UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D. C. 20549
 FORM
10-Q
 
 [X] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
 
 For the
quarterly period ended June 29, 2008
 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:       0-27618
 
 Columbus
      McKinnon Corporation(Exact
      name of registrant as specified in its charter)New
      York
              16-0547600(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)140
      John James Audubon Parkway, Amherst, NY
              14228-1197(Address
      of principal executive offices)
              (Zip
      code)(716)
      689-5400(Registrant's
      telephone number, including area code)(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.  :[X]
Yes   []  No
  Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Act.
 Large
      accelerated
      filer  [  ]
              Accelerated
      filer [X]Non-accelerated
      filer  [  ]  (Do not check if a smaller
      reporting company)
              Smaller
      Reporting Company [  ]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [  ] Yes    [X]
No
 
 The
number of shares of common stock outstanding as of July 31, 2008
was:  19,009,888 shares.
  Table of Contents
  FORM 10-Q INDEX
 COLUMBUS
McKINNON CORPORATION
 June
29, 2008
 
 
 Page #Part
      I. Financial InformationItem
      1.
              Condensed
      Consolidated Financial Statements (Unaudited)Condensed consolidated balance sheets – June 29, 2008 and March
      31, 2008
              2Condensed consolidated statements of operations and retained
      earnings - Three months ended June 29, 2008 and July 1,
      2007
              3Condensed consolidated statements of cash flows - Three months
      ended June 29, 2008 and July 1, 2007
              4Condensed consolidated statements of comprehensive income -
      Three months ended June 29, 2008 and July 1, 2007
              5Notes to condensed consolidated financial statements - June
      29, 2008
              6Item
      2.
              Management's Discussion and Analysis of Results of Operations
      and Financial Condition
              15Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              20Item
      4.
              Controls and Procedures
              20Part
      II. Other InformationItem
      1.
              Legal Proceedings – none.
              21Item
      1A.
              Risk Factors
              21Item
      2.
              Unregistered Sales of Equity Securities and Use of Proceeds
      – none.
              21Item
      3.
              Defaults upon Senior Securities – none.
              21Item
      4.
              Submission of Matters to a Vote of Security Holders –
      none.
              21Item
      5.
              Other Information – none.
              21Item
      6.
              Exhibits
              21
 
  - 1
-
 Table of Contents
  Part
I.     Financial Information
 
 Item
1.     Condensed Consolidated Financial Statements
(Unaudited)
 
 COLUMBUS
McKINNON CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS
 
 June
      29,
              
              
              March 31,2008
              
              
              2008ASSETS:
              
              (In
      thousands)Current
      assets:Cash
      and cash equivalents
              
              $
              84,834
              
              
              $
              75,994Trade
      accounts receivable
              
              
              93,736
              
              
              
              93,833Inventories
              
              
              89,071
              
              
              
              84,286Prepaid
      expenses
              
              
              32,610
              
              
              
              17,320Current
      assets of discontinued operations
              
              
              -
              
              
              
              17,334Total
      current assets
              
              
              300,251
              
              
              
              288,767Property,
      plant, and equipment, net
              
              
              53,374
              
              
              
              53,420Goodwill
      and other intangibles, net
              
              
              187,348
              
              
              
              187,376Marketable
      securities
              
              
              30,098
              
              
              
              29,807Deferred
      taxes on income
              
              
              16,390
              
              
              
              17,570Other
      assets
              
              
              6,695
              
              
              
              8,094Assets
      of discontinued operations
              
              
              -
              
              
              
              5,001Total
      assets
              
              $
              594,156
              
              
              $
              590,035LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      liabilities:Notes
      payable to banks
              
              $
              28
              
              
              $
              36Trade
      accounts payable
              
              
              34,606
              
              
              
              35,149Accrued
      liabilities
              
              
              55,696
              
              
              
              52,265Restructuring
      reserve
              
              
              -
              
              
              
              58Current
      portion of long-term debt
              
              
              332
              
              
              
              326Current
      liabilities of discontinued operations
              
              
              15,191
              
              
              
              24,955Total
      current liabilities
              
              
              105,853
              
              
              
              112,789Senior
      debt, less current portion
              
              
              2,986
              
              
              
              3,066Subordinated
      debt
              
              
              129,855
              
              
              
              129,855Other
      non-current liabilities
              
              
              49,294
              
              
              
              48,844Total
      liabilities
              
              
              287,988
              
              
              
              294,554Shareholders'
      equityCommon
      stock
              
              
              190
              
              
              
              189Additional
      paid-in capital
              
              
              179,374
              
              
              
              178,457Retained
      earnings
              
              
              131,296
              
              
              
              122,400ESOP
      debt guarantee
              
              
              (2,694
              )
              
              
              (2,824
              )Accumulated
      other comprehensive loss
              
              
              (1,998
              )
              
              
              (2,741
              )Total
      shareholders' equity
              
              
              306,168
              
              
              
              295,481Total
      liabilities and shareholders' equity
              
              $
              594,156
              
              
              $
              590,035
 
 See
accompanying notes to condensed consolidated financial statements.
 
 
 
 
  - 2
-
 Table of Contents
  
 
 COLUMBUS
McKINNON CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS
 (UNAUDITED)
 
 
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007(In
      thousands)Net
      sales
              
              $
              151,164
              
              
              $
              141,450Cost
      of products sold
              
              
              102,639
              
              
              
              98,118Gross
      profit
              
              
              48,525
              
              
              
              43,332Selling
      expenses
              
              
              18,202
              
              
              
              15,544General
      and administrative expenses
              
              
              9,901
              
              
              
              8,277Restructuring
      charges
              
              
              -
              
              
              
              8Amortization
      of intangibles
              
              
              27
              
              
              
              2828,130
              
              
              
              23,857Income
      from operations
              
              
              20,395
              
              
              
              19,475Interest
      and debt expense
              
              
              3,193
              
              
              
              3,960Investment
      income
              
              
              (291
              )
              
              
              (294
              )Other
      (income) and expense, net
              
              
              (772
              )
              
              
              (939
              )Income
      before income tax expense
              
              
              18,265
              
              
              
              16,748Income
      tax expense
              
              
              6,499
              
              
              
              6,294Income
      from continuing operations
              
              
              11,766
              
              
              
              10,454Loss
      from discontinued operations (net of tax benefit)
              
              
              (2,096
              )
              
              
              (934
              )Net
      income
              
              
              9,670
              
              
              
              9,520Retained earnings
      - beginning of period
              
              
              122,400
              
              
              
              85,237Change
      in accounting principle (note 11)
              
              
              (774
              )
              
              
              (186
              )Retained
      earnings - end
      of period
              
              $
              131,296
              
              
              $
              94,571Basic
      income per share:Income
      from continuing operations
              
              $
              0.62
              
              
              $
              0.56Loss
      from discontinued operations
              
              
              (0.11
              )
              
              
              (0.05
              )Net
      income
              
              $
              0.51
              
              
              $
              0.51Diluted
      income per share:Income
      from continuing operations
              
              $
              0.61
              
              
              $
              0.55Loss
      from discontinued operations
              
              
              (0.11
              )
              
              
              (0.05
              )Net
      income
              
              $
              0.50
              
              
              $
              0.50
 
 See accompanying notes to condensed
consolidated financial statements.
  - 3
-
 Table of Contents
  
 COLUMBUS
McKINNON CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007(In
      thousands)OPERATING
      ACTIVITIES:Income
      from continuing operations
              
              $
              11,766
              
              
              $
              10,454Adjustments
      to reconcile income from continuing
                operations to net cash provided
      by operating activities:Depreciation and
      amortization
              
              
              2,172
              
              
              
              2,091Deferred income
    taxes
              
              
              1,180
              
              
              
              6,072Gain on sale of real
      estate/investments
              
              
              (48
              )
              
              
              (325
              )Stock-based
      compensation
              
              
              408
              
              
              
              195Amortization/write-off of
      deferred financing costs
              
              
              133
              
              
              
