##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 Commission file number: 333-172207
 CPM Holdings, Inc.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    06-1612494
(I.R.S. Employer
Identification No.)2975 Airline Circle, Waterloo, Iowa
(Address of principal executive offices)
    
    50703
(Zip Code)
 (319) 464-8275
 o þ
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company 
o o þ
  Class
    
    Outstanding at May 25,
2011Common Stock, $0.001 par value per share
    
    936,913 shares




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##### 



CPM Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2011
TABLE OF CONTENTS
 BEGINNINGPAGEPART I
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsConsolidated Balance
Sheets at September 30, 2010 and March 31, 2011 (Unaudited)
    
    
    3Consolidated Statements of
Operations for the three and six  months ended March 31, 2010 and 2011 (Unaudited)
    
    
    4Consolidated Statements of Changes in Equity and Comprehensive Income
 (Loss) (Unaudited)
    
    
    5Condensed
Consolidated Statements of Cash Flows for the six months ended
March 31, 2010 and 2011 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22ITEM 4.
    
    Controls and Procedures
    
    
    22PART II
    
    OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    23ITEM 1A.
    
    Risk Factors
    
    
    23ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    23ITEM 4.
    
    Removed and Reserved
    
    
    23ITEM 5.
    
    Other Information
    
    
    23ITEM 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



CPM Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2011
 
 PART I. Financial Information
 
 Item 1. Financial Statements.
 
 CPM Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 September 30,
    
    
    March 31,2010
    
    
    2011(dollars in thousands, except per share information)
    
    (as revised)AssetsCurrent assetsCash and cash equivalents
    
    $
    58,691
    
    
    $
    73,997Restricted customer deposits
    
    
    28,690
    
    
    
    29,712Accounts receivable, net
    
    
    42,453
    
    
    
    36,527Inventories
    
    
    49,898
    
    
    
    60,289Costs and estimated earnings in excess of billings on
uncompleted contracts
    
    
    17,451
    
    
    
    25,009Prepaid expenses and other current assets
    
    
    2,122
    
    
    
    4,345Deferred taxes
    
    
    3,277
    
    
    
    3,308Total current assets
    
    
    202,582
    
    
    
    233,187Property, plant and equipment, net
    
    
    18,398
    
    
    
    17,007Trademarks
    
    
    54,099
    
    
    
    54,447Goodwill
    
    
    125,306
    
    
    
    126,786Other intangibles, net
    
    
    67,026
    
    
    
    60,526Total assets
    
    $
    467,411
    
    
    $
    491,953Liabilities and EquityCurrent liabilitiesAccounts payable
    
    $
    20,904
    
    
    $
    25,954Accrued expenses
    
    
    35,275
    
    
    
    40,838Billings in excess of costs and estimated earnings on
uncompleted contracts
    
    
    51,745
    
    
    
    55,029Total current liabilities
    
    
    107,924
    
    
    
    121,821Long-term debt
    
    
    196,878
    
    
    
    197,207Deferred taxes
    
    
    9,050
    
    
    
    10,783Other liabilities
    
    
    4,180
    
    
    
    2,880Total liabilities
    
    
    318,032
    
    
    
    332,691Commitments and contingenciesEquityParent Company stockholders equityCommon stock, $.001 par value, authorized shares 1,100,000;
shares issued and outstanding 936,913
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    82,478
    
    
    
    82,633Retained earnings
    
    
    67,965
    
    
    
    71,097Accumulated other comprehensive loss
    
    
    (5,958
    )
    
    
    (1,907
    )Total Parent Company
stockholders equity
    
    
    144,486
    
    
    
    151,824Noncontrolling interest
    
    
    4,893
    
    
    
    7,438Total equity
    
    
    149,379
    
    
    
    159,262Total liabilities and equity
    
    $
    467,411
    
    
    $
    491,953
  3




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CPM Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,(dollars in thousands)
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011Net sales
    
    $
    73,444
    
    
    $
    85,953
    
    
    $
    134,451
    
    
    $
    176,424Cost of goods sold
    
    
    52,288
    
    
    
    59,390
    
    
    
    97,037
    
    
    
    127,150Gross profit
    
    
    21,156
    
    
    
    26,563
    
    
    
    37,414
    
    
    
    49,274Operating expensesSelling, general and administrative expenses
    
    
    11,282
    
    
    
    12,352
    
    
    
    21,817
    
    
    
    23,315Amortization expense
    
    
    2,775
    
    
    
    2,641
    
    
    
    5,514
    
    
    
    5,309Management fees
    
    
    625
    
    
    
    500
    
    
    
    1,250
    
    
    
    1,125Total operating expenses
    
    
    14,682
    
    
    
    15,493
    
    
    
    28,581
    
    
    
    29,749Income from operations
    
    
    6,474
    
    
    
    11,070
    
    
    
    8,833
    
    
    
    19,525Other expense (income)Interest expense
    
    
    6,242
    
    
    
    6,105
    
    
    
    12,776
    
    
    
    12,002Interest income
    
    
    (211
    )
    
    
    (612
    )
    
    
    (373
    )
    
    
    (1,167
    )Total other expense
    
    
    6,031
    
    
    
    5,493
    
    
    
    12,403
    
    
    
    10,835Income (loss) before income taxes
    
    
    443
    
    
    
    5,577
    
    
    
    (3,570
    )
    
    
    8,690Income tax expense (benefit)
    
    
    753
    
    
    
    2,000
    
    
    
    (1,097
    )
    
    
    3,149Net income (loss)
    
    
    (310
    )
    
    
    3,577
    
    
    
    (2,473
    )
    
    
    5,541Less: Net income attributable to noncontrolling
interest
    
    
    445
    
    
    
    1,219
    
    
    
    1,135
    
    
    
    2,409Net income (loss) attributable to Parent Company
    
    $
    (755
    )
    
    $
    2,358
    
    
    $
    (3,608
    )
    
    $
    3,132
  4




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CPM Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity and Comprehensive Income (Loss)
(Unaudited)
 Parent Company Stockholders EquityAccumulated
    
    
    ParentAdditional
    
    
    
    
    
    
    Other
    
    
    Company
    
    
    NoncontrollingCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Stockholders
    
    
    Interest in
    
    
    Total(dollars in thousands)
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity
    
    
    Subsidiary
    
    
    EquityBalances at September 30, 2009
    
    
    936,913
    
    
    $
    1
    
    
    $
    81,838
    
    
    $
    71,944
    
    
    $
    (5,167
    )
    
    $
    148,616
    
    
    $
    2,525
    
    
    $
    151,141Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    243
    
    
    
    
    
    
    
    
    
    
    
    243
    
    
    
    
    
    
    
    243Stock subscription note repayment
    
    
    
    
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    397Comprehensive income (loss), net of taxForeign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (435
    )
    
    
    (435
    )
    
    
    78
    
    
    
    (357
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,979
    )
    
    
    
    
    
    
    (3,979
    )
    
    
    2,290
    
    
    
