##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
 ANNUAL REPORT
 PURSUANT TO SECTION 13 OR
    15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the year ended
    March 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .  Commission file
    number 1-8462
 GRAHAM CORPORATION
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

16-1194720(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

Identification No.)20 Florence Avenue, Batavia, New York

14020(Address of Principal Executive
    Offices)

(Zip Code)   Registrants telephone number, including area code
    585-343-2216
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon Stock (Par Value $.10)

NYSE Amex   Securities registered pursuant to Section 12(g) of the
    Act:
  Title of ClassPreferred Stock Purchase Rights   o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
    Large accelerated filer o

Accelerated filer þ

Non-accelerated filero
    (Do not check if a smaller reporting company)

Smaller Reporting company o   Rule 12b-2 o þ
      Documents
    Incorporated By Reference




---



##### 





Table of
    Contents
  GRAHAM
    CORPORATION
 Annual Report on
    Form 10-K
 Year Ended March 31, 2009
   
  PagePART IItem 1

Business


1Item 1A

Risk Factors


4Item 1B

Unresolved Staff Comments


10Item 2

Properties


10Item 3

Legal Proceedings


10Item 4

Submission of Matters to a Vote of Security
    Holders


10PART IIItem 5

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


10Item 6

Selected Financial Data


12Item 7

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


13Item 7A

Quantitative and Qualitative Disclosures About
    Market Risk


22Item 8

Financial Statements and Supplementary Data


24Item 9

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


52Item 9A

Controls and Procedures


52Item 9B

Other Information


52PART IIIItem 10

Directors, Executive Officers and Corporate
    Governance


53Item 11

Executive Compensation


53Item 12

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


53Item 13

Certain Relationships and Related Transactions,
    and Director Independence


53Item 14

Principal Accounting Fees and Services


54PART IVItem 15

Exhibits and Financial Statement Schedules


54EX-10.27EX-10.28EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1    Note:
    Portions of the registrants definitive Proxy Statement, to
    be issued in connection with the registrants 2009 Annual
    Meeting of Stockholders to be held on July 30, 2009, have
    been incorporated by reference into Part III,
    Items 10, 11, 12, 13 and 14 of this Annual Report on
    Form 10-K.




---



##### Table of Contents



PART I    Item 1.
    Business.  ®
    
    petroleum refineries;
    chemical and petrochemical plants;
    fertilizer plants;
    power generation facilities, such as fossil fuel, nuclear,
    cogeneration and geothermal power plants;
    alternate energy;
    pharmaceutical plants;
    plastics plants;
    liquefied natural gas production facilities;
    soap manufacturing plants;
    air conditioning systems;
    food processing plants; and
    other process industries.  Our
    Customers and Markets
        Form 10-K.
 1




---



##### Table of Contents



Our
    Strengths
    
    We have strong brand recognition. Over the past 73 years,
    we believe that we have built a reputation for top quality,
    reliable products and high standards of customer service. We
    have also established a large installed application base. As a
    result, the Graham name is well known not only by our existing
    customers, but also by many of our potential customers. We
    believe that the recognition of the Graham brand allows us to
    capitalize on market opportunities in both existing and
    potential markets.
    We custom engineer and manufacture high quality products and
    systems that address the particular needs of our customers. With
    73 years of engineering expertise, we believe that we are
    well respected for our knowledge in vacuum and heat transfer
    technologies. We maintain strict quality control and
    manufacturing standards in order to manufacture products of the
    highest quality.
    We have a global presence. Our products are used worldwide, and
    we have sales representatives located in major cities throughout
    the world.
    We believe that we have a solid reputation and strong
    relationships with our existing customer base, as well as with
    our key suppliers.
    We have a strong balance sheet with significant cash and
    investments, and minimal debt.
    We have a high quality credit facility, which allows for a
    $30,000 borrowing capacity.  Our
    Strategy
    
    To capitalize on the strength of the Graham brand in order to
    win more business in our traditional markets and enter other
    markets.
    To identify acquisition and organic growth opportunities where
    our brand strength provides us an advantage to expand and
    complement our core business. This includes opportunities to
    extend our existing product lines, move into complementary
    product lines and to expand our global sales presence in order
    to further broaden our existing markets and reach additional
    markets.
    To invest in people and capital to meet the long-term growth in
    demand for our products in the oil refining, petrochemical
    processing and power generating industries, especially in
    emerging markets. Specifically, we intend to strengthen our
    sales and engineering in Asia and establish manufacturing
    capabilities where long-term estimates of demand for oil and oil
    by-products point to continued growth.
    To always deliver products and solutions that enable our
    customers to achieve their operating objectives and that
    differentiate us from our competitors, and which allows us to
    win new orders based on value.    
    Invest in engineering resources and technology in order to
    advance our vacuum and heat transfer technology market
    penetration.
    Enhance our engineering and manufacturing capacities, especially
    in connection with the design of our products, in order to be
    able to more quickly respond to existing and future customer
    demands. 2




---



##### Table of Contents




    Accelerate our bids on available contracts by implementing
    front-end bid automation and design processes.
    Expand our margins by implementing and expanding upon our
    operational efficiencies through a flexible manufacturing flow
    model and other cost efficiencies.  Competition
    NORTH
    AMERICA
  Market

CompetitorsRefining vacuum distillation

Gardner Denver, Inc.Chemicals/Petrochemicals

Croll Reynolds Company, Inc.; Schutte Koerting; Gardner Denver,
    Inc.Turbomachinery Original Equipment Manufacturer
    (OEM)  refining, petrochemical

Ambassador; KEMCO; Yuba Heat Transfer, LLCTurbomachinery OEM  power and power producer

Holtec; Thermal Engineering International (USA), Inc.; KEMCO;
    Yuba Heat Transfer, LLCHVAC

Alfa Laval AB; APV; ITT; Ambassador   INTERNATIONAL
  Market

CompetitorsRefining vacuum distillation

Gardner Denver, Inc.; GEA Wiegand GmbH; Edwards, Ltd.; Korting
    Hannover AGChemicals/Petrochemicals

Croll Reynolds Company, Inc.; Schutte Koerting; Gardner Denver,
    Inc.; GEA Wiegand GmbH; Korting Hannover AG; Edwards, Ltd.Turbomachinery OEM  refining, petrochemical

DongHwa Entec Co., Ltd.; Bumwoo Engineering Co., Ltd.;
    Oeltechnik GmbH; KEMCOTurbomachinery OEM  power and power producer

Holtec; Thermal Engineering International; KEMCO; 
    Yuba Heat Transfer, LLC     Intellectual
    Property
    Availability
    of Raw Materials
    Working
    Capital Practices
   3




---



##### Table of Contents



Environmental
    Matters
    Seasonality
    Research
    and Development Activities
    Information
    Regarding Our International Sales
    Available
    Information
      Item 1A.
    Risk
    Factors  Our business and operations are subject to numerous risks,
    many of which are described below and elsewhere in this Annual
    Report on
    Form 10-K.
    If any of the events or risks described below occur or
    materialize, our business and results of operations could be
    seriously harmed.
  Risks
    related to our business
  The
    industries in which we operate are cyclical, and downturns in
    such industries may adversely affect our operating
    results.
   4




