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 December 31, 2009
 or
 
 [ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
 For the
transition period from  to
 
 Commission
File Number:       0-27618
 
 Columbus
      McKinnon Corporation(Exact
      name of registrant as specified in its charter)New
      York
              16-0547600(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)140
      John James Audubon Parkway, Amherst, NY
              14228-1197(Address
      of principal executive offices)
              (Zip
      code)(716)
      689-5400(Registrant's
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report.)
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  :[X]
Yes   []  No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).  Yes []  No
[  ]
 
 Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Act.
 Large
      accelerated
      filer  [  ]
              Accelerated
      filer [X]Non-accelerated
      filer  [  ]  (Do not check if a smaller
      reporting company)
              Smaller
      Reporting Company [  ]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [  ] Yes    [X]
No
 
 The
number of shares of common stock outstanding as of December 31, 2009
was:  19,112,106 shares.
  
  FORM 10-Q INDEX
 COLUMBUS
McKINNON CORPORATION
 December
31, 2009
 
 
 Page #Part
      I. Financial InformationItem
      1.
              Condensed
      Consolidated Financial Statements (Unaudited)Condensed consolidated balance sheets – December 31, 2009 and
      March 31, 2009
              2Condensed consolidated statements of operations and retained
      earnings - Three months  and nine months ended December 31, 2009
      and December 28, 2008
              3Condensed consolidated statements of cash flows - Nine months
      ended December 31, 2009 and December 28, 2008
              4Condensed consolidated statements of comprehensive (loss)
      income - Three months and nine months ended December 31, 2009 and December
      28, 2008
              5Notes to condensed consolidated financial statements –
      December 31, 2009
              6Item
      2.
              Management's Discussion and Analysis of Results of
      Operations and Financial Condition
              22Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              31Item
      4.
              Controls and Procedures
              31Part
      II. Other InformationItem
      1.
              Legal Proceedings – none.
              32Item
      1A.
              Risk Factors
              32Item
      2.
              Unregistered Sales of Equity Securities and Use of Proceeds
      – none.
              32Item
      3.
              Defaults upon Senior Securities – none.
              32Item
      4.
              Submission of Matters to a Vote of Security Holders –
      none.
              32Item
      5.
              Other Information – none.
              32Item
      6.
              Exhibits
              32
 
  - 1
-
 Table of Contents
  Part
I.     Financial Information
 
 Item 1.     Condensed Consolidated
Financial Statements (Unaudited)
 
 COLUMBUS
McKINNON CORPORATION
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 December
      31,
              
              
              March 31,2009
              
              
              2009(unaudited)ASSETS:
              
              (In
      thousands)Current
      assets:Cash
      and cash equivalents
              
              $
              51,034
              
              
              $
              39,236Trade
      accounts receivable less allowance for doubtful accounts ($4,512 and
      $5,338, respectively)
              
              
              65,105
              
              
              
              80,168Inventories
              
              
              85,696
              
              
              
              100,621Prepaid
      expenses
              
              
              16,647
              
              
              
              18,115Total
      current assets
              
              
              218,482
              
              
              
              238,140Property,
      plant, and equipment, net
              
              
              60,243
              
              
              
              62,102Goodwill
      and other intangibles, net
              
              
              127,037
              
              
              
              125,080Marketable
      securities
              
              
              30,860
              
              
              
              28,828Deferred
      taxes on income
              
              
              36,607
              
              
              
              32,521Other
      assets
              
              
              3,991
              
              
              
              4,993Total
      assets
              
              $
              477,220
              
              
              $
              491,664LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      liabilities:Notes
      payable to banks
              
              $
              1,003
              
              
              $
              4,787Trade
      accounts payable
              
              
              22,476
              
              
              
              33,298Accrued
      liabilities
              
              
              50,193
              
              
              
              50,443Restructuring
      reserve
              
              
              4,194
              
              
              
              1,302Current
      portion of long-term debt
              
              
              1,165
              
              
              
              1,171Total
      current liabilities
              
              
              79,031
              
              
              
              91,001Senior
      debt, less current portion
              
              
              6,538
              
              
              
              7,073Subordinated
      debt
              
              
              124,855
              
              
              
              124,855Other
      non-current liabilities
              
              
              81,323
              
              
              
              86,881Total
      liabilities
              
              
              291,747
              
              
              
              309,810Shareholders'
      equity:Voting
      common stock; 50,000,000 shares authorized;19,112,106  and
      19,046,930 shares issued, respectively
              
              
              191
              
              
              
              190Additional
      paid-in capital
              
              
              182,011
              
              
              
              180,327Retained
      earnings
              
              
              34,418
              
              
              
              41,891ESOP
      debt guarantee
              
              
              (1,963
              )
              
              
              (2,309
              )Accumulated
      other comprehensive loss
              
              
              (29,184
              )
              
              
              (38,245
              )Total
      shareholders' equity
              
              
              185,473
              
              
              
              181,854Total
      liabilities and shareholders' equity
              
              $
              477,220
              
              
              $
              491,664
 
 See
accompanying notes to condensed consolidated financial statements.
 
 
 
 
  - 2
-
 Table of Contents
  
 COLUMBUS McKINNON CORPORATION
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
 (UNAUDITED)
 
 
 Three Months Ended
              
              
              Nine Months EndedDecember
      31,
              
              
              December
      28,
              
              
              December
      31,
              
              
              December
      28,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      thousands, except per share data)Net
      sales
              
              $
              118,971
              
              
              $
              165,076
              
              
              $
              353,213
              
              
              $
              470,920Cost
      of products sold
              
              
              92,146
              
              
              
              120,285
              
              
              
              268,907
              
              
              
              332,032Gross
      profit
              
              
              26,825
              
              
              
              44,791
              
              
              
              84,306
              
              
              
              138,888Selling
      expenses
              
              
              15,791
              
              
              
              19,861
              
              
              
              47,873
              
              
              
              55,227General
      and administrative expenses
              
              
              9,471
              
              
              
              8,630
              
              
              
              26,663
              
              
              
              27,977Restructuring
      charges
              
              
              3,616
              
              
              
              990
              
              
              
              12,148
              
              
              
              1,145Amortization
      of intangibles
              
              
              490
              
              
              
              421
              
              
              
              1,408
              
              
              
              47729,368
              
              
              
              29,902
              
              
              
              88,092
              
              
              
              84,826Loss
      (income) from operations
              
              
              (2,543
              )
              
              
              14,889
              
              
              
              (3,786
              )
              
              
              54,062Interest
      and debt expense
              
              
              3,257
              
              
              
              3,604
              
              
              
              10,001
              
              
              
              9,929Investment
      (income) loss
              
              
              (361
              )
              
              
              3,335
              
              
              
              (966
              )
              
              
              3,158Foreign
      currency exchange loss (gain)
              
              
              6
              
              
              
              1,759
              
              
              
              (633
              )
              
              
              2,548Other
      income, net
              
              
              (2,059
              )
              
              
              (761
              )
              
              
              (2,040
              )
              
              
              (3,194
              )(Loss)
      income from continuing operations before income tax (benefit)
      expense
              
              
              (3,386
              )
              
              
              6,952
              
              
              
              (10,148
              )
              
              
              41,621Income
      tax (benefit) expense
              
              
              (909
              )
              
              
              2,454
              
              
              
              (2,409
              )
              
              
              14,850(Loss) income
      from continuing operations
              
              
              (2,477
              )
              
              
              4,498
              
              
              
              (7,739
              )
              
              
              26,771Income
      (loss) from discontinued operations - net of tax
              
              
              133
              
              
              
              (685
              )
              
              
              266
              
              
              
              (2,651
              )Net
      (loss) income
              
              
              (2,344
              )
              
              
              3,813
              
              
              
              (7,473
              )
              
              
              24,120Retained earnings
      - beginning of period
              
              
              36,762
              
              
              
              141,933
              
              
              
              41,891
              
              
              
              122,400Change
      in accounting principle (note 18)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (774
              )Retained
      earnings - end
      of period
              
              $
              34,418
              
              
              $
              145,746
              
              
              $
              34,418
              
              
              $
              145,746Average
      basic shares outstanding
              
              
              18,980
              
              
              
              18,876
              
              
              
              18,952
              
              
              
              18,851Average
      diluted shares outstanding
              
              
              18,980
              
              
              
              19,064
              
              
              
              18,952
              
              
              
              19,161Basic
      income per share:(Loss)
      income from continuing operations
              
              $
              (0.13
              )
              
              $
              0.24
              
              
              $
              (0.40
              )
              
              $
              1.42Income
      (loss) from discontinued operations
              
              
              0.01
              
              
              
              (0.04
              )
              
              
              0.01
              
              
              
              (0.14
              )Net
      (loss) income
              
              $
              (0.12
              )
              
              $
              0.20
              
              
              $
              (0.39
              )
              
              $
              1.28Diluted
      income per share:(Loss)
      income from continuing operations
              
              $
              (0.13
              )
              
              $
              0.24
              
              
              $
              (0.40
              )
              
              $
              1.40Income
      (loss) from discontinued operations
              
              
              0.01
              
              
              
              (0.04
              )
              
              
              0.01
              
              
              
              (0.14
              )Net
      (loss) income
              
              $
              (0.12
              )
              
              $
              0.20
              
              
              $
              (0.39
              )
              
              $
              1.26
 
 See accompanying notes to condensed
consolidated financial statements.
  - 3
-
 Table of Contents
  
 COLUMBUSMcKINNON CORPORATION
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Nine Months EndedDecember
      31,
              
              
              December
      28,2009
              
              
              2008(In
      thousands)OPERATING
      ACTIVITIES:Net
      (loss) income
              
              $
              (7,473
              )
              
              $
              24,120Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activities:(Income) loss from discontinued
      operations
              
              
              (266
              )
              
              
              2,651Depreciation and
      amortization
              
              
              9,231
              
              
              
              7,521Deferred income
    taxes
              
              
              (4,054
              )
              
              
              8,684(Gain) loss on sale of real
      estate/investments
              
              
              (1,994
              )
              
              
              2,943Gain on
      early retirement of bonds
              
              
              -
              
              
              
              (300
              )Stock-based
      compensation
              
              
              1,527
              
              
              
              1,001Amortization/write-off of
      deferred financing costs
              
              
              460
              
              
              
              449Non-cash restructuring
      charges
              
              
              950
              
              
              
              -Changes in operating assets and
      liabilities net of effects of businessacquisitions
      and divestitures:Trade accounts
      receivable
              
              
              15,672
              
              
              
              10,577Inventories
              
              
              15,721
              
              
              
              (4,372
              )Prepaid expenses
              
              
              1,510
              
              
              
              (775
              )Other assets
              
              
              410
              
              
              
              997Trade accounts
      payable
              
              
              (10,783
              )
              
              
              (2,581
              )Accrued and non-current
      liabilities
              
              
              (3,769
              )
              
              
              (6,532
              )Net
      cash provided by operating activities from continuing
      operations
              
              
              17,142
              
              
              
              44,383Net
      cash used by operating activities from discontinued
    operations
              
              
              -
              
              
              
              (3,082
              )Net
      cash provided by operating activities
              
              
              17,142
              
              
              
              41,301INVESTING
      ACTIVITIES:Proceeds
      from sale of marketable securities
              
              
              3,246
              
              
              
              338Purchases
      of marketable securities
              
              
              (3,171
              )
              
              
              (2,277
              )Capital
      expenditures
              
              
              (5,916
              )
              
              
              (8,504
              )Purchase
      of businesses, net of cash acquired
              
              
              -
              
              
              
              (53,261
              )Proceeds
      from sale of businesses or assets
              
              
              3,380
              
              
              
              1,269Net
      cash used by investing activities from continuing
    operations
              
              
              (2,461
              )
              
              
              (62,435
              )Net
      cash provided by investing activities from discontinued
      operations
              
              
              266
              
              
              
              448Net
      cash used by investing activities
              
              
              (2,195
              )
              
              
              (61,987
              )FINANCING
      ACTIVITIES:Proceeds
      from exercise of stock options
              
              
              201
              
              
              
              391Net
      payments under revolving line-of-credit agreements
              
              
              (3,784
              )
              
              
              (5,067
              )Repayment
      of debt
              
              
              (392
              )
              
              
              (6,871
              )Other
              
              
              158
              
              
              
              567Net
      cash used by financing activities from continuing
    operations
              
              
              (3,817
              )
              
              
              (10,980
              )Net
      cash used by financing activities from discontinued
    operations
              
              
              -
              
              
              
              (14,612
              )Net
      cash used by financing activities
              
              
              (3,817
              )
              
              
              (25,592
              )Effect
      of exchange rate changes on cash
              
              
              668
              
              
              
              (7,743
              )Net
      change in cash and cash equivalents
              
              
              11,798
              
              
              
              (54,021
              )Cash
      and cash equivalents at beginning of period
              
              
              39,236
              
              
              
              75,994Cash
      and cash equivalents at end of period
              
              $
              51,034
              
              
              $
              21,973
 
 See
accompanying notes to condensed consolidated financial
statements.
  - 4
-
 Table of Contents
  
