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 30, 2009


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 check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).  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, 2009
was:  19,079,305 shares.





FORM 10-Q INDEX


COLUMBUS
McKINNON CORPORATION


June
30, 2009








Page #Part
      I. Financial InformationItem
      1.
              Condensed
      Consolidated Financial Statements (Unaudited)Condensed consolidated balance sheets – June 30, 2009 and March
      31, 2009
              2Condensed consolidated statements of operations and retained
      earnings - Three months  ended June 30, 2009 and June 29,
      2008
              3Condensed consolidated statements of cash flows - Three months
      ended June 30, 2009 and June 29, 2008
              4Condensed consolidated statements of comprehensive income
      (loss) - Three months ended June 30, 2009 and June 29,
      2008
              5Notes to condensed consolidated financial statements – June
      30, 2009
              6Item
      2.
              Management's Discussion and Analysis of Results of Operations
      and Financial Condition
              20Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              27Item
      4.
              Controls and Procedures
              27Part
      II. Other InformationItem
      1.
              Legal Proceedings – none.
              28Item
      1A.
              Risk Factors
              28Item
      2.
              Unregistered Sales of Equity Securities and Use of Proceeds
      – none.
              28Item
      3.
              Defaults upon Senior Securities – none.
              28Item
      4.
              Submission of Matters to a Vote of Security Holders –
      none.
              28Item
      5.
              Other Information – none.
              28Item
      6.
              Exhibits
              28





- 1
-
 Table of Contents


Part
I.     Financial Information





Item
1.     Condensed Consolidated Financial Statements
(Unaudited)





COLUMBUS McKINNON CORPORATION


CONDENSED
CONSOLIDATED BALANCE SHEETS





June
      30,
                
                
                March 31,2009
                
                
                2009(unaudited)ASSETS:
                
                (In
      thousands)Current
      assets:Cash
      and cash equivalents
                
                $
                44,198
                
                
                $
                39,236Trade
      accounts receivable
                
                
                73,309
                
                
                
                80,168Inventories
                
                
                94,943
                
                
                
                100,621Prepaid
      expenses
                
                
                21,076
                
                
                
                18,115Total
      current assets
                
                
                233,526
                
                
                
                238,140Property,
      plant, and equipment, net
                
                
                61,913
                
                
                
                62,102Goodwill
      and other intangibles, net
                
                
                127,800
                
                
                
                125,080Marketable
      securities
                
                
                30,589
                
                
                
                28,828Deferred
      taxes on income
                
                
                31,695
                
                
                
                32,521Other
      assets
                
                
                5,583
                
                
                
                4,993Total
      assets
                
                $
                491,106
                
                
                $
                491,664LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      liabilities:Notes
      payable to banks
                
                $
                6,327
                
                
                $
                4,787Trade
      accounts payable
                
                
                25,171
                
                
                
                33,298Accrued
      liabilities
                
                
                43,589
                
                
                
                50,443Restructuring
      reserve
                
                
                3,995
                
                
                
                1,302Current
      portion of long-term debt
                
                
                1,182
                
                
                
                1,171Total
      current liabilities
                
                
                80,264
                
                
                
                91,001Senior
      debt, less current portion
                
                
                7,086
                
                
                
                7,073Subordinated
      debt
                
                
                124,855
                
                
                
                124,855Other
      non-current liabilities
                
                
                92,013
                
                
                
                86,881Total
      liabilities
                
                
                304,218
                
                
                
                309,810Shareholders'
      equity:Common
      stock
                
                
                190
                
                
                
                190Additional
      paid-in capital
                
                
                180,979
                
                
                
                180,327Retained
      earnings
                
                
                39,493
                
                
                
                41,891ESOP
      debt guarantee
                
                
                (2,193
                )
                
                
                (2,309
                )Accumulated
      other comprehensive loss
                
                
                (31,581
                )
                
                
                (38,245
                )Total
      shareholders' equity
                
                
                186,888
                
                
                
                181,854Total
      liabilities and shareholders' equity
                
                $
                491,106
                
                
                $
                491,664





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
      30,
                
                
                June
      29,2009
                
                
                2008(In
      thousands, except per share data)Net
      sales
                
                $
                119,008
                
                
                $
                151,164Cost
      of products sold
                
                
                89,578
                
                
                
                102,639Gross
      profit
                
                
                29,430
                
                
                
                48,525Selling
      expenses
                
                
                16,477
                
                
                
                18,202General
      and administrative expenses
                
                
                8,461
                
                
                
                9,901Restructuring
      charges
                
                
                5,838
                
                
                
                -Amortization
      of intangibles
                
                
                440
                
                
                
                2731,216
                
                
                
                28,130(Loss)
      income from operations
                
                
                (1,786
                )
                
                
                20,395Interest
      and debt expense
                
                
                3,337
                
                
                
                3,193Investment
      income
                
                
                (319
                )
                
                
                (291
                )Foreign
      currency exchange (gain) loss
                
                
                (408
                )
                
                
                50Other
      (income) and expense, net
                
                
                (41
                )
                
                
                (822
                )(Loss)
      income from continuing operations before income tax (benefit)
      expense
                
                
                (4,355
                )
                
                
                18,265Income
      tax (benefit) expense
                
                
                (1,824
                )
                
                
                6,499(Loss) income
      from continuing operations
                
                
                (2,531
                )
                
                
                11,766Income
      (loss) from discontinued operations - net of tax
                
                
                133
                
                
                
                (2,096
                )Net
      (loss) income
                
                
                (2,398
                )
                
                
                9,670Retained earnings
      - beginning of period
                
                
                41,891
                
                
                
                122,400Change
      in accounting principle (note 18)
                
                
                -
                
                
                
                (774
                )Retained
      earnings - end
      of period
                
                $
                39,493
                
                
                $
                131,296Average
      basic shares outstanding
                
                
                18,915
                
                
                
                18,819Average
      diluted shares outstanding
                
                
                18,915
                
                
                
                19,221Basic
      income per share:(Loss)
      income from continuing operations
                
                $
                (0.14
                )
                
                $
                0.62Income
      (loss) from discontinued operations
                
                
                0.01
                
                
                
                (0.11
                )Net
      (loss) income
                
                $
                (0.13
                )
                
                $
                0.51Diluted
      income per share:(Loss)
      income from continuing operations
                
                $
                (0.14
                )
                
                $
                0.61Income
      (loss) from discontinued operations
                
                
                0.01
                
                
                
                (0.11
                )Net
      (loss) income
                
                $
                (0.13
                )
                
                $
                0.50





See accompanying notes to condensed
consolidated financial statements.


- 3
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 Table of Contents


COLUMBUS McKINNON CORPORATION


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)


Three Months EndedJune
      30,
                
                
                June
      29,2009
                
                
                2008(In
      thousands)OPERATING
      ACTIVITIES:Net
      (loss) income
                
                $
                (2,398
                )
                
                $
                9,670Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activities:(Income) loss from discontinued
      operations
                
                
                (133
                )
                
                
                2,096Depreciation and
      amortization
                
                
                3,059
                
                
                
                2,172Deferred income
    taxes
                
                
                (1,534
                )
                
                
                1,180Gain on sale of real
      estate/investments
                
                
                (49
                )
                
                
                (48
                )Stock-based
      compensation
                
                
                501
                
                
                
                408Amortization/write-off of
      deferred financing costs
                
                
                148
                
                
                
                133Changes in operating assets and
      liabilities
                  net of effects of business
      acquisitions and divestitures:Trade accounts
      receivable
                
                
                7,163
                
                
                
                247Inventories
                
                
                6,434
                
                
                
                (4,613
                )Prepaid expenses
                
                
                (556
                )
                
                
                (1,236
                )Other assets
                
                
                (584
                )
                
                
                1,244Trade accounts
      payable
                
                
                (8,069
                )
                
                
                (551
                )Accrued and non-current
      liabilities
                
                
                889
                
                
                
                1,347Net
      cash provided by operating activities from continuing
      operations
                
                
                4,871
                
                
                
                12,049Net
      cash used by operating activities from discontinued
    operations
                
                
                -
                
                
                
                (2,218
                )Net
      cash provided by operating activities
                
                
                4,871
                
                
                
                9,831INVESTING
      ACTIVITIES:Proceeds
      from sale of marketable securities
                
                
                135
                
                
                
                170Purchases
      of marketable securities
                
                
                (1,122
                )
                
                
                (667
                )Capital
      expenditures
                
                
                (1,250
                )
                
                
                (2,118
                )Net
      cash used by investing activities from continuing
    operations
                
                
                (2,237
                )
                
                
                (2,615
                )Net
      cash provided by investing activities from discontinued
      operations
                
                
                133
                
                
                
                139Net
      cash used by investing activities
                
                
                (2,104
                )
                
                
                (2,476
                )FINANCING
      ACTIVITIES:Proceeds
      from exercise of stock options
                
                
                176
                
                
                
                221Net
      borrowings (payments) under revolving line-of-credit
      agreements
                
                
                1,552
                
                
                
                (8
                )Repayment
      of debt
                
                
                -
                
                
                
                (74
                )Other
                
                
                (72
                )
                
                
                317Net
      cash provided by financing activities from continuing
      operations
                
                
                1,656
                
                
                
                456Net
      cash provided by financing activities from discontinued
      operations
                
                
                -
                
                
                
                579Net
      cash provided by financing activities
                
                
                1,656
                
                
                
                1,035Effect
      of exchange rate changes on cash
                
                
                539
                
                
                
                450Net
      change in cash and cash equivalents
                
                
                4,962
                
                
                
                8,840Cash
      and cash equivalents at beginning of period
                
                
                39,236
                
                
                
                75,994Cash
      and cash equivalents at end of period
                
                $
                44,198
                
                
                $
                84,834





See
accompanying notes to condensed consolidated financial
statements.


