UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

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

Commission File Number 1-34495

Ladish Co., Inc.

( Exact name of registrant as specified in its charter )

Wisconsin ( State of Incorporation )		31-1145953 ( I.R.S. Employer Identification No. )
5481 S. Packard Avenue Cudahy, Wisconsin ( Address of principal executive offices )		53110 ( Zip Code )

Registrant’s telephone number, including area code: (414) 747-2611

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Title of each class		Name of each exchange on which registered
Common stock, $0.01 par value		Nasdaq

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 if disclosure of delinquent filers pursuant to Item 405 of Registration S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		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

The aggregate market value of voting stock held by non-affiliates of the Registrant was $189,507,328 as of June 30, 2009.

15,903,004
(Number of Shares of common stock outstanding as of March 4, 2010)

DOCUMENTS INCORPORATED BY REFERENCE

		Part of Form 10-K into Which
Documents*		Portions of Documents are Incorporated
Proxy Statement for 2010 Annual Meeting of Stockholders		Part III, Item 10.		Directors and Executive Officers of the Registrant
		Part III, Item 11.		Executive Compensation
		Part III, Item 12.		Security Ownership of Certain Beneficial Owners and Management
		Part III, Item 13.		Certain Relationships and Related Transactions
		Part III, Item 14.		Principal Accountant Fees and Services

 

 

PART 1

Item 1. Business

General

Ladish Co., Inc. (“Ladish” or the “Company”) engineers, produces and markets high-strength, high-technology forged and cast metal components for a wide variety of load-bearing and fatigue-resisting applications in the jet engine, aerospace and industrial markets. Approximately 88% of the Company’s 2009 revenues were derived from the sale of jet engine parts, missile components, landing gear, helicopter rotors and other aerospace products. Approximately 44% of the Company’s 2009 revenues were derived from sales, directly or through prime contractors, under United States government contracts or under contracts with allies of the United States government, primarily covering defense equipment. Although no comprehensive trade statistics are available, based on its experience and knowledge of the industry, management believes that the Company is the second largest supplier of forged and cast metal components to the domestic aerospace industry, with an estimated 25% market share in the jet engine component field.

Products and Markets

The Company markets its products primarily to manufacturers of jet engines, commercial business and defense aircraft, helicopters, satellites, heavy-duty off-road vehicles and industrial and marine turbines. The principal markets served by the Company are jet engine, commercial aerospace (defined by Ladish as satellite, rocket and aircraft components other than jet engines) and general industrial products. The amount of revenue and the revenue as a percentage of total revenue by market were as follows for the periods indicated:

		Years Ended December 31,
		2007								2008								2009
		(Dollars in millions)
Jet Engine Components		$	238				56	%		$	239				51	%		$	193				55	%
Aerospace Components			102				24	%			124				26	%			114				33	%
General Industrial Components			85				20	%			107				23	%			43				12	%
Total		$	425				100	%		$	470				100	%		$	350				100	%

Manufacturing

Ladish offers one of the most complete range of forging, investment casting and precision machining services in the world. The Company employs all major forging processes, including open and closed-die hammer and press forgings, as well as ring-rolling, and also produces near-net shape aerospace components through isothermal forging and hot-die forging techniques. Closed-die forging involves hammering or pressing heated metal into the required shape and size by utilizing machined impressions in specially prepared dies which exert three-dimensional control on the heated metal. Open-die forging involves the hammering or pressing of metal into the required shape without such three-dimensional control, and ring-rolling involves rotating heated metal rings through presses to produce the desired shape. Investment casting involves the creation of precise wax molds which are dipped, autoclaved and cast to create near-net components for the aerospace industry. The Company’s precision machining services focus on the milling and turning of components for the aerospace industry.

Much of the Company’s business is capital intensive, requiring large and sophisticated forging, casting, machining and heating equipment and extensive facilities for inspection and testing of components after formation. Ladish believes that it has the largest forging hammer, isothermal press and ring-roll in the world at its plant in Cudahy, Wisconsin. Its largest counterblow forging hammer has a capacity of 125,000 mkg (meter-kilograms), and its ring-rolling equipment can produce single-piece seamless products that weigh up to 350,000 pounds with outside diameters as large as 28 feet and face heights up to 10 feet. Ladish’s 4,500-ton and 10,000-ton isothermal presses can produce forgings, in superalloys as well as titanium, that weigh up to 2,000 pounds. Ladish is in the process of qualifying a new 12,500-ton isothermal press which will be operational in 2010. Much of the domestic forging equipment has been designed and built by Ladish. The Company also maintains such auxiliary facilities as die-sinking, heat-treating and machining equipment and produces most of the precision dies necessary for its forging operations. The Company considers such equipment to be in good operating condition and adequate for the purposes for which it is being used.

Marketing and Sales

The product sales force, consisting primarily of sales engineers, is supported by the Company’s metallurgical staff of engineers and technicians. These technically trained sales engineers, organized along product line and customer groupings, work with customers on an ongoing basis to monitor competitive trends and technological innovations. Additionally, sales engineers consult with customers regarding potential projects and product development opportunities. During the past few years, the Company has refocused its marketing efforts on the jet engine components market and the commercial aerospace industry.

The Company is actively involved with key customers in joint cooperative research and development, engineering, quality control, just-in-time inventory control and computerized process modeling programs. The Company has entered into strategic contracts for a number of sole-sourced products with each of Rolls-Royce, Sikorsky and Snecma for major programs. The Company believes that these contracts are a reflection of the aerospace and industrial markets’ recognition of the Company’s manufacturing and technical expertise.

The research and development of jet engine components is actively supported by the Company’s Advanced Materials and Process Technology Group. The Company’s long-standing commitment to research and development is evidenced by its industry-recognized materials and process advancements. The experienced staff and fully equipped research facilities support Ladish sales through customer-funded projects. Management believes that these research efforts position the Company to participate in future growth in demand for critical advanced jet engine components.

Customers

The Company’s top three customers, Rolls-Royce, United Technologies and General Electric, accounted for approximately 50%, 47% and 56% of the Company’s revenues in 2007, 2008 and 2009, respectively. Net sales to Rolls-Royce were 28%, 23% and 26%, United Technologies 15%, 15% and 19% and General Electric 7%, 9% and 11% of total Company net sales for the respective years. No other customer accounted for ten percent or more of the Company’s net sales.

Caterpillar, Boeing, Techspace Aero, Goodrich and Snecma are also important customers of the Company. Because of the relatively small number of customers for some of the Company’s principal products, the Company’s largest customers exercise significant influence over the Company’s prices and other terms of trade.

U.S. exports accounted for approximately 49%, 46% and 46% of total Company net sales in 2007, 2008 and 2009, respectively. U.S. exports to England constituted approximately 29%, 25% and 26%, respectively in the above years, of total Company net sales.

A substantial portion of the Company’s revenues is derived from long-term, fixed price contracts with major engine and aircraft manufacturers. These contracts are typically “requirements” contracts under which the purchaser commits to purchase a given portion of its requirements of a particular component from the Company, and provide the Company with the ability to adjust prices based on raw material price fluctuation. Actual purchase quantities are typically not determined until shortly before the year in which products are to be delivered. The Company attempts to minimize its risk by entering into fixed-price contracts with its raw material suppliers. Additionally, a portion of the Company’s revenue is directly or indirectly related to government spending, particularly military and space program spending.

Research and Development

The Company maintains a research and development department which is engaged in applied research and development work primarily relating to the Company’s forging operations. The Company works closely with customers, universities and government technical agencies in developing advanced forgings, materials and processes. The Company spent approximately $2.9 million, $3.1 million and $2.7 million on applied research and development work during 2007, 2008 and 2009, respectively. Customers reimbursed the Company for $1.2 million, $1.3 million and $1.2 million of the foregoing research and development expenses in 2007, 2008 and 2009, respectively.

Patents and Trademarks

Although the Company owns patents covering certain of its processes, the Company does not consider these patents to be of material importance to the Company’s business as a whole. The Company considers certain other information that it owns to be trade secrets and the Company takes measures to protect the confidentiality and control the disclosure and use of such information. The Company believes that these safeguards adequately protect its proprietary rights and the Company vigorously defends these rights.

The Company owns or has obtained licenses for various trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, copyright registrations, patent applications, inventions, know-how, trade secrets, confidential information and any other intellectual property that is necessary for the conduct of its business (collectively, “Intellectual Property”). The Company is not aware of any existing or threatened patent infringement claim (or of any facts that would reasonably be expected to result in any such claim) or any other existing or threatened challenge by any third party that would significantly limit the rights of the Company with respect to any such Intellectual Property or to the validity or scope of any such Intellectual Property. The Company has no pending claim against a third party with respect to the infringement by such third party of any such Intellectual Property that, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the Company’s financial condition or results of operations. While the Company considers all of its proprietary rights as a whole to be important, the Company does not consider any single right to be essential to its operations as a whole.

Raw Materials

Raw materials used by the Company in its metal components include alloys of titanium, nickel, steel, aluminum, tungsten and other high temperature alloys. The major portion of metal requirements for forged products are purchased from major metal suppliers producing forging quality material as needed to fill customer orders. The Company has two or more sources of supply for all significant raw materials, with the exception of certain nickel-based powder alloys where the Company is currently dependent upon a single source of supply.

The titanium and nickel-based superalloys used by the Company have a relatively high dollar value. Accordingly, the Company recovers and recycles scrap materials such as machine turnings, forging flash, solids and test pieces (“by-products’). The proceeds from the disposition of by-products are taken as a reduction to the Company’s cost of goods and are not treated as a part of net sales.

The Company’s most significant raw materials consist of nickel and titanium alloys. Its principal suppliers of nickel alloys include Carpenter Technology, Special Metals Corporation and Allegheny Technologies, Inc. (“ATI”). Its principal suppliers of titanium alloys are Titanium Metals Corporation of America (“Timet”), ATI and RTI International. The Company typically has fixed-price contracts with its suppliers.

