The following table summarizes financial information for our five current reportable segments for the years ended December 31, 2006, 2007 and 2008:

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Results of Operations

Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008

        The principal factors impacting us during the nine months ended September 30, 2009 compared with the nine months ended September 30, 2008, were:

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the continued impact of the current global economic recession, resulting in lower sales volumes and reduced earnings across all of our reportable segments;



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costs incurred and savings realized related to our Profit Improvement Plan, primarily in our Cequent segment;



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compression of gross profit margins in certain of our segments due to lower absorption of fixed costs and, during the first quarter of 2009, sales of higher-cost inventory; and



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increases in the value of the U.S. dollar as compared to the currencies in other countries where we operate.

        Overall, net sales decreased approximately $193.1 million, or approximately 23.9%, for the nine months ended September 30, 2009, as compared with the nine months ended September 30, 2008. Although a few of our businesses benefited from new product introductions during the first three quarters of 2009, net sales declined in each of our five reportable segments, generally due to lower sales volumes resulting from the continued global economic recession. In addition, net sales were unfavorably impacted by approximately $16.8 million as a result of currency exchange, as our reported results in U.S. dollars were negatively impacted by weaker foreign currencies.

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        Gross profit margin (gross profit as a percentage of sales) approximated 24.9% and 26.6% for the nine months ended September 30, 2009 and 2008, respectively, declining primarily as a result of the lower sales volumes and lower absorption of fixed costs associated with lower production and/or sales levels. In addition, gross profit was negatively impact by approximately $4.8 million as a result of currency exchange, as our reported results in U.S. dollars were negatively impacted by weaker foreign currencies.

        Operating profit margin (operating profit as a percentage of sales) approximated 6.5% and 10.6% for the nine months ended September 30, 2009 and 2008, respectively. Operating profit decreased approximately $45.6 million, or 53.3%, to $40.1 million for the nine months ended September 30, 2009, from $85.7 million for the nine months ended September 30, 2008. Consistent with the decrease in gross profit, operating profit also declined primarily as a result of the lower sales volumes and lower absorption of fixed costs associated with lower production and/or sales levels. However, we did reduce our selling, general and administrative expenses by approximately $15.8 million in the first three quarters of 2009 compared to the first three quarters of 2008, primarily as a result of realization of savings associated with our Profit Improvement Plan in the third quarter of 2009 and concerted efforts to reduce discretionary spending in response to the current economic conditions.

        Adjusted EBITDA margin (Adjusted EBITDA as a percentage of sales) approximated 16.2% and 14.0% for the nine months ended September 30, 2009 and 2008, respectively. Adjusted EBITDA decreased approximately $13.4 million for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008. After consideration of the $29.4 million gross gain on extinguishment of debt, an increase in year-over-year depreciation expense of approximately $1.4 million, gains on transactions denominated in foreign currencies in the nine months ended September 30, 2009 of approximately $0.4 million as compared to losses on transactions denominated in foreign currencies in the nine months ended September 30, 2008 of approximately $0.4 million, and $0.6 million lower year-over-year expense for receivables sales and securitization, the change in Adjusted EBITDA is consistent with the change in operating profit between years.

        See below for a discussion of operating results by segment.

        Packaging.    Net sales decreased approximately $22.8 million, or 17.7%, to $106.1 million in the nine months ended September 30, 2009, as compared to $128.9 million in the nine months ended September 30, 2008. Overall, sales decreased approximately $7.9 million due to currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales of our specialty dispensing products and new product introductions increased by approximately $9.9 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, due primarily to increased sales into the personal care markets, pharmaceuticals, and the food industries. Sales of our industrial closures, rings and levers decreased by approximately $24.8 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily as a result of the continued general economic slowdown.

        Packaging's gross profit decreased approximately $6.0 million to $37.7 million, or 35.5% of sales, in the nine months ended September 30, 2009, as compared to $43.7 million, or 33.9% of sales, in the nine months ended September 30, 2008. The decrease in gross profit between years is primarily attributed to lower sales volumes of our industrial products and unfavorable currency exchange, the impact of which was partially offset by lower steel and resin costs year-over-year.

        Packaging's selling, general and administrative expenses decreased approximately $3.0 million to $14.5 million, or 13.7% of sales, in the nine months ended September 30, 2009, as compared to $17.5 million, or 13.6% of sales, in the nine months ended September 30, 2008. Discretionary spending has been reduced from 2008 levels, and additional selling, and general and administrative cost reduction plans have been implemented to better align the fixed cost structure with current business requirements resulting from the general economic decline.

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        Packaging's operating profit decreased approximately $3.1 million to $23.4 million, or 22.0% of sales, in the nine months ended September 30, 2009, as compared to $26.5 million, or 20.6% of sales, in nine months ended September 30, 2008. The decrease in operating profit between years is primarily attributed to lower sales volumes of our industrial products and unfavorable currency exchange, which were partially offset by lower steel and resin costs, and reduced selling, general and administrative costs as a result of our cost reduction plans.

        Packaging's Adjusted EBITDA decreased approximately $3.6 million to $32.8 million, or 30.9% of sales, in the nine months ended September 30, 2009, as compared to $36.4 million, or 28.3% of sales, in the nine months ended September 30, 2008, consistent with the change in operating profit between years after consideration of increased foreign currency transaction losses of approximately $0.2 million during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 and $0.4 million reduced depreciation expense in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008.

        Energy.    Net sales for the nine months ended September 30, 2009 decreased approximately $46.1 million, or 29.3%, to $111.3 million, as compared to $157.4 million in the nine months ended September 30, 2008. Sales of specialty gaskets and related fastening hardware decreased approximately $16.3 million as a result of reduced levels of turn-around activity at petrochemical refineries and decreased sales demand from the chemical industry, as customers continue to defer maintenance and new programs that require our replacement and specialty gaskets and hardware. Sales of slow speed and compressor engines and related products decreased by approximately $29.8 million, due to a reduction of drilling activity in North America and customers deferring completion of previously drilled wells. Sales of compressor products increased slightly, as the Company continues to develop new products to add to its well-site content.

        Gross profit within Energy decreased approximately $17.4 million to $27.3 million, or 24.6% of sales, in the nine months ended September 30, 2009, as compared to $44.7 million, or 28.4% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $13.1 million as a result of the reduction in sales levels between years. The remaining decrease in gross profit is primarily attributable to lower absorption of fixed costs as a result of the lower sales volumes.

        Selling, general and administrative expenses within Energy decreased approximately $2.1 million to $17.9 million, or 16.1% of net sales, in the nine months ended September 30, 2009, as compared to $20.0 million or 12.7% of net sales, in the nine months ended September 30, 2008. This decrease was primarily due to reduced sales commissions, compensation and other administrative costs in an effort to match spending and headcount to current production volumes. These decreases were partially offset by the opening of two new branches within our specialty gasket business, one in Salt Lake City, Utah, and one in Rotterdam, Netherlands, in 2009, which has increased selling, general and administrative expenses in the first three quarters of 2009 by approximately $0.7 million.

        Overall, operating profit within Energy decreased approximately $15.3 million to $9.4 million, or 8.4% of sales, in the nine months ended September 30, 2009, as compared to $24.7 million, or 15.7% of sales, in the nine months ended September 30, 2008, due principally to lower sales volumes and lower absorption of fixed costs, which were partially offset by reductions in commissions, salaries and other administrative costs in light of lower sales volumes.

        Energy's Adjusted EBITDA decreased $15.0 million to $11.7 million, or 10.5% of sales, in the nine months ended September 30, 2009, as compared to $26.7 million, or 16.9% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years.

        Aerospace & Defense.    Net sales for the nine months ended September 30, 2009 decreased approximately $9.3 million, or 14.0%, to $56.5 million, as compared to $65.8 million in the nine months ended September 30, 2008. Sales in our aerospace business decreased approximately $8.9 million, primarily due to lower blind-bolt fastener sales resulting from program delays beginning in the first quarter of 2009 at commercial airframe manufacturers and inventory reductions by our distribution customers, who are adjusting inventory levels in response to the delayed programs and the current

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economic uncertainty. This decrease was partially offset by sales of new products, primarily titanium screws, of approximately $4.4 million during the first three quarters of 2009, which increased our content on certain aircraft. Sales in our defense business decreased approximately $0.4 million. Revenue associated with managing the relocation and closure of the defense facility increased $2.7 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. In addition, we had approximately $1.9 million of new product sales during the nine months ended September 30, 2009. These increases in revenue were more than offset by a decrease in cartridge sales of approximately $5.0 million in the nine months ended September 30, 2009 compared with the nine months ended September 30, 2008, as our customer had been building its inventory throughout 2008 in advance of the relocation of the facility, which began in late second quarter 2009.

        Gross profit within Aerospace & Defense decreased approximately $4.5 million to $24.9 million, or 44.0% of sales, in the nine months ended September 30, 2009, from $29.4 million, or 44.7% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $4.1 million as a result of the decline in sales levels between years. This decrease in gross profit was also impacted by lower absorption of fixed costs as a result of lower production and/or sales levels, primarily within our aerospace business.

        Selling, general and administrative expenses decreased approximately $0.7 million to $6.5 million, or 11.4% of sales, in the nine months ended September 30, 2009, as compared to $7.2 million, or 10.9% of sales, in the nine months ended September 30, 2008 due primarily to reduced sales commissions and expenses and discretionary spending in light of the decrease in sales levels between years.

        Operating profit within Aerospace & Defense decreased approximately $3.8 million to $18.4 million, or 32.6% of sales, in the nine months ended September 30, 2009, as compared to $22.2 million, or 33.8% of sales, in the nine months ended September 30, 2008, primarily due to lower sales volumes and lower absorption of fixed costs, which were partially offset by reduced selling, general and administrative expenses.

