##### Table of Contents





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, 2011ORo

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
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)   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, 2011
   
  PagePART IItem 1

Business


1Item 1A

Risk Factors


5Item 1B

Unresolved Staff Comments


14Item 2

Properties


14Item 3

Legal Proceedings


14Item 4

(Removed and Reserved)


14PART IIItem 5

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


14Item 6

Selected Financial Data


15Item 7

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


16Item 7A

Quantitative and Qualitative Disclosures About
    Market Risk


28Item 8

Financial Statements and Supplementary Data


29Item 9

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


62Item 9A

Controls and Procedures


62Item 9B

Other Information


63PART IIIItem 10

Directors, Executive Officers and Corporate
    Governance


63Item 11

Executive Compensation


63Item 12

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


63Item 13

Certain Relationships and Related Transactions,
    and Director Independence


64Item 14

Principal Accounting Fees and Services


64PART IVItem 15

Exhibits and Financial Statement Schedules


64EX-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 2011 Annual
    Meeting of Stockholders to be held on July 28, 2011, 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



(Dollar
    amounts in thousands except per share data).  Item 1.
    Business  ®
      Petroleum
    Refining
  Chemical
    and Petrochemical Processing
  
    fertilizer plants
    ethylene, methanol and nitrogen producing plants
    plastics, resins and fibers plants
    petrochemical intermediate plants
    coals-to-chemicals
    plants
    gas-to-liquids
    plants  Power
    Generation/Alternate Energy
  
    nuclear power generation
    fossil fuel plants
    biomass plants
    cogeneration power plants
    geothermal power plants
    ethanol plants  Defense
  
    propulsion systems for nuclear aircraft carriers and other
    nuclear powered vessels  Other
  
    soap manufacturing plants
    air conditioning and water heating systems
    food processing plants
    pharmaceutical plants
    liquefied natural gas production facilities 1




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Our
    Customers and Markets
  and/or
      Form 10-K
    Our
    Strengths
    
    We have strong brand recognition.  Over the
    past 75 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. Energy Steel has a
    30-year
    history of providing products and support to its customers,
    especially the U.S. nuclear power industry, and has a
    recognized brand name in its markets.
    We custom engineer and manufacture high quality products and
    systems that address the particular needs of our
    customers.  With 75 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 of both placing customers first and
    standing behind our products. We believe that our relationships
    are strong with our existing customer base, as well as with our
    key suppliers. 2




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
    We have a highly trained workforce.  We
    maintain a long-tenured, skilled and flexible workforce.
    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 $25,000 borrowing capacity
    that is expandable at our option at any time up to a total of
    $50,000.  Our
    Strategy
    
    Capitalize on the strength of the Graham and Energy Steel brands
    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.
    We intend to accomplish this objective by 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. Our
    acquisition of Energy Steel was in furtherance of this portion
    of our business strategy.
    Maximize the benefits from our acquisition of Energy Steel. We
    plan to expand our market penetration with Energy Steels
    current customer base in the domestic nuclear industry. We also
    intend to identify additional domestic and international
    opportunities to serve the nuclear industry.
    Expand our market presence in the Navys Nuclear Propulsion
    Program. We plan to capitalize on our success in securing the
    nuclear carrier order by flawlessly executing our existing order
    for this program. We also plan to expand our market presence
    into additional defense-related programs, including nuclear
    submarines and destroyer projects.
    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.  
    Deliver highest quality products and solutions that enable our
    customers to achieve their operating objectives and that
    differentiate us from our competitors, and which we believe
    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.
    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 ability to quickly and efficiently bid on
    available contracts by continuing to implement front-end bid
    automation and design processes.
    Expanding our capabilities and penetrating the existing sales
    channel and customer base in the nuclear market.
    Expanding our margins by implementing and expanding upon our
    operational efficiencies through a flexible manufacturing flow
    model and other cost efficiencies.
    Continuing to focus on production error elimination and rework
    reduction. 3




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Competition
    NORTH
    AMERICA
  Market

Principle 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 TransferTurbomachinery OEM  power and power producer

Holtec; Thermal Engineering International (USA), Inc.; Krueger;
    Yuba Heat TransferHVAC

Alfa Laval AB; APV; ITT; AmbassadorNuclear

Dubose, Consolidated, Tioga, Nova, Joseph Oats, Energy &
    Process   INTERNATIONAL
  Market

Principle 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; KruegerTurbomachinery OEM  power and power producer

Holtec; Thermal Engineering International; Krueger; Yuba Heat
    Transfer   Intellectual
    Property
    Availability
    of Raw Materials
    Working
    Capital Practices
    Environmental
    Matters
   4




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Seasonality
    Research
    and Development Activities
    Information
    Regarding International Sales
  Form 10-K.
  Employees
    Available
    Information
  1-800-SEC-0330.
    Item 1A.
    Risk
    Factors  Form 10-K. Form 10-K
 5




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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. 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 crude oil. As a result, volatility in
    the price of oil may negatively impact our operating
    results.
    A
    large percentage of our sales occur outside of the U.S. As a
    result, we are subject to the economic, political, regulatory
    and other risks of international operations.
   6




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
    nationalization of private enterprises and assets;
    political or economic instability in certain countries and
    regions, such as the recent uprisings and instability throughout
    the Middle East;
    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 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.
    Efforts
    to reduce large U.S. federal budget deficits could result in
    government cutbacks in defense spending or in reduced incentives
    to pursue alternative energy projects, resulting in reduced
    demand for our products.
    Changes
    in tax policies and tax rates in the U.S. could result in
    adverse impacts for domestic manufacturing investments,
    resulting in reduced demand for our products.
   7