In addition, the Company, its customers and suppliers have undertaken active programs for supply chain management to reduce overall lead times and the total cost of raw materials. In 2009, the Company experienced a decline in raw material prices and saw lead times shorten as demand for material eased due to the global economic downturn. The Company expects raw material prices to stabilize in 2010 as aerospace markets firm. The Company attempts to protect against raw material price escalation by passing those price increases directly to the Company’s customers.

Energy

The Company uses a considerable amount of energy in the processing of its forged and cast metal components. The fluctuating prices for energy, both natural gas and electricity, had a significant impact on the Company’s 2008 and 2009 results. With the reduction of natural gas prices, the Company expects energy to have a reduced impact on 2010 results. The Company attempts to ameliorate the impact of these price swings by purchasing directly from producers and pre-ordering supplies for the future, however, the level of price fluctuation and lack of availability are not within the control of the Company.

Backlog

The average amount of time necessary to manufacture the Company’s products is five to six weeks from the receipt of raw material. The timing of the placement and filling of specific orders may significantly affect the Company’s backlog figures, which are subject to cancellation for a variety of reasons. In addition, the Company typically only includes those contracts which will result in shipments within the next 18 months when compiling backlog and does not include the out years of long-term agreements. As a result, the Company’s backlog may not be indicative of actual results or provide meaningful data for period-to-period comparisons. The Company’s backlog was approximately $611 million, $629 million and $504 million as of December 31, 2007, 2008 and 2009, respectively. In 2008, the Company received approximately $408 million in new orders and in 2009 the Company received $229 million in new orders as the backlog and order activity were negatively impacted by 787 delays at Boeing and the unsettled economic climate.

Competition

The sale of metal components is highly competitive. Certain of the Company’s competitors are larger than the Company and have substantially greater capital resources. Although the Company is the sole supplier on several sophisticated components required by prime contractors under a number of governmental programs, many of the Company’s products could be replaced with other similar products of its competitors. However, the significant investment in tooling, the time required and the cost of obtaining the status of a “certified supplier” are barriers to entry. Competition is based on quality (including advanced engineering and manufacturing capability), price and the ability to meet delivery requirements.

Website Access to Company Reports

The Company’s annual report is available free of charge on the Company’s website at www.ladishco.com as soon as reasonably practicable after such material is filed electronically with the SEC. The Company’s other filings with the SEC; Form 10-K, Form 10-Q, Form 8-K and Form 4 are readily available at www.sec.gov/edgar or www.secfiling.com. The Company’s Form 14 Proxy Statement for the 2010 annual stockholders’ meeting is available on the Company’s website. The Company’s Code of Conduct is available on the Company’s website and in printed form upon request. Also, copies of the Company’s annual report will be made available, free of charge, upon written request.

Environmental, Health and Safety Matters

The Company’s operations are subject to many federal, state and local regulations relating to the protection of the environment and to workplace health and safety. In particular, the Company’s operations are subject to extensive federal, state and local laws and regulations governing waste disposal, air and water emissions, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters. Management believes that the Company is presently in substantial compliance with all such laws and does not currently anticipate that the Company will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental, workplace health or safety requirements. However, additional costs and liabilities may be incurred to comply with current and future requirements which could have a material adverse effect on the Company’s results of operations or financial condition.

There are no known pending remedial actions or claims relating to environmental matters that are expected to have a material effect on the Company’s financial position or results of operations. All of the properties owned by the Company, however, are located in industrial areas and have a history of heavy industrial use. These properties may potentially incur environmental liabilities in the future that could have a material adverse effect on the Company’s financial condition or results of operations. The Company was previously named a potentially responsible party at several “Superfund” sites. The Company’s liability with respect to these sites has largely been resolved. Although the Company does not believe that the amount for which it may be held liable for any further administrative or wrap-up expense will exceed the amount it has reserved, no assurance can be given that the amount for which the Company will be held responsible will not be significantly greater than expected. In 2006, the Company agreed to participate in the environmental remediation of a site near Houston, Texas. The Company’s allocated share is relatively small, less than 1%, and its projected exposure for the site is estimated to be $0.16 million. The Company has an accrual of $0.30 million for this site and any other environmental claims which may arise.

With respect to any past or future claim for any environmental, health or safety matter, the Company evaluates every such claim from both a technical and legal perspective, using outside consultants where necessary. The Company establishes a good faith estimate of its prospective risk associated with said claim and, where material, establishes an accrual for the estimated value of such claim.

Forward Looking Statements

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995, and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performance, estimates, projections, goals and forecasts. Potential factors which could cause the Company’s actual results of operations to differ materially from those in the forward-looking statements include:

•		Market conditions and demand for the Company’s products
•		Interest rates and capital costs
•		Unstable governments and business conditions in emerging economies
•		Health care costs
•		Legal, regulatory and environmental issues
•		Competition
•		Technologies
•		Raw material and energy prices
•		Taxes

Any forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Employees

As of December 31, 2009, domestically, the Company had approximately 1,137 employees, of whom 847 were engaged in manufacturing functions, 65 in executive and administrative functions, 180 in technical functions, and 45 in sales and sales support. At such date, approximately 517 employees, principally those engaged in manufacturing, were represented by labor organizations under collective bargaining agreements. Internationally, the Company had approximately 500 employees in Poland as of December 31, 2009, approximately two-thirds of which are represented by trade unions.

				Number of Employees
				Represented by Collective
Union		Expiration Date		Bargaining Agreement
International Association of Machinists & Aerospace Workers, Local 1862		February 26, 2012		193
International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers, Subordinate Lodge 1509		October 1, 2012		145
International Federation of Professional & Technical Engineers, Technical Group, Local 92		August 19, 2012		92
International Association of Machinists & Aerospace Workers, Die Sinkers, Local 140		March 26, 2012		47
Office & Professional Employees International Union, Clerical Group, Local 35		July 15, 2013		16
International Brotherhood of Electrical Workers, Local 662		November 11, 2012		20
Service Employees International, Local 1		April 22, 2012		4

Executive Officers of the Company

Name		Age				Position
Gary J. Vroman			50			President & CEO and Director
Wayne E. Larsen			55			Vice President Law/Finance & Secretary and Director
Lawrence C. Hammond			62			Vice President, Human Resources
Randy B. Turner			60			President — Pacific Cast Technologies, Inc. (“PCT”)
John Delaney			60			President — Stowe Machine Co., Inc. (“Stowe”) & Aerex LLC (“Aerex”)
Robert C. Miller			59			President — Valley Machining, Inc. (“Valley”)
Jozef Burdzy			58			President — Zaklad Kuznia Matrycowa Sp. z o.o. (“ZKM”) & Zaklad Obrobki i Procesow Specjalnych Sp. z o.o. (“ZOPS”)
Shannon J. S. Ko			67			President — Chen-Tech Industries, Inc. (“Chen-Tech”)

Item 1A. Risk Factors

Cyclicality of the Aerospace and Jet Engine Industries

Substantially all of our revenues are derived from the aerospace and jet engine industries, which are cyclical in nature and subject to changes based on general economic conditions, airline profitability, passenger ridership and international relations. The duration and severity of upturns and downturns in these industries are influenced by a variety of factors, including those set forth herein. Accordingly, they cannot be predicted with any certainty. Historically, orders for new commercial aircraft and related commercial aerospace components have been driven by the operating profits or losses of commercial airlines. Purchases by customers in the military aerospace sector are dependent upon defense budgets. Events adversely affecting the airline industry, such as cyclical overcapacity and inability to maintain profitable fare structures, would likely have a material adverse effect on our financial condition and results of operations.

Reduction in Government Spending

Since 2002, approximately 25% to 40% of our annual revenues have been derived from the government-sponsored aerospace industry, an industry that is dependent upon government budgets and, in particular, the United States government budget. There can be no assurance that U.S. defense and space budgets and the related demand for defense and space equipment will continue or that sales of defense and space equipment to foreign governments will continue at present levels.

Competition

The sale of metal components for the aerospace, jet engine and industrial markets is highly competitive. Many products we manufacture are readily interchangeable with the products manufactured by our competitors. Many of our products are sold under long-term contracts which are bid upon by several suppliers. Our principal competitor, Precision Castparts Corp. (“PCC”), is a substantially larger business and has greater financial resources. In 2006, PCC purchased one of our larger suppliers of nickel-based alloys, Special Metals Corporation.

Reliance on Major Customers

Our three largest customers accounted for approximately 50%, 47% and 56% of our revenues in 2007, 2008 and 2009, respectively. Because of the small number of customers for some of our principal products, those customers exercise significant influence over our prices and other terms of trade. The loss of any of our largest customers could have a material adverse effect on our financial condition and results of operations. The labor strike at Boeing during the second half of 2008 had a negative impact upon the entire commercial aviation industry including the Company.

Dependence on Key Personnel

We have been and continue to be dependent on certain key management personnel. Our ability to maintain our competitive position will depend, in part, upon our ability to retain these key managers and to continue to attract and retain highly qualified managerial, manufacturing and sales and marketing personnel. There can be no assurance that the loss of key personnel would not have a material adverse effect on our results of operations or that we will be able to recruit and retain such personnel.

Product Liability Exposure

We produce many critical engine and structural parts for commercial and military aircraft and for other specialty applications. As a result, we have an inherent risk of exposure to product liability claims. We currently maintain product liability insurance, but there can be no assurance that insurance coverage will continue to be available on terms acceptable to us or that such coverage will be adequate for any liabilities that might be incurred.

Availability and Price of Raw Materials

The largest single component of our cost of goods sold is raw material costs. We manufacture products in a wide variety of specialty metals and alloys, some of which can only be purchased from a limited number of suppliers. We hold limited quantities of raw materials in inventory but, for the principal part of our business, we seek to procure delivery of raw materials in quantities and at times matching customers’ orders. We, along with other entities in the industry, have experienced periods of increased delivery times for nickel-based and titanium alloys and certain stainless steels, which account for a significant portion of our raw materials. Significant scarcity of supply of raw materials used by us could have a material adverse effect on our results of operations by affecting both the timing of delivery and the cost of purchasing such materials. In addition, our largest competitor, PCC, has purchased one of our largest suppliers of nickel-based alloys. Many of our products are sold pursuant to long-term agreements with our customers, which currently provide us the right to pass through material cost increases. Any inability to obtain such rights in future long-term agreements could have a material adverse effect on our results of operations.

