William and Mary MASON School of Business

Frank Batten Investment Fund

Graham Corporation June 17, 2011 Paul Jacob, Analyst

Ticker: GHM Current Price (06/17/11): $19.11 Target Price: $25.00

Exchange: NASDAQ Recommendation: BUY ETF: IYJ

BASIC INFORMATION:
Value or Growth: FY end: Industry: Number of Analysts: GROWTH March 31st Industrial Equipment 2

INVESTMENT HIGHLIGHTS
Graham will be positively affected by the likely approval of the Keystone XL pipeline project, which will allow for increased processing of heavy oil from the Canadian oil sands region. Increased global energy needs coupled with the debased U.S. dollar and the conflict in the Middle East will continue to drive the price of oil and other energy based commodities. As energy prices increase, the amount of processing and the need for more efficient processing also increase. Graham will benefit from this by providing the machinery that creates processing efficiency. Recent EPA regulations of mercury emissions will force end-users to upgrade facilities with more advanced products. Concerns over Fukushima will expand regulatory pushback on existing nuclear power plants, likely spurring facility upgrades that will benefit Graham. Graham will benefit from increased exposure to contracts for naval ships and submarines. These avenues of expansion are untapped markets and present high barriers to entry since there is a strict approval process for defense contractors. Graham has recently received clearances that allow them greater access to Navy programs. Alternative energy needs will create higher demand for solar, geothermal, bio-fuel, and other alternative energy sources of which Graham is a key equipment manufacturer. As developing nations continue to rapidly expand, Graham's position in these markets will grow in coincidence with market needs. Graham executives have indicated a strong likelihood for a larger acquisition than the recent Energy Steel deal. This signals future optimism that we believe, given the success of the Energy Steel integration, will lead to an expanded and more efficient organization.

SHARES AND RELATED DATA:

Current Price (9/22/10) 52 Week High 52 Week Low Avg. Daily Vol. Dividend Yield Beta Mkt. Cap. Share Out. Short Interest as % of Float $19.11 $26.30 $13.09 54,328 sh. 0.36% 1.35 $187.85MM 9.83MM 3.70%

OWNERSHIP :
Institutional Ownership Inside Ownership Insider Transactions (TTM) 61% 2.8% -7690 sh.

PRICE RATIOS:
Price/Earnings (TTM) Price/Earnings Growth (5 yr) 31.33 1.6

INCOME DATA:
Revenue (TTM) Revenue Growth (5-year avg.) $74MM 6.1%

PROFITABILITY AND M ETRICS:

Operating Margin (TTM) ROE (TTM) Debt/Equity 12% 8.0% 0%

TOP NEWS:
Graham Corps Q4 Profit Surges, Sales Rise 88% Proactive Investors, 27 May 2011 EPA Loses in Bid to Delay Air Rules Wall Street Journal, 21 January 2011 Graham Corporation Acquires NuclearAccredited Supplier Energy Steel Business Wire, 4:15 PM, 14 December 2010

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INVESTMENT THESIS QUALITATIVE:

Graham Corporation provides vacuum and heat transfer products that are largely driven by energy prices, EPA regulations, and production shifts. Grahams product portfolio consists of custom engineered equipment that is used in the production process for various industries. In these processes, heat or steam is often used to covert a raw material into a final product. For instance, when processing crude oil, the oil is heated up in order to separate it into different types of oil like diesel, petroleum, kerosene and others. In the process, energy is generated. Grahams products allow for the capturing of this energy for reuse. The more energy that is captured, the greater the efficiency of the production process. The equipment also plays a vital role in capturing pollutants that are created. As such, Grahams products tend to be most in demand when energy prices are high (increased need for efficiency) or when regulations force companies to upgrade their pollution capturing systems. Similarly, in the petroleum processing market, Graham benefits when oil companies process greater amounts of sour crude because more processing is required. Looking at the next fiscal year, Graham is expected to benefit from a few changes in the economic and regulatory environments: First, the State Department will likely approve the Keystone XL pipeline project which will create increased need for petrochemical processing in the Canadian sands region. It is expected that the Athabasca oil sands contain 1.7 trillion barrels of oil. Of this amount, approximately 170 billion barrels is economically recoverable, making the Athabasca sands the second largest reserve of oil in the world after Saudi Arabia (Athabasca Oil Sands, 2011). The Keystone XL pipeline would essentially transport this oil from Canada directly to refineries in the Gulf region, for use in the United States and for export abroad. The project currently awaits approval from the Department of the State, but there are a few indications that it will soon meet approval. For instance, refiners have already invested approximately $20 billion in heavy crude assets for processing the oil from the sands, pipe manufacturing for the line has already begun, and last but not least, Paul Elliot, Hillary Clinton's former campaign director, is the head of the pipeline's lobbying effort (Daly, 2011). Mrs. Clinton, who is in charge of the final decision, has already indicated in a speech that approval is likely (Daly, 2011). Furthermore, the heavy oil from the sands requires more processing than other varieties, a good signal that Grahams products will be in high demand. In fact, Graham recently won a $4 million dollar contract from a U.S. refinery for an ejector system that will be used to retrofit facilities for the processing of Athabasca sand oil (Businesswire, 2011). Once the EIS is approved, Graham's stock price should immediately reflect the increased revenue expectations associated with the pipeline. Guidance from management conservatively estimates revenue of $5 to $6 million annually (Glajch, Chief Financial Officer, 2011). Estimations for total demand increase range from $100-150 million (Glajch, Capacity to Grow, 2009). Second, the successful integration of Energy Steel presents an opportunity for future growth via acquisition. Executives have indicated future acquisitions are a likely use of cash on hand. The company has also suggested that future acquisitions will be larger than Energy Steel and may be in the natural gas compression space. Given the success of Energy Steel and the possibility of greater horizontal integration, we believe that this strategy presents strong revenue growth going forward. Third, the new EPA regulations for the emission of mercury and other hazardous pollutants will force processors to upgrade their plants to meet tighter guidelines. While attempts have been made by the [2]

