Use these links to rapidly review the document TABLE OF CONTENTS PART IV

United States ~~Securities and Exchange Commission Washington, D.C. 20549~~

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

ý		Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended January 31, 2011
o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended January 31, 2012

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-33836

Stewart & Stevenson LLC ~~(Exact name of registrant as specified in its charter)~~

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		20-3974034 (I.R.S. employer identification number)


1000 Louisiana St., Suite 5900, Houston, TX (Address of principal executive offices)		77002 (Zip code)

(713) 751-2700 ~~(Registrant's telephone number; including area code)~~

~~None~~ (~~Securities~~Registrant’s ~~registered~~telephone ~~pursuant~~number; toincluding ~~Section 12(b)~~area ~~of the Act~~code)

None ~~(Securities registered pursuant to Section 12(g) of the Act)~~

~~Indicate by~~(Securities ~~check~~registered ~~mark~~pursuant ifto ~~the registrant is a well-known seasoned issuer, as defined in Rule~~Section ~~405~~ 12(b) of the ~~Securities~~ Act~~. Yes o No ý~~ )

~~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 ý No o~~ None

~~Indicate by check mark whether the registrant~~ (~~1) has~~Securities ~~filed~~registered ~~all~~pursuant ~~reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(dg) of the ~~Securities Exchange~~ Act ~~of 1934 during the preceding 12 months (or if 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 ý* No o~~

Indicate by check mark if ~~disclosure~~the ofregistrant ~~delinquent~~is ~~filers~~a ~~pursuant to Item 405 of Regulation S~~well-Kknown isseasoned ~~not contained herein~~issuer, ~~and~~as ~~will~~defined ~~not be contained, to the best of registrant's knowledge,~~ in ~~definitive proxy or information statements incorporated by reference in Part~~Rule ~~III~~405 of ~~this~~the ~~Form 10-K~~Securities ~~or any amendment to this Form 10-K~~Act. ý Yes o No x

Indicate by check mark ~~whether~~if the registrant ~~has~~is ~~submitted~~not ~~electronically and posted on its corporate Web site, if any, every Interactive Data File~~ required to ~~be submitted~~file ~~and~~reports ~~posted~~ pursuant to ~~Rule~~Section ~~405~~13 ofor ~~Regulation~~Section ~~S-T~~ 15(§d) ~~232.405~~ of ~~this chapter) during~~ the ~~preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)~~Act. Yes ox No o

Indicate by check mark whether the registrant is(1) has afiled ~~large~~all ~~accelerated~~reports ~~filer,~~required anto ~~accelerated~~be ~~filer,~~filed aby ~~non-accelerated~~Section 13 ~~filer~~ or a15(d) of ~~smaller~~the ~~reporting company.~~Securities ~~See~~Exchange ~~definition~~Act of ~~"large~~1934 ~~accelerated~~during ~~filer,"~~the ~~"accelerated~~preceding ~~filer"~~12 months ~~and~~(or ~~"smaller~~if ~~reporting~~such ~~company"~~shorter inperiod ~~Rule 12b-2~~that of the ~~Exchange~~registrant ~~Act~~was ~~(check~~required ~~one~~to file such reports):, and (2) has been subject to such filing requirements for the past 90 days. Yes x * No o

~~Large~~Indicate ~~accelerated~~by ~~filer~~check omark ~~Accelerated~~if ~~filer~~disclosure oof ~~Non~~delinquent filers pursuant to Item 405 of Regulation S-~~accelerated~~K ~~filer~~is ýnot ~~(Do~~contained herein, and will not ~~check~~be ifcontained, ato ~~smaller~~the ~~reporting~~best ~~company)~~of ~~Smaller~~registrant’s ~~reporting~~knowledge, ~~company~~in odefinitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant ishas asubmitted ~~shell~~electronically ~~company~~and ~~(as~~posted ~~defined~~on inits ~~Exchange~~corporate ~~Act~~Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule ~~12b~~405 of Regulation S-2T (§ 232.405 of this chapter) ~~Yes~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No ý x

~~There~~Indicate isby nocheck ~~market~~mark ~~for~~whether the registrant's ~~equity.~~is Asa oflarge ~~January 31,~~accelerated ~~2011~~filer, ~~there~~an ~~were~~accelerated ~~100~~filer,~~005,000~~ ~~common~~a ~~units~~non-accelerated ~~outstanding~~filer or a smaller reporting company. See definition 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 o

Non-accelerated filer x

(Do not check if a

smaller reporting company)

Smaller reporting company o

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

There is no market for the registrant’s equity. As of January 31, 2012, there were 56,179,272 common units outstanding.

* The registrant is currently not required to file reports, including this report, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 but is voluntarily filing this report with the Securities and Exchange Commission.

Table of Contents

TABLE OF CONTENTS

	TABLE OF CONTENTS

	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	19

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A.	Controls and Procedures	37
Item 9B.	Other Information	37

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	38
Item 11.	Executive Compensation	41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions and Director Independence	49
Item 14.	Principal Accountant Fees and Services	50

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	51

	Signatures	53
	Certifications

	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	24
Item 4.	[Removed and Reserved]	24
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	25
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 9A.	Controls and Procedures	45
Item 9B.	Other Information	46
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
Item 13.	Certain Relationships and Related Transactions and Director Independence	57
Item 14.	Principal Accountant Fees and Services	57
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	58
	Signatures	61
	Certifications

Table of Contents

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K (this "“Annual Report"” or "“Form 10-K"”) includes statements that are, or may be deemed to be, "“forward-looking statements."” These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "“believes,"” "“estimates,~~" "~~” “anticipates,"” "“expects,"” "“intends,"” "“plans,"” "“may,"” "“will"” or "“should"” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts and are not limited to the outlook for our future business and financial performance. They appear in a number of places throughout this Annual Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and some of which are beyond our control. We believe that these risks and uncertainties include:

· periodic economic and industry downturns affecting the oil and gas industry;

· competitive pressures in the industries that we serve;

· factors affecting our international sales and operations;

· the potential loss of a key OEM supplier;

· our failure to accurately estimate costs associated with products produced under fixed-price contracts;

· our ability to translate backlog into revenue and profit;

· the effect of regulation of hydraulic fracturing on the demand for our products;

· the impact of governmental laws and regulations, including environmental laws and regulations;

· the hazards to which our employees and customers are exposed during the conduct of our business;

· the occurrence of events not covered by insurance;

· our susceptibility to adverse weather conditions affecting the Gulf Coast;

· unforeseen difficulties relating to acquisitions;

· our ability to attract and retain qualified employees;

· our failure to maintain key licenses;

· our ability to protect our intellectual property;

· our level of indebtedness and restrictions on our activities imposed by our debt instruments;

· our principal stockholder could exercise control of our affairs through his beneficial ownership of a majority of our common equity; and

· the other factors described under “Item 1A.—Risk Factors.”

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this Annual Report.

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We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if our results of operations, financial condition, liquidity and growth, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements which we make in this Annual Report speak only as of the dates of such statements, and, except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after we distribute this Annual Report, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

~~PART I~~ 1

Unless otherwise indicated or the context otherwise requires, the terms "Stewart & Stevenson," the "Company," "we," "our" and "us" refer to Stewart & Stevenson LLC and its subsidiaries. Our fiscal year begins on February 1 of the year stated and ends on January 31 of the following year. For example, Fiscal 2010 commenced on February 1, 2010 and ended on January 31, 2011.

Stewart & Stevenson LLC, headquartered in Houston, Texas, was formed in November 2005 for the purpose of acquiring from Stewart & Stevenson Services, Inc. ("SSSI") and its affiliates on January 23, 2006 substantially all of their equipment, aftermarket parts and service and rental businesses that primarily served the oil and gas industry (the "SSSI Acquisition"). Except as otherwise expressly noted, when we refer to financial and other information about us on a historical basis prior to the date of the SSSI Acquisition, the information reflects the operations we acquired from SSSI prior to such acquisition.

ITEM 1. Business

Our company

We are a leading designer, manufacturer and provider of specialized equipment and aftermarket parts and service for the oil and gas industry and other industries that we have served for over 100 years.

Our wide range of products covers hydraulic fracturing, well stimulation, workover, intervention and drilling operations. These products include pumping, acidizing, coil tubing, cementing and nitrogen units, drilling rigs, workover rigs, power generation systems and electrical support and distribution systems, as well as engines, transmissions and material handling equipment. We have a substantial installed base of products, which provides us with significant opportunities for recurring, higher-margin aftermarket parts and service revenues from customers in the oil and gas, power generation and various other industries. In addition, we provide rental equipment to our customers, including generator sets, air compressors, rail car movers and material handling equipment.

Table of Contents

~~With~~PART more than a century of continuous service across diverse industries, we have an established track record of providing a high-quality, technologically advanced series of products using state-of-the-art components, processes and techniques. We have long-standing relationships with six globally recognized original equipment suppliers, or OEMs—Detroit Diesel, MTU Friedrichshafen, Electro-Motive Diesel, Hyster, Allison Transmission and Deutz—with which we have conducted business for more than 40 years on average. I

~~Demand for~~Unless ~~our~~otherwise ~~products~~indicated ~~has~~or ~~been~~the ~~driven~~context ~~primarily~~otherwise byrequires, ~~capital spending in~~ the ~~oil~~terms ~~and~~“Stewart & ~~gas industry~~Stevenson,” ~~which~~the ~~accounted~~“Company,” ~~for~~“we,” an“our” ~~estimated 81.5%~~ and ~~76.0%~~“us” ofrefer ~~our~~to ~~equipment~~Stewart & ~~revenues~~Stevenson LLC and ~~an estimated~~its 77subsidiaries.6% ~~and~~Our ~~72.2%~~fiscal ofyear ~~our~~begins ~~total~~on ~~revenues~~February 1 inof ~~Fiscal~~the ~~2010~~year ~~and~~stated ~~Fiscal 2009, respectively. Our extensive~~ and ~~diverse~~ends ~~customer~~on ~~base~~January 31 ~~includes many~~ of the ~~world's~~following ~~leading~~year. ~~oilfield~~For ~~service companies~~example, as ~~well~~Fiscal as2011 ~~customers~~commenced inon ~~the power generation~~February 1, ~~marine,~~2011 ~~mining, construction, commercial vehicle~~ and ~~material~~ended ~~handling~~on ~~industries.~~January 31, 2012.

Stewart & ~~Crown~~Stevenson LLC, headquartered in Houston, Texas, was formed in November 2005 for the purpose of acquiring from Stewart & Stevenson Services, Inc. (“SSSI”) and its affiliates on January 23, 2006 substantially all of their equipment, aftermarket parts and service and rental businesses that primarily served the oil and gas industry (the “SSSI Acquisition”). Except as otherwise expressly noted, when we refer to financial and other information about us on a historical basis prior to the date of the SSSI Acquisition, the information reflects the operations we acquired from SSSI prior to such acquisition .

OnITEM ~~February 26, 2007, we acquired substantially all of the operating assets and assumed certain liabilities of Crown Energy Technologies, Inc~~1. and certain of its affiliates (collectively, "Crown"), which we refer to as the "Crown Acquisition." Crown, which was headquartered in Calgary, Alberta, had multiple U.S. operations. Crown manufactured drilling, well servicing and workover rigs, stimulation equipment and provided related parts and services. Business

Our ~~EMDSI acquisition~~ company

OnWe ~~March 23,~~are ~~2011,~~a weleading ~~acquired 100% of the stock of EMDSI-Hunt Power~~designer, ~~L.L.C.~~ ~~("EMDSI")~~manufacturer inand anprovider ~~all cash transaction from ITOCHU Corporation~~ of ~~Japan~~specialized ~~for~~equipment ~~total consideration of approximately $25.7 million, subject to final closing adjustments. The acquisition was funded from available cash~~ and ~~through~~ ~~borrowings~~aftermarket ~~under~~parts ~~our revolving credit facility. EMDSI, which is based in Harvey, Louisiana, specializes in the marketing~~ and ~~distribution~~service ~~of medium speed diesel engines~~ for ~~marine~~the ~~propulsion, drilling~~oil and ~~power~~gas ~~generation~~industry ~~applications~~ and isother aindustries ~~provider~~that ofwe ~~aftermarket~~have ~~parts~~served ~~and~~for ~~service.~~over 100 years.

