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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    March 31, 2010ORo

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. þ
    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




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##### 





Table of
    Contents
    GRAHAM CORPORATION
    Annual Report on
    Form 10-K
    Year Ended March 31, 2010
   
  PagePART IItem 1

Business


1Item 1A

Risk Factors


4Item 1B

Unresolved Staff Comments


10Item 2

Properties


10Item 3

Legal Proceedings


10Item 4

(Removed and Reserved)


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


24Item 8

Financial Statements and Supplementary Data


26Item 9

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


57Item 9A

Controls and Procedures


57Item 9B

Other Information


57PART IIIItem 10

Directors, Executive Officers and Corporate
    Governance


58Item 11

Executive Compensation


58Item 12

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


58Item 13

Certain Relationships and Related Transactions,
    and Director Independence


58Item 14

Principal Accounting Fees and Services


59PART IVItem 15

Exhibits and Financial Statement Schedules


59EX-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 2010 Annual
    Meeting of Stockholders to be held on July 29, 2010, are
    incorporated by reference into Part III, Items 10, 11,
    12, 13 and 14 of this Annual Report on
    Form 10-K.




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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;
    alternative energy;
    pharmaceutical plants;
    plastics plants;
    liquefied natural gas production facilities;
    soap manufacturing plants;
    air conditioning systems;
    propulsion systems for nuclear aircraft carriers;
    food processing plants; and
    other process industries.  Our
    Customers and Markets
  and/or
       1




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Form 10-K.
    Our
    Strengths
    
    We have strong brand recognition.  Over the
    past 74 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 74 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
    many countries throughout the world.
    We have a strong reputation.  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.  We maintain
    significant cash and investments on hand, and no bank debt. Our
    defined benefit pension plan obligations are fully funded.
    We have a high quality credit facility.  Our
    credit facility provides us with a $30,000 borrowing capacity.  Our
    Strategy
    
    Capitalize on the strength of the Graham brand in order to win
    more business in our traditional markets and enter other markets.
    Identify and consummate acquisition and organic growth
    opportunities where we believe our brand strength will provide
    us with the ability to expand and complement our core business.
    This includes extending our existing product lines, moving into
    complementary product lines and expanding our global sales
    presence in order to further broaden our existing markets and
    reach additional markets.
    Invest in people and capital equipment 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.
    Deliver highest quality products and solutions that enable our
    customers to achieve their operating objectives and that
    differentiate us from our competitors, and which allow us to win
    new orders based on value.    
    Investing in engineering resources and technology in order to
    advance our vacuum and heat transfer technology market
    penetration. 2




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
    Enhancing our engineering and manufacturing capacities,
    especially in connection with the design of our products, in
    order to more quickly respond to existing and future customer
    demand and to minimize underutilization of capacity.
    Accelerating our bids on available contracts by implementing
    front-end bid automation and design processes.
    Expanding our margins by implementing and expanding upon our
    operational efficiencies through a flexible manufacturing flow
    model and other cost efficiencies.
    Continued focus and success on production error elimination and
    rework reduction.  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
   3




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Working
    Capital Practices
    Environmental
    Matters
    Seasonality
    Research
    and Development Activities
    Information
    Regarding International Sales
  Form 10-K.
  Available
    Information
  1-800-SEC-0330.
    Item 1A.
    Risk
    Factors  Form 10-K. Form 10-K
 4




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Risks
    related to our business
  The
    industries in which we operate are cyclical, and downturns in
    such industries may adversely affect our operating
    results.
    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.
    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.
   5




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
    nationalization of private enterprises and assets;
    political or economic instability in certain countries,
    especially during the ongoing global economic crisis;
    differences in foreign laws, including increased difficulties in
    protecting intellectual property and uncertainty in enforcement
    of contract rights;
    the possibility that foreign governments may adopt regulations
    or take other actions that could directly or indirectly harm our
    business and growth strategy;
    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 U.S. 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 management team and our inability to
    make up for such loss with a qualified replacement could harm
    our business.
   6




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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 upon our intellectual property or if we
    were to infringe upon 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




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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.
    If we
    become subject to product liability claims, our results of
    operations and financial condition could be adversely
    affected.
      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.
   8




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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.
    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. This plan expires on September 11,
    2010.
    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. 9




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
    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.
    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.
    (Removed
    and Reserved) PART II(Amounts
    in thousands, except per share data)  Item 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   10




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High


LowFiscal year 2010First quarter

$
16.12


$
8.70Second quarter


15.67



10.52Third quarter


21.84



13.37Fourth quarter


21.58



14.63Fiscal year 2009First quarter

$
38.25


$
17.50Second quarter


54.91



21.25Third quarter


27.36



6.85Fourth quarter


13.89



7.16        11




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

2010


2009


2008(1)


2007(1)


