Introduction
We are engaged in one principal business segment-material handling equipment and systems. We operate in two primary geographic locations-North and South America (the "Americas") and Europe, the Middle East, Africa and Asia ("EMEA/Asia"). Within the material handling equipment and systems segment, we have two main business lines ("business lines"), which are our process and size reduction business lines.
We are an industrial capital goods supplier, and many of the markets for our products are cyclical. During periods of economic expansion, when capital spending normally increases, we generally benefit from greater demand for our products. During periods of economic contraction, when capital spending normally decreases, we generally are adversely affected by declining demand for our products, and the credit worthiness of our customers is a greater concern. Our process business line designs, produces, markets, sells and services both feeding and pneumatic conveying equipment. Markets served include the plastics compounding, base resin production, food, chemical and pharmaceutical industries. The plastics compounding and base resin production markets represent the largest markets for our process business line, and they are sensitive to changes in U.S. and global economic conditions, especially as these changes relate to the use of plastics in building materials and automotive products. The food and pharmaceutical markets for our process business line tend to be less cyclical than the plastics compounding and base resin production markets.

Our size reduction business line designs, produces, markets and sells size reduction, conveying, screening and related equipment. The main industries served by our size reduction business line are the power generation, coal mining, pulp and paper, wood and forest products and biomass energy generation industries, and a majority of the revenues and profits are generated from replacement part sales instead of from the sale of new equipment. Historically, the markets for our size reduction business line related to power generation and coal mining have been less cyclical than have the pulp and paper and wood and forest products markets. Our size reduction business line's exposure to economic swings is moderated by the fact that a majority of its sales is for replacement parts needed by customers to keep their machines operating.
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with our consolidated financial statements and accompanying notes. All references in this Item 2 to the first quarter or first three months of 2009 or 2008 mean the 13-week periods ended April 4, 2009 or March 29, 2008. Critical Accounting Assumptions, Estimates and Policies; Recent Pronouncements This discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2008 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the fiscal year ended January 3, 2009 which was filed with the Securities and Exchange Commission on March 13, 2009 (our "2008 Form 10-K"). The preparation of those financial statements required management to make assumptions and estimates that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements as well as the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those based on such assumptions and estimates.
Our critical accounting policies, assumptions and estimates are described in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Assumptions and Estimates" in our 2008 Form 10-K. There have been no changes in these accounting policies. Our significant accounting policies are described in Note 2 to our 2008 consolidated financial statements contained in our 2008 Form 10-K. Information concerning our implementation and the impact of recent accounting standards issued by the Financial Accounting Standards Board is included in the notes to our 2008 consolidated financial statements and also in Note 3 to our consolidated financial statements contained in this quarterly report on Form 10-Q. We did not adopt any accounting policy in the first three months of 2009 that had a material impact on our consolidated financial statements.

Results of Operations
Overview
For the first three months of 2009, we reported revenues of $49,686,000 and net income of $4,447,000, compared to revenues of $57,398,000 and net income of $5,651,000 for the same period in 2008. The decreases in our revenues and net income in the first quarter of 2009 compared to the same period in 2008 were primarily due to lower sales to customers of our process business line, especially in EMEA/Asia, and the negative effect of a stronger U.S. dollar in the first three months of 2009 versus the same period in 2008 on the translation of the revenues and profits of our foreign operations into U.S. dollars, which more than offset somewhat higher sales to customers of our size reduction business line. Net income was also adversely affected by a higher tax rate. The overall effective tax rate for the first three months of 2009 was 33.2%, up from 30.7% in the same period of 2008, with the increase being primarily due to a higher proportion of our earnings coming from the Unites States where these earnings are taxed at an overall higher rate than are our earnings in EMEA/Asia. Foreign Exchange Rates
We are an international company, and we derived approximately 28% and 35% of our revenues for the first three months of 2009 and 2008 from products manufactured in, and sales made and services performed from, our facilities located outside the United States, primarily in Europe. With our global operations, we are sensitive to changes in foreign currency exchange rates ("foreign exchange rates"), which can affect both the translation of financial statement items into U.S. dollars as well as transactions where the revenues and related expenses may initially be accounted for in different currencies, such as sales made from our Swiss manufacturing facility in currencies other than the Swiss franc. We are also exposed to foreign currency transactional gains and losses caused by the marking to market of certain balance sheet items of our foreign subsidiaries which are measured in other currencies, particularly of non-Swiss franc values, including the euro and the British pound sterling, on the balance sheet of our Swiss subsidiary.
Since we receive substantial revenues from activities in foreign jurisdictions, our results can be significantly affected by changes in foreign exchange rates, particularly in U.S. dollar exchange rates with respect to the Swiss franc, euro, British pound sterling, Canadian dollar and Swedish krona and, to a lesser degree, other currencies. When the U.S. dollar weakens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales increases. When the U.S. dollar strengthens against these currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases when the U.S. dollar strengthens. Overall, our revenues in U.S. dollars generally benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide, especially those identified above. In particular, a general weakening of the U.S. dollar against other currencies would positively affect our revenues, gross profit and operating income as expressed in U.S. dollars (provided that the gross profit and operating income numbers from foreign operations are not losses, since in the case of a loss, the effect would be to increase the loss), whereas a general strengthening of the U.S. dollar against such currencies would have the opposite effect. In addition, our revenues and income with respect to sales transactions may be affected by changes in foreign exchange rates when a sale is made in a currency other than the functional currency of the facility manufacturing the product subject to the sale.