    (1,689
    )Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,414
    )
    
    
    2,368
    
    
    
    (2,046
    )Balances
at September 30, 2010 (as reported)
    
    
    936,913
    
    
    
    1
    
    
    
    82,478
    
    
    
    67,965
    
    
    
    (5,602
    )
    
    
    144,842
    
    
    
    4,893
    
    
    
    149,735Prior period
revision (see note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (356
    )
    
    
    (356
    )
    
    
    
    
    
    
    (356
    )Balances at
September 30, 2010 (as revised)
    
    
    936,913
    
    
    
    1
    
    
    
    82,478
    
    
    
    67,965
    
    
    
    (5,958
    )
    
    
    144,486
    
    
    
    4,893
    
    
    
    149,379Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    155Comprehensive income, net of taxForeign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,051
    
    
    
    4,051
    
    
    
    136
    
    
    
    4,187Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,132
    
    
    
    
    
    
    
    3,132
    
    
    
    2,409
    
    
    
    5,541Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,183
    
    
    
    2,545
    
    
    
    9,728Balances at March 31, 2011
    
    
    936,913
    
    
    $
    1
    
    
    $
    82,633
    
    
    $
    71,097
    
    
    $
    (1,907
    )
    
    $
    151,824
    
    
    $
    7,438
    
    
    $
    159,262
  5




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CPM Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six months endedMarch 31,(dollars in thousands)
    
    2010
    
    
    2011Net cash provided by (used in) operating activities
    
    $
    (3,755
    )
    
    $
    13,848Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (1,263
    )
    
    
    (810
    )Proceeds on sales of property, plant and equipment
    
    
    
    
    
    
    353Acquisition of other intangibles
    
    
    (1,485
    )
    
    
    Net cash used in investing activities
    
    
    (2,748
    )
    
    
    (457
    )Cash flows from financing activitiesPayments of long-term debt
    
    
    (9
    )
    
    
    Proceeds from revolving credit facilities
    
    
    696
    
    
    
    Payments on revolving credit facilities
    
    
    (696
    )
    
    
    Payments of deferred financing fees
    
    
    (914
    )
    
    
    Stock subscription note repayment
    
    
    397
    
    
    
    Net cash used in financing activities
    
    
    (526
    )
    
    
    Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (1,576
    )
    
    
    1,915Net increase (decrease) in cash and cash equivalents
    
    
    (8,605
    )
    
    
    15,306Cash and cash equivalentsBeginning of period
    
    
    54,989
    
    
    
    58,691End of period
    
    $
    46,384
    
    
    $
    73,997
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CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 (dollars in thousands, except per share information)
 1.
    
    Basis of Presentation
 The interim consolidated financial statements are unaudited but, in the opinion of management,
reflect all adjustments necessary for a fair presentation of the Companys consolidated
financial position, results of operations and cash flows for the periods presented pursuant to
the rules and regulations of the Securities and Exchange Commission
(SEC). These adjustments consist
of normal, recurring items. The results of operations for any interim period are not
necessarily indicative of results for the full year. The interim consolidated financial
statements and notes are presented as permitted by the requirements for Quarterly Reports on
Form 10-Q.
 Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted, pursuant to such rules and regulations. These interim
consolidated financial statements should be read in conjunction with the Companys annual
consolidated financial statements and related notes for the fiscal year ended September 30, 2010
included on Form S-4, filed with the SEC.
 2.
    
    Description of Business
 CPM Holdings, Inc. (the Company or CPM or Parent), is engaged in the design, production
and marketing of process systems, equipment and parts and services utilized primarily in the
agricultural and food producing/processing industries. The Companys businesses fall into
three reporting segments: Process Equipment, Engineered Process Systems and All Other.
 The Process Equipment segment manufactures and sells process machinery and other equipment
utilized primarily in the agricultural and food producing/processing industries. Products
include the manufacture of mills, flakers, and dryers.
 The Engineered Process Systems segment sells engineering, design and layout services along
with outsourced process equipment for extraction, oilseed processing, biodiesel and edible oil
refining industries.
 The All Other segment designs, manufactures and sells extrusion equipment, thermal processing
equipment and process scaling systems utilized primarily in the plastics, agricultural and
other industries.
 Operations are worldwide and include production and sales facilities in the United States, the
Netherlands, United Kingdom, Singapore, China, Brazil and Argentina.
 3.
    
    Significant Accounting Policies
 Principles of Consolidation
 The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. Significant intercompany accounts and transactions have been eliminated in
consolidation.
 Use of Estimates
 The preparation of the Companys consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Recent Accounting Pronouncements
 In June 2009, the Financial Accounting Standards Board (the FASB) issued guidance which
amends the consolidation guidance for variable-interest entities. The modifications include
the elimination of the exemption for qualifying special purpose entities, a new model for
determining who should consolidate a variable-interest entity, changes to when it is necessary
to reassess who should consolidate a variable-interest entity, and requires additional
disclosures about a Companys involvement with variable interest entities. The guidance is
effective for fiscal years beginning after November 15, 2009. The adoption of this standard
did not impact the Companys financial position or results of operations.
 In October 2009, the FASB issued guidance on the accounting for multiple-deliverable revenue
arrangements. This guidance establishes a selling price hierarchy for determining the selling
price of a deliverable; eliminates the residual method of allocation and requires arrangement
consideration be allocated at the inception of the arrangement to all deliverables using the
relative selling price method; and requires a vendor to determine its best estimate of selling
price in a manner consistent with that used to determine the selling price of the deliverable
on a stand-alone basis. This guidance also expands the required disclosures related to a
vendors multiple-deliverable revenue arrangements. The guidance is effective for fiscal years
beginning on or after June 15, 2010, with early adoption permitted. The adoption of this
standard did not impact the Companys financial position or results of operations.
 In January 2010, the FASB issued guidance that amends existing disclosure requirements for
fair value measurements. The amendments require companies to add disclosures about items
transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate
disclosures about purchases, sales, issuances, and settlements relative to level 3
measurements; and clarifying, among other things, the existing fair value disclosures about
the level of disaggregation. The guidance is effective for fiscal years beginning after
December 15, 2009 except for the disclosures about purchases, sales, issuances and settlements
in the Level 3 reconciliation, which is effective for fiscal years beginning after December
15, 2010. The adoption of this guidance did not impact the Companys financial
position or results of operations.
 In July 2010, the FASB issued guidance that amends disclosure requirements related to
financing receivables. The amendment requires disclosures of information regarding the credit
quality, aging, nonaccrual status and impairments by class of receivable. A receivable class
is a subdivision of a portfolio segment with similar measurement attributes, risk
characteristics and common methods to monitor and assess credit risk. Trade accounts
receivable with maturities of one year or less are excluded from the disclosure requirements.
The effective date for disclosures as of the end of the reporting period is for interim and
annual reporting periods ending on or after December 15, 2010. The effective date for
disclosures for activity during the reporting period is for interim and annual reporting
periods beginning on or after December 15, 2010. The adoption of
this guidance did not
impact the Companys financial position or results of operations.
 Prior Period Revisions
 During the three month period ended March 31, 2011, the Company determined that the foreign currency translation adjustments included within other comprehensive income in the
statement of changes in equity and other comprehensive income had historically not been recorded
net of income taxes. As a result, the Company has corrected the 2010 balance sheet and statements
of changes in equity and other comprehensive income to appropriately reflect the tax effects of the
foreign currency translation adjustments on other comprehensive income for this period. This
correction had no impact on the results of operations and cash flows,
and the Company concluded that
the impact to the 2010 balance sheet and statements of changes in equity and comprehensive income
is immaterial. The revisions to the Companys historical financial statements are as follows:
 As Reported
    
