Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~January 30, 2018,~~July 28, 2020, there were outstanding ~~9,768,026~~9,976,893 shares of the registrant’s common stock, par value ~~$.10~~$0.10 per share.

As of ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017~~2020 and for the ~~Three~~three months ended June 30, 2020 and ~~Nine-Month Periods Ended December 31, 2017 and 2016~~2019

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2020			2019
	(Amounts in thousands, except per share data)						(Amounts in thousands, except per share data)						(Amounts in thousands, except per share data)
Net sales	$	17,281		$	22,654		$	55,356		$	66,145		$	16,710		$	20,593
Cost of products sold		13,696			16,353			43,075			50,723			15,142			15,879
Gross profit		3,585			6,301			12,281			15,422			1,568			4,714
Other expenses and income:
Selling, general and administrative		4,007			3,746			11,270			10,462			3,902			4,556
Selling, general and administrative – amortization		59			58			177			175			—			11
Impairment of goodwill and intangible assets		14,816			—			14,816			—
Restructuring charge		—			—			316			630
Other expense														—			523
Other income														(55	)		(87	)
Interest income		(142	)		(100	)		(455	)		(272	)		(94	)		(399	)
Interest expense		3			3			8			7			5			3
Total other expenses and income		18,743			3,707			26,132			11,002			3,758			4,607
(Loss) income before provision for income taxes		(15,158	)		2,594			(13,851	)		4,420			(2,190	)		107
(Benefit) provision for income taxes		(3,536	)		754			(3,174	)		1,198			(372	)		25
Net (loss) income		(11,622	)		1,840			(10,677	)		3,222		$	(1,818	)	$	82
Retained earnings at beginning of period		109,731			108,655			110,544			109,013
Dividends		(880	)		(876	)		(2,638	)		(2,616	)
Retained earnings at end of period	$	97,229		$	109,619		$	97,229		$	109,619
Per share data
Basic:
Net (loss) income	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33		$	(0.18	)	$	0.01
Diluted:
Net (loss) income	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33		$	(0.18	)	$	0.01
Weighted average common shares outstanding:
Basic		9,768			9,727			9,762			9,709			9,895			9,855
Diluted		9,768			9,733			9,762			9,714			9,895			9,858
Dividends declared per share	$	0.09		$	0.09		$	0.27		$	0.27		$	0.11		$	0.10

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2020			2019
	(Amounts in thousands)						(Amounts in thousands)						(Amounts in thousands)
Net (loss) income	$	(11,622	)	$	1,840		$	(10,677	)	$	3,222		$	(1,818	)	$	82
Other comprehensive income:
Foreign currency translation adjustment		76			(135	)		216			(283	)		9			(87	)
Defined benefit pension and other postretirement plans net of income tax expense (benefit) of $(17) and $123, for the three months ended December 31, 2017 and 2016, respectively, and $169 and $369 for the nine months ended December 31, 2017 and 2016, respectively		279			225			619			674
Defined benefit pension and other postretirement plans net of income tax expense of $61 and $55, for the three months ended June 30, 2020 and 2019, respectively														205			194
Total other comprehensive income		355			90			835			391			214			107
Total comprehensive (loss) income	$	(11,267	)	$	1,930		$	(9,842	)	$	3,613		$	(1,604	)	$	189

	December 31,			March 31,			June 30,			March 31,
	2017			2017			2020			2020
	(Amounts in thousands, except per share data)						(Amounts in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	36,159		$	39,474		$	41,069		$	32,955
Investments		38,023			34,000			26,103			40,048
Trade accounts receivable, net of allowances ($336 and $168 at December 31 and March 31, 2017, respectively)		16,555			11,483
Trade accounts receivable, net of allowances ($47 and $33 at June 30 and March 31, 2020, respectively)								17,054			15,400
Unbilled revenue		10,709			15,842			15,683			14,592
Inventories		8,899			9,246			22,656			22,291
Prepaid expenses and other current assets		1,181			681			1,262			906
Income taxes receivable		1,288			—			975			485
Total current assets		112,814			110,726			124,802			126,677
Property, plant and equipment, net		16,098			17,021			17,323			17,587
Prepaid pension asset		3,110			2,340			3,670			3,460
Goodwill		1,222			6,938
Permits		1,700			10,300
Other intangible assets, net		3,433			4,068
Operating lease assets								206			243
Other assets		246			177			105			153
Total assets	$	138,623		$	151,570		$	146,106		$	148,120
Liabilities and stockholders’ equity
Current liabilities:
Current portion of capital lease obligations	$	105		$	107
Current portion of finance lease obligations							$	33		$	40
Accounts payable		9,386			10,295			9,713			14,253
Accrued compensation		4,418			5,189			4,551			4,453
Accrued expenses and other current liabilities		2,722			3,723			3,963			3,352
Customer deposits		17,814			12,407			31,082			26,983
Income taxes payable		—			317
Operating lease liabilities								137			153
Total current liabilities		34,445			32,038			49,479			49,234
Capital lease obligations		67			143
Finance lease obligations								50			55
Operating lease liabilities								60			82
Deferred income tax liability		736			4,051			1,017			721
Accrued pension liability		534			467			774			747
Accrued postretirement benefits		780			761			562			557
Other long-term liabilities		126			—
Total liabilities		36,688			37,460			51,942			51,396
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized								—			—
Common stock, $.10 par value, 25,500 shares authorized 10,579 and 10,548 shares issued and 9,768 and 9,740 shares outstanding at December 31 and March 31, 2017, respectively		1,058			1,055
Common stock, $0.10 par value, 25,500 shares authorized, 10,780 and 10,689 shares issued and 9,969 and 9,881 shares outstanding at June 30 and March 31, 2020, respectively								1,078			1,069
Capital in excess of par value		23,573			23,176			26,516			26,361
Retained earnings		97,229			110,544			88,474			91,389
Accumulated other comprehensive loss		(7,599	)		(8,434	)		(9,342	)		(9,556	)
Treasury stock (811 and 808 shares at December 31 and March 31, 2017, respectively)		(12,326	)		(12,231	)
Treasury stock (811 and 808 shares at June 30 and March 31, 2020, respectively)								(12,562	)		(12,539	)
Total stockholders’ equity		101,935			114,110			94,164			96,724
Total liabilities and stockholders’ equity	$	138,623		$	151,570		$	146,106		$	148,120

	Three Months Ended
	June 30,
	2020			2019
Operating activities:	(Dollar amounts in thousands)
Net (loss) income	$	(1,818	)	$	82
Adjustments to reconcile net (loss) income to net cash used by operating activities:
Depreciation		486			490
Amortization		—			11
Amortization of unrecognized prior service cost and actuarial losses		266			249
Equity-based compensation expense		164			88
Gain on disposal or sale of property, plant and equipment		(4	)		—
Loss on sale of Energy Steel & Supply Co.		—			87
Deferred income taxes		282			202
(Increase) decrease in operating assets:
Accounts receivable		(1,646	)		3,088
Unbilled revenue		(1,091	)		(2,323	)
Inventories		(361	)		552
Prepaid expenses and other current and non-current assets		(356	)		(166	)
Income taxes receivable		(490	)		(187	)
Operating lease assets		37			105
Prepaid pension asset		(210	)		(218	)
Increase (decrease) in operating liabilities:
Accounts payable		(4,430	)		(5,565	)
Accrued compensation, accrued expenses and other current and non-current liabilities		709			(1,005	)
Customer deposits		4,094			(242	)
Operating lease liabilities		(37	)		(27	)
Long-term portion of accrued compensation, accrued pension liability and accrued postretirement benefits		32			26
Net cash used by operating activities		(4,373	)		(4,753	)
Investing activities:
Purchase of property, plant and equipment		(338	)		(294	)
Proceeds from disposal of property, plant and equipment		6			—
Proceeds from the sale of Energy Steel & Supply Co.		—			602
Purchase of investments		(26,103	)		(28,651	)
Redemption of investments at maturity		40,048			32,595
Net cash provided by investing activities		13,613			4,252
Financing activities:
Principal repayments on finance lease obligations		(12	)		(10	)
Principal repayments on long-term debt		(4,599	)		—
Proceeds from the issuance of long-term debt		4,599			—
Dividends paid		(1,097	)		(988	)
Purchase of treasury stock		(23	)		(230	)
Net cash used by financing activities		(1,132	)		(1,228	)
Effect of exchange rate changes on cash		6			(76	)
Net increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale		8,114			(1,805	)
Net decrease in cash classified within current assets held for sale		—			552
Net increase (decrease) in cash and cash equivalents		8,114			(1,253	)
Cash and cash equivalents at beginning of period		32,955			15,021
Cash and cash equivalents at end of period	$	41,069		$	13,768

Nine Months Ended

December 31,

2017

2016

Operating activities:

(Dollar amounts in thousands)

Net (loss) income

$
(10,677
)

$
3,222

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation

1,490

1,571

Amortization

177

175

Amortization of unrecognized prior service cost and actuarial losses

788

1,043

Impairment of goodwill and purchased intangible assets

14,816

—

Stock-based compensation expense

362

433

Loss on disposal or sale of property, plant and equipment

1

1

Deferred income taxes

(3,498
)

10

(Increase) decrease in operating assets:

Accounts receivable

(5,029
)

1,126

Unbilled revenue

5,170

(2,651
)
Inventories

352

1,697

Prepaid expenses and other current and non-current assets

(591
)

(489
)
Income taxes receivable

(1,605
)

1,109

Prepaid pension asset

(770
)

—

Increase (decrease) in operating liabilities:

Accounts payable

(1,005
)

(2,173
)
Accrued compensation, accrued expenses and other current and non-current liabilities

(1,593
)

(558
)
Customer deposits

5,400

6,699

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

86

(508
)
Net cash provided by operating activities

3,874

10,707

Investing activities:

Purchase of property, plant and equipment

(543
)

(241
)
Proceeds from disposal of property, plant and equipment

1

—

Purchase of investments

(34,023
)

(39,000
)
Redemption of investments at maturity

30,000

45,000

Net cash (used) provided by investing activities

(4,565
)

5,759

Financing activities:

Principal repayments on capital lease obligations

(78
)

(38
)
Issuance of common stock

—

79

Dividends paid

(2,638
)

(2,616
)
Purchase of treasury stock

(119
)

(29
)
Excess tax deficiency on stock awards

—

(26
)
Net cash used by financing activities

(2,835
)

(2,630
)
Effect of exchange rate changes on cash

211

(231
)
Net (decrease) increase in cash and cash equivalents

(3,315
)