- 4
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 Table of Contents


COLUMBUSMcKINNON CORPORATION


CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(UNAUDITED)





Three Months EndedJune
      30,
                
                
                June
      29,2009
                
                
                2008(In
      thousands)Net
      (loss) income
                
                $
                (2,398
                )
                
                $
                9,670Other
      comprehensive income, net of tax:Foreign
      currency translation adjustments
                
                
                5,889
                
                
                
                947Unrealized
      loss on investments:Unrealized
      holding gain (loss) arising during the period, net of deferred taxes
      (benefit) of $417 and ($110)
                
                
                774
                
                
                
                (206
                )Reclassification
      adjustment for loss included in net income, net of deferred taxes of $0
      and $1
                
                
                1
                
                
                
                2775
                
                
                
                (204
                )Total
      other comprehensive income
                
                
                6,664
                
                
                
                743Comprehensive
      income
                
                $
                4,266
                
                
                $
                10,413





See
accompanying notes to condensed consolidated financial statements.
































- 5
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 Table of Contents


COLUMBUS McKINNON CORPORATION


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


(Dollar
amounts in thousands, except share data)


June
30, 2009





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 30, 2009 and the results of its operations and its cash flows
for the three month periods ended June 30, 2009 and June 29, 2008, have been
included. Results for the period ended June 30, 2009 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2010. The balance sheet at March 31, 2009 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, 2009.





The
Company is a leading designer, marketer and manufacturer of material handling
products, systems and services which efficiently and ergonomically move, lift,
position and secure material. Key products include hoists, cranes, rigging tools
including chain and forged attachments, and actuators. The Company’s material
handling products are sold, domestically and internationally, principally to
third party distributors through diverse distribution channels, and to a lesser
extent directly to end-users.





2.  Acquisitions





On
October 1, 2008, the Company acquired Pfaff Beteiligungs GmbH
(“Pfaff-silberblau” or “Pfaff”), a Kissing, Germany based company with a leading
European position in lifting, material handling and actuator products. Pfaff had
revenue of approximately $90,000 USD in calendar 2007. This strategic
acquisition continues the execution of the Company’s strategic plan to grow its
revenue in complimentary product lines and also broaden that revenue in
international markets. Pfaff-silberblau complements the Company’s existing
material handling business in Europe and the U.S. and creates a more global
actuator business when combined with the U.S. based Duff Norton actuator
company. The Company is creating value from this acquisition through integrating
the Pfaff business with the Columbus McKinnon European and U.S. based material
handling businesses and Duff Norton. Value is being created by cross selling
products among these groups as well as reducing costs through business
integration and procurement activities. The results of Pfaff-silberblau are
included in the Company’s consolidated financial statements from the date of
acquisition.





This
transaction was accounted for under the purchase method of accounting in
accordance with SFAS No. 141 “Business Combinations.” The aggregate purchase
consideration for the acquisition of Pfaff-silberblau was $52,779 in cash and
acquisition costs. The acquisition was funded with existing cash. The purchase
price was allocated to the assets acquired and liabilities assumed based upon a
valuation of respective fair values. The identifiable intangible assets
consisted of trademarks with a value of $6,101 (18 year estimated useful life),
customer relationships with a value of $15,092 (11 year estimated useful life),
and technology with a value of $806 (14 year estimated useful life). The excess
consideration over fair value was recorded as goodwill and approximated $27,769,
none of which is deductible for tax purposes. The allocation of purchase
consideration to the assets acquired and liabilities assumed is as
follows:





Working
      capital
                
                $
                13,340Property,
      plant and equipment
                
                
                8,321Other
      long term liabilities, net
                
                
                (18,650
                )Identifiable
      intangible assets
                
                
                21,999Goodwill
                
                
                27,769Total
                
                $
                52,779





- 6
-
 Table of Contents





3.  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 Company’s former “Solutions” segment. In
accordance with the provisions of SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets” the results of operations of Univeyor A/S have
been classified as discontinued operations in the condensed statements of
operations and statements of cash flows presented herein. 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.





Income
from discontinued operations presented herein also includes payments received on
a note receivable related to our fiscal 2002 disposal of Automatic Systems, Inc.
Due to the uncertainty surrounding the financial viability of the debtor, the
note has been recorded at the estimated net realizable value of $0.





Summarized
statements of operations for discontinued operations follows:





Three Months EndedJune
      30,
                
                
                June
      29,2009
                
                
                2008Net
      sales
                
                $
                -
                
                
                $
                8,982Gain
      (loss) from operations before income tax
                
                
                214
                
                
                
                (1,441
                )Income
      tax expense
                
                
                81
                
                
                
                75Gain
      (loss) from operations, net of tax
                
                
                133
                
                
                
                (1,516
                )Loss
      on sale of discontinued operations
                
                
                -
                
                
                
                (14,627
                )Gain
      (loss) from discontinued operations
                
                
                133
                
                
                
                (16,143
                )Tax
      benefit from sale
                
                
                -
                
                
                
                14,047Gain
      (loss) from discontinued operations, net of tax
                
                $
                133
                
                
                $
                (2,096
                )





4.  Fair
Value Measurements





On April
1, 2008, 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 157 did not
have a material impact on our consolidated financial position or results of
operations.





Relative
to SFAS No. 157, the FASB issued FASB Staff Position (FSP) 157-2. FSP 157-2
delays the effective date of the application of SFAS 157 to fiscal years
beginning after November 15, 2008 for all nonfinancial assets and
nonfinancial liabilities that are recognized or disclosed at fair value in the
financial statements on a nonrecurring basis.  Accordingly, we apply
the provisions of SFAS 157 in determining the fair value of our nonfinancial
assets and nonfinancial liabilities on a nonrecurring basis effective April 1,
2009.





SFAS 157
establishes a hierarchy for inputs that may be used to measure fair value. Level
1 is defined as quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access. The fair value of the
Company’s marketable securities is based on Level 1 inputs. Level 2 is defined
as quoted prices for similar assets and liabilities in active markets; quoted
prices for identical or similar assets and liabilities in markets that are not
active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. The Company
primarily uses readily observable market data in conjunction with internally
developed discounted cash flow valuation models when valuing its derivative
portfolio and, consequently, the fair value of the Company’s derivatives is
based on Level 2 inputs.  As of June 30, 2009, the Company’s assets
and liabilities measured at fair value on recurring bases were as
follows:


- 7
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 Table of Contents





Fair
      value measurements at reporting date usingDescription
                
                At
      June 30, 2009
                
                
                Quoted
      prices in active markets for identical assets (Level 1)
                
                
                Significant
      other observable inputs
                  (Level
      2)
                
                
                Significant
      unobservable inputs
                  (Level
      3)Assets/(Liabilities):Marketable
      securities
                
                $
                30,589
                
                
                $
                30,589
                
                
                $
                -
                
                
                $
                -Derivative
      liabilities
                
                
                (1,889
                )
                
                
                -
                
                
                
                (1,889
                )
                
                
                -





Assets
that are measured on a nonrecurring basis include our reporting units that we
use to test goodwill for impairment on an annual or interim basis under the
provisions of SFAS 142, as well as property, plant and equipment in
circumstances when we determine that those assets are impaired under the
provisions of SFAS 144.  No non-recurring fair value measurements were
made during the three months ended June 30, 2009.





5.  Inventories





Inventories
consisted of the following:


June
      30,
                
                
                March 31,2009
                
                
                2009At
      cost - FIFO basis:Raw
      materials
                
                $
                46,011
                
                
                $
                49,697Work-in-process
                
                
                10,616
                
                
                
                12,497Finished
      goods
                
                
                59,117
                
                
                
                59,896115,744
                
                
                
                122,090LIFO
      cost less than FIFO cost
                
                
                (20,801
                )
                
                
                (21,469
                )Net
      inventories
                
                $
                94,943
                
                
                $
                100,621





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, estimated interim results are subject to
change in the final year-end LIFO inventory valuation.





