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 September 28, 2008


or





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





For the
transition period from  to





Commission
File Number:       0-27618





Columbus
      McKinnon Corporation(Exact
      name of registrant as specified in its charter)New
      York
            16-0547600(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)140
      John James Audubon Parkway, Amherst, NY
            14228-1197(Address
      of principal executive offices)
            (Zip
      code)(716)
      689-5400(Registrant's
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report.)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  :[X]
Yes   []  No





Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Act.


Large
      accelerated
      filer  [  ]
            Accelerated
      filer [X]Non-accelerated
      filer  [  ]  (Do not check if a smaller
      reporting company)
            Smaller
      Reporting Company [  ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [  ] Yes    [X]
No





The
number of shares of common stock outstanding as of October 31, 2008
was:  19,037,151 shares.





FORM 10-Q INDEX


COLUMBUS
McKINNON CORPORATION


September
28, 2008








Page #Part
      I. Financial InformationItem
      1.
            Condensed
      Consolidated Financial Statements (Unaudited)Condensed consolidated balance sheets – September 28, 2008 and
      March 31, 2008
            2Condensed consolidated statements of operations and retained
      earnings - Three months  and six months ended September 28, 2008
      and September 30, 2007
            3Condensed consolidated statements of cash flows - Six months
      ended September 28, 2008 and September 30, 2007
            4Condensed consolidated statements of comprehensive income
      (loss) - Three months  and six months ended September 28, 2008
      and September 30, 2007
            5Notes to condensed consolidated financial statements -
      September 28, 2008
            6Item
      2.
            Management's Discussion and Analysis of Results of Operations
      and Financial Condition
            16Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            23Item
      4.
            Controls and Procedures
            23Part
      II. Other InformationItem
      1.
            Legal Proceedings – none.
            24Item
      1A.
            Risk Factors
            24Item
      2.
            Unregistered Sales of Equity Securities and Use of Proceeds
      – none.
            24Item
      3.
            Defaults upon Senior Securities – none.
            24Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            24Item
      5.
            Other Information – none.
            24Item
      6.
            Exhibits
            25





- 1
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 Table of Contents


Part
I.     Financial Information





Item
1.     Condensed Consolidated Financial Statements
(Unaudited)





COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS





September
      28,
            
            
            March 31,2008
            
            
            2008ASSETS:
            
            (In
      thousands)Current
      assets:Cash
      and cash equivalents
            
            $
            82,034
            
            
            $
            75,994Trade
      accounts receivable
            
            
            94,165
            
            
            
            93,833Inventories
            
            
            89,232
            
            
            
            84,286Prepaid
      expenses
            
            
            24,796
            
            
            
            17,320Current
      assets of discontinued operations
            
            
            -
            
            
            
            17,334Total
      current assets
            
            
            290,227
            
            
            
            288,767Property,
      plant, and equipment, net
            
            
            52,973
            
            
            
            53,420Goodwill
      and other intangibles, net
            
            
            186,450
            
            
            
            187,376Marketable
      securities
            
            
            29,130
            
            
            
            29,807Deferred
      taxes on income
            
            
            16,954
            
            
            
            17,570Other
      assets
            
            
            6,724
            
            
            
            8,094Assets
      of discontinued operations
            
            
            -
            
            
            
            5,001Total
      assets
            
            $
            582,458
            
            
            $
            590,035LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      liabilities:Notes
      payable to banks
            
            $
            17
            
            
            $
            36Trade
      accounts payable
            
            
            35,135
            
            
            
            35,149Accrued
      liabilities
            
            
            53,996
            
            
            
            52,265Restructuring
      reserve
            
            
            -
            
            
            
            58Current
      portion of long-term debt
            
            
            327
            
            
            
            326Current
      liabilities of discontinued operations
            
            
            -
            
            
            
            24,955Total
      current liabilities
            
            
            89,475
            
            
            
            112,789Senior
      debt, less current portion
            
            
            2,917
            
            
            
            3,066Subordinated
      debt
            
            
            129,855
            
            
            
            129,855Other
      non-current liabilities
            
            
            50,882
            
            
            
            48,844Total
      liabilities
            
            
            273,129
            
            
            
            294,554Shareholders'
      equityCommon
      stock
            
            
            190
            
            
            
            189Additional
      paid-in capital
            
            
            180,181
            
            
            
            178,457Retained
      earnings
            
            
            141,933
            
            
            
            122,400ESOP
      debt guarantee
            
            
            (2,570
            )
            
            
            (2,824
            )Accumulated
      other comprehensive loss
            
            
            (10,405
            )
            
            
            (2,741
            )Total
      shareholders' equity
            
            
            309,329
            
            
            
            295,481Total
      liabilities and shareholders' equity
            
            $
            582,458
            
            
            $
            590,035





See
accompanying notes to condensed consolidated financial statements.














- 2
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COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS


(UNAUDITED)








Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      thousands, except per share data)Net
      sales
            
            $
            154,680
            
            
            $
            144,977
            
            
            $
            305,844
            
            
            $
            286,427Cost
      of products sold
            
            
            109,108
            
            
            
            99,681
            
            
            
            211,747
            
            
            
            197,799Gross
      profit
            
            
            45,572
            
            
            
            45,296
            
            
            
            94,097
            
            
            
            88,628Selling
      expenses
            
            
            17,164
            
            
            
            16,882
            
            
            
            35,366
            
            
            
            32,426General
      and administrative expenses
            
            
            9,446
            
            
            
            8,311
            
            
            
            19,347
            
            
            
            16,588Restructuring
      charges
            
            
            155
            
            
            
            394
            
            
            
            155
            
            
            
            402Amortization
      of intangibles
            
            
            29
            
            
            
            25
            
            
            
            56
            
            
            
            5326,794
            
            
            
            25,612
            
            
            
            54,924
            
            
            
            49,469Income
      from operations
            
            
            18,778
            
            
            
            19,684
            
            
            
            39,173
            
            
            
            39,159Interest
      and debt expense
            
            
            3,132
            
            
            
            3,369
            
            
            
            6,325
            
            
            
            7,329Cost
      of bond redemptions
            
            
            -
            
            
            
            1,443
            
            
            
            -
            
            
            
            1,443Investment
      loss (income)
            
            
            114
            
            
            
            (257
            )
            
            
            (177
            )
            
            
            (551
            )Other
      (income) and expense, net
            
            
            (872
            )
            
            
            (439
            )
            
            
            (1,644
            )
            
            
            (1,378
            )Income
      before income tax expense
            
            
            16,404
            
            
            
            15,568
            
            
            
            34,669
            
            
            
            32,316Income
      tax expense
            
            
            5,897
            
            
            
            5,698
            
            
            
            12,396
            
            
            
            11,992Income
      from continuing operations
            
            
            10,507
            
            
            
            9,870
            
            
            
            22,273
            
            
            
            20,324Income
      (loss) from discontinued operations (net of tax benefit)
            
            
            130
            
            
            
            (417
            )
            
            
            (1,966
            )
            
            
            (1,351
            )Net
      income
            
            
            10,637
            
            
            
            9,453
            
            
            
            20,307
            
            
            
            18,973Retained earnings
      - beginning of period
            
            
            131,296
            
            
            
            94,571
            
            
            
            122,400
            
            
            
            85,237Change
      in accounting principle (note 11)
            
            
            -
            
            
            
            -
            
            
            
            (774
            )
            
            
            (186
            )Retained
      earnings - end
      of period
            
            $
            141,933
            
            
            $
            104,024
            
            
            $
            141,933
            
            
            $
            104,024Basic
      income per share:Income
      from continuing operations
            
            $
            0.55
            
            
            $
            0.53
            
            
            $
            1.18
            
            
            $
            1.09Income
      (loss) from discontinued operations
            
            
            0.01
            
            
            
            (0.02
            )
            
            
            (0.10
            )
            
            
            (0.07
            )Net
      income
            
            $
            0.56
            
            
            $
            0.51
            
            
            $
            1.08
            
            
            $
            1.02Diluted
      income per share:Income
      from continuing operations
            
            $
            0.54
            
            
            $
            0.51
            
            
            $
            1.16
            
            
            $
            1.06Income
      (loss) from discontinued operations
            
            
            0.01
            
            
            
            (0.02
            )
            
            
            (0.10
            )
            
            
            (0.07
            )Net
      income
            
            $
            0.55
            
            
            $
            0.49
            
            
            $
            1.06
            
            
            $
            0.99





See accompanying notes to condensed
consolidated financial statements.


