UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2011~~2012

Commission file number: 333-172207

CPM Holdings, Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		06-1612494 (I.R.S. Employer Identification No.)

2975 Airline Circle, Waterloo, Iowa (Address of principal executive offices)		50703 (Zip Code)

(319) 464-8275

(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 o No þ

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

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.

Class		Outstanding at ~~February~~May 1311, 2012
Common Stock, $0.001 par value per share		936,913 shares

CPM Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended ~~December~~March 31, ~~2011~~2012

TABLE OF CONTENTS

		BEGINNING
		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at September 30, 2011 and December 31, 2011 (Unaudited)	3
	Consolidated Balance Sheets at September 30, 2011 and March 31, 2012 (Unaudited)	3
	Consolidated Statements of Operations for the three months ended December 31, 2010 and 2011 (Unaudited)	4
	Consolidated Statements of Operations for the three and six months ended March 31, 2011 and 2012 (Unaudited)	4
	Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the year ended September 30, 2011 and the three months ended December 31, 2011 (Unaudited)	5
	Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the year ended September 30, 2011 and the six months ended March 31, 2012 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2010 and 2011 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2011 and 2012 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1721
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2026
ITEM 4.	Controls and Procedures	2026
PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	2127
ITEM 1A.	Risk Factors	2127
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2127
ITEM 3.	Defaults Upon Senior Securities	2127
ITEM 4.	Mine Safety Disclosures	2127
ITEM 5.	Other Information	2127
ITEM 6.	Exhibits	2228
	Signatures	S- 1
EX-31.1
EX-31.2
EX-32
EX-101

CPM Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended ~~December~~March 31, ~~2011~~2012

PART I. Financial Information

Item 1. Financial Statements.

CPM Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(dollars in thousands, except per share information)	September 30, 2011			~~December~~March 31, ~~2011~~2012
Assets
Current assets
Cash and cash equivalents	$	81,288		$	8553,~~296~~601
Restricted customer deposits	26,853			2940,~~735~~009
Accounts receivable, net	48,570			4137,~~359~~902
Inventories	54,026			6267,~~999~~122
Costs and estimated earnings in excess of billings on uncompleted contracts	24,585			2128,~~708~~570
Prepaid expenses and other current assets	4,004			5,~~296~~703
Deferred taxes	1,523			1,~~525~~526
Total current assets	240,849			~~247~~234,~~918~~433
Property, plant and equipment, net	17,547			1716,~~157~~926
Trademarks	54,178			5354,~~895~~226
Goodwill	140,086			~~138~~139,~~052~~736
Other intangibles, net	58,882			5552,~~104~~138
Total assets	$	511,542		$	~~512~~497,~~126~~459
Liabilities and Equity
Current liabilities
Accounts payable	$	31,869		$	36,352
Current portion of long-term debt	$	—		$	65
Accrued expenses	44,401			45,370
Accounts payable	31,869			38,372
Billings in excess of costs and estimated earnings on uncompleted contracts	59,812			72,021
Accrued expenses	44,401			42,365
Total current liabilities	136,082			153,743
Billings in excess of costs and estimated earnings on uncompleted contracts	59,812			43,588
Long-term debt	172,796			159,681
Total current liabilities	136,082			124,390
Deferred taxes	27,233			27,403
Long-term debt, less current portion	172,796			159,831
Other liabilities	2,616			2,534
Deferred taxes	27,233			28,226
Total liabilities	338,727			343,361
Other liabilities	2,616			3,150
Total liabilities	338,727			315,597
Commitments and contingencies
Equity
Parent Company stockholders’ equity
Common stock, $.001 par value, authorized shares 1,100,000; shares issued and outstanding 936,913	1			1
Additional paid-in capital	83,105			83,~~197~~289
Retained earnings	84,456			8795,~~559~~598
Accumulated other comprehensive loss	(7,003		)	(106,~~424~~535		)
Total Parent Company stockholders’ equity	160,559			~~160~~172,~~333~~353
Noncontrolling interest	12,256			89,~~432~~509
Total equity	172,815			~~168~~181,~~765~~862
Total liabilities and equity	$	511,542		$	~~512~~497,~~126~~459

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

CPM Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three months ended						Six months ended
	December 31,			December 31,
	March 31,						March 31,
(dollars in thousands)	~~2010~~2011			~~2011~~2012			2011			2012
Net sales	$	9085,~~471~~953		$	~~100~~136,~~451~~948		$	176,424		$	237,399
Cost of goods sold	6759,~~760~~390			6899,~~971~~427			127,150			168,398
Gross profit	2226,~~711~~563			3137,~~480~~521			49,274			69,001
Operating expenses
Selling, general and administrative expenses	1012,~~963~~352			1413,~~326~~176			23,315			27,502
Amortization expense	2,~~668~~641			2,~~808~~635			5,309			5,443
Management fees	~~625~~500			~~1,237~~500			1,125			1,737
Total operating expenses	1415,~~256~~493			1816,~~371~~311			29,749			34,682
Income from operations	811,~~455~~070			1321,~~109~~210			19,525			34,319
Other expense (income)
Interest expense	56,~~897~~105			65,~~599~~055			12,002			11,654
Interest income	(~~555~~612		)	(~~835~~484		)	(1,167		)	(1,319		)
Total other expense	5,~~342~~493			54,~~764~~571			10,835			10,335
Income before income taxes	35,~~113~~577			716,~~345~~639			8,690			23,984
Income tax expense	12,~~149~~000			37,~~160~~553			3,149			10,713
Net income	13,~~964~~577			49,~~185~~086			5,541			13,271
Less: Net income attributable to noncontrolling interest	1,~~190~~219			1,~~082~~047			2,409			2,129
Net income attributable to Parent Company	$	~~774~~2,358		$	38,~~103~~039		$	3,132		$	11,142

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

CPM Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity and Comprehensive Income (Loss)

(Unaudited)

	Parent Company Stockholders’ Equity
				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)			Parent Company Stockholders' Equity			Noncontrolling Interest in Subsidiary
	Common Stock					Retained Earnings											Total Equity
(dollars in thousands)	Shares	Amount
Balances at September 30, 2010	936,913	1$	1	~~82,478~~$	82,478	~~67,965~~$	67,965	~~(5,958~~$	(5,958	)	~~144,486~~$	144,486		~~4,893~~$	4,893		~~149,379~~$	149,379
Stock-based compensation	—	—		627		—		—			627			—			627
Comprehensive income (loss), net of tax
Foreign currency translation adjustment	—	—		—		—		(1,045		)	(1,045		)	377			(668		)
Net income	—	—		—		16,491		—			16,491			6,986			23,477
Total comprehensive income											15,446			7,363			22,809
Balances at September 30, 2011	936,913	1		83,105		84,456		(7,003		)	160,559			12,256			172,815
Stock-based compensation	—	—		92184		—		—			92184			—			92184
Dividends	—	—		—		—		—			—			(5,015		)	(5,015		)
Comprehensive income (loss), net of tax
Comprehensive income, net of tax
Foreign currency translation adjustment	—	—		—		—		~~(3,421~~468		)	~~(3,421~~468		)	~~109~~139			~~(3,312~~607		)
Net income	—	—		—		311,~~103~~142		—			311,~~103~~142			12,~~082~~129			413,~~185~~271
Total comprehensive income (loss)											(318		)	1,191			873
Total comprehensive income											11,610			2,268			13,878
Balances at December 31, 2011	936,913	$	1	$	83,197	$	87,559	$	(10,424	)	$	160,333		$	8,432		$	168,765
Balances at March 31, 2012	936,913	$	1	$	83,289	$	95,598	$	(6,535	)	$	172,353		$	9,509		$	181,862

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

CPM Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	Six Months Ended
	December 31,
	March 31,
(dollars in thousands)	~~2010~~2011			~~2011~~2012
Net cash provided by operating activities	20,122			24,260
Net cash provided by (used in) operating activities	$	13,848		$	(9,138	)
Cash flows from investing activities
Purchases of property, plant and equipment	(~~180~~810		)	(~~578~~1,140		)
Proceeds on sales of property, plant and equipment	20353			2627
Net cash used in investing activities	(~~160~~457		)	(~~552~~1,113		)
Cash flows from financing activities
Payments of long-term debt	—			(14,262		)
Proceeds from revolving credit facilities	—			3245,~~055~~567
Payments on revolving credit facilities	—			(3245,~~055~~502		)
Payments of dividends	—			(5,015		)
Net cash used in financing activities	—			(19,~~277~~212		)
Effect of foreign exchange rate changes on cash and cash equivalents	~~383~~1,915			~~(423~~1,776		)
Net increase in cash and cash equivalents	20,345			4,008
Net increase (decrease) in cash and cash equivalents	15,306			(27,687		)
Cash and cash equivalents
Beginning of period	58,691			81,288
End of period	$	7973,~~036~~997		$	8553,~~296~~601

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

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)


1.	Basis of Presentation

The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to such rules and regulations. These interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements and related notes for the fiscal year ended September 30, 2011 included on Form 10-K, filed with the SEC.


2.	Description of Business

CPM Holdings, Inc. (the “Company” or “CPM” or “Parent”), is engaged in the design, production and marketing of process systems, equipment and parts and services utilized primarily in the agricultural and food producing/processing industries. The Company’s businesses fall into three reporting segments: Process Equipment, Engineered Process Systems and All Other.

The Process Equipment segment manufactures and sells process machinery and other equipment utilized primarily in the agricultural and food producing/processing industries. Products include the manufacture of mills, flakers, and dryers.

The Engineered Process Systems segment sells engineering, design and layout services along with outsourced process equipment for oilseed processing, biodiesel and edible oil refining industries.

The All Other segment designs, manufactures and sells process machinery for the plastics compounding, two-piece beverage container and other industries.

Operations are worldwide and include production and sales facilities in the United States, the Netherlands, United Kingdom, Germany, Singapore, China, Brazil and Argentina.


3.	Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its controlled, majority owned subsidiaries. The Company classifies noncontrolling interest as part of consolidated net income (loss) and includes the accumulated amount of noncontrolling interest as part of equity. Noncontrolling interest primarily relates to the minority shareholder of Wuhan Crown Friendship Edible Oil Engineering Co., Ltd., the Company's joint venture in China. Significant intercompany accounts and transactions have been eliminated in consolidation.

