UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-13215

GARDNER DENVER, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0419383
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1800 Gardner Expressway
Quincy, Illinois 62305
(Address of principal executive offices and Zip Code)

(217) 222-5400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 52,056,642 shares of Common Stock, par value $0.01 per share, as of October 25, 2009.

 

 

GARDNER DENVER, INC.
Table of Contents

				Page
PART I FINANCIAL INFORMATION
Item 1		Financial Statements
		Condensed Consolidated Statements of Operations			3
		Condensed Consolidated Balance Sheets			4
		Condensed Consolidated Statements of Cash Flows			5
		Notes to Condensed Consolidated Financial Statements			6
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			37
Item 3		Quantitative and Qualitative Disclosures About Market Risk			52
Item 4		Controls and Procedures			54
PART II OTHER INFORMATION
Item 1		Legal Proceedings			55
Item 1A		Risk Factors			55
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 6		Exhibits			56
SIGNATURES					57
INDEX TO EXHIBITS					58
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

GARDNER DENVER, INC.

(Dollars in thousands, except per share amounts)

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Revenues		$	428,846			$	480,310			$	1,327,375			$	1,494,092
Cost of sales			293,651				329,925				921,033				1,014,505
Gross profit			135,195				150,385				406,342				479,587
Selling and administrative expenses			89,946				80,343				271,699				257,330
Other operating expense, net			10,847				14,586				40,747				17,258
Impairment charges			2,540				—				263,605				—
Operating income (loss)			31,862				55,456				(169,709	)			204,999
Interest expense			7,109				3,829				21,377				14,470
Other income, net			(1,738	)			(237	)			(3,169	)			(814	)
Income (loss) before income taxes			26,491				51,864				(187,917	)			191,343
Provision for income taxes			7,074				17,226				14,436				56,280
Net income (loss)		$	19,417			$	34,638			$	(202,353	)		$	135,063
Basic earnings (loss) per share		$	0.37			$	0.65			$	(3.90	)		$	2.55
Diluted earnings (loss) per share		$	0.37			$	0.65			$	(3.90	)		$	2.52

The accompanying notes are an integral part of these condensed consolidated financial statements.

GARDNER DENVER, INC.

(Dollars in thousands, except per share amounts)

		September 30,				December 31,
		2009				2008
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	109,717			$	120,735
Accounts receivable (net of allowance of $13,925 at September 30, 2009 and $10,642 at December 31, 2008)			345,343				388,098
Inventories, net			239,173				284,825
Deferred income taxes			33,899				33,014
Other current assets			21,008				30,892
Total current assets			749,140				857,564
Property, plant and equipment (net of accumulated depreciation of $316,931 at September 30, 2009 and $283,676 at December 31, 2008)			314,140				305,012
Goodwill			581,338				804,648
Other intangibles, net			322,003				346,263
Other assets			22,233				26,638
Total assets		$	1,988,854			$	2,340,125
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt		$	35,197			$	36,968
Accounts payable			103,762				135,864
Accrued liabilities			208,190				224,550
Total current liabilities			347,149				397,382
Long-term debt, less current maturities			382,339				506,700
Postretirement benefits other than pensions			14,864				17,481
Deferred income taxes			74,751				91,218
Other liabilities			133,966				128,596
Total liabilities			953,069				1,141,377
Stockholders’ equity:
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,050,262 and 51,785,125 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively			585				583
Capital in excess of par value			554,844				545,671
Retained earnings			508,712				711,065
Accumulated other comprehensive income			104,050				72,268
Treasury stock at cost; 6,425,747 and 6,469,971 shares at September 30, 2009 and December 31, 2008, respectively			(132,406	)			(130,839	)
Total stockholders’ equity			1,035,785				1,198,748
Total liabilities and stockholders’ equity		$	1,988,854			$	2,340,125

The accompanying notes are an integral part of these condensed consolidated financial statements.

GARDNER DENVER, INC.

(Dollars in thousands)

(Unaudited)

		Nine Months Ended
		September 30,
		2009				2008
Cash Flows From Operating Activities
Net (loss) income		$	(202,353	)		$	135,063
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			51,378				44,675
Impairment charges			263,605				—
Unrealized foreign currency transaction (gain) loss, net			(14	)			10,452
Net loss on asset dispositions			298				317
Stock issued for employee benefit plans			3,078				3,661
Stock-based compensation expense			2,293				3,813
Excess tax benefits from stock-based compensation			(151	)			(8,492	)
Deferred income taxes			(9,894	)			(8,563	)
Changes in assets and liabilities:
Receivables			54,772				2,008
Inventories			55,368				19,662
Accounts payable and accrued liabilities			(68,279	)			16,754
Other assets and liabilities, net			(1,712	)			(14,873	)
Net cash provided by operating activities			148,389				204,477
Cash Flows From Investing Activities
Capital expenditures			(34,806	)			(28,924	)
Net cash paid in business combinations			(64	)			(6,469	)
Disposals of property, plant and equipment			875				1,624
Other, net			(1	)			656
Net cash used in investing activities			(33,996	)			(33,113	)
Cash Flows From Financing Activities
Principal payments on short-term borrowings			(26,484	)			(30,709	)
Proceeds from short-term borrowings			21,204				27,480
Principal payments on long-term debt			(165,447	)			(143,208	)
Proceeds from long-term debt			35,372				131,319
Proceeds from stock option exercises			1,208				10,885
Excess tax benefits from stock-based compensation			151				8,492
Purchase of treasury stock			(338	)			(81,691	)
Debt issuance costs			(166	)			(91	)
Other			(759	)			(1,258	)
Net cash used in financing activities			(135,259	)			(78,781	)
Effect of exchange rate changes on cash and cash equivalents			9,848				(6,390	)
Net (decrease) increase in cash and equivalents			(11,018	)			86,193
Cash and cash equivalents, beginning of year			120,735				92,922
Cash and cash equivalents, end of period		$	109,717			$	179,115

The accompanying notes are an integral part of these condensed consolidated financial statements.

GARDNER DENVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts and amounts described in millions)
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

     The accompanying condensed consolidated financial statements include the accounts of Gardner Denver, Inc. and its majority-owned subsidiaries (referred to herein as “Gardner Denver” or the “Company”). In consolidation, all significant intercompany transactions and accounts have been eliminated.