2006(1)(Amounts in thousands, except per share data)Operations:Net sales

$
62,189


$
101,111


$
86,428


$
65,822


$
55,208Gross profit


22,231



41,712



34,162



16,819



15,959Gross profit percentage


35.7
%


41.3
%


39.5
%


25.6
%


28.9
%Income from continuing operations


6,361



17,467



15,034



5,761



3,586Dividends


788



754



493



387



367Common stock:Basic earnings from continuing operations per share

$
.64


$
1.72


$
1.52


$
.59


$
.39Diluted earnings from continuing operations per share


.64



1.71



1.49



.58



.38Stockholders equity per share


7.01



6.21



4.86



3.15



2.83Dividends declared per share


.08



.075



.05



.04



.04Market price range of common stockHigh


21.84



54.91



30.48



9.20



10.40Low


8.70



6.85



6.30



5.02



3.31Average common shares outstanding  diluted


9,937



10,195



10,085



9,850



9,336Financial data at March 31:Cash and cash equivalents and investments

$
74,590


$
46,209


$
36,793


$
15,051


$
10,988Working capital


56,704



49,547



36,998



20,119



16,779Capital expenditures


1,003



1,492



1,027



1,637



1,048Depreciation


1,107



977



862



874



775Total assets


108,979



86,924



70,711



48,878



40,556Long-term debt, including capital lease obligations


144



31



36



56



30Stockholders equity


69,074



61,111



48,536



30,654



27,107     (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




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
      Highlights
    
    Net income and income per diluted share for fiscal 2010, were
    $6,361 and $0.64 compared with net income and income per diluted
    share of $17,467 and $1.71 for fiscal year ended March 31,
    2009, which we refer to as fiscal 2009.
    Net sales for fiscal 2010 of $62,189 were down 38% compared with
    $101,111 for fiscal 2009.
    Orders placed in fiscal 2010 of $108,317 were up 47% compared
    with fiscal 2009, when orders were $73,874. Fiscal 2010 orders
    set a record high.
    Backlog on March 31, 2010 of $94,255 was up 95% from
    backlog of $48,290 on March 31, 2009. Backlog on
    March 31, 2010 set a record high.
    Gross profit and operating margins for fiscal 2010 were 35.7%
    and 16.2% compared with 41.3% and 26.0%, respectively, for
    fiscal 2009.
    Cash and short-term investments at March 31, 2010 were
    $74,590 compared with $46,209 as of March 31, 2009, up 61%.
    Cash and investments on hand at March 31, 2010 set a record
    high. Our cash and short-term investments position includes a
    significant increase in customer advances, as certain key
    customers negotiated these pre-payments to lower project costs.
    At fiscal year end, we had a solid balance sheet that was free
    of bank debt and that provided financial flexibility.  Forward-Looking
    Statements
    Form 10-K.
  
    the current and future economic environments affecting us and
    the markets we serve;
    sources of revenue and anticipated revenue, including the
    contribution from the growth of new products, services and
    markets; 13




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
    plans for future products and services and for enhancements to
    existing products and services;
    our operations in foreign countries;
    estimates regarding our liquidity and capital requirements;
    timing of conversion of backlog to sales;
    our ability to attract or retain customers;
    the outcome of any existing or future litigation;
    our acquisition strategy; and
    our ability to increase our productivity and capacity.    Form 10-K,
  Fiscal
    2011 and the Near-Term Market Conditions
        
    As the world recovers slowly from the global recession, many
    emerging economies continue to have relatively strong economic
    growth. This expansion is driving growing energy requirements
    and the need for more refined petroleum products. Although
    uncertainty in the capital markets continues, there has been
    some improved access to capital, which has resulted in certain
    previously stalled projects being released.
    The expansion of the Middle Eastern economies and the continued
    growth in demand for oil and refined products has renewed
    investment activity in that area. We believe that such renewed
    activity is exemplified by the re-starting of projects in both
    the petrochemical and refining industries, such as the Jubail
    and Yanbu export refinery projects in Saudi Arabia (as
    construction costs for these projects have reportedly been
    reduced by 20%).
    Asia, specifically China, has been experiencing renewed demand
    for refined petroleum products such as gasoline in calendar year
    2009 and thus far in 2010, following reductions in demand during
    calendar year 2008 as economic uncertainty stymied growth. This
    renewed demand is driving increased investment in petrochemical
    and refining projects.
    South America, specifically Brazil, Venezuela and Colombia, is
    seeing increased refining and petrochemical investments that are
    driven by their continually expanding economies and increased
    local demand for gasoline and other products that are made from
    oil as the feedstock.
    The U.S. refining market has declined and refinery
    utilization has fallen as demand declined from conservation
    efforts, economic weakness, and uncertainty around
    U.S. energy policy and its potential 14




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impact on production costs. As a result, there have been fewer
    investment dollars in capital projects for refineries in the
    U.S. This is expected to continue for the next few years.  
    Investments in North American oil sands have been delayed as a
    result of construction costs and uncertainty around
    U.S. energy policy (and the potential impact that changes
    to the energy policy may have on production costs which has
    impacted project economics and risk). Recently however, there
    have been investments in extraction projects in Alberta and
    foreign investment in Alberta which suggest that downstream
    investments that involve our equipment might increase in the
    next two to three years.      Shift
    Back to International Growth Expected to Drive Next Industry
    Cycle
    Demand
    Trends
  