- 3
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COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)


Six Months EndedSeptember
      28,
            
            
            September
      30,2008
            
            
            2007(In
      thousands)OPERATING
      ACTIVITIES:Net
      income
            
            $
            20,307
            
            
            $
            18,973Adjustments
      to reconcile net income to net cash provided by operating
      activities:Loss from discontinued
      operations
            
            
            1,966
            
            
            
            1,351Depreciation and
      amortization
            
            
            4,512
            
            
            
            4,057Deferred income
    taxes
            
            
            8,016
            
            
            
            10,115Gain on sale of real
      estate/investments
            
            
            (649
            )
            
            
            (333
            )Loss on early retirement of
      bonds
            
            
            -
            
            
            
            1,106Stock-based
      compensation
            
            
            974
            
            
            
            395Amortization/write-off of
      deferred financing costs
            
            
            266
            
            
            
            643Changes in operating assets and
      liabilities
              net of effects of business
      divestitures:Trade accounts
      receivable
            
            
            (584
            )
            
            
            603Inventories
            
            
            (5,301
            )
            
            
            (12,146
            )Prepaid expenses
            
            
            (837
            )
            
            
            1,203Other assets
            
            
            1,042
            
            
            
            (981
            )Trade accounts
      payable
            
            
            88
            
            
            
            2,643Accrued and non-current
      liabilities
            
            
            1,443
            
            
            
            (108
            )Net
      cash provided by operating activities from continuing
      operations
            
            
            31,243
            
            
            
            27,521Net
      cash used by operating activities from discontinued
    operations
            
            
            (2,214
            )
            
            
            (3,637
            )Net
      cash provided by operating activities
            
            
            29,029
            
            
            
            23,884INVESTING
      ACTIVITIES:Proceeds
      from sale of marketable securities
            
            
            313
            
            
            
            12,776Purchases
      of marketable securities
            
            
            (999
            )
            
            
            (13,487
            )Capital
      expenditures
            
            
            (5,014
            )
            
            
            (4,954
            )Proceeds
      from sale of assets
            
            
            1,269
            
            
            
            5,454Net
      cash used by investing activities from continuing
    operations
            
            
            (4,431
            )
            
            
            (211
            )Net
      cash provided by investing activities from discontinued
      operations
            
            
            265
            
            
            
            253Net
      cash (used) provided by investing activities
            
            
            (4,166
            )
            
            
            42FINANCING
      ACTIVITIES:Proceeds
      from exercise of stock options
            
            
            391
            
            
            
            1,061Net
      payments under revolving line-of-credit agreements
            
            
            (19
            )
            
            
            (777
            )Repayment
      of debt
            
            
            (125
            )
            
            
            (23,326
            )Other
            
            
            441
            
            
            
            281Net
      cash provided (used) by financing activities from continuing
      operations
            
            
            688
            
            
            
            (22,761
            )Net
      cash (used) provided by financing activities from discontinued
      operations
            
            
            (14,612
            )
            
            
            780Net
      cash used by financing activities
            
            
            (13,924
            )
            
            
            (21,981
            )Effect
      of exchange rate changes on cash
            
            
            (4,899
            )
            
            
            3,028Net
      change in cash and cash equivalents
            
            
            6,040
            
            
            
            4,973Cash
      and cash equivalents at beginning of year
            
            
            75,994
            
            
            
            48,655Cash
      and cash equivalents at end of year
            
            $
            82,034
            
            
            $
            53,628





See
accompanying notes to condensed consolidated financial
statements.


- 4
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 Table of Contents


COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)


(UNAUDITED)





Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      thousands)Net
      income
            
            $
            10,637
            
            
            $
            9,453
            
            
            $
            20,307
            
            
            $
            18,973Other
      comprehensive (loss) income, net of tax:Foreign
      currency translation adjustments
            
            
            (7,638
            )
            
            
            3,738
            
            
            
            (6,691
            )
            
            
            5,375Unrealized
      (loss) gain on investments:Unrealized
      holding (loss) gain arising during the period
            
            
            (1,157
            )
            
            
            106
            
            
            
            (1,363
            )
            
            
            107Reclassification
      adjustment for loss (gain) included in net income
            
            
            388
            
            
            
            (1
            )
            
            
            390
            
            
            
            (45
            )(769
            )
            
            
            105
            
            
            
            (973
            )
            
            
            62Total
      other comprehensive (loss) income
            
            
            (8,407
            )
            
            
            3,843
            
            
            
            (7,664
            )
            
            
            5,437Comprehensive
      income
            
            $
            2,230
            
            
            $
            13,296
            
            
            $
            12,643
            
            
            $
            24,410





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)


September
28, 2008





1.  Description
of Business





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position of Columbus McKinnon Corporation (the
Company) at September 28, 2008 and the results of its operations and its cash
flows for the three and six-month periods ended September 28, 2008 and September
30, 2007, have been included. Results for the period ended September 28, 2008
are not necessarily indicative of the results that may be expected for the year
ended March 31, 2009. The balance sheet at March 31, 2008 has been derived from
the audited consolidated financial statements at that date, but does not include
all of the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Columbus McKinnon Corporation annual report on Form 10-K
for the year ended March 31, 2008.





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





2.  Discontinued  Operations





As part
of its continuing evaluation of its businesses, the Company determined that its
integrated material handling conveyor systems business (Univeyor A/S) no longer
provided a strategic fit with its long-term growth and operational objectives.
On July 25, 2008, the Company completed the sale of Univeyor A/S, which business
represented the majority of the Solutions segment. In accordance with the
provisions of Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets” the results of operations of the Univeyor
business have been classified as discontinued operations in the condensed,
consolidated balance sheets, statements of operations and statements of cash
flows presented herein.  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:


Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      sales
            
            $
            -
            
            
            $
            6,433
            
            
            $
            8,982
            
            
            $
            13,093Income
      (loss) before income tax expense (benefit)
            
            
            218
            
            
            
            (496
            )
            
            
            (1,223
            )
            
            
            (1,693
            )Income
      tax expense (benefit)
            
            
            88
            
            
            
            (79
            )
            
            
            163
            
            
            
            (342
            )Income
      (loss) from operations, net of tax expense (benefit)
            
            
            130
            
            
            
            (417
            )
            
            
            (1,386
            )
            
            
            (1,351
            )Loss
      on sale of discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            (14,627
            )
            
            
            -Income
      (loss) from discontinued operations
            
            
            130
            
            
            
            (417
            )
            
            
            (16,013
            )
            
            
            (1,351
            )Tax
      benefit from sale
            
            
            -
            
            
            
            -
            
            
            
            14,047
            
            
            
            -Income
      (loss) from discontinued operations, net of tax expense
      (benefit)
            
            $
            130
            
            
            $
            (417
            )
            
            $
            (1,966
            )
            
            $
            (1,351
            )


- 6
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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.





Prior to
the disposal of Univeyor A/S, during the past year as part of Univeyor’s ongoing
business, the Company had provided performance guarantees to certain customers
and a third party for the satisfactory completion of contracts to design,
manufacture and install its integrated material handling conveyor systems.
Pursuant to the terms of the share purchase agreement, the Company has agreed to
continue to provide performance guarantees on certain pre-existing contracts
totaling approximately $9,200 as of September 28, 2008 based on current exchange
rates. Approximately $5,000 of these guarantees is expected to expire by the end
of fiscal 2009 unless released by the third parties prior thereto, with the
remaining guarantees expiring at various times during 2010 through fiscal 2012.
Historically, none of Univeyor’s customers has ever made a claim against either
Univeyor A/S or the Company for indemnification on the performance guarantees.
The terms of the share purchase agreement provide that the purchaser indemnify
the Company for and hold it harmless against any loss, liability, or claim
arising from the guarantees after the date of sale. However, as a result of the
global credit crisis, liquidity has become an area of growing concern as it
affects Univeyor, the purchaser and the purchaser’s affiliated companies.
Performance under these guarantees is dependent upon Univeyor’s ability to
generate sufficient cash flow and secure performance bonds for future projects.
Accordingly, the Company’s potential loss under these guarantees, if any, cannot
be reasonably estimated at this time, and no liability has been recorded in the
accompanying condensed consolidated balance sheets relating to these
guarantees.





3.  Fair
Value Measurements





Beginning
in fiscal year 2009, the Company adopted the provisions of SFAS No. 157, “Fair
Value Measurements,” (“SFAS 157”) for all financial assets and liabilities and
nonfinancial assets and liabilities that are recognized or disclosed at fair
value on a recurring basis (at least annually). Under this standard, fair value
is defined as the price that would be received to sell an asset or paid to
transfer a liability (i.e. the "exit price") in an orderly transaction between
market participants at the measurement date. The adoption of SFAS No. 157 did
not have a material impact on our consolidated financial position or results of
operations.