Obama Administration to stall these revised regulations, federal judges have blocked these attempts. Companies are now forced to compensate with increased facility upgrades: focusing largely on boilers. The new regulations were officially released in March of 2011. Increased industry expenditure related to the new regulations is estimated at $9.5 billion the first year and $3 billion each year thereafter (Nelson, 2011). Other estimates point to additional expenses totaling $10.9 billion annually (Jackson, 2011). Fourth, after Fukushima, the Nuclear Regulatory Commission has increased inspections on existing facilities. Executives have indicated that upgrades are likely and will directly benefit Graham in the short term. Fifth, Graham will benefit from increased naval contract work. Within the last year alone, Graham won a $25 million contract from Northrop Grumman Shipbuilding for the new Gerald R. Ford aircraft carrier that will generate expected revenues of $8.3 million over the next three years. Graham has indicated that it gained approval that allowing limited access to naval information for bidding purposes. Past guidance recommended that full access will be granted by 2013 or 2014. Naval contracts are expected to contribute an additional $10-15 million of revenue annually (Glajch, Chief Financial Officer, 2011). Sixth, as a lead producer for alternative energy applications, Graham will benefit from increased reliance on renewable energy. As oil prices increase, power generation will increasingly turn to longer lasting solutions including geothermal, solar, and biodiesel. By providing necessary equipment in the processing of energy from these sources, Graham is well positioned to capture some of the increased expenditure related to alternative energy. Finally, Graham has significant exposure to developing countries in Asia, the Middle East, South America, Latin America, and North Africa. Graham also has significant exposure to the Chinese market. It is expected that continued growth in these markets will been seen in demand growth for Graham's products since developing countries will require more energy for infrastructure development, industrial use, and individual consumption.

EMPIRICAL:
Empirically, a discounted cash flow analysis shows that Graham Corp. is undervalued. Graham has adequate room for stock price inflation at an implicit value of $25.00 per share (see Discounted Cash Flow Valuation). A relative valuation based on P/E and EV/EBITDA ratios indicates a lower valuation around $17 per share. On a historic basis, Graham is trading relatively high in terms of price to earnings (currently at 31x with a range from 10 to 40). However, we remain positive going forward because Graham has a low price to book relative to competitors, indicating that share price degradation will likely be met with resistance.

INVESTMENT RISKS:
Energy price decline. Harmful regulatory changes. Lack of approval for the Keystone XL pipeline. Failure to gain contractor approval for work on naval submarines. Adverse economic conditions leading to a double-dip recession. Raw material supply shortages from global demand or extreme events. Currency inflation in international markets.

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COMPANY DISCUSSION BACKGROUND :

Graham Corporation is a global designer, manufacturer, and supplier of custom-engineered heat exchangers, steam condensers, compressors, vacuum pumps, and ejectors (see definitions below). The company was founded in 1936 by Harold M. Graham. During World War II, Graham specialized in the design and production of heat exchangers for military ships. After the war its focus shifted to industrial applications (Corporation, History, 2011). The company provides its products primarily to industries such as chemical, petrochemical, petroleum refining, and electric power generation, including cogeneration and geothermal plants. It also sells its products to the metal refining, pulp and paper, shipbuilding, water heating, refrigeration, desalination, food processing, drugs, heating, ventilating, and air conditioning industries. The Graham Corporation has a worldwide presence, with equipment installed in facilities located in North and South America, Europe, Asia, Africa, and the Middle East (SBI, 2006). Graham's revenue allocation by product is shown below:

Product Definitions: Heat Exchangers- A device used to transfer heat between two physically separate fluids of different temperatures (SBI, 2006). Condensers- A device used to condense steam into water. After condensation has occurred, the water is collected and transferred back to the boiler, helping to reduce operating costs (SBI, 2006). Compressors- Devices used for increasing the pressure of a given volume of air (SBI Reports, 2007). Vacuum Pumps- Devices that create a partial vacuum by exhausting gas molecules from a closed chamber (SBI Reports, 2007). Ejectors- Similar to vacuum pumps except that these devices employ the venturi effect to pressurize a low pressure fluid.

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STRATEGY:
Graham's strategy can be summarized with the following differentiators: 1. Entry into Expanding Markets: In an effort to expand its brand of high-end products and components, Graham targets opportunities for growth, higher-efficiency production, and attractive new markets both domestically and overseas. Graham has recently made bold moves into the nuclear industry. The company also plans to enter the liquid natural gas compression market in the near future. Further, overseas expansion is expected to outpace domestic expansion as the company seeks higher growth markets. 2. Product Support: Through a robust product support system, Graham intends to leverage marketplace reputation as a differentiator to its offerings. Graham offers on-site and inhouse training, maintenance, repair, and other support services. 3. Future Growth via Acquisition: Graham is constantly evaluating future potential acquisitions that they feel may help strengthen their overall brand. The three main criteria include: Geographic Expansion. Currently, over half of Grahams revenue is from international markets. From FY09 to FY11, the proportion of international revenues increased from 37% to 55%. In order to capitalize on what they perceive as attractive opportunities abroad, Graham is targeting potential investments in China and other Asian expansion. Product Diversification. To strengthen its product portfolio, Graham is evaluating targeted expansion in specialty heat exchangers, process vacuum equipment, packaged systems, process vessels and environmental products. Market Diversification. In addition to its current offerings in the Power market, Graham is targeting opportunities to expand into both nuclear and alternative energy options. Additionally, Graham hopes to further expand Department of Defense markets. 4. Best Company Practices: In engineering and manufacturing specialized equipment for industrial processing, Graham relies heavily on the knowledge, skills, and motivation of its 317 employees. Through maintaining a small company atmosphere with a commitment to excellence, Graham enjoys a very low employee turnover rate. The company also offers competitive benefits to help maintain the stability and low turnover that has been observed in its employee pool. These include: Pension (employee hires prior to 1/1/03) 401k matching (all employees) Health Insurance (current employees) ESOP Tuition Assistance.

PRINCIPLE MARKETS:
Oil Refining (35% of Total Revenues) The success of this industry is largely dependent on the "crack spread," which in turn is based on a number of economic, political, natural, and social factors. Ultimately, refiners are most successful when a barrel of oil is cheap relative to the retail price of oil based products. As these margins increase, refining output increases and the demand for greater efficiency in the refining process follows likewise. One simple way to increase efficiency is to upgrade heat exchangers, condensers, and other specialized equipment that recycles the input-energy required in the refining process. As a primary supplier of these products, Graham's success is positively correlated to the success of the oil industry.

