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 28, 2008


or





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





For the
transition period from  to





Commission
File Number:       0-27618





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





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





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


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





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





The
number of shares of common stock outstanding as of January 31, 2009
was:  19,041,930 shares.





FORM 10-Q INDEX


COLUMBUS
McKINNON CORPORATION


December
28, 2008








Page #Part
      I. Financial InformationItem
      1.
              Condensed
      Consolidated Financial Statements (Unaudited)Condensed consolidated balance sheets – December 28, 2008 and
      March 31, 2008
              2Condensed consolidated statements of operations and retained
      earnings - Three months  and nine months ended December 28, 2008
      and December 30, 2007
              3Condensed consolidated statements of cash flows - Nine months
      ended December 28, 2008 and December 30, 2007
              4Condensed consolidated statements of comprehensive income
      (loss) - Three months and nine months ended December 28, 2008 and December
      30, 2007
              5Notes to condensed consolidated financial statements -
      December 28, 2008
              6Item
      2.
              Management's Discussion and Analysis of Results of Operations
      and Financial Condition
              17Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              24Item
      4.
              Controls and Procedures
              24Part
      II. Other InformationItem
      1.
              Legal Proceedings – none.
              25Item
      1A.
              Risk Factors
              25Item
      2.
              Unregistered Sales of Equity Securities and Use of Proceeds
      – none.
              25Item
      3.
              Defaults upon Senior Securities – none.
              25Item
      4.
              Submission of Matters to a Vote of Security Holders –
      none.
              25Item
      5.
              Other Information – none.
              25Item
      6.
              Exhibits
              25





- 1
-
 Table of Contents


Part
I.     Financial Information





Item
1.     Condensed Consolidated Financial Statements
(Unaudited)





COLUMBUS McKINNON CORPORATION


CONDENSED
CONSOLIDATED BALANCE SHEETS





December
      28,
                
                
                March 31,2008
                
                
                2008(unaudited)ASSETS:
                
                (In
      thousands)Current
      assets:Cash
      and cash equivalents
                
                $
                21,973
                
                
                $
                75,994Trade
      accounts receivable
                
                
                93,997
                
                
                
                93,833Inventories
                
                
                106,850
                
                
                
                84,286Prepaid
      expenses
                
                
                24,814
                
                
                
                17,320Current
      assets of discontinued operations
                
                
                -
                
                
                
                17,334Total
      current assets
                
                
                247,634
                
                
                
                288,767Property,
      plant, and equipment, net
                
                
                61,404
                
                
                
                53,420Goodwill
      and other intangibles, net
                
                
                235,044
                
                
                
                187,376Marketable
      securities
                
                
                28,039
                
                
                
                29,807Deferred
      taxes on income
                
                
                12,452
                
                
                
                17,570Other
      assets
                
                
                6,635
                
                
                
                8,094Assets
      of discontinued operations
                
                
                -
                
                
                
                5,001Total
      assets
                
                $
                591,208
                
                
                $
                590,035LIABILITIES
      AND SHAREHOLDERS' EQUITY:Current
      liabilities:Notes
      payable to banks
                
                $
                1,858
                
                
                $
                36Trade
      accounts payable
                
                
                37,870
                
                
                
                35,149Accrued
      liabilities
                
                
                56,962
                
                
                
                52,265Restructuring
      reserve
                
                
                933
                
                
                
                58Current
      portion of long-term debt
                
                
                331
                
                
                
                326Current
      liabilities of discontinued operations
                
                
                -
                
                
                
                24,955Total
      current liabilities
                
                
                97,954
                
                
                
                112,789Senior
      debt, less current portion
                
                
                8,045
                
                
                
                3,066Subordinated
      debt
                
                
                124,855
                
                
                
                129,855Other
      non-current liabilities
                
                
                50,633
                
                
                
                48,844Total
      liabilities
                
                
                281,487
                
                
                
                294,554Shareholders'
      equityCommon
      stock
                
                
                190
                
                
                
                189Additional
      paid-in capital
                
                
                180,249
                
                
                
                178,457Retained
      earnings
                
                
                145,746
                
                
                
                122,400ESOP
      debt guarantee
                
                
                (2,444
                )
                
                
                (2,824
                )Accumulated
      other comprehensive loss
                
                
                (14,020
                )
                
                
                (2,741
                )Total
      shareholders' equity
                
                
                309,721
                
                
                
                295,481Total
      liabilities and shareholders' equity
                
                $
                591,208
                
                
                $
                590,035





See
accompanying notes to condensed consolidated financial statements.














- 2
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 Table of Contents








COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS


(UNAUDITED)








Three Months Ended
                
                
                Nine Months EndedDecember
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007(In
      thousands, except per share data)Net
      sales
                
                $
                165,076
                
                
                $
                146,176
                
                
                $
                470,920
                
                
                $
                432,603Cost
      of products sold
                
                
                120,285
                
                
                
                100,698
                
                
                
                332,032
                
                
                
                298,497Gross
      profit
                
                
                44,791
                
                
                
                45,478
                
                
                
                138,888
                
                
                
                134,106Selling
      expenses
                
                
                19,861
                
                
                
                17,310
                
                
                
                55,227
                
                
                
                49,736General
      and administrative expenses
                
                
                8,630
                
                
                
                8,593
                
                
                
                27,977
                
                
                
                25,181Restructuring
      charges
                
                
                990
                
                
                
                149
                
                
                
                1,145
                
                
                
                551Amortization
      of intangibles
                
                
                421
                
                
                
                29
                
                
                
                477
                
                
                
                8229,902
                
                
                
                26,081
                
                
                
                84,826
                
                
                
                75,550Income
      from operations
                
                
                14,889
                
                
                
                19,397
                
                
                
                54,062
                
                
                
                58,556Interest
      and debt expense
                
                
                3,604
                
                
                
                3,147
                
                
                
                9,929
                
                
                
                10,476(Gain)
      loss on bond redemptions
                
                
                (244
                )
                
                
                177
                
                
                
                (244
                )
                
                
                1,620Investment
      loss (income)
                
                
                3,335
                
                
                
                (261
                )
                
                
                3,158
                
                
                
                (812
                )Foreign
      currency exchange loss
                
                
                1,759
                
                
                
                153
                
                
                
                2,548
                
                
                
                301Other
      (income) and expense, net
                
                
                (517
                )
                
                
                (815
                )
                
                
                (2,950
                )
                
                
                (2,341
                )Income
      from continuing operations before income tax expense
                
                
                6,952
                
                
                
                16,996
                
                
                
                41,621
                
                
                
                49,312Income
      tax expense
                
                
                2,454
                
                
                
                6,849
                
                
                
                14,850
                
                
                
                18,841Income
      from continuing operations
                
                
                4,498
                
                
                
                10,147
                
                
                
                26,771
                
                
                
                30,471Loss
      from discontinued operations (net of tax benefit)
                
                
                (685
                )
                
                
                (153
                )
                
                
                (2,651
                )
                
                
                (1,504
                )Net
      income
                
                
                3,813
                
                
                
                9,994
                
                
                
                24,120
                
                
                
                28,967Retained earnings
      - beginning of period
                
                
                141,933
                
                
                
                104,024
                
                
                
                122,400
                
                
                
                85,237Change
      in accounting principle (note 15)
                
                
                -
                
                
                
                -
                
                
                
                (774
                )
                
                
                (186
                )Retained
      earnings - end
      of period
                
                $
                145,746
                
                
                $
                114,018
                
                
                $
                145,746
                
                
                $
                114,018Basic
      income per share:Income
      from continuing operations
                
                $
                0.24
                
                
                $
                0.54
                
                
                $
                1.42
                
                
                $
                1.63Loss
      from discontinued operations
                
                
                (0.04
                )
                
                
                (0.01
                )
                
                
                (0.14
                )
                
                
                (0.08
                )Net
      income
                
                $
                0.20
                
                
                $
                0.53
                
                
                $
                1.28
                
                
                $
                1.55Diluted
      income per share:Income
      from continuing operations
                
                $
                0.24
                
                
                $
                0.53
                
                
                $
                1.40
                
                
                $
                1.59Loss
      from discontinued operations
                
                
                (0.04
                )
                
                
                (0.01
                )
                
                
                (0.14
                )
                
                
                (0.08
                )Net
      income
                
                $
                0.20
                
                
                $
                0.52
                
                
                $
                1.26
                
                
                $
                1.51





See accompanying notes to condensed
consolidated financial statements.