SFAS No.
157 establishes a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the
asset or liability developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the
Company's assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available
in the circumstances. The hierarchy is separated into three levels based on the
reliability of inputs as follows:





Level 1 -
Valuations based on quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access.  Since
valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail a significant
degree of judgment.





Level 2 -
Valuations based on quoted prices in markets that are not active or for which
all significant inputs are observable, either directly or indirectly, involving
some degree of judgment.





Level 3 -
Valuations based on inputs that are unobservable and significant to the overall
fair value measurement. The degree of judgment exercised in determining fair
value is greatest for instruments categorized in Level 3.


- 7
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The
availability of observable inputs can vary from asset/liability to
asset/liability and is affected by a wide variety of factors, including, the
type of asset/liability, whether the asset/liability is established in the
marketplace, and other characteristics particular to the
transaction.  To the extent that valuation is based on models or
inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to
measure fair  value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes the level in the fair value
hierarchy within which the fair value measurement in its entirety falls is
determined based on the lowest level input that is significant to the fair value
measurement in its entirety.





Fair
value is a market-based measure considered from the perspective of a market
participant rather than an entity-specific measure. Therefore, even when market
assumptions are not readily available, assumptions are required to reflect those
that market participants would use in pricing the asset or liability at the
measurement date.





The
following table provides information regarding financial assets and liabilities
measured at fair value on a recurring basis:





Fair
      value measurements at reporting date usingDescription
            
            At
      September 28, 2008
            
            
            Quoted
      prices in active markets for identical assets (Level 1)
            
            
            Significant
      other observable inputs
              (Level
      2)
            
            
            Significant
      unobservable inputs
              (Level
      3)Assets:Marketable
      securities
            
            $
            29,130
            
            
            $
            29,130
            
            
            $
            -
            
            
            $
            -





As of
September 28, 2008, the Company did not have any nonfinancial assets and
liabilities that are recognized or disclosed at fair value on a recurring
basis.





In February 2007, the FASB issued SFAS No. 159 “The Fair Value
Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159
permits entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007.The Company did not elect to implement the fair value options
allowed under this standard.





4.  Inventories





Inventories
consisted of the following:





September
      28,
            
            
            March 31,2008
            
            
            2008At
      cost - FIFO basis:Raw
      materials
            
            $
            47,062
            
            
            $
            44,594Work-in-process
            
            
            12,483
            
            
            
            10,454Finished
      goods
            
            
            47,472
            
            
            
            44,102107,017
            
            
            
            99,150LIFO
      cost less than FIFO cost
            
            
            (17,785
            )
            
            
            (14,864
            )Net
      inventories
            
            $
            89,232
            
            
            $
            84,286





An actual
valuation of inventory under the LIFO method can be made only at the end of each
year based on the inventory levels and costs at that time. Accordingly, interim
LIFO calculations must necessarily be based on management's estimates of
expected year-end inventory levels and costs. Because these are subject to many
forces beyond management's control, interim results are subject to the final
year-end LIFO inventory valuation.


- 8
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 Table of Contents


5.  Net
Periodic Benefit Cost





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


Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Service costs
            
            $
            1,105
            
            
            $
            1,094
            
            
            $
            2,211
            
            
            $
            2,188Interest cost
            
            
            2,206
            
            
            
            2,019
            
            
            
            4,412
            
            
            
            4,038Expected return on plan
      assets
            
            
            (2,299
            )
            
            
            (2,043
            )
            
            
            (4,598
            )
            
            
            (4,086
            )Net amortization
            
            
            295
            
            
            
            450
            
            
            
            589
            
            
            
            900Net periodic pension
      cost
            
            $
            1,307
            
            
            $
            1,520
            
            
            $
            2,614
            
            
            $
            3,040





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


Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Service costs
            
            $
            1
            
            
            $
            1
            
            
            $
            2
            
            
            $
            2Interest cost
            
            
            167
            
            
            
            146
            
            
            
            334
            
            
            
            292Amortization of plan net
      losses
            
            
            116
            
            
            
            96
            
            
            
            231
            
            
            
            192Net periodic postretirement
      cost
            
            $
            284
            
            
            $
            243
            
            
            $
            567
            
            
            $
            486





For
additional information on the Company’s defined benefit pension and
postretirement benefit plans, refer to Note 11 in the consolidated financial
statements and footnotes thereto included in the Company’s annual report on Form
10-K for the year ended March 31, 2008.





6.  Income
Taxes





Income
tax expense as a percentage of income from continuing operations before income
tax expense was 35.9%, 36.6%, 35.8%, and 37.1% in the fiscal 2009 and 2008
quarters and the six-month periods then ended, 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.





7.  Earnings
Per Share





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


Three Months Ended
            
            
            Six Months EndedSeptember
      28,
            
            
            September
      30,
            
            
            September
      28,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Numerator
      for basic and diluted earnings per share:Net
      income
            
            $
            10,637
            
            
            $
            9,453
            
            
            $
            20,307
            
            
            $
            18,973Denominators:Weighted-average
      common stock outstanding -denominator for basic EPS
            
            
            18,857
            
            
            
            18,717
            
            
            
            18,838
            
            
            
            18,677Effect
      of dilutive employee stock options and awards
            
            
            341
            
            
            
            426
            
            
            
            372
            
            
            
            438Adjusted
      weighted-average common stock outstanding and assumed conversions –
      denominator for diluted EPS
            
            
            19,198
            
            
            
            19,143
            
            
            
            19,210
            
            
            
            19,115


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During
the first six months of fiscal 2009, a total of 40,750 shares of stock were
issued upon the exercising of stock options related to the Company’s stock
option plans, and 13,863 shares of stock were issued under the Company’s Long
Term Incentive Plan to the Company’s non-executive directors as part of their
annual compensation.





8.  Business
Segment Information





SFAS No.
131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes the standards for reporting information about operating segments in
financial statements.  Historically the Company had two operating and
reportable segments, Products and Solutions.  The Solutions segment engaged
primarily in the design, fabrication and installation of integrated material
handling conveyor systems and service and in the design and manufacture of tire
shredders, lift tables and light-rail systems.  In the first quarter
of fiscal 2009, the Company re-evaluated its operating and reportable segments
in connection with the discontinuation of its integrated material handling
conveyor systems and service business. With this divestiture, and in
consideration of the quantitative contribution of the remaining portions of the
Solutions segment to the Company as a whole and our products-orientated
strategic growth initiatives, the Company determined that it now has only one
operating and reportable segment for both internal and external reporting
purposes. Prior period financial information included herein has been restated
to reflect the financial position and results of operations as one
segment.





9.  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 September 28, 2008Current
      assets:Cash and cash
      equivalents
            
            $
            12,311
            
            
            $
            43
            
            
            $
            69,680
            
            
            $
            —
            
            
            $
            82,034Trade accounts
      receivable
            
            
            65,365
            
            
            
            —
            
            
            
            28,800
            
            
            
            —
            
            
            
            94,165Inventories
            
            
            37,139
            
            
            
            19,843
            
            
            
            34,615
            
            
            
            (2,365
            )
            
            
            89,232Other current
    assets
            
            
            13,833
            
            
            
            820
            
            
            
            10,143
            
            
            
            —
            
            
            
            24,796Total current
      assets
            
            
            128,648
            
            
            
            20,706
            
            
            
            143,238
            
            
            
            (2,365
            )
            
            
            290,227Property, plant, and equipment,
      net
            
            
            26,354
            
            
            
            11,751
            
            
            
            14,868
            
            
            
            —
            
            
            
            52,973Goodwill and other intangibles,
      net
            
            
            89,014
            
            
            
            57,032
            
            
            
            40,404
            
            
            
            —
            
            
            
            186,450Intercompany
            
            
            63,430
            
            
            
            (52,736
            )
            
            
            (82,701
            )
            
            
            72,007
            
            
            
            —Other assets
            
            
            61,978
            
            
            
            194,881
            
            
            
            30,571
            
            
            
            (234,622
            )
            
            
            52,808Total assets
            
            $
            369,424
            
            
            $
            231,634
            
            
            $
            146,380
            
            
            $
            (164,980
            )
            
            $
            582,458Current
      liabilities
            
            
            43,261
            
            
            
            17,689
            
            
            
            31,772
            
            
            
            (3,247
            )
            
            
            89,475Long-term
      debt, less current portion
            
            
            129,855
            
            
            
            2,709
            
            
            
            208
            
            
            
            —
            
            
            