              163Changes in operating assets and
      liabilities
                net of effects of business
      divestitures:Trade accounts
      receivable
              
              
              247
              
              
              
              130Inventories
              
              
              (4,613
              )
              
              
              (7,064
              )Prepaid expenses
              
              
              (1,236
              )
              
              
              409Other assets
              
              
              1,244
              
              
              
              (118
              )Trade accounts
      payable
              
              
              (551
              )
              
              
              3,201Accrued and non-current
      liabilities
              
              
              1,347
              
              
              
              (3,188
              )Net
      cash provided by operating activities from continuing
      operations
              
              
              12,049
              
              
              
              12,020Net
      cash used by operating activities from discontinued
    operations
              
              
              (2,218
              )
              
              
              (2,359
              )Net
      cash provided by operating activities
              
              
              9,831
              
              
              
              9,661INVESTING
      ACTIVITIES:Proceeds
      from sale of marketable securities
              
              
              170
              
              
              
              12,776Purchases
      of marketable securities
              
              
              (667
              )
              
              
              (12,663
              )Capital
      expenditures
              
              
              (2,118
              )
              
              
              (2,530
              )Proceeds
      from sale of assets
              
              
              -
              
              
              
              5,454Net
      cash (used) provided by investing activities from continuing
      operations
              
              
              (2,615
              )
              
              
              3,037Net
      cash provided by investing activities from discontinued
      operations
              
              
              139
              
              
              
              116Net
      cash (used) provided by investing activities
              
              
              (2,476
              )
              
              
              3,153FINANCING
      ACTIVITIES:Proceeds
      from exercise of stock options
              
              
              221
              
              
              
              569Net
      payments under revolving line-of-credit agreements
              
              
              (8
              )
              
              
              (671
              )Repayment
      of debt
              
              
              (74
              )
              
              
              (21
              )Other
              
              
              317
              
              
              
              142Net
      cash provided by financing activities from continuing
      operations
              
              
              456
              
              
              
              19Net
      cash provided (used) by financing activities from
      discontinued operations
              
              
              579
              
              
              
              (398
              )Net
      cash provided (used) by financing activities
              
              
              1,035
              
              
              
              (379
              )Effect
      of exchange rate changes on cash
              
              
              450
              
              
              
              808Net
      change in cash and cash equivalents
              
              
              8,840
              
              
              
              13,243Cash
      and cash equivalents at beginning of year
              
              
              75,994
              
              
              
              48,655Cash
      and cash equivalents at end of year
              
              $
              84,834
              
              
              $
              61,898
 See
accompanying notes to condensed consolidated financial
statements.
  - 4
-
 Table of Contents
  COLUMBUS
McKINNON CORPORATION
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
 (UNAUDITED)
 
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007(In
      thousands)Net
      income
              
              $
              9,670
              
              
              $
              9,520Other
      comprehensive income, net of tax:Foreign
      currency translation adjustments
              
              
              947
              
              
              
              1,637Unrealized
      loss on investments:Unrealized
      holding (loss) gain arising during the period
              
              
              (206
              )
              
              
              1Reclassification
      adjustment for loss (gain) included in net income
              
              
              2
              
              
              
              (44
              )(204
              )
              
              
              (43
              )Total
      other comprehensive income
              
              
              743
              
              
              
              1,594Comprehensive
      income
              
              $
              10,413
              
              
              $
              11,114
 
 See
accompanying notes to condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
  - 5
-
 Table of Contents
  COLUMBUS
McKINNON CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 (Dollar
amounts in thousands, except share data)
 June
29, 2008
 
 1.  Description
of Business
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position of Columbus McKinnon Corporation (the
Company) at June 29, 2008 and the results of its operations and its cash flows
for the three month periods ended June 29, 2008 and July 1, 2007, have been
included. Results for the period ended June 29, 2008 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2009. The balance sheet at March 31, 2008 has been derived from the audited
consolidated financial statements at that date, but does not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Columbus McKinnon Corporation annual report on Form 10-K for the year ended
March 31, 2008.
 
 The
Company is a leading manufacturer and marketer of material handling products,
systems and services which lift, secure, position and move material
ergonomically, safely, precisely and efficiently. Key products include hoists,
cranes, chain and forged attachments. The Company’s products are sold,
domestically and internationally, principally to third party distributors
through diverse distribution channels, and to a lesser extent directly to
manufacturers and other end-users.
 
 2.  Discontinued  Operations
 
 As part of its continuing
evaluation of its businesses, the Company determined that its integrated
material handling conveyor systems business (Univeyor A/S) no longer provided a
strategic fit with its long-term growth and operational objectives.On
July 25, 2008, the Company completed the sale of Univeyor A/S, which business
represented the majority of the Solutions segment. In accordance with the
provisions of Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets” the results of operations of the Univeyor
business have been classified as discontinued operations in the condensed,
consolidated balance sheets, statements of operations and statements of cash
flows presented herein.
 
 Summarized
statements of operations for discontinued operations of Univeyor
A/S:
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007Net sales
              
              $
              8,982
              
              
              $
              6,660Loss before income tax
      benefit
              
              
              (1,655
              )
              
              
              (1,411
              )Income
      tax benefit
              
              
              -
              
              
              
              (338
              )Loss from operations, net of tax
      benefit
              
              
              (1,655
              )
              
              
              (1,073
              )Loss
      on sale of discontinued operations
              
              
              (14,627
              )
              
              
              -Loss
      from discontinued operations
              
              
              (16,282
              )
              
              
              (1,073
              )Tax
      benefit from sale
              
              
              14,047
              
              
              
              -Loss
      from discontinued operations, net of tax benefit
              
              $
              (2,235
              )
              
              $
              (1,073
              )
 
 In
connection with the sale of Univeyor A/S on July 25, 2008, the Company used cash
on hand to repay $15,191 in amounts outstanding on Univeyor’s lines of credit
and fixed term bank debt. These obligations are reported as current liabilities
of discontinued operations on the June 29, 2008 consolidated balance
sheet.
  - 6
-
 Table of Contents
 
 Prior to
the disposal of Univeyor A/S, during the past year as part of Univeyor’s ongoing
business, the Company had provided performance guarantees to certain customers
and a third party for the satisfactory completion of contracts to design,
manufacture and install its integrated material handling conveyor systems.
Pursuant to the terms of the share purchase agreement, the Company has agreed to
continue to provide performance guarantees on certain pre-existing contracts
totaling approximately $11,000. Approximately $5,800 of these guarantees are
expected to expire by October 31, 2008, with the remaining portion being
performance bond guarantees that are expected to expire by the end of fiscal
2010 unless released by third party prior thereto. There are no liabilities
recorded in the accompanying condensed consolidated balance sheets relating to
these guarantees. Historically, none of Univeyor’s customers has ever made a
claim against either Univeyor A/S or the Company for indemnification on the
performance guarantees. The terms of the share purchase agreement provide that
the purchaser indemnify the Company for and hold it harmless against any loss,
liability, or claim arising from the guarantees after the date of
sale.
 
 3.  Fair
Value Measurements
 
 Beginning
in fiscal year 2009, the Company adopted the provisions of SFAS No. 157, “Fair
Value Measurements,” (“SFAS 157”) for all financial assets and liabilities and
nonfinancial assets and liabilities that are recognized or disclosed at fair
value on a recurring basis (at least annually). Under this standard, fair value
is defined as the price that would be received to sell an asset or paid to
transfer a liability (i.e. the "exit price") in an orderly transaction between
market participants at the measurement date. The adoption of SFAS No. 157 did
not have a material impact on our consolidated financial position or results of
operations.
 
 SFAS No.
157 establishes a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the
asset or liability developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the
Company's assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available
in the circumstances. The hierarchy is separated into three levels based on the
reliability of inputs as follows:
 
 Level 1 -
Valuations based on quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access.  Since
valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail a significant
degree of judgment.
 