~~Use~~Fair Value of ~~Estimates~~Financial Instruments

The ~~preparation of the~~ Company’'s ~~consolidated~~ financial ~~statements~~instruments ininclude ~~conformity~~cash ~~with~~and ~~accounting~~cash ~~principles~~equivalents, ~~generally~~restricted ~~accepted~~customer indeposits, ~~the~~accounts ~~United~~receivable, ~~States~~prepaid ofexpenses ~~America~~and ~~requires~~other ~~management~~current toassets, ~~make~~accounts ~~estimates~~payable and ~~assumptions~~long-term ~~that~~debt. ~~affect~~The ~~the~~carrying ~~reported~~values ~~amounts~~approximated offair ~~assets~~value ~~and~~for ~~liabilities~~cash and ~~disclosure~~cash ofequivalents, ~~contingent~~restricted customer deposits, accounts receivable, prepaid expenses and other current assets, accounts payable and ~~liabilities~~the atrevolving credit facility loan because of the ~~date~~short term nature of these instruments. The fair value of the ~~consolidated~~senior ~~financial~~notes, ~~statements~~as ~~and~~determined by management based on the ~~reported~~quoted ~~amounts~~market price for the same or similar issues of ~~revenues~~debt ~~and~~(classified ~~expenses~~as ~~during~~level ~~the~~2) ~~reporting~~is ~~period.~~approximately ~~Actual~~$186,000 ~~results~~and ~~could~~$172,000 ~~differ~~at September ~~from~~30, ~~those~~2011 ~~estimates~~and March 31, 2012, respectively.

Recent Accounting Pronouncements

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

~~components~~Use ~~in the statement~~ of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements. Each component of net income and each component of other comprehensive income, together with totals for comprehensive income and its two parts - net income and other comprehensive income, would need to be displayed under either alternative. The new requirements are effective for public entities for fiscal years beginning after December 15, 2011 and interim and annual periods thereafter. The Company believes this pronouncement will not have a material impact on its financial position or results of operations and is currently evaluating the impact on the form and content of the Company's financial statements and related disclosures.Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (the "FASB") issued ASU 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements. Each component of net income and each component of other comprehensive income, together with totals for comprehensive income and its two parts - net income and other comprehensive income, would need to be displayed under either alternative. The new requirements are effective for public entities for fiscal years beginning after December 15, 2011 and interim and annual periods thereafter. The Company believes this pronouncement will not have a material impact on its financial position or results of operations and is currently evaluating the impact on the form and content of the Company's financial statements and related disclosures.

In September 2011, the FASB issued FASB ASU No. 2011-08, “Testing Goodwill for Impairment,” which is now codified under FASB ASC Topic 350, “Intangibles - Goodwill and Other.” This new guidance allows an entity to first assess qualitative factors to evaluate if the existence of events or circumstances leads to a determination that it is necessary to perform the current two-step test. After assessing the totality of events or circumstances, if it is determined it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. Otherwise, the entity is required to perform Step 1 of the impairment test. An entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to Step 1 of the two-step impairment test, and then resume performing the qualitative assessment in any subsequent period. Reporting units with zero or negative carrying amounts continue to be required to perform a qualitative assessment in place of Step 1 of the impairment test. FASB ASU No. 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company has not elected early adoption and is currently evaluating the impact of this pronouncement on the Company's financial statements and related disclosures. The Company does not expect this pronouncement to have a material impact on the financial statements and related disclosures.


4.	Selected Consolidated Financial Statement Information

Inventories

	September 30, 2011		~~December~~March 31, ~~2011~~2012
Raw materials	$	13,869	$	18,~~445~~621
Work-in-process	7,412		814,~~947~~401
Finished goods	32,745		3534,~~607~~100
	$	54,026	$	6267,~~999~~122

Accrued Warranties

	Year Ended September 30, 2011			Three Months Ended December 31, 2011
Accrued warranties
Beginning of period	$	2,089		$	1,706
Warranty liability assumed in acquisition	345			—
Settlements made	(1,160		)	(342		)
Change in liability related to product warranties issued	432			273
End of period	$	1,706		$	1,637

Accrued warranties are included as a component of accrued expenses on the accompanying balance sheets.

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Accrued Warranties



	Twelve months ended September 30, 2011			Six months ended March 31, 2012
Accrued warranties
Beginning of period	$	2,089		$	1,706
Warranty liability assumed in acquisition	345			—
Settlements made	(1,160		)	(731		)
Change in liability related to product warranties issued	432			874
End of period	$	1,706		$	1,849

Accrued warranties are included as a component of accrued expenses on the accompanying balance sheets.

Contracts in Progress

	September 30, 2011			~~December~~March 31, ~~2011~~2012
Costs incurred on uncompleted contracts	$	365,906		$	~~397~~481,~~100~~876
Estimated earnings on uncompleted contracts	85,011			95117,~~908~~310
Less: Billings on contracts in progress	(486,144		)	(~~543~~614,~~321~~204		)
	$	(35,227	)	$	(5015,~~313~~018	)

These amounts are included in the consolidated financial statements as follows:

	September 30, 2011			~~December~~March 31, ~~2011~~2012
Costs and estimated earnings in excess of billings on uncompleted contracts	$	24,585		$	2128,~~708~~570
Billings in excess of costs and estimated earnings on uncompleted contracts	(59,812		)	(7243,~~021~~588		)
	$	(35,227	)	$	(5015,~~313~~018	)


5.	Acquisitions

2011 Acquisition

On September 13, 2011, the Company purchased Kimba Germany GMBH, Cimbria SKET GMBH and a 51% holding in MDV Magdeburg-Dessauer GMBH (altogether referred to as "Sket") for $23,252. Direct acquisition costs totaling $443 in fiscal 2011 and $41 in fiscal 2012 were expensed as incurred. Sket provides engineered solutions and process equipment in preparation, refining and oleochemical processing and compliments the Company's existing businesses by broadening product portfolios, engineering capabilities, application expertise, and worldwide market coverage. The acquisition was funded through available cash. The pro forma impact of the Sket acquisition was not significant to the results of the Company for the fiscal year ended September 30, 2011. The Sket results have been included in the Company’s results of operations since the date of acquisition. The estimated fair value of assets acquired and liabilities assumed are as follows:

Cash	$	2,952
Accounts receivable	7,935
Costs in excess of billings	3,641
Property, plant and equipment	243
Goodwill	14,532
Other intangibles	5,794
Accounts payable	(5,728		)
Accrued expenses	(2,774		)
Billings in excess of costs	(1,449		)
Deferred taxes	(1,894		)
	$	23,252

The goodwill is not deductible for tax purposes. We believe this acquisition resulted in goodwill as it broadens product portfolios, engineering capabilities, application expertise, and worldwide market coverage.The identifiable other intangibles for Sket include trade names, customer relationships, customer contracts, and software and are amortized over a period of one to ten years with a weighted average useful life of seven years.

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)



Cash	$	2,952
Accounts receivable	7,935
Costs in excess of billings	3,641
Property, plant and equipment	243
Goodwill	14,532
Other intangibles	5,794
Accounts payable	(5,728		)
Accrued expenses	(2,774		)
Billings in excess of costs	(1,449		)
Deferred taxes	(1,894		)
	$	23,252


6.	Debt

The Company’s debt at September 30, 2011 and ~~December~~March 31, ~~2011~~2012, consists of the following:

	September 30, 2011		~~December~~March 31, ~~2011~~2012
Senior Notes, net of unamortized discount	$	172,796	$	159,~~681~~831
Less: Amounts due within one year	—		—
Revolving credit facility loan	—		65
	$	172,796	$	159,681
	172,796		159,896
Less: Amounts due within one year	—		(65		)
	$	172,796	$	159,831

In August 2009, the Company issued $200,000 of Senior Notes due September 1, 2014 at 98.101% of par (the “Senior Notes”), resulting in an original issue discount of $3,798. The original issue discount, net of accumulated amortization was $2,139 and $1,~~829~~679 at September 30, 2011 and ~~December~~March 31, ~~2011~~2012, respectively. The original issue discount is being amortized using the effective interest method over the term of the debt. The Senior Notes bear interest at 10.625% per year and provide for semi-annual interest payments, in arrears, due on March 1 and September 1. All principal will be paid at maturity. The net proceeds from the offering were used to retire the remaining outstanding borrowings on the previous term loan and revolving credit facility, which provided for a term loan of $210,000 and a revolving credit facility up to $30,000.

The Senior Notes are subject to certain covenants and restrictions, such as restrictions on the payment of dividends, incurrence of certain additional indebtedness, issuance of preferred stock or entering into certain merger transactions, as defined by the Senior Notes Offering Memorandum. The Senior Notes are collateralized by a second priority interest in the Company’s U.S. current assets and a first priority interest in substantially all of the Company’s U.S. other assets. The Senior Notes are also guaranteed by the Company’s U.S. subsidiaries.

The Senior Notes contain an optional redemption feature whereby the Company can redeem all or a portion of the Senior Notes, including applicable premiums for early redemptions as defined in the agreement. In addition, the Senior Notes have a change of control provision which gives each holder the right to require the Company to purchase all or a portion of such holders’ Senior Notes upon a change in control, as defined in the agreement, at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase.

During 2011, the Company repurchased Senior Notes having a face value of $25,065 in the open market. As a result of the repurchases, the Company recorded a loss of $2,012 which represents the difference between the acquired debt's purchase price of $26,765 and its carrying value of $24,753. This loss is included in interest expense in the ~~consolidated statements of operations. At the time of the repurchases, the Company also wrote off $836 of unamortized deferred financing costs related to the repurchased debt.~~

During the quarter ended December 31, 2011, the Company repurchased Senior Notes having a face value of $13,425 in the open market. As a result of the repurchases, the Company recorded a loss of $1,000 which represents the difference between the acquired debt's purchase price of $14,262 and its carrying value of $13,262. This loss is included in interest expense in the consolidated statements of operations. At the time of the repurchases, the Company also wrote off $441 of unamortized deferred financing costs related to the repurchased debt.