        Aerospace & Defense's Adjusted EBITDA decreased $3.4 million to $20.2 million, or 35.7% of sales, in the nine months ended September 30, 2009, as compared to $23.6 million, or 35.8% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years after consideration of approximately $0.4 million of higher depreciation expense in the first nine months of 2009 compared to the first nine months of 2008 resulting from the full-run-rate impact of procurement of additional machinery and equipment in our aerospace business during mid-2008.

        Engineered Components.    Net sales for the nine months ended September 30, 2009 decreased approximately $52.1 million, or 50.5%, to $51.1 million, as compared to $103.2 million in the nine months ended September 30, 2008. Sales within our specialty fittings business declined $3.1 million due to lower sales of our core tube nut products which have been significantly impacted by the continued weak domestic automotive market demand, this decrease was partially offset by new product offerings for automotive fuel systems. Sales in our industrial cylinder and precision tool cutting businesses decreased $40.7 million and $4.3 million, respectively, due primarily to the global economic recession, which has significantly impacted industrial applications and products. Finally, sales in our medical device business decreased $4.0 million due to certain contract manufacturing awards that did not recur in the first nine months of 2009.

        Gross profit within Engineered Components decreased approximately $15.3 million to $4.3 million, or 8.5% of sales, in the nine months ended September 30, 2009, from $19.6 million, or 19.0% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $9.9 million as a result of the decline in sales levels between years. This decrease in gross profit was also impacted by sales of higher-cost inventory, primarily related to steel, in excess of the businesses' ability to secure price increases and lower absorption of fixed costs as a result of lower production and/or sales levels.

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        Selling, general and administrative expenses decreased approximately $1.7 million to $5.2 million, or 10.3% of sales, in the nine months ended September 30, 2009, as compared to $6.9 million, or 6.7% of sales, in the nine months ended September 30, 2008 due primarily to lower sales commissions and reduced discretionary spending in light of the decrease in sales levels between years.

        Operating profit within Engineered Components decreased approximately $13.5 million to a loss of $1.0 million, or (2.0%) of sales, in the nine months ended September 30, 2009, as compared to $12.5 million, or 12.1% of sales, in the nine months ended September 30, 2008, primarily due to lower sales volumes and lower absorption of fixed costs, which were partially offset by reduced sales commissions and discretionary spending within selling, general and administrative expenses.

        Engineered Components' Adjusted EBITDA decreased approximately $13.5 million to $2.1 million, or 4.2% of sales, in the nine months ended September 30, 2009, as compared to $15.6 million, or 15.2% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years.

        Cequent.    Net sales decreased approximately $62.9 million to $290.1 million in the nine months ended September 30, 2009, as compared to $352.9 million in the nine months ended September 30, 2008. Net sales were unfavorably impacted by approximately $8.1 million of currency exchange, as our reported results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales in our retail business decreased $0.4 million, due to reduced sales volumes to existing retail customers due to the economic uncertainty, which was mostly offset by considerable additional business at a few large customers and the addition of several new customers during 2009. Sales within our performance products business (includes the legacy towing, trailering and electrical businesses) decreased by $50.5 million, due to the continued soft demand in the majority of the end markets we serve due to the current uncertain economic conditions. Sales in our Australia/Asia Pacific business decreased approximately $3.9 million, due primarily to decreases in certain original equipment manufacturer revenue and the overall global economic recession, which improved in the third quarter of 2009 due to the government incentive stimulus, which bolstered revenues during the quarter.

        Cequent's gross profit decreased approximately $18.4 million to $58.7 million, or 20.2% of sales, in the nine months ended September 30, 2009, from approximately $77.1 million, or 21.9% of sales, in the nine months ended September 30, 2008. Of the decline in gross profit between years, approximately $13.7 million is attributed to the decline in sales between periods and $1.5 million is attributed to unfavorable currency exchange. The remaining decrease in gross profit was due to sales of higher-cost inventory in excess of the businesses' ability to secure sales price increases during the first two quarters of 2009, lower absorption of fixed costs as a result of lower production and/or sales levels and accelerated depreciation expense related to machinery and equipment in our Mosinee, WI manufacturing facility that will no longer be utilized following the closure of the facility during the fourth quarter of 2009.

        Selling, general and administrative expenses decreased approximately $6.9 million to $52.1 million, or 18.0% of sales, in the nine months ended September 30, 2009, as compared to $59.0 million, or 16.7% of sales, in the nine months ended September 30, 2008, due primarily to reductions in salaries, sales promotions, sales commissions and other discretionary spending, all as a part of our Profit Improvement Plan to better align the spending and cost structure with the current demand and production levels. These decreases were partially offset by severance charges of approximately $1.6 million incurred in the first quarter of 2009 associated with the involuntary termination of employees located at our Mosinee, WI manufacturing facility, which is scheduled to be closed during the fourth quarter of 2009.

        Cequent's operating profit declined approximately $11.1 million to $6.8 million, or 2.3% of sales, in the nine months ended September 30, 2009, from $17.9 million, or 5.1% of net sales, in the nine months ended September 30, 2008. The decline in operating profit between years was primarily due to lower sales volumes, unfavorable foreign currency exchange, sales of higher-cost inventory, lower absorption of fixed costs and costs associated with the closure of the Mosinee, WI manufacturing facility, which were partially offset by cost reductions as part of the Profit Improvement Plan.

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        Cequent's Adjusted EBITDA decreased approximately $9.2 million to $21.7 million, or 7.5% of sales, for the nine months ended September 30, 2009, from $30.9 million, or 8.8% of sales, for the nine months ended September 30, 2008. In the nine months ended September 30, 2009, Cequent recognized gains of approximately $0.5 million on transactions denominated in foreign currencies, as compared to losses of $0.4 million in the nine months ended September 30, 2008. In addition, depreciation expense was approximately $1.1 million higher in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily as a result of accelerated depreciation incurred in the first nine months of 2009 in connection with certain machinery and equipment that will no longer be utilized following the closure of the Mosinee facility. After consideration of these two items, the change in Adjusted EBITDA is consistent with the decline in operating profit between years.

        Corporate Expenses (Income).    Corporate expenses (income) included in operating profit and Adjusted EBITDA consist of the following:

        Corporate expenses included in operating profit decreased approximately $1.4 million to $16.8 million for the nine months ended September 30, 2009, from $18.2 million for the nine months ended September 30, 2008. During the first nine months of 2009, we recorded a charge of approximately $2.9 million associated with the termination of our former chief executive officer. During the first nine months of 2008, we recorded a charge of approximately $1.6 million related to severance under our corporate office restructuring. This net increase in employee costs and related benefits of approximately $1.3 million was more than offset by $0.8 million of reduced non-cash equity compensation expense, and significant reductions in discretionary and overall spending levels due to the reduction in corporate office headcount and in response to the general economic conditions in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. In addition, during the first nine months of 2009, we retired approximately $73.2 million face value of our senior subordinated notes, resulting in a net gain of approximately $28.3 million after considering non-cash debt extinguishment costs of $1.1 million.

        Interest Expense.    Interest expense decreased approximately $7.6 million, to $34.6 million, for the nine months ended September 30, 2009, as compared to $42.2 million for the nine months ended September 30, 2008. The decrease in interest expense is primarily the result of a decrease in our effective weighted average interest rate on variable rate U.S. borrowings to approximately 3.9% during the nine months ended September 30, 2009, from approximately 5.4% during the nine months ended September 30, 2008. Partially offsetting this reduction in interest rates was an increase in our weighted average U.S. borrowings from approximately $297.8 million in the nine months ended September 30, 2008 to approximately $315.7 million in the nine months ended September 30, 2009, as we utilized our revolving credit facility as our primary source to fund operations in the first nine months of 2009 (as it was our lowest cost source of borrowings), as compared to utilizing our securitization facility as the primary source of operational funding in the first nine months of 2008 when it was the more cost-effective alternative. In addition, we recorded approximately $2.0 million lower interest expense related to our senior subordinated notes in the first nine months of 2009 compared to the first nine

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months of 2008, as we retired approximately $81.2 million between December 2008 and the third quarter of 2009.

        Other Expense, Net.    Other expense, net decreased approximately $1.3 million, to $1.7 million for the nine months ended September 30, 2009. In the first nine months of 2009, we incurred approximately $1.6 million of expenses in connection with the use of our accounts receivable securitization facility and sales of receivables to fund working capital needs and recorded approximately $0.3 million of gains on transactions denominated in foreign currencies. In the first nine months of 2008, we incurred approximately $2.2 million of expenses in connection with the use of our accounts receivable securitization facility and sales of receivables to fund working capital needs and recorded approximately $0.4 million of losses on transactions denominated in foreign currencies. There were no other individually significant amounts incurred or changes in amounts incurred in either of the nine month periods ended September 30, 2009 and 2008.

        Income Taxes.    The effective income tax rates for the nine months ended September 30, 2009 and 2008 were 38% and 37%, respectively. The increase in the effective tax rate in the nine months ended September 30, 2009 compared to the same period a year ago is primarily due to recording a valuation allowance against a loss carry-forward of approximately $1.0 million and $0.6 million of expense related to a deferred tax correction. These increases were mostly offset by a shift in pre-tax income from higher-taxed jurisdictions to lower-taxed jurisdictions. In the nine months ended September 30, 2009, the Company reported domestic and foreign pre-tax income of approximately $17.5 million and $14.6 million, respectively. In the nine months ended September 30, 2008, the Company reported domestic and foreign pre-tax income of approximately $24.4 million and $16.1 million, respectively.

        Discontinued Operations.    The results of discontinued operations consist of our N.I. Industries property management line of business, which is currently held for sale, and our specialty tapes and laminates business, which was sold in February 2009. Loss from discontinued operations, net of income tax benefit, was $8.7 million for the nine months ended September 30, 2009, as compared to income from discontinued operations, net of income tax expense, of $0.3 million for the nine months ended September 30, 2008. See Note 2, "Discontinued Operations and Assets Held for Sale," to our consolidated financial statements included in our Form 10-Q for the period ended September 30, 2009.