 Level 2 -
Valuations based on quoted prices in markets that are not active or for which
all significant inputs are observable, either directly or indirectly, involving
some degree of judgment.
 
 Level 3 -
Valuations based on inputs that are unobservable and significant to the overall
fair value measurement. The degree of judgment exercised in determining fair
value is greatest for instruments categorized in Level 3.
 
 The
availability of observable inputs can vary from asset/liability to
asset/liability and is affected by a wide variety of factors, including, the
type of asset/liability, whether the asset/liability is established in the
marketplace, and other characteristics particular to the
transaction.  To the extent that valuation is based on models or
inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to
measure fair  value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes the level in the fair value
hierarchy within which the fair value measurement in its entirety falls is
determined based on the lowest level input that is significant to the fair value
measurement in its entirety.
 Fair
value is a market-based measure considered from the perspective of a market
participant rather than an entity-specific measure. Therefore, even when market
assumptions are not readily available, assumptions are required to reflect those
that market participants would use in pricing the asset or liability at the
measurement date.
 
  - 7
-
 Table of Contents
  
 The
following table provides information regarding financial assets and liabilities
measured at fair value on a recurring basis:
 Fair
      value measurements at reporting date usingDescription
              
              At
      June 29, 2008
              
              
              Quoted
      prices in active markets for identical assets
                (Level
      1)
              
              
              Significant
      other observable inputs
                (Level
      2)
              
              
              Significant
      unobservable inputs
                (Level
      3)Assets:Marketable
      securities
              
              $
              30,098
              
              
              $
              30,098
              
              
              $
              -
              
              
              $
              -
 
 As of
June 29, 2008, the Company did not have any nonfinancial assets and liabilities
that are recognized or disclosed at fair value on a recurring
basis.
 
 In February 2007, the FASB issued SFAS No. 159 “The Fair Value
Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159
permits entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007.The Company did not elect to implement the fair value options
allowed under this standard.
 
 4.  Inventories
 
 Inventories
consisted of the following:
 
 June
      29,
              
              
              March 31,2008
              
              
              2008At
      cost - FIFO basis:Raw
      materials
              
              $
              47,608
              
              
              $
              44,594Work-in-process
              
              
              11,177
              
              
              
              10,454Finished
      goods
              
              
              46,451
              
              
              
              44,102105,236
              
              
              
              99,150LIFO
      cost less than FIFO cost
              
              
              (16,165
              )
              
              
              (14,864
              )Net
      inventories
              
              $
              89,071
              
              
              $
              84,286
 
 An actual
valuation of inventory under the LIFO method can be made only at the end of each
year based on the inventory levels and costs at that time. Accordingly, interim
LIFO calculations must necessarily be based on management's estimates of
expected year-end inventory levels and costs. Because these are subject to many
forces beyond management's control, interim results are subject to the final
year-end LIFO inventory valuation.
 
 5.  Net
Periodic Benefit Cost
 
 The
following table sets forth the components of net periodic pension cost for the
Company’s defined benefit pension plans:
 
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007Service costs
              
              $
              1,106
              
              
              $
              1,094Interest cost
              
              
              2,206
              
              
              
              2,019Expected return on plan
      assets
              
              
              (2,299
              )
              
              
              (2,043
              )Net amortization
              
              
              294
              
              
              
              450Net periodic pension
      cost
              
              $
              1,307
              
              
              $
              1,520
 
  - 8
-
 Table of Contents
  The
following table sets forth the components of net periodic postretirement benefit
cost for the Company’s defined benefit postretirement plans:
  Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007Service costs
              
              $
              1
              
              
              $
              1Interest cost
              
              
              167
              
              
              
              146Amortization of plan net
      losses
              
              
              115
              
              
              
              96Net periodic postretirement
      cost
              
              $
              283
              
              
              $
              243
 
 For
additional information on the Company’s defined benefit pension and
postretirement benefit plans, refer to Note 11 in the consolidated financial
statements and footnotes thereto included in the Company’s annual report on Form
10-K for the year ended March 31, 2008.
 
 6.  Income
Taxes
 
 Income
tax expense from continuing operations as a percentage of income from continuing
operations before income tax expense was 35.6% and 37.6% in the fiscal 2009 and
2008 quarters, respectively. The percentages vary from the U.S. statutory rate
due to varying effective tax rates at our foreign subsidiaries.
 
 7.  Earnings
Per Share
 
 The
following table sets forth the computation of basic and diluted earnings per
share:
 Three Months EndedJune
      29,
              
              
              July
      1,2008
              
              
              2007Numerator
      for basic and diluted earnings per share:Net
      income
              
              $
              9,670
              
              
              $
              9,520Denominators:Weighted-average
      common stock outstanding -denominator for basic EPS
              
              
              18,819
              
              
              
              18,638Effect
      of dilutive employee stock options and awards
              
              
              402
              
              
              
              450Adjusted
      weighted-average common stock outstanding and assumed conversions –
      denominator for diluted EPS
              
              
              19,221
              
              
              
              19,088
 
 During
the first three months of fiscal 2009, a total of 27,350 shares of stock were
issued upon the exercising of stock options related to the Company’s stock
option plans.
 
 8.  Business
Segment Information
 
 SFAS No.
131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes the standards for reporting information about operating segments in
financial statements.  Historically the Company had two operating and
reportable segments, Products and Solutions.  The Solutions segment engaged
primarily in the design, fabrication and installation of integrated material
handling conveyor systems and service and in the design and manufacture of tire
shredders, lift tables and light-rail systems.  In the first quarter
of fiscal 2009, the Company re-evaluated its operating and reportable segments
in connection with the discontinuation of its integrated material handling
conveyor systems and service business. With this divestiture, and in
consideration of the quantitative contribution of the remaining portions of the
Solutions segment to the Company as a whole and our products-orientated
strategic growth initiatives, the Company determined that it now has only one
operating and reportable segment for both internal and external reporting
purposes. Prior period financial information included herein has been restated
to reflect the financial position and results of operations as one
segment.
 
  - 9
-
 Table of Contents
  9.
Summary Financial Information
 
 The
following information sets forth the condensed consolidating summary financial
information of the parent and guarantors, which guarantee the 8 7/8% Senior
Subordinated Notes, and the nonguarantors. The guarantors are wholly owned and
the guarantees are full, unconditional, joint and several.
 
 Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedAs
      of June 29, 2008Current
      assets:Cash and cash
      equivalents
              
              $
              35,710
              
              
              $
              51
              
              
              $
              49,073
              
              
              $
              —
              
              
              $
              84,834Trade accounts
      receivable
              
              
              61,703
              
              
              
              5
              
              
              
              32,028
              
              
              
              —
              
              
              
              93,736Inventories
              
              
              36,974
              
              
              
              18,967
              
              
              
              35,495
              
              
              
              (2,365
              )
              
              
              89,071Other current
    assets
              
              
              22,606
              
              
              
              976
              
              
              
              9,028
              
              
              
              —
              
              
              
              32,610Total current
      assets
              
              
              156,993
              
              
              
              19,999
              
              
              
              125,624
              
              
              
              (2,365
              )
              
              
              300,251Property, plant, and equipment,
      net
              
              
              26,345
              
              
              
              11,810
              
              
              
              15,219
              
              
              
              —
              
              
              
              53,374Goodwill and other intangibles,
      net
              
              
              89,005
              
              
              
              57,033
              
              
              
              41,310
              
              
              
              —
              
              
              
              187,348Intercompany
              
              
              50,231
              
              
              
              (55,554
              )
              
              
              (66,965
              )
              
              
              72,288
              
              
              
              —Other assets
              
              
              77,239
              
              
              
              194,783
              
              
              
              31,018
              
              
              
              (249,857
              )
              
              
              53,183Total assets
              
              $
              399,813
              
              
              $
              228,071
              
              
              $
              146,206
              
              
              $
              (179,934
              )
              
              $
              594,156Current
      liabilities of continuing operations
              
              $
              43,099
              
              
              $
              16,618
              
              
              $
              33,911
              
              
              $
              (2,966
              )
              