6.  Marketable
Securities





All of
the Company’s marketable securities, which consist of equity securities, have
been classified as available-for-sale securities and are therefore recorded at
their fair values with the unrealized gains and losses, net of tax, reported in
accumulated other comprehensive loss in the shareholders’ equity section of the
balance sheet unless unrealized losses are deemed to be other than
temporary. In such instance, the unrealized losses are reported in the
consolidated statements of operations and retained earnings within investment
income. Estimated fair value is based on published trading values at the balance
sheet dates. The cost of securities sold is based on the specific identification
method. Interest and dividend income are included in investment income in the
consolidated statements of operations and retained earnings.




The
marketable securities are carried as long-term assets since they are held for
the settlement of the Company’s general and products liability insurance claims
filed through CM Insurance Company, Inc., a wholly owned captive insurance
subsidiary.  The marketable securities are not available for general
working capital purposes.





In
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” the Company reviews its marketable securities for declines
in market value that may be considered other than temporary. The Company
generally considers market value declines to be other than temporary if they are
declines for a period longer than six months and in excess of 20% of original
cost, or when other evidence indicates impairment.  There were no
other than temporary impairments for the three months ended June 30, 2009 or
June 29, 2008.


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The
following is a summary of available-for-sale securities at June 30,
2009:


Cost
              
              
              Gross
      Unrealized Gains
              
              
              Gross
      Unrealized Losses
              
              
              Estimated
      Fair
                ValueEquity securities
              
              $
              29,885
              
              
              $
              943
              
              
              $
              239
              
              
              $
              30,589





The
aggregate fair value of investments and unrealized losses on available-for-sale
securities in an unrealized loss position at June 30, 2009 are as
follows:


Aggregate
                
                
                UnrealizedFair Value
                
                
                LossesSecurities
      in a continuous loss position for less than 12 months
                
                $
                1,592
                
                
                $
                16Securities
      in a continuous loss position for more than 12 months
                
                
                13,234
                
                
                
                223$
                14,826
                
                
                $
                239





The
Company considered the nature of the investments, causes of previous
impairments, the severity and duration of unrealized losses and other factors
when determining whether or not the unrealized losses at June 30, 2009 were
temporary in nature.  The primary cause for certain portions of our
equity securities trading below cost at June 30, 2009 is due to the general
volatility in the underlying equity markets and the continued weakness in the
global economy. We believe the underlying investments in the mutual funds and
exchange-traded funds that we hold in our portfolio are sound and we expect that
our equity securities which are currently trading below cost will recover to or
above cost within a reasonable period of time.  Because of these and
other factors, the Company believes that the unrealized losses at June 30, 2009
are temporary.





Net
realized gains related to sales of marketable securities (excluding
other-than-temporary impairments) were $1 and $2 in the three-months ended
June 30, 2009 and June 29, 2008, respectively.





The
following is a summary of available-for-sale securities at March 31,
2009:


Cost
              
              
              Gross
      Unrealized
                Gains
              
              
              Gross
      Unrealized
                Losses
              
              
              Estimated
      Fair
                ValueEquity securities
              
              $
              29,315
              
              
              $
              394
              
              
              $
              881
              
              
              $
              28,828





7.  Goodwill
and Intangible Assets





Goodwill
is not amortized but is periodically tested for impairment, in accordance with
the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS
142”).  Goodwill impairment is deemed to exist if the net book value
of a reporting unit exceeds its estimated fair value.  The fair value
of a reporting unit is determined using a discounted cash flow
methodology.  The Company’s reporting units are determined based upon
whether discrete financial information is available and regularly reviewed,
whether those units constitute a business, and the extent of economic
similarities between those reporting units for purposes of
aggregation.  The Company’s reporting units identified under SFAS 142
are at the component level, or one level below the reporting segment level as
defined under SFAS No. 131, “Disclosures about Segments of an Enterprise and
Related Information.” The Company has four reporting units.  Only two
of the four reporting units carry goodwill at June 30, 2009 and March 31,
2009.





Under
SFAS 142, the measurement of impairment of goodwill consists of two steps. In
the first step, the Company compares the fair value of each reporting unit to
its carrying value. As part of the impairment analysis, the Company determines
the fair value of each of its reporting units with goodwill using the income
approach. The income approach uses a discounted cash flow methodology to
determine fair value. This methodology recognizes value based on the expected
receipt of future economic benefits. Key assumptions in the income approach
include a free cash flow projection, an estimated discount rate, a long-term
growth rate and a terminal value. These assumptions are based upon the Company’s
historical experience, current market trends and future
expectations.  During fiscal 2009, the generally weak economic
conditions resulted in a rapid decline in business, a reduction in forecast cash
flows, and an increase in capital costs as a result of tightening credit
markets.  Based on this evaluation, the Company determined that the
fair value of its rest of products reporting unit was less than its carrying
value in the fourth quarter of fiscal 2009. Following this assessment, SFAS 142
required the Company to perform a second step in order to determine the implied
fair value of goodwill in this reporting unit and to compare it to its carrying
value. The activities in the second step included hypothetically valuing all of
the tangible and intangible assets of the impaired reporting unit using market
participant assumptions, as if the reporting unit had been acquired in a
business combination.


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As a
result of this assessment, the Company recorded a goodwill impairment charge of
$107,000 in the fourth quarter of fiscal 2009. None of the charges related to
goodwill were deductible for tax purposes. No impairment charges related to
goodwill or intangible assets were recorded during the first quarter of fiscal
2010.  However, future impairment indicators, such as declines in
forecasted cash flows, may cause additional significant impairment charges.
Impairment charges could be based on such factors as the Company’s stock price,
forecasted cash flows, assumptions used, control premiums or other
variables.





A summary
of changes in goodwill during the first quarter of fiscal 2010 is as
follows:


Balance
      at April 1, 2009
                
                $
                104,744Currency
      translation
                
                
                1,970Balance
      at June 30, 2009
                
                $
                106,714





Identifiable
intangible assets acquired in a business combination are amortized over their
useful lives unless their useful lives are indefinite, in which case those
intangible assets are tested for impairment annually and not amortized until
their lives are determined to be finite.





Intangible
assets are summarized as follows:


June
      30, 2009
                    
                    
                    March
      31, 2009Gross
      Carrying Amount
                    
                    
                    Accumulated
      Amortization
                    
                    
                    Net
                    
                    
                    Gross
      Carrying Amount
                    
                    
                    Accumulated
      Amortization
                    
                    
                    NetTrademark
                    
                    $
                    6,082
                    
                    
                    $
                    250
                    
                    
                    $
                    5,832
                    
                    
                    $
                    5,743
                    
                    
                    $
                    157
                    
                    
                    $
                    5,586Customer
      relationships
                    
                    
                    15,047
                    
                    
                    
                    1,036
                    
                    
                    
                    14,011
                    
                    
                    
                    14,208
                    
                    
                    
                    652
                    
                    
                    
                    13,556Other
                    
                    
                    1,431
                    
                    
                    
                    188
                    
                    
                    
                    1,243
                    
                    
                    
                    1,342
                    
                    
                    
                    148
                    
                    
                    
                    1,194Total
                    
                    $
                    22,560
                    
                    
                    $
                    1,474
                    
                    
                    $
                    21,086
                    
                    
                    $
                    21,293
                    
                    
                    $
                    957
                    
                    
                    $
                    20,336





Based on
the current amount of intangible assets, the estimated amortization expense for
each of the fiscal years 2010 through 2014 is expected to be approximately
$1,800.





8.  Derivative
Instruments





The
Company uses derivative instruments to manage selected foreign currency
exposures. The Company does not use derivative instruments for speculative
trading purposes. All derivative instruments must be recorded on the balance
sheet at fair value. For derivatives designated as cash flow hedges, the
effective portion of changes in the fair value of the derivative is recorded as
accumulated other comprehensive loss, or AOCL, and is reclassified to earnings
when the underlying transaction has an impact on earnings. The ineffective
portion of changes in the fair value of the derivative is reported in cost of
products sold. For derivatives not classified as cash flow hedges, all changes
in market value are recorded to earnings.





The
Company has forward agreements in place to hedge changes in the value of
intercompany loans to certain foreign subsidiaries due to changes in foreign
exchange rates. The notional amount of these derivatives is $25,070, and all
contracts mature by September 30, 2013.





In
relation to certain of the derivative transactions discussed above, the Company
issued a guarantee to a third party lender which secures any obligations of one
of the Company’s wholly-owned foreign subsidiaries under the subsidiary’s
agreement with the third party lender, regarding those derivative
transactions.  The fair value of the derivative liability of the
foreign subsidiary at June 30, 2009 relating to this guarantee was
$1,761.