Year Ended December 31, 2008 Compared with Year Ended December 31, 2007

        The principal factors impacting us during the year ended December 31, 2008 compared with the year ended December 31, 2007 were:

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strong demand in certain industrial sectors during the first three quarters of 2008, most notably energy and aerospace, positively impacting our specialty gasket and engine businesses in the Energy operating segment and the aerospace fastener business in our Aerospace & Defense operating segment;



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continued declines in end-market demand across most market channels in our Cequent operating segments as a result of reduced consumer discretionary spending in response to unfavorable economic conditions including higher fuel prices, uncertain credit market and interest rate environment and diminished consumer confidence;



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non-cash goodwill and indefinite-lived intangible asset impairment charges of $172.2 million and $171.2 million in the fourth quarter of 2008 and 2007, respectively, as a result of declining market capitalization, the impact of weakening demand and order intake for the Company's products due to recessionary forces in the US and globally, the significant decline in the financial markets and continued uncertainty and lack of availability in the credit markets;

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inflationary increases in raw material prices, most notably for steel and resin, and increases in costs and freight related to foreign-sourced products, which impacted our businesses most significantly in the second and third quarters of 2008; and



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completion of our initial public offering of our common stock in May 2007, the use of proceeds therefrom to retire $100.0 million face value of senior subordinated notes, to effect early termination of operating leases and acquire underlying machinery and equipment assets and to terminate an advisory services agreement, and the related cost savings from such retirements/terminations;

        Overall, net sales increased $18.2 million, or approximately 1.8%, in 2008 as compared with 2007. Of this increase, approximately $5.6 million is due to currency exchange as our reported results in U.S. dollars benefited from stronger foreign currencies. Packaging's net sales increased $9.4 million, or approximately 6.2%, in 2008 as compared with 2007 due to increases in our specialty dispensing products and new product introductions and the favorable effects of currency exchange. Net sales within Energy increased $50.3 million, or 30.8%, in 2008 as compared with 2007, due to continued high levels of turnaround activity at petroleum refineries and petrochemical facilities and increases in sales of engines and engine-related products. Net sales within our Aerospace & Defense segment increased $15.8 million, or 19.8%, in 2008 as compared with 2007, due to improved demand in our aerospace fastener and defense businesses. Engineered Components' net sales increased $1.5 million, or approximately 1.2%, in 2008 as compared with 2007, due to increased sales in our industrial cylinder business and a full year sales associated with a medical device manufacturer acquired in August 2007, which were partially offset by sales declines in our specialty fittings business due to the severe decline in domestic automotive end market. Cequent's net sales decreased $58.6 million, or approximately 12.1%, in 2008 as compared with 2007, due to continued weak end-market demand and a result of retail promotional programs in 2007 that did not recur in 2008.

        Gross profit margin (gross profit as a percentage of sales) approximated 25.8% and 27.3% for 2008 and 2007, respectively. Packaging's gross profit margin decreased to approximately 33.2% in 2008, from 33.8% in 2007, primarily due to increases in raw material and commodity costs that, while recovered, were not recovered at cost plus a normal gross profit margin. Energy's gross profit margin decreased to approximately 27.7% in 2008, from 29.1% in 2007, due to the opening of a gasket branch in the Netherlands, increased costs of imported materials and a less favorable product sales mix. Gross profit margin within our Aerospace & Defense segment increased to approximately 42.7% in 2008, from 42.4% in 2007, due to higher sales and improved leverage and efficiencies. Engineered Components' gross profit margin decreased to 16.9% in 2008, from 21.2% in 2007, primarily to commodity price increases not fully recovered and lower absorption of fixed costs due to reducing scheduled production as a result of the significant decline in industrial demand at the end of 2008. Cequent's gross profit margin decreased to 20.8% in 2008, from 23.7% in 2007, due primarily to increasing commodity and freight costs and higher costs of promotional programs, operating inefficiencies and lower absorption of fixed costs resulting from reduced manufacturing activity in response to the decrease in demand and a less favorable product mix, which were partially offset by savings as a result of the closure of the Huntsville, Ontario, Canada facility in the fourth quarter of 2007.

        Operating profit (loss) margin (operating profit (loss) as a percentage of sales) approximated (7.5)% and (9.4)% in 2008 and 2007, respectively. Operating profit increased approximately $18.3 million, to an operating loss of $76.4 million in 2008, compared to an operating loss of $94.7 million in 2007. In 2008, we recorded a non-cash goodwill and indefinite-lived intangible asset impairment charge of $172.2 million in our Packaging, Engineered Components, and Cequent segments. In 2007, we recorded a non-cash goodwill and indefinite-lived intangible asset impairment charge of $171.2 million in our Cequent segment. In addition to these impairment charges, during 2007, we utilized proceeds from our IPO to fund a $10.0 million fee to Heartland for agreeing to a contractual settlement of its right to receive a $4.0 million annual fee under its advisory services agreement and $4.2 million of costs and expenses related to the early termination of operating leases. In 2007, we also recorded approximately $9.0 million related to the closure of our Huntsville, Ontario,

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Canada facility within our Cequent segment and a non-cash settlement of a benefit plan liability of approximately $3.9 million in our Packaging segment.

        Packaging's operating profit margin was (19.3)% and 17.7% in 2008 and 2007, respectively. Operating profit decreased $58.1 million in 2008 as compared with 2007, due primarily to a non-cash goodwill and intangible asset impairment charge of approximately $62.5 million. Energy's operating profit margin was 15.3% and 14.0% in 2008 and 2007, respectively. Operating profit improved $9.9 million in 2008 compared to 2007 due to higher sales levels, partially offset by increased costs for imported materials and components. Aerospace & Defenses' operating profit margin was 33.4% and 29.2% in 2008 and 2007, respectively. Operating profit increased $8.7 million in 2008 compared to 2007 primarily due to higher sales volumes. Engineered Components' operating profit margin was (9.6)% and 14.9% in 2008 and 2007, respectively. Operating profit decreased $30.8 million in 2008 compared to 2007 primarily due to a non-cash goodwill impairment charge of approximately $24.8 million in addition to higher commodity costs not fully recovered and declines in industry demand. Cequent's operating profit increased $70.0 million in 2008, from an operating loss of $145.4 million in 2007 to an operating loss of $75.4 million in 2008, principally due to the difference between years in impairment charges of $89.2 million, which was partially offset by declines in operating profit due to reduced sales, lower absorption of fixed costs and a less favorable product sales mix.

        Adjusted EBITDA margin (Adjusted EBITDA as a percentage of sales) approximated 13.6% and 11.5% in 2008 and 2007, respectively. The increase in Adjusted EBITDA in our Energy and Aerospace & Defense segments was consistent with the increase in operating profit. The Adjusted EBITDA margins in our Packaging and Engineered Components segments were significantly higher than the operating profit margins in 2008 due to the add-back of the non-cash goodwill and intangible asset impairment charges of $62.5 million and $24.8 million, respectively. After consideration of these charges and increases in depreciation expense in 2008 of approximately $1.8 million and $1.0 million in Packaging and Engineered Components, respectively, the increase (decrease) in Adjusted EBITDA between 2008 and 2007 of $6.2 million and ($5.4) million in Packaging and Engineered Components, respectively, was consistent with the change in operating profit between years. The Adjusted EBITDA margins in our Cequent segment was significantly higher than the operating profit margins in 2008 and 2007 due to the add-back of the non-cash goodwill, intangible asset and Huntsville facility impairment charges of $85.4 million, in 2008, and $174.6 million, in 2007. After consideration of the goodwill, intangible asset and Huntsville impairment charges, the change in Adjusted EBITDA was consistent with the change in operating profit for Cequent.

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        Packaging.    Net sales increased $9.4 million, or approximately 6.2%, to $161.3 million in 2008, as compared to $151.9 million in 2007. Overall, approximately $2.1 million of the increase in sales was due to favorable currency exchange, as our reported results in U.S. dollars were positively impacted as a result of stronger foreign currencies. In addition, sales of our specialty dispensing products and new product introductions increased approximately $7.3 million and sales of our industrial closures remained relatively flat year over year.

        Packaging's gross profit increased approximately $2.1 million to $53.5 million, or 33.2% of sales, in 2008, as compared to $51.4 million, or 33.8% of sales, in 2007. The increase in gross profit between years was primarily attributed to higher sales levels, but was partially offset by increased raw material and commodity costs which, while recovered, were not recovered at cost plus a normal gross profit margin.

        Packaging's selling, general and administrative costs increased approximately $0.9 million to $22.4 million, or 13.9% of sales, in 2008, as compared to $21.5 million, or 14.1% of sales, in 2007. The increase in selling, general and administrative expenses was primarily due to increased spending to support sales growth initiatives.

        Packaging's operating profit (loss) decreased $58.1 million to $(31.2) million, or (19.3)% of sales, in 2008, as compared to $26.9 million, or 17.7% of sales, in 2007. The decrease in operating profit was due primarily to the recognition of a $62.5 million non-cash goodwill and indefinite-lived intangible asset impairment in 2008, which was partially offset by a non-cash charge in 2007 that did not recur in 2008 of $3.9 million related to settlement of a defined benefit plan liability resulting from the closure of a distribution facility. The remaining change between years was due to increased profit due to higher sales levels, which was partially offset by increased selling, general and administrative costs incurred to support sales growth initiatives.

        Packaging's Adjusted EBITDA increased $6.2 million to $45.0 million, or 27.9% of sales, in 2008, as compared to $38.8 million, or 25.6% of sales, in 2007. After consideration of the $62.5 million non-cash goodwill and indefinite-lived intangible asset impairment charge in 2008 and an increase in depreciation expense of $1.8 million in 2008 as compared to 2007, the change in Adjusted EBITDA was consistent with the change in operating profit (loss).