              $
              90,662Current
      liabilities of discontinued operations
              
              
              —
              
              
              
              —
              
              
              
              15,191
              
              
              
              —
              
              
              
              15,191Current
      liabilities
              
              
              43,099
              
              
              
              16,618
              
              
              
              49,102
              
              
              
              (2,966
              )
              
              
              105,853Long-term
      debt, less current portion
              
              
              129,855
              
              
              
              2,763
              
              
              
              223
              
              
              
              —
              
              
              
              132,841Other
      non-current liabilities
              
              
              12,018
              
              
              
              10,593
              
              
              
              26,683
              
              
              
              —
              
              
              
              49,294Total
    liabilities
              
              
              184,972
              
              
              
              29,974
              
              
              
              76,008
              
              
              
              (2,966
              )
              
              
              287,988Shareholders'
      equity
              
              
              214,841
              
              
              
              198,097
              
              
              
              70,198
              
              
              
              (176,968
              )
              
              
              306,168Total liabilities and
      shareholders' equity
              
              $
              399,813
              
              
              $
              228,071
              
              
              $
              146,206
              
              
              $
              (179,934
              )
              
              $
              594,156
 
 
 
 For
      the Three Months Ended June 29, 2008Net
      sales
              
              $
              75,255
              
              
              $
              43,093
              
              
              $
              44,037
              
              
              $
              (11,221
              )
              
              $
              151,164Cost
      of products sold
              
              
              54,048
              
              
              
              32,295
              
              
              
              27,517
              
              
              
              (11,221
              )
              
              
              102,639Gross
      profit
              
              
              21,207
              
              
              
              10,798
              
              
              
              16,520
              
              
              
              —
              
              
              
              48,525Selling,
      general and administrative expenses
              
              
              14,661
              
              
              
              3,367
              
              
              
              10,075
              
              
              
              —
              
              
              
              28,103Amortization
      of intangibles
              
              
              26
              
              
              
              1
              
              
              
              —
              
              
              
              —
              
              
              
              2714,687
              
              
              
              3,368
              
              
              
              10,075
              
              
              
              —
              
              
              
              28,130Income
      from operations
              
              
              6,520
              
              
              
              7,430
              
              
              
              6,445
              
              
              
              —
              
              
              
              20,395Interest
      and debt expense
              
              
              2,762
              
              
              
              400
              
              
              
              31
              
              
              
              —
              
              
              
              3,193Other
      (income) and expense, net
              
              
              (280
              )
              
              
              (24
              )
              
              
              (759
              )
              
              
              —
              
              
              
              (1,063
              )Income
      before income tax expense
              
              
              4,038
              
              
              
              7,054
              
              
              
              7,173
              
              
              
              —
              
              
              
              18,265Income
      tax expense
              
              
              1,678
              
              
              
              2,777
              
              
              
              2,044
              
              
              
              —
              
              
              
              6,499Income
      from continuing operations
              
              
              2,360
              
              
              
              4,277
              
              
              
              5,129
              
              
              
              —
              
              
              
              11,766Income
      (loss) from discontinued operations
              
              
              139
              
              
              
              —
              
              
              
              (2,235
              )
              
              
              —
              
              
              
              (2,096
              )Net
      income
              
              $
              2,499
              
              
              $
              4,277
              
              
              $
              2,894
              
              
              $
              —
              
              
              $
              9,670
 
 
 
 
  - 10
-
 Table of Contents
   Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedFor
      the Three Months Ended June 29, 2008Operating
      activities:Net
      cash provided by operating activities from continuing
      operations
              
              $
              4,042
              
              
              $
              697
              
              
              $
              7,310
              
              
              $
              —
              
              
              $
              12,049Net
      cash used by operating activities from discontinued
    operations
              
              
              —
              
              
              
              —
              
              
              
              (2,218
              )
              
              
              —
              
              
              
              (2,218
              )Net
      cash provided by operating activities
              
              
              4,042
              
              
              
              697
              
              
              
              5,092
              
              
              
              —
              
              
              
              9,831Investing
      activities:Purchase
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              (497
              )
              
              
              —
              
              
              
              (497
              )Capital
      expenditures
              
              
              (809
              )
              
              
              (257
              )
              
              
              (1,052
              )
              
              
              —
              
              
              
              (2,118
              )Net
      cash used by investing activities from continuing
    operations
              
              
              (809
              )
              
              
              (257
              )
              
              
              (1,549
              )
              
              
              —
              
              
              
              (2,615
              )Net
      cash provided by investing activities from discontinued
      operations
              
              
              139
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              139Net
      cash used by investing activities
              
              
              (670
              )
              
              
              (257
              )
              
              
              (1,549
              )
              
              
              —
              
              
              
              (2,476
              )Financing
      activities:Proceeds
      from stock options exercised
              
              
              221
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              221Net
      payments under revolving line-of-creditagreements
              
              
              —
              
              
              
              —
              
              
              
              (8
              )
              
              
              —
              
              
              
              (8
              )Repayment
      of debt
              
              
              —
              
              
              
              (46
              )
              
              
              (28
              )
              
              
              —
              
              
              
              (74
              )Other
              
              
              317
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              317Net
      cash provided (used) by financing activities from continuing
      operations
              
              
              538
              
              
              
              (46
              )
              
              
              (36
              )
              
              
              —
              
              
              
              456Net
      cash provided by financing activities from discontinued
      operations
              
              
              —
              
              
              
              —
              
              
              
              579
              
              
              
              —
              
              
              
              579Net
      cash provided (used) by financing activities
              
              
              538
              
              
              
              (46
              )
              
              
              543
              
              
              
              —
              
              
              
              1,035Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              (2
              )
              
              
              452
              
              
              
              —
              
              
              
              450Net
      change in cash and cash equivalents
              
              
              3,910
              
              
              
              392
              
              
              
              4,538
              
              
              
              —
              
              
              
              8,840Cash
      and cash equivalents at beginning of period
              
              
              31,800
              
              
              
              (341
              )
              
              
              44,535
              
              
              
              —
              
              
              
              75,994Cash
      and cash equivalents at end of period
              
              $
              35,710
              
              
              $
              51
              
              
              $
              49,073
              
              
              $
              —
              
              
              $
              84,834
 
  - 11
-
 Table of Contents
  
 Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedAs
      of March 31, 2008Current
      assets:Cash and cash
      equivalents
              
              $
              31,800
              
              
              $
              (341
              )
              
              $
              44,535
              
              
              $
              —
              
              
              $
              75,994Trade accounts
      receivable
              
              
              62,992
              
              
              
              —
              
              
              
              30,841
              
              
              
              —
              
              
              
              93,833Inventories
              
              
              35,375
              
              
              
              18,797
              
              
              
              32,479
              
              
              
              (2,365
              )
              
              
              84,286Other current
    assets
              
              
              8,264
              
              
              
              1,025
              
              
              
              8,031
              
              
              
              —
              
              
              
              17,320Current assets of discontinued
      operations
              
              
              —
              
              
              
              —
              
              
              
              17,334
              
              
              
              —
              
              
              
              17,334Total current
      assets
              
              
              138,431
              
              
              
              19,481
              
              
              
              133,220
              
              
              
              (2,365
              )
              
              
              288,767Property, plant, and equipment,
      net
              
              
              26,834
              
              
              
              11,916
              
              
              
              14,670
              
              
              
              —
              
              
              
              53,420Goodwill and other intangibles,
      net
              
              
              89,008
              
              
              
              57,034
              
              
              
              41,334
              
              
              
              —
              
              
              
              187,376Intercompany
              
              
              50,555
              
              
              
              (59,869
              )
              
              
              (64,821
              )
              
              
              74,135
              
              
              
              —Other assets
              
              
              79,909
              
              
              
              194,783
              
              
              
              30,636
              
              
              
              (249,857
              )
              
              
              55,471Assets of discontinued
      operations
              
              
              —
              
              
              
