any obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions associated with them. Forward-looking statements are subject to the safe harbors created in the Acts.
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 December 28, 2008 Compared with Three Months Ended

December 30, 2007 (in thousands)

                                                           Three Months Ended
                                                   December 28,          December 30,            Increase (decrease)
                                                       2008                  2007                 $                 %
New Equipment                                     $       12,695        $       11,026        $    1,669            15.1
Spare Parts                                                4,664                 3,527             1,137            32.2
Overhaul and Repair                                        5,159                 3,403             1,756            51.6
Engineering Services                                       1,009                   105               904           861.0

Net Sales                                                 23,527                18,061             5,466            30.3
Cost of Sales                                             14,175                 9,919             4,256            42.9
Gross Profit                                               9,352                 8,142             1,210            14.9
General, administrative and selling expenses               4,744                 4,714                30             0.6
Interest expense                                             305                   846              (541 )         (63.9 )
Net income                                        $        2,470        $        1,526        $      944            61.9

Net Sales. Our net sales increased to $23.5 million in the third quarter of fiscal 2009, an increase of $5.5 million from net sales of $18.1 million in the third quarter of fiscal 2008. The $1.7 million increase in sales of new equipment for the third quarter of fiscal 2009 as compared to the same period last year was driven primarily by $0.9 million higher shipments in the cargo hook operating segment and $0.2 million in the hoist and winch operating segment. New equipment sales in the weapons handling operating segment increased $0.6 million in the third quarter