            132,772Other
      non-current liabilities
            
            
            12,911
            
            
            
            10,577
            
            
            
            27,394
            
            
            
            —
            
            
            
            50,882Total
    liabilities
            
            
            186,027
            
            
            
            30,975
            
            
            
            59,374
            
            
            
            (3,247
            )
            
            
            273,129Shareholders'
      equity
            
            
            183,397
            
            
            
            200,659
            
            
            
            87,006
            
            
            
            (161,733
            )
            
            
            309,329Total liabilities and
      shareholders' equity
            
            $
            369,424
            
            
            $
            231,634
            
            
            $
            146,380
            
            
            $
            (164,980
            )
            
            $
            582,458





- 10
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Parent
            
            
            Guarantors
            
            
            Non
              Guarantors
            
            
            Eliminations
            
            
            ConsolidatedFor
      the Six Months Ended September 28, 2008Net
      sales
            
            $
            155,392
            
            
            $
            85,901
            
            
            $
            87,368
            
            
            $
            (22,817
            )
            
            $
            305,844Cost
      of products sold
            
            
            114,114
            
            
            
            64,984
            
            
            
            55,466
            
            
            
            (22,817
            )
            
            
            211,747Gross
      profit
            
            
            41,278
            
            
            
            20,917
            
            
            
            31,902
            
            
            
            —
            
            
            
            94,097Selling,
      general and administrative expenses
            
            
            25,347
            
            
            
            10,030
            
            
            
            19,336
            
            
            
            —
            
            
            
            54,713Restructuring
      charges
            
            
            155
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            155Amortization
      of intangibles
            
            
            54
            
            
            
            2
            
            
            
            —
            
            
            
            —
            
            
            
            5625,556
            
            
            
            10,032
            
            
            
            19,336
            
            
            
            —
            
            
            
            54,924Income
      from operations
            
            
            15,722
            
            
            
            10,885
            
            
            
            12,566
            
            
            
            —
            
            
            
            39,173Interest
      and debt expense
            
            
            5,478
            
            
            
            828
            
            
            
            19
            
            
            
            —
            
            
            
            6,325Other
      (income) and expense, net
            
            
            (577
            )
            
            
            (942
            )
            
            
            (302
            )
            
            
            —
            
            
            
            (1,821
            )Income
      before income tax expense
            
            
            10,821
            
            
            
            10,999
            
            
            
            12,849
            
            
            
            —
            
            
            
            34,669Income
      tax expense
            
            
            4,590
            
            
            
            4,279
            
            
            
            3,527
            
            
            
            —
            
            
            
            12,396Income
      from continuing operations
            
            
            6,231
            
            
            
            6,720
            
            
            
            9,322
            
            
            
            —
            
            
            
            22,273Income
      (loss) from discontinued operations
            
            
            265
            
            
            
            —
            
            
            
            (2,231
            )
            
            
            —
            
            
            
            (1,966
            )Net
      income
            
            $
            6,496
            
            
            $
            6,720
            
            
            $
            7,091
            
            
            $
            —
            
            
            $
            20,307








For
      the Six Months Ended September 28, 2008Operating
      activities:Net
      cash provided (used) by operating activities from continuing
      operations
            
            $
            19,725
            
            
            $
            (6
            )
            
            $
            11,524
            
            
            $
            —
            
            
            $
            31,243Net
      cash provided (used) by operating activities from discontinued
      operations
            
            
            4
            
            
            
            —
            
            
            
            (2,218
            )
            
            
            —
            
            
            
            (2,214
            )Net
      cash provided (used) by operating activities
            
            
            19,729
            
            
            
            (6
            )
            
            
            9,306
            
            
            
            —
            
            
            
            29,029Investing
      activities:Purchase
      of marketable securities, net
            
            
            —
            
            
            
            —
            
            
            
            (686
            )
            
            
            —
            
            
            
            (686
            )Capital
      expenditures
            
            
            (2,124
            )
            
            
            (903
            )
            
            
            (1,987
            )
            
            
            —
            
            
            
            (5,014
            )Proceeds
      from sale of assets
            
            
            —
            
            
            
            1,269
            
            
            
            —
            
            
            
            —
            
            
            
            1,269Net
      cash (used) provided by investing activities from continuing
      operations
            
            
            (2,124
            )
            
            
            366
            
            
            
            (2,673
            )
            
            
            —
            
            
            
            (4,431
            )Net
      cash provided by investing activities from discontinued
      operations
            
            
            265
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            265Net
      cash (used) provided by investing activities
            
            
            (1,859
            )
            
            
            366
            
            
            
            (2,673
            )
            
            
            —
            
            
            
            (4,166
            )Financing
      activities:Proceeds
      from stock options exercised
            
            
            391
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            391Net
      (payments) borrowings under
      revolving       line-of-credit
      agreements
            
            
            (23,000
            )
            
            
            —
            
            
            
            22,981
            
            
            
            —
            
            
            
            (19
            )Repayment
      of debt
            
            
            —
            
            
            
            (93
            )
            
            
            (32
            )
            
            
            —
            
            
            
            (125
            )Other
            
            
            441
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            441Net
      cash (used) provided by financing activities from continuing
      operations
            
            
            (22,168
            )
            
            
            (93
            )
            
            
            22,949
            
            
            
            —
            
            
            
            688Net
      cash (used) provided by financing activities from discontinued
      operations
            
            
            (15,191
            )
            
            
            —
            
            
            
            579
            
            
            
            —
            
            
            
            (14,612
            )Net
      cash (used) provided by financing activities
            
            
            (37,359
            )
            
            
            (93
            )
            
            
            23,528
            
            
            
            —
            
            
            
            (13,924
            )Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            117
            
            
            
            (5,016
            )
            
            
            —
            
            
            
            (4,899
            )Net
      change in cash and cash equivalents
            
            
            (19,489
            )
            
            
            384
            
            
            
            25,145
            
            
            
            —
            
            
            
            6,040Cash
      and cash equivalents at beginning of period
            
            
            31,800
            
            
            
            (341
            )
            
            
            44,535
            
            
            
            —
            
            
            
            75,994Cash
      and cash equivalents at end of period
            
            $
            12,311
            
            
            $
            43
            
            
            $
            69,680
            
            
            $
            —
            
            
            $
            82,034







- 11
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Parent
            
            
            Guarantors
            
            
            Non
              Guarantors
            
            
            Eliminations
            
            
            ConsolidatedAs
      of March 31, 2008Current
      assets:Cash and cash
      equivalents
            
            $
            31,800
            
            
            $
            (341
            )
            
            $
            44,535
            
            
            $
            —
            
            
            $
            75,994Trade accounts
      receivable
            
            
            62,992
            
            
            
            —
            
            
            
            30,841
            
            
            
            —
            
            
            
            93,833Inventories
            
            
            35,375
            
            
            
            18,797
            
            
            
            32,479
            
            
            
            (2,365
            )
            
            
            84,286Other current
    assets
            
            
            8,264
            
            
            
            1,025
            
            
            
            8,031
            
            
            
            —
            
            
            
            17,320Current assets of discontinued
      operations
            
            
            —
            
            
            
            —
            
            
            
            17,334
            
            
            
            —
            
            
            
            17,334Total current
      assets
            
            
            138,431
            
            
            
            19,481
            
            
            
            133,220
            
            
            
            (2,365
            )
            
            
            288,767Property, plant, and equipment,
      net
            
            
            26,834
            
            
            
            11,916
            
            
            
            14,670
            
            
            
            —
            
            
            
            53,420Goodwill and other intangibles,
      net
            
            
            89,008
            
            
            
            57,034
            
            
            
            41,334
            
            
            
            —
            
            
            
            187,376Intercompany
            
            
            50,555
            
            
            
            (59,869
            )
            
            
            (64,821
            )
            
            
            74,135
            
            
            
            —Other assets
            
            
            79,909
            
            
            
            194,783
            
            
            
            30,636
            
            
            
            (249,857
            )
            
            
            55,471Assets of discontinued
      operations
            
            
            —
            
            
            
            —
            
            
            
            5,001
            
            
            
            —
            
            
            
            5,001Total assets
            
            $
            384,737
            
            
            $
            223,345
            
            
            $
            160,040
            
            
            $
            (178,087
            )
            
            $
            590,035Current
      liabilities of continuous operations
            
            $
            42,714
            
            
            $
            15,951
            
            
            $
            30,288
            
            
            $
            (1,119
            )
            
            $
            87,834Current
      liabilities of discontinued operations
            
            
            —
            
            
            
            —
            
            
            
            24,955
            
            
            
            —
            
            
            