---



##### Table of Contents



We
    serve markets that are capital intensive. The recent volatility
    and disruption of the capital and credit markets and adverse
    changes in the global economy may negatively impact our
    operating results. Such volatility and disruption may also
    negatively impact our ability to access additional
    financing.
      The
    larger markets we serve are the petroleum refining and
    petrochemical industries which are both cyclical in nature and
    dependent on the price of oil. As a result, volatility in the
    price of crude oil may negatively impact our operating
    results.
    Our
    international sales operations are subject to uncertainties that
    could harm our business.
      
    difficulty enforcing agreements through some foreign legal
    systems;
    general economic and political conditions in the countries where
    we sell our products may have an adverse effect on our sales in
    those countries;
    foreign governments may adopt regulations or take other actions
    that could directly or indirectly harm our business and growth
    strategy; and
    it may be difficult to enforce intellectual property rights in
    some foreign countries.   5




---



##### Table of Contents



A
    large percentage of our sales are in
    non-U.S.
    jurisdictions. As a result, we are subject to the economic,
    political, regulatory and other risks of international
    operations.
    
    nationalization of private enterprises and assets;
    political or economic instability in certain countries,
    especially during the current global economic crisis;
    differences in foreign laws, including increased difficulties in
    protecting intellectual property and uncertainty in enforcement
    of contract rights;
    credit risks;
    currency fluctuations;
    tariff and tax increases;
    export and import restrictions and restrictive regulations of
    foreign governments;
    shipping products during times of crisis or wars;
    our failure to comply with United States laws regarding doing
    business in foreign jurisdictions, such as the Foreign Corrupt
    Practices Act; and
    other factors inherent in foreign operations.  We are
    subject to foreign currency fluctuations which may adversely
    affect our operating results.
    If we
    fail to introduce enhancements to our existing products or to
    keep abreast of technological changes in our markets, our
    business and results of operations could be adversely
    affected.
    The
    loss of any member of our executive management team and our
    inability to make up for such loss with a qualified replacement
    could harm our business.
   6




---



##### Table of Contents



Our
    business is highly competitive. If we are unable to successfully
    implement our business strategy, we risk losing market share to
    current and future competitors.
    If we
    are unable to make necessary capital investments or respond to
    pricing pressures, our business may be harmed.
    If
    third parties infringe our intellectual property or if we were
    to infringe the intellectual property of third parties, we may
    expend significant resources enforcing or defending our rights
    or suffer competitive injury.
      We are
    subject to contract cancellations and delays by our customers,
    which may adversely affect our operating results.
    A
    decrease in supply or increase in cost of the materials used in
    our products could harm our profitability.
   7




---



##### Table of Contents



If we
    are unable to effectively outsource a portion of our production
    during times when we are experiencing strong demand, our results
    of operations might be adversely affected. In addition,
    outsourcing may negatively affect our profit
    margins.
    We
    face potential liability from asbestos exposure and similar
    claims.
    Risks
    related to operating a subsidiary in China
  The
    operations of our Chinese subsidiary may be adversely affected
    by Chinas evolving economic, political and social
    conditions.
    Intellectual
    property rights are difficult to enforce in China.
    Uncertainties
    with respect to the Chinese legal system may adversely affect
    the operations of our Chinese subsidiary.
   8




---



##### Table of Contents



Risks
    related to the ownership of our common stock
  Provisions
    contained in our certificate of incorporation, bylaws and our
    stockholder rights plan could impair or delay stockholders
    ability to change our management and could discourage takeover
    transactions that our stockholders might consider to be in their
    best interests.
    
    We could issue shares of preferred stock with terms
    adverse to our common stock.  Under our
    certificate of incorporation, our Board of Directors is
    authorized to issue shares of preferred stock and to determine
    the rights, preferences and privileges of such shares without
    obtaining any further approval from the holders of our common
    stock. We could issue shares of preferred stock with voting and
    conversion rights that adversely affect the voting power of the
    holders of our common stock, or that have the effect of delaying
    or preventing a change in control of our company.
    We maintain a stockholder rights, or poison
    pill, plan.  Our stockholder rights plan
    has the effect of discouraging any person or group that wishes
    to acquire 15% or more of our common stock from doing so without
    obtaining our agreement because such acquisition would cause
    such person or group to suffer substantial dilution. Such plan
    may have the effect of discouraging a change in control
    transaction that our stockholders would otherwise consider to be
    in their best interests.
    Only a minority of our directors may be elected in a given
    year.  Our bylaws provide for a classified
    Board of Directors, with only approximately one-third of our
    Board elected each year. This provision makes it more difficult
    to effect a change of control because at least two annual
    stockholder meetings are necessary to replace a majority of our
    directors.
    Our bylaws contain advance notice
    requirements.  Our bylaws also provide that
    any stockholder who wishes to bring business before an annual
    meeting of our stockholders or to nominate candidates for
    election as directors at an annual meeting of our stockholders
    must deliver advance notice of their proposals to us before the
    meeting. Such advance notice provisions may have the effect of
    making it more difficult to introduce business at stockholder
    meetings or nominate candidates for election as director.
    Our certificate of incorporation requires supermajority
    voting to approve a change of control
    transaction.  Seventy-five percent of our
    outstanding shares entitled to vote are required to approve any
    merger, consolidation, sale of all or substantially all of our
    assets and similar transactions if the other party to such
    transaction owns 5% or more of our shares entitled to vote. In
    addition, a majority of the shares entitled to vote not owned by
    such 5% or greater stockholder are also required to approve any
    such transaction.
    Amendments to our certificate of incorporation require
    supermajority voting.  Our certificate of
    incorporation contains provisions that make its amendment
    require the affirmative vote of both 75% of our outstanding
    shares entitled to vote and a majority of the shares entitled to
    vote not owned by any person who may hold 50% or more of our
    shares unless the proposed amendment was previously recommended
    to our stockholders by an affirmative vote of 75% of our Board.
    This provision makes it more difficult to implement a change to
    our certificate of incorporation that stockholders might
    otherwise consider to be in their best interests without
    approval of our Board. 9




---



##### Table of Contents




    Amendments to our bylaws require supermajority
    voting.  Although our Board of Directors is
    permitted to amend our bylaws at any time, our stockholders may
    only amend our bylaws upon the affirmative vote of both 75% of
    our outstanding shares entitled to vote and a majority of the
    shares entitled to vote not owned by any person who owns 50% or
    more of our shares. This provision makes it more difficult for
    our stockholders to implement a change they may consider to be
    in their best interests without approval of our Board.  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        Item 3.
    Legal
    Proceedings  Form 10-K
  Item 4.
    Submission
    of Matters to a Vote of Security Holders  Form 10-K.
 PART II    Item 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   10




---



##### Table of Contents



two-for-one
  High


LowFiscal year 2009First quarter

$
38.25


$
17.50Second quarter


54.91



21.25Third quarter


27.36



6.85Fourth quarter


13.89



7.16Fiscal year 2008First quarter

$
11.40


$
6.30Second quarter


18.30



10.17Third quarter


30.48



15.82Fourth quarter


25.15



14.00       Form 10-K.
  Purchases
    of Equity Securities by the Issuer
    (c)


(d)Total Number


Maximumof Shares


Number of(b)


Purchased


Shares that(a)


Average


As Part of


May YetTotal


Price


Publicly


Be PurchasedNumber


Paid


Announced


Underof Shares


Per


Plans or


The Plans orPeriod

Purchased


Share


Programs


Programs1/1/2009  1/31/2009


0


$
0



0



02/1/2009  2/28/2009


89



7.86



89



9113/1/2009  3/31/2009


188



8.43



188



723Total


277


$
8.25



277



723  11




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  GRAHAM CORPORATION  FIVE YEAR SUMMARY OF SELECTED
    FINANCIAL DATA(For Fiscal Years Ended March 31)