 COLUMBUS McKINNON CORPORATION
 CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 (UNAUDITED)
 
 Three Months Ended
              
              
              Nine Months EndedDecember
      31,
              
              
              December
      28,
              
              
              December
      31,
              
              
              December
      28,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      thousands)Net
      (loss) income
              
              $
              (2,344
              )
              
              $
              3,813
              
              
              $
              (7,473
              )
              
              $
              24,120Other
      comprehensive (loss) income, net of tax:Foreign
      currency translation adjustments
              
              
              (863
              )
              
              
              (4,900
              )
              
              
              7,047
              
              
              
              (11,591
              )Unrealized
      loss on derivatives qualifying as hedges, net of deferred tax benefit of
      ($21), $0, ($21) and $0
              
              
              (35
              )
              
              
              -
              
              
              
              (35
              )
              
              
              -Unrealized
      (loss) gain on investments:Unrealized
      holding (loss) gain arising during the period, net of deferred tax
      (benefit) of ($72), ($1,262), $1,135 and ($1,996)
              
              
              (133
              )
              
              
              (2,344
              )
              
              
              2,108
              
              
              
              (3,707
              )Reclassification
      adjustment for (gain) loss included in net (loss) income, net of deferred
      tax (benefit) of ($32), $1,954, ($32) and $2,164
              
              
              (60
              )
              
              
              3,629
              
              
              
              (59
              )
              
              
              4,019(193
              )
              
              
              1,285
              
              
              
              2,049
              
              
              
              312Total
      other comprehensive (loss) income
              
              
              (1,091
              )
              
              
              (3,615
              )
              
              
              9,061
              
              
              
              (11,279
              )Comprehensive
      (loss) income
              
              $
              (3,435
              )
              
              $
              198
              
              
              $
              1,588
              
              
              $
              12,841
 
 See
accompanying notes to condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
  - 5
-
 Table of Contents
  COLUMBUS McKINNON CORPORATION
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 (Dollar
amounts in thousands, except share data)
 December
31, 2009
 
 1.  Description
of Business
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position of Columbus McKinnon Corporation (the
Company) at December 31, 2009, the results of its operations for the three and
nine-month periods ended December 31, 2009 and December 28, 2008, and cash flows
for the nine-month periods ended December 31, 2009 and December 28, 2008, have
been included. Results for the period ended December 31, 2009 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2010. The balance sheet at March 31, 2009 has been derived from the
audited consolidated financial statements at that date, but does not include all
of the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Columbus McKinnon Corporation annual report on Form 10-K for the year ended
March 31, 2009.
 
 The
Company is a leading designer, marketer and manufacturer of material handling
products, systems and services which efficiently and ergonomically move, lift,
position and secure material. Key products include hoists, cranes, rigging tools
including chain and forged attachments, and actuators. The Company’s material
handling products are sold, domestically and internationally, principally to
third party distributors through diverse distribution channels, and to a lesser
extent directly to end-users.
 
 2.  Acquisitions
 
 On
October 1, 2008, the Company acquired Pfaff Beteiligungs GmbH
(“Pfaff-silberblau” or “Pfaff”), a Kissing, Germany based company with a leading
European position in lifting, material handling and actuator products. Pfaff had
revenue of approximately $90,000 USD in calendar 2007. This strategic
acquisition continues the execution of the Company’s strategic plan to grow its
revenue in complementary product lines and also broaden that revenue in
international markets. Pfaff-silberblau complements the Company’s existing
material handling business in Europe and the U.S. and creates a global actuator
business when combined with the Company’s U.S. based Duff-Norton actuator
business. The Company is creating value from this acquisition through
integrating the Pfaff business with the Columbus McKinnon European and U.S.
based material handling businesses and Duff-Norton. Value is being created by
cross selling products among these groups as well as reducing costs through
business integration and procurement activities. The results of Pfaff-silberblau
are included in the Company’s consolidated financial statements from the date of
acquisition.
 
 This
transaction was accounted for under the purchase method of accounting. The
aggregate purchase consideration for the acquisition of Pfaff-silberblau was
$52,779 in cash and acquisition costs. The acquisition was funded with existing
cash. The purchase price was allocated to the assets acquired and liabilities
assumed based upon a valuation of respective fair values. The identifiable
intangible assets consisted of trademarks with a value of $6,101 (18 year
estimated useful life), customer relationships with a value of $15,092 (11 year
estimated useful life), and technology with a value of $806 (14 year estimated
useful life). The excess consideration over fair value was recorded as goodwill
and approximated $27,769, none of which is deductible for tax purposes. The
allocation of purchase consideration to the assets acquired and liabilities
assumed is as follows:
 
 Working
      capital
              
              $
              13,340Property,
      plant and equipment
              
              
              8,321Other
      long term liabilities, net
              
              
              (18,650
              )Identifiable
      intangible assets
              
              
              21,999Goodwill
              
              
              27,769Total
              
              $
              52,779
 
  - 6
-
 Table of Contents
  
 3.  Divestitures
 
 As part
of its continuing evaluation of its businesses, the Company determined that its
integrated material handling conveyor systems business (Univeyor A/S) no longer
provided a strategic fit with its long-term growth and operational objectives.
On July 25, 2008, the Company completed the sale of Univeyor A/S, which business
represented the majority of the Company’s former “Solutions” segment. In
accordance with the provisions of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 205-20-45-1, “Presentation of
Financial Statements – Discontinued Operations”, the results of operations of
Univeyor A/S have been classified as discontinued operations in the condensed
statements of operations and statements of cash flows presented herein. In
connection with the sale of Univeyor A/S on July 25, 2008, the Company used cash
on hand to repay $15,191 in amounts outstanding on Univeyor’s lines of credit
and fixed term bank debt.
 
 Income
from discontinued operations presented herein includes payments received on a
note receivable related to the fiscal 2002 disposal of Automatic Systems, Inc.
Due to the uncertainty surrounding the financial viability of the debtor, the
note has been recorded at the estimated net realizable value of $0.
 
 Summarized
statements of operations for discontinued operations follows:
 
 Three Months Ended
              
              
              Nine Months EndedDecember
      31,
              
              
              December
      28,
              
              
              December
      31,
              
              
              December
      28,2009
              
              
              2008
              
              
              2009
              
              
              2008Net
      sales
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              8,982Gain
      (loss) from operations before income tax
              
              
              214
              
              
              
              (1,136
              )
              
              
              428
              
              
              
              (2,359
              )Income
      tax (benefit) expense
              
              
              81
              
              
              
              (451
              )
              
              
              162
              
              
              
              (288
              )Gain
      (loss) from operations, net of tax
              
              
              133
              
              
              
              (685
              )
              
              
              266
              
              
              
              (2,071
              )Loss
      on sale of discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (14,627
              )Gain
      (loss) from discontinued operations
              
              
              133
              
              
              
              (685
              )
              
              
              266
              
              
              
              (16,698
              )Tax
      benefit from sale
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              14,047Gain
      (loss) from discontinued operations, net of tax
              
              $
              133
              
              
              $
              (685
              )
              
              $
              266
              
              
              $
              (2,651
              )
 
 During
fiscal 2010, as part of the continuing strategic evaluation of its businesses,
the Company determined that its American Lifts business no longer provided a
strategic fit with its long-term growth and operational objectives. The American
Lifts business manufactured powered lift tables which enhance workplace
ergonomics and were sold primarily to customers in the general manufacturing,
construction, and air cargo industries. On October 30, 2009, the Company sold
this business to a strategic buyer for $2,400 in cash. A $1,055 pre-tax gain on
the sale is included in other income, net in the Company’s consolidated
statements of operations for the three-month and nine-month periods ended
December 31, 2009. American Lifts has not been treated as a discontinued
operation as its results from operations were immaterial to the overall
financial results of the Company.
 
 4.  Fair
Value Measurements
 
 ASC Topic
820 “Fair Value Measurements and Disclosures” establishes the standards for
reporting 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 these standards, 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
Company applied the provisions of ASC Topic 820 in determining the fair value of
its financial assets and financial liabilities effective April 1, 2008. The
Company applied the provisions of ASC Topic 820- in determining the fair value
of its nonfinancial assets and nonfinancial liabilities on a nonrecurring basis
effective April 1, 2009 in accordance with ASC Topic
820-10-65-1.
  - 7
-
 Table of Contents
  ASC Topic
820-10-35-37 establishes a hierarchy for inputs that may be used to measure fair
value. Level 1 is defined as quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access. The fair value
of the Company’s marketable securities is based on Level 1 inputs. Level 2 is
defined as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that
are not active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. Level 3 inputs are
unobservable inputs based on the Company’s own assumptions used to measure
assets and liabilities at fair value. The Company primarily uses readily
observable market data in conjunction with internally developed discounted cash
flow valuation models when valuing its derivative portfolio and, consequently,
the fair value of the Company’s derivatives is based on Level 2
inputs.  As of December 31, 2009, the Company’s assets and liabilities
measured at fair value on recurring bases were as follows:
 
 Fair
      value measurements at reporting date usingDescription
              
              At
      December 31, 2009
              
              
              Quoted
      prices in active markets for identical assets (Level 1)
              
              
              Significant
      other observable inputs
                (Level
      2)
              
              
              Significant
      unobservable inputs
                (Level
      3)Assets/(Liabilities):Marketable
      securities
              
              $
              30,860
              
              
              $
              30,860
              
              
              $
              -
              
              
              $
              -Accrued
      severance costs
              
              
              (4,194
              )
              
              
              -
              
              
              
              -
              
              
              
              (4,194
              )Property,
      plant, and equipment
              
              
              175
              
              
              
              -
              
              
              
              -
              
              
              
              175Derivative
      liabilities
              
              
              (1,979
              )
              
              
              -
              
              
              
              (1,979
              )
              
              
              -
 
 Assets
that are measured on a nonrecurring basis include the Company’s reporting units
that are used to test goodwill for impairment on an annual or interim basis
under the provisions of ASC Topic 350-20-35-1 “Intangibles, Goodwill and Other –
Goodwill Subsequent Measurement”, as well as property, plant and equipment in
circumstances when the Company determines that those assets are impaired under
the provisions of ASC Topic 360-10-35-17 “Property Plant and Equipment –
Subsequent Measurement” and the measurement of termination benefits in
connection with the Company’s restructuring plan under the provisions of ASC
Topic 420 “Exit or Disposal Cost Obligations”.  Non-recurring fair
value measurements made during the nine months ended December 31, 2009 used in
the testing of goodwill for impairment, to determine the write-down of fixed
assets to their estimated fair values in connection with the Company’s
restructuring plan, and to measure the fair value of certain termination
benefits offered to employees as part of the Company’s restructuring
plan.
 
 The
Company applied the provisions of ASC Topic 350-20-35-1 during the goodwill
impairment test performed as of September 30, 2009. Step I of the goodwill
impairment test consisted of determining a fair value for the Company’s Duff-
Norton reporting unit. The fair values for the Company’s reporting units cannot
be determined using readily available quoted Level 1 inputs or Level 2 inputs
that are observable in active markets. Therefore, the Company used a discounted
cash flow valuation model to estimate the fair value of its Duff-Norton
reporting unit, using Level 3 inputs. To estimate the fair values of reporting
units, the Company uses significant estimates and judgmental factors. The key
estimates and factors used in the discounted cash flow valuation model include
revenue growth rates and profit margins based on internal forecasts, terminal
value, and the weighted-average cost of capital used to discount future cash
flows. See Note 7 of the condensed consolidated financial statements for the
results of the Company’s September 30, 2009 goodwill impairment
test.
 
 The
write-down of fixed assets to their estimated fair market values, as shown
above, related to the closure of two manufacturing facilities and the
significant downsizing of a third facility in connection with the Company’s
restructuring plan. The fair value was determined based on management’s best
estimate of the realizability of the assets, using Level 3 inputs given the lack
of observable market data for the assets. The net book value of the assets was
$1,125, and their estimated fair market value was $175.
 
 During
the nine months ended December 31, 2009 the Company offered termination benefits
to certain employees in connection with its restructuring plan and the
liabilities measured and recorded during the period have been determined based
upon their ultimate payment amounts, which approximate fair value as determined
using Level 3 inputs.
  - 8
-
 Table of Contents
  5.  Inventories
 
 Inventories
consisted of the following:
 December
      31,
              
              
              March 31,2009
              
              
              2009At
      cost - FIFO basis:Raw
      materials
              
              $
              39,492
              
              
              $
              49,697Work-in-process
              
              
              11,332
              
              
              
              12,497Finished
      goods
              
              
              54,698
              
              
              
              59,896105,522
              
              
              
              122,090LIFO
      cost less than FIFO cost
              
              
              (19,826
              )
              
              
              (21,469
              )Net
      inventories
              
              $
              85,696
              
              
              $
              100,621
 
 An actual
valuation of inventory under the LIFO method can be made only at the end of each
year based on the inventory levels and costs at that time. Accordingly, interim
LIFO calculations must necessarily be based on management's estimates of
expected year-end inventory levels and costs. Because these are subject to many
factors beyond management's control, estimated interim results are subject to
change in the final year-end LIFO inventory valuation.
 