            24,955Current
      liabilities
            
            
            42,714
            
            
            
            15,951
            
            
            
            55,243
            
            
            
            (1,119
            )
            
            
            112,789Long-term
      debt, less current portion
            
            
            129,855
            
            
            
            2,815
            
            
            
            251
            
            
            
            —
            
            
            
            132,921Other
      non-current liabilities
            
            
            12,312
            
            
            
            10,757
            
            
            
            25,775
            
            
            
            —
            
            
            
            48,844Total
    liabilities
            
            
            184,881
            
            
            
            29,523
            
            
            
            81,269
            
            
            
            (1,119
            )
            
            
            294,554Shareholders'
      equity
            
            
            199,856
            
            
            
            193,822
            
            
            
            78,771
            
            
            
            (176,968
            )
            
            
            295,481Total liabilities and
      shareholders' equity
            
            $
            384,737
            
            
            $
            223,345
            
            
            $
            160,040
            
            
            $
            (178,087
            )
            
            $
            590,035








For
      the Six Months Ended September 30, 2007Net
      sales
            
            $
            145,976
            
            
            $
            85,899
            
            
            $
            74,469
            
            
            $
            (19,917
            )
            
            $
            286,427Cost
      of products sold
            
            
            106,731
            
            
            
            63,341
            
            
            
            47,644
            
            
            
            (19,917
            )
            
            
            197,799Gross
      profit
            
            
            39,245
            
            
            
            22,558
            
            
            
            26,825
            
            
            
            —
            
            
            
            88,628Selling,
      general and administrative expenses
            
            
            23,074
            
            
            
            8,657
            
            
            
            17,283
            
            
            
            —
            
            
            
            49,014Restructuring
      charges
            
            
            402
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            402Amortization
      of intangibles
            
            
            51
            
            
            
            2
            
            
            
            —
            
            
            
            —
            
            
            
            5323,527
            
            
            
            8,659
            
            
            
            17,283
            
            
            
            —
            
            
            
            49,469Income
      from operations
            
            
            15,718
            
            
            
            13,899
            
            
            
            9,542
            
            
            
            —
            
            
            
            39,159Interest
      and debt expense
            
            
            5,228
            
            
            
            2,037
            
            
            
            64
            
            
            
            —
            
            
            
            7,329Other
      (income) and expense, net
            
            
            806
            
            
            
            (227
            )
            
            
            (1,065
            )
            
            
            —
            
            
            
            (486
            )Income
      before income tax expense
            
            
            9,684
            
            
            
            12,089
            
            
            
            10,543
            
            
            
            —
            
            
            
            32,316Income
      tax expense
            
            
            4,083
            
            
            
            4,901
            
            
            
            3,008
            
            
            
            —
            
            
            
            11,992Income
      from continuing operations
            
            
            5,601
            
            
            
            7,188
            
            
            
            7,535
            
            
            
            —
            
            
            
            20,324Income
      (loss) from discontinued operations
            
            
            278
            
            
            
            —
            
            
            
            (1,629
            )
            
            
            —
            
            
            
            (1,351
            )Net
      income
            
            $
            5,879
            
            
            $
            7,188
            
            
            $
            5,906
            
            
            $
            —
            
            
            $
            18,973








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Parent
            
            
            Guarantors
            
            
            Non
              Guarantors
            
            
            Eliminations
            
            
            ConsolidatedFor
      the Six Months Ended September 30, 2007Operating
      activities:Net
      cash provided (used) by operating activities from continuing
      operations
            
            $
            26,428
            
            
            $
            (4,675
            )
            
            $
            5,768
            
            
            $
            —
            
            
            $
            27,521Net
      cash used by operating activities from discontinued
    operations
            
            
            —
            
            
            
            —
            
            
            
            (3,637
            )
            
            
            —
            
            
            
            (3,637
            )Net
      cash provided (used) by operating activities
            
            
            26,428
            
            
            
            (4,675
            )
            
            
            2,131
            
            
            
            —
            
            
            
            23,884Investing
      activities:Purchases
      of marketable securities, net
            
            
            —
            
            
            
            —
            
            
            
            (711
            )
            
            
            —
            
            
            
            (711
            )Capital
      expenditures
            
            
            (2,965
            )
            
            
            (1,071
            )
            
            
            (918
            )
            
            
            —
            
            
            
            (4,954
            )Proceeds
      from sale of assets
            
            
            —
            
            
            
            5,454
            
            
            
            —
            
            
            
            —
            
            
            
            5,454Net
      cash (used) provided by investing activities from continuing
      operations
            
            
            (2,965
            )
            
            
            4,383
            
            
            
            (1,629
            )
            
            
            —
            
            
            
            (211
            )Net
      cash provided (used) by investing activities from discontinued
      operations
            
            
            278
            
            
            
            —
            
            
            
            (25
            )
            
            
            —
            
            
            
            253Net
      cash (used) provided by investing activities
            
            
            (2,687
            )
            
            
            4,383
            
            
            
            (1,654
            )
            
            
            —
            
            
            
            42Financing
      activities:Proceeds
      from stock options exercised
            
            
            1,061
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,061Net
      payments under revolving line-of-creditagreements
            
            
            —
            
            
            
            —
            
            
            
            (777
            )
            
            
            —
            
            
            
            (777
            )(Repayment)
      borrowings of debt
            
            
            (23,481
            )
            
            
            (55
            )
            
            
            210
            
            
            
            —
            
            
            
            (23,326
            )Other
            
            
            281
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            281Net
      cash used by financing activities from continuing
    operations
            
            
            (22,139
            )
            
            
            (55
            )
            
            
            (567
            )
            
            
            —
            
            
            
            (22,761
            )Net
      cash provided by financing activities from discontinued
      operations
            
            
            —
            
            
            
            —
            
            
            
            780
            
            
            
            —
            
            
            
            780Net
      cash (used) provided by financing activities
            
            
            (22,139
            )
            
            
            (55
            )
            
            
            213
            
            
            
            —
            
            
            
            (21,981
            )Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            (121
            )
            
            
            3,149
            
            
            
            —
            
            
            
            3,028Net
      change in cash and cash equivalents
            
            
            1,602
            
            
            
            (468
            )
            
            
            3,839
            
            
            
            —
            
            
            
            4,973Cash
      and cash equivalents at beginning of period
            
            
            18,366
            
            
            
            (1,162
            )
            
            
            31,451
            
            
            
            —
            
            
            
            48,655Cash
      and cash equivalents at end of period
            
            $
            19,968
            
            
            $
            (1,630
            )
            
            $
            35,290
            
            
            $
            —
            
            
            $
            53,628





10.  Loss
Contingencies





Like many
industrial manufacturers, the Company is involved in asbestos-related
litigation.  In continually evaluating costs associated with its
estimated asbestos-related liability, the Company reviews, among other things,
the incidence of past and recent claims, the historical case dismissal rate, the
mix of the claimed illnesses and occupations of the plaintiffs, its recent and
historical resolution of the cases, the number of cases pending against it, the
status and results of broad-based settlement discussions, and the number of
years such activity might continue. Based on this review, the Company has
estimated its share of liability to defend and resolve probable asbestos-related
personal injury claims. This estimate is highly uncertain due to the limitations
of the available data and the difficulty of forecasting with any certainty the
numerous variables that can affect the range of the liability. The Company will
continue to study the variables in light of additional information in order to
identify trends that may become evident and to assess their impact on the range
of liability that is probable and estimable.





Based on
actuarial information, the Company has estimated its asbestos-related aggregate
liability through March 2026 and March 2038 to range between $5,000 and $15,000
using actuarial parameters of continued claims for a period of 18 to 30 years.
The Company's estimation of its asbestos-related aggregate liability that is
probable and estimable, in accordance with U.S. generally accepted accounting
principles approximates $7,900 which has been reflected as a liability in the
consolidated financial statements as of September 28, 2008. The recorded
liability does not consider the impact of any potential favorable federal
legislation. This liability may fluctuate based on the uncertainty in the number
of future claims that will be filed and the cost to resolve those claims, which
may be influenced by a number of factors,


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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.





11.  New
Accounting Standards





In March
2008, the FASB issued 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. SFAS No. 161 is effective for fiscal years beginning after
November 15, 2008. The Company does not expect the adoption of SFAS
No. 161 to have a material impact on its financial statements.





On April
1, 2007, the Company adopted the provisions of FASB Interpretation ("FIN") No.
48 “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of
SFAS No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized under SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and also provides
guidance on various related matters such as derecognition, interest and
penalties, and disclosure. The adoption of FIN 48 resulted in a $186 reduction
to the opening balance of retained earnings, recorded on April 1, 2007, the date
of adoption.