        Energy.    Net sales for 2008 increased $50.3 million, or 30.8%, to $213.8 million, as compared to $163.5 million in 2007. Sales of specialty gaskets and related fastening hardware increased approximately $15.5 million as compared to 2007 as a result of increased demand from customers with whom we have global supply agreements, continued penetration in our fastening hardware product line and increased demand for replacement parts as refineries continued to operate at capacity for most of the year. Sales of slow speed and compressor engines and related products increased approximately $34.8 million in 2008 as compared to 2007, as higher commodity prices drove a robust drilling and completion market. Our engine business also benefited from investments made in prior years to develop compression and gas production equipment products, which contributed about 10% of the year-on-year growth.

        Gross profit within Energy increased $11.6 million to $59.2 million, or 27.7% of sales, in 2008, as compared to $47.6 million, or 29.1% of sales in 2007. While the increase in sales volume contributed $4.8 million to gross profit in our specialty gasket business, this increase was partially offset by a combined approximately $2.8 million of increased costs related to imported materials, an unfavorable product sales mix and the launch of a new branch in the Netherlands. Gross profit increased by $9.6 million in our engine business in 2008 as compared to 2007, approximately $8.6 million of which was driven by the increase in sales volumes year over year. The remainder of the increase resulted from production efficiencies realized with higher, predictable volumes in 2008 as compared to 2007, which was partially offset by higher costs of imported components.

        Selling, general and administrative expenses within Energy increased $1.9 million to $26.5 million, or 12.4% of net sales, in 2008, as compared to $24.6 million, or 15.0% of net sales, in 2007. This change is comprised of an increase of approximately $3.0 million in compensation and commission

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expenses in support of increased sales in both businesses in this group and severance and other charges associated with the separation of the former Energy, Aerospace & Defense and Engineered Components Group President in the second quarter of 2008, which were partially offset by lower legal costs associated with the defense of asbestos claims.

        Overall, operating profit within Energy increased $9.8 million to $32.7 million, or 15.3% of sales, in 2008, as compared to $22.9 million, or 14.0% of sales, in 2007. This increase is due principally to higher sales volumes and other operational improvements, which were partially offset by increases in the costs of imported materials and components and compensation expenses.

        Energy's Adjusted EBITDA increased $10.0 million to $35.4 million, or 16.6% of sales, in 2008, as compared to $25.4 million, or 15.6% of sales, in 2007, consistent with the improvement in operating profit between years.

        Aerospace & Defense.    Net sales in 2008 increased $15.8 million, or approximately 19.8%, to $95.3 million, from $79.6 million in 2007. Net sales in 2008 increased 16.9% in our aerospace fastener business as compared to 2007, as we continued to benefit from share gains as well as strong market demand. Net sales grew 29.8% in our defense business, primarily as our customers continued to build-up their inventory of cartridge cases in advance of the closure of the army munitions plant.

        Gross profit within Aerospace & Defense increased $7.0 million to $40.7 million, or 42.7% of sales, in 2008, from $33.7 million, or 42.4% of sales, in 2007. Gross profit increased approximately $6.2 million at our aerospace fastener business, approximately $4.6 million of which was attributable to higher sales in 2008 and $1.6 million from improved operating leverage and efficiencies. Gross profit also increased at our defense business by $0.8 million, primarily as a result of incremental sales volume.

        Selling, general and administrative expenses decreased $1.4 million to $8.8 million, or 9.2% of sales, in 2008, as compared to $10.2 million, or 12.8% of sales, in 2007. The businesses in this segment largely held their investment in sales resources and product development flat in the current year, and benefited by approximately $0.9 million from the curtailment of a postretirement benefit pension plan.

        Overall, operating profit within Aerospace & Defense increased $8.7 million to $31.9 million, or 33.4% of sales, in 2008, as compared to $23.2 million, or 29.2% of sales, in 2007, primarily due to higher sales levels in our aerospace and defense businesses.

        Aerospace & Defenses' Adjusted EBITDA increased $9.0 million to $33.8 million, or 35.5% of sales, in 2008, as compared to $24.8 million, or 31.2% of sales, in 2007. The change in Adjusted EBITDA was consistent with the change in operating profit.

        Engineered Components.    Net sales in 2008 increased $1.5 million, or approximately 1.2%, to $126.5 million, from $125.1 million in 2007. Sales within our industrial gas cylinders and specialty cutting tools remained essentially flat year over year. Sales within our specialty fittings business declined approximately 16.8% in 2008 as compared to 2007 due to the severe decline in the domestic automotive end market. Finally, this segment benefited from the full year sales associated with a medical device manufacturer acquired in August 2007.

        Gross profit within Engineered Components decreased $5.1 million to $21.4 million, or 16.9% of sales, in 2008, from $26.5 million, or 21.2% of sales, in 2007. Gross profit was flat to lower across the businesses in this segment, which were unfavorably impacted by 2008 material cost increases in excess of the businesses' ability to secure price increases and a significant decline in industrial demand in the fourth quarter of 2008, most notably in our specialty fittings business.

        Selling, general and administrative expenses increased $0.7 million to $8.6 million, or 6.8% of sales, in 2008, as compared to $7.9 million, or 6.3% of sales, in 2007. The businesses in this segment largely held their investment in sales resources and product development flat in the current year, with the increase primarily attributable to the full-year impact of the medical device manufacturer acquired in August 2007.

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        Overall, operating profit within Engineered Components decreased $30.8 million to ($12.2) million, in 2008, as compared to $18.6 million, or 14.9% of sales, in 2007, primarily due to the $24.8 million non-cash goodwill and indefinite-lived intangible asset impairment charge in 2008, in addition to higher commodity costs not fully recovered and declines in industrial demand, most notably within our specialty fittings business.

        Engineered Components' Adjusted EBITDA decreased $5.4 million to $16.7 million, or 13.2% of sales, in 2008, as compared to $22.1 million, or 17.7% of sales, in 2007. After consideration of the $24.8 million non-cash goodwill and indefinite-lived intangible asset impairment charge in 2008, the change in Adjusted EBITDA was consistent with the change in operating profit.

        Cequent.    Net sales decreased $58.6 million, or 12.1%, to $424.4 million in 2008, from $483.0 million in 2007. Net sales were favorably impacted by approximately $3.5 million of currency exchange, as our reported results in U.S. dollars were positively impacted as a result of stronger foreign currencies. In addition, this segment benefited from $4.7 million in higher sales in 2008 in our Australian legacy business and from the acquisition of Parkside Towbars, which was completed in the first quarter of 2008. However, these amounts were more than offset by the decrease in sales within our performance products business of approximately $45.1 million in 2008 as compared to 2007, as increases in sales of new products were more than offset by declines in sales to the installer, distributor and original equipment channels due to continued weak end-market demand and low consumer confidence resulting from uncertain economic conditions. Sales in our retail business declined $19.9 million in 2008 as compared 2007 due to the combination of lower sales volumes as a result of the current economic uncertainty and changes in certain customer promotional programs and one-time product pipeline fills that did not recur in 2008.

        Cequent's gross profit decreased $26.0 million to $88.4 million, or 20.8% of net sales in 2008, from $114.4 million, or 23.7% of net sales, in 2007. Of the decrease in gross profit between years, approximately $13.9 million was attributed to the decline in sales volumes between periods. Gross profit between years further decreased by approximately $12.1 million of operating inefficiencies and lower absorption of fixed costs resulting from reduced manufacturing activity in response to lower demand and a less favorable product sales mix. The impact of increasing commodity and higher freight costs was largely offset by pricing initiatives and cost savings realized as a result of the closure of our Huntsville, Ontario, Canada facility, which was closed in the fourth quarter of 2007.

        Cequent's selling, general and administrative expenses decreased $6.3 million to $78.1 million, or 18.4% of sales in 2008, from $84.4 million, or 17.5% of sales in 2007. The decrease between years was due primarily to reductions in selling and distribution expenses in our performance products business as a result of further consolidation of our warehouse and distribution network. In addition, our discretionary spending was reduced in 2008 commensurate with the decline in sales in our installer and distributor channels and we lowered our promotional spending in our retail business. This decrease was partially offset by $1.6 million in higher spending within our Australian business, including spending within our recently acquired Parkside Towbars business, and to support growth initiatives in Thailand.

        Cequent's operating loss was $75.4 million in 2008, compared to an operating loss of $145.4 million in 2007. In 2008, we recognized a non-cash goodwill and indefinite-lived intangible asset impairment charge of $85.4 million due to continued declines in the fair value of this business, compared to a non-cash goodwill and indefinite-lived intangible asset impairment charge in 2007 of $174.6 million. The remaining incremental operating loss of $19.2 million is primarily the result of the decline in sales between years, operating inefficiencies from reduced manufacturing activity in response to the lower demand, and a less favorable sales mix.

        Cequent's Adjusted EBITDA decreased $19.7 million to $28.3 million, or 6.7% of net sales in 2008, from $48.0 million, or 9.9% of net sales in 2007 which, after considering the impact of the goodwill and indefinite-lived intangible asset impairment charges in 2008 and 2007, is consistent with the decline in operating profit between years.

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        Corporate Expenses and Management Fees.    Corporate expenses and management fees included in operating profit and Adjusted EBITDA consist of the following:

        Corporate expenses and management fees decreased by approximately $18.5 million to $22.2 million in 2008, from $40.7 million in 2007, primarily due to the impact of the use of IPO proceeds in 2007, including payment of a $10.0 million termination fee to Heartland for agreeing to a contractual settlement of its right to receive a $4.0 million annual fee under its advisory services agreement and $4.2 million of costs and expenses related to the early termination of operating leases. Additionally, we incurred higher-than-normal professional fees expense in 2007 in support of our efforts to fully document and complete initial testing associated with the requirements of Sarbanes-Oxley. Employee costs and related benefits increased by approximately $0.8 million to $10.4 million in 2008, from $9.6 million in 2007, primarily due to approximately $1.6 million of severance charges incurred in connection with our corporate office restructuring during the second quarter of 2008, which were partially offset by the benefit of having fewer employees during the second half of 2008. Receivables sales and securitization expenses decreased approximately $1.8 million in 2008 as compared to 2007, due primarily to an approximate 2.4% decrease in the weighted average securitization rate from 2007 to 2008. In addition, during the fourth quarter of 2008, we repurchased $8.0 million face value of our senior subordinated notes, resulting in a $3.7 million gain.