13,605

Cash and cash equivalents at beginning of year

39,474

24,072

Cash and cash equivalents at end of period

$
36,159

$
37,677

	Common Stock						Capital in						Accumulated Other						Total
				Par			Excess of			Retained			Comprehensive			Treasury			Stockholders'
	Shares			Value			Par Value			Earnings			Loss			Stock			Equity
Balance at April 1, 2020		10,689		$	1,069		$	26,361		$	91,389		$	(9,556	)	$	(12,539	)	$	96,724
Comprehensive income											(1,818	)		214						(1,604	)
Issuance of shares		113			11			(11	)											—
Forfeiture of shares		(22	)		(2	)		2												—
Dividends											(1,097	)								(1,097	)
Recognition of equity-based compensation expense								164												164
Purchase of treasury stock																	(23	)		(23	)
Balance at June 30, 2020		10,780		$	1,078		$	26,516		$	88,474		$	(9,342	)	$	(12,562	)	$	94,164

	Common Stock						Capital in						Accumulated Other						Total
				Par			Excess of			Retained			Comprehensive			Treasury			Stockholders'
	Shares			Value			Par Value			Earnings			Loss			Stock			Equity
Balance at April 1, 2019		10,650		$	1,065		$	25,277		$	93,847		$	(8,833	)	$	(12,390	)	$	98,966
Cumulative effect of change in accounting principle											(80	)								(80	)
Comprehensive income											82			107						189
Issuance of shares		83			8			(8	)											—
Forfeiture of shares		(34	)		(3	)		3												—
Dividends											(988	)								(988	)
Recognition of equity-based compensation expense								88												88
Purchase of treasury stock																	(230	)		(230	)
Balance at June 30, 2019		10,699		$	1,070		$	25,360		$	92,861		$	(8,726	)	$	(12,620	)	$	97,945

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its ~~(i)~~ wholly-owned foreign ~~subsidiary~~subsidiaries located in Suzhou, China and ~~(ii) wholly-owned domestic subsidiary located in Lapeer, Michigan.~~Ahmedabad, India. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule ~~10-01~~8-03 of Regulation S-X, each as promulgated by the U.S. Securities and Exchange Commission. The Company's Condensed Consolidated Financial Statements do not include all information and notes required by GAAP for complete financial statements. The unaudited Condensed Consolidated Balance Sheet as of March 31, ~~2017~~2020 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, ~~2017.~~2020. For additional information, please refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~2020 ("fiscal ~~2017"~~2020"). In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included in the Company's Condensed Consolidated Financial Statements.

The Company's results of operations and cash flows for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2020 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, ~~2018~~2021 ("fiscal ~~2018"~~2021").

The Company recognizes revenue on contracts when or as it satisfies a performance obligation by transferring control of the product to the customer. For contracts in which revenue is recognized upon shipment, control is generally transferred when products are shipped, title is transferred, significant risks of ownership have transferred, the Company has rights to payment, and rewards of ownership pass to the customer. For contracts in which revenue is recognized over time, control is generally transferred as the Company creates an asset that does not have an alternative use to the Company and the Company has an enforceable right to payment for the performance completed to date.

The following table presents the Company’s revenue disaggregated by product line and geographic area:

A performance obligation represents a promise in a contract to provide a distinct good or service to a customer. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferred products. A contract’s transaction

price is allocated to each distinct performance obligation and revenue is recognized as the performance obligation is satisfied. In certain cases, the Company may separate a contract into more than one performance obligation, while in other cases, several products may be part of a fully integrated solution and are bundled into a single performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods underlying each performance obligation. The Company has made an accounting policy election to exclude from the measurement of the contract price all ~~contracts with~~taxes assessed by government authorities that are collected by the Company from its customers. The Company does not adjust the contract price for the effects of a ~~planned manufacturing process~~financing component if the Company expects, at contract inception, that the period between when a product is transferred to a customer and when the customer pays for the product will be one year or less. Shipping and handling fees billed to the customer are recorded in ~~excess~~revenue and the related costs incurred for shipping and handling are included in cost of ~~four weeks (which approximates 575 direct labor hours) using~~products sold.

Revenue on the ~~percentage-of-completion method. The~~ majority of the ~~Company's~~Company’s contracts, as measured by number of contracts, is recognized upon shipment to the customer. Revenue on larger contracts, which are fewer in number but represent the majority of revenue, is recognized ~~under this methodology.~~over time. However, in the three months ended June 30, 2020, revenue recognized over time was lower than revenue recognized upon shipment due to limited production on large contracts as a result of the COVID-19 pandemic. Revenue from contracts that is recognized upon shipment accounted for approximately 60% and 45% of revenue for the three-month periods ended June 30, 2020 and 2019, respectively, and revenue from contracts that is recognized over time accounted for approximately 40% and 55% of revenue for the three-month periods ended June 30, 2020 and 2019, respectively. The Company recognizes revenue over time when contract performance results in the creation of a product for which the Company does not have an alternative use and the contract includes an enforceable right to payment in an amount that corresponds directly with the value of the performance completed. To measure progress towards completion on performance obligations for which revenue is recognized over time the Company utilizes an input method based upon a ratio of direct labor hours incurred to date to management’s estimate of the total labor hours to be incurred on each contract or an output method based upon completion of operational milestones, depending upon the nature of the contract. The Company has established the systems and procedures essential to developing the estimates required to account for ~~contracts using the percentage-of-completion method. The percentage-of-completion method is determined~~performance obligations over time. These procedures include monthly review by ~~comparing actual labor~~management of costs incurred, ~~to a specific date to management's estimate~~progress towards completion, identified risks and opportunities, sourcing determinations, changes in estimates of ~~the total labor~~costs yet to be incurred, ~~on each contract or completion~~availability of ~~operational milestones assigned to each contract. Contracts in progress are reviewed monthly~~materials, and execution by ~~management, and sales~~subcontractors. Sales and earnings are adjusted in current accounting periods based on revisions in the contract value due to pricing changes and estimated costs at completion. Losses on contracts are recognized immediately when evident to management.

~~Revenue~~The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable, unbilled revenue (contract assets) and customer deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Unbilled revenue represents revenue on contracts ~~not accounted for using the percentage-of-completion method~~that is recognized ~~utilizing~~over time and exceeds the completed contract method. The majority of the Company's contracts (as opposed to revenue) have a planned manufacturing process of less than four weeks and the results reported under this method do not vary materially from the percentage-of-completion method. The Company recognizes revenue and all related costs on these contracts upon substantial completion or shipmentamount that has been billed to the customer. ~~Substantial completion~~Unbilled revenue is ~~consistently defined~~separately presented in the Condensed Consolidated Balance Sheets. The Company may have an unconditional right to payment upon billing and prior to satisfying the performance obligations. The Company will then record a contract liability and an offsetting asset of equal amount until the deposit is collected and the performance obligations are satisfied. Customer deposits are separately presented in the Condensed Consolidated Balance Sheets. Customer deposits are not considered a significant financing component as they are generally received less than one year before the product is completed or used to procure specific material on a contract, as well as related overhead costs incurred during design and construction.

Contract liabilities at ~~least 95% complete with regard to direct labor hours. Customer acceptance is generally required throughout the construction process~~June 30, 2020 and March 31, 2020 include $8,823 and $3,660, respectively, of customer deposits for which the Company has ~~no further material obligations under its contracts after~~an unconditional right to collect payment. Trade accounts receivable, as presented on the Condensed Consolidated Balance Sheets, includes corresponding balances at June 30, 2020 and March 31, 2020, respectively. Revenue recognized in the three months ended June 30, 2020 that was included in the contract liability balance at March 31, 2020 was $7,350. Changes in the net contract liability balance during the three-month period ended June 30, 2020 were impacted by a $1,091 increase in contract assets, of which $1,751 was due to contract progress offset by invoicing to customers of $660. In addition, contract liabilities increased $4,099 driven by revenue ~~is recognized.~~recognized in the current period that was included in the contract liability balance at March 31, 2020 offset by new customer deposits of $11,449.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were ~~$1,141~~$2,926 and ~~$971~~$2,016 at ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017,~~2020, respectively.

Incremental costs to obtain a contract consist of sales employee and agent commissions. Commissions paid to employees and sales agents are capitalized when paid and amortized to selling, general and administrative expense when the related revenue is recognized. Capitalized costs, net of amortization, to obtain a contract were $72 and $45 at June 30, 2020 and March 31, 2020, respectively, and are included in the line item "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets. The related amortization expense was $10 and $46 in the three months ended June 30, 2020 and 2019, respectively.

The Company’s remaining unsatisfied performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company also refers to this measure as backlog. As of June 30, 2020, the Company had remaining unsatisfied performance obligations of $107,220. The Company expects to recognize revenue on approximately 70% to 75% of the remaining performance obligations within one year, 15% to 20% in one to two years and the remaining beyond two years.

Investments consist of certificates of deposits with financial institutions. All investments have original maturities of greater than three months and less than one year and are classified as held-to-maturity, as the Company believes it has the intent and ability to hold the securities to maturity. Investments are stated at amortized cost which approximates fair value. All investments held by the Company at ~~December 31, 2017~~June 30, 2020 are scheduled to mature on or before ~~May 31, 2018.~~September 24, 2020.

Inventories are stated at the lower of cost or ~~market,~~net realizable value, using the average cost method. Unbilled revenue in the Condensed Consolidated Balance Sheets represents revenue recognized that has not been billed to customers on contracts accounted for on the percentage-of-completion method. For contracts accounted for on the percentage-of-completion method, progress payments are netted against unbilled revenue to the extent the payment is less than the unbilled revenue for the applicable contract. Progress payments exceeding unbilled revenue are netted against inventory to the extent the payment is less than or equal to the inventory balance relating to the applicable contract, and the excess is presented as customer deposits in the Condensed Consolidated Balance Sheets.