 6.  Marketable
Securities
 
 All of
the Company’s marketable securities, which consist of equity securities, have
been classified as available-for-sale securities and are therefore recorded at
their fair values with the unrealized gains and losses, net of tax, reported in
accumulated other comprehensive loss in the shareholders’ equity section of the
balance sheet unless unrealized losses are deemed to be other-than-temporary. In
such instances, the unrealized losses are reported in the consolidated
statements of operations and retained earnings within investment income.
Estimated fair value is based on published trading values at the balance sheet
dates. The cost of securities sold is based on the specific identification
method. Interest and dividend income are included in investment income in the
consolidated statements of operations and retained earnings.
 
 The
marketable securities are carried as long-term assets since they are held for
the settlement of the Company’s general and products liability insurance claims
filed through CM Insurance Company, Inc., a wholly owned captive insurance
subsidiary.  The marketable securities are not available for general
working capital purposes.
 
 In
accordance with ASC Topic 320-10-35-30 “Investments – Debt & Equity
Securities – Subsequent Measurement,” the Company reviews its marketable
securities for declines in market value that may be considered
other-than-temporary. The Company generally considers market value declines to
be other-than-temporary if they are declines for a period longer than six months
and in excess of 20% of original cost, or when other evidence indicates
impairment.  There were no other-than-temporary impairments for the
nine-months ended December 31, 2009.  As a result of the decline in
the financial markets, other-than-temporary impairments resulted in the
recognition of a pre-tax charge to earnings of $3,628 and $4,014 for the
three-months and nine-months ended December 28, 2008, which is classified within
investment (income) loss in the Company’s consolidated statements of
operations.
 
 The
following is a summary of available-for-sale securities at December 31,
2009:
 Cost
              
              
              Gross
      Unrealized Gains
              
              
              Gross
      Unrealized Losses
              
              
              Estimated
      Fair
                ValueEquity securities
              
              $
              28,196
              
              
              $
              2,674
              
              
              $
              10
              
              
              $
              30,860
 
 The
aggregate fair value of investments and unrealized losses on available-for-sale
securities in an unrealized loss position at December 31, 2009 are as
follows:
 Aggregate
              
              
              UnrealizedFair Value
              
              
              LossesSecurities
      in a continuous loss position for less than 12 months
              
              $
              926
              
              
              $
              2Securities
      in a continuous loss position for more than 12 months
              
              
              454
              
              
              
              8$
              1,380
              
              
              $
              10
 
  - 9
-
 Table of Contents
  Net
realized (gain) loss related to sales of marketable securities (excluding
other-than-temporary impairments) were ($60), $1, ($59) and $5 in the
three-month and nine-month periods ended December 31, 2009 and December 28,
2008, respectively. In December 2009, the Company used the proceeds from the
sale $3,111 of marketable securities to settle one product liability insurance
claim.
 
 The
following is a summary of available-for-sale securities at March 31,
2009:
 Cost
              
              
              Gross
      Unrealized
                Gains
              
              
              Gross
      Unrealized
                Losses
              
              
              Estimated
      Fair
                ValueEquity securities
              
              $
              29,315
              
              
              $
              394
              
              
              $
              881
              
              
              $
              28,828
 
 7.  Goodwill
and Intangible Assets
 
 Goodwill
is not amortized but is periodically tested for impairment, in accordance with
the provisions of ASC Topic
350-20-35-1.  Goodwill impairment is deemed to exist if the net
book value of a reporting unit exceeds its estimated fair value.  The
fair value of a reporting unit is determined using a discounted cash flow
methodology.  The Company’s reporting units are determined based upon
whether discrete financial information is available and regularly reviewed,
whether those units constitute a business, and the extent of economic
similarities between those reporting units for purposes of
aggregation.  The Company’s reporting units identified under ASC Topic 350-20-35-33are at the component level, or one level below the reporting segment
level as defined under ASC Topic 280-10-50-10
“Segment Reporting – Disclosure.” The Company has four reporting
units.  Only two of the four reporting units carry goodwill at
December 31, 2009 and March 31, 2009. The Duff-Norton reporting unit (which
designs and manufactures industrial components such as mechanical and
electromechanical actuators and rotary unions) has goodwill of $9,919 at
December 31, 2009 and the Rest of Products reporting unit (representing the core
hoist, chain, and forgings design, manufacturing, and distribution businesses)
has goodwill of $96,500 at December 31, 2009.
 
 In
accordance with ASC
Topic 350-20-35-3, the measurement of impairment of goodwill consists of
two steps. In the first step, the Company compares the fair value of each
reporting unit to its carrying value. As part of the impairment analysis, the
Company determines the fair value of each of its reporting units with goodwill
using the income approach. The income approach uses a discounted cash flow
methodology to determine fair value. This methodology recognizes value based on
the expected receipt of future economic benefits. Key assumptions in the income
approach include a free cash flow projection, an estimated discount rate, a
long-term growth rate and a terminal value. These assumptions are based upon the
Company’s historical experience, current market trends and future
expectations.  During fiscal 2009, the generally weak economic
conditions resulted in a rapid decline in business, a reduction in forecasted
cash flows, and an increase in capital costs as a result of tightening credit
markets.  Based on this evaluation, the Company determined that the
fair value of its Rest of Products reporting unit was less than its carrying
value in the fourth quarter of fiscal 2009. Following this assessment, ASC Topic 350-20-35-8required the Company to perform a second step in order to determine the
implied fair value of goodwill in this reporting unit and to compare it to its
carrying value. The activities in the second step included hypothetically
valuing all of the tangible and intangible assets of the impaired reporting unit
using market participant assumptions, as if the reporting unit had been acquired
in a business combination.
 
 As a
result of this assessment, the Company recorded a goodwill impairment charge of
$107,000 in the fourth quarter of fiscal 2009. None of the charge related to
goodwill was deductible for tax purposes.
 
 Key
performance indicators for the Duff-Norton reporting unit were below budget
levels for the first six months of the current fiscal year. Accordingly, the
Company performed a Step I test for goodwill impairment for the Duff-Norton
reporting unit as of September 30, 2009. No goodwill impairment charges were
required during the quarter ended September 30, 2009 as a result of completion
of Step I testing. Fair value of the reporting unit exceeded book value by 6%
and a decline in terminal growth rate greater than 50 basis points or an
increase in the weighted-average cost of capital greater than 50 basis points
would have indicated a potential impairment for this reporting unit at September
30, 2009. Step I was not considered necessary of the Rest of Products reporting
unit because, based on testing performed at March 31, 2009, year end fair value
of this reporting unit sufficiently exceeded book value and therefore no risk of
impairment existed at September 30, 2009. As of December 31, 2009, the Company
concluded that no indicators of goodwill impairment existed, so an interim test
was not performed.
  - 10
-
 Table of Contents
  
 Future
impairment indicators, such as declines in forecasted cash flows, may cause
additional significant impairment charges. Impairment charges could be based on
such factors as the Company’s stock price, forecasted cash flows, assumptions
used, control premiums or other variables.
 
 A summary
of changes in goodwill during the first nine months of fiscal 2010 is as
follows:
 
 Balance
      at April 1, 2009
              
              $
              104,744Currency
      translation
              
              
              1,675Balance
      at December 31, 2009
              
              $
              106,419
 
 Identifiable
intangible assets acquired in a business combination are amortized over their
useful lives unless their useful lives are indefinite, in which case those
intangible assets are tested for impairment annually and not amortized until
their lives are determined to be finite.
 
 Intangible
assets are summarized as follows:
 
 December
      31, 2009
              
              
              March
      31, 2009Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              Net
              
              
              Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              NetTrademark
              
              $
              6,209
              
              
              $
              425
              
              
              $
              5,784
              
              
              $
              5,743
              
              
              $
              157
              
              
              $
              5,586Customer
      relationships
              
              
              15,360
              
              
              
              1,763
              
              
              
              13,597
              
              
              
              14,208
              
              
              
              652
              
              
              
              13,556Other
              
              
              1,507
              
              
              
              270
              
              
              
              1,237
              
              
              
              1,342
              
              
              
              148
              
              
              
              1,194Total
              
              $
              23,076
              
              
              $
              2,458
              
              
              $
              20,618
              
              
              $
              21,293
              
              
              $
              957
              
              
              $
              20,336
 
 Based on
the current amount of intangible assets, the estimated amortization expense for
each of the fiscal years 2010 through 2014 is expected to be approximately
$1,800.
 
 8.  Derivative
Instruments
 
 The
Company uses derivative instruments to manage selected foreign currency
exposures. The Company does not use derivative instruments for speculative
trading purposes. All derivative instruments must be recorded on the balance
sheet at fair value. For derivatives designated as cash flow hedges, the
effective portion of changes in the fair value of the derivative is recorded as
accumulated other comprehensive loss, or AOCL, and is reclassified to earnings
when the underlying transaction has an impact on earnings. The ineffective
portion of changes in the fair value of the derivative is reported in cost of
products sold. For derivatives not classified as cash flow hedges, all changes
in market value are recorded as a foreign currency exchange loss (gain) in the
Company’s consolidated statements of operations.
 
 The
Company has foreign currency forward agreements and a cross-currency swap in
place to offset changes in the value of intercompany loans to certain foreign
subsidiaries due to changes in foreign exchange rates. The notional amount of
these derivatives is $21,780, and all contracts mature by September 30, 2013.
These contracts are not designated as hedges.
 
 In
relation to certain of the derivative transactions discussed above, the Company
issued a guarantee to a third party lender which secures any obligations of one
of the Company’s wholly-owned foreign subsidiaries under the subsidiary’s
agreement with the third party lender, regarding those derivative
transactions.  The fair value of the derivative liabilities of the
foreign subsidiary at December 31, 2009 relating to this guarantee was $1,689.
In addition, the Company has foreign currency forward agreements in place to
hedge changes in the value of booked foreign currency liabilities due to changes
in foreign exchange rates at the settlement date. The notional amount of those
derivatives is $1,215 and all contracts mature within twelve months. These
contracts are not designated as hedges.
 
 The
Company has foreign currency forward agreements that are designated as cash flow
hedges to hedge a small portion of forecasted inventory purchases denominated in
a foreign currency. The notional amount of those derivates is $1,382 and all
contracts mature within twelve months.
  - 11
-
 Table of Contents
  
 The
Company is exposed to credit losses in the event of nonperformance by the
counterparties on its financial instruments. All counterparties have investment
grade credit ratings. The Company anticipates that these counterparties will be
able to fully satisfy their obligations under the contracts.
 
 The
following is the pretax effect of derivative instruments on the condensed
consolidated statement of operations for the nine months ended December 31,
2009:
 
 Derivatives
      Designated as Cash Flow  Hedges
              
              Amount
      of (Gain) or Loss Recognized in Other Comprehensive Income on Derivatives
      (Effective Portion)
              
              Location
      of (Gain) or Loss Recognized in Income on Derivatives
              
              Amount
      of (Gain) or Loss Reclassified from AOCL into Income (Effective
      Portion)Foreign
      exchange contracts
              
              $
              56
              
              Foreign
      currency exchange loss (gain)
              
              
              -
 
 Derivatives
      Not Designated as Hedging Instruments
              
              
              Location
      of (Gain) or Loss Recognized in Income on Derivatives
              
              Amount
      of (Gain) or Loss Recognized in Income on DerivativesForeign
      exchange contracts
              
              Foreign
      currency exchange loss (gain)
              
              $
              905
 
 The
following is information relative to the Company’s derivative instruments in the
condensed consolidated balance sheet as of December 31, 2009:
 
 Derivatives
      Designated as Hedging Instruments
              
              
              Balance
      Sheet Location
              
              Fair
      Value of LiabilityForeign
      exchange contracts
              
              Accrued
      Liabilities
              
              $
              67
 
 Derivatives
      Not Designated as Hedging Instruments
              
              
              Balance
      Sheet Location
              
              Fair
      Value of LiabilityForeign
      exchange contracts
              
              
              Accrued
      Liabilities
              
              $
              1,912
 
 9.  Debt
 
 The
Company entered into an amended, restated and expanded revolving credit facility
dated December 31, 2009. The new Revolving Credit Facility provides availability
up to a maximum of $85,000.
 
 The
Revolving Credit Agreement has an initial term ending May 1, 2013, which can be
extended to Dec 31, 2013 as long as the Company’s existing Senior Subordinated
Notes are paid in full on or prior to May 1, 2013 from proceeds of permitted
Indebtedness with a maturity of no earlier than January 5, 2014.
 
 Provided
there is no default, the Company may, on a one-time basis, request an increase
in the availability of the Revolving Credit Facility by an amount not exceeding
$65,000, subject to lender approval. The unused portion of the Revolving Credit
Facility totaled $77,726, net of outstanding borrowings of $0 and outstanding
letters of credit of $7,274, as of December 31, 2009.  Interest on the
revolver is payable at varying Eurodollar rates based on LIBOR or prime plus a
spread determined by the Company’s total leverage ratio amounting to 325 or 225
basis points, respectively, at December 31, 2009. The Revolving Credit Facility
is secured by all domestic inventory, receivables, equipment, real property,
subsidiary stock (limited to 65% of foreign subsidiaries) and intellectual
property.
 
