Results of Operations for the Three and Nine Months Ended September 30, 2009 and 2008

Analysis of Net Sales



The following table presents net sales by business segment (in millions):



                    Three Months Ended       Nine Months Ended
                      September 30,            September 30,
                    2009         2008        2009        2008
Net sales:
Crane             $   479.5    $   991.0   $ 1,804.7   $ 2,939.2
Foodservice           402.0        115.8     1,139.1       347.2
Total net sales   $   881.5    $ 1,106.8   $ 2,943.8   $ 3,286.4

Consolidated net sales for the three months ended September 30, 2009 decreased 20.4% to $881.5 million, from $1.107 billion for the same period in 2008. For the nine months ended September 30, 2009 sales decreased 10.4% to $2.944 billion versus sales of $3.286 billion for the nine months ended September 30, 2008. The decreases in sales were driven primarily by a 51.6% and 38.6% decrease in Crane segment sales for the three and nine months ended September 30, 2009 versus the same periods in 2008. These results were partially offset by the increases in sales in the Foodservice segment for both periods in 2009 as compared to 2008, due to sales from businesses acquired in the Enodis acquisition during the fourth quarter of 2008.

Net sales from the Crane segment for the three months ended September 30, 2009 decreased to $479.5 million versus $991.0 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009 sales decreased to $1.805 billion versus $2.939 billion for the nine months ended September 30, 2008. Net sales for both the three and nine months ended September 30, 2009 decreased over the same periods in the prior year in all major geographic regions and in all product lines. The Crane segment sales continue to be negatively impacted by a weak global crane market.

For the three and nine months ended September 30, 2009 versus the same periods in 2008, the weaker Euro currency compared to the U.S. Dollar had an approximate $31.3 million and $183.1 million, respectively, unfavorable impact on Crane segment sales. As of September 30, 2009, total Crane segment backlog was $667 million, a 26% decrease compared to the June 30, 2009 backlog of $901 million and a 65% decrease compared to the December 31, 2008 backlog of $1.9 billion. However, the company has seen stabilization in the form of net positive order flow. This positive trend started in March, continued to increase over the succeeding six months, and is expected to continue into the fourth quarter.

Net sales from the Foodservice segment increased 247.2% to $402.0 million for the three months ended September 30, 2009 versus $115.8 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, Foodservice segment sales of $1.139 billion increased 228.1% over the same period in 2008. The sales increases during the both periods were the result of $311.0 million and $870.9 million of sales from the Enodis businesses in the three and nine months ended September 30, 2009, respectively. On a proforma basis, sales were lower than comparable periods due to the extended contraction of capital spending by the restaurant industry. In addition, proforma sales for both periods were negatively impacted by the strength of the U.S. Dollar relative to the Euro and British Pound currencies and as a result lowered proforma sales for the three and nine months ended 2009 versus 2008 by $2.4 million and $37.9 million, respectively.

Analysis of Operating Earnings

The following table presents operating earnings by business segment (in millions):

                               Three Months Ended        Nine Months Ended
                                 September 30,             September 30,
                              2009          2008          2009        2008
Earnings from operations:
Crane                       $    19.2    $     137.1   $     122.1   $ 435.6
Foodservice                      52.1           18.3         112.3      53.1
Corporate expense               (10.9 )        (12.4 )       (36.2 )   (37.9 )
Asset impairments                   -              -        (700.0 )       -
Restructuring expense           (12.8 )         (0.8 )       (38.7 )    (0.8 )
Integration expense                 -           (1.6 )        (3.5 )    (1.6 )
Total                       $    47.6    $     140.6   $    (544.0 ) $ 448.4

Consolidated gross profit for the three months ended September 30, 2009 was $201.5 million, a decrease of $42.2 million compared to the $243.7 million of consolidated gross profit for the same period in 2008. Consolidated gross profit for the nine months ended September 30, 2009 was $643.4 million, a decrease of $130.2 million compared to the $773.6 million of consolidated gross profit for the same period in 2008. These decreases were driven by significantly lower gross profit in the Crane segment primarily due to decreased sales volumes, increased manufacturing unabsorbed overhead costs and an unfavorable translation effect of foreign currency exchange rate changes. For the three and nine month periods ended September 30, 2009 versus the same periods in 2008, the Crane segment gross profit declined $134.5 million and $372.5 million, respectively. The weaker Euro currency compared to the U.S. Dollar had an unfavorable impact on gross profit of approximately $1.9 million and $35.4 million, respectively. The gross profit decreases for both periods as compared to last year were partially offset by favorable product price increases and factory cost reductions.