	December 31,		March 31,		June 30,		March 31,
	2017		2017		2020		2020
Raw materials and supplies	$	3,034	$	3,016	$	3,149	$	3,061
Work in process		9,334		12,573		18,283		18,018
Finished products		935		891		1,224		1,212
		13,303		16,480
Less - progress payments		4,404		7,234
Total	$	8,899	$	9,246	$	22,656	$	22,291

Gross
Carrying
Amount

Accumulated
Amortization

Impairment
Loss

Net
Carrying
Amount

At December 31, 2017

Intangibles subject to amortization:

Customer relationships

$
2,700

$
1,267

$
—

$
1,433

Intangibles not subject to amortization:

Permits

$
10,300

$
—

$
8,600

$
1,700

Tradename

2,500

—

500

2,000

$
12,800

$
—

$
9,100

$
3,700

At March 31, 2017

Intangibles subject to amortization:

Customer relationships

$
2,700

$
1,132

$
—

$
1,568

Intangibles not subject to amortization:

Permits

$
10,300

$
—

$
—

$
10,300

Tradename

2,500

—

—

2,500

$
12,800

$
—

$
—

$
12,800

Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives. Intangible amortization expense for each of the three-month periods ended December 31, 2017 and 2016 was $45. Intangible amortization expense for each of the nine-month periods ended December 31, 2017 and 2016 was $135. As of December 31, 2017, amortization expense is estimated to be $45 for the remainder of fiscal 2018 and $180 in each of the fiscal years ending March 31, 2019, 2020, 2021 and 2022.

During the third quarter of fiscal 2018, the Company performed its annual goodwill and intangible asset impairment review. The Company assesses impairment by comparing the fair value of its reporting units and intangible assets to their related carrying value. Accounting Standards Update No. 2015-07, “Fair Value Measurement (Topic 820), establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets of liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 – Valuations determined from quoted prices for similar assets of liabilities in active markets, quoted prices for identical instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The Company estimated the fair value of intangible assets and goodwill of its commercial nuclear power business related to the December 2010 acquisition of Energy Steel & Supply Co. (“Energy Steel”) using the income approach. Under the income approach, the fair value of the business is calculated based on the present value of estimated future cash flows. Cash flow projections are based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The inputs utilized in the analyses are classified as Level 3 inputs within the fair value hierarchy outlined above. The impairment review indicated that the fair value of the permits, tradename and goodwill of the business were substantially lower than the carrying value due to reduced investment from the U.S. nuclear power market, the strength of the Energy Steel brand relative to larger more vertically integrated suppliers, and the bankruptcy of Westinghouse Electric Company which resulted in the stoppage of work at the Summer, SC nuclear facility. As a result, in the third quarter of fiscal 2018 the Company recorded impairment losses of $8,600, $500, and $5,716 for permits, tradename and goodwill, respectively.

The Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value, as approved by the Company’s stockholders at the Annual Meeting on July 28, 2016, provides for the issuance of up to 1,375 shares of common stock in connection with grants of incentive stock options, non-qualified stock options, stock awards and performance awards to officers, key employees and outside ~~directors:~~directors; provided, however, that no more than 467 shares of common stock may be used for awards other than stock options. Stock options may be granted at prices not less than the fair market value at the date of grant and expire no0 later than ten years after the date of grant.

~~No restricted~~ Restricted stock awards ~~were~~ granted in the three-month periods ended ~~December 31, 2017~~June 30, 2020 and ~~2016. Restricted stock awards granted in the nine-month periods ended December 31, 2017~~2019 were 113 and ~~2016 were 59 and 82,~~83, respectively. Restricted shares of 3054 and 4340 granted to officers in fiscal ~~2018~~2021 and fiscal ~~2017,~~2020, respectively, vest 100% on the third anniversary of the grant date subject to the satisfaction of the performance metrics for the applicable three-year period. Restricted shares of 2238 and 3128 granted to officers and key employees in fiscal ~~2018~~2021 and fiscal ~~2017,~~2020, respectively, vest 33⅓% per year over a three-year term. Restricted shares of 721 and 815 granted to directors in fiscal ~~2018~~2021 and fiscal ~~2017,~~2020, respectively, vest 100% on the first year anniversary of the grant date. NoNaN stock option awards were granted in the three-month ~~or nine-month~~ periods ended ~~December 31, 2017~~June 30, 2020 and ~~2016 December 31, 2017 and 2016.~~2019.

During the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, the Company recognized ~~stock-based~~equity-based compensation costs related to ~~stock option and~~ restricted stock awards of ~~$213~~$155 and ~~$200,~~$87, respectively. The income tax benefit recognized related to ~~stock-based~~equity-based compensation was ~~$24~~$38 and ~~$70~~$20 for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively. During the nine months ended December 31, 2017 and 2016, the Company recognized stock-based compensation costs related to stock option and restricted stock awards of $362 and $427, respectively. The income tax benefit recognized related to stock-based compensation was $77 and $151 for the nine months ended December 31, 2017 and 2016, respectively.

The Company has an Employee Stock Purchase Plan (the "ESPP"), which allows eligible employees to purchase shares of the Company's common stock at a discount of up to 15% of its fair market value on the ~~(i)~~(1) last, ~~(ii)~~(2) first or ~~(iii)~~(3) lower of the last or first day of the six-month offering period. A total of 200 shares of common stock may be purchased under the ESPP. ~~In each of~~During the three months

ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, the Company recognized ~~stock-based~~equity-based compensation costs of ~~$0 related to the ESPP~~$9 and $0, ~~of related tax benefits. During the nine months ended December 31, 2017 and 2016, the Company recognized stock-based compensation costs of $0 and $6,~~ respectively, related to the ESPP and $0$2 and ~~$2,~~$0, respectively, of related tax benefits.

Basic (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Diluted (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding and, when applicable, potential common shares outstanding during the period. A reconciliation of the numerators and denominators of basic and diluted (loss) income per share is presented below:

	Three Months Ended					Nine Months Ended					Three Months Ended
	December 31,					December 31,					June 30,
	2017			2016		2017			2016		2020			2019
Basic (loss) income per share
Basic income per share
Numerator:
Net (loss) income	$	(11,622	)	$	1,840	$	(10,677	)	$	3,222	$	(1,818	)	$	82
Denominator:
Weighted average common shares outstanding		9,768			9,727		9,762			9,709		9,895			9,855
Basic (loss) income per share	$	(1.19	)	$	.19	$	(1.09	)	$	.33	$	(0.18	)	$	0.01
Diluted income per share
Numerator:
Net (loss) income	$	(11,622	)	$	1,840	$	(10,677	)	$	3,222	$	(1,818	)	$	82
Denominator:
Weighted average common shares outstanding		9,768			9,727		9,762			9,709		9,895			9,855
Stock options outstanding		—			6		—			5		—			3
Weighted average common and potential common shares outstanding		9,768			9,733		9,762			9,714		9,895			9,858
Diluted (loss) income per share	$	(1.19	)	$	.19	$	(1.09	)	$	.33	$	(0.18	)	$	0.01

None of the options to purchase 37 shares of common stock ~~which totaled 69~~at June 30, 2020 were included in the computation of diluted loss per share ~~for the three and nine months ended December 31, 2017~~ as the ~~effect~~affect would be anti-dilutive due to the net ~~loss~~losses in the ~~periods.~~quarter. Options to purchase a total of 164 shares of common stock were outstanding at ~~December 31, 2016~~June 30, 2019 but were not included in the above computation of diluted income per share ~~in the three and nine-month periods ended December 31, 2016~~ given their exercise prices, as they would not be dilutive upon issuance.

The reconciliation of the changes in the product warranty liability is as follows:

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2020			2019
Balance at beginning of period	$	301		$	582		$	538		$	686		$	359		$	366
Expense (income) for product warranties		22			(81	)		(59	)		31
(Income) expense for product warranties														(19	)		27
Product warranty claims paid		(22	)		(4	)		(178	)		(220	)		(35	)		(35	)
Balance at end of period	$	301		$	497		$	301		$	497		$	305		$	358

Income of ~~$59~~$19 for product warranties in the ~~nine months ended December 31, 2017 and the income of $81 in the~~ three months ended ~~December 31, 2016~~June 30, 2020 resulted from the reversal of provisions made that were no longer required due to lower claims experience.

The product warranty liability is included in the line item "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets.

Interest paid was $8$5 and $7$3 in the ~~nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019, respectively. Income taxes (refunded) paid for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 were ~~$1,801~~$(164) and ~~$104,~~$10, respectively.

~~In the nine months ended December 31, 2017 and 2016, non-cash activities included the issuance of treasury stock valued at $63 and $107, respectively, to the Company’s Employee Stock Purchase Plan.~~

At ~~December 31 2017~~June 30, 2020 and ~~2016, respectively,~~2019, there were ~~$29~~$48 and ~~$31~~$58, respectively, of capital purchases that were recorded in accounts payable and are not included in the caption "Purchase of property, plant and equipment" in the Condensed Consolidated Statements of Cash Flows.

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2020			2019
Service cost	$	149		$	151		$	448		$	451		$	116		$	124
Interest cost		356			362			1,067			1,087			303			323
Expected return on assets		(743	)		(718	)		(2,232	)		(2,155	)		(629	)		(664	)
Amortization of actuarial loss		253			337			760			1,013			260			242
Net pension cost	$	15		$	132		$	43		$	396		$	50		$	25

The Company made 0 contributions to its defined benefit pension plan during the ~~nine~~three months ended ~~December 31, 2017 of $52~~June 30, 2020 and does ~~not~~0t expect to make any contributions to the plan for the balance of fiscal ~~2018.~~2021.

	Three Months Ended				Nine Months Ended				Three Months Ended
	December 31,				December 31,				June 30,
	2017		2016		2017		2016		2020		2019
Interest cost	$	6	$	5	$	19	$	19	$	5	$	5
Amortization of actuarial loss		9		11		28		30		6		7
Net postretirement benefit cost	$	15	$	16	$	47	$	49	$	11	$	12

The Company paid no0 benefits related to its postretirement benefit plan during the ~~nine~~three months ended ~~December 31, 2017.~~June 30, 2020. The Company expects to pay benefits of approximately ~~$83~~$77 for the balance of fiscal ~~2018.~~2021.

The components of net periodic benefit cost other than service cost are included in the line item "Other income" in the Condensed Consolidated Statements of Operations.

The Company self-funds the medical insurance coverage it provides to its U.S. based employees. The Company maintains a stop loss insurance policy in order to limit its exposure to claims. The liability of ~~$134~~$85 and ~~$174~~$124 on ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017,~~2020, respectively, related to the self-insured medical plan is primarily based upon claim history and is included in the caption ~~“Accrued compensation”~~"Accrued compensation" as a current liability in the Condensed Consolidated Balance Sheets.

The Company has been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in, or accompanying, products made by the Company. The Company is a co-defendant with numerous other defendants in these lawsuits and intends to vigorously defend itself against these claims. The claims in the Company’s current lawsuits are similar to those made in previous asbestos-related suits that named the Company as a defendant, which either were dismissed when it was shown that the Company had not supplied products to the plaintiffs’ places of work or were settled for immaterial amounts. The Company cannot provide any assurances that any pending or future matters will be resolved in the same manner as previous lawsuits.