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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.
    Our
    business is highly competitive. If we are unable to successfully
    implement our business strategy and compete against entities
    with greater resources than us, 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.
     8




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We are
    subject to contract cancellations and delays by our customers,
    which may adversely affect our operating results.
      A
    decrease in supply or cost of the materials used in our products
    could harm our profit margins.
    The
    loss of, or significant reduction or delay in, purchases by our
    largest customers could reduce our revenue and adversely affect
    our results of operations.
    Our
    exposure to fixed-price contracts could negatively impact our
    results of operations.
   9




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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, warranty or other claims,
    our results of operations and financial condition could be
    adversely affected.
        Changes
    in or enforcement of energy policy regulations could adversely
    affect our business.
   10




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Any
    global economic recovery may be led by emerging markets, which
    could result in lower profit margins and increased
    competition.
    Risks
    related to operating a subsidiary and doing business 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.
   11




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Risks
    related to our acquisition and ownership of Energy
    Steel & Supply Company
    It may
    be more difficult, costly or time-consuming to integrate our
    historical business with the business of Energy Steel than we
    expect.
    Our
    acquisition of Energy Steel might subject us to unknown
    liabilities.
    Political
    and regulatory developments could make the utilization and
    growth of nuclear power as an energy source less
    desirable.
      Our
    intangible assets substantially increased as a result of our
    acquisition of Energy Steel. Should a portion of these
    intangible assets be impaired, results of operations could be
    materially adversely affected.
   12




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Risks
    related to the ownership of our common stock
  Provisions
    contained in our certificate of incorporation and bylaws 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.
    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.
    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. 13




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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      High

LowFiscal year 2011First quarter

$
19.60


$
13.50Second quarter


17.99



13.52Third quarter


21.00



14.75Fourth quarter


24.58



19.08Fiscal year 2010First quarter

$
16.12


$
8.70Second quarter


15.67



10.52Third quarter


21.84



13.37Fourth quarter


21.58



14.63    14




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Form 10-K.
    Item 6.
    Selected
    Financial Data  GRAHAM CORPORATION  FIVE YEAR SUMMARY OF SELECTED
    FINANCIAL DATA(For Fiscal Years Ended March 31)

2011(2)

2010

2009

2008(1)

2007(1)(Amounts in thousands, except per share data)Operations:Net sales

$
74,235


$
62,189


$
101,111


$
86,428


$
65,822Gross profit


21,851



22,231



41,712



34,162



16,819Gross profit percentage


29.4
%


35.7
%


41.3
%


39.5
%


25.6
%Income from continuing operations


5,874



6,361



17,467



15,034



5,761Cash dividends


790



788



754



493



387Common stock:Basic earnings from continuing operations per share

$
.59


$
.64


$
1.72


$
1.52


$
.59Diluted earnings from continuing operations per share


.59



.64



1.71



1.49



.58Stockholders equity per share


7.47



7.01



6.21



4.86



3.15Dividends declared per share


.08



.08



.075



.05



.04Market price range of common stockHigh


24.58



21.84



54.91



30.48



9.20Low


13.50



8.70



6.85



6.30



5.02Average common shares outstanding  diluted


9,958



9,937



10,195



10,085



9,850Financial data at March 31:Cash and cash equivalents and investments

$
43,083


$
74,590


$
46,209


$
36,793


$
15,051Working capital


44,003



56,704



49,547



36,998



20,119Capital expenditures


1,979



1,003



1,492



1,027



1,637Depreciation


1,334



1,107



993



862



874Total assets


118,050



108,979



86,924



70,711



48,878Long-term debt, including capital lease obligations


116



144



31



36



56Stockholders equity


73,655



69,074



61,111



48,536



30,654     (1)
    
    Per share data has been adjusted to reflect the following stock
    splits: (i) a
    two-for-one
    stock split declared on July 31, 2008, and (ii) a
    five-for-four
    stock split declared on October 26, 2007. Each such stock
    split was paid in the form of a dividend.(2)
    
    The financial data presented for fiscal 2011 includes the
    financial results of Energy Steel from the date of acquisition,
    which was December 14, 2010. 15




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
  gas-to-liquids
      Highlights
    
    Net income and income per diluted share for fiscal 2011, were
    $5,874 and $0.59 compared with net income and income per diluted
    share of $6,361 and $0.64 for fiscal year ended March 31,
    2010, which we refer to as fiscal 2010. Excluding the
    transaction costs related to the Energy Steel acquisition, net
    income and income per diluted share was $6,407 and $.64 in
    fiscal 2011.
    Net sales for fiscal 2011 of $74,235 were up 19% compared with
    $62,189 for fiscal 2010.
    Orders received in fiscal 2011 of $63,222 were down 42% compared
    with fiscal 2010, when orders were $108,317. Orders received in
    fiscal 2011 included $6,104 associated with Energy Steel.
    Backlog on March 31, 2011 of $91,096 was down 3% from
    backlog of $94,255 on March 31, 2010. Included in backlog
    at March 31, 2011 was $8,444 associated with Energy Steel.
    Gross profit and operating margins for fiscal 2011 were 29.4%
    and 11.8% compared with 35.7% and 16.1%, respectively, for
    fiscal 2010.
    Cash and short-term investments at March 31, 2011 were
    $43,083 compared with $74,590 as of March 31, 2010, down
    42%.
    At fiscal year end, we had a solid balance sheet that was free
    of bank debt and that provided financial flexibility.  Forward-Looking
    Statements
     16