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Product Uses: Vacuum distillation: Graham ejector systems and ejector-liquid ring combination systems support vacuum distillation of crude oil throughout the world. Their experience includes the world's largest vacuum distillation columns in North America, Middle East and Asia. Grahams vacuum producing equipment can be found wherever crude oil is refined. Heavy Oils and Oil Sands: Unconventional crude oils are some of the most difficult to upgrade. Graham equipment is found in Alberta providing reliable operation for the largest oil sands upgraders in Western Canada and in Venezuela for the difficult extra-heavy crude oils from the Orinoco Belt. Lube Oil Fractionation: The production of lube oil from various crude oil slates requires predictable and reliable vacuum levels in the fractionation towers. Graham ejector systems and ejector-liquid ring combination systems for lube oil service are found in the Middle East, North America, Southeast Asia, Australia and Europe. Conversion processes: Including FCCU, hydrocracking, hydrotreating, coking, require reliable equipment to support these specialized services. Graham works closely with turbomachinery equipment providers to ensure steam surface condensers allow optimum horsepower from the steam turbine. Clean transportation fuels: Graham ejector systems and specialty process vacuum condensers provide outstanding performance in ultra-low sulfur diesel (ULSD) and clean gasoline services. Chemical & Petrochemical (22% of Total Revenues) Graham sells various products to the chemicals industry. For instance, heat exchangers are used in a number of applications including cooling, heating, and heat recovery. Other examples are condensers and liquid ring pumps, which are useful for compressing liquids during processing. Since many of the solutions used by this industry are aggressive and corrosive in nature, the equipment manufacturers are relied upon to produce robust products with long replacement cycles (SBI, 2006). Produce Uses: Ethylene: Graham steam surface condensers are installed in the largest ethylene producing facilities in the world. Product reliability and engineering capability to effectively integrate steam surface condensers into today's world scale facilities make Graham an ideal partner. Whether naphtha or natural gas feedstock, Graham has proven experience with cracked gas compressor, ethylene refrigeration compressor, propane refrigeration compressor installations supporting the largest producing plants. Methanol: This building block petrochemical has several compressors services supported by a steam turbine that require steam surface condensers and condenser exhausters. The largest single train methanol plants located in the Middle East use Grahams steam surface condensers. Synthetic gas compressors are critical to throughput. Ammonia/Urea: Fertilizer production for a growing global population will require reliable and proven designs for steam surface condensers and ejector systems. Graham has installations throughout the world for plants designed by every major ammonia or urea process licensor. Their equipment is known for its reliability, quality and engineering expertise that went into its design. Power and Others (43% of Total Revenues) Graham mainly provides heat exchangers, surface condensers, steam ejectors, and liquid pump systems to the power industry. These products allow for a more efficient production process and for emissions control. As such, there is a normal replacement cycle that creates stable business for Graham's products. Product Uses: Geothermal Power Generation: Graham products for geothermal service include both barometric and surface condensers and condenser exhauster system including ejector and liquid ring combination systems. Grahams expertise in both heat transfer and vacuum service for the design of condensing and evacuation systems involving high concentrations of non-condensible gases is a distinct advantage.

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Waste to Energy: Graham has many proven installations throughout the world in waste to energy and cogeneration power producing applications. Products provided for waste to energy service include surface condensers, ejector systems, liquid ring pump packages and specialty heat exchangers. Combined cycle power generation: Graham products provide for combined cycle power generation service including surface condensers, ejector systems, liquid ring pump packages and specialty heat exchangers. Grahams experience is extensive for integrating surface condensers with various turbine-generator suppliers. Ethanol, biodiesel and corn to petrochemicals: Requiring engineered to order ejector systems. Combination ejector-liquid ring pump systems: Uses various heat exchangers. Gas to liquids, coal to liquids, shale oil and solar power: Requiring specialized equipment. In addition to the power industry, Graham products can also be found in: Shipbuilding Refrigeration Water Heating Metal Refining Food Processing Pulp and Paper Processing Desalination

OPERATIONS:
Marketing Grahams largest piece of intellectual property is its brand name. In the highly competitive markets in which it competes, Graham leans heavily on a knowledgeable engineering sales staff to custom design the product that best meets the needs of the customer. Graham relies heavily on its established network of customers to directly market its products. In addition to conventional sales calls, they also maintain a presence in both industry trade shows and publications. With larger agencies, Graham wins work through bid selection processes. Production Graham custom manufactures most of its products in house. However, in times of stronger demand they have been forced to utilize strategic outsourcing to achieve targets. Distribution Distribution of Grahams products is led by an experienced internal engineering team. To custom-design and produce the correct piece of equipment, these representatives work with the customer and contractors throughout the project lifecycle. Graham's distribution network is best described as internal since most of its products are custom made and delivered by the company itself. Graham utilizes an on-time delivery system that is 94% effective. Training and Support To support their products, Graham employs a Service Team to field issues with products, both over the phone and on-site. For assistance with implementation of new products, Graham also provides extensive training materials and the option of on-site training sessions.

COMPETITION:
Competition in Grahams space is moderate. Major competitors include: Gardner Denver- Manufacturer of highly engineered stationary air compressors and blowers for industrial applications. Gardner is a much larger company than Graham Corporation and has been known to grow at a very rapid pace (See Exhibit 14 for a Competitive Mapping). Much of this [7]

growth comes from the use of debt based financing. Gardner is much more diversified than Graham in terms of product portfolio. Geographically, the company focuses more on the European and domestic markets, compared with Graham's focus on Asia, S. America, N. America, and the Middle East. Because the company is larger, its turnover rate and cash conversion cycle are substantially longer than Graham's. Gardner has built barriers to entry through branding. Notably, the company owns Nash, Thomas, CompAir, and more. Chart Industries- Manufacturer of highly engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. Chart is slightly larger than Graham and specializes in energy and chemicals with a high emphasis also placed on compression cylinders and distribution tanks for natural gas. Alpha Laval- Energy-manufacturer of efficient heat exchangers, separators that separate liquids and removes particles from liquids and gases, and equipment that safely transports and regulates fluids.

