Any number of factors could affect future operations and results, including, without limitation, competition from other companies; changes in applicable laws, rules, and regulations affecting the Company in the locations in which it conducts its business; interest rate trends; a decrease in the United States Government defense spending, changes in spending allocation or the termination, postponement, or failure to fund one or more significant contracts by the United States Government; determination by the Company to dispose of or acquire additional assets; general industry and economic conditions; events impacting the U.S. and world financial markets and economies; and those specific risks that are discussed or referenced elsewhere in this Report.
The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information or future events. General
We design, develop, manufacture, sell and service sophisticated lifting equipment for specialty aerospace and defense applications. With over 50% of the global market, we have long been recognized as the world's leading designer, manufacturer, service provider and supplier of performance-critical rescue hoists and cargo-hook systems. We also manufacture weapons-handling systems, cargo winches, and tie-down equipment. Our products are designed to be efficient and reliable in extreme operating conditions and are used to complete rescue operations and military insertion/extraction operations, move and transport cargo, and load weapons onto aircraft and ground-based launching systems. We have three operating segments which we aggregate into one reportable segment. The operating segments are Hoist and Winch, Cargo Hooks, and Weapons Handling. The nature of the production process (assemble, inspect, and test) is similar for each operating segment, as are the customers and the methods of distribution for the products.
All references to years in the Management's Discussion and Analysis of Financial Condition and Results of Operations refer to the fiscal year ended on or ending on March 31 of the indicated year unless otherwise specified. Results of Operations
Three Months Ended September 28, 2008 Compared with Three Months Ended

September 30, 2007 (in thousands)

                                                            Three Months Ended
                                                   September 28,          September 30,             Increase (decrease)
                                                       2008                   2007                  $                 %

New Equipment                                     $         7,467        $         9,461        $   (1,994 )          (21.1 )
Spare Parts                                                 2,758                  4,297            (1,539 )          (35.8 )
Overhaul and Repair                                         3,127                  3,457              (330 )           (9.5 )
Engineering Services                                        1,155                     25             1,130          4,520.0

Net Sales                                                  14,507                 17,240            (2,733 )          (15.9 )
Cost of Sales                                               8,637                 10,006            (1,369 )          (13.7 )
Gross Profit                                                5,870                  7,234            (1,364 )          (18.9 )
General, administrative and selling expenses                4,636                  4,953              (317 )           (6.4 )
Interest expense                                              385                    892              (507 )          (56.8 )
Loss on extinguishment of debt                                551                      -               551              N/A
Net income                                        $           143        $           801        $     (658 )          (82.1 )

Net Sales. Our net sales decreased to $14.5 million in the second quarter of fiscal 2009, a decrease of $2.7 million from net sales of $17.2 million in the second quarter of fiscal 2008. The $2.0 million decrease in sales of new equipment for the second quarter of fiscal 2009 as compared to the same period last year was driven primarily by lower shipments and order patterns of customers in the hoist and winch and cargo hook operating segments. The