    Global consumption of crude oil is estimated to expand
    significantly over the next two decades, primarily in emerging
    markets. This is expected to offset estimated flat to slightly
    declining demand in North America and Europe.
    Increased demand is expected for power, refinery and
    petrochemical products, stimulated by an expanding middle class
    in Asia.
    Increased development of geothermal electrical power plants in
    certain regions is expected to meet projected growth in demand
    for electrical power.
    Increased global regulations over the refining and petrochemical
    industries are expected to continue to drive requirements for
    capital investments.
    Increased demand is expected from the nuclear power generation
    industry and government contractors.  Impact of
    Demand Trends
  
    Construction of new petrochemical plants in the Middle East,
    where natural gas is plentiful and less expensive, is expected
    to continue.
    Increased investments in new power projects are expected in Asia
    and South America to meet projected consumer demand increases.
    Global oil refining capacity is projected to increase, and is
    expected to be addressed through new facilities, refinery
    upgrades, revamps and expansions.
    Long-term growth potential is believed to exist in alternative
    energy markets, such as coal-to-liquids, gas-to-liquids and
    other emerging technologies, such as biodiesel, ethanol and
    waste-to-energy. 15




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Results
    of Operations
  Form 10-K.
    Year Ended March 31,2010


2009


2008Net sales

$
62,189


$
101,111


$
86,428Net income

$
6,361


$
17,467


$
15,034Diluted income per share

$
0.64


$
1.71


$
1.49Total assets

$
108,979


$
86,924


$
70,711   Fiscal
    2010 Compared with Fiscal 2009
         16




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Fiscal
    2009 Compared with Fiscal 2008
                 17




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Stockholders
    Equity
  Form 10-K.
  March 31, 2010

March 31, 2009

March 31, 2008$
69,074


$
61,111


$
48,536   Fiscal
    2010 Compared with Fiscal 2009
      Fiscal
    2009 Compared with Fiscal 2008
  2-for-1
    Liquidity
    and Capital Resources
  Form 10-K:
  March 31,2010


2009Working capital(1)

$
56,704


$
49,547Working capital ratio(1)


2.6



3.1Long-term debt (capital leases)

$
144


$
31Long-term debt/capitalization(2)


0.0
%


0.0
%Long-term liabilities/capitalization(3)


7.1
%


4.3
%     (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.   18




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Payments Due by PeriodLess Than


1 − 3


3 − 5Total


1 Year


Years


Years


ThereafterCapital lease obligations

$
219


$
70


$
82


$
67


$
Operating leases(1)


264



158



106







Pension and postretirement benefits(2)


109



109











Accrued compensation


292















292Accrued pension liability


272



26



52



52



142Other long-term liabilities


445







445







Total

$
1,601


$
363


$
685


$
119


$
434     (1)
    
    For additional information, see Note 5 to the consolidated
    financial statements in Item 8 of Part II 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 our
    fiscal year ending March 31, 2011.             19




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Orders
    and Backlog
  Form 10-K.
    Form 10-K).
 20




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Outlook
      12-month
      
    A significantly enhanced competitive environment which has been
    evident through recent orders during the contraction of the
    industry as competitors have been aggressively pursuing fewer
    projects;
    A shift toward international markets, where margins are
    generally lower than domestic project margins; and
    Continued expected underutilization of capacity, especially in
    the first two quarters of fiscal 2011.     21




---



##### Table of Contents



Contingencies
    and Commitments
      Critical
    Accounting Policies
  Form 10-K,
    Revenue Recognition.
    Pension and Postretirement Benefits.
 22




---



##### Table of Contents



Income Taxes.
      Critical
    Accounting Estimates and Judgments
  Form 10-K
      Form 10-K.
       23




---



##### Table of Contents



Form 10-K
  New
    Accounting Pronouncements
    Off
    Balance Sheet Arrangements
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      Foreign
    Currency
     24




---



##### Table of Contents



Price
    Risk
    Project
    Cancellation and Project Continuation Risk
     25




---



##### 



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, 2010, 2009 and 2008


27Consolidated Balance Sheets as of March 31,
    2010 and 2009


28Consolidated Statements of Cash Flows for the
    years ended March 31, 2010, 2009 and 2008


29Consolidated Statements of Changes in
    Stockholders Equity for the years ended March 31,
    2010, 2009 and 2008


30Notes to Consolidated Financial Statements


31Reports of Independent Registered Public
    Accounting Firm


55   26




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended March 31,2010


2009


2008(Amounts in thousands,except per share data)Net sales

$
62,189


$
101,111


$
86,428Cost of products sold


39,958



59,399



52,266Gross profit


22,231



41,712



34,162Other expenses and income:Selling, general and administrative


12,093



14,825



13,074Interest income


(55
)


(416
)


(1,026
)Interest expense


36



5



10Other expense


96



559



Total other expenses and income


12,170



14,973



12,058Income before income taxes


10,061



26,739



22,104Provision for income taxes


3,700



9,272



7,070Net income

$
6,361


$
17,467


$
15,034Per share dataBasic:Net income

$
.64


$
1.72


$
1.52Diluted:Net income

$
.64


$
1.71


$
1.49Average common shares outstanding:Basic


9,899



10,134



9,912Diluted


9,937



10,195



10,085Dividends declared per share

$
.08


$
.075


$
.05    27




---



##### Table of Contents



CONSOLIDATED
    BALANCE SHEETS  March 31,2010


2009(Amounts in thousands, except per share data)AssetsCurrent assets:Cash and cash equivalents