In November 2009, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions which provides for a revolving credit facility consisting of a revolving credit loan and letters of credit in an aggregate amount of up to $14,500, including swing line loans in the principal amount of $5,000. The swing line loans are subfacilities of the revolving credit facility used for daily fluctuations on borrowings. As of September 30, 2011 and December 31, 2011, there were no borrowings outstanding under the revolving credit facility. The availability under the facility is subject to a borrowing base, which is based on the eligible receivables, inventory and certain other commitments of the Company’s U.S. subsidiaries. The credit available for borrowing was limited by the borrowing base to $14,500 and $7,500 on September 30, 2011 or December 31, 2011. The Credit Agreement expires on April 20, 2013.

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

~~payable~~consolidated onstatements ~~the last day~~ of ~~each calendar month~~operations. ~~Interest~~At on the ~~Eurodollar~~time ~~loans is payable on the last day~~ of ~~each interest period relating to such loan, but not to exceed six months. An applicable margin is added for~~ the ~~Base Rate loans and Eurodollar loans ranging from 2.75% and 4.25%~~repurchases, ~~based on~~ the Company’s ~~fixed~~also ~~charge~~wrote ~~coverage~~off ~~ratio~~$836 ~~at the end~~ of aunamortized ~~given~~deferred ~~period,~~financing ascosts ~~further~~related ~~defined~~to in the ~~Credit~~repurchased ~~Agreement~~debt.

~~Commitment~~During ~~fees on~~ the ~~revolving~~six ~~credit~~months ~~facility~~ended ~~range~~March ~~from~~31, ~~0.625%~~2012, tothe ~~0.75%~~Company ~~per~~repurchased ~~year~~Senior ~~payable~~Notes ~~quarterly~~having ina ~~amounts.~~face ~~Commitment~~value ~~fees on the letters~~ of ~~credit vary~~$13,425 ~~as further defined~~ in the ~~Credit~~open ~~Agreement, and range from 3~~market.~~75%~~ As toa ~~4.25%~~result ~~(or~~of ~~2.00%~~the ifrepurchases, ~~cash~~the ~~collateralized)~~Company ~~payable~~recorded ~~quarterly.~~a ~~Total~~loss ~~commitment~~of ~~fees~~$1,000 ~~under~~which represents the ~~revolving~~difference ~~credit~~between ~~facility were $28 and $13 for~~ the ~~three~~acquired ~~month~~debt's ~~periods~~purchase ~~ending~~price ~~December~~of 31$14,262 ~~2010~~ and ~~2011,~~its ~~respectively.~~carrying ~~Outstanding~~value ~~letters~~ of ~~credit were~~ $413,~~183~~262. ~~and~~This ~~$727~~loss atis ~~September 30,~~included ~~2011~~in ~~and~~interest ~~December 31,~~expense ~~2011,~~in ~~respectively.~~the Inconsolidated ~~conjunction~~statements ~~with~~of ~~entering~~operations. ~~into~~At the ~~Credit~~time ~~Agreement~~of inthe ~~fiscal 2010~~repurchases, the Company ~~paid~~also ~~$914~~wrote inoff ~~costs~~$441 ~~capitalized~~of asunamortized deferred financing ~~fees,~~costs ~~consisting of legal, accounting and deal fees directly~~ related to ~~consummation of~~ the ~~Credit~~repurchased ~~Agreement~~debt.

In November 2009, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions which provides for a revolving credit facility consisting of a revolving credit loan and letters of credit in an aggregate amount of up to $14,500, including swing line loans in the principal amount of $5,000. The swing line loans are sub-facilities of the revolving credit facility used for daily fluctuations on borrowings. Loans outstanding under the revolving credit facility were $0 and $65 as of September 30, 2011 and March 31, 2012. The availability under the facility is subject to a borrowing base, which is based on the eligible receivables, inventory and certain other commitments of the Company’s U.S. subsidiaries. The credit available for borrowing was limited by the borrowing base to $14,500 and $5,138 on September 30, 2011 or March 31, 2012. The Credit Agreement expires on April 20, 2013.

At the Company’s option, borrowings under the revolving credit facility are either Base Rate loans, bearing interest at a rate equal to the greater of (a) the lender’s prime rate (3.25% at March 31, 2012), (b) the LIBOR rate (0.24% at March 31, 2012) plus 1.00% or (c) the federal funds rate (0.09% at March 31, 2012) plus 0.50%; or Eurodollar loans, bearing interest at the adjusted LIBOR rate (0.33% at March 31, 2012). Interest on the Base Rate loans is payable on the last day of each calendar month. Interest on the Eurodollar loans is payable on the last day of each interest period relating to such loan, but not to exceed six months. An applicable margin is added for the Base Rate loans and Eurodollar loans ranging from 2.75% and 4.25%, based on the Company’s fixed charge coverage ratio at the end of a given period, as further defined in the Credit Agreement.

Commitment fees on the revolving credit facility range from 0.625% to 0.75% per year payable quarterly in amounts. Commitment fees on the letters of credit vary, as further defined in the Credit Agreement, and range from 3.75% to 4.25% (or 2.00% if cash collateralized) payable quarterly. Total commitment fees under the revolving credit facility were $31 and $17 for the three month periods ending March 31, 2011, and 2012, respectively, and $59 and $30 for the six month periods ending March 31, 2011 and 2012, respectively. Outstanding letters of credit were $4,183 and $9,735 at September 30, 2011 and March 31, 2012, respectively. In conjunction with entering into the Credit Agreement in fiscal 2010, the Company paid $914 in costs capitalized as deferred financing fees, consisting of legal, accounting and deal fees directly related to consummation of the Credit Agreement.

Borrowings under the revolving credit facility are subject to certain restrictive financial covenants, including a fixed charge coverage ratio. The Credit Agreement also includes a subjective acceleration clause which permits the financial institution to accelerate the due date of the facility under certain circumstances, including, but not limited to, material adverse effect on the Company’s financial status or otherwise. Borrowings under the Credit Agreement are collateralized by a first priority security interest in substantially all U.S. current assets of the Company and are guaranteed by the Company’s U.S. subsidiaries. The Credit Agreement also requires the Company to maintain all of its U.S. lockbox accounts, disbursement accounts and other operating accounts with the lenders.


7.	Income Taxes

The Company recognizes the financial statement effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. We have adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company's effective tax rate in future periods. The Company does not expect a significant change in the liability for unrecognized tax benefits in the next 12 months.

The Company files tax returns as prescribed by tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and foreign jurisdictions. The Company is potentially subject to income tax examinations for the fiscal years 2008 through 2011. The Company is currently under a federal income tax examination in the U.S. for fiscal year 2010.


8.	Commitments and Contingencies

Environmental Health and Safety Matters

We are subject to a variety of environmental standards imposed by federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air, water and land, the management and disposal of hazardous substances and wastes and the responsibility to investigate and cleanup contaminated sites that are or were owned, leased, operated or used by us or our predecessors. In the opinion of management, the ultimate disposition of matters arising from these environmental standards not reserved for on our balance sheet will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Litigation

The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.


9.	Segment and Geographic Data

The Company identified three reportable segments: Process Equipment, Engineered Process Systems and All Other. Segment selection was based on the internal organizational structure, management of operations and performance evaluation by the chief operating decision maker.

Corporate and Unallocated includes corporate expenses determined to be nonallocable to the segments, interest income, interest expense and income taxes. Assets included in Corporate and Unallocated principally are cash and cash equivalents, certain prepaid expenses and other current assets, and deferred taxes. Segment allocated assets are primarily accounts receivable, inventories, property, plant and equipment, goodwill and intangible assets, and certain other assets. Reconciling items included in Corporate and Unallocated are created based on accounting differences between segment reporting and the consolidated, external reporting as well as internal allocation methodologies.

11Segment detail is summarized as follows:

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CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

cash equivalents, certain prepaid expenses and other current assets, and deferred taxes. Segment allocated assets are primarily accounts receivable, inventories, property, plant and equipment, goodwill and intangible assets, and certain other assets. Reconciling items included in Corporate and Unallocated are created based on accounting differences between segment reporting and the consolidated, external reporting as well as internal allocation methodologies.



	Process Equipment Segment	Engineered Process Systems Segment	All Other	Corporate and Unallocated		Total Company
Three months ended March 31, 2011
Net sales	35,601	40,844	9,508	—		85,953
Income (loss) before income taxes	5,305	6,274	735	(6,737	)	5,577
Depreciation and amortization	827	1,943	794	857		4,421
Capital expenditures	229	27	60	314		630
Six months ended March 31, 2011
Net sales	70,366	85,555	20,503	—		176,424
Income (loss) before income taxes	10,785	9,505	1,853	(13,453	)	8,690
Depreciation and amortization	1,532	3,890	1,624	1,715		8,761
Capital expenditures	299	63	134	314		810
Three months ended March 31, 2012
Net sales	44,153	79,271	13,524	—		136,948
Income (loss) before income taxes	9,436	11,397	1,407	(5,601	)	16,639
Depreciation and amortization	635	2,388	349	742		4,114
Capital expenditures	379	143	40	—		562
Six months ended March 31, 2012
Net sales	79,877	130,941	26,581	—		237,399
Income (loss) before income taxes	15,776	17,747	3,781	(13,320	)	23,984
Depreciation and amortization	1,240	4,948	708	1,325		8,221
Capital expenditures	730	205	194	11		1,140
Total assets at March 31, 2012	218,348	241,980	32,488	4,643		497,459

Segment detail is summarized as follows:

	ProcessEquipmentSegment	EngineeredProcessSystemsSegment	All Other	CorporateandUnallocated		TotalCompany
Three months ended December 31, 2010
Net sales	34,765	44,711	10,995	—		90,471
Income (loss) before income taxes	5,480	3,231	1,118	(6,716	)	3,113
Depreciation and amortization	705	1,947	830	858		4,340
Capital expenditures	70	36	74	—		180
Three months ended December 31, 2011
Net sales	35,724	51,670	13,057	—		100,451
Income (loss) before income taxes	6,340	6,350	2,374	(7,719	)	7,345
Depreciation and amortization	605	2,560	359	583		4,107
Capital expenditures	351	62	154	11		578
Total assets at December 31, 2011	214,488	257,700	33,094	6,844		512,126


10.	Related Party Transactions

The Company has a management advisory agreement with GGEP Management, L.L.C. and GGEP Management Ltd. (“Gilbert”) which are related parties. The agreement requires an annual management fee of up to $2,500 per year for management services provided, plus certain fees and expenses. Expense under the management agreement was $~~625~~500 for the three month periods ended March 31, 2011 and 2012, respectively and $1,~~237~~125 and 1,737 for the ~~three~~six month periods ended ~~December~~March 31, ~~2010~~2011 and ~~2011,~~2012 respectively. The Company had $500 ~~and $0~~ of management fees included in current liabilities at September 30, 2011 and ~~December~~March 31, ~~2011~~2012, respectively.