$0.7 million decrease in new equipment sales in the cargo hook operating segment was offset by $0.8 million of increased sales in the weapons handling operating segment, as we resumed shipments for the High Mobility Artillery Rocket System (HIMARS).
In the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008, shipments of spare parts in the hoist and winch and cargo hook operating segments decreased $0.9 million and $1.2 million, respectively, but were partially offset by an increase in spare parts shipments of $0.6 million in the weapons handling operating segment. The demand for spare parts remained weak during the second quarter of fiscal 2009 due primarily, we believe, to the delay by the U.S. Government in fully funding the war effort in Iraq and Afghanistan. This delay is the single biggest factor impacting the shift in our sales mix. The $1.1 million increase in engineering sales during the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008 is all attributable to the weapons handling operating segment. Specifically, it is the result of a contract for the design and development of a recovery winch being developed for the U.S. Army under the Future Combat Systems (FCS) program. Sales during the second quarter of fiscal 2009 in the overhaul and repair operating segment had a slight decrease of $0.3 million as compared to the same period last year. In recent years, our revenues in the second half of the fiscal year have generally exceeded revenues in the first half of the fiscal year. The timing of U.S. Government awards, the availability of U.S. Government funding and product delivery schedules are among the factors that affect the period in which revenues are recorded. We expect this trend to continue in fiscal 2009. Cost of Sales. The three operating segments of hoist and winch, cargo hooks, and weapons handling equipment have generated sales in three separate components:
new equipment, overhaul and repair, and spare parts, each of which has progressively better margins. Accordingly, the cost of sales as a percent of sales will be affected by the weighting of these components to the total sales volume. In the second quarter of fiscal 2009, the $8.6 million cost of sales as a percent of sales was 59.5%. In the second quarter of fiscal 2008, the $10.0 million cost of sales as a percent of sales was 58.0%. This 1.5% increase in cost of sales as a percentage of sales in the second quarter of fiscal 2009 as compared to the same period last year is the result of lower sales volume of new equipment and spare parts in the hoist and winch and cargo hook operating segments.
Gross Profit. As discussed in the "Cost of Sales" section above, the three components of sales in each of the operating segments have margins reflective of the market. During the last four fiscal years, the gross profit margin on new equipment was generally in the range of 31% to 35%, with overhaul and repair 27% to 43% and spare parts ranging from 64% to 71%. The balance, or mix, of this activity, in turn, will have an impact on overall gross profit and overall gross profit margins. Our overall gross margin for the second quarter of fiscal 2009 was 41% compared to 42% for the second quarter of fiscal 2008. This was principally the result of lower sales volume of new equipment and spare parts in the hoist and winch and cargo hook operating segments.
General, administrative and selling expenses. General, administrative and selling expenses for the second quarter of fiscal 2009, as compared to the second quarter of fiscal 2008, decreased $0.3 million. This decrease was due to lower non-recurring engineering expenditures related to the Company's Airbus A400M military transport aircraft project, marketing commissions, and one-time costs associated with a threatened proxy contest that occurred and was settled during the second quarter of fiscal 2008. These decreases were partially offset by higher internal research and development costs.
Interest expense. Interest expense decreased $0.5 million to $0.4 million in the second quarter of fiscal 2009, as compared to $0.9 million in the second quarter of fiscal 2008. In the second quarter of fiscal 2009, there was a decline in the overall effective interest rate of approximately 4% as compared to the second quarter of fiscal 2008, resulting from the refinancing of our Former Senior Credit Facility in the second quarter of fiscal 2009 (see Senior Credit Facility section below). The refinancing is expected to save us in excess of $1.0 million in interest expense in fiscal 2009 as compared to fiscal 2008. The decline in the interest rate coupled with the reduction of our former senior credit facility through cash flows from operations and proceeds from the sale of the Company's Union, New

Jersey facility in the fourth quarter of fiscal 2008, caused the decrease in interest expense of $0.5 million for the second quarter of fiscal 2009 as compared to the same prior year period.
Loss on Extinguishment of Debt. In the second quarter of fiscal 2009, we refinanced and paid in full the Former Senior Credit Facility with a new 60 month, $33.0 million Senior Credit Facility consisting of a $10.0 million revolving credit facility, and term loans totaling $23.0 million. As a result of this refinancing, in the second quarter of fiscal 2009, we recorded a pre-tax charge of $0.6 million consisting of $0.2 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of a pre-payment premium associated with the payoff of the Former Senior Credit Facility. Net Income. We reported net income of $0.1 million in the second quarter of fiscal 2009 versus net income of $0.8 million in the second quarter of fiscal 2008, resulting from the reasons discussed above. Net income for the second quarter of fiscal 2009 included a pretax charge of $0.6 million related to the refinancing of the Company's debt.
New orders. New orders received during the second quarter of fiscal 2009 totaled $18.4 million, as compared with $27.6 million in the second quarter of fiscal 2008. Orders for new equipment in the hoist and winch operating segment decreased $12.1 million in the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008. The decrease in orders for new equipment in the hoist and winch operating segment is attributable to the timing of customer order patterns. This decrease was partially offset by an increase in orders for new equipment in the cargo hook operating segment and is mainly attributable to a $4.9 million order for the manufacture of the cargo hook for the CH-47F Chinook helicopter.
New orders for overhaul and repair increased $0.4 million and $0.3 million in the cargo hook and hoist and winch operating segments, respectively, during the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008. In the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008, new orders for spare parts in the hoist and winch operating segment decreased approximately $1.1 million, and remained essentially unchanged on both the cargo hook and weapons handling operating segments. The demand for spare parts remained weak during the second quarter of fiscal 2009 due, we believe, primarily to the delay in fully funding the war effort in Iraq and Afghanistan. While we remain confident that the unrealized portion of the anticipated spare part sales will eventually be ordered, it is not clear at this time when that will happen.
Backlog. Backlog at September 28, 2008 was $137.2 million, an increase of $12.9 million from the $124.3 million at March 31, 2008. The increase in backlog is mainly attributable to a $5.1 million order for the manufacture of the probe hoist for the MH-60R Naval Hawk and a $3.4 million order for the manufacture of the electric rescue hoist system for the H-60 Black Hawk MEDEVAC helicopter, and a $4.9 million order for the manufacture of the cargo hook for the CH-47F Chinook helicopter. The backlog at September 28, 2008 includes approximately $65.0 million relating to the Airbus A400M military transport aircraft, which is scheduled to commence shipping in late calendar 2009 and continue through 2020. The product backlog varies substantially from time to time due to the size and timing of orders. We measure backlog by the amount of products or services that our customers have committed by contract to purchase from us as of a given date. Approximately $38.5 million of backlog at September 28, 2008 is scheduled for shipment during the next twelve months. The book-to-bill ratio is computed by dividing the new orders received during the period by the sales for the period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in our sales. Our book to bill ratio for the second quarter of fiscal 2009 was 1.3 as compared to 1.6 for the second quarter of fiscal 2008. The decrease in the book to bill ratio was directly related to the lower order intake during the second quarter of fiscal 2009, as compared to the second quarter of fiscal 2008. Cancellations of purchase orders or reductions of product quantities in existing contracts, although seldom occurring, could substantially and materially reduce our backlog. Therefore, our backlog may not represent the actual amount of shipments or sales for any future period.

