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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 24,~~July 28, 2020, there were outstanding ~~9,891,052~~9,976,893 shares of the registrant’s common stock, par value ~~$.10~~$0.10 per share.

As of ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019~~2020 and for the ~~Three~~three months ended June 30, 2020 and ~~Nine-Month Periods Ended December 31,~~ 2019 ~~and 2018~~

	Three Months Ended						Nine Months Ended						Three Months Ended
	December 31,						December 31,						June 30,
	2019			2018			2019			2018			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	$	25,286		$	17,198		$	67,522		$	68,190		$	16,710		$	20,593
Cost of products sold		21,242			13,456			53,816			51,079			15,142			15,879
Gross profit		4,044			3,742			13,706			17,111			1,568			4,714
Other expenses and income:
Selling, general and administrative		4,441			4,249			12,844			13,518			3,902			4,556
Selling, general and administrative – amortization		—			59			11			178			—			11
Other expense		—			—			523			—			—			523
Other income		(87	)		(206	)		(261	)		(618	)		(55	)		(87	)
Interest income		(318	)		(404	)		(1,080	)		(1,044	)		(94	)		(399	)
Interest expense		2			5			9			8			5			3
Total other expenses and income		4,038			3,703			12,046			12,042			3,758			4,607
Income before provision for income taxes		6			39			1,660			5,069
(Loss) income before provision for income taxes														(2,190	)		107
(Benefit) provision for income taxes		(3	)		(56	)		364			824			(372	)		25
Net income	$	9		$	95		$	1,296		$	4,245
Net (loss) income													$	(1,818	)	$	82
Per share data
Basic:
Net income	$	—		$	0.01		$	0.13		$	0.43
Net (loss) income													$	(0.18	)	$	0.01
Diluted:
Net income	$	—		$	0.01		$	0.13		$	0.43
Net (loss) income													$	(0.18	)	$	0.01
Weighted average common shares outstanding:
Basic		9,884			9,832			9,874			9,817			9,895			9,855
Diluted		9,888			9,845			9,877			9,832			9,895			9,858
Dividends declared per share	$	0.11		$	0.10		$	0.32		$	0.29		$	0.11		$	0.10

	Three Months Ended				Nine Months Ended						Three Months Ended
	December 31,				December 31,						June 30,
	2019		2018		2019			2018			2020			2019
	(Amounts in thousands)				(Amounts in thousands)						(Amounts in thousands)
Net income	$	9	$	95	$	1,296		$	4,245
Net (loss) income											$	(1,818	)	$	82
Other comprehensive income:
Foreign currency translation adjustment		88		10		(135	)		(323	)		9			(87	)
Defined benefit pension and other postretirement plans net of income tax expense of $55 and $48, for the three months ended December 31, 2019 and 2018, respectively, and $164 and $145 for the nine months ended December 31, 2019 and 2018, respectively		194		170		583			510
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		282		180		448			187			214			107
Total comprehensive income	$	291	$	275	$	1,744		$	4,432
Total comprehensive (loss) income											$	(1,604	)	$	189

December 31,

March 31,

2019

2019

(Amounts in thousands, except per share data)

Assets

Current assets:

Cash and cash equivalents

$
10,851

$
15,021

Investments

59,000

62,732

Trade accounts receivable, net of allowances ($35 and $33 at December 31 and
   March 31, 2019, respectively)

17,901

17,582

Unbilled revenue

14,321

7,522

Inventories

20,408

24,670

Prepaid expenses and other current assets

1,289

1,333

Income taxes receivable

772

1,073

Assets held for sale

—

4,850

Total current assets

124,542

134,783

Property, plant and equipment, net

16,906

17,071

Prepaid pension asset

4,920

4,267

Operating lease assets

283

—

Other assets

150

149

Total assets

$
146,801

$
156,270

Liabilities and stockholders’ equity

Current liabilities:

Current portion of finance lease obligations

$
47

$
51

Accounts payable

9,253

12,405

Accrued compensation

4,855

5,126

Accrued expenses and other current liabilities

2,835

2,933

Customer deposits

28,816

30,847

Operating lease liabilities

153

—

Liabilities held for sale

—

3,525

Total current liabilities

45,959

54,887

Finance lease obligations

61

95

Operating lease liabilities

122

—

Deferred income tax liability

1,273

1,056

Accrued pension liability

726

662

Accrued postretirement benefits

619

604

Total liabilities

48,760

57,304

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred stock, $1.00 par value, 500 shares authorized

—

—

Common stock, $.10 par value, 25,500 shares authorized,
   10,700 and 10,650 shares issued and 9,884 and 9,843 shares
   outstanding at December 31 and March 31, 2019, respectively

1,070

1,065

Capital in excess of par value

26,057

25,277

Retained earnings

91,900

93,847

Accumulated other comprehensive loss

(8,385
)

(8,833
)
Treasury stock (816 and 807 shares at December 31 and March 31, 2019,
   respectively)

(12,601
)

(12,390
)
Total stockholders’ equity

98,041

98,966

Total liabilities and stockholders’ equity

$
146,801

$
156,270

Nine Months Ended

December 31,

2019

2018

Operating activities:

(Dollar amounts in thousands)

Net income

$
1,296

$
4,245

Adjustments to reconcile net income to net cash (used) provided by operating
   activities:

Depreciation

1,468

1,469

Amortization

11

178

Amortization of unrecognized prior service cost and actuarial losses

747

655

Equity-based compensation expense

731

797

(Gain) loss on disposal or sale of property, plant and equipment

(2
)

30

Loss on sale of Energy Steel & Supply Co.

87

—

Deferred income taxes

33

128

(Increase) decrease in operating assets:

Accounts receivable

(438
)

3,050

Unbilled revenue

(6,799
)

(2,011
)
Inventories

4,225

1,813

Prepaid expenses and other current and non-current assets

(7
)

(773
)
Income taxes receivable

301

770

Operating lease assets

176

—

Prepaid pension asset

(653
)

(893
)
Increase (decrease) in operating liabilities:

Accounts payable

(3,036
)

(8,136
)
Accrued compensation, accrued expenses and other current and non-current
   liabilities

(299
)

946

Customer deposits

(1,938
)

6,177

Operating lease liabilities

(101
)

—

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

79

90

Net cash (used) provided by operating activities

(4,119
)

8,535

Investing activities:

Purchase of property, plant and equipment

(1,389
)

(1,471
)
Proceeds from disposal of property, plant and equipment

2

—

Proceeds from the sale of Energy Steel & Supply Co.