Graham recognizes that they cannot always compete on price with their competitors, due to a variety of factors in their production process. However, they choose to differentiate themselves as a higher quality alternative with a knowledgeable staff to support customers on a variety of needs. As an indication of Graham's competitive position, the company has been found to hold significant market share in the unique space in which it competes (see Exhibit 15 & 16). Looking at the industry as a whole, the total market size is estimated as follows:

Heat Exchanger & Steam Condensers = Compressors and Vacuum Pumps = Total =

$2.2-2.7 billion $4.4 billion $7 billion

Combined, the total market value is roughly $7 billion dollars of which Graham has a 0.7% penetration (SBI, 2006). Graham's size and lack of debt have allowed it to grow organically and maintain low employee turnover and efficient operations. These characteristics in addition to its entry into fast growing markets (China, Canada, and the Middle East) are believed to give Graham a competitive advantage going forward.

MANAGEMENT:
James R. Lines, CEO Age: 49 years Tenure: 26 years Mr. Lines moved his way up the internal ranks, starting as a production engineer and eventually escalating into management. He has been CEO since 2008. Mr. Lines holds a B.S. in Aerospace Engineering from the State University of New York at Buffalo. Jeffrey F. Glajch, VP- Finance & Administration and CFO Age: 47 years Tenure: 2 years Following the retirement of Ron Hansen in March of 2009, Mr. Glajch joined Graham as the CFO. Mr. Glajch holds an MBA from Purdue University, an MS in Chemical Engineering from Clarkson University, and a BS in Chemistry from Carnegi Mellon University. Prior to his tenure at Graham, he served three years as the Chief Financial Officer of Nukote International, a privately held global remanufacturer of printing and imaging products. Between June 2000 and May 2006, Mr. Glajch was the [8]

Chief Financial Officer of Fisher Scientific Canada, a global healthcare and laboratory equipment company. Mr. Glajch has also previously served as a Senior Manager of Finance and Business Planning/Analysis at Walt Disney World Company, as Director of Finance/Division Controller at Great Lakes Chemical Corporation and in various financial positions with Air Products and Chemicals, Inc (Thompson, Officer & Directors, 2011). Alan E. Smith, VP of Operations Age: 43 years Tenure: 17 years Mr. Smith ascended through the company ranks beginning his career as a process engineer. He has been in his current position since 2007. Jennifer R. Condame, CAO Age: 45 years Tenure: 18 years Prior to joining Graham, Ms. Condame served as an Audit Manager for PricewaterhouseCoopers. She has been Comptroller since 1994 and in her current role since 2008.

HISTORY AND MILESTONES :

2010- Energy Steel Acquisition. In an $18 million cash deal, Graham purchased Energy Steel, a leading code fabrication and specialty machining company dedicated exclusively to the nuclear power industry. In an effort to reduce the cyclicality of its heavy presence in the oil and petrochemical industry, Graham has used this acquisition to expand its footprint in a key growth industry for the company. Prior to the acquisition, Energy Steel generated approximately $10 million in revenue annually. Last quarter, it generated $5.1 million. 2009- Share Repurchase. In January 2009, the board of Graham Corp (GC), a manufacturer of heat exchangers, condensers and vacuum tanks, authorized the repurchase of up to 1 mil common shares, or about 9.88% of the company's common stock outstanding, in open market or privately negotiated transactions. Based on GC's closing stock price of $9.48 on January 29, the last full trading day prior to the announcement of the board's approval, the buyback had an indicated value of up to $9.48 million (Thompson, Deals, 2011). 2005- Reorganization. The company was reorganized into five business groups to focus on efficiency: Condensers, Ejectors, Pumps, Spare Parts and Heat Exchangers. As a result, Graham Precision Pumps UK and Graham Vacuum Pumps UK spun off (eventually bought out and discontinued) (SBI, 2006). 2005 Exporter of the Year. Graham was recognized as the Exporter of the Year by the International Business Council of the Rochester Business Alliance (SBI, 2006).

CONTRACT BACKLOG:
In closing out FY2011, Graham built up $91.1 million backlog for contract services (see Exhibit 4). According to company filings, highlights of those contracts include: $25+ million contract from Northrop Grumman Shipbuilding for equipment to be installed on the U.S Navys new CVN 79 Gerald R. Ford class aircraft carrier. $23 million in contracts for two 400,000 barrels per day refineries being constructed in Saudi Arabia. $12 million in contracts for ethylene, fertilizer and other petrochemical producing plants. $7.5 million in contracts for new oil refining plants under construction in the Peoples Republic of China. $4 million in contracts for alternative energy projects, including geothermal and biomass. $4 million in contracts for oil refinery projects in Mexico and South America. [9]

Graham traditionally converts 85% to 90% of existing backlog to sales within a 12-month period. However, they plan to spread out a few large orders (e.g. Northrop Grumman for the U.S. Navy project and a couple large Middle East refinery orders) over a multi-year period (Annual Report 2010). According to conversations with the CFO, the Northrop Grumman (largest) will be spread over a 3-year period (Glajch, Chief Financial Officer, 2011). Therefore, the conversion rate is expected to be in the 70 percentiles for 2012.

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INDUSTRY DISCUSSION
Graham Corporation manufactures products that meet the needs of many different industrial end-users including: oil refiners, power generators, chemical processors, shipping, alternative energy generators, and many others. This report will concentrate on the largest end-users.

OIL REFINING:
Market Size: Forecast: Driver: $700 billion in 2009 (First Research, 2010) 40% growth in 2010 and 5.2% CAGR from 2010 to 2015 (See Exhibit 5) Economic growth

About 150 petroleum refineries operate in the US, owned by approximately 90 companies, with combined annual revenue of about $700 billion. Large refiners include Chevron, ConocoPhillips, ExxonMobil, Valero, and BP's US-based subsidiaries. Annual revenue fluctuates substantially because of the shifting price of crude oil (First Research, 2010). The oil refining market is best described as concentrated: the eight largest refiners hold about 60 percent of all US refining capacity (First Research, 2010). The margins tend to be relatively small and capital expenditure is quite large. Regulation is a critical aspect that, albeit creating high barriers to entry, tends to reduce margins. While a market is growing for substitute products (notably bio-fuels and ethanol), refined petroleum products will play a critical role in global energy demands for many years to come. Prospects for near term growth are positive with the end of the recession. Evidence of this is found when looking at refiner's capital expenditure this year as projected into the future. Below are two major U.S. refiners and their historic/projected capital expenditure: Capital Expenditure (in Millions USD)
$4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2005 2006 2007 2008 2009 2010 *2011 Valero Sunoco

A trough in spending was hit in 2009/2010 but spending has started to increase again as the effects of the recession wear off. For instance, Valero, one of the top three US refiners by output capacity, has indicated that it will increase capital expenditure by 20% from 2010 to 2011. As capital expenditure continues to increase in the wake of the economic recovery, industrial suppliers including Graham stand to benefit.

