Ladish (LDSH)

First Quarter 2009 Compared to First Quarter 2008

Net sales for the three months ended March 31, 2009 were $105,739 compared to $117,197 for the same period in 2008. The 9.8% decrease in net sales for the first quarter of 2009 versus 2008 was due to the worldwide decline in all markets served by the Company. Net sales in the first quarter of 2009, in comparison to the same period of 2008, benefited from the acquisitions of Chen-Tech in September 2008 and Aerex in July 2008. Gross profit for the first quarter of 2009 was 6.9% of net sales in contrast to 12.6% of net sales in the first quarter of 2008. The reduction in gross profit is primarily a result of the decline in sales which diminished the Company’s opportunity for incremental earnings combined with the $1,098 of additional pension expense and a reduction of $2,911 of by-product sales in the first quarter of 2009 in comparison to the same period in 2008.

Selling, general and administrative expenses, as a percentage of net sales, were 3.8% for the first quarters of 2009 and 2008.

Interest expense for the first quarter of 2009 was $845 in contrast to $439 for the same period in 2008. The higher interest expense in 2009 is due primarily to an increased level of long-term debt associated with the Series C Notes and reduced capitalization of interest expense on capital projects offset by reduced interest rates. During the first quarter of 2009, the Company’s revolving line of credit had an interest rate equal to the LIBOR rate plus 1.25% or at a base rate per annum. Series B and Series C senior notes bore interest at the rate of 6.14% and 6.41%, respectively, per annum. The Company had $18,200 of borrowings under the revolving line of credit facility and had $90,000 of senior notes outstanding at the end of the first quarter of 2009.

Pretax income for the first quarter of 2009 was $2,003 in contrast to $9,570 for the same period in 2008. The decline in pretax income was due to the loss of incremental sales, the relative absence of by-product sales, and significantly higher expenses associated with pension costs, employment reductions, depreciation levels and interest expense.

The 2009 and 2008 first quarter income tax provisions are based on effective tax rates of 40.1% and 37.3%, respectively. The increase in the tax rate for 2009 is attributable to state income taxes and a reduced benefit from the Domestic Production Activities deduction.

The Company’s net income for the first quarter of 2009 was $1,200, a decrease from $5,983 in the first quarter of 2008. Profitability decreased in the period due to the lower sales, higher expenses associated with pension costs, higher interest levels due to the Series C senior notes, a one-time charge of $814 related to a reduction of employment levels and a higher effective tax rate in 2009. The Company’s contract backlog at March 31, 2009 was $523,258 as new orders in the first quarter of 2009 were largely offset by delivery schedule adjustments, in comparison to backlogs of $630,527 and $628,754 at March 31, 2008 and December 31, 2008, respectively.

In response to the lower net sales and accompanying reduction in net income, the Company has taken, and continues to take, a number of steps to reduce its costs. These steps have included personnel reductions, an early retirement program at one facility, plant shutdowns, wage and hiring freezes and other cost containment measures. In the first quarter of 2009, the Company recognized a charge of approximately $840 associated with these cost containment measures.

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