- 3
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 Table of Contents


COLUMBUS McKINNON CORPORATION


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)


Nine Months EndedDecember
      28,
                
                
                December
      30,2008
                
                
                2007(In
      thousands)OPERATING
      ACTIVITIES:Net
      income
                
                $
                24,120
                
                
                $
                28,967Adjustments
      to reconcile net income to net cash provided by operating
      activities:Loss from discontinued
      operations
                
                
                2,651
                
                
                
                1,504Depreciation and
      amortization
                
                
                7,521
                
                
                
                6,003Deferred income
    taxes
                
                
                8,684
                
                
                
                14,502Loss (gain) on sale of real
      estate/investments
                
                
                2,943
                
                
                
                (433
                )(Gain) loss on early retirement
      of bonds
                
                
                (300
                )
                
                
                1,244Stock-based
      compensation
                
                
                1,001
                
                
                
                944Amortization/write-off of
      deferred financing costs
                
                
                449
                
                
                
                814Changes in operating assets and
      liabilities
                  net of effects of business
      acquisitions and divestitures:Trade accounts
      receivable
                
                
                10,577
                
                
                
                2,453Inventories
                
                
                (4,372
                )
                
                
                (13,122
                )Prepaid expenses
                
                
                (775
                )
                
                
                293Other assets
                
                
                997
                
                
                
                (1,045
                )Trade accounts
      payable
                
                
                (2,581
                )
                
                
                3,043Accrued and non-current
      liabilities
                
                
                (6,532
                )
                
                
                (6,932
                )Net
      cash provided by operating activities from continuing
      operations
                
                
                44,383
                
                
                
                38,235Net
      cash used by operating activities from discontinued
    operations
                
                
                (3,082
                )
                
                
                (250
                )Net
      cash provided by operating activities
                
                
                41,301
                
                
                
                37,985INVESTING
      ACTIVITIES:Proceeds
      from sale of marketable securities
                
                
                338
                
                
                
                12,876Purchases
      of marketable securities
                
                
                (2,277
                )
                
                
                (14,273
                )Capital
      expenditures
                
                
                (8,504
                )
                
                
                (7,390
                )Purchase
      of businesses, net of cash acquired
                
                
                (53,261
                )
                
                
                -Proceeds
      from sale of assets
                
                
                1,269
                
                
                
                5,504Net
      cash used by investing activities from continuing
    operations
                
                
                (62,435
                )
                
                
                (3,283
                )Net
      cash provided by investing activities from discontinued
      operations
                
                
                448
                
                
                
                386Net
      cash used by investing activities
                
                
                (61,987
                )
                
                
                (2,897
                )FINANCING
      ACTIVITIES:Proceeds
      from exercise of stock options
                
                
                391
                
                
                
                1,309Net
      payments under revolving line-of-credit agreements
                
                
                (5,067
                )
                
                
                (842
                )Repayment
      of debt
                
                
                (6,871
                )
                
                
                (26,465
                )Other
                
                
                567
                
                
                
                420Net
      cash used by financing activities from continuing
    operations
                
                
                (10,980
                )
                
                
                (25,578
                )Net
      cash used by financing activities from discontinued
    operations
                
                
                (14,612
                )
                
                
                (603
                )Net
      cash used by financing activities
                
                
                (25,592
                )
                
                
                (26,181
                )Effect
      of exchange rate changes on cash
                
                
                (7,743
                )
                
                
                3,511Net
      change in cash and cash equivalents
                
                
                (54,021
                )
                
                
                12,418Cash
      and cash equivalents at beginning of year
                
                
                75,994
                
                
                
                48,655Cash
      and cash equivalents at end of year
                
                $
                21,973
                
                
                $
                61,073





See
accompanying notes to condensed consolidated financial
statements.


- 4
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 Table of Contents


COLUMBUS
McKINNON CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)


(UNAUDITED)





Three Months Ended
                
                
                Nine Months EndedDecember
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007(In
      thousands)Net
      income
                
                $
                3,813
                
                
                $
                9,994
                
                
                $
                24,120
                
                
                $
                28,967Other
      comprehensive (loss) income, net of tax:Foreign
      currency translation adjustments
                
                
                (4,900
                )
                
                
                1,262
                
                
                
                (11,591
                )
                
                
                6,637Unrealized
      loss on investments:Unrealized
      holding loss arising during the period
                
                
                (2,344
                )
                
                
                (211
                )
                
                
                (3,707
                )
                
                
                (104
                )Reclassification
      adjustment for loss (gain) included in net income
                
                
                3,629
                
                
                
                -
                
                
                
                4,019
                
                
                
                (45
                )1,285
                
                
                
                (211
                )
                
                
                312
                
                
                
                (149
                )Total
      other comprehensive (loss) income
                
                
                (3,615
                )
                
                
                1,051
                
                
                
                (11,279
                )
                
                
                6,488Comprehensive
      income
                
                $
                198
                
                
                $
                11,045
                
                
                $
                12,841
                
                
                $
                35,455





See
accompanying notes to condensed consolidated financial statements.
































- 5
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 Table of Contents


COLUMBUS
McKINNON CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


(Dollar
amounts in thousands, except share data)


December
28, 2008





1.  Description
of Business





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





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





2.  Acquisitions





On
October 1, 2008, the Company acquired the Kissing, Germany based Pfaff
Beteiligungs GmbH (“Pfaff-silberblau”), a leading European supplier of lifting,
material handling and actuator products with revenue of approximately $90
million USD, in 2007. Pfaff-silberblau is a leading European hoist and material
handling equipment brand which complements the Company’s existing business in
the region. Its actuator business provides the Company with technical
engineering expertise, access to the growing European market and diversifies the
Company’s existing North American business. The Pfaff-silberblau acquisition
will strengthen the Company’s global sales to help level geographic economic
cycles and meet its strategic objectives. The results of Pfaff-silberblau are
included in the Company’s condensed consolidated financial statements from the
date of acquisition. The acquisition of Pfaff-silberblau is not considered
significant to the Company’s consolidated results of operations.





This
transaction was accounted for under the purchase method of accounting in
accordance with Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations.” The
aggregate purchase consideration for the acquisition of Pfaff-silberblau was
$53,261 USD 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 preliminary valuation of respective fair
values. The identifiable intangible assets consisted of a trademark with a value
of $4,571 (18 year estimated useful life), a trademark with a value of $1,530
(18 year estimated useful life), customer relationships with a value of $15,097
(11 year estimated useful life), and technology with a value of $635 (15 year
estimated useful life). A final valuation is expected to be completed during the
fourth quarter of fiscal 2009. The excess consideration over fair value was
recorded as goodwill and approximated $27,428, none of which is deductible for
tax purposes. The preliminary allocation of purchase consideration to the assets
acquired and liabilities assumed is as follows:


Working
      capital
                  
                  $
                  13,382Property,
      plan and equipment
                  
                  
                  7,875Other
      long term liabilities, net
                  
                  
                  (17,659
                  )Identifiable
      intangible assts
                  
                  
                  22,235Goodwill
                  
                  
                  27,428Total
                  
                  $
                  53,261





- 6
-
 Table of Contents





3.  Discontinued  Operations





As part
of its continuing evaluation of its businesses, the Company determined that its
integrated material handling conveyor systems business (Univeyor A/S) no longer
provided a strategic fit with its long-term growth and operational objectives.
On July 25, 2008, the Company completed the sale of Univeyor A/S, which business
represented the majority of the Solutions segment. In accordance with the
provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” the results of operations of the Univeyor business have been
classified as discontinued operations in the condensed consolidated balance
sheets, statements of operations and statements of cash flows presented
herein.  Income from discontinued operations presented herein also
includes payments received on a note receivable related to our fiscal 2002
disposal of Automatic Systems, Inc. Due to the uncertainty surrounding the
financial viability of the debtor, the note has been recorded at the estimated
net realizable value of $0.