For the three and nine months ended September 30, 2009, the Foodservice segment gross profit increased approximately $93.3 million and $243.3 million, respectively, versus the same periods last year. The increases in Foodservice gross profit for both periods in 2009 were due to the inclusion of the Enodis gross profit of $94.3 million and $263.8 million. Partially offsetting these increases were lower sales volumes, higher material costs and the unfavorable impact of the stronger U.S. Dollar versus other foreign currencies for the three and nine months ended September 30, 2009 versus the same periods in 2008.

Engineering, selling and administrative (ES&A) expenses for the third quarter of 2009 increased approximately $34.0 million to $132.7 million versus $98.7 million for the third quarter of 2008. For the nine months ended September 30, 2009, ES&A expenses were $420.0 million, which was a $102.6 million increase over ES&A expenses for the nine months ended September 30, 2008. For both periods these increases were driven by the Foodservice segment as a result of including the Enodis ES&A expenses of $51.5 million and $172.6 million for the three and nine months ended September 30, 2009. Partially offsetting the overall increases in ES&A expenses were the lower Crane segment ES&A expenses of $16.2 million and $58.7 million for the respective periods, due to lower employee related costs, travel and professional fees. In addition, the stronger U.S. Dollar versus other foreign currencies had a favorable impact of $1.8 million and $12.2 million in Crane ES&A expenses for the respective periods.

For the three months ended September 30, 2009, the Crane segment reported operating earnings of $19.2 million compared to $137.1 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, the Crane segment reported operating earnings of $122.1 million compared to $435.6 million for the nine months ended September 30, 2008. Operating earnings of the Crane segment for the three and nine month periods in 2009 as compared to the same periods in 2008 were unfavorably affected by lower sales volumes across all regions, lower factory efficiencies and an unfavorable translation effect of foreign currency exchange rate changes partially offset by favorable reductions in ES&A expenses, favorable product price increases and factory cost reductions. As a result, operating margin for the three months ended September 30, 2009 was 4.0% versus 13.8% for the three months ended September 30, 2008 and 6.8% for the nine months ended September 30, 2009 versus 14.8% for the nine months ended September 30, 2008.

For the three months ended September 30, 2009, the Foodservice segment reported operating earnings of $52.1 million compared to $18.3 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, the Foodservice segment reported operating earnings of $112.3 million compared to $53.1 million for the nine months ended September 30, 2008. The primary driver for the increases in operating earnings for both periods is the inclusion of the Enodis operating earnings of $42.8 million and $91.2 million, respectively, for the three and nine months ended September 30, 2009. However, excluding the impact of the Enodis results, operating earnings for the Foodservice segment decreased $9.0 million and $32.0 million, respectively, in the three and nine month periods of 2009 versus the same periods in 2008 due to lower sales volumes across most regions and product lines as a result of the lower capital spending by the restaurant industry.

For the three months ended September 30, 2009, corporate expenses were $10.9 million compared to $12.4 million for the three months ended September 30, 2008. For the nine months ended September 30, 2009, corporate expenses were $36.2 million compared to $37.9 million for the nine months ended September 30, 2008. These decreases were primarily the result of lower employee-related costs.

The company accounts for goodwill and other intangible assets under the guidance ASC Topic 350-10, "Intangibles - Goodwill and Other." Under ASC Topic 350-10, goodwill is no longer amortized; however, the company performs an annual impairment at June 30 of every year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The company performs impairment reviews for its reporting units, which have been determined to be:
Cranes Americas; Cranes Europe, Middle East, and Africa; Cranes Asia; Crane CARE; Foodservice Americas; Foodservice Europe, Middle East, and Africa; Foodservice Asia; and Foodservice Retail, using a fair-value method based on the present value of future cash flows, which involves management's judgments and assumptions about the amounts of those cash flows and the discount rates used. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. Goodwill and other intangible assets are then subject to risk of write-down to the extent that the carrying amount exceeds the estimated fair value.