As of ~~December 31, 2017,~~June 30, 2020, the Company was subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business.

Although the outcome of the lawsuits, legal proceedings or potential claims to which the Company is, or may become, a party to cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, management does not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on the Company’s results of operations, financial position or cash flows.

The Company files federal and state income tax returns in several domestic and international jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is subject to U.S. federal examination for the tax years ~~2015~~2016 through ~~2017~~2019 and examination in state tax jurisdictions for the tax years ~~2013~~2015 through ~~2017.~~2019. The Company is subject to examination in the People’s Republic of China for tax years ~~2014~~2016 through ~~2016.~~2019 and in India for tax year 2019.

There was no0 liability for unrecognized tax benefits at either ~~December 31, 2017~~June 30, 2020 or March 31, ~~2017.~~

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act, which is effective on January 1, 2018, significantly revises the U.S. tax code by, among other changes, lowering the corporate income tax rate from 35% to 21%, requiring a one-time transition tax on accumulated foreign earnings of certain foreign subsidiaries that were previously tax deferred and creating new taxes on certain foreign sourced earnings. At December 31, 2017, the Company has not completed its accounting for the tax effects of the Tax Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax.

The Company remeasured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and provisionally recorded an income tax benefit of $1,575 related to such remeasurement in the third quarter of fiscal 2018. The Company is still analyzing certain aspects of the Tax Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) of our foreign subsidiary that has previously been deferred from U.S. income taxes. The Company recorded a provisional amount for its one-time transition liability of its foreign subsidiary resulting in additional income tax expense of $137 in the third quarter of fiscal 2018. The Company has not yet completed its calculation of the total post-1986 foreign E&P for the foreign subsidiary. The transition tax is based in part on the amount of those earnings held in cash and other specified assets. The amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets.

The changes in accumulated other comprehensive loss by component for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 are as follows:

	Pension and Other Postretirement Benefit Items			Foreign Currency Items		Total			Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2017	$	(8,439	)	$	5	$	(8,434	)
Balance at April 1, 2020									$	(9,472	)	$	(84	)	$	(9,556	)
Other comprehensive income before reclassifications		—			216		216			—			9			9
Amounts reclassified from accumulated other comprehensive loss		619			—		619			205			—			205
Net current-period other comprehensive income		619			216		835			205			9			214
Balance at December 31, 2017	$	(7,820	)	$	221	$	(7,599	)
Balance at June 30, 2020									$	(9,267	)	$	(75	)	$	(9,342	)

Pension and
Other
Postretirement
Benefit Items

Foreign
Currency
Items

Total

Balance at April 1, 2016

$
(10,932
)

$
256

$
(10,676
)
Other comprehensive income before reclassifications

—

(283
)

(283
)
Amounts reclassified from accumulated other comprehensive
loss

674

—

674

Net current-period other comprehensive income

674

(283
)

391

Balance at December 31, 2016

$
(10,258
)

$
(27
)

$
(10,285
)

	Pension and Other Postretirement Benefit Items			Foreign Currency Items			Total
Balance at April 1, 2019	$	(8,947	)	$	114		$	(8,833	)
Other comprehensive loss before reclassifications		—			(87	)		(87	)
Amounts reclassified from accumulated other comprehensive loss		194			—			194
Net current-period other comprehensive income (loss)		194			(87	)		107
Balance at June 30, 2019	$	(8,753	)	$	27		$	(8,726	)

The reclassifications out of accumulated other comprehensive loss by component for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 are as follows:

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss								Affected Line Item in the Condensed Consolidated Statements of Income and Retained Earnings	Amount Reclassified from Accumulated Other Comprehensive Loss								Affected Line Item in the Condensed Consolidated Statements of Income
	Nine Months Ended									Three Months Ended
	December 31,									June 30,
	2017				2016					2020				2019
Pension and other postretirement benefit items:
Amortization of actuarial loss	$	(788	)	⁽¹⁾	$	(1,043	)	⁽¹⁾	Income before provision for income taxes	$	(266	)	⁽¹⁾	$	(249	)	⁽¹⁾	(Loss) income before provision for income taxes
		(169	)			(369	)		Provision for income taxes		(61	)			(55	)		(Benefit) provision for income taxes
	$	(619	)		$	(674	)		Net income	$	(205	)		$	(194	)		Net (loss) income

On June 24, 2019, the Company completed the sale of its subsidiary, Energy Steel & Supply Co., to Hayward Tyler, a division of Avingtrans PLC, a global leader in performance-critical pumps and motors for the energy sector. Under the terms of the stock purchase agreement, the Company received proceeds of $602, subject to certain adjustments, including a customary working capital adjustment. The Company recognized a loss on the disposal of $87 in the first quarter of fiscal 2020. In addition, during the first quarter of fiscal 2020, the Company incurred a bad debt charge of $98 and an inventory write down of $338 related to the bankruptcy of Westinghouse Electric Company. All of these items are included in the line item "Other expense" in the Condensed Consolidated Statement of Operations for the three months ended June 30, 2019.

In each of the second quarter of fiscal 2018 and the first half of fiscal 2017, the Company’s workforce was aligned with market conditions by reducing the number of management, office and manufacturing positions. As a result, restructuring charges of $316 and $630 were recognized in the nine months ended December 31, 2017 and 2016, respectively. The restructuring charges included severance and related employee benefit costs. The charges are included in the caption “Restructuring Charge” in the Condensed Consolidated Statements of Income and Retained Earnings. The reconciliation of the changes in the restructuring reserve is as follows:

~~The liability of $100 and $120 at December 31, 2017 and March 31, 2017 respectively, is included in the caption “Accrued Compensation” in the Condensed Consolidated Balance Sheets.~~

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board ~~(“FASB”~~("FASB"), the Securities and Exchange Commission, the Emerging Issues Task Force, the American Institute of Certified Public Accountants or any other authoritative accounting ~~bodies~~body to determine the potential impact they may have on the Company's consolidated financial statements.

In ~~May 2014,~~June 2016, the FASB issued Accounting Standards Update ("ASU") ~~2014-09, "Revenue from Contracts with Customers.~~No. 2016-13, "Financial Instruments-Credit Losses (Topic 326)," ~~This guidance establishes principles~~which replaces the current incurred loss impairment methodology for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers. The guidance requires companies to apply a five-step model when recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The guidance also includes a comprehensive set of disclosure requirements regarding revenue recognition. The guidance allows two methods of adoption: (1) a full retrospective approach where historicalmost financial ~~information is presented in accordance~~assets with the ~~new standard~~current expected credit loss ("CECL") methodology. Under the CECL method, the Company will be required to immediately recognize an estimate of credit losses expected to occur over the life of the financial asset at the time the financial asset is originated or acquired. Estimated credit losses are determined by taking into consideration historical loss conditions, current conditions and ~~(2) a modified retrospective approach where the guidance is applied~~reasonable and supportable forecasts. Changes to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 "Revenue from Contracts with Customers: Deferral of the Effective Date," which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," to clarify the implementation guidance on principal versus agent. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing," which clarifies the identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients," which clarifies the implementation guidance related to collectability, presentation of sales tax, noncash consideration, contract modifications and completed contracts at transition. The Company plans to adopt these standards using the modified retrospective approach in the first quarter of its fiscal year ending March 31, 2019. The Company has developed a project plan and is currently reviewing its contracts and evaluating the impact of the guidance on its revenue. The Company currently believes that the most significant impact of adopting the guidance will be the timing of revenue recognition. The Company believes that revenue on the majority of its contracts will continueexpected lifetime credit losses are required to be recognized ~~upon shipment while revenue on its larger contracts are expected to be recognized over time as these contracts meet specific criteria established in the new standards.~~each period. The Company is in the process of implementing changes to its business processes, systems and controls to support the recognition and disclosure requirements under the new guidance. See Note 2 for a description of the Company’s current revenue recognition policy.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory," which simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASUstandard is effective for ~~public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The~~the Company ~~adopted the new guidance in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact~~ on ~~the Company’s Consolidated Financial Statements.~~

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. This ASU retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting guidance. As a result, the effect of leases on the consolidated statement of comprehensive income and the consolidated statement of cash flows is largely unchanged from previous generally accepted accounting principles. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company believes the adoption of this ASU may have a material impact on its assets and liabilities due to the addition of right-of-use assets and lease liabilities to its Consolidated Balance Sheet, however, it does not expect the guidance to have a material impact on its Consolidated Statement of Income or Consolidated Statement of Cash Flows.

In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. The Company adopted the new guidance in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230)", which clarifies the presentation and classification of eight specific issues on the cash flow statement. This ASU is effective for public businesses for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.April 1, 2023. The Company does not expect the adoption of this ASU will have a material effect on its Consolidated Financial Statements.

In ~~March 2017,~~August 2018, the FASB issued ASU No. ~~2017-07,~~2018-14, "Compensation-Retirement ~~Benefits (Topic 715)~~Benefits-Defined Benefit Plans-General (Subtopic 715-20),", which ~~amended its guidance related to the presentation of net periodic~~removes disclosures that no longer are considered cost beneficial, clarifies specific disclosure requirements and adds disclosure requirements identified as relevant for defined benefit pension ~~cost~~ and ~~net periodic~~other postretirement benefit ~~cost.~~plans. This amendment is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The amendment requires application on a retrospective basis to all periods presented. The Company believes the adoption of this ASU will not have a material impact on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes.” The amended guidance ~~requires~~simplifies the ~~service~~accounting for income taxes, eliminating certain exceptions to the general income tax principles, in an effort to reduce the cost ~~component be disaggregated from the other components~~and complexity of ~~net benefit cost.~~application. The ~~service cost component of expense~~amended guidance is required to be reported in the income statement in the same line item as other compensation costs within income from operations. The other components of net benefit cost are required to be presented separately from the service cost component outside of income from operations. This ASU is effective ~~for public businesses~~ for fiscal years beginning after December 15, ~~2017, and~~2020, including interim periods within those fiscal years. Earlier application is permitted. The guidance requires application on either a prospective, retrospective or modified retrospective basis, contingent on the income tax exception being applied. The Company ~~is currently evaluating the impact that~~believes the adoption of this ASU will not have a material impact on its Consolidated Financial Statements.