     The financial information presented as of any date other than December 31, 2008 has been prepared from the books and records of the Company without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of such financial statements, have been included. The Company has evaluated events that occurred subsequent to September 30, 2009, through the financial statement issue date of November 6, 2009.

     The unaudited interim condensed consolidated financial statements should be read in conjunction with the complete consolidated financial statements and notes thereto included in Gardner Denver’s Annual Report on Form 10-K for the year ended December 31, 2008.

     The results of operations for the nine-month period ended September 30, 2009 are not necessarily indicative of the results to be expected for the full year. The balance sheet at December 31, 2008 has been derived from the audited financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements.

     Other than as specifically indicated in these “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q, the Company has not materially changed its significant accounting policies from those disclosed in its Form 10-K for the year ended December 31, 2008.

     Effective January 1, 2009, the Company reorganized its five former operating divisions into two major product groups: the Industrial Products Group and the Engineered Products Group. The Industrial Products Group includes the former Compressor and Blower Divisions, plus the multistage centrifugal blower operations formerly managed in the Engineered Products Division. The Engineered Products Group is comprised of the former Engineered Products (excluding the multistage centrifugal blower operations), Thomas Products and Fluid Transfer Divisions. These changes were designed to streamline operations, improve organizational efficiencies and create greater focus on customer needs. As a result of these organizational changes, the Company realigned

its segment reporting structure with the newly formed product groups effective with the reporting period ended March 31, 2009. Segment financial information presented for prior years in these “Notes to Condensed Consolidated Financial Statements” and under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, has been recast to reflect this realignment. See Note 17 “Segment Information.”

New Accounting Standards

Recently Adopted Accounting Pronouncements

     In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162.” (“SFAS No. 168”). This statement modified the GAAP hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative. SFAS No. 168 also established the “FASB Accounting Standards Codification™” (the “Codification” or the “FASB ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP in the United States. All guidance contained in the Codification carries an equal level of authority. Effective July 1, 2009, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification is nonauthoritative. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. All accounting references in this Quarterly Report on Form 10-Q have been updated and, accordingly, references to prior accounting standards have been replaced with FASB ASC references as appropriate.

     In December 2007, the FASB issued revised guidance for the accounting for business combinations. The revised guidance, which is now part of FASB ASC 805, Business Combinations (“FASB ASC 805”), requires the fair value measurement of assets acquired, liabilities assumed and any noncontrolling interest in the acquiree, at the acquisition date with limited exceptions. Previously, a cost allocation approach was used to allocate the cost of the acquisition based on the estimated fair value of the individual assets acquired and liabilities assumed. The cost allocation approach treated acquisition-related costs and restructuring costs that the acquirer expected to incur as a liability on the acquisition date as part of the cost of the acquisition. Under the revised guidance, those costs are recognized in the consolidated statement of operations separately from the business combination. In April 2009, the FASB amended the guidance on the initial recognition, measurement and subsequent accounting for contingencies arising in business combinations. The revised guidance applies to business combinations for acquisitions occurring on or after January 1, 2009. The impact of the revised guidance on the Company’s consolidated financial statements will depend on the nature, terms and size of acquisitions it consummates in the future. Also see Note 13 “Income Taxes” for a discussion of a valuation allowance established against deferred tax assets recorded in connection with the acquisition of CompAir Holdings Ltd. (“CompAir”) in 2008.

     In December 2007, the FASB issued new guidance for the accounting for noncontrolling interests. The new guidance, which is now a part of FASB ASC 810, Consolidation, establishes accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. In addition, it clarifies that noncontrolling interests in a subsidiary are ownership interests in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. The provisions of this guidance were effective

for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of this guidance effective January 1, 2009 did not have a material effect on the Company’s consolidated financial statements.

     In March 2008, the FASB issued new guidance on the disclosure of derivative instruments and hedging activities. The new guidance, which is now part of FASB ASC 815, Derivatives and Hedging, requires enhanced disclosures for derivative instruments and hedging activities, including (i) how and why an entity uses derivative instruments; (ii) how derivative instruments and related hedged items are accounted for; and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company adopted this guidance effective January 1, 2009. See Note 12 “Hedging Activities and Fair Value Measurements” for the Company’s disclosures about its derivative instruments and hedging activities.

     In April 2009, the FASB issued new guidance related to the disclosure of the fair value of financial instruments. The new guidance, which is now part of FASB ASC 825, Financial Instruments, requires disclosure of the fair value of financial instruments in all interim financial statements. The adoption of this guidance by the Company in the second quarter of 2009 did not have a material effect on its consolidated financial statements.

     Effective April 1, 2009, the Company adopted the new accounting guidance for subsequent events as codified in FASB ASC 855, Subsequent Events. The new guidance incorporates the subsequent events guidance contained in the auditing standards literature into the authoritative accounting literature. It also requires entities to disclose the date through which they have evaluated subsequent events and whether that date corresponds with the release of their financial statements. The new guidance was effective for all interim and annual periods ending after June 15, 2009. Adoption of the guidance had no impact on the Company’s consolidated financial statements, other than disclosure of the date through which it evaluated subsequent events.

Recently Issued Accounting Pronouncements

     In December 2008, the FASB issued new guidance regarding disclosures about plan assets of defined benefit pension or other postretirement plans. This guidance, which is now part of FASB ASC 715, Compensation-Retirement Benefits, is effective for financial statements issued for fiscal years ending after December 15, 2009. The Company is currently evaluating the disclosure impact of adopting this new guidance on its consolidated financial statements; however, its adoption will not have an impact on the determination of the Company’s financial results.

     In October 2009, the FASB issued Update No. 2009-13, Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (“ASU 2009-13”). It updates the existing multiple-element revenue arrangements guidance currently included under FASB ASC 605-25, Revenue Recognition, Multiple-Element Arrangements. The revised guidance primarily provides two significant changes: (i) eliminates the need for objective and reliable evidence of fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and (ii) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance expands the disclosure requirements for revenue recognition. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. The Company is currently assessing the impact of this new guidance on its consolidated financial statements and related disclosures.