Labor Contracts

Approximately 45% of our domestic employees are represented by seven collective bargaining units. Contracts were historically renegotiated every three years with each union. Six of the unions in 2006 and one union in 2007 entered into six-year agreements with the Company. While we do not expect that work stoppages will arise in connection with the renewal of labor agreements expiring in the foreseeable future, no assurance can be given that work stoppages will not occur. An extended or widespread work stoppage could have a material adverse effect on our results of operations.

Pension and Other Postretirement Benefit Obligations

Many of our employees are eligible to participate in various Company-sponsored pension plans. In addition to pension benefits, we provide health care and life insurance benefits to our eligible employees and retirees. The pension benefits have been and will continue to be funded through contributions to pension trusts, while health care and life insurance benefits are paid as incurred.

We have several pension plans, all of which are underfunded. The aggregate actuarially determined liability recorded for these pension plans on the balance sheet at December 31, 2009 was approximately $79.3 million. The decline in the equity market in the United States in 2008 had a negative impact upon the level of assets in the pension trust of the Company; a portion of that decline was recovered in 2009.

The actuarially determined liability recorded for postretirement health care and life insurance benefits on the balance sheet at December 31, 2009 was approximately $33.7 million and will be paid as incurred.

Compliance with Environmental and Other Government Regulations

Our operations are subject to extensive environmental, health and safety laws and regulations promulgated by federal, state and local governments. Many of these laws and regulations provide for substantial fines and criminal sanctions for violations. The nature of our business exposes us to risks of liability due to the use and storage of materials that can cause contamination or personal injury if released into the environment. In addition, environmental laws may have a significant effect on the nature, scope and cost of cleanup of contamination at operating facilities. It is difficult to predict the future development of such laws and regulations or their impact on future earnings and operations, but we anticipate that these standards will continue to require continued capital expenditures. There can be no assurance that we will not incur material costs and liabilities in the future relating to environmental matters.

Risks Related to Significant Price Concessions to Our Customers and Increased Pressure to Reduce Our Costs

We are subject to substantial competition in all of the markets we serve, and we expect this competition to continue. As a result, we have made significant price concessions to our customers in the aerospace and industrial markets in recent years and we expect customer pressure for price concessions to continue. Maintenance of our profitability will depend, in part, on our ability to sustain a cost structure that enables us to be cost-competitive. If we are unable to adjust our cost relative to our pricing or if we are unable to continue to compete effectively, our business will suffer.

Our Business is Affected by Federal Rules, Regulations and Orders Applicable to Government Contractors

A number of our products are manufactured and sold under U.S. government contracts or subcontracts. Violation of applicable government rules and regulations could result in civil liability, in cancellation or suspension of existing contracts or in ineligibility for future contracts or subcontracts funded in whole or in part with federal funds.

Risks Associated with International Operations

We purchase products from and supply products to businesses located outside of the United States. In fiscal 2009, approximately 54% of our total sales were attributable to non-U.S. customers. A number of risks inherent in international business could have a material adverse effect on our future results of operations, including:

•		currency fluctuations;
•		general economic and political uncertainties and potential for social unrest in international markets;
•		limitations on our ability to enforce legal rights and remedies;
•		changes in trade policies;
•		tariff regulations;
•		difficulties in obtaining export and import licenses; and
•		the risk of government financed competition.

Our Business Involves Risks Associated with Complex Manufacturing Processes

Our manufacturing processes depend on certain sophisticated and high-value equipment, such as some of our forging presses for which there may be only limited or no production alternative. Unexpected failures of this equipment may result in production delays, revenue loss and significant repair costs. In addition, equipment failures could result in injuries to our employees. Moreover, the competitive nature of our business requires that we continuously implement process changes intended to achieve product improvements and manufacturing efficiencies. These process changes may at times result in production delays, quality concerns and increased costs. Any disruption of operations at our facilities due to equipment failures or process interruptions could have a material adverse effect on our business.

Acquisitions

We expect that we will continue to make acquisitions of, investments in, and strategic alliances with complementary businesses, products and technologies to enable us to add products and services for our core customer base and for related markets, and to expand our business geographically. The success of this acquisition strategy will depend on our ability to: identify suitable businesses to buy; negotiate the purchase of those businesses on terms acceptable to us; complete the acquisitions within our expected time frame; improve the results of operations of the businesses that we buy and successfully integrate their operations into our own; and avoid or overcome any concerns expressed by regulators.

We may fail to properly complete any or all of these steps. We may not be able to find appropriate acquisition candidates, acquire those candidates that we do find, obtain necessary permits or integrate acquired businesses effectively and profitably.

Some of our competitors are also seeking to acquire similar businesses, including competitors that have greater financial resources than we do. Increased competition may reduce the number of acquisition targets available to us and may lead to less favorable terms as part of any acquisition, including higher purchase prices. If acquisition candidates are unavailable or too costly, we may need to change our business strategy.

We also cannot be certain that we will have enough capital or be able to raise enough capital on reasonable terms, if at all, to complete the purchases of the businesses that we want to buy. Our credit facility limits our ability to make acquisitions. Our lender may object to certain purchases or place conditions on them that would limit their benefit to us.

If we are unsuccessful in implementing our acquisition strategy for the reasons discussed above or otherwise, our financial condition and results of operations could be materially adversely affected.

Item 1B. Unresolved Staff Comments

The Company has no unresolved comments from the Commission staff.

Item 2. Properties

The following table sets forth the location and size of the Company’s seven facilities:

		Approximate Acreage				Approximate Square Footage
Forging — Cudahy, Wisconsin			140.0				1,650,000
Stowe — Windsor, Connecticut			8.2				40,000
PCT — Albany, Oregon			14.0				149,000
Valley — Coon Valley, Wisconsin			3.0				40,000
ZKM — Stalowa Wola, Poland			70.0				820,000
Chen-Tech — Irvine, California			2.0				55,000
Aerex — Windsor, Connecticut			1.0				15,000

The above facilities, except for Chen-Tech and Aerex, are owned by the Company.

The Company believes that its facilities are well maintained, are suitable to support the Company’s business and are adequate for the Company’s present and anticipated needs. While the rate of utilization of the Company’s manufacturing equipment is not uniform, the Company estimates that its facilities overall are currently operating at approximately 50% of capacity.

The principal executive offices of the Company are located at 5481 South Packard Avenue, Cudahy, Wisconsin 53110. Its telephone number at such address is (414) 747-2611.

Item 3. Legal Proceedings

From time to time the Company is involved in legal proceedings relating to claims arising out of its operations in the normal course of business. Although the Company believes that there are no material legal proceedings pending or threatened against the Company or any of its properties, the Company has been named as a defendant in a number of asbestos cases in Mississippi, Illinois, Wisconsin and California. As of December 31, 2009, the Company has been dismissed from the case in California and has 11 individual claims in Mississippi, two individual claims remaining in Illinois and one individual claim in Wisconsin. The Company has never manufactured or processed asbestos. The Company’s only exposure to asbestos involves products the Company purchased from third parties. The Company has notified its insurance carriers of these claims and is vigorously defending these actions. The Company has not made any provision in its financial statements for the asbestos litigation.

The Company is participating in an investigation initiated by U.S. Customs & Border Protection (“Customs”) into duty drawback claims filed on behalf of the Company by its former export agent. The Company is cooperating with Customs in this investigation and has voluntarily suspended its duty drawback claims. Based upon its internal investigation, the Company believes any errors or omissions with respect to its filings were solely attributable to its former export agent. The Company intends to continue to cooperate with Customs in resolving this matter. The Company has not made any provision in its financial statements for the Customs investigation.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2009.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of the Company, par value $0.01 per share, trades on the Nasdaq National Market under the symbol “LDSH”.

The following table sets forth, for the fiscal periods indicated, the high and low closing prices for each quarter of the years 2007, 2008 and 2009. At December 31, 2009 there were an estimated 2,500 beneficial holders of the Company’s common stock.

		Year Ended								Year Ended								Year Ended
		December 31, 2007								December 31, 2008								December 31, 2009
		High				Low				High				Low				High				Low
First quarter		$	44.40			$	35.08			$	41.94			$	32.90			$	15.34			$	5.36
Second quarter		$	44.39			$	37.22			$	37.35			$	20.59			$	15.04			$	7.28
Third quarter		$	56.21			$	40.96			$	27.56			$	18.75			$	16.48			$	10.88
Fourth quarter		$	59.30			$	40.03			$	19.74			$	11.47			$	16.03			$	11.79

The Company has not paid cash dividends and currently intends to retain all its earnings to reduce debt and to finance its operations, its stock repurchase program and future growth. The Company does not expect to pay dividends for the foreseeable future.

TOTAL SHAREHOLDER RETURN

The following graph compares the period percentage change in Ladish’s cumulative total shareholder return on its common stock, assuming dividend reinvestment, with the cumulative total return of (i) the Russell 2000 Small Cap Index, and (ii) a peer group from the Company’s industry, for the period of December 31, 2004 to December 31, 2009. The Company’s peer group is comprised of PCC, ATI, Timet and SIFCO Industries, Inc.

		Dec-31-04				Dec-31-05				Dec-31-06				Dec-31-07				Dec-31-08				Dec-31-09
Ladish			11.60				22.35				37.08				43.19				13.85				15.05
Russell 2000			651.57				673.22				796.89				765.90				499.45				625.39
Industry Peers			26.29				67.53				73.05				86.93				24.94				45.51

Item 6. Selected Financial Data

The selected financial data of the Company for each of the last five fiscal years are set forth below.

The data below should be read in conjunction with the Financial Statements and the Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this filing.