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POWER :
Market Size: Forecast: Driver: $130 billion in 2009 (DataMonitor) (1%) change in 2010; 5.3% CAGR from 2010 to 2015 (See Exhibit 6) Economic and population growth

The US electric power generation industry consists of approximately 400 companies with combined annual revenue of about $130 billion. Major companies include American Electric Power, Dominion Resources, Duke Energy, and Exelon. The industry is highly concentrated: the 50 largest companies account for more than 95 percent of revenue (First Research, 2010). Demand is driven by commercial, government, and residential needs for electrical power, which depend mainly on economic activity and population growth. Profitability is determined by government regulations and fuel costs. Large companies have an advantage in negotiating fuel contracts and being able to pass the costs of implementing government regulations directly to consumers. Small companies can compete effectively by exploiting market niches, such as offering green power in regulated markets. The industry is capital-intensive: average annual revenue per employee is about $540,000 (First Research, 2010). The primary product of the industry is alternating current (AC) electrical power. Electricity is produced by generators that convert mechanical energy into electrical energy when large coils are rotated in a powerful magnetic field. Most commercial power comes from turbine engines powered by steam produced by burning fossil fuels, mainly coal and natural gas. Other power sources include steam from nuclear reactors; conventional hydroelectric conversion; and renewable sources such as solar, wind, and geothermal. Power plants typically produce between 500 and 900 megawatts of power, or enough to supply the needs of 500,000 to 1 million households. Larger plants require special metals and fabrication and require more downtime for maintenance, while smaller units aren't as economical to operate (First Research, 2010). Selecting the method of powering an electric generator is critical to its long-term efficiency, since fuel costs are 40 to 60 percent of annual operating expenses. The cost of environmental pollution controls are also a major consideration in selecting a power source. Petroleum and natural gas emissions can be controlled at reasonable costs, but prices for these fuels are often volatile. Coal prices are the most stable of potential fuels, but emission controls can be expensive and some of the control technology is untested. Challenges to designs, extensive environmental studies, and lack of a long-term solution for nuclear waste make the costs of nuclear power plants higher than that of conventional plants. Hydroelectric plants are the most thermally efficient and least polluting generation method, but the number of suitable locations for dams is limited and long-term downstream effects are a growing concern (First Research, 2010). Future expectations for this industry predict growth that will likely exceed inflation by a couple percentiles. Revenue changes for Graham's power segment are likely to be in-line with the industry.

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CHEMICALS & PETROCHEMICALS :

Market Size: Forecast: Driver: $670 billion in 2009 (DataMonitor) 6.9% CAGR from 2009 to 2015 (See Exhibit 7) Economic growth

The US chemicals industry includes about 11,000 companies with combined annual revenue of about $700 billion. Major companies include Dow, DuPont, Eastman Chemical, ExxonMobil Chemical, and Huntsman. The industry is concentrated: the 50 largest firms generate more than half of industry revenue (First Research, 2010). Because chemicals are used to make a wide variety of industrial and consumer products, demand is driven by the overall health of the US economy. The profitability of individual companies is closely tied to efficient operations. Big companies have large economies of scale in production. Small companies can compete effectively by producing specialty products, of which there are a large number, or by operating a single plant highly efficiently. The industry is capital-intensive: average annual revenue per employee is more than $900,000 (First Research, 2010). The manufacturing process usually involves mixing various raw materials and adding heat to produce a series of chemical reactions, then using various physical techniques to isolate the finished product. Production may involve dozens of intermediate steps. Many specialty chemicals are produced in batches, while commodity chemicals are often produced in continuous-flow operations. Special reaction vessels, valves, piping, and control instruments are used to produce different chemicals. Companies generally employ a large number of engineers to manage the manufacturing process. There are usually waste products to be disposed of, and energy inputs are often high. Large amounts of energy are typically used to drive chemical reactions, and natural gas or petroleum is used as feedstock for many chemicals (First Research, 2010). Because the chemical industry continuously invests in the latest technology to maintain efficient operations, it is expected to remain one of the leading avenues of revenue for Graham Corporation. As the chemical industry expands from $670 billion in 2009 to an estimated $1 trillion in 2015, Graham's segmental revenue associated with the chemical industry is also expected to increase.

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NAVAL DEFENSE AND MARINE:

Market Size: Forecast: Driver: Marine - $300 billion in 2009 (DataMonitor) Defense - $500 billion in 2009 (DataMonitor) Marine - 5.8% CAGR from 2010 to 2015 (See Exhibit 8) Defense (2.8%) CAGR from 2011 to 2016 (Whitlock, 2011). Government, International Trade, and International Security

Graham has provided steam surface condensers for main propulsion and turbine generator applications aboard naval and commercial vessels. The range of application varies from the design and fabrication of condensers used in the main propulsion systems of the largest of naval vessels to the supply of small condensers for use aboard commercial ships. The single largest award in this market has been the $25 million contract for the propulsion system on the Gerald R. Ford aircraft carrier being built by Northrop Grumman. Recently the Pentagon announced that it would reduce spending by $78 billion over the next five years (Whitlock, 2011). Even though this diminishes the possibility for growth in the U.S. defense industry, the overall effect on Graham's products is negated by the following admissions: 1. The cuts focus largely on the Army and Marine Corps but Graham is dealing solely with the Navy. 2. The increased revenue that will result from the Navy will come if and when the company is granted contractor approval for work on submarines. This would be an untapped end-user market for the company and so any expenditure decrease on submarine building, which is likely to be put into effect in the first budgetary year well before approval might be granted, won't adversely affect Graham's year-over-year revenue.