 The
corresponding credit agreement associated with the Revolving Credit Facility
places certain debt covenant restrictions on the Company, including certain
financial requirements and restrictions on dividend payments, with which the
Company was in compliance as of December 31, 2009. Key financial covenants
include a minimum fixed charge coverage ratio of 1.25x, a maximum total leverage
ratio, net of cash, of 3.75x through June 30, 2010 and 3.5x thereafter, and
maximum annual capital expenditures of $15,000 in fiscal 2010 and $18,000
thereafter excluding capital expenditures required for a global ERP
system.
  - 12
-
 Table of Contents
  
 The
carrying amount of the Company’s revolving credit facility, notes payable to
banks and other senior debt approximate their fair values based on current
market rates. The Company’s Senior Subordinated Notes, which have a carrying
value of $124,855 at December 31, 2009, have an approximate fair value of
$126,104, based on quoted market prices. The Company incurred approximately
$1,055 of deferred financing charges related to the refinancing of its credit
agreement, which will be amortized over the life of the agreement.
 
 The
Company’s Notes payable to banks consist primarily of secured and unsecured
international lines of credit.  The Company’s Senior debt consists of
capital lease obligations as well as any borrowings under the Company’s
Revolving Credit Facility, if any.
 
 Refer to
the Company’s consolidated financial statements included in its annual report on
Form 10-K for the year ended March 31, 2009 for further information on the
Company’s debt arrangements.
 
 10.  Restructuring
Charges
 
 In the
nine-month period ended December 31, 2009, the Company continued its business
reorganization plan. As part of that plan, the Company consolidated its North
American sales force and offered certain of its employees an incentive to
voluntarily retire early. The early retirement program consists of two benefits:
a paid leave of absence and an enhanced pension benefit. Charges for the paid
leave of absence of $3,826 were recorded in restructuring reserves during the
nine-month period ended December 31, 2009. The payments are being made to the
employees in installments on their regular pay dates. Charges for the enhanced
pension benefit of $2,012 are recorded in long-term pension liabilities.
Long-term pension liabilities are included in other non-current liabilities on
the condensed consolidated balance sheets.
 
 Furthermore,
during fiscal 2010, as part of the business reorganization plan, the Company
initiated strategic consolidation of its North American hoist and rigging
operations.  The process includes the closure of two manufacturing
facilities and the significant downsizing of a third facility. The closures will
result in a reduction of approximately 500,000 square feet of manufacturing
space and generation of annual savings estimated at approximately $9 - $11
million with approximately 75% of the total $9 - $10 million of restructuring
charges related to manufacturing facility consolidation expected in fiscal 2010.
The Company expects the majority of these charges to relate to both one-time and
ongoing termination benefit arrangements and in total, including charges for the
early retirement program and paid leave of absence discussed above, to record
approximately $13 million in restructuring charges for fiscal 2010.
Rationalization of North American hoist and rigging operations and the
significant downsizing of the third facility resulted in $950 of non-cash fixed
asset impairment charges, $724 of other facility related costs, $4,218 in
expense for severance costs related to salaried and union workforce reductions,
and $418 of pension plan curtailment charges recognized in the nine-month period
ended December 31, 2009.
 
 Restructuring
reserves were $4,194 as of December 31, 2009, consisting primarily of accrued
severance costs.  The majority of the severance costs will be paid
during fiscal 2010.
 
 The
following table provides a reconciliation of the fiscal 2010 activity related to
restructuring reserves:
 
 Employee
              
              
              Facility
              
              
              TotalReserve at April 1,
      2009
              
              $
              1,302
              
              
              $
              -
              
              
              $
              1,302Restructuring charges
              
              
              10,474
              
              
              
              1,674
              
              
              
              12,148Cash payments
              
              
              (5,152
              )
              
              
              (724
              )
              
              
              (5,876
              )Reclassification of long-term
      pension liability
              
              
              (2,430
              )
              
              
              -
              
              
              
              (2,430
              )Reclassification of fixed asset
      impairment
              
              
              -
              
              
              
              (950
              )
              
              
              (950
              )Reserve at December 31,
      2009
              
              $
              4,194
              
              
              $
              -
              
              
              $
              4,194
 
  - 13
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 Table of Contents
  
 11.  Net
Periodic Benefit Cost
 
 The
following table sets forth the components of net periodic pension cost for the
Company’s defined benefit pension plans:
 
 Three Months Ended
              
              
              Nine Months EndedDecember 31, 2009
              
              
              December 28, 2008
              
              
              December 31, 2009
              
              
              December 28, 2008Service cost
              
              $
              983
              
              
              $
              1,113
              
              
              $
              2,948
              
              
              $
              3,324Interest cost
              
              
              2,432
              
              
              
              2,270
              
              
              
              7,294
              
              
              
              6,682Expected return on plan
      assets
              
              
              (1,717
              )
              
              
              (2,299
              )
              
              
              (5,150
              )
              
              
              (6,897
              )Net amortization
              
              
              1,168
              
              
              
              294
              
              
              
              3,506
              
              
              
              883Net periodic pension
      cost
              
              $
              2,866
              
              
              $
              1,378
              
              
              $
              8,598
              
              
              $
              3,992
 
 The
increase in net periodic pension cost for the periods ended December 31, 2009
compared to the periods ended December 28, 2008 is primarily the result of an
increase in the amortization of unrecognized losses due to the difference
between the actual return on investments compared to the expected return from
depressed asset values during fiscal 2009.
 
 The
Company currently plans to contribute approximately $18,000 to its pension plans
in fiscal 2010.
 
 The
following table sets forth the components of net periodic postretirement benefit
cost for the Company’s defined benefit postretirement plans:
 
 Three Months Ended
              
              
              Nine Months EndedDecember 31, 2009
              
              
              December 28, 2008
              
              
              December 31, 2009
              
              
              December 28, 2008Service cost
              
              $
              -
              
              
              $
              -
              
              
              $
              1
              
              
              $
              2Interest cost
              
              
              144
              
              
              
              168
              
              
              
              432
              
              
              
              502Amortization of plan net
      losses
              
              
              73
              
              
              
              115
              
              
              
              218
              
              
              
              346Net periodic postretirement
      cost
              
              $
              217
              
              
              $
              283
              
              
              $
              651
              
              
              $
              850
 
 
 For
additional information on the Company’s defined benefit pension and
postretirement benefit plans, refer to Note 12 in the consolidated financial
statements included in the Company’s annual report on Form 10-K for the year
ended March 31, 2009.
 
 12.  Income
Taxes
 
 Income
tax (benefit) expense as a percentage of (loss) income from continuing
operations before income tax (benefit) expense was 26.8%, 35.3%, 23.7% and 35.7%
in the fiscal 2010 and 2009 quarters and the nine-month periods ended December
31, 2009 and December 28, 2008, respectively. The Company estimates that its
effective tax rate related to losses from continuing operations will be
approximately 26%-27% for fiscal 2010. The percentages vary from the U.S.
statutory rate due to varying effective tax rates at the Company’s foreign
subsidiaries, the jurisdictional mix of taxable income forecasted for these
subsidiaries, and the impact of U.S. state franchise taxes unrelated to income.
The Company changed its forecasted effective tax rate for the full year of
fiscal 2010 during the quarter ended December 31, 2009 primarily as a result of
changes in its expectation of the jurisdictional mix of taxable income given its
operating results year-to-date and the impact of U.S. state franchise
taxes.
  - 14
-
 Table of Contents
  
 13.  Earnings
Per Share
 
 The
following sets forth the computation of basic and diluted earnings per share
(tabular amounts in thousands):
 
 Three Months Ended
              
              
              Nine Months EndedDecember 31, 2009
              
              
              December 28, 2008
              
              
              December 31, 2009
              
              
              December 28, 2008Numerator
      for basic and diluted earnings per share:Net
      (loss) income
              
              $
              (2,344
              )
              
              $
              3,813
              
              
              $
              (7,473
              )
              
              $
              24,120Denominators:Weighted-average
      common stock outstanding – denominator for basic EPS
              
              
              18,980
              
              
              
              18,876
              
              
              
              18,952
              
              
              
              18,851Effect
      of dilutive employee stock options and awards
              
              
              -
              
              
              
              188
              
              
              
              -
              
              
              
              310Adjusted
      weighted-average common stock outstanding and assumed conversions –
      denominator for diluted EPS
              
              
              18,980
              
              
              
              19,064
              
              
              
              18,952
              
              
              
              19,161
 
 During
the nine months ended December 31, 2009, a total of 35,500 shares of stock were
issued upon the exercising of stock options related to the Company’s stock
option plans, and 29,676 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.  Options, restricted stock units, and performance
shares with respect to approximately 855,000 and 463,000 shares were not
included in the computation of diluted earnings per share for the periods ended
December 31, 2009 and December 28, 2008, respectively, because they were
anti-dilutive.
 
 14.  Business
Segment Information
 
 ASC Topic
280-10-50-10 establishes the standards for reporting information about operating
segments in financial statements. Historically, the Company had two operating
and reportable segments, Products and Solutions. The Solutions segment engaged
primarily in the design, fabrication and installation of integrated material
handling conveyor systems and service and in the design and manufacture of tire
shredders, lift tables and light-rail systems. In fiscal 2009, the Company
re-evaluated its operating and reportable segments in connection with the
divestiture 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 its products-orientated strategic growth initiatives, the Company
determined that it now has only one operating and reportable segment for both
internal and external reporting purposes. As part of the organizational
restructuring announced in response to adverse market conditions, the Company
has reevaluated its reportable segments and continues to believe that it has
only one reportable and operating segment.
  - 15
-
 Table of Contents
  
 15.  Summary
Financial Information
 
 The
following information sets forth the condensed consolidating summary financial
information of the parent and guarantors, which guarantee the 8 7/8% Senior
Subordinated Notes, and the nonguarantors. The guarantors are wholly owned and
the guarantees are full, unconditional, joint and several.
 
 As
      of December 31, 2009
              
              Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedCurrent
      assets:Cash and cash
      equivalents
              
              $
              27,380
              
              
              $
              28
              
              
              $
              23,626
              
              
              $
              —
              
              
              $
              51,034Trade accounts
      receivable
              
              
              34,225
              
              
              
              28
              
              
              
              30,852
              
              
              
              —
              
              
              
              65,105Inventories
              
              
              29,276
              
              
              
              15,505
              
              
              
              43,612
              
              
              
              (2,697
              )
              
              
              85,696Other current
    assets
              
              
              4,688
              
              
              
              1,014
              
              
              
              10,101
              
              
              
              844
              
              
              
              16,647Total current
      assets
              
              
              95,569
              
              
              
              16,575
              
              
              
              108,191
              
              
              
              (1,853
              )
              
              
              218,482Property, plant, and equipment,
      net
              
              
              28,383
              
              
              
              11,643
              
              
              
              20,217
              
              
              
              —
              
              
              
              60,243Goodwill and other intangibles,
      net
              
              
              41,023
              
              
              
              31,029
              
              
              
              54,985
              
              
              
              —
              
              
              
              127,037Intercompany
              
              
              (69,875
              )
              
              
              145,216
              
              
              
              (76,993
              )
              
              
              1,652
              
              
              
              —Other assets
              
              
              33,099
              
              
              
              5,761
              
              
              
              32,598
              
              
              
              —
              
              
              
              71,458Investment in
      subsidiaries
              
              
              242,427
              
              
              
              —
              
              
              
              —
              
              
              
              (242,427
              )
              
              
              —Total assets
              
              $
              370,626
              
              
              $
              210,224
              
              
              $
              138,998
              
              
              $
              (242,628
              )
              
              $
              477,220Current
      liabilities
              
              
              31,713
              
              
              
              11,853
              
              
              
              35,666
              
              
              
              (201
              )
              
              
              79,031Long-term
      debt, less current portion
              
              
              124,855
              
              
              
              2,530
              
              
              
              4,008
              
              
              
              —
              
              
              
              131,393Other
      non-current liabilities
              
              
              28,585
              
              
              
              13,848
              
              
              
              38,890
              
              
              
              —
              
              
              
              81,323Total
    liabilities
              
              
              185,153
              
              
              
              28,231
              
              
              
              78,564
              
              
              
              (201
              )
              
              
              291,747Shareholders'
      equity
              
              
              185,473
              
              
              
              181,993
              
              
              
              60,434
              
              
              
              (242,427
              )
              
              
              185,473Total liabilities and
      shareholders' equity
              
              $
              370,626
              
              
              $
              210,224
              
              
              $
              138,998
              
              
              $
              (242,628
              )
              
              $
              477,220
 
 For
      the Nine Months Ended December 31, 2009Net
      sales
              
              $
              143,453
              
              
              $
              87,692
              
              
              $
              141,946
              
              
              $
              (19,878
              )
              
