The following discussion is intended to highlight significant changes in the Company's financial position and results of operations for the thirteen weeks ended April 4, 2009. The interim financial statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended January 3, 2009 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

Certain statements set forth in this discussion and analysis of financial condition and results of operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They use such words as "may," "will," "expect," "believe," "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties, and actual future results and trends may differ materially depending on a variety of factors, including changing customer preferences, lack of success of new products, loss of customers, competition, increased raw material prices, problems associated with foreign sourcing of parts and products, changes within our industry segments and in the overall economy, litigation and legislation. In addition, terrorist threats and the possible responses by the U.S. government, the effects on consumer demand, the financial markets, the travel industry, the trucking industry and other conditions increase the uncertainty inherent in forward-looking statements. Forward-looking statements reflect the expectations of the Company at the time they are made, and investors should rely on them only as expressions of opinion about what may happen in the future and only at the time they are made. The Company undertakes no obligation to update any forward-looking statement. Although the Company believes it has an appropriate business strategy and the resources necessary for its operations, future revenue and margin trends cannot be reliably predicted and the Company may alter its business strategies to address changing conditions.

In addition, the Company makes estimates and assumptions that may materially affect reported amounts and disclosures. These relate to valuation allowances for accounts receivable and for excess and obsolete inventories, accruals for pensions and other postretirement benefits (including forecasted future cost increases and returns on plan assets), provisions for depreciation (estimating useful lives), uncertain tax positions, and, on occasion, accruals for contingent losses.

Overview

Sales in the first quarter of 2009 decreased 14% compared to the prior year, as a result of erosion in the general economy. The Industrial Hardware segment sales decreased approximately 15%, the Security Products segment experienced a 30% decrease and the Metal Products segment experienced a 45% increase in sales in the first quarter of 2009 compared to the first quarter of 2008. The decreases in the Industrial Hardware and Security Products segments were due to decreases in sales of existing products in many of the markets we serve as a result of the worldwide weak general economic conditions. The increase in the Metals Products segment was primarily a result of increased volume of our existing mine roof products to the U.S. mining industry.

For the three months ended April 4, 2009, gross margin as a percentage of sales was 12% compared to 21% in the comparable period of 2008. This decrease was primarily the result of lower sales volume causing lower utilization of the Company's production capacity in the 2009 period.

Raw material prices have rolled back from the dramatic increases experienced during 2008. We believe this is a result of the worldwide general economic decline. Currently, there is no indication that the Company will be unable to obtain supplies of all the materials that it requires.

Cash flow from operations in the first quarter of 2009 has improved compared to the same period in 2008. Cash flow from operations along with the result of controlling discretionary expenditures, should be sufficient to enable the Company to meet all its existing obligations and continue its quarterly dividend payments.

Results of Operations

The following table shows, for the periods indicated, selected line items from the condensed consolidated statements of operations as a percentage of net sales, by segment:

                                     Three Months Ended April 4, 2009

                                    Industrial Security    Metal
                                      Hardware Products Products  Total
Net sales                               100.0%   100.0%   100.0% 100.0%
Cost of products sold                    78.9%    85.0%   110.5%  88.0%
Gross margin                             21.1%    15.0%   -10.5%  12.0%

Selling and administrative expense       15.5%    20.6%     7.2%  15.4%
Operating profit/(loss)                   5.6%    -5.6%   -17.7%  -3.4%


                                    Three Months Ended March 29, 2008

                                    Industrial Security    Metal
                                      Hardware Products Products  Total
Net sales                               100.0%   100.0%   100.0% 100.0%
Cost of products sold                    78.8%    76.5%    91.2%  79.5%
Gross margin                             21.2%    23.5%     8.8%  20.5%

Selling and administrative expense       14.1%    15.8%     9.6%  14.2%
Operating profit/(loss)                   7.1%     7.7%    -0.8%   6.3%

The following table shows the amount of change for the first quarter of 2009 compared to the first quarter of 2008 in sales, cost of products sold, gross margin, selling and administrative expenses and operating results, by segment (dollars in thousands):

                                    Industrial  Security     Metal
                                      Hardware  Products  Products     Total
Net sales                            $ (2,193) $ (4,250)   $ 1,957 $ (4,486)

Volume                                  -36.7%    -34.0%     29.1%    -26.9%
Prices                                    1.5%      3.0%      5.2%      2.6%
New products                             20.1%      0.8%     11.0%     10.7%
                                        -15.1%    -30.2%     45.3%    -13.6%

Cost of products sold                $ (1,717) $ (2,423)   $ 2,998 $ (1,142)
                                        -15.0%    -22.5%     76.1%     -4.4%

Gross margin                           $ (476) $ (1,827)  $(1,041)  $(3,344)
                                        -15.4%    -55.4%   -273.2%    -49.4%

Selling and administrative expenses    $ (139)   $ (199)      $ 34   $ (304)
                                         -6.8%     -8.9%      8.1%     -6.5%

Operating results                      $ (337) $ (1,628)  $(1,075)  $(3,040)

Net sales in the Industrial Hardware segment were down 15% in the first quarter of 2009 compared to the prior year quarter. The decrease in sales in the first quarter reflected a decrease in sales of existing products to the vehicular markets in 2009 compared to the same period in 2008. That decrease was reduced by sales generated from the introduction of new products for the various markets we serve. All of the new products were developed internally and included a hidden handle assembly, a roof center case assembly, a slam bolt latch and a turret hatch kit for the military market, a multi-stage rotary and a push button lock for the truck accessory market, as well as several new lightweight honeycomb structures for the high tech and transportation industries. The Industrial Hardware segment continues to develop new latching systems for the military and has experienced an increase in orders for military projects. Sales to the Class 8 truck market are predicted to not improve until at least the end of 2009.