$
4,530


$
5,150Investments


70,060



41,059Trade accounts receivable, net of allowances 
    ($17 and $39 at March 31, 2010 and 2009, respectively)


7,294



6,995Unbilled revenue


3,039



10,444Inventories


6,098



4,665Income taxes receivable






4,054Prepaid expenses and other current assets


651



375Total current assets


91,672



72,742Property, plant and equipment, net


9,769



9,645Prepaid pension asset


7,335



4,300Other assets


203



237Total assets

$
108,979


$
86,924Liabilities and stockholders equityCurrent liabilities:Current portion of capital lease obligations

$
66


$
28Accounts payable


6,623



5,514Accrued compensation


4,010



4,630Accrued expenses and other current liabilities


2,041



2,266Customer deposits


22,022



5,892Income taxes payable


68



Deferred income tax liability


138



4,865Total current liabilities


34,968



23,195Capital lease obligations


144



31Accrued compensation


292



250Deferred income tax liability


2,930



1,253Accrued pension liability


246



256Accrued postretirement benefits


880



828Other long-term liabilities


445



Total liabilities


39,905



25,813Commitments and contingencies (Note 15)Stockholders equity:Preferred stock, $1.00 par value Authorized, 500 sharesCommon stock, $.10 par value Authorized, 25,500 sharesIssued, 10,155 and 10,127 shares at March 31, 2010 and
    2009, respectively


1,016



1,013Capital in excess of par value


15,459



14,923Retained earnings


59,539



53,966Accumulated other comprehensive loss


(4,386
)


(6,460
)Treasury stock (305 and 279 shares at March 31, 2010
    and 2009, respectively)


(2,554
)


(2,325
)Notes receivable






(6
)Total stockholders equity


69,074



61,111Total liabilities and stockholders equity

$
108,979


$
86,924    28




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended March 31,2010


2009


2008(Dollar amounts in thousands)Operating activities:Net income

$
6,361


$
17,467


$
15,034Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


1,119



1,005



885Amortization of unrecognized prior service cost and actuarial
    losses


678



106



104Discount accretion on investments


(50
)


(397
)


(904
)Stock-based compensation expense


436



372



187Loss on disposal or sale of property, plant and equipment


70



4



3Deferred income taxes


(4,568
)


6,022



4,342(Increase) decrease in operating assets:Accounts receivable


(299
)


(1,941
)


6,807Unbilled revenue


7,407



(1,675
)


(3,969
)Inventories


(1,433
)


132



(115
)Income taxes receivable/payable


4,122



(2,552
)


(634
)Prepaid expenses and other current and non-current assets


(24
)


90



(250
)Prepaid pension asset


(245
)


(7,677
)


(3,045
)Increase (decrease) in operating liabilities:Accounts payable


990



(11
)


159Accrued compensation, accrued expenses and other current and
    non-current liabilities


(401
)


260



1,308Customer deposits


16,130



(100
)


(127
)Long-term portion of accrued compensation, accrued pension
    liability and accrued postretirement benefits


(23
)


(59
)


(83
)Net cash provided by operating activities


30,270



11,046



19,702Investing activities:Purchase of property, plant and equipment


(1,003
)


(1,492
)


(1,027
)Proceeds from disposal of property, plant and equipment


9



1



45Purchase of investments


(182,481
)


(142,601
)


(94,781
)Redemption of investments at maturity


153,530



136,620



74,680Net cash used by investing activities


(29,945
)


(7,472
)


(21,083
)Financing activities:Proceeds from issuance of long-term debt


822



2,927



69Principal repayments on long-term debt


(861
)


(2,955
)


(106
)Issuance of common stock


63



695



1,116Dividends paid


(788
)


(754
)


(493
)Purchase of treasury stock


(229
)


(2,303
)


Excess tax deduction on stock awards


40



1,696



1,473Other


5



5



(17
)Net cash (used) provided by financing activities


(948
)


(689
)


2,042Effect of exchange rate changes on cash


3



153



76Net (decrease) increase in cash and cash equivalents


(620
)


3,038



737Cash and cash equivalents at beginning of year


5,150



2,112



1,375Cash and cash equivalents at end of year

$
4,530


$
5,150


$
2,112    29




---



##### 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, 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 transition to a fiscal year end measurement date for
    defined benefit pension and other postretirement plan assets and
    obligations, 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
)


61,111Net income














6,361















6,361Foreign currency translation adjustment


















2











2Pension and other postretirement benefits adjustments, net of
    income tax of $1,289


















2,072











2,072Total comprehensive income






























8,435Issuance of shares


27,896



3



60



















63Stock award tax benefit










40



















40Dividends














(788
)














(788
)Recognition of equity-based compensation expense










436



















436Purchase of treasury stock






















(229
)






(229
)Collection of notes receivable from officers and directors


























6



6Balance at March 31, 2010


10,155,104


$
1,016


$
15,459


$
59,539


$
(4,386
)

$
(2,554
)

$



$
69,074     (1)
    