Six Months Ended September 28, 2008 Compared with Six Months Ended September 30,

2007 (in thousands)

                                                             Six Months Ended
                                                   September 28,          September 30,             Increase (decrease)
                                                       2008                   2007                   $                 %

New Equipment                                     $        13,746        $        18,011        $    (4,265 )         (23.7 )
Spare Parts                                                 5,687                  8,086             (2,399 )         (29.7 )
Overhaul and Repair                                         6,936                  7,104               (168 )          (2.4 )
Engineering Services                                        2,106                    294              1,812           616.3

Net Sales                                                  28,475                 33,495             (5,020 )         (15.0 )
Cost of Sales                                              16,583                 19,844             (3,261 )         (16.4 )
Gross Profit                                               11,892                 13,651             (1,759 )         (12.9 )
General, administrative and selling expenses                8,863                  9,355               (492 )          (5.3 )
Interest expense                                              824                  1,824             (1,000 )         (54.8 )
Loss on extinguishment of debt                                551                      -                551             N/A
Net income                                        $           908        $         1,442        $      (534 )         (37.0 )

Net Sales. Sales of $28.5 million for the first six months of fiscal 2009 declined $5.0 million from sales of $33.5 million in the first six months of fiscal 2008. The $4.3 million decrease in sales of new equipment for the first six months of fiscal 2009 as compared to the same period last year was driven by $3.7 million of lower shipments in the hoist and winch operating segment and $0.5 million of lower shipments in the weapons handling operating segment. The decrease in new equipment sales was attributable to lower shipment volume over the prior period and order patterns of customers.
In the first six months of fiscal 2009 as compared to the same period last year, shipments of spare parts in the hoist and winch and cargo hook operating segments decreased $2.3 million and $0.9 million, respectively, but were partially offset by an increase in spare parts shipments of $0.8 million in the weapons handling operating segment. The demand for spare parts remained weak during the first six months of fiscal 2009 due primarily, we believe, to the delay by the U.S. Government in fully funding the war effort in Iraq and Afghanistan. This delay is the single biggest factor impacting the shift in our sales mix.
The $1.8 million net increase in engineering sales during the first six months of fiscal 2009 as compared to the first six months of fiscal 2008 is attributable to the weapons handling operating segment. Specifically, it is the result of a contract for the development and design of a recovery winch being developed for the U.S. Army under the FCS program.
In recent years, our revenues in the second half of the fiscal year have generally exceeded revenues in the first half of the fiscal year. The timing of U.S. Government awards, the availability of U.S. Government funding and product delivery schedules are among the factors that affect the period in which revenues are recorded. We expect this trend to continue in fiscal 2009. Cost of Sales. The three operating segments of hoist and winch, cargo hooks, and weapons handling equipment have generated sales in three separate components:
new equipment, overhaul and repair, and spare parts, each of which has progressively better margins. Accordingly, the cost of sales as a percent of sales will be affected by the weighting of these components to the total sales volume. In the first six months of fiscal 2009, as compared to the first six months of fiscal 2008, the cost of sales as a percent of sales decreased approximately 1%. This reflects an improvement related to performance and product mix enhancement in both the new production and engineering market segments, which have offset the volume decreases in the new production and spare parts market segments we have experienced.