		Year Ended December 31,
		(Dollars in millions, except earnings per share)
INCOME STATEMENT DATA		2005				2006				2007				2008				2009
Net sales		$	266.841			$	369.290			$	424.631			$	469.466			$	349.832
Income from operations			23.847				48.960				52.319				39.538				9.248
Interest expense			2.072				3.548				2.528				1.971				5.050
Net income			13.715				28.481				32.288				32.205				6.094
Basic earnings per share			1.00				2.01				2.22				2.15				0.38
Diluted earnings per share			0.98				2.00				2.22				2.15				0.38
Dividends paid			—				—				—				—				—
Shares used to compute earnings per share:
Basic			13,781,586				14,136,946				14,516,120				14,998,437				15,901,833
Diluted			13,931,539				14,205,641				14,550,258				15,000,844				15,902,246

		December 31,
BALANCE SHEET DATA		2005				2006				2007				2008				2009
Total assets		$	296.556			$	329.060			$	381.833			$	509.466			$	469.514
Net working capital			71.116				123.764				130.855				138.910				137.515
Total debt			45.000				54.100				53.500				118.900				90.000
Stockholders’ equity			117.469				152.670				201.554				223.411				225.582

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

2009 was a transitional year for Ladish. The Company entered the year fully cognizant of the global economic issues associated with credit and the capital markets which occurred in the second half of 2008. However, Ladish, with $629 million of contract backlog, had yet to be significantly impacted by the recession. The global economic slowdown began impacting Ladish in the first quarter of 2009 as delivery schedules for products began to shrink and move out to later dates. By June 30, 2009, the Company’s contract backlog had declined to $488 million. The third quarter was the nadir for the Company both in terms of sales, $76.2 million, a pretax loss of $3.0 million, and a contract backlog of $476 million. The fourth quarter brought signs of an economic recovery for Ladish. Net sales increased to $83.2 million, pretax income was $3.3 million and contract backlog increased to $504 million.

In response to the sudden downturn in business, Ladish took a number of steps to reduce costs while still maintaining the ability to serve customers’ shifting demands. Employment levels were reduced from 2,039 to 1,637, a 20% decline. In addition, the Company instituted a salary freeze for 2009 and reduced certain discretionary benefits. At a number of the operating units of the Company, weeks of lay-off and unpaid weeks were also utilized to reduce costs. During the course of this business slowdown, the Company significantly reduced its working capital by lowering inventory by $36.6 million and receivables by $19.3 million. Ladish also reduced its capital expenditures from the 2008 peak of $49.8 million to $13.9 million in 2009. Through its focus on cost control and working capital reduction in 2009, Ladish generated over $44 million of positive cash flow.

While many businesses faced credit difficulties and shortages of liquidity in 2009, Ladish avoided those balance sheet challenges by deleveraging itself through the repayment of $28.9 million of senior bank debt and $1.7 million of capital leases. The Company also proactively worked with both its senior bank lenders and the holders of its long-term notes to adjust covenants in the respective agreements to provide the Company added operational flexibility. Ladish ended 2009 with no bank debt, no capital leases, $90 million of long-term notes, $19.9 million in cash and in full compliance with all covenants and requirements in its lending agreements.

Net income in 2009 had a tax benefit of $2.9 million in lieu of a tax provision. The tax benefit resulted primarily from the decision of the Company to reverse a $5.3 million valuation allowance for a manufacturing investment credit in Wisconsin. This decision was largely influenced by legislative changes in Wisconsin in late 2009 along with the Company’s long-term optimistic outlook toward full utilization of the credit. The tax credit contributed to Ladish’s $6.1 million, or $0.38 per share, of earnings in 2009. Without the tax credit, Ladish would have had $0.8 million, or $0.05 per share, of earnings in 2009.

All three of Ladish’s major markets declined in 2009, albeit at varying rates. In 2009, component sales were down 8% for aerospace, 19% for jet engines and 60% for general industrial. In spite of these declines, the Company’s domestic operations remained profitable in 2009. The Company’s European operations are currently primarily dependent on the industrial market and could not sufficiently offset the lack of demand in order to produce positive results.

Results of Operations

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

2009 net sales were $349.8 million, a 25.5% reduction from the $469.5 million of net sales in 2008. The decline in sales was due to reduced demand in all of the Company’s markets. The Company’s sales of components for jet engines, aerospace and general industrial declined 19%, 8% and 60%, respectively, as customers reduced their build schedules and destocked their inventory. In 2009, cost of sales at the Company increased to 92.3% of net sales in comparison to 87.4% in 2008. The percentage increase in 2009 is directly linked to the reduction of sales with fewer sales to cover the fixed costs at the Company.

SG&A expenses at the Company were $17.8 million in 2009, in contrast to $19.8 million of SG&A expenses in 2008. Although the Company experienced a $2 million year-over-year reduction in SG&A, as a percentage of sales SG&A increased to 5.1% in 2009 from 4.2% during the same period in 2008. The increased rate of SG&A expense in 2009 is attributable to a combination of one-time charges related to employment reductions and the reduced level of sales.

Interest expense at the Company in 2009 was $5.1 million, a $3.1 million increase from the level in 2008. The growth of interest expense in 2009 was related to a full year of interest on the Series C long-term notes along with the reduction of capitalized interest in 2009. The Company was able to capitalize $2.4 million of interest in 2008 while it only capitalized $1.0 million of interest in 2009. Total interest incurred was $6.0 million and $4.4 million, respectively, in 2009 and 2008. The following table reflects the Company’s treatment of interest in 2008 and 2009:

(Dollars in millions)		2008				2009
Interest expensed		$	1.971			$	5.050
Interest capitalized			2.418				0.953
Total		$	4.389			$	6.003

The Company earned $3.1 million and $38.3 million of pretax income, respectively, in 2009 and 2008. The decline in pretax income was due to decreased sales and increases in pension expense, interest expense, depreciation expense, costs associated with downsizing operations and lower by-product sales in 2009. These expense increases were somewhat offset by reductions in employment costs related to lower employment levels in 2009.

In 2009, the Company reversed a valuation allowance and recognized a tax asset in the amount of $5.3 million which resulted in a tax benefit of $2.9 million. The tax asset related to a credit for state taxes which the Company determined it was more likely than not that the Company would earn sufficient income to fully utilize the credit. In 2008, the Company had a tax provision of $5.9 million for an effective rate of 15.4%.

Net income for 2009 was $6.1 million or $0.38 per share on a fully diluted basis. The decline from 2008 net income of $32.2 million was a result of reduced sales combined with increases in pension expense of $4.4 million, interest expense of $3.1 million, depreciation expense of $2.0 million, employment reduction expenses of $3.0 million and reduced by-product sales of $7.9 million, offset by the recognition of the state tax credit of $5.3 million.

The Company ended 2009 with a contract backlog of $504 million, down from the 2008 ending backlog of $629 million. In 2009, the Company booked $229 million of new orders in contrast to $408 million of new orders in 2008. The decline in new orders was related to the global slowdown in the aerospace market associated with reduced passenger miles in 2009.

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

Net sales in 2008 were $469.5 million, a 10.6% increase over the $424.6 million of net sales in 2007. The sales growth in 2008 was due to the continued strength of Ladish’s markets and the acquisitions of Aerex and Chen-Tech in the third quarter of 2008. In 2008, cost of sales for the Company was 87% of net sales in comparison to 84% of net sales in 2007.

The Company’s SG&A expense in 2008 was $19.8 million, or 4.2% of net sales. In 2007, SG&A expense was 3.9% of net sales. The percentage increase in SG&A expense is attributed to growth in employment to support capacity expansion and higher professional fees associated with tax planning.

In 2008, the Company’s interest expense was $2.0 million in comparison to $2.5 million in 2007. The decrease in interest expense in 2008 was the result of a larger amount of interest capitalized associated with the capacity expansion programs at the Company. Total interest increased in 2008 as the Company incurred additional debt to support the acquisitions of Aerex and Chen-Tech. The following table reflects the Company’s treatment of interest for the years 2007 and 2008:

(Dollars in millions)		2007				2008
Interest expensed		$	2.528			$	1.971
Interest capitalized			0.795				2.418
Total		$	3.323			$	4.389

Pretax income in 2008 was $38.3 million, an $11.9 million reduction from the 2007 pretax income level. The decline in pretax income was due to product mix and under-absorbed fixed costs.

Tax expense for 2008 was $5.9 million, which equated to an effective tax rate of 15.4%. In 2007, the Company experienced an effective tax rate of 35.5%. The reduction in tax rate is mainly attributed to the Company recognizing a significant tax savings from the recognition of a $5.5 million research and development tax credit in the third quarter of 2008 and a $1.9 million foreign economic zone credit.

Net income in 2008 was $32.2 million, which equates to $2.15 per share on a fully-diluted basis. Net income was similar to 2007 levels but declined as a percentage of sales due to higher raw material and energy costs, a less profitable mix of products sold and inefficiencies associated with expanding manufacturing capacity, offset by the aforementioned tax savings and the capitalization of interest expense to capital projects.

The Company booked $408 million of new orders in 2008 in comparison to $534 million of new orders in 2007. The decline in orders was associated with the Boeing labor stoppage in the third quarter of 2008 and general, global economic conditions.

Liquidity and Capital Resources

The Company’s cash position as of December 31, 2009 is $15 million more than its position at December 31, 2008. The 2009 increase in cash is due to reduced capital expenditures and pension contributions along with a reduction in working capital. Cash flow from operations in 2009 was $29.6 million more than cash flow from operations in 2008 primarily due to working capital reduction as the Company reduced inventories and receivables, partially offset by a reduction in accounts payable.

On May 16, 2006, the Company sold $40 million of Series B Notes in a private placement to certain institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the principal amortizing equally over the duration after the fourth year.

On September 2, 2008, the Company sold $50 million of Series C Notes in a private placement to certain institutional investors. The Series C Notes are unsecured and bear interest at a rate of 6.41% per annum with interest being paid semiannually. The Series C Notes have a seven-year duration with the principal amortizing equally over the duration after the third year.