~~Financial statements~~Our ~~for~~wide ~~EMDSI~~range of products covers hydraulic fracturing, well stimulation, workover, intervention and ~~related~~drilling ~~pro~~operations. ~~forma~~These ~~information~~products ~~will~~include bepumping, ~~filed~~acidizing, coil tubing, cementing and nitrogen units, drilling rigs, workover rigs, power generation systems and electrical support and distribution systems, as well as engines, transmissions and material handling equipment. We have a substantial installed base of products, which provides us with ~~the~~significant ~~Securities~~opportunities for recurring, higher-margin aftermarket parts and ~~Exchange~~service ~~Commission~~revenues ~~within~~from customers in the ~~time~~oil ~~period~~and ~~prescribed~~gas, power generation and various other industries. In addition, we provide rental equipment to our customers, including generator sets, air compressors, rail car movers and material handling equipment.

With ~~Our~~more than a century of continuous service across diverse industries, we have an established track record of providing a high-quality, technologically advanced series of products using state-of-the-art components, processes and techniques. We have long-standing relationships with six globally recognized original equipment suppliers, or OEMs—Detroit Diesel, Tognum (formerly MTU Friedrichshafen), Electro-Motive Diesel, Hyster, Allison Transmission and Deutz—with which we have conducted business for more than 50 years on average.

WeDemand ~~manage~~for our ~~business~~products ~~through~~has been driven primarily by capital spending in the ~~following~~oil ~~two~~and ~~segments:~~gas industry, which accounted for an estimated 75.8% and 81.5% of our equipment revenues and an estimated 70.3% and 77.6% of our total revenues in Fiscal 2011 and Fiscal 2010, respectively. Our extensive and diverse customer base includes many of the world’s leading oilfield service companies, as well as customers in the power generation, marine, mining, construction, commercial vehicle and material handling industries.

~~Manufacturing. Our~~Crown manufacturing segment, which generated approximately 39.8%, 35.8% and 42.7% of our revenues in Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively, designs, manufactures and markets equipment for oilfield service providers and drilling and workover contractors as well as national oil companies that require integrated and customized product solutions. We manufacture equipment specifically for hydraulic fracturing, well stimulation, well workover, intervention and drilling operations. Our manufactured products include integrated solutions, which incorporate a variety of components into a single system, for a wide range of oilfield services and support applications. Our manufacturing segment benefits from long-standing relationships with our globally recognized OEMs. We have 5 main manufacturing facilities across North America, comprising more than 600,000 square feet of space, that are strategically located to service our customers' needs. acquisition

3 On February 26, 2007, we acquired substantially all of the operating assets and assumed certain liabilities of Crown Energy Technologies, Inc. and certain of its affiliates (collectively, “Crown”), which we refer to as the “Crown Acquisition.” Crown, which was headquartered in Calgary, Alberta, had multiple U.S. operations. Crown manufactured drilling, well servicing and workover rigs, stimulation equipment and provided related parts and services.

~~Table~~EMDSI ~~of Contents~~acquisition

~~Distribution. Our~~ On ~~distribution segment~~March 23, ~~which generated approximately 60.2%~~2011, ~~64.2%~~we ~~and~~acquired ~~57.3~~100% of ~~our~~the ~~revenues~~stock inof ~~Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively, provides stand~~EMDSI-~~alone~~Hunt ~~products and aftermarket parts and service for products manufactured by us~~Power, ~~our six key OEMs~~ ~~and other manufacturers~~L. ~~In addition, we provide rental equipment including generator sets, air compressors, rail car movers and material handling equipment to our customers~~L.C. ~~Our~~(“EMDSI”) ~~aftermarket~~in ~~parts~~an ~~and~~all ~~service~~cash ~~operations,~~transaction ~~which~~from ~~provide~~ITOCHU usCorporation ~~with a recurring higher-margin source~~ of ~~revenue,~~Japan ~~serve customers engaged in the oil and gas~~(“ITOCHU”), ~~power~~which ~~generation,~~we ~~marine,~~refer ~~mining,~~to ~~construction, commercial vehicle and material handling industries,~~ as ~~well~~the as“EMDSI ~~other industries~~Acquisition.” ~~Throughout the period of our relationship with our six key OEMs~~EMDSI, wewhich ~~have~~is ~~been~~based ~~the only factory-authorized provider of a substantial portion of their stand-alone products~~ in ~~specified territories~~Harvey, ~~which~~Louisiana, ~~include~~specializes ~~major oil and gas producing regions~~ in the ~~United~~marketing ~~States. Our arrangements with our key OEMs generated approximately 57.1%, 55.8%~~ and ~~54.9%~~distribution of ~~our~~medium ~~aftermarket~~speed ~~parts and~~diesel ~~service~~engines ~~revenues~~for inmarine ~~Fiscal 2010~~propulsion, ~~Fiscal~~drilling ~~2009~~ and ~~Fiscal~~power ~~2008,~~generation ~~respectively.~~applications ~~Our~~and ~~extensive distribution network~~ is ~~strategically~~a ~~positioned~~provider throughout major oil and gas producing regions, enabling us to effectively support our customers. We provide in-house servicing in close proximity to our customers' operational locations as well as on-site servicing. As of ~~January 31,~~ ~~2011,~~aftermarket weparts ~~employed over 650 highly trained service technicians utilizing approximately 575 service bays in the United States, Canada~~ and ~~abroad~~service. ~~Additionally, we provide aftermarket parts through our network of approximately 185 authorized dealers.~~

