversification Drives Recovery Markets and Geography 12-Month Revenue ($ in millions) $107.0* $101.1 $86.4 37% $74.2 $65.8 46% $62.2 $55.2 55% FY 2010 – FY 2012E 50% FY 2006 – FY 2009 55% 31.2% CAGR 49% 22.4% CAGR Oil refining, petrochemicals, Driven by oil refining Navy and power markets will and petrochemical drive growth markets FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY 2012 Domestic Revenue International Revenue * Midpoint of guidance provided on October 28, 2011 ($104-$110 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

Strength Through Diversification Revenue by Geographic Market: H1 FY 2012 Asia Asia (China) 16% • Refining, petrochemical, U.S. coal-to-liquid, fertilizer Middle 50% East 20% Middle East • Refining, petrochemical Other 14% Selling into the South America opportunities • Refining, petrochemical Revenue by Industry: H1 FY 2012 Oil Refining United States 41% • Nuclear power, renewable energy and refining Chemical / • Defense (Navy) Petrochemical Other Processing 19% 12% Past: Primarily Oil Refining & Petrochem Now: Four Distinct Markets Power 28% 9

Major Project Cycle Year 1 Year 2 Year 3 Year 4 Year 5 Contracts awarded Construction Conception to RFP 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 10

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 11 * World Nuclear Association 2009 Report

Operating Performance Principles Use disciplined product pricing and order selection process Apply continuous improvement and targeted capex to gain capacity and reduce lead time Employ flexible cost model to accommodate cyclical demand Align manager and employee compensation with profit and cash management objectives Focus on cash management and operating working capital A business poised for Strong, debt organic and free balance inorganic long sheet Dramatic improvement in term growth financial results, both at top and bottom of cycle 12

Financial Performance DIVERSIF Y IN G IMP ROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 13

Raised the Floor on Margins ($ in millions) $107 ** $101.1 $86.4 $74.2 $65.8 $62.2 $55.2 $40.3 $41 $46.4 $46.8 * $51.8 $48.9 $40.7 $41.1 $44.5 $37.5 $41.3 $34.9 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% 14.0% 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 October 28, 2011 ($104-$110 million) Note: See supplemental slides for EBITDA reconciliation and other important disclaimers regarding EBITDA. 14

Profitable Through Downturn Net Income $17.5 $15.0 $8.5 $6.4 $6.4 $5.8 $5.5 Q2 $3.0 Q1 FY07 FY08 FY09 FY10 FY11 FY2012 $0.58** $1.49 $1.71 $0.64 $0.64* 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 15

Q2 FY2012: Solid Start Revenue ($ in millions) $33.6 $25.9 $25.0 EPS $19.2 $15.7 $0.55 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 $0.30 $0.27 EBITDA Margin 26.3% $0.16 $0.08 20.0% 17.1% 17.1% Q2 Q3 Q4 Q1 Q2 FY11 FY11* FY11 FY12 FY12 8.6% Q2 Q3 Q4 Q1 Q2 FY11 FY11 FY11 FY12 FY12 16

Strong Cash Position Cash, Cash Equivalents and Investments ($ in millions) No bank Energy Steel: $58.6* all cash debt at $18 million 9/30/11 acquisition $46.2 $43.1 $37.7 $36.8 3/31/08 3/31/09 3/31/10 3/31/11 9/30/11 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 17

Solid Core Backlog Strength ($ in millions) $94.3 $91.1 $75.7 $75.1 $41 $50 $26.3 $54.2 $48.3 $44.3 $50.1 $48.8 3/31/07 03/31/08 3/31/09 3/31/10 3/31/11 09/30/11 Reflect major multi-year projects, including U.S. Navy and major Middle East refineries 18

FY 2012 E XPECTATIONS FY 2012 Expectations Revenue $104 to $110 million Organic growth 25% to 30% Gross margin 32% to 33% SG&A 15% of sales Effective Tax Rate 33% to 35% Varied order rates by quarter Guidance provided as of October 28, 2011 19

Strategy & Outlook DIVERSIF Y IN G IMP ROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 20