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Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)


11.	Guarantor Subsidiary Financial Information

The Senior Notes issued in August 2009 (Note 6) have been guaranteed, fully and unconditionally, except for customary release provisions, on a joint and several basis, by its 100% owned U.S. domestic subsidiaries. The following condensed consolidating balance sheets at September 30, 2011 and ~~December~~March 31, ~~2011~~2012, the condensed consolidating statements of operations for the three and six month periods ended ~~December~~March 31, ~~2010~~2011 and ~~2011~~2012, and the condensed consolidating statements of cash flows for the ~~three~~six month periods ended ~~December~~March 31, ~~2010~~2011 and ~~2011~~2012 have been prepared in accordance with the requirements for presentation of Rule 3-10(f) of Regulation S-X promulgated under the Securities Act. These condensed consolidating statements reflect CPM Holdings, Inc. as the issuer of the Senior Notes, the Company’s wholly owned U.S. domestic subsidiaries as the guarantors presented on a combined basis, the Company’s non-guarantor subsidiaries presented on a combined basis, and consolidating and eliminating adjustments, to combine such entities on a consolidated basis.

1214

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Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Balance Sheet

September 30, 2011



(dollars in thousands)	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	564	$	80,724	$	—		$	81,288
Restricted customer deposits	—			4,183		22,670		—			26,853
Accounts receivable, net	2,260			58,707		36,184		(48,581		)	48,570
Inventories	—			25,635		28,391		—			54,026
Costs and estimated earnings in excess of billings on uncompleted contracts	—			4,717		19,868		—			24,585
Prepaid expenses and other current assets	—			1,296		2,708		—			4,004
Deferred taxes	—			1,350		173		—			1,523
Total current assets	2,260			96,452		190,718		(48,581		)	240,849
Property, plant and equipment, net	—			11,825		5,722		—			17,547
Investment in subsidiaries	323,506			65,968		—		(389,474		)	—
Trademarks	—			53,778		400		—			54,178
Goodwill	—			116,693		23,393		—			140,086
Other intangibles, net	5,748			45,485		7,649		—			58,882
Total assets	$	331,514		$	390,201	$	227,882	$	(438,055	)	$	511,542
Liabilities and Equity
Current liabilities
Accounts payable	$	—		$	16,540	$	63,910	$	(48,581	)	$	31,869
Accrued expenses	(654		)	20,055		25,000		—			44,401
Billings in excess of costs and estimated earnings on uncompleted contracts	—			12,264		47,548		—			59,812
Total current liabilities	(654		)	48,859		136,458		(48,581		)	136,082
Long-term debt	172,796			—		—		—			172,796
Deferred taxes	(1,187		)	15,220		13,200		—			27,233
Other liabilities	—			2,616		—		—			2,616
Total liabilities	170,955			66,695		149,658		(48,581		)	338,727
Commitments and contingencies
Equity
Total Parent Company stockholders’ equity	160,559			323,506		65,968		(389,474		)	160,559
Noncontrolling interest	—			—		12,256		—			12,256
Total equity	160,559			323,506		78,224		(389,474		)	172,815
Total liabilities and equity	$	331,514		$	390,201	$	227,882	$	(438,055	)	$	511,542

1315

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Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Statement of Operations

Three Months Ended ~~December~~March 31, ~~2010~~2011

(dollars in thousands)

ParentIssuer

GuarantorSubsidiaries

Non-GuarantorSubsidiaries

Eliminations

Consolidated

Net sales

—

3340,~~630~~483

6252,~~858~~037

(6,~~017~~567

)

9085,~~471~~953

Cost of goods sold

—

2429,~~729~~175

4936,~~048~~782

(6,~~017~~567

)

6759,~~760~~390

Gross profit

—

811,~~901~~308

1315,~~810~~255

—

2226,~~711~~563

Operating expenses

7778

7,~~826~~457

67,~~353~~958

—

1415,~~256~~493

Income (loss) from operations

(7778

)

13,~~075~~851

7,~~457~~297

—

811,~~455~~070

Interest expense (income), net

6,~~019~~196

(~~153~~92

)

(~~524~~611

)

—

5,~~342~~493

Income (loss) before income taxes

(6,~~096~~274

)

13,~~228~~943

7,~~981~~908

—

35,~~113~~577

Income tax expense (benefit)

(2,~~130~~177

)

~~455~~1,456

2,~~824~~721

—

12,~~149~~000

Income (loss) before equity in income (loss) of subsidiaries

(34,~~966~~097

)

~~773~~2,487

5,~~157~~187

—

13,~~964~~577

Equity in income (loss) of subsidiaries

46,~~740~~455

3,~~967~~968

—

(810,~~707~~423

)

—

Net income (loss)

~~774~~2,358

46,~~740~~455

5,~~157~~187

(810,~~707~~423

)

13,~~964~~577

Less: Net income attributable to noncontrolling interest

—

1,~~190~~219

—

1,~~190~~219

Net income (loss) attributable to Parent Company

~~774~~2,358

46,~~740~~455

3,~~967~~968

(810,~~707~~423

)

~~774~~2,358

Condensed Consolidating Statement of Operations

Six Months Ended March 31, 2011



(dollars in thousands)	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	74,113		$	114,895		$	(12,584	)	$	176,424
Cost of goods sold	—			53,904			85,830			(12,584		)	127,150
Gross profit	—			20,209			29,065			—			49,274
Operating expenses	155			15,283			14,311			—			29,749
Income (loss) from operations	(155		)	4,926			14,754			—			19,525
Interest expense (income), net	12,215			(245		)	(1,135		)	—			10,835
Income (loss) before income taxes	(12,370		)	5,171			15,889			—			8,690
Income tax expense (benefit)	(4,299		)	1,934			5,514			—			3,149
Income (loss) before equity in income (loss) of subsidiaries	(8,071		)	3,237			10,375			—			5,541
Equity in income (loss) of subsidiaries	11,203			7,966			—			(19,169		)	—
Net income (loss)	3,132			11,203			10,375			(19,169		)	5,541
Less: Net income attributable to noncontrolling interest	—			—			2,409			—			2,409
Net income (loss) attributable to Parent Company	$	3,132		$	11,203		$	7,966		$	(19,169	)	$	3,132

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Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Statement of Cash Flows

~~Three~~Six Months Ended ~~December~~March 31, ~~2010~~2011

(dollars in thousands)	ParentIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Consolidated
Net cash provided by (used in) operating activities	$	(612,~~097~~370	)	$	1015,~~700~~842		$	1510,~~519~~376		$	2013,~~122~~848
Cash flows from investing activities
Purchases of property, plant and equipment	—			(61505		)	(~~119~~305		)	(~~180~~810		)
Proceeds on sales of property, plant, and equipment	—			15349			54			20353
Net cash used in investing activities	—			(46156		)	(~~114~~301		)	(~~160~~457		)
Cash flows from financing activities
Investment in subsidiaries	6,097			(3,795		)	(2,302		)	—
Proceeds from (payments of)	—			9,097			(9,097		)	—
Net cash provided by (used in) financing activities	6,097			(3,795		)	(2,302		)	—
Investment in subsidiaries	12,370			(12,843		)	473			—
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			383			383
Net cash provided by (used in) financing activities	12,370			(3,746		)	(8,624		)	—
Net increase (decrease) in cash and cash equivalents	—			6,859			13,486			20,345
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			1,915			1,915
Net increase (decrease) in cash and cash equivalents	—			11,940			3,366			15,306
Cash and cash equivalents
Beginning of period	—			2,930			55,761			58,691
End of period	$	—		$	914,~~789~~870		$	6959,~~247~~127		$	7973,~~036~~997

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Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Balance Sheet

~~December~~March 31, ~~2011~~2012

(dollars in thousands)	ParentIssuer			GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	~~172~~139	$	8553,~~124~~462	$	—		$	8553,~~296~~601
Restricted customer deposits	—			~~727~~438		2939,~~008~~571		—			2940,~~735~~009
Accounts receivable, net	2,260			6455,~~971~~825		3530,~~985~~157		(6150,~~857~~340		)	4137,~~359~~902
Inventories	—			3136,~~019~~149		3130,~~980~~973		—			6267,~~999~~122
Costs and estimated earnings in excess of billings on uncompleted contracts	—			67,~~292~~164		1521,~~416~~406		—			2128,~~708~~570
Prepaid expenses and other current assets	—			~~1,052~~994		4,~~244~~709		—			5,~~296~~703
Deferred taxes	—			1,~~350~~351		175		—			1,~~525~~526
Total current assets	2,260			~~105~~102,~~583~~060		~~201~~180,~~932~~453		(6150,~~857~~340		)	~~247~~234,~~918~~433
Property, plant and equipment, net	—			11,~~447~~144		5,~~710~~782		—			1716,~~157~~926
Investment in subsidiaries	~~312~~319,~~990~~583			6266,~~070~~004		—		(~~375~~385,~~060~~587		)	—
Trademarks	—			53,~~496~~815		~~399~~411		—			5354,~~895~~226
Goodwill	—			~~115~~116,~~132~~145		2223,~~920~~591		—			~~138~~139,~~052~~736
Other intangibles, net	4,~~848~~386			4341,~~339~~194		6,~~917~~558		—			5552,~~104~~138
Total assets	$	~~320~~326,~~098~~229		$	~~391~~390,~~067~~362	$	~~237~~216,~~878~~795	$	(~~436~~435,~~917~~927	)	$	~~512~~497,~~126~~459
Liabilities and Equity
Current liabilities
Accounts payable	$	—		$	24,167	$	74,042	$	(61,857	)	$	36,352
Current portion of long-term debt	$	—		$	65	$	—	$	—		$	65
Accrued expenses	1,271			13,278		30,821		—			45,370
Accounts payable	—			20,394		68,318		(50,340		)	38,372
Billings in excess of costs and estimated earnings on uncompleted contracts	—			22,649		49,372		—			72,021
Accrued expenses	(4,768		)	19,286		27,847		—			42,365
Total current liabilities	1,271			60,094		154,235		(61,857		)	153,743
Billings in excess of costs and estimated earnings on uncompleted contracts	—			11,715		31,873		—			43,588
Long-term debt	159,681			—		—		—			159,681
Total current liabilities	(4,768		)	51,460		128,038		(50,340		)	124,390
Deferred taxes	(1,187		)	15,449		13,141		—			27,403
Long-term debt, net of current portion	159,831			—		—		—			159,831
Other liabilities	—			2,534		—		—			2,534
Deferred taxes	(1,187		)	16,169		13,244		—			28,226
Total liabilities	159,765			78,077		167,376		(61,857		)	343,361
Other liabilities	—			3,150		—		—			3,150
Total liabilities	153,876			70,779		141,282		(50,340		)	315,597
Commitments and contingencies
Equity
Total Parent Company stockholders’ equity	~~160~~172,~~333~~353			~~312~~319,~~990~~583		6266,~~070~~004		(~~375~~385,~~060~~587		)	~~160~~172,~~333~~353
Noncontrolling interest	—			—		89,~~432~~509		—			89,~~432~~509
Total equity	~~160~~172,~~333~~353			~~312~~319,~~990~~583		7075,~~502~~513		(~~375~~385,~~060~~587		)	~~168~~181,~~765~~862
Total liabilities and equity	$	~~320~~326,~~098~~229		$	~~391~~390,~~067~~362	$	~~237~~216,~~878~~795	$	(~~436~~435,~~917~~927	)	$	~~512~~497,~~126~~459