Note 2. Business Combinations

     On October 20, 2008, the Company acquired CompAir, a leading global manufacturer of compressed air and gas solutions. The acquisition of CompAir allows the Company to further broaden its geographic presence, diversify its end market segments served, and provides opportunities to reduce operating costs and achieve sales and marketing efficiencies. CompAir’s products are complementary to the Industrial Products Group’s product portfolio. The Company acquired all outstanding shares and share equivalents of CompAir for a total purchase price of $378.5 million, which consisted of $329.9 million in shareholder consideration, $39.8 million of CompAir external debt retired at closing and $8.8 million of transaction costs and other liabilities settled at closing. As part of the transaction, the Company also assumed approximately $5.9 million in long-term debt. As of October 20, 2008, CompAir had $24.1 million in cash and equivalents. The net transaction value, including assumed debt (net of cash acquired) and direct acquisition costs, was approximately $360.3 million. There are no remaining material contingent payments or commitments related to this acquisition.

     The CompAir acquisition has been accounted for using the purchase method and, accordingly, its results are included in the Company’s consolidated financial statements from the date of acquisition. Under the purchase method, the purchase price is allocated based on the fair value of assets received and liabilities assumed as of the acquisition date.

     Under the purchase method of accounting, the assets and liabilities of CompAir were recorded at their estimated respective fair values as of October 20, 2008. The initial allocation of the purchase price was subsequently adjusted when certain preliminary valuation estimates were finalized. The following table summarizes the nature and amount of such adjustments recorded in 2009. The amounts presented in this table do not reflect the portion of the goodwill impairment charge recorded in 2009 that may be directly attributable to the CompAir acquisition. For purposes of the impairment testing performed in 2009, in accordance with FASB ASC 350, Intangibles-Goodwill and Other (“FASB ASC 350”), the net assets from the CompAir acquisition were included as a component of a reporting unit within the Industrial Products Group in which the impairment charge was recorded. Since goodwill impairment testing is performed at the reporting unit level, the amount directly attributable to the CompAir acquisition cannot be specifically identified. See also Note 5 “Goodwill and Other Intangible Assets” for a description of the impairment charge.

CompAir Holdings Limited
Purchase Price Allocation and Adjustments
September 30, 2009

Total purchase price allocated to amortizable intangible assets as of December 31, 2008		$	166,018
Purchase accounting adjustments recorded in 2009:
Fair value of trademarks			(3,243	)
Fair value of customer relationships			(13,231	)
Fair value of other amortizable intangible assets			(1,197	)
Total purchase price allocated to amortizable intangible assets as of September 30, 2009		$	148,347
Total purchase price allocated to goodwill as of December 31, 2008		$	155,466
Purchase accounting adjustments recorded in 2009:
Fair value of amortizable intangible assets			17,671
Fair value of inventory			2,489
Fair value of accounts receivable			729
Termination benefits and other liabilities			4,585
Income taxes, net			(5,052	)
Other, net			(349	)
Total purchase price allocated to goodwill as of September 30, 2009		$	175,539

Note 3. Restructuring

     In 2008 and the nine-month period of 2009, the Company finalized and announced certain restructuring plans designed to address (i) rationalization of the Company’s manufacturing footprint, (ii) slowing global economic growth and the resulting deterioration in the Company’s end markets and (iii) integration of CompAir into its existing operations. These plans included the closure and consolidation of manufacturing facilities in Europe and the U.S., and various voluntary and involuntary employee termination and relocation programs. In accordance with FASB ASC 420, Exit or Disposal Cost Obligations (“FASB ASC 420”), and FASB ASC 712, Compensation — Nonretirement Postemployment Benefits (“FASB ASC 712”), a charge totaling $11.1 million (included in “Other operating expense, net”) was recorded in 2008, of which $8.5 million was associated with the Industrial Products Group and $2.6 million was associated with the Engineered Products Group. An additional charge totaling $40.2 million was recorded in the nine-month period of 2009, of which $25.6 million was associated with the Industrial Products Group and $14.6 million was associated with the Engineered Products Group. Execution of these plans, including payment of employee severance benefits, is expected to be substantively completed during the first quarter of 2010.

     During the nine-month period ended September 30, 2009, the Company recorded charges totaling approximately $1.8 million in connection with the consolidation of certain U.S. operations, which it expects to be funded by a state grant. The anticipated amount of the grant was recorded as a reduction in the associated charge and the establishment of a current receivable. If the Company does not maintain certain employment and payroll levels specified in the grant over a ten-year period, it will be obligated to return a portion of the grant funds to the

state on a pro-rata basis. Any such amounts that may be returned to the state will be charged to operating income when identified. The Company currently expects to meet the required employment and payroll levels.

     In connection with the acquisition of CompAir, the Company has been implementing plans identified at or prior to the acquisition date to close and consolidate certain former CompAir functions and facilities, primarily in North America and Europe. These plans included various voluntary and involuntary employee termination and relocation programs affecting both salaried and hourly employees and exit costs associated with the sale, lease termination or sublease of certain manufacturing and administrative facilities. The terminations, relocations and facility exits are expected to be substantively completed during 2009. A liability of $8.9 million was included in the allocation of the CompAir purchase price for the estimated cost of these actions at October 20, 2008. This liability was increased by $2.3 million in the nine-month period of 2009 to reflect the finalization of certain of these plans.