              —
              
              
              
              5,001
              
              
              
              —
              
              
              
              5,001Total assets
              
              $
              384,737
              
              
              $
              223,345
              
              
              $
              160,040
              
              
              $
              (178,087
              )
              
              $
              590,035Current
      liabilities of continuous operations
              
              $
              42,714
              
              
              $
              15,951
              
              
              $
              30,288
              
              
              $
              (1,119
              )
              
              $
              87,834Current
      liabilities of discontinued operations
              
              
              —
              
              
              
              —
              
              
              
              24,955
              
              
              
              —
              
              
              
              24,955Current
      liabilities
              
              
              42,714
              
              
              
              15,951
              
              
              
              55,243
              
              
              
              (1,119
              )
              
              
              112,789Long-term
      debt, less current portion
              
              
              129,855
              
              
              
              2,815
              
              
              
              251
              
              
              
              —
              
              
              
              132,921Other
      non-current liabilities
              
              
              12,312
              
              
              
              10,757
              
              
              
              25,775
              
              
              
              —
              
              
              
              48,844Total
    liabilities
              
              
              184,881
              
              
              
              29,523
              
              
              
              81,269
              
              
              
              (1,119
              )
              
              
              294,554Shareholders'
      equity
              
              
              199,856
              
              
              
              193,822
              
              
              
              78,771
              
              
              
              (176,968
              )
              
              
              295,481Total liabilities and
      shareholders' equity
              
              $
              384,737
              
              
              $
              223,345
              
              
              $
              160,040
              
              
              $
              (178,087
              )
              
              $
              590,035
 
 
 For
      the Three Months Ended July 1, 2007Net
      sales
              
              $
              74,263
              
              
              $
              41,361
              
              
              $
              35,110
              
              
              $
              (9,284
              )
              
              $
              141,450Cost
      of products sold
              
              
              54,410
              
              
              
              30,428
              
              
              
              22,564
              
              
              
              (9,284
              )
              
              
              98,118Gross
      profit
              
              
              19,853
              
              
              
              10,933
              
              
              
              12,546
              
              
              
              —
              
              
              
              43,332Selling,
      general and administrative expenses
              
              
              12,770
              
              
              
              3,195
              
              
              
              7,856
              
              
              
              —
              
              
              
              23,821Restructuring
      charges
              
              
              8
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              8Amortization
      of intangibles
              
              
              24
              
              
              
              1
              
              
              
              3
              
              
              
              —
              
              
              
              2812,802
              
              
              
              3,196
              
              
              
              7,859
              
              
              
              —
              
              
              
              23,857Income
      from operations
              
              
              7,051
              
              
              
              7,737
              
              
              
              4,687
              
              
              
              —
              
              
              
              19,475Interest
      and debt expense
              
              
              2,920
              
              
              
              997
              
              
              
              43
              
              
              
              —
              
              
              
              3,960Other
      (income) and expense, net
              
              
              (364
              )
              
              
              (250
              )
              
              
              (619
              )
              
              
              —
              
              
              
              (1,233
              )Income
      before income tax expense
              
              
              4,495
              
              
              
              6,990
              
              
              
              5,263
              
              
              
              —
              
              
              
              16,748Income
      tax expense
              
              
              1,827
              
              
              
              2,740
              
              
              
              1,727
              
              
              
              —
              
              
              
              6,294Income
      from continuing operations
              
              
              2,668
              
              
              
              4,250
              
              
              
              3,536
              
              
              
              —
              
              
              
              10,454Income
      (loss) from discontinued operations
              
              
              139
              
              
              
              —
              
              
              
              (1,073
              )
              
              
              —
              
              
              
              (934
              )Net
      income
              
              $
              2,807
              
              
              $
              4,250
              
              
              $
              2,463
              
              
              $
              —
              
              
              $
              9,520
 
 
  - 12
-
 Table of Contents
  
 Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedFor
      the Three Months Ended July 1, 2007Operating
      activities:Net
      cash provided (used) by operating activities from continuing
      operations
              
              $
              15,227
              
              
              $
              (5,260
              )
              
              $
              2,053
              
              
              $
              —
              
              
              $
              12,020Net
      cash used by operating activities from discontinued
    operations
              
              
              —
              
              
              
              —
              
              
              
              (2,359
              )
              
              
              —
              
              
              
              (2,359
              )Net
      cash provided (used) by operating activities
              
              
              15,227
              
              
              
              (5,260
              )
              
              
              (306
              )
              
              
              —
              
              
              
              9,661Investing
      activities:Sale
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              113
              
              
              
              —
              
              
              
              113Capital
      expenditures
              
              
              (1,609
              )
              
              
              (699
              )
              
              
              (222
              )
              
              
              —
              
              
              
              (2,530
              )Proceeds
      from sale of assets
              
              
              —
              
              
              
              5,454
              
              
              
              —
              
              
              
              —
              
              
              
              5,454Net
      cash (used) provided by investing activities from continuing
      operations
              
              
              (1,609
              )
              
              
              4,755
              
              
              
              (109
              )
              
              
              —
              
              
              
              3,037Net
      cash provided by investing activities from discontinued
      operations
              
              
              139
              
              
              
              —
              
              
              
              (23
              )
              
              
              —
              
              
              
              116Net
      cash (used) provided by investing activities
              
              
              (1,470
              )
              
              
              4,755
              
              
              
              (132
              )
              
              
              —
              
              
              
              3,153Financing
      activities:Proceeds
      from stock options exercised
              
              
              569
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              569Net
      payments under revolving line-of-creditagreements
              
              
              —
              
              
              
              —
              
              
              
              (671
              )
              
              
              —
              
              
              
              (671
              )Repayment
      of debt
              
              
              —
              
              
              
              —
              
              
              
              (21
              )
              
              
              —
              
              
              
              (21
              )Other
              
              
              142
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              142Net
      cash provided (used) by financing activities from continuing
      operations
              
              
              711
              
              
              
              —
              
              
              
              (692
              )
              
              
              —
              
              
              
              19Net
      cash used by financing activities from discontinued
    operations
              
              
              —
              
              
              
              —
              
              
              
              (398
              )
              
              
              —
              
              
              
              (398
              )Net
      cash provided (used) by financing activities
              
              
              711
              
              
              
              —
              
              
              
              (1,090
              )
              
              
              —
              
              
              
              (379
              )Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              (24
              )
              
              
              832
              
              
              
              —
              
              
              
              808Net
      change in cash and cash equivalents
              
              
              14,468
              
              
              
              (529
              )
              
              
              (696
              )
              
              
              —
              
              
              
              13,243Cash
      and cash equivalents at beginning of period
              
              
              18,366
              
              
              
              (1,162
              )
              
              
              31,451
              
              
              
              —
              
              
              
              48,655Cash
      and cash equivalents at end of period
              
              $
              32,834
              
              
              $
              (1,691
              )
              
              $
              30,755
              
              
              $
              —
              
              
              $
              61,898
 
 10.  Loss
Contingencies
 
 Like many
industrial manufacturers, the Company is involved in asbestos-related
litigation.  In continually evaluating costs associated with its
estimated asbestos-related liability, the Company reviews, among other things,
the incidence of past and recent claims, the historical case dismissal rate, the
mix of the claimed illnesses and occupations of the plaintiffs, its recent and
historical resolution of the cases, the number of cases pending against it, the
status and results of broad-based settlement discussions, and the number of
years such activity might continue. Based on this review, the Company has
estimated its share of liability to defend and resolve probable asbestos-related
personal injury claims. This estimate is highly uncertain due to the limitations
of the available data and the difficulty of forecasting with any certainty the
numerous variables that can affect the range of the liability. The Company will
continue to study the variables in light of additional information in order to
identify trends that may become evident and to assess their impact on the range
of liability that is probable and estimable.
 