        Interest Expense.    Interest expense, including gain (loss) on debt extinguishments, decreased approximately $23.8 million to $52.0 million in 2008, from $75.8 million in 2007. In 2008, we recognized a $3.7 million gain on the repurchase of $8.0 million face value of senior subordinated notes, less $0.2 million in debt extinguishment costs, while in 2007 we incurred approximately $7.4 million of debt extinguishment costs in connection with the retirement of $100.0 million senior subordinated notes in June 2007 with our IPO proceeds. In addition, approximately $5.0 million of the reduction in interest expense is a result of the aforementioned retirement of $100.0 million senior subordinated notes in June 2007. The decrease is also a result of a decrease in our weighted-average U.S. variable-rate on U.S. borrowings of 5.4% in 2008, from 7.8% in 2007. Weighted-average borrowings on U.S. variable-rate debt were approximately flat year-over-year.

        Other Expense, Net.    Other expense, net decreased approximately $1.6 million to $2.3 million in 2008, from $3.9 million in 2007. The decrease is principally due a $1.8 million decrease in costs related to receivable sales and securitization expenses resulting from an approximate 2.4% decrease in the weighted average securitization rate from 2007 to 2008.

        Income Taxes.    The effective income tax rate for 2008 was 1.6%, compared with 7.5% for 2007. In 2008, we reported domestic and foreign pretax loss of approximately $98.6 million and $32.1 million, respectively. The loss in 2008 is primarily the result of a goodwill and indefinite-lived intangible asset impairment charge of $172.2 million, for which we received an income tax benefit of approximately

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$17.2 million. In 2008, we recorded a $2.8 million tax benefit associated with the release of valuation allowances. The release of valuation allowances is related to our change in judgments about the effects of tax restrictions on utilizing certain deferred tax assets, primarily a capital loss carryforward. The loss in 2007 is primarily the result of a goodwill and indefinite-lived intangible asset impairment charge of $171.2 million, for which we received an income tax benefit of approximately $11.3 million. In 2007, we also recorded a $1.4 million tax benefit associated with changes in statutory tax rates and tax law. The Company reduced its net deferred income tax liabilities for the tax law changes that were signed into effect during 2007. In addition, the Company recorded a valuation allowance of $1.0 million against certain state NOL's during 2007.

        Discontinued Operations.    The results of discontinued operations consist of our industrial fastening business through February 2007, when the sale of the business was completed, our N.I. Industries rocket launcher line of business through December 2007, when the sale of the business was completed, our N.I. Industries property management line of business and our specialty tapes and laminates business, currently held for sale, through December 31, 2008. The results of operations also include certain non-operating charges related to our industrial fastening businesses post-sale. Loss from discontinued operations, net of income tax benefit, was $7.6 million in 2008, as compared to income from discontinued operations, net of income tax expense, of $2.8 million in 2007. See Note 5, "Discontinued Operations and Assets Held for Sale," to the financial statements included in our Form 10-Q for the period ended September 30, 2009.

Year Ended December 31, 2007 Compared with Year Ended December 31, 2006

        The principal factors impacting us during the year ended December 31, 2007 compared with the year ended December 31, 2006 were:

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continued economic expansion and a strong industrial economy which impacted end user demand in our specialty gasket business in our Energy business segment and across our Aerospace & Defense and Engineered Components business segments;



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the continued impact of soft end-market demand and significant competitive pricing pressures within certain sales channels in our Cequent segment, which, in conjunction with a cyclical market decline, resulted in a non-cash goodwill and indefinite-lived intangible asset impairment charge of $174.6 million and $117.0 million in 2007 and 2006, respectively;



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the impact of economic weakness in the paint and chemical industries, resulting in pricing pressure and flat end-market demand for our industrial closure, ring and lever products in our Packaging segment;



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completion of our initial public offering of our common stock ("IPO") and use of proceeds therefrom to retire $100.0 million face value of senior subordinated notes, to effect early termination of operating leases and acquire underlying machinery and equipment assets and to terminate an advisory services agreement;

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        Overall, net sales increased $54.7 million, or approximately 5.8%, in 2007 as compared with 2006. Of this increase, approximately $13.8 million is due to currency exchange as our reported results in U.S. dollars benefited from stronger foreign currencies. Packaging's net sales increased $8.2 million, or approximately 5.7%, in 2007 as compared with 2006 due to increases in our specialty dispensing products and new product introductions and the favorable effects of currency exchange. Net sales within Energy increased $6.5 million, or 4.1%, in 2007 as compared with 2006, due to continued high levels of turnaround activity at petroleum refineries and petrochemical facilities, partially offset by decreased sales of slow speed and compressor engines and related parts. Net sales within our Aerospace & Defense segment increased $14.0 million, or 21.4%, in 2007 as compared with 2006, due to improved demand in our aerospace fastener and defense businesses. Engineered Components' net sales increased $15.2 million, or approximately 13.8%, in 2007 as compared with 2006, due primarily to the increased demand in our industrial cylinder business, and the benefit of sales associated with the purchase of our medical device business during the third quarter of 2007. Cequent's net sales increased $10.9 million, or approximately 2.3%, in 2007 as compared with 2006, due to sales resulting from new programs in our retail business and the favorable effects of currency exchange, partially offset by reduced sales activity in our performance products business due to continued softness of its end-customer market.

        Gross profit margin (gross profit as a percentage of sales) approximated 27.3% and 27.0% for 2007 and 2006, respectively. Packaging's gross profit margin decreased to approximately 33.8% in 2007, from 35.0% in 2006, primarily due a less favorable product sales mix. Energy's gross profit margin remained flat at 29.1% in 2007 and 2006, as increases in sales volumes and improved material margins in our specialty gasket business were offset by decreased sales volumes and a less favorable product sales mix in our engine business. Gross profit margin within our Aerospace & Defense segment increased to 42.4% in 2007, from 41.8% in 2006, primarily due to the sales level increase between years. Engineered Components' gross profit margin decreased to 21.2% in 2007, from 22.1% in 2006, as the higher sales volumes and related margins in our industrial cylinder, medical device, and precision tool cutting businesses were more than offset by declines in sales and gross margin within our specialty fitting business. Cequent's gross profit margin increased to 23.7% in 2007, from 22.9% in 2006, due primarily to increased sales and a more favorable product sales mix and material margin improvements in our performance products business, improved material margins within our Australian and retail businesses, purchasing savings initiatives, additional manufacturing efficiencies and material management improvement initiatives, partially offset by continued pricing pressure in our performance products business and duplicative costs in our Australian operations corresponding with start-up costs of new programs in our Thailand facility.

        Operating profit margin (operating profit as a percentage of sales) decreased from negative 2.0% in 2006 to negative 9.4% in 2007. Operating profit decreased approximately $75.9 million, to an operating loss of $94.7 million in 2007, compared to an operating loss of $18.8 million in 2006. In 2007, we recorded a non-cash goodwill and indefinite-lived intangible asset impairment charge of $171.2 million in our Cequent segment. In 2006, we recorded a non-cash goodwill impairment charge of $116.5 million in this segment. In addition to the increase in impairment charges, during 2007, we utilized proceeds from our IPO to fund a $10.0 million fee to Heartland for agreeing to a contractual settlement of its right to receive a $4.0 million annual fee under its advisory services agreement and $4.2 million of costs and expenses related to the early termination of operating leases. In 2007, we also recorded approximately $9.0 million related to the closure of our Huntsville, Ontario, Canada facility within our Cequent segment and a non-cash settlement of a benefit plan liability of approximately $3.9 million in our Packaging segment. Packaging's operating profit margin was 17.7% and 21.7% in 2007 and 2006, respectively. Operating profit decreased $4.3 million in 2007 as compared with 2006, due primarily to the aforementioned non-cash charge for settlement of a defined benefit pension plan settlement liability of $3.9 million. Energy's operating profit margin was 14.0% and 14.5% in 2007 and 2006, respectively. Operating profit improved $0.1 million in 2007 compared to 2006 as increases in margin earned due to higher sales levels and margin improvement in our specialty gasket business were mostly offset by reductions in operating profit in our engine business due to lower sales volumes and costs incurred to introduce new programs. Aerospace & Defenses' operating profit margin was 29.2% and 29.6% in 2007

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and 2006, respectively. Operating profit increased $3.8 million in 2007 compared to 2006 due to increased sales levels in the businesses in this segment, partially offset by higher selling, general and administrative expenses as a result of increased investment in sales resources and product development. Engineered Components' operating profit margin was 14.9% and 15.3% in 2007 and 2006, respectively. Operating profit increased $1.8 million in 2007 compared to 2006 due to increased sales levels in the majority of the businesses in this segment, which were partially offset by higher selling, general and administrative expenses as a result of increased investment in sales resources and product development. Cequent's operating profit decreased $60.9 million in 2007, from an operating loss of $84.6 million in 2006 to an operating loss of $145.4 million in 2007, principally due to a non-cash goodwill and indefinite-lived intangible asset impairment charge of $171.2 million in 2007, as compared to a goodwill impairment charge of $116.5 million in 2006. In addition, we recorded charges of approximately $9.0 million related to the closure of the Huntsville, Ontario, Canada facility in the fourth quarter of 2007. These increases in charges were partially offset by higher sales volumes resulting from new program introductions and savings resulting from continued operational improvements and our Asian sourcing initiatives.