Management does not expect any other recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company's consolidated financial statements.

Item 2.Management’s Discussion and Analysis ofof Financial Condition and Results of Operations

We are a global business that designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. Our energy markets include oil refining, cogeneration, ~~nuclear~~ and alternative power. For the defense industry, our equipment is used in nuclear propulsion power systems for the U.S. Navy. For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities.

~~Graham’s~~Our global brand is built upon our world-renowned engineering expertise in vacuum and heat transfer technology, responsive and flexible service and high quality standards. We design and manufacture custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. We are also a leading nuclear code accredited fabrication and specialty machining company. We supply components used inside reactor vessels and outside containment vessels of nuclear power facilities. Our equipment can also be found in other diverse applications such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, and heating, ventilating and air conditioning.

Our corporate headquarters are located in Batavia, New York. We have production facilities co-located with our headquarters in ~~Batavia and also at our wholly-owned subsidiary, Energy Steel & Supply Co. ("Energy Steel"), located in Lapeer, Michigan.~~Batavia. We also have a wholly-owned foreign ~~subsidiary,~~subsidiaries, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. ("GVHTT"), located in Suzhou, ~~China.~~China and Graham India Private Limited ("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us in the ~~People’s~~People's Republic of China and management oversight throughout Southeast Asia. GIPL serves as a sales and market development office focusing on the refining, petrochemical and fertilizer markets in India.

In the first quarter of fiscal 2020, we completed the sale of our commercial nuclear utility business, Energy Steel and Supply Co. ("Energy Steel").

Our current fiscal year (which we refer to as ~~“fiscal 2018”~~"fiscal 2021") ends March 31, ~~2018.~~

Highlights for the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2020 include:

This report and other documents we file with the Securities and Exchange Commission include ~~“forward-looking statements”~~"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.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Such factors include, but are not limited to, the risks and uncertainties identified by us under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for fiscal ~~2017.~~

Forward-looking statements may also include, but are not limited to, statements about:

•~~sources of revenue and anticipated revenue, including the contribution from anticipated growth;~~

•~~expectations regarding achievement of revenue and profitability expectations;~~

•~~plans for future products and services and for enhancements to existing products and services;~~

Forward-looking statements are usually accompanied by words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "may," "might," "intend," "interest," "appear," "expect," "suggest," "plan," "predict," "project," "encourage," ~~"potential", "view"~~"potential," "should," "view," "will," and similar expressions. Actual results could differ materially from historical results or those implied by the forward-looking statements contained in this report.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.

AsOur global energy and petrochemical markets turned downward during the latter part of fiscal 2020. These markets were adversely impacted by a ~~result~~dramatic reduction in oil prices, partly due to the COVID-19 pandemic, but importantly, also due to geopolitical imbalance of supply compared with demand, which began to appear before COVID-19 was prevalent. Accordingly, volatility in ~~crude oil~~pricing began prior to the COVID-19 pandemic and ~~natural gas prices,~~has increased because of it. Customers have significantly reduced their capital budgets to invest in upgrading and turnaround maintenance for existing facilities. This has impacted, and is expected to continue to impact, both our capital equipment sales as well as our short cycle business.

The COVID-19 pandemic has further impacted our customers, the markets which they serve and the operation of our business. The near term ~~price uncertainty, our~~impact on global energy ~~markets~~and petrochemical demand was immediate and significant. Our customers’ plans for capital spending, operational upgrades and maintenance spending have been insignificantly reduced and their outlook for this calendar year, and likely beyond, has turned negative. We believe the quantity of projects available to compete for will be fewer and pricing will be challenging. The timing and catalyst for a contracted state for the past three years. In response to the market conditions, our customers in the downstream energy sector have sharply reduced capital spending in each of the last three years. This impacted not only new capacity, but also revamping and turnaround for routine maintenance. Oil prices have risen over the past six months from $45 to over $60 per barrel. As a result, certain projects where our equipment is utilized have begun to proceed, however, it is not clear whether a sustained capital spending recovery ~~in our markets has begun.~~are unclear.

~~Capital spending in~~Over the nuclear market for both new capacity and to maintain existing facilities continues to trend downward. Capital spending in the nuclear market is down 25% to 35% compared with 3 to 4 years ago, according to a report from the Nuclear Energy Institute. Additionally, the March 2017 bankruptcy filing by Westinghouse Electric Company (“Westinghouse”) and the decision to cease building the two new reactors located in Summer, South Carolina has dramatically impacted the health of the

~~domestic nuclear market. The contracted capital spending within the commercial nuclear power market has had the effect of measurably reducing new orders and consequently reducing~~long-term, our ~~sales.~~

~~Our long-term~~ view for the ~~refining~~global energy and petrochemical markets is that general economic fundamentals will drive increasing ~~demand.~~demand and result in continued capital investment to satisfy increasing global demand for energy and chemicals. These fundamentals include rising populations, strong emerging market economic growth, and overall global economic ~~expansion, which~~expansion.

We believe the long-term outlook in our key markets supports our growth plans. However, the energy markets we ~~believe~~serve will ~~result in capital investment necessary~~also be impacted by increased use of renewable energy sources and conservation. In addition, over the long term, should demand for transportation fuels flatten to ~~satisfy increasing~~decline, we anticipate that the use of oil as a feedstock to petrochemicals will increase and will provide additional opportunities for us to provide products to our customers. However, until there is greater clarity regarding the impact of the COVID-19 pandemic on the global economy, energy ~~demand.~~demand and customer financial strength, new order levels may be challenged due to the resulting weak energy and petrochemical markets.

~~Our~~Demand for our products in the defense industry is related to the naval nuclear propulsion market ~~has demand~~which is tied to aircraft carrier and submarine vessel construction schedules of the primary shipyards who service the U.S. Navy. We expect growth in our naval nuclear propulsion business ~~based on~~to result from our strategic actions to increase our market share, our successful performance, and expected increases in demand. ~~For more information, refer~~To date, there has not been an adverse impact to demand in the defense market due to the ~~heading "Strategy and Outlook" within this Item 2 of this Quarterly Report on Form 10-Q.~~

~~In the near term, given the current market conditions, new order levels are expected to remain volatile from quarter to quarter.~~ COVID-19 pandemic.

The chart below shows the impact of our successful diversification ~~strategy. Nearly 60%~~strategy into multiple U.S. Navy defense platforms. The diversification began with our entry into the nuclear carrier program and expanded into both the Virginia and Columbia class nuclear submarine programs. Our U.S. Navy defense business makes up 51% of our total backlog at June 30, 2020. Each vessel platform has made up at least 10% of our total backlog for the past three years. On June 30, 2020, the nuclear carriers, Virginia class submarines and Columbia class submarines, make up 15%, 12% and 24% of our backlog, ~~as of December 31, 2017 is from~~respectively. We believe this diversification will be especially beneficial during periods where our commercial markets ~~not served by us in the Fiscal 2007-2009 time frame.~~are weak.

Backlog Mix Illustrating Impact of Diversification Strategies
Backlog ($ million) at FYE*

To better understand the significant factors that influenced our performance during the periods presented, the following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the notes to our Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

The following table summarizes our results of operations for the periods indicated:

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2017			2016			2017			2016			2020			2019
Net sales	$	17,281		$	22,654		$	55,356		$	66,145		$	16,710		$	20,593
Gross profit	$	3,585		$	6,301		$	12,281		$	15,422		$	1,568		$	4,714
Gross profit margin		21	%		28	%		22	%		23	%		9	%		23	%
SG&A expense ⁽¹⁾	$	4,066		$	3,804		$	11,447		$	10,637		$	3,902		$	4,567
SG&A as a percent of sales		24	%		17	%		21	%		16	%		23	%		22	%
Net (loss) income	$	(11,622	)	$	1,840		$	(10,677	)	$	3,222		$	(1,818	)	$	82
Diluted (loss) income per share	$	(1.19	)	$	0.19		$	(1.09	)	$	0.33		$	(0.18	)	$	0.01
Total assets	$	138,623		$	148,328		$	138,623		$	148,328		$	146,106		$	145,331
Total assets excluding cash, cash equivalents and investments	$	64,441		$	75,651		$	64,441		$	75,651		$	78,934		$	72,774

The ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2018~~2021 Compared With the ~~Third~~First Quarter ~~and First Nine Months~~

In the first quarter of fiscal 2021, production at our facility in Batavia, New York was dramatically reduced to proactively address the risk to our employees of the COVID-19 pandemic. We began the quarter at 10% of normal staffing capacity and gradually increased to normal capacity by early June 2020. On average we were at approximately 50% of normal staffing capacity across the quarter. Despite not receiving any relief from the U.S. federal government’s Payroll Protection Program ("PPP"), we continued to pay full wages and benefits to all of our employees during this capacity reduction. This reduction in available capacity yet still incurring the cost of full staffing significantly affected our sales and earnings in the quarter. We did, however, benefit from a project which had been delayed due to COVID-19 from the fourth quarter of fiscal 2020 into the first quarter of fiscal 2021 that was subcontracted to a vendor in China. This project represented nearly 30% of the sales in the quarter.

Sales for the ~~third~~first quarter of fiscal ~~2018~~2021 were ~~$17,281,~~$16,710, a ~~24%~~19% decrease ~~as compared with~~from sales of ~~$22,654~~$20,593 for the ~~third~~first quarter of fiscal ~~2017.~~2020. Included in the first quarter of fiscal 2020 were sales of $1,276, from our commercial nuclear utility business which was sold in the prior year first quarter. Our domestic sales, as a percentage of aggregate ~~product~~ sales, were ~~65%~~56% in the ~~third~~first quarter of fiscal ~~2018~~2021 compared with ~~77%~~70% in the ~~third~~first quarter of fiscal ~~2017.~~2020. Domestic sales ~~year-over-year~~ decreased ~~$6,160,~~$5,010 in the first quarter of fiscal 2021, or 35%. year-over-year. International sales increased ~~$787,~~$1,127, or ~~15%~~18%, in the ~~third~~first quarter of fiscal ~~2018~~2021 compared with the ~~third~~first quarter of fiscal ~~2017.~~2020. Sales in the three months ended ~~December 31, 2017~~June 30, 2020 were ~~31%~~16% to the refining industry, ~~24%~~48% to the chemical and petrochemical industries, 21% for the defense (U.S. Navy) industry, 15% to other commercial and industrial applications. Sales in the three months ended June 30, 2019 were 36% to the refining industry, 35% to the chemical and petrochemical industries, 10% tofor the ~~power~~defense (U.S. Navy) industry ~~including the nuclear market,~~ and ~~35%~~19% to other commercial and industrial applications, including the U.S. Navy. Sales in the three months ended December 31, 2016 were 28% to the refining industry, 19% to the chemical and petrochemical industries, 19% to the power industry, including the nuclear market, and 34% to other commercial and industrial applications, including the U.S. Navy. Fluctuationsapplications. Fluctuation in sales among markets, products and geographic locations ~~can vary measurably~~varies, sometimes significantly, from quarter-to-quarter based on timing and magnitude of projects. See also "Current Market Conditions," above. For additional information on anticipated future sales and our markets, see "Orders and Backlog" below.