On April
1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force
(“EITF”) Issue No. 06-10, “Accounting for Collateral Assignment
Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In accordance with
EITF 06-10, an employer should recognize a liability for the postretirement
benefit related to a collateral assignment split-dollar life insurance
arrangement in accordance with either SFAS No. 106, Employers’ Accounting
for Postretirement Benefits Other Than Pensions, or APB Opinion 12, Omnibus
Opinion—1967. The provisions of EITF 6-10 were applied as a change in
accounting principle through a cumulative-effect adjustment to retained
earnings.  The adoption of EITF 6-10 resulted in a $774 reduction to
the opening balance of retained earnings, recorded on April 1, 2008, the date of
adoption.





On April
1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands the required disclosure for fair value
measurements. The adoption of SFAS No. 157 did not have a material impact on the
Company’s consolidated financial position or results of operations. See Footnote
No. 3, “Fair Value Measurements,” for additional information.





In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 was effective for fiscal years
beginning after November 15, 2007. The Company did not elect to implement the
fair value options allowed under this standard.





In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity’s
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. The Company adopted all of
the currently required provisions of SFAS 158 in fiscal 2007. This statement
also requires an entity to measure a defined benefit postretirement plan’s
assets and obligations that determine its funded status as of the end of the
employers’ fiscal year. This requirement is effective for fiscal years ending
after December 15, 2008. The Company does not expect the adoption of this
requirement to have a material impact on the Company’s consolidated financial
statements.


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In
December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring
entity in a business combination to recognize all the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose all of the information required
to evaluate and understand the nature and financial effect of the business
combination. This statement is effective for acquisition dates on or after the
beginning of the first annual reporting period beginning after December 15,
2008. The Company is currently evaluating the impact the adoption of SFAS 141(R)
will have on its consolidated financial statements.





12.  Subsequent
Events





On
October 1, 2008, the Company acquired  Pfaff Beteiligungs GmbH
(“Pfaff-silberblau”), a leading European supplier of lifting, material handling
and actuator products with revenue of approximately $90 million USD, in 2007.
Pfaff-silberblau is a leading European hoist and material handling equipment
brand which complements the Company’s existing business in the region. Its
actuator business provides the Company with technical engineering expertise,
access to the growing European market and diversifies the Company’s existing
North American business. The Pfaff-silberblau acquisition will strengthen the
Company’s global sales to help level geographic economic cycles and meet its
strategic objectives. The Company acquired the Kissing, Germany based
Pfaff-silberblau for approximately $53 million USD. The acquisition was funded
with existing cash.





On
October 8, 2008, the Company used cash on hand to redeem $5,000 of the
outstanding 8 7/8% Notes. The redemption included a $300 discount.  As
a result of the redemption, $56 of unamortized financing costs were
written-off.




Subsequent
to the second quarter of fiscal 2009, we have entered into cross currency swaps
and foreign exchange forward contracts to hedge changes in the value of
intercompany loans to a certain foreign subsidiary due to changes in foreign
exchange rates. The notional amount of these hedges is approximately $14.5
million.










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Item
2.                                                                             MANAGEMENT'S DISCUSSION AND ANALYSIS
OF


RESULTS OF OPERATIONS AND FINANCIAL CONDITION


(Dollar
amounts in thousands)





Executive
Overview





We are a
leading manufacturer and marketer of a wide variety of powered and manually
operated wire rope and chain hoists, industrial crane systems, chain, hooks and
attachments, actuators, rotary unions, lift tables and industrial components
serving a wide variety of commercial and industrial end-user markets. Our
products are used to efficiently and ergonomically move, lift, position or
secure objects and loads.





Founded
in 1875, we have grown to our current size and leadership position through
organic growth and acquisitions. We have developed our leading market position
over our 133-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, acquisitions have
significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and customer base. Ongoing operation of these
businesses includes extending our sales activities to the European and Asian
marketplaces and improving our productivity. We are executing those initiatives
through expanded sales activities, our Lean manufacturing efforts and new
product development. Shareholder value will be enhanced through continued
emphasis on improvement of the fundamentals including manufacturing efficiency,
cost containment, efficient capital investment, market expansion and excellent
customer satisfaction.





We
maintain a strong North American market share with significant leading market
positions in hoists, lifting and sling chain, and forged attachments. To broaden
our product offering in markets where we have a strong competitive position as
well as to facilitate penetration into new geographic markets, we have
heightened our new product development activities. Such activities have been
focused on product line offerings of hoist and rigging products in accordance
with international standards, to complement our offering of products designed in
accordance with U.S. standards. Our efforts to expand our global sales are being
accomplished through the introduction of certain of our products that
historically have been distributed only in North America and also by introducing
new products through our existing European distribution network. Furthermore, we
continue to leverage our on-the-ground sales forces as well as distribution
relationships in China to capture the growing demand for material handling
products as that economy continues to industrialize. Our internal organization
supports these strategic initiatives through division of responsibility for
North America, Europe, Latin America and Asia Pacific. Strategically, the
investments in international markets and new products are part of our focus on
our greatest opportunities for growth. To compliment our organic growth
activities, we are also seeking acquisitions or joint ventures. Over the long
term, the focus of our acquisition strategy centers on opportunities for
international revenue growth and product line expansion in alignment with our
existing offering.





The
recently evolved global credit crisis has caused us to reflect on the current
state of our business.  First, we currently 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 the external credit crisis.  Secondly, we are prepared to
manage our business through this cycle, with a lower fixed cost footprint than
prior cycles and flexibility to manage costs and deliveries enabled through our
Lean manufacturing profile.  Additionally, our revenue base is more
geographically diverse than in our Company’s history, with approximately 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, which has weakened
over recent months, as an indicator of anticipated U.S. demand for our product.
In addition, we continue to monitor the potential impact of other global and
U.S. trends, including energy costs, steel price fluctuations, interest rates,
currency impact and activity in a variety of end-user markets around the globe,
which have been volatile of late.





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


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implementation
of our Lean manufacturing 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
manufacturing, we are working to achieve these strategic initiatives through
product simplification, the creation of centers of excellence, and improved
supply chain management.





We
continuously monitor market prices of steel.  We utilize approximately
$40,000 to $45,000 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. However, during the second quarter of fiscal
2009, we were impacted by rapid increases in the cost of materials (steel and
other components), freight, and utilities, especially in the latter half of the
quarter. Certain of these costs are expected to decline in the fiscal third
quarter, and we are taking aggressive measures to manage our pricing practices
and fine tune our cost structure to be prepared for potential slower demand for
our products.





As part
of the continuing evaluation of our business strategy, we determined that our
integrated material handling conveyor systems business (Univeyor A/S) no longer
provided a strategic fit with our long-term growth and operational objectives.
On July 25, 2008, we completed the sale of our Univeyor business. The results of
this business were accounted for as discontinued operations for the quarters
presented herein.





Also, as
part of our strategic growth plan, on October 1, 2008, we acquired Pfaff
Beteiligungs GmbH (“Pfaff-silberblau”), a leading European supplier of lifting,
material handling and actuator products with revenue of approximately $90
million USD, in 2007. Pfaff-silberblau is a leading European hoist material
handling equipment and actuator brand which complements our existing business in
the region. Its actuator business provides us with technical engineering
expertise, access to the growing European market and diversifies our existing
North American business. The Pfaff-silberblau acquisition will strengthen our
global sales and meet our strategic objectives. We acquired the Kissing, Germany
based Pfaff-silberblau for approximately $53 million USD, funded with existing
cash.





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 growth strategy, we are prepared to weather a downturn with our
strong capital structure, solid cash position and flexible cost
base.  We are aggressively addressing costs to buffer the impact on
margins and will rapidly implement change where needed.





Results
of Operations





Three
Months and Six Months Ended September 28, 2008 and September 30,
2007


Net sales
in the fiscal 2009 quarter ended September 28, 2008 were $154,680, up
$9,703 or 6.7% from the fiscal 2008 quarter ended September 30, 2007 net sales
of $144,977. Net sales for the six month period ended September 28, 2008 were
$305,844, up $19,417 or 6.8% from the six months ended September 30, 2007
net sales of $286,427. The increase is due to the continued strength of the U.S.
and European industrial markets, as well as the impact of price
increases/surcharges of $7,200 and $10,900 in the quarter and six month period
ended September 28, 2008, respectively. Translation of foreign currencies,
particularly the Euro and Canadian dollar, into U.S. dollars contributed $2,000
and $6,000 toward the increase in sales for the quarter and six month period
ended September 28, 2008, respectively.