1518

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CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Statement of Operations

Three Months Ended ~~December~~March 31, ~~2011~~2012

(dollars in thousands)

ParentIssuer

GuarantorSubsidiaries

Non-GuarantorSubsidiaries

Eliminations

Consolidated

Net sales

—

3955,~~247~~619

6587,~~953~~113

(45,~~749~~784

)

~~100~~136,~~451~~948

Cost of goods sold

—

2641,~~826~~535

4663,~~894~~676

(45,~~749~~784

)

6899,~~971~~427

Gross profit

—

1214,~~421~~084

1923,~~059~~437

—

3137,~~480~~521

Operating expenses

87,~~342~~188

9,~~937~~031

—

1816,~~371~~311

Income (loss) from operations

(92

)

46,~~079~~896

914,~~122~~406

—

1321,~~109~~210

Interest expense (income), net

64,~~490~~937

7390

(~~799~~456

)

—

54,~~764~~571

Income (loss) before income taxes

(65,~~582~~029

)

46,~~006~~806

914,~~921~~862

—

716,~~345~~639

Income tax expense (benefit)

(21,~~361~~784

)

13,~~474~~165

46,~~047~~172

—

37,~~160~~553

Income (loss) before equity in income (loss) of subsidiaries

(43,~~221~~245

)

23,~~532~~641

58,~~874~~690

—

49,~~185~~086

Equity in income (loss) of subsidiaries

711,~~324~~284

47,~~792~~643

—

(1218,~~116~~927

)

—

Net income (loss)

38,~~103~~039

711,~~324~~284

58,~~874~~690

(1218,~~116~~927

)

49,~~185~~086

Less: Net income attributable to noncontrolling interest

—

1,~~082~~047

—

1,~~082~~047

Net income (loss) attributable to Parent Company

38,~~103~~039

711,~~324~~284

47,~~792~~643

(1218,~~116~~927

)

38,~~103~~039

Condensed Consolidating Statement of Operations

Six Months Ended March 31, 2012



(dollars in thousands)	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	94,866	$	153,065		$	(10,532	)	$	237,399
Cost of goods sold	—			68,360		110,570			(10,532		)	168,398
Gross profit	—			26,506		42,495			—			69,001
Operating expenses	184			15,530		18,968			—			34,682
Income (loss) from operations	(184		)	10,976		23,527			—			34,319
Interest expense (income), net	11,428			163		(1,256		)	—			10,335
Income (loss) before income taxes	(11,612		)	10,813		24,783			—			23,984
Income tax expense (benefit)	(4,145		)	4,639		10,219			—			10,713
Income (loss) before equity in income (loss) of subsidiaries	(7,467		)	6,174		14,564			—			13,271
Equity in income (loss) of subsidiaries	18,609			12,435		—			(31,044		)	—
Net income (loss)	11,142			18,609		14,564			(31,044		)	13,271
Less: Net income attributable to noncontrolling interest	—			—		2,129			—			2,129
Net income (loss) attributable to Parent Company	$	11,142		$	18,609	$	12,435		$	(31,044	)	$	11,142

Table of Contents

CPM Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except per share information)

Condensed Consolidating Statement of Cash Flows

~~Three~~Six Months Ended ~~December~~March 31, ~~2011~~2012

(dollars in thousands)	ParentIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Consolidated
Net cash provided by (used in) operating activities	$	(4,~~221~~314	)	$	179,~~517~~521		$	10(14,~~964~~345	)	$	24(9,~~260~~138	)
Cash flows from investing activities
Purchases of property, plant and equipment	—			(~~286~~640		)	(~~292~~500		)	(~~578~~1,140		)
Proceeds on sales of property, plant and equipment	—			—			2627			2627
Net cash used in investing activities	—			(~~286~~640		)	(~~266~~473		)	(~~552~~1,113		)
Cash flows from financing activities
Payments of long-term debt	(14,262		)	—			—			(14,262		)
Proceeds from revolving credit facilities	—			3245,~~055~~567			—			3245,~~055~~567
Payments on revolving credit facilities	—			(3245,~~055~~502		)	—			(3245,~~055~~502		)
Payments of dividends	—			7,523			(12,538		)	(5,015		)
Proceeds from (payments of) dividends	—			13,679			(18,694		)	(5,015		)
Investment in subsidiaries	18,~~483~~576			(2523,~~146~~050		)	64,~~663~~474			—
Net cash provided by (used in) financing activities	4,~~221~~314			(179,~~623~~306		)	(514,~~875~~220		)	(19,~~277~~212		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			~~(423~~1,776		)	~~(423~~1,776		)
Net increase in cash and cash equivalents	—			(392		)	4,400			4,008
Net decrease in cash and cash equivalents	—			(425		)	(27,262		)	(27,687		)
Cash and cash equivalents
Beginning of period	—			564			80,724			81,288
End of period	$	—		$	~~172~~139		$	8553,~~124~~462		$	8553,~~296~~601

1620

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The statements in this discussion regarding market conditions and outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on December 29, 2011. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

Company Overview

We are a global leader in the design, production and marketing of high-quality, efficient, durable process systems, equipment and after-market parts and services for the oilseed, animal feed, breakfast cereal and snack food and biofuels processing industries. We believe that we have the number one or number two global market position, based on sales revenue, in each of our core markets. We have an installed base of more than 10,000 proprietary machines and provided after-market parts and services to over 2,500 customers in fiscal 2011. We serve a diverse customer base from small independent producers to large, blue-chip companies. We employ a flexible, modular design philosophy which minimizes engineering investment while meeting exacting customer requirements. We outsource most of our machining and fabrication of components and perform assembly and testing either in-house or at the customer’s location. This business model provides a flexible cost structure and limits capital expenditure requirements.

Business Segments

We operate our company through three business segments: our Engineered Process Systems segment, our Process Equipment segment, and All Other. Our Process Equipment segment manufactures and sells process machinery and other equipment utilized primarily in the agricultural and food producing/processing industries. Our Engineered Process Systems segment sells engineering, design and layout services, along with outsourced process equipment, for the oilseed processing, biodiesel and edible oil refining industries. The remainder of our business is included in our All Other segment and involves the design, manufacturing and selling of process machinery for the plastics compounding, two-piece beverage container and other industries.

Market Conditions and Outlook

For the ~~three~~six months ended ~~December~~March 31, ~~2011~~2012, our net sales and operating income increased at each of our business segments when compared to the ~~three~~six months ended ~~December~~March 31, ~~2010~~2011. These results are consistent with the increase in our backlog and the improvements in our end markets. We believe that our improved performance will continue at each of our business units through the remainder of fiscal 2012. This belief is supported by our increasing backlog as evidenced below. There can be no assurance, however, that our performance in fiscal 2012 will meet our forecast.

Due to our high level of outsourcing, we continue to be able to rapidly adjust our operations in response to the improving market conditions. This allows us to take advantage of the new opportunities as they are presented.

Backlog

As of ~~December~~March 31, ~~2011~~2012, we had a consolidated backlog of $~~287~~267.49 million. This figure compares to a consolidated backlog of $266.1 million and $~~206~~237.50 million at September 30, 2011 and ~~December~~March 31, ~~2010~~2011, respectively. An order normally becomes part of our backlog after we receive a customer down payment or a letter of credit against the order. Our backlog is a measure of unrecognized revenue on booked orders. Our backlog provides revenue visibility into the next three to 18 months, depending on project lead-times and delivery requirements. Historically, once placed in our backlog, our customers have rarely canceled orders. There can be no assurance, however, that our consolidated backlog will convert into revenue.

Results of Operations

Three months ended December 31, 2011 compared to three months ended December 31, 2010

The following table sets forth, for the periods indicated, amounts derived from our consolidated statements of operations and related percentages of total net sales.