Sales for the first nine months of fiscal 2018 were $55,356, a decrease of $10,789, or 16% compared with sales of $66,145 for the first nine months of fiscal 2017. The decrease in fiscal 2018 year-to-date sales was due to weaker domestic sales. Our domestic sales, as a percentage of aggregate product sales, were 67% in the first nine months of fiscal 2018 compared with 74% in the same period in fiscal 2017. Domestic sales decreased $11,900, or 24%, while international sales increased by $1,111, or 7%. International sales accounted for 33% and 26% of total sales for the first nine months of fiscal 2018 and fiscal 2017, respectively. Sales in the first nine months of fiscal 2018 were 25% to the refining industry, 30% to the chemical and petrochemical industries, 14% to the power industry, including the nuclear market, and 31% to other commercial and industrial applications, including the U.S. Navy. Sales in the first nine months of fiscal 2017 were 31% to the refining industry, 22% to the chemical and petrochemical industries, 23% to the power industry, including the nuclear market, and 24% to other commercial and industrial applications, including the U.S. Navy.

~~Our gross~~Gross profit margin for the third quarter of fiscal 2018 was 21% compared with 28% for the third quarter of fiscal 2017. Gross profit for the third quarter of fiscal 2018 decreased 43% compared with fiscal 2017, to $3,585 from $6,301. Gross profit was impacted by lower sales and ~~margins were impacted by a weaker mix of projects and less cost absorption.~~

~~Our gross profit~~operating margin for the first ~~nine months~~quarter of fiscal ~~2018 was 22%~~2021 were 9% and (14%), respectively, compared with 23% and (2%), respectively, for the first ~~nine months~~quarter of fiscal ~~2017.~~2020. Gross profit for the first ~~nine months~~quarter of fiscal ~~2018~~2021 decreased ~~20%~~ compared with fiscal ~~2017,~~2020, to ~~$12,281~~$1,568 from ~~$15,422. The decrease in gross profit was~~$4,714, primarily due to ~~lower volume.~~

our Batavia facility being partially shut down during the majority of the quarter. This shutdown impacted revenue while certain operating costs, primarily production labor wages, continued to be paid.

SG&A expenses as a percent of sales for the ~~three and nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2020 and 2019 were ~~24%~~23% and ~~21%~~22%, respectively. SG&A expenses in the ~~third~~first quarter of fiscal ~~2018~~2021 were ~~$4,066, an increase~~$3,902, a decrease of $262, or 7%, compared with the third quarter of fiscal 2017 SG&A expenses of $3,804, due to bad debts in the commercial nuclear power market. Excluding the commercial nuclear power market bad debts, SG&A expenses were $3,832, or 22% of sales in the third quarter of fiscal 2018. SG&A expenses in the first nine months of fiscal 2018 were $11,447, an increase of $810, or 8%,$665 compared with the first ~~nine months~~quarter of fiscal ~~2017~~2020 SG&A expenses of ~~$10,637. This increase~~$4,567. Included in the first quarter of fiscal 2020 was ~~principally~~$621 of costs related to the ~~benefit of insurance proceeds of $759 received in the prior year and the $234 bad debt in the~~ commercial nuclear ~~power market~~utility business, which was sold in ~~the current three-month period, as described below. Excluding these two items, SG&A expenses were $183, or 2%, lower.~~

During the third quarter of fiscal 2018, we performed our annual goodwill and intangible asset impairment review. We estimated the fair value of intangible assets and goodwill of our commercial nuclear power business related to the December 2010 acquisition of Energy Steel & Supply Co. (“Energy Steel”). The impairment review indicated that the fair value of the permits, tradename and goodwill of the business were substantially lower than the carrying value due to reduced investment from the U.S. nuclear power market, the strength of the Energy Steel brand relative to larger more vertically integrated suppliers, and the bankruptcy of Westinghouse which resulted in the stoppage of work at the Summer, SC nuclear facility. As a result, in the third quarter of fiscal 2018 we recorded impairment losses of $8,600, $500, and $5,716 for permits, tradename and goodwill, respectively. The total impairment charge was $14,816 before taxes and $12,852 after taxes. Additionally, we incurred a $46 revenue reversal, and a $234 bad debt charge, related to the bankruptcy of Westinghouse and the stoppage of work at the Summer, SC nuclear facility. The total before and after tax cost of these two charges was $280 and $208, respectively. Additionally, we recognized a gain of $1,416 related to the revaluation of deferred tax liabilities, which were impacted by the reduction in federal income tax rates from the Tax Act. The deferred tax gain of $1,438 included $2,034 for adjusting the rates on the deferred tax liability of the Energy Steel acquisition offset by a charge of $596 for other tax items.

Prior to the third quarter, in the first half of fiscal 2018, we incurred a pre-tax restructuring charge of $316 ($224 after tax) for severance costs related to certain headcount reductions. In the first half of fiscal 2017, we incurred a pre-tax restructuring charge of fiscal 2017 was $630 ($441 after tax) related to certain headcount reductions. The reduction in headcount in the first half of fiscal 2018 was approximately 6% of our global workforce. The annual savings from these reductions is expected to be $1,500. Approximately half of the savings should be realized in fiscal 2018.

Interest income for the ~~three and nine-month~~three-month periods ended ~~December 31, 2017~~June 30, 2020 and 2019 was ~~$142~~$94 and ~~$455, respectively,~~$399, respectively. The decrease in interest income is due to dramatically lower market investment rates compared with ~~$100 and $272, respectively,~~rates during the prior year period. Interest expense was $5 for the ~~same periods~~quarter ended ~~December 31, 2016. Interest expense for the three and nine-month periods ended December 31, 2017 was $3 and $8, respectively,~~June 30, 2020, compared with $3 ~~and $7, respectively,~~ for the ~~same periods~~quarter ended ~~December 31, 2016.~~June 30, 2019.

~~The reduction in the year-to-date~~Our effective tax rate ~~from 28%~~ in the ~~second~~first quarter toof fiscal 2021 was 17%, compared with 23% in the ~~third quarter as well as in the~~ first nine months of fiscal 2018 was due primarily to adjustments related to the Tax Act. The effective tax rates for the comparable three and nine month periods of fiscal 2017 were 29% and 27%, respectively.

~~Net (loss) income and (loss) income per diluted share for the third~~ quarter of fiscal 2018 were ($11,622) and ($1.19), compared with $1,840 and $0.19, respectively, for the third quarter of fiscal 2017. Excluding impairment and other related charges for our commercial nuclear business as well as the gain from implementation of the Tax Act, net income and income per diluted share for the third quarter of fiscal 2018 were ($1) and $0.00, respectively, and were $1,840 and $0.19 in the third quarter of fiscal 2017. 2020.

Net (loss) income and (loss) income per diluted share for the first ~~nine months~~quarter of fiscal ~~2018~~2021 were ($~~10,677)~~1,818) and ($~~1.09)~~0.18), respectively, compared with ~~net income of $3,222~~$82 and income per diluted share of $0.33 for the first nine months of fiscal 2017. Excluding the items noted above as well as restructuring charges in each year, net income and income per diluted share for the first nine months of fiscal 2018 were $1,168 and $0.12,$0.01, respectively, ~~and were $3,663 and $0.38~~ in the first ~~nine months~~quarter of fiscal ~~2017.~~

2020. Included in the first quarter of fiscal 2020 was a loss of ($893) and ($0.09), respectively, for our commercial nuclear utility business.

The following discussion should be read in conjunction with our Condensed Consolidated Balance Sheets and ~~Condensed Consolidated~~ Statements of Cash Flows:

	December 31,		March 31,		June 30,			March 31,
	2017		2017		2020			2020
Cash and investments	$	74,182	$	73,474	$	67,172		$	73,003
Working capital		78,369		78,688		75,323			77,443
Working capital ratio⁽¹⁾		3.3		3.5		2.5			2.6
Working capital excluding cash and investments		4,187		5,214		8,151			4,440
Working capital excluding cash and investments as a percent of net sales⁽²⁾						9.4	%		4.9	%

Net cash ~~generated~~used by operating activities for the first ~~nine months~~quarter of fiscal ~~2018~~2021 was ~~$3,874, compared~~$4,373 which was comparable with ~~$10,707~~$4,753 of cash used for the first ~~nine months~~quarter of fiscal 2017. The decrease in cash generation year over year was attributable to lower earnings, an increase in accounts receivable, an increase in income taxes receivable and a smaller decrease in inventories, partly offset by higher unbilled revenue.2020.

Dividend payments and capital expenditures in the first ~~nine months~~quarter of fiscal ~~2018~~2021 were ~~$2,638~~$1,097 and ~~$543,~~$338, respectively, compared with ~~$2,616~~$988 and ~~$241,~~$294, respectively, for the first ~~nine months~~quarter of fiscal ~~2017.~~2020.

Capital expenditures for fiscal ~~2018~~2021 are expected to be ~~between~~ approximately ~~$1,500 and~~$2,000 to $2,500. We have a capital project for approximately $1,500 which will be completed in the next few months, however, it is not clear whether the payments will occur in this fiscal year or early in next fiscal year. Approximately 80% of our fiscal 2018 capital expenditures are expected to be for productivity-enhancing machinery and equipment, with the remaining amounts expected to be used for information technology upgrades and other items.

Cash and investments were ~~$74,182~~$67,172 on ~~December 31, 2017~~June 30, 2020 compared with ~~$73,474~~$73,003 on March 31, ~~2017, up $708.~~2020, down $5,831.

We invest net cash generated from operations in excess of cash held for near-term needs in short-term, or less than 365 days, certificates of deposit, money market accounts or U.S. government instruments, generally with maturity periods of up to 180 days. Our money market account is used to securitize our outstanding letters of credit, which reduces our cost on those letters of credit. Approximately 95% of our cash and investments are held in the U.S. The remaining 5% is invested in our China operations.