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VALUATION RELATIVE VALUATION:

In performing a relative valuation, GHM was compared against four direct competitors (GDI, GTLS, TRS, and DOV) as shown in Table 1 below: Table 1 Relative Valuation
GHM Share Price Market Cap P/E (TTM) P/E (Forward) PEG P/Book (MRQ) EV/EBITDA (TTM) P/Sales (TTM) ROA (TTM) ROE (TTM) Earnings/Share (TTM) D/E Gross Margin (TTM) Operating Margin (TTM) Cash Conversion (MRQ) Beta (Valueline) Forecasted Growth (5 yr) $19.11 187.9M 31.30 23.60 1.60 2.53 12.85 2.51 5.3% 8.0% 0.61 0 30.0% 12.0% 87.5 1.35 20% GDI $79.64 4.16B 20.96 14.48 0.75 3.21 11.77 2.03 9.1% 17.3% 3.80 22.26 33.0% 14.7% 109.3 1.30 28% GTLS $44.35 1.30B 49.83 20.21 1.43 2.52 16.13 2.19 4.1% 5.3% 0.89 43.16 29.8% 10.3% 111.7 1.80 35% TRS $21.56 738.58 14.51 11.41 0.54 5.50 7.47 0.73 8.7% 48.8% 1.49 379 29.7% 12.4% 75.5 1.75 27% DOV $63.22 11.80B 15.28 12.61 1.01 2.45 9.01 1.55 8.0% 17.5% 4.14 46.91 38.3% 14.8% 77.6 1.15 15% Comp. Avg. $52.19 3.23B 25.15 14.68 0.93 3.42 11.10 1.63 7.5% 22.2% $2.58 122.83 32.7% 13.0% 93.5 1.50 26%

Evaluating against the average of these four competitors, the relative valuation produced the following implied price per share based on P/E, P/Book, and EV/EBITDA metrics:
Relative Valuation P/E (TTM) P/E (Forward) EV/EBITDA (TTM) P/Book (MRQ) Average $15.35 $11.89 $16.50 $25.83 $17.39

Generally, the companies used in the evaluation run similar operations as Graham with the exception of two main differences: 1. Graham is much smaller than all of the comparative companies. 2. Graham is financed entirely with equity while its competitors use a debt/equity mix.

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While Grahams size warrants a price discount, lack of debt justifies a larger premium because credit is still tight following the financial crisis. Furthermore, even if Grahams stock price dropped to the lower end of the historical P/E range, the price to book ratio will serve to push it up.

DISCOUNTED CASH FLOW VALUATION :

In computing a valuation based on discounted cash flows, the following assumptions were made: Risk Free Rate = 3% for 10-year treasuries Risk Premium = 5% (based on Prof. Haltiner's Cost of Capital note) Size Premium = 1.5% for low liquidity concerns Beta = 1.35 (Value line). The beta value was checked with a 5-year regression against the sector ETF (IYJ) and the Russell 2000 Small Cap Index, producing an average adjusted beta equal to 1.32.

Using the above values, return on equity worked out to 11.25%. In order to compute WACC, tax was taken at 35% based on historic averages and equity was taken to be the current market cap. ( ) ( )

Graham currently has no long term and minimal short term debt, therefore the WACC worked out to the cost of equity or 11.25%. The valuation was taken out ten years beginning with the next reported quarter (Q1 2012), which will be announced at the end of July 2011 (see Exhibit 9). The model projects 2012 revenue at a 28% growth rate equal to annual revenue of $95 million. Future growth is estimated at 20% for the following 3 years and tapering off thereafter. These estimates are based on company guidance and our own thoughts about the potential markets that Graham services. Additionally, margins were based on the last call and taken at the low end of guidance. An average gross margin of 30% was used for 2012 increasing to 35% beyond. SG&A was approximated at 17.4% of revenue based on the low end of guidance. Capex and depreciation were projected forward at 2010s run rate. Finally, a regression was used to compare working capital and revenue over the past 6 years to create an equation that "predicts" the working capital needs based on forecasted revenues. The equation follows:

The model returned a fair market value of $25.62 per share or approximately $25. Because the model utilized "low-end" approximations, we believe this is a fairly conservative estimate. It is important to note that this valuation doesn't price many of the main drivers (Keystone XL and the granting of full naval access rights) into the stock. Statistical analysis shows that the contribution of these will increase value by $1 to $2 per share. For the sensitivity analysis, revenue growth and gross margin were considered variable. Revenue change from FY 2016 and beyond is a function of Graham's long term ability to seek and capture market growth. The baseline estimate for gross margins was given by Graham's CFO, who expects margins to normalize to the mid to upper 30 percentile when the company reaches previous revenue peaks of $90 to $100 million (Glajch, Chief Financial Officer, 2011). Price sensitivity to a 1% margin movement in either

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direction is relatively high, and therefore an unexpected decline in future margins is likely to decrease value expectations. Table 2 Sensitivity Analysis: Model A

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FINANCIAL ANALYSIS OPERATIONAL :

One of Graham's main strengths is its relatively small size as it is able to capture efficiency in its operations. Evidence for this is clear in the relative valuation (see Valuation) when looking at Graham's cash conversion cycle relative to its competitors. In the past cycle Graham did an effective job increasing the margin productivity of its employees as well as the efficiency of its manufacturing cycle as shown in the following chart:

Although these measurements have retreated since the recession, it is expected that as economic conditions improve greater utilization will be achieved. Current capacity utilization in Batavia is around 80% with expectations of 100% utilization during the next market peak Turning to margins, it is clear that GHM has experienced gross margin erosion since reaching a peak of 44% in Q1 of 2009 [Q4 2011 margins were approximately 30.5%] (see Exhibit 2). Margin erosion occurred for three main reasons: 1. One of Graham's biggest strength lies with the intellectual property of its employees. This is particularly true in the specialized manufacturing segment since the majority of the workers have specialized knowledge and because experience is crucial in the design and manufacturing process. Good engineers and welders are particularly hard to come by. Entering the downturn, Graham chose to retain many of its employees so as to remain competitive when the economy recovered. As a result, Graham saw significant margin erosion. This is normal with any business that experiences significant revenue reduction. However, by retaining its employees, Graham has secured business opportunity.