2009


2008(1)


2007(1)


2006(1)


2005(1)(Amounts in thousands, except per share data)Operations:Net sales

$
101,111


$
86,428


$
65,822


$
55,208


$
41,333Gross profit


41,712



34,162



16,819



15,959



7,540Gross profit percentage


41.3
%


39.5
%


25.6
%


28.9
%


18.2
%Income from continuing operations


17,467



15,034



5,761



3,586



296Dividends


754



493



387



367



334Common stock:Basic earnings from continuing operations per share

$
1.72


$
1.52


$
.59


$
.39


$
.04Diluted earnings from continuing operations per share


1.71



1.49



.58



.38



.03Stockholders equity per share


6.21



4.86



3.15



2.83



1.95Dividend declared per share


.075



.05



.04



.04



.04Market price range of common stockHigh


54.91



30.48



9.20



10.40



3.56Low


6.85



6.30



5.02



3.31



2.14Average common shares outstanding  diluted


10,195



10,085



9,850



9,336



8,583Financial data at March 31:Cash and cash equivalents and investments

$
46,209


$
36,793


$
15,051


$
10,988


$
2,717Working capital


49,547



36,998



20,119



16,779



11,204Capital expenditures


1,492



1,027



1,637



1,048



224Depreciation


977



862



874



775



768Total assets


86,924



70,711



48,878



40,556



33,529Long-term debt, including capital lease obligations


31



36



56



30



44Stockholders equity


61,111



48,536



30,654



27,107



16,578     (1)
    
    Per share data has been adjusted to reflect the following stock
    splits: a
    two-for-one
    stock split declared on July 31, 2008; a
    five-for-four
    stock split declared on October 26, 2007; and a
    two-for-one
    stock split declared on July 28, 2005. 12




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
    
    Net income and income per diluted share for fiscal 2009, were
    $17,467 and $1.71 compared with net income and income per
    diluted share of $15,034 and $1.49 for fiscal year ended
    March 31, 2008, which we refer to as fiscal 2008. Net
    income and income per diluted share for fiscal 2009 were record
    highs.
    Net sales for fiscal 2009 of $101,111 were up 17% compared with
    $86,428 for fiscal 2008. Fiscal 2009 net sales set a record
    high.
    Orders placed in fiscal 2009 of $73,874 were down 31% compared
    with fiscal 2008, when orders were $107,102.
    Backlog on March 31, 2009 was $48,290, down from backlog of
    $75,662 on March 31, 2008.
    Gross profit and operating margins for fiscal 2009 were 41.3%
    and 26.0% compared with 39.5% and 24.4%, respectively, for
    fiscal 2008. Gross profit margin and operating margin
    percentages for fiscal 2009 set record highs.
    Cash and short-term investments at March 31, 2009 were
    $46,209, compared with $36,793 as of March 31, 2008, up
    26%. Cash and investments on hand at March 31, 2009 set a
    record high.
    Our balance sheet is strong and free of bank debt.      Market
    Conditions: Fiscal 2009 and the Near Term
       13




---



##### Table of Contents



Market
    View: Long Term View / Shift Back to International
    Growth
    
    Global consumption of crude oil is estimated to expand
    significantly over the next two decades, primarily in developing
    countries.
    Increased demand is expected for power, refinery and
    petrochemical products, caused by the expanding middle class in
    Asia.
    As demand grows, global oil refining capacity increases are
    expected to be addressed through new facilities, refinery
    upgrades, revamps and expansions.
    Known supplies of sweet crude oil are being depleted. Sour crude
    sources are identified and believed to be plentiful.
    Differential in raw material prices for sweet and sour crude
    oil. To lower production costs, many refineries will continue to
    upgrade facilities in order to be able to process sour crude
    oil, which requires an upgrade of vacuum and heat transfer
    equipment of the types we design and manufacture.
    Increased global regulations over the refining and petrochemical
    industries will continue and drive demand for capital activity.
    Construction of new petrochemical plants in the Middle East,
    where natural gas is plentiful and less expensive.
    Refineries in the United States will be upgraded to process
    synthetic crude oil from the Alberta oil sands region of Canada.
    Increased need in certain regions for geothermal electrical
    power plants to meet increased electricity demand.
    Long-term growth potential in emerging energy market
    opportunities, such as
    coal-to-liquids,
    gas-to-liquids
    and other emerging technologies, such as biodiesel, ethanol and
    waste-to-energy.      Forward
    Looking Statements
  Form 10-K
  Form 10-K.
  
    the current and future economic environments affecting us and
    the markets we serve; 14




---



##### Table of Contents




    sources of revenue and anticipated revenue, including the
    contribution from the growth of new products, services and
    markets;
    plans for future products and services and for enhancements to
    existing products and services;
    estimates regarding our liquidity and capital requirements;
    our ability to attract or retain customers;
    the outcome of any existing or future litigation; and
    our ability to increase our productivity and capacity.      Results
    of Operations
  Form 10-K.
    Year Ended March 31,2009


2008


2007Net sales

$
101,111


$
86,428


$
65,822Net income

$
17,467


$
15,034


$
5,761Diluted income per share

$
1.71


$
1.49


$
0.58Identifiable assets

$
86,924


$
70,711


$
48,878   Fiscal
    2009 Compared with Fiscal 2008
       15




---



##### Table of Contents



Fiscal
    2008 Compared with Fiscal 2007
  year-over-year
             16




---



##### Table of Contents



Stockholders
    Equity
    March 31, 2009


March 31, 2008


March 31, 2007$
61,111


$
48,536


$
30,654   Fiscal
    2009 Compared with Fiscal 2008
  2-for-1,
    Fiscal
    2008 Compared with Fiscal 2007
      Liquidity
    and Capital Resources
    March 31,2009


2008Working capital(1)

$
49,547


$
36,998Working capital ratio(1)


3.1



2.8Long-term debt (capital leases)

$
31


$
36Long-term debt/capitalization(2)


0.0
%


0.0
%Long-term liabilities/capitalization(3)


4.3
%


3.7
%     1)
    
    Working capital equals current assets minus current liabilities.
    Working capital ratio equals current assets divided by current
    liabilities.2)
    
    Long-term debt/capitalization equals long-term debt divided by
    stockholders equity plus long-term debt.3)
    
    Long-term liabilities/capitalization equals total liabilities
    minus current liabilities divided by stockholders equity
    plus long-term debt. 17




---



##### Table of Contents



Payments Due by PeriodLess Than


1 − 3


3 − 5Total


1 Year


Years


Years


ThereafterCapital lease obligations

$
63


$
31


$
32


$



$
Operating leases(1)


307



103



164



40



Pension and postretirement benefits(2)


122



122











Accrued compensation


250















250Accrued pension liability


282



26



52



52



152Total

$
1,024


$
282


$
248


$
92


$
402     1)
    
    For additional information, see Note 5 to the consolidated
    financial statements in Item 8 of this Annual Report on
    Form 10-K.2)
    
    Amounts represent anticipated contributions during fiscal 2010
    to our postretirement medical benefit plan, which provides
    healthcare benefits for eligible retirees and eligible survivors
    of retirees. On February 4, 2003, we terminated
    postretirement healthcare benefits for our U.S. employees.
    Benefits payable to retirees of record on April 1, 2003
    remained unchanged. We expect to be required to make cash
    contributions in connection with these plans beyond one year,
    but such amounts cannot be estimated. No contributions are
    expected to be made to our defined benefit pension plan for
    fiscal 2010.           18