Cost of products sold for the Industrial Hardware segment decreased 15% from the first quarter of 2008 to the first quarter of 2009. The primary reason for this reduction was due to lower volume of sales in the 2009 quarter.

Gross margin as a percent of net sales was comparable at 21% in both the first quarter of 2009 and 2008.

Selling and administrative expenses decreased 7% for the first quarter of 2009 compared to the prior year period primarily due to reductions in payroll and payroll related charges.

Security Products Segment

Net sales in the Security Products segment decreased 30% in the first quarter of 2009 compared to the first quarter of 2008. The decrease in sales in the first quarter of 2009 in the Security Products segment is primarily the result of lower sales volume of existing products across all of our markets as a result of weak general economic conditions. Sales of new products spanned across most of the markets we service and included a variety of new locks.

Cost of products sold for the Security Products segment was down 23% in 2009 compared to the first quarter of 2008. The decrease in cost of products sold was due to the decrease in sales volume and the change in the mix of products sold compared to the prior year periods. This segment experienced cost increases for research and development.

Gross margin as a percentage of sales decreased from 24% to 15% due to the mix of products sold in 2009 compared to the same period in 2008.

Selling and administrative expenses decreased 9% from 2008 levels due to reduced expenses for advertising and payroll and payroll related charges.

Metal Products Segment

Net sales in the Metal Products segment increased 45% in the first quarter of 2009 as compared to the prior year period. Sales of mining products were up 52% in 2009 compared to the first quarter of 2008 and sales of contract castings decreased 9% from the prior year levels. The increase in sales of mining products was driven by an increase in the U.S. mining market demand compared to the prior year first quarter. The decrease in sales of contract casting products was the result of the continued decline in general economic conditions. New product sales included a crater head used in underground mining.

Cost of products sold increased 76% in the first quarter of 2009 compared to the same period in 2008. The increase is attributable to the product mix and the higher raw material cost associated with the manufacturing of ductile iron products, increased costs for payroll and payroll related charges, as well as production difficulties which are being addressed.

Selling and administrative expenses were up 8% in 2009 compared to the same period in 2008. The increase was related to an increase in the allocation of corporate charges based on higher sales volume in 2009.

Other Items

Interest expense decreased 17% in the first quarter of 2009 compared to the prior year period primarily due to the decreased level of debt.

Other income was comparable for both periods presented and was not material to the financial statements.

Income taxes reflected the change in the operating results. The effective tax rate in the first quarter of 2009 was -7% compared to 34% in the first quarter of 2008. The lower effective rate in the first quarter of 2009 resulted from a tax benefit related to the loss from operations which was reduced by a discrete tax item. See also Note K - Income Taxes, included at Item 1 of this Form 10-Q.

Liquidity and Sources of Capital

The Company generated $3.1 million from operations during the first three months of 2009 compared to having used $75,000 during the same period in 2008. The increase in cash flows was primarily the result of the associated timing differences for collections of accounts receivable and payments of liabilities and changes in inventories. Cash flow from operations coupled with cash on hand at the beginning of the year were sufficient to fund capital expenditures, debt service, incentive payments, contributions to the Company's pension plans, and dividend payments. The Company did not utilize its revolving line of credit during the first quarter of 2009 or 2008.

Additions to property, plant and equipment were $683,000 during the first three months of 2009 versus $700,000 for the first quarter of 2008. Total capital expenditures for 2009 are expected to be in the range of $1.5 million to $2.5 million. There are no outstanding commitments for these estimated capital expenditures.

Total inventories as of April 4, 2009 were $26.8 million, compared to $30.8 million at year-end 2008. The inventory turnover ratio of 3.7 turns at the end of the first quarter was comparable to the year-end 2008 ratio of 3.6 turns, and slightly higher than the 3.3 turns in the first quarter of 2008. Accounts receivable decreased by $1.7 million from year end and decreased $4.3 million from the first quarter of Fiscal 2008. The average days sales in accounts receivable for the first quarter of 2009 at 49 days was comparable to the 46 days at the end of Fiscal 2008, and lower than the 54 days at the end of the first quarter of Fiscal 2008.

Cash flow from operating activities and funds available under the revolving credit portion of the Company's loan agreement are expected to be sufficient to cover future foreseeable working capital requirements.

During the fourth quarter of Fiscal 2008 a change in the general economy caused a significant tightening of credit by financial institutions. This economic slowdown has continued throughout the first quarter of Fiscal 2009. The Company believes it has sufficient credit resources available to it to sustain itself though these difficult economic times. While the Company's $12 million revolving credit line is due to expire in the third quarter of 2009, the Company has received verbal assurances from its lender that a renewal of the line should not be an issue for the Company at that time. The Company received a waiver from its lender, Bank of America, for its fixed coverage ratio covenant for the first quarter of 2009. The waiver agreement covers the period beginning April 4, 2009 and ends on June 19, 2009 (the "waiver period"). While the Company does not believe that it will need to utilize any portion of the line of credit, during the waiver period the Company has agreed to limit its use of the line of credit to no more than $3 million. Also during the waiver period the Company will be working with its lender to amend its credit agreements so as to provide the Company with liquidity in an amount that the Company believes will be adequate to provide sufficient cash flow for current operations and to properly service the Company's outstanding debt.