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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;
    plans for future products and services and for enhancements to
    existing products and services;
    our operations in foreign countries;
    our ability to integrate our acquisition of Energy Steel and
    continue to pursue our acquisition and growth strategy;
    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; and
    our ability to increase our productivity and capacity.    Form 10-K,
  Fiscal
    2012 and Near-Term Market Conditions
    four-to-five-year
    
    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. The planned sequential project
    activity for refineries is encouraging.
    Asia, specifically China, began experiencing renewed demand for
    refined petroleum products such as gasoline. This renewed demand
    is driving increased investment in petrochemical and refining
    projects. 17




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
    South America, specifically Brazil, Venezuela and Colombia, is
    seeing increased refining and petrochemical investments that are
    driven by their 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 exhibited recent improvement,
    including near-term increases in orders of short cycle and spare
    parts. Historically, these types of orders have suggested a
    recovery, as delayed spending is released. We expect the
    U.S. refining market will not return to the levels
    experienced during the last upcycle, but will improve compared
    with its levels over the past few years. We expect that the
    U.S. refining markets will continue to be an important
    aspect of our business.
    Investments in North American oil sands projects have recently
    increased, especially for extraction projects in Alberta and
    foreign investment in Alberta which suggest that downstream
    investments that involve our equipment might increase in the
    next one to three years.
    Investment in new nuclear power capacity may become subject to
    increased uncertainty due to political and social pressures,
    enhanced by the tragic earthquake and tsunami which occurred in
    Japan in March 2011. However, the need for additional safety and
    back up redundancies at existing plants could increase demand in
    the near term.      Mix
    Shift: Stronger International Growth in Refining and Chemical
    Processing with Domestic Growth in Nuclear Power and Navy
    Projects
      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.
    Global oil refining capacity is projected to increase, and is
    expected to be addressed through new facilities, refinery
    upgrades, revamps and expansions.
    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. 18




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
    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.
    Increased focus on safety and redundancy is anticipated in
    existing nuclear power facilities.
    Long-term increased project development of international nuclear
    facilities is expected, despite the recent tragedy in Japan.
    Construction of new petrochemical plants in the Middle East is
    anticipated, 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.
    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.
    Shale gas development and the resulting availability of
    affordable natural gas as feedstock to
    U.S.-based
    chemical/petrochemical facilities is expected to lead to renewed
    investment is chemical/petrochemical markets in the U.S.      Results
    of Operations
  Form 10-K.
    Year Ended March 31,2011

2010

2009Net sales

$
74,235


$
62,189


$
101,111Net income

$
5,874


$
6,361


$
17,467Diluted income per share

$
0.59


$
0.64


$
1.71Total assets

$
118,050


$
108,979


$
86,924   Fiscal
    2011 Compared with Fiscal 2010
   19




---



##### Table of Contents



step-up
            Fiscal
    2010 Compared with Fiscal 2009
       20




---



##### Table of Contents



Stockholders
    Equity
  Form 10-K.
  March 31, 2011

March 31, 2010

March 31, 2009$
73,655


$
69,074


$
61,111   Fiscal
    2011 Compared with Fiscal 2010
      Fiscal
    2010 Compared with Fiscal 2009
     21




---



##### Table of Contents



Liquidity
    and Capital Resources
  Form 10-K:
  March 31,2011

2010Cash and investments

$
43,083


$
74,590Working capital(1)


44,003



56,704Working capital ratio(1)


2.3



2.6     (1)
    
    Working capital equals current assets minus current liabilities.
    Working capital ratio equals current assets divided by current
    liabilities.      Payments Due by PeriodLess Than


1 − 3


3 − 5Total


1 Year


Years


Years


ThereafterCapital lease obligations

$
169


$
50


$
92


$
27


$
Operating leases(1)


1,686



452



691



543



Pension and postretirement benefits(2)


107



107











Accrued compensation


333



74











259Accrued pension liability


260



26



52



52



130Liability for unrecognized tax benefits


1,365



888



477







Other liabilities


1,617



798



819







Total

$
5,537


$
2,395


$
2,131


$
622


$
389     (1)
    
    For additional information, see Note 6 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 2012
    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 2012.     22




---



##### Table of Contents



Orders
    and Backlog
  Form 10-K.
     23




---



##### Table of Contents



Outlook
    12-month
      mid-to-upper
   24




---



##### Table of Contents



1 2
    Contingencies
    and Commitments
      Critical
    Accounting Policies
  Form 10-K,
    Revenue Recognition. percentage-of-completion percentage-of-completion
  percentage-of-completion percentage-of-completion
  Business Combinations and Intangible
    Assets.
 25




---



##### Table of Contents



Pension and Postretirement Benefits.
  Income Taxes.
        Critical
    Accounting Estimates and Judgments
  Form 10-K
  percentage-of-completion
  percentage-of-completion percentage-of-completion
   26




---



##### Table of Contents



Form 10-K.
          Form 10-K
  New
    Accounting Pronouncements
    Off
    Balance Sheet Arrangements
   27




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      Foreign
    Currency
      Price
    Risk
    Project
    Cancellation and Project Continuation Risk
     28