     The following table summarizes the activity in the restructuring accrual accounts:

		Termination
		Benefits				Other				Total
Balance as of December 31, 2008		$	13,634			$	2,365			$	15,999
Charged to expense			36,502				3,703				40,205
Acquisition purchase price allocation			1,712				583				2,295
Paid			(31,790	)			(3,373	)			(35,163	)
Other, net			2,530				172				2,702
Balance as of September 30, 2009		$	22,588			$	3,450			$	26,038

Note 4. Inventories

     Inventories as of September 30, 2009 and December 31, 2008 consisted of the following:

		September 30,				December 31,
		2009				2008
Raw materials, including parts and subassemblies		$	141,670			$	159,425
Work-in-process			46,303				47,060
Finished goods			66,180				90,951
			254,153				297,436
Excess of FIFO costs over LIFO costs			(14,980	)			(12,611	)
Inventories, net		$	239,173			$	284,825

Note 5. Goodwill and Other Intangible Assets

     During the first quarter of 2009, the Company concluded that sufficient indicators existed to require it to perform an interim impairment test of the carrying values of its goodwill and indefinite-lived intangible assets as of March 31, 2009. The Company’s conclusion was based upon a combination of factors, including the continued significant decline in order rates for certain products, the uncertain outlook regarding when such order rates might return to levels and growth rates experienced in recent years, and the sustained decline in the price of the

Company’s common stock resulting in the Company’s market capitalization being below the Company’s carrying value at March 31, 2009. Accordingly, the Company performed the first step of its interim goodwill impairment test for each of its reporting units and determined that the carrying value of one of its reporting units within the Industrial Products Group segment exceeded its fair value, indicating that a potential goodwill impairment existed. The Company recorded a preliminary non-cash goodwill impairment charge of $265.0 million in the quarter ended March 31, 2009 which represented the Company’s best estimate of the impairment at that time. During the second quarter of 2009, the Company finalized the valuation of the tangible and intangible assets and the allocation of fair value to the assets and liabilities of the impaired reporting unit, and recorded a reduction to the preliminary non-cash goodwill impairment change of $14.3 million to a total of $250.7 million.

     The Company completed its annual impairment test of the carrying values of its goodwill and indefinite-lived intangible assets as of June 30, 2009 and concluded that there had been no further impairment of goodwill. However, the Company identified and recorded a non-cash impairment charge related to its indefinite-lived intangible assets in the second quarter of 2009 of $10.0 million, primarily associated with a trade name in the Industrial Products Group segment. The estimated fair value of this trade name is based on a royalty savings concept, which assumes the Company would be required to pay a royalty to a third party for use of the asset if the Company did not own the asset, and is largely dependent on the projected revenues for products directly associated with the trade name. The projected revenues and resulting projected cash flows for these products declined, resulting in the necessity to reduce the carrying value for this intangible. The trade name impairment charge is reflected as a decrease in the carrying value of other intangibles, net, in the Condensed Consolidated Balance Sheet as of September 30, 2009 and as an impairment charge in the Condensed Consolidated Statements of Operations for the nine-month period ended September 30, 2009.

     During the third quarter of 2009, the Company identified further adjustments to the allocation of the CompAir purchase price and recorded an additional non-cash impairment charge of $2.9 million. The Company also assessed whether there were any further indicators of impairment or triggering events that had occurred during the third quarter of 2009 which may require the performance of an interim impairment test. This assessment did not identify any such indicators or events. Adverse changes in economic or operating conditions in the future may result in additional future material impairment charges.

     In performing the annual and interim goodwill impairment tests, the Company determined the estimated fair value of each reporting unit utilizing an income approach model based on the present value of the estimated future cash flows of the reporting unit at an applicable discount rate. This approach makes use of unobservable factors such as projected revenues and a discount rate applied to the estimated cash flows. The determination of the discount rate was based on a cost of equity and debt model, which uses a risk-free rate, a stock-beta adjusted risk premium, a size premium, among others, and aims to be reflective of the assumptions made by market participants. Additionally, the aggregate estimated fair value of the reporting units was compared to the Company’s market capitalization. In considering the Company’s market capitalization, an estimated premium to reflect the fair value on a control basis was applied.

     In performing the annual and interim assessments of the carrying values of indefinite-lived intangible assets, the Company compared the discounted estimates of future cash flow projections to the carrying values. Significant judgments inherent in this analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

     The Company reviews long-lived assets, including its intangible assets subject to amortization, which consist primarily of customer relationships and intellectual property for the Company, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability

of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, the impairment charge recognized is the amount by which the carrying amounts of the assets exceeds the fair value of the assets. As a result of the impairment indicators described above, during the first quarter of 2009, the Company tested its long-lived assets for impairment and determined that there was no impairment. There were no further impairment indicators during the second and third quarters of 2009.

     The changes in the carrying amount of goodwill attributable to each business segment for the nine-month period ended September 30, 2009, and the year ended December 31, 2008, are presented in the table below. The adjustments to goodwill in 2009 are primarily related to the finalization of the valuation of certain CompAir intangible assets.

		Industrial				Engineered
		Products				Products				Total
Balance as of December 31, 2007		$	363,011			$	322,485			$	685,496
Acquisitions			157,533				—				157,533
Adjustments to goodwill			(3,851	)			3,559				(292	)
Foreign currency translation			(25,641	)			(12,448	)			(38,089	)
Balance as of December 31, 2008			491,052				313,596				804,648
Adjustments to goodwill			17,332				(2	)			17,330
Impairment of goodwill			(253,590	)			—				(253,590	)
Foreign currency translation			3,372				9,578				12,950
Balance as of September 30, 2009		$	258,166			$	323,172			$	581,338

     The following table presents the gross carrying amount and accumulated amortization of identifiable intangible assets, other than goodwill, at the dates presented:

		September 30, 2009								December 31, 2008
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Amortized intangible assets:
Customer lists and relationships		$	125,426			$	(23,677	)		$	133,596			$	(17,654	)
Acquired technology			104,556				(50,351	)			91,713				(36,464	)
Trade names			56,541				(5,862	)			57,332				(3,450	)
Other			5,097				(3,336	)			4,728				(2,883	)
Unamortized intangible assets:
Trade names			113,609				—				119,345				—
Total other intangible assets		$	405,229			$	(83,226	)		$	406,714			$	(60,451	)

     Amortization of intangible assets for the three and nine-month periods ended September 30, 2009 was $4.7 million and $14.6 million, respectively. Amortization of intangible assets for the three and nine-month periods ended September 30, 2008 was $3.2 million and $9.2 million, respectively. Amortization of intangible assets is anticipated to be approximately $19.6 million in 2009 and $17.4 million in 2010 through 2013 based upon exchange rates as of September 30, 2009 and intangible assets with finite useful lives included in the balance sheet as of September 30, 2009.