~~Products and services~~ 2

~~Through~~Table ~~our two operating segments, we design, manufacture, and market a wide-range~~ of ~~equipment, provide aftermarket parts and service, and provide rental equipment to a broad range of customers.~~ Contents

Our ~~Equipment~~ business

We ~~design,~~manage manufacture and market equipment for well stimulation, drilling and well servicing rigs, coiled tubing, cementing, nitrogen pumping, power generation and electrical systems. We record sales of these products in our ~~manufacturing~~business ~~segment.~~through Wethe ~~distribute~~following ~~stand-alone~~two ~~products manufactured by us. We record sales of these products in our distribution segment.~~ segments:

~~A substantial~~Manufacturing. Our ~~portion~~manufacturing ofsegment, ~~the~~which ~~products~~generated weapproximately ~~sell~~45.3%, in39.8% ~~both the manufacturing~~ and ~~distribution~~35.8% ~~segments~~of ~~includes~~our ~~components~~revenues ~~provided~~in byFiscal ~~our~~2011, ~~six~~Fiscal ~~key~~2010 ~~OEMs. Our~~and ~~relationships~~Fiscal ~~with~~2009, ~~these OEMs generally~~respectively, ~~enable~~designs, usmanufactures toand ~~sell~~markets ~~their~~equipment ~~products~~for ~~globally~~oilfield asservice ~~components~~providers ofand ~~our~~drilling ~~engineered equipment~~ and inworkover ~~specified~~contractors ~~territories~~as well as ~~stand-alone~~national ~~products.~~oil Wecompanies ~~have~~that ~~been~~require ~~the~~integrated ~~factory-authorized provider~~and ofcustomized ~~stand-alone~~product ~~products~~solutions. ofWe ~~our~~manufacture ~~six~~equipment ~~key~~specifically ~~OEMs in~~for ~~these~~hydraulic ~~territories~~fracturing, ~~which~~well ~~principally~~stimulation, ~~cover~~well ~~major~~workover, ~~oil~~intervention and ~~gas~~drilling ~~producing~~operations. ~~regions~~Our inmanufactured ~~the~~products ~~United~~include ~~States~~integrated solutions, ~~for~~which anincorporate ~~average~~a variety of ~~approximately 40 years.~~components ~~For~~into ~~Fiscal~~a ~~2010~~single system, ~~approximately~~for ~~76.1%~~a ~~and~~wide ~~23.9%~~range of ~~our~~oilfield ~~equipment~~services ~~sales~~and ~~revenues~~support ~~were~~applications. ~~derived~~Our ~~from~~manufacturing ~~engineered~~segment ~~products~~benefits ~~and~~from ~~stand~~long-~~alone~~standing ~~products,~~relationships ~~respectively.~~with ~~Approximately 40.4% of~~ our ~~product~~ ~~costs~~six ~~for~~key ~~Fiscal~~globally ~~2010~~recognized OEMs. ~~represented~~We ~~equipment~~have ~~supplied~~5 tomain usmanufacturing byfacilities ~~these~~across ~~OEMs~~North America, ~~which~~comprising wemore ~~use~~than in800,000 ~~combination~~square ~~with~~feet ~~our~~of ~~design~~space, ~~engineering,~~which ~~and~~are ~~manufacturing~~strategically ~~expertise~~located to ~~deliver~~service ~~a value-added, integrated solution to~~ our customers.’ needs.

4 Distribution. Our distribution segment, which generated approximately 54.7%, 60.2% and 64.2% of our revenues in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively, provides stand-alone products and aftermarket parts and service for products manufactured by us, our six key OEMs and other manufacturers. In addition, we provide rental equipment including generator sets, air compressors, rail car movers and material handling equipment to our customers. Our aftermarket parts and service operations, which provide us with a recurring higher-margin source of revenue, serve customers engaged in the oil and gas, power generation, marine, mining, construction, commercial vehicle and material handling industries, as well as other industries. Throughout the period of our relationship with our six key OEMs, we have been the only factory-authorized provider of a substantial portion of their stand-alone products in specified territories, which include major oil and gas producing regions in the United States. Our arrangements with our six key OEMs generated approximately 59.9%, 57.1% and 55.8% of our aftermarket parts and service revenues in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. Our extensive distribution network is strategically positioned throughout major oil and gas producing regions, enabling us to effectively support our customers. We provide in-house servicing in close proximity to our customers’ operational locations as well as on-site servicing. As of January 31, 2012, we employed approximately 790 highly trained service technicians utilizing approximately 600 service bays in the United States, Canada and abroad. Additionally, we provide aftermarket parts through our network of approximately 155 authorized dealers.

~~Table~~Products ofand ~~Contents~~services

~~The following~~Through ~~table~~our ~~lists~~two ~~the~~operating ~~equipment~~segments, we design, manufacture, and market a wide-range of equipment, provide: aftermarket parts and service, and provide rental equipment to a broad range of customers.

Product line	Percentage of total equipment sales in Fiscal 2010	Product description	Segment
Well stimulation	49.1%	Equipment that includes fracturing pumps, blenders, hydration, chemical additive systems and control systems and software used to enhance oil and gas production.	Manufacturing
Power generation	12.3%	Standby, emergency backup, fire suppression and prime power in a variety of configurations and capacities using natural gas and diesel engines.	Manufacturing and Distribution
Transmissions	8.9%	Automatic transmissions and related products.	Distribution
Prime movers	6.4%	Engineered packages, mating internal combustion engines to a transmission or torque converter to power specific customer applications.	Distribution
Material handling	5.8%	Fork lift trucks and ancillary equipment.	Distribution
Engines	5.4%	Internal combustion diesel and natural gas engines.	Distribution
Rigs	2.7%	Equipment used in drilling, workover and well servicing and exploration and enhancement of oil and gas production.	Manufacturing
Rail car movers	2.2%	Engine-driven equipment used in rail car switching operations.	Distribution

Equipment

5 We design, manufacture and market equipment for well stimulation, drilling and well servicing rigs, coiled tubing, cementing, nitrogen pumping, power generation and electrical systems. We record sales of these products in our manufacturing segment. We distribute stand-alone products manufactured by us, our six key OEMs and other manufacturers. We record sales of these products in our distribution segment.

