Third Quarter 2009 VS. Third Quarter 2008

OVERVIEW

Sales for the third quarter of 2009 were down from the same quarter last year. Sales for 2009 continued to trail the prior year in the third quarter primarily due to the recession, the housing decline and the end of the sales surge for vapor recovery systems to meet regulatory requirements in California. Earnings decreased in 2009 due to the lower sales in Fueling Systems and restructuring expenses. Water Systems, which represents over 80 percent of the Company's sales in the third quarter of 2009, reported a 12 percent increase in operating income before restructuring charges compared to the third quarter 2008 and improved operating income margins before restructuring charges of 320 basis points compared to the prior year. Water Systems operating income after restructuring charges increased 11 percent compared to the third quarter 2008 and the Water Systems segment improved operating income margins before restructuring charges of 300 basis points compared to the prior year. The rate of sales decline in Water Systems has abated sequentially each quarter this year. Cash flow from operations increased by $60.5 million compared to the first nine months of 2008 and net debt has been reduced from $141 million at the end of the third quarter last year to $81 million at the end of the third quarter 2009.

RESULTS OF OPERATIONS

Net Sales

                    Q3 2009       Q3 2008       2009 v 2008
                                  Net Sales
Water Systems     $   137.4     $   154.6     $       (17.2 )
Fueling Systems   $    28.6     $    61.2     $       (32.6 )
Other             $       -     $       -     $           -
Consolidated      $   166.0     $   215.8     $       (49.8 )

Third quarter sales were $166.0 million, down $49.8 million or 23 percent compared to $215.8 million in 2008. Sales from businesses acquired during the last 12 months were $6.5 million or 3 percent. Sales revenue decreased by $5.5 million or 2 percent in the quarter due to foreign currency translation. Overall sales declined organically, exclusive of acquisitions and foreign currency translation, $50.8 million or 24 percent for the third quarter.

Net Sales-Water Systems
Water Systems sales worldwide were $137.4 million, down $17.2 million or 11 percent for the third quarter of 2009 compared to the same period for 2008. Sales from businesses acquired during the last 12 months were $6.5 million. Sales revenue decreased by $5.4 million in the quarter due to foreign currency translation. The organic sales decline, excluding foreign currency translation and acquisitions, was $18.3 million or 12 percent. In international markets, Water Systems sales declined organically by 6 percent as sales gains in Latin America and the Asia/Pacific region were offset by a decline in Europe and Africa. In the United States and Canada, Water Systems sales declined organically by 17 percent due primarily to the housing recession and inventory reductions by distributors.

Net Sales-Fueling Systems
Fueling Systems sales worldwide were $28.6 million, a decrease of $32.6 million or 53 percent for the third quarter of 2009 compared to the same period for 2008. The decline was primarily caused by reduced sales of the Company's vapor recovery products in the State of California, a reduction of 90 percent compared to the same period in the prior year. In California, the Company estimates that there are approximately 1,800 stations that have yet to comply with the mandate out of the total 10,600 stations in the State. However, the Company believes that many station owners are waiting to assess the State's policy on enforcing major fines for non-compliance and the Company also believes that some station owners are having difficulty arranging financing. As a result, it is difficult for the Company to predict with certainty what percentage of the remaining stations will ultimately comply.

Cost of Sales
Cost of sales as a percent of net sales for the third quarter of 2009 and 2008 was 69.7 percent and 69.2 percent, respectively. The Company's gross profit margin for the third quarter of 2009 and 2008 was 30.3 percent and 30.8 percent, respectively. The Company's consolidated gross profit was $50.2 million for the third quarter of 2009, down $16.2 million from $66.5 million in the third quarter of 2008. The gross profit was significantly impacted by the decline in Fueling Systems sales in the third quarter. However, due to the improvement of Water Systems gross profit margin in the quarter, overall gross profit margin only declined by 50 basis points to 30.3 percent.

Restructuring Expenses
Restructuring expenses for the third quarter of 2009 were approximately $1.0 million. Restructuring expenses included asset impairments, severance expenses and manufacturing equipment relocation costs.

Selling, General and Administrative ("SG&A") Selling, general, and administrative expenses decreased by $5.1 million or 13 percent in the third quarter of 2009 compared to the third quarter last year. Acquisitions, primarily Vertical in Italy, added $0.8 million of SG&A expenses to the Water Systems segment for the third quarter of 2009. SG&A expense as a percent of net sales for the third quarter of 2009 and 2008 was 20.4 percent and 18.0 percent, respectively. The increase in percentage terms is due to lower sales as SG&A decreases, consistent with management's fixed cost reduction initiatives, were not as large in percentage terms as the Company's drop in sales volume.