---



##### 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, 2011, 2010 and 2009


30Consolidated Balance Sheets as of March 31,
    2011 and 2010


31Consolidated Statements of Cash Flows for the
    years ended March 31, 2011, 2010 and 2009


32Consolidated Statements of Changes in
    Stockholders Equity for the years ended March 31,
    2011, 2010 and 2009


33Notes to Consolidated Financial Statements


34Reports of Independent Registered Public
    Accounting Firm


60  29




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended March 31,2011


2010


2009(Amounts in thousands,except per share data)Net sales

$
74,235


$
62,189


$
101,111Cost of products sold


52,137



39,958



59,399Cost of goods sold   amortization


247







Total cost of goods sold


52,384



39,958



59,399Gross profit


21,851



22,231



41,712Other expenses and income:Selling, general and administrative


13,009



12,081



14,813Amortization


67



12



12Interest income


(77
)


(55
)


(416
)Interest expense


92



36



5Other expense






96



559Total other expenses and income


13,091



12,170



14,973Income before provision for income taxes


8,760



10,061



26,739Provision for income taxes


2,886



3,700



9,272Net income

$
5,874


$
6,361


$
17,467Per share dataBasic:Net income

$
.59


$
.64


$
1.72Diluted:Net income

$
.59


$
.64


$
1.71Average common shares outstanding:Basic


9,919



9,899



10,134Diluted


9,958



9,937



10,195Dividends declared per share

$
.08


$
.08


$
.075    30




---



##### Table of Contents



CONSOLIDATED
    BALANCE SHEETS  March 31,2011


2010(Amounts in thousands, except per share data)AssetsCurrent assets:Cash and cash equivalents

$
19,565


$
4,530Investments


23,518



70,060Trade accounts receivable, net of allowances 
    ($26 and $17 at March 31, 2011 and 2010, respectively)


8,681



7,294Unbilled revenue


14,280



3,039Inventories


8,257



6,098Prepaid expenses and other current assets


424



396Deferred income tax asset


1,906



255Total current assets


76,631



91,672Property, plant and equipment, net


11,705



9,769Prepaid pension asset


6,680



7,335Goodwill


7,404



Permits


10,300



Other intangible assets, net


5,218



Other assets


112



203Total assets

$
118,050


$
108,979Liabilities and stockholders equityCurrent liabilities:Current portion of capital lease obligations

$
47


$
66Accounts payable


9,948



6,623Accrued compensation


4,580



4,010Accrued expenses and other current liabilities


3,427



2,041Customer deposits


12,854



22,022Income taxes payable


1,772



68Deferred income tax liability






138Total current liabilities


32,628



34,968Capital lease obligations


116



144Accrued compensation


259



292Deferred income tax liability


8,969



2,930Accrued pension liability


234



246Accrued postretirement benefits


892



880Other long-term liabilities


1,297



445Total liabilities


44,395



39,905Commitments and contingencies (Note 15)Stockholders equity:Preferred stock, $1.00 par value Authorized, 500 sharesCommon stock, $.10 par value Authorized, 25,500 sharesIssued, 10,216 and 10,155 shares at March 31, 2011 and
    2010, respectively


1,022



1,016Capital in excess of par value


16,322



15,459Retained earnings


64,623



59,539Accumulated other comprehensive loss


(5,012
)


(4,386
)Treasury stock (350 and 305 shares at March 31, 2011
    and 2010, respectively)


(3,300
)


(2,554
)Total stockholders equity


73,655



69,074Total liabilities and stockholders equity

$
118,050


$
108,979    31




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended March 31,2011


2010


2009(Dollar amounts in thousands)Operating activities:Net income

$
5,874


$
6,361


$
17,467Adjustments to reconcile net income to net cash (used) provided
    by operating activities:Depreciation


1,334



1,107



993Amortization


314



12



12Amortization of unrecognized prior service cost and actuarial
    losses


293



678



106Discount accretion on investments


(50
)


(50
)


(397
)Stock-based compensation expense


478



436



372Loss on disposal or sale of property, plant and equipment


23



70



4Deferred income taxes


(923
)


(4,568
)


6,022(Increase) decrease in operating assets, net of acquisition:Accounts receivable


155



(299
)


(1,941
)Unbilled revenue


(10,672
)


7,407



(1,675
)Inventories


(1,723
)


(1,433
)


132Income taxes receivable/payable


1,703



4,122



(2,552
)Prepaid expenses and other current and non-current assets


63



(24
)


90Prepaid pension asset


(776
)


(245
)


(7,677
)Increase (decrease) in operating liabilities, net of acquisition:Accounts payable


2,679



990



(11
)Accrued compensation, accrued expenses and other current and
    non-current liabilities


461



(401
)


260Customer deposits


(9,498
)


16,130



(100
)Long-term portion of accrued compensation, accrued pension
    liability and accrued postretirement benefits


(104
)


(23
)


(59
)Net cash (used) provided by operating activities


(10,369
)


30,270



11,046Investing activities:Purchase of property, plant and equipment


(1,979
)


(1,003
)


(1,492
)Proceeds from disposal of property, plant and equipment


14



9



1Purchase of investments


(155,717
)


(182,481
)


(142,601
)Redemption of investments at maturity


202,310



153,530



136,620Acquisition of Energy Steel & Supply Company (See
    Note 2)


(17,899
)






Net cash provided ( used) by investing activities


26,729



(29,945
)