              $
              353,213Cost
      of products sold
              
              
              118,303
              
              
              
              70,933
              
              
              
              99,549
              
              
              
              (19,878
              )
              
              
              268,907Gross
      profit
              
              
              25,150
              
              
              
              16,759
              
              
              
              42,397
              
              
              
              —
              
              
              
              84,306Selling,
      general and administrative expenses
              
              
              30,645
              
              
              
              9,959
              
              
              
              33,932
              
              
              
              —
              
              
              
              74,536Restructuring
      charges
              
              
              11,597
              
              
              
              —
              
              
              
              551
              
              
              
              —
              
              
              
              12,148Amortization
      of intangibles
              
              
              85
              
              
              
              2
              
              
              
              1,321
              
              
              
              —
              
              
              
              1,40842,327
              
              
              
              9,961
              
              
              
              35,804
              
              
              
              —
              
              
              
              88,092(Loss)
      income from operations
              
              
              (17,177
              )
              
              
              6,798
              
              
              
              6,593
              
              
              
              —
              
              
              
              (3,786
              )Interest
      and debt expense
              
              
              8,751
              
              
              
              415
              
              
              
              835
              
              
              
              —
              
              
              
              10,001Other
      (income) and expense, net
              
              
              (528
              )
              
              
              (1,090
              )
              
              
              (2,021
              )
              
              
              —
              
              
              
              (3,639
              )(Loss)
      income from continuing operations before income tax (benefit) expense
      and equity in income of subsidiaries
              
              
              (25,400
              )
              
              
              7,473
              
              
              
              7,779
              
              
              
              —
              
              
              
              (10,148
              )Income
      tax (benefit) expense
              
              
              (6,501
              )
              
              
              2,196
              
              
              
              1,896
              
              
              
              —
              
              
              
              (2,409
              )Equity
      in income from continuing operations of subsidiaries
              
              
              11,160
              
              
              
              —
              
              
              
              —
              
              
              
              (11,160
              )
              
              
              —(Loss)
      income from continuing operations
              
              
              (7,739
              )
              
              
              5,277
              
              
              
              5,883
              
              
              
              (11,160
              )
              
              
              (7,739
              )Gain
      from discontinued operations
              
              
              266
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              266Net
      (loss) income
              
              $
              (7,473
              )
              
              $
              5,277
              
              
              $
              5,883
              
              
              $
              (11,160
              )
              
              $
              (7,473
              )
 
  - 16
-
 Table of Contents
  
 For
      the Nine Months Ended December 31, 2009
              
              Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedOperating
      activities:Net
      cash provided (used) by operating activities
              
              
              18,098
              
              
              
              (1,475
              )
              
              
              11,679
              
              
              
              (11,160
              )
              
              
              17,142Investing
      activities:Sale
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              75
              
              
              
              —
              
              
              
              75Capital
      expenditures
              
              
              (4,229
              )
              
              
              (802
              )
              
              
              (885
              )
              
              
              —
              
              
              
              (5,916
              )Investment
      in subsidiaries
              
              
              (11,160
              )
              
              
              —
              
              
              
              —
              
              
              
              11,160
              
              
              
              —Proceeds
      from sale of assets
              
              
              —
              
              
              
              2,407
              
              
              
              973
              
              
              
              —
              
              
              
              3,380Net
      cash (used) provided by investing activities from continuing
      operations
              
              
              (15,389
              )
              
              
              1,605
              
              
              
              163
              
              
              
              11,160
              
              
              
              (2,461
              )Net
      cash provided by investing activities from discontinued
      operations
              
              
              266
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              266Net
      cash (used) provided by investing activities
              
              
              (15,123
              )
              
              
              1,605
              
              
              
              163
              
              
              
              11,160
              
              
              
              (2,195
              )Financing
      activities:Proceeds
      from stock options exercised
              
              
              201
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              201Net
      payments under revolving line-of-credit agreements
              
              
              —
              
              
              
              (82
              )
              
              
              (4,094
              )
              
              
              —
              
              
              
              (4,176
              )Other
              
              
              89
              
              
              
              69
              
              
              
              —
              
              
              
              —
              
              
              
              158Net
      cash provided (used) by financing activities
              
              
              290
              
              
              
              (13
              )
              
              
              (4,094
              )
              
              
              —
              
              
              
              (3,817
              )Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              (119
              )
              
              
              787
              
              
              
              —
              
              
              
              668Net
      change in cash and cash equivalents
              
              
              3,265
              
              
              
              (2
              )
              
              
              8,535
              
              
              
              —
              
              
              
              11,798Cash
      and cash equivalents at beginning of period
              
              
              24,115
              
              
              
              30
              
              
              
              15,091
              
              
              
              —
              
              
              
              39,236Cash
      and cash equivalents at end of period
              
              $
              27,380
              
              
              $
              28
              
              
              $
              23,626
              
              
              $
              —
              
              
              $
              51,034
 
 As
      of March 31, 2009Current
      assets:Cash and cash
      equivalents
              
              $
              24,115
              
              
              $
              30
              
              
              $
              15,091
              
              
              $
              —
              
              
              $
              39,236Trade accounts
      receivable
              
              
              46,358
              
              
              
              37
              
              
              
              33,773
              
              
              
              —
              
              
              
              80,168Inventories
              
              
              33,268
              
              
              
              21,113
              
              
              
              48,937
              
              
              
              (2,697
              )
              
              
              100,621Other current
    assets
              
              
              8,480
              
              
              
              1,060
              
              
              
              7,731
              
              
              
              844
              
              
              
              18,115Total current
      assets
              
              
              112,221
              
              
              
              22,240
              
              
              
              105,532
              
              
              
              (1,853
              )
              
              
              238,140Property, plant, and equipment,
      net
              
              
              29,001
              
              
              
              11,995
              
              
              
              21,106
              
              
              
              —
              
              
              
              62,102Goodwill and other intangibles,
      net
              
              
              41,016
              
              
              
              31,031
              
              
              
              53,033
              
              
              
              —
              
              
              
              125,080Intercompany
              
              
              (58,739
              )
              
              
              140,495
              
              
              
              (83,748
              )
              
              
              1,992
              
              
              
              —Other assets
              
              
              36,099
              
              
              
              4,659
              
              
              
              25,584
              
              
              
              —
              
              
              
              66,342Investment in
      subsidiaries
              
              
              222,102
              
              
              
              —
              
              
              
              —
              
              
              
              (222,102
              )
              
              
              —Total assets
              
              $
              381,700
              
              
              $
              210,420
              
              
              $
              121,507
              
              
              $
              (221,963
              )
              
              $
              491,664Current
      liabilities
              
              $
              33,767
              
              
              $
              17,162
              
              
              $
              39,933
              
              
              $
              139
              
              
              $
              91,001Long-term
      debt, less current portion
              
              
              124,855
              
              
              
              2,597
              
              
              
              4,476
              
              
              
              —
              
              
              
              131,928Other
      non-current liabilities
              
              
              41,224
              
              
              
              13,895
              
              
              
              31,762
              
              
              
              —
              
              
              
              86,881Total
    liabilities
              
              
              199,846
              
              
              
              33,654
              
              
              
              76,171
              
              
              
              139
              
              
              
              309,810Shareholders'
      equity
              
              
              181,854
              
              
              
              176,766
              
              
              
              45,336
              
              
              
              (222,102
              )
              
              
              181,854Total liabilities and
      shareholders' equity
              
              $
              381,700
              
              
              $
              210,420
              
              
              $
              121,507
              
              
              $
              (221,963
              )
              
              $
              491,664
 
 - 17
-
 Table of Contents
 For
      the Nine Months Ended December 28, 2008
              
              Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedNet
      sales
              
              $
              228,521
              
              
              $
              126,809
              
              
              $
              149,362
              
              
              $
              (33,772
              )
              
              $
              470,920Cost
      of products sold
              
              
              169,209
              
              
              
              96,677
              
              
              
              99,918
              
              
              
              (33,772
              )
              
              
              332,032Gross
      profit
              
              
              59,312
              
              
              
              30,132
              
              
              
              49,444
              
              
              
              —
              
              
              
              138,888Selling,
      general and administrative expenses
              
              
              36,295
              
              
              
              14,957
              
              
              
              31,952
              
              
              
              —
              
              
              
              83,204Restructuring
      charges
              
              
              1,145
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,145Amortization
      of intangibles
              
              
              83
              
              
              
              2
              
              
              
              392
              
              
              
              —
              
              
              
              47737,523
              
              
              
              14,959
              
              
              
              32,344
              
              
              
              —
              
              
              
              84,826Income
      from operations
              
              
              21,789
              
              
              
              15,173
              
              
              
              17,100
              
              
              
              —
              
              
              
              54,062Interest
      and debt expense
              
              
              8,136
              
              
              
              1,203
              
              
              
              590
              
              
              
              —
              
              
              
              9,929Other
      (income) and expense, net
              
              
              (1,185
              )
              
              
              (943
              )
              
              
              4,640
              
              
              
              —
              
              
              
              2,512Income
      from continuing operations before income tax expense and equity in
      income of subsidiaries
              
              
              14,838
              
              
              
              14,913
              
              
              
              11,870
              
              
              
              —
              
              
              
              41,621Income
      tax expense
              
              
              5,959
              
              
              
              5,919
              
              
              
              2,972
              
              
              
              —
              
              
              
              14,850Equity
      in income from continuing operations of subsidiaries
              
              
              17,892
              
              
              
              —
              
              
              
              —
              
              
              
              (17,892
              )
              
              
              —Income
      (loss) from continuing operations
              
              
              26,771
              
              
              
              8,994
              
              
              
              8,898
              
              
              
              (17,892
              )
              
              
              26,771Loss
      from discontinued operations (net of tax) before equity in income of
      subsidiaries
              
              
              (420
              )
              
              
              —
              
              
              
              (2,231
              )
              
              
              —
              
              
              
              (2,651
              )Equity
      in loss from discontinued operations of subsidiaries (net of
      tax)
              
              
              (2,231
              )
              
              
              —
              
              
              
              —
              
              
              
              2,231
              
              
              
              —Net
      income (loss)
              
              $
              24,120
              
              
              $
              8,994
              
              
              $
              6,667
              
              
              $
              (15,661
              )
              
              $
              24,120
 
 For
      the Nine Months Ended December 28, 2008Operating
      activities:Net
      cash provided (used) by operating activities from continuing
      operations
              
              $
              36,874
              
              
              $
              261
              
              
              $
              25,140
              
              
              $
              (17,892
              )
              
              $
              44,383Net
      cash (used) provided by operating activities from discontinued
      operations
              
              
              (3,095
              )
              
              
              —
              
              
              
              (2,218
              )
              
              
              2,231
              
              
              
              (3,082
              )Net
      cash provided (used) by operating activities
              
              
              33,779
              
              
              
              261
              
              
              
              22,922
              
              
              
              (15,661
              )
              
              
              41,301Investing
      activities:Purchase
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              (1,939
              )
              
              
              —
              
              
              
              (1,939
              )Capital
      expenditures
              
              
              (4,351
              )
              
              
              (1,176
              )
              
              
              (2,977
              )
              
              
              —
              
              
              
              (8,504
              )Investment
      in subsidiaries
              
              
              (15,661
              )
              
              
              —
              
              
              
              —
              
              
              
              15,661
              
              
              
              —Purchases
      of businesses, net
              
              
              —
              
              
              
              —
              
              
              
              (53,261
              )
              
              
              
              
              
              
              (53,261
              )Proceeds
      from sale of assets
              
              
              —
              
              
              
              1,269
              
              
              
              —
              
              
              
              —
              
              
              
              1,269Net
      cash (used) provided by investing activities from continuing
      operations
              
              
              (20,012
              )
              
              
              93
              
              
              
              (58,177
              )
              
              
              15,661
              
              
              
              (62,435
              )Net
      cash provided by investing activities from discontinued
      operations
              
              
              448
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              448Net
      cash (used) provided by investing activities
              
              
              (19,564
              )
              
              
              93
              
              
              
              (58,177
              )
              
              
              15,661
              
              
              
              (61,987
              )Financing
      activities:Proceeds
      from stock options exercised
              
              
              391
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              391Net
      (payments) borrowings under revolving line-of-credit
      agreements
              
              
              (21,974
              )
              
              
              —
              
              
              
              16,907
              
              
              
              —
              
              
              
              (5,067
              )Repayment
      of debt
              
              
              (4,700
              )
              
              
              (141
              )
              
              
              (2,030
              )
              
              
              —
              
              
              
              (6,871
              )Other
              
              
              567
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              567Net
      cash (used) provided by financing activities from continuing
      operations
              
              
              (25,716
              )
              
              
              (141
              )
              
              
              14,877
              
              
              
              —
              
              
              
              (10,980
              )Net
      cash (used) provided by financing activities from discontinued
      operations
              
              
              (15,191
              )
              
              
              —
              
              
              
              579
              
              
              
              —
              
              
              
              (14,612
              )Net
      cash (used) provided by financing activities
              
              
              (40,907
              )
              
              
              (141
              )
              
              
              15,456
              
              
              
              —
              
              
              
              (25,592
              )Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              170
              
              
              
              (7,913
              )
              
              
              —
              
              
              
              (7,743
              )Net
      change in cash and cash equivalents
              
              
              (26,692
              )
              
              
              383
              
              
              
              (27,712
              )
              
              
              —
              
              
              
              (54,021
              )Cash
      and cash equivalents at beginning of period
              
              
              31,800
              
              
              
              (341
              )
              
              
              44,535
              
              
              
              —
              
              
              
              75,994Cash
      and cash equivalents at end of period
              
              $
              5,108
              
              
              $
              42
              
              
              $
              16,823
              
              
              $
              —
              
              
              $
              21,973
 
  - 18
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 Table of Contents
  
 16.  Loss
Contingencies
 
 Like many
industrial manufacturers, the Company is involved in asbestos-related
litigation.  In continually evaluating costs associated with its
estimated asbestos-related liability, the Company reviews, with the help of
actuaries, among other things, the incidence of past and recent claims, the
historical case dismissal rate, the mix of the claimed illnesses and occupations
of the plaintiffs, its recent and historical resolution of the cases, the number
of cases pending against it, the status and results of broad-based settlement
discussions, and the number of years such activity might continue. Based on this
review, the Company has estimated its share of liability to defend and resolve
probable asbestos-related personal injury claims. This estimate is highly
uncertain due to the limitations of the available data and the difficulty of
forecasting with any certainty the numerous variables that can affect the range
of the liability. The Company will continue to study the variables in light of
additional information in order to identify trends that may become evident and
to assess their impact on the range of liability that is probable and
estimable.
 
