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<SEC-DOCUMENT>0000716314-05-000004.txt : 20050201
<SEC-HEADER>0000716314-05-000004.hdr.sgml : 20050201
<ACCEPTANCE-DATETIME>20050201145338
ACCESSION NUMBER:		0000716314-05-000004
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050201
DATE AS OF CHANGE:		20050201

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GRAHAM CORP
		CENTRAL INDEX KEY:			0000716314
		STANDARD INDUSTRIAL CLASSIFICATION:	GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560]
		IRS NUMBER:				161194720
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08462
		FILM NUMBER:		05565452

	BUSINESS ADDRESS:	
		STREET 1:		20 FLORENCE AVE
		STREET 2:		POST OFFICE BOX 719
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14020
		BUSINESS PHONE:		5853432216

	MAIL ADDRESS:	
		STREET 1:		20 FLORENCE AVENUE
		STREET 2:		POST OFFICE BOX 719
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14021-0719
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>fm10q305.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

                              FORM 10-Q
               SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C.  20549

(Mark one)
[X]  QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15  (d)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934.

For Quarterly Period Ended    December 31, 2004

                               OR
[ ]  TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15 (d)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to ____________

Commission File Number 1-8462

GRAHAM CORPORATION
(Exact name of registrant as specified in its charter)


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


20 FLORENCE AVENUE, BATAVIA, NEW YORK                        14020
(Address of Principal Executive Offices)                (Zip Code)


Registrant's telephone number, including Area Code -  585-343-2216


(Former  name, former address and former fiscal year, if  changed
since last report.)

   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 __X__      NO _____

   Indicate   by  check  mark  whether  the  registrant   is   an
accelerated filer (as defined by Rule 12b-2 of the Act).

                        Yes __ __      No __X__

   As  of  February  1,  2005, there were  outstanding  1,668,667
shares of common stock, $.10 per share.





<Page>2

               Graham Corporation and Subsidiaries
                       Index to Form 10-Q
  As of and for the Three and Nine Month Periods Ended December 31, 2004
<Table>
<Caption>
<S>      <C>                                               <C>

                                                           Page
Part I   FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements        3

Item 2.  Management's   Discussion  and   Analysis   of
         Financial Condition and Results of Operations      16

Item 3.  Quantitative and Qualitative Disclosure  About
         Market Risk                                        23

Item 4.  Controls and Procedures                            26


Part II. OTHER INFORMATION

Item 5.  Other Information                                  27

Item 6.  Exhibits and Reports on Form 8-K                   27

</Table>






























<Page>3


               GRAHAM CORPORATION AND SUBSIDIARIES

                            FORM 10-Q

                        DECEMBER 31, 2004

                 PART I - FINANCIAL INFORMATION

       (Dollar amounts in thousands except per share data)




























   Unaudited  condensed  consolidated  financial  statements   of
Graham  Corporation  (the Company) and  its  subsidiaries  as  of
December 31, 2004 and for the three month and nine month  periods
ended  December 31, 2004 and 2003 are presented on the  following
pages.  The financial statements have been prepared in accordance
with  the Company's usual accounting policies, are based in  part
on  estimates  and  reflect all normal and recurring  adjustments
which  are,  in the opinion of management, necessary  to  a  fair
presentation  of the results of the interim periods.   The  March
31,   2004  Consolidated  Balance  Sheet  was  derived  from  the
Company's  audited  Balance Sheet for the year  ended  March  31,
2004.

   This  part also includes management's discussion and  analysis
of  the Company's financial condition as of December 31, 2004 and
its  results  of operations for the three and nine month  periods
ended December 31, 2004.



<Page>4
               GRAHAM CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS

                             (Unaudited)
<Table>
<Caption>
                                               December 31,    March 31,
                                                   2004           2004
                                                   ----           ----
<S>                                            <C>             <C>
Assets
Current Assets:
  Cash and cash equivalents                    $   825         $   467
  Investments                                    1,896           5,296
  Trade accounts receivable, net of
  allowances ($97 and $75 at December 31
  and March 31, respectively)                    6,977           8,950
  Inventories, net                              10,571           6,984
  Domestic and foreign income taxes receivable      62             972
  Deferred income tax asset                      1,813           1,521
  Prepaid expenses and other current assets        328             217
                                               -------         -------
      Total current assets                      22,472          24,407
Property, plant and equipment, net               8,652           9,227
Deferred income tax asset                        2,169           2,048
Other assets                                        52              58
                                               -------         -------
Total assets                                   $33,345         $35,740
                                               =======         =======

Liabilities and Shareholders' Equity
Current liabilities:
  Short-term debt                              $ 1,867         $ 1,925
  Current portion of long-term debt                 47              44
  Accounts payable                               2,771           3,230
  Accrued compensation                           2,733           3,866
  Accrued expenses and other liabilities         1,403           1,562
  Customer deposits                              1,190           2,128
                                               -------         -------
      Total current liabilities                 10,011          12,755


Long-term debt                                      58              93
Accrued compensation                               216             239
Deferred income tax liability                       81              77
Other long-term liabilities                        365              61
Accrued pension liability                        2,700           1,873
Accrued postretirement benefits                  2,457           2,540
                                               -------         -------
  Total liabilities                             15,888          17,638
                                               -------         -------
</TABLE>







<Page>5
               GRAHAM CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS (concluded)

                             (Unaudited)
<Table>
<Caption>
                                               December 31,    March 31,
                                                   2004           2004
                                                   ----           ----
<S>                                            <C>             <C>
Shareholders' equity:
  Preferred Stock, $1 par value -
   Authorized, 500,000 shares
  Common stock, $.10 par value -
   Authorized, 6,000,000 shares
   Issued, 1,767,790 shares at December 31
    and 1,757,450 shares at March 31               177             176
  Capital in excess of par value                 5,180           5,097
  Retained earnings                             16,458          17,322
  Accumulated other comprehensive loss
   Minimum pension liability adjustment         (1,456)         (1,456)
   Cumulative foreign currency translation
    adjustment                                  (1,338)         (1,452)
                                               -------         -------
                                                19,021          19,687

Less:
  Treasury Stock (99,123 shares at December
   31, and March 31)                            (1,385)         (1,385)
  Notes receivable from officers and directors    (179)           (200)
                                               -------         -------
Total shareholders' equity                      17,457          18,102
                                               -------         -------
   Total liabilities and shareholders' equity  $33,345         $35,740
</Table>



         See Notes to Consolidated Financial Statements.




















<Page>6

               GRAHAM CORPORATION AND SUBSIDIARIES

   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

                           (Unaudited)
<Table>
<Caption>

                                Three Months Ended      Nine Months Ended
                                   December 31,            December 31,
                                  2004        2003       2004        2003
                                  ----        ----       ----        ----
<S>                               <C>         <C>        <C>         <C>
Net sales                         $12,937     $10,224    $33,781     $31,348
                                  -------     -------    -------     -------
Cost and expenses:
  Cost of products sold             9,715       8,732     28,130      26,088
  Selling, general and
   administrative                   2,559       2,528      7,450       7,450
  Interest expense                     34          35         84          93
  Other income                                            (1,592)       (522)
  Other expense                       648                    648
                                  -------     -------    -------     -------
      Total costs and expenses     12,956      11,295     34,720      33,109
                                  -------     -------    -------     -------

Loss before income taxes              (19)     (1,071)      (939)     (1,761)

Provision (benefit) for
  income taxes                          2        (322)      (324)       (516)
                                  -------     -------    -------     -------

Net loss                              (21)       (749)      (615)     (1,245)

Retained earnings at
  beginning of period              16,562      18,152     17,322      18,810
Dividends                             (83)        (81)      (249)       (243)
                                  -------     -------    -------     -------
Retained earnings at
  end of period                   $16,458     $17,322    $16,458     $17,322
                                  =======     =======    =======     =======
Per Share Data:
  Basic:
   Net loss                         $(.01)      $(.46)     $(.37)      $(.76)
                                    =====       =====      =====       =====
  Diluted:
   Net loss                         $(.01)      $(.46)     $(.37)      $(.76)
                                    =====       =====      =====       =====

</Table>






          See Notes to Consolidated Financial Statements.

<Page>7

               GRAHAM CORPORATION AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (Unaudited)
<Table>
<Caption>

                                                Nine Months Ended
                                                   December 31,
                                                  2004       2003
                                                  ----       ----
<S>                                             <C>          <C>
Operating activities:
  Net loss                                      $  (615)     $(1,245)
                                                -------      -------
  Adjustments to reconcile net loss to net
    cash used by operating activities:
    Non cash other (income) expense                (761)        (522)
    Depreciation and amortization                   751          784
    Discount accretion on investments               (27)         (42)
    Loss on sale of property, plant and equipment     2            2
    (Increase) decrease in operating assets:
     Accounts receivable                          2,049          (98)
     Inventory, net of customer deposits         (3,022)       2,268
     Prepaid expenses and other current and non-
      current assets                               (110)        (142)
  Increase (decrease) in operating liabilities:
    Accounts payable, accrued compensation,
     accrued expenses and other current and
     non-current liabilities                     (1,199)      (3,445)
    Non-current accrued compensation, accrued
     pension liability and accrued
     postemployment benefits                       (230)        (469)
    Domestic and foreign income taxes               910         (225)
    Deferred income taxes                          (377)         (98)
                                                -------      -------
      Total adjustments                          (2,014)      (1,049)
                                                -------      -------
  Net cash used by operating activities          (2,629)      (2,294)
                                                -------      -------
Investing activities:
  Purchase of property, plant and equipment        (128)        (172)
  Collection of notes receivable from
   officers and directors                            22           48
  Purchase of investments                        (6,475)      (7,919)
  Redemption of investments at maturity           9,903       10,905
                                                -------      -------
  Net cash provided by investing activities       3,322        2,862
                                                -------      -------
Financing activities:
  Decrease in short-term debt                      (137)        (263)
  Proceeds from issuance of long-term debt                     9,195
  Principal repayments on long-term debt            (31)      (9,260)
  Issuance of common stock                           83           94
  Dividends paid                                   (249)        (326)
</Table>

<Page>8
               GRAHAM CORPORATION AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS (concluded)

                           (Unaudited)
<Table>
<Caption>

                                                Nine Months Ended
                                                   December 31,
                                                  2004       2003
                                                  ----       ----
<S>                                             <C>          <C>
  Acquisition of treasury stock                                  (20)
                                                -------      -------
  Net cash used by financing activities            (334)        (580)
                                                -------      -------
  Effect of exchange rate changes on cash            (1)          (3)
                                                -------      -------
  Net increase (decrease)in cash and cash
  equivalents                                       358          (15)

  Cash and cash equivalents at beginning of
  period                                            467          217
                                                -------      -------
 Cash and cash equivalents at end of
 period                                         $   825      $   202
                                                =======      =======

</Table>



         See Notes to Consolidated Financial Statements.

