(7,472
)Financing activities:Proceeds from issuance of long-term debt






822



2,927Principal repayments on long-term debt


(68
)


(861
)


(2,955
)Issuance of common stock


236



63



695Dividends paid


(790
)


(788
)


(754
)Purchase of treasury stock


(874
)


(229
)


(2,303
)Excess tax deduction on stock awards


120



40



1,696Other






5



5Net cash used by financing activities


(1,376
)


(948
)


(689
)Effect of exchange rate changes on cash


51



3



153Net increase (decrease) in cash and cash equivalents


15,035



(620
)


3,038Cash and cash equivalents at beginning of year


4,530



5,150



2,112Cash and cash equivalents at end of year

$
19,565


$
4,530


$
5,150    32




---



##### 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, 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
)






69,074Net income














5,874















5,874Foreign currency translation adjustment


















81











81Pension and other postretirement benefits adjustments, net of
    income tax of $502


















(707
)










(707
)Total comprehensive income






























5,248Issuance of shares


60,521



6



230



















236Stock award tax benefit










120



















120Dividends














(790
)














(790
)Recognition of equity-based compensation expense










478



















478Purchase of treasury stock






















(874
)






(874
)Issuance of treasury stock










35











128







163Balance at March 31, 2011


10,215,625


$
1,022


$
16,322


$
64,623


$
(5,012
)

$
(3,300
)

$



$
73,655     (1)
    
    Accumulated foreign currency translation adjustments were $300,
    $219 and $217, accumulated pension benefit adjustments were
    $(5,418), $(4,845) and $(7,074), and accumulated other
    postretirement benefit adjustments were $106, $240 and $397 at
    March 31, 2011, 2010 and 2009, respectively, net of tax.   33




---



##### 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
 34




---



##### Table of Contents



Completed Contract Method
  percentage-of-completion percentage-of-completion
  Cash and
    cash equivalents
    Shipping
    and handling fees and costs
    Investments
  held-to-maturity,
  Inventories
  percentage-of-completion percentage-of-completion
    March 31,2011


2010Costs incurred since inception on contracts in progress

$
24,572


$
7,096Estimated earnings since inception on contracts in progress


9,612



2,94834,184



10,044Less billings to date


40,320



30,710Net (over) under billings

$
(6,136
)

$
(20,666
)  35




---



##### Table of Contents



March 31,2011


2010Unbilled revenue

$
14,280


$
3,039Progress payments reducing inventory (Note 3)


(7,562
)


(1,683
)Customer deposits


(12,854
)


(22,022
)Net (over) under billings

$
(6,136
)

$
(20,666
)   Property,
    plant, equipment and depreciation
    Business
    combinations
    Intangible
    assets
    Impairment
    of long-lived assets
     36




---



##### Table of Contents



Product
    warranties
    Research
    and development
    Income
    taxes
      non-U.S. domestic
  Stock
    splits
  two-for-one two-for-one two-for-one
 37




---



##### Table of Contents



Stock-based
    compensation
    Income
    per share data
    Year Ended March 31,2011


2010


2009Basic income per share:Numerator:Net income

$
5,874


$
6,361


$
17,467Denominator:Weighted common shares outstanding


9,860



9,842



10,073Share equivalent units (SEUs) outstanding


59



57



61Weighted average shares and SEUs outstanding


9,919



9,899



10,134Basic income per share

$
.59


$
.64


$
1.72Diluted income per share:Numerator:Net income

$
5,874


$
6,361


$
17,467Denominator:Weighted average shares and SEUs outstanding


9,919



9,899



10,134Stock options outstanding


38



36



60Contingently issuable SEUs


1



2



1Weighted average common and potential common shares outstanding


9,958



9,937



10,195Diluted income per share

$
.59


$
.64


$
1.71     Cash flow
    statement
   38




---



##### Table of Contents



two-for-one
  Accumulated
    other comprehensive income (loss)
    Fair
    value measurements
    Level 1
  Level 2
  Level 3
   39




---



##### Table of Contents



Use of
    Estimates
    Accounting
    and reporting changes
    Reclassifications
    Note 2 
    Acquisition:       40




---



##### Table of Contents



December 14,2010Assets acquired:Current assets

$
2,827Property, plant & equipment


1,295Backlog


170Customer relationships


2,700Tradename


2,500Permits


10,300Goodwill


7,404Other assets


14Total assets acquired


27,210Liabilities assumed:Current liabilities


1,899Deferred income tax liability


5,924Total liabilities assumed


7,813Purchase price

$
19,397     step-up step-up
 41




---



##### Table of Contents



Fair Value


Weighted AverageAssigned


Amortization PeriodIntangibles subject to amortizationBacklog

$
170



6 monthsCustomer relationships


2,700



15 years$
2,870



14 yearsIntangibles not subject to amortizationPermits

$
10,300



indefiniteTradename


2,500



indefinite$
12,800              42




---



##### Table of Contents



Year Ended March 31,2011

2010Sales

$
83,301


$
84,803Net income


6,097



8,258Earnings per shareBasic

$
.61


$
.83Diluted

$
.61


$
.83   step-up
    Note 3 
    Inventories:    March 31,2011


2010Raw materials and supplies

$
2,293


$
1,843Work in process


12,983



5,365Finished products


543



57315,819



7,781Less  progress payments


7,562



1,683$
8,257


$
6,098   Note 4 
    Property,
    Plant and Equipment:    March 31,2011


2010Land

$
210


$
210Buildings and leasehold improvements


11,030



10,713Machinery and equipment


20,994



17,972Construction in progress


209



49832,443



29,393Less  accumulated depreciation and amortization


20,738



19,624$
11,705


$
9,769    43




---



##### Table of Contents



Note 5 
    Product Warranty Liability:
    Year Ended March 31,2011


2010Balance at beginning of year

$
369


$
366Expense for product warranties


59



99Product warranty claims paid


(226
)