    Accumulated foreign currency translation adjustments were $219,
    $217 and $70, accumulated pension benefit adjustments were
    $(4,845), $(7,074) and $(2,351), and accumulated other
    postretirement benefit adjustments were $240, $397 and $461 at
    March 31, 2010, 2009 and 2008, respectively, net of tax.   30




---



##### 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
 31




---



##### Table of Contents



percentage-of-completion
      Shipping
    and handling fees and costs
    Investments
  held-to-maturity,
  Inventories
  percentage-of-completion percentage-of-completion
    March 31,2010


2009Costs incurred since inception on contracts in progress

$
7,096


$
24,358Estimated earnings since inception on contracts in progress


2,948



18,47910,044



42,837Less billings to date


30,710



40,908Net (over) under billings

$
(20,666
)

$
1,929  32




---



##### Table of Contents



March 31,2010


2009Unbilled revenue

$
3,039


$
10,444Progress payments reducing inventory (Note 2)


(1,683
)


(2,623
)Customer deposits


(22,022
)


(5,892
)Net (over) under billings

$
(20,666
)

$
1,929   Property,
    plant, equipment and depreciation
    Product
    warranties
    Research
    and development
    Income
    taxes
      non-U.S. domestic
 33




---



##### Table of Contents



Stock
    splits
  two-for-one two-for-one two-for-one
  five-for-four five-for-four five-for-four
  Stock-based
    compensation
    Income
    per share data
   34




---



##### Table of Contents



Year Ended March 31,2010


2009


2008Basic income per share:Numerator:Net income

$
6,361


$
17,467


$
15,034Denominator:Weighted common shares outstanding


9,842



10,073



9,838Share equivalent units (SEUs) outstanding


57



61



74Weighted average shares and SEUs outstanding


9,899



10,134



9,912Basic income per share

$
.64


$
1.72


$
1.52Diluted income per share:Numerator:Net income

$
6,361


$
17,467


$
15,034Denominator:Weighted average shares and SEUs outstanding


9,899



10,134



9,912Stock options outstanding


36



60



173Contingently issuable SEUs


2



1



Weighted average common and potential common shares outstanding


9,937



10,195



10,085Diluted income per share

$
.64


$
1.71


$
1.49     Cash flow
    statement
          two-for-one five-for-four
 35




---



##### Table of Contents



Accumulated
    other comprehensive income (loss)
    Fair
    value measurements
    Level 1
  Level 2
  Level 3
     36




---



##### Table of Contents



Accounting
    and Reporting Changes
    BeforeRemeasurement of



After RemeasurementPlan Assets and



of Plan Assets andBalance Sheet Caption

Obligations

Adjustments

ObligationsPrepaid 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
)     Reclassifications
    Note 2 
    Inventories:    March 31,2010


2009Raw materials and supplies

$
1,843


$
1,929Work in process


5,365



4,664Finished products


573



6957,781



7,288Less  progress payments


1,683



2,623$
6,098


$
4,665  37




---



##### Table of Contents



Note 3 
    Property,
    Plant and Equipment:    March 31,2010


2009Land

$
210


$
210Buildings and improvements


10,713



10,709Machinery and equipment


17,972



17,509Construction in progress


498



69629,393



29,124Less  accumulated depreciation and amortization


19,624



19,479$
9,769


$
9,645     Note 4 
    Product
    Warranty Liability:    Year Ended March 31,2010


2009Balance at beginning of year

$
366


$
441Expense for product warranties


99



204Product warranty claims paid


(96
)


(279
)Balance at end of year

$
369


$
366     Note 5 
    Leases:      March 31,2010


2009Machinery and equipment

$
288


$
97Less accumulated amortization


74



41$
214


$
56    38




---



##### Table of Contents



Operating


CapitalLeases


Leases2010

$
158


$
702011


66



422012


40



402013






402014






27Total minimum lease payments

$
264


$
219Less  amount representing interest






9Present value of net minimum lease payments





$
210   Note 6 
    Debt:  Short-Term
    Debt Due to Banks
          Long-Term
    Debt
    March 31,2010


2009Capital lease obligations (Note 5)

$
210


$
59Less: current amounts


66



28Total

$
144


$
31    39




---



##### 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 31,2010


2009


2008United States

$
10,060


$
26,831


$
22,382United Kingdom










(8
)China


1



( 92
)


(270
)$
10,061


$
26,739


$
22,104  40




---



##### Table of Contents



Year Ended March 31,2010


2009


2008Current:Federal

$
8,143


$
3,138


$
2,646State


125



121



73Foreign






(9
)


98,268



3,250



2,728Deferred:Federal


(4,658
)


5,827



4,474State


(278
)


159



(55
)Foreign


36



36



(77
)Changes in valuation allowance


332







(4,568
)


6,022



4,342Total provision for income taxes

$
3,700


$
9,272


$
7,070     Year Ended March 31,2010


2009


2008Provision for income taxes at federal rate

$
3,421


$
9,091


$
7,516State taxes


(173
)


239



(6
)Charges not deductible for income tax purposes


32



89



26Recognition of tax benefit generated by qualified production
    activities deduction


(367
)


(18
)


(206
)Research and development tax credits


(109
)


(218
)


