Supplemental Slides First Quarter Fiscal 2012 First Quarter Fiscal 2012 Earnings Call Executing our Strategy ● Driving Sustainable Growth 1 Diversifying Improving Expanding
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “outlook,” “priorities,” “could,” and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, statements Graham Corporation expects or anticipates will occur in the future, including but not limited to, statements relating to Graham’s acquisition of Energy Steel & Supply Co. (including but not limited to, the integration of the acquisition of Energy Steel, revenue, backlog and expected performance of Energy Steel, and expected expansion and growth opportunities within the domestic and international nuclear power generation markets), anticipated revenue, the timing of conversion of backlog to sales, profit margins, foreign sales operations its strategy to build its global sales representative channel the effectiveness of foreign sales operations, its strategy to build its global sales representative channel, the effectiveness of automation in expanding its engineering capacity, its ability to improve cost competitiveness, customer preferences, changes in market conditions in the industries in which it operates, changes in general economic conditions and customer behavior and its acquisition strategy are forward-looking statements. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties These risk factors and uncertainties are more fully described in Graham Corporation's most uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation s most recent Annual and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of Graham Corporation's underlying assumptions prove incorrect actual results may vary materially from those currently underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation's forward-looking statements. Except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this presentation. 2
James R. Lines President & Chief Executive Officer DIVERSIFYING IMPROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 3
Highlights of Q1 FY2012 Sales: Excellent Diversity • Organic sales up 58% • $3.9 million from Energy Steel • Strong growth in Middle East and South America • 55/45 international/domestic Orders: A Full Pipeline • $5.2 million for nuclear power • $1.8 million for renewable and alternative energy $ gy • $6.1 million for oil refining markets • Bidding activity is diverse and strong Margins: 32.8% Gross and 20% EBITDA Margins* M i 32 8% G d 20% EBITDA M i * • Better leverage on higher sales • Strong mix with two large orders * Note: Important disclaimers regarding EBITDA and a reconciliation to GAAP operating profit are included on slides 16 and 17 of this presentation. 4
Diversification Drives Recovery y Markets and Geography 12 Month Revenue 12-Month Revenue ($ in millions) $101 1 $101.1 $100.0* $100 0* $86.4 37% $74.2 $65.8 46% $62.2 $55.2 $55 2 55% 50% 55% 49% FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY 2012 Domestic Revenue Domestic Revenue International Revenue International Revenue * Midpoint of guidance provided on July 28, 2011 ($95-$105 million)
Energy Steel Acquisition Q1 FY12 Impact • $5.2 million in new orders $5 2 illi i d • $3.9 million in sales • $9.7 million in backlog at 6/30 $9.7 million in backlog at 6/30 Opportunities • Increase market penetration with existing nuclear power plants • Increase market penetration with existing nuclear power plants • Integrate Graham engineering and design with nuclear-certified quality program to expand opportunities and enhance margin • Significant addressable opportunities anticipated with new construction Executing our Strategy ● Driving Sustainable Growth 6 Diversifying Improving Expanding
FY 2012 Outlook * � Strong start to FY 2012 Revenue $95-$105 million Energy Steel 16%-20% of total revenue Organic growth rate 20%-25% Gross margin Gross margin 29%-32% 29% 32% SG&A $16-$17 million * Guidance provided as of July 28, 2011 Executing our Strategy ● Driving Sustainable Growth 7 Diversifying Improving Expanding
FY 2012 Priorities � Advance market share in oil refining and petrochemical markets markets � Gain share in Asia and South America � Maintain strong position in Middle East � Continue to dominate North American market Continue to dominate North American market � Expand Energy Steel capabilities to increase sales and profit � Exploit synergies of Graham engineering and fabrication capabilities capabilities � Aggressively pursue sales to U.S. nuclear utilities � Capitalize on opportunities in new construction � Continue to develop Naval Nuclear Propulsion Program sales channel � Continue to evaluate acquisitions q Executing our Strategy ● Driving Sustainable Growth 8 Diversifying Improving Expanding
Jeffrey F. Glajch Chief Financial Officer DIVERSIFYING IMPROVING E X P A N D I N G Executing our Strategy ● Driving Sustainable Growth 9
Q1 FY12: A Solid Start to the New Year Revenue Revenue EBITDA Margin* EBITDA Margin* EPS EPS (in millions) $25.0 20% $0.30 $13.4 12% $0.09 Q1 FY11 Q1 FY12 Q1 FY11 Q1 FY12 Q1 FY11 Q1 FY12 * See supplemental slides for EBITDA reconciliation and other important disclaimers regarding EBITDA. Executing our Strategy ● Driving Sustainable Growth 10 Diversifying Improving Expanding
Near-Record Backlog Levels ($ in millions) $94.3 $91.1 $85.2 $75.7 $54.2 $48.3 $33.1 3/31/06 3/31/07 3/31/08 3/31/09 3/31/10 3/31/11 6/30/11 Executing our Strategy ● Driving Sustainable Growth 11 Diversifying Improving Expanding
Operational Review: Q1 FY2012 Gross Margin SG&A ($ in millions) $3.9 $3.7 $3.2 $3.1 $3.0 $3.0 $2.9 $2 9 $2.7 $2.6 Operating Margin 25.0% 18.0% 17.5% Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 15.4% FY10 FY10 FY10 FY10 FY11 FY11 FY11* FY11 FY12 14.8% % of 16.1% 18.8% 22.3% 22.5% 19.2% 19.2% 15.2% 15.0% 14.8% Sales: 9.1% 9.6% 9.5% 8.6% * Excludes $0.7 million in transaction costs related to the acquisition of Energy Steel on December 14, 2010. acq isition of Energ Steel on December 14 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY10 FY10 FY10 FY10 FY11 FY11 FY11* FY11 FY12 12
Strong Cash Position Cash and Cash Equivalents ($ in millions) No bank Energy Steel: all cash debt at $58.6* $18 million 6/30/11 acquisition $ $46.2 $43.1 $41.1 $36.8 3/31/08 3/31/09 3/31/10 3/31/11 6/30/11 Cash available for acquisitions and organic growth * Excludes $16 million in unusually high upfront and near-term customer advances utilized to lock in raw 13 material costs
FY 2012 Outlook * � Strong start to FY 2012 Revenue $95-$105 million Energy Steel 16%-20% of total revenue Organic growth rate 20%-25% Gross margin Gross margin 29%-32% 29% 32% SG&A $16-$17 million * Guidance provided as of July 28, 2011 Executing our Strategy ● Driving Sustainable Growth 14 Diversifying Improving Expanding
First Quarter Fiscal 2012 Earnings Call Executing our Strategy ● Driving Sustainable Growth 15 Diversifying Improving Expanding
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