    
    Adjustment
    
    
    As RevisedSeptember 30, 2010:Deferred tax liability
    
    
    8,694
    
    
    
    356
    
    
    
    9,050Total liabilities
    
    
    317,676
    
    
    
    356
    
    
    
    318,032Accumulated Other comprehensive income (loss)
    
    
    (5,602
    )
    
    
    (356
    )
    
    
    (5,958
    )Total Parent Company stockholders equity
    
    
    144,842
    
    
    
    (356
    )
    
    
    144,486Total Parent Company comprehensive income (loss)
    
    
    (4,414
    )
    
    
    (356
    )
    
    
    (4,770
    )Total equity
    
    
    149,735
    
    
    
    (356
    )
    
    
    149,379
 4.
    
    Selected Consolidated Financial Statement Information
 Inventories
 September 30,
    
    
    March 31,2010
    
    
    2011Raw materials
    
    $
    14,145
    
    
    $
    14,429Work-in-process
    
    
    7,535
    
    
    
    12,761Finished goods
    
    
    28,218
    
    
    
    33,099$
    49,898
    
    
    $
    60,289
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CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Accrued Warranties
 Twelve months
    
    
    Six monthsended
    
    
    endedSeptember 30,
    
    
    March 31,2010
    
    
    2011Accrued warrantiesBeginning of period
    
    $
    1,820
    
    
    $
    2,089Settlements made
    
    
    (1,363
    )
    
    
    (530
    )Change in liability related to product
warranties issued
    
    
    1,632
    
    
    
    665End of period
    
    $
    2,089
    
    
    $
    2,224
 Contracts in Progress
 September 30,
    
    
    March 31,2010
    
    
    2011Costs incurred on uncompleted contracts
    
    $
    256,010
    
    
    $
    286,820Estimated earnings on uncompleted contracts
    
    
    58,951
    
    
    
    62,514Less: Billings on contracts in progress
    
    
    (349,255
    )
    
    
    (379,354
    )$
    (34,294
    )
    
    $
    (30,020
    )
 These amounts are included in the unaudited consolidated financial statements as follows:
 September 30,
    
    
    March 31,2010
    
    
    2011Costs and estimated earnings in excess of billings
on uncompleted contracts
    
    $
    17,451
    
    
    $
    25,009Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    (51,745
    )
    
    
    (55,029
    )$
    (34,294
    )
    
    $
    (30,020
    )
 5.
    
    Debt
 The Companys debt at September 30, 2010 and March 31, 2011, consists of the following:
 September 30,
    
    
    March 31,2010
    
    
    2011Senior Notes, net of unamortized discount
    
    $
    196,878
    
    
    $
    197,207Less: Amounts due within one year
    
    
    
    
    
    
    $
    196,878
    
    
    $
    197,207
 In August 2009, the Company issued $200,000 of Senior Notes due September 1, 2014 at 98.101%
of par (the Senior Notes), resulting in an original issue discount of $3,798. The original
issue discount was $3,122 and $2,793 at September 30, 2010 and March 31, 2011, respectively.
The original issue discount is being amortized using the effective interest method over the
term of the debt. The Senior Notes bear interest at 10.625% per year and provide for
semi-annual interest payments, in arrears, due on March 1 and September 1. All principal will
be paid at maturity. The net proceeds from the offering were used to retire the remaining
outstanding borrowings on the previous term loan and revolving credit facility, which provided
for a term loan of $210,000 and a revolving credit facility up to $30,000.
 The Senior Notes are subject to certain covenants and restrictions, such as restrictions on
the payment of dividends, incurrence of certain additional indebtedness, issuance of preferred
stock or entering into certain merger transactions, as defined by the Senior Notes Offering
Memorandum. The Senior Notes are collateralized by a second priority interest in
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CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 the Companys
U.S. current assets and a first priority interest in substantially all of the Companys U.S.
other assets. The Senior Notes are also guaranteed by the Companys U.S. subsidiaries.
 The Senior Notes contain an optional redemption feature whereby the Company can redeem all or
a portion of the Senior Notes, including applicable premiums for early redemptions as defined
in the agreement. In addition, the Senior Notes have a change of control provision which gives
each holder the right to require the Company to purchase all or a portion of such holders
Senior Notes upon a change in control, as defined in the agreement, at a purchase price equal
to 101% of the principal amount plus accrued interest to the date of purchase.
 In November 2009, the Company entered into a Credit Agreement (the Credit Agreement) with
certain financial institutions which provides for a revolving credit facility consisting of a
revolving credit loan and letters of credit in an aggregate amount of up to $14,500, including
swing line loans in the principal amount of $5,000. The swing line loans are subfacilities of
the revolving credit facility used for daily fluctuations on borrowings. As of September 30,
2010 and March 31, 2011, there were no borrowings outstanding under the revolving credit
facility. The availability under the facility is subject to a borrowing base, which is based
on the eligible receivables and
inventory of the Companys U.S. subsidiaries. Under the revolving credit facility, the Company
had unused credit of $14,500 at September 30, 2010 and March 31, 2011. The credit available
for borrowing was limited by the borrowing base to $12,500 and $11,000 on September 30, 2010
and March 31, 2011, respectively. The Credit Agreement expires on April 20, 2013.
 At the Companys option, borrowings under the revolving credit facility are either Base Rate
loans, bearing interest at a rate equal to the greater of (a) the lenders prime rate (3.25%
at March 31, 2011), (b) the LIBOR rate (0.25% at March 31, 2011) plus 1.00% or (c) the federal
funds rate (0.10% at March 31, 2011) plus 0.50%; or Eurodollar loans, bearing interest at the
adjusted LIBOR rate (0.42% at March 31, 2011). Interest on the Base Rate loans is payable on
the last day of each calendar month. Interest on the Eurodollar loans is payable on the last
day of each interest period relating to such loan, but not to exceed six months. An applicable
margin is added for the Base Rate loans and Eurodollar loans ranging from 2.75% and 4.25%,
based on the Companys fixed charge coverage ratio at the end of a given period, as further
defined in the Credit Agreement.
 Commitment fees on the revolving credit facility range from 0.625% to 0.75% per year payable
quarterly in amounts. Commitment fees on the letters of credit vary, as further defined in the
Credit Agreement, and range from 3.75% to 4.25% (or 2.00% if cash collateralized) payable
quarterly. Total commitment fees under the revolving credit facility were $31 and $31 for the
three month periods ended March 31, 2010 and 2011, respectively, and $55 and $59 for the six
month periods ended March 31, 2010 and 2011, respectively. Outstanding letters of credit were
$300 and $4,029 at September 30, 2010 and March 31, 2011, respectively. In conjunction with
entering into the Credit Agreement, the Company paid $914 in costs capitalized as deferred
financing fees, consisting of legal, accounting and deal fees directly related to consummation
of the Credit Agreement.
 Borrowings under the revolving credit facility are subject to certain restrictive financial
covenants, including a fixed charge coverage ratio. The Credit Agreement also includes a
subjective acceleration clause which permits the financial institution to accelerate the due
date of the facility under certain circumstances, including, but not limited to, material
adverse effect on the Companys financial status or otherwise. Borrowings under the Credit
Agreement are collateralized by a first priority security interest in substantially all U.S.
current assets of the Company and are guaranteed by the Companys U.S. subsidiaries. The
Credit Agreement also requires the Company to maintain all of its U.S. lockbox accounts,
disbursement accounts and other operating accounts with the lenders.
 10




