Three Months     Nine Months
                  Underlying volume         (25 )%           (30 )%
                  Price/Mix                  (5 )             (1 )

                                            (30 )%           (31 )%

For both period comparisons, the decreases in underlying volumes were caused by lower end-market demand and decreases in discretionary spending in the economy. The lower volumes occurred across all of our segments and major end markets with the most significant declines occurring in those which are more sensitive to discretionary spending, including the transportation, recreation and leisure and building and construction markets. The price/mix decline in the third quarter was primarily due to lower resin costs that were passed through to customers as lower selling prices.
The following table presents net sales, cost of sales, and the resulting gross margin in dollars and on a per pound sold basis for the third quarter and first nine months of 2009 compared to the same periods in 2008. Cost of sales presented in the consolidated condensed statements of operations includes material and conversion costs and excludes amortization of intangible assets and restructuring and exit costs. Cost of sales are presented in the following table, and we have not presented it as a percentage of net sales because a comparison of this measure is distorted by changes in resin costs that are

generally passed through to customers as changes to selling prices. These changes can materially affect the percentages but do not present accurate performance measures of the business.

                                       Three Months Ended              Nine Months Ended
                                   August 1,        August 2,       August 1,      August 2,
                                      2009            2008            2009            2008
Dollars and Pounds (in millions)
Net sales                          $    241.7      $     347.5     $     722.7     $  1,043.1
Cost of sales                           206.8            313.1           629.4          950.4

Gross margin                       $     34.9      $      34.4     $      93.3     $     92.7


Pounds Sold                             223.3            296.6           657.4          936.5


Dollars per Pound Sold
Net sales                          $    1.082      $     1.171     $     1.099     $    1.114
Cost of sales                            .926            1.055            .957          1.015

Gross margin                       $     .156      $      .116     $      .142     $     .099

The decrease in net sales per pound in the third quarter of 2009 compared to the same period in the prior year was caused by lower resin prices that were passed through to customers as lower selling prices. For the first nine months of 2009, the decrease in net sales per pound was due to lower resin prices in the second and third quarters that were passed through to customers as lower selling prices, partially offset by higher resin costs and selling prices in the first quarter of 2009. The 4.0 cent and 4.3 cent per pound increases in gross margin for the third quarter and first nine months of 2009 reflect a reduced mix of lower margin products sold to the automotive sector of the transportation market, and margin increases from our improvement initiatives and conversion cost reductions. Our conversion cost dollars decreased 26% and 25% in the third quarter and first nine months, respectively, due to the impact of our cost reductions and the volume declines. In addition, our conversion costs in the first nine months of 2009 were impacted by a $2.9 million one-time reduction in our second quarter from a change in our vacation policy and by approximately $1.0 million of benefit each quarter from compensation reductions initiated in the second quarter that will be restored at the end of 2009 and will be replaced by further structural reductions.
Selling, general and administrative expenses were $19.6 million and $61.1 million in the third quarter and first nine months of 2009 compared to $21.7 million and $66.7 million in the same periods of the prior year. For both period comparisons, the benefits associated with our improvement initiatives were partially offset by the impact of $1.3 million and $1.7 million of foreign currency losses for the third quarter and the first nine months of 2009, respectively. In addition, our selling, general and administrative expenses in the first nine months of 2009 were impacted by a $1.0 million one-time reduction in our second quarter from a change in our vacation policy and by approximately $1.0 million of benefit each quarter from compensation reductions initiated in the second quarter that will be restored at the end of 2009 and will be replaced by further structural reductions.
Amortization of intangibles was $1.1 million and $3.4 million in the third quarter and first nine months of 2009 compared to $1.2 and $3.9 million in the same periods of the prior year. The decreases in both period comparisons reflect intangibles which were fully amortized by the end of 2008.
Restructuring and exit costs were $1.1 million and $5.6 million in the third quarter and first nine months of 2009 compared to $0.9 million and $1.7 million in the same periods of the prior year. The costs during the third quarter and first nine months of 2009 primarily consist of employee severance, facility consolidation and shut-down costs and accelerated depreciation resulting from our improvement initiatives. We expect to incur approximately $1.6 million of additional restructuring expenses for initiatives announced through August 1, 2009 which will be mostly comprised of employee severance and facility consolidation and shut-down costs. In the future, we expect to announce additional cost reduction activities to further facilitate a low cost-to-serve model and improve earnings.
Interest expense, net of interest income, was $3.8 million and $12.6 million in the third quarter and first nine months of 2009 compared to $5.2 million and $15.3 million in the same periods of the prior year. These decreases were primarily driven by the $76.7 million debt paydowns during the last 12 months.

