Overview

The Company designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid materials. Management classifies the Company's business into three reportable segments: Industrial, Contractor and Lubrication. Key strategies include development of new products, expansion of distribution and new market penetration.

The following Management's Discussion and Analysis reviews significant factors affecting the Company's results of operations and financial condition. This discussion should be read in conjunction with the financial statements and the accompanying notes to the financial statements.

Results of Operations

Net sales, net earnings and earnings per share were as follows (in millions
except per share amounts and percentages):


                              Thirteen Weeks Ended                   Thirty-nine Weeks Ended
                       Sep 25,      Sep 26,         %           Sep 25,       Sep 26,         %
                         2009         2008        Change         2009           2008        Change

Net Sales              $  147.3     $  207.2          (29 )%   $   432.9      $  650.6          (33 )%
Net Earnings           $   17.3     $   32.8          (47 )%   $    31.7      $  110.8          (71 )%
Diluted Net Earnings
  per Common Share     $   0.29     $   0.54          (46 )%   $    0.53      $   1.81          (71 )%

Weak economic conditions worldwide continued to affect the Company's operating results. Sales and orders decreased in all segments and regions. Currency translation had an unfavorable effect on sales ($2 million for the quarter and $14 million year-to-date) and net earnings ($1 million for the quarter and $5 million year-to-date). Year-to-date, the Company has recorded $5 million of cost related to workforce reductions, mostly in the first quarter. The resulting decrease in cost structure contributed to improvements in second and third quarter net earnings compared to the first quarter.

Consolidated Results

Sales by geographic area were as follows (in millions):


                                               Thirteen Weeks Ended             Thirty-nine Weeks Ended
                                             Sep 25,          Sep 26,         Sep 25,            Sep 26,
                                              2009              2008            2009               2008

Americas 1                                 $      84.1       $    112.8     $      252.6       $      360.5
Europe 2                                          35.6             57.8            105.9              189.4
Asia Pacific                                      27.6             36.6             74.4              100.7
Consolidated                               $     147.3       $    207.2     $      432.9       $      650.6

1 North and South America, including the U.S. 2 Europe, Africa and Middle East

Sales for the quarter were down 25 percent in the Americas, 39 percent in Europe (36 percent at consistent translation rates) and 25 percent in Asia Pacific. Year-to-date sales were down 30 percent in the Americas, 44 percent in Europe (38 percent at consistent translation rates) and 26 percent in Asia Pacific. Consolidated sales were down 29 percent for the quarter and 33 percent year-to-date.

Gross profit margin, expressed as a percentage of sales, was 53 percent for the quarter and 50 percent year-to-date, compared to 53 percent and 54 percent, respectively, for the comparable periods last year. For the quarter, the favorable effects of pricing, material costs and cost reduction actions were offset by decreases from lower production volume and increased pension cost. Decreases in the year-to-date rate were due to lower production volumes (approximately 5 percentage points), unfavorable currency translation rates (approximately 1 percentage point) and increased pension cost (approximately 1 percentage point). Decreases were offset somewhat by the effects of favorable material costs and pricing.

Total operating expenses for the quarter and year-to-date were down 10 percent and 8 percent, respectively. For both the quarter and year-to-date, the effects of spending reductions and lower volume were partially offset by higher pension expenses. Year-to-date, a $4 million decrease from translation effects was partially offset by $2 million related to workforce reductions.

Effective income tax rates were 30 percent for the quarter and 31 percent year-to-date, down from last year's rates of 34 percent for the quarter and 33 percent year-to-date. A higher-than-expected benefit upon filing of prior year tax returns contributed to lower rates in 2009. Effective rates were higher in 2008 because the R&D tax credit was not renewed until the fourth quarter and no credit was included in the provisions for the first three quarters.

Segment Results

Certain measurements of segment operations compared to last year are summarized
below:


Industrial
                            Thirteen Weeks Ended            Thirty-nine Weeks Ended
                           Sep 25,         Sep 26,        Sep 25,            Sep 26,
                             2009            2008           2009               2008

Net sales (in millions)
Americas                  $     37.0       $   54.1     $      108.3       $      169.0
Europe                          22.0           36.4             65.7              122.2
Asia Pacific                    19.2           27.2             52.8               73.8
Total                     $     78.2       $  117.7     $      226.8       $      365.0

Operating earnings as a
percentage of net sales           26 %           30 %             20 %               32 %

For the quarter, Industrial segment sales decreased 32 percent in the Americas, 40 percent in Europe (37 percent at consistent translation rates) and 29 percent in Asia Pacific. Year-to-date sales decreased 36 percent in the Americas, 46 percent in Europe (41 percent at consistent translation rates) and 28 percent in Asia Pacific.