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 The Company entered into interest rate swap agreements under the provisions of their previous
credit agreement to swap a variable rate of interest for fixed rates. The effective date of
the swaps ranged from September 2007 through January 2008, and they expired at various dates
from September 2010 through January 2011. The Companys interest rate swap contracts are not
associated with any of the Companys existing debt at September 30, 2010 and March 31, 2011.
The interest rate swap contracts were reflected at fair value and the related gains of $865
and $130 for the three month periods ended March 31, 2010 and 2011, respectively, and $1,663
and $802 for the six month periods ended March 31, 2010 and 2011, respectively, were recorded
as a component of interest expense in the consolidated statements of operations. The fair
value of the interest rate swaps were determined using a valuation
model that reflected the
contractual terms of the derivatives, the period to maturity, and market-based parameters such
as interest rates, volatility, and the credit quality of the
counterparty. The model used did
not contain a high level of subjectivity, as the methodologies used
in the model did not
require significant judgment, and inputs to the model were level 2 inputs readily observable
from actively quoted markets. The fair value of the interest rate swaps of $802 and $0 was
included in accrued expenses in the consolidated balance sheets at September 30, 2010 and
March 31, 2011, respectively. Any interest differentials received or paid under the interest
rate swap contracts were  recognized as an adjustment to interest expense on the consolidated
statements of operations.
 6.
    
    Income Taxes
 Income tax expense (benefit) differs from the expected income tax expense (benefit) computed
by applying the U.S. statutory rate for the three and six months ended March 31, 2010 and 2011
primarily due to state income taxes, permanent items such as meals and entertainment and stock based compensation,
and foreign taxes. Our effective tax rate decreased during the three months ended March 31, 2011 compared to the three months
ended March 31, 2010 due to the mix of income or loss in our U.S. and foreign jurisdictions, and a decrease in the impact of foreign permanent
items and state taxes to the effective tax rate. Our effective tax rate increased during the six months
ended March 31, 2011 compared to the six months ended March 31, 2010 due to the mix of income
or loss in our U.S. and foreign jurisdictions, and a decrease in the impact of foreign permanent items
and state taxes on the effective tax rate.
 The Company recognizes the financial statement effect of a tax position when it is more likely
than not, based on the technical merits, that the position will be sustained upon examination.
We have adequately provided for liabilities resulting from tax assessments by taxing
authorities, positions taken by these tax authorities could have a material impact on the
Companys effective tax rate in future periods. During the three
and six months ended March 31, 2011, one of the uncertain tax liabilities was reversed
as it no longer met the more likely than not criteria based upon
current quarter activity thus reducing the related liability and decreasing deferred taxes by $1.3 million. The Company does not expect
a significant change in the liability for unrecognized tax benefits in the next 12 months.
 7.
    
    Commitments and Contingencies
 Litigation
 The Company is involved in various legal actions arising in the ordinary course of business.
In the opinion of management, the ultimate disposition of these matters will not have a
material adverse effect on the Companys financial position, results of operations or cash
flows.
 8.
    
    Segment and Geographic Data
 The Company identified three reportable segments: Process Equipment, Engineered Process
Systems and All Other. Segment selection was based on the internal organizational structure,
management of operations and performance evaluation by the chief operating decision maker.
 Corporate and Unallocated includes corporate expenses determined to be nonallocable to the
segments, interest income, interest expense and income taxes. Assets included in Corporate
and Unallocated principally are cash and cash equivalents, certain prepaid expenses and other
current assets, and deferred taxes. Segment allocated assets are primarily accounts
receivable, inventories, property, plant and equipment, goodwill and intangible assets, and
certain other assets. Reconciling items included in Corporate and Unallocated are created
based on accounting differences between segment reporting and the consolidated, external
reporting as well as internal allocation methodologies.
 11




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Segment detail is summarized as follows:
 EngineeredProcess
    
    Process
    
    
    
    
    
    CorporateEquipment
    
    Systems
    
    
    
    
    
    and
    
    TotalSegment
    
    Segment
    
    All Other
    
    Unallocated
    
    CompanyThree months ended March 31, 2010Net sales
    
    $
    39,020
    
    
    $
    27,021
    
    
    $
    7,403
    
    
    $
    
    
    
    $
    73,444Income (loss) before income taxes
    
    
    7,134
    
    
    
    860
    
    
    
    (381
    )
    
    
    (7,170
    )
    
    
    443Depreciation and amortization
    
    
    736
    
    
    
    1,992
    
    
    
    826
    
    
    
    845
    
    
    
    4,399Capital expenditures
    
    
    874
    
    
    
    2
    
    
    
    46
    
    
    
    1
    
    
    
    923Six months ended March 31, 2010Net sales
    
    
    68,930
    
    
    
    50,039
    
    
    
    15,482
    
    
    
    
    
    
    
    134,451Income (loss) before income taxes
    
    
    11,836
    
    
    
    203
    
    
    
    (578
    )
    
    
    (15,031
    )
    
    
    (3,570
    )Depreciation and amortization
    
    
    1,492
    
    
    
    3,936
    
    
    
    1,668
    
    
    
    1,618
    
    
    
    8,714Capital expenditures
    
    
    1,151
    
    
    
    21
    
    
    
    53
    
    
    
    38
    
    
    
    1,263Three months ended March 31, 2011Net sales
    
    
    35,601
    
    
    
    40,844
    
    
    
    9,508
    
    
    
    
    
    
    
    85,953Income (loss) before income taxes
    
    
    5,305
    
    
    
    6,274
    
    
    
    735
    
    
    
    (6,737
    )
    
    
    5,577Depreciation and amortization
    
    
    827
    
    
    
    1,943
    
    
    
    794
    
    
    
    857
    
    
    
    4,421Capital expenditures
    
    
    229
    
    
    
    27
    
    
    
    60
    
    
    
    314
    
    
    
    630Six months ended March 31, 2011Net sales
    
    
    70,366
    
    
    
    85,555
    
    
    
    20,503
    
    
    
    
    
    
    
    176,424Income (loss) before income taxes
    
    
    10,785
    
    
    
    9,505
    
    
    
    1,853
    
    
    
    (13,453
    )
    
    
    8,690Depreciation and amortization
    
    
    1,532
    
    
    
    3,890
    
    
    
    1,624
    
    
    
    1,715
    
    
    
    8,761Capital expenditures
    
    
    299
    
    
    
    63
    
    
    
    134
    
    
    
    314
    
    
    
    810Total assets March 31, 2011
    
    
    218,827
    
    
    
    216,502
    
    
    
    30,924
    
    
    
    25,700
    
    
    
    491,953
 9.
    