	Three Months Ended March 31,								Six Months Ended March 31,
(Dollars in thousands)	2011				2012				2011				2012
Statement of Operations Data:
Net sales
Process Equipment	$	35,601	41.4	%	$	44,153	32.2	%	$	70,366	39.9	%	$	79,877	33.6	%
Engineered Process Systems	40,844		47.5		79,271		57.9		85,555		48.5		130,941		55.2
All Other	9,508		11.1		13,524		9.9		20,503		11.6		26,581		11.2
Total net sales	85,953		100.0		136,948		100.0		176,424		100.0		237,399		100.0
Cost of goods sold	59,390		69.1		99,427		72.6		127,150		72.1		168,398		70.9
Gross profit	26,563		30.9		37,521		27.4		49,274		27.9		69,001		29.1
Selling, general and administrative expenses	12,352		14.4		13,176		9.6		23,315		13.2		27,502		11.6
Other operating expenses	3,141		3.7		3,135		2.3		6,434		3.6		7,180		3.0
Income from operations	11,070		12.8		21,210		15.5		19,525		11.1		34,319		14.5
Interest expense, net	5,493		6.4		4,571		3.3		10,835		6.1		10,335		4.4
Income before income taxes	5,577		6.4		16,639		12.2		8,690		5.0		23,984		10.1
Income tax expense	2,000		2.3		7,553		5.5		3,149		1.8		10,713		4.5
Net income	3,577		4.1		9,086		6.7		5,541		3.2		13,271		5.6
Net income attributable to noncontrolling interest	1,219		1.4		1,047		0.8		2,409		1.4		2,129		0.9
Net income attributable to Parent Company	$	2,358	2.7	%	$	8,039	5.9	%	$	3,132	1.8	%	$	11,142	4.7	%

	Three Months Ended December 31,
(Dollars in thousands)	2010				2011
Statement of Operations Data:
Net sales
Process Equipment	$	34,765	38.4	%	$	35,724	35.6	%
Engineered Process Systems	44,711		49.4		51,670		51.4
All Other	10,995		12.2		13,057		13.0
Total net sales	90,471		100.0		100,451		100.0
Cost of goods sold	67,760		74.9		68,971		68.7
Gross profit	22,711		25.1		31,480		31.3
Selling, general and administrative expenses	10,963		12.1		14,326		14.3
Other operating expenses	3,293		3.6		4,045		4.0
Income from operations	8,455		9.4		13,109		13.0
Interest expense, net	5,342		5.9		5,764		5.7
Income before income taxes	3,113		3.5		7,345		7.3
Income tax expense	1,149		1.3		3,160		3.1
Net income	1,964		2.2		4,185		4.2
Net income attributable to noncontrolling interest	1,190		1.3		1,082		1.1
Net income attributable to Parent Company	$	774	0.9	%	$	3,103	3.1	%

Three months ended March 31, 2012 compared to three months ended March 31, 2011

Net sales. Net sales for the three months ended ~~December~~ March 31, ~~2011~~2012 increased by $1051.0 million, or 1159.03%, to $~~100~~136.59 million from $9086.50 million for the corresponding period in ~~2010~~2011. In our Process Equipment segment, net sales increased by $08.96 million, or 24.0%, to $3544.72 million compared to $3435.86 million for the corresponding period in ~~2010~~2011. ~~This~~Sales ~~increase~~of ~~was~~oilseed ~~primarily~~processing ~~due~~equipment to increased ~~biomass~~by ~~pelleting equipment sales of~~ $15.94 million, primarily in ~~Europe.~~Latin ~~The~~America ~~increase~~and ~~was~~Europe ~~partially~~and ~~offset~~sales byof ~~decreased~~thermal ~~ethanol~~processing equipment ~~sales~~increased ofby $1.18 million, primarily in Asia.

Net sales in our Engineered Process Systems segment for the three months ended ~~December~~ March 31, ~~2011~~2012 increased by $738.04 million, or 94.1%, to $5179.73 million compared to $4440.78 million for the corresponding period in ~~2010~~2011. ~~The~~Overall, ~~acquisition~~sales of ~~Sket~~oilseed inprocessing ~~September~~equipment ofincreased ~~2011~~by ~~contributed~~ $417.63 million ofas sales increases to Europe and Latin America were offset slightly by decreases to the ~~increase~~United States. ~~Overall~~ In addition, biodiesel sales increased by $78.54 million, primarily in Latin America and refining equipment sales increased by $412.57 million, primarily in ~~the United States,~~ Europe and Latin America. ~~These~~The ~~increases~~acquisition ~~were~~of ~~partially~~Sket ~~offset by a decrease~~ in ~~sales~~September of 2011 contributed $59.08 million toof the ~~oilseed~~increases ~~processing~~achieved ~~market. While~~in ~~oilseed~~this ~~processing~~segment ~~sales~~for ~~increased~~the inthree ~~North~~months ~~America,~~ended ~~Latin America and Europe~~March 31, ~~sales~~2012 compared to ~~Asia~~the ~~decreased~~corresponding byperiod ~~$15.0~~in ~~million~~2011.

Net sales in our All Other segment increased $24.10 million, or 1842.82%, to $13.15 million for the three months ended ~~December~~ March 31, ~~2011~~2012, from $119.05 million for the corresponding period in ~~2010~~2011, due to increased ~~extrusion~~thermal ~~parts~~processing ~~and~~equipment ~~machinery~~ sales of $35.25 million, primarily in ~~the United States and~~ Asia. This increase was partially offset by decreased extrusion ~~thermal~~parts ~~processing~~and ~~equipment~~machinery sales of $1.48 million~~, primarily in Europe and Asia~~.

Cost of goods sold. Cost of goods sold increased by $140.20 million from $6759.84 million or 7469.91% of net sales, for the three months ended ~~December~~ March 31, ~~2010~~2011 to $6999.04 million, or 6872.76% of net sales, for the three months ended ~~December~~ March 31, 2011. ~~Cost~~A ofprimary ~~sales~~factor asin athe ~~percentage~~increase ofin ~~net~~cost ~~sales~~of ~~decreased~~goods atsold ~~all three business segments. The modest decreases at our Process Equipment and All Other segments were driven primarily by improved pricing~~ as ~~market~~a ~~conditions~~percentage ~~have~~of ~~returned~~net tosales ~~normal~~was ~~combined~~the ~~with~~proportion ~~fewer~~of sales ofat ~~pass~~each ~~through items~~segment. ~~The~~Our ~~larger decreases experienced at our~~ Engineered Process Systems segment, ~~are~~which ~~primarily~~historically agenerates ~~result~~our oflowest ~~reduced~~profit ~~volume~~margins ~~and~~accounted ~~improved~~for ~~profitability~~58% inof ~~Asia~~our astotal wesales ~~have~~for ~~declined~~the ~~lower~~three ~~margin~~months ~~projects~~ended ~~due~~March 31, 2012 compared to ~~improved~~48% ~~business~~of ~~levels.~~our Intotal sales for the three months ended ~~December~~ March 31, ~~2010, sales~~2011. toIn ~~Asia~~addition, ~~where~~cost weof ~~generally~~goods ~~experience~~sold ~~our~~as ~~lowest~~a ~~margins, accounted~~percentage ~~for 60%~~ of ~~the~~net ~~total~~ sales ~~volume~~increased slightly for ~~the~~our Engineered Process Systems segment~~. In~~ ~~the~~and ~~three~~our ~~months~~All ~~ended~~Other ~~December~~segment ~~31,~~due ~~2011, sales~~ to ~~Asia~~larger ~~accounted~~projects ~~for~~with ~~23%~~slightly oflower ~~the~~margins. These ~~total~~increases ~~sales~~were ~~volume~~offset ~~for~~slightly ~~the~~by ~~Engineered~~decreases in ~~Process~~cost ~~Systems~~of ~~segment~~good ~~and~~sold ~~the~~as ~~margins~~a onpercentage ~~those~~of net sales ~~have~~for ~~improved~~our toProcess ~~levels~~Equipment ~~consistent~~segment ~~with~~caused ~~rest~~by ofefficiencies ~~the~~achieved ~~segment~~due to higher volume.

Gross profit. As a result of the foregoing, gross profit for the three months ended ~~December~~ March 31, ~~2011~~2012 increased by $811.80 million, or 3841.63%, to $3137.5 million, or 3127.34% of net sales, from $2226.76 million, or 2530.19% of net sales, for the corresponding period in ~~2010~~2011.

Selling, general and administrative expenses. SG&A expenses increased from $1112.04 million for the three months ended ~~December~~ March 31, ~~2010~~2011 to $1413.32 million for the corresponding period in ~~2011~~2012, an increase of approximately $30.38 million, or 30.5%. The increase reflects the inclusion of $1.1 million in SG&A expenses of Sket for the three months ended December 31, 2011 which had not yet been acquired during the corresponding period in 2010, $0.6 ~~million of bad debt recoveries on large projects in Asia reduced the SG&A expenses for the three months ended December 31, 2010, and direct selling costs resulting from higher net sales in 2011~~. ~~As a percentage of net sales, SG&A expenses increased from 12.1~~7% ~~for the three months ended December 31, 2010 to 14~~.3% ~~for the corresponding period in the current year.~~ The ~~increase in SG&A expenses as a percentage of net sales resulted from the impact of the bad debt recoveries in 2010 and the SG&A expenses of the acquired Sket business~~

1822

~~unit~~increase ~~being~~reflects ~~higher~~the inclusion of $1.1 million in SG&A expenses of Sket for the three months ended March 31, as2012 which had not yet been acquired during the corresponding period in 2011. This was offset slightly by non-recurring legal and accounting expenses of $0.7 million for the three months ended March 31, 2011 related to our Registration Statement on Amended Form S-4 filed with the SEC on May 16, 2011. As a percentage of net sales, ~~than~~SG&A expenses decreased from 14.4% for the ~~average~~three months ended March 31, 2011 to 9.6% for the ~~existing~~corresponding ~~business~~period ~~units~~in the current year. The percentage decrease in SG&A expenses as a percentage of net sales is a direct result of the fixed nature of a majority of our SG&A expenses leveraging our increase in sales.

Other operating expenses. Other operating expenses ~~increased~~were ~~from~~ $3.31 million for the three months ended ~~December~~March 31, ~~2010~~2011 toand ~~$4.0~~2012, ~~million~~respectively, ~~for~~and ~~the~~are ~~corresponding~~comprised ~~period~~primarily inof ~~2011,~~amortization anexpense ~~increase~~and ofmanagement ~~approximately $0~~fees.7 ~~million. The~~Both ~~increase~~amortization ~~relates~~expense ~~primarily~~and tomanagement afees ~~$0.6~~were ~~million~~consistent ~~increase~~for inthe ~~management~~three ~~fees~~months ~~and~~ended March 31, 2011 compared to athe ~~$0.1~~three ~~increase~~months inended ~~amortization~~March ~~expense~~31, 2012.

Income from operations. Income from operations increased from $811.51 million for the three months ended ~~December~~ March 31, ~~2010~~2011 to $1321.12 million during the corresponding period in ~~2011~~2012, an increase of $411.61 million. As a percentage of net sales, income from operations increased from 912.49% for the three months ended ~~December~~ March 31, ~~2010~~2011 to 1315.05% for the three months ended ~~December~~ March 31, ~~2011~~2012 as a result of the factors mentioned above, particularly the increased sales ~~and improved gross profit percentage~~.