The Company’s Series B and Series C Notes contain financial covenants which (a) limit the incurrence of certain additional debt; (b) require a certain level of consolidated adjusted net worth; (c) require a minimum fixed charges coverage ratio; and (d) require a limited amount of funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits funded debt to 60% of total capitalization. At December 31, 2009, funded debt at Ladish was at 21% of total capitalization. This covenant also limits priority debt to 20% of adjusted net worth. Ladish had no priority debt at December 31, 2009. The covenant on adjusted net worth requires a minimum of $112.8 million. At December 31, 2009, Ladish had $259.8 million of adjusted net worth. The covenant on fixed charges coverage ratio requires that consolidated cash flow to fixed charges be a minimum of 2.00. The Company’s fixed charges coverage ratio at December 31, 2009 was 4.77. The final covenant on funded debt to consolidated cash flow allows for a maximum level of 4.00. At December 31, 2009, the Company’s actual level was 2.91. The Note Agreement for the Series B and Series C Notes also contains customary representations and warranties and events of default.

At December 31, 2009, the Company was in compliance with all covenants in the Series B and Series C Notes and the Facility.

In addition, the Company and a syndicate of lenders have entered into a $35 million unsecured revolving line of credit (the “Facility”) which was most recently renewed on April 10, 2009. The Facility bears interest at a rate of LIBOR plus 2.00% or at a base rate. At December 31, 2009, there were no borrowings under the Facility and $35 million of credit was available pursuant to the terms of the Facility. The Facility has a maturity date of April 9, 2010. The Company expects to renew the Facility on similar terms, as it has for each of the past nine years.

On July 31, 2009, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 1 to the Facility. This amendment, effective as of the date of execution, modified the covenant on maximum indebtedness to EBITDA by deleting that covenant and substituting in its place a covenant on minimum EBITDA. In addition, the lenders and the Company agreed to modify the definition of EBITDA for this covenant by now allowing the Company to add back non-cash charges to EBITDA.

The Facility also contains certain financial covenants which (a) require a minimum amount of modified EBITDA and (b) require a minimum fixed charge coverage ratio of 1.7x. At December 31, 2009, the Company was in compliance with the minimum modified EBITDA and had a fixed charge coverage ratio of 6.47x. The Facility also contains customary representations and warranties and events of default.

During 2009, the Company applied $13.9 million of cash toward capital expenditures. These expenditures were funded by cash from operations.

In 2008, the Company issued 1,301,961 shares of common stock in connection with the acquisitions of Aerex and Chen-Tech.

During the years ending December 31, 2008 and 2009, the Company received $0.215 million and $0.015 million, respectively, from the exercise of employee stock options.

Given the Company’s ability to pass along raw material price increases to its customers, inflation has not had a material effect upon the Company during the period covered by this report. Given the rising demand for the products manufactured by the Company, and the prospects for increases in raw material costs and possible energy cost escalation, the Company cannot determine at this time if there will be any significant impact from inflation in the foreseeable future.

Contractual Obligations Table
(Dollars in Millions)

		Less Than												More Than
		1 Year				1-3 Years				3-5 Years				5 Years
Senior Notes (1)		$	5.715			$	31.430			$	31.430			$	21.425
Bank Facility			—				—				—				—
Operating Leases			.974				1.592				1.239				1.848
Purchase Obligations (2)			61.438				101.602				—				—
Other Long-Term Obligations:
Pensions (3)			7.456				26.806				—				—
Postretirement Benefits (4)			3.464				6.737				6.262				13.137

Critical Accounting Policies

Deferred Income Taxes

The Company started 2008 with $2.1 million of domestic net operating loss (“NOL”) carryforwards that were generated prior to its reorganization completed on April 30, 1993. These NOLs were utilized by the Company to reduce taxable income in 2008. The Company has $3.7 million of NOL carryforwards that were generated by its foreign operations in 2008 and 2009. These NOLs expire in the years 2012 through 2014. The Company has total net deferred income tax assets of $31.7 million as of December 31, 2009.

Pensions

The Company has noncontributory defined benefit pension plans (“Plans”) covering a number of its employees. The Company contributed $8.955 million and $3.428 million, respectively, to the Plans in 2008 and 2009. The Company intends to contribute $7.5 million, $11.8 million and $15 million to the Plans in 2010, 2011 and 2012, respectively. The Company plans on funding those contributions from cash on hand, cash generated from operations, working capital reductions, treasury stock contributions and, if necessary, from the Facility. No estimates have been made for payments into the Plans beyond 2012.

The Plans’ assets are held in a trust and are primarily invested in U.S. Government securities, investment grade corporate bonds and marketable common stocks. The key assumptions the Company considers with respect to the assets in the Plans and funding the liabilities associated with the Plans are the discount rate, the long-term rate of return on Plans’ assets, the projected rate of increase in compensation levels and the actuarial estimate of mortality of participants in the Plans. The most sensitive assumption is the discount rate. For funding purposes, the Company’s independent actuaries assumed an annual long-term rate of return on the Plans’ assets of 7.95% and 8.05% for 2008 and 2009, respectively. For the ten-year period ending December 31, 2009, the Company experienced an annual rate of return on the Plans’ assets of 3.31%.

The Company used a rate of 5.16% for its discount rate assumption for 2009, a decrease from the 6.05% rate used for 2008. An increase in the discount rate results in a decrease in the accumulated benefit obligation at the measurement date which may also result in a decrease in the additional minimum pension liability included as a credit to accumulated other comprehensive income. Such an increase also results in an actuarial gain which is amortized to pension expense in accordance with FASB ASC 715-30. A decrease in the discount rate will have the opposite effect in the pension liability and pension expense. The Company bases its discount rate on long maturity AA rated corporate debt securities. The Company cannot predict whether these interest rates will increase or decrease in future years.

The Company cannot predict the level of interest rates in the future and correspondingly cannot predict the future discount rate which will be applied to determine the Company’s projected benefit obligation. As demonstrated in the chart below, relatively small movements in the discount rate, up or down, can have a significant impact on the Company’s projected benefit obligation under the Plans.

Projected Plan Benefit Obligation as of December 31, 2009
(Dollars in Millions)
At 4.91% discount rate		$	225.019
At 5.16% discount rate		$	219.756
At 5.41% discount rate		$	214.709

Nor can the Company predict with any certainty what the actual rate of return will be for the Plans’ assets. As demonstrated in the chart below, a modest change in the presumed rate of return on the Plans’ assets will have a material impact upon the actual net periodic cost for the Plans.

Net Periodic Benefit for Year Ending December 31, 2010
(Dollars in Millions)
7.80% expected return		$	9.334
8.05% expected return		$	8.954
8.30% expected return		$	8.573

Fair Value Measurement of Pension Assets

FASB ASC 820-10, Fair Value Measurements and Disclosures, establishes a framework and provides guidance on measuring the fair value of assets in a pension plan and how an employer should disclose the same. The framework establishes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value. The three levels of fair value hierarchy are described as follows:

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

The following table sets forth by level (dollars in millions), within the fair value hierarchy, the Plans’ assets at fair value as of December 31, 2009:

Plans’ Assets			Level 1				Level 2				Level 3				Total
$	142.967		$	142.967				—				—			$	142.967

Goodwill and Other Intangible Assets

Goodwill represents the cost of acquired net assets in excess of their fair market values. Goodwill and other intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually in accordance with the provisions of FASB ASC 350-20, Intangibles — Goodwill and Other. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and also reviewed at least annually for impairment.

In accordance with ASC 350-20, a two-step impairment test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In the first step, the fair value of each reporting unit is compared to its carrying value to determine if the goodwill is impaired. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired and the second step is not required. If the carrying value of the net assets assigned to the reporting unit exceeds its fair value, then the second step is performed in order to determine the implied fair value of the reporting unit’s goodwill and an impairment loss is recorded for an amount equal to the difference between the implied fair value and the carrying value of the goodwill.

For the purpose of goodwill analysis, the Company has only one reporting segment, as defined by ASC 350-20. Goodwill of $37.6 million represents the excess of the purchase price over the fair value of identifiable tangible and intangible net assets relating to business acquisitions. Goodwill increased significantly in 2008 due to the acquisitions of Aerex and Chen-Tech. It is an asset with an indefinite life and therefore is not amortized to expense, but is subject to annual impairment testing. The Company tests the goodwill for impairment at least annually by fair value impairment testing. The Company’s assessment of fair value used in the annual impairment testing takes into account a number of factors including EBITDA and revenue multiples of transactions in the Company’s industry as well as fair market value multiples of transactions of similarly situated enterprises. No impairments were recognized in 2007, 2008 or 2009. Should goodwill become impaired in the future, the amount of impairment will be charged to SG&A expense. The Company has $19.5 million of amortizable customer relationships included in other intangible assets that are being amortized over 50 years with annual amortization of $0.4 million.

New Accounting Pronouncements

Effective July 1, 2009, the Company adopted FASB ASC 105-10, Generally Accepted Accounting Principles — Overall. ASC 105-10 establishes the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). The Company has updated GAAP referencing for this report. The FASB Codification had no impact on financial reporting of the Company.

In December 2007, the FASB issued guidance for accounting and reporting of noncontrolling interests in financial statements, which is included in ASC 810-10, Consolidation — Overall. The objective of ASC 810-10 is to improve the financial information provided in consolidated financial statements. ASC 810-10 changes the way the consolidated income statement is presented, establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation, requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated, and expands disclosures in the consolidated financial statements in order to clearly identify and distinguish between the interests of the parent’s owners and the interest of the noncontrolling owners of a subsidiary. The Company adopted ASC 810-10 effective January 1, 2009. ASC 810-10 modified the manner in which the Company reported on the noncontrolling interest in ZKM as the noncontrolling interest has been classified as a component of equity.

On December 30, 2008, the FASB issued guidance related to employers’ disclosures regarding postretirement benefit plan assets, which is included in ASC 715-20, Defined Benefit Plans — General. ASC 715-20 provides additional guidance on employers’ disclosures about plan assets of a defined benefit pension or other postretirement plan. The Company adopted ASC 715-20 in fiscal year 2009. The disclosure requirements are annual and do not apply to interim financial statements.