    Related Party Transactions
 The Company has a management advisory agreement with GGEP Management, L.L.C. and GGEP
Management Ltd. (Gilbert) which are related parties. The agreement requires an annual
management fee for management services provided, plus certain fees and expenses. Expense
under the management agreement was $625 and $500 for the three month periods ended March 31,
2010 and 2011, respectively, and $1,250 and $1,125 for the six month periods ended March 31,
2010 and 2011, respectively.
 10.
    
    Guarantor Subsidiary Financial Information
 The Senior Notes issued in August 2009 (Note 5) have been guaranteed, fully and
unconditionally on a joint and several basis, by its 100% owned U.S. domestic subsidiaries.
The following condensed consolidating balance sheets at September 30,
2010 and March 31, 2011, the condensed
consolidating statements of operations for the three and six month periods ended March 31,
2010 and 2011, and the condensed consolidating statements of cash flows for the six month
periods ended March 31, 2010 and 2011 have been prepared in accordance with the requirements
for presentation of Rule 3-10(f) of Regulation S-X promulgated under the Securities Act. These
condensed consolidating statements reflect CPM Holding, Inc. as the issuer of the Senior
Notes, the Companys wholly owned U.S. domestic subsidiaries as the guarantors presented on a
combined basis, the Companys non-guarantor subsidiaries presented on a combined basis, and
consolidating and eliminating adjustments, to combine such entities on a consolidated basis.
 Condensed
Consolidating Balance Sheet
September 30, 2010
(as revised)
 Parent
    
    
    Guarantors
    
    
    Non-Guarantors(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    2,930
    
    
    $
    55,761
    
    
    $
    
    
    
    $
    58,691Restricted customer deposits
    
    
    
    
    
    
    
    
    
    
    28,690
    
    
    
    
    
    
    
    28,690Accounts receivable, net
    
    
    2,261
    
    
    
    45,199
    
    
    
    37,762
    
    
    
    (42,769
    )
    
    
    42,453Inventories
    
    
    
    
    
    
    25,132
    
    
    
    24,766
    
    
    
    
    
    
    
    49,898Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    
    
    
    
    3,374
    
    
    
    14,077
    
    
    
    
    
    
    
    17,451Prepaid expenses and other current assets
    
    
    
    
    
    
    676
    
    
    
    1,446
    
    
    
    
    
    
    
    2,122Deferred taxes
    
    
    
    
    
    
    2,971
    
    
    
    306
    
    
    
    
    
    
    
    3,277Total current assets
    
    
    2,261
    
    
    
    80,282
    
    
    
    162,808
    
    
    
    (42,769
    )
    
    
    202,582Property, plant and equipment, net
    
    
    
    
    
    
    12,079
    
    
    
    6,319
    
    
    
    
    
    
    
    18,398Investment in subsidiaries
    
    
    323,564
    
    
    
    57,566
    
    
    
    
    
    
    
    (381,130
    )
    
    
    Trademarks
    
    
    
    
    
    
    53,696
    
    
    
    403
    
    
    
    
    
    
    
    54,099Goodwill
    
    
    
    
    
    
    116,084
    
    
    
    9,222
    
    
    
    
    
    
    
    125,306Other intangibles, net
    
    
    8,860
    
    
    
    54,195
    
    
    
    3,971
    
    
    
    
    
    
    
    67,026Total assets
    
    $
    334,685
    
    
    $
    373,902
    
    
    $
    182,723
    
    
    $
    (423,899
    )
    
    $
    467,411Liabilities and EquityCurrent liabilitiesAccounts payable
    
    $
    
    
    
    $
    14,132
    
    
    $
    49,541
    
    
    $
    (42,769
    )
    
    $
    20,904Accrued expenses
    
    
    1,799
    
    
    
    12,792
    
    
    
    20,684
    
    
    
    
    
    
    
    35,275Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    
    
    
    
    6,922
    
    
    
    44,823
    
    
    
    
    
    
    
    51,745Total current liabilities
    
    
    1,799
    
    
    
    33,846
    
    
    
    115,048
    
    
    
    (42,769
    )
    
    
    107,924Long-term debt
    
    
    196,878
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,878Deferred taxes
    
    
    (8,478
    )
    
    
    12,312
    
    
    
    5,216
    
    
    
    
    
    
    
    9,050Other liabilities
    
    
    
    
    
    
    4,180
    
    
    
    
    
    
    
    
    
    
    
    4,180Total liabilities
    
    
    190,199
    
    
    
    50,338
    
    
    
    120,264
    
    
    
    (42,769
    )
    
    
    318,032Commitments and contingenciesEquityTotal Parent Company stockholders equity
    
    
    144,486
    
    
    
    323,564
    
    
    
    57,566
    
    
    
    (381,130
    )
    
    
    144,486Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    4,893
    
    
    
    
    
    
    
    4,893Total equity
    
    
    144,486
    
    
    
    323,564
    
    
    
    62,459
    
    
    
    (381,130
    )
    
    
    149,379Total liabilities and
equity
    
    $
    334,685
    
    
    $
    373,902
    
    
    $
    182,723
    
    
    $
    (423,899
    )
    
    $
    467,411
 12




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2010
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    41,154
    
    
    $
    36,533
    
    
    $
    (4,243
    )
    
    $
    73,444Cost of goods sold
    
    
    
    
    
    
    28,456
    
    
    
    28,075
    
    
    
    (4,243
    )
    
    
    52,288Gross profit
    
    
    
    
    
    
    12,698
    
    
    
    8,458
    
    
    
    
    
    
    
    21,156Operating expenses
    
    
    102
    
    
    
    9,272
    
    
    
    5,308
    
    
    
    
    
    
    
    14,682Income (loss) from operations
    
    
    (102
    )
    
    
    3,426
    
    
    
    3,150
    
    
    
    
    
    
    
    6,474Interest expense (income), net
    
    
    5,906
    
    
    
    268
    
    
    
    (143
    )
    
    
    
    
    
    
    6,031Income (loss) before income taxes
    
    
    (6,008
    )
    