 Based on
actuarial information, the Company has estimated its asbestos-related aggregate
liability including related legal costs through March 31, 2027 and March 31,
2039 to range between $6,500 and $18,000 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
$11,000 which has been reflected as a liability in the condensed consolidated
financial statements as of December 31, 2009. The recorded liability does not
consider the impact of any potential favorable federal legislation. This
liability may fluctuate based on the uncertainty in the number of future claims
that will be filed and the cost to resolve those claims, which may be influenced
by a number of factors, including the outcome of the ongoing broad-based
settlement negotiations, defensive strategies, and the cost to resolve claims
outside the broad-based settlement program. Of this amount, management expects
to incur asbestos liability payments of approximately $500 over the next 12
months. Because payment of the liability is likely to extend over many years,
management believes that the potential additional costs for claims will not have
a material after-tax effect on the financial condition of the Company or its
liquidity, although the net after-tax effect of any future liabilities recorded
could be material to earnings in a future period.
 
 17.  Shareholder
Rights Plan
 
 On May
19, 2009 the Company announced that its Board of Directors had adopted a
Shareholder Rights Plan, pursuant to which a dividend distribution was declared
of one preferred share purchase right to each outstanding common share of the
Company. Subject to limited exceptions, the rights will be exercisable if a
person or group acquires 20% or more of the Company’s common shares or announces
a tender offer for 20% or more of the common shares. Under certain
circumstances, each right will entitle shareholders to buy one one-thousandth of
a share of the newly created series A junior participating preferred shares of
the Company at an exercise price of $80.00.
 
 18.  New
Accounting Standards
 
 Effective
July 1, 2009, the Company adopted ASC Topic 105-10, “Generally Accepted
Accounting Principles – Overall” (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in
their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.
 
  - 19
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 Table of Contents
  
 On April
1, 2009 the Company adopted the provisions of ASC Topic 855 “Subsequent Events”
which establishes principles and requirements for subsequent events. These
provisions set forth the period after the balance sheet date during which
management shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, circumstances under which
an entity shall recognize events or transactions occurring after the balance
sheet date, as well as the disclosures that an entity shall make about events or
transactions that occurred after the balance sheet date. The adoption of these
provisions did not have a material impact on the Company’s consolidated
financial position or results of operations. The Company has evaluated
subsequent events through January 29, 2010, the date this quarterly report on
Form 10-Q was filed with the U.S. Securities and Exchange Commission. The
Company made no significant changes to its condensed consolidated financial
statements as a result of its subsequent events evaluation.
 
 On April
1, 2009, the Company adopted the additional guidance issued under ASC Topic 820
through the issuance of  FSP Statement of Financial Accounting
Standards (“SFAS”) No. 157-4, “Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (“FSP SFAS 157-4”). FSP SFAS
157-4 amends ASC Topic 820 to provide additional guidance on estimating fair
value when the volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or
liability. The FSP also provides additional guidance on circumstances that may
indicate that a transaction is not orderly, and requires additional disclosures
about fair value measurements in annual and interim reporting
periods.  FSP SFAS No. 157-4 also supersedes FSP SFAS 157-3,
“Determining the Fair Value of a Financial Asset When the Market for That Asset
is Not Active.” Disclosures required by this codification update are included in
Notes 4, 8 and 9.
 
 On April
1, 2009, the Company adopted the additional guidance issued under ASC Topic 320
and ASC Topic 325 through the issuance of FSP SFAS No. 115-2 and SFAS No. 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS
115-2 / 124-2”). This FSP extends existing disclosure requirements about debt
and equity securities to interim reporting periods as well as provides new
disclosure requirements. FSP SFAS 115-2 / 124-2 also provides new guidance on
the recognition and presentation of an other-than-temporary impairment for debt
securities classified as available for sale or held to maturity. Equity
securities are excluded from the scope the FSP’s recognition and measurement
provisions.  Refer to Note 6 for disclosures required as a result of
the adoption of this codification update.
 
 On April
1, 2009, the Company adopted additional guidance issued under ASC Topic 825
“Financial Instruments” through the issuance of FSP SFAS No. 107-1,
“Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS
107-1”) which requires disclosures about fair value of financial instruments in
financial statements for interim reporting periods and in annual financial
statements of publicly-traded companies. These provisions also require entities
to disclose the method(s) and significant assumptions used to estimate the fair
value of financial instruments in financial statements on an interim and annual
basis and to highlight any changes from prior periods. The adoption of these
provisions did not have a material impact on the Company’s consolidated
financial position, results of operations or cash flows. Disclosures required by
this codification update are included in Notes 4, 8 and 9.
 
 On April
1, 2009, the Company adopted the additional guidance issued under ASC Topic 815
“Derivatives and Hedging” through the issuance of SFAS No. 161 “Disclosures
about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133” which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such
instruments and a tabular disclosure of the effects of such instruments and
related hedged items on the Company’s financial position, financial performance,
and cash flows. The adoption of these provisions did not have a material impact
on the Company’s consolidated financial position, results of operations or cash
flows.
  - 20
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 Table of Contents
  
 On April
1, 2008, the Company adopted the additional guidance issued under ASC Topic 715
“Compensation – Retirement Benefits” through the issuance 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 this codification update, an employer should recognize a
liability for the postretirement benefit related to a collateral assignment
split-dollar life insurance arrangement. The provisions of EITF 06-10 were
applied as a change in accounting principle through a cumulative-effect
adjustment to retained earnings.  The adoption of EITF 06-10 resulted
in a $774 reduction to the opening balance of retained earnings, recorded on
April 1, 2008, the date of adoption.  The adoption of EITF 06-10 did
not have a significant impact on the Company’s financial position, results of
operations or cash flows, basic or diluted per share amounts.
 
 On April
1, 2009, the Company adopted the provisions of ASC Topic 805 “Business
Combinations” which 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. The Company adopted these
provisions effective April 1, 2009 for future acquisitions and for deferred tax
adjustments related to acquisitions completed before its effective
date.
 
 In
December 2008, the FASB issued additional guidance under ASC Topic 715 to
require additional disclosures about assets held in an employer’s defined
benefit pension or other postretirement plan. This replaces the requirement to
disclose the percentage of the fair value of total plan assets for each major
category of plan assets, such as equity securities, debt securities, real estate
and all other assets, with the fair value of each major asset category as of
each annual reporting date for which a financial statement is presented. It also
requires disclosure of the level within the fair value hierarchy in which each
major category of plan assets falls, using the guidance in ASC Topic 820. This
requirement is applicable for fiscal years ending after December 15, 2009.
The Company will comply with these disclosure provisions after its effective
date. The Company does not expect the adoption of this requirement to have a
material impact on its consolidated financial position, results of operations or
cash flows.
  - 21
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 Table of Contents
  
 Item
2.
 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
 RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
 (Dollar
amounts in thousands)
 
 Executive
Overview
 
 We are a
leading designer, marketer and manufacturer of a wide variety of powered and
manually operated wire rope and chain hoists, industrial crane systems, chain,
hooks and other attachments, actuators, rotary unions, and tire shredders
serving a wide variety of commercial and industrial end-user markets. Our
products are used to efficiently and ergonomically move, lift, position or
secure objects and loads.
 
 Founded
in 1875, we have grown to our current size and leadership position through
organic growth and acquisitions. We developed our leading market position over
our 135-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, acquisitions
significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and customer base. Ongoing initiatives
include improving our productivity and increasing penetration of the European,
Latin American, and Asian marketplaces. In accordance with our strategy, we have
been investing in our Lean efforts across the Company, new product development
and directed sales and marketing activities. Shareholder value will be enhanced
through continued emphasis on improvement of the fundamentals including new
product development, market expansion, manufacturing efficiency, cost
containment, efficient capital investment and a high degree of customer
satisfaction.
 
 Over the
course of its history, the Company has resiliently withstood many business
cycles and its strong cash flow profile has helped it endure. Reflecting on the
recent global economic recession and credit crisis, we stand with a strong
capital structure which includes excess cash reserves, significant revolver
availability with an expiration of May 2013, fixed-rate long-term debt which
doesn’t expire until 2013 and a strong free cash flow business profile. We
believe our liquidity strength will enable us to withstand this downturn as
well. During the first quarter of fiscal 2010, we consolidated our North
American sales force and offered certain employees an incentive to voluntarily
retire early. The early retirement program consisted of two benefits: a paid
leave of absence and an enhanced pension benefit. In furtherance of our
strategic reorganization, we completed the sale of one of our less strategic
businesses, American Lifts, generating $2.4 million of proceeds during the third
quarter of fiscal 2010. Further, we are managing our business through this cycle
with a lower fixed cost footprint than prior cycles and are aggressively
reducing our fixed cost base further as we strategically reorganize our North
American hoist and rigging operations.  The process includes the
closure of two manufacturing facilities and the significant downsizing of a
third facility, of which two of the three projects were completed in the third
quarter of fiscal 2010. The closures will result in a reduction of approximately
500,000 square feet of manufacturing space and generation of annual savings
estimated at approximately $9 - $11 million with approximately 75% of the total
$9 - $10 million of restructuring charges related to manufacturing facility
consolidation expected in fiscal 2010. These costs were being recognized
beginning in the second quarter of fiscal 2010 and will continue into early
fiscal 2011. We expect the majority of these charges to relate to both one-time
and ongoing termination benefit arrangements and expect to record total
restructuring charges, including costs related to the early retirement program
and paid leave of absence, of approximately $13 million for fiscal
2010.
 
 Additionally,
our revenue base now is more geographically diverse than in our Company’s
history, with over 40% derived outside the U.S., which we believe will help to
balance the impact of changes that will occur in different global economies at
different times. As in the past, we monitor U.S. Industrial Capacity Utilization
as an indicator of anticipated U.S. demand for our product. This statistic
weakened significantly between September 2008 and June 2009, but has since
consistently improved for each of the six months ended December 31, 2009 by a
total of over 300 basis points. In addition, we continue to monitor the
potential impact of other global and U.S. trends, including European capacity
utilization and industrial production, energy costs, steel price fluctuations,
interest rates, currency exchange and activity in a variety of end-user markets
around the globe.
  - 22
-
 Table of Contents
  Regardless
of the economic climate, we constantly explore ways to manage our operating
margins as well as further improve our productivity and competitiveness,
regardless of the point in the economic cycle. We have specific initiatives
related to improved customer satisfaction, reduction of defects, shortened lead
times, improved inventory turns and on-time deliveries, reduction of warranty
costs, and improved working capital utilization. The initiatives are being
driven by the continued implementation of our Lean efforts which are
fundamentally changing our manufacturing and business processes to be more
responsive to customer demand and improving on-time delivery and productivity.
In addition to Lean, we are working to achieve these strategic initiatives
through product simplification, the creation of centers of excellence, and
improved supply chain management.
 
 We
continuously monitor market prices of steel. We utilize approximately $20,000 to
$25,000 of steel annually in a variety of forms including rod, wire, bar,
structural and others. Generally, as we experience fluctuations in our costs, we
reflect them as price increases or surcharges to our customers with the goal of
being margin neutral. Our steel costs have been relatively stable during this
quarter despite an increase in structural steel pricing experienced as the
result of higher scrap surcharges and the outsourcing of cut-to-length processes
in conjunction with our plant rationalization.
 