Effective June 30, 2009, the Company adopted FASB ASC 855-10, Subsequent Events — Overall. ASC 855-10 establishes standards for the accounting for and the disclosing of subsequent events. ASC 855-10 introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance sheet date.

The Company evaluated its December 31, 2009 financial statements for subsequent events through March 4, 2010, the date the financial statements were available to be issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company believes that its exposure to market risk related to changes in foreign currency exchange rates and trade accounts receivable is immaterial.

Item 8. Financial Statements and Supplementary Data

The response to Item 8. Financial Statements and Supplementary Data incorporates by reference the information listed in the consolidated financial statements and accompanying schedules beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Grant Thornton LLP have been the auditors of the financial statements of the Company for the fiscal years ended December 31, 2007, 2008 and 2009. It is anticipated that representatives of Grant Thornton LLP will be present at the 2010 Annual Meeting, will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions raised at the 2010 Annual Meeting or submitted to them in writing before the 2010 Annual Meeting.

Grant Thornton LLP has informed the Company that it does not have any direct financial interest in the Company and that it has not had any direct connection with the Company in the capacity of promoter, underwriter, director, officer or employee.

As is customary, auditors for the fiscal year ending December 31, 2010 will be appointed by the Audit Committee and ratified by the stockholders and by the Board of Directors at their meeting immediately following the 2010 Annual Meeting.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The disclosure controls and procedures of the Company are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers to allow timely decisions regarding disclosure.

Under the direction of the principal executive officer and the principal financial officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2009. Based on that evaluation, the chief executive officer and the chief financial officer have concluded that the Company’s disclosure controls and procedures were effective.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of management’s evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal controls over the financial reporting of the Company. The Company’s management, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s internal controls over financial reporting based upon the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, as of December 31, 2009, management concluded that the Company’s internal controls over financial reporting are operating effectively. Grant Thornton LLP, an independent registered public accounting firm, has issued an attestation report on the Company’s internal control over financial reporting, which is included herein.

Item 9B. Other Information

None.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of
Ladish Co., Inc.

We have audited Ladish Co., Inc.’s (a Wisconsin Corporation) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ladish Co., Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Ladish Co., Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Ladish Co., Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ladish Co., Inc. and subsidiaries as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity, and cash flows for the three years then ended and our report dated March 4, 2010 expressed an unqualified opinion.

GRANT THORNTON LLP
Milwaukee, Wisconsin
March 4, 2010

PART III

Item 10. Directors and Executive Officers of the Registrant

Certain information called for by this Item is incorporated herein by reference to the sections entitled “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee” and “Independent/Nominating Committee” in the Proxy Statement for the 2010 Annual Meeting of Stockholders.

The list of Executive Officers in Part I, Item 1. Business, paragraph captioned “Executive Officers of the Registrant” is incorporated by reference. The list of Directors of the Company is as follows:

Name		Age
Lawrence W. Bianchi			68
James C. Hill			61
Leon A. Kranz			70
Wayne E. Larsen			55
J. Robert Peart			47
John W. Splude			64
Gary J. Vroman			50

Other information required by Item 401 of Regulation S-K is as follows:

Lawrence W. Bianchi, 68. Director since 1998. Mr. Bianchi in 1993 retired as the Managing Partner of the Milwaukee, Wisconsin office of KPMG LLP. From 1994 to 1998, Mr. Bianchi served as CFO of the law firm of Foley & Lardner LLP. Mr. Bianchi’s principal occupation is investments.

Lawrence C. Hammond, 62. Mr. Hammond has served as Vice President, Human Resources since January 1994. Prior to that time he had served as Director of Industrial Relations at the Company and he had been Labor Counsel at the Company. Mr. Hammond has been with the Company since 1980.

James C. Hill, 61. Director since 2003. Mr. Hill was Chairman and Chief Executive Officer of Vision Metals, Inc., a steel tubing producer, from 1997 to 2001. Prior to that period he was Corporate Vice President of Quanex Corporation, a NYSE public company and President of its Tube Group from 1983 to 1997.

Leon A. Kranz, 70. Director since 2001. Mr. Kranz was formerly President and Chief Executive Officer of Weber Metals, Inc., a Paramount, California based metals processor, a position he held for more than ten years.

Wayne E. Larsen, 55. Director since 2009 and previously a director from 1997 to 2003. Since 1995 Mr. Larsen has been Vice President Law/Finance and Secretary of the Company. He served as General Counsel and Secretary since 1989 after joining the Company as corporate counsel in 1981. Mr. Larsen is a Trustee of the Ladish Co. Foundation and a Director of the South Shore YMCA of Milwaukee and serves on the Advisory Board of U.S. Bank-Wisconsin.

J. Robert Peart, 47. Director since 2003. Mr. Peart is Managing Director for Guggenheim Aviation Partners, LLC, a private investment concern since 2004. Prior to that period, he was Managing Director of Residco, a transportation investment banking concern.

John W. Splude, 64. Director since 2004. Mr. Splude is Executive Chairman of HK Systems, Inc., an automated material handling and logistics software provider, a position he has held for over ten years. He is also a Director of Superior Die Cast and Ministry Health Care, a regent of Milwaukee School of Engineering, and serves on the Advisory Board of U.S. Bank-Wisconsin.

Randy B. Turner, 60. Mr. Turner has served as President of PCT since it was acquired by the Company in January 2000. Prior to joining the Company, Mr. Turner served as President of the corporate predecessor to PCT.

Gary J. Vroman, 50. Mr. Vroman has served as President and Chief Executive Officer of the Company since September 2009 after serving as President of Forging since January 1, 2008. Prior to that time, he was Vice President, Sales and Marketing of Forging since December 1995. Mr. Vroman has been with the Company since 1982. He is a Trustee of the Ladish Co. Foundation.

The Company’s ethics code is reflected in its policies addressing i) conflict of interest, ii) compliance with antitrust laws, iii) improper payments, iv) falsification of records, and v) insider trading. These policies apply to all Company employees including the principal executive officer, the principal financial officer, controller and members of the Board of Directors. On an annual basis, the Company requires its key management personnel to certify their review and compliance with these policies. A copy of the policies was filed as an exhibit to the Form 10-K on March 25, 2003. The policies can also be found on the Company’s website, www.ladishco.com.

Item 11. Executive Compensation

The information called for by this Item is incorporated herein by reference to the sections entitled “Executive Compensation and Other Matters,” “The Stock Option Plan,” “Pension Benefits,” “Compensation of Directors,” “Employment Agreements,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation and Stock Option Committee Report” of the Proxy Statement for the 2010 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information called for by this Item is incorporated herein by reference to the sections entitled “Voting Securities and Stockholders” and “The Stock Option Plan” of the Proxy Statement for the 2010 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

The information called for by this Item is incorporated herein by reference to the section entitled “Certain Relationships” of the Proxy Statement for the 2010 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services

The information called for by this Item is incorporated by reference to the section entitled “Audit Committee” of the Proxy Statement for the 2010 Annual Meeting of Stockholders.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Exhibits. See the accompanying index to exhibits on page X-1 which is part of this report.

Financial Statements. See the accompanying index to financial statements and schedules on page F-1 which is a part of this report.

SIGNATURES

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

		LADISH CO., INC.
		By:		/s/ Wayne E. Larsen   Wayne E. Larsen
March 4, 2010				Vice President Law/Finance & Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Gary J. Vroman   Gary J. Vroman		Director, President and Chief Executive Officer (Principal Executive Officer)		March 2, 2010
/s/ Wayne E. Larsen   Wayne E. Larsen		Director, Vice President Law/Finance & Secretary (Principal Financial and Accounting Officer)		March 2, 2010
/s/ Lawrence W. Bianchi   Lawrence W. Bianchi		Director		March 2, 2010
/s/ James C. Hill   James C. Hill		Director		March 2, 2010
/s/ Leon A. Kranz   Leon A. Kranz		Director		March 1, 2010
/s/ J. Robert Peart   J. Robert Peart		Director		March 3, 2010
/s/ John W. Splude   John W. Splude		Director		March 3, 2010

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm for 2007, 2008 and 2009			F-3
Consolidated Balance Sheets as of December 31, 2008 and 2009			F-4
Consolidated Statements of Operations for the years ended December 31, 2007, 2008 and 2009			F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2007, 2008 and 2009			F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2008 and 2009			F-8
Notes to Consolidated Financial Statements			F-9

THIS PAGE INTENTIONALLY LEFT BLANK

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Ladish Co., Inc.

We have audited the accompanying consolidated balance sheets of Ladish Co., Inc. (a Wisconsin Corporation) and subsidiaries, collectively the “Company” as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ladish Co., Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ladish Co., Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 4, 2010 expressed an unqualified opinion on the effectiveness of internal control over financial reporting.

GRANT THORNTON LLP
Milwaukee, Wisconsin
March 4, 2010

Ladish Co., Inc.

Consolidated Balance Sheets

December 31, 2008 and 2009
(Dollars in Thousands Except Per Share Data)

		2008				2009
Assets
Current Assets:
Cash and Cash Equivalents		$	4,903			$	19,917
Accounts Receivable, Less Allowance of $84 and $75			78,673				59,382
Inventories			129,307				92,697
Deferred Income Taxes			6,780				5,144
Prepaid Expenses and Other Current Assets			10,469				6,118
Total Current Assets			230,132				183,258
Property, Plant and Equipment:
Land and Improvements			6,414				6,905
Buildings and Improvements			54,652				60,416
Machinery and Equipment			229,310				240,352
Construction in Progress			62,244				58,451
			352,620				366,124
Less Accumulated Depreciation			(153,351	)			(167,688	)
Net Property, Plant and Equipment			199,269				198,436
Deferred Income Taxes			19,880				26,522
Goodwill			37,113				37,571
Other Intangible Assets, Net			20,011				19,465
Other Assets			3,061				4,262
Total Assets		$	509,466			$	469,514

See accompanying notes to consolidated financial statements.