~~Table~~ A substantial portion of ~~Contents~~the products we sell in both the manufacturing and distribution segments includes components provided by our six key OEMs. Our relationships with these OEMs generally enable us to sell their products globally as components of our engineered equipment and in specified territories as stand-alone products. We have been the factory-authorized provider of stand-alone products of our six key OEMs in these territories, which principally cover major oil and gas producing regions in the United States, for an average of approximately 50 years. For Fiscal 2011, approximately 79.0% and 21.0% of our equipment sales revenues were derived from engineered products and stand-alone products, respectively. Approximately 47.5% of our product costs for Fiscal 2011 represented equipment supplied to us by these OEMs, which we use in combination with our design, engineering and manufacturing expertise to deliver a value-added, integrated solution to our customers.

Product line		Percentage of total equipment sales in Fiscal 2010		Product description		Segment
Coiled tubing		1.8%		Well workover, stimulation and drilling equipment used on land and offshore applications.		Manufacturing
Other		5.4%		Various equipment utilized in the oil and gas services industry, such as cementing, nitrogen pumping, fluid pumping and contract manufacturing of seismic and electric equipment.		Manufacturing and Distribution

Table ~~Aftermarket~~of ~~parts and service~~ Contents

WeThe ~~provide~~following ~~aftermarket~~table ~~parts~~lists ~~and service to customers in~~ the oil and gas industry, as well as customers in the power generation, marine, mining, construction, commercial vehicle and material handling industries. Our aftermarket parts and service business supports equipment ~~manufactured by approximately 100 manufacturers, and in certain cases, including for our product offerings from our six key OEMs,~~ we have been the factory-authorized parts and service provider for specified territories, principally in major oil and gas producing regions in the United States. Approximately 34.9% of our total revenues for Fiscal 2010 were from aftermarket parts and service operations. For Fiscal 2010, approximately 57.1% of the aftermarket parts and service revenues pertained to products sourced from our six key OEMs. Both our manufacturing and distribution segments generate revenues from aftermarket parts and service. provide:

We believe there are a number of factors which affect a customer's choice of its supplier of aftermarket parts and service, including the customer's preference to use factory-authorized parts and service, price, parts availability, level and number of experienced technicians, proximity to the customer's location and flexibility to service products in the field. As of January 31, 2011, we employed over 650 highly trained service technicians, utilizing approximately 575 service bays in the United States, Canada and abroad. We also have significant capabilities to service customers at their sites, due to our large number of technicians and our close proximity to the customer. Additionally, we maintain a substantial investment in parts inventory managed by our experienced parts personnel, and we provide aftermarket parts through our extensive network of approximately 185 authorized dealers.

Product line	Estimated percentage of total equipment sales in Fiscal 2011	Product description	Segment
Well stimulation	52.1%	Equipment that includes fracturing pumps, blenders, hydration, chemical additive systems, cementing, nitrogen pumping, fluid pumping and control systems and software used to enhance oil and gas production.	Manufacturing
Transmissions	8.6%	Automatic transmissions and related products.	Distribution
Prime movers	8.0%	Engineered packages, mating internal combustion engines to a transmission or torque converter to power specific customer applications.	Distribution
Power generation	7.9%	Standby, emergency backup, fire suppression and prime power in a variety of configurations and capacities using natural gas and diesel engines.	Manufacturing and Distribution
Material handling	4.9%	Forklift trucks and ancillary equipment.	Distribution
Engines	4.3%	Internal combustion diesel and natural gas engines.	Distribution
Rigs	3.7%	Equipment used in drilling, workover and well servicing and exploration and enhancement of oil and gas production.	Manufacturing
Seismic	3.3%	Contract manufacturing of seismic equipment.	Manufacturing
Rail car movers	1.7%	Engine-driven equipment used in rail car switching operations.	Distribution
Coiled tubing	1.6%	Well workover, stimulation and drilling equipment used on land and offshore applications.	Manufacturing
Other	3.9%	Other miscellaneous equipment including electrical equipment and trucks.	Manufacturing and Distribution

Aftermarket ~~Rental~~ parts and service

~~Our~~We ~~rental~~provide ~~products~~aftermarket ~~primarily~~parts ~~consist~~and ofservice ~~generator~~to ~~sets~~customers in the oil and gas industry, ~~air~~as ~~compressors~~well as customers in the power generation, ~~rail~~marine, ~~car~~mining, ~~movers~~construction, commercial vehicle and material handling ~~equipment~~industries. ~~that~~Our ~~are offered~~aftermarket toparts aand ~~wide~~service ~~range~~business ofsupports ~~end~~equipment ~~markets~~manufactured by approximately 100 manufacturers, and ~~are~~in ~~principally~~certain ~~rented~~cases, onincluding afor ~~short-term~~our ~~basis~~product asofferings afrom ~~complementary~~our ~~solution~~six tokey ~~equipment~~OEMs, ~~sales.~~we ~~Our~~have ~~rental~~been ~~fleet~~the ~~consists~~factory-authorized ofparts ~~over~~and ~~1,300~~service ~~units~~provider asfor ~~of January 31,~~specified ~~2011~~territories, principally in major oil and wegas ~~are~~producing ~~able~~regions toin ~~complement~~the ~~our~~United ~~equipment~~States. ~~offering~~Approximately by28.2% ~~providing~~of our ~~customers~~total ~~the~~revenues ~~flexibility~~for ofFiscal ~~renting~~2011 ~~versus~~were ~~purchasing~~from ~~certain~~aftermarket ~~equipment.~~parts ~~Revenues~~and ~~for~~service operations. For Fiscal ~~2010 represented~~2011, approximately 259.79% of ~~our~~the ~~total~~aftermarket ~~revenues,~~parts and ~~our~~service ~~rental~~revenues ~~products~~pertained ~~generate~~to ~~our~~products ~~highest~~sourced ~~margins~~from ~~and~~our ~~provide~~six uskey ~~with~~OEMs. Both aour ~~strong~~manufacturing ~~return~~and ondistribution ~~our~~segments ~~investment.~~generate Werevenues ~~record~~from ~~these~~aftermarket ~~revenues~~parts ~~within~~and ~~our distribution segment~~service.