of fiscal 2009 compared to the third quarter of fiscal 2008, as we resumed shipments during fiscal 2009 for the High Mobility Artillery Rocket System (HIMARS).
In the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008, shipments of spare parts in the hoist and winch and cargo hook operating segments increased $0.3 million and $0.9 million, respectively. While spare part sales were $1.1 million higher in the third quarter of fiscal 2009 as compared to the same prior year period, the demand for spare parts continues to remain weak due primarily, we believe, to the prioritization of procurement due 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.
Overhaul and repair sales in the hoist and winch and cargo hook operating segments increased $1.2 million and $0.4 million, respectively, in the third quarter of fiscal 2009 as compared to the same period last year. The $0.9 million increase in engineering sales during the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008 is mainly 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. 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. 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. Fiscal 2009 indicates a continuance of this trend as evidenced by the strong sales reported in the third quarter which we expect to continue for the remainder of fiscal 2009 resulting in a favorable sales comparison for the entire fiscal year.
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 third quarter of fiscal 2009, the $14.2 million cost of sales as a percent of sales was 60.2%. In the third quarter of fiscal 2008, the $9.9 million cost of sales as a percent of sales was 54.9%. This 5.3% increase in cost of sales as a percentage of sales in the third quarter of fiscal 2009 as compared to the same period last year is discussed below under "Gross Profit". 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 third quarter of fiscal 2009 was 40% compared to 45% for the third quarter of fiscal 2008. A portion of the decline in the overall gross margin is attributable to costs incurred in the third quarter of fiscal 2009 associated with a contract to develop a new piece of equipment for a fixed wing aircraft to be used by the U.S. Army for tactical combat operations. In the third quarter of fiscal 2008 we had better performance, in both cost and pricing, in the production of new equipment, spare parts and overhaul and repair sales, resulting in very favorable gross profit margins for the third quarter of fiscal 2008. The better than normal gross profit margins in the third quarter of fiscal 2008, along with the aforementioned increase in our contractual product development cost accounted for the decline in the overall gross profit margin for the third quarter of fiscal 2009 as compared to the same period last year.
General, administrative and selling expenses. General, administrative and selling expenses for the third quarter of fiscal 2009, as compared to the third quarter of fiscal 2008, remained essentially unchanged.
Interest expense. Interest expense decreased $0.5 million to $0.3 million in the third quarter of fiscal 2009, as compared to $0.8 million in the third quarter of fiscal 2008. In the third quarter of fiscal 2009, there was a decline in the overall effective interest rate of approximately 4% as compared to the third quarter of fiscal 2008, resulting from the refinancing of our Former Senior Credit Facility in the second quarter of fiscal 2009 and lower LIBOR rates (see Senior Credit Facility section below). The refinancing is expected to save us in excess of $1.5 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 third quarter of fiscal 2009 as compared to the same prior year period.
Net Income. We reported net income of $2.5 million in the third quarter of fiscal 2009, an increase of 62%, compared to net income of $1.5 million in the third quarter of fiscal 2008, resulting from the reasons discussed above. New orders. New orders received during the third quarter of fiscal 2009 totaled $17.7 million, as compared with $19.1 million in the third quarter of fiscal 2008. Orders for new equipment in the hoist and winch operating segment increased $2.2 million in the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008. New orders for overhaul and repair in the hoist and winch operating segment increased $1.3 million in the third quarter of fiscal 2009 as compared to the same period last year. The increase in orders for new equipment and overhaul and repair in the hoist and winch operating segment is attributable to the timing of customer order patterns. Orders for new equipment and overhaul and repair in both the cargo hook and weapons handling operating segments remained essentially unchanged for the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008.
New orders for engineering in the weapons handling operating segment decreased $3.9 million in the third quarter of fiscal 2009 as compared to the same period last year. This decrease is directly attributable to a new order in received in the third quarter of fiscal 2008 for 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.
In the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008, new orders for spare parts in the hoist and winch and weapons handling operating segments decreased approximately $1.8 million and $ 0.6 million, respectively. These decreases were partially offset by an increase in new orders for spare parts in the cargo hook operating segment of $0.7 million. The demand for spare parts remained weak during the third 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 December 28, 2008 was $131.3 million, an increase of $7.0 million from the $124.3 million at March 31, 2008. Increases in backlog are mainly attributable to a $5.1 million order for the manufacture of the probe hoist for the MH-60R Naval Hawk, 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 offsetting decrease is attributable to previously scheduled shipments.
The backlog at December 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. There have been recent reports by analysts that there is a delay in the production schedule for the Airbus A400M military transport aircraft. Notwithstanding these reports, we have not to date received notification from Airbus that there is a significant delay in delivering our equipment for this program.
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 $35.0 million of backlog at December 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 third quarter of fiscal 2009 was 0.8 as compared to 1.1 for the third quarter of fiscal 2008. The decrease in the book to bill ratio was directly related to the lower order intake during the third quarter of fiscal 2009, as compared to the third quarter of fiscal 2008. Although significant cancellations of purchase orders or substantial reductions of product quantities in existing contracts seldom occur, such cancellations or reductions could substantially and materially reduce our backlog. Therefore, our backlog information may not represent the actual amount of shipments or sales for any future period.

Nine Months Ended December 28, 2008 Compared with Nine Months Ended December 30,

2007 (in thousands)

                                                           Nine Months Ended                        Increase
                                                  December 28,          December 30,               (decrease)
                                                      2008                  2007                $               %
New Equipment                                     $      26,441        $       29,037        $ (2,596 )         (8.9 )
Spare Parts                                              10,351                11,613          (1,262 )        (10.9 )
Overhaul and Repair                                      12,095                10,507           1,588           15.1
Engineering Services                                      3,115                   399           2,716          680.7

Net Sales                                                52,002                51,556             446            0.9
Cost of Sales                                            30,758                29,763             995            3.3
Gross Profit                                             21,244                21,793            (549 )         (2.5 )
General, administrative and selling expenses             13,607                14,069            (462 )         (3.3 )
Interest expense                                          1,129                 2,670          (1,541 )        (57.7 )
Loss on extinguishment of debt                              551                     -             551            N/A
Net income                                        $       3,378        $        2,968        $    410           13.8