        Adjusted EBITDA margin (Adjusted EBITDA as a percentage of sales) approximated 11.5% and 13.7% in 2007 and 2006, respectively. The increase in Adjusted EBITDA margin in our Energy and Aerospace & Defense segments was consistent with the increase in operating profit margin. After consideration of increases in depreciation expense from 2006 to 2007, the Adjusted EBITDA margin for Packaging and Engineered Components was consistent with the decrease in operating profit margin. The Adjusted EBITDA margin in our Cequent segment was significantly higher than the operating profit margin in 2007 and 2006 due to the add-back of the non-cash goodwill and indefinite-lived intangible asset impairment charges of $171.2 million and $116.5 million in 2007 and 2006, respectively. In addition, we recorded a $3.4 million fixed asset impairment charge in 2007 related to the closure of the Huntsville facility. After consideration of the goodwill, intangible asset and Huntsville charges, the remaining change in Adjusted EBITDA was consistent with the change in operating profit margin for Cequent.

        Packaging.    Net sales increased $8.2 million, or approximately 5.7%, to $152.0 million in 2007, as compared to $143.8 million in 2006. Overall, approximately $5.6 million of the increase in sales is due to favorable currency exchange as our reported results in U.S. dollars were positively impacted as a result of stronger foreign currencies. In addition, approximately $2.6 million of the increase is due to continued strong demand for our specialty dispensing products and new product introductions. Sales of our industrial closures, rings and levers were essentially flat year-over-year.

        Packaging's gross profit increased approximately $1.0 million to $51.4 million, or 33.8% of sales, in 2007, as compared to $50.4 million, or 35.0% of sales, in 2006. The increase in gross profit between years is primarily attributed to favorable currency exchange, as incremental margin from increased sales levels was substantially offset by a less favorable product sales mix and general economic increases.

        Packaging's selling, general and administrative costs increased approximately $2.4 million to $21.5 million, or 14.1% of sales, in 2007, as compared to $19.1 million, or 13.3% of sales, in 2006. The increase in selling, general and administrative expenses is a result of increased spending related to sales growth initiatives and realigning of certain manufacturing equipment between our facilities.

        Packaging's operating profit decreased $4.3 million to $26.9 million, or 17.7% of sales, in 2007, as compared to $31.2 million, or 21.7% of sales, in 2006. The decrease in operating profit is due primarily recognition of a $3.9 million non-cash charge related to settlement of a defined benefit plan liability resulting from the closure of a distribution facility in 1997, for which the ultimate resolution and related accounting for distribution of surplus assets of the plan was not approved by Canadian authorities until 2007. The other components of the change were an increase in operating profit due to favorable currency exchange, offset by a less favorable product sales mix, increased selling costs in support of our sales growth initiatives and the realignment of certain manufacturing equipment between our facilities.

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        Packaging's Adjusted EBITDA decreased $2.8 million to $38.8 million, or 25.6% of sales, in 2007, as compared to $41.6 million, or 28.9% of sales, in 2006. In 2007, Packaging had an increased depreciation expense add-back of approximately $1.2 million, primarily due to the acquisition of previously leased assets with the use of proceeds from our initial public offering in May 2007. The remaining change is consistent with the decrease in operating profit.

        Energy.    Net sales for 2007 increased $6.5 million, or 4.1%, to $163.5 million, as compared to $157.0 million in 2006. Sales of specialty gaskets and related fastening hardware increased approximately $14.6 million as compared to 2006 as a result of increased demand from existing customers due to continued high levels of turn-around activity at petrochemical refineries and increased demand for replacement parts as refineries continue to operate at capacity. Sales of slow speed and compressor engines and related products decreased approximately $9.4 million in 2007 as compared to 2006 due to lower gas commodity prices persisting for most of 2007 and the impact of lower rig count activity in the Canadian natural gas market.

        Gross profit within Energy increased $1.9 million to $47.6 million, or 29.1% of sales in 2007, as compared to $45.7 million, or 29.1% of sales in 2006. Gross profit increased approximately $6.4 million in our specialty gasket business in 2007 as compared to 2006, approximately $4.2 million of which resulted from increased sales volumes. The remainder of the increase in gross profit compared to 2006 was due to improved material margins and a more favorable product sales mix. Gross profit decreased by $4.5 million in our engine business in 2007 as compared to 2006, approximately $2.7 million of which was driven by the decrease in sales volumes year over year. The remainder of the decrease was due to lower margins resulting from a less favorable mix of engine sales, increased labor and overhead spending associated with investments in developing infrastructure for its new compressor products and the loss of operating leverage due to lower sales volumes compared to 2006.

        Selling, general and administrative expenses within Energy increased $1.8 million to $24.5 million, or 15.0% of net sales in 2007, as compared to $22.7 million, or 14.5% of net sales in 2006. Of this increase, approximately $1.7 million was due to increased compensation, commission and launch expenses in support of increased sales in our specialty gasket business and new product introduction in our engine business.

        Overall, operating profit within Energy increased $0.1 million to $22.9 million, or 14.0% of sales in 2007, as compared to $22.8 million, or 14.5% of sales, in 2006. Overall, increases in operating profit in our specialty gasket business due to higher sales volumes and other operational improvements were mostly offset by reductions in operating profit in our engine business due to lower sales volumes resulting from lower gas commodity prices, lower rig count activity in the Canadian natural gas market and increased spending in support of new product development.

        Energy's Adjusted EBITDA increased $0.4 million to $25.4 million, or 15.6% of sales, in 2007, as compared to $25.0 million, or 16.0% of sales, in 2006, consistent with the improvement in operating profit between years.

        Aerospace & Defense.    Net sales in 2007 increased $14.0 million, or approximately 21.4%, to $79.6 million, from $65.5 million in 2006. Net sales in 2007 increased 20.8% in our aerospace fastener business as compared to 2006, as we continued to benefit from share gains as well as strong market demand. Net sales in our defense business increased 23.3% as compared to 2006, as our customers built-up their inventory of cartridge cases.

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        Gross profit within Aerospace & Defense increased $6.3 million to $33.7 million, or 42.4% of sales, in 2007, from $27.4 million, or 41.8% of sales, in 2006. The increase in gross profit is primarily attributed to the sales level increase between years.

        Selling, general and administrative expenses increased $2.5 million to $10.2 million, or 12.8% of sales, in 2007, as compared to $7.8 million, or 11.8% of sales, in 2006, as this segment increased its investment in sales resources and product development, primarily in our aerospace business.

        Operating profit increased $3.8 million to $23.2 million, or 29.2% of sales, in 2007, as compared to $19.4 million, or 29.6% of sales, in 2006, due primarily to higher sales levels between years, partially offset by our increased investment in sales resources and product development.

        Aerospace & Defense's Adjusted EBITDA increased $3.9 million to $24.8 million, or 31.2% of sales, in 2007, as compared to $20.9 million, or 31.9% of sales, in 2006, consistent with the change in operating profit.

        Engineered Components.    Net sales in 2007 increased $15.2 million, or approximately 13.8%, to $125.1 million, from $109.9 million in 2006. Net sales in 2007 increased 17.3% in our industrial cylinders business, due to higher demand for our new ISO cylinder. Net sales increased 4.3% in our precision cutting tools business in 2007 as compared to 2006 due to increased sales of medical and special products to new customers and markets. Sales within our specialty fittings business declined approximately 11.2% in 2007 as compared to 2006 due to continued softness in domestic automotive market demand. Finally, this segment benefited from the acquisition of a medical device manufacturer in August 2007.

        Gross profit within Engineered Components increased $2.2 million to $26.5 million, or 21.2% of sales, in 2007, from $24.3 million, or 22.1% of sales, in 2006. The increase in gross profit is primarily attributed to the sales level increase between years and the acquisition of the medical device manufacturer.

        Selling, general and administrative expenses increased $0.6 million to $7.9 million, or 6.3% of sales, in 2007, as compared to $7.4 million, or 6.7% of sales, in 2006, as this segment increased its investment in sales resources and product development.

        Operating profit increased $1.8 million to $18.6 million, or 14.9% of sales, in 2007, as compared to $16.8 million, or 15.3% of sales, in 2006, due primarily to higher sales levels between years, partially offset by our increased investment in sales resources and product development.

        Engineered Components' Adjusted EBITDA increased $2.3 million to $22.1 million, or 17.7% of sales, in 2007, as compared to $19.8 million, or 18.0% of sales, in 2006, In 2007, Engineered Components had increased depreciation expense of approximately $0.5 million, primarily as the result of the acquisition of previously leased assets with the use of proceeds from our initial public offering in May 2007. The remaining change is consistent with the change in operating profit.

        Cequent.    Net sales increased $10.9 million, or 2.3%, to $483.0 million in 2007, from $472.2 million in 2006. Net sales were favorably impacted by approximately $7.5 million of currency exchange, as our reported results in U.S. dollars were positively impacted as a result of a stronger foreign currencies. In addition, sales in our retail business increased approximately $13.0 million in 2007 compared to 2006 due to increased sales to existing customers and new product sales. Net sales in our performance products business decreased approximately $9.0 million in 2007 as compared to 2006, due to continued soft demand in certain end-markets, particularly in the horse/livestock market and to our installer and original equipment customer groups, and, more generally, pricing pressure across all market channels, partially offset by sales of new brake controller products. In addition, our Australian business' sales declined approximately $0.6 million in 2007 primarily due to slow sales of aftermarket products until the second half of the year. While our performance products business has experienced declines in sales, we believe that our rate of decline has been at a lesser rate than the overall market due to certain market share gains made during 2007.

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        Cequent's gross profit increased $6.3 million to $114.4 million, or 23.7% of net sales in 2007, from $108.1 million, or 22.9% of net sales, in 2006. Of the increase in gross profit between years, $2.4 million is attributed to the higher sales volumes, primarily in our consumer products business, and $1.3 million is attributed the aforementioned currency exchange impact. The remaining increase in gross profit is due to the impact of improved operating margins within our Australian business, primarily due to improved material margins. These increases in gross profit were partially offset by continued weak demand and pricing pressures in our performance products business, and inefficiencies and duplication of labor and overhead costs in our Australian operations associated with the closure of one Australian facility and a corresponding start-up of new programs in our Thailand facility. The closing of our Australian facility was completed in the third quarter of 2007.