602

—

Purchase of investments

(141,414
)

(101,343
)
Redemption of investments at maturity

145,146

73,633

Net cash provided (used) by investing activities

2,947

(29,181
)
Financing activities:

Principal repayments on finance lease obligations

(38
)

(81
)
Issuance of common stock

24

171

Dividends paid

(3,163
)

(2,851
)
Purchase of treasury stock

(230
)

(146
)
Net cash used by financing activities

(3,407
)

(2,907
)
Effect of exchange rate changes on cash

(143
)

(228
)
Net decrease in cash and cash equivalents, including cash classified within current
   assets held for sale

(4,722
)

(23,781
)
Plus:  Net decrease in cash classified within current assets held for sale

552

—

Net decrease in cash and cash equivalents

(4,170
)

(23,781
)
Cash and cash equivalents at beginning of period

15,021

40,456

Cash and cash equivalents at end of period

$
10,851

$
16,675

	June 30,			March 31,
	2020			2020
	(Amounts in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	41,069		$	32,955
Investments		26,103			40,048
Trade accounts receivable, net of allowances ($47 and $33 at June 30 and March 31, 2020, respectively)		17,054			15,400
Unbilled revenue		15,683			14,592
Inventories		22,656			22,291
Prepaid expenses and other current assets		1,262			906
Income taxes receivable		975			485
Total current assets		124,802			126,677
Property, plant and equipment, net		17,323			17,587
Prepaid pension asset		3,670			3,460
Operating lease assets		206			243
Other assets		105			153
Total assets	$	146,106		$	148,120
Liabilities and stockholders’ equity
Current liabilities:
Current portion of finance lease obligations	$	33		$	40
Accounts payable		9,713			14,253
Accrued compensation		4,551			4,453
Accrued expenses and other current liabilities		3,963			3,352
Customer deposits		31,082			26,983
Operating lease liabilities		137			153
Total current liabilities		49,479			49,234
Finance lease obligations		50			55
Operating lease liabilities		60			82
Deferred income tax liability		1,017			721
Accrued pension liability		774			747
Accrued postretirement benefits		562			557
Total liabilities		51,942			51,396
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $1.00 par value, 500 shares authorized		—			—
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		26,516			26,361
Retained earnings		88,474			91,389
Accumulated other comprehensive loss		(9,342	)		(9,556	)
Treasury stock (811 and 808 shares at June 30 and March 31, 2020, respectively)		(12,562	)		(12,539	)
Total stockholders’ equity		94,164			96,724
Total liabilities and stockholders’ equity	$	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

	Common Stock						Capital in						Accumulated Other						Total			Common Stock						Capital in						Accumulated Other						Total
				Par			Excess of			Retained			Comprehensive			Treasury			Stockholders'						Par			Excess of			Retained			Comprehensive			Treasury			Stockholders'
	Shares			Value			Par Value			Earnings			Loss			Stock			Equity			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	)
Balance at April 1, 2020																							10,689		$	1,069		$	26,361		$	91,389		$	(9,556	)	$	(12,539	)	$	96,724
Comprehensive income											82			107						189												(1,818	)		214						(1,604	)
Issuance of shares		83			8			(8	)											—			113			11			(11	)											—
Forfeiture of shares		(34	)		(3	)		3												—			(22	)		(2	)		2												—
Dividends											(988	)								(988	)											(1,097	)								(1,097	)
Recognition of equity-based compensation expense								88												88									164												164
Purchase of treasury stock																	(230	)		(230	)																	(23	)		(23	)
Balance at June 30, 2019		10,699			1,070			25,360			92,861			(8,726	)		(12,620	)		97,945
Comprehensive income											1,205			59						1,264
Dividends											(1,087	)								(1,087	)
Recognition of equity-based compensation expense								324												324
Issuance of treasury stock								30									19			49
Balance at September 30, 2019		10,699			1,070			25,714			92,979			(8,667	)		(12,601	)		98,495
Comprehensive income											9			282						291
Issuance of shares		2						24												24
Forfeiture of shares		(1	)																	—
Dividends											(1,088	)								(1,088	)
Recognition of equity-based compensation expense								319												319
Balance at December 31, 2019		10,700		$	1,070		$	26,057		$	91,900		$	(8,385	)	$	(12,601	)	$	98,041
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

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, 2018

10,579

$
1,058

$
23,826

$
99,011

$
(8,250
)

$
(12,296
)

$
103,349

Cumulative effect of change in
  accounting principle

(1,022
)

(1,022
)
Comprehensive income

2,323

(29
)

2,294

Issuance of shares

59

6

96

102

Dividends

(885
)

(885
)
Recognition of equity-based
  compensation expense

260

260

Purchase of treasury stock

(146
)

(146
)
Balance at June 30, 2018

10,638

1,064

24,182

99,427

(8,279
)

(12,442
)

103,952

Comprehensive income

1,827

36

1,863

Issuance of shares

4

69

69

Dividends

(983
)

(983
)
Recognition of equity-based
  compensation expense

274

274

Issuance of treasury stock

47

32

79

Balance at September 30, 2018

10,642

1,064

24,572

100,271

(8,243
)

(12,410
)

105,254

Comprehensive income

95

180

275

Forfeiture of shares

(1
)

—

Dividends

(983
)

(983
)
Recognition of equity-based
  compensation expense

263

263

Balance at December 31, 2018

10,641

$
1,064

$
24,835

$
99,383

$
(8,063
)

$
(12,410
)

$
104,809

Graham Corporation's (the "Company's") Condensed Consolidated Financial Statements include its wholly-owned foreign subsidiaries located in Suzhou, China and Ahmedabad, India. During the fiscal year ended March 31, 2019 ("fiscal 2019"), the Company decided to divest of its wholly-owned domestic subsidiary, Energy Steel & Supply Co. ("Energy Steel"), located in Lapeer, Michigan. The sale of Energy Steel was completed in June 2019 and the accompanying Condensed Consolidated Financial Statements include the results of operations of Energy Steel for the period April 1, 2018 through June 23, 2019. 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, ~~2019~~2020 presented herein was derived from the Company’s audited Consolidated Balance Sheet as of March 31, ~~2019.~~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 ~~2019.~~year ended March 31, 2020 ("fiscal 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, 2019~~June 30, 2020 are not necessarily indicative of the results that may be expected for the current fiscal year, which ends March 31, ~~2020~~2021 ("fiscal ~~2020"~~2021").

The Company accounts for revenue in accordance with Accounting Standard Codification 606, “Revenue from Contracts with Customers” (“ASC 606”), which it adopted on April 1, 2018 using the modified retrospective approach.

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:

	Three Months Ended				Nine Months Ended				Three Months Ended
	December 31,				December 31,				June 30,
Product Line	2019		2018		2019		2018		2020		2019
Heat transfer equipment	$	7,062	$	5,164	$	21,394	$	15,495	$	10,673	$	7,852
Vacuum equipment		12,969		3,765		27,232		28,823		2,551		5,530
All other		5,255		8,269		18,896		23,872		3,486		7,211
Net sales	$	25,286	$	17,198	$	67,522	$	68,190	$	16,710	$	20,593


Geographic Region
Asia	$	723	$	966	$	4,960	$	5,591	$	5,163	$	3,219
Canada		2,666		549		5,910		15,672		992		1,348
Middle East		7,498		806		8,783		1,705		449		773
South America		808		47		3,284		239		220		359
U.S.		13,409		14,320		43,589		42,846		9,438		14,448
All other		182		510		996		2,137		448		446
Net sales	$	25,286	$	17,198	$	67,522	$	68,190	$	16,710	$	20,593

A performance obligation represents a promise in a contract to provide a distinct good or service to a ~~customer and is the unit of accounting pursuant to ASC 606.~~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 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 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 revenue and the related costs incurred for shipping and handling are included in cost of products sold.