Gross
profit in the fiscal 2009 quarter ended September 28, 2008 was $45,572, up
$276 or 0.6% from the fiscal 2008 quarter ended September 30, 2007 gross profit
of $45,296. Gross profit margin decreased to 29.5% in the fiscal 2009 quarter
from 31.2% in the fiscal 2008 quarter. Gross profit in the six month period
ended September 28, 2008 was $94,097, up $5,469 or 6.2% from the six month
period ended September 30, 2007 gross profit of $88,628. Gross profit margin
decreased to 30.8% in the six month period ended September 28, 2008 from 30.9%
in the six month period ended September 30, 2007. The fiscal 2009 quarter gross
profit margin was negatively impacted by rapid unrecovered increases in the cost
of materials, freight, and utilities and the effect of hurricane Ike in the
United States gulf coast region.





Selling
expenses were $17,164, $16,882, $35,366 and $32,426 in the fiscal 2009 and 2008
quarters and the six-month periods then ended, respectively. The increase in
fiscal 2009 quarter compared to the fiscal 2008 quarter is primarily
due


- 17
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 Table of Contents


to an
additional $400 resulting from translation of foreign currencies into U.S.
dollars. The increase in fiscal 2009 six-month period compared to the fiscal
2008 six-month period is primarily due to our increased investment to support
our strategic growth initiatives which include international markets, especially
Eastern Europe, Southeast Asia, and Latin America ($1,100), the Company’s
marketing efforts in the energy and non-residential construction markets in
North America ($800), and translation of foreign currencies into U.S. dollars
($1,100). As a percentage of consolidated net sales, selling expenses were
11.1%, 11.6%, 11.6%, and 11.3% in the fiscal 2009 and 2008 quarters and the
six-month periods then ended, respectively.





General
and administrative expenses were $9,446, $8,311, $19,347 and $16,588 in the
fiscal 2009 and 2008 quarters and the six-month periods then ended,
respectively. The increase in administrative expenses was primarily the result
of increased personnel costs for new market investments and global management
($400 for the six-month period ended September 28, 2008), increased new product
development costs ($100 and $250 for the quarter and six-month period ended
September 28, 2008, respectively), an increase in our accounts receivable
reserves ($600 and $1,400 for the quarter and six-month period ended September
28, 2008, respectively) and the translation of foreign currencies into U.S.
dollars ($100 and $400 for the quarter and six-month period ended September 28,
2008, respectively). As a percentage of consolidated net sales, general and
administrative expenses were 6.1%, 5.7%, 6.3%, and 5.8% in the fiscal 2009 and
2008 quarters and the six-month periods then ended, respectively.





Restructuring
charges were $155, $394, $155, and $402 in the fiscal 2009 and 2008 quarters and
the six-month periods then ended, respectively. The fiscal 2009 restructuring
costs were related to the consolidation of a U.S. crane manufacturing facility
into another existing crane manufacturing facility. The 2008 restructuring costs
related to the partial demolition of an older and underutilized U.S.
facility.





Interest
and debt expense was $3,132, $3,369, $6,325, and $7,329 in the fiscal 2009 and
2008 quarters and the six-month periods then ended, respectively. This decrease
is the result of lower debt levels.





Cost of
bond redemptions of $1,443 in both the quarter and six-month periods ended
September 30, 2007 were related to the redemption of all of our outstanding
Senior Secured 10% Notes.  There were no bond redemptions in the
fiscal 2009 six-month period ended September 28, 2008.





Income
tax expense as a percentage of income from continuing operations before income
tax expense was 35.9%, 36.6%, 35.8%, and 37.1% in the fiscal 2009 and 2008
quarters and the six-month periods then ended, 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.





Liquidity
and Capital Resources





Cash and
cash equivalents totaled $82,034 at September 28, 2008, an increase of $6,040
from the March 31, 2008 balance of $75,994. On October 1, 2008, we used
approximately $53 million of cash on hand to acquire
Pfaff-silberblau.





Net cash
provided by operating activities from continuing operations was $31,243 for the
six months ended September 28, 2008 compared with $27,521 for the six months
ended September 30, 2007. The net cash provided by operating activities from
continuing operations for the six months ended September 28, 2008 is primarily
the result of $22,273 of income from continuing operations plus non-cash charges
for depreciation and amortization of $4,512, deferred income taxes of $8,016,
and $591 of other non-cash charges. These amounts were partially offset by
$4,149 of cash used for changes in operating assets and liabilities, primarily
the result of a $5,301 increase in inventory. The net cash provided by operating
activities from continuing operations for the six months ended September 30,
2007 is primarily the result of $20,324 of income from continuing operations
plus a $1,106 loss on early retirement of bonds and non-cash charges for
depreciation and amortization of $4,057 and deferred income taxes of $10,115.
These amounts were partially offset by $8,786 of cash used for changes in
operating assets and liabilities, primarily the result of a $12,146 increase in
inventory offset by a $2,643 increase in accounts payable. The increase in
inventory in both periods resulted from support for penetration of new European
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 Univeyor business, was $2,214 and $3,637 for the
six months ended September 28, 2008 and September 30, 2007,
respectively.


- 18
-
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Net cash
used by investing activities from continuing operations was $4,431 for the six
months ended September 28, 2008 compared with $211 for the six months ended
September 30, 2007. The net cash used by investing activities from continuing
operations for the six ended September 28, 2008 was the result of $5,014 used
for capital expenditures and $686 for the net purchases of marketable
securities, partially offset by $1,269 of proceeds from the sale of facilities
and surplus real estate. The net cash used by investing activities from
continuing operations for the six months ended September 30, 2007 was the result
of $4,954 used for capital expenditures and $711 for the net purchases of
marketable securities, partially offset by $5,454 of proceeds from the sale of
facilities and surplus real estate. Net cash provided by investing activities
from discontinued operations, primarily attributable to payments received on our
note receivable related to our sale of Automatic Systems, Inc, was $265 and $253
for the six months ended September 28, 2008 and September 30, 2007,
respectively.





Net cash
provided by financing activities from continuing operations was $688 for the six
months ended September 28, 2008 compared with $22,761 of cash used by financing
activities from continuing operations for the six months ended September 30,
2007. The net cash provided by financing activities from continuing operations
for six months ended September 28, 2008 consisted primarily of $391 of proceeds
from stock options exercised, $187 of tax benefit from exercise of stock options
and $254 from the change in ESOP debt guarantee, partially offset by $144 of net
debt repayments. The net cash provided by financing activities from continuing
operations for the six months ended September 30, 2007 consisted primarily of
$24,103 of net debt repayments, including the repurchase of all $22,125 of our
outstanding 10% notes in August 2007. Cash used for debt repayments was
partially offset by $1,061 of proceeds from stock options exercised and $281
from the change in ESOP debt guarantee. Net cash provided by financing
activities from discontinued operations, attributable to borrowings on revolving
lines of credit agreements at our Univeyor business, was $579 for the six months
ended September 28, 2008, compared with $780 for the six months ended September
30, 2007. In addition, the Company repaid $15,191 of amounts outstanding on
Univeyor’s lines of credit and fixed term bank debt during the six months ended
September 28, 2008.





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 continued implementation of new market penetration, new product
development, Lean manufacturing and improving 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. The Revolving Credit Facility matures February 2011.





The
unused portion of the Revolving Credit Facility totaled $64,187, net of
outstanding borrowings of zero and outstanding letters of credit of $10,813 as
of September 28, 2008. Interest is payable at a Eurodollar Rate or a prime rate
plus an applicable margin determined by our leverage ratio. At our current
leverage ratio, we qualify for the lowest applicable margin level, which amounts
to 87.5 basis points for Eurodollar borrowings and zero basis points for prime
rate based borrowings. The Revolving Credit Facility is secured by all domestic
inventory, receivables, equipment, real property, subsidiary stock (limited to
65% for foreign subsidiaries) and intellectual property. The corresponding
credit agreement associated with the Revolving Credit Facility places certain
debt covenant restrictions on us, including certain financial requirements and a
limitation on dividend payments.  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 September 28, 2008.  These covenants
are set at levels which allow the Company extreme 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 $129,855 at September 28, 2008 and are due November 1, 2013.
Provisions of the 8 7/8% Notes include limitations on indebtedness, asset sales,
and dividends and other restricted payments. Until November 1, 2008, we may
redeem up to 35% of the outstanding notes at a redemption price of 108.875% with
the proceeds of equity offerings, subject to certain restrictions. On or after
November 1, 2009, the 8 7/8% Notes are redeemable at the option of the Company,
in whole or in part, at prices


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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. On October 8, 2008 the
Company used cash on hand to redeem $5,000 of the outstanding 8 7/8% Notes. The
redemption included a $300 discount.  As a result of the redemption,
$56 of unamortized financing costs were written-off in the third quarter of
fiscal 2009.