In
connection with the sale of Univeyor A/S on July 25, 2008, the Company used cash
on hand to repay $15,191 in amounts outstanding on Univeyor’s lines of credit
and fixed term bank debt.





Prior to
the divestiture of Univeyor A/S, during the past year as part of Univeyor’s
ongoing business, the Company had provided performance guarantees to certain
customers and a third party for the satisfactory completion of contracts to
design, manufacture and install its integrated material handling conveyor
systems. Pursuant to the terms of the share purchase agreement, the Company
agreed to continue to maintain performance guarantees on certain pre-existing
contracts.  As of the end of the second quarter, the Company had
agreed to maintain performance guarantees on certain pre-existing contracts
totaling $9,200 as of September 28, 2008 based on exchange rates at that
time.  Any potential loss under these guarantees, if any, could not be
reasonably estimated at that time, and therefore no liability was recorded in
the condensed consolidated balance sheets relating to those guarantees as of
September 28, 2008.  During the third quarter of fiscal 2009, the
acquirer of Univeyor A/S became financially distressed as a result of a
bankruptcy filing by one of its other owned businesses.  In reaction
to this development, the Company paid $1,400 ($868, net of tax) to a third party
by which the Company was released from approximately $4.5 million of
guarantees.  The arrangement also required that the Company retain
liability for any claims and liabilities under four remaining guarantees with an
indemnification against those guarantees from a third party. As of January 31,
2009, the Company has two remaining guarantees outstanding totaling
approximately $1,300. These guarantees are expected to expire in February of
2009.  The Company has an indemnification agreement with a third party
amounting to approximately $900 for any claims and liabilities arising out of
these two remaining guarantees.  No liability has been recorded in the
accompanying condensed consolidated balance sheets relating to these guarantees
as the Company believes that the third party indemnification is sufficient to
cover any exposure to loss.





Summarized
statements of operations for discontinued operations:


Three Months Ended
                
                
                Nine Months EndedDecember
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007Net
      sales
                
                $
                -
                
                
                $
                9,020
                
                
                $
                8,982
                
                
                $
                22,113Loss
      before income tax
                
                
                (1,136
                )
                
                
                (146
                )
                
                
                (2,359
                )
                
                
                (1,839
                )Income
      tax (benefit) expense
                
                
                (451
                )
                
                
                7
                
                
                
                (288
                )
                
                
                (335
                )Loss
      from operations, net of tax
                
                
                (685
                )
                
                
                (153
                )
                
                
                (2,071
                )
                
                
                (1,504
                )Loss
      on sale of discontinued operations
                
                
                -
                
                
                
                -
                
                
                
                (14,627
                )
                
                
                -Loss
      from discontinued operations
                
                
                (685
                )
                
                
                (153
                )
                
                
                (16,698
                )
                
                
                (1,504
                )Tax
      benefit from sale
                
                
                -
                
                
                
                -
                
                
                
                14,047
                
                
                
                -Loss
      from discontinued operations, net of tax
                
                $
                (685
                )
                
                $
                (153
                )
                
                $
                (2,651
                )
                
                $
                (1,504
                )





4.  Fair
Value Measurements





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


- 7
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SFAS No.
157 establishes a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the
asset or liability developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the
Company's assumptions about the valuation techniques that market participants
would use in pricing the asset or liability developed based on the best
information available in the circumstances. The hierarchy is separated into
three levels based on the reliability of inputs as follows:





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





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





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





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





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





When
valuing our derivative portfolio, the Company uses readily observable market
data in conjunction with commonly used valuation models. Consequently, the
Company designates our derivatives as Level 2.





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


Fair
      value measurements at reporting date usingDescription
                
                At
      December 28, 2008
                
                
                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
                
                $
                28,039
                
                
                $
                28,039
                
                
                $
                -
                
                
                $
                -Derivative
      liabilities
                
                
                (1,942
                )
                
                
                -
                
                
                
                (1,942
                )
                
                
                -





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





Interest
and dividend income on marketable securities, and changes in the fair value of
derivatives, are recorded in investment income and foreign currency exchange
loss, respectively. Interest and dividend income on marketable securities are
measured based upon amounts earned on their respective declaration
dates.  During the quarter ended December 28, 2008, the Company
reduced the cost bases of certain marketable securities since it was determined
that the unrealized losses on those securities were other than temporary in
nature.  This determination resulted in the recognition of a pre-tax
charge to earnings of $3,628 for the quarter ended December 28, 2008, classified
within investment (loss) income.


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





5.  Inventories





Inventories
consisted of the following:


December
      28,
                
                
                March 31,2008
                
                
                2008At
      cost - FIFO basis:Raw
      materials
                
                $
                52,156
                
                
                $
                44,594Work-in-process
                
                
                14,858
                
                
                
                10,454Finished
      goods
                
                
                59,167
                
                
                
                44,102126,181
                
                
                
                99,150LIFO
      cost less than FIFO cost
                
                
                (19,331
                )
                
                
                (14,864
                )Net
      inventories
                
                $
                106,850
                
                
                $
                84,286





Inventory
at Pfaff-silberblau, which was acquired October 1, 2008, was $14,880 at December
28, 2008.





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





6.  Goodwill
and Intangible Assets





Goodwill
is not amortized but is periodically tested for impairment, in accordance with
the provisions of Statement of Financial Accounting Standards (SFAS) No. 142,
“Goodwill and Other Intangible Assets.” No impairment charges related to
goodwill were recorded during fiscal 2009 or 2008.





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.





A summary
of changes in goodwill during fiscal 2009 is as follows:


Balance
      at March 31, 2008
                
                $
                187,055Acquisitions
                
                
                27,428Currency
      translation
                
                
                (1,313
                )Balance
      at December 28, 2008
                
                $
                213,170





Intangible
assets at March 31, 2008 were $321, consisting of patents and other intangibles,
net. Intangible assets at December 28, 2008 are as follows:


Gross
      Carrying Amount
                  
                  
                  AccumulatedAmortization
                  
                  
                  NetTrademark
                  
                  $
                  6,101
                  
                  
                  $
                  126
                  
                  
                  $
                  5,975Customer
      relationships
                  
                  
                  15,499
                  
                  
                  
                  559
                  
                  
                  
                  14,940Other
                  
                  
                  1,060
                  
                  
                  
                  101
                  
                  
                  
                  959Balance
      at December 28, 2008
                  
                  $
                  22,660
                  
                  
                  $
                  786
                  
                  
                  $
                  21,874





Based on
the current amount of intangible assets, the estimated amortization expense for
the fourth quarter of fiscal 2009 and for each of the succeeding four years is
expected to be $467, $1,846, $1,828, $1,807, and 1,778,
respectively.


- 9
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7.  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 to
accumulated other comprehensive income, or AOCI, and is reclassified to earnings
when the underlying transaction has an impact on earnings. The ineffective
portion of changes in the fair value of the derivative is reported in cost of
products sold. For derivatives not classified as cash flow hedges, all changes
in market value are recorded to earnings.





One of
the Company’s wholly-owned foreign subsidiaries has cross-currency swaps and
foreign exchange forward agreements in place and executed during the third
quarter of fiscal 2009, 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 $26,807, and all contracts mature by
September 30, 2013. As of December 28, 2008, the fair value of these
derivatives was a $1,942 pretax loss that was recorded to earnings and is
included in foreign currency exchange loss.