Revenue on the majority of the Company’s contracts, as measured by number of contracts, is recognized upon shipment to the ~~customer, however, revenue~~customer. Revenue on larger contracts, which are fewer in number but represent the majority of revenue, is recognized 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 ~~these contracts meet specific criteria established in ASC 606.~~a result of the COVID-19 pandemic. Revenue from contracts that is recognized upon shipment accounted for approximately ~~20%~~60% and ~~50%~~45% of revenue for the three-month periods ended ~~December 31,~~June 30, 2020 and 2019, ~~and 2018,~~ respectively, and revenue from contracts that is recognized over time accounted for approximately ~~80%~~40% and ~~50%~~55% of revenue for the three-month periods ended ~~December 31,~~June 30, 2020 and 2019, and 2018, respectively. Revenue from contracts that is recognized upon shipment accounted for approximately 30% and 40% of revenue for the nine-month periods ended December 31, 2019 and 2018, respectively, and revenue from contracts that is recognized over time accounted for approximately 70% and 60% of revenue for the nine-month periods ended December 31, 2019 and 2018, 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 performance obligations over time. These procedures include monthly review by management of costs incurred, progress towards completion, identified risks and opportunities, sourcing determinations, changes in estimates of costs yet to be incurred, availability of materials, and execution by 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.

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 that is recognized over time and exceeds the amount that has been billed to the customer. Unbilled revenue is 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. In addition, customer deposits are~~completed or used to procure specific material on a contract, ~~and fund~~as well as related overhead costs incurred during design and construction.

	December 31, 2019			March 31, 2019			Change		June 30, 2020			March 31, 2020			Change

Unbilled revenue (contract assets)	$	14,321		$	7,522		$	6,799	$	15,683		$	14,592		$	1,091
Customer deposits (contract liabilities)		(28,816	)		(30,847	)		2,031		(31,082	)		(26,983	)		(4,099	)
Net contract liabilities	$	(14,495	)	$	(23,325	)	$	8,830	$	(15,399	)	$	(12,391	)	$	(3,008	)

Contract liabilities at ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019~~2020 include ~~$3,101~~$8,823 and ~~$6,382,~~$3,660, respectively, of customer deposits for which the Company has an unconditional right to collect payment. Trade accounts receivable, as presented on the Condensed Consolidated Balance Sheets, includes corresponding balances at ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019,~~2020, respectively. Revenue recognized in the three ~~and nine~~ months ended ~~December 31, 2019~~June 30, 2020 that was included in the contract liability balance at March 31,

~~2019~~ 2020 was ~~$2,276 and $13,308, respectively.~~$7,350. Changes in the net contract liability balance during the ~~nine months~~three-month period ended ~~December 31, 2019~~June 30, 2020 were impacted by a ~~$6,799~~$1,091 increase in contract assets, of which ~~$19,675~~$1,751 was due to contract progress offset by invoicing to customers of ~~$12,876.~~$660. In addition, contract liabilities ~~decreased $2,031~~increased $4,099 driven by revenue recognized in the current period that was included in the contract liability balance at March 31, ~~2019~~2020 offset by new customer deposits of ~~$11,277.~~$11,449.

Receivables billed but not paid under retainage provisions in the Company’s customer contracts were ~~$1,901~~$2,926 and ~~$2,214~~$2,016 at ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019,~~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 ~~$64~~$72 and ~~$133~~$45 at ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019,~~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 ~~$53~~$10 and ~~$33~~$46 in the three months ended ~~December 31,~~June 30, 2020 and 2019, ~~and 2018, respectively, and $139 and $115 in the nine months ended December 31, 2019 and 2018,~~ 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 ~~December 31, 2019,~~June 30, 2020, the Company had remaining unsatisfied performance obligations of ~~$122,899.~~$107,220. The Company expects to recognize revenue on approximately ~~55%~~70% to ~~60%~~75% of the remaining performance obligations within one year, ~~10%~~15% to ~~15%~~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, 2019~~June 30, 2020 are scheduled to mature on or before ~~March 30,~~September 24, 2020.

Inventories are stated at the lower of cost or net realizable value, using the average cost method.

	December 31,		March 31,		June 30,		March 31,
	2019		2019		2020		2020
Raw materials and supplies	$	2,854	$	2,787	$	3,149	$	3,061
Work in process		16,463		20,553		18,283		18,018
Finished products		1,091		1,330		1,224		1,212
Total	$	20,408	$	24,670	$	22,656	$	22,291

~~In March 2019, the Company~~'s Board of Directors approved a plan to sell Energy Steel. Energy Steel met all of the criteria to classify its assets and liabilities as held for sale at March 31, 2019. The disposal of Energy Steel did not represent a strategic shift that would have a major effect on the Company’s operations and financial results and was, therefore, not classified as discontinued operations in accordance with ASU 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operation And Disclosures of Disposals Of Components Of An Entity." As part of the required assessment under the held for sale guidance, the Company determined that the approximate fair value less costs to sell the operations was less than its carrying value and, as a result, an impairment loss totaling $6,449 was recorded in fiscal 2019.

On June 24, 2019, the Company completed the sale of Energy Steel 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 purchase price was finalized within 90 days of the sale and no adjustments to the purchase price were required. In addition, $202 of Energy Steel’s net accounts receivable was retained by the Company. The Company recognized a loss on the disposal of $87 in the first quarter of fiscal 2020. As of June 24, 2019, all of the Energy Steel assets and liabilities were legally transferred, and therefore, are not included in the Company’s Condensed Consolidated Balance Sheet at December 31, 2019.

~~The following table reconciles the major classes of assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheet at March 31, 2019:~~

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; 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,~~June 30, 2020 and 2019 were 113 and ~~2018. Restricted stock awards granted in the nine-month periods ended December 31, 2019 and 2018 were~~ 83, ~~and 53,~~ respectively. Restricted shares of 4054 and 2740 granted to officers in fiscal ~~2020~~2021 and fiscal ~~2019,~~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 2838 and 2028 granted to officers and key employees in fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively, vest 33⅓% per year over a three-year term. Restricted shares of 1521 and 615 granted to directors in fiscal ~~2020~~2021 and fiscal ~~2019,~~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, 2019~~June 30, 2020 and ~~2018.~~2019.

During the three months ended ~~December 31,~~June 30, 2020 and 2019, ~~and 2018,~~ the Company recognized equity-based compensation costs related to restricted stock awards of ~~$308~~$155 and ~~$263,~~$87, respectively. The income tax benefit recognized related to equity-based compensation was ~~$67~~$38 and ~~$59~~$20 for the three months ended ~~December 31,~~June 30, 2020 and 2019, and 2018, respectively. During the nine months ended December 31, 2019 and 2018, the Company recognized equity-based compensation costs related to restricted stock awards of $709 and $797, respectively. The income tax benefit recognized related to equity-based compensation was $156 and $177 for the nine months ended December 31, 2019 and 2018, 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 (1) last, (2) first or (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. During the three months

ended ~~December 31,~~June 30, 2020 and 2019, ~~and 2018,~~ the Company recognized equity-based compensation costs of ~~$11~~$9 and $0, respectively, related to the ESPP and $3$2 and $0, respectively, of related tax benefits. During the nine months ended December 31, 2019 and 2018, the Company recognized equity-based compensation costs of $22 and $0, respectively, related to the ESPP and $5 and $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,
	2019		2018		2019		2018		2020			2019
Basic income per share
Numerator:
Net income	$	9	$	95	$	1,296	$	4,245
Net (loss) income									$	(1,818	)	$	82
Denominator:
Weighted average common shares outstanding		9,884		9,832		9,874		9,817		9,895			9,855
Basic income per share	$	—	$	.01	$	.13	$	.43
Basic (loss) income per share									$	(0.18	)	$	0.01
Diluted income per share
Numerator:
Net income	$	9	$	95	$	1,296	$	4,245
Net (loss) income									$	(1,818	)	$	82
Denominator:
Weighted average common shares outstanding		9,884		9,832		9,874		9,817		9,895			9,855
Stock options outstanding		4		13		3		15		—			3
Weighted average common and potential common shares outstanding		9,888		9,845		9,877		9,832		9,895			9,858
Diluted income per share	$	—	$	.01	$	.13	$	.43
Diluted (loss) income per share									$	(0.18	)	$	0.01