(96
)Balance at end of year

$
202


$
369     Note 6 
    Leases:
      March 31,2011


2010Machinery and equipment

$
311


$
288Less accumulated amortization


146



74$
165


$
214       Operating


CapitalLeases


Leases2012

$
452


$
502013


365



482014


326



442015


326



272016


217



Total minimum lease payments

$
1,686


$
169Less  amount representing interest






6Present value of net minimum lease payments





$
163   Note 7 
    Debt:
  Short-Term
    Debt Due to Banks
     44




---



##### Table of Contents



Long-Term
    Debt
    March 31,2011


2010Capital lease obligations (Note 6)

$
163


$
210Less: current amounts


47



66Total

$
116


$
144     Note 8 
    Financial Instruments and Derivative Financial
    Instruments:
  Concentrations
    of Credit Risk
    Letters
    of Credit
    Foreign
    Exchange Risk Management
  and/or
 45




---



##### Table of Contents



Fair
    Value of Financial Instruments
    Cash and cash equivalents:
  Note 9 
    Income Taxes:
    Year Ended March 31,2011


2010


2009United States

$
8,954


$
10,060


$
26,831China


(194
)


1



(92
)$
8,760


$
10,061


$
26,739     Year Ended March 31,2011


2010


2009Current:Federal

$
3,677


$
8,143


$
3,138State


119



125



121Foreign


13







(9
)3,809



8,268



3,250Deferred:Federal


(805
)


(4,658
)


5,827State


(137
)


(278
)


159Foreign


(48
)


36



36Changes in valuation allowance


67



332



(923
)


(4,568
)


6,022Total provision for income taxes

$
2,886


$
3,700


$
9,272  46




---



##### Table of Contents



Year Ended March 31,2011


2010


2009Provision for income taxes at federal rate

$
2,979


$
3,421


$
9,091State taxes


(69
)


(173
)


239Charges not deductible for income tax purposes


140



32



89Recognition of tax benefit generated by qualified production
    activities deduction


(222
)


(367
)


(18
)Research and development tax credits


(160
)


(109
)


(218
)Valuation allowance


67



332



Uncertain tax positions


32



445



Other


119



119



89Provision for income taxes

$
2,886


$
3,700


$
9,272     March 31,2011


2010Depreciation

$
(2,004
)

$
(1,355
)Accrued compensation


169



186Prepaid pension asset


(2,381
)


(2,556
)Accrued pension liability


93



94Accrued postretirement benefits


356



344Compensated absences


552



453Inventories


1,074



(553
)Warranty liability


72



128Accrued expenses


415



210Stock-based compensation


302



247Intangible assets


(5,633
)


Net operating loss carryforwards






55New York State investment tax credit


406



311Other


(3
)


154(6,582
)


(2,282
)Less: Valuation allowance


(406
)


(332
)Total

$
(6,988
)

$
(2,614
)     March 31,2011


2010Current deferred income tax asset

$
1,906


$
255Long-term deferred income tax asset


75



199Current deferred income tax liability






(138
)Long-term deferred income tax liability


(8,969
)


(2,930
)$
(6,988
)

$
(2,614
)  47




---



##### Table of Contents



Year Ended March 31,2007


2008


2009


2010


2011


TotalTax benefit of research and development tax credit

$
1,653


$
218


$
238


$
137


$
137


$
2,383Unrecognized tax benefit














(445
)


(32
)


(477
)Net tax benefit of research and development tax credit

$
1,653


$
218


$
238


$
(308
)

$
105


$
1,906       Year Ended March 31,2011


2010Balance at beginning of year

$
445


$
Additions based upon tax positions taken during prior periods


893



314Additions based upon tax positions taken during the current
    period


27



131Balance at end of year

$
1,365


$
445    48




---



##### Table of Contents



Note 10 
    Employee Benefit Plans:
  Retirement
    Plans
        Year Ended March 31,2011


2010


2009Service cost during the period

$
384


$
315


$
509Interest cost on projected benefit obligation


1,340



1,298



1,558Expected return on assets


(2,499
)


(1,858
)


(2,310
)Amortization of:Unrecognized prior service cost


4



4



5Actuarial loss


421



818



271Net pension (benefit) cost

$
(350
)

$
577


$
33     Year Ended March 31,2011


2010


2009Discount rate


6.07
%


7.39
%


6.75
%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 31,2011


2010Change in the benefit obligationProjected benefit obligation at beginning of year

$
22,498


$
17,895Service cost


305



235Interest cost


1,340



1,298Actuarial loss


2,431



3,854Benefit payments


(886
)


(784
)Projected benefit obligation at end of year

$
25,688


$
22,498  49




---



##### Table of Contents



March 31,2011


2010Discount rate


5.63
%


6.07
%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

$
29,833


$
22,195Actual return on plan assets


3,421



8,422Benefit and administrative expense payments


(886
)