Table of Contents

~~The following~~We ~~table~~believe ~~lists~~there ~~our~~are ~~rental~~a number of factors which affect a customer’s choice of its supplier of aftermarket parts and service, including the customer’s preference to use factory-authorized parts and service, price, parts availability, level and number of experienced technicians, proximity to the customer’s location and flexibility to service products: in the field. As of January 31, 2012, we employed approximately 790 highly trained service technicians, utilizing approximately 600 service bays in the United States, Canada and abroad. We also have significant capabilities to service customers at their sites, due to our large number of technicians and our close proximity to the customer. Additionally, we maintain a substantial investment in parts inventory managed by our experienced parts personnel, and we provide aftermarket parts through our extensive network of approximately 155 authorized dealers.

Product line	Percentage of total rental sales in Fiscal 2010	Product description
Generators	41.8%	Engines/generators ranging from 25 to 2,000 kilowatts.
Material handling equipment	36.0%	Fork lift trucks, rail car movers and ancillary equipment.
Air compressors	22.2%	Air compressors ranging from 375 to 1,600 cubic feet per minute.

Rental

Our ~~utilization~~ ~~rate~~rental ~~for~~products ~~Fiscal~~primarily ~~2010~~consist ~~and~~of ~~Fiscal~~generator ~~2009~~sets, ~~was~~air ~~approximately~~compressors, ~~49.1%~~rail car movers and ~~43.8%,~~material ~~respectively,~~handling ofequipment ~~our~~that ~~available~~are ~~rental~~offered ~~fleet,~~to ~~and~~a wewide ~~generally~~range ~~recover~~of ~~our~~end ~~costs~~markets toand ~~acquire~~are ~~rental equipment~~principally ~~over~~rented on a ~~three~~short-~~year~~term ~~period~~basis as a complementary solution to equipment sales. ~~The~~Our ~~average~~rental ~~useful~~fleet ~~life~~consists of ~~our~~over ~~rental~~1,500 ~~equipment~~units isas ~~approximately~~of ~~five~~January 31, ~~years~~2012, and ~~our~~we ~~practice~~are isable to ~~sell~~complement aour ~~unit~~equipment ~~out~~offerings ofby providing our customers the ~~rental~~flexibility ~~fleet~~of ~~upon~~renting ~~reaching~~versus ~~its useful~~purchasing ~~life~~certain equipment. WeRental ~~closely~~revenues ~~monitor~~for Fiscal 2011 represented approximately 2.7% of our ~~utilization~~total ~~rate~~revenues, ~~before~~and ~~making~~our ~~capital~~rental ~~investments~~products ~~used~~generate toour ~~replenish~~highest ormargins ~~grow~~and ~~the~~provide ~~rental~~us ~~fleet~~with a strong return on our investment. We record these revenues within our distribution segment.

The ~~Customers~~following ~~and~~table ~~Markets~~ lists our rental products:

We maintain a broad and diverse customer base, including leading oil and gas service companies, drilling contractors, integrated oil companies and national oil companies, as well as customers in the power generation, marine, mining, construction, commercial vehicles and material handling industries. We are not dependent on any single customer, and during Fiscal 2010, our ten largest customers accounted for approximately 30.7% of our total sales and no single customer accounted for more than 5.4% of our total sales. The demand of our customers for the products we provide has not historically been characterized by seasonality.

Product line	Percentage of total rental sales in Fiscal 2011	Product description
Generators	42.4%	Engines/generators ranging from 25 to 2,000 kilowatts.
Material handling equipment	34.4%	Forklift trucks, rail car movers and ancillary equipment.
Air compressors	23.2%	Air compressors ranging from 375 to 1,600 cubic feet per minute.

7 Our utilization rate for Fiscal 2011 and Fiscal 2010 was approximately 54.6% and 49.1%, respectively, of our available rental fleet, and we generally recover our costs to acquire rental equipment over a three-year period. The average useful life of our rental equipment is approximately five years and our practice is to sell a unit out of the rental fleet upon reaching its useful life. We closely monitor our utilization rate before making capital investments used to replenish or grow the rental fleet.

~~Table~~Customers ofand ~~Contents~~markets

~~The following~~We ~~table~~maintain ~~lists~~a broad and diverse customer base, including leading oil and gas service companies, drilling contractors, integrated oil companies and national oil companies, as well as customers in the ~~markets~~power generation, marine, mining, construction, commercial vehicles and ~~types~~material handling industries. We are not dependent on any single customer, and during Fiscal 2011, our ten largest customers accounted for approximately 41.8% of our total sales and no single customer accounted for more than 8.0% of our total sales. The demand of our customers for the products we ~~serve:~~provide has not historically been characterized by seasonality.