<Page>9
               GRAHAM CORPORATION AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2004



NOTE 1 - CHANGE IN ACCOUNTING FOR REVENUE RECOGNITION

      During  the second quarter of fiscal year 2005, the Company
changed  its method of recognizing revenue for certain  contracts
from  the  completed  contract  to  the  percentage-of-completion
method.   Formerly,  only contracts with a planned  manufacturing
process  in excess of three months and with revenue of  at  least
$1,000  and  500  pounds sterling, in the USA  and  UK  operating
segments,  respectively, were accounted for under the percentage-
of-completion   method.   Now  all  contracts  with   a   planned
manufacturing  process of four weeks or more (which  approximates
575  direct  labor  hours) and without  a  dollar  threshold  are
accounted  for  using the percentage-of-completion  method.   The
Company believes this is a preferable accounting method for these
contracts because it measures revenue, costs of products sold and
related  income on construction type contracts based on  progress
on the contracts, thus providing a better measure of the earnings
process  on a more timely basis.  The Company extended its  scope
of  contracts  accounted  for using the  percentage-of-completion
method  at this time because management believes that the effects
on  the  financial statements of applying the completed  contract
method on these contracts could begin to vary materially from the
effects  of  applying the percentage-of-completion  method.   The
majority  of the Company's contracts have a planned manufacturing
process of less than four weeks, and are accounted for using  the
completed  contract method.  Prior period financial results  have
been  restated to reflect this change.  The impact of the  change
on  net sales, cost of products sold, provision for income  taxes
and  net  income  for the prior periods presented  and  the  nine
months ended December 31, 2004 is as follows:
<Table>
<Caption>

                                       Three Months Ended
                                        December 31, 2003
                                     Amounts Reported Using
                                     ----------------------
<S>                                  <C>           <C>           <C>
                                     Percentage
                                         of        Completed
                                     Completion     Contract
                                       Method        Method      Difference
                                     ----------    ---------     ----------
Net sales                              $10,224       $10,027       $197
Cost of products sold                  $ 8,732       $ 8,590       $142
(Benefit) provision for income taxes   $  (322)      $  (339)      $ 17
Net income (loss)                      $  (749)      $  (787)      $ 38
Net income (loss) per share
Basic                                    $(.46)        $(.48)      $.02
Diluted                                  $(.46)        $(.48)      $.02

</Table>

<Page>10
<Table>
<Caption>
                                               Nine Months Ended
                                                  December 31,
                                               -----------------
                                                      2003
                                                      ----
                                             Amounts Reported Using
                                             ----------------------
<S>                             <C>              <C>             <C>
                                Percentage
                                   of            Completed
                                Completion        Contract
                                  Method           Method        Difference
                                ----------       ---------       ----------
Net Sales                       $31,348           $30,919           $429
Cost of products sold           $26,088           $25,727           $361
(Benefit) for income taxes      $  (516)          $  (540)          $ 24
Net income (loss)               $(1,245)          $(1,289)          $ 44
Net income (loss) per share
                  Basic           $(.76)            $(.78)          $.02
                  Diluted         $(.76)            $(.78)          $.02
</Table>

<Table>
<Caption>
                                               Nine Months Ended
                                                  December 31,
                                               -----------------
                                                      2004
                                                      ----
                                             Amounts Reported Using
                                             ----------------------
<S>                             <C>              <C>             <C>
                                Percentage
                                   of            Completed
                                Completion        Contract
                                  Method           Method        Difference
                                ----------       ---------       ----------
Net Sales                       $33,781           $32,626           $1,155
Cost of products sold           $28,130           $27,193           $  937
(Benefit) for income taxes      $  (324)          $  (380)          $   56
Net income (loss)               $  (615)          $  (807)          $  192
Net income (loss) per share
                  Basic           $(.37)            $(.48)            $.11
                  Diluted         $(.37)            $(.48)            $.11
</Table>












<Page>11
The effect of the change on retained earnings is as follows:
<Table>
<Caption>
                                       Three Months Ended    Nine Months Ended
                                          December 31,         December 31,
                                               2003                 2003
                                               ----                 ----
<S>                                          <C>                  <C>
Balance at beginning of period as
  previously reported                        $18,103              $18,767
Add adjustment for the cumulative
  effect on prior periods of
  applying retroactively the
  change in accounting method                     49                   43
                                             -------              -------
Balance  at beginning of period,
  as adjusted                                 18,152               18,810
Net loss                                        (749)              (1,245)
Dividends                                        (81)                (243)
                                             -------              -------
Balance at end of period                     $17,322              $17,322
                                             =======              =======

</Table>

NOTE 2 - INVENTORIES

   Major classifications of inventories are as follows:
<Table>
<Caption>
<S>                                  <C>                 <C>
                                     December 31,        March 31,
                                         2004               2004
                                         ----               ----
Raw materials and supplies           $ 2,245             $ 1,745
Work in process                       10,135               6,169
Finished products                      2,613               2,500
                                     -------             -------
                                      14,993              10,414
Less - progress payments               4,261               3,309
     - inventory reserve                 161                 121
                                     -------             -------
                                     $10,571             $ 6,984
                                     =======             =======
</Table>














<Page>12

NOTE 3 - STOCK-BASED COMPENSATION:

     The   Company  accounts  for  stock-based  compensation   in
accordance   with  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation".   As  permitted  by  SFAS  No.  123,  the  Company
continues  to  measure  compensation for  such  plans  using  the
intrinsic  value  based  method  of  accounting,  prescribed   by
Accounting  Principles Board (APB), Opinion No.  25,  "Accounting
for  Stock Issued to Employees".  Accordingly, compensation  cost
for  stock  options is measured as the excess,  if  any,  of  the
quoted  market price of the Company's stock at the date of  grant
over  the  amount  an  employee must pay to  acquire  the  stock.
Compensation cost for share equivalent units is recorded based on
the  quoted market price of the Company's stock at the end of the
period.

     Under  the intrinsic value method, no compensation  expense
has  been recognized for the Company's stock option plans.   Had
compensation  cost  for the Company's stock  option  plans  been
determined based on the fair value at the grant date for  awards
under  those plans in accordance with the fair value methodology
prescribed  under SFAS No. 123, the Company's net loss  and  net
loss  per  share would have been the pro forma amounts indicated
below:
<Table>
<Caption>

                              Three Months Ended        Nine Months Ended
                                 December 31,              December 31,
                              2004          2003        2004         2003
                              ----          ----        ----         ----
<S>                          <C>           <C>         <C>          <C>
Net loss as reported         $ (21)        $(749)      $(615)       $(1,245)
Stock-based employee
  compensation cost
  net of related tax
  benefits                    (118)          (63)       (118)           (74)
                             -----         -----       -----        -------
Pro forma net loss           $(139)        $(812)      $(733)       $(1,319)
                             =====         =====       =====        =======
Basic loss per
  share      As reported     $(.01)        $(.46)      $(.37)         $(.76)
             Pro forma       $(.08)        $(.49)      $(.44)         $(.80)

Diluted loss per
  share      As reported     $(.01)        $(.46)      $(.37)         $(.76)
             Pro forma       $(.08)        $(.49)      $(.44)         $(.80)
</Table>










<Page>13
   For  purposes of the disclosure above, the fair value of  each
option  grant  is  estimated on the date of the grant  using  the
Black-Scholes  option-pricing model with the following  weighted-
average  assumptions  used for grants in fiscal  years  2005  and
2004:
<Table>
<Caption>
                               2005        2004
                               ----        ----
<S>                            <C>         <C>
Expected life                  5 years     5 years
Volatility                     42.84%      47.13%
Risk-free interest rate        3.53%       3.01%
Dividend yield                 1.65%       2.25%
</Table>



NOTE 4 - INCOME (LOSS) PER SHARE:

   Basic  income  (loss) per share is computed  by  dividing  net
income  (loss)  by the weighted average number of  common  shares
outstanding  for  the period.  Common shares outstanding  include
share  equivalent  units which are contingently issuable  shares.
Diluted  income  (loss) per share is calculated by  dividing  net
income  (loss)  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  income  (loss)
per share is presented below:
<Table>
<Caption>
                            Three Months Ended          Nine Months Ended
                               December 31,                December 31,
                            2004          2003          2004        2003
                            ----          ----          ----        ----
<S>                        <C>         <C>           <C>           <C>
Basic loss per share

  Numerator:
   Net loss                     $(21)      $(749)        $(615)      $(1,245)
                                ----       -----         -----       -------
  Denominator:
   Weighted common shares
    outstanding            1,666,613   1,629,656     1,662,472     1,625,601
  Share equivalent units
    (SEU) outstanding         13,900      16,437        15,689        16,344
                           ---------   ---------     ---------     ---------
  Weighted average shares
    and SEUs outstanding   1,680,513   1,646,093     1,678,161     1,641,945
                           ---------   ---------     ---------     ---------

Basic loss per share           $(.01)      $(.46)        $(.37)        $(.76)
                               =====       =====         =====         =====
</Table>




<Page>14
<Table>
<Caption>
                            Three Months Ended          Nine Months Ended
                               December 31,                December 31,
                            2004          2003          2004        2003
                            ----          ----          ----        ----
<S>                        <C>         <C>           <C>           <C>

Diluted loss per share

  Numerator:
   Net loss                    $(21)      $(749)         $(615)        $(1,245)

  Denominator:
   Weighted average shares
     and SEUs outstanding  1,680,513  1,646,093      1,678,161      1,641,945

                           ---------  ---------      ---------      ---------

Diluted loss per share         $(.01)     $(.46)         $(.37)         $(.76)
                               =====      =====          =====          =====
</Table>

   There  are 219,955 options to purchase shares of common  stock
at   various  exercise  prices  that  were  excluded   from   the
computation  of  diluted loss per share for the  three  and  nine
month  periods  ended December 31, 2004 and 2003  as  the  effect
would be antidilutive due to the net losses for the periods.