Effective
October 6, 2008, 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, in
relation to derivative transactions.  The obligations of the foreign
subsidiary at December 28, 2008 were $1,942 which represents the fair value of
the derivatives as of that date.





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; accordingly, the Company anticipates that these
counterparties will be able to fully satisfy their obligations under the
contracts.





8.  Restructuring
Charges





During
the first nine-months of fiscal 2009, the Company recorded restructuring charges
of $1,145 for severance related to workforce reductions in response to the
current economic climate and facility rationalization. The third quarter
restructuring charges of $990 included $960 for salaried workforce
reductions.  The number of employees terminated during the third
quarter as a result of these reductions was approximately 30. The liability as
of December 28, 2008 was $933, consisting of accrued severance
costs.





During
the first nine-months of fiscal 2008, the Company recorded restructuring charges
of $551 for the partial demolition of an older and underutilized U.S. facility.
Of this amount, $149 was recorded in the third quarter.





9.  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
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007Service costs
                
                $
                1,113
                
                
                $
                1,094
                
                
                $
                3,324
                
                
                $
                3,282Interest cost
                
                
                2,270
                
                
                
                2,019
                
                
                
                6,682
                
                
                
                6,057Expected return on plan
      assets
                
                
                (2,299
                )
                
                
                (2,043
                )
                
                
                (6,897
                )
                
                
                (6,129
                )Net amortization
                
                
                294
                
                
                
                450
                
                
                
                883
                
                
                
                1,350Net periodic pension
      cost
                
                $
                1,378
                
                
                $
                1,520
                
                
                $
                3,992
                
                
                $
                4,560





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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
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007Service costs
                
                $
                -
                
                
                $
                -
                
                
                $
                2
                
                
                $
                2Interest cost
                
                
                168
                
                
                
                147
                
                
                
                502
                
                
                
                439Amortization of plan net
      losses
                
                
                115
                
                
                
                96
                
                
                
                346
                
                
                
                288Net periodic postretirement
      cost
                
                $
                283
                
                
                $
                243
                
                
                $
                850
                
                
                $
                729





We
currently plan to contribute approximately $8.5 million to our pension plans in
fiscal 2009.





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





10.  Income
Taxes





Income
tax expense as a percentage of income from continuing operations before income
tax expense was 35.3%, 40.3%, 35.7%, and 38.2% in the fiscal 2009 and 2008
quarters and the nine-month periods then ended, respectively. The percentages
vary from the U.S. statutory rate due to varying effective tax rates at the
Company’s foreign subsidiaries, and the jurisdictional mix of taxable income
forecasted for these subsidiaries.





11.  Earnings
Per Share





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


Three Months Ended
                
                
                Nine Months EndedDecember
      28,
                
                
                December
      30,
                
                
                December
      28,
                
                
                December
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007Numerator
      for basic and diluted earnings per share:Net
      income
                
                $
                3,813
                
                
                $
                9,994
                
                
                $
                24,120
                
                
                $
                28,967Denominators:Weighted-average
      common stock outstanding -denominator for basic EPS
                
                
                18,876
                
                
                
                18,753
                
                
                
                18,851
                
                
                
                18,702Effect
      of dilutive employee stock options and awards
                
                
                188
                
                
                
                447
                
                
                
                310
                
                
                
                442Adjusted
      weighted-average common stock outstanding and assumed conversions –
      denominator for diluted EPS
                
                
                19,064
                
                
                
                19,200
                
                
                
                19,161
                
                
                
                19,144





During
the first nine-months of fiscal 2009, a total of 40,750 shares of stock were
issued upon the exercising of stock options related to the Company’s stock
option plans, and 13,863 shares of stock were issued under the Company’s Long
Term Incentive Plan to the Company’s non-executive directors as part of their
annual compensation.  Options, RSUs, and performance shares with
respect to approximately 463,000 shares were not included in the computation of
diluted earnings per share for the third quarter and first nine months of fiscal
2009 because they were anti-dilutive.


- 11
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12.  Business
Segment Information





SFAS No.
131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes the standards for reporting information about operating segments in
financial statements. Historically the Company had two operating and reportable
segments, Products and Solutions.  The Solutions segment engaged primarily
in the design, fabrication and installation of integrated material handling
conveyor systems and service and in the design and manufacture of tire
shredders, lift tables and light-rail systems.  In the first quarter
of fiscal 2009, the Company re-evaluated its operating and reportable segments
in connection with the discontinuation of its integrated material handling
conveyor systems and service business. With this divestiture, and in
consideration of the quantitative contribution of the remaining portions of the
Solutions segment to the Company as a whole and our products-orientated
strategic growth initiatives, the Company determined that it now has only one
operating and reportable segment for both internal and external reporting
purposes. Prior period financial information included herein has been restated
to reflect the financial position and results of operations as one segment. As
part of the organizational restructuring announced in December of 2008, we have
reevaluated our reportable segments and we continue to believe that we have only
one reportable operating segment.





13.  Summary
Financial Information





The
following information sets forth the condensed consolidating summary financial
information of the parent and guarantors, which guarantee the 8 7/8% Senior
Subordinated Notes, and the nonguarantors. The guarantors are wholly owned and
the guarantees are full, unconditional, joint and several.


Parent
              
              
              Guarantors
              
              
              Non
                Guarantors
              
              
              Eliminations
              
              
              ConsolidatedAs
      of December 28, 2008Current
      assets:Cash and cash
      equivalents
              
              $
              5,108
              
              
              $
              42
              
              
              $
              16,823
              
              
              $
              —
              
              
              $
              21,973Trade accounts
      receivable
              
              
              57,522
              
              
              
              —
              
              
              
              36,475
              
              
              
              —
              
              
              
              93,997Inventories
              
              
              38,591
              
              
              
              20,864
              
              
              
              49,760
              
              
              
              (2,365
              )
              
              
              106,850Other current
    assets
              
              
              9,994
              
              
              
              796
              
              
              
              14,024
              
              
              
              —
              
              
              
              24,814Total current
      assets
              
              
              111,215
              
              
              
              21,702
              
              
              
              117,082
              
              
              
              (2,365
              )
              
              
              247,634Property, plant, and equipment,
      net
              
              
              27,409
              
              
              
              11,659
              
              
              
              22,336
              
              
              
              —
              
              
              
              61,404Goodwill and other intangibles,
      net
              
              
              89,028
              
              
              
              57,032
              
              
              
              88,984
              
              
              
              —
              
              
              
              235,044Intercompany
              
              
              62,237
              
              
              
              (51,405
              )
              
              
              (82,265
              )
              
              
              71,433
              
              
              
              —Other assets
              
              
              61,729
              
              
              
              194,928
              
              
              
              25,091
              
              
              
              (234,622
              )
              
              
              47,126Total assets
              
              $
              351,618
              
              
              $
              233,916
              
              
              $
              171,228
              
              
              $
              (165,554
              )
              
              $
              591,208Current
      liabilities
              
              
              36,986
              
              
              
              17,718
              
              
              
              47,071
              
              
              
              (3,821
              )
              
              
              97,954Long-term
      debt, less current portion
              
              
              124,855
              
              
              
              2,654
              
              
              
              5,391
              
              
              
              —
              
              
              
              132,900Other
      non-current liabilities
              
              
              4,223
              
              
              
              10,558
              
              
              
              35,852
              
              
              
              —
              
              
              
              50,633Total
    liabilities
              
              
              166,064
              
              
              
              30,930
              
              
              
              88,314
              
              
              
              (3,821
              )
              
              
              281,487Shareholders'
      equity
              
              
              185,554
              
              
              
              202,986
              
              
              
              82,914
              
              
              
              (161,733
              )
              
              
              309,721Total liabilities and
      shareholders' equity
              
              $
              351,618
              
              
              $
              233,916
              
              
              $
              171,228
              
              
              $
              (165,554
              )
              