 Based on
actuarial information, the Company has estimated its asbestos-related aggregate
liability through March 2026 and March 2038 to range between $5,000 and $15,000
using actuarial parameters of continued claims for a period of 18 to 30 years.
The Company's estimation of its asbestos-related aggregate liability that is
probable and estimable, in accordance with U.S. generally accepted accounting
principles approximates $8,400 which has been reflected as a liability in the
consolidated financial statements as of June 29, 2008. The recorded liability
does not consider the impact of any potential favorable federal legislation.
This liability may fluctuate based on the uncertainty in the number of future
claims that will be filed and the cost to resolve those claims, which may be
influenced by a number of factors, including the outcome of the ongoing
broad-based settlement negotiations, defensive strategies, and the cost to
resolve claims outside the broad-based settlement program. Of
  - 13
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  this
amount, management expects to incur asbestos liability payments of approximately
$400 over the next 12 months. Because payment of the liability is likely to
extend over many years, management believes that the potential additional costs
for claims will not have a material after-tax effect on the financial condition
of the Company or its liquidity, although the net after-tax effect of any future
liabilities recorded could be material to earnings in a future
period.
 
 11.  New
Accounting Standards
 
 On April
1, 2007, the Company adopted the provisions of FASB Interpretation ("FIN") No.
48 “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of
SFAS No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized under SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and also provides
guidance on various related matters such as derecognition, interest and
penalties, and disclosure.  The adoption of FIN 48 resulted in a $186
reduction to the opening balance of retained earnings, recorded on the date of
adoption.
 
 On April
1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force
(“EITF”) Issue No. 06-10, “Accounting for Collateral Assignment
Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In accordance with
EITF 06-10, an employer should recognize a liability for the postretirement
benefit related to a collateral assignment split-dollar life insurance
arrangement in accordance with either SFAS No. 106, Employers’ Accounting
for Postretirement Benefits Other Than Pensions, or APB Opinion 12, Omnibus
Opinion—1967. The provisions of EITF 6-10 were applied as a change in
accounting principle through a cumulative-effect adjustment to retained
earnings.  The adoption of EITF 6-10 resulted in a $774 reduction to
the opening balance of retained earnings, recorded on the date of
adoption.
 
 On April
1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands the required disclosure for fair value
measurements. The adoption of SFAS No. 157 did not have a material impact on our
consolidated financial position or results of operations. See Footnote
No. 3, “Fair Value Measurements,” for additional information.
 
 In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. The Company did not elect to implement the
fair value options allowed under this standard.
 
 In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity’s
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. We adopted all of the
currently required provisions of SFAS 158 in fiscal 2007. This statement also
requires an entity to measure a defined benefit postretirement plan’s assets and
obligations that determine its funded status as of the end of the employers’
fiscal year. This requirement is effective for fiscal years ending after
December 15, 2008. The Company does not expect the adoption of this
requirement to have a material impact on the Company’s consolidated financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring
entity in a business combination to recognize all the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose all of the information required
to evaluate and understand the nature and financial effect of the business
combination. This statement is effective for acquisition dates on or after the
beginning of the first annual reporting period beginning after December 15,
2008. The Company is currently evaluating the impact the adoption of SFAS 141(R)
will have on the Company’s consolidated financial statements.
  - 14
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 Item
2.                                                                                                                                              
 MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
 RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
 (Dollar
amounts in thousands)
 
 Executive
Overview
 
 We are a
leading manufacturer and marketer of a wide variety of powered and manually
operated wire rope and chain hoists, industrial crane systems, chain, hooks and
attachments, actuators, rotary unions, lift tables and industrial components
serving a wide variety of commercial and industrial end-user markets. Our
products are used to efficiently and ergonomically move, lift, position or
secure objects and loads.
 
 Founded
in 1875, we have grown to our current size and leadership position through
organic growth and acquisitions. We have developed our leading market position
over our 133-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, acquisitions have
significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and customer base. Ongoing operation of these
businesses includes extending our sales activities to the European and Asian
marketplaces and improving our productivity. We are executing those initiatives
through expanded sales activities, our Lean manufacturing efforts and new
product development. Shareholder value will be enhanced through continued
emphasis on improvement of the fundamentals including manufacturing efficiency,
cost containment, efficient capital investment, market expansion and excellent
customer satisfaction.
 
 We
maintain a strong North American market share with significant leading market
positions in hoists, lifting and sling chain, and forged attachments. To broaden
our product offering in markets where we have a strong competitive position as
well as to facilitate penetration into new geographic markets, we have
heightened our new product development activities. New product development
activities have been focused on product line offerings of hoist and rigging
products in accordance with international standards, to complement our offering
of products designed in accordance with U.S. standards. Our efforts to expand
our global sales are being accomplished through the introduction of certain of
our products that historically have been distributed only in North America and
also by introducing new products through our existing European distribution
network. Furthermore, we continue to expand our on-the-ground sales forces as
well as the distribution relationships in China to capture the anticipated
growing demand for material handling products as that economy continues to
industrialize. Our internal organization supports these strategic initiatives
through division of responsibility for North America, Europe, Latin America and
Asia Pacific. The investments in international markets and new products are part
of our focus on our greatest opportunities for growth. To compliment our organic
growth activities, we are also looking for opportunities via acquisitions or
joint ventures. The focus of our acquisition strategy centers on opportunities
for international revenue growth and product line expansion in alignment with
our existing offering.
 
 As a
result of these efforts and the continued strong industrial economy in our
important markets of interest, management believes we can sustain a growth rate
in the mid single-digit range for fiscal 2009. We monitor U.S. Industrial
Capacity Utilization, which has approximated 80% for the past 21⁄2 years, as an
indicator of anticipated U.S. demand for our product. In addition, we continue
to monitor the potential impact of other global and U.S. trends, including
energy costs, steel price fluctuations, interest rates, currency impact and
activity in a variety of end-user markets around the globe.
 
 We
constantly explore ways to enhance our operating margins and leverage as well as
further improve our productivity and competitiveness.  We have
specific initiatives related to improved customer satisfaction, reduction of
defects, shortened lead times, improved inventory turns and on-time deliveries,
reduction of warranty costs, and improved working capital
utilization.  The initiatives are being driven by the continued
implementation of our Lean manufacturing efforts which are fundamentally
changing our manufacturing processes to be more responsive to customer demand
and improving on-time delivery and productivity. In addition to Lean
manufacturing, we are working to achieve these strategic initiatives through
product simplification, the creation of centers of excellence, and improved
supply chain management. As part of its continuing
evaluation of our businesses, we determined that our integrated material
handling conveyor systems business (Univeyor A/S) no longer provided a strategic
fit with our long-term growth and operational objectives.On July 25, 2008, we
completed the sale of our Univeyor business. The results of this business were
accounted for as discontinued operations for the quarters presented
herein.
  - 15
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 We keep a
close watch on the costs of steel.  We utilize approximately $35,000
to $40,000 of steel annually in a variety of forms including rod, wire, bar,
structural and others. With increases in worldwide demand for steel and
fluctuating scrap steel prices, as we experience fluctuations in our costs, we
reflect them as price increases or surcharges to our customers. During the
quarter, the Company has maintained margin neutrality on steel by increasing the
steel surcharge in step with rising market prices. We will continue to monitor
our costs and reevaluate our pricing policies.
 
 We
continue to operate in a highly competitive and global business environment.
Accordingly, we face a variety of challenges and opportunities in those markets
and geographies, including trends towards increased utilization of the global
labor force and the expansion of market opportunities in Asia and other emerging
markets.
 
 Results
of Operations
 
 Three
Months Ended June 29, 2008 and July 1, 2007
 Net sales
in the fiscal 2009 quarter ended June 29, 2008 were $151,164, up $9,714 or
6.9% from the fiscal 2008 quarter ended July 1, 2007 net sales of $141,450. The
increase is due to the continued strength of the U.S. and European industrial
markets, as well as the impact of price increases of $3,700 in the three months
ended June 29, 2008. Translation of foreign currencies, particularly the Euro
and Canadian dollar, into U.S. dollars contributed $4,000 toward the increase in
sales for the quarter ended June 29, 2008.
 