NOTE 5 - PRODUCT WARRANTY LIABILITY

   The  reconciliation  of the changes in  the  product  warranty
liability is as follows:
<Table>
<Caption>

                               Three Months Ended      Nine Months Ended
                                  December 31,           December 31,
                               2004          2003      2004         2003
                               ----          ----      ----         ----
<S>                            <C>           <C>       <C>          <C>
Balance at beginning
  of period                    $225          $359      $242         $592
Expense (reversal) for
  product warranties             18           (70)       74           50
Product warranty
  claims paid                    (6)          (31)      (79)        (384)
                               ----          ----      ----         ----
Balance at end of
  period                       $237          $258      $237         $258
                               ====          ====      ====         ====
</Table>

NOTE 6 - CASH FLOW STATEMENT

   Interest  paid  was  $84  and $95 for the  nine  months  ended
December  31,  2004 and 2003, respectively.  In addition,  income
taxes  refunded  were  $886 and $193 for the  nine  months  ended
December 31, 2004 and 2003, respectively.
<Page>15
   Dividends  of  $249 and $243 were recorded for the  respective
nine month periods ended December 31, 2004 and 2003, of which $83
and $0 were not paid during the respective periods.  In addition,
during   the  nine  months  ended  December  31,  2003,   capital
expenditures totaling $11 were financed through the  issuance  of
capital leases.

NOTE 7 - COMPREHENSIVE INCOME (LOSS)

   Total comprehensive income (loss) was $143 and $(536) for  the
three  months  ended  December 31, 2004 and  2003,  respectively.
Other  comprehensive income for the three months  ended  December
31,   2004   and  2003  included  foreign  currency   translation
adjustments  of $164 and $213, respectively.  Total comprehensive
loss  for  the nine months ended December 31, 2004 and  2003  was
$501 and $899, respectively.  Other comprehensive income for  the
nine  months  ended December 31, 2004 and 2003  included  foreign
currency translation adjustments of $114 and $346, respectively.

NOTE 8 - EMPLOYEE BENEFIT PLANS

   The components of pension cost are as follows:
<Table>
<Caption>
                               Three Months Ended        Nine Months Ended
                                   December 31              December 31
                               2004         2003         2004         2003
                               ----         ----         ----         ----
<S>                            <C>          <C>          <C>          <C>
Service cost                   $118         $111         $354         $331
Interest cost                   243          224          731          668
Expected return on assets      (226)        (183)        (678)        (546)
Amortization of:
  Transition asset               (3)         (11)         (11)         (11)
  Unrecognized prior
   service cost                   1            1            3            3
  Actuarial loss                 76           67          228          200
                               ----         ----         ----         ----
Net pension cost               $209         $209         $627         $625
                               ====         ====         ====         ====
</Table>

   The  Company  made  contributions of  $201  and  $773  to  the
defined  benefit pension plan in the three and nine months  ended
December 31, 2004, respectively.  The Company does not expect  to
make any contributions to the plan for the balance of fiscal year
2005 due to a decrease in the minimum contribution requirement as
a  result  of  the  combination  of  the  amortization  bases  as
permitted  by the Internal Revenue Service Code Section 412(b)(4)
and  the  replacement of the 30-year Treasury bond interest  rate
with  a  four-year  weighted  average  long-term  corporate  bond
interest rate.







<Page>16

   The  components of the postretirement benefit  income  are  as
follows:
<Table>
<Caption>
                                Three Months Ended        Nine Months Ended
                                   December 31               December 31
                                2004          2003        2004         2003
                                ----          ----        ----         ----
<S>                             <C>           <C>         <C>          <C>
Service cost                    $  0          $  4        $  0         $ 10
Interest cost                     19            14          55           47
Amortization of prior
  service cost                   (41)          (31)       (124)         (93)
Amortization of  actuarial
  loss                             5             3          17            7
                                ----          ----        ----         ----
Net postretirement benefit      $(17)         $(10)       $(52)        $(29)
                                ====          ====        ====         ====
</Table>

   The  Company  paid  benefits of $3  and  $31  related  to  its
postretirement  benefit plan in the three and nine  months  ended
December  31,  2004, respectively.  The Company  expects  to  pay
benefits  of  approximately $125 for the balance of  fiscal  year
2005.

NOTE 9 - OTHER INCOME AND EXPENSE

   In  November  2004, the Company entered into an Agreement  and
General  Release in connection with the retirement of its  former
President and CEO.  In accordance with the agreement, the Company
will  retain the former officer as an independent consultant  for
the  period  January  1, 2005 to November  8,  2008  and  provide
certain  medical,  dental  and  insurance  benefits  during   the
consulting  period.   The agreement also contains  a  non-compete
provision.  The agreement has been accounted for as an individual
deferred compensation arrangement, and, therefore, an expense of
$648 was recognized and is included in the caption "Other Expense"
in  the Consolidated  Statement of Operations and Retained  Earnings
for the  three  and nine month periods ended December 31, 2004.   The
current  and  long-term  portions of  the  related  liability  at
December  31,  2004  were $243 and $319,  respectively,  and  are
included in the captions "Accrued Expenses and Other Liabilities"
and  "Other  Long-Term  Liabilities" in the Consolidated  Balance
Sheet at December 31, 2004.

   In  September  2004,  the Company settled a  contract  dispute
with  a customer regarding cancellation charges.  This settlement
agreement was executed prior to the end of the quarter,  and  the
unpaid settlement amount due of $183 was received on October  13,
2004.  As a result of the settlement, other income of $1,592  was
recorded.






<Page>17
   On  February  4,  2003,  the  Company  irrevocably  terminated
postretirement  health care benefits for current U.S.  employees.
Benefits  payable to retirees of record on April 1, 2003 remained
unchanged.  As a result of the plan change, a curtailment gain of
$522 was recognized.  This gain is included in the caption "Other
Income"  in the Consolidated Statement of Operations and Retained
Earnings for the nine months ended December 31, 2003.


NOTE 10 - SEGMENT INFORMATION

   The  Company's  business  consists of two  operating  segments
based  upon  geographic area.  The United States segment  designs
and  manufactures  heat  transfer and vacuum  equipment  and  the
operating  segment  located  in the United  Kingdom  manufactures
vacuum  equipment.   Operating segment information  is  presented
below:
<Table>
<Caption>
                                Three Months Ended        Nine Months Ended
                                    December 31,             December 31,
                                2004          2003        2004         2003
                                ----          ----        ----         ----
<S>                             <C>           <C>         <C>          <C>
Sales to external customers
  U.S.                          $10,783       $ 8,891     $28,135      $27,863
  U.K.                            2,154         1,333       5,646        3,485
                                -------       -------     -------      -------
  Total                         $12,937       $10,224     $33,781      $31,348
                                =======       =======     =======      =======
Intersegment sales
  U.S.                                                    $   118      $    38
  U.K.                          $   252       $ 1,025         610        2,091
                                -------       -------     -------      -------
Total                           $   252       $ 1,025     $   728      $ 2,129
                                =======       =======     =======      =======
Segment net income (loss)
  U.S.                          $   (69)      $  (701)    $  (389)     $  (914)
  U.K.                          $    22                      (329)        (276)
                                -------       -------     -------      -------
Total segment net loss          $   (47)      $  (701)    $  (718)     $(1,190)
                                =======       =======     =======      =======
</Table>

The segment net loss above is reconciled to the consolidated totals
as follows:
<Table>
<Caption>
                                Three Months Ended        Nine Months Ended
                                    December 31,             December 31,
                                2004          2003        2004         2003
                                ----          ----        ----         ----
<S>                             <C>           <C>         <C>          <C>
Total segment net loss          $ (47)        $(701)      $(718)       $(1,190)
Eliminations                       26           (48)        103            (55)
                                -----         -----       -----        =======
Net loss                        $ (21)        $(749)      $(615)       $(1,245)
                                =====         =====       =====        =======
</Table>
<Page>18


NOTE 11 - RELATED PARTY TRANSACTION

   On  April  1,  2003,  the Company acquired  30,800  shares  of
common   stock  previously  issued  under  the  Long-Term   Stock
Ownership  Plan  from two former officers.  This transaction  was
accounted  for  as a purchase.  The shares were redeemed  at  the
original  issue price of $7.25, as compared to a market price  at
the time of the closing of $7.55.  This transaction resulted in a
$224,000  increase  to  treasury stock, a $204,000  reduction  in
notes receivable from officers and directors and cash payments to
former  officers.   The cash payments of $20 approximate  amounts
previously  paid  on  the  notes.  (See  Note  9  for  additional
disclosure of related party transactions).

NOTE 12 - CONTINGENCIES

       The  Company  has  been named as a  defendant  in  certain
lawsuits wherein the respective plaintiffs allege personal injury
from  exposure  to  asbestos contained in products  made  by  the
Company.   The  Company  is a co-defendant  with  numerous  other
defendants  in these suits.  The Company has retained  litigation
counsel  to  defend  these claims.  The  claims  are  similar  to
previous  asbestos suits naming the Company as  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  minimal amounts below the expected  defense  costs.
The potential for liability is not determinable.

       In  December  2004,  the Company received  a  request  for
payment  from the Metal Goods & Manufacturers Trust Fund for  $30
relating  to a workers' compensation assessment asserted  against
members  in  the Trust Fund during the period 1993 through  2001.
The  Company was a member of the Trust Fund from April 1994 until
May  1995.   The  Company is disputing this  claim and has provided
for this contingent liability at December 31, 2004.

       From  time  to  time,  the Company  is  subject  to  legal
proceedings   and  potential  claims  arising  from   contractual
agreements  in  the  ordinary course of  business.   The  Company
believes there are no such matters pending against it that  could
have, individually or in the aggregate, a material adverse effect
on its financial statements.















<Page>19

NOTE 13 - ACCOUNTING AND REPORTING CHANGES

       In November 2004, the Financial Accounting Standards Board
("FASB")  issued  Statement  of  Financial  Accounting  Standards
("SFAS")  No.  151,  "Inventory Costs."   This  Statement  amends
Accounting  Research  Bulletin  No.  43,  Chapter  4,  "Inventory
Pricing", to clarify the accounting for abnormal amounts of  idle
facility  expense, freight, handling costs and  wasted  material.
This Statement requires that those items be recognized as current
period  charges regardless of whether they meet the criterion  of
"abnormal".  In addition, this Statement requires that allocation
of fixed production overheads to the costs of conversion be based
on  the  normal  capacity  of  the production  facilities.   This
Statement  is effective for inventory costs incurred  during  the
fiscal  year  2007.  The Company believes the  adoption  of  this
Statement will result in the acceleration of recognizing indirect
manufacturing  expenses during times of below normal  utilization
of plant capacity.

      In December 2004, the FASB issued SFAS No. 152, "Accounting
for  Real  Estate Time-Sharing Transactions" and  SFAS  No.  153,
"Exchanges of Nonmonetary Assets".  Both Statements are effective
for fiscal years beginning after June 15, 2005.  The Company does
not  believe  either  of these Statements will  have  a  material
effect  on the Company's consolidated financial position, results
of operations or cash flows.