    
    3,158
    
    
    
    3,293
    
    
    
    
    
    
    
    443Income tax expense (benefit)
    
    
    (2,114
    )
    
    
    1,271
    
    
    
    1,596
    
    
    
    
    
    
    
    753Income (loss) before equity income (loss) in subsidiaries
    
    
    (3,894
    )
    
    
    1,887
    
    
    
    1,697
    
    
    
    
    
    
    
    (310
    )Equity in income (loss) of subsidiaries
    
    
    3,139
    
    
    
    1,252
    
    
    
    
    
    
    
    (4,391
    )
    
    
    Net income (loss)
    
    
    (755
    )
    
    
    3,139
    
    
    
    1,697
    
    
    
    (4,391
    )
    
    
    (310
    )Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    445
    
    
    
    
    
    
    
    445Net income (loss) attributable to Parent Company
    
    $
    (755
    )
    
    $
    3,139
    
    
    $
    1,252
    
    
    $
    (4,391
    )
    
    $
    (755
    )
 Condensed Consolidating Statement of Operations
Six Months Ended March 31, 2010
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    70,853
    
    
    $
    72,635
    
    
    $
    (9,037
    )
    
    $
    134,451Cost of goods sold
    
    
    
    
    
    
    50,343
    
    
    
    55,731
    
    
    
    (9,037
    )
    
    
    97,037Gross profit
    
    
    
    
    
    
    20,510
    
    
    
    16,904
    
    
    
    
    
    
    
    37,414Operating expenses
    
    
    199
    
    
    
    17,850
    
    
    
    10,532
    
    
    
    
    
    
    
    28,581Income (loss) from operations
    
    
    (199
    )
    
    
    2,660
    
    
    
    6,372
    
    
    
    
    
    
    
    8,833Interest expense (income), net
    
    
    12,134
    
    
    
    525
    
    
    
    (256
    )
    
    
    
    
    
    
    12,403Income (loss) before income taxes
    
    
    (12,333
    )
    
    
    2,135
    
    
    
    6,628
    
    
    
    
    
    
    
    (3,570
    )Income tax expense (benefit)
    
    
    (4,839
    )
    
    
    932
    
    
    
    2,810
    
    
    
    
    
    
    
    (1,097
    )Income (loss) before equity income (loss) in subsidiaries
    
    
    (7,494
    )
    
    
    1,203
    
    
    
    3,818
    
    
    
    
    
    
    
    (2,473
    )Equity in income (loss) of subsidiaries
    
    
    3,886
    
    
    
    2,683
    
    
    
    
    
    
    
    (6,569
    )
    
    
    Net income (loss)
    
    
    (3,608
    )
    
    
    3,886
    
    
    
    3,818
    
    
    
    (6,569
    )
    
    
    (2,473
    )Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    1,135
    
    
    
    
    
    
    
    1,135Net income (loss) attributable to Parent Company
    
    $
    (3,608
    )
    
    $
    3,886
    
    
    $
    2,683
    
    
    $
    (6,569
    )
    
    $
    (3,608
    )
 13




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2010
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (12,163
    )
    
    $
    (2,834
    )
    
    $
    11,242
    
    
    $
    (3,755
    )Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    
    
    
    
    (828
    )
    
    
    (435
    )
    
    
    (1,263
    )Acquisition of other intangibles
    
    
    
    
    
    
    (1,000
    )
    
    
    (485
    )
    
    
    (1,485
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,828
    )
    
    
    (920
    )
    
    
    (2,748
    )Cash flows from financing activitiesPayments of long-term debt
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Proceeds from revolving credit facilities
    
    
    
    
    
    
    696
    
    
    
    
    
    
    
    696Payments on revolving credit facilities
    
    
    
    
    
    
    (696
    )
    
    
    
    
    
    
    (696
    )Proceeds (payments) of dividends
    
    
    
    
    
    
    4,400
    
    
    
    (4,400
    )
    
    
    Payments of deferred financing fees
    
    
    
    
    
    
    (914
    )
    
    
    
    
    
    
    (914
    )Stock
subscription note repayment
    
    
    397
    
    
    
    
    
    
    
    
    
    
    
    397Investment in subsidiaries
    
    
    11,766
    
    
    
    (15,473
    )
    
    
    3,707
    
    
    
    Net cash provided by (used in) financing activities
    
    
    12,163
    
    
    
    (11,987
    )
    
    
    (702
    )
    
    
    (526
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (1,576
    )
    
    
    (1,576
    )Net increase (decrease) in cash and cash
equivalents
    
    
    
    
    
    
    (16,649
    )
    
    
    8,044
    
    
    
    (8,605
    )Cash and cash equivalentsBeginning of period
    
    
    
    
    
    
    19,117
    
    
    
    35,872
    
    
    
    54,989End of period
    
    $
    
    
    
    $
    2,468
    
    
    $
    43,916
    
    
    $
    46,384
 14




---



##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Condensed Consolidating Balance Sheet
March 31, 2011
 Parent
    
    
    Guarantors
    
    
    Non-Guarantors(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    14,870
    
    
    $
    59,127
    
    
    $
    
    
    
    $
    73,997Restricted customer deposits
    
    
    
    
    
    
    4,029
    
    
    
    25,683
    
    
    
    
    
    
    
    29,712Accounts receivable, net
    
    
    2,260
    
    
    
    45,245
    
    
    
    36,161
    
    
    
    (47,139
    )
    
    
    36,527Inventories
    
    
    
    
    
    
    29,135
    
    
    
    31,154
    
    
    
    
    
    
    
    60,289Costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    
    
    
    
    3,789
    
    
    
    21,220
    
    
    
    
    
    
    
    25,009Prepaid expenses and other current assets
    
    
    
    
    
    
    1,613
    
    
    
    2,732
    
    
    
    
    
    
    
    4,345Deferred taxes
    
    
    
    
    
    
    3,018
    
    
    
    290
    
    
    
    
    
    
    
    3,308Total current assets
    
    
    2,260
    
    
    
    101,699
    
    
    
    176,367
    
    
    
    (47,139
    )
    
    
    233,187Property, plant and equipment, net
    
    
    
    
    
    
    11,008
    
    
    
    5,999
    
    
    
    
    
    
    
    17,007Investment in subsidiaries
    
    
    328,049
    
    
    
    58,808
    
    
    
    
    
    
    
    (386,857
    )
    
    
    Trademarks
    
    
    
    
    
    
    54,035
    
    
    
    412
    
    
    
    
    
    
    
    54,447Goodwill
    
    
    
    
    
    
    117,369
    
    
    
    9,417
    
    
    
    
    
    
    
    126,786Other intangibles, net
    
    
    7,716
    
    
    
    49,841
    
    
    
    2,969
    
    
    
    
    
    
    
    60,526Total assets
    
    $
    338,025
    
    
    $
    392,760
    
    
    $
    195,164
    
    
    $
    (433,996
    )
    