The
Company is exposed to credit losses in the event of nonperformance by the
counterparties on its financial instruments. All counterparties have investment
grade credit ratings. The Company anticipates that these counterparties will be
able to fully satisfy their obligations under the contracts.





The
following is the pretax effect of derivative instruments on the condensed
consolidated statement of operations for the three months ended June 30,
2009:


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Derivatives
      Not Designated as Hedging Instruments under SFAF No. 133
            
            Location
      of (Gain) or Loss Recognized in Income on Derivatives
            
            Amount
      of (Gain) or Loss Recognized in Income on DerivativesForeign
      exchange contracts
            
            Foreign
      currency exchange (gain) loss
            
            $          882





As of
June 30, 2009, the Company had no derivatives designated as cash flow hedges,
net investments or fair value hedges in accordance with SFAS No. 133 “Accounting
for Derivative Instruments and Hedging Activities.”





The
following is information relative to our derivative instruments in the condensed
consolidated balance sheet as of June 30, 2009:





Derivatives
      Not Designated as Hedging Instruments under SFAF No. 133
              
              Balance
      Sheet Location
              
              Fair
      ValueForeign
      exchange contracts
              
              Accrued
      Liabilities
              
              $          1,889





9.  Debt





The
Company’s Revolving Credit Facility, which expires February 22, 2011, provides
availability up to a maximum of $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, subject to lender approval. The
unused Revolving Credit Facility totaled $66,087, net of outstanding borrowings
of $0 and outstanding letters of credit of $8,913, as of June 30,
2009.  Interest on the revolver is payable at varying Eurodollar rates
based on LIBOR or prime plus a spread determined by our leverage ratio amounting
to 87.5 or 0 basis points, respectively, at June 30, 2009.  The
Revolving Credit Facility is secured by all domestic inventory, receivables,
equipment, real property, subsidiary stock (limited to 65% of foreign
subsidiaries) and intellectual property.





The
corresponding credit agreement associated with the Revolving Credit Facility
places certain debt covenant restrictions on the Company, including certain
financial requirements and restrictions on dividend payments, with which the
Company was in compliance as of June 30, 2009. The Company amended its Revolving
Credit Facility on May 19, 2009. The credit facility was amended to increase the
amount of restructuring charges to be excluded from the fixed charge coverage
ratio covenant calculation as a result of the amendment.





The
carrying amount of the Company’s revolving credit facility, notes payable to
banks and other senior debt approximate their fair values based on current
market rates. The Company’s Senior Subordinated Notes, which have a carrying
value of $124,855 at June 30, 2009, have an approximate fair value of $124,243,
based on quoted market prices.





The
Company’s Notes payable to banks consist primarily of secured and unsecured
international lines of credit.  The Company’s Senior debt consists
primarily of any borrowings under the Company’s Revolving Credit Facility as
well as capital lease obligations.





Refer to
our consolidated financial statements included in our annual report on Form 10-K
for the year ended March 31, 2009 for further information on our debt
arrangements.





10.  Restructuring
Charges





In the
first quarter of fiscal 2010, the Company implemented a business reorganization
plan. As part of that plan, the Company consolidated its North American sales
force and offered certain of its employees an incentive to voluntarily retire
early. The early retirement program consists of two benefits: a paid leave of
absence and an enhanced pension benefit. Charges for the paid leave of absence
of $3,392 were recorded as restructuring reserves in the first quarter of fiscal
2010. The payments are being made to the employees in installments on their
regular pay date. Charges for the enhanced pension benefit of $2,012 were
recorded in long-term pension liabilities in the first quarter of fiscal 2010.
Long-term pension liabilities are included in other non-current liabilities on
the consolidated balance sheets. Involuntary terminations resulted in severance
costs of $434 which related to salaried workforce reductions.


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In
addition, the Company is continuing with the execution of its rationalization of
North American hoist and rigging operations.  The process includes the
closure of two manufacturing facilities and the significant downsizing of a
third facility. The Company is currently engaged with the labor unions at each
facility in bargaining unit negotiations. The closures will result in a
reduction of 500,000 square feet of manufacturing space and generation of annual
savings estimated at approximately $9 - $11 million with 80% of the total $8 -
$10 million of charges expected in fiscal 2010. These costs will be recorded
beginning in the second quarter of fiscal 2010 and continue into fiscal
2011.





The
liability as of June 30, 2009 was $3,995, consisting of accrued severance
costs.  The majority of the severance costs will be paid during fiscal
2010.





The
following table provides a reconciliation of the fiscal 2010 activity related to
restructuring reserves:





Reserve at April 1,
      2009
                    
                    $
                    1,302Restructuring
    charges
                    
                    
                    5,838Cash payments
                    
                    
                    (1,133
                    )Reclassification of long-term
      pension liability
                    
                    
                    (2,012
                    )Reserve at June 30,
      2009
                    
                    $
                    3,995





11.  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 30, 2009
                
                
                June 29, 2008Service costs
                
                $
                983
                
                
                $
                1,106Interest cost
                
                
                2,431
                
                
                
                2,206Expected return on plan
      assets
                
                
                (1,717
                )
                
                
                (2,299
                )Net amortization
                
                
                1,169
                
                
                
                294Net periodic pension
      cost
                
                $
                2,866
                
                
                $
                1,307





The
increase in net periodic pension cost for the three months ended June 30, 2009
compared to the three months ended June 29, 2008 is primarily the result of an
increase in the amortization of unrecognized losses due to the difference
between the actual return on investments compared to the expected return from
depressed asset values during fiscal 2009.





The
following table sets forth the components of net periodic postretirement benefit
cost for the Company’s defined benefit postretirement plans:


Three Months EndedJune 30, 2009
                
                
                June 29, 2008Service costs
                
                $
                -
                
                
                $
                1Interest cost
                
                
                144
                
                
                
                167Amortization of plan net
      losses
                
                
                73
                
                
                
                115Net periodic postretirement
      cost
                
                $
                217
                
                
                $
                283





We
currently plan to contribute approximately $18,300 to our pension plans in
fiscal 2010.





For
additional information on the Company’s defined benefit pension and
postretirement benefit plans, refer to Note 12 in the consolidated financial
statements included in the Company’s annual report on Form 10-K for the year
ended March 31, 2009.


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12.  Income
Taxes





Income
tax (benefit) expense as a percentage of (loss) income from continuing
operations before income tax (benefit) expense was 41.9% and 35.6% in the fiscal
2010 and 2009 quarters, respectively. The percentages vary from the U.S.
statutory rate due to varying effective tax rates at the Company’s foreign
subsidiaries, and the jurisdictional mix of taxable income forecasted for these
subsidiaries. We estimate that our effective tax rate related to continuing
operations will be approximately 41%-42% for fiscal 2010 based on the forecasted
jurisdictional mix of taxable income.


13.  Earnings
Per Share





The
following table sets forth the computation of basic and diluted earnings per
share:


Three Months EndedJune 30, 2009
                
                
                June 29, 2008Numerator
      for basic and diluted earnings per share:Net
      (loss) income
                
                $
                (2,389
                )
                
                $
                9,670Denominators:Weighted-average
      common stock outstanding -denominator for basic EPS
                
                
                18,915
                
                
                
                18,819Effect
      of dilutive employee stock options and awards
                
                
                -
                
                
                
                402Adjusted
      weighted-average common stock outstanding and assumed conversions –
      denominator for diluted EPS
                
                
                18,915
                
                
                
                19,221





During
the first three-months of fiscal 2010, a total of 32,375 shares of stock were
issued upon the exercising of stock options related to the Company’s stock
option plans. Options, RSUs, and performance shares with respect to
approximately 853,000 and 165,000 shares were not included in the computation of
diluted earnings per share for the three-months ended June 30, 2009 and June 29,
2008, respectively, because they were anti-dilutive.





14.  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 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. As part of the organizational restructuring announced in
response to adverse market conditions, we have reevaluated our reportable
segments and we continue to believe that we have only one reportable and
operating segment.