Gross Profit. As discussed in the "Cost of Sales" section above, the three components of sales in each of the operating segments have margins reflective of the market. During the last four fiscal years, the gross profit margin on new equipment was generally in the range of 31% to 35%, overhaul and repair 27% to 43% and spare parts ranging from 64% to 71%. The balance or mix of this activity, in turn, will have an impact on gross profit and gross profit margins. The gross margin of 42% for the first six months of fiscal 2009 as compared to 41% for the first six months of fiscal 2008 reflects an improvement related to performance and product mix enhancement in both the new production and engineering market segments, which have offset the volume decreases in the new production and spare parts market segments we have experienced. General, administrative and selling expenses. General, administrative and selling expenses for the first six months of fiscal 2009, as compared to the first six months of fiscal 2008, decreased $0.5 million. This decrease was due mainly to lower non-recurring engineering expenditures related to the Company's Airbus A400M military transport aircraft project and one-time costs associated with a threatened proxy contest that occurred and was settled during the second quarter of fiscal 2008. These decreases were partially offset by higher internal research and development costs.
Interest expense. Proceeds from the sale of the Company's Union, New Jersey facility in the fourth quarter of fiscal 2008, required principal payments, and strong cash flows from operations allowed us to reduce our Former Senior Credit Facility by approximately $14.7 million from the debt level at September 30, 2007 compared to the total debt that was paid off at the refinancing on August 28, 2008. The decrease in interest expense of $1.0 million to $0.8 million in the first six months of fiscal 2009, as compared to $1.8 million in the same period last year is the direct result of the pay down of debt. In the second quarter of fiscal 2009, we completed the refinancing of our existing debt (see Senior Credit Facility below). The refinancing is expected to save us in excess of $1.0 million in interest expense in fiscal 2009 as compared to fiscal 2008.
Loss on Extinguishment of Debt. In the second quarter of fiscal 2009, we refinanced and paid in full the Former Senior Credit Facility with a new 60 month, $33.0 million Senior Credit Facility consisting of a $10.0 million revolving credit facility, and term loans totaling $23.0. As a result of this refinancing, in the second quarter of fiscal 2009, we recorded a pre-tax charge of $0.6 million consisting of $0.2 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of a pre-payment premium associated with the payoff of the Former Senior Credit Facility.
Net Income. We reported net income of $0.9 million for the first six months of fiscal 2009 versus net income of $1.4 million for the first six months of fiscal 2008, resulting from the reasons discussed above. Net income for the first six months of fiscal 2009 included a pretax charge of $0.6 million related to the refinancing of the Company's debt.
New orders. New orders received during the first six months of fiscal 2009 totaled $41.4 million, as compared with $35.8 million in the first six months of fiscal 2008. Orders for new equipment increased $8.1 million in the cargo hook operating segment, which was the result of a $4.9 million order for the manufacture of the cargo hook for the CH-47F Chinook helicopter. Orders for new equipment in the hoist and winch operating segment decreased $3.0 million in the first six months of fiscal 2008 as compared to the same period in the prior year, despite orders that were received in the first quarter of fiscal 2009 for $5.1 million for the manufacture of the probe hoist for the MH-60R Naval Hawk and a $3.4 million order for the manufacture of the electric rescue hoist system for the H-60 Black Hawk MEDEVAC helicopter.
In the first six months of fiscal 2009 as compared to the first six months of fiscal 2008, orders for overhaul and repair in both the hoist and winch and cargo hook operating segments increased $0.3 million and $0.5 million respectively, and orders for engineering increased approximately $0.6 million. Orders for spare parts in the hoist and winch operating segment decreased $1.5 million, but were offset by an increase of approximately $0.4 million in the cargo hook operating segment. The demand for spare parts remained weak during the first six months of fiscal 2009, due, we believe, primarily to the delay by the U.S. Government in fully funding the war effort in Iraq and Afghanistan. While we remain confident that the unrealized portion of the anticipated spare part sales will eventually be ordered, it is not clear at this time when that will happen.

Backlog. Backlog at September 28, 2008 was $137.2 million, an increase of $12.9 million from the $124.3 million at March 31, 2008. The increase in backlog is mainly attributable to a $5.1 million order for the manufacture of the probe hoist for the MH-60R Naval Hawk and a $3.4 million order for the manufacture of the electric rescue hoist system for the H-60 Black Hawk MEDEVAC helicopter, and a $4.9 million order for the manufacture of the cargo hook for the CH-47F Chinook helicopter. The backlog at September 28, 2008 includes approximately $65.0 million relating to the Airbus A400M military transport aircraft, which is scheduled to commence shipping in late calendar 2009 and continue through 2020. The product backlog varies substantially from time to time due to the size and timing of orders. We measure backlog by the amount of products or services that our customers have committed by contract to purchase from us as of a given date. Approximately $38.5 million of backlog at September 28, 2008 is scheduled for shipment during the next twelve months. The book-to-bill ratio is computed by dividing the new orders received during the period by the sales for the period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in our sales. Our book to bill ratio for the first six months of fiscal 2009 was 1.5 as compared to 1.1 for the first six months of fiscal 2008. The increase in the book to bill ratio was directly related to the higher order intake during the first six months of fiscal 2009, as compared to the first six months of fiscal 2008. Cancellations of purchase orders or reductions of product quantities in existing contracts, although seldom occurring, could substantially and materially reduce our backlog. Therefore, our backlog may not represent the actual amount of shipments or sales for any future period. Liquidity and Capital Resources . . .