(784
)Fair value of plan assets at end of year

$
32,368


$
29,833Funded statusFunded status at end of year

$
6,680


$
7,335Amount recognized in the Consolidated Balance Sheets

$
6,680


$
7,335       March 31,2011


2010Net actuarial losses

$
5,407


$
4,831Prior service cost


11



14$
5,418


$
4,845     Net actuarial loss arising during the year

$
847Amortization of actuarial loss


(271
)Amortization of prior service cost


(3
)$
573       2012

$
1,0072013


1,0002014


1,0822015


1,2002016


1,1892017-2021


7,344Total

$
12,822  50




---



##### Table of Contents



Target


March 31,Allocation


2011


2010Asset CategoryEquity securities


50-70
%


68
%


66
%Debt securities


20-50
%


32
%


34
%Other, including cash


0-10
%



%



%100
%


100
%       Fair Value Measurements UsingQuoted Prices inActive Markets for


Significant Other


SignificantAt


Identical Assets


Observable Inputs


Unobservable InputsAsset Category

March 31, 2011


(Level 1)


(Level 2)


(Level 3)Cash

$
75


$
75


$



$
Equity securities:U.S. companies


17,840



17,840







International companies


4,260



4,260







Fixed income:Corporate bond fundsIntermediate-term


8,174



8,174







Short-term


2,019



2,019







$
32,368


$
32,368


$



$
          51




---



##### Table of Contents



Other
    Postretirement Benefits
          Year Ended March 31,2011


2010


2009Interest cost on accumulated benefit obligation

$
50


$
61


$
77Amortization of prior service benefit


(166
)


(166
)


(208
)Amortization of actuarial loss


34



22



32Net postretirement benefit income

$
(82
)

$
(83
)

$
(99
)       Year Ended March 31,2011


2010Change in the benefit obligationProjected benefit obligation at beginning of year

$
989


$
950Interest cost


50



61Actuarial gain


72



106Benefit payments


(112
)


(128
)Projected benefit obligation at end of year

$
999


$
989     March 31,2011

2010Discount rate


4.69
%


5.15
%Medical care cost trend rate


8.5
%


9.00
%  52




---



##### Table of Contents



Year Ended March 31,2011


2010Change in fair value of plan assetsFair value of plan assets at beginning of year

$



$
Employer contribution


112



128Benefit payments


(112
)


(128
)Fair value of plan assets at end of year

$



$
Funded statusFunded status at end of year

$
(999
)

$
(989
)Amount recognized in the Consolidated Balance Sheets

$
(999
)

$
(989
)       March 31,2011


2010Net actuarial loss

$
283


$
262Prior service cost


(389
)


(503
)$
(106
)

$
(241
)     Net actuarial loss arising during the year

$
50Amortization of actuarial loss


(22
)Amortization of prior service cost


107$
135       2012

$
1072013


1042014


992015


942016


902017-2021


374Total

$
868    53




---



##### Table of Contents



Employee
    Stock Ownership Plan
    Note 11 
    Stock
    Compensation Plans:    1 3
        Year Ended March 31,2011

2010

2009Expected life


3 years



3 years



4.89 yearsVolatility


93.19
%


99.04
%


63.68
%Risk-free interest rate


1.20
%


1.52
%


3.12
%Dividend yield


.51
%


.36
%


.28
%    54




---



##### Table of Contents



WeightedShares


Average


Weighted


AggregateUnder


Exercise


Average Remaining


IntrinsicOption


Price


Contractual Term


ValueOutstanding at April 1, 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


$
10.37Granted


20


$
15.25Exercised


(36
)

$
6.52Outstanding at March 31, 2011


159


$
11.87



6.43 years


$
2,065Vested or expected to vest at March 31, 2011


152


$
11.75



6.38 years


$
1,992Exercisable at March 31, 2011


98


$
9.99



5.56 years


$
1,457     Weighted AverageOptions Outstanding





Remainingat March 31,


Weighted Average


Contractual LifeExercise Price

2011


Exercise Price


(In Years)$ 1.50- 2.50


15


$
1.92



2.535.56- 8.01


74



7.15



5.7410.84-15.25


53



14.67



8.2530.88-44.50


17



32.41



7.19$ 1.50-44.50


159


$
11.87



6.43      55




---



##### Table of Contents



Restricted


Weighted Average


AggregateStock


Grant Date Fair Value


Intrinsic ValueNon-vested at April 1, 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


$
16.15Granted


24


$
15.25Vested


(11
)

$
15.28Non-vested at March 31, 2011


32


$
15.77


$
275       Note 12 
    Segment Information:
   56




---



##### Table of Contents



Year Ended March 31,2011


2010


2009Heat transfer equipment

$
28,923


$
23,170


$
35,231Vacuum equipment


26,227



24,564



46,043All other


19,085



14,455



19,837Net sales

$
74,235


$
62,189


$
101,111     Year Ended March 31,2011


2010


2009Net Sales:Africa

$
1,677


$
2,440


$
583Asia


16,134



20,308



13,255Australia & New Zealand


62



37



115Canada


3,059



2,032



8,015Mexico


930



700



528Middle East


11,857



6,390



8,373South America


6,050



1,327



4,038U.S.