---



##### Table of Contents



Orders
    and Backlog
        Contingencies
    and Commitments
      Critical
    Accounting Policies
   19




---



##### Table of Contents



Form 10-K,
    Revenue Recognition. percentage-of-completion percentage-of-completion
  percentage-of-completion percentage-of-completion
  Pension and Postretirement Benefits.
  Income Taxes.
    Critical
    Accounting Estimates and Judgments
  Form 10-K
  percentage-of-completion
  percentage-of-completion percentage-of-completion
 20




---



##### Table of Contents



Form 10-K.
          Form 10-K
  New
    Accounting Pronouncements
  Fair Value
    Measurements
  Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans
  Disclosures about Derivative Instruments and Hedging
    Activities Accounting for Derivative Instruments
    and Hedging Activities
 21




---



##### Table of Contents



FAS 132R-1 Employers Disclosures about Postretirement Benefit Plan
    Assets FAS 132R-1 FAS 132R-1
  Off
    Balance Sheet Arrangements
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      Foreign
    Currency
      Price
    Risk
   22




---



##### Table of Contents



Project
    Cancellation and Project Continuation Risk
     23




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
  Graham Corporation

PageConsolidated Financial Statements:Consolidated Statements of Operations for the
    years ended March 31, 2009, 2008 and 2007


25Consolidated Balance Sheets as of March 31,
    2009 and 2008


26Consolidated Statements of Cash Flows for the
    years ended March 31, 2009, 2008 and 2007


27Consolidated Statements of Changes in
    Stockholders Equity for the years ended March 31,
    2009, 2008 and 2007


28Notes to Consolidated Financial Statements


29Reports of Independent Registered Public
    Accounting Firm


50  24




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended March 31,2009


2008


2007(Amounts in thousands,except per share data)Net sales

$
101,111


$
86,428


$
65,822Cost of products sold


59,399



52,266



49,003Gross profit


41,712



34,162



16,819Other expenses and income:Selling, general and administrative


14,825



13,074



10,806Interest income


(416
)


(1,026
)


(516
)Interest expense


5



10



10Other expense


559







Total other expenses and income


14,973



12,058



10,300Income before income taxes


26,739



22,104



6,519Provision for income taxes


9,272



7,070



758Net income

$
17,467


$
15,034


$
5,761Per Share DataBasic:Net income

$
1.72


$
1.52


$
.59Diluted:Net income

$
1.71


$
1.49


$
.58Average common shares outstanding:Basic


10,134



9,912



9,734Diluted


10,195



10,085



9,850Dividends declared per share

$
.075


$
.05


$
.04    25




---



##### Table of Contents



CONSOLIDATED
    BALANCE SHEETS  March 31,2009


2008(Amounts in thousands, except per share data)AssetsCurrent assets:Cash and cash equivalents

$
5,150


$
2,112Investments


41,059



34,681Trade accounts receivable, net of allowances
    ($39 and $41 at March 31, 2009 and 2008, respectively)


6,995



5,052Unbilled revenue


10,444



8,763Inventories


4,665



4,797Domestic and foreign income taxes receivable


4,054



1,502Prepaid expenses and other current assets


375



463Total current assets


72,742



57,370Property, plant and equipment, net


9,645



9,060Deferred income tax asset


224



70Prepaid pension asset


4,300



4,186Other assets


13



25Total assets

$
86,924


$
70,711Liabilities and stockholders equityCurrent liabilities:Current portion of capital lease obligations

$
28


$
20Accounts payable


5,514



5,461Accrued compensation


4,630



4,517Accrued expenses and other liabilities


2,266



2,114Customer deposits


5,892



5,985Deferred income tax liability


4,865



2,275Total current liabilities


23,195



20,372Capital lease obligations


31



36Accrued compensation


250



232Deferred income tax liability


1,253



315Accrued pension liability


256



271Accrued postretirement benefits


828



949Total liabilities


25,813



22,175Commitments and contingencies (Note 15)Stockholders equity:Preferred stock, $1.00 par value Authorized, 500 sharesCommon stock, $.10 par value Authorized, 25,500 and 6,000 shares at March 31, 2009
    and 2008, respectivelyIssued, 10,127 and 9,982 shares at March 31, 2009 and
    2008, respectively


1,013



499Capital in excess of par value


14,923



12,674Retained earnings


53,966



37,216Accumulated other comprehensive loss


(6,460
)


(1,820
)Treasury stock (279 and 2 shares at March 31, 2009 and
    2008, respectively)


(2,325
)


(22
)Notes receivable


(6
)


(11
)Total stockholders equity


61,111



48,536Total liabilities and stockholders equity

$
86,924


$
70,711    26




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended March 31,2009


2008


2007(Dollar amounts in thousands)Operating activities:Net income

$
17,467


$
15,034


$
5,761Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


1,111



989



887Discount accretion on investments


(397
)


(904
)


(458
)Stock-based compensation expense


372



187



84Loss (gain) on disposal or sale of property, plant and equipment


4



3



(17
)Deferred income taxes


6,022



4,342



646(Increase) decrease in operating assets:Accounts receivable


(1,941
)


6,807



(5,882
)Unbilled revenue


(1,675
)


(3,969
)


185Inventories


132



(115
)


433Domestic and foreign income taxes receivable


(2,552
)


(634
)


(31
)Prepaid expenses and other current and non-current assets


90



(250
)


(7
)Prepaid pension asset


(7,677
)


(3,045
)


(1,979
)Increase (decrease) in operating liabilities:Accounts payable


(11
)


159



1,007Accrued compensation, accrued expenses and other current and
    non-current liabilities


260



1,308



237Customer deposits


(100
)


(127
)


4,547Long-term portion of accrued compensation, accrued pension
    liability and accrued postretirement benefits


(59
)


(83
)


(220
)Net cash provided by operating activities


11,046



19,702



5,193Investing activities:Purchase of property, plant and equipment


(1,492
)


(1,027
)


(1,637
)Proceeds from disposal of property, plant and equipment


1



45



25Purchase of investments


(142,601
)


(94,781
)


(33,300
)Redemption of investments at maturity


136,620



74,680



30,500Net cash used by investing activities


(7,472
)


(21,083
)


(4,412
)Financing activities:Proceeds from issuance of long-term debt


2,927



69



3,896Principal repayments on long-term debt


(2,955
)


(106
)


(3,948
)Issuance of common stock


695



1,116



413Dividends paid


(754
)


(493
)


(387
)Purchase of treasury stock


(2,303
)






Excess tax deduction on stock awards


1,696



1,473



Other


5



(17
)


42Net cash (used) provided by financing activities


(689
)


2,042



16Effect of exchange rate changes on cash


153



76



8Net increase in cash and cash equivalents


3,038



737



805Cash and cash equivalents at beginning of year


2,112



1,375



570Cash and cash equivalents at end of year

$
5,150


$
2,112


$
1,375    27




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY  AccumulatedCommon Stock


Capital in





OtherPar


Excess of


Retained


Comprehensive


Treasury


Notes


StockholdersShares


Value


Par Value


Earnings


Loss(1)


Stock


Receivable


Equity(Dollar amounts in thousands)Balance at April 1, 2006


3,832,390


$
383


$
9,517


$
17,301


$
(1
)

$



$
(93
)