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Employee Count (Total Full-Time)

350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011

2. Higher material costs from copper, steel, and other commodity materials. 3. A "drying up" of domestic business as a result of the recession forced Graham to concentrate on international markets where competition is higher and margins are lower. Still, when compared against the industry, Graham has maintained an advantage in its margins that will only increase going forward (see Table 4).

Table 4 Market Comparison

Source: Yahoo Finance

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TECHNICAL ANALYSIS
Turning to stock performance, GHM has outperformed the ETF by approximately 6% over the past year (see chart below).

Source: Google Finance Short interest in Graham has gone down recently and is currently low relative to recent trends, indicating investor confidence going forward:

Source: NASDAQ online

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OTHER INFORMATION INSIDERS TRADING:

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MAJOR H OLDERS :

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EXHIBITS
Exhibit 1 Analyst Price Targets

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$10.0

$12.5

$15.0

$17.5

$20.0

$22.5

$25.0

$27.5

$30.0

$0.0 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 0.0% 5.0%

$2.5

$5.0

$7.5

Exhibit 3

Exhibit 2

Quarterly Gross Margins (As Percent of Sales)

Quarterly Sales (in Millions USD)

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2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4

Exhibit 4 Annual Backlog (in Millions USD)

$100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0

2000

1996

1997

1998

1999

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Exhibit 5 Oil Refining Industry Forecast

Source: First Research

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2011

Exhibit 6 Power Industry Forecast

Source: First Research

Exhibit 7 Chemicals & Petrochemicals Industry Forecast

Source: First Research

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Exhibit 8 Marine Industry Forecast

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Exhibit 9 DCF Valuation

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Exhibit 10 Thompson Forecast

Exhibit 11 Analyst Earnings per Share Matrix

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Exhibit 12 Earnings Surprises

Exhibit 13 Earnings Surprises

500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% -50% -100% Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11

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Exhibit 14 Competitive Field

(SBI Reports, 2007) Quadrant I: Companies with relatively high revenue and high year-on-year growth rates. Quadrant II: Companies with relatively high revenue and low year-on-year growth rates. Quadrant III: Companies with relatively low revenue and low year-on-year growth rates. Quadrant IV: Companies with relatively low revenue and low year-on-year growth rates.

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Exhibit 15 Market Share by Product (Domestic)

Exhibit 16 Market Share by Product (Abroad)

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Exhibit 17 Income Statement

(All Values in Millions $USD except as noted) Year Revenue Graham Energy Steel COGS Gross Margin Operating Expenses SG&A Other Operating Income (EBIT) Taxes Tax Effected EBIT Shares Outstanding EPS Depreciation CAP EX Sales YOY COGS (as a % sales) COGS as % Sales Gross Margins Gross Margins SG&A (as a % sales) SG&A as % Sales Operating Margins Operating Margins Tax Rate CapEx (as a % sales) EBITDA EBITDA per share Stock Price P/EBITDA P/EBIT P/E 2005 Year March 41.33 2006 Year March 55.21 2007 Year March 65.82 2008 Year March 86.43 2009 Year March 101.11 2010 Q1 Q2 Q3 Q4 Jun-09 Sep-09 Dec-09 Mar-10 20.14 16.11 12.17 13.78 2011 Q1 Q2 Q3 Q4 Jun-10 Sep-10 Dec-10 Mar-11 13.35 15.72 19.22 25.95 20.80 5.10 9.50 10.38 14.35 18.04 3.85 5.35 4.86 7.90 2012 Q1 Q2 Q3 Q4 Jun-11 Sep-11 Dec-11 Mar-12 23.75 23.75 23.75 23.75 19.00 19.00 19.00 19.00 4.75 4.75 4.75 4.75 16.63 16.63 16.63 16.63 7.13 7.13 7.13 7.13

Year March 62.19

33.79 7.54

39.25 15.96

49.00 16.82

55.27 31.16

59.40 41.71

11.86 8.28

10.25 5.85

8.35 3.82

9.50 4.28

39.96 22.23

Year March 74.24 68.44 5.80 52.27 21.96

Year March 95.00 76.00 19.00 66.50 28.50

7.69 0 -0.15 0.086 -0.237 9.84 (0.02) $ 0.78 0.22 -5% 82% 1% 18% -4% 19% -1% 0% -289% -57% 1% 0.63 0.06 $ 3.5 54.8 -228.1 -145.0

9.82 0 6.14 2.167 3.974 9.84 0.40 $ 0.78 1.05 34% 71% -6% 29% 19% 18% 577% 11% -49% 35% 2% 6.92 0.70 $ 7.8 11.1 12.5 19.3

10.34 0 6.48 0.758 5.723 9.84 0.58 $ 0.87 1.64 19% 74% 3% 26% -8% 16% 9% 10% -26% 12% 2% 7.36 0.75 $ 6.6 8.8 10.0 11.3

13.07 0 18.09 7.07 11.018 9.84 1.12 $ 0.86 1.03 31% 64% -10% 36% 23% 15% 1% 21% 46% 39% 1% 18.95 1.93 $ 17.5 9.1 9.5 15.6

14.83 0 26.89 9.272 17.615

3.25 5.03 1.529 3.501

3.03 2.82 1.24 1.582

2.72 1.10 0.35 0.753

3.10 1.18 0.581 0.602

12.09 0 10.14 3.7 6.438

2.57 1.28 0.414 0.869

3.02 2.33 0.78 1.548

3.58 1.28 0.442 0.838

3.85 4.06 1.295 2.762

13.02 0 8.95 2.931 6.017

4.13 3.00 1.02 1.98

4.13 3.00 1.02 1.98

4.13 3.00 1.02 1.98

4.13 3.00 1.02 1.98

16.50 0 12.00 4.08 7.92 9.84 0.81 2.20 3.30 28% 70% 1% 30% -2% 17% 17% 13% -19% 34% 3%

9.84 9.83 9.84 9.83 9.84 1.79 $ 0.36 $ 0.16 $ 0.08 $ 0.06 $ 0.98 1.49 17% 59% -21% 41% 58% 15% -12% 27% 185% 34% 1% 0.42 0.08 -27% 59% 0% 41% 0% 16% 10% 25% -6% 30% 0% 0.84 0.20 -33% 64% 8% 36% -12% 19% 17% 18% -30% 44% 1% 0.75 0.22 -51% 69% 8% 31% -14% 22% 19% 9% -48% 32% 2% -0.90 0.50 -45% 69% 1% 31% -1% 22% 1% 9% -5% 49% 4%