        Cequent's selling, general and administrative expenses increased $8.8 million to $84.4 million, or 17.5% of sales in 2007, from $75.6 million, or 16.0% of sales in 2006. This increase was due to approximately $4.8 million of expense related to severance and other costs associated with the aforementioned closure of our Huntsville facility and higher sales-related support activities associated with the start-up of our new Thailand facility, increased promotional expenses in attempts to boost sales volumes and increased litigation defense costs. In addition, we experienced additional selling and promotional spending in our retail channel in connection with the new business awarded during 2007. These increases were partially offset by continued reductions in selling and distribution expenses in our performance products business as a result of further consolidation of warehouses and lower discretionary spending corresponding with the decline in sales to our installer and original equipment customer groups.

        Cequent's operating loss increased $60.8 million to $145.4 million in 2007, compared to an operating loss of $84.6 million in 2006. In 2007, we recognized a non-cash goodwill and indefinite-lived intangible asset impairment charge of $171.2 million due to continued declines in the fair value of the business, compared to a non-cash goodwill impairment charge in 2006 of $116.5 million. The remainder of the increase in operating loss resulted from continued weak demand and closure of the Huntsville facility, both within our performance products business, and inefficiencies within our Australian business as a result of the closure of the facility and startup of the Thailand facility, which were partially offset by higher sales volumes, favorable currency exchange and continued reductions in our selling and distribution expenses as we consolidated our warehouses in response to the decline in sales in our installer and original equipment customer groups.

        Cequent's Adjusted EBITDA decreased $2.6 million to $48.0 million, or 9.9% of sales in 2007, from $50.6 million, or 10.7% of sales, in 2006. After considering the effect of the goodwill and indefinite-lived intangible asset impairment charges in 2007 and 2006, the effect of approximately $2.9 million incremental asset impairments in 2007 compared with 2006, primarily related to the Huntsville facility, consideration of year over year increased depreciation expense of approximately $1.4 million and foreign currency transaction losses of approximately $0.4 million in 2007 compared to foreign currency transaction gains of approximately $0.1 million in 2006, the change in Adjusted EBITDA is consistent with the change in operating profit between years.

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        Corporate Expenses and Management Fees.    Corporate expenses and management fees included in operating profit and Adjusted EBITDA consist of the following:

        Corporate operating expenses increased by approximately $3.4 million to $14.8 million in 2007, from $11.4 million in 2006, due to increased professional fees expense related to our ongoing efforts to comply with the requirements of Sarbanes-Oxley, increased costs for directors and officers insurance as a result of completing our IPO and higher operating expenses associated with our Asian sourcing office. Employee costs and related benefits increased by approximately $0.7 million to $9.6 million in 2007, from $8.9 million in 2006, primarily due to higher incentive compensation costs. The remaining increase between years is attributed to the impact of the use of IPO proceeds, including payment of a $10.0 million termination fee to Heartland for agreeing to a contractual settlement of its right to receive a $4.0 million annual fee under its advisory services agreement and $4.2 million of costs and expenses related to the early termination of operating leases.

        Interest Expense.    Interest expense, including debt extinguishment costs of approximately $7.4 million and $8.6 million in 2007 and 2006, respectively, decreased approximately $11.9 million to $75.8 million in 2007, from $87.7 million in 2006. Of the decrease, approximately $4.9 million is due to lower borrowings in the second half of 2007 as compared to the second half of 2006 resulting from the retirement of $100.0 million senior subordinated notes in June 2007 with our IPO proceeds. The decrease is also a result of a decrease in our weighted-average U.S. variable-rate on U.S. borrowings of 7.8% in 2007, from 8.5% in 2006. Weighted-average borrowings on U.S. variable-rate debt were approximately flat year-over-year.

        Other Expense, Net.    Other expense, net decreased approximately $0.3 million to $3.9 million in 2007, from $4.2 million in 2006. The decrease is principally due to income in 2007 of approximately $0.6 million as a result of investing $100.0 million of IPO proceeds prior to retirement of the senior subordinated notes, partially offset by a change in gains and losses on transactions denominated in foreign currencies, from a gain of $0.1 million in 2006 to a loss of $0.2 million in 2007.

        Income Taxes.    The effective income tax rate for 2007 was 7.5% compared with (0.7)% for 2006. In 2007, we reported foreign pre-tax income of approximately $6.6 million and a domestic pre-tax loss of approximately $180.9 million. The loss in 2007 is primarily the result of a goodwill and indefinite-lived intangible asset impairment charge of $171.2 million, for which we received an income tax benefit of approximately $11.3 million. In 2007, we recorded a $1.4 million tax benefit associated with changes in statutory tax rates and tax law. The Company reduced its net deferred income tax liabilities for the tax law changes that were signed into effect during 2007. In addition, the Company recorded a valuation allowance of $1.0 million against certain state NOL's. The loss in 2006 is primarily the result of a goodwill impairment charge of $116.5 million, for which we received an income tax benefit of only $1.2 million. In 2006, we also recorded a tax benefit of approximately $0.5 million due to the change in

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Texas tax law signed into effect on May 19, 2006, recorded a valuation allowance of $1.7 million against certain deferred tax assets associated with a dual consolidated tax loss, certain state NOL's and a foreign tax credit carryforward, and recorded a tax benefit of $0.6 million related to extraterritorial income exclusions ("ETI"). The ETI tax deduction is based on the amount of export sales by domestic entities and has minimal relationship to net income (loss).

        Discontinued Operations.    The results of discontinued operations consist of our industrial fastening business through February 2007, when the sale of the business was completed, our asphalt-coated paper business through June 2006, when the sale of that business was completed, our N.I. Industries rocket launcher and property management lines of business through December 2007, when the sale of the rocket launcher business was completed and our specialty tapes and laminates business through December 2007. The results of operations also include a charge in 2007 related to our Wood Dale leased manufacturing facility, which was part of our industrial fastening business, for the estimated unrecoverable future minimum lease obligations. Income from discontinued operations, net of income tax expense, was $2.8 million in 2007, as compared to a loss from discontinued operations, net of income tax benefit, of $17.5 million in 2006. See Note 5, "Discontinued Operations and Assets Held for Sale," to the financial statements included in our Form 10-Q for the period ended September 30, 2009.

Liquidity and Capital Resources

Cash Flows

        Cash provided by operating activities for the nine months ended September 30, 2009 was approximately $67.6 million, as compared to $22.8 million for the nine months ended September 30, 2008. Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

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For the nine months ended September 30, 2009, we generated $23.6 million of cash, based on the reported net income from operations of $11.1 million and after considering the effects of non-cash items related to gains/losses on dispositions of property and equipment, depreciation and amortization, changes in deferred taxes, debt extinguishments, stock compensation and other non-cash items. For the nine months ended September 30, 2008, we generated $67.4 million in cash flows based on the reported net income from operations of $25.6 million and after considering the effects of non-cash impacts related to depreciation, amortization and other non-cash items.



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For the nine months ended September 30, 2009, activity related to the sale of receivables and use of our accounts receivable securitization facility resulted in a net cash use of approximately $15.7 million, as we reduced amounts outstanding under the facility relative to December 31, 2008. During the first nine months of 2009, we relied on our revolving credit facility as the principal source of funding our working capital requirements and ordinary course needs, as it was our lowest cost source of borrowings. For the nine months ended September 30, 2008, activity related to the sale of receivables and use of our accounts receivable securitization facility resulted in a net cash use of approximately $26.7 million. Although we relied on our accounts receivable securitization facility as the primary source of funding working capital requirements and ordinary course needs during the first nine months of 2008, as it was our lowest cost source of borrowings, we lowered our borrowings outstanding from December 31, 2007 to September 30, 2008, as we generated sufficient cash to lower the borrowing requirements.



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Reductions in receivables resulted in a source of cash of approximately $24.6 million for the nine months ended September 30, 2009, while increases in receivables resulted in a use of cash of approximately $19.3 million for the nine months ended September 30, 2008. As compared to first nine months of 2008, sales in the first nine months of 2009 decreased approximately 24%, and the gross level of accounts receivable at September 30, 2009 declined a comparable amount.



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For the nine months ended September 30, 2009, we reduced our investment in inventory consistent with our management strategy to improve inventory turns and to better align

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inventory levels with end market demand, which resulted in a cash source of approximately $51.7 million. For the nine months ended September 30, 2008, we used approximately $7.6 million of cash relative to our investment in inventory.

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For the nine months ended September 30, 2009, accounts payable and accrued liabilities resulted in a net use of cash of approximately $18.4 million, as compared to a net source of cash of $4.7 million for the nine months ended September 30, 2008. The reduction in accounts payable and accrued liabilities is a result of lowering our purchases in the process of aligning our inventory levels with end market demand.



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Management of prepaid expenses and other assets resulted in a source of cash of approximately $1.9 million and $4.4 million for the nine months ended September 30, 2009 and 2008, respectively, primarily as a result of ongoing initiatives to reduce the relative level of investment in manufacturing supplies, spare parts and tooling assets.

        Cash provided by operating activities in 2008 was approximately $31.2 million, as compared to $65.0 million in 2007. Significant changes in cash flows provided by operating activities and the reasons for such changes are as follows:

        In 2008, we generated $73.0 million in cash flows, based on the reported net loss from operations and after considering the effects of non-cash items related to asset impairments, depreciation and amortization, changes in deferred taxes, debt extinguishments and stock compensation. In 2007, we generated $53.1 million based on the reported net loss from operations and after considering the effects of comparable non-cash items.