Our third quarter and first nine months of 2009 effective tax rate was negatively impacted by increases in losses from our Donchery, France operations for which we have not recorded a tax benefit, non-deductable items, and adjustments related to finalizing the Company's 2008 tax returns. Exclusive of these items, our effective tax rate reflected our typical 37-39% tax rate.
We reported net earnings from continuing operations of $4.7 million and $4.3 million for the third quarter and first nine months of 2009 compared to net earnings of $4.4 million and $5.0 million in the same periods of the prior year. These decreases reflect the impact of the items previously discussed. Segment Results
Custom Sheet and Rollstock Segment
Net sales were $122.3 million and $342.3 million in the three and nine-month periods ended August 1, 2009, respectively, representing 24% and 28% decreases over the same periods of the prior year. These decreases were caused by:

                                       Three Months     Nine Months
                  Underlying volume         (12 )%           (23 )%
                  Price/Mix                 (12 )             (5 )

                                            (24 )%           (28 )%

For both period comparisons, most of our underlying volume decreases in this segment occurred in the transportation, building and construction, and recreation and leisure markets. The price/mix declines were primarily due to lower resin costs that were passed through to customers as lower selling prices.
This segment's operating earnings were $9.3 million and $13.3 million in the third quarter and first nine months of 2009 compared to $6.8 million and $12.7 million in the same periods of the prior year. The increases in operating earnings for both period comparisons were primarily caused by the benefits of our improvement initiatives partially offset by the decrease in sales volumes and the increase in restructuring and exit costs. Packaging Technologies
Net sales were $52.7 million and $160.1 million in the three and nine-month periods ended August 1, 2009, respectively, representing 25% and 22% decreases over the same periods of the prior year. These decreases were caused by:

                                       Three Months     Nine Months
                  Underlying volume         (15 )%           (18 )%
                  Price/Mix                 (10 )             (4 )

                                            (25 )%           (22 )%

The decreases in underlying volume reflected 6% and 7% declines to packaging-related markets for the third quarter and first nine-months of 2009, which represent approximately 80% of this segment's total sales volume. The remaining declines in underlying volume for the three and nine-month periods were attributable to the portion of this segment which sells to non-packaging related markets. The price/mix declines were primarily due to lower resin costs that were passed through to customers as lower selling prices.
This segment's operating earnings were $8.0 million and $23.6 million in the third quarter and first nine months of 2009 compared to $4.5 million and $14.1 million in the same periods of the prior year. The increase in operating earnings was due to the positive benefits of a higher mix of food packaging products and the benefits of our improvement initiatives, including our Mankato, Minnesota facility consolidation.

Color and Specialty Compounds Segment
   Net sales were $54.4 million and $178.4 million in the three and nine-month
periods ended August 1, 2009, respectively, representing 46% and 43% decreases
over the same periods of the prior year. These decreases were caused by:

                                       Three Months     Nine Months
                  Underlying volume         (41 )%           (41 )%
                  Price/Mix                  (5 )             (2 )

                                            (46 )%           (43 )%

For both period comparisons, the decrease in underlying volume was due to lower sales of compounds across all of our end markets. In particular, underlying volumes sold to the automotive sector of the transportation market, the building and construction market and the film packaging end market were down significantly. The price/mix decline in both period comparisons were caused by lower resin costs that were passed through to customers as lower selling prices, partially offset by a smaller mix of lower priced automotive sales.
This segment's operating earnings were $2.7 million and $5.0 million in the third quarter and first nine months of 2009 compared to $6.2 million and $12.7 million of operating earnings in the same periods of the prior year. For both period comparisons, these declines were primarily caused by the decrease in sales volumes, partially offset by benefits from our improvement initiatives. Engineered Products Group
Net sales were $12.3 million and $41.9 million in the three and nine-month periods ended August 1, 2009, respectively, representing 20% and 17% decreases over the same periods of the prior year. These decreases were caused by:

                                       Three Months     Nine Months
                  Underlying volume         (25 )%           (22 )%
                  Price/Mix                   5                5

                                            (20 )%           (17 )%

The decreases in underlying volume for both period comparisons were largely caused by lower sales volume to the lawn and garden markets due to decreases in discretionary spending in the economy.
This group's operating earnings were $2.6 million and $8.9 in the third quarter and first nine months of 2009 compared to $2.3 million and $7.4 million in the same periods of the prior year. The increase in operating earnings for both period comparisons was largely was due to the positive benefits of our improvement initiatives, partially offset by the decline in sales volumes. Corporate
Corporate expenses are reported as selling, general and administrative expenses in the consolidated condensed statement of operations and include corporate office expenses, information technology costs, professional fees and the impact of foreign currency exchange. Corporate expenses were $9.7 million and $27.6 million in third quarter and the first nine months of 2009 compared to $9.2 million and $26.5 million in the same periods of the prior year. Excluding the impact of foreign currency exchange, corporate expenses were essentially flat in both period comparisons reflecting the positive benefits of our improvement initiatives offset by higher corporate expenses from our transition to a shared service environment.