9.84 9.83 9.84 9.83 9.84 0.65 $ 0.09 $ 0.16 $ 0.09 $ 0.28 $ 1.11 1.00 -38% 64% 5% 36% -8% 19% 38% 16% -34% 36% 2% 0.29 0.53 -34% 71% 11% 29% -19% 19% -1% 10% -41% 32% 4% 0.58 0.16 -2% 66% -7% 34% 18% 19% 0% 15% 54% 34% 1% 0.88 1.44 58% 75% 13% 25% -26% 19% -3% 7% -55% 35% 7% 0.60 0.54 88% 70% -7% 30.5% 20% 15% -21% 16% 135% 32% 2%

9.84 9.83 9.84 9.83 9.84 0.61 $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 2.36 2.67 19% 70% 2% 30% -5% 18% -22% 12% 40% 33% 4% 0.55 0.83 78% 70% -1% 30% 1% 16% -9% 13% 5% 34% 3% 0.55 0.83 51% 70% 0% 30% 0% 16% 0% 13% 0% 34% 3% 0.55 0.83 24% 70% 0% 30% 0% 16% 0% 13% 0% 34% 3% 0.55 0.83 -8% 70% 0% 30.0% 0% 16% 0% 13% 0% 34% 3%

27.86 5.45 3.66 1.85 0.28 2.83 $ 0.55 $ 0.37 $ 0.19 $ 0.03 $ 9.6 14.8 14.9 20.7 18.7 3.4 6.7 10.0 27.4 164.9 3.5 7.2 13.0 46.1 38.9 5.4 10.4 23.2 67.6 76.4

11.25 1.57 2.91 2.16 4.66 11.31 3.55 3.55 3.55 3.55 14.20 1.14 $ 0.16 $ 0.30 $ 0.22 $ 0.47 $ 1.15 $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 1.44 23.5 19.5 20.5 21.5 22 23.5 24 24 24 24 24 20.6 30.4 17.3 24.4 11.6 20.5 16.6 16.6 16.6 16.6 16.6 22.8 37.4 21.7 41.3 13.3 25.8 19.7 19.7 19.7 19.7 19.7 35.9 55.1 32.6 63.1 19.6 38.4 29.8 29.8 29.8 29.8 29.8

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WORKS CITED
Annual Report 2010. Graham Corporation. Web. 27 Jan. 2011. <http://www.grahammfg.com/index.asp?pageId=81 >. Athabasca Oil Sands. (2011, January 3). Retrieved January 22, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Athabasca_oil_sands Businesswire. (2011, January 6). Graham Corporation Wins Two Ejector System Orders Valued at $4 Million. Retrieved January 22, 2011, from Businesswire: http://www.businesswire.com/news/mfrtech/20110106006949/en/Graham-Corporation-WinsEjector-System-Orders-Valued Corporation, G. (2011, January 27). History. Retrieved January 27, 2011, from Graham Corporation: http://www.graham-mfg.com/index.asp?pageId=42 Corporation, G. (2011, January 27). Our Strategy. Retrieved January 17, 2011, from Graham Corporation: http://www.graham-mfg.com/index.asp?pageId=41 Daly, S. (2011, January 10). Graham Corp.: In the Sweet Spot of the Energy Bull-Market. Retrieved January 22, 2011, from Seekingalpha: http://seekingalpha.com/article/245664-graham-corp-inthe-sweet-spot-of-the-energy-bull-market Datamonitor. (2010). Chemicals in the United States. New York: Datamonitor. First Research. (2010, November 1). Industry Profile: Chemicals. Retrieved January 23, 2011, from First Research: http://williamandmary.firstresearch-learn.com/industry.aspx?chapter=0&pid=17 First Research. (2010, November 22). Industry Profile: Petroleum Refining. Retrieved January 23, 2011, from First Research: http://williamandmary.firstresearchlearn.com/industry.aspx?chapter=0&pid=155 First Research. (2010, October 25). Industry Profile: Power. Retrieved January 23, 2011, from First Research: http://williamandmary.firstresearch-learn.com/industry.aspx?chapter=0&pid=241 Glajch, J. (2009). Capacity to Grow. Singular Research Conference (pp. 1-33). Graham Corporation. Glajch, J. (2011, January 21). Chief Financial Officer. (P. Jacob, Interviewer) Jackson, L. (2011, June 13). The EPA's War On Jobs. The Wall Street Journal . Nelson, G. (2011, January 21). With Extension Denied, EPA Sends Boiler Rules to White House. Retrieved January 22, 2011, from New York Times: http://www.nytimes.com/gwire/2011/01/21/21greenwire-with-extension-denied-epa-sends-boilerrules-t-75622.html

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Pulizzi, H. J. (2010, February 16). Obama Unveils Loan Guarantees for Georgia Nuclear Plant. Retrieved January 22, 2011, from Wall Street Journal: http://online.wsj.com/article/SB10001424052748704804204575069301926799046.html SBI. (2006). Heat Exchangers & Steam Condensers and Power Boilers in the U.S. New York: SBI. SBI Reports. (2007). Compressors and Vacuum Pumps and Industrial Spraying Equipment in the U.S. New York: SBI. Thompson. (2011, January 28). Deals. Retrieved January 28, 2011, from Thompson Banker: http://mergers.thomsonib.com/NASApp/DealSearch/TDWhiteLabel.htm?component=overviewde alsTearsheet&currScreenName=XX&source=XX&reptype=standard&outputFormat=xml&dealn umber=2047149020&category=MA&hidelinks=yes&PRODUCT_CODE=Banker&tfn_locale=en -US&SessionID=E Thompson. (2011, January 27). Officer & Directors. Retrieved January 27, 2011, from Thompson ONE Banker: http://banker.thomsonib.com/ta/?ExpressCode=wmary Whitlock, C. (2011, January 7). Pentagon to Cut Spending by $78 Billion, Reduce Troop Strength. Retrieved January 22, 2011, from Washington Post: http://www.washingtonpost.com/wpdyn/content/article/2011/01/06/AR2011010603628.html

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