Note 6. Accrued Product Warranty

     A reconciliation of the changes in the accrued product warranty liability for the three and nine-month periods ended September 30, 2009 and 2008 is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Balance at beginning of period		$	19,036			$	16,858			$	19,141			$	15,087
Product warranty accruals			5,846				4,796				17,003				12,813
Settlements			(6,148	)			(4,109	)			(17,790	)			(10,819	)
Effect of foreign currency translation			216				(862	)			596				(398	)
Balance at end of period		$	18,950			$	16,683			$	18,950			$	16,683

Note 7. Pension and Other Postretirement Benefits

     The following table summarizes the components of net periodic benefit cost for the Company’s defined benefit pension plans and other postretirement benefit plans recognized for the three and nine-month periods ended September 30, 2009 and 2008:

		Three Months Ended September 30,
		Pension Benefits																Other
		U.S. Plans								Non-U.S. Plans								Postretirement Benefits
		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	301			$	190			$	14			$	4
Interest cost			1,019				1,025				2,897				3,036				269				282
Expected return on plan assets			(686	)			(1,116	)			(2,377	)			(3,255	)			—				—
Recognition of:
Unrecognized prior-service cost			1				4				8				—				(33	)			(94	)
Unrecognized net actuarial loss (gain)			438				1				(19	)			(23	)			(355	)			(336	)
Net periodic benefit cost (income)			772				(86	)			810				(52	)			(105	)			(144	)
FASB ASC 715-30 curtailment gain			—				—				—				—				—				—
Total net periodic benefit cost (income)		$	772			$	(86	)		$	810			$	(52	)		$	(105	)		$	(144	)

		Nine Months Ended September 30,
		Pension Benefits																Other
		U.S. Plans								Non-U.S. Plans								Postretirement Benefits
		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	830			$	576			$	25			$	12
Interest cost			3,205				3,157				8,155				9,317				799				846
Expected return on plan assets			(2,512	)			(3,466	)			(6,678	)			(10,007	)			—				—
Recognition of:
Unrecognized prior-service cost			7				12				23				—				(133	)			(282	)
Unrecognized net actuarial loss (gain)			1,348				111				(54	)			(69	)			(1,005	)			(1,008	)
Net periodic benefit cost (income)			2,048				(186	)			2,276				(183	)			(314	)			(432	)
FASB ASC 715-30 curtailment gain			—				—				(118	)			—				—				—
Total net periodic benefit cost (income)		$	2,048			$	(186	)		$	2,158			$	(183	)		$	(314	)		$	(432	)

     The Company previously disclosed in its financial statements for the year ended December 31, 2008, that it expected to contribute approximately $8.6 million to its U.S. pension plans in fiscal 2009. As a result of recent changes to pension plan funding guidelines in the U.S. released by the Internal Revenue Service, the Company currently expects to contribute $1.4 million to its U.S. pension plans in fiscal 2009.

Note 8. Debt

     The Company’s debt at September 30, 2009 and December 31, 2008 is summarized as follows:

		September 30,				December 31,
		2009				2008
Short-term debt		$	5,659			$	11,786
Long-term debt:
Credit Line, due 2013 (1)		$	4,000			$	37,000
Term Loan, denominated in U.S. dollars, due 2013 (2)			132,000				177,750
Term Loan, denominated in euro (“EUR”), due 2013 (3)			131,669				165,284
Senior Subordinated Notes at 8%, due 2013			125,000				125,000
Secured Mortgages (4)			9,014				8,911
Variable Rate Industrial Revenue Bonds, due 2018			—				8,000
Capitalized leases and other long-term debt			10,194				9,937
Total long-term debt, including current maturities			411,877				531,882
Current maturities of long-term debt			29,538				25,182
Total long-term debt, less current maturities		$	382,339			$	506,700

Note 9. Stock-Based Compensation

     The following table summarizes the total stock-based compensation expense included in the consolidated statements of operations and the realized excess tax benefits included in the consolidated statements of cash flows for the three and nine-month periods ended September 30, 2009 and 2008.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Selling and administrative expenses		$	339			$	774			$	2,293			$	3,813
Total stock-based compensation expense included in operating expenses		$	339			$	774			$	2,293			$	3,813
Income (loss) before income taxes			(339	)			(774	)			(2,293	)			(3,813	)
Provision for income taxes			77				166				636				1,009
Net income (loss)		$	(262	)		$	(608	)		$	(1,657	)		$	(2,804	)
Net cash provided by operating activities		$	(63	)		$	(13	)		$	(151	)		$	(8,492	)
Net cash used in financing activities		$	63			$	13			$	151			$	8,492

Stock Option Awards

     A summary of the Company’s stock option activity for the nine-month period ended September 30, 2009 is presented in the following table (underlying shares in thousands):

														Weighted-
						Outstanding								Average
						Weighted-				Aggregate				Remaining
						Average				Intrinsic				Contractual
		Shares				Exercise Price				Value				Life
Outstanding at December 31, 2008			1,337			$	27.99
Granted			413			$	19.40
Exercised			(85	)		$	14.47
Forfeited			(77	)		$	28.70
Expired or canceled			(65	)		$	27.97
Outstanding at September 30, 2009			1,523			$	26.38			$	13,958			4.1 years
Exercisable at September 30, 2009			970			$	27.42			$	8,069			3.1 years

     The aggregate intrinsic value was calculated as the difference between the exercise price of the underlying stock options and the quoted closing price of the Company’s common stock at September 30, 2009 multiplied by

the number of in-the-money stock options. The weighted-average estimated grant-date fair value of employee stock options granted during the three and nine-month periods ended September 30, 2009 were $11.02 and $7.22, respectively.

     The total pre-tax intrinsic values of stock options exercised during the three-month periods ended September 30, 2009 and 2008 were $0.5 million and $0.1 million, respectively. The total pre-tax intrinsic values of stock options exercised during the nine-month periods of 2009 and 2008 were $1.2 million and $27.8 million, respectively. Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $2.6 million as of September 30, 2009 and will be recognized as expense over a weighted-average period of 1.8 years.