Interest expense, net. Interest expense, net, for the three months ended ~~December~~ March 31, ~~2011~~2012, was $54.86 million ~~or 5.7% of net sales,~~ compared to $5.35 million, ~~or 5.9% of net sales,~~ for the ~~three~~corresponding ~~months~~period ~~ended~~in ~~December 31, 2010~~2011. The ~~increase~~decrease of $0.59 million ~~resulted~~in ~~from~~interest aexpense ~~$1.0~~is ~~million~~proportionate ~~loss~~to onthe ~~repurchases~~decrease ofin outstanding senior notes ~~and a $0.4 million write off of deferred financing costs related to the repurchased notes~~ during the three months ended ~~December~~March 31, ~~2011. The~~2012 ~~increases~~compared ~~were~~to ~~partially offset by a decrease in interest accrued on~~ the ~~senior~~three ~~notes~~months ~~of $0.9 million resulting from repurchases of senior notes during the quarters~~ ended ~~September~~March ~~30, 2011 and December~~ 31, 2011.

Provision for income taxes. The provision for income taxes was $37.26 million for the three months ended ~~December~~ March 31, ~~2011~~2012 compared to $12.10 million for the corresponding period in ~~2010~~2011. The provision for income taxes reflects the combined federal, state and foreign effective tax rate of approximately 4345.04% and 3635.9% for the three months ended ~~December~~ March 31, ~~2011~~2012 and ~~2010~~2011, respectively. Our combined effective tax rate reflects the different federal, state and foreign statutory rates of the various jurisdictions in which we operate and the proportion of taxable income earned in each of those tax jurisdictions. The provision for income taxes for the three months periods ended ~~December~~ March 31, ~~2011~~2012 and ~~2010~~2011 differs from the expected income tax expense computed by applying the statutory United States federal tax rates to income before income taxes primarily due to state income taxes, permanent differences between book income and taxable income, ~~the~~fluctuations ~~release~~in ~~and~~our ~~recording~~reserve offor ~~valuation~~uncertain ~~allowances~~tax ~~against~~positions ~~foreign losses~~ and our limited ability to utilize foreign tax credits to offset U.S. tax liabilities.

Net income attributable to noncontrolling interest. This is the net income attributable to our joint venture partner. The decrease of $0.12 million from $1.2 million for the three months ended ~~Decmeber~~ March 31, ~~2010~~2011 to $1.10 million for the corresponding period in ~~2011~~2012 is a result of the decreased profitability of our Chinese joint venture.

Net income ~~(loss)~~ attributable to parent company. As a result of the foregoing, net income increased from $02.84 million for the three months ended ~~December~~ March 31, ~~2010~~2011 to $38.10 million for the three months ended ~~December~~ March 31, ~~2011~~2012.

Six months ended March 31, 2012 compared to six months ended March 31, 2011

Net sales. Net sales for the six months ended March 31, 2012 increased by $61.0 million, or 34.6%, to $237.4 million from $176.4 million for the corresponding period in 2011. In our Process Equipment segment, net sales increased by $9.5 million, or 13.5%, to $79.9 million compared to $70.4 million for the corresponding period in 2011. This increase was attributable to increased oilseed processing equipment sales of $5.5 million, primarily in Latin America and Asia, increased thermal processing equipment sales of $1.8 million, primarily in Europe and Asia, and increased biomass pelleting equipment sales of $1.3 million, primarily in Europe.

Net sales in our Engineered Process Systems segment for the six months ended March 31, 2012 increased by $45.4 million, or 53.0%, to $130.9 million compared to $85.6 million for the corresponding period in 2011. The acquisition of Sket in September of 2011 contributed $14.4 million of the increase. Overall, refining equipment sales increased by $17.1 million and biodiesel equipment sales increased by $15.9 million primarily in Europe and Latin America. Sales of oilseed processing equipment increased by $12.4 million in total as increases in North America, Latin America and Europe were offset by decreases in sales to Asia.

Net sales in our All Other segment increased $6.1 million, or 29.6%, to $26.6 million for the six months ended March 31, 2012, from $20.5 million for the corresponding period in 2011, due to increased thermal processing equipment sales of $4.1 million, primarily in and Asia and increased extrusion parts and machinery sales of $1.5 million, primarily in the United States.

Cost of goods sold. Cost of goods sold increased by $41.2 million from $127.2 million or 72.1% of net sales, for the six months ended March 31, 2011 to $168.4 million, or 70.9% of net sales, for the six months ended March 31, 2012. Cost of goods sold as a percentage of net sales decreased in our Process Equipment and Engineered Process Systems segments and remained constant

in our All Other segment. The decrease at our Process Equipment segment was driven primarily by improved pricing as market conditions have returned to normal combined with efficiencies gained due to increased volume. The decreases experienced at our Engineered Process Systems segment are primarily a result of reduced volume and improved profitability in Asia. Sales to Asia, where we generally experience our lowest margins, accounted for 52% of the total sales volume for the Engineered Process Systems segment for the six months ended March 31, 2011 compared to 26% for the six months ended March 31, 2012. These decreases were offset slightly by an increase caused by the change in the proportion of sales by each segment to total sales. Our Engineered Process Systems segment, which historically generates our lowest profit margins accounted for 55% of our total sales for the six months ended March 31, 2012 compared to 49% of our total sales for the six months ended March 31, 2011.

Gross profit. As a result of the foregoing, gross profit for the six months ended March 31, 2012 increased by $19.7 million, or 40.0%, to $69.0 million, or 29.1% of net sales, from $49.3 million, or 27.9% of net sales, for the corresponding period in 2011.

Selling, general and administrative expenses. SG&A expenses increased from $23.3 million for the six months ended March 31, 2011 to $27.5 million for the corresponding period in 2012, an increase of approximately $4.2 million, or 18.0%. The increase reflects the inclusion of $2.2 million in SG&A expenses of Sket for the six months ended March 31, 2012 which had not yet been acquired during the corresponding period in 2011. In addition, $0.6 million of bad debt recoveries on large projects in Asia reduced the SG&A expenses for the six months ended March 31, 2011, and direct selling costs increased during the six months ended March 31, 2012 resulting from higher net sales. As a percentage of net sales, SG&A expenses decreased from 13.2% for the six months ended March 31, 2011 to 11.6% for the corresponding period in the current year. The percentage decrease in SG&A expenses as a percentage of net sales is a direct result of the fixed nature of a majority of our SG&A expenses.

Other operating expenses. Other operating expenses increased from $6.4 million for the six months ended March 31, 2011 to $7.2 million for the corresponding period in 2012, an increase of approximately $0.8 million. The increase relates primarily to a $0.6 million increase in management fees and a $0.1 increase in amortization expense.

Income from operations. Income from operations increased from $19.5 million for the six months ended March 31, 2011 to $34.3 million during the corresponding period in 2012, an increase of $14.8 million. As a percentage of net sales, income from operations increased from 11.1% for the six months ended March 31, 2011 to 14.5% for the six months ended March 31, 2012 as a result of the factors mentioned above, particularly the increased sales.

Interest expense, net. Interest expense, net, for the six months ended March 31, 2012, was $10.3 million, compared to $10.8 million for the six months ended March 31, 2011. The decrease of $0.5 million resulted from a decrease in interest accrued on the senior notes in the amount of $1.8 million during the six months ended March 31, 2012 compared to the corresponding period in 2011 resulting from the lower outstanding balance on the senior notes. That decrease was partially offset by a $1.0 million loss on repurchases of senior notes and a $0.4 million write off of deferred financing costs related to the repurchased notes included as a component of interest expense during the six months ended March 31, 2012.

Provision for income taxes. The provision for income taxes was $10.7 million for the six months ended March 31, 2012 compared to $3.1 million for the corresponding period in 2011. The provision for income taxes reflects the combined federal, state and foreign effective tax rate of approximately 44.7% and 36.2% for the six months ended March 31, 2012 and 2011, respectively. Our combined effective tax rate reflects the different federal, state and foreign statutory rates of the various jurisdictions in which we operate and the proportion of taxable income earned in each of those tax jurisdictions. The provision for income taxes for the six months periods ended March 31, 2012 and 2011 differs from the expected income tax expense computed by applying the statutory United States federal tax rates to income before income taxes primarily due to state income taxes, permanent differences between book income and taxable income, the release and recording of valuation allowances against foreign losses, fluctuations in our reserve for uncertain tax positions and our limited ability to utilize foreign tax credits to offset U.S. tax liabilities.

Net income attributable to noncontrolling interest. This is the net income attributable to our joint venture partner. The decrease of $0.3 million from $2.4 million for the six months ended March 31, 2011 to $2.1 million for the corresponding period in 2012 is a result of the decreased profitability of our Chinese joint venture.

Net income attributable to parent company. As a result of the foregoing, net income increased from $3.1 million for the six months ended March 31, 2011 to $11.1 million for the six months ended March 31, 2012.

Liquidity and Capital Resources

The following table summarizes our net cash from our operating activities, investing activities and financing activities and the effect of foreign exchange rate changes on cash and cash equivalents for the first ~~three~~six months of fiscal 2011 and 2012:

	Three Months Ended December 31,
	Six Months Ended March 31,
(Dollars in thousands)	~~2010~~2011			~~2011~~2012
Net cash provided by (used in):
Operating activities	$	2013,~~122~~848		$	24(9,~~260~~138	)
Investing activities	(~~160~~457		)	(~~552~~1,113		)
Financing activities	—			(19,~~277~~212		)
Effect of foreign exchange rate changes on cash and cash equivalents	~~383~~1,915			~~(423~~1,776		)
Net increase in cash and cash equivalents	$	20,345		$	4,008
Net increase (decrease) in cash and cash equivalents	$	15,306		$	(27,687	)

We have historically financed operations with internally generated funds. Accordingly, we have traditionally not needed to access the capital markets in order to finance our ongoing operations.