(234
)Valuation allowance


332







Uncertain tax positions


445







Other


119



89



(26
)Provision for income taxes

$
3,700


$
9,272


$
7,070  41




---



##### Table of Contents



March 31,2010


2009Depreciation

$
(1,355
)

$
(1,163
)Accrued compensation


186



110Prepaid pension asset


(2,556
)


(1,695
)Accrued pension liability


94



99Accrued postretirement benefits


344



428Compensated absences


453



469Inventories


(553
)


(5,701
)Warranty liability


128



128Accrued expenses


210



252Stock-based compensation


247



103Net operating loss carryforwards


55



188Federal tax credits






656New York State investment tax credit


311



202Other


154



30(2,282
)


(5,894
)Less: Valuation allowance


(332
)


Total

$
(2,614
)

$
(5,894
)     March 31,2010


2009Current deferred income tax asset

$
255


$
Long-term deferred income tax asset


199



224Current deferred income tax liability


(138
)


(4,865
)Long-term deferred income tax liability


(2,930
)


(1,253
)$
(2,614
)

$
(5,894
)        42




---



##### Table of Contents



Balance at April 1, 2009

$
Additions based upon tax positions taken during prior periods


314Additions based upon tax positions taken during the current
    period


131Balance at March 31, 2010

$
445   Note 9 
    Employee
    Benefit Plans:  Retirement
    Plans
        Year Ended March 31,2010


2009


2008Service cost during the period

$
315


$
509


$
471Interest cost on projected benefit obligation


1,298



1,558



1,123Expected return on assets


(1,858
)


(2,310
)


(1,639
)Amortization of:Unrecognized prior service cost


4



5



4Actuarial loss


818



271



236Net pension cost

$
577


$
33


$
195     Year Ended March 31,2010


2009


2008Discount rate


7.39
%


6.75
%


5.91
%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
%  43




---



##### Table of Contents



Year Ended March 31,2010


2009Change in the benefit obligationProjected benefit obligation at beginning of year

$
17,895


$
19,019Service cost


235



509Interest cost


1,298



1,558Actuarial (gain) loss


3,854



(2,438
)Benefit payments


(784
)


(753
)Projected benefit obligation at end of year

$
22,498


$
17,895     March 31,2010


2009Discount rate


6.07
%


7.39
%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

$
22,195


$
23,205Actual return on plan assets


8,422



(7,757
)Employer contributions






7,500Benefit and administrative expense payments


(784
)


(753
)Fair value of plan assets at end of year

$
29,833


$
22,195Funded statusFunded status at end of year

$
7,335


$
4,300Amount recognized in the Consolidated Balance Sheets

$
7,335


$
4,300       March 31,2010


2009Net actuarial losses

$
4,831


$
7,058Prior service cost


14



16$
4,845


$
7,074  44




---



##### Table of Contents



Net actuarial gain arising during the year

$
1,692Amortization of actuarial loss


535Amortization of prior service cost


2$
2,229       2011

$
8972012


9582013


9632014


1,0402015


1,1512016-2020


6,616Total

$
11,625     Target


March 31,Allocation


2010


2009Asset CategoryEquity securities


50-70
%


66
%


64
%Debt securities


20-50
%


34
%


35
%Other, including cash


0-10
%






1
%100
%


100
%    45




---



##### Table of Contents



Fair Value Measurements UsingQuoted Prices inActive Markets for


Significant Other


SignificantAt


Identical Assets


Observable Inputs


Unobservable InputsAsset Category

March 31, 2010


(Level 1)


(Level 2)


(Level 3)Cash

$
73


$
73


$



$
Equity securities:U.S. companies


15,943



15,943







International companies


3,792



3,792







Fixed income:Corporate bond fundsIntermediate-term


8,035



8,035







Short-term


1,990



1,990







$
29,833


$
29,833


$



$
           Other
    Postretirement Benefits
       46




---



##### Table of Contents



Year Ended March 31,2010


2009


2008Interest cost on accumulated benefit obligation

$
61


$
77


$
61Amortization of prior service benefit


(166
)


(208
)


(166
)Amortization of actuarial loss


22



32



29Net postretirement benefit income

$
(83
)

$
(99
)

$
(76
)       Year Ended March 31,2010


2009Change in the benefit obligationProjected benefit obligation at beginning of year

$
950


$
1,078Interest cost


61



77Actuarial gain (loss)


106



(74
)Benefit payments


(128
)


(131
)Projected benefit obligation at end of year

$
989


$
950     March 31,2010


2009Discount rate


5.15
%


6.88
%Medical care cost trend rate


9.00
%


7.50
%       Year Ended March 31,2010


2009Change in fair value of plan assetsFair value of plan assets at beginning of year

$



$
Employer contribution


128



131Benefit payments


(128
)


(131
)Fair value of plan assets at end of year

$



$
Funded statusFunded status at end of year

$
(989
)

$
(950
)Amount recognized in the Consolidated Balance Sheets

$
(989
)

$
(950
)    47




---



##### Table of Contents



March 31,2010


2009Net actuarial loss

$
262


$
202Prior service cost


(503
)


(599
)$
(241
)