Our revolving credit facility with JP Morgan Chase, N.A. ("JP Morgan Chase") provides us with a line of credit of $25,000, including letters of credit and bank guarantees. In addition, our JP Morgan Chase agreement allows us to increase the line of credit, at our discretion, up to another $25,000, for total availability of $50,000. Borrowings under this credit facility are secured by all of our assets. We also ~~have~~had a ~~$5,000~~$10,000 unsecured line of credit with HSBC, N.A. ("HSBC"), which was increased to $14,000 in the first quarter of fiscal 2021. Letters of credit outstanding on ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017~~2020 were ~~$7,401~~$14,888 and ~~$8,372,~~$13,328, respectively. The outstanding letters of credit as of ~~December 31, 2017~~June 30, 2020 were issued by JP Morgan Chase ~~HSBC, as well as Bank of America (under our previous credit facility).~~and HSBC. There were no other amounts outstanding on our credit facilities at ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017.~~2020. The borrowing rate under our JP Morgan Chase facility as of ~~December 31, 2017~~June 30, 2020 was the bank’s prime rate, or ~~4.50%~~3.25%. Availability under the JP Morgan Chase and HSBC lines of credit was ~~$25,168~~$24,112 and ~~$25,761~~$21,672, respectively, at ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017,~~2020, respectively. We believe that cash generated from operations, combined with our investments and available financing capacity under our credit facility, will be adequate both to meet our cash needs for the immediate future and to support our growth strategies.

Orders for the three-month period ended ~~December 31, 2017~~June 30, 2020 were ~~$40,528~~$11,468 compared with ~~$17,699~~$15,089 for the same period last year, a decrease of $3,621. Included in the ~~prior year, an increase~~orders for the first three months of ~~129%.~~fiscal 2020 was $2,996 for the commercial nuclear business, which was sold in that quarter. Orders represent written communications received from customers requesting us to supply products and/or services. Domestic orders were ~~47%~~28% of total orders, or ~~$19,144,~~$3,232, and international orders were ~~53%~~72% of total orders, or ~~$21,384,~~$8,236, in the ~~current~~first quarter of fiscal 2021 compared with the ~~third~~first quarter of fiscal ~~2017,~~2020 when domestic orders were ~~59%~~74%, or ~~$10,396,~~$11,157, of total orders, and international orders were ~~41%~~26%, or ~~$7,303,~~$3,932, of total orders. ~~Over 80% of the international orders in the third quarter of fiscal 2018 were from Canada.~~

~~During the first nine months of fiscal 2018, orders were $68,679,~~Backlog was $107,220 at June 30, 2020, compared with $57,123 for the same period of fiscal 2017, an increase of $11,556, or 20%. For the first nine months of fiscal 2018, refining orders increased by $19,121, power orders increased $812, chemical and petrochemical decreased by $6,167 and other commercial and industrial applications, including the U.S. Navy, decreased by $2,210. See “Current Market Conditions” above for additional information.

~~Backlog was $96,246~~$112,389 at ~~December~~March 31, ~~2017, compared with $72,981 at September 30, 2017,~~2020, a ~~32% increase.~~5% decrease. Backlog is defined as the total dollar value of orders received for which revenue has not yet been recognized. Approximately ~~55%~~70% to ~~60%~~75% of orders currently in our backlog are expected to be converted to sales within one ~~year, 5% to 10% are expected to ship between 12 and 24 months, and 25% to 35% beyond two years.~~year. The majority of the orders that are expected to convert beyond twelve months are for the defense industry, specifically the U.S. Navy. At ~~December 31, 2017, 35%~~June 30, 2020, 34% of our backlog was attributable to equipment for refinery project work, 4%12% for chemical and petrochemical projects, 6%51% for U.S. Navy projects and 3% for power and other industrial applications. At March 31, 2020, 27% of our backlog was attributable to equipment for refinery project work, 17% for chemical and petrochemical projects, ~~including nuclear, 51%~~52% for U.S. Navy projects and 4% for power and other industrial applications. At ~~December 31, 2016, 17%~~June 30, 2020, we had two projects totaling $562 on hold.

Capital spending in the energy markets we serve began to decrease during the second half of fiscal 2020 and the pace of activity materially contracted as COVID-19 became a global health issue in the fourth quarter of fiscal 2020. The weak energy markets have continued into fiscal 2021. Our bidding activity also slowed in the second half of fiscal 2020, with more international opportunities in emerging markets than in domestic markets. At June 30, 2020, 51% of our backlog was ~~attributed to equipment~~ for ~~refinery project work, 14%~~the defense industry, specifically the U.S. Navy. Our pipeline for ~~chemical and petrochemical projects, 9% for power projects, 57% for~~the U.S. Navy ~~projects~~continues to be robust, but quarterly fluctuations in order levels will occur due to the size and ~~3% for other industrial applications. At December 31, 2017, we had no projects on hold.~~timing of release of the U.S. Navy projects. Defense programs in backlog are planned to deliver $20 to $25 million per year of revenue in fiscal 2021 and beyond.

~~Prolonged weakness~~While the near term opportunities in the global energy and petrochemical markets ~~has continued~~have slowed significantly due to ~~negatively~~the combined impact ~~our business in fiscal 2018. Our oil refining~~of the COVID-19 pandemic and ~~chemical market customer spending has started to improve compared with last year, but this will have no effect on our fiscal 2018 sales. We anticipate that~~ the ~~nuclear power market will continue to be weak and unpredictable during the next few years,~~geopolitical imbalance of supply, and this ~~determination led to~~may continue for the ~~impairment of our goodwill and intangible assets which we recognized in the third quarter.~~

~~Despite the current downturn,~~foreseeable future, we continue to believe in the ~~long-term potential~~longer-term opportunities of the energy ~~markets~~and petrochemical markets. Coupled with our diversification strategy into the defense industry, we ~~serve. We intend to expand~~believe that the long-term strength of our ~~participation and market share. We believe this anticipated long-term strength~~markets will support our ~~strategy~~goal to ~~significantly~~ grow our ~~business when the energy markets begin to recover.~~business. We have invested in capacity to serve our commercial ~~refining and chemical/petrochemical~~ customers as well as to expand the work we do for the U.S. Navy. ~~In addition~~We intend to ~~these organic growth~~

~~opportunities, we~~ continue to look for organic growth opportunities as well as acquisitions or other business combinations that we believe will allow us to expand our presence in both our existing and ancillary markets. ~~We are focused on growing our business, reducing earnings volatility, and further diversifying our business and product lines.~~

~~The prolonged contraction~~Our expectations for sales and profitability in fiscal 2021 assume that we are able to operate our production facility in Batavia, New York at or near normal capacity for the last three quarters of fiscal 2021. In our first quarter of fiscal 2021, our production capability was significantly reduced due to the COVID-19 pandemic. Our production was at approximately 50% of normal production for the first quarter of fiscal 2021. This outlook is based upon the assumption that we are able to operate our production facility, have access to the global supply chain, including our subcontractors, with minimal or no disruption due to the COVID-19 pandemic or any other unforeseen events.

After our weak first quarter of fiscal 2021, we expect to operate at near normal capacity. We project that approximately 70% to 75% of our $107,220 June 30, 2020 backlog will convert to sales over the next twelve months. We expect the remaining backlog will convert beyond twelve months, which includes a combination of U.S. Navy orders that have a long conversion cycle (up to five years) as well as certain commercial orders, the conversion of which has been extended by our customers. We had two projects totaling $3,165 cancelled in fiscal 2020 and a third project of $654 cancelled in the first quarter of fiscal 2021. At June 30, 2020, we had two projects totaling $562 on hold by our customers. In addition, we have three projects which have been delayed by our customers due to COVID-19 and related energy ~~markets~~market dynamics, and we ~~serve continues to cause near-term uncertainty, affecting our outlook for fiscal 2018. We~~therefore expect revenue ~~in fiscal 2018~~of $4,118 to be ~~approximately $75,000.~~ delayed beyond fiscal 2021.

We expect fiscal year 2021 revenue to be between $90,000 and $95,000, gross profit margin ~~in fiscal 2018~~ to be in the ~~21%~~20% to 22% ~~range. We are experiencing the impact of lower pricing from orders received over the past year~~range and the under-utilization of our production facilities in fiscal 2018. We believe that production overhead absorption will be weak, which we expect in turn will put continued pressure on gross profit margins in our fourth quarter.

SG&A ~~during fiscal 2018 is expected~~expenses to be between ~~$15,000~~$17,000 and ~~$15,500.~~$18,000. We expect interest income to be de minimis, given the low market rates on short term cash and investments. Our effective tax rate during fiscal ~~2018, excluding the tax effect of the impairment loss and the one-time impact of the new Tax Act recorded in the third quarter,~~2021 is expected to be ~~between 24%~~approximately 22%. This outlook incorporates the very challenged first quarter which had been significantly impacted by the COVID-19 pandemic, assumes that we are able to operate near normal capacity for the last nine months of fiscal 2021 and ~~26%, which we~~do not have ~~lowered due~~a significant production interruption related to the ~~reduced federal corporate income tax rate. Fiscal 2018 will benefit from the fiscal fourth quarter being taxed at a lower rate.~~ COVID-19 pandemic.

~~We continue to~~Cash flow was negative in the first quarter of fiscal 2021, although, we expect ~~operating~~positive cash flow infrom operations for the remainder of fiscal ~~2018 will be lower than fiscal 2017. Fiscal 2017 cash flow benefited from the build-up of customer deposits.~~

We have been named as a defendant in lawsuits alleging personal injury from exposure to asbestos allegedly contained in or accompanying our products. We are a co-defendant with numerous other defendants in these lawsuits and intend to vigorously defend ourselves against these claims. The claims in our current lawsuits are similar to those made in previous asbestos lawsuits that named

us as a defendant. Such previous lawsuits either were dismissed when it was shown that we had not supplied products to the plaintiffs’ places of work, or were settled by us for immaterial amounts.

As of ~~December 31, 2017,~~June 30, 2020, we are subject to the claims noted above, as well as other legal proceedings and potential claims that have arisen in the ordinary course of business. Although the outcome of the lawsuits, legal proceedings or potential claims to which we are or may become a party cannot be determined and an estimate of the reasonably possible loss or range of loss cannot be made for the majority of the claims, we do not believe that the outcomes, either individually or in the aggregate, will have a material adverse effect on our results of operations, financial position or cash flows.