Valuation Assumptions

     The fair value of each stock option grant under the Incentive Plan was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used for the periods indicated are noted in the table below.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Assumptions:
Risk-free interest rate			2.1	%			2.3	%			1.7	%			2.6	%
Dividend yield			—				—				—				—
Volatility factor			44				35				45				30
Expected life (in years)			4.0				4.2				4.6				4.5

Restricted Share Awards

     A summary of the Company’s restricted share award activity for the nine-month period ended September 30, 2009 is presented in the following table (underlying shares in thousands):

						Weighted-
						Average Grant-
						Date Fair Value
		Shares				(per share)
Nonvested at December 31, 2008			159			$	35.25
Granted			70			$	20.56
Vested			(82	)		$	33.57
Forfeited			(7	)		$	23.71
Nonvested at September 30, 2009			140			$	29.85

     The restricted shares granted in the nine-month period of 2009 were valued at the market close price of the Company’s common stock on the date of grant. Pre-tax unrecognized compensation expense for nonvested restricted share awards, net of estimated forfeitures, was $2.1 million as of September 30, 2009, which will be recognized as expense over a weighted-average period of 1.8 years. The total fair value of restricted share awards that vested during the nine-month periods of 2009 and 2008 was $2.8 million and $0.1 million, respectively.

Note 10. Stockholders’ Equity and Earnings (Loss) Per Share

     In November 2008, the Company’s Board of Directors authorized a new share repurchase program to acquire up to 3.0 million shares of the Company’s outstanding common stock. During the nine-month period ended September 30, 2009, no shares were repurchased under this program. All common stock acquired is held as treasury stock and is available for general corporate purposes.

     The following table details the calculation of basic and diluted earnings (loss) per common share for the three and nine-month periods ended September 30, 2009 and 2008 (shares in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Basic Earnings (Loss) Per Share:
Net income (loss)		$	19,417			$	34,638			$	(202,353	)		$	135,063
Shares:
Weighted average number of common shares outstanding			51,923				53,080				51,847				52,915
Basic earnings (loss) per common share		$	0.37			$	0.65			$	(3.90	)		$	2.55
Diluted Earnings (Loss) Per Share:
Net income (loss)		$	19,417			$	34,638			$	(202,353	)		$	135,063
Shares:
Weighted average number of common shares outstanding			51,923				53,080				51,847				52,915
Effect of dilutive outstanding equity-based awards (1)			294				528				—				656
Weighted average number of diluted common shares			52,217				53,608				51,847				53,571
Diluted earnings (loss) per common share		$	0.37			$	0.65			$	(3.90	)		$	2.52

     For the three-month periods ended September 30, 2009 and 2008, respectively, antidilutive equity-based awards to purchase 771 thousand and 20 thousand weighted-average shares of common stock were outstanding. For the nine-month periods ended September 30, 2009 and 2008, respectively, antidilutive equity-based awards to purchase 792 thousand and 169 thousand weighted-average shares of common stock were outstanding. Antidilutive equity-based awards outstanding were not included in the computation of diluted earnings (loss) per common share.

Note 11. Accumulated Other Comprehensive Income (Loss)

     The Company’s accumulated other comprehensive income (loss) consists of (i) unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations; (ii) foreign currency gains and losses associated with the Company’s net investments in foreign operations and translation of intercompany transactions of a long-term investment nature, net of income taxes; (iii) unrecognized gains and losses on cash flow hedges (consisting of interest rate swaps), net of income taxes; and (iv) unamortized pension and other postretirement benefit prior service cost and actuarial gains or losses, net of income taxes.

     The following table sets forth the changes in each component of accumulated other comprehensive income (loss):

										Unrealized
		Cumulative				Foreign				(Losses)								Accumulated
		Currency				Currency				Gains on				Pension and				Other
		Translation				Gains and				Cash Flow				Postretirement				Comprehensive
		Adjustment (1)				(Losses)				Hedges				Benefit Plans				Income
Balance at December 31, 2007		$	133,467			$	—			$	(110	)		$	(5,347	)		$	128,010
Before tax income (loss)			50,157				—				(1,110	)			(393	)			48,654
Income tax effect			—				—				422				147				569
Other comprehensive income (loss)			50,157				—				(688	)			(246	)			49,223
Currency translation (2)			—				—				—				1				1
Balance at March 31, 2008			183,624				—				(798	)			(5,592	)			177,234
Before tax income (loss)			1,313				—				1,287				(395	)			2,205
Income tax effect			—				—				(489	)			148				(341	)
Other comprehensive income (loss)			1,313				—				798				(247	)			1,864
Currency translation (2)			—				—				—				4				4
Balance at June 30, 2008			184,937				—				—				(5,835	)			179,102
Before tax income loss			(85,998	)			—				—				(448	)			(86,446	)
Income tax effect			—				—				—				168				168
Other comprehensive loss			(85,998	)			—				—				(280	)			(86,278	)
Currency translation (2)			—				—				—				2				2
Balance at September 30, 2008		$	98,939			$	—			$	—			$	(6,113	)		$	92,826
Balance at December 31, 2008		$	99,633			$	(9,410	)		$	—			$	(17,955	)		$	72,268
Before tax (loss) income			(35,671	)			7,634				—				73				(27,964	)
Income tax effect			—				(2,886	)			—				(28	)			(2,914	)
Other comprehensive (loss) income			(35,671	)			4,748				—				45				(30,878	)
Currency translation (2)			—				—				—				—				—
Balance at March 31, 2009			63,962				(4,662	)			—				(17,910	)			41,390
Before tax income (loss)			43,242				(3,626	)			366				73				40,055
Income tax effect			—				1,294				(139	)			(28	)			1,127
Other comprehensive income (loss)			43,242				(2,332	)			227				45				41,182
Currency translation (2)			—				—				—				1				1
Balance at June 30, 2009			107,204				(6,994	)			227				(17,864	)			82,573
Before tax income (loss)			21,483				(326	)			(900	)			40				20,297
Income tax effect			—				852				342				(17	)			1,177
Other comprehensive income (loss)			21,483				526				(558	)			23				21,474
Currency translation (2)			—				—				—				3				3
Balance at September 30, 2009		$	128,687			$	(6,468	)		$	(331	)		$	(17,838	)		$	104,050