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15.  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 30, 2009Current
      assets:Cash and cash
      equivalents
              
              $
              28,001
              
              
              $
              22
              
              
              $
              16,175
              
              
              $
              —
              
              
              $
              44,198Trade accounts
      receivable
              
              
              40,722
              
              
              
              46
              
              
              
              32,541
              
              
              
              —
              
              
              
              73,309Inventories
              
              
              30,615
              
              
              
              19,212
              
              
              
              47,813
              
              
              
              (2,697
              )
              
              
              94,943Other current
    assets
              
              
              11,292
              
              
              
              1,053
              
              
              
              7,887
              
              
              
              844
              
              
              
              21,076Total current
      assets
              
              
              110,630
              
              
              
              20,333
              
              
              
              104,416
              
              
              
              (1,853
              )
              
              
              233,526Property, plant, and equipment,
      net
              
              
              28,830
              
              
              
              11,709
              
              
              
              21,374
              
              
              
              —
              
              
              
              61,913Goodwill and other intangibles,
      net
              
              
              41,024
              
              
              
              31,030
              
              
              
              55,746
              
              
              
              —
              
              
              
              127,800Intercompany
              
              
              55,145
              
              
              
              (49,602
              )
              
              
              (80,182
              )
              
              
              74,639
              
              
              
              —Other assets
              
              
              73,263
              
              
              
              195,524
              
              
              
              33,702
              
              
              
              (234,622
              )
              
              
              67,867Total assets
              
              $
              308,892
              
              
              $
              208,994
              
              
              $
              135,056
              
              
              $
              (161,836
              )
              
              $
              491,106Current
      liabilities
              
              
              28,680
              
              
              
              13,703
              
              
              
              37,778
              
              
              
              103
              
              
              
              80,264Long-term
      debt, less current portion
              
              
              124,855
              
              
              
              2,542
              
              
              
              4,544
              
              
              
              —
              
              
              
              131,941Other
      non-current liabilities
              
              
              39,061
              
              
              
              13,873
              
              
              
              39,079
              
              
              
              —
              
              
              
              92,013Total
    liabilities
              
              
              192,596
              
              
              
              30,118
              
              
              
              81,401
              
              
              
              103
              
              
              
              304,218Shareholders'
      equity
              
              
              116,296
              
              
              
              178,876
              
              
              
              53,655
              
              
              
              (161,939
              )
              
              
              186,888Total liabilities and
      shareholders' equity
              
              $
              308,892
              
              
              $
              208,994
              
              
              $
              135,056
              
              
              $
              (161,836
              )
              
              $
              491,106





For
      the Three Months Ended June 30, 2009Net
      sales
                
                $
                47,678
                
                
                $
                30,978
                
                
                $
                46,476
                
                
                $
                (6,124
                )
                
                $
                119,008Cost
      of products sold
                
                
                37,819
                
                
                
                25,041
                
                
                
                32,842
                
                
                
                (6,124
                )
                
                
                89,578Gross
      profit
                
                
                9,859
                
                
                
                5,937
                
                
                
                13,634
                
                
                
                —
                
                
                
                29,430Selling,
      general and administrative expenses
                
                
                11,541
                
                
                
                2,258
                
                
                
                11,139
                
                
                
                —
                
                
                
                24,938Restructuring
      charges
                
                
                5,713
                
                
                
                —
                
                
                
                125
                
                
                
                —
                
                
                
                5,838Amortization
      of intangibles
                
                
                27
                
                
                
                1
                
                
                
                412
                
                
                
                —
                
                
                
                44017,281
                
                
                
                2,259
                
                
                
                11,676
                
                
                
                —
                
                
                
                31,216(Loss)
      income from operations
                
                
                (7,422
                )
                
                
                3,678
                
                
                
                1,958
                
                
                
                —
                
                
                
                (1,786
                )Interest
      and debt expense
                
                
                2,905
                
                
                
                121
                
                
                
                311
                
                
                
                —
                
                
                
                3,337Other
      (income) and expense, net
                
                
                (274
                )
                
                
                (3
                )
                
                
                (491
                )
                
                
                —
                
                
                
                (768
                )(Loss)
      income before income tax expense
                
                
                (10,053
                )
                
                
                3,560
                
                
                
                2,138
                
                
                
                —
                
                
                
                (4,355
                )Income
      tax (benefit) expense
                
                
                (3,757
                )
                
                
                1,378
                
                
                
                555
                
                
                
                —
                
                
                
                (1,824
                )(Loss)
      income from continuing operations
                
                
                (6,296
                )
                
                
                2,182
                
                
                
                1,583
                
                
                
                —
                
                
                
                (2,531
                )Gain
      from discontinued operations
                
                
                133
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                133Net
      (loss) income
                
                $
                (6,163
                )
                
                $
                2,182
                
                
                $
                1,583
                
                
                $
                —
                
                
                $
                (2,398
                )





- 14
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For
      the Three Months Ended June 30, 2009
                
                Parent
                
                
                Guarantors
                
                
                Non
                  Guarantors
                
                
                Eliminations
                
                
                ConsolidatedOperating
      activities:Net
      cash provided (used) by operating activities
                
                
                4,783
                
                
                
                188
                
                
                
                (100
                )
                
                
                —
                
                
                
                4,871Investing
      activities:Purchase
      of marketable securities, net
                
                
                —
                
                
                
                —
                
                
                
                (987
                )
                
                
                —
                
                
                
                (987
                )Capital
      expenditures
                
                
                (1,134
                )
                
                
                (73
                )
                
                
                (43
                )
                
                
                —
                
                
                
                (1,250
                )Net
      cash used by investing activities from continuing
    operations
                
                
                (1,134
                )
                
                
                (73
                )
                
                
                (1,030
                )
                
                
                —
                
                
                
                (2,237
                )Net
      cash provided by investing activities from discontinued
      operations
                
                
                133
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                133Net
      cash used by investing activities
                
                
                (1,001
                )
                
                
                (73
                )
                
                
                (1,030
                )
                
                
                —
                
                
                
                (2,104
                )Financing
      activities:Proceeds
      from stock options exercised
                
                
                176
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                176Net
      (payments) borrowings under
      revolving       line-of-credit
      agreements
                
                
                —
                
                
                
                (51
                )
                
                
                1,603
                
                
                
                —
                
                
                
                1,552Other
                
                
                (72
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (72
                )Net
      cash provided (used) by financing activities
                
                
                104
                
                
                
                (51
                )
                
                
                1,603
                
                
                
                —
                
                
                
                1,656Effect
      of exchange rate changes on cash
                
                
                —
                
                
                
                (72
                )
                
                
                611
                
                
                
                —
                
                
                
                539Net
      change in cash and cash equivalents
                
                
                3,886
                
                
                
                (8
                )
                
                
                1,084
                
                
                
                —
                
                
                
                4,962Cash
      and cash equivalents at beginning of period
                
                
                24,115
                
                
                
                30
                
                
                
                15,091
                
                
                
                —
                
                
                
                39,236Cash
      and cash equivalents at end of period
                
                $
                28,001
                
                
                $
                22
                
                
                $
                16,175
                
                
                $
                —
                
                
                $
                44,198





As
      of March 31, 2009Current
      assets:Cash and cash
      equivalents
                                    
                                    $
                                    24,115
                                    
                                    
                                    $
                                    30
                                    
                                    
                                    $
                                    15,091
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    39,236Trade accounts
      receivable
                                    
                                    
                                    46,358
                                    
                                    
                                    
                                    37
                                    
                                    
                                    
                                    33,773
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    80,168Inventories
                                    
                                    
                                    33,268
                                    
                                    
                                    
                                    21,113
                                    
                                    
                                    
                                    48,937
                                    
                                    
                                    
                                    (2,697
                                    )
                                    
                                    
                                    100,621Other current
    assets
                                    
                                    
                                    8,480
                                    
                                    
                                    
                                    1,060
                                    
                                    
                                    
                                    7,731
                                    
                                    
                                    
                                    844
                                    
                                    
                                    
                                    18,115Total current
      assets
                                    
                                    
                                    112,221
                                    
                                    
                                    
                                    22,240
                                    
                                    
                                    
                                    105,532
                                    
                                    
                                    
                                    (1,853
                                    )
                                    
                                    
                                    238,140Property, plant, and equipment,
      net
                                    
                                    
                                    29,001
                                    
                                    
                                    
                                    11,995
                                    
                                    
                                    
                                    21,106
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    62,102Goodwill and other intangibles,
      net
                                    
                                    
                                    41,016
                                    
                                    
                                    
                                    31,031
                                    
                                    
                                    
                                    53,033
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    125,080Intercompany
                                    
                                    
                                    59,508
                                    
                                    
                                    
                                    (50,435
                                    )
                                    
                                    
                                    (83,748
                                    )
                                    
                                    
                                    74,675
                                    
                                    
                                    
                                    —Other assets
                                    
                                    
                                    79,791
                                    
                                    
                                    
                                    195,589
                                    
                                    
                                    
                                    25,584
                                    
                                    
                                    
                                    (234,622
                                    )
                                    
                                    
                                    66,342Total assets
                                    
                                    $
                                    321,537
                                    
                                    
                                    $
                                    210,420
                                    
                                    
                                    $
                                    121,507
                                    
                                    
                                    $
                                    (161,800
                                    )
                                    
                                    $
                                    491,664Current
      liabilities
                                    
                                    $
                                    33,767
                                    
                                    
                                    $
                                    17,162
                                    
                                    
                                    $
                                    39,933
                                    
                                    
                                    $
                                    139
                                    
                                    
                                    $
                                    91,001Long-term
      debt, less current portion
                                    