$
27,107Net income














5,761















5,761Foreign currency translation adjustment


















7











7Total comprehensive income






























5,768Adjustment to initially apply SFAS No. 158 for pension
    and other postretirement benefits, net of income tax of $1,335


















(2,373
)










(2,373
)Issuance of shares


55,100



6



407



(387
)














413Dividends






























(387
)Recognition of equity-based compensation expense










84



















84Collection of notes receivable from officers and directors


























42



42Balance at March 31, 2007


3,887,490



389



10,008



22,675



(2,367
)






(51
)


30,654Net income














15,034















15,034Foreign currency translation adjustment


















64











64Pension and other postretirement benefits adjustments, net of
    income tax of $271


















483











483Total comprehensive income






























15,581Issuance of shares


111,266



11



1,105



















1,116Stock award tax benefit










1,473



















1,473Dividends














(493
)














(493
)Five-for four stock split


992,189



99



(99
)


















Recognition of equity-based compensation expense










187



















187Purchase of treasury stock






















(22
)






(22
)Collection of notes receivable from officers and directors


























40



40Balance at March 31, 2008


4,990,945



499



12,674



37,216



(1,820
)


(22
)


(11
)


48,536Effect of adoption of measurement date provisions of Statement
    of Financial Accounting Standards No. 158, net of income
    tax of $260














37



(543
)










(506
)Balance at April 1, 2008


4,990,945



499



12,674



37,253



(2,363
)


(22
)


(11
)


48,030Net income














17,467















17,467Foreign currency translation adjustment


















147











147Pension and other postretirement benefits adjustments, net of
    income tax of $2,387


















(4,244
)










(4,244
)Total comprehensive income






























13,370Issuance of shares


72,659



8



687



















695Stock award tax benefit










1,696



















1,696Dividends














(754
)














(754
)Two-for-one
    stock split


5,063,604



506



(506
)


















Recognition of equity-based compensation expense










372



















372Purchase of treasury stock






















(2,303
)






(2,303
)Collection of notes receivable from officers and directors


























5



5Balance at March 31, 2009


10,127,208


$
1,013


$
14,923


$
53,966


$
(6,460
)

$
(2,325
)

$
(6
)

$
61,111     (1)
    
    Accumulated foreign currency translation adjustments were $217,
    $70 and $6, accumulated pension benefit adjustments were
    $(7,074), $(2,351) and $(2,951), and accumulated other
    postretirement benefit adjustments were $397, $461 and $578 at
    March 31, 2009, 2008 and 2007, respectively, net of tax.   28




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS



(Amounts in
    thousands, except per share data)  Note 1 
    The Company and Its Accounting Policies:
      Principles
    of consolidation and use of estimates in the preparation of
    financial statements
      Translation
    of foreign currencies
    Revenue
    recognition
  Percentage-of-Completion Method
  percentage-of-completion percentage-of-completion percentage-of-completion
  percentage-of-completion
  Completed Contract Method
  percentage-of-completion
 29




---



##### Table of Contents



percentage-of-completion
    Shipping
    and handling fees and costs
    Investments
  held-to-maturity,
  Inventories
  percentage-of-completion percentage-of-completion
    2009


2008Costs incurred since inception on contracts in progress

$
24,358


$
14,817Estimated earnings since inception on contracts in progress


18,479



10,34042,837



25,157Less billings to date


40,908



25,561Net (over) under billings

$
1,929


$
(404
)  30




---



##### Table of Contents



2009


2008Unbilled revenue

$
10,444


$
8,763Progress payments reducing inventory (Note 2)


(2,623
)


(3,182
)Customer deposits


(5,892
)


(5,985
)Net (over) under billings

$
1,929


$
(404
)   Property,
    plant, equipment and depreciation
    Product
    warranties
    Research
    and development
    Income
    taxes
    Accounting for
    Uncertainty in Income Taxes
 31




---



##### Table of Contents



non-U.S. domestic
  Stock
    splits
  two-for-one two-for-one two-for-one
  five-for-four five-for-four five-for-four
  Stock-based
    compensation
  Share-Based
    Payment
  Income
    per share data
   32




---



##### Table of Contents



Year Ended March 31,2009


2008


2007Basic income per share:Numerator:Net income

$
17,467


$
15,034


$
5,761Denominator:Weighted common shares outstanding


10,073



9,838



9,662Share equivalent units (SEUs) outstanding


61



74



72Weighted average shares and SEUs outstanding


10,134



9,912



9,734Basic income per share

$
1.72


$
1.52


$
.59Diluted income per share:Numerator:Net income

$
17,467


$
15,034


$
5,761Denominator:Weighted average shares and SEUs outstanding


10,134



9,912



9,734Stock options outstanding


60



173



116Contingently issuable SEUs


1







Weighted average common and potential common shares outstanding


10,195



10,085



9,850Diluted income per share

$
1.71


$
1.49


$
.58     Cash flow
    statement
      two-for-one five-for-four
  Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans
   33




---



##### Table of Contents



Accumulated
    other comprehensive income (loss)
    Accounting
    and Reporting Changes
  Fair Value Measurements
    Before Application





After ApplicationBalance Sheet Caption

of SFAS No. 158


Adjustments


of SFAS No. 158Prepaid pension asset

$
4,186


$
(801
)

$
3,385Long-term deferred income tax liability

$
(315
)

$
260


$
(55
)Accrued postretirement benefits

$
(949
)

$
35


$
(914
)Accumulated other comprehensive loss

$
1,820


$
543


$
2,363Retained earnings

$
(37,216
)

$
(37
)

$
(37,253
)   Disclosures about Derivative Instruments and Hedging
    Activities Accounting for Derivative Instruments
    and Hedging Activities
  FAS 132R-1 Employers Disclosures about Postretirement Benefit Plan
    Assets FAS 132R-1 FAS 132R-1
  Reclassifications
   34




---



##### Table of Contents



Note 2 
    Inventories:
    March 31,2009


2008Raw materials and supplies

$
1,929


$
2,047Work in process


4,664



5,348Finished products


695



5847,288



7,979Less  progress payments


2,623



3,182$
4,665


$
4,797   Note 3 
    Property, Plant and Equipment:
    March 31,2009


2008Land

$
210


$
210Buildings and improvements


10,709



10,575Machinery and equipment


17,509



16,924Construction in progress


696



39929,124



28,108Less  accumulated depreciation and amortization


19,479



19,048$
9,645


$
9,060     Note 4 
    Product Warranty Liability:
    Year Ended March 31,2009


2008Balance at beginning of year

$
441


$
357Expense for product warranties


204



361Product warranty claims paid


(279
)


(277
)Balance at end of year

$
366


$
441   Note 5 
    Leases:
      March 31,2009


2008Machinery and equipment

$
97


$
116Less accumulated amortization


41



64$
56


$
52  35




---



##### Table of Contents



Operating


CapitalLeases


Leases2010


103



312011


98



302012


66



22013


40



2014






Total minimum lease payments

$
307


$
63Less  amount representing interest






4Present value of net minimum lease payments





$
59   Note 6 
    Debt:
  Short-Term
    Debt Due to Banks
          Long-Term
    Debt
    March 31,2009


2008Capital lease obligations (Note 5)

$
59


$
56Less: current amounts


28



20Total

$
31


$
36  36




---



##### Table of Contents



Note 7 
    Financial Instruments and Derivative Financial
    Instruments
  Concentrations
    of Credit Risk
    Letters
    of Credit
    Foreign
    Exchange Risk Management
  and/or
  Fair
    Value of Financial Instruments
    Cash and cash equivalents:
  Investments:
  Note 8 
    Income Taxes:
    Year Ended March 31,2009