Net cash flow ~~provided~~used by operating activities ~~increased~~was by $49.21 million ~~to $24.3 million~~ for the ~~three~~six months ended ~~December~~ March 31, ~~2011~~2012 compared to net cash provided by operating activities of $2013.18 million for the corresponding period in ~~2010~~2011. The ~~increase~~decrease in cash provided by (used in) operating activities of $22.9 million reflects the increase in net income of $27.27 million to $413.23 million for the ~~three~~six months ended ~~December~~ March 31, ~~2011~~2012 compared to $25.05 million for the ~~three~~six months ended ~~December~~ March 31, ~~2010~~2011. Net income for the ~~three~~six months ended ~~December~~ March 31, ~~2011~~2012 includes non-cash losses on the repurchase of senior notes of $1.4 million including the write-off of related deferred financing costs. There were no such repurchases during the ~~three~~six months ended ~~December~~ March 31, ~~2010~~2011. InCash ~~addition to the~~ increases related to net income plus non-cash losses were offset by cash decreases of $30.8 million related to fluctuations in working capital balances. For the six months ended March 31, 2012, fluctuations in working capital were a use of cash ~~provided~~of $33.3 million comprised of decreases in cash caused by ~~operating~~the ~~activities~~fluctuations ~~increased~~of restricted customer deposits, costs and estimated earnings in excess of billings on uncompleted contracts, inventories, prepaid expenses and other current assets, billings in excess of costs and estimated earnings on uncompleted contracts and accrued expenses, partially offset by increases in cash caused by the fluctuations of accounts receivable and accounts payable. For the six months ended March 31, 2011, fluctuations in working capital were a use of cash of $02.64 million ~~related~~comprised toof decreases in cash caused by fluctuations of restricted customer deposits, costs and estimated earnings in excess of billings on uncompleted contracts, and inventory, partially offset by increases in cash caused by fluctuations in accounts receivable, prepaid expenses and other current assets, accounts payable, billings in excess of costs and estimated earnings on uncompleted contracts and accrued expenses.

19Net cash flow used in investing activities was $0.5 million and $1.1 million for the six months ended March 31, 2011 and 2012, respectively and related to capital expenditures net of proceeds on disposal.

~~working~~Net ~~capital~~cash ~~balances. For~~flow ~~the~~used ~~three months ended December 31, 2011, fluctuations~~ in ~~working~~financing ~~capital~~activities ~~were~~was a$0.0 ~~source~~million ofand ~~cash of~~ $1419.12 million ~~comprised~~for ~~of increases in cash caused by~~ the ~~fluctuations~~six ofmonths ~~accounts~~ended ~~receivable~~March 31, ~~costs~~2011 and ~~estimated earnings in excess of billings on uncompleted contracts~~2012, ~~accounts~~respectively. ~~payable,~~The ~~billings~~use ~~in excess~~ of ~~costs and estimated earnings on uncompleted contracts and accrued expenses, partially offset by decreases in~~ cash ~~caused~~during by the ~~fluctuations~~six ~~of restricted customer deposits, inventories, and prepaid expenses and other current assets. For the three~~ months ended ~~December~~ March 31, ~~2010,~~2012 ~~fluctuations~~was inprimarily ~~working~~for ~~capital~~the ~~were~~repurchase ~~a source~~ of ~~cash~~senior notes of $1314.53 million ~~comprised~~and ofthe ~~increases~~payment ~~in cash caused by fluctuations~~ of ~~restricted~~dividends ~~customer deposits, accounts receivable, costs and estimated earnings in excess~~ of ~~billings~~$5.0 onmillion ~~uncompleted~~to ~~contracts,~~our ~~prepaid~~joint ~~expenses~~venture ~~and~~partner ~~other current assets, accounts payable and accrued expenses, partially offset by decreases~~ in ~~cash caused by fluctuations in inventories and billings in excess of costs and estimated earnings on uncompleted contracts~~China.

~~Net~~In ~~cash~~November 2009, ~~flow~~we ~~used~~entered ininto ~~investing~~a ~~activities~~U.S. ~~was~~based $0senior secured revolving credit facility.2 ~~million~~Our ~~and~~senior secured revolving credit facility provides up to $014.6 5 million ~~for~~of ~~the~~revolving ~~three~~credit ~~months~~borrowings, ~~ended~~subject ~~December~~to 31a borrowing base, ~~2010~~which is based on the eligible accounts receivable and ~~2011~~inventory of our U.S subsidiaries less our aggregate net exposure under permitted hedging obligations and subject to certain reserves. The credit facility expires on April 20, ~~respectively~~2013. A portion of the availability under the credit facility is available for the issuance of letters of credit and ~~related~~that the face amount of any outstanding letters of credit will reduce availability under our senior secured revolving credit facility on a dollar-for-dollar basis. Borrowings under the credit facility are subject to ~~capital~~certain ~~expenditures~~restrictive ~~net~~covenants, including a fixed charge coverage ratio. At March 31, 2012, we had $14.5 million of ~~proceeds~~unused credit under this facility, of which $5.1 million was available for borrowing based on ~~disposal~~our borrowing base calculation.

Net cash flow used in financing activities was $0.0 million and $19.3 million for the three months ended December 31, 2010 and 2011, respectively. The use of cash during the three months ended December 31, 2011 was primarily for the repurchase of senior notes of $14.3 million and the payment of dividends of $5.0 million to our joint venture partner in China.

In November 2009, we entered into a U.S. based senior secured revolving credit facility. Our senior secured revolving credit facility provides up to $14.5 million of revolving credit borrowings, subject to a borrowing base, which is based on the eligible accounts receivable and inventory of our U.S subsidiaries less our aggregate net exposure under permitted hedging obligations and subject to certain reserves. The credit facility expires on April 20, 2013. A portion of the availability under the credit facility is available for the issuance of letters of credit and that the face amount of any outstanding letters of credit will reduce availability under our senior secured revolving credit facility on a dollar-for-dollar basis. Borrowings under the credit facility are subject to certain restrictive covenants, including a fixed charge coverage ratio. At December 31, 2011, we had $14.5 million of unused credit under this facility, of which $7.5 million was available for borrowing based on our borrowing base calculation.

We believe that our operating cash flow and amounts available for borrowing under our senior secured revolving credit facility will be adequate to fund our capital expenditures and working capital requirements for the next twelve months.

Financial Covenants

We are subject to certain restrictive financial covenants contained in our senior secured revolving credit facility including a fixed charge coverage ratio. At September 30, 2011 and ~~December~~March 31, ~~2011~~2012, we were in compliance with all covenants under the facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks, which include changes in interest rate, foreign exchange rates and commodity prices. We do not engage in financial transactions for trading or speculative purposes. There have been no material changes in this item from the discussion contained in our Annual Report on Form 10-K, as filed with the SEC on December 29, 2011.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term as defined under Rule 13a-15e promulgated under the Securities Exchange Act of 1934 (Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the period covered by this report.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

2026

CPM Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended ~~December~~March 31, ~~2011~~2012

PART II. Other Information

Item 1. Legal Proceedings.

Discussion of legal matters is incorporated by reference from Part I, Item 1, Note 8, "Commitments and Contingencies", of this document, and should be considered an integral part of Part II, Item 1, "Legal Proceedings".

Item 1A. Risk Factors.

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. In our Annual Report Form 10-K, as filed with the SEC on December 29, 2011, the section titled Risk Factors (pages 12 through 16) describes some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. We do not believe that there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K, as filed with the SEC on December 29, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no sales of unregistered equity securities during the quarter ended ~~December~~March 31, ~~2011~~2012.

Item 3. Defaults Upon Senior Securities.

No matters requiring disclosure.

Item 4. Mine Safety Disclosures.

No matters requiring disclosure.

Item 5. Other Information.

No matters requiring disclosure.

2127

Item 6. Exhibits.

Index to Exhibits:

Exhibit
No.		Description
31.1*		Rule 13a-14(a) Certification by Principal Executive Officer.
31.2*		Rule 13a-14(a) Certification by Principal Financial Officer.
32**		Section 1350 Certifications by Principal Executive Officer and Principal Financial Officer.
101***		The following materials from CPM Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2011~~2012, filed on ~~February~~May 1311, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Equity and Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.



*		Filed herewith

**		Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.

***		Furnished (and not filed) herewith pursuant to Rule 406T of Regulation S-T under the Exchange Act.

2228

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

		CPM HOLDINGS, INC.
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrants and in the capacities and on ~~February~~May 1311, 2012.



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

/s/ Steven Gilbert*		Director
Steven Gilbert

/s/ Steven Kotler*		Director
Steven Kotler

/s/ Richard Gaenzle, Jr.*		Director
Richard Gaenzle, Jr.

/s/ Larry Pitsch*		Director
Larry Pitsch




*	By:	/s/ Douglas Ostrich
		Douglas Ostrich
		Attorney-in-fact

S- 1

		CPM ACQUISITION CORP.
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

/s/ Steven Gilbert*		Director
Steven Gilbert

/s/ Steven Kotler*		Director
Steven Kotler

/s/ Richard Gaenzle, Jr.*		Director
Richard Gaenzle, Jr.

/s/ Larry Pitsch*		Director
Larry Pitsch




*	By:	/s/ Douglas Ostrich
		Douglas Ostrich
		Attorney-in-fact

S- 2

		CROWN ACQUISITION CORP.
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

/s/ Steven Gilbert*		Director
Steven Gilbert

/s/ Steven Kotler*		Director
Steven Kotler

/s/ Richard Gaenzle, Jr.*		Director
Richard Gaenzle, Jr.

/s/ Larry Pitsch*		Director
Larry Pitsch




*	By:	/s/ Douglas Ostrich
		Douglas Ostrich
		Attorney-in-fact

S- 3

		CPM WOLVERINE PROCTOR, LLC
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

S- 4

		CROWN IRON WORKS COMPANY
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

/s/ Steven Gilbert*		Director
Steven Gilbert

/s/ Steven Kotler*		Director
Steven Kotler

/s/ Richard Gaenzle, Jr.*		Director
Richard Gaenzle, Jr.

/s/ Larry Pitsch*		Director
Larry Pitsch




*	By:	/s/ Douglas Ostrich
		Douglas Ostrich
		Attorney-in-fact

S- 5

		CPM SA, LLC
Date:	~~February~~May 1311, 2012	By:	/s/ Douglas Ostrich
			Douglas Ostrich
			Chief Financial Officer



Signatures		Title

/s/ Ted Waitman		President, Chief Executive Officer and Director
Ted Waitman		(Principal Executive Officer)

/s/ Douglas Ostrich		Chief Financial Officer, Treasurer and Secretary
Douglas Ostrich		(Principal Financial Officer)

S- 6

Filing Compare · CPM Holdings, Inc.