Our unaudited condensed consolidated financial statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions.We believe that the most critical accounting estimates used in the preparation of our condensed consolidated financial statements relate to labor hour estimates and establishment of operational milestones which are used to recognize revenue under the ~~percentage-of-completion method, fair value estimates of identifiable tangible and intangible assets acquired in business combinations,~~overtime recognition model, accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, and accounting for pensions and other postretirement benefits. For further information, refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8 "Financial Statements and Supplementary Data" included in our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~ 2020.

We did not have any off balance sheet arrangements as of ~~December 31, 2017~~June 30, 2020 or March 31, ~~2017,~~2020, other than ~~operating leases and~~ letters of credit.

The principal market risks (i.e., the risk of loss arising from market changes) to which we are exposed are foreign currency exchange rates, price risk, ~~and~~ project cancellation ~~risk.~~

The assumptions applied in preparing the following qualitative and quantitative disclosures regarding foreign currency exchange rate, price risk and project cancellation risk are based upon volatility ranges experienced by us in relevant historical periods, our current knowledge of the marketplace, and our judgment of the probability of future volatility based upon the historical trends and economic conditions of the markets in which we operate.

International consolidated sales for the first three months ~~and nine months ended December 31, 2017~~of fiscal 2021 were ~~35% and 33%, respectively,~~44% of total sales compared with ~~23% and 26%, respectively,~~30% for the same ~~periods~~period of fiscal ~~2017.~~2020. Operating in markets throughout the world exposes us to movements in currency exchange rates. Currency movements can affect sales in several ways, the foremost being our ability to compete for orders against foreign competitors that base their prices on relatively weaker currencies. Business lost due to competition for orders against competitors using a relatively weaker currency cannot be quantified. In addition, cash can be adversely impacted by the conversion of sales made by us in a foreign currency to U.S. dollars. In each of the first three ~~and nine~~ months of ~~each of~~ fiscal ~~2018~~2021 and fiscal ~~2017,~~2020, all sales by us and our wholly-owned subsidiaries, for which we were paid, were denominated in the local currency of the respective subsidiary (U.S. dollars or Chinese RMB).

We have limited exposure to foreign currency purchases. In each of the first three ~~and nine~~ months of fiscal ~~2018,~~2021 and 2020, our purchases in foreign currencies represented 1%approximately 2% of the cost of products sold. ~~In the first three and nine months of 2017, our purchases in foreign currencies represented 2% and 3% of cost of products sold, respectively.~~ At certain times, we may enter into forward foreign currency exchange agreements to hedge our exposure against potential unfavorable changes in foreign currency values on significant sales and purchase contracts negotiated in foreign currencies. Forward foreign currency exchange contracts were not used in the periods being reported on in this Quarterly Report on Form 10-Q and as of ~~December 31, 2017~~June 30, 2020 and March 31, ~~2017,~~2020, we held no forward foreign currency contracts.

Operating in a global marketplace requires us to compete with other global manufacturers which, in some instances, benefit from lower production costs and more favorable economic conditions. Although we believe that our customers differentiate our products on the basis of our manufacturing quality, responsive and flexible service, and engineering experience and excellence, among other things, such lower production costs and more favorable economic conditions mean that certain of our competitors are able to

offer products similar to ours at lower prices. ~~In market downturns, we typically experience depressed price levels. Moreover, the~~The cost of metals and other materials used in our products ~~have experienced~~can experience significant ~~volatility. Such factors, in addition to the global effects of the ongoing~~ volatility, and ~~disruption of the capital and credit markets, have resulted~~as such, can impact our ability to reflect this volatility in ~~downward demand and pricing pressure on~~ our ~~products.~~

Open orders are reviewed continuously through communications with customers. If it becomes evident to us that a project is delayed well beyond its original shipment date, management will move the project into "placed on hold" (i.e., suspended) category. Furthermore, if a project is cancelled by our customer, it is removed from our backlog. We attempt to mitigate the risk of cancellation by structuring contracts with our customers to maximize the likelihood that progress payments made to us for individual projects cover the costs we have incurred. As a result, we do not believe we have a significant cash exposure to projects which may be cancelled. ~~At December 31, 2017,~~In the first quarter of fiscal 2021, we had noone job for $654 cancelled. At June 30, 2020, we had two projects totaling $562 on hold.

Our President and Chief Executive Officer (principal executive officer) and Vice President-Finance & Administration and Chief Financial Officer (principal financial officer) each have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, and as of such date, our President and Chief Executive Officer and Vice President-Finance & Administration and Chief Financial Officer concluded that our disclosure controls and procedures were effective in all material respects.

There has been no change to our internal control over financial reporting during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

~~DECEMBER 31, 2017~~ We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our non-productive employees were working remotely during the majority of the first quarter due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Except as stated below, there have been no material changes from the risk factors previously disclosed in Part 1 – Item 1A of the Company’s Form 10-K for the fiscal year ended March 31, 2020.

Our business, financial condition and results of operations have been and may continue to be adversely affected by global public health pandemics, including the recent COVID-19 pandemic.

Our business, financial condition and results of operations have been and may continue to be adversely affected if the COVID-19 pandemic, or another global health crisis, impacts our employees, suppliers, customers, financing sources or others’ ability to conduct business or negatively affects consumer and business confidence or the global economy. The COVID-19 pandemic has affected large segments of the global economy, including the markets we operate in, since the fourth quarter of fiscal 2020. In response to the COVID-19 pandemic, beginning in late March 2020, we reduced staffing at our facility in Batavia, New York to approximately 10%, which significantly reduced our production capabilities for approximately three weeks. We have since gradually increased our staffing, which reached normal levels in early June 2020, and have applied numerous new health and safety protocols for those working onsite. On average, we were at approximately 50% of normal staffing capacity across the quarter. This reduction in staffing significantly affected our sales and earnings in the quarter ended June 30, 2020.

The pandemic and any additional preventative or protective actions that governments or we may take in response to the COVID-19 pandemic may have a material adverse effect on our business or our suppliers, distribution channels, and customers, including business shutdowns or disruptions for an indefinite period of time, reduced operations, restrictions on shipping, fabricating or installing products, reduced consumer demand or customers’ ability to make payments. We have and may continue to experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government

orders), implementing further precautionary measures to protect the health of our workforce, increased project cancellations or projects put on hold, access to supplies, capital, and fundamental support services (such as shipping and transportation). For example, at June 30, 2020, two projects were on hold and one project was cancelled during the quarter. Furthermore, at June 30, 2020, we had three projects which have been delayed by our customers due to the COVID-19 pandemic and related energy market dynamics. Any resulting financial impact cannot be fully estimated at this time, but may materially affect our business, financial condition or results of operations. The extent to which the COVID-19 pandemic affects our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the pandemic or treat its impact, among others.

The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A - Risk Factors of our Form 10-K for the fiscal year ended March 31, 2020, any of which could have a material adverse effect on us. The situation surrounding the COVID-19 pandemic and its impact continues to change rapidly and additional impacts that we are presently unaware of may arise.

During the first quarter of fiscal 2020, we directly withheld shares for tax withholding purposes from restricted stock awarded to officers that vested during the period. Common stock repurchases in the quarter ended June 30, 2020 were as follows:


(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 Certification

+	32.1	Section 1350 Certifications


(101)	Interactive Data File

+	101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

+	101.SCH	Inline XBRL Taxonomy Extension Schema Document

+	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

+	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

+	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

+	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

	104
	+	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit ~~filed with this report~~101).

	+ #	Exhibit filed with this report Management contract or compensation plan

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	16-1194720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

20 Florence Avenue, Batavia, New York	14020
(Address of principal executive offices)	(Zip Code)

Large accelerated filer	☐		Accelerated filer	☒☐
Non-accelerated filer	☐☒	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒
Emerging growth company	☐

		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	43

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2321

Item 4.	Controls and Procedures	2422

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 6.	Exhibits	2524

Signatures		2625

	Three Months Ended
	June 30,
Product Line	2020		2019
Heat transfer equipment	$	10,673	$	7,852
Vacuum equipment		2,551		5,530
All other		3,486		7,211
Net sales	$	16,710	$	20,593


Geographic Region
Asia	$	5,163	$	3,219
Canada		992		1,348
Middle East		449		773
South America		220		359
U.S.		9,438		14,448
All other		448		446
Net sales	$	16,710	$	20,593

	June 30, 2020			March 31, 2020			Change

Unbilled revenue (contract assets)	$	15,683		$	14,592		$	1,091
Customer deposits (contract liabilities)		(31,082	)		(26,983	)		(4,099	)
Net contract liabilities	$	(15,399	)	$	(12,391	)	$	(3,008	)

	Gross Carrying Amount		Accumulated Amortization		Impairment Loss		Net Carrying Amount
At December 31, 2017
Intangibles subject to amortization:
Customer relationships	$	2,700	$	1,267	$	—	$	1,433
Intangibles not subject to amortization:
Permits	$	10,300	$	—	$	8,600	$	1,700
Tradename		2,500		—		500		2,000
	$	12,800	$	—	$	9,100	$	3,700
At March 31, 2017
Intangibles subject to amortization:
Customer relationships	$	2,700	$	1,132	$	—	$	1,568
Intangibles not subject to amortization:
Permits	$	10,300	$	—	$	—	$	10,300
Tradename		2,500		—		—		2,500
	$	12,800	$	—	$	—	$	12,800


Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program

4/01/2020 – 4/30/2020	--	--	--	--
5/01/2020 – 5/31/2020	2	$11.23	--	--
6/01/2020 – 6/30/2020	--	--	--	--
Total	2	$11.23	--	--


(10)	Material Contracts

	10.1	Letter Agreement dated May 1, 2020, with respect to the continuing Letter of Credit Facility dated March 24, 2014, between the Company and HSBC Bank USA, National Association is incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 30, 2020.

	10.2	Pledge Agreement between the Company and HSBC Bank USA, National Association dated May 1, 2020 is incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K dated April 30, 2020.

	10.3	First Amendment to Credit Agreement dated May 1, 2020 between the Company and JPMorgan Chase Bank, N.A. is incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K dated April 30, 2020.

#	10.4	Graham Corporation Annual Stock-Based Long-Term Incentive Award Plan for Senior Executives in effect for the fiscal year ending March 31, 2021 is incorporated by reference from Exhibit 99.1 to the Company’s Current Report on Form 8-K dated June 9, 2020.


			GRAHAM CORPORATION
By:			/s/ Jeffrey Glajch
			Jeffrey Glajch
			Vice President-Finance & Administration and
			Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)