Ladish Co., Inc.

Consolidated Balance Sheets
December 31, 2008 and 2009
(Dollars in Thousands Except Per Share Data)

		2008				2009
Liabilities and Equity
Current Liabilities:
Accounts Payable		$	37,748			$	23,613
Senior Bank Debt			28,900				—
Senior Notes			—				5,714
Accrued Liabilities:
Pensions			341				259
Postretirement Benefits			3,540				3,464
Officers’ Deferred Compensation			31				155
Wages and Salaries			4,911				3,314
Taxes, Other Than Income Taxes			304				289
Interest			1,425				1,355
Profit Sharing			1,898				611
Paid Progress Billings			4,683				2,428
Other			7,441				4,541
Total Current Liabilities			91,222				45,743
Noncurrent Liabilities:
Senior Notes			90,000				84,286
Pensions			63,661				69,653
Postretirement Benefits			29,716				30,215
Officers’ Deferred Compensation			6,792				9,276
Other Noncurrent Liabilities			3,998				4,220
Total Liabilities			285,389				243,393
Stockholders’ Equity:
Common Stock-Authorized 100,000,000, Issued and Outstanding 15,907,552 Shares at Each Date of $.01 Par Value			159				159
Additional Paid-In Capital			153,285				153,292
Retained Earnings			139,284				145,378
Treasury Stock, 6,336 and 4,548 Shares, Respectively, of Common Stock at Cost			(46	)			(33	)
Accumulated Other Comprehensive Loss			(69,271	)			(73,214	)
Total Stockholders’ Equity			223,411				225,582
Noncontrolling Interest in Equity of Subsidiary			666				539
Total Equity			224,077				226,121
Total Liabilities and Equity		$	509,466			$	469,514

See accompanying notes to consolidated financial statements.

Ladish Co., Inc.

Consolidated Statements of Operations

(Dollars in Thousands Except Per Share Data)

		Years Ended December 31,
		2007				2008				2009
Net Sales		$	424,631			$	469,466			$	349,832
Cost of Sales			355,628				410,163				322,745
Gross Profit			69,003				59,303				27,087
Selling, General and Administrative Expenses			16,684				19,765				17,839
Income from Operations			52,319				39,538				9,248
Other (Income) Expense:
Interest Expense			2,528				1,971				5,050
Other, Net			(363	)			(683	)			1,062
Income Before Income Tax Provision			50,154				38,250				3,136
Income Tax Provision (Benefit)			17,798				5,876				(2,894	)
Net Income			32,356				32,374				6,030
Noncontrolling Interest in Net Earnings (Loss) of Subsidiary			68				169				(64	)
Net Income Attributable to the Controlling Interest		$	32,288			$	32,205			$	6,094
Earnings Per Share:
Basic		$	2.22			$	2.15			$	0.38
Diluted		$	2.22			$	2.15			$	0.38

See accompanying notes to consolidated financial statements.

Ladish Co., Inc.

Consolidated Statements of Equity

(Dollars in Thousands Except Per Share Data)

																										Non-
																						Accumulated				Controlling
		Common Stock								Additional								Treasury				Other				Interest in
						Par				Paid-in				Retained				Stock,				Comprehensive				Equity of
		Shares				Value				Capital				Earnings				at Cost				Income (Loss)				Subsidiary				Total
Balance, December 31, 2006			14,605,591			$	146			$	115,688			$	74,791			$	(2,962	)		$	(34,993	)		$	635			$	153,305
Comprehensive Net Income (Loss):
Net Income			—				—				—				32,288				—				—				68				32,356
Other Comprehensive Income:
Foreign Currency Translation Adjustments			—				—				—				—				—				6,139				—				6,139
Adjustment for Pension & Post-retirement Plans, Net of Tax			—				—				—				—				—				(1,454	)			—				(1,454	)
Comprehensive Income																															37,041
Purchase of Subsidiary Shares			—				—				—				—				—				—				(206	)			(206	)
Issuance of Common Stock			—				—				8,972				—				2,441				—				—				11,413
Tax Effect Related to Stock Options			—				—				498				—				—				—				—				498
Balance, December 31, 2007			14,605,591			$	146			$	125,158			$	107,079			$	(521	)		$	(30,308	)		$	497			$	202,051
Comprehensive Net Income (Loss):
Net Income			—				—				—				32,205				—				—				169				32,374
Other Comprehensive Income:
Foreign Currency Translation Adjustments			—				—				—				—				—				(7,519	)			—				(7,519	)
Adjustment for Unrealized Investment Losses, Net of Tax			—				—				—				—				—				(473	)			—				(473	)
Adjustment for Pension & Post-retirement Plans, Net of Tax			—				—				—				—				—				(30,971	)			—				(30,971	)
Comprehensive Loss																															(6,589	)
Issuance of Common Stock			—				—				655				—				475				—				—				1,130
Acquisition of Aerex			45,750				1				940				—				—				—				—				941
Acquisition of Chen-Tech			1,256,211				12				31,808				—				—				—				—				31,820
Pre-reorganization Deferred Tax Basis Adjustment			—				—				(5,498	)			—				—				—				—				(5,498	)
Tax Effect Related to Stock Options			—				—				222				—				—				—				—				222
Balance, December 31, 2008			15,907,552			$	159			$	153,285			$	139,284			$	(46	)		$	(69,271	)		$	666			$	224,077
Comprehensive Net Income (Loss):
Net Income			—				—				—				6,094				—				—				(64	)			6,030
Other Comprehensive Income:
Foreign Currency Translation Adjustments			—				—				—				—				—				1,175				—				1,175
Adjustment for Unrealized Investment Gains, Net of Tax			—				—				—				—				—				316				—				316
Adjustment for Pension & Post-retirement Plans, Net of Tax			—				—				—				—				—				(5,434	)			—				(5,434	)
Comprehensive Income																															2,087
Purchase of Subsidiary Shares			—				—				—				—				—				—				(63	)			(63	)
Issuance of Common Stock			—				—				2				—				13				—				—				15
Tax Effect Related to Stock Options			—				—				5				—				—				—				—				5
Balance, December 31, 2009			15,907,552			$	159			$	153,292			$	145,378			$	(33	)		$	(73,214	)		$	539			$	226,121

See accompanying notes to consolidated financial statements.

Ladish Co., Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

		Years Ended December 31,
		2007				2008				2009
Cash Flows from Operating Activities:
Net Income Attributable to the Controlling Interest		$	32,288			$	32,205			$	6,094
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Depreciation			11,134				13,320				15,339
Amortization of Intangibles			—				—				546
Non-Cash Deferred Compensation			—				(788	)			527
Deferred Income Taxes			4,957				1,650				(1,017	)
Noncontrolling Interest in Net Earnings (Loss) of Subsidiary			68				169				(64	)
Gain on Purchase of Stock — Noncontrolling Interest			—				—				(23	)
Loss (Gain) on Disposal of Property, Plant and Equipment			(443	)			(137	)			308
Changes in Assets and Liabilities, Net of Acquired Businesses:
Accounts Receivable			(4,161	)			2,595				19,405
Inventories			(10,647	)			8,969				36,666
Other Assets			(4,813	)			3,759				2,246
Accounts Payable and Accrued Liabilities			7,432				(11,607	)			(23,070	)
Other Liabilities			3,953				(21,450	)			1,331
Net Cash Provided by Operating Activities			39,768				28,685				58,288
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment			(38,096	)			(49,751	)			(13,883	)
Proceeds from Sale of Property, Plant and Equipment			703				468				88
Purchase of ZKM Stock — Noncontrolling Interest			(215	)			—				(37	)
Cash Paid for Acquired Companies, Net of Cash Acquired			—				(40,271	)			—
Proceeds from Aerex Acquisition Working Capital Adjustment			—				—				1,200
Net Cash Used in Investing Activities			(37,608	)			(89,554	)			(12,632	)
Cash Flows from Financing Activities:
Borrowings from (Repayment of) Facility			5,400				21,400				(28,900	)
Issuance of Senior Notes			—				50,000				—
Repayment of Senior Notes			(6,000	)			(6,000	)			—
Repayment of Notes Payable			—				(4,610	)			—
Retirement of Capital Leases			—				—				(1,660	)
Deferred Financing Costs			—				(299	)			—
Issuance of Common Stock			289				215				15
Net Cash (Used in) Provided by Financing Activities			(311	)			60,706				(30,545	)
Effect of Exchange Rate Change on Cash and Cash Equivalents			672				(886	)			(97	)
Increase (Decrease) in Cash and Cash Equivalents			2,521				(1,049	)			15,014
Cash and Cash Equivalents, Beginning of Period			3,431				5,952				4,903
Cash and Cash Equivalents, End of Period		$	5,952			$	4,903			$	19,917
Supplemental Cash Flow Information:
Income Taxes Paid (Refunded)		$	12,559			$	8,417			$	(3,255	)
Interest Paid		$	3,467			$	3,734			$	6,008
Non-Cash Supplemental Information:
Issuance of Stock for Acquisitions			—			$	32,761				—

See accompanying notes to consolidated financial statements.

Ladish Co., Inc.

Notes to Consolidated Financial Statements

(Dollars in Thousands Except Per Share Data)

(1)

Business Information

Ladish Co., Inc. (the “Company”), headquartered in Cudahy, Wisconsin, engineers, produces and markets high-strength, high technology forged and cast metal components for a wide variety of load-bearing and fatigue-resisting applications in the jet engine, aerospace and industrial markets, for both domestic and international customers. The Company’s manufacturing site in Irvine, California produces forgings for commercial and military jet engine applications. The Company’s manufacturing site in Albany, Oregon produces cast metal components, the Company’s manufacturing site in Stalowa Wola, Poland produces forgings for the industrial and aerospace markets and its sites in Windsor, Connecticut and western Wisconsin are finished machining operations. The Company operates as a single segment. Net sales to jet engine, aerospace and industrial customers were approximately 56%, 24% and 20% in 2007, 51%, 26% and 23% in 2008 and 55%, 33% and 12% in 2009, respectively, of total company net sales.