       The  FASB  also  issued in December 2004, SFAS  No.  123R,
"Share-Based  Payment".   This Statement  revises  the  standards
established for the accounting of transactions in which an entity
exchanges its equity instruments for goods and services.  It also
addresses  transactions in which an entity incurs liabilities  in
exchange  for goods or services that are based on the fair  value
of  the entity's equity instruments or that may be settled by the
issuance   of  those  equity  instruments.   This  Statement   is
effective  as  of  the beginning of the first  interim  reporting
period  that  begins after December 15, 2005 and applies  to  all
awards  granted after the required effective date and  to  awards
modified,  repurchased,  or  cancelled  after  that  date.    The
adoption  of this Statement will have an effect on the  Company's
consolidated  results of operations.  For additional information,
see Note 3 to the Condensed Consolidated Financial Statements.

       Certain reclassifications have been made to prior financial
information to conform to the current period presentation.













<Page>20
               GRAHAM CORPORATION AND SUBSIDIARIES
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS (MD&A)
                        December 31, 2004


OVERVIEW

     Graham  Corporation  consists of two operating  segments  as
determined  by  geographic areas (USA:  Graham  Corporation,  UK:
Graham  Vacuum  and  Heat Transfer Limited and  its  wholly-owned
subsidiary, Graham Precision Pumps Limited).

     Graham's fiscal financial reporting year commences  April  1
and ends March 31.

     In  the  quarter  ended September 30, 2004, the  Corporation
modified  its method of recognizing revenue for certain contracts
from  the  completed  contract  to  the  percentage-of-completion
method.   Prior  period financial results have been  restated  to
reflect  this change.  The impact of the restatement on FYE  2004
information  discussed in this MD&A is disclosed as parenthetical
information   within  the  relevant  discussion  sections.    The
restatement  did  not  change previously  reported  UK  financial
information.   The  impact of the change on net  sales,  cost  of
products sold, provision for income taxes and net income for  the
prior  periods presented and the nine months ended  December  31,
2004 is as follows:
<Table>
<Caption>

                                       Three Months Ended
                                        December 31, 2003
                                     Amounts Reported Using
                                     ----------------------
<S>                                  <C>           <C>           <C>
                                     Percentage
                                         of        Completed
                                     Completion     Contract
                                       Method        Method      Difference
                                     ----------    ---------     ----------
Net sales                              $10,224       $10,027       $197
Cost of products sold                  $ 8,732       $ 8,590       $142
(Benefit) provision for income taxes   $  (322)      $  (339)      $ 17
Net income (loss)                      $  (749)      $  (787)      $ 38
Net income (loss) per share
Basic                                    $(.46)        $(.48)      $.02
Diluted                                  $(.46)        $(.48)      $.02

</Table>









<Page>21
<Table>
<Caption>
                                               Nine Months Ended
                                                  December 31,
                                               -----------------
                                                      2003
                                                      ----
                                             Amounts Reported Using
                                             ----------------------
<S>                             <C>              <C>             <C>
                                Percentage
                                   of            Completed
                                Completion        Contract
                                  Method           Method        Difference
                                ----------       ---------       ----------
Net Sales                       $31,348           $30,919           $429
Cost of products sold           $26,088           $25,727           $361
(Benefit) for income taxes      $  (516)          $  (540)          $ 24
Net income (loss)               $(1,245)          $(1,289)          $ 44
Net income (loss) per share
                  Basic           $(.76)            $(.78)          $.02
                  Diluted         $(.76)            $(.78)          $.02
</Table>

<Table>
<Caption>
                                               Nine Months Ended
                                                  December 31,
                                               -----------------
                                                      2004
                                                      ----
                                             Amounts Reported Using
                                             ----------------------
<S>                             <C>              <C>             <C>
                                Percentage
                                   of            Completed
                                Completion        Contract
                                  Method           Method        Difference
                                ----------       ---------       ----------
Net Sales                       $33,781           $32,626           $1,155
Cost of products sold           $28,130           $27,193           $  937
(Benefit) for income taxes      $  (324)          $  (380)          $   56
Net income (loss)               $  (615)          $  (807)          $  192
Net income (loss) per share
                  Basic           $(.37)            $(.48)            $.11
                  Diluted         $(.37)            $(.48)            $.11
</Table>

The effect of the change on retained earnings is as follows:










<Page>22
<Table>
<Caption>
                                   Three Months Ended    Nine Months Ended
                                       December 31,         December 31,
                                           2003                 2003
                                           ----                 ----
<S>                                     <C>                    <C>
Balance at beginning of period as
  previously reported                    $18,103               $18,767
Add adjustment for the cumulative
  effect on prior periods of
  applying retroactively the
  change in accounting method                 49                    43
                                         -------               -------
Balance at beginning of period,
  as adjusted                             18,152                18,810
Net loss                                    (749)               (1,245)
Dividends                                    (81)                 (243)
                                         -------               -------
Balance at end of period                 $17,322               $17,322
                                         =======               =======
</Table>

     Graham  Corporation  designs  and  builds  vacuum  and  heat
transfer  equipment  for  the process industries  throughout  the
world.   The  Company  is a leader in vacuum  technology  in  the
principal  markets  it  serves.  The principal  markets  for  our
equipment are the chemical, petrochemical, petroleum refining and
electric power generating industries, including cogeneration  and
geothermal plants.  Other markets served include metal  refining,
pulp   and   paper   processing,  shipbuilding,  water   heating,
refrigeration, desalination, food processing, drug manufacturing,
heating, ventilating and air conditioning.

     Ejectors, liquid ring and dry vacuum pumps, condensers, heat
exchangers  and other products we sell, sold either as components
or  as  complete  systems, are used by our customers  to  produce
synthetic   fibers,  chemicals,  petroleum  products   (including
gasoline),  electric  power, processed  food  (including  canned,
frozen  and  dairy  products),  pharmaceutical  products,  paper,
steel,  fertilizers and numerous other products used everyday  by
people throughout the world.

FORWARD-LOOKING STATEMENTS

     Certain statements contained in this document, including  in
this  MD&A,  that are not historical facts, constitute  "Forward-
Looking  Statements" within the meaning of the Private Securities
Litigation  Reform Act of 1995.  Forward-looking  statements,  in
general,  predict,  forecast, indicate or imply  future  results,
performance   or  achievements  and  generally   use   words   so
indicative.   The  Company  wishes to  caution  the  reader  that
numerous important factors which involve risks and uncertainties,
including  but not limited to economic, competitive, governmental
and  technological  factors affecting the  Company's  operations,
markets,  products,  services  and  prices,  and  other   factors
discussed  in  the  Company's filings  with  the  Securities  and
Exchange  Commission, in the future, could affect  the  Company's
actual results and could cause its actual consolidated results to
<Page>23
differ  materially  from those expressed in  any  forward-looking
statement made by, or on behalf of, the Company.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

     The  discussion and analysis of our financial condition  and
results  of operations are based upon our consolidated  financial
statements,   which  have  been  prepared  in   accordance   with
accounting principles generally accepted in the United States  of
America ("GAAP").

     Critical  accounting policies are defined as those that  are
reflective of significant judgments and uncertainties, and  could
potentially   result  in  materially  different   results   under
different  assumptions and conditions.  Management has  discussed
each of these critical accounting policies and estimates with the
Audit Committee of the Board of Directors.

Revenue Recognition - The Corporation recognizes revenue  on  all
contracts with a planned manufacturing process in excess of  four
weeks  (which  approximates 575 direct  labor  hours)  using  the
percentage-of-completion  method.   The  percentage-of-completion
method is determined by relating actual labor incurred to-date to
management's  estimate  of total labor to  be  incurred  on  each
contract.  Contracts in progress are reviewed monthly, and  sales
and earnings are adjusted in current accounting periods based  on
revisions   in  the  contract  value  and  estimated   costs   at
completion.

     Revenue not accounted for using the percentage-of-completion
method  is accounted for on the completed contract method because
the   majority  of  the  Company's  contracts  have   a   planned
manufacturing  process of less than four weeks  and  the  results
reported under this method do not vary materially from the use of
the  percentage-of-completion  method.   The  Company  recognizes
revenue  and  all related costs on the completed contract  method
upon   substantial  completion  or  shipment  to  the   customer.
Substantial  completion is consistently defined as at  least  95%
complete  with regard to direct labor hours.  Customer acceptance
is generally required throughout the construction process and the
Company  has  no further material obligations under the  contract
after the revenue is recognized.

Pension  and  Postretirement Benefits  -  The  Company's  defined
benefit  pension  and  other  postretirement  benefit  costs  and
obligations  are  dependent  on  actuarial  assumptions  used  in
calculating such amounts.  These assumptions, which are  reviewed
annually  by  the  Company, include the discount rate,  long-term
expected rate of return on plan assets, salary growth, healthcare
cost trend rate and other economic and demographic factors.   The
Company bases the discount rate assumption for its plans  on  the
AA-rated  corporate  long-term bond yield  rate.   The  long-term
expected  rate  of return on plan assets is based on  the  plan's
asset allocation, historical returns and management's expectation
as  to  future returns that are expected to be realized over  the
estimated  remaining life of the plan liabilities  that  will  be
funded  with the plan assets.  The salary growth assumptions  are
determined based on the Company's long-term actual experience and

<Page>24
future  and  near-term outlook.  The healthcare cost  trend  rate
assumptions  are based on historical cost and payment  data,  the
near-term  outlook,  and an assessment of  the  likely  long-term
trends.

     To   the   extent  that  actual  results  differ  from   our
assumptions, the differences are reflected as unrecognized  gains
and  losses  and  are  amortized to earnings over  the  estimated
future service period of the plan participants to the extent such
total  net recognized gains and losses exceed 10% of the  greater
of  the plan's projected benefit obligation or the market-related
value of assets.  Significant differences in actual experience or
significant  changes  in  future  assumptions  would  affect  the
Company's   pension   and  postretirement   benefit   costs   and
obligations.

Use of Estimates -  The preparation of these financial statements
requires  us  to  make estimates and judgments  that  affect  the
reported amounts of assets and liabilities, revenues and expenses
and  related  disclosure of contingent assets and liabilities  at
the  date of our financial statements.  Actual results may differ
from  these  estimates under different assumptions or conditions.
Use  of  estimates  include  the recording  of  revenue,  pension
obligations,   and  the  underlying  assumptions  and   valuation
reserves  for  uncollectible  accounts,  inventory  obsolescence,
deferred taxes, warranty and liquidated damages.