     The Company’s comprehensive income (loss) for the three and nine-month periods ended September 30, 2009 and 2008 was as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income (loss)		$	19,417			$	34,638			$	(202,353	)		$	135,063
Other comprehensive income (loss)			21,474				(86,278	)			31,778				(35,191	)
Comprehensive income (loss)		$	40,891			$	(51,640	)		$	(170,575	)		$	99,872

Note 12. Hedging Activities and Fair Value Measurements

Hedging Activities

     The Company is exposed to certain market risks during the normal course of business arising from adverse changes in commodity prices, interest rates, and foreign currency exchange rates. The Company’s exposure to these risks is managed through a combination of operating and financing activities. The Company selectively uses derivative financial instruments (“derivatives”), including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in commodity prices, interest rates, and foreign currency exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

     Credit risk related to derivatives arises when amounts receivable from a counterparty exceed those payable. Because the notional amount of the derivative instruments only serves as a basis for calculating amounts receivable or payable, the risk of loss with any counterparty is limited to a fraction of the notional amount. The Company minimizes the credit risk related to derivatives by transacting only with multiple, high-quality counterparties that are major financial institutions with investment-grade credit ratings. The Company has not experienced any financial loss as a result of counterparty nonperformance in the past. The majority of the derivative contracts to which the Company is a party settle monthly or quarterly, or mature within one year. Because of these factors, the Company believes it has minimal credit risk related to derivative contracts at September 30, 2009.

     The Company’s exposure to interest rate risk results primarily from its borrowings of $417.5 million at September 30, 2009. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by maintaining a mixture of fixed and variable rate debt and, from time to time, uses pay-fixed interest rate swaps as cash flow hedges of variable rate debt in order to adjust the relative proportions.

     A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the U.S. in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Other than the USD, the EUR, British pound sterling (“GBP”), and Chinese yuan (“CNY”) are the principal currencies in which the Company

and its subsidiaries enter into transactions. The Company is exposed to the impacts of changes in foreign currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities, and earnings into USD. The Company partially offsets these exposures by having certain of its non-U.S. subsidiaries act as the obligor on a portion of its borrowings and by denominating such borrowings, as well as a portion of the borrowings for which the Company is the obligor, in currencies other than the USD.

     The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances monthly. The Company also selectively uses forward currency contracts to manage this risk. These contracts for the sale or purchase of European and other currencies generally mature within one year.

     In accordance with FASB ASC 815, Derivatives and Hedging, the Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. If a derivative is designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings in the same period. If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects income. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. Derivatives that are not designated as hedges or do not qualify for hedge accounting treatment are marked to market through earnings. All cash flows associated with derivatives are classified as operating cash flows in the Condensed Consolidated Statement of Cash Flows.

     Fluctuations due to changes in foreign currency exchange rates in the value of non-USD borrowings that have been designated as hedges of the Company’s net investment in foreign operations are included in other comprehensive income.

     The following table summarizes the notional amounts, fair values and classification of the Company’s outstanding derivatives by risk category and instrument type within the Condensed Consolidated Balance Sheets:

		September 30, 2009
										Asset				Liability
						Notional				Derivatives				Derivatives
		Balance Sheet Location				Amount (1)				Fair Value (1)				Fair Value (1)
Derivatives designated as hedging instruments under FASB ASC 815
Interest rate swap contracts		Other Assets				$	133,520			$	—			$	603
Derivatives not designated as hedging instruments under FASB ASC 815
Foreign currency forwards		Accrued Liabilities				$	2,213			$	12			$	113
Foreign currency forwards		Other Current Assets				$	133,668			$	4,521			$	2,477

     Gains and losses on derivatives designated as cash flow hedges in accordance with FASB ASC 815, Derivatives and Hedging, included in the Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2009 are as follows:

Amount of Gain or (Loss)

Amount of Gain or

Recognized in Income on

Amount of Gain or (Loss)

(Loss) Reclassified

Derivatives

Recognized in OCI on

from Accumulated OCI

(Ineffective Portion and

Derivatives Designated as

Derivatives

into Income

Amount Excluded from

Cash Flow Hedges

(Effective Portion)

(Effective Portion)

Effectiveness Testing))

Three Months Ended September 30, 2009

Interest rate swap contracts (1)

$

(1,258

)

$

(359

)

$

(3

)

Amount of Gain or (Loss)

Amount of Gain or

Recognized in Income on

Amount of Gain or (Loss)

(Loss) Reclassified

Derivatives

Recognized in OCI on

from Accumulated OCI

(Ineffective Portion and

Derivatives Designated as

Derivatives

into Income

Amount Excluded from

Cash Flow Hedges

(Effective Portion)

(Effective Portion)

Effectiveness Testing))

Nine Months Ended September 30, 2009

Interest rate swap contracts (1)

$

(1,051

)

$

(518

)

$

(1

)

     During the second quarter of 2009, the Company entered into five pay-fixed/receive-variable interest rate swap contracts that effectively fix the LIBOR-based index used to determine the interest rates charged on a total of $75.0 million and €40.0 million of LIBOR-based variable rate borrowings. These contracts carry fixed rates ranging from 0.7% to 2.2% and have expiration dates ranging from 2010 to 2013. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted LIBOR-based interest payments. Based on LIBOR-based swap yield curves as of September 30, 2009, the Company expects to reclassify losses of $0.9 million out of AOCI into earnings during the next 12 months. The Company’s LIBOR-based variable rate borrowings outstanding at September 30, 2009 were $132.0 million and €90.0 million.

     There were 35 foreign currency forward contracts outstanding as of September 30, 2009 with notional amounts ranging from $0.1 million to $8.4 million. These contracts are used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in foreign currency exchange

rates. The Company has not designated the forward contracts as hedging instruments because changes in the fair value of the contracts generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included in the other operating expense, net, line on the face of the Condensed Consolidated Statements of Operations. During the three and nine-month periods ended September 30, 2009, the Company recorded net losses of $1.0 million and $14.9 million, respectively, relating to foreign currency forward contracts outstanding during all or part of the nine-month period of 2009. During the three and nine-month periods ended September 30, 2009, net foreign currency gains reported in other operating expense, net, were $1.6 million and zero, respectively.