                                    
                                    124,855
                                    
                                    
                                    
                                    2,597
                                    
                                    
                                    
                                    4,476
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    131,928Other
      non-current liabilities
                                    
                                    
                                    41,224
                                    
                                    
                                    
                                    13,895
                                    
                                    
                                    
                                    31,762
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    86,881Total
    liabilities
                                    
                                    
                                    199,846
                                    
                                    
                                    
                                    33,654
                                    
                                    
                                    
                                    76,171
                                    
                                    
                                    
                                    139
                                    
                                    
                                    
                                    309,810Shareholders'
      equity
                                    
                                    
                                    121,691
                                    
                                    
                                    
                                    176,766
                                    
                                    
                                    
                                    45,336
                                    
                                    
                                    
                                    (161,939
                                    )
                                    
                                    
                                    181,854Total liabilities and
      shareholders' equity
                                    
                                    $
                                    321,537
                                    
                                    
                                    $
                                    210,420
                                    
                                    
                                    $
                                    121,507
                                    
                                    
                                    $
                                    (161,800
                                    )
                                    
                                    $
                                    491,664


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For
      the Three Months Ended June 29, 2008
                
                Parent
                
                
                Guarantors
                
                
                Non
                  Guarantors
                
                
                Eliminations
                
                
                ConsolidatedNet
      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





For
      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:Purchases
      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 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





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16.  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 including related legal costs through March 31, 2027 and March 31,
2039 to range between $5,500 and $15,500 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
$8,800 which has been reflected as a liability in the condensed consolidated
financial statements as of June 30, 2009. 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 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.





17.  Shareholder
Rights Plan





On May
19, 2009 the Company announced that its Board of Directors had adopted a
Shareholder Rights Plan, pursuant to which a dividend distribution was declared
of one preferred share purchase right to each outstanding common share of the
Company. Subject to limited exceptions, the rights will be exercisable if a
person or group acquires 20% or more of the Company’s common shares or announces
a tender offer for 20% or more of the common shares. Under certain
circumstances, each right will entitle shareholders to buy one one-thousandth of
a share of the newly created series A junior participating preferred shares of
the Company at an exercise price of $80.00.





18.  New
Accounting Standards





On April
1, 2009 the Company adopted the provisions of SFAS No. 165, “Subsequent Events”
(“SFAS 165”), which establishes principles and requirements for subsequent
events. SFAS 165 sets forth the period after the balance sheet date during which
management shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, circumstances under which
an entity shall recognize events or transactions occurring after the balance
sheet date, as well as the disclosures that an entity shall make about events or
transactions that occurred after the balance sheet date.  The adoption
of SFAS 165 did not have a material impact on the Company’s consolidated
financial position or results of operations. We have evaluated subsequent events
through August 5, 2009, the date this quarterly report on Form 10-Q was filed
with the U.S. Securities and Exchange Commission. We made no significant changes
to our condensed consolidated financial statements as a result of our subsequent
events evaluation.





On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP
SFAS 157-4”). FSP SFAS 157-4 amends SFAS No. 157, “Fair Value Measurements” to
provide additional guidance on estimating fair value when the volume and level
of activity for an asset or liability have significantly decreased in relation
to normal market activity for the asset or liability. The FSP also provides
additional guidance on circumstances that may indicate that a transaction is not
orderly, and requires additional disclosures about fair value measurements in
annual and interim reporting periods.  FSP SFAS No. 157-4 also
supersedes FSP SFAS 157-3, “Determining the Fair Value of a Financial Asset When
the Market for That Asset is Not Active.” Disclosures required by FSP SFAS 157-4
are included in Notes 4, 8 and 9.


- 17
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On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 115-2 and SFAS No.
124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP
SFAS 115-2 / 124-2”). This FSP extends existing disclosure requirements about
debt and equity securities to interim reporting periods as well as provides new
disclosure requirements. FSP SFAS 115-2 / 124-2 also provides new guidance on
the recognition and presentation of an other-than-temporary impairment for debt
securities classified as available for sale or held to maturity. Equity
securities are excluded from the scope the FSP’s recognition and measurement
provisions.  Refer to Note 6 for disclosures required as a result of
the adoption of this standard.





On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 107-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1”), which
amends SFAS No. 107, “Disclosures about Fair Value of Financial
Instruments,” and APB Opinion No. 28, “Interim Financial Reporting.” FSP
SFAS No. 107-1 requires disclosures about fair value of financial
instruments in financial statements for interim reporting periods and in annual
financial statements of publicly-traded companies. This FSP also requires
entities to disclose the method(s) and significant assumptions used to estimate
the fair value of financial instruments in financial statements on an interim
and annual basis and to highlight any changes from prior periods. The adoption
of FSP SFAS 107-1 did not have a material impact on the Company’s consolidated
financial position, results of operations or cash flows. Disclosures required by
SFAS 107 are included in Notes 4, 8 and 9.





On April
1, 2009, the Company adopted the provisions of SFAS No. 161, “Disclosures
about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133” (“SFAS 161”), which requires additional disclosures
about the objectives of derivative instruments and hedging activities, the
method of accounting for such instruments under SFAS No. 133 and its
related interpretations, and a tabular disclosure of the effects of such
instruments and related hedged items on the Company’s financial position,
financial performance, and cash flows. The adoption of SFAS 161 did not have a
material impact on the Company’s consolidated financial position, results of
operations or cash flows.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51” (“SFAS 160”).
This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The adoption of SFAS 160 did not have an impact on the Company’s
consolidated financial position, results of operations or cash
flows.





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 April 1, 2008, the date of
adoption.  The adoption of this EITF did not have a significant impact
on our financial position, results of operations or cash flows, basic or diluted
per share amounts.





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. We adopted this statement effective April 1, 2009 for future
acquisitions and for deferred tax adjustments related to acquisitions completed
before its effective date.





In
December 2008, the FASB issued FASB Staff Position, or FSP,
No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan
Assets” (“SFAS 132(R)-1”).  This FSP amends SFAS 132(R), “Employer’s
Disclosures about Pensions and Other Postretirement Benefits”
(“SFAS 132(R)”), to require additional disclosures about assets held in an
employer’s defined benefit pension or other postretirement plan. This FSP
replaces the requirement to disclose the percentage of the fair value of total
plan assets for each major category of plan assets, such as equity securities,
debt securities, real estate and all other assets, with the fair value of each
major asset category as of each annual reporting date


- 18
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for which
a financial statement is presented. It also amends SFAS 132(R) to require
disclosure of the level within the fair value hierarchy in which each major
category of plan assets falls, using the guidance in SFAS No. 157, “Fair
Value Measurements.” This FSP is applicable to employers that are subject to the
disclosure requirements of SFAS 132(R) and is generally effective for fiscal
years ending after December 15, 2009. We will comply with the disclosure
provisions of this FSP after its effective date. We do not expect the adoption
of this requirement to have a material impact on our consolidated financial
position, results of operations or cash flows.





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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 designer, marketer and manufacturer of a wide variety of powered and
manually operated wire rope and chain hoists, industrial crane systems, chain,
hooks and other attachments, actuators, rotary unions, lift tables and tire
shredders 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 developed our leading market position over
our 134-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, acquisitions
significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and customer base. Ongoing operations include
improving our productivity and increasing penetration of the European, Latin
American, and Asian marketplaces. In accordance with our strategy, we have been
investing in our Lean efforts across the Company, new product development and
directed sales and marketing activities. Shareholder value will be enhanced
through continued emphasis on improvement of the fundamentals including new
product development, market expansion, manufacturing efficiency, cost
containment, efficient capital investment and a high degree of customer
satisfaction.





Over the
course of its history, the Company has resiliently withstood many business
cycles and its strong cash flow profile has helped it endure. Reflecting on the
current global economic recession and recent credit crisis, we stand with a
strong capital structure which includes excess cash reserves, significant
revolver availability with expiration dating to 2011, fixed-rate long-term debt
which doesn’t expire until 2013 and a strong free cash flow business profile. We
believe our liquidity strength will enable us to withstand this downturn as
well. Further, we are managing our business through this cycle with a lower
fixed cost footprint than prior cycles and are aggressively reducing our fixed
cost base further as we strategically reorganize our North American hoist and
rigging operations.  The process includes the closure of two
manufacturing facilities and the significant downsizing of a third facility. We
are currently engaged with the labor unions at each facility in bargaining unit
negotiations. The closures will result in a reduction of 500,000 square feet of
manufacturing space and generation of annual savings estimated at approximately
$9 - $11 million with 80% of the total $8-$10 million of charges occurring in
fiscal 2010. These costs will be recorded beginning in the second quarter of
fiscal 2010 and continue into fiscal 2011. During the first quarter of fiscal
2010, also in accordance with our strategy, we consolidated our North American
sales force and offered certain employees an incentive to voluntarily retire
early. The early retirement program consisted of two benefits: a paid leave of
absence and an enhanced pension benefit.