None of the options to purchase 37 shares of common stock at June 30, 2020 were included in the computation of diluted loss per share as the affect would be anti-dilutive due to the net losses in the quarter. Options to purchase a total of 4 shares of common stock were outstanding at June 30, 2019 but were not included in the above computation of diluted income per share 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,
	2019			2018			2019			2018			2020			2019
Balance at beginning of period	$	348		$	349		$	366		$	493		$	359		$	366
Expense for product warranties		67			76			96			87
(Income) expense for product warranties														(19	)		27
Product warranty claims paid		(3	)		(15	)		(50	)		(170	)		(35	)		(35	)
Balance at end of period	$	412		$	410		$	412		$	410		$	305		$	358

Income of $19 for product warranties in the three months ended 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.

The Company accounts for leases in accordance with Accounting Standard Codification 842, "Leases," which it adopted on April 1, 2019 using the modified retrospective approach. See Note 16 to the Condensed Consolidated Financial Statements for further discussion of this adoption.

The Company leases certain manufacturing facilities, office space, machinery and office equipment. An arrangement is considered to contain a lease if it conveys the right to use and control an identified asset for a period of time in exchange for consideration. If it is determined that an arrangement contains a lease, then a classification of a lease as operating or finance is determined by evaluating the five criteria outlined in the lease accounting guidance at inception. Leases generally have remaining terms of one year to five years, whereas leases with an initial term of twelve months or less are not recorded on the Condensed

Consolidated Balance Sheets. The depreciable life of leased assets related to finance leases is limited by the expected term of the lease, unless there is a transfer of title or purchase option that the Company believes is reasonably certain of exercise. Certain leases include options to renew or terminate. Renewal options are exercisable per the discretion of the Company and vary based on the nature of each lease. The term of the lease includes renewal periods only if the Company is reasonably certain that it will exercise the renewal option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the cost of moving to another location, the cost of disrupting operations, whether the purpose or location of the leased asset is unique and the contractual terms associated with extending the lease. The Company’s lease agreements do not contain any residual value guarantees or any material restrictive covenants and the Company does not sublease to any third parties. As of December 31, 2019, the Company did not have any material leases that have been signed but not commenced.

Right-of-use (“ROU”) lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments in exchange for that right of use. Finance lease ROU assets and operating lease ROU assets are included in the line items “Property, plant and equipment, net” and “Operating lease assets”, respectively, in the Condensed Consolidated Balance Sheets. The current portion and non-current portion of finance and operating lease liabilities are all presented separately in the Condensed Consolidated Balance Sheets.

The discount rate implicit within the Company’s leases is generally not readily determinable, and therefore, the Company uses an incremental borrowing rate in determining the present value of lease payments based on rates available at commencement.

~~The weighted average remaining lease term and discount rate for finance and operating leases are as follows:~~

~~Operating lease costs during the three and nine months ended December 31, 2019 were included within cost of sales and selling, general and administrative expenses.~~

~~As of December 31, 2019, future minimum payments required under non-cancelable leases are:~~

The Company’s future minimum lease commitments for operating leases as of March 31, 2019 for the fiscal years 2020 through 2024 were $501, $301, $37, $32, and $8, respectively. Future minimum lease commitments for finance leases as of March 31, 2019 for the fiscal years 2020 through 2024 were $62, $47, $26, $26, and $11, respectively.

~~ROU assets obtained in exchange for new operating lease liabilities were $3 and $224 in the three and nine months ended December 31, 2019.~~

Interest paid was $9$5 and $8$3 in the ~~nine-month~~three-month periods ended ~~December 31,~~June 30, 2020 and 2019, ~~and 2018,~~ respectively. Income taxes (refunded) paid ~~(refunded)~~ for the ~~nine~~three months ended ~~December 31,~~June 30, 2020 and 2019 were $(164) and ~~2018 were $27 and $(74),~~$10, respectively.

~~In the nine months ended December 31, 2019 and 2018, non-cash activities included the issuance of treasury stock valued at $49 and $79, respectively, to the Company’s ESPP.~~

At ~~December 31,~~June 30, 2020 and 2019, ~~and 2018,~~ there were ~~$10~~$48 and ~~$242,~~$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,
	2019			2018			2019			2018			2020			2019
Service cost	$	124		$	142		$	372		$	428		$	116		$	124
Interest cost		322			335			968			1,005			303			323
Expected return on assets		(663	)		(766	)		(1,992	)		(2,297	)		(629	)		(664	)
Amortization of actuarial loss		242			212			726			635			260			242
Net pension cost (income)	$	25		$	(77	)	$	74		$	(229	)
Net pension cost													$	50		$	25

The Company made no0 contributions to its defined benefit pension plan during the ~~nine~~three months ended ~~December 31, 2019~~June 30, 2020 and does ~~not~~0t expect to make any contributions to the plan for the balance of fiscal ~~2020.~~2021.

	Three Months Ended				Nine Months Ended				Three Months Ended
	December 31,				December 31,				June 30,
	2019		2018		2019		2018		2020		2019
Interest cost	$	5	$	7	$	16	$	19	$	5	$	5
Amortization of actuarial loss		7		6		21		20		6		7
Net postretirement benefit cost	$	12	$	13	$	37	$	39	$	11	$	12

The Company paid 0 benefits ~~of $1~~ related to its postretirement benefit plan during the ~~nine~~three months ended ~~December 31, 2019.~~June 30, 2020. The Company expects to pay benefits of approximately $77 for the balance of fiscal ~~2020.~~2021.

The components of net periodic benefit cost other than service cost are included in the line item ~~“Other income”~~"Other income" in the Condensed Consolidated Statements of ~~Income.~~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 ~~$140~~$85 and ~~$150~~$124 on ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019,~~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, 2019,~~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 ~~2018~~2019 and examination in state tax jurisdictions for the tax years ~~2014~~2015 through ~~2018.~~2019. The Company is subject to examination in the People’s Republic of China for tax years 2016 through ~~2018.~~2019 and in India for tax year 2019.

There was no0 liability for unrecognized tax benefits at either ~~December 31, 2019~~June 30, 2020 or March 31, ~~2019.~~2020.