     As of September 30, 2009, the Company has designated a portion of its term loan denominated in EUR of approximately €19.2 million as a hedge of the Company’s net investment in European subsidiaries with EUR functional currencies. Accordingly, changes in the fair value of this debt due to changes in the USD to EUR exchange rate are recorded through other comprehensive income. During the three and nine-month periods ended September 30, 2009, the Company recorded losses of $0.8 million and $1.2 million, net of tax, through other comprehensive income. As of September 30, 2009, the net balance of such losses included in accumulated other comprehensive income was $4.5 million, net of tax.

Fair Value Measurements

     A financial instrument is defined as a cash equivalent, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company’s financial instruments consist primarily of cash equivalents, trade receivables, trade payables, deferred compensation obligations and debt instruments. The book values of these instruments, other than the Senior Subordinated Notes, are a reasonable estimate of their respective fair values.

     The Senior Subordinated Notes outstanding are carried at cost. Their estimated fair value was approximately $120.0 million as of September 30, 2009 based upon non-binding market quotations that were corroborated by observable market data (Level 2). The estimated fair value is not indicative of the amount that the Company would have to pay to redeem these notes since they are infrequently traded and are not callable at this value.

     Effective January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”), with respect to its financial assets and liabilities. FASB ASC 820 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value is defined under FASB ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under FASB ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1		Quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2		Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

     The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2009:

		Level 1				Level 2				Level 3				Total
Financial Assets
Foreign currency forwards (1)		$	—			$	4,533			$	—			$	4,533
Trading securities held in deferred compensation plan (2)			7,622				—				—				7,622
Total		$	7,622			$	4,533			$	—			$	12,155
Financial Liabilities
Foreign currency forwards (1)		$	—			$	2,590			$	—			$	2,590
Interest rate swaps (3)			—				603				—				603
Phantom stock plan (4)			—				2,268				—				2,268
Deferred compensation plan (5)			7,622				—				—				7,622
Total		$	7,622			$	5,461			$	—			$	13,083

     As discussed in Note 5 “Goodwill and Other Intangible Assets” and in accordance with the provisions of FASB ASC 350, the Company recorded impairment charges associated with goodwill and indefinite-lived intangible asset of $253.6 million and $10.0 million, respectively, during the nine-month period ended September 30, 2009. The goodwill and indefinite-lived intangible asset impairment charges were calculated as the amount by which the carrying value of each asset exceeded its implied, in the case of goodwill, or estimated fair value. These fair values were determined using Level 3 inputs of the fair value hierarchy.

Note 13. Income Taxes

     As of September 30, 2009, the total balance of unrecognized tax benefits was $5.4 million compared with $7.8 million at December 31, 2008. The decrease in the balance primarily related to the favorable settlement of tax

audits in various foreign jurisdictions and changes in foreign currency exchange rates. The unrecognized tax benefits at September 30, 2009 include $5.4 million of uncertain tax positions that would affect the Company’s effective tax rate if recognized, of which $2.4 million would be offset by a reduction of a corresponding deferred tax asset. The Company does not expect any significant changes to its unrecognized tax benefits within the next twelve months.

     The Company’s accounting policy with respect to interest expense on underpayments of income tax and related penalties is to recognize such interest expense and penalties as part of the provision for income taxes. The Company’s income tax liabilities at September 30, 2009 include approximately $1.2 million of accrued interest and $0.3 million of penalties.

     The Company’s U.S. federal income tax returns for the tax years 2005 to 2007 are under examination by the Internal Revenue Service. As of the date of this report, the examination has not identified any material changes. The statutes of limitations for the U.S. state tax returns are open beginning with the 2005 tax year, except for two states for which the statutes have been extended, beginning with the 2003 tax year for one state and 2004 for the other state.

     The Company is subject to income tax in approximately 30 jurisdictions outside the U.S. The statute of limitations varies by jurisdiction. The Company’s significant operations outside the U.S. are located in China, the United Kingdom and Germany. In Germany, generally, the tax years 2003 and beyond remain subject to examination with the statutes of limitations for the 2003 tax year expiring during 2009. In China and the United Kingdom, tax years prior to 2005 are closed. In addition, audits are being conducted in various countries. To date, no material adjustments have been proposed as a result of these audits. During the three-month period ended September 30, 2009, a tax audit at one of the German subsidiaries was announced for the 2003 through 2007 tax years. The audit is expected to begin in November.

     The provision for income taxes was $14.4 million for the nine-month period ended September 30, 2009, compared to $56.3 million for the nine-month period ended September 30, 2008. The provision in the nine-month period of 2009 includes an $8.6 million valuation allowance against deferred tax assets related to net operating losses recorded in connection with the acquisition of CompAir based on revised financial projections. The provision in the nine-month period of 2009 also reflects a benefit for the reversal of deferred tax liabilities totaling $11.6 million associated with a portion of the net goodwill and all of the trade name impairment charges recorded in the nine-month period of 2009. Deferred tax liabilities were recorded when the trade name was established and offsetting deferred tax liabilities and deferred tax assets were established for the portion of goodwill which was amortizable for tax purposes. A portion of the goodwill for which the impairment charge was taken was not amortizable for tax purposes and, accordingly, deferred tax liabilities were not recorded when that goodwill was established and a corresponding tax benefit did not arise upon impairment of that portion of goodwill. Additionally, the provision in the nine-month period of 2009 includes a $3.6 million credit for the reversal of an income tax reserve and the related interest associated with the completion of a foreign tax examination. The provision in the nine-month period of 2008 includes incremental taxes of approximately $2.7 million associated with cash repatriation.

Note 14. Supplemental Information

     The components of other operating expense, net, and supplemental cash flow information are as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Other Operating Expense, Net
Foreign currency (gains) losses, net		$	(1,577	)		$	10,415			$	(14	)		$	8,500
Restructuring charges (1)			12,586				2,369				40,205				2,369
Other employee and certain retirement costs			273				863				45				4,548
Other, net			(435	)			939				511				1,841
Total other operating expense, net		$	10,847			$	14,586			$	40,747			$	17,258
Supplemental Cash Flow Information
Cash taxes paid										$	33,446			$	44,589
Interest paid											17,161				11,775
Accrued purchases of treasury stock											—				19,245