Results of Operations
- ---------------------

     For   an  understanding  of  the  significant  factors  that
influenced  the  Company's performance, the following  discussion
should  be  read  in conjunction with the quarterly  consolidated
financial  statements  and  the notes to  consolidated  financial
statements.
<Table>
<Caption>

                                            Three Months Ended
                                   ---------------------------------------
                                   December 31, 2004      December 31, 2003
                                   -----------------      -----------------
<S>                                <C>          <C>       <C>          <C>
                                   USA          UK        USA          UK
                                   ---          --        ---          --
Sales                              $10,783      $ 2,406   $ 8,891      $ 2,358
Net Income (Loss)                  $   (69)     $    22   $  (701)     $     0
Diluted Income (Loss)Per Share     $ (0.04)     $  0.01   $ (0.43)     $     0
Identifiable Assets                $31,104      $ 6,046   $31,485      $ 6,176
</Table>









<Page>25
<Table>
<Caption>

                                            Nine Months Ended
                                   ----------------------------------------
                                   December 31, 2004      December 31, 2003
                                   -----------------      -----------------
<S>                                <C>          <C>       <C>          <C>
                                   USA          UK        USA          UK
                                   ---          ---       ---          --
Sales                              $28,253      $ 6,256   $27,901      $ 5,576
Net Loss                           $  (389)     $  (329)  $  (914)     $  (276)
Diluted Loss Per Share             $ (0.23)     $ (0.20)  $ (0.56)     $ (0.17)
</Table>

Amounts above are inclusive of intercompany amounts.

     Consolidated  sales  (net  of intercompany  sales)  for  the
quarter  were  $12,937, as compared to $10,224  for  the  quarter
ended  December  31, 2003.  This represents  a  27%  increase  in
consolidated  sales. Sales in the USA were up 21% from  one  year
ago.   Sales from UK operations were up 2%.  The increase in  USA
sales  for the current quarter was due to selling price increases
initiated  to mitigate rising material costs and greater  surface
condenser  sales.  (Due to the restatement, FYE 2004 consolidated
and USA sales were increased by $197 for the quarter).

     Consolidated sales (net of intercompany sales) for the  nine
months  were $33,781, as compared to $31,348 for the nine  months
ended  December  31, 2003.  This represents  an  8%  increase  in
sales.   Sales  in the USA were up 1% from one year  ago.   Sales
from  UK operations were up 12%.  The FYE 2005 year-to-date (YTD)
increase  in sales was due to USA increased sales in the  current
quarter and increased sales YTD in UK operations of offshore  oil
extraction  pumps. (Due to the restatement, FYE 2004 consolidated
and USA sales increased $429 for the nine months).

     The consolidated gross profit margin for the current quarter
was  25%,  as compared to 15% for the quarter ended December  31,
2003.   By  segment, USA operations' gross profit increased  from
11%  for the third quarter ended December 31, 2003 to 24% for the
current quarter.  The UK's gross profit margin remained unchanged
at  25% for both the quarter ended December 31, 2004 and December
31, 2003.  The improvement in the USA gross profit margin for the
quarter was due to greater sales volume, selling price increases,
which  generated improved contribution margins across all product
lines,  and  fewer sales of lower margin products.  (Due  to  the
restatement,   FYE  2004  consolidated  and  USA   gross   profit
percentages increased 1% for the quarter).










<Page>26
     The  consolidated gross profit margin was 17% for  both  the
nine  months  ended December 31, 2004 and 2003.  USA  operations'
gross profit margin of 15% for the nine months ended December 31,
2004 was unchanged, as compared to the nine months ended December
31,  2003.  The UK's gross profit margin decreased to 20% for the
nine  months ended December 31, 2004 from 22% for the nine months
ended  December 31, 2003.  The reduction in the UK  gross  profit
margin  for  the  nine months was due to the shipment  of  a  few
orders  taken  at very low selling prices.  (The restatement  did
not  change  gross profit percentages for the nine  months  ended
December 31, 2003).

     Selling, General and Administrative expenses (SG&A) were 20%
of  sales  for the current quarter, as compared to  25%  for  the
quarter  ended December 31, 2003 and 22% of sales  for  the  nine
months  ended December 31, 2004, as compared to 24% for the  nine
month  period  ended one year earlier.  Percentage  variances  in
SG&A  expenses  are due to changes in sales levels  in  both  the
quarterly and nine-month comparative periods.

     Interest expense was $34 for the quarter ended December  31,
2004  and $35 for the quarter ended December 31, 2003.   For  the
nine-month  periods  ended December 31, 2004 and  2003,  interest
expense was $84 and $93, respectively.  Interest expense for  the
current  fiscal year to date decreased in the USA, which resulted
in a consolidated decrease of interest expense.

     Other income for the nine months ended December 31, 2004 was
$1,592,  as  compared to $522 for the nine months ended  December
31, 2003.  Other income of $1,592 resulted from a settlement of a
contract  dispute over cancellation charges.  The  settlement  of
this  matter ended a complaint filed in April 2004 in the  United
States  District  Court for the Northern District  of  California
alleging  breach  of  contract by a customer and  a  counterclaim
filed  by  the  customer  seeking  specific  performance  of  the
contract  or money damages.  Other income of $522 recognized  for
the  nine  months  ended  December 31,  2003  represents  a  non-
recurring curtailment gain resulting from the discontinuation  of
postretirement medical benefits.

     Other  expense  recognized in the current quarter  and  nine
months   ended  December  31,  2004  of  $648  was  incurred   in
conjunction  with reaching an Agreement and General Release  with
its  former President and CEO.  In accordance with the agreement,
the  Company  will  retain the former officer as  an  independent
consultant for the period January 1, 2005 to November 8, 2008 and
provide certain medical, dental and insurance benefits during the
consulting  period.   Other expense for  the  nine  months  ended
December 31, 2003 was zero.










<Page>27
     The effective income tax rate for the quarter was (11)%,  as
compared  to 30% at December 31, 2003.  The effective income  tax
rate  for  the nine months ended December 31, 2004  was  35%,  as
compared to 29% at December 31, 2003.  The lower effective income
tax  rate  for the nine-month period ended December 31, 2003,  as
compared  to  2004,  was  attributable  to  permanent  items  not
available  to  the  Company  in  FYE  2005.   The  unusually  low
effective  income tax rate for the current quarter resulted  from
the  need to revise the annualized projected effective income tax
rate  and  recognize the year-to-date provision adjustment  in  a
quarter  when  the  income (loss) before income  tax  amount  was
minimal.   (The restatement did not change the income  tax  rates
for the three or nine months ended December 31, 2003).

     Net loss for the quarter was $21 or $0.01 per diluted share.
This compares to a net loss of $749 or $0.46 per diluted share
for the quarter ended December 31, 2003.  Net losses for the nine-
month  periods  ended December 31, 2004 and 2003  were  $615,  or
$0.37  per diluted share, and $1,245 or $0.76 per diluted  share,
respectively.  (For the nine months ended December 31, 2003,  the
restatement reduced  the consolidated and USA net losses by $44 or
$0.02  per diluted  share.  The restatement reduced the consolidated
and USA net losses for the quarter ended December 31, 2004 by $38
or $0.02 per diluted share.)

Liquidity and Capital Resources
- -------------------------------
<Table>
<Caption>
                                         As of and for the Nine Months Ended
                                       ---------------------------------------
                                       December 31, 2004     December 31, 2003
                                       -----------------     -----------------
<S>                                  <C>        <C>        <C>         <C>
                                        USA         UK        USA         UK
                                        ---         ---       ---         ---
Working Capital                      $10,830    $ 1,914    $ 9,720     $ 1,918
Cash Flow (Deficit) from Operations  $(2,824)   $   195    $(2,612)    $   318
Cash and Investments                 $ 2,711    $    10    $ 3,660     $    44
Capital Expenditures                 $    53    $    74    $   141     $    31
Long-Term Bank Borrowings            $     0    $     0    $     0     $     0
Capital Leases                       $   105    $     0    $   154     $     0
Working Capital Ratio(1)                 2.6        1.6        2.2         1.6
Long-Term Debt/Equity(1)                 0.6%         0%       0.6%          0%
</Table>
(1)As of December 31

   Working  Capital Ratio equals Current Assets divided by Current Liabilities
   Long-Term Debt/Equity equals (Current Portion of Long-Term Debt and Long-
    Term Debt) divided by Shareholders' Equity


     Consolidated  cash flow from operations was negative  $2,629
for  the nine months ended December 31, 2004 compared to negative
cash  flow  from operations of $2,294 for the nine  months  ended
December 31, 2003.  The increase in negative cash flow was due to
increased inventories.  Inventories increased in preparation  for
significant  FYE  2005  fourth quarter  shipments,  for  stocking
standard products and due to rising material costs.
<Page>28
     The   primary  source  of  liquidity  is  cash   flow   from
operations, investments in short-term treasury bills and  secured
credit agreements.

Orders and Backlog
- ------------------

     Consolidated orders for the current quarter were $16,195, as
compared  to  $9,965  for the quarter ended  December  31,  2003,
representing  a 63% increase.  Prior to intercompany elimination,
USA  orders  were $13,954, as compared to $8,301 in  the  quarter
ended  December  31,  2003.  Orders in the  UK  were  $2,638,  as
compared to $2,394 one year ago.

     Consolidated  orders for the nine months ended December  31,
2004  were $41,707, up 44%, as compared to $29,052 for  the  nine
months   ended   December  31,  2003.   Prior   to   intercompany
elimination,  USA orders for the nine months ended  December  31,
2004  were  $36,600, as compared to $23,624 for the  nine  months
ended  December 31, 2003.  UK orders were $5,985 and  $7,504  for
the nine months ended December 31, 2004 and 2003, respectively.

     Orders of surface condensers were up $10,013 over the nine
months  ended December 31, 2003 due to increased demand in  major
project  work  in  the  chemical, energy  and  refinery  sectors.
Improved business conditions are global.  As compared to December
31, 2003, for USA products, export orders are up 53% and domestic
orders are up 57%.  Profit margins on orders in backlog have also
improved.

     Backlog  was  $24,722 at December 31, 2004, as  compared  to
$15,759 at December 31, 2003, representing a 57% increase.  Prior
to  intercompany  eliminations, USA backlog was  $22,145  and  UK
backlog  was $3,082 at December 31, 2004.  At December 31,  2003,
USA and UK backlog amounts were $12,840 and $3,712, respectively.
The  prior  year  backlog amounts have been restated  to  reflect
contract  cancellations and the restatement of sales due  to  the
change  in the revenue recognition accounting method. All  orders
in  backlog  represent  orders from traditional  markets  in  the
Company's established product lines.