The changes in accumulated other comprehensive loss by component for the ~~nine~~three months ended ~~December 31,~~June 30, 2020 and 2019 ~~and 2018~~ 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, 2018	$	(8,599	)	$	349		$	(8,250	)
Balance at April 1, 2019										$	(8,947	)	$	114		$	(8,833	)
Other comprehensive loss before reclassifications		—			(323	)		(323	)		—			(87	)		(87	)
Amounts reclassified from accumulated other comprehensive loss		510			—			510			194			—			194
Net current-period other comprehensive income (loss)		510			(323	)		187			194			(87	)		107
Balance at December 31, 2018	$	(8,089	)	$	26		$	(8,063	)
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,~~June 30, 2020 and 2019 ~~and 2018~~ 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	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,
	2019				2018					2020				2019
Pension and other postretirement benefit items:
Amortization of actuarial loss	$	(747	)	⁽¹⁾	$	(655	)	⁽¹⁾	Income before provision for income taxes	$	(266	)	⁽¹⁾	$	(249	)	⁽¹⁾	(Loss) income before provision for income taxes
		(164	)			(145	)		Provision for income taxes		(61	)			(55	)		(Benefit) provision for income taxes
	$	(583	)		$	(510	)		Net income	$	(205	)		$	(194	)		Net (loss) income

On June 24, 2019, the Company ~~sold~~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 ~~sale~~disposal of ~~$87. See Note 5 to~~$87 in the ~~Condensed Consolidated Financial Statements for further discussion~~first quarter of ~~the sale.~~fiscal 2020. In addition, during the first quarter of fiscal ~~2019,~~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”~~"Other expense" in the Condensed Consolidated Statement of ~~Income~~Operations for the ~~nine~~three months ended ~~December 31,~~June 30, 2019.

In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board ("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 ~~February~~June 2016, the FASB issued Accounting Standards Update ("ASU") No. ~~2016-02, "Leases~~2016-13, "Financial Instruments-Credit Losses (Topic ~~842)~~326)," which ~~requires companies~~replaces the current incurred loss impairment methodology for most financial assets with the current expected credit loss ("CECL") methodology. Under the CECL method, the Company will be required to ~~recognize all leases as assets and liabilities on the consolidated balance sheet. Lessees are permitted to make an accounting policy election to not~~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 ~~liability for leases with a term of twelve months or less. This ASU retains a distinction between finance leases~~reasonable and ~~operating leases, and the classification criteria for distinguishing between finance leases and~~

~~operating leases are substantially similar~~supportable forecasts. Changes to the ~~classification criteria~~expected lifetime credit losses are required to be recognized each period. The standard is effective for ~~distinguishing between capital leases~~the Company on April 1, 2023. The Company does not expect the adoption of this ASU will have a material effect on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)," which removes disclosures that no longer are considered cost beneficial, clarifies specific disclosure requirements and ~~operating leases~~adds disclosure requirements identified as relevant for defined benefit pension and other postretirement benefit 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 simplifies the accounting for income taxes, eliminating certain exceptions to the general income tax principles, in an effort to reduce the ~~previous accounting guidance.~~cost and complexity of application. The amended guidance is effective for fiscal years beginning after December 15, ~~2018,~~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 ~~adopted~~believes the ~~new standard using the modified retrospective approach~~adoption of this ASU will not have a material impact on April 1, 2019. The Company elected the available transition method that uses the effective date of the amended guidance as the date of initial application. The guidance provided for several practical expedients. The Company elected the package of practical expedients permitted under the transition guidance which allows entities to carry forward historical lease classification. The Company made an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. The Company recognizes those lease payments in the Condensed Consolidated Statements of Income on a straight-line basis over the lease term. On April 1, 2019, the Company recognized the cumulative effect of initially applying the amended guidance which resulted in the recognition of operating lease ROU assets of $676, lease liabilities of $732 and a decrease to the opening balance of retained earnings of $80. Other current assets and the deferred income tax liability were reduced by $47 and $20, respectively. Approximately $500 of ROU assets and lease liabilities were related to the business held for sale at March 31, 2019 and subsequently sold on June 24, 2019. See Note 9 to the Condensedits Consolidated Financial ~~Statements for additional information on the Company’s leases.~~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. ~~For the~~Our energy ~~industry, our equipment is used by customers in~~ markets ~~including petroleum~~include oil refining, ~~power generation,~~cogeneration, and alternative ~~and renewable energy.~~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.

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. 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. We also have ~~two~~ wholly-owned foreign subsidiaries, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. ("GVHTT"), located in Suzhou, China and Graham India Private Limited ~~(“GIPL”~~("GIPL"), located in Ahmedabad, India. GVHTT provides sales and engineering support for us in the 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")~~, a wholly-owned subsidiary through which we sold products into the commercial nuclear market.~~.

Our current fiscal year (which we refer to as "fiscal ~~2020"~~2021") ends March 31, ~~2020.~~2021.

Highlights for the three ~~and nine~~ months ended ~~December 31, 2019~~June 30, 2020 include:

~~Cash and short-term investments at December 31, 2019 were $69,851, compared with $77,753 on March 31, 2019.~~

This report and other documents we file with the Securities and Exchange Commission include "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 ~~2019.~~

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

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," ~~"should," "will,"~~ "encourage," "potential," ~~"contemplate,~~"should," ~~"continue,~~"view," ~~"could"~~"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.

Our global energy and petrochemical markets ~~continue~~turned downward during the latter part of fiscal 2020. These markets were adversely impacted by a dramatic reduction in oil prices, partly due to ~~exhibit active project~~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 pricing began prior to the COVID-19 pandemic and ~~bid activity. Although general global economic conditions appear~~has increased because of it. Customers have significantly reduced their capital budgets to ~~be weakening for many sectors, we continue to see strong activity by our customers in the downstream energy sector. Customers are investing~~invest in upgrading and turnaround maintenance for existing ~~facilities~~facilities. This has impacted, and ~~in certain geographies,~~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 impact on global energy and petrochemical demand was immediate and significant. Our customers’ plans for capital spending, operational upgrades and maintenance spending have been significantly 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 recovery are ~~looking at new capacity. While this additional activity continues to be encouraging, we cannot predict~~unclear.

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

We believe the long-term outlook in our key markets supports our growth plans. However, the energy markets we serve will also be impacted by increased use of renewable energy sources and conservation. ~~We have multiple initiatives~~In addition, over the long term, should demand for transportation fuels flatten to ~~actively extend~~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 ~~market reach. We are focused~~customers. However, until there is greater clarity regarding the impact of the COVID-19 pandemic on ~~expanding~~the global economy, energy demand and customer financial strength, new order levels may be challenged due to the resulting weak energy and petrochemical markets.

Demand for our participation to serve our existing customers’ needs for replacement components and facility upgrades, including increasing our technical service resources near customer locations. We are also expanding our reach into developing markets through partnerships with local suppliers to assist our efforts to penetrate markets which we have not servedproducts in the ~~past (e.g. India). We believe these efforts will provide benefit~~defense industry is related to ~~our customers and shareholders.~~

~~Our~~the naval nuclear propulsion market ~~has demand~~which is tied to aircraft carrier and submarine vessel construction schedules of the primary shipyards ~~that~~who service the U.S. Navy. We expect growth in our naval nuclear propulsion business to result from our strategic actions to increase our market share, our successful performance, and expected increases in demand.