2008


2007United States

$
26,831


$
22,382


$
6,476United Kingdom






(8
)


9China


( 92
)


(270
)


34$
26,739


$
22,104


$
6,519  37




---



##### Table of Contents



Year Ended March 31,2009


2008


2007Current:Federal

$
3,138


$
2,646


$
80State


121



73



29Foreign


(9
)


9



33,250



2,728



112Deferred:Federal


5,827



4,474



438State


159



(55
)


201Foreign


36



(77
)


76,022



4,342



646Total provision for income taxes

$
9,272


$
7,070


$
758     Year Ended March 31,2009


2008


2007Provision for income taxes at federal rate

$
9,091


$
7,516


$
2,216State taxes


239



(6
)


221Charges not deductible for income tax purposes


89



26



21Recognition of tax benefit generated by extraterritorial income
    exclusion










(88
)Recognition of tax benefit generated by qualified production
    activities deduction


(18
)


(206
)Research and development tax credits


(218
)


(234
)


(1,607
)Other


89



(26
)


(5
)Provision for income taxes

$
9,272


$
7,070


$
758  38




---



##### Table of Contents



March 31,2009


2008Depreciation

$
(1,163
)

$
(898
)Accrued compensation


110



143Prepaid pension asset


(1,695
)


(1,593
)Accrued pension liability


99



94Accrued postretirement benefits


428



414Compensated absences


469



476Inventories


(5,701
)


(3,124
)Warranty liability


128



153Accrued expenses


252



172Stock-based compensation


103



62Net operating loss carryforwards


188



122Federal tax credits


656



1,280New York State investment tax credit


202



190Other


30



(11
)(5,894
)


(2,520
)Less: Valuation allowance






Total

$
(5,894
)

$
(2,520
)     March 31,2009


2008Long-term deferred income tax asset

$
224


$
70Current deferred income tax liability


(4,865
)


(2,275
)Long-term deferred income tax liability


(1,253
)


(315
)$
(5,894
)

$
(2,520
)       Note 9 
    Employee Benefit Plans:
  Retirement
    Plans
   39




---



##### Table of Contents



Year Ended March 31,2009


2008


2007Service cost-benefits earned during the period

$
509


$
471


$
472Interest cost on projected benefit obligation


1,558



1,123



1,056Expected return on assets


(2,310
)


(1,639
)


(1,360
)Amortization of:Unrecognized prior service cost


5



4



4Actuarial loss


271



236



349Net pension cost

$
33


$
195


$
521     Year Ended March 31,2009


2008


2007Discount rate


6.75
%


5.91
%


5.75
%Rate of increase in compensation levels


3.5
%


3.5
%


3.5
%Long-term rate of return on plan assets


8.5
%


8.5
%


8.5
%           Year Ended March 31,2009


2008Change in the benefit obligationProjected benefit obligation at beginning of year

$
19,019


$
19,064Service cost


509



392Interest cost


1,558



1,123Actuarial (gain) loss


(2,438
)


(958
)Benefit payments


(753
)


(602
)Projected benefit obligation at end of year

$
17,895


$
19,019  40




---



##### Table of Contents



March 31,2009


2008Discount rate


7.39
%


6.48
%Rate of increase in compensation levels


3.5
%


3.5
%     Change in fair value of plan assetsFair value of plan assets at beginning of year

$
23,205


$
19,509Actual return on plan assets


(7,757
)


1,298Employer contributions


7,500



3,000Benefit and administrative expense payments


(753
)


(602
)Fair value of plan assets at end of year

$
22,195


$
23,205Funded statusFunded status at end of year

$
4,300


$
4,186Amount recognized in the Consolidated Balance Sheets

$
4,300


$
4,186       March 31,2009


2008Net actuarial losses

$
7,058


$
2,333Prior service cost


16



19$
7,074


$
2,352     Net actuarial loss arising during the year

$
4,900Amortization of actuarial loss


(175
)Amortization of prior service cost


(3
)$
4,722    41




---



##### Table of Contents



2010





$
7702011






8032012






8872013






8812014






9572015-2019






6,106Total





$
10,404     Target


March 31,Allocation


2009


2008Asset CategoryEquity securities


50-70
%


64
%


64
%Debt securities


20-50
%


35
%


36
%Other, including cash


0-10
%


1
%


100
%


100
%           Other
    Postretirement Benefits
     42




---



##### Table of Contents



Year Ended March 31,2009


2008


2007Interest cost on accumulated benefit obligation

$
77


$
61


$
63Amortization of prior service benefit


(208
)


(166
)


(166
)Amortization of actuarial loss


32



29



25Net postretirement benefit income

$
(99
)

$
(76
)

$
(78
)       Year Ended March 31,2009


2008Change in the benefit obligationProjected benefit obligation at beginning of year

$
1,078


$
1,110Interest cost


77



61Participant contributions






4Actuarial loss


(74
)


45Benefit payments


(131
)


(142
)Projected benefit obligation at end of year

$
950


$
1,078     March 31,2009


2008Discount rate


6.88
%


6.00
%Medical care cost trend rate


7.50
%


8.00
%    43




---



##### Table of Contents



Year Ended March 31,2009


2008Change in fair value of plan assetsFair value of plan assets at beginning of year

$



$
Employer contribution


131



138Participants contributions






4Benefit payments


(131
)


(142
)Fair value of plan assets at end of year

$



$
Funded statusFunded status at end of year

$
(950
)

$
(1,078
)Amount recognized in the Consolidated Balance Sheets

$
(950
)

$
(1,078
)       March 31,2009


2008Net actuarial loss

$
202


$
270Prior service cost


(599
)


(731
)$
(397
)

$
(461
)     Net actuarial gain arising during the year





$
(49
)Amortization of actuarial loss






(20
)Amortization of prior service cost






133$
64       2010





$
1222011






1102012






1032013






992014






942015-2019






401Total





$
929    44




---



##### Table of Contents



Employee
    Stock Ownership Plan
    Note 10 
    Stock Compensation Plans:
            2009


2008


2007Expected life


4.89 years



5 years



5 yearsVolatility


63.68
%


43.86
%


48.44
%Risk-free interest rate


3.12
%


4.83
%


5.03
%Dividend yield


.28
%


.63
%


.58
%    45




---



##### Table of Contents



WeightedShares


Average


Weighted


AggregateUnder


Exercise


Average Remaining


IntrinsicOption


Price


Contractual Term


ValueOutstanding at April 1, 2006


498


$
3.46Granted


148


$
7.92Exercised


(138
)

$
3.00Forfeited


(36
)

$
7.98Outstanding at March 31, 2007


472


$
4.66Granted


112


$
7.33Exercised


(258
)

$
4.33Forfeited


(20
)

$
7.71Expired


(12
)

$
4.25Outstanding at March 31, 2008


294


$
5.76Granted


19


$
31.06Exercised


(142
)

$
4.90Forfeited


(7
)