 From a
strategic perspective, we are investing in international markets and new
products as we focus on our greatest opportunities for growth. We maintain a
strong North American market share with significant leading market positions in
hoists, lifting and sling chain, forged attachments and actuators. We seek to
maintain and enhance our market share by continuing and focusing our sales and
marketing activities directed toward select North American and global sectors
including entertainment, energy, construction, mining and food processing. Our
fiscal 2009 acquisition of Pfaff is enhancing our European market penetration as
well as strengthening our global actuator offering. Further, we continue to
invest in emerging market penetration, including the geographic regions of
Eastern Europe, Latin America and Asia. We complement these activities with
continued investments in new product development, particularly products with
global reach.
 
 We are
also looking for opportunities for growth via acquisitions or joint ventures.
The focus of our acquisition strategy centers on opportunities for international
revenue growth and product line expansion in alignment with our existing core
offering.
 
 We
continue to operate in a highly competitive and global business environment,
effectively managing through a global economic cycle. We face a variety of
opportunities in those markets and geographies, including trends toward
increased utilization of the global labor force and the expansion of market
opportunities in Asia and other emerging markets. While we continue to execute
our long-term growth strategy, we are weathering this cycle with our strong
capital structure, including a solid cash position and flexible cost base,
aggressively addressing costs and implementing cost control measures and
restructuring to buffer the impact on current margins.
 
 Results
of Operations
 
 Three
Months and Nine Months Ended December 31, 2009 and December 28,
2008
 
 Net sales
in the fiscal 2010 quarter ended December 31, 2009 were $118,971, down
$46,105 or 27.9% from the fiscal 2009 quarter ended December 28, 2008 net sales
of $165,076. Net sales for the nine month period ended December 31, 2009 were
$353,213, down $117,707 or 25.0% from the nine months ended December 28,
2008 net sales of $470,920. The net sales for the nine month periods ended
December 31, 2009 and December 28, 2008 include sales of Pfaff-silberblau, which
was acquired October 1, 2008, of $52,502 and $26,839, respectively. Excluding
the sales of Pfaff-silberblau, sales decreased $143,370 or 32.3% in the nine
month period ended December 31, 2009. For the quarterly period, net sales were
positively impacted $503 by price increases, $5,058 by foreign currency
translation and negatively impacted $51,666 by decreased volume due to continued
weakness in the global economy. For the nine month period excluding
Pfaff-silberblau, sales were positively impacted by $4,077 of price increases
and $2,455 for an additional shipping day and negatively impacted by $149,368 of
decreased volume due to continued weakness in the global economy and $534 by
foreign currency translation.
  - 23
-
 Table of Contents
  Gross
profit in the fiscal 2010 quarter ended December 31, 2009 was $26,825, down
$17,966 or 40.1% from the fiscal 2009 quarter ended December 28, 2008 gross
profit of $44,791. Gross profit margin decreased to 22.5% in the fiscal 2010
third quarter from 27.1% compared to the same period in fiscal 2009. Gross
profit in the nine month period ended December 31, 2009 was $84,306, down
$54,582 or 39.3% from the nine month period ended December 28, 2008 gross profit
of $138,888. Gross profit margin decreased to 23.9% in the nine month period
ended December 31, 2009 from 29.5% in the nine month period ended December 28,
2008. The decline in gross profit margin was due mostly to lower volume in all
markets as well as additional charges for the quarter and nine months ended
December 31, 2009, respectively, related to the consolidation of our North
American hoist and rigging operations and $2,900 for an atypical product
liability reserve. The translation of foreign currencies had a $1,478 favorable
and $282 unfavorable impact on gross profit for the quarter and nine month
periods, respectively.
 
 Selling
expenses were $15,791 and $19,861 in the fiscal year third quarter 2010 and
2009, respectively. Selling expenses for the nine-months ended Fiscal 2010 and
2009 were $47,873 and $55,227, respectively. Decreases in the current quarter
and the first nine months of the current fiscal year reflect aggressive efforts
to reduce or eliminate costs, as well as $1,610 and $2,310 for the three and
nine months ended December 31, 2009, respectively, of lower salaries, benefits
and commissions on lower sales volume. Additionally, foreign currency
translation had an $897 unfavorable and $167 of favorable impact on selling
expenses for the three and nine months ended December 31, 2009,
respectively.  As a percentage of consolidated net sales, selling
expenses were 13.3% and 12.0% for the fiscal year third quarter 2010 and 2009,
respectively. Selling expenses were 13.6% and 11.7% for the nine months ended
fiscal year 2010 and 2009, respectively.
 
 General
and administrative expenses were $9,471, $8,630, $26,663, and $27,977 in the
fiscal 2010 and 2009 quarters and the nine-month periods then ended,
respectively. The increase in general and administrative expenses for the
quarter ended December 31, 2009 was due primarily due to higher variable
compensation expense of $1,486, and $300 of additional recruitment/relocation
expenses, partially offset by $650 decrease in bad debt reserves and lower group
health charge of $247 for fiscal 2010 compared fiscal 2009. Additionally,
foreign currency translation had a $369 unfavorable and $61 favorable impact on
general and administrative expenses for the three and nine month periods ended
December 31, 2009. Decrease in the general and administrative expenses for the
nine months ended December 31, 2009 compared to the same period prior year is
primarily due to lower salaries and benefits as a result of the aggressive
restructuring actions we have been implementing. As a percentage of consolidated
net sales, general and administrative expenses were 8.0%, 5.2%, 7.5% and 5.9% in
the fiscal 2010 and 2009 quarters and the nine-month periods,
respectively.
 
 Restructuring
charges were $3,616, $990, $12,148, and $1,145 in the fiscal 2010 and 2009
quarters and the nine-month periods then ended, respectively. The fiscal 2010
restructuring costs for the three-month period include $3,045 in expense for
severance costs related to workforce reductions, and $571 of other costs related
to our reorganization plan. Costs for the nine-month period of fiscal 2010
include $950 of non-cash fixed asset impairment charges, the above items, as
well as both voluntary $5,838 and involuntary $4,218 termination benefits
related to workforce reductions in our North American sales force reorganization
and other salaried workforce reductions, $724 of other costs related to our
reorganization plan, and $418 of pension curtailment charges. The fiscal 2009
restructuring costs were $990 for severance related to workforce reductions and
$155 for the consolidation of a U.S. crane manufacturing facility into another
existing crane manufacturing facility.
 
 Amortization
of intangibles was $490, $421, $1,408, and $477 in the fiscal 2010 and 2009
quarters and the nine-month periods then ended, respectively. The increase was
the result of amortization of intangibles acquired in the Pfaff-silberblau
acquisition.
 
 Interest
and debt expense was $3,257, $3,604, $10,001, and $9,929 in the fiscal 2010 and
2009 quarters and the nine-month periods then ended, respectively. The decrease
in the quarterly expense is the result of lower debt levels.
 
 Investment
(income) loss was ($361), $3,335, ($966), and $3,158 in the fiscal 2010 and 2009
quarters and the nine-month periods then ended, respectively. Fiscal 2009
included $3,628 and $4,014 of losses on investments deemed to be impaired on an
other-than-temporary basis in the quarter and nine month periods,
respectively.
 
 Foreign
currency exchange loss (gain) was $6, $1,759, ($633), and $2,548 in the fiscal
2010 and 2009 quarters and the nine-month periods then ended, respectively, as a
result of foreign currency volatility related to purchases and intercompany
debt.
  - 24
-
 Table of Contents
  
 Other
income, net was ($2,059), ($761), ($2,040) and ($3,194) in the fiscal 2010 and
2009 quarters and the nine-month periods then ended, respectively. The increase
in other income, net in the 2010 quarter compared to the prior year is due to
additional gains on the sale of assets.  The decrease in the 2010
nine-month period compared to the 2009 nine-month period is the result of
reduced interest income resulting from lower interest rates and lower average
cash balance.
 
 Income
tax (benefit) expense as a percentage of (loss) income from continuing
operations before income tax (benefit) expense was 26.8%, 35.3%, 23.7% and 35.7%
in the fiscal 2010 and 2009 quarters and the nine-month periods ended December
31, 2009 and December 28, 2008, respectively. The percentages vary from the U.S.
statutory rate due to varying effective tax rates at our foreign subsidiaries,
the jurisdictional mix of taxable income forecasted for these subsidiaries, and
the impact of U.S. state franchise taxes unrelated to income.
 
 Income
(loss) from discontinued operations, net of tax, was $133, ($685), $266, and
($2,651) in the fiscal 2010 and 2009 quarters and the nine-month periods then
ended, respectively. The loss during the fiscal 2009 nine-month period ended
December 28, 2008 related primarily to the Univeyor business that was divested
in July 2008.
 
 Liquidity
and Capital Resources
 
 Cash and
cash equivalents totaled $51,034 at December 31, 2009, an increase of $11,798
from the March 31, 2009 balance of $39,236.
 
 Net cash
provided by operating activities from continuing operations was $17,142 for the
nine months ended December 31, 2009 compared with $44,383 for the nine months
ended December 28, 2008. The decrease was primarily due to lower operating
performance on lower sales. The net cash provided by operating activities from
continuing operations for the nine months ended December 31, 2009 was primarily
the result of $18,761 of cash provided by changes in operating assets and
liabilities, which was driven by a $15,672 decrease in accounts receivable and a
$15,721 decrease in inventory.  These were partially offset by a
$10,783 decrease in accounts payable and a $3,769 decrease in accrued and
non-current liabilities. The changes in accounts receivable, inventory, accounts
payable, and accrued and non-current liabilities were the result of the decline
in net sales due to the continued weakness in the global economy. The positive
effect on cash from non-cash charges of $9,231 for depreciation and amortization
and $1,527 for stock-based compensation were largely offset by a net loss from
continuing operations of $7,739 and a $4,054 non-cash benefit from deferred
income taxes. The net cash provided by operating activities from continuing
operations for the nine months ended December 28, 2008 was primarily the result
of $26,771 of income from continuing operations plus non-cash charges for
depreciation and amortization of $7,521, deferred income taxes of $8,684, loss
on sale of real estate and investments of $2,943, stock-based compensation of
$1,001, and $149 of other non-cash charges. These amounts were partially offset
by $2,686 of cash used for changes in operating assets and liabilities, as a
result of a $10,577 decrease in accounts receivable, $4,372 increase in
inventory, and $9,113 decrease in accounts payable and accrued liabilities. The
increase in inventory 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 former Univeyor A/S business, was $3,082 for the
nine months ended December 28, 2008.
 
 Net cash
used by investing activities from continuing operations was $2,461 for the nine
months ended December 31, 2009 compared with $62,435 for the nine months ended
December 28, 2008. The net cash used by investing activities from continuing
operations for the nine months ended December 31, 2009 consisted of $5,916 for
capital expenditures and $75 for the net purchases of marketable securities. The
net cash used by investing activities from continuing operations for the nine
months ended December 28, 2008 was the result of $53,261 used to acquire
Pfaff-silberblau, net of cash acquired, $8,504 for capital expenditures, and
$1,939 for the net purchases of marketable securities, partially offset by
$1,269 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 2002
sale of Automatic Systems, Inc, was $266 and $448 for the nine months ended
December 31, 2009 and December 28, 2008, respectively.
 
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  Net cash
used by financing activities from continuing operations was $3,817 for the nine
months ended December 31, 2009 compared with $10,980 for the nine months ended
December 28, 2008. The net cash used by financing activities for the nine months
ended December 31, 2009 consisted primarily of $4,176 of net debt payments and
$188 of deferred financing fees, partially offset by $201 of proceeds from stock
options exercised and $346 from the change in ESOP debt guarantee. The net cash
used by financing activities from continuing operations for nine months ended
December 28, 2008 consisted of $11,938 of net debt repayments, partially offset
by $391 of proceeds from stock options exercised, $187 of tax benefit from
exercise of stock options, and $380 from the change in ESOP debt guarantee. Net
cash used by financing activities from discontinued operations, attributable to
the repayments of amounts outstanding on lines of credit and fixed term bank
debt of our former Univeyor A/S business, was $14,612 for the nine months ended
December 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 aggressive cost management, facility consolidations and effective
working capital utilization. This is complemented by the fact that throughout
the last economic recession spanning 2000 - 2004, we generated positive cash
flows from operating activities.
 
 We
entered into an amended, restated and expanded revolving credit facility dated
December 31, 2009. The new Revolving Credit Facility provides availability up to
a maximum of $85,000.
 
 The
Revolving Credit Agreement has an initial term ending May 1, 2013, which can be
extended to Dec 31, 2013 as long as our existing Senior Subordinated Notes are
paid in full on or prior to May 1, 2013 from proceeds of permitted Indebtedness
with a maturity of no earlier than January 5, 2014.
 
 Provided
there is no default, we may, on a one-time basis, request an increase in the
availability of the Revolving Credit Facility by an amount not exceeding
$65,000, subject to lender approval. The unused portion of the Revolving Credit
Facility totaled $77,726, net of outstanding borrowings of $0 and outstanding
letters of credit of $7,274, as of December 31, 2009.  Interest on the
revolver is payable at varying Eurodollar rates based on LIBOR or prime plus a
spread determined by our total leverage ratio amounting to 325 or 225 basis
points, respectively, at December 31, 2009. The Revolving Credit Facility is
secured by all domestic inventory, receivables, equipment, real property,
subsidiary stock (limited to 65% of foreign subsidiaries) and intellectual
property.
 