    $
    491,953Liabilities and EquityCurrent liabilitiesAccounts payable
    
    $
    
    
    
    $
    19,124
    
    
    $
    53,969
    
    
    $
    (47,139
    )
    
    $
    25,954Accrued expenses
    
    
    (2,528
    )
    
    
    21,273
    
    
    
    22,093
    
    
    
    
    
    
    
    40,838Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    
    
    
    
    7,823
    
    
    
    47,206
    
    
    
    
    
    
    
    55,029Total current liabilities
    
    
    (2,528
    )
    
    
    48,220
    
    
    
    123,268
    
    
    
    (47,139
    )
    
    
    121,821Long-term debt
    
    
    197,207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197,207Deferred taxes
    
    
    (8,478
    )
    
    
    13,611
    
    
    
    5,650
    
    
    
    
    
    
    
    10,783Other liabilities
    
    
    
    
    
    
    2,880
    
    
    
    
    
    
    
    
    
    
    
    2,880Total liabilities
    
    
    186,201
    
    
    
    64,711
    
    
    
    128,918
    
    
    
    (47,139
    )
    
    
    332,691Commitments and contingenciesEquityTotal Parent Company stockholders equity
    
    
    151,824
    
    
    
    328,049
    
    
    
    58,808
    
    
    
    (386,857
    )
    
    
    151,824Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    7,438
    
    
    
    
    
    
    
    7,438Total equity
    
    
    151,824
    
    
    
    328,049
    
    
    
    66,246
    
    
    
    (386,857
    )
    
    
    159,262Total liabilities and
equity
    
    $
    338,025
    
    
    $
    392,760
    
    
    $
    195,164
    
    
    $
    (433,996
    )
    
    $
    491,953
 15




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2011
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    40,483
    
    
    $
    52,037
    
    
    $
    (6,567
    )
    
    $
    85,953Cost of goods sold
    
    
    
    
    
    
    29,175
    
    
    
    36,782
    
    
    
    (6,567
    )
    
    
    59,390Gross profit
    
    
    
    
    
    
    11,308
    
    
    
    15,255
    
    
    
    
    
    
    
    26,563Operating expenses
    
    
    78
    
    
    
    7,457
    
    
    
    7,958
    
    
    
    
    
    
    
    15,493Income (loss) from operations
    
    
    (78
    )
    
    
    3,851
    
    
    
    7,297
    
    
    
    
    
    
    
    11,070Interest expense (income), net
    
    
    6,196
    
    
    
    (92
    )
    
    
    (611
    )
    
    
    
    
    
    
    5,493Income (loss) before income taxes
    
    
    (6,274
    )
    
    
    3,943
    
    
    
    7,908
    
    
    
    
    
    
    
    5,577Income tax expense (benefit)
    
    
    (2,177
    )
    
    
    1,456
    
    
    
    2,721
    
    
    
    
    
    
    
    2,000Income (loss) before equity income (loss) in
subsidiaries
    
    
    (4,097
    )
    
    
    2,487
    
    
    
    5,187
    
    
    
    
    
    
    
    3,577Equity in income (loss) of subsidiaries
    
    
    6,455
    
    
    
    3,968
    
    
    
    
    
    
    
    (10,423
    )
    
    
    Net income (loss)
    
    
    2,358
    
    
    
    6,455
    
    
    
    5,187
    
    
    
    (10,423
    )
    
    
    3,577Less: Net income attributable to noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    1,219
    
    
    
    
    
    
    
    1,219Net income (loss) attributable to Parent Company
    
    $
    2,358
    
    
    $
    6,455
    
    
    $
    3,968
    
    
    $
    (10,423
    )
    
    $
    2,358
 Condensed Consolidating Statement of Operations
Six Months Ended March 31, 2011
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    74,113
    
    
    $
    114,895
    
    
    $
    (12,584
    )
    
    $
    176,424Cost of goods sold
    
    
    
    
    
    
    53,904
    
    
    
    85,830
    
    
    
    (12,584
    )
    
    
    127,150Gross profit
    
    
    
    
    
    
    20,209
    
    
    
    29,065
    
    
    
    
    
    
    
    49,274Operating expenses
    
    
    155
    
    
    
    15,283
    
    
    
    14,311
    
    
    
    
    
    
    
    29,749Income (loss) from operations
    
    
    (155
    )
    
    
    4,926
    
    
    
    14,754
    
    
    
    
    
    
    
    19,525Interest expense (income), net
    
    
    12,215
    
    
    
    (245
    )
    
    
    (1,135
    )
    
    
    
    
    
    
    10,835Income (loss) before income taxes
    
    
    (12,370
    )
    
    
    5,171
    
    
    
    15,889
    
    
    
    
    
    
    
    8,690Income tax expense (benefit)
    
    
    (4,299
    )
    
    
    1,934
    
    
    
    5,514
    
    
    
    
    
    
    
    3,149Income (loss) before equity income (loss) in
subsidiaries
    
    
    (8,071
    )
    
    
    3,237
    
    
    
    10,375
    
    
    
    
    
    
    
    5,541Equity in income (loss) of subsidiaries
    
    
    11,203
    
    
    
    7,966
    
    
    
    
    
    
    
    (19,169
    )
    
    
    Net income (loss)
    
    
    3,132
    
    
    
    11,203
    
    
    
    10,375
    
    
    
    (19,169
    )
    
    
    5,541Less: Net income attributable to noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    2,409
    
    
    
    
    
    
    
    2,409Net income (loss) attributable to Parent Company
    
    $
    3,132
    
    
    $
    11,203
    
    
    $
    7,966
    
    
    $
    (19,169
    )
    
    $
    3,132
 16




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##### Table of Contents



CPM Holdings, Inc. and Subsidiaries  Notes to Consolidated Financial Statements
(Unaudited)
 Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2011
 Parent
    
    
    Guarantor
    
    
    Non-Guarantor(dollars in thousands)
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (12,370
    )
    
    $
    15,842
    
    
    $
    10,376
    
    
    $
    13,848Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    
    
    
    
    (505
    )
    
    
    (305
    )
    
    
    (810
    )Proceeds on sales of property, plant and equipment
    
    
    
    
    
    
    349
    
    
    
    4
    
    
    
    353Net cash used in investing activities
    
    
    
    
    
    
    (156
    )
    
    
    (301
    )
    
    
    (457
    )Cash flows from financing activitiesProceeds (payments) of dividends
    
    
    
    
    
    
    9,097
    
    
    
    (9,097
    )
    
    
    Investment in subsidiaries
    
    
    12,370
    
    
    
    (12,843
    )
    
    
    473
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    12,370
    
    
    
    (3,746
    )
    
    
    (8,624
    )
    
    
    Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,915
    
    
    
    1,915Net increase in cash and cash equivalents
    
    
    
    
    
    
    11,940
    
    
    
    3,366
    
    
    
    15,306Cash and cash equivalentsBeginning of period
    
    
    
    
    
    
    2,930
    
    
    