              $
              591,208





For
      the Nine Months Ended December 28, 2008Net
      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
      before income tax expense
                
                
                14,838
                
                
                
                14,913
                
                
                
                11,870
                
                
                
                —
                
                
                
                41,621Income
      tax expense
                
                
                5,959
                
                
                
                5,919
                
                
                
                2,972
                
                
                
                —
                
                
                
                14,850Income
      from continuing operations
                
                
                8,879
                
                
                
                8,994
                
                
                
                8,898
                
                
                
                —
                
                
                
                26,771Loss
      from discontinued operations
                
                
                (420
                )
                
                
                —
                
                
                
                (2,231
                )
                
                
                —
                
                
                
                (2,651
                )Net
      income
                
                $
                8,459
                
                
                $
                8,994
                
                
                $
                6,667
                
                
                $
                —
                
                
                $
                24,120





- 12
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For
      the Nine Months Ended December 28, 2008
                
                Parent
                
                
                Guarantors
                
                
                Non
                  Guarantors
                
                
                Eliminations
                
                
                ConsolidatedOperating
      activities:Net
      cash provided by operating activities from continuing
      operations
                
                $
                18,982
                
                
                $
                261
                
                
                $
                25,140
                
                
                $
                —
                
                
                $
                44,383Net
      cash used by operating activities from discontinued
    operations
                
                
                (864
                )
                
                
                —
                
                
                
                (2,218
                )
                
                
                —
                
                
                
                (3,082
                )Net
      cash provided by operating activities
                
                
                18,118
                
                
                
                261
                
                
                
                22,922
                
                
                
                —
                
                
                
                41,301Investing
      activities:Purchase
      of marketable securities, net
                
                
                —
                
                
                
                —
                
                
                
                (1,939
                )
                
                
                —
                
                
                
                (1,939
                )Capital
      expenditures
                
                
                (4,351
                )
                
                
                (1,176
                )
                
                
                (2,977
                )
                
                
                —
                
                
                
                (8,504
                )Purchase
      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
                
                
                (4,351
                )
                
                
                93
                
                
                
                (58,177
                )
                
                
                —
                
                
                
                (62,435
                )Net
      cash provided by investing activities from discontinued
      operations
                
                
                448
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                448Net
      cash (used) provided by investing activities
                
                
                (3,903
                )
                
                
                93
                
                
                
                (58,177
                )
                
                
                —
                
                
                
                (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





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


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 Table of Contents





For
      the Nine Months Ended December 30, 2007
                
                Parent
                
                
                Guarantors
                
                
                Non
                  Guarantors
                
                
                Eliminations
                
                
                ConsolidatedNet
      sales
                
                $
                218,182
                
                
                $
                130,388
                
                
                $
                113,830
                
                
                $
                (29,797
                )
                
                $
                432,603Cost
      of products sold
                
                
                159,021
                
                
                
                96,563
                
                
                
                72,710
                
                
                
                (29,797
                )
                
                
                298,497Gross
      profit
                
                
                59,161
                
                
                
                33,825
                
                
                
                41,120
                
                
                
                —
                
                
                
                134,106Selling,
      general and administrative expenses
                
                
                35,096
                
                
                
                13,293
                
                
                
                26,528
                
                
                
                —
                
                
                
                74,917Restructuring
      charges
                
                
                551
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                551Amortization
      of intangibles
                
                
                80
                
                
                
                2
                
                
                
                —
                
                
                
                —
                
                
                
                8235,727
                
                
                
                13,295
                
                
                
                26,528
                
                
                
                —
                
                
                
                75,550Income
      from operations
                
                
                23,434
                
                
                
                20,530
                
                
                
                14,592
                
                
                
                —
                
                
                
                58,556Interest
      and debt expense
                
                
                7,432
                
                
                
                2,994
                
                
                
                50
                
                
                
                —
                
                
                
                10,476Other
      (income) and expense, net
                
                
                678
                
                
                
                (298
                )
                
                
                (1,612
                )
                
                
                —
                
                
                
                (1,232
                )Income
      before income tax expense
                
                
                15,324
                
                
                
                17,834
                
                
                
                16,154
                
                
                
                —
                
                
                
                49,312Income
      tax expense
                
                
                6,818
                
                
                
                7,209
                
                
                
                4,814
                
                
                
                —
                
                
                
                18,841Income
      from continuing operations
                
                
                8,506
                
                
                
                10,625
                
                
                
                11,340
                
                
                
                —
                
                
                
                30,471Income
      (loss) from discontinued operations
                
                
                417
                
                
                
                —
                
                
                
                (1,921
                )
                
                
                —
                
                
                
                (1,504
                )Net
      income
                
                $
                8,923
                
                
                $
                10,625
                
                
                $
                9,419
                
                
                $
                —
                
                
                $
                28,967





For
      the Nine Months Ended December 30, 2007Operating
      activities:Net
      cash provided (used) by operating activities from continuing
      operations
                
                $
                30,010
                
                
                $
                (3,697
                )
                
                $
                11,922
                
                
                $
                —
                
                
                $
                38,235Net
      cash used by operating activities from discontinued
    operations
                
                
                —
                
                
                
                —
                
                
                
                (250
                )
                
                
                —
                
                
                
                (250
                )Net
      cash provided (used) by operating activities
                
                
                30,010
                
                
                
                (3,697
                )
                
                
                11,672
                
                
                
                —
                
                
                
                37,985Investing
      activities:Purchases
      of marketable securities, net
                
                
                —
                
                
                
                —
                
                
                
                (1,397
                )
                
                
                —
                
                
                
                (1,397
                )Capital
      expenditures
                
                
                (4,495
                )
                
                
                (1,664
                )
                
                
                (1,231
                )
                
                
                —
                
                
                
                (7,390
                )Proceeds
      from sale of assets
                
                
                —
                
                
                
                5,504
                
                
                
                —
                
                
                
                —
                
                
                
                5,504Net
      cash (used) provided by investing activities from continuing
      operations
                
                
                (4,495
                )
                
                
                3,840
                
                
                
                (2,628
                )
                
                
                —
                
                
                
                (3,283
                )Net
      cash provided (used) by investing activities from discontinued
      operations
                
                
                417
                
                
                
                —
                
                
                
                (31
                )
                
                
                —
                
                
                
                386Net
      cash (used) provided by investing activities
                
                
                (4,078
                )
                
                
                3,840
                
                
                
                (2,659
                )
                
                
                —
                
                
                
                (2,897
                )Financing
      activities:Proceeds
      from stock options exercised
                
                
                1,309
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,309Net
      payments under revolving line-of-creditagreements
                
                
                —
                
                
                
                —
                
                
                
                (842
                )
                
                
                —
                
                
                
                (842
                )(Repayment)
      borrowings of debt
                
                
                (26,619
                )
                
                
                (84
                )
                
                
                238
                
                
                
                —
                
                
                
                (26,465
                )Other
                
                
                420
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                420Net
      cash used by financing activities from continuing
    operations
                
                
                (24,890
                )
                
                
                (84
                )
                
                
                (604
                )
                
                
                —
                
                
                
                (25,578
                )Net
      cash used by financing activities from discontinued
    operations
                
                
                —
                
                
                
                —
                
                
                
                (603
                )
                
                
                —
                
                
                
                (603
                )Net
      cash used by financing activities
                
                
                (24,890
                )
                
                
                (84
                )
                
                
                (1,207
                )
                
                
                —
                
                
                
                (26,181
                )Effect
      of exchange rate changes on cash
                
                
                —
                
                
                
                (189
                )
                
                
                3,700
                
                
                
                —
                
                
                
                3,511Net
      change in cash and cash equivalents
                
                
                1,042
                
                
                
                (130
                )
                
                
                11,506
                
                
                
                —
                
                
                
                12,418Cash
      and cash equivalents at beginning of period
                
                
                18,366
                
                
                
                (1,162
                )
                
                
                31,451
                
                
                
                —
                
                
                