        In 2008, activity related to the sale of receivables and use of our accounts receivable securitization facility resulted in a net cash use of approximately $18.3 million, whereas in 2007, activity related to the sale of receivables and use of our accounts receivable securitization facility resulted in a net cash source of approximately $26.0 million. During the last three months of 2008, we shifted the primary source of funding our working capital requirements and ordinary course needs from the accounts receivable securitization facility to our revolving credit facility in response to credit market uncertainties and because the relative cost of the facilities was comparable. In 2007, we used the accounts receivable securitization facility as the primary source of funding working capital requirements and ordinary course needs because it was more cost-effective.

        In 2008, we used approximately $8.7 million of cash relative to our investment in inventory primarily as reductions in inventory levels were more than offset by significantly higher commodity costs experienced during the second half of the year. In 2007, we used approximately $25.1 million of cash relative to our investment in inventory in order to fund sales growth initiatives and as a result of longer lead times associated with sourcing products from Asia.

        In 2008, accounts payable and accrued liabilities represented a net use of cash of $13.9 million, as compared to being a net a source of cash of approximately $13.7 million in 2007. As of December 31, 2008, the relative level of accounts payables and accrued liabilities declined as we reduced levels of manufacturing and purchasing activity in response to an abrupt slowdown in order activity experienced during the fourth quarter of 2008. In 2007, we increased our days purchases in accounts payable to a level closer to our inventory turnover and consistent with the increased investment in inventory.

        Management of prepaid expenses and other assets resulted in a source of cash of approximately $3.5 million and $12.5 million in 2008 and 2007, respectively, primarily as a result of ongoing initiatives to reduce the relative level of investment in manufacturing supplies, spare parts and tooling assets.

        Increases in receivables resulted in a use of cash of approximately $0.5 million and $15.7 million in 2008 and 2007, respectively. Relative to 2007, fourth quarter 2008 sales declined approximately 4%, while fourth quarter 2007 increased approximately 7% versus fourth quarter 2006.

        Net cash provided by investing activities for the nine months ended September 30, 2009 was approximately $12.3 million, as compared to net cash used of $24.2 million for the nine months ended September 30, 2008. During the first nine months of 2009, we generated approximately $23.1 million of

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cash from business and asset dispositions, primarily related to the sale of our specialty laminates business. We also incurred approximately $10.9 million in capital expenditures to support our growth initiatives, which we decreased from 2008 levels in response to the current economic recession. During the first nine months of 2008, our investing activities used cash of approximately $24.2 million. We paid approximately $2.8 million for the acquisition of Parkside Towbars, net of cash acquired, and paid approximately $3.4 million of additional purchase price for the medical device company acquired in the third quarter of 2007. We received approximately $2.3 million in cash related to asset dispositions. In addition, we incurred approximately $20.1 million in capital expenditures to support our growth initiatives.

        Net cash used for investing activities in 2008 was approximately $33.4 million, as compared to $68.9 million in 2007. In 2008, we incurred $29.2 million in capital expenditures to support our growth initiatives. We also paid approximately $3.2 million for the acquisition of Parkside Towbars, net of cash acquired, and approximately $3.5 million in additional purchase price in connection with earn-out clauses related to prior year acquisitions. In 2008, net proceeds from various asset dispositions were $2.4 million. In 2007, we incurred $34.7 million in capital expenditures to support our growth initiatives. Also, during 2007, we used proceeds from our IPO to purchase approximately $17.1 million of machinery and equipment subject to operating leases, and also paid approximately $12.9 million for certain machinery and equipment subject to operating leases in connection with the disposition of our Frankfort, Indiana industrial fastening business, which was sold in February 2007. In addition, during 2007, we paid approximately $13.5 million to acquire certain assets from Quest Technologies, Inc., expanding fifth-wheel product offerings in our Cequent segment, and all of the capital stock of DEW Technologies, Inc., a medical device manufacturer, which is reported in our Engineered Components segment. We also generated cash proceeds in 2007 of approximately $9.3 million on the disposition of businesses and other assets, the main components of which include $4.0 million related to the sale of the Frankfort, Indiana industrial fastening business in February 2007, and $3.1 million related to the sale of our rocket launcher business in December 2007.

        Net cash used by financing activities for the nine months ended September 30, 2009 was approximately $59.0 million, as compared to net cash provided by financing activities of approximately $1.3 million for the nine months ended September 30, 2008. During the first three quarters of 2009, we used approximately $43.8 million of available cash to retire $73.2 million face value of our 9⁷/8% senior subordinated notes due 2012 via open market purchases. As previously noted, during the first three quarters of 2009, we significantly increased the use of our revolving credit facility as the primary source of funding our working capital requirements, as it was our lowest cost source of borrowing, as compared to the first nine months of 2008, when we relied more heavily on our accounts receivable securitization facility. However, on a net basis, we reduced amounts outstanding on our revolving credit facilities at September 30, 2009 by approximately $12.8 million from December 31, 2008. In contrast, we increased amounts outstanding on our revolving credit facilities during the first nine months of 2008 by approximately $5.0 million.

        Net cash provided by financing activities in 2008 was approximately $1.3 million, as compared to cash provided by financing activities of approximately $5.1 million in 2007. During the fourth quarter of 2008, we used $4.1 million of cash from operating activities to retire $8.0 million face value of our 9⁷/8% senior subordinated notes due in 2012 via open market purchases. We also increased our net borrowings on revolving credit facilities by $10.0 million during 2008 to fund our normal operations. In both 2008 and 2007, we repaid approximately $5.0 million of borrowings on senior credit facilities. During 2007, we received net proceeds from the initial public offering of our common stock of approximately $126.5 million, which we used to retire $100.0 million of senior subordinated notes and to pay the associated call premium. In addition, we reduced our net borrowings under our revolving credit facilities by approximately $16.4 million.

Our Debt and Other Commitments

        At September 30, 2009 our senior secured credit facility was comprised of a $90.0 million revolving credit facility, a $60.0 million deposit-linked supplemental revolving credit facility and a $260.0 million

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term loan facility. At September 30, 2009, approximately $252.2 million was outstanding on the term loan and $0 was outstanding on the revolving credit facilities. Under the senior secured credit facility, up to $90.0 million in the aggregate of our revolving credit facility is available to be used for one or more permitted acquisitions subject to certain conditions and other outstanding borrowings and issued letters of credit.

        We successfully completed the "amend and extend" of our revolving credit facility and term loan facility on December 16, 2009 and further amended on January 13, 2010. Pursuant to the amendments to our senior secured credit agreement, consenting revolving lenders had the maturity date of their commitments extended from August 2, 2011 to December 15, 2013 and consenting term lenders had the maturity date of their term loans extended from August 2, 2013 to December 15, 2015. As a result of the amendments and extensions, we now have $83.0 million of revolving credit commitments, of which $75.0 million mature on December 15, 2013 and $8.0 million continue to mature on August 2, 2011, and the ability to increase these commitments to an aggregate of $90.0 million in the future. In addition, the maturity date of $226.3 million of term loans was extended to December 15, 2015, with $25.9 million of term loans continuing to mature on August 2, 2013.

        The amended and restated credit agreement resulted in increased margins above LIBOR on the portion of the revolving credit facility and term loans that were extended. Extended revolving loans will bear interest at a per annum rate of LIBOR plus 4% (subject to reduction to LIBOR plus 3.75% when our leverage ratio is below 3.00 to 1.00) and our extended term loans will bear interest at a rate of LIBOR (which shall not be less than 2%) plus 4%. In addition, the interest rates applicable to lenders under our deposit-linked supplemental revolving credit facility who approved the amended and restated credit agreement were increased to LIBOR (which shall not be less than 2%) plus 4%.

        Amounts drawn under our revolving credit facilities fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facilities depends upon, among other things, compliance with our credit agreement's financial covenants. Our amended and restated credit facilities contain negative and affirmative covenants and other requirements affecting us and our subsidiaries, including among others: restrictions on incurrence of debt (except for permitted acquisitions and subordinated indebtedness), liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted junior payments, stock repurchases, transactions with affiliates, restrictive agreements and amendments to charters, by-laws, and other material documents. The terms of our amended and restated credit facilities require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility over consolidated EBITDA, as defined), interest expense ratio (consolidated EBITDA, as defined, over cash interest expense, as defined) and a capital expenditures covenant. The most restrictive of these financial covenants and ratios are the leverage ratio and interest expense ratio. Our permitted leverage ratio under our amended and restated credit agreement was 4.75 to 1.00 on September 30, 2009 and is 4.50 to 1.00 for October 1, 2009 to December 31, 2009, 5.00 to 1.00 for January 1, 2010 to March 31, 2010, 5.25 to 1.00 for April 1, 2010 to June 30, 2010, 5.00 to 1.00 for July 1, 2010 to December 31, 2010, 4.75 to 1.00 for January 1, 2011 to June 30, 2011, 4.50 to 1.00 from July 1, 2011 to September 30, 2011, 4.25 to 1.00 for October 1, 2011 to September 30, 2012, 4.00 to 1.00 for October 1, 2012 to June 30, 2013 and 3.50 to 1.00 for July 1, 2013 and thereafter. Our actual leverage ratio was 3.80 to 1.00 at September 30, 2009. Our permitted interest expense ratio under our amended and restated credit agreement is 2.20 to 1.00 for July 1, 2009 to December 31, 2009, 2.30 to 1.00 for January 1, 2010 to March 31, 2010, 2.15 to 1.00 for April 1, 2010 to June 30, 2010, 2.00 to 1.00 for July 1, 2010 to June 30, 2011, 2.25 for July 1, 2011 to June 30, 2012, 2.40 for July 1, 2012 to December 31, 2012, 2.50 to 1.00 for January 1, 2013 to September 30, 2013 and 2.75 to 1.00 for October 1, 2013 and thereafter. Our actual interest expense ratio was 3.00 to 1.00 at September 30, 2009. At September 30, 2009, we were in compliance with our financial covenants.

        The following are the reconciliations of net income (loss), which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, and interest expense, as reported, to Consolidated

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Cash Interest Expense, both as defined in our credit agreement as in effect on September 30, 2009, for the twelve month period ended September 30, 2009.

 

 

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