Market	Percentage of total sales in Fiscal 2010	Types of customers
Oil and gas services	81.5%	Well stimulation providers, drilling contractors, well servicing companies, integrated oil companies and national oil companies.
Material handling	4.3%	Warehouse /distribution companies, manufacturing companies, chemical companies and various other companies that utilize fork lifts and rail car spotters.
Power generation	3.5%	Commercial facilities that need back-up power generation capabilities.
Commercial vehicles	2.5%	Freight transportation companies, emergency services, transit authorities and recreational vehicle users. Primarily aftermarket parts and service.
Construction	1.0%	Commercial building and home construction companies and highway construction companies.
Mining	0.2%	Companies involved in the extraction of raw materials through various mining methods.
Government	0.2%	Federal agencies (such as the U.S. Department of Defense), state agencies (e.g., departments of transportation) and local agencies (e.g., departments of public works)
Marine	0.1%	Offshore work boat providers, tug boat operators and recreational boat users.
Other	6.7%	Primarily authorized dealers and distributors of our products in various markets, including the primary markets we serve, and various other industries

~~We believe~~Table ~~that our wide range~~ of ~~high-quality standard products, demonstrated by our ISO 9001:2000 certifications, and our partnership-based approach generate high levels of customer satisfaction and result in repeat business.~~ Contents

~~We sell~~The afollowing ~~significant~~table ~~portion~~lists ofthe ~~our~~markets ~~equipment~~ and ~~parts~~types ~~and~~of ~~service to our~~ customers ~~pursuant~~we to purchase orders subject to our standard terms and conditions, which generally provide for payment within 30 days. Historically, cancellations are infrequent, but customers generally have the right to cancel an order until it is filled. serve:

For larger equipment, particularly for customers in the oil and gas industry, we often enter into fixed-price contracts, and the measurement of progress toward completion is based on direct labor hours incurred. Many of these contracts require downpayments from the customer or, for international customers, credit support. Some of our contracts are cost-plus-fixed-fee contracts, which provide for reimbursement of specified costs plus a fixed fee.

Market	Estimated percentage of total sales in Fiscal 2011	Types of customers
Oil and gas services	70.3%	Well stimulation providers, drilling contractors, well servicing companies, integrated oil companies and national oil companies.
Power generation	6.8%	Commercial facilities that need back-up power generation capabilities.
Commercial vehicles	4.6%	Freight transportation companies, emergency services, transit authorities and recreational vehicle users. Primarily aftermarket parts and service.
Material handling	4.4%	Warehouse /distribution companies, manufacturing companies, chemical companies and various other companies that utilize forklifts and rail car spotters.
Construction	2.2%	Commercial building and home construction companies and highway construction companies.
Mining	1.7%	Companies involved in the extraction of raw materials through various mining methods.
Government	1.3%	Federal agencies (such as the U.S. Department of Defense), state agencies ( e.g., departments of transportation) and local agencies (e.g., departments of public works).
Marine	1.0%	Offshore work boat providers, tug boat operators and recreational boat users.
Other	7.7%	Primarily authorized dealers and distributors of our products in various markets, including the primary markets we serve, and various other industries.

~~For Fiscal~~We ~~2010~~believe ~~and~~that ~~Fiscal~~our ~~2009,~~wide werange ~~derived~~of ~~approximately~~high-quality ~~19.4%~~standard ~~and 29.9%~~products, ~~respectively,~~demonstrated ofby our ~~revenues~~ISO 9001:2000 ~~from~~certifications, ~~sales of products~~ and ~~services~~our topartnership-based ~~customers~~approach ~~outside~~generate ~~the~~high ~~United~~levels ~~States, including~~of ~~sales~~customer tosatisfaction ~~U.S.~~and ~~customers~~result ~~for~~in ~~export.~~repeat business.

8 We sell a significant portion of our equipment and parts and service to our customers pursuant to purchase orders subject to our standard terms and conditions, which generally provide for payment within 30 days. Historically, cancellations are infrequent, but customers generally have the right to cancel an order until it is filled.

For larger ~~Table~~equipment, particularly for customers in the oil and gas industry, we often enter into fixed-price contracts, and the measurement of ~~Contents~~progress toward completion is based on direct labor hours incurred. Many of these contracts require downpayments from the customer or, for international customers, credit support. Some of our contracts are cost-plus-fixed-fee contracts, which provide for reimbursement of specified costs plus a fixed fee.

For ~~Manufacturing~~Fiscal 2011 and ~~engineering~~Fiscal ~~design~~ 2010, we derived approximately 19.7% and 19.4%, respectively, of our revenues from sales of products and services to customers outside the United States, including sales to U.S. customers for export.

~~Our~~Manufacturing ~~manufacturing processes generally consist of fabrication, machining, assembly~~ and ~~testing.~~engineering Many of our products are designed, manufactured and produced to clients' specifications, often for long-life and harsh environment applications. To facilitate quality and productivity, we are continuing to implement a variety of manufacturing strategies, including inventory management, flow line manufacturing and integrated supply chain management. As a result of these manufacturing strategies, we have increased our capacity throughput, reduced our production costs and lowered manufacturing cycle times for our products. In addition, we have been successful in outsourcing the fabrication of subassemblies and components of our products, such as trailers, whenever costs are significantly lower and quality is comparable to our own manufacturing. Our manufacturing operations are principally conducted in 10 locations throughout the United States and Canada. See "Item 2.—Properties." design

~~We strive~~Our tomanufacturing ~~manufacture~~processes ~~the~~generally ~~highest~~consist ~~quality~~of fabrication, machining, assembly and testing. Many of our products are designed, manufactured and produced to clients’ specifications, often for long-life and harsh environment applications. To facilitate quality and productivity, we are ~~committed~~continuing to ~~improving~~implement a variety of manufacturing strategies, including inventory management, flow line manufacturing and integrated supply chain management. As a result of these manufacturing strategies, we have increased our capacity throughput, reduced our production costs and lowered manufacturing cycle times for our products. In addition, we have been successful in outsourcing the ~~quality~~fabrication of subassemblies and ~~efficiency~~components of our products, such as trailers, whenever costs are significantly lower and ~~processes~~quality is comparable to our own manufacturing. WeOur manufacturing operations are ~~certified~~principally conducted in ~~compliance~~9 ~~with ISO 9001:2000~~locations throughout the United States and Canada. See “Item 2.—Properties.”