During the first quarter of 2009, the company's stock price continued to decline as global market conditions remained depressed, the credit markets did not improve and the performance of the company's Crane and Foodservice segments was below the company's expectations. In connection with a reforecast of expected 2009 financial results completed in early April 2009, the company determined the foregoing circumstances to be indicators of potential impairment under the guidance of ASC Topic 350-10. Therefore, the company performed the required initial impairment test for each of the company's operating units as of March 31, 2009. The company re-performed its established method of present-valuing future cash flows, taking into account our updated projections, to determine the fair value of the reporting units. The determination of fair value of the reporting units requires the company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, projections of revenue growth, operating earnings, discount rates, terminal growth rates, and required capital for each reporting unit. Due to the inherent uncertainty involved in making these estimates, actual results could differ materially from the estimates. The company evaluated the significant assumptions used to determine the fair value of each reporting unit, both individually and in the aggregate, and concluded they are reasonable.

The results of the analysis indicated that the fair values of three of the company's eight reporting units (Foodservice Americas; Foodservice Europe, Middle East, and Africa; and Foodservice Retail) were potentially impaired, and therefore, the company proceeded to measure the amount of the potential impairment with the assistance of a third-party valuation firm. Upon completion of that assessment, the company recognized impairment charges as of March 31, 2009 of $548.8 million related to goodwill. The company also recognized impairment charges of $151.2 million related to other indefinite-lived intangible assets as of March 31, 2009. Both charges were within the Foodservice segment. These non-cash impairment charges have no direct impact on the company's cash flows, liquidity, debt covenants, debt position or tangible asset values. There is no tax benefit in relation to the goodwill impairment; however, the company did recognize a $52.0 million benefit associated with the other indefinite-lived intangible asset impairment.

As of June 30, 2009, the company performed its annual impairment analysis relative to goodwill and indefinite-lived intangible assets and based on those results no additional impairment had occurred subsequent to the impairment charges recorded in the first quarter of 2009. The company will continue to monitor market conditions and determine if any additional interim reviews of goodwill, other intangibles or long-lived assets are warranted. Further deterioration in the market or actual results as compared with the company's projections may ultimately result in a future impairment. In the event the company determines that assets are impaired in the future, the company would need to recognize a non-cash impairment charge, which could have a material adverse effect on the company's consolidated balance sheet and results of operations.

As a result of the continued worldwide decline in crane sales during the three and nine months ended September 30, 2009, the company recorded $8.6 million and $28.2 million, respectively, in restructuring charges to further reduce the Crane segment cost structure in all regions. The Foodservice segment also recorded a restructuring expense of $4.3 million and $10.6 million during the three and nine months ended September 30, 2009, respectively, as a result of closing its Harford Duracool facility in Aberdeen, Maryland in the second quarter and its McCall facility in Parsons, Tennessee in the third quarter. See further detail related to the restructuring expenses at Note 18, "Restructuring".

The company is engaged in a number of integration activities associated with the Enodis acquisition. For the nine months ended September 30, 2009, integration expenses were approximately $3.5 million. Integration expenses include only costs directly associated with the integration such as costs related to outside vendors or services, costs of employees who have been assigned full-time to integration activities, and travel-related expenses.

Analysis of Non-Operating Income Statement Items

Amortization expense for deferred financing fees was $12.0 million and $31.9 million, respectively, for the three and nine months ended September 30, 2009. For the same periods in 2008, the expense was $0.2 million and $0.6 million, respectively. The higher expense in 2009 is related to the amortization of the fees associated with entering into the New Credit Agreement which was drawn upon in November of 2008 to fund our purchase of Enodis. See further detail on the New Credit Agreement at Note 9, "Debt".

Interest expense for the three and nine months ended September 30, 2009 was $49.0 million and $130.4 million, respectively. Interest expense was $7.4 million and $21.0 million for the three and nine months ended September 30, 2008. The increase is the result of

additional interest expense associated with the New Credit Agreement due to the Enodis acquisition.

During July 2008, the company entered into various hedging transactions (the "hedges") to comply with the terms of its New Credit Agreement (see further detail related to the New Credit Agreement at Note 9, "Debt") issued to fund the purchase of Enodis. The hedges were required to limit the company's exposure to fluctuations in the underlying purchase Great British Pound (GBP) price of the Enodis shares which could have ultimately required additional funding capacity under the New Credit Agreement. Subsequent to entering into the hedging transactions, the U.S. Dollar strengthened against the GBP which resulted in a significant change to the fair value of the underlying hedges. Financial Accounting Standards Board Statement (FAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" states that hedges of a firm commitment to acquire a business do not qualify for hedge accounting (or balance sheet) treatment. Therefore, the periodic market value changes in these hedges were required to be recognized in the income statement. For the three and nine months ended September 30, 2008, loss on currency hedges related to the purchase of Enodis was $198.4 million.