Market Risk (Quantitative and Qualitative Disclosures)
- ------------------------------------------------------

     The  principal market risks (i.e., the risk of loss  arising
from  changes  in  market rates and prices) to  which  Graham  is
exposed are:

- -  foreign currency exchange rates
- -  equity price risk (related to its Long-Term Incentive Plan for Directors)
- -  material availability and price risk

     The    assumptions   applied   in   preparing   quantitative
disclosures regarding foreign currency exchange rate  and  equity
price  risk  are  based  upon volatility  ranges  experienced  in
relevant  historical periods, management's current  knowledge  of
the  business and market place, and management's judgment of  the
probability of future volatility based upon the historical trends
and economic conditions of the business.
<Page>29
     Graham's international consolidated sales for the past three
years  approximates  43%  of  total sales.   Operating  in  world
markets  involves  exposure  to movements  in  currency  exchange
rates.  Currency movements can affect sales in several ways,  the
foremost  being  the  ability  to  compete  for  orders   against
competition  having a relatively weaker currency.  Business  lost
due  to  this  cannot  be  quantified.   Secondly,  cash  can  be
adversely impacted by the conversion of sales in foreign currency
to  U.S.  dollars.  The substantial portion of Graham's sales  is
collected  in  the  local currency (USA - dollars;  UK  -  pounds
sterling).  For both quarters ended December 31, 2004  and  2003,
sales  in  foreign  currencies were 2% of sales.   For  the  nine
months  ended  December  31,  2004 and  2003,  sales  in  foreign
currencies  were  3%  and  2% of total sales,  respectively.   At
certain  times,  the  Company  may  enter  into  forward  foreign
currency  exchange  agreements  to  hedge  its  exposure  against
unfavorable  changes  in foreign currency values  on  significant
sales contracts negotiated in foreign currencies.

     Graham  has  limited exposure to foreign currency purchases.
For  the  three month periods ended December 31, 2004  and  2003,
purchases in foreign currencies were 5% and 9% of cost  of  goods
sold,  respectively.  For the nine month periods  ended  December
31,  2004 and 2003, purchases in foreign currencies were  6%  and
10%  of cost of goods sold, respectively.  In FYE 2004 and  2005,
USA operations recorded an unusually significant dollar volume of
orders  utilizing UK subsidiary products in conjunction with  USA
equipment.   At certain times, forward foreign currency  exchange
contracts may be utilized to limit currency exposure.

     UK  operations experienced a current quarter net  income  of
$22,  as  compared  to a quarterly net income (loss)  of  $0  for
December  31, 2003.  For the nine months ended December 31,  2004
and  2003,  foreign operations produced net losses  of  $329  and
$276,   respectively.    As  currency  exchange   rates   change,
translations of the income statements of the UK business into  US
dollars affect year-over-year comparability of operating results.
The  increase in the foreign currency translation rate to convert
pounds  sterling to US dollars increased all UK income  statement
items  and  order  amounts by 12% and all UK  balance  sheet  and
backlog amounts by 7% for the nine months ended December 31, 2004
over  2003.  The Company does not hedge translation risks because
cash flows from UK operations are mostly reinvested in the UK.  A
10% change in foreign currency exchange rates would have impacted
the UK reported net loss by approximately $3 and $0 for the three
months ended December 31, 2004 and 2003, and $33 and $28 for  the
nine month periods, respectively.

     The  Company has a Long-Term Incentive Plan, which  provides
for awards of share equivalent units (SEUs) for outside directors
based  upon the Company's performance.  The outstanding SEUs  are
recorded  at  fair market value thereby exposing the  Company  to
equity  price  risk.  Gains and losses recognized due  to  market
price   changes  are  included  in  the  Company's   results   of
operations.  Based upon the SEUs outstanding at December 31, 2004
and  2003  and  a  $12 per share price, a 50-75%  change  in  the
respective  year end market price of the Company's  common  stock
would  positively  or  negatively impact the Company's  operating

<Page>30 (Continued)
results  by  $79  to  $118 for the three and  nine  months  ended
December  31, 2004 and $99 to $148 for the three and nine  months
ended December 31, 2003.  Assuming required net income of $500 is
met, and based upon a market price of the Company's stock of  $12
per share, a 50-75% change in the stock price would positively or
negatively impact the Company's operating results by $122 to $183
in 2006, $136 to $203 in 2007, $146 to $218 in 2008, $156 to $233
in 2009 and $158 to $237 in 2010.

     The risks associated with materials include availability and
price  increases.  Material shortages have affected the Company's
ability  to  meet delivery requirements for certain orders.   The
Company  has  identified alternative vendors in  such  cases  and
seeks  to  negotiate escalation provisions in its sales contracts
in the event that costs of materials increase.  Profit margins on
sales  would be reduced to the extent rising material costs could
not be passed on to Graham's customers.

Contingencies
- -------------

     The Company is a co-defendant with numerous other defendants
in  matters of litigation alleging personal injury from  exposure
to   asbestos  contained  in  some  of  the  Company's   products
previously  manufactured.  To date, it  has  been  the  Company's
experience that upon investigation the cases have been  dismissed
or  settled  for  minimal  amounts.  However,  the  magnitude  of
potential   damages   on   unsettled  current   claims   is   not
determinable.

       In  December  2004,  the Company received  a  request  for
payment  from the Metal Goods & Manufacturers Trust Fund for  $30
relating  to a workers' compensation assessment asserted  against
members  in  the Trust Fund during the period 1993 through  2001.
The  Company was a member of the Trust Fund from April 1994 until
May  1995.   The  Company is disputing this  claim.   It  is  not
possible  to  predict the outcome of this dispute at  this  time,
however, management has provided for this contingent liability at
December 31, 2004.

       From  time  to  time,  the Company  is  subject  to  legal
proceedings   and  potential  claims  arising  from   contractual
agreements  in  the  ordinary course of  business.   The  Company
believes there are no such matters pending against it that  could
have, individually or in the aggregate, a material adverse effect
on its financial statements.

New Accounting Pronouncements
- -----------------------------

      In  November 2004, the Financial Accounting Standard  Board
(FASB)  issued Statement of Financial Accounting Standards (SFAS)
No. 151, Inventory Costs.  This Statement amends the guidance  in
ARB  No.  43,  Chapter  4, "Inventory Pricing,  "to  clarify  the
accounting  for  abnormal  amounts  of  idle  facility   expense,
freight,  handling  costs and wasted materials.   This  Statement
requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "abnormal."   In
addition,  this  Statement  requires  that  allocation  of  fixed
<Page>31 (Continued)
production overheads to the costs of conversion be based  on  the
normal capacity of the production facilities.  SFAS No. 151  will
be  effective for inventory costs incurred on a prospective basis
during   fiscal  years  beginning  after  June  15,  2005.    The
pronouncement   will   have  the  effect  of   accelerating   the
recognition  of  indirect manufacturing costs in times  of  below
normal manufacturing capacity utilization.

     In  December 2004, the FASB issued SFAS Nos. 152, Accounting
for  Real Estate Time-Sharing Transactions and 153, Exchanges  of
Nonmonetary  Assets  as Amendment of ARB Opinion  No.  29.   Both
statements  are effective for fiscal years beginning  after  June
15, 2005.  It is anticipated that neither pronouncement will have
a significant, if any, impact on Graham's financial reporting, if
any.

       The  FASB  also  issued in December 2004, SFAS  No.  123R,
"Share-Based  Payment".   This Statement  revises  the  standards
established for the accounting of transactions in which an entity
exchanges its equity instruments for goods and services.  It also
addresses  transactions in which an entity incurs liabilities  in
exchange  for goods or services that are based on the fair  value
of  the entity's equity instruments or that may be settled by the
issuance   of  those  equity  instruments.   This  Statement   is
effective  as  of  the beginning of the first  interim  reporting
period  that  begins after December 15, 2005 and applies  to  all
awards  granted after the required effective date and  to  awards
modified,  repurchased,  or  cancelled  after  that  date.    The
adoption  of this Statement will have an effect on the  Company's
consolidated  results of operations.  For additional information,
see Note 3 to the Condensed Consolidated Financial Statements.

Controls and Procedures
- -----------------------

            The  Company's President and Chief Executive  Officer
and  its Vice President-Finance and Chief Financial Officer  each
have  independently  evaluated the Company's disclosure  controls
and procedures as defined in Exchange Act Rules 13a-14(c) and 15d-
14(c)  as  of  the  end of the period covered by  this  quarterly
report on Form 10-Q and each regards such controls as effective.

            There  have been no significant changes to  any  such
controls or in other factors that could significantly affect such
controls, subsequent to the date of their evaluation by  each  of
the CEO and the CFO.













<Page>32
               GRAHAM CORPORATION AND SUBSIDIARIES
                            FORM 10-Q
                        DECEMBER 31, 2004
                   PART II - OTHER INFORMATION


Item 5. Other Information

        The   Company's   Chief  Executive  Officer   and   Chief
Financial  Officer  have furnished to the SEC  the  certifications
with respect to this Form 10-Q that is required by Section 302 and
906 of the Sarbanes-Oxley Act of 2002.  These certifications are
included in Exhibits 31 and 32 to this Form 10-Q.

Item 6. Exhibits

        a. See index to exhibits.


                             SIGNATURES

        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.

                           GRAHAM CORPORATION


                           /s/ J. R. Hansen
                           ----------------
                          J. R. Hansen
                          Vice President Finance and
                          Administration / CFO (Principal
                          Accounting Officer)

Date 2/1/05






















<Page>33
                        INDEX OF EXHIBITS

          (2)   Plan of acquisition, reorganization, arrangement,
          liquidation or succession

               Not applicable.

          (3)(i)      Articles   of   Incorporation   of   Graham
          Corporation  (filed as Exhibit 3(b) to the Registrant's
          annual  report on Form 10-K for the year ended December
          31, 1989, and incorporated herein by reference.)

(3)(ii)   By-laws  of  registrant, as amended (filed  as  Exhibit
          3(ii) to the Registrant's quarterly report on Form 10-Q
          for  the  quarter ended June 30, 2004, and incorporated
          herein by reference).

(4)       Instruments  defining  the  rights  of  security
          holders, including indentures

          (a)  Equity securities

               The instruments defining the rights of the holders
               of Registrant's equity securities are as follows:

                  Certificate  of Incorporation, as  amended,  of
                  Registrant  (filed  as  Exhibit  3(a)  to   the
                  Registrant's annual report on Form 10-K for the
                  fiscal  year  ended  December  31,  1989,   and
                  incorporated herein by reference.)

                  Stockholder  Rights Plan of Graham  Corporation
                  (filed as Item 5 to Registrant's current report
                  filed  on  Form  8-K  on August  23,  2000  and
                  Registrant's  Form 8-A filed on  September  15,
                  2000, and incorporated herein by reference.)