                48,655Cash
      and cash equivalents at end of period
                
                $
                19,408
                
                
                $
                (1,292
                )
                
                $
                42,957
                
                
                $
                —
                
                
                $
                61,073





- 14
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 Table of Contents





14.  Loss
Contingencies





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





Based on
actuarial information, the Company has estimated its asbestos-related aggregate
liability through March 2027 and March 2039 to range between $5,600 and $15,600
using actuarial parameters of continued claims for a period of 18 to 30 years.
The Company's estimation of its asbestos-related aggregate liability that is
probable and estimable, in accordance with U.S. generally accepted accounting
principles approximates $8,800 which has been reflected as a liability in the
consolidated financial statements as of December 28, 2008. The recorded
liability does not consider the impact of any potential favorable federal
legislation. This liability may fluctuate based on the uncertainty in the number
of future claims that will be filed and the cost to resolve those claims, which
may be influenced by a number of factors, including the outcome of the ongoing
broad-based settlement negotiations, defensive strategies, and the cost to
resolve claims outside the broad-based settlement program. Of this amount,
management expects to incur asbestos liability payments of approximately $400
over the next 12 months. Because payment of the liability is likely to extend
over many years, management believes that the potential additional costs for
claims will not have a material after-tax effect on the financial condition of
the Company or its liquidity, although the net after-tax effect of any future
liabilities recorded could be material to earnings in a future
period.





15.  New
Accounting Standards





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement
No. 133” (“SFAS 161”), which requires additional disclosures about the
objectives of derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on the Company’s financial position, financial performance,
and cash flows. SFAS No. 161 is effective for fiscal years beginning after
November 15, 2008. The Company does not expect the adoption of SFAS
No. 161 to have a material impact on its financial statements.





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





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


- 15
-
 Table of Contents





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





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





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





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





- 16
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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 manufacturer and marketer of a wide variety of powered and manually
operated wire rope and chain hoists, industrial crane systems, chain, hooks and
attachments, actuators, rotary unions, lift tables and industrial components
serving a wide variety of commercial and industrial end-user markets. Our
products are used to efficiently and ergonomically move, lift, position or
secure objects and loads.





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





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





The
recently evolved global credit crisis and economic recession have caused us to
reflect on the current state of our business.  First, we currently
stand with a strong capital structure which includes excess cash reserves,
significant revolver availability with expiration dating to 2011, fixed-rate
long-term debt which doesn’t expire until 2013 and a strong free cash flow
business profile.  We believe our liquidity strength will enable us to
withstand the external credit crisis and economic
recession.  Secondly, we are prepared to manage our business through
this cycle, with a lower fixed cost footprint than prior cycles and flexibility
to manage costs and deliveries enabled through our Lean manufacturing profile.
Recently, we have taken action to reorganize and adjust our workforce to
coincide with lower demand levels. We are also addressing further opportunities
to permanently remove structural costs from our existing footprint over the next
few quarters. Additionally, our revenue base is more geographically diverse than
in our Company’s history, with approximately 40% derived outside the U.S., pro
forma for the effects of our October 1, 2008 Pfaff Beteiligungs GmbH
(“Pfaff-silberblau”) acquisition, which we believe will help to balance the
impact of changes that will occur in different global economies at different
times.  As in the past, we monitor U.S. Industrial Capacity
Utilization, which has weakened significantly over recent months, as an
indicator of anticipated U.S. demand for our product. In addition, we continue
to monitor the potential impact of other global and U.S. trends, including
European industrial production, energy costs, steel price fluctuations, interest
rates, currency impact and activity in a variety of end-user markets around the
globe, which have been volatile of late.





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-


- 17
-
 Table of Contents


time
deliveries, reduction of warranty costs, and improved working capital
utilization.  The initiatives are being driven by the continued
implementation of our Lean manufacturing efforts which are fundamentally
changing our manufacturing and business processes to be more responsive to
customer demand and improving on-time delivery and productivity. In addition to
Lean manufacturing, we are working to achieve these strategic initiatives
through product simplification, the creation of centers of excellence, and
improved supply chain management.





We
continuously monitor market prices of steel.  We utilize approximately
$40,000 to $45,000 of steel annually in a variety of forms including rod, wire,
bar, structural and others. Generally, as we experience fluctuations in our
costs, we reflect them as price increases or surcharges to our customers with
the goal of being margin neutral. However, during the second and third quarters
of fiscal 2009, we were impacted by rapid increases in the cost of materials
(steel and other components), freight, and utilities. Certain of these costs are
expected to decline in the fiscal fourth quarter, and we are taking aggressive
measures to manage our pricing practices and fine tune our cost structure to be
prepared for potential slower demand for our products.





As part
of our strategic growth plan, on October 1, 2008, we acquired Pfaff-silberblau,
a leading European supplier of lifting, material handling and actuator products
with revenue of approximately $90,000 USD, in 2007. Pfaff-silberblau is a
leading European hoist material handling equipment and actuator brand which
complements our existing business in the region. Its actuator business provides
us with technical engineering expertise, access to the growing European market
and diversifies our existing North American business. The Pfaff-silberblau
acquisition will strengthen our global sales and meet our strategic objectives.
We acquired the Kissing; Germany based Pfaff-silberblau for approximately
$53,000 USD, funded with existing cash.





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





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





Results
of Operations





Three
Months and Nine Months Ended December 28, 2008 and December 30,
2007


Net sales
in the fiscal 2009 quarter ended December 28, 2008 were $165,076, up
$18,900 or 12.9% from the fiscal 2008 quarter ended December 30, 2007 net sales
of $146,176. This increase was due to $26,800 of sales from Pfaff-silberblau,
which was acquired October 1, 2008, and $5,800 impact of price
increases/surcharges, partially offset by the $4,600 negative impact from
translation of foreign currencies, particularly the Euro and Canadian dollar,
into U.S. dollars, and $9,100 from the effect of the global economic downturn.
Net sales for the nine month period ended December 28, 2008 were
$470,920, up $38,317 or 8.9% from the nine months ended December 30, 2007
net sales of $432,603. This increase was due to $26,800 of sales from
Pfaff-silberblau, $16,700 impact of price increases/surcharges, and $1,400
contributed from the translation of foreign currencies, partially offset by
$6,600 from the effect of the global economic downturn.





Gross
profit in the fiscal 2009 quarter ended December 28, 2008 was $44,791, down
$687 or 1.5% from the fiscal 2008 quarter ended December 30, 2007 gross profit
of $45,478. Gross profit margin decreased to 27.1% in the fiscal 2009 quarter
from 31.1% in the fiscal 2008 quarter. Gross profit in the nine month period
ended December 28, 2008 was $138,888, up $4,782 or 3.6% from the nine month
period ended December 30, 2007 gross profit of $134,106. Gross profit margin
decreased to 29.5% in the nine month period ended December 28, 2008 from 31.0%
in the nine month period ended December 30, 2007. The fiscal 2009 quarter and
nine month period gross profit margins were negatively impacted by a $1,300
one-time inventory valuation accounting charge related to the Pfaff-silberblau
acquisition in the quarter ended December 28, 2008, currently lower margins at
Pfaff-silberblau and unrecovered increases in the cost of materials, freight,
and utilities. The translation of foreign currencies had a $1,400 negative
impact in the fiscal 2009 third quarter and a $1,100 positive impact on the nine
month period ended December 28, 2008.


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Selling
expenses were $19,861, $17,310, $55,227 and $49,736 in the fiscal 2009 and 2008
quarters and the nine-month periods then ended, respectively. The increase in
the fiscal 2009 quarter compared with the fiscal 2008 quarter was due to $3,400
of selling expenses at Pfaff-silberblau, partially offset by an $800 favorable
impact from translation of foreign currencies into U.S. dollars. The increase in
the fiscal 2009 nine-month period compared with the fiscal 2008 nine-month
period was primarily due to $3,400 of selling expenses at Pfaff-silberblau,
$1,500 from our increased investment to support our strategic growth initiatives
which include international markets, especially Eastern Europe, Southeast Asia,
and Latin America, and $300 from the translation of foreign currencies into U.S.
dollars. As a percentage of consolidated net sales, selling expenses were 12.0%,
11.8%, 11.7%, and 11.5% in the fiscal 2009 and 2008 quarters and the nine-month
periods then ended, respectively.