~~We believe~~ To date, there has not been an adverse impact to demand in the ~~long-term outlook in our key markets supports our growth plans. In~~defense market due to the near term, new order levels are expected to remain variable, resulting in both relatively strong and weak periods. We believe, however, order activity will continue to improve for the next several fiscal quarters.COVID-19 pandemic.

The chart below shows the ~~historical~~ impact of our successful diversification ~~strategy. Over half~~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 ~~current~~total backlog ~~is from markets not served by us in the fiscal 2007-2009 time frame. Included in the graph for prior periods, but not the third quarter~~at June 30, 2020. Each vessel platform has made up at least 10% of ~~fiscal 2020 (referred to as "Q3 FY20" on the chart below) is the~~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, respectively. We believe this diversification will be especially beneficial during periods where our commercial ~~nuclear business which was divested in June 2019. At the end of fiscal 2019 (referred to as "FYE19" on the chart below), backlog for our commercial nuclear business was $8,039.~~ markets are weak.

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,
	2019			2018			2019			2018			2020			2019
Net sales	$	25,286		$	17,198		$	67,522		$	68,190		$	16,710		$	20,593
Gross profit	$	4,044		$	3,742		$	13,706		$	17,111		$	1,568		$	4,714
Gross profit margin		16	%		22	%		20	%		25	%		9	%		23	%
SG&A expense ⁽¹⁾	$	4,441		$	4,308		$	12,855		$	13,696		$	3,902		$	4,567
SG&A as a percent of sales		18	%		25	%		19	%		20	%		23	%		22	%
Net income	$	9		$	95		$	1,296		$	4,245
Diluted income per share	$	—		$	0.01		$	0.13		$	0.43
Net (loss) income													$	(1,818	)	$	82
Diluted (loss) income per share													$	(0.18	)	$	0.01
Total assets	$	146,801		$	156,761		$	146,801		$	156,761		$	146,106		$	145,331
Total assets excluding cash, cash equivalents and investments	$	76,950		$	76,354		$	76,950		$	76,354		$	78,934		$	72,774

The ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2020~~2021 Compared With the ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2019~~2020

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 2021 were $16,710, a 19% decrease from sales of $20,593 for the first quarter of fiscal 2020. Included in the first quarter of fiscal 2020 were ~~$25,286, a 47% increase as compared with~~ sales of ~~$17,198 for the third quarter of fiscal 2019. Included in our third quarter fiscal 2019 were sales of $1,847~~$1,276, from our ~~recently sold~~ commercial nuclear ~~business.~~utility business which was sold in the prior year first quarter. Our domestic sales, as a percentage of aggregate ~~product~~ sales, were ~~53%~~56% in the ~~third~~first quarter of fiscal ~~2020~~2021 compared with ~~83%~~70% in the ~~third~~first quarter of fiscal ~~2019.~~2020. Domestic sales decreased ~~$911,~~$5,010 in the first quarter of fiscal 2021, or 6%35% year-over-year. International sales increased $1,127, or 18%, in the ~~third~~first quarter of fiscal ~~2020~~2021 compared with the ~~third~~first quarter of fiscal ~~2019. International sales increased $8,999, or 313%, in the third quarter of fiscal 2020 compared with the third quarter of fiscal 2019.~~2020. Sales in the three months ended ~~December 31, 2019~~June 30, 2020 were ~~49%~~16% to the refining industry, ~~24%~~48% to the chemical and petrochemical industries, ~~1% to~~21% for the ~~power~~defense (U.S. Navy) industry, ~~and 26%~~15% to other commercial and industrial ~~applications, including the U.S. Navy.~~applications. Sales in the three months ended ~~December 31, 2018~~June 30, 2019 were ~~39%~~36% to the refining industry, ~~17%~~35% to the chemical and petrochemical industries, ~~15% to~~10% for the ~~power~~defense (U.S. Navy) industry ~~including the commercial nuclear market,~~ and ~~29%~~19% to other commercial and industrial ~~applications, including the U.S. Navy.~~applications. Fluctuation in sales among markets, products and geographic locations varies, sometimes significantly, from quarter-to-quarter based on timing ~~quantity,~~ and ~~value~~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 2020 were $67,522, a decrease of $668, or 1% compared with sales of $68,190 for the first nine months of fiscal 2019. Included in the first nine months of fiscal 2020 and fiscal 2019 were sales of $1,276 and $6,588, respectively, from our recently sold commercial nuclear business. Our domestic sales, as a percentage of aggregate product sales, were 65% in the first nine months of fiscal 2020 compared with 63% in the same period in fiscal 2019. Domestic sales increased $742, or 2%, while international sales decreased by $1,410, or 6%. International sales accounted for 35% and 37% of total sales for the first nine months of fiscal 2020 and fiscal 2019, respectively. Sales in the first nine months of fiscal 2020 were 39% to the refining industry, 35% to the chemical and petrochemical industries, 3% to the power industry, including the nuclear market, and 23% to other commercial and industrial applications, including the U.S. Navy. Sales in the first nine months of fiscal 2019 were 53% to the refining industry, 14% to the chemical and petrochemical industries, 12% to the power industry, including the nuclear market, and 21% to other commercial and industrial applications, including the U.S. Navy.

Gross profit margin for the third quarter of fiscal 2020 was 16% compared with 22% for the third quarter of fiscal 2019. Gross profit for the third quarter of fiscal 2020 increased 8% compared with fiscal 2019, to $4,044 from $3,742. Gross profit was higher due to increased volume, though mostly offset by a very unfavorable mix of projects, including a lower level of short cycle and ~~aftermarket sales.~~

~~Gross profit~~operating margin for the first ~~nine months~~quarter of fiscal ~~2020 was 20%~~2021 were 9% and (14%), respectively, compared with ~~25%~~23% and (2%), respectively, for the first ~~nine months~~quarter of fiscal ~~2019.~~2020. Gross profit for the first ~~nine months~~quarter of fiscal ~~2020~~2021 decreased ~~20%~~ compared with ~~the same period of~~ fiscal ~~2019,~~2020, to ~~$13,706~~$1,568 from ~~$17,111. The decrease in gross profit on relatively similar revenue (down 1% from the same period in the prior fiscal year), as well as gross margin, was~~$4,714, primarily due to ~~an unfavorable mix~~our Batavia facility being partially shut down during the majority of ~~projects compared with~~ the ~~first nine months of fiscal 2019.~~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,~~June 30, 2020 and 2019 were ~~18%~~23% and ~~19%~~22%, respectively. SG&A expenses in the ~~third~~first quarter of fiscal 2021 were $3,902, a decrease of $665 compared with the first quarter of fiscal 2020 ~~were $4,441, an increase of $133 compared with~~ SG&A expenses of ~~$4,308~~$4,567. Included in the ~~third~~first quarter of fiscal ~~2019. Included in SG&A in~~2020 was $621 of costs related to the ~~third quarter of fiscal 2019 was $418 from our recently sold~~

commercial nuclear ~~business. The increase~~utility business, which was sold in SG&A was primarily due to investments to expand our sales and support organizations. SG&A expenses in the first nine months of fiscal 2020 were $12,855, a decrease of $841 compared with SG&A expenses of $13,696 in the first nine months of fiscal 2019. The sale of our commercial nuclear business in June 2019 was the primary driver of lower year-to-date spending. Our former commercial nuclear subsidiary had SG&A of $621 in fiscal 2020 and $1,700 in fiscal 2019. that quarter.