In 2007, 2008 and 2009, the Company had three customers that collectively accounted for approximately 50%, 47% and 56%, respectively, of total Company net sales. Net sales to Rolls-Royce were 28%, 23% and 26%, United Technologies 15%, 15% and 19% and General Electric 7%, 9% and 11% of total Company net sales for the respective years.

U.S. exports accounted for approximately 49%, 46% and 46% of total Company net sales in 2007, 2008 and 2009, respectively, with exports to England constituting approximately 29%, 25% and 26%, respectively, of total Company net sales.

As of December 31, 2009, approximately 45% of the Company’s domestic employees were represented by one of seven collective bargaining units. New collective bargaining agreements were negotiated with six of these units during 2006 and negotiations with one unit were successfully concluded in 2007. Internationally, the Company had approximately 500 employees in Poland as of December 31, 2009, most of whom are represented by the Solidarity trade union.

(2)

Summary of Significant Accounting Policies

(a)

Consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries, including the results of operations of Aerex and Chen-Tech from their respective acquisition dates. All significant intercompany accounts and transactions have been eliminated in consolidation.

The assets and liabilities of the Company’s foreign subsidiary are translated at year-end exchange rates and the related statements of earnings are translated at the average exchange rates for the respective years. Gains or losses resulting from translating foreign currencies are recorded as accumulated other comprehensive income or loss, a separate component of stockholders’ equity.

Gains or losses resulting from foreign currency transactions (transactions denominated in a currency other than the Company’s local currency) are included in net earnings, but are not significant in the years presented.

	(b)		Cash and Cash Equivalents
			Cash in excess of daily requirements is invested in marketable securities consisting of commercial paper and money market instruments which mature in three months or less. Such investments are deemed to be cash equivalents due to the high liquidity and short term duration of such money market accounts. The Company maintains deposits in financial institutions that consistently exceed the FDIC limit of $250,000. The Company has not experienced any losses in such accounts and management believes the Company is not at significant risk.
	(c)		Outstanding Checks
			Outstanding payroll and accounts payable checks related to certain bank accounts are recorded as accounts payable on the balance sheets. These checks amounted to $4,933 and $105 as of December 31, 2008 and 2009, respectively.
	(d)		Inventories
			Inventories are stated at the lower of cost, first-in, first-out (FIFO) basis, or market. Inventory values include material and conversion costs.
			Inventories for the years ended December 31, 2008 and 2009 consist of the following:

		December 31,
		2008				2009
Raw Materials		$	31,182			$	18,038
Work-In-Process and Finished			100,019				77,209
			131,201				95,247
Less Progress Payments			(1,894	)			(2,550	)
Total Inventories		$	129,307			$	92,697

(e)

Property, Plant and Equipment

Additions to property, plant, and equipment are recorded at cost. Normal repair and maintenance costs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, as follows:

Land Improvements		39 years
Buildings and Improvements		39 years
Machinery and Equipment			5 to 20 years

Interest is capitalized in connection with construction of plant and equipment. Interest capitalization ceases when the construction of the asset is substantially complete and the asset is available for use. Interest capitalization was $795, $2,418 and $953 in 2007, 2008 and 2009, respectively.

	(f)		Goodwill and Other Intangible Assets
			Goodwill represents the cost of acquired net assets in excess of their fair market values. Goodwill and other intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually in accordance with the provisions of FASB ASC 350-20, Intangibles — Goodwill and Other. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and also reviewed at least annually for impairment.

			In accordance with ASC 350-20, a two-step impairment test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In the first step, the fair value of each reporting unit is compared to its carrying value to determine if the goodwill is impaired. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired and the second step is not required. If the carrying value of the net assets assigned to the reporting unit exceeds its fair value, then the second step is performed in order to determine the implied fair value of the reporting unit’s goodwill and an impairment loss is recorded for an amount equal to the difference between the implied fair value and the carrying value of the goodwill.
			For the purpose of goodwill analysis, the Company has only one reporting segment, as defined by ASC 350-20. Goodwill amounted to $37,113 and $37,571 at December 31, 2008 and 2009, respectively. There was a significant increase in goodwill in 2008 due to the acquisitions of Aerex and Chen-Tech. A $1,000 opening balance sheet deferred tax asset related to the Chen-Tech acquisition was charged to Goodwill in lieu of taxes upon realization in 2009. Goodwill has been subjected to fair value impairment tests in 2007, 2008 and 2009 and no impairments were recognized.
			The Company has amortizable customer relationships of $20,011 and $19,465 at December 31, 2008 and 2009, respectively, included in other intangible assets that are being amortized over 50 years with annual amortization of $400. The 2009 amortization expense of $546 included partial year expense of $146 from 2008.
			The Company conducted its annual impairment analysis in the third quarter of 2009. The fair value of the Company as measured by the Company market capitalization plus a control premium exceeded its carrying value. The Company reviewed the analysis at year-end and concluded it remained accurate.
			The control premium that a third party would be willing to pay to obtain a controlling interest in the Company was considered when determining fair value. Management considered recent transactions with comparable companies in the industry, and possible synergies to a market participant. In addition, factors such as the capital structure, the increase in the Company’s stock price and recent volatility in the Company’s trading price prior to December 31, 2009, were also considered. Management concluded there was a reasonable basis for the excess of estimated fair value of the Company over its market capitalization.
			The estimated fair value requires judgment and the use of estimates by management. Potential factors requiring assessment include a decline in the Company’s stock price and variance in results of operations from projections. Any of these potential factors may cause the Company to re-evaluate goodwill during any quarter throughout the year. If an impairment charge were to be taken for goodwill it would be a non-cash charge and would not impact the Company’s cash position or cash flows, however, such a charge could have a material impact to equity and the statement of operations.
	(g)		Fair Values of Financial Instruments
			The Company considers the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable to approximate fair value because of the short maturities of these financial instruments. The fair values of the Senior Notes do not materially differ from their carrying values.

(h)

Revenue Recognition

Sales revenue is recognized when the title and risk of loss have passed to the customer, there is pervasive evidence of an arrangement, delivery has occurred or the service has been provided, the sale price is determinable and collectibility is reasonably assured. This occurs at the time of shipment. Net sales include freight out as well as reductions for returns and allowances, and sales discounts. Progress payments on contracts are generally recognized as reductions of the related inventory costs. Progress payments in excess of inventory costs are reflected as a liability. The Company does not recognize revenue from the disposal of by-products. Any proceeds received from by-product disposal are considered an offset to cost of sales. The allowance for doubtful accounts is based on a review of sales reports, open deduction reports, trends in collections, historical experience and existing economic conditions. Bad debt write-offs occur upon notice of insolvency or other evidence of business closure. The Company has reviewed SEC Staff Accounting Bulletin No. 104 and believes its revenue recognition policy to be in compliance with FASB ASC 605-10-S99-1.

(i)

Income Taxes

Deferred income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates. Deferred income tax provisions or benefits are based on the change in the deferred tax assets and liabilities from period to period.

(j)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results will likely differ from those estimates, but management believes such differences are not material.

(k)

Reclassification

Certain reclassifications have been made to the 2008 financial statements to conform with the 2009 presentation.

(l)

New Accounting Pronouncements

Effective July 1, 2009, the Company adopted FASB ASC 105-10, Generally Accepted Accounting Principles — Overall. ASC 105-10 establishes the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). The Company has updated GAAP referencing for this report. The FASB Codification had no impact on financial reporting of the Company.

In December 2007, the FASB issued guidance for accounting and reporting of noncontrolling interests in financial statements, which is included in ASC 810-10, Consolidation — Overall. The objective of ASC 810-10 is to improve the financial information provided in consolidated financial statements. ASC 810-10 changes the way the consolidated income statement is presented, establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation, requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated, and expands disclosures in the consolidated financial statements in order to clearly identify and distinguish between the interests of the parent’s owners and the interest of the noncontrolling owners of a subsidiary. The Company adopted ASC 810-10 effective January 1, 2009. ASC 810-10 modified the manner in which the Company reported on the noncontrolling interest in ZKM as the noncontrolling interest has been classified as a component of equity.

On December 30, 2008, the FASB issued guidance related to employers’ disclosures regarding postretirement benefit plan assets, which is included in ASC 715-20, Defined Benefit Plans — General. ASC 715-20 provides additional guidance on employers’ disclosures about plan assets of a defined benefit pension or other postretirement plan. The Company adopted ASC 715-20 in fiscal year 2009. The disclosure requirements are annual and do not apply to interim financial statements.

Effective June 30, 2009, the Company adopted FASB ASC 855-10, Subsequent Events — Overall. ASC 855-10 establishes standards for the accounting for and the disclosing of subsequent events. ASC 855-10 introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance sheet date. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

(m)

Investments

Investments in marketable securities are stated at fair value. Investments with no readily determinable fair value are carried at cost. Fair value is determined using quoted market prices at the end of the reporting period and, when appropriate, exchange rates at that date. Unrealized gains and losses on marketable securities classified as available-for-sale are recorded in accumulated other comprehensive income, net of tax. If the decline in fair value is judged to be other-than-temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the consolidated statements of operations.

Investment securities are exposed to various risks including, but not limited to, interest rate and market and credit risks. Due to the level of risks associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term.

The Company regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. To determine whether a decline in value is other-than-temporary, the Company evaluates several factors, including current economic environment, market conditions, operational and financial performance of the investee, and other specific factors relating to the business underlying the investment, including business outlook of the investee, future trends in the investee’s industry and the Company’s intent to carry the investment for a sufficient period of time for any recovery in fair value. If a decline in value is deemed as other-than-temporary, the Company records reductions in carrying values to estimated fair values, which are determined based on quoted market prices if available or on one or more of the valuation methods such as pricing models using historical and projected financial information, liquidation values, and values of other comparable public companies.