General
and administrative expenses were $8,630, $8,593, $27,977 and $25,181 in the
fiscal 2009 and 2008 quarters and the nine-month periods then ended,
respectively. The administrative expenses in the fiscal 2009 quarter were
consistent with the fiscal 2008 quarter as $1,200 of expenses at
Pfaff-silberblau was offset by $1,100 from reductions in variable and stock
based compensation and $300 favorable impact from translation of foreign
currencies into U.S. dollars. The increase in the fiscal 2009 nine-month period
compared with the fiscal 2008 nine-month period was primarily the result of
$1,200 of expenses at Pfaff-silberblau, $1,500 increase in our accounts
receivable reserves, $400 from increased personnel costs for new market
investments and global management, $400 from increased new product development
costs, and $100 from the translation of foreign currencies into U.S. dollars,
partially offset by $900 from reductions in variable and stock based
compensation. As a percentage of consolidated net sales, general and
administrative expenses were 5.2%, 5.9%, 5.9%, and 5.8% in the fiscal 2009 and
2008 quarters and the nine-month periods then ended, respectively.





Restructuring
charges were $990, $149, $1,145, and $551 in the fiscal 2009 and 2008 quarters
and the nine-month periods then ended, respectively. The fiscal 2009
restructuring costs were for severance related to workforce reductions in
response to the current economic climate. The 2008 restructuring costs related
to the partial demolition of an older and underutilized U.S.
facility.





Amortization
of intangibles was $421, $29, $477, and $82 in the fiscal 2009 and 2008 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 $3,604, $3,147, $9,929, and $10,476 in the fiscal 2009 and
2008 quarters and the nine-month periods then ended, respectively. The increase
in the fiscal 2009 quarter was the result of higher debt levels in the fiscal
2009 quarter from debt assumed upon the acquisition of Pfaff-silberblau. The
decrease in the nine month period was the result of lower levels of our Senior
Subordinated Notes, partially offset by the Pfaff-silberblau debt acquired in
the third quarter of fiscal 2009.





Gain from
bond redemptions of $244 in both the quarter and nine-month periods ended
December 28, 2008 was related to the redemption of $5,000 of our Senior
Subordinated 8 7/8% Notes at a discount.  Loss from bond redemptions
of $177 and $1,620 in the quarter and nine-month periods ended December 30,
2007, respectively, were related to the redemption of all $22,125 of our
outstanding Senior Secured 10% Notes and $3,000 of our Senior Subordinated 8
7/8% Notes.





Investment
loss (income) was $3,335, ($261), $3,158, and ($812) in the fiscal 2009 and 2008
quarters and the nine-month periods then ended, respectively.  The
fiscal 2009 quarter included $3,600 of mark-to-market loss on investments deemed
other-than-temporary and related to the recent turmoil in the financial
markets.





Foreign
currency exchange loss was $1,759, $153, $2,548, and $301 in the fiscal 2009 and
2008 quarters and the nine-month periods then ended,
respectively.  The fiscal 2009 quarter included a $1,800 loss on
intercompany loans, primarily associated with the Pfaff acquisition and the U.S.
dollar’s weakening against the euro.





Income
tax expense as a percentage of income from continuing operations before income
tax expense was 35.3%, 40.3%, 35.7%, and 38.2% in the fiscal 2009 and 2008
quarters and the nine-month periods then ended, respectively. The percentages
vary from the U.S. statutory rate due to varying effective tax rates at our
foreign subsidiaries, and the jurisdictional mix of taxable income forecasted
for these subsidiaries.


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Loss from
discontinued operations, net of tax benefit, was $685, $153, $2,651, and $1,504
in the fiscal 2009 and 2008 quarters and the nine-month periods then ended,
respectively, related primarily to the Univeyor business that was divested in
July 2008.





Liquidity
and Capital Resources





Cash and
cash equivalents totaled $21,973 at December 28, 2008, a decrease of $54,021
from the March 31, 2008 balance of $75,994.  The decrease was
primarily the result of $53,261 used to acquire Pfaff-silberblau on October 1,
2008.





Net cash
provided by operating activities from continuing operations was $44,383 for the
nine months ended December 28, 2008 compared with $38,235 for the nine months
ended December 30, 2007. 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, $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
net cash provided by operating activities from continuing operations for the
nine months ended December 30, 2007 was primarily the result of $30,471 of
income from continuing operations plus a $1,244 loss on early retirement of
bonds and non-cash charges for depreciation and amortization of $6,003, deferred
income taxes of $14,502, stock-based compensation of $944 and $381 of other
non-cash charges. These amounts were partially offset by $15,310 of cash used
for changes in operating assets and liabilities, primarily the result of a
$13,122 increase in inventory. The increase in inventory in both periods
resulted from support for penetration of new European markets, upcoming new
product launches, longer-duration projects and timing of offshore purchases. Net
cash used by operating activities from discontinued operations, attributable to
our former Univeyor business, was $3,082 and $250 for the nine months ended
December 28, 2008 and December 30, 2007, respectively.





Net cash
used by investing activities from continuing operations was $62,435 for the nine
months ended December 28, 2008 compared with $3,283 for the nine months ended
December 30, 2007. 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. The net cash used by investing activities from continuing
operations for the nine months ended December 30, 2007 was the result of $7,390
used for capital expenditures and $1,397 for the net purchases of marketable
securities, partially offset by $5,504 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 $448 and $386
for the nine months ended December 28, 2008 and December 30, 2007,
respectively.





Net cash
used by financing activities from continuing operations was $10,980 for the nine
months ended December 28, 2008 compared with $25,578 for the nine months ended
December 30, 2007. 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. The net cash provided by financing activities
from continuing operations for the nine months ended December 30, 2007 consisted
of $27,307 of net debt repayments, including the repurchase of all $22,125 of
our outstanding 10% notes in August 2007. Cash used for debt repayments was
partially offset by $1,309 of proceeds from stock options exercised and $420
from the change in ESOP debt guarantee. Net cash used by financing activities
from discontinued operations, attributable to repayments on lines of credit at
our former Univeyor business, was $14,612 for the nine months ended December 28,
2008, and $603 for the nine months ended December 30, 2007.





We
believe that our cash on hand, cash flows, and borrowing capacity under our
Revolving Credit Facility will be sufficient to fund our ongoing operations and
budgeted capital expenditures for at least the next twelve months. This belief
is dependent upon successful execution of our current business plan which
includes continued implementation of new market penetration, new product
development, Lean manufacturing and improving working capital
utilization.  This is complemented by the fact that throughout the
last economic recession spanning 2000 - 2004, we generated positive cash flows
from operating activities.


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Our
Revolving Credit Facility provides availability up to $75,000. Provided there is
no default, the Company may request an increase in the availability of the
Revolving Credit Facility by an amount not exceeding $50,000 subject to lender
approval and possible renegotiation of the terms of the credit agreement. The
Revolving Credit Facility matures February 2011.





The
unused portion of the Revolving Credit Facility totaled $62,948, net of
outstanding borrowings of zero and outstanding letters of credit of $12,052 as
of December 28, 2008. Interest is payable at a Eurodollar Rate or a prime rate
plus an applicable margin determined by our leverage ratio. At our current
leverage ratio, we qualify for the lowest applicable margin level, which amounts
to 87.5 basis points for Eurodollar borrowings and zero basis points for prime
rate based borrowings. The Revolving Credit Facility is secured by all domestic
inventory, receivables, equipment, real property, subsidiary stock (limited to
65% for foreign subsidiaries) and intellectual property. The corresponding
credit agreement associated with the Revolving Credit Facility places certain
debt covenant restrictions on us, including certain financial requirements and a
limitation on dividend payments.  The financial covenants are limited
to a senior leverage ratio and a fixed charge coverage ratio with which the
Company is in compliance as of December 28, 2008.  These covenants are
set at levels which allow the Company extreme flexibility relative to
deteriorating market conditions given the Company’s low level of outstanding
senior debt and its favorable cash flow profile.