 Gross
profit in the fiscal 2009 quarter ended June 29, 2008 was $48,525, up
$5,193 or 12.0% from the fiscal 2008 quarter ended July 1, 2007 gross profit of
$43,332. Gross profit margin increased to 32.1% in the fiscal 2009 quarter from
30.6% in the fiscal 2008 quarter. The increase in the gross profit margin is the
result of product mix, the realization of operational leverage at increased
sales volumes, implementation of surcharges, ongoing cost containment activities
and the translation of foreign currencies into U.S. dollars, which contributed
$1,700 toward the increase in gross margin for the quarter ended June 29,
2008.
 
 Selling
expenses were $18,202 and $15,544 in the fiscal 2009 and 2008 quarters,
respectively. The changes in selling expense dollars were impacted by our
increased investment to support our strategic growth initiatives including in
international markets, especially Eastern Europe, Southeast Asia, and Latin
America ($1,100), the Company’s focus on the energy and non-residential
construction markets in North America ($800) and translation of foreign
currencies into U.S. dollars ($700). As a percentage of consolidated net sales,
selling expenses were 12.0%, and 11.0% in the fiscal 2009 and 2008 quarters,
respectively.
 
 General
and administrative expenses were $9,901 and $8,277 in the fiscal 2009 and 2008
quarters, respectively. The change in administrative expenses was primarily the
result of an increase in our bad debt reserves ($600), personnel costs for new
market investment and organizational capacity expansion ($400), increased
research and development costs ($150) and the translation of foreign currencies
into U.S. dollars ($300). As a percentage of consolidated net sales, general and
administrative expenses were 6.5% and 5.9% in the fiscal 2009 and 2008 quarters
then ended, respectively.
 
 Interest
and debt expense was $3,193 and $3,960 in the fiscal 2009 and 2008 quarters,
respectively. This decrease is the result of lower debt levels.
 
 Income
tax expense from continuing operations as a percentage of income from continuing
operations before income tax expense was 35.6% and 37.6% in the fiscal 2009 and
2008 quarters, respectively. The percentages vary from the U.S. statutory rate
due to varying effective tax rates at our foreign subsidiaries.
 
 Liquidity
and Capital Resources
 
 Cash and
cash equivalents totaled $84,834 at June 29, 2008, an increase of $8,840 from
the March 31, 2008 balance of $75,994.
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  Net cash
provided by operating activities from continuing operations was $12,049 for the
three months ended June 29, 2008 compared to $12,020 for the three months ended
July 1, 2007. The net cash provided by operating activities from continuing
operations for the three months ended June 29, 2008 is primarily the result of
$11,766 of income from continuing operations plus non-cash charges of
depreciation and amortization of $2,172, deferred income taxes of $1,180, which
were partially offset by $3,562 of cash used for changes in operating assets and
liabilities, primarily the result of a $4,613 increase in inventory. The net
cash provided by operating activities from continuing operations for the three
months ended July 1, 2007 is primarily the result of $10,454 of income from
continuing operations plus non-cash charges of depreciation and amortization of
$2,091, deferred income taxes of $6,072, which were partially offset by $6,630
of cash used for changes in operating assets and liabilities, primarily the
result of a $7,064 increase in inventory. The increase in inventory in both
periods resulted from support for penetration of new European markets, upcoming
new product launches, an increase for longer term capital projects equipment and
timing of offshore purchases. We fully utilized our U.S. federal net operating
loss carryforwards in the fourth quarter of fiscal 2008, resulting in the
decrease in the utilization of deferred taxes in the three months ended June 29,
2008 as compared to the three months ended July 1, 2007. Net cash used by
operating activities from discontinued operations, attributable to our Univeyor
business, was $2,218 and $2,359 for the three months ended June 29, 2008 and
July 1, 2007, respectively.
 
 Net cash
used by investing activities from continuing operations was $2,615 for the three
months ended June 29, 2008 compared to $3,037 of net cash provided by investing
activities from continuing operations for the three months ended July 1, 2007.
The net cash used by investing activities from continuing operations for the
three months ended June 29, 2008 was the result of $2,118 used for capital
expenditures and $497 for the net purchases of marketable securities. The net
cash provided by investing activities from continuing operations for the three
months ended July 1, 2007 was the result of $5,454 of proceeds from the sale of
facilities and surplus real estate and $113 from the net sales of marketable
securities, partially offset by $2,530 used for capital expenditures. Net cash
provided by investing activities from discontinued operations, primarily
attributable to payments received on our note receivable related to our sale of
Automatic Systems, Inc, was $139 and $116 for the three months ended June 29,
2008 and July 1, 2007, respectively.
 
 Net cash
provided by financing activities from continuing operations was $456 for the
three months ended June 29, 2008 compared to $19 for the three months ended July
1, 2007. The net cash provided by financing activities from continuing
operations for three months ended June 29, 2008 consisted primarily of $221 of
proceeds from stock options exercised, $187 of tax benefit from exercise of
stock options and $130 from the change in ESOP debt guarantee, partially offset
by $82 of net debt repayments. The net cash provided by financing activities
from continuing operations for three months ended July 1, 2007 consisted
primarily of $569 of proceeds from stock options exercised and $142 from the
change in ESOP debt guarantee, partially offset by $692 of net debt repayments.
Net cash provided by financing activities from discontinued operations,
attributable to borrowings on revolving lines of credit agreements at our
Univeyor business, was $579 for the three months ended June 29, 2008, compared
to $398 of net cash used by financing activities from discontinued operations,
attributable to borrowings on revolving lines of credit agreements at our
Univeyor business, for the three months ended July 1, 2007.
 
 We
believe that our cash on hand, cash flows, and borrowing capacity under our
Revolving Credit Facility will be sufficient to fund our ongoing operations and
budgeted capital expenditures for at least the next twelve months. This belief
is dependent upon a steady economy and successful execution of our current
business plan which includes focus on cash generation for debt repayment. The
business plan includes continued implementation of new market penetration, new
product development, lean manufacturing and improving working capital
utilization.
 
 Our
Revolving Credit Facility provides availability up to $75,000. Provided there is
no default, the Company may request an increase in the availability of the
Revolving Credit Facility by an amount not exceeding $50,000. The Revolving
Credit Facility matures February 2011.
 
 The
unused portion of the Revolving Credit Facility totaled $64,047, net of
outstanding borrowings of zero and outstanding letters of credit of $10,953 as
of June 29, 2008. Interest is payable at a Eurodollar Rate or a prime rate plus
an applicable margin determined by our leverage ratio. At our current leverage
ratio, we qualify for the lowest applicable margin level, which amounts to 87.5
basis points for Eurodollar borrowings and zero basis points for prime rate
based borrowings. The Revolving Credit Facility is secured by all domestic
inventory, receivables, equipment, real property, subsidiary stock (limited to
65% for foreign subsidiaries) and intellectual property. The corresponding
credit agreement
  - 17
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  associated
with the Revolving Credit Facility places certain debt covenant restrictions on
us, including certain financial requirements and a limitation on dividend
payments.
 
 The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $129,855 at June 29, 2008 and are due November 1, 2013. Provisions
of the 8 7/8% Notes include limitations on indebtedness, asset sales, and
dividends and other restricted payments. Until November 1, 2008, we may redeem
up to 35% of the outstanding notes at a redemption price of 108.875% with the
proceeds of equity offerings, subject to certain restrictions. On or after
November 1, 2009, the 8 7/8% Notes are redeemable at the option of the Company,
in whole or in part, at prices declining annually from 104.438% to 100% on and
after November 1, 2011. In the event of a Change of Control (as defined in the
indenture for such notes), each holder of the 8 7/8% Notes may require us to
repurchase all or a portion of such holder’s 8 7/8% Notes at a purchase price
equal to 101% of the principal amount thereof. The 8 7/8% Notes are guaranteed
by certain existing and future domestic subsidiaries and are not subject to any
sinking fund requirements.
 