$
8.95Outstanding at March 31, 2009


164


$
9.23



7.31 years


$
383Vested or expected to vest at March 31, 2009


157


$
9.16



7.29 years


$
375Exercisable at March 31, 2009


52


$
5.82



5.75 years


$
229     Options Outstanding





Weighted Averageat March 31,


Weighted Average


RemainingExercise Price

2009


Exercise Price


Contractual Life$ 1.50- 1.76


10


$
1.63



4.00
years2.34- 2.50


16



2.44



4.325.56- 8.01


112



7.15



5.2810.84-12.52


9



11.80



8.3330.88-44.50


17



32.41



9.19$ 1.50-44.50


164


$
9.23



7.31      46




---



##### Table of Contents



Restricted


Weighted Average


AggregateStock


Grant Date Fair Value


Intrinsic ValueNon-vested at March 31, 2007


Granted


5


$
6.90Vested


(2
)

$
6.90Non-vested at March 31, 2008


3


$
6.90Granted


4


$
30.88Vested


(2
)

$
26.56Non-vested at March 31, 2009


5


$
18.72


$
5     Note 11 
    Shareholder Rights Plan:
        Note 12 
    Segment Information:
   47




---



##### Table of Contents



2009


2008


2007Heat transfer equipment

$
35,231


$
31,988


$
28,275Vacuum equipment


46,043



38,911



26,676All other


19,837



15,529



10,871Net sales

$
101,111


$
86,428


$
65,822     2009


2008


2007Net Sales:Africa

$
583


$
342


$
84Asia


13,255



12,840



11,157Australia & New Zealand


115



85



1,652Canada


8,015



5,869



2,764Mexico


528



905



583Middle East


8,373



9,918



15,253South America


4,038



7,862



583U.S.


63,719



46,881



33,006Western Europe


2,400



1,128



566Other


85



598



174Net sales

$
101,111


$
86,428


$
65,822       Note 13 
    Other Expense:
    Year EndedMarch 31, 2009Balance at beginning of year

$
Expense for restructuring


559Amounts paid for restructuring


(210
)Balance at end of year

$
349  48




---



##### Table of Contents



Note 14 
    Purchase of Treasury Stock:
    Note 15 
    Commitments and Contingencies:
      Note 16 
    Quarterly Financial Data (Unaudited):
    First


Second


Third


Fourth


Total2009

Quarter(1)


Quarter


Quarter


Quarter


YearNet sales

$
27,647


$
23,915


$
24,701


$
24,848


$
101,111Gross profit


12,218



10,499



9,362



9,633



41,712Provision for income taxes


2,842



2,326



2,087



2,017



9,272Net income


5,684



4,412



3,790



3,581



17,467Per share:Net income:Basic


.56



.43



.37



.35



1.72Diluted


.56



.43



.37



.35



1.71Market price range of common stock


17.50-38.25



21.25-54.91



6.85-27.36



7.16-13.89



6.85-54.91   First


Second


Third


Fourth


Total2008(1)

Quarter


Quarter


Quarter


Quarter


YearNet sales

$
19,987


$
23,060


$
20,625


$
22,756


$
86,428Gross profit


6,679



9,897



8,647



8,939



34,162Provision for income taxes


1,167



2,299



1,948



1,656



7,070Net income


2,658



4,422



3,763



4,191



15,034Per share:Net income:Basic


.27



.45



.38



.42



1.52Diluted


.27



.44



.37



.41



1.49Market price range of common stock


6.30-11.40



10.17-18.30



15.82-30.48



14.00-25.15



6.30-30.48     (1)
    
    Per share data has been adjusted to reflect a
    two-for-one
    stock split declared on July 31, 2008. 49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans.
  Internal Control  Integrated Framework
       50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework Form 10-K
        Internal Control  Integrated Framework
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans,
       51




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
    Changes
    in Internal Control Over Financial Reporting
  Form 10-K
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f).
      Item 9B.
    Other
    Information   52




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Code of Ethics. Form 8-K
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Securities
    Authorized for Issuance under Equity Compensation Plans as of
    March 31, 2009
  Equity Compensation Plan InformationNumber of securitiesremaining availableNumber of securities





for future issuanceto be issued upon


Weighted average


under equityexercise of


exercise price of


compensation plansoutstanding options,


outstanding options,


(excluding securitiesPlan Category

warrants and rights


warrants and rights


reflected in column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


164


$
9.23



635Equity compensation plans not approved by security holders










Total


164


$
9.23



635   Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   53




---



##### Table of Contents



Item 14.
    Principal
    Accounting Fees and Services    Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K Form 10-K
    Form 10-K Form 10-K.
 54




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans, Form 10-K.
       55




---



##### Table of Contents



GRAHAM
    CORPORATION AND SUBSIDIARIES
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
 (In
    Thousands)
  Balance at


Charged to


Charged to





Balance atBeginning


Costs and


Other





End ofDescription

of Period


Expenses


Accounts


Deductions


PeriodYear ended March 31, 2009Reserves deducted from the asset to which they apply:Reserve for doubtful accounts receivable

$
41


$
38


$



$
(40
)

$
39Reserves included in the balance sheet caption accrued
    expensesProduct warranty liability


441



204







(279
)


366Restructuring reserve






559







(210
)


349Year ended March 31, 2008Reserves deducted from the asset to which they apply:Reserve for doubtful accounts receivable

$
48


$
4


$



$
(11
)

$
41Reserves included in the balance sheet caption accrued
    expensesProduct warranty liability


357



361







(277
)


441Restructuring reserve


14



(1
)






(13
)


Year ended March 31, 2007Reserves deducted from the asset to which they apply:Reserve for doubtful accounts receivable

$
28


$
23


$



$
(3
)

$
48Reserves included in the balance sheet caption accrued
    expensesProduct warranty liability


330



199







(172
)


357Restructuring reserve


26











(12
)


14  56




---



##### Table of Contents



INDEX TO
    EXHIBITS
  (2)

Plan of acquisition, reorganization, arrangement, liquidation or
    successionNot applicable.(3)

Articles of Incorporation and By-Laws3
.1

Certificate of Incorporation of Graham Corporation, as amended,
    is incorporated herein by reference to Exhibit 3.1 to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2008.3
.2

Amended and Restated By-laws of Graham Corporation are
    incorporated herein by reference to Exhibit 3.2 to the
    Companys Current Report on
    Form 8-K
    dated October 25, 2007.(4)

Instruments defining the rights of security holders, including
    indentures4
.1

Stockholder Rights Plan is incorporated herein by reference to
    Exhibit 99.3 to the Companys
    Form 8-A
    (SEC File
    No. 000-18703)
    filed September 15, 2000.(9)

Voting trust agreementNot applicable.(10)

Material Contracts#10
.1

1995 Graham Corporation Incentive Plan to Increase Shareholder
    Value is incorporated herein by reference to Appendix A to
    the Companys Proxy Statement for its 1996 Annual Meeting
    of Stockholders (SEC File
    No. 001-08462).#10
.2

Employment Agreement between the Company and J. Ronald Hansen
    dated May 13, 1993 is incorporated herein by reference to
    Exhibit 10.4 to the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 1998 (SEC File
    No. 001-08462).#10
.3

Graham Corporation Senior Executive Severance Agreement between
    the Company and J. Ronald Hansen dated July 28, 1995 is
    incorporated herein by reference to Exhibit 10.5 to the
    Companys Annual Report on
    Form 10-K
    for the year ended March 31, 1998 (SEC File
    No. 001-08462).#10
.4

Amendment No. 1, dated September 26, 1996, to
    Employment Agreement between the Company and J. Ronald Hansen,
    dated May 13, 1993, is incorporated herein by reference to
    Exhibit 10.4 to the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 1998 (SEC File
    No. 001-08462).#10
.5