For the first three months of 2009 and 2008, the changes in certain key foreign exchange rates affecting us were as follows:

                                                              Three Months Ended
                                                   April 4,                       March 29,
                                                     2009                           2008

Average U.S. dollar equivalent of one Swiss
franc                                                  0.870                           0.940
% change vs. prior year                                                -7.4 %

Average U.S. dollar equivalent of one euro             1.306                           1.500
% change vs. prior year                                               -12.9 %

Average U.S. dollar equivalent of one British
pound sterling                                         1.448                           1.978
% change vs. prior year                                               -26.8 %

Average U.S. dollar equivalent of one Canadian
dollar                                                 0.806                           0.995
% change vs. prior year                                               -19.0 %

Average U.S. dollar equivalent of one Swedish
krona                                                  0.119                           0.160
% change vs. prior year                                               -25.6 %

Average Swiss franc equivalent of one euro             1.501                           1.596
% change vs. prior year                                                -6.0 %

Average Swiss franc equivalent of one British
pound sterling                                         1.664                           2.104
% change vs. prior year                                               -20.9 %

Presentation of Results and Analysis
The following table sets forth our results of operations, expressed as a
percentage of total revenues, for the periods indicated:

                                                    Three Months Ended
                                                 April 4,        March 29,
                                                   2009            2008

          Total revenues                             100.0 %          100.0 %

          Cost of revenues                            59.4             57.8


          Gross profit                                40.6             42.2

          Selling, general and administrative         25.4             26.2

          Research and development                     1.1              1.1


          Operating income                            14.1             14.9

          Interest expense, net                        0.6              0.7


          Income before income taxes                  13.5             14.2

          Income tax provision                         4.5              4.4


          Net income                                   9.0 %            9.8 %

Total revenues decreased by $7,712,000 or 13.4% in the first quarter of 2009 compared to the same period in 2008. The decrease in our revenues in the first quarter of 2009 compared to the same period in 2008 was primarily due to lower sales to customers of our process business line, especially in EMEA/Asia, and the negative effect of a stronger U.S. dollar in the first three months of 2009 compared with the same period in 2008 on the translation of the revenues of our foreign operations into U.S. dollars, which more than offset somewhat higher sales to customers of our size reduction business line.
Gross profit as a percentage of total revenues decreased to 40.6% in the first quarter of 2009 from 42.2% for the same period in 2008. We believe that this decrease primarily reflected a change in the sales mix of the products and services sold by our two business lines during these periods. Sales mix refers to the relative amounts of different products sold and services provided. Gross margin levels vary with the products sold or services provided. For example, sales of replacement parts in our size reduction business line generally carry a higher gross margin than do sales of equipment within that line.
Selling, general and administrative ("SG&A") expense decreased by $2,439,000 or 16.2% in the first quarter of 2009 compared to the same period in 2008. This decrease was primarily due to the favorable effect of a stronger U.S. dollar on the translation of foreign costs into U.S. dollars, favorable effects of foreign exchange on transaction exposure caused by the marking to market of non-Swiss franc balances to Swiss franc values on the balance sheet of our Swiss subsidiary and decreased commissions related to decreased revenues. As a percentage of revenues, SG&A decreased to 25.4% in the first three months of 2009 compared to 26.2% in the first three months of 2008.