$
(397
)     Net actuarial loss arising during the year

$
74Amortization of actuarial loss


(14
)Amortization of prior service cost


96$
156       2011

$
1092012


1042013


992014


902015


852016-2020


356Total

$
843     Employee
    Stock Ownership Plan
    Note 10 
    Stock
    Compensation Plans:   48




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##### Table of Contents



1 3
        Year Ended March 31,2010


2009


2008Expected life


3 years



4.89 years



5 yearsVolatility


99.04
%


63.68
%


43.86
%Risk-free interest rate


1.52
%


3.12
%


4.83
%Dividend yield


.36
%


.28
%


.63
%      49




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##### Table of Contents



WeightedShares


Average


Weighted


AggregateUnder


Exercise


Average Remaining


IntrinsicOption


Price


Contractual Term


ValueOutstanding at April 1, 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


$
9.23Granted


24


$
15.22Exercised


(13
)

$
4.78Outstanding at March 31, 2010


175


$
10.37



6.77 years


$
1,579Vested or expected to vest at March 31, 2010


167


$
10.29



6.73 years


$
1,517Exercisable at March 31, 2010


80


$
8.04



5.75 years


$
889     Weighted AverageOptions Outstanding





Remainingat March 31,


Weighted Average


Contractual LifeExercise Price

2010


Exercise Price


(In Years)$ 1.50- 1.76


10


$
1.63



3.002.34- 2.50


11



2.42



2.765.56- 8.01


104



7.22



4.5810.84-15.22


33



14.30



7.3330.88-44.50


17



32.41



8.76$ 1.50-44.50


175


$
10.37



6.77      50




---



##### Table of Contents



Restricted


Weighted Average


AggregateStock


Grant Date Fair Value


Intrinsic ValueNon-vested at April 1, 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


$
18.72Granted


15


$
15.22Vested


(1
)

$
12.31Non-vested at March 31, 2010


19


$
16.15


$
63     Note 11 
    Shareholder
    Rights Plan:       51




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##### Table of Contents



Note 12 
    Segment
    Information:      Year Ended March 31,2010


2009


2008Heat transfer equipment

$
23,170


$
35,231


$
31,988Vacuum equipment


24,564



46,043



38,911All other


14,455



19,837



15,529Net sales

$
62,189


$
101,111


$
86,428     Year Ended March 31,2010


2009


2008Net Sales:Africa

$
2,440


$
583


$
342Asia


20,308



13,255



12,840Australia & New Zealand


37



115



85Canada


1,891



8,015



5,869Mexico


700



528



905Middle East


6,390



8,373



9,918South America


1,327



4,038



7,862U.S.


28,068



63,719



46,881Western Europe


1,014



2,400



1,128Other


14



85



598Net sales

$
62,189


$
101,111


$
86,428       Note 13 
    Other
    Expense:     52




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##### Table of Contents



Year Ended March 31,2010


2009Balance at beginning of year

$
349


$
Expense for restructuring


96



559Amounts paid for restructuring


(442
)


(210
)Balance at end of year

$
3


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


Second


Third


Fourth


TotalYear Ended March 31, 2010

Quarter


Quarter


Quarter


Quarter


YearNet sales

$
20,138


$
16,108


$
12,166


$
13,777


$
62,189Gross profit


8,278



5,854



3,821



4,278



22,231Provision for income taxes


1,529



1,240



350



581



3,700Net income


3,518



1,468



764



611



6,361Per share:Net income:Basic

$
.36


$
.15


$
.08


$
.06


$
.64Diluted

$
.35


$
.15


$
.08


$
.06


$
.64Market price range of common stock

$
8.70-16.12


$
10.52-15.67


$
13.37-21.84


$
14.63-21.58


$
8.70-21.84   53




---



##### Table of Contents



First


Second


Third


Fourth


TotalYear Ended March 31, 2009

Quarter


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  54




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Compensation  Retirement Benefits
  Internal Control  Integrated Framework
  
     55




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework Form 10-K
        Internal Control  Integrated Framework
  Compensation  Retirement Benefits
  
     56




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Conclusion
    Regarding Disclosure Controls and Procedures
  Form 10-K.
  Changes
    in Internal Control Over Financial Reporting
  Form 10-K
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f).
  Internal Control 
    Integrated Framework
  Form 10-K,
  Item 9B.
    Other
    Information   57




---



##### 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, 2010
  Equity Compensation Plan InformationNumber of securitiesremaining availablefor future issuanceNumber of securities to


Weighted average


under equitybe issued upon exercise


exercise price of


compensation plansof outstanding 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


175


$
10.37



596Equity compensation plans not approved by security holders










Total


175


$
10.37



596   Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   58




---



##### Table of Contents



Item 14.
    Principal
    Accounting Fees and Services   Part IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K Form 10-K
    Form 10-K Form 10-K.
 59




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Compensation  Retirement Benefits Form 10-K.
  