Net Sales. Sales of $52.0 million in the first nine months of fiscal 2009 increased by $0.4 million from sales of $51.6 million in the first nine months of fiscal 2008. Sales of new equipment decreased $2.6 million for the first nine months of fiscal 2009 as compared to the same period last year, and were driven by $3.5 million lower shipments in the hoist and winch operating segment. This decrease was partially offset by higher sales of new equipment in the cargo hook operating segment of $0.8 million. The decrease in new equipment sales was attributable to lower shipment volume over the prior period and order patterns of customers.
In the first nine months of fiscal 2009 as compared to the same period last year, shipments of spare parts in the hoist and winch operating segment decreased $2.0, but was partially offset by an increase in spare parts shipments of $0.7 million in the weapons handling operating segment. The demand for spare parts remained weak during the first nine months of fiscal 2009 due primarily, we believe, to the prioritization of procurement due 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.
Overhaul and repair sales were $12.1 million in the first nine months of fiscal 2009, an increase of $1.6 million, as compared to $10.5 million in the first nine months of fiscal 2008. Higher shipments in the hoist and winch and cargo hook operating segments of $0.9 and $0.5 million, respectively, accounted for the majority of the increase.
The $2.7 million increase in engineering sales during the first nine months of fiscal 2009 as compared to the first nine 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.
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. 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. Fiscal 2009 indicates a continuance of this trend as evidenced by the strong sales reported in the third quarter which we expect to continue for the remainder of fiscal 2009 resulting in a favorable sales comparison for the entire fiscal year.
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 nine months of fiscal 2009, as compared to the

first nine months of fiscal 2008, the cost of sales as a percent of sales increased approximately 1%, due to an increase in our contractual product development cost as discussed below in the "Gross Profit".
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 was 41% for the first nine months of fiscal 2009 as compared to 42% for the first nine months of fiscal 2008. In the first nine months of fiscal 2009 we had higher gross profit margins in the new production operating segment due to better operating efficiencies and product mix were offset entirely by gross profit margin decreases in the spare parts operating segment due to volume, performance and product mix. The 1% decrease in the gross margin for the first nine months of fiscal 2009 compared to the same period last year is directly attributable to costs incurred in the third quarter of fiscal 2009 associated with a contract to develop a new piece of equipment for a fixed wing aircraft to be used by the U.S. Army for tactical combat operations. General, administrative and selling expenses. General, administrative and selling expenses for the first nine months of fiscal 2009, as compared to the first nine 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. The refinancing of our Former Senior Credit Facility was completed in the second quarter of fiscal 2009 (see Senior Credit Facility section below). The refinancing is expected to save us in excess of $1.5 million in interest expense in fiscal 2009 as compared to fiscal 2008. Interest expense was $1.1 million for the first nine months of fiscal 2009, as compared to $2.7 million for the first nine months of fiscal 2008. The decline in the interest rates due to the refinancing 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 $1.6 million for the first nine months 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. 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 $3.4 million for the first nine months of fiscal 2009 versus net income of $3.0 million for the first nine months of fiscal 2008, resulting from the reasons discussed above. Net income for the first nine 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 nine months of fiscal 2009 totaled $59.0 million, as compared with $54.8 million in the first nine months of fiscal 2008. Orders for new equipment increased $8.6 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 $0.7 million in the first nine months of fiscal 2009 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 nine months of fiscal 2009 as compared to the first nine months of fiscal 2008, orders for overhaul and repair in both the hoist and winch and cargo hook operating segments increased $1.6 million and $0.7 million respectively, and orders for engineering increased approximately $0.3 million.

Orders for spare parts in the hoist and winch and weapons handling operating segments decreased $3.3 million and $0.5 million, respectively, but were partially offset by an increase of approximately $1.1 million in the cargo hook operating segment. The demand for spare parts continued to remain weak during the first nine 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.
New orders for engineering in the weapons handling operating segment decreased $3.2 million in the first nine months of fiscal 2009 as compared to the same period last year. This decrease is directly attributable to a new order received in fiscal 2008 for 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. Backlog. Backlog at December 28, 2008 was $131.3 million, an increase of $7.0 million from the $124.3 million at March 31, 2008. Increases in backlog are . . .