    55,761
    
    
    
    58,691End of period
    
    $
    
    
    
    $
    14,870
    
    
    $
    59,127
    
    
    $
    73,997
 17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our unaudited consolidated financial statements and
the notes thereto appearing elsewhere in
this Quarterly Report on Form 10-Q. The statements in this discussion
regarding market conditions and outlook, our expectations regarding our future performance,
liquidity and capital resources and other non-historical statements are subject to numerous risks
and uncertainties, including, but not limited to, the risks and uncertainties described under
Forward-Looking Statements and Risk Factors
in our Registration Statement on Amended Form S-4 as filed with the
SEC on May 16, 2011. Our actual results may differ materially from those contained in or
implied by any forward-looking statements.
 Overview
 Company Overview
  Business Segments
  Market Conditions and Outlook
   Backlog
  Results of Operations
 18




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##### Table of Contents



Three Months Ended March 31,
    
    
    Six Months Ended March 31,(Dollars in thousands)
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011Statement of Operations Data:Net salesProcess Equipment
    
    $
    39,020
    
    
    
    53.1
    %
    
    $
    35,601
    
    
    
    41.4
    %
    
    $
    68,930
    
    
    
    51.3
    %
    
    $
    70,366
    
    
    
    39.9
    %Engineered Process Systems
    
    
    27,022
    
    
    
    36.8
    
    
    
    40,844
    
    
    
    47.5
    
    
    
    50,039
    
    
    
    37.2
    
    
    
    85,555
    
    
    
    48.5All Other
    
    
    7,402
    
    
    
    10.1
    
    
    
    9,508
    
    
    
    11.1
    
    
    
    15,482
    
    
    
    11.5
    
    
    
    20,503
    
    
    
    11.6Total net sales
    
    
    73,444
    
    
    
    100.0
    
    
    
    85,953
    
    
    
    100.0
    
    
    
    134,451
    
    
    
    100.0
    
    
    
    176,424
    
    
    
    100.0Cost of goods sold
    
    
    52,288
    
    
    
    71.2
    
    
    
    59,390
    
    
    
    69.1
    
    
    
    97,037
    
    
    
    72.2
    
    
    
    127,150
    
    
    
    72.1Gross profit
    
    
    21,156
    
    
    
    28.8
    
    
    
    26,563
    
    
    
    30.9
    
    
    
    37,414
    
    
    
    27.8
    
    
    
    49,274
    
    
    
    27.9Selling, general and
administrative expenses
    
    
    11,282
    
    
    
    15.4
    
    
    
    12,352
    
    
    
    14.4
    
    
    
    21,817
    
    
    
    16.2
    
    
    
    23,315
    
    
    
    13.2Other operating expenses
    
    
    3,400
    
    
    
    4.6
    
    
    
    3,141
    
    
    
    3.6
    
    
    
    6,764
    
    
    
    5.1
    
    
    
    6,434
    
    
    
    3.6Income from operations
    
    
    6,474
    
    
    
    8.8
    
    
    
    11,070
    
    
    
    12.9
    
    
    
    8,833
    
    
    
    6.5
    
    
    
    19,525
    
    
    
    11.1Interest expense, net
    
    
    6,031
    
    
    
    8.2
    
    
    
    5,493
    
    
    
    6.4
    
    
    
    12,403
    
    
    
    9.2
    
    
    
    10,835
    
    
    
    6.1Income (loss) before income taxes
    
    
    443
    
    
    
    0.6
    
    
    
    5,577
    
    
    
    6.5
    
    
    
    (3,570
    )
    
    
    (2.7
    )
    
    
    8,690
    
    
    
    5.0Income tax (benefit) expense
    
    
    753
    
    
    
    1.0
    
    
    
    2,000
    
    
    
    2.4
    
    
    
    (1,097
    )
    
    
    (0.8
    )
    
    
    3,149
    
    
    
    1.8Net income (loss)
    
    
    (310
    )
    
    
    (0.4
    )
    
    
    3,577
    
    
    
    4.1
    
    
    
    (2,473
    )
    
    
    (1.9
    )
    
    
    5,541
    
    
    
    3.2Net income attributable to
noncontrolling interest
    
    
    445
    
    
    
    0.6
    
    
    
    1,219
    
    
    
    1.4
    
    
    
    1,135
    
    
    
    0.8
    
    
    
    2,409
    
    
    
    1.4Net income (loss) attributable to
Parent Company
    
    $
    (755
    )
    
    
    (1.0
    )%
    
    $
    2,358
    
    
    
    2.7
    %
    
    $
    (3,608
    )
    
    
    (2.7
    )%
    
    $
    3,132
    
    
    
    1.8
    %
 Three months ended March 31, 2011 compared to three months ended March 31, 2010
 Net sales.
   Cost of goods sold
 Gross profit.
 Selling, general and administrative expenses.
 19




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##### Table of Contents



Other operating expenses.
 Income from operations.
 Interest expense, net.
 Provision for income taxes
 Net income  attributable to noncontrolling interest.
 Net income (loss) attributable to parent company.
 Six months ended March 31, 2011 compared to six months ended March 31, 2010
 Net
sales.
   Cost of goods sold
 Gross profit.
 Selling, general and administrative expenses.
 20




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##### Table of Contents



Other operating expenses.
 Income from operations.
 Interest expense, net.
 Provision for income taxes.
 Net income  attributable to noncontrolling interest.
 Net income (loss) attributable to parent company.
 Liquidity and Capital Resources
  Six Months EndedMarch 31,(Dollars in thousands)
    
    2010
    
    
    2011Net cash provided by (used in):Operating activities
    
    $
    (3,755
    )
    
    $
    13,848Investing activities
    
    
    (2,748
    )
    
    
    (457
    )Financing activities
    
    
    (526
    )
    
    
    Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (1,576
    )
    
    
    1,915Net increase (decrease) in cash and cash equivalents
    
    $
    (8,605
    )
    
    $
    15,306
   21




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##### Table of Contents



Financial Covenants
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
   22




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##### Table of Contents



CPM Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2011
PART II. Other Information
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
 
 Item 4. Removed and Reserved.
 
 Item 5. Other Information.
 23




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##### Table of Contents



Item 6. Exhibits.
 Index to Exhibits:
 ExhibitNo.
    
    Description31.1*
    
    Rule 13a-14(a) Certification by
Principal Executive Officer31.2*
    
    Rule 13a-14(a) Certification by
Principal Financial Officer32**
    
    Section 1350 Certifications by
Principal Executive Officer and Principal Financial Officer
 
 *
    
    Filed herewith**
    
    Furnished (and not filed) herewith pursuant to
Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act. 24




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##### Table of Contents



SIGNATURES
  CPM HOLDINGS, INC.Date: May 25, 2011
    By:

/s/
Ted WaitmanTed WaitmanChief Executive OfficerDate: May 25, 2011
    By:
    /s/ Douglas OstrichDouglas OstrichChief Financial Officer 25