Additionally,
our revenue base is more geographically diverse than in our Company’s history,
with over 40% derived outside the U.S., pro forma for the effects of our
October 1, 2008 Pfaff acquisition, which we believe will help to balance the
impact of changes that will occur in different global economies at different
times. As in the past, we monitor U.S. Industrial Capacity Utilization as an
indicator of anticipated U.S. demand for our product. This statistic weakened
significantly between September 2008 and March 2009, but has since moderated
over recent months. In addition, we continue to monitor the potential impact of
other global and U.S. trends, including European industrial production, energy
costs, steel price fluctuations, interest rates, currency exchange and activity
in a variety of end-user markets around the globe.





Regardless
of the economic climate, we constantly explore ways to manage our operating
margins as well as further improve our productivity and competitiveness,
regardless of the point in the economic cycle. 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 efforts which are
fundamentally changing our manufacturing and business processes to be more
responsive to customer demand and improving on-time delivery and productivity.
In addition to Lean, we are working to achieve these strategic initiatives
through product simplification, the creation of centers of excellence, and
improved supply chain management.


- 20
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We
continuously monitor market prices 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. Generally, as we experience fluctuations in our costs, we
reflect them as price increases or surcharges to our customers with the goal of
being margin neutral. Our steel costs have been relatively stable during this
quarter.





From a
strategic perspective, we are investing in international markets and new
products as we focus on our greatest opportunities for growth. We maintain a
strong North American market share with significant leading market positions in
hoists, lifting and sling chain, forged attachments and actuators. We seek to
maintain and enhance our market share by continuing and focusing our sales and
marketing activities directed toward select North American and global sectors
including entertainment, energy, construction, mining and food processing. Our
fiscal 2009 acquisition of Pfaff is enhancing our European market penetration as
well as strengthening our global actuator offering. Further, we continue to
invest in emerging market penetration, including the geographic regions of
Eastern Europe, Latin America and Asia. We complement these activities with
continued investments in new product development, particularly products with
global reach.





We are
also looking for opportunities for growth via acquisitions or joint ventures,
although given the current economic uncertainty we intend to continue to monitor
and assess deployment of capital prudently. The focus of our acquisition
strategy centers on opportunities for international revenue growth and product
line expansion in alignment with our existing core offering.





We
continue to operate in a highly competitive and global business environment
faced with significant uncertainty at the present time. We face a variety of
challenges and opportunities in those markets and geographies, including trends
toward increased utilization of the global labor force and the expansion of
market opportunities in Asia and other emerging markets. While we continue to
execute our long-term growth strategy, we are weathering this downturn with our
strong capital structure, solid cash position and flexible cost base,
aggressively addressing costs and implementing changes to buffer the impact on
current margins.





Results
of Operations





Three
Months Ended June 30, 2009 and June 29, 2008


Net sales
in the fiscal 2010 quarter ended June 30, 2009 were $119,008, down $32,156
or 21.3% from the fiscal 2009 quarter ended June 29, 2008 net sales of $151,164.
The fiscal 2010 quarter includes $17,600 of sales from Pfaff-silberblau, which
was acquired October 1, 2008. Excluding the sales from Pfaff-silberblau, sales
decreased $49,800 or 32.9%. Net sales was positively impacted $2,200 by price
increases and negatively impacted $47,900 by decreased volume due to continued
weakness in the global economy. Foreign currency translation also negatively
impacted sales by $4,100 in the fiscal 2010 quarter.





Gross
profit in the fiscal 2010 quarter ended June 30, 2009 was $29,430, down
$19,095 or 39.4% from the fiscal 2009 quarter ended June 29, 2008 gross profit
of $48,525. Gross profit margin decreased to 24.7% in the fiscal 2010 quarter
from 32.1% in the fiscal 2009 quarter. The decline in gross profit margin was
due mostly to lower volume in all markets and currently lower margins at Pfaff.
The translation of foreign currencies had a $1,300 negative impact on gross
profit in the fiscal 2010 quarter.





Selling
expenses were $16,477 and $18,202 in the fiscal 2010 and 2009 quarters,
respectively. This decrease reflects aggressive efforts to reduce or eliminate
costs, as well as $500 lower commissions on lower sales volume, despite the
addition of $3,000 of expenses associated with the Pfaff business and continued
investments in emerging markets. Additionally, foreign currency translation had
an $800 favorable impact on selling expenses.  As a percentage of
consolidated net sales, selling expenses were 13.8% and 12.0% in the fiscal 2010
and 2009 quarters, respectively.





General
and administrative expenses were $8,461 and $9,901 in the fiscal 2010 and 2009
quarters, respectively, as additional $600 of expenses associated with the Pfaff
business and continuation of investments in new product development were more
than offset by benefits from aggressive cost reduction activities. Additionally,
foreign currency translation had a $300 favorable impact on general and
administrative expense. As a percentage of consolidated net sales, general and
administrative expenses were 7.1% and 6.5% in the fiscal 2010 and 2009 quarters,
respectively.


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Restructuring
charges were $5,838 in the fiscal 2010 quarter ended June 30, 2009. These
restructuring costs were for both voluntary ($5,404) and involuntary ($434)
termination benefits related to workforce reductions in our North American sales
force reorganization and other salaried workforce reductions. There were no
restructuring charges recorded during the quarter ended June 29,
2008.





Amortization
of intangibles was $440 and $27 in the fiscal 2010 and 2009 quarters,
respectively. The increase was the result of amortization of intangibles
acquired in the Pfaff-silberblau acquisition.





Interest
and debt expense was $3,337 and $3,193 in the fiscal 2010 and 2009 quarters,
respectively. The increase was the result of higher debt levels in the fiscal
2010 quarter from debt assumed upon the acquisition of
Pfaff-silberblau.





Income
tax (benefit) expense as a percentage of (loss) income from continuing
operations before income tax expense was 41.9% and 35.6% in the fiscal 2010 and
2009 quarters, respectively. The percentages vary from the U.S. statutory rate
due to varying effective tax rates at our foreign subsidiaries, and the
jurisdictional mix of taxable income forecasted for these
subsidiaries.





Income
(loss) from discontinued operations, net of tax, was $133 and ($2,096) in the
fiscal 2010 and 2009 quarters, respectively. The fiscal 2009 first quarter loss
was related primarily to the Univeyor business that was divested in July
2008.





Liquidity
and Capital Resources





Cash and
cash equivalents totaled $44,198 at June 30, 2009, an increase of $4,962 from
the March 31, 2009 balance of $39,236.





Net cash
provided by operating activities was $4,871 for the quarter ended June 30, 2009
compared with $9,831 for the quarter ended June 29, 2008. The net cash provided
by operating activities for the quarter ended June 30, 2009 was primarily the
result of $5,277 of cash provided by changes in operating assets and liabilities
driven by a $7,163 decrease in accounts receivable and a $6,434 decrease in
inventory, which were partially offset by an $8,069 decrease in accounts
payable. The changes in operating assets and liabilities were the result of the
decline in net sales due to the continued weakness in the global economy. A net
loss of $2,398 and a $1,534 negative effect on cash from deferred income taxes
were offset by non-cash charges for depreciation and amortization of $3,059 and
stock-based compensation of $501. The net cash provided by operating activities
for the quarter ended June 29, 2008 was primarily the result of $11,766 of
income from continuing operations plus non-cash charges of depreciation and
amortization of $2,172 and deferred income taxes of $1,180, which were partially
offset by $3,562 of cash used for changes in operating assets and liabilities,
primarily driven by a $4,613 increase in inventory to support penetration of new
markets, upcoming new product launches, longer-duration projects and timing of
offshore purchases. Net cash used by operating activities from discontinued
operations, attributable to our former Univeyor A/S business, was $2,218 for the
quarter ended June 29, 2008.





Net cash
used by investing activities was $2,104 for the quarter ended June 30, 2009
compared with $2,476 for the quarter ended June 29, 2008. The net cash used by
investing activities for the quarter ended June 30, 2009 was primarily the
result of $1,250 for capital expenditures and $987 for the net purchases of
marketable securities. The net cash used by investing activities for the quarter
ended June 29, 2008 was primarily the result of $2,118 for capital expenditures
and $497 for the net purchases of marketable securities. Net cash provided by
investing activities from discontinued operations, primarily attributable to
payments received on our note receivable related to our 2002 sale of Automatic
Systems, Inc, was $133 and $139 for the quarters ended June 30, 2009 and June
29, 2008, respectively.





Net cash
provided by financing activities was $1,656 for the quarter ended June 30, 2009
compared with $1,035 for the quarter ended June 29, 2008. The net cash used by
financing activities for the quarter ended June 30, 2009 consisted primarily of
$1,552 of net debt borrowings and $176 of proceeds from stock options exercised.
The net cash provided by financing activities for quarter 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. Net cash provided by
financing activities from discontinued operations, attributable to our former
Univeyor A/S business, was $579 for the quarter ended June 29,
2008.