In the third quarter, the impact of low volume on operating earnings was partially offset by the impacts of lower selling-related expenses and spending reductions initiated in prior quarters. Low volume, workforce reduction costs and currency translation affected year-to-date operating earnings as a percentage of sales.

Contractor
                             Thirteen Weeks Ended             Thirty-nine Weeks Ended
                           Sep 25,          Sep 26,         Sep 25,            Sep 26,
                             2009             2008            2009               2008

Net sales (in millions)
Americas                  $     36.2       $     41.7     $      109.0       $      135.5
Europe                          12.5             19.4             37.3               61.3
Asia Pacific                     6.7              6.7             16.9               19.2
Total                     $     55.4       $     67.8     $      163.2       $      216.0

Operating earnings as a
percentage of net sales           20 %             22 %             15 %               23 %

For the quarter, Contractor segment sales decreased 13 percent in the Americas and 35 percent in Europe (32 percent at consistent translation rates). Year-to-date sales decreased 20 percent in the Americas, 39 percent in Europe (33 percent at consistent translation rates) and 12 percent in Asia Pacific.

In the third quarter, the impact of low volume on operating earnings was partially offset by the impacts of lower selling-related expenses and spending reductions initiated in prior quarters. Low volume, workforce reduction costs, currency translation and sustained product development spending affected year-to-date operating earnings as a percentage of sales. Contractor year-to-date operating results were also affected by sales, costs and expenses related to the rollout of entry-level paint sprayers to additional paint and home center stores in both 2009 and 2008.

Lubrication
                              Thirteen Weeks Ended             Thirty-nine Weeks Ended
                           Sep 25,            Sep 26,        Sep 25,             Sep 26,
                             2009              2008           2009                2008

Net sales (in millions)
Americas                  $     10.9         $    17.0     $      35.4         $      56.1
Europe                           1.1               2.1             2.9                 5.8
Asia Pacific                     1.7               2.7             4.6                 7.7
Total                     $     13.7         $    21.8     $      42.9         $      69.6

Operating earnings as a
percentage of net sales           (1 )%             16 %            (8 )%               18 %

For the quarter, Lubrication segment sales decreased 35 percent in the Americas, 49 percent in Europe (47 percent at consistent translation rates) and 39 percent in Asia Pacific. Year-to-date sales decreased 37 percent in the Americas, 50 percent in Europe (47 percent at consistent translation rates) and 41 percent in Asia Pacific.

In the third quarter, the impact of low volume on operating earnings was partially offset by the impacts of lower selling-related expenses and spending reductions initiated in prior quarters. Low volume, workforce reduction costs and increased product development expense affected year-to-date operating earnings as a percentage of sales. Mix of products sold and costs related to discontinued products contributed to lower margin rates in the Lubrication segment.

Liquidity and Capital Resources

In the first nine months of 2009, the Company used cash to reduce the borrowings under its long-term line of credit by $73 million and paid dividends of $34 million. The Company also made a $15 million voluntary contribution to a funded defined benefit pension plan. Significant uses of cash and borrowings in the first nine months of 2008 included $114 million for purchases and retirement of Company common stock, $40 million for business acquisitions and $34 million for payment of dividends.

Since the end of 2008, inventories have been reduced by $31 million. Accounts receivable decreased by $21 million from continuing collections and lower sales levels.

At September 25, 2009, the Company had various lines of credit totaling $282 million, of which $162 million was unused. Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2009.

Outlook

While economic conditions continue to create headwinds for the business, management is encouraged by improved profitablility in each of the last two quarters, resulting from efforts to improve production costs and control expenses. While management is cautious about predicting stronger sales and further improvement in profitability in the near-term, it expects to continue investing in growth initiatives including product development, international expansion and entering new markets. Management remains confident that the Company will emerge from the recession with strong, profitable growth.

SAFE HARBOR CAUTIONARY STATEMENT

A forward-looking statement is any statement made in this report and other reports that the Company files periodically with the Securities and Exchange Commission, or in press or earnings releases, analyst briefings and conference calls, which reflects the Company's current thinking on market trends and the Company's future financial performance at the time they are made. All forecasts and projections are forward-looking statements.

The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 by making cautionary statements concerning any forward-looking statements made by or on behalf of the Company. The Company cannot give any assurance that the results forecasted in any forward-looking statement will actually be achieved. Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to: economic conditions in the United States and other major world economies, currency fluctuations, political instability, changes in laws and regulations, and changes in product demand. Please refer to Item 1A of, and Exhibit 99 to, the Company's Annual Report on Form 10-K for fiscal year 2008 for a more comprehensive discussion of these and other risk factors.

Investors should realize that factors other than those identified above and in Item 1A and Exhibit 99 might prove important to the Company's future results. It is not possible for management to identify each and every factor that may have an impact on the Company's operations in the future as new factors can develop from time to time.