Interest income for the ~~three and nine-month~~three-month periods ended ~~December 31,~~June 30, 2020 and 2019 was ~~$318~~$94 and ~~$1,080, respectively,~~$399, respectively. The decrease in interest income is due to dramatically lower market investment rates compared with ~~$404 and $1,044, respectively,~~rates during the prior year period. Interest expense was $5 for the ~~same periods~~quarter ended ~~December 31, 2018. Interest expense~~June 30, 2020, compared with $3 for the ~~three and nine-month periods~~quarter ended ~~December 31, 2019 was $2 and $9, respectively, compared with $5 and $8, respectively, for the same periods ended December 31, 2018.~~ June 30, 2019.

Our effective tax ~~rates for~~rate in the three-month periods ended December 31, 2019 and 2018 were not meaningful due to the proximity of our results to breakeven. Our effective tax rates for the nine-month periods ended December 31, 2019 and 2018 were 22% and 16%, respectively.

~~Net income and income per diluted share for the third~~first quarter of fiscal ~~2020 were $9 and $0.00, respectively,~~2021 was 17%, compared with ~~$95 and $0.01, respectively,~~23% in the ~~third~~first quarter of fiscal ~~2019.~~ 2020.

Net (loss) income and (loss) income per diluted share for the first ~~nine months~~quarter of fiscal 2021 were ($1,818) and ($0.18), respectively, compared with $82 and $0.01, respectively, in the first quarter of fiscal 2020. Included in the first quarter of fiscal 2020 ~~were $1,296~~was a loss of ($893) and ~~$0.13,~~($0.09), respectively, ~~compared with net income of $4,245 and income per diluted share of $0.43~~ for ~~the first nine months of fiscal 2019.~~our commercial nuclear utility business.

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

	December 31,			March 31,			June 30,			March 31,
	2019			2019			2020			2020
Cash and investments	$	69,851		$	77,753		$	67,172		$	73,003
Working capital		78,583			79,896			75,323			77,443
Working capital ratio⁽¹⁾		2.7			2.5			2.5			2.6
Working capital excluding cash and investments		8,732			2,143			8,151			4,440
Working capital excluding cash and investments as a percent of net sales⁽²⁾		9.6	%		2.3	%		9.4	%		4.9	%

Net cash used by operating activities for the first ~~nine months~~quarter of fiscal ~~2020~~2021 was ~~$4,119, compared~~$4,373 which was comparable with $4,753 of cash ~~generated of $8,535~~used for the first ~~nine months~~quarter of fiscal 2019. The cash usage comparison year over year was attributable primarily to an increase in unbilled revenue, a decrease in accounts payable and customer deposits and lower earnings, partially offset by an increase in inventory.2020.

Dividend payments and capital expenditures in the first ~~nine months~~quarter of fiscal ~~2020~~2021 were ~~$3,163~~$1,097 and ~~$1,389,~~$338, respectively, compared with ~~$2,851~~$988 and ~~$1,471,~~$294, respectively, for the first ~~nine months~~quarter of fiscal ~~2019.~~2020.

Capital expenditures for fiscal ~~2020~~2021 are expected to be ~~between $2,500 and $2,800. Approximately 75%~~approximately $2,000 to ~~80% of our fiscal 2020 capital expenditures are expected to be for machinery and equipment, with the remaining amounts expected to be used for other items.~~$2,500.

Cash and investments were ~~$69,851~~$67,172 on ~~December 31, 2019~~June 30, 2020 compared with ~~$77,753~~$73,003 on March 31, ~~2019,~~2020, down ~~$7,902, primarily due to the timing of working capital.~~$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. ~~Certificates of deposit are~~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 had a $10,000 unsecured line of credit with HSBC, N.A. ("HSBC") ~~on December 31, 2019. This line~~, which was increased ~~from $5,000~~ to ~~$10,000 on October 8, 2019 to support our international business activities.~~$14,000 in the first quarter of fiscal 2021. Letters of credit outstanding on ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019~~2020 were ~~$13,346~~$14,888 and ~~$8,503,~~$13,328, respectively. The outstanding letters of credit as of ~~December 31, 2019~~June 30, 2020 were issued by JP Morgan Chase and HSBC. There were no other amounts outstanding on our credit facilities at ~~December 31, 2019~~June 30, 2020 and March 31, ~~2019.~~2020. The borrowing rate under our JP Morgan Chase facility as of ~~December 31, 2019~~June 30, 2020 was the bank’s prime rate, or ~~4.75%~~3.25%. Availability under the JP Morgan Chase and HSBC lines of credit was ~~$21,654~~$24,112 and ~~$22,505,~~$21,672, respectively, at ~~each of December 31, 2019~~June 30, 2020 and March 31, ~~2019.~~2020, respectively. We believe that cash generated from operations, combined with our investments and available financing capacity under our credit ~~facilities,~~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, 2019~~June 30, 2020 were ~~$20,057~~$11,468 compared with ~~$23,169~~$15,089 for the same period last ~~year.~~year, a decrease of $3,621. Included in the ~~third quarter~~orders for the first three months of fiscal 2020 ~~were orders of $1,352 from our former subsidiary which serviced~~was $2,996 for the commercial nuclear ~~market.~~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 ~~77%~~28% of total orders, or ~~$15,478,~~$3,232, and international orders were ~~23%~~72% of total orders, or ~~$4,579,~~$8,236, in the ~~third~~first quarter of fiscal 2021 compared with the first quarter of fiscal 2020 ~~compared with the third quarter of fiscal 2019~~ when domestic orders were ~~50%~~74%, or ~~$11,623,~~$11,157, of total orders, and international orders were ~~50%~~26%, or ~~$11,546, of total orders.~~

During the first nine months of fiscal 2020, orders were $67,698, compared with $79,562 for the same period of fiscal 2019. Included in the orders for the first nine months of fiscal 2020 and fiscal 2019 were $2,996 and $7,656, respectively, for the commercial nuclear utility market, a business which was divested in June 2019. Domestic orders were 55% of total orders, or $37,395, and international orders were 45% of total orders, or $30,303, in the first nine months of fiscal 2020 compared with the same period of fiscal 2019 when domestic orders were 64%, or $51,119, of total orders, and international orders were 36%, or $28,443,$3,932, of total orders.

~~For the first nine months of fiscal~~Backlog was $107,220 at June 30, 2020, ~~refining orders increased by $6,547, chemical and petrochemical decreased by $14,761, and other commercial and industrial applications, including the U.S. Navy, increased by $1,386 as~~ compared with the prior year period. Power, including commercial nuclear, decreased $5,036, primarily due to the sale of the business in the first quarter of fiscal 2020. See “Current Market Conditions” for additional information.