Research and development ("R&D") expense decreased by $90,000 or 13.8% in the first quarter of 2009 compared to the same period in 2008, primarily due to the favorable effect of a stronger U.S. dollar in the first quarter of 2009 on the translation into U.S. dollars of our R&D expenses incurred in Switzerland. Interest expense, net of interest income, decreased by $67,000 or 17.7% in the first quarter of 2009 compared to the same period in 2008. This decrease was primarily due to the effect of lower debt levels.
Income before income taxes decreased to $6,661,000 in the first quarter of 2009 compared to $8,156,000 for the same period in 2008. This decrease of $1,495,000 in the first quarter of 2009 was primarily the net result of the items discussed above.
The income tax provisions for the first quarters of 2009 and 2008 were $2,214,000 and $2,505,000, and the overall effective income tax rates were 33.2% and 30.7%. The higher effective income tax rate in 2009 versus 2008 was primarily due to a higher proportion of our earnings coming from the United States where the earnings are taxed at an overall higher rate than are our earnings in EMEA/Asia.
The following table sets forth our order backlog at the dates indicated:

                                                   April 4, 2009        January 3, 2009       March 29, 2008

Order backlog (at April 4, 2009 foreign
exchange rates, in thousands of dollars)          $        59,429      $          66,903      $        70,941

Our order backlog at constant foreign exchange rates decreased by $7,474,000 or 11.2% at the end of the first quarter of 2009 compared to the end of fiscal year 2008. Our order backlog at constant foreign exchange rates decreased by $11,512,000 or 16.2% at the end of the first quarter of 2009 compared to the end of the first quarter of 2008.
Liquidity and Capital Resources
Capitalization
Our capitalization at the end of the first quarter of 2009 and at the end of fiscal year 2008 is summarized below:

                                                         April 4,        January 3,
 (Dollars in Thousands)                                    2009             2009

 Short-term debt, including current
 portion of long-term debt                               $   1,602      $      1,662
 Long-term debt                                             21,000            22,000

 Total debt                                                 22,602            23,662
 Shareholders' equity                                      129,087           126,052

 Total debt and shareholders' equity (total
 capitalization)                                         $ 151,689      $    149,714

 Percent total debt to total capitalization                     15 %              16 %
 Percent long-term debt to equity                               16 %              17 %
 Percent total debt to equity                                   18 %              19 %

The weighted average annual interest rate on total debt at April 4, 2009 was 5.68%.
Total debt decreased by $1,060,000 in the first three months of 2009. At April 4, 2009, and subject to certain conditions which may limit the amount that may be borrowed at any particular time, we had $26,508,000 of unused borrowing capacity under our U.S. revolving credit facility and $7,066,000 of unused borrowing capacity under our foreign loan agreements. Other Items
At April 4, 2009, our working capital was $71,173,000 compared to $67,694,000 at January 3, 2009, and the ratio of our current assets to our current liabilities at those dates was 2.85 and 2.45. In the first three months of 2009, we utilized internally generated funds to meet our working capital needs. In the first three months of 2008, we utilized internally generated funds and our U.S. revolving credit facility to meet our working capital needs.
Net cash provided by operating activities was $3,330,000 in the first three months of 2009 compared to net cash used in operating activities of $1,261,000 for the same period in 2008. This increase in net cash provided by operating activities in 2009 was primarily from reductions in accounts receivable and inventory and a smaller decrease in accrued expenses and other current liabilities, partially offset by a decrease in accounts payable and lower net income.
Net cash of $341,000 used in investing activities in the first three months of 2009 was primarily for capital additions, while net cash of $829,000 used in investing activities in the first three months of 2008 was primarily for capital additions and an installment payment related to the purchase of certain assets of Wuxi Chenghao Machinery Co., Ltd.
Net cash used in financing activities in the first three months of 2009 was primarily for principal payments on debt, partially offset by the proceeds from stock option exercises and the tax benefit associated therewith. Net cash used in financing activities in the first three months of 2008 was primarily for net principal payments on debt, partially offset by the proceeds from stock option exercises and the tax benefit associated therewith.
Shareholders' equity increased $3,035,000 in the first three months of 2009, of which $4,447,000 was from net income, $470,000 was from the issuance of common stock, $233,000 was from the tax benefit associated with stock option exercises and $98,000 was from an unrealized gain, net of taxes, attributable to seven interest rate swaps, partially offset by $2,213,000 from changes in foreign exchange rates, primarily the translation of Swiss francs into U.S. dollars during the three-month period ended April 4, 2009. Future Payments Under Contractual Obligations We are obligated to make future payments under various contracts such as debt agreements and lease agreements, and we are subject to certain other commitments and contingencies. There have been no material changes to Future Payments Under Contractual Obligations as reflected in the Liquidity and Capital Resources section of Management's Discussion and Analysis in our 2008 Form 10-K. Refer to Notes 8 and 15 to the consolidated financial statements in our 2008 Form 10-K for additional information on long-term debt and commitments and contingencies.

Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors." in our 2008 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2008 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by us or on our behalf. We and our representatives may from time to time make written or oral statements that are "forward-looking", including statements contained in this report and other filings with the Securities and Exchange Commission, reports to our shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "projects", "forecasts", "may", "should", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies which are difficult to predict. These risks and uncertainties include, but are not limited to, the risks described above under the heading "Risk Factors". Many of the factors that will determine our future results are beyond our ability to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by any forward-looking statements that we may make. The forward-looking statements contained in this report include, but are not limited to, statements regarding the effect of changes in foreign exchange rates and interest rates on our business and financial results. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are currently exposed to certain market risks related to fluctuations in foreign exchange rates and interest rate changes. Foreign Exchange Rate Risk
The primary currencies for which we have exchange rate exposure are (i) the U.S. dollar versus each of the Swiss franc, the euro, the British pound sterling, the Canadian dollar and the Swedish krona and (ii) the Swiss franc versus the euro and the British pound sterling. We do not, as a routine matter, use hedging vehicles to manage foreign exchange exposures. Foreign cash balances held by our Swiss subsidiary in currencies other than the Swiss franc are limited in amount in order to manage the transaction exposure caused by the marking to market of non-Swiss franc balances to Swiss franc values on the balance sheet of that subsidiary.

As of April 4, 2009 a 10% unfavorable change in the foreign exchange rates affecting balance sheet transactional exposures would have resulted in a reduction in our earnings before income taxes for the first three months of 2009 of approximately $624,000, or 9.4%. This hypothetical reduction on transactional exposures is based on the differences between the April 4, 2009 actual foreign exchange rates and hypothetical rates assuming a 10% unfavorable change in foreign exchange rates on that date.
The translation of the balance sheets of our non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign exchange rates. These translation gains or losses are recorded as translation adjustments within the accumulated other comprehensive income component of shareholders' equity on our balance sheet. Using the above example, a hypothetical change in translation adjustments would be calculated by multiplying the net assets of our non-U.S. operations by a 10% unfavorable change in the applicable foreign exchange rates. The result of this calculation would be to reduce shareholders' equity by approximately $5,385,000, or 4.2% of our April 4, 2009 shareholders' equity of $129,087,000.
Interest Rate Risk
We have loans that require us to pay interest at rates that may change periodically. These variable rate obligations expose us to the risk of increased interest expense if short-term interest rates rise. We limit our exposure to increased interest expense from rising short-term interest rates by including in our debt portfolio various amounts of fixed rate debt as well as by the use of interest rate swaps. As of April 4, 2009, we had total debt of $22,602,000, $1,602,000 of which was subject to fixed interest rates which ranged from 5.00% to 6.45% and $21,000,000 of which was variable rate debt subject to seven interest rate swaps with fixed interest rates which ranged from 4.925% to 6.095%, subject in the case of our variable rate debt and interest rate swaps to increases in the event our Debt Ratio exceeds certain specified levels at the end of any relevant measurement period, as described in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources" in our 2008 Form 10-K. Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report was carried out by us under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities and Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Change in Internal Control over Financial Reporting No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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