          (b)  Debt securities

               Not applicable.

(10)      Material Contracts

(10.1)    Indemnification Agreements with Named Directors

          1989  Stock  Option  and Appreciation  Rights  Plan  of
          Graham  Corporation  (filed on the  Registrant's  Proxy
          Statement  for its 1990 Annual Meeting of  Stockholders
          and incorporated herein by reference.)

          1995  Graham  Corporation Incentive  Plan  to  Increase
          Shareholder  Value  (filed on  the  Registrant's  Proxy
          Statement  for its 1996 Annual Meeting of  Stockholders
          and incorporated herein by reference.)





<Page>34
Index to Exhibits (Continued)

          2000  Graham  Corporation Incentive  Plan  to  Increase
          Shareholder  Value  (filed on  the  Registrant's  Proxy
          Statement  for its 2001 Annual Meeting of  Stockholders
          and incorporated herein by reference.)

          Graham   Corporation   Outside   Directors'   Long-Term
          Incentive   Plan  (filed  as  Exhibit   10.3   to   the
          Registrant's annual report on Form 10-K for the  fiscal
          year  ended March 31, 1998, and is incorporated  herein
          by reference.)

          Employment  Contracts  between Graham  Corporation  and
          Named Executive Officers (filed as Exhibit 10.4 to  the
          Registrant's annual report on Form 10-K for the  fiscal
          year   ended  March  31,  1998  and  Exhibit  10.2   to
          Registrant's  current  report  filed  on  Form  8-K  on
          December  2,  2004,  and  are  incorporated  herein  by
          reference.)

          Senior   Executive  Severance  Agreements  with   Named
          Executive  Officers  (filed  as  Exhibit  10.5  to  the
          Registrant's annual report on Form 10-K for the  fiscal
          year  ended March 31, 1998, and is incorporated  herein
          by reference.)

          Long-Term  Stock  Ownership Plan of Graham  Corporation
          (filed on the Registrant's Proxy Statement for its 2000
          Annual  Meeting of Stockholders and incorporated herein
          by reference.)

          Agreement and Release of Claims dated November 29, 2004
          between Alvaro Cadena and Graham Corporation (filed  as
          Exhibit  10.1 to Registrant's current report  filed  on
          Form 8-K on December 2, 2004 and is incorporated herein
          by reference.)

          Indemnification Agreement with Named Officer (filed  as
          Exhibit  10.1 to Registrant's current report  filed  on
          Form 8-K on January 25, 2005 and is incorporated herein
          by reference.)

(11)      Statement re-computation of per share earnings

          Computation of per share earnings is included in Note 4
          of the Notes to Financial Information.

(14)      Code of Ethics

          The  Company's  code  of ethics  is  available  on  the
          Company's website at www.graham-mfg.com.

(15)      Letter re-unaudited interim financial information

          Not applicable.



<Page>35 (Continued)
(18)      Letter re-change in accounting principles

          Not applicable.

(19)      Report furnished to security holders

          None.

(22)      Published report regarding matters  submitted  to
          vote of security holders

          None.

(23)      Consents of experts and counsel

          Not applicable.

(24)      Power of Attorney

          Not applicable.

(31)      Rule 13a-14(a)/15d-14(a) Certifications

(32)      Section 1350 Certifications

(99)      Additional exhibits

          None.





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>ex10-1fm10q305.txt
<DESCRIPTION>EXHIBIT 10.1 - INDEMNIFICATION AGREEMENT
<TEXT>

                                                     EXHIBIT 10.1



                    INDEMNIFICATION AGREEMENT


           This  Agreement is made as of the 5th  day  of  March,
2004,  by  and  among Graham Corporation, a Delaware  corporation
(the  "Company"),  and  the  undersigned  (the  "Director")  with
reference to the following facts:

           The  Director is currently serving as a member of  the
Board  of Directors of the Company (the "Board") and the  Company
wishes  the Director to continue in such capacity.  The  Director
is  willing,  under certain circumstances, to  continue  in  such
capacity.

           In  addition  to  the  indemnification  to  which  the
Director is entitled pursuant to the Certificate of Incorporation
of   the  Company,  and  as  additional  consideration  for   the
Director's  service, the Company has, in the past,  furnished  at
its   expense   directors'  and  officers'  liability   insurance
protecting the Director in connection with such service.

          In order to induce the Director to continue to serve as
a  member  of  the Board and in consideration for  his  continued
service,  the Company hereby agrees to indemnify the Director  as
follows:

          1.   The Company will pay on behalf of the Director and
his executors, administrators or assigns, any amount which he  is
or  becomes  legally obligated to pay because  of  any  claim  or
claims made against him because of any act or omission or neglect
or  breach of duty, including any actual or alleged error or  mis
statement  or misleading statement, which he commits  or  suffers
while  acting  in his capacity as a Director of the  Company  and
solely  because of his being a Director.  The payments which  the
Company will be obligated to make hereunder shall include,  inter
alia,  damages, judgments, settlements and costs, cost of investi
gation (excluding salaries of officers or employees of the  Compa
ny)  and costs of defense of legal actions, claims or proceedings
and  appeals therefrom, and costs of attachment or similar bonds;
provided however, that the Company shall not be obligated to  pay
fines  or  other obligations or fees imposed by law or  otherwise
which it is prohibited by applicable law from paying as indemnity
or for any other reason.

          2.   If a claim under this Agreement is not paid by the
Company,  or  on its behalf, within ninety days after  a  written
claim  has been received by the Company, the claimant may at  any
time  thereafter bring suit against the Company  to  recover  the
unpaid amount of the claim and if successful in whole or in part,
the  claimant  shall be entitled to be paid also the  expense  of
prosecuting such claim.




<Page>2 (Continued)
           3.   In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to  all
of  the rights of recovery of the Director, who shall execute all
papers required and shall do everything that may be necessary  to
secure  such  rights, including the execution of  such  documents
necessary to enable the Company effectively to bring suit  to  en
force such rights.

           4.    The Company shall not be liable under this Agree
ment  to  make  any  payment in connection with  any  claim  made
against the Director;

                (a)   for which payment is actually made  to  the
Director  under a valid and collectible insurance policy,  except
in  respect of any excess beyond the amount of payment under such
insurance;

                (b)   for  which  the  Director  is  entitled  to
indemnity and/or payment by reason of having given notice of  any
circumstance which might give rise to a claim under any policy of
insurance, the terms of which have expired prior to the effective
date of this Agreement;

                (c)  for which the Director is indemnified by the
Company otherwise than pursuant to this Agreement;

                (d)   based upon or attributable to the  Director
gaining in fact any personal profit or advantage to which he  was
not legally entitled;

                (e)   for an accounting of profits made from  the
purchase  or  sale by the Director of securities of  the  Company
within  the  meaning of Section 16(b) of the Securities  Exchange
Act  of 1934 and amendments thereto or similar provisions of  any
state statute or common law; or

               (f)  brought about or contributed to by illegal or
dishonest  conduct  on the part of the Director  seeking  payment
hereunder;  however, notwithstanding the foregoing, the  Director
shall  be  protected under this Agreement as to any  claims  upon
which  suit  may be brought against him by reason of any  alleged
dishonest  conduct on his part, unless a judgment or other  final
adjudication thereof adverse to the Director shall establish that
he  committed (i) acts of active and deliberate dishonesty,  (ii)
with  actual  dishonest  purpose  and  intent,  which  acts  were
material to the cause of action so adjudicated.

           5.   No costs, charges or expenses for which indemnity
shall be sought hereunder shall be incurred without the Company's
consent, which consent shall not be unreasonably withheld.

           6.    The  Director, as a condition precedent  to  his
right  to be indemnified under this Agreement, shall give to  the
Company  notice in writing as soon as practicable  of  any  claim
made  against  him for which indemnity will or  could  be  sought
under this Agreement.  Notice to the Company shall be directed to
the  Secretary of the Company at Graham Corporation, 20  Florence
Avenue, Batavia, New York 14020 (or to such other address  as  to
the  Company  may  designate in writing to the Director);  notice
<Page>3
shall  be  deemed  received  if sent  by  prepaid  mail  properly
addressed, the date of such notice being the date postmarked.  In
addition,  the  Director shall give the Company such  information
and  cooperation  as it may reasonably require and  as  shall  be
within the Director's power.

           7.    Costs  and expenses (including attorneys'  fees)
incurred  by  the  Director  in defending  or  investigating  any
action,  suit, proceeding or investigation shall be paid  by  the
Company  as they are incurred in advance of the final disposition
of  such matter; provided, however that the Director must pay  to
the  Company the amount of any such costs and expenses for  which
the Director has been indemnified with respect to such matter, if
it is ultimately determined by a court of final adjudication that
the  Director is not entitled to indemnification under the  terms
of  this  Agreement.  Notwithstanding the foregoing or any  other
provision  of  this Agreement, no indemnification for  costs  and
expenses  shall  be  made by the Company if  a  determination  is
reasonably and promptly made (1) by the Board, by a majority vote
of  a quorum of disinterested directors, or alternatively, (2) if
so directed by a majority vote of a quorum of disinterested direc
tors,  by  independent  legal counsel; or  (3)  if  a  quorum  of
disinterested  directors is not obtainable, by independent  legal
counsel,  that, based upon the facts known to the Board  or  such
independent counsel at the time such determination is  made,  (a)
the Director acted in bad faith or in a manner that he or she did
not  believe to be in or not opposed to the best interest of  the
Company,  or  (b)  with respect to any criminal  proceeding,  the
Director believed or had reasonable cause to believe his  conduct
was  unlawful, or (c) the Director deliberately breached his duty
to the Company or its stockholders.

          8.   In the event that the indemnification provided for
herein  is  held by a court of competent jurisdiction  to  be  un
available to the Director in whole or part, the Company shall con
tribute to the payment of the Director's liabilities in an amount
that  is just and equitable in the circumstances, taking into  ac
count,  among other things, payments by other directors and  offi
cers  of  the Company for their respective liabilities  in  conse
quence  of  the event or events which gave rise to the Director's
liability.   The  Company and the Director  agree  that,  in  the
absence  of  personal  enrichment, acts of intentional  fraud  or
dishonesty  or criminal conduct on the part of the  Director,  it
would not be just and equitable for the Director to contribute to
the payment of Losses arising out of any action, suit, proceeding
or  investigation in an amount greater than:  (i) in a case where
the Director is a director of the Company, but not an officer  of
the  Company, the amount of fees paid to the Director for serving
as  a director during the 12 months preceding the commencement of
such action, suit, proceeding or investigation; or (ii) in a case
where the Director is a director of the Company and is an officer
of the Company, the amount set forth in clause (i) plus 5% of the
aggregate  cash compensation paid to the Director for service  in
such office(s) during the 12 months preceding the commencement of
such action, suit, proceeding or investigation.