 The
corresponding credit agreement associated with the Revolving Credit Facility
places certain debt covenant restrictions on us, including certain financial
requirements and restrictions on dividend payments, with which we were in
compliance as of December 31, 2009. Key financial covenants include a minimum
fixed charge coverage ratio of 1.25x, a maximum total leverage ratio, net of
cash, of 3.75x through June 30, 2010 and 3.5x thereafter, and maximum annual
capital expenditures of $15,000 in fiscal 2010 and $18,000 thereafter excluding
capital expenditures required for a global ERP system.
 
 The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $124,855 at December 31, 2009 and are due November 1, 2013.
Provisions of the 8 7/8% Notes include limitations on indebtedness, asset sales,
and dividends and other restricted payments. On or after November 1, 2009, the 8
7/8% Notes are redeemable at the option of the Company, in whole or in part, at
prices declining annually from 104.438% to 100% on and after November 1, 2011.
In the event of a Change of Control (as defined in the indenture for such
notes), each holder of the 8 7/8% Notes may require us to repurchase all or a
portion of such holder’s 8 7/8% Notes at a purchase price equal to 101% of the
principal amount thereof. The 8 7/8% Notes are guaranteed by certain existing
and future U.S. subsidiaries and are not subject to any sinking fund
requirements.
 
 Our
capital lease obligations related to property and equipment leases amounted to
$7,692 at December 31, 2009. Capital lease obligations are included in senior
debt in the consolidated balance sheets.
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  Unsecured
and uncommitted lines of credit are available to meet short-term working capital
needs for certain of our subsidiaries operating outside of the U.S. The lines of
credit are available on an offering basis, meaning that transactions under the
line of credit will be on such terms and conditions, including interest rate,
maturity, representations, covenants and events of default, as mutually agreed
between our subsidiaries and the local bank at the time of each specific
transaction. As of December 31, 2009, significant unsecured credit lines totaled
approximately $7,520, of which $998 was drawn.
 
 In
addition to the above facilities, our foreign subsidiaries have certain secured
credit lines. As of December 31, 2009, significant secured credit lines totaled
$2,148, of which $0 was drawn.
 
 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 nine months ended
December 31, 2009 and December 28, 2008 were $5,916 and $8,504, respectively. We
expect capital spending for fiscal 2010 to be approximately $8,000 to $10,000
compared with $12,245 in fiscal 2009. Capital expenditures for fiscal 2010
primarily consist of investments required to accommodate facility consolidation
and new product development activities.
 
 Goodwill
impairment testing
 
 We test
goodwill for impairment at least annually or more frequently whenever events or
circumstances indicate that there is potential for impairment.  We
currently have four reporting units of which two carry goodwill as of December
31, 2009. Key performance indicators for the Duff-Norton reporting unit were
below budget and prior year levels for the six months ended September 30, 2009.
Accordingly, we performed Step I impairment testing as of the end of the second
quarter.  Step I testing was not considered necessary for the other
reporting unit because, based on testing performed for prior year end, fair
value of the reporting unit sufficiently exceeded book value and no new risk of
impairment existed at September 30, 2009.
 
 The
goodwill impairment test consists of comparing the fair value of a reporting
unit, determined using discounted cash flows, with its carrying amount including
goodwill.  If the carrying amount of the reporting unit is less than
the reporting unit’s fair value no impairment is recognized and Step two of the
goodwill impairment testing is not necessary.
 
 Based on
our assessment as of September 30, 2009, fair value of the Duff-Norton reporting
unit exceeded its book value by 6%; as such, no impairment charges related to
goodwill or intangible assets were recorded during the six month period ended
September 30, 2009. A decline in terminal growth rate greater than 50 basis
points or an increase in the weighted-average cost of capital greater than 50
basis points would have indicated a potential impairment for this reporting unit
at September 30, 2009. Step I was not considered necessary for the Rest of
Products reporting unit because, based on testing performed at March 31, 2009,
year end fair value of this reporting unit sufficiently exceeded book value and
therefore no risk of impairment existed at September 30, 2009.
 
 As of
December 31, 2009, we concluded that no indicators of goodwill impairment
existed, so an interim test was not performed. However, future impairment
indicators, such as declines in forecasted cash flows, may cause additional
significant impairment charges. Impairment charges could be based on such
factors as our stock price, forecasted cash flows, assumptions used, control
premiums or other variables.
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 Inflation
and Other Market Conditions
 
 Our costs
are affected by inflation in the U.S. economy and, to a lesser extent, in
foreign economies including those of Europe, Canada, Mexico, South America, and
the Asia Pacific region. We have been impacted by fluctuations in steel costs,
which vary by type of steel and we continue to monitor them and address our
pricing policies accordingly. In addition, U.S. employee benefits costs such as
health insurance and pension, as well as energy costs have exceeded general
inflation levels. Otherwise, we do not believe that general inflation has had a
material effect on results of operations over the periods presented primarily
due to overall low inflation levels of most costs over such periods and our
ability to generally pass on rising costs through price increases or
surcharges.  In the future, we may be further affected by inflation
that we may not be able to offset with price increases or surcharges.
Additionally, we are impacted by fluctuations in currency exchange rates which
are primarily translational, but transactional fluctuations could also impact
our financial results.
 
 Seasonality
and Quarterly Results
 
 Quarterly
results may be materially affected by the timing of large customer orders,
periods of high vacation and holiday concentrations, gains or losses on early
retirement of bonds, gains or losses in our portfolio of marketable securities,
restructuring charges, favorable or unfavorable foreign currency translation,
divestitures and acquisitions. Therefore, the operating results for any
particular fiscal quarter are not necessarily indicative of results for any
subsequent fiscal quarter or for the full fiscal year.
 
 Effects
of New Accounting Pronouncements
 
 Effective
July 1, 2009, we adopted ASC Topic 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting
Standards Codification (the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S.
GAAP. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants.
All guidance contained in the Codification carries an equal level of authority.
The Codification superseded all existing non-SEC accounting and reporting
standards. All other non-grandfathered, non-SEC accounting literature not
included in the Codification is non-authoritative. The FASB will not issue new
standards in the form of Statements, FASB Staff Positions or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates
(“ASUs”). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information
about the guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this document have
been updated for the Codification.
 
 On April
1, 2009 we adopted the provisions of ASC Topic 855 “Subsequent Events” which
establishes principles and requirements for subsequent events. These provisions
set forth the period after the balance sheet date during which management shall
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, circumstances under which an entity
shall recognize events or transactions occurring after the balance sheet date,
as well as the disclosures that an entity shall make about events or
transactions that occurred after the balance sheet date.  The adoption
of these provisions did not have a material impact on our consolidated financial
position or results of operations. We have evaluated subsequent events through
January 29, 2010, the date this quarterly report on Form 10-Q was filed with the
U.S. Securities and Exchange Commission. We made no significant changes to our
condensed consolidated financial statements as a result of our subsequent events
evaluation.
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 On April
1, 2009, we adopted the additional guidance issued under ASC Topic 820 through
the issuance of  FSP Statement of Financial Accounting Standards
(“SFAS”) No. 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly” (“FSP SFAS 157-4”). FSP SFAS 157-4 amends ASC
Topic 820 to provide additional guidance on estimating fair value when the
volume and level of activity for an asset or liability have significantly
decreased in relation to normal market activity for the asset or liability. The
FSP also provides additional guidance on circumstances that may indicate that a
transaction is not orderly, and requires additional disclosures about fair value
measurements in annual and interim reporting periods.  FSP SFAS No.
157-4 also supersedes FSP SFAS 157-3, “Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active.” Disclosures required by
this codification update are included in Notes 4, 8 and 9.
 
 On April
1, 2009, we adopted the additional guidance issued under ASC Topic 320 and ASC
Topic 325 through the issuance of FSP SFAS No. 115-2 and SFAS No. 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS
115-2 / 124-2”). This FSP extends existing disclosure requirements about debt
and equity securities to interim reporting periods as well as provides new
disclosure requirements. FSP SFAS 115-2 / 124-2 also provides new guidance on
the recognition and presentation of an other-than-temporary impairment for debt
securities classified as available for sale or held to maturity. Equity
securities are excluded from the scope the FSP’s recognition and measurement
provisions.  Refer to Note 6 for disclosures required as a result of
the adoption of this codification update.
 
 On April
1, 2009, we adopted additional guidance issued under ASC Topic 825 “Financial
Instruments” through the issuance of FSP SFAS No. 107-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1”) which
requires disclosures about fair value of financial instruments in financial
statements for interim reporting periods and in annual financial statements of
publicly-traded companies. These provisions also require entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments in financial statements on an interim and annual basis and
to highlight any changes from prior periods. The adoption of these provisions
did not have a material impact on our consolidated financial position, results
of operations or cash flows. Disclosures required by this codification update
are included in Notes 4, 8 and 9.
 
 On April
1, 2009, we adopted the additional guidance issued under ASC Topic 815
“Derivatives and Hedging” through the issuance of SFAS No. 161 “Disclosures
about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133” which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such
instruments and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. The adoption of these provisions did not have a material impact on our
consolidated financial position, results of operations or cash
flows.
 
 On April
1, 2008, we adopted the additional guidance issued under ASC Topic 715
“Compensation – Retirement Benefits” through the issuance 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 this codification update, an employer should recognize a
liability for the postretirement benefit related to a collateral assignment
split-dollar life insurance arrangement. The provisions of EITF 06-10 were
applied as a change in accounting principle through a cumulative-effect
adjustment to retained earnings.  The adoption of EITF 06-10 resulted
in a $774 reduction to the opening balance of retained earnings, recorded on
April 1, 2008, the date of adoption.  The adoption of EITF 06-10 did
not have a significant impact on our financial position, results of operations
or cash flows, basic or diluted per share amounts.
 
 On April
1, 2009, we adopted the provisions of ASC Topic 805 “Business Combinations”
which 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. We adopted these provisions effective April 1, 2009
for future acquisitions and for deferred tax adjustments related to acquisitions
completed before its effective date.
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 In
December 2008, the FASB issued additional guidance under ASC Topic 715 to
require additional disclosures about assets held in an employer’s defined
benefit pension or other postretirement plan. This replaces the requirement to
disclose the percentage of the fair value of total plan assets for each major
category of plan assets, such as equity securities, debt securities, real estate
and all other assets, with the fair value of each major asset category as of
each annual reporting date for which a financial statement is presented. It also
requires disclosure of the level within the fair value hierarchy in which each
major category of plan assets falls, using the guidance in ASC Topic 820. This
requirement is applicable for fiscal years ending after December 15, 2009.
We will comply with these disclosure provisions after its effective date. We do
not expect the adoption of this requirement to have a material impact on our
consolidated financial position, results of operations or cash
flows.
 
 Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
 
 This
report may include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause our actual
results to differ materially from the results expressed or implied by such
statements, including general economic and business conditions, conditions
affecting the industries served by us and our subsidiaries, conditions affecting
our customers and suppliers, competitor responses to our products and services,
the overall market acceptance of such products and services, facility
consolidations and other restructurings, our asbestos-related liability, the
integration of acquisitions and other factors disclosed in our periodic reports
filed with the Commission. Consequently such forward-looking statements should
be regarded as our current plans, estimates and beliefs. We do not undertake and
specifically decline any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
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 Item 3.      Quantitative and
Qualitative Disclosures About Market Risk
 
 There
have been no material changes in the market risks since the end of Fiscal
2009.
 
 
 Item
      4.
              Controls
      and Procedures
 
 As of
December 31,
2009, an evaluation was performed under the supervision and with the
participation of the Company’s management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures. Based on that evaluation, the
Company’s management, including the chief executive officer and chief financial
officer, concluded that the Company’s disclosure controls and procedures were
effective as of December 31, 2009, to ensure that
information required to be disclosed in reports filed or submitted under the
Exchange Act is made known to them on a timely basis, and that these disclosure
controls and procedures are effective to ensure such information is recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms.
 
 There
have been no changes in the Company’s internal control over financial reporting
during the most recent quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
 
 
 
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  Part II.    Other Information
 
 Item
      1.
              Legal
      Proceedings – none.
 
 Item
      1A.
              Risk
      Factors
 
 There
have been no material changes from the risk factors as previously disclosed in
the Company’s Form 10-K for the year ended March 31, 2009.
 
 Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds –
  none.
 
 Item
      3.
              Defaults
      upon Senior Securities – none.
 
 Item
      4.
              Submission
      of Matters to a Vote of Security Holders –
none.
 
 Item
5.        Other Information –
none.
 
 Item
      6.
              Exhibits
 
 Exhibit 31.1
              Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002Exhibit 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 2002Exhibit 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:
      January 29, 2010
              
              /s/ Karen L. HowardKaren
      L. HowardVice
      President and Chief Financial Officer(Principal Financial
      Officer)