International
lines of credit are available to meet short-term working capital needs for our
subsidiaries operating outside of the United States. The lines of credit are
available on an offering basis, meaning that transactions under the line of
credit will be on such terms and conditions, including interest rate, maturity,
representations, covenants and events of default, as mutually agreed between our
subsidiaries and the local bank at the time of each specific transaction. In
addition to these facilities, our foreign subsidiaries have certain fixed term
bank loans. The outstanding balance of international lines of credit and foreign
subsidiary fixed bank debt was $348 at September 28, 2008.





Prior to
the disposal of Univeyor A/S, during the past year as part of Univeyor’s ongoing
business, the Company had provided performance guarantees to certain customers
and a third party for the satisfactory completion of contracts to design,
manufacture and install its integrated material handling conveyor systems.
Pursuant to the terms of the share purchase agreement, the Company has agreed to
continue to provide performance guarantees on certain pre-existing contracts
totaling approximately $9,200 as of September 28, 2008 based on current exchange
rates. Approximately $5,000 of these guarantees is expected to expire by the end
of fiscal 2009 unless released by the third parties prior thereto, with the
remaining guarantees expiring at various times during 2010 through fiscal 2012.
Historically, none of Univeyor’s customers has ever made a claim against either
Univeyor A/S or the Company for indemnification on the performance guarantees.
The terms of the share purchase agreement provide that the purchaser indemnify
the Company for and hold it harmless against any loss, liability, or claim
arising from the guarantees after the date of sale. However, as a result of the
global credit crisis, liquidity has become an area of growing concern as it
affects Univeyor, the purchaser and the purchaser’s affiliated companies.
Performance under these guarantees is dependent upon Univeyor’s ability to
generate sufficient cash flow and secure performance bonds for future projects.
Accordingly, the Company’s potential loss under these guarantees, if any, cannot
be reasonably estimated at this time, and no liability has been recorded in the
accompanying condensed consolidated balance sheets relating to these
guarantees.





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 six months ended
September 28, 2008 and September 30, 2007 were $5,014 and $4,954, respectively.
We expect capital spending for fiscal 2009 to be approximately $12 to $14
million compared with $13.1 million in fiscal 2008. Capital expenditures for
fiscal 2009 are primarily directed toward new product development and
productivity improvement.





Inflation
and Other Market Conditions





Our costs
are affected by inflation in the U.S. economy and, to a lesser extent, in
foreign economies including those of Europe, Canada, Mexico, South America, and
the 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 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.


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Seasonality
and Quarterly Results





Quarterly
results may be materially affected by the timing of large customer orders,
periods of high vacation and holiday concentrations, gains or losses on early
retirement of bonds, restructuring charges, divestitures and acquisitions.
Therefore, the operating results for any particular fiscal quarter are not
necessarily indicative of results for any subsequent fiscal quarter or for the
full fiscal year.





Effects
of New Accounting Pronouncements





In March
2008, the FASB issued 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 our financial position, financial performance, and cash
flows. SFAS No. 161 is effective for fiscal years beginning after
November 15, 2008. We do not expect the adoption of SFAS No. 161 to
have a material impact on our financial statements.





On April
1, 2007, we adopted the provisions of FASB Interpretation ("FIN") No. 48
“Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of
SFAS No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized under SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return and also provides
guidance on various related matters such as derecognition, interest and
penalties, and disclosure.  The adoption of FIN 48 resulted in a $186
reduction to the opening balance of retained earnings, recorded on April 1,
2007, the date of adoption.





On April
1, 2008, we 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.





On April
1, 2008, we adopted the provisions of SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands the required disclosure for fair value
measurements. The adoption of SFAS No. 157 did not have a material impact on our
consolidated financial position or results of operations. See Footnote
No. 3, “Fair Value Measurements,” for additional information.





In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We did not elect to implement the fair value
options allowed under this standard.





In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity’s
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. We adopted all of the
currently required provisions of SFAS 158 in fiscal 2007. This statement also
requires an entity to measure a defined benefit postretirement plan’s assets and
obligations that determine its funded status as of the end of the employers’
fiscal year. This requirement is effective for fiscal years ending after
December 15, 2008. We do not expect the adoption of this requirement to
have a material impact on the Company’s consolidated financial
statements.


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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 are currently evaluating the impact the adoption of SFAS 141(R) will
have on our consolidated financial statements.





Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995





This
report may include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause our actual
results to differ materially from the results expressed or implied by such
statements, including general economic and business conditions, conditions
affecting the industries served by us and our subsidiaries, conditions affecting
our customers and suppliers, competitor responses to our products and services,
the overall market acceptance of such products and services, our
asbestos-related liability, the integration of acquisitions and other factors
disclosed in our periodic reports filed with the Commission. Consequently such
forward-looking statements should be regarded as our current plans, estimates
and beliefs. We do not undertake and specifically decline any obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.





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Item 3.      Quantitative and
Qualitative Disclosures About Market Risk








Subsequent
to the end of the second quarter of fiscal 2009, we have entered into cross
currency swaps and foreign exchange forward contracts to hedge changes in the
value of intercompany loans to a certain foreign subsidiary due to changes in
foreign exchange rates. The notional amount of these hedges is approximately
$14.5 million. There have been no other material changes in the market risks
since the end of Fiscal 2008.








Item
      4.
            Controls
      and Procedures





As of
September 28,
2008, an evaluation was performed under the supervision and with the
participation of the Company’s management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures. Based on that evaluation, the
Company’s management, including the chief executive officer and chief financial
officer, concluded that the Company’s disclosure controls and procedures were
effective as of September 28, 2008, 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 speicified
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





Subsequent
to the end of the second quarter of fiscal 2009, we have entered into cross
currency swaps and foreign exchange forward contracts to hedge changes in the
value of intercompany loans to a certain foreign subsidiary due to changes in
foreign exchange rates. The notional amount of these hedges is approximately
$14.5 million.





Due to
the general weakening of the U.S. economy, certain of the lenders in our senior
credit facility may have a weakened financial condition related to their lending
and other financial relationships.  As a result, they may tighten their
lending standards, which could make it more difficult for us to borrow under our
credit facility or to obtain other financing on favorable terms or at all. Also,
any cash balances with our banks are insured only up to $250,000 per bank by the
FDIC, and any deposits in excess of this limit are also subject to risk. In
addition, the weakening of the national economy and the recent reduced
availability of credit may have decreased the financial stability of our major
customers and suppliers.  As a result, it may become more difficult for us
to collect our accounts receivable and outsource products and services from our
suppliers. If any of these conditions were to occur, our financial condition and
results of operations could be adversely affected.





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,
2008.





Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds –
  none.





Item
      3.
            Defaults
      upon Senior Securities – none.





Item
      4.
            Submission
      of Matters to a Vote of Security
Holders





At the
Company’s Annual Meeting of Stockholders held on July 30, 2008, the stockholders
approved the following:





(a)  A
proposal to elect directors of the Company as follows:





16,573,270
      votes cast for:
            Timothy
      T. Tevens;16,562,173
      votes cast for:
            Richard
      H. Fleming;16,564,880
      votes cast for:
            Ernest
      R. Verebelyi;16,562,113
      votes cast for:
            Wallace
      W. Creek;16,563,785
      votes cast for:
            Linda
      A. Goodspeed;16,549,884
      votes cast for:
            Stephen
      Rabinowitz;16,574,202
      votes cast for:
            Nicholas
      T. Pinchuk.






(b)  The
      ratification of the appointment of Ernst & Young LLP as independent
      auditors of the Company for the fiscal year ending March 31,
      2009.




Votes
      for:
            17,058,596Votes
      against:
            943,722Abstentions:
            7,102





Item
5.    Other Information – none.





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Item
      6.
            Exhibits





(a)
            Exhibits:





Exhibit 10.1
            Form
      of Change in Control Agreement as entered into between Columbus McKinnon
      Corporation and each of Timothy T. Tevens, Derwin R. Gilbreath, Karen L.
      Howard, Joseph J. Owen, Richard A. Steinberg, and Timothy R.
      Harvey.





Exhibit 31.1
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





Exhibit 31.2
            Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





Exhibit 32
            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.








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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:
      November 6, 2008
            
            /s/ Karen L. HowardKaren
      L. HowardVice
      President and Chief Financial Officer(Principal Financial
      Officer)





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