~~Backlog was $122,899 at December 31, 2019, compared with $127,765 on September 30, 2019, down 4% and $132,127~~$112,389 at March 31, ~~2019. The March 31, 2019 backlog includes $8,039 of backlog for our subsidiary which serviced the commercial nuclear industry which we sold in June 2019.~~2020, a 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. 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, 2019, 30%~~June 30, 2020, 34% of our backlog was attributable to equipment for refinery project work, ~~13%~~12% for chemical and petrochemical projects, 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, 52% for U.S. Navy projects and 5%4% for power and other industrial applications. At December 31, 2018, 23% of our backlog was attributable to equipment for refinery project work, 20% for chemical and petrochemical projects, 50% for U.S. Navy projects and 7% for power and other industrial applications. At December 31, 2019,June 30, 2020, we had notwo projects totaling $562 on hold.

Capital spending in the energy markets we serve began to ~~increase~~decrease during the second half of fiscal ~~2018~~2020 and ~~this trend has continued. Likewise, orders~~the pace of activity materially contracted as COVID-19 became a global health issue in the ~~chemical and petrochemical~~fourth quarter of fiscal 2020. The weak energy markets ~~began to increase~~have continued into fiscal 2021. Our bidding activity also slowed in the second half of fiscal 2019. While our bidding pipeline continues to be very active as our customers plan their capacity expansion and upgrade projects, however, they continue to be cautious about releasing orders and as a result, we expect quarterly fluctuations2020, with more international opportunities in ~~order levels to occur.~~emerging markets than in domestic markets. At ~~December 31, 2019, 52%~~June 30, 2020, 51% of our backlog was for the defense industry, specifically the U.S. Navy. Our pipeline for the U.S. Navy continues to be robust, but quarterly fluctuations in order levels will occur due to the size and 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.

WeWhile the near term opportunities in the global energy and petrochemical markets have slowed significantly due to the combined impact of the COVID-19 pandemic and the geopolitical imbalance of supply, and this may continue for the foreseeable future, we continue to believe in the ~~long-term strength~~longer-term opportunities of the energy and petrochemical ~~markets and our ability to differentiate ourselves.~~markets. Coupled with our diversification strategy ~~with~~into the ~~U.S. Navy, as well as our initiatives to increase sales from our installed base and gain share in underserved markets,~~defense industry, we believe that the long-term strength of our markets will support our goal to ~~significantly~~ grow our business. We have invested in capacity to serve our commercial customers as well as to expand the work we do for the U.S. Navy. We intend to continue to ~~expand~~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 continuing to reduce earnings volatility, grow our business and diversify our business and product lines.~~

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 ~~revenue~~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 ~~to be approximately $100,000 to $105,000; this excludes our commercial nuclear utility business which was sold~~and a third project of $654 cancelled in the first quarter of fiscal ~~2020.~~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 market dynamics, and we therefore expect revenue of $4,118 to be delayed beyond fiscal 2021.

We expect fiscal year 2021 revenue to be between $90,000 and $95,000, gross profit margin ~~in fiscal 2020~~ to be in the ~~21%~~20% to 22% range ~~compared with 23.9% in fiscal 2019, with the reduction due to project mix.~~and SG&A ~~during fiscal 2020 is expected~~expenses to be between $17,000 and ~~$17,500, excluding~~$18,000. We expect interest income to be de minimis, given the ~~SG&A incurred in the first quarter by our commercial nuclear subsidiary.~~low market rates on short term cash and investments. Our effective tax rate during fiscal ~~2020~~2021 is expected to be approximately ~~20%~~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 do not have a significant production interruption related to the COVID-19 pandemic.

~~We continue to believe that~~Cash flow was negative in the ~~long-term outlook~~first quarter of fiscal 2021, although, we expect positive cash flow from operations for the ~~energy and petrochemical markets is positive. We expect to have better insight into the strength, durability and sustainability~~remainder of ~~the recent improvements in our core markets as we look towards~~ fiscal 2021.

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, 2019,~~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 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, ~~2019.~~ 2020.

We did not have any off balance sheet arrangements as of ~~December 31, 2019~~June 30, 2020 or March 31, ~~2019,~~2020, other than 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, project cancellation risk and trade policy.

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 ~~and nine~~ months ~~ended December 31, 2019~~of fiscal 2021 were ~~47% and 35%, respectively,~~44% of total sales compared with ~~17% and 37%, respectively,~~30% for the same ~~periods~~period of fiscal ~~2019.~~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 fiscal ~~2020~~2021 and fiscal ~~2019,~~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 months of fiscal 2021 and ~~nine months ended December 31, 2019,~~2020, our purchases in foreign currencies represented ~~0% and 1% of cost of products sold, respectively. In the three and nine months ended December 31, 2018, our purchases in foreign currencies represented 4% and~~approximately 2% of the cost of products ~~sold, respectively.~~sold. 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, 2019~~June 30, 2020 and March 31, ~~2019,~~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. The cost of metals and other materials used in our products can experience significant volatility, and as such, can impact our ability to reflect this volatility in our pricing.

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, 2019,~~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, 2019~~ 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:

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	☐☒	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	2015

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2621

Item 4.	Controls and Procedures	2722

Part II.	OTHER INFORMATION

Item 1A.	Risk Factors	22

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

Item 6.	~~EXHIBITS~~Exhibits	2824

Signatures		2925

	~~December 31,~~
	~~2019~~
~~Finance Leases~~
~~Weighted-average remaining lease term in years~~		~~1.38~~
~~Weighted-average discount rate~~		~~9.27~~	%

~~Operating Leases~~
~~Weighted-average remaining lease term in years~~		~~2.25~~
~~Weighted-average discount rate~~		~~5.44~~	%


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	--	--

	March 31, 2019

Major classes of assets included as held for sale
Cash	$	552
Trade accounts receivable, net of allowances		1,921
Unbilled revenue		302
Inventories		1,809
Prepaid expenses and other current assets		130
Income taxes receivable		10
Deferred tax asset		126
Total major classes of assets included as held for sale	$	4,850

Major classes of liabilities included as held for sale
Accounts payable	$	520
Accrued compensation		326
Accrued expenses and other current liabilities		746
Customer deposits		1,933
Total major classes of liabilities included as held for sale	$	3,525

	Operating Leases		Finance Leases
Remainder of 2020	$	26	$	15
2021		163		48
2022		63		26
2023		33		26
2024		7		11
2025		—		—
Total lease payments		292		126

Less – amount representing interest		17		18
Present value of net minimum lease payments	$	275	$	108


(10)	Material Contracts

	10.1	Letter Agreement dated ~~October 8, 2019,~~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 ~~Quarterly~~Current Report on Form ~~10-Q for the quarterly period ended September~~8-K dated April 30, ~~2019.~~2020.

	10.2	Pledge Agreement between the Company and HSBC Bank USA, National Association dated ~~October 8, 2019~~May 1, 2020 is incorporated by reference from Exhibit 10.2 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarterly period ended September~~8-K dated April 30, ~~2019.~~2020.

	10.3	~~Letter Consent Agreement dated October 8, 2019 pursuant~~First Amendment to ~~the~~ Credit Agreement dated ~~December 2, 2015~~May 1, 2020 between the Company and ~~JP Morgan~~JPMorgan Chase Bank, N.A. is incorporated by reference from Exhibit 10.3 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarterly period ended September~~8-K dated April 30, ~~2019.~~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.


(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 101).

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


			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)