Long-Term Stock Ownership Plan of Graham Corporation is
    incorporated herein by reference to Appendix A to the
    Companys Proxy Statement for its 2000 Annual Meeting of
    Stockholders filed with the Securities and Exchange Commission
    on June 30, 2000 (SEC File
    No. 001-08462).#10
.6

Form of Director Indemnification Agreement is incorporated
    herein by reference to Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended December 31, 2004 (SEC File
    No. 001-08462).#10
.7

Graham Corporation Outside Directors Long-Term Incentive
    Plan is incorporated herein by reference to Exhibit 10.1 to
    the Companys Current Report on
    Form 8-K
    dated March 3, 2005.#10
.8

Graham Corporation Policy Statement for U.S. Foreign Service
    Employees is incorporated herein by reference to
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated March 27, 2006.#10
.9

Graham Corporation Annual Stock-Based Incentive Award Plan in
    effect for the years ended March 31, 2007, 2008 and 2009 is
    incorporated herein by reference to Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated March 27, 2006.#10
.10

Graham Corporation Annual Executive Cash Bonus Program in effect
    for the years ended March 31, 2007, 2008 and 2009 is
    incorporated herein by reference to Exhibit 99.3 to the
    Companys Current Report on
    Form 8-K
    dated March 27, 2006.#10
.11

Employment Agreement between Graham Corporation and James R.
    Lines executed July 27, 2006 with an effective date of
    August 1, 2006, is incorporated herein by reference to
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated July 27, 2006. 57




---



##### Table of Contents



#10
.12

Amended and Restated 2000 Graham Corporation Incentive Plan to
    Increase Shareholder Value is incorporated herein by reference
    to Appendix A to the Companys Proxy Statement for its
    2006 Annual Meeting of Stockholders filed with the Securities
    and Exchange Commission on June 23, 2006.10
.13

Loan Agreement between the Company and Bank of America, N.A.,
    dated as of December 5, 2007, is incorporated herein by
    reference to Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    dated December 5, 2007.10
.14

Security Agreement between the Company and Bank of America,
    N.A., dated as of December 5, 2007, is incorporated herein
    by reference to Exhibit 99.2 to the Companys Current
    Report on
    Form 8-K
    dated December 5, 2007.10
.15

Patent Security Agreement between the Company and Bank of
    America, N.A., dated as of December 5, 2007, is
    incorporated herein by reference to Exhibit 99.3 of the
    Companys Current Report on
    Form 8-K
    dated December 5, 2007.10
.16

Trademark Security Agreement between the Company and Bank of
    America, N.A., dated as of December 5, 2007, is
    incorporated herein by reference to the Companys Current
    Report on
    Form 8-K
    dated December 5, 2007.#10
.17

Employment Agreement between Graham Corporation and Alan E.
    Smith executed August 1, 2007 with an effective date of
    July 30, 2007 is incorporated herein by reference to
    Exhibit 10.19 to the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2008.#10
.18

Professional Consulting Agreement dated as of July 9, 2008
    between J. Ronald Hansen and Graham Corporation, is incorporated
    herein by reference to Exhibit 99.1 to the Companys
    Current Report on
    Form 8-K
    dated July 14, 2008.#10
.19

Form of Director Non-Qualified Stock Option Agreement is
    incorporated herein by reference to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2008.#10
.20

Form of Employee Non-Qualified Stock Option Agreement is
    incorporated herein by reference to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2008.#10
.21

Form of Employee Restricted Stock Agreement is incorporated
    herein by reference to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2008.#10
.22

Amendment to Employment Agreement dated as of December 31,
    2008 by and between Graham Corporation and James R. Lines, is
    incorporated herein by reference to Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    dated December 31, 2008.#10
.23

Amendment to Employment Agreement dated as of December 31,
    2008 by and between Graham Corporation and Alan E. Smith, is
    incorporated herein by reference to Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated December 31, 2008.#10
.24

Amendment No. 1 to Professional Consulting Agreement dated
    January 8, 2009, between Graham Corporation and J. Ronald
    Hansen, is incorporated herein by reference to Exhibit 99.1
    to the Companys Current Report on
    Form 8-K
    dated January 8, 2009.10
.25

Amendment No. 1 to Loan Agreement between Graham
    Corporation and Bank of America, N.A., dated as of
    February 13, 2009, is incorporated herein by reference to
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated February 13, 2009.#10
.26

Employment Agreement dated March 2, 2009 between Jeffrey
    Glajch and Graham Corporation is incorporated herein by
    reference to Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    dated March 2, 2009.#*10
.27

Graham Corporation Annual Stock-Based Incentive Award Plan for
    Senior Executives in effect for the year ending March 31,
    2010.#*10
.28

Graham Corporation Annual Executive Cash Bonus Program in effect
    for the year ending March 31, 2010.(11)

Statement re computation of per share earningsComputation of per share earnings is included in Note 1 of
    the Notes to the Consolidated Financial Statements contained in
    this Annual Report on
    Form 10-K.(12)

Statement re computation of ratiosNot applicable. 58




---



##### Table of Contents



(13)

Annual report to security holders,
    Form 10-Q
    or quarterly report to security holdersNot applicable.(14)

Code of EthicsNot applicable.(16)

Letter re change in certifying accountantNot applicable.(18)

Letter re change in accounting principlesNot applicable.(21)

Subsidiaries of the registrant*21
.1

Subsidiaries of the registrant(22)

Published report regarding matters submitted to vote of security
    holders.Not applicable.(23)

Consents of Experts and Counsel*23
.1

Consent of Deloitte & Touche LLP(24)

Power of AttorneyNot applicable.(31)

Rule 13a-14(a)/15d-14(a)
    Certifications*31
.1

Certification of Principal Executive Officer*31
.2

Certification of Principal Financial Officer(32)

Section 1350 Certifications*32
.1

Section 1350 Certifications(99)

Additional ExhibitsNot applicable.     *
    
    Exhibits filed with this report.#
    
    Management contract or compensatory plan. 59




---



##### Table of Contents



SIGNATURES
      June 2, 2009By: /s/  Jeffrey
    GlajchJeffrey
    GlajchVice President  Finance & Administration
    and
    Chief Financial Officer     Signature/s/  James
    R. LinesJames
    R. Lines

President and Chief Executive Officer and  Director
    (Principal Executive Officer)

June 2, 2009/s/  Jeffrey
    GlajchJeffrey
    Glajch

Vice President  Finance & Administration
    and  Chief Financial Officer (Principal
    Financial  Officer)

June 2, 2009/s/  Jennifer
    R. CondameJennifer
    R. Condame

Chief Accounting Officer and Controller  (Principal
    Accounting Officer)

June 2, 2009/s/  Helen
    H. BerkeleyHelen
    H. Berkeley

Director

June 2, 2009/s/  Jerald
    D. BidlackJerald
    D. Bidlack

Director and Chairman of the Board

June 2, 2009/s/  Alan
    FortierAlan
    Fortier

Director

June 2, 2009/s/  James
    J. MalvasoJames
    J. Malvaso

Director

June 2, 2009/s/  Gerard
    T. MazurkiewiczGerard
    T. Mazurkiewicz

Director

June 2, 2009/s/  Cornelius
    S. Van ReesCornelius
    S. Van Rees

Director

June 2, 2009  60




---



##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
  WASHINGTON, D.C.
    20549
      EXHIBITS
  filed with
  Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
  of
  THE SECURITIES EXCHANGE ACT OF
    1934
  FOR THE YEAR ENDED
  March 31, 2009
      GRAHAM CORPORATION