           9.    This Agreement may be executed in any number  of
counterparts,  all of which taken together shall  constitute  one
document.
<Page>4
           10.  Nothing herein shall be deemed to diminish or oth
erwise restrict the Director's right to indemnification under any
provision of the certificate of incorporation or by-laws  of  the
Company or under Delaware law.

           11.  This Agreement shall be governed by and construed
in  accordance  with  the law of the State of  Delaware,  without
regard to the conflict of  laws provisions thereof.

           12.   This Agreement shall be binding upon all  succes
sors and assigns of the Company (including any transferee of  all
or substantially all of its assets and any successor by merger or
operation  of law) and shall inure to the benefit of  the  heirs,
personal representatives and estate of Director.

           13.   If any provision or provisions of this Agreement
shall  be  held to be invalid, illegal or unenforceable  for  any
reason  whatsoever (i) the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs  of
this  Agreement containing any such provision held to be invalid,
illegal  or  unenforceable, that are not by  themselves  invalid,
illegal  or  unenforceable) shall not in any way be  affected  or
impaired  thereby, and (ii) to the fullest extent  possible,  the
provisions of this agreement (including, without limitation,  all
portions  of any paragraph of this Agreement containing any  such
provision held to be invalid, illegal or unenforceable, that  are
not  themselves  invalid,  illegal  or  unenforceable)  shall  be
construed so as to give effect to the intent of the parties  that
the Company provide protection to Director to the fullest enforce
able extent.


          IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and signed as of the day  and  year
first above written.




GRAHAM CORPORATION



By:_____________________________





________________________________
Director

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>ex31-110q305.txt
<DESCRIPTION>EXHIBIT 31.1 - 302 CERTIFICATION
<TEXT>
                                                     Exhibit 31.1


                        CERTIFICATION OF
                     CHIEF EXECUTIVE OFFICER


  I, William C. Johnson, certify that:

     1.I  have  reviewed this quarterly report on  Form  10-Q  of
       Graham Corporation;

     2.Based  on  my  knowledge, this quarterly report  does  not
       contain  any untrue statement of a material fact  or  omit
       to  state a material fact necessary to make the statements
       made,  in  light  of the circumstances  under  which  such
       statements were made, not misleading with respect  to  the
       period covered by this quarterly report;

     3.Based  on  my  knowledge,  the financial  statements,  and
       other  financial  information included in  this  quarterly
       report,  fairly  present  in  all  material  respects  the
       financial condition, results of operations and cash  flows
       of  the  registrant as of, and for, the periods  presented
       in this quarterly report;

     4.The  registrant's  other  certifying  officer  and  I  are
       responsible  for  establishing and maintaining  disclosure
       controls and procedures (as defined in Exchange Act  Rules
       13a-15(e) and 15d-15(e))for the registrant and have:

          a) Designed such disclosure controls and procedures, or
          caused  such disclosure controls and procedures  to  be
          designed under our supervision, to ensure that material
          information  relating to the registrant, including  its
          consolidated  subsidiaries, is  made  known  to  us  by
          others  within those entities, particularly during  the
          period   in  which  this  quarterly  report  is   being
          prepared;

          b)  Evaluated  the  effectiveness of  the  registrant's
          disclosure  controls and procedures  and  presented  in
          this   quarterly  report  our  conclusions  about   the
          effectiveness of the disclosure controls and procedures
          as  of  the end of the period covered by this quarterly
          report based on such evaluation; and

          c) Disclosed in this quarterly report any change in the
          registrant's internal control over financial  reporting
          that  occurred  during  the  registrant's  most  recent
          fiscal  quarter  that has materially  affected,  or  is
          reasonably    likely   to   materially   affect,    the
          registrant's internal control over financial reporting;

     5.The  registrant's  other certifying  officer  and  I  have
       disclosed,   based  on  our  most  recent  evaluation   of
       internal   control  over  financial  reporting,   to   the
       registrant's   auditors  and  the   audit   committee   of
       registrant's  board  of directors (or  persons  performing
       the equivalent functions):
<Page>2 (Continued)
                  a)  All significant deficiencies in the design
               and   material  weaknesses  in  the   design   or
               operation  of  internal controls  over  financial
               reporting   which   are  reasonably   likely   to
               adversely  affect  the  registrant's  ability  to
               record,  process, summarize and report  financial
               information; and

               b)  Any  fraud,  whether or  not  material,  that
               involves management or other employees who have a
               significant  role  in  the registrant's  internal
               control over financial reporting.






Date: February 1, 2005                  /s/ William C. Johnson
                                        ----------------------
                                        William C. Johnson
                                        President and
                                        Chief Executive Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>ex31-210q305.txt
<DESCRIPTION>EXHIBIT 31.2 - 302 CERTIFICATION
<TEXT>
                                                    Exhibit 31.2


                        CERTIFICATION OF
                     CHIEF FINANCIAL OFFICER


  I, J. Ronald Hansen, certify that:

     1.I  have  reviewed this quarterly report on  Form  10-Q  of
       Graham Corporation;

     2.Based  on  my  knowledge, this quarterly report  does  not
       contain  any untrue statement of a material fact  or  omit
       to  state a material fact necessary to make the statements
       made,  in  light  of the circumstances  under  which  such
       statements were made, not misleading with respect  to  the
       period covered by this quarterly report;

     3.Based  on  my  knowledge,  the financial  statements,  and
       other  financial  information included in  this  quarterly
       report,  fairly  present  in  all  material  respects  the
       financial condition, results of operations and cash  flows
       of  the  registrant as of, and for, the periods  presented
       in this quarterly report;

     4.The  registrant's  other  certifying  officer  and  I  are
       responsible  for  establishing and maintaining  disclosure
       controls and procedures (as defined in Exchange Act  Rules
       13a-15(e) and 15d-15(e)) for the registrant and have:

          a) Designed such disclosure controls and procedures, or
          caused  such disclosure controls and procedures  to  be
          designed under our supervision, to ensure that material
          information  relating to the registrant, including  its
          consolidated  subsidiaries, is  made  known  to  us  by
          others  within those entities, particularly during  the
          period   in  which  this  quarterly  report  is   being
          prepared;

          b)  Evaluated  the  effectiveness of  the  registrant's
          disclosure  controls and procedures  and  presented  in
          this   quarterly  report  our  conclusions  about   the
          effectiveness of the disclosure controls and procedures
          as  of  the end of the period covered by this quarterly
          report based on such evaluation; and

          c) Disclosed in this quarterly report any change in the
          registrant's internal control over financial  reporting
          that  occurred  during  the  registrant's  most  recent
          fiscal  quarter  that has materially  affected,  or  is
          reasonably    likely   to   materially   affect,    the
          registrant's internal control over financial reporting;

     5.The  registrant's  other certifying  officer  and  I  have
       disclosed,   based  on  our  most  recent  evaluation   of
       internal   control  over  financial  reporting,   to   the
       registrant's   auditors  and  the   audit   committee   of
       registrant's  board  of directors (or  persons  performing
       the equivalent functions):
<Page>2 (Continued)
                  a)  All significant deficiencies in the design
               and   material  weaknesses  in  the   design   or
               operation  of  internal controls  over  financial
               reporting   which   are  reasonably   likely   to
               adversely  affect  the  registrant's  ability  to
               record,  process, summarize and report  financial
               information; and

               b)  Any  fraud,  whether or  not  material,  that
               involves management or other employees who have a
               significant  role  in  the registrant's  internal
               control over financial reporting.








Date: February 1, 2005                  /s/ J. Ronald Hansen
                                        --------------------
                                        J. Ronald Hansen
                                        Vice President-Finance &
                                        Administration
                                        Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>ex32-110q305.txt
<DESCRIPTION>EXHIBIT 32.1 - 906 CERTIFICATION
<TEXT>
                                                     Exhibit 32.1


               GRAHAM CORPORATION AND SUBSIDIARIES

                    CERTIFICATION PURSUANT TO
                     18 U.S.C. SECTION 1350,
                     AS ADOPTED PURSUANT TO
          SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with  the Quarterly Report of Graham  Corporation
(the  "Company") on Form 10-Q for the period ending December  31,
2004 as filed with the Securities and Exchange Commission on  the
date hereof (the "Report"), the undersigned certifies pursuant to
18  U.S.C.  Section 1350, as adopted  pursuant to Section 906  of
the  Sarbanes-Oxley  Act of 2002, that:

(1)  The Report fully complies with the  requirements  of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The  information  contained in the Report fairly  presents,
in  all material respects, the financial condition and results of
operations of the Company.





February 1, 2005                        /s/ William C. Johnson
- -----------------                       -----------------
Date                                    William C. Johnson
                                        President and
                                        Chief Executive Officer


A  signed original of this written statement required by  Section
906  or other document authenticating, acknowledging or otherwise
adopting the signature that appears in the typed form within  the
electronic version of this written statement required by  Section
906, has been provided to Graham Corporation and will be retained
by  Graham  Corporation  and  furnished  to  the  Securities  and
Exchange Commission or its staff upon request.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>ex32-210q305.txt
<DESCRIPTION>EXHIBIT 32.2 - 906 CERTIFICATION
<TEXT>



                                                     Exhibit 32.2



               GRAHAM CORPORATION AND SUBSIDIARIES

                    CERTIFICATION PURSUANT TO
                     18 U.S.C. SECTION 1350,
                     AS ADOPTED PURSUANT TO
          SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In  connection  with  the Quarterly Report of Graham  Corporation
(the  "Company") on Form 10-Q for the period ending December  31,
2004 as filed with the  Securities and Exchange Commission on the
date hereof (the "Report"), the undersigned certifies pursuant to
18  U.S.C.  Section 1350, as adopted  pursuant to Section 906  of
the  Sarbanes-Oxley  Act of 2002, that:

(1)  The Report fully complies with the  requirements  of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The  information  contained in the Report fairly  presents,
in  all material respects, the financial condition and results of
operations of the Company.




February 1, 2005                        /s/ J. Ronald Hansen
- -----------------                       --------------------
Date                                    J. Ronald Hansen
                                        Vice President-Finance
                                        and Administration and
                                        Chief Financial Officer


A  signed original of this written statement required by  Section
906  or other document authenticating, acknowledging or otherwise
adopting the signature that appears in the typed form within  the
electronic version of this written statement required by  Section
906, has been provided to Graham Corporation and will be retained
by  Graham  Corporation  and  furnished  to  the  Securities  and
Exchange Commission or its staff upon request.



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