The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $124,855 at December 28, 2008 and are due November 1, 2013.
Provisions of the 8 7/8% Notes include limitations on indebtedness, asset sales,
and dividends and other restricted payments. Until November 1, 2008, we may
redeem up to 35% of the outstanding notes at a redemption price of 108.875% with
the proceeds of equity offerings, subject to certain restrictions. On or after
November 1, 2009, the 8 7/8% Notes are redeemable at the option of the Company,
in whole or in part, at prices declining annually from 104.438% to 100% on and
after November 1, 2011. In the event of a Change of Control (as defined in the
indenture for such notes), each holder of the 8 7/8% Notes may require us to
repurchase all or a portion of such holder’s 8 7/8% Notes at a purchase price
equal to 101% of the principal amount thereof. The 8 7/8% Notes are guaranteed
by certain existing and future U.S. subsidiaries and are not subject to any
sinking fund requirements. On October 8, 2008 the Company used cash on hand to
redeem $5,000 of the outstanding 8 7/8% Notes. The redemption included a $300
discount.  As a result of the redemption, $56 of unamortized financing
costs were written-off in the third quarter of fiscal 2009.





International
lines of credit are available to meet short-term working capital needs for our
subsidiaries operating outside of the United States. The lines of credit are
available on an offering basis, meaning that transactions under the line of
credit will be on such terms and conditions, including interest rate, maturity,
representations, covenants and events of default, as mutually agreed between our
subsidiaries and the local bank at the time of each specific transaction. In
addition to these facilities, our foreign subsidiaries have certain fixed term
bank loans. The outstanding balance of international lines of credit and foreign
subsidiary fixed bank debt was $2,130 at December 28, 2008.





Prior to
the divestiture of Univeyor A/S, during the past year as part of Univeyor’s
ongoing business, we had provided performance guarantees to certain customers
and a third party for the satisfactory completion of contracts to design,
manufacture and install our integrated material handling conveyor systems.
Pursuant to the terms of the share purchase agreement, we agreed to continue to
maintain performance guarantees on certain pre-existing contracts.  As
of the end of the second quarter, we had agreed to maintain performance
guarantees on certain pre-existing contracts totaling $9,200 as of September 28,
2008 based on exchange rates at that time.  Any potential loss under
these guarantees, if any, could not be reasonably estimated at that time, and
therefore no liability was recorded in the condensed consolidated balance sheets
relating to those guarantees as of September 28, 2008.  During the
third quarter of fiscal 2009, the acquirer of Univeyor A/S became financially
distressed as a result of a bankruptcy filing by one of its other owned
businesses.  In reaction to this development, we paid $1,400 ($868,
net of tax) to a third party by which we were released from approximately $4.5
million of guarantees. The arrangement also required that we retain liability
for any claims and liabilities under four remaining guarantees with an
indemnification against those guarantees from a third party. As of January 31,
2009, we have two remaining guarantees outstanding totaling approximately
$1,300. These guarantees are expected to expire in February of
2009.  We have an indemnification agreement with a third party
amounting to approximately $900 for any claims and liabilities arising out of
these two remaining guarantees.  No liability has been recorded in the
accompanying condensed consolidated balance sheets relating to these guarantees
as we believe that the third party indemnification is sufficient to cover any
exposure to loss.


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Capital
Expenditures





In
addition to keeping our current equipment and plants properly maintained, we are
committed to replacing, enhancing, and upgrading our property, plant, and
equipment to support new product development, reduce production costs, increase
flexibility to respond effectively to market fluctuations and changes, meet
environmental requirements, enhance safety, and promote ergonomically correct
work stations. Consolidated capital expenditures for the nine months ended
December 28, 2008 and December 30, 2007 were $8,504 and $7,390, respectively. We
expect capital spending for fiscal 2009 to be approximately $11,000 to $12,000
compared with $12,479 in fiscal 2008. Capital expenditures for fiscal 2009 are
primarily directed toward new product development and productivity
improvement.





Inflation
and Other Market Conditions





Our costs
are affected by inflation in the U.S. economy and, to a lesser extent, in
foreign economies including those of Europe, Canada, Mexico, South America, and
the Asia Pacific region. We have been impacted by fluctuations in steel costs,
which vary by type of steel and we continue to monitor them and address our
pricing policies accordingly. In addition, U.S. employee benefits costs such as
health insurance as well as energy costs have exceeded general inflation levels.
Otherwise, we do not believe that general inflation has had a material effect on
results of operations over the periods presented primarily due to overall low
inflation levels of most costs over such periods and our ability to generally
pass on rising costs through price increases or surcharges.  In the
future, we may be further affected by inflation that we may not be able to
offset with price increases or surcharges. Additionally, we are impacted by
fluctuations in currency exchange rates which are primarily translational, but
transactional fluctuations could also impact our financial results.





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





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement
No. 133” (“SFAS 161”), which requires additional disclosures about the
objectives of derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. SFAS No. 161 is effective for fiscal years beginning after
November 15, 2008. We do not expect the adoption of SFAS No. 161 to
have a material impact on our financial statements.





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





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


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





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





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





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





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





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





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Item
3.      Quantitative and Qualitative Disclosures
About Market Risk








During
the third quarter of fiscal 2009, we entered into cross currency swaps and
foreign exchange forward contracts to offset changes in the value of
intercompany loans to a certain foreign subsidiary due to changes in foreign
exchange rates. The notional amount of these derivatives is approximately
$26,807. There have been no other material changes in the market risks since the
end of Fiscal 2008.








Item
      4.
            Controls
      and Procedures





As of
December 28,
2008, an evaluation was performed under the supervision and with the
participation of the Company’s management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures. Based on that evaluation, the
Company’s management, including the chief executive officer and chief financial
officer, concluded that the Company’s disclosure controls and procedures were
effective as of December 28, 2008, to
ensure that information required to be disclosed in reports filed or submitted
under the Exchange Act is made known to them on a timely basis, and that these
disclosure controls and procedures are effective to ensure such information is
recorded, processed, summarized and reported within the time periods 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





During
the third quarter of fiscal 2009, we entered into cross currency swaps and
foreign exchange forward contracts to offset changes in the value of
intercompany loans to a certain foreign subsidiary due to changes in foreign
exchange rates. The notional amount of these derivatives is approximately
$26,807. There have been no other material changes in the market risks since the
end of Fiscal 2008.





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





There
have been no other material changes from the risk factors as previously
disclosed in the Company’s Form 10-K for the year ended March 31,
2008.





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





Item
      3.
            Defaults
      upon Senior Securities – none.





Item
      4.
            Submission
      of Matters to a Vote of Security Holders –
none.





Item
5.         Other Information –
none.





Item
      6.
            Exhibits





Exhibit 10.1
            Amendment
      No. 13 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated December 19,
      2008.





Exhibit 10.2
            Amendment
      No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated December 19,
  2008.





Exhibit 10.3
            Amendment
      No. 1 to the Columbus McKinnon Corporation 2006 Long Term Incentive Plan,
      dated December 30, 2008.





Exhibit 10.4
            Amendment
      No. 15 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift 401(k) plan, dated January 27, 2009.





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





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


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


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SIGNATURES








Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








COLUMBUS McKINNON
    CORPORATION(Registrant)Date:
      February 5, 2009
            
            /s/ Karen L. HowardKaren
      L. HowardVice
      President and Chief Financial Officer(Principal Financial
      Officer)





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