 International
lines of credit are available to meet short-term working capital needs for our
subsidiaries operating outside of the United States. The lines of credit are
available on an offering basis, meaning that transactions under the line of
credit will be on such terms and conditions, including interest rate, maturity,
representations, covenants and events of default, as mutually agreed between our
subsidiaries and the local bank at the time of each specific transaction. In
addition to these facilities, our foreign subsidiaries have certain fixed term
bank loans. In connection with the sale of Univeyor A/S on July 25, 2008, the
Company used cash on hand to repay $15,191 in amounts outstanding on Univeyor’s
lines of credit and fixed term bank debt. The outstanding balance of other
international lines of credit and foreign subsidiary fixed bank debt was $386 at
June 29, 2008.
 
 Prior to
the disposal of Univeyor A/S, during the past year as part of Univeyor’s ongoing
business, the Company had provided performance guarantees to certain customers
and a third party for the satisfactory completion of contracts to design,
manufacture and install its integrated material handling conveyor systems.
Pursuant to the terms of the share purchase agreement, the Company has agreed to
continue to provide performance guarantees on certain pre-existing contracts
totaling approximately $11,000. Approximately $5,800 of these guarantees are
expected to expire by October 31, 2008, with the remaining portion being
performance bond guarantees that are expected to expire by the end of fiscal
2010 unless released by third party prior thereto. There are no liabilities
recorded in the accompanying condensed consolidated balance sheets relating to
these guarantees. Historically, none of Univeyor’s customers has ever made a
claim against either Univeyor A/S or the Company for indemnification on the
performance guarantees. The terms of the share purchase agreement provide that
the purchaser indemnify the Company for and hold it harmless against any loss,
liability, or claim arising from the guarantees after the date of
sale.
 
 Capital
Expenditures
 
 In
addition to keeping our current equipment and plants properly maintained, we are
committed to replacing, enhancing, and upgrading our property, plant, and
equipment to support new product development, reduce production costs, increase
flexibility to respond effectively to market fluctuations and changes, meet
environmental requirements, enhance safety, and promote ergonomically correct
work stations. Consolidated capital expenditures for the three months ended June
29, 2008 and July 1, 2007 were $2,118 and $2,530, respectively. We expect
capital spending for fiscal 2009 to be approximately $14 to $15 million compared
with $13.1 million in fiscal 2008. Incremental capital expenditures for fiscal
2009 will be primarily directed toward new product development and productivity
improvement.
 
 Inflation
and Other Market Conditions
 
 Our costs
are affected by inflation in the U.S. economy and, to a lesser extent, in
foreign economies including those of Europe, Canada, Mexico, South America, and
the Pacific Rim. We do not believe that general inflation has had a material
effect on results of operations over the periods presented primarily due to
overall low inflation levels of most costs over such periods and our ability to
generally pass on rising costs through price increases. However, we have been
impacted by fluctuations in steel costs, which vary by type of steel and we
continue to monitor them. In addition, U.S. employee benefits costs such as
health insurance and energy costs have exceeded general inflation levels. We
generally incorporate those cost increases into our sales price increases and
consider surcharges on certain products, as determined necessary.  In
the future, we may be further affected by inflation that we may not be able to
pass on as price increases or surcharges.
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  Seasonality
and Quarterly Results
 
 Quarterly
results may be materially affected by the timing of large customer orders,
periods of high vacation and holiday concentrations, gains or losses on early
retirement of bonds, restructuring charges, divestitures and acquisitions.
Therefore, the operating results for any particular fiscal quarter are not
necessarily indicative of results for any subsequent fiscal quarter or for the
full fiscal year.
 
 Effects
of New Accounting Pronouncements
 
 On April
1, 2007, the Company adopted the provisions of FASB Interpretation ("FIN") No.
48 “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of
SFAS No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized under SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and also provides
guidance on various related matters such as derecognition, interest and
penalties, and disclosure.  The adoption of FIN 48 resulted in a $186
reduction to the opening balance of retained earnings, recorded on the date of
adoption.
 
 On April
1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force
(“EITF”) Issue No. 06-10, “Accounting for Collateral Assignment
Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In accordance with
EITF 06-10, an employer should recognize a liability for the postretirement
benefit related to a collateral assignment split-dollar life insurance
arrangement in accordance with either SFAS No. 106, Employers’ Accounting
for Postretirement Benefits Other Than Pensions, or APB Opinion 12, Omnibus
Opinion—1967. The provisions of EITF 6-10 were applied as a change in
accounting principle through a cumulative-effect adjustment to retained
earnings.  The adoption of EITF 6-10 resulted in a $774 reduction to
the opening balance of retained earnings, recorded on the date of
adoption.
 
 On April
1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands the required disclosure for fair value
measurements. The adoption of SFAS No. 157 did not have a material impact on our
consolidated financial position or results of operations. See Footnote
No. 3, “Fair Value Measurements,” for additional information.
 
 In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. The Company did not elect to implement the
fair value options allowed under this standard.
 
 In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity’s
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. We adopted all of the
currently required provisions of SFAS 158 in fiscal 2007. This statement also
requires an entity to measure a defined benefit postretirement plan’s assets and
obligations that determine its funded status as of the end of the employers’
fiscal year. This requirement is effective for fiscal years ending after
December 15, 2008. The Company does not expect the adoption of this
requirement to have a material impact on the Company’s consolidated financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring
entity in a business combination to recognize all the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose all of the information required
to evaluate and understand the nature and financial effect of the business
combination. This statement is effective for acquisition dates on or after the
beginning of the first annual reporting period beginning after December 15,
2008. The Company is currently evaluating the impact the adoption of SFAS 141(R)
will have on the Company’s consolidated financial statements.
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 Table of Contents
  
 Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
 
 This
report may include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause our actual
results to differ materially from the results expressed or implied by such
statements, including general economic and business conditions, conditions
affecting the industries served by us and our subsidiaries, conditions affecting
our customers and suppliers, competitor responses to our products and services,
the overall market acceptance of such products and services, our
asbestos-related liability, the integration of acquisitions and other factors
disclosed in our periodic reports filed with the Commission. Consequently such
forward-looking statements should be regarded as our current plans, estimates
and beliefs. We do not undertake and specifically decline any obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
 
 
 Item 3.      Quantitative and
Qualitative Disclosures About Market Risk
 
 
 There
have been no material changes in the market risks since the end of Fiscal
2008.
 
 
 Item
      4.
              Controls
      and Procedures
 
 As of
June 29,
2008, an evaluation was performed under the supervision and with the
participation of the Company’s management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures. Based on that evaluation, the
Company’s management, including the chief executive officer and chief financial
officer, concluded that the Company’s disclosure controls and procedures were
effective as of June
29, 2008. There were no changes in the Company’s internal controls or
other factors during our first quarter ended June 29,
2008.
 
 
 
  - 20
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 Table of Contents
  Part II.  Other Information
 
 Item
      1.
              Legal
      Proceedings – none.
 
 Item
      1A.
              Risk
      Factors
 
 No
      material changes from risk factors as previously disclosed in the
      Company’s Form 10-K for the year ended March 31,
  2008.
 
 Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds –
  none.
 
 Item
      3.
              Defaults
      upon Senior Securities – none.
 
 Item
      4.
              Submission
      of Matters to a Vote of Security Holders –
none.
  Item
      5.
              Other
      Information – none.
  Item
      6.
              Exhibits
 
 (a)
              Exhibits:
 
 Exhibit 31.1
              Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
 
 Exhibit 31.2
              Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
 
 Exhibit 32
              Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
 
 
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 Table of Contents
  
 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.
 
 COLUMBUS McKINNON
    CORPORATION(Registrant)Date:
      August 7, 2008
                
                /s/ Karen L. HowardKaren
      L. HowardVice
      President and Chief Financial Officer(Principal Financial
      Officer)
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