     60




---



##### 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, 2010Reserves deducted from the asset to which they apply:Reserve for doubtful accounts receivable

$
39


$
(5
)

$



$
(17
)

$
17Reserves included in the balance sheet caption accrued
    expensesProduct warranty liability


366



99







(96
)


369Restructuring reserve


349



96







(442
)


3Year 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
)


  61




---



##### 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 from 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 from 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 from
    Exhibit 99.3 to the Companys
    Form 8-A
    filed with the Securities and Exchange Commission on
    September 15, 2000 (SEC File
    No. 000-18703).(9)

Voting trust agreementNot applicable.(10)

Material Contracts#10
.1

1995 Graham Corporation Incentive Plan to Increase Shareholder
    Value is incorporated herein by reference from Appendix A
    to the Companys Proxy Statement for its 1996 Annual
    Meeting of Stockholders filed with the Securities and Exchange
    Commission on April 8, 1996 (SEC File
    No. 001-08462).#10
.2

Long-Term Stock Ownership Plan of Graham Corporation is
    incorporated herein by reference from 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
.3

Graham Corporation Outside Directors Long-Term Incentive
    Plan is incorporated herein by reference from Exhibit 10.1
    to the Companys Current Report on
    Form 8-K
    dated March 3, 2005.#10
.4

Graham Corporation Policy Statement for U.S. Foreign Service
    Employees is incorporated herein by reference from
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated March 27, 2006.#10
.5

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 from Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated March 27, 2006.#10
.6

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 from
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated July 27, 2006.#10
.7

Amended and Restated 2000 Graham Corporation Incentive Plan to
    Increase Shareholder Value is incorporated herein by reference
    from 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
.8

Loan Agreement between the Company and Bank of America, N.A.,
    dated as of December 5, 2007, is incorporated herein by
    reference from Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    dated December 5, 2007.10
.9

Security Agreement between the Company and Bank of America,
    N.A., dated as of December 5, 2007, is incorporated herein
    by reference from Exhibit 99.2 to the Companys
    Current Report on
    Form 8-K
    dated December 5, 2007.10
.10

Patent Security Agreement between the Company and Bank of
    America, N.A., dated as of December 5, 2007, is
    incorporated herein by reference from Exhibit 99.3 of the
    Companys Current Report on
    Form 8-K
    dated December 5, 2007.10
.11

Trademark Security Agreement between the Company and Bank of
    America, N.A., dated as of December 5, 2007, is
    incorporated herein by reference from the Companys Current
    Report on
    Form 8-K
    dated December 5, 2007.#10
.12

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 from
    Exhibit 10.19 to the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2008.#10
.13

Form of Director Non-Qualified Stock Option Agreement is
    incorporated herein by reference from the Companys
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2008. 62




---



##### Table of Contents



#10
.14

Amendment to Employment Agreement dated as of December 31,
    2008 by and between Graham Corporation and James R. Lines, is
    incorporated herein by reference from Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    dated December 31, 2008.#10
.15

Amendment to Employment Agreement dated as of December 31,
    2008 by and between Graham Corporation and Alan E. Smith, is
    incorporated herein by reference from Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated December 31, 2008.10
.16

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 from
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated February 13, 2009.#10
.17

Employment Agreement dated March 2, 2009 between Jeffrey
    Glajch and Graham Corporation is incorporated herein by
    reference from Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    dated March 2, 2009.#10
.18

Graham Corporation Annual Stock-Based Incentive Award Plan for
    Senior Executives is incorporated herein by reference from
    Exhibit 10.27 to the Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2009.#10
.19

Graham Corporation Annual Executive Cash Bonus Program is
    incorporated herein by reference from Exhibit 10.28 to the
    Companys Annual Report on
    Form 10-K
    for the year ended March 31, 2009.10
.20

Amendment No. 2 to Loan Agreement between Graham
    Corporation and Bank of America, N.A. dated as of
    August 19, 2009, is incorporated herein by reference from
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated August 19, 2009.#10
.21

Form of Director Restricted Stock Agreement is incorporated
    herein by reference from Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2009.#10
.22

Form of Employee Non-Qualified Stock Option Agreement is
    incorporated herein by reference from Exhibit 10.2 to the
    Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2009.#10
.23

Form of Employee Restricted Stock Agreement is incorporated
    herein by reference from Exhibit 10.3 to the Companys
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2009.#10
.24

Form of Indemnification Agreement between Graham Corporation and
    each of its Directors and Officers is incorporated herein by
    reference from Exhibit 99.2 to the Companys Current
    Report on
    Form 8-K
    dated January 29, 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.(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 63




---



##### Table of Contents



(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. 64




---



##### Table of Contents



SIGNATURES
      May 25, 2010By: /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)

May 25, 2010/s/  Jeffrey
    GlajchJeffrey
    Glajch

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

May 25, 2010/s/  Jennifer
    R. CondameJennifer
    R. Condame

Chief Accounting Officer and Controller (Principal Accounting
    Officer)

May 25, 2010/s/  Helen
    H. BerkeleyHelen
    H. Berkeley

Director

May 25, 2010/s/  Jerald
    D. BidlackJerald
    D. Bidlack

Director and Chairman of the Board

May 25, 2010/s/  Alan
    FortierAlan
    Fortier

Director

May 25, 2010/s/  James
    J. MalvasoJames
    J. Malvaso

Director

May 25, 2010/s/  Gerard
    T. MazurkiewiczGerard
    T. Mazurkiewicz

Director

May 25, 2010/s/  Cornelius
    S. Van ReesCornelius
    S. Van Rees

Director

May 25, 2010  65




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66