The loss on debt extinguishment of $2.1 million in the nine months ended September 30, 2009 is related to the accelerated paydown of Term Loan X using the proceeds from the sale of the Enodis ice businesses in the second quarter. Other income, net for the nine months ended September 30, 2009 was $8.5 million versus $5.3 million for the same period in 2008. The increase is primarily the result of higher currency exchange gains versus the prior year partially offset by a decrease in interest income as a result of lower cash balances during the first nine months of 2009 versus the same period last year.

The tax benefit for the nine months ended September 30, 2009 was favorably impacted by the reversal of various reserves for uncertain tax positions as discussed in Note 11, "Income Taxes". These reversals resulted in a discrete tax benefit of $31.7 million. The company recorded a valuation allowance related to Wisconsin net operating loss carryforwards of $3.5 million, for which it is more likely than not that the benefit of the carryforwards will not be realized. The goodwill impairment of $548.8 million is not tax deductible and thus had an unfavorable impact on the tax rate. The write-down of the trademarks of $151.2 million had an associated deferred tax liability of $52.0 million which resulted in no impact on the tax rate. As the company posted a pre-tax loss, a tax benefit increases the effective tax rate, and an increase in tax expense decreases the effective tax rate. As a result, the tax rate for the nine months ended September 30, 2009 was 9.1% as compared to 23.9% for the nine months ended September 30, 2008. Both the 2009 and 2008 rates were also favorably affected, as compared to the statutory rate, to varying degrees by certain global tax planning initiatives.

The results from discontinued operations were a loss of $1.8 million and earnings of $11.6 million, net of income taxes, for the three months ended September 30, 2009 and September 30, 2008, respectively. The 2009 loss is related to final tax adjustments on the results of operations and additional administration expenses associated with the disposition of the Marine segment sold on December 31, 2008 and of the Enodis ice businesses sold on May 15, 2009. The tax adjustment related to the former Marine segment was an additional tax expense of $2.0 million which was partially offset by a $1.1 million favorable adjustment to lower the tax expense related to the Enodis ice operation results. In addition, $0.3 million and $0.6 million of administration costs for the three and nine months ended September 30, 2009, respectively, were recorded for the disposition of the former Marine segment and the Enodis ice operations, respectively. The 2008 earnings from discontinued operations related to the results of operations from the Marine segment.

The loss on sale of discontinued operations of $2.7 million, net of income taxes, for the three months ended September 30, 2009 is related to a final tax adjustment on the sale of the Enodis ice machine operations.

For the three and nine months ended September 30, 2009, a net loss attributable to a noncontrolling interest of $1.5 million and $3.2 million, respectively, was recorded in relation to our 50% joint venture with the shareholders of TaiAn Dongyue. There was a net loss of $0.8 million and $0.9 million for the same periods of 2008, respectively. See further detail related to the joint venture at Note 2, "Acquisitions."

Financial Condition

First Nine Months of 2009

The cash and cash equivalents balance as of September 30, 2009 totaled $158.5 million, which was a decrease of $14.5 million from the December 31, 2008 balance of $173.0 million. Cash flow provided by operating activities of continuing operations for the first nine months of 2009 was $201.1 million compared to cash provided of $112.9 million for the same period in 2008. During the first nine months of 2009 the source of cash was primarily driven by effective working capital management resulting in reductions of accounts receivable and inventory levels by $210.6 million and $237.6 million, respectively. Partially offsetting this was a decrease in accounts payable by $271.2 million and a $70.0 million settlement payment made in connection with the settlement of a long-standing, non-operational legal matter relating to Enodis, during the first half of 2009. See further detail related to the legal settlement at Note 15, "Contingencies and Significant Estimates".

Capital expenditures during the first nine months of 2009 were $63.5 million versus $96.2 million during the same period in 2008.

The majority of the capital expenditures were related to capacity expansion projects and ERP implementation costs for the Crane segment and tooling and equipment costs for the Foodservice segment.