33,358



27,927



63,719Western Europe


1,032



1,014



2,400Other


76



14



85Net sales

$
74,235


$
62,189


$
101,111       Note 13 
    Other Expense:
     57




---



##### Table of Contents



Year Ended March 31,2011


2010Balance at beginning of year

$
3


$
349Expense for restructuring






96Amounts paid for restructuring


(3
)


(442
)Balance at end of year

$



$
3   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, 2011

Quarter

Quarter

Quarter

Quarter

YearNet sales

$
13,351


$
15,723


$
19,215


$
25,946


$
74,235Gross profit


3,850



5,347



4,751



7,903



21,851Provision for income taxes


414



780



397



1,295



2,886Net income


878



1,557



759



2,680



5,874Per share:Net income:Basic

$
.09


$
.16


$
.08


$
.27


$
.59Diluted

$
.09


$
.16


$
.08


$
.27


$
.59Market price range of common stock

$
13.50-19.60


$
13.52-17.99


$
14.75-21.00


$
19.08-24.58


$
13.50-24.58   58




---



##### Table of Contents



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  59




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Internal Control  Integrated Framework
  
     60




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework Form 10-K Form 10-K
        Internal Control  Integrated Framework
    
     61




---



##### 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
  Energy
    Steel Acquisition
  10-K Form 10-K.
    Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f).
 62




---



##### Table of Contents



Internal Control 
    Integrated Framework
  Form 10-K,
  Item 9B.
    Other
    Information    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   63




---



##### Table of Contents



Securities
    Authorized for Issuance under Equity Compensation Plans as of
    March 31, 2011
  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


159


$
11.87



551Equity compensation plans not approved by security holders










Total


159


$
11.87



551   Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    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.
 64




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Form 10-K.
  
     65




---



##### 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, 2011Reserves deducted from the asset to which they apply:Reserve for doubtful accounts receivable

$
17


$
8


$
1


$



$
26Reserves included in the balance sheet caption accrued
    expensesProduct warranty liability


369



59







(226
)


202Restructuring reserve


3











(3
)


Year 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
)


349  66




---



##### 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 28, 2010.(4)

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

Not applicable.(9)

Voting trust agreementNot applicable.(10)

Material Contracts#10
.1

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
.2

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
.3

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
.4

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
.5

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
.6

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
.7

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.#10
.8

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
.9

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
.10

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. 67




---



##### Table of Contents



#10
.11

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
.12

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
.13

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
.14

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
.15

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.#10
.16

Form of Employee Performance-Vested 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 June 30, 2010.#10
.17

Amended and Restated Employment Agreement between Graham
    Corporation and Jeffrey F. Glajch executed and effective on
    July 29, 2010 is incorporated herein by reference from
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2010.10
.18

Policy Statement on Stockholder Rights Plans is incorporated
    herein by reference from Exhibit 99.1 to the Companys
    Current Report on
    Form 8-K
    dated September 9, 2010.10
.19

Stock Purchase Agreement dated December 14, 2010 by and
    among Graham Corporation, ES Acquisition Corp., Energy
    Steel & Supply Co. and Lisa D. Rice, individually, and
    as Trustee of the Lisa D. Rice Revocable Trust dated
    June 5, 2003, is incorporated herein by reference from
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended December 31, 2010.10
.20

Earn Out Agreement dated December 14, 2010 by and between
    Energy Steel Acquisition Corp., Graham Corporation and Lisa D.
    Rice, individually, and as Trustee of the Lisa D. Rice Revocable
    Trust dated June 5, 2003, is incorporated herein by
    reference from Exhibit 10.2 to the Companys Quarterly
    Report on From
    10-Q for the
    quarterly period ended December 31, 2010.10
.21

Escrow Agreement dated December 14, 2010 by and among PNC
    Bank, National Association, ES Acquisition Corp. and Lisa D.
    Rice, individually, and as Trustee of the Lisa D. Rice Revocable
    Trust dated June 5, 2003, is incorporated herein by
    reference from Exhibit 10.3 to the Companys Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended December 31, 2010.10
.22

Lease Agreement by and between ESSC Investments, LLC, Energy
    Steel & Supply Co., and Graham Corporation dated
    December 14, 2010, is incorporated herein by reference from
    Exhibit 10.4 to the Companys Quarterly Report on
    Form 10-Q
    for the quarterly period ended December 31, 2010.10
.23

Loan Agreement between the Company and Bank of America, N.A.,
    dated December 3, 2010, is incorporated herein by reference
    from Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    dated December 3, 2010.10
.24

Trademark Security Agreement Amendment 1 between the Company and
    Bank of America, N.A., dated December 3, 2010, is
    incorporated herein by reference from Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    dated December 3, 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. 68




---



##### Table of Contents



(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(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. 69




---



##### Table of Contents



SIGNATURES
      June 3, 2011By: /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 3, 2011/s/  Jeffrey
    GlajchJeffrey
    Glajch

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

June 3, 2011/s/  Jennifer
    R. CondameJennifer
    R. Condame

Chief Accounting Officer and Controller (Principal Accounting
    Officer)

June 3, 2011/s/  Helen
    H. BerkeleyHelen
    H. Berkeley

Director

June 3, 2011/s/  Jerald
    D. BidlackJerald
    D. Bidlack

Director and Chairman of the Board

June 3, 2011/s/  Alan
    FortierAlan
    Fortier

Director

June 3, 2011/s/  James
    J. MalvasoJames
    J. Malvaso

Director

June 3, 2011/s/  Gerard
    T. MazurkiewiczGerard
    T. Mazurkiewicz

Director

June 3, 2011/s/  Cornelius
    S. Van ReesCornelius
    S. Van Rees

Director

June 3, 2011  70




---



##### Table of Contents



UNITED STATES 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, 2011
      GRAHAM CORPORATION