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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 successful execution of our current business plan which
includes aggressive cost management, facility consolidations and effective
working capital utilization. This is complemented by the fact that throughout
the last economic recession spanning 2000 - 2004, we generated positive cash
flows from operating activities.





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 subject to lender
approval and possible renegotiation of the terms of the credit agreement. The
Revolving Credit Facility matures February 2011.





The
unused portion of the Revolving Credit Facility totaled $66,087, net of
outstanding borrowings of zero and outstanding letters of credit of $8,913 as of
June 30, 2009. 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 associated with the Revolving Credit Facility places certain
debt covenant restrictions on us, including certain financial requirements and a
limitation on dividend payments.  The Company amended its Revolving
Credit Facility on May 19, 2009. The credit facility was amended to increase the
amount of restructuring charges to be excluded from the fixed charge coverage
ratio covenant calculation as a result of the amendment. The financial covenants
are limited to a senior leverage ratio and a fixed charge coverage ratio with
which the Company is in compliance as of June 30, 2009.  These
covenants were set at levels which allow the Company flexibility relative to
deteriorating market conditions given the Company’s low level of outstanding
senior debt and its favorable cash flow profile.





The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $124,855 at June 30, 2009 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. 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 U.S. subsidiaries and are not subject to any sinking fund
requirements.





The
Company’s capital lease obligations related to property and equipment leases
amounted to $8,100 at June 30, 2009. Capital lease obligations are included in
senior debt in the consolidated balance sheets.





Unsecured
and uncommitted lines of credit are available to meet short-term working capital
needs for certain of our subsidiaries operating outside of the U.S. 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. As of June 30, 2009, significant unsecured credit lines totaled
approximately $7,400, of which $5,200 was drawn.





In
addition to the above facilities, our foreign subsidiaries have certain secured
credit lines. As of June 30, 2009, significant secured credit lines totaled
$3,100, of which $300 was drawn.





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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
30, 2009 and June 29, 2008 were $1,250 and $2,118, respectively. We expect
capital spending for fiscal 2010 to be approximately $10,000 to $12,000 compared
with $12,245 in fiscal 2009. Capital expenditures for fiscal 2010 include
investments required to accommodate facility consolidation activities as well as
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 Asia Pacific region. We have been impacted by fluctuations in steel costs,
which vary by type of steel and we continue to monitor them and address our
pricing policies accordingly. In addition, U.S. employee benefits costs such as
health insurance and pension, as well as energy costs have exceeded general
inflation levels. Otherwise, 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 or
surcharges.  In the future, we may be further affected by inflation
that we may not be able to offset with price increases or surcharges.
Additionally, we are impacted by fluctuations in currency exchange rates which
are primarily translational, but transactional fluctuations could also impact
our financial results.





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, gains or losses in our portfolio of marketable securities,
restructuring charges, favorable or unfavorable foreign currency translation,
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, 2009 the Company adopted the provisions of SFAS No. 165, “Subsequent Events”
(“SFAS 165”), which establishes principles and requirements for subsequent
events. SFAS 165 sets forth the period after the balance sheet date during which
management shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, circumstances under which
an entity shall recognize events or transactions occurring after the balance
sheet date, as well as the disclosures that an entity shall make about events or
transactions that occurred after the balance sheet date.  The adoption
of SFAS 165 did not have a material impact on the Company’s consolidated
financial position or results of operations. We have evaluated subsequent events
through August 5, 2009, the date this quarterly report on Form 10-Q was filed
with the U.S. Securities and Exchange Commission. We made no significant changes
to our condensed consolidated financial statements as a result of our subsequent
events evaluation.





On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP
SFAS 157-4”). FSP SFAS 157-4 amends SFAS No. 157, “Fair Value Measurements” to
provide additional guidance on estimating fair value when the volume and level
of activity for an asset or liability have significantly decreased in relation
to normal market activity for the asset or liability. The FSP also provides
additional guidance on circumstances that may indicate that a transaction is not
orderly, and requires additional disclosures about fair value measurements in
annual and interim reporting periods.  FSP SFAS No. 157-4 also
supersedes FSP SFAS 157-3, “Determining the Fair Value of a Financial Asset When
the Market for That Asset is Not Active.” Disclosures required by FSP SFAS 157-4
are included in Notes 4, 8 and 9.


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On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 115-2 and SFAS No.
124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP
SFAS 115-2 / 124-2”). This FSP extends existing disclosure requirements about
debt and equity securities to interim reporting periods as well as provides new
disclosure requirements. FSP SFAS 115-2 / 124-2 also provides new guidance on
the recognition and presentation of an other-than-temporary impairment for debt
securities classified as available for sale or held to maturity. Equity
securities are excluded from the scope the FSP’s recognition and measurement
provisions.  Refer to Note 6 for disclosures required as a result of
the adoption of this standard.





On April
1, 2009, the Company adopted the provisions of FSP SFAS No. 107-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1”), which
amends SFAS No. 107, “Disclosures about Fair Value of Financial
Instruments,” and APB Opinion No. 28, “Interim Financial Reporting.” FSP
SFAS No. 107-1 requires disclosures about fair value of financial
instruments in financial statements for interim reporting periods and in annual
financial statements of publicly-traded companies. This FSP also requires
entities to disclose the method(s) and significant assumptions used to estimate
the fair value of financial instruments in financial statements on an interim
and annual basis and to highlight any changes from prior periods. The adoption
of FSP SFAS 107-1 did not have a material impact on the Company’s consolidated
financial position, results of operations or cash flows. Disclosures required by
SFAS 107 are included in Notes 4, 8 and 9.





On April
1, 2009, the Company adopted the provisions of SFAS No. 161, “Disclosures
about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133” (“SFAS 161”), which requires additional disclosures
about the objectives of derivative instruments and hedging activities, the
method of accounting for such instruments under SFAS No. 133 and its
related interpretations, and a tabular disclosure of the effects of such
instruments and related hedged items on the Company’s financial position,
financial performance, and cash flows. The adoption of SFAS 161 did not have a
material impact on the Company’s consolidated financial position, results of
operations or cash flows.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51” (“SFAS 160”).
This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. The adoption of SFAS 160 did not have an impact on the Company’s
consolidated financial position, results of operations or cash
flows.





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 April 1, 2008, the date of
adoption.  The adoption of this EITF did not have a significant impact
on our financial position, results of operations or cash flows, basic or diluted
per share amounts.





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. We adopted this statement effective April 1, 2009 for future
acquisitions and for deferred tax adjustments related to acquisitions completed
before its effective date.





In
December 2008, the FASB issued FASB Staff Position, or FSP,
No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan
Assets” (“SFAS 132(R)-1”).  This FSP amends SFAS 132(R), “Employer’s
Disclosures about Pensions and Other Postretirement Benefits”
(“SFAS 132(R)”), to require additional disclosures about assets held in an
employer’s defined benefit pension or other postretirement plan. This FSP
replaces the requirement to disclose the percentage of the fair value of total
plan assets for each major category of plan assets, such as equity securities,
debt securities, real estate and all other assets, with the fair value of each
major asset category as of each annual reporting date


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for which
a financial statement is presented. It also amends SFAS 132(R) to require
disclosure of the level within the fair value hierarchy in which each major
category of plan assets falls, using the guidance in SFAS No. 157, “Fair
Value Measurements.” This FSP is applicable to employers that are subject to the
disclosure requirements of SFAS 132(R) and is generally effective for fiscal
years ending after December 15, 2009. We will comply with the disclosure
provisions of this FSP after its effective date. We do not expect the adoption
of this requirement to have a material impact on our consolidated financial
position, results of operations or cash flows.





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, facility
consolidations and other restructurings, 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.





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Item 3.      Quantitative and
Qualitative Disclosures About Market Risk








There
have been no material changes in the market risks since the end of Fiscal
2009.








Item
      4.
            Controls
      and Procedures





As of
June 30,
2009, 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
30, 2009, to ensure that information required to be disclosed in reports filed
or submitted under the Exchange Act is made known to them on a timely basis, and
that these disclosure controls and procedures are effective to ensure such
information is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms.





There
have been no changes in the Company’s internal control over financial reporting
during the most recent quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.











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Part II.    Other Information





Item
      1.
            Legal
      Proceedings – none.





Item
      1A.
            Risk
      Factors





There
have been no other material changes from the risk factors as previously
disclosed in the Company’s Form 10-K for the year ended March 31,
2009.





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





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
      32Certification 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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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 5, 2009
            
            /s/ Karen L. HowardKaren
      L. HowardVice
      President and Chief Financial Officer(Principal Financial
      Officer)





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