Proceeds from the sale of the Enodis ice businesses provided $148.8 million, which were used to partially pay down Term Loan X during the second quarter.

First Nine Months of 2008

Cash and cash equivalents balance as of September 30, 2008 totaled $382.0 million, which was an increase of $12.6 million from the December 31, 2007 balance of $369.4 million. Cash flow provided by operating activities of continuing operations for the first nine months of 2008 was $112.9 million compared to $18.5 million for the first nine months of 2007. During the first nine months of 2008, the cash flow from operating activities of continuing operations primarily benefited from $210.4 million of net earnings, the unrealized loss on currency hedges of $205.2 million and a non-cash adjustment for depreciation expense of $62.2 million. Cash flow was negatively impacted by an increase in inventory of $257.5 million, an increase in accounts receivable of $68.0 million, and a non-cash adjustment for discontinued operations earnings of $31.7 million. The increase in inventory was due to the increase in production to support higher sales volumes and higher backlog levels in the Crane segment. In addition, supplier constraints have negatively impacted production throughput resulting in higher Crane segment inventories. The increase in accounts receivable was driven primarily by an increase in the Crane segment sales volumes. During the first nine months of 2008 the company made tax payments of approximately $96.3 million versus $103.8 million during the first nine months of 2007.

On March 6, 2008, the company formed a 50% joint venture with the shareholders of TaiAn Dongyue for the production of mobile and truck-mounted hydraulic cranes. The cash flow impact of this acquisition is included in business acquisitions, net of cash acquired, within the cash flow from investing section of the Consolidated Statement of Cash Flows. See further detail related to the joint venture at Note 2, "Acquisitions."

Capital expenditures during the first nine months of 2008 were $94.0 million versus $52.4 million during the first nine months of 2007. The majority of the capital expenditures were related to capacity expansion projects and ERP implementation costs for the Crane segment and ERP costs for the Foodservice segment.

Liquidity and Capital Resources



Outstanding debt at September 30, 2009 and December 31, 2008 is summarized as
follows:



                             September 30,     December 31,
                                 2009              2008
Revolving credit facility   $             -   $         17.0
Term loan A                           948.1          1,025.0
Term loan B                         1,191.0          1,200.0
Term loan X                            33.6            181.5
Senior notes due 2013                 150.0            150.0
Other                                  70.5             81.8
Total debt                          2,393.2          2,655.3

In April 2008, the company entered into a $2.4 billion credit agreement which was amended and restated as of August 25, 2008 to ultimately increase the size of the total facility to $2.925 billion (New Credit Agreement). The New Credit Agreement became effective November 6, 2008. The New Credit Agreement includes four loan facilities - a revolving facility of $400.0 million with a five-year term, a Term Loan A of $1,025.0 million with a five-year term, a Term Loan B of $1,200.0 million with a six-year term, and a Term Loan X of $300.0 million with an eighteen-month term. The company is obligated to prepay the three term loan facilities from the net proceeds of asset sales, casualty losses, equity offerings, and new indebtedness for borrowed money, and from a portion of its excess cash flow, subject to certain exceptions.

In June 2009 the company entered into Amendment No. 2 (the Amendment) to the New Credit Agreement to provide relief under its consolidated total leverage ratio and consolidated interest coverage ratio financial covenants. This Amendment was obtained to avoid a potential financial covenant violation at the end of its second quarter of fiscal 2009 as a result of lower demand for certain of the company's products due to continued weakness in the global economy and tight credit markets. Terms of the Amendment included an increase in the margin on London Interbank Offered Rate (LIBOR) and Alternative Borrowing Rate (ABR) loans of between 150 and 175 basis points, depending on the consolidated total leverage ratio. Also, one additional interest rate pricing level was added for each loan facility above a certain leverage amount.

The New Credit Agreement, as amended, contains financial covenants whereby the ratio of (a) consolidated earnings before interest, taxes, depreciation and amortization, and other adjustments (EBITDA), as defined in the New Credit Agreement, to (b) consolidated interest expense, each for the most recent four fiscal quarters (Consolidated Interest Coverage Ratio) and the ratio of
(c) consolidated

indebtedness to (d) consolidated EBITDA for the most recent four fiscal quarters (Consolidated Total Leverage Ratio), at all times must each meet certain defined limits listed below:

. . .