Although we manufacture some of the components included in our products, the principal raw materials required for the manufacture of our products are purchased from our six key OEMs, and we believe that available sources of supply generally will be sufficient for our needs for the foreseeable future. 6

Table ~~Sales~~of ~~and Marketing~~ Contents

We ~~primarily~~strive ~~sell and market our products directly~~ to ~~our~~manufacture ~~customers through our sales and service centers in~~ the ~~United~~highest ~~States~~quality ~~and abroad~~products ~~with a direct sales force of approximately 200 employees. We also utilize a network of approximately 185 authorized dealers~~ and ~~approximately 16 independent overseas sales representatives to market and distribute our products. Our equipment product lines~~ are ~~generally~~committed ~~sold directly~~ to improving the ~~end~~quality ~~users~~ and, inefficiency ~~certain international markets, we may use authorized sales representatives to help facilitate the marketing~~ of our products. ~~Our aftermarket parts~~ and ~~service and rental product lines are also provided to our customers on a direct basis~~processes. We ~~also~~are ~~utilize~~certified ain ~~network~~compliance ofwith ~~authorized dealers to market and distribute parts~~ISO 9001:2000. ~~During Fiscal 2010, 96.7% of our total sales resulted from direct sales to the customer, while 3.3% was derived from sales to our dealer network.~~

~~Our authorized~~Although ~~dealers~~we ~~and~~manufacture ~~our~~some ~~independent~~of ~~overseas~~the ~~sales~~components ~~representatives~~included ~~are~~in ~~independent~~our ~~contractors~~products, ~~and~~the ~~are~~principal ~~not~~raw ~~our~~materials ~~employees.~~required ~~Our~~for ~~authorized~~the ~~dealers~~manufacture ~~buy~~of our products ~~and~~are ~~resell~~purchased ~~to their~~from ~~end~~our ~~customers.~~six ~~Our~~key ~~independent~~OEMs, ~~overseas~~and ~~sales~~we ~~representatives~~believe ~~assist~~that inavailable ~~arranging~~sources ~~for~~of ~~sales~~supply ~~to international customers and~~ generally dowill ~~not~~be ~~take~~sufficient ~~resale~~for ~~risk with respect to~~ our ~~products~~needs ~~but receive~~for ~~commissions~~the ~~based~~foreseeable ~~on completed sales~~future. ~~We provide training to our authorized dealers and independent overseas sales representatives.~~

Sales ~~Backlog~~ and marketing

~~Our~~We ~~unfilled~~primarily ~~equipment~~sell ~~orders~~and ~~that~~market weour ~~include~~products directly to our customers through our sales and service centers in ~~equipment~~the ~~order~~United ~~backlog~~States ~~consist~~and abroad with a direct sales force of ~~written~~over ~~purchase~~200 ~~orders~~employees. We also utilize a network of approximately 155 authorized dealers and 4 ~~signed~~independent ~~contracts accompanied,~~overseas ifsales ~~required~~representatives byto market and distribute our ~~credit~~products. ~~policies~~Our equipment product lines are generally sold directly to the end users and, byin ~~credit~~certain ~~support~~international ~~(typically~~markets, ~~downpayments~~we ormay ~~letters~~use authorized sales representatives to help facilitate the marketing of ~~credit),~~our ~~determined~~products. inWe ~~accordance~~also ~~with~~provide our ~~credit~~aftermarket ~~policies.~~parts ~~Historically,~~and ~~cancellations~~service ~~are infrequent;~~and ~~however,~~rental ~~these~~product ~~unfilled~~lines ~~orders~~to ~~are~~our ~~generally~~customers ~~subject~~on a direct basis. We also utilize a network of authorized dealers to ~~cancellation~~market and distribute parts. ~~Purchase~~During ~~options~~Fiscal ~~are~~2011, ~~not~~97.4% ~~included~~of inour ~~equipment~~total ~~order~~sales ~~backlog~~resulted ~~until~~from ~~exercised~~direct sales to customers, while 2.6% was derived from sales to our dealer network.

Our ~~unfilled~~ ~~equipment~~authorized ~~order~~dealers ~~backlog~~and ~~has~~our ~~increased~~independent ~~since~~overseas ~~the~~sales ~~third~~representatives ~~quarter~~are ofindependent ~~Fiscal~~contractors ~~2009~~and are not our employees. Our authorized dealers buy our products and, asresell ofto ~~January 31,~~their ~~2011,~~end ~~was~~customers. ~~$375~~Our independent overseas sales representatives assist in arranging for sales to international customers and generally do not take resale risk with respect to our products but receive commissions based on completed sales.~~0 million.~~ We ~~expect~~provide training to ~~recognize~~our ~~most~~authorized ~~of this~~dealers ~~backlog~~and inindependent ~~Fiscal~~overseas ~~2011.~~sales representatives.

9Backlog

~~Table~~ Our unfilled equipment orders that we include in equipment order backlog consist of ~~Contents~~written purchase orders and signed contracts accompanied, if required by our credit policies, by credit support (typically down payments or letters of credit), determined in accordance with our credit policies. Historically, cancellations are infrequent; however, these unfilled orders are generally subject to cancellation. Purchase options are not included in equipment order backlog until exercised.

~~Backlog of~~Our ~~$375.0 million~~unfilled asequipment oforder ~~January 31,~~backlog ~~2011~~has ~~includes~~increased ~~$37.5 million~~since ofthe ~~related~~third ~~party~~quarter ~~transactions~~of ~~reflecting an order in~~ Fiscal 2009 ~~from an affiliate. Revenue recognition from this transaction will be deferred until title to the product passes to a third party~~ and, ~~all~~as ~~other revenue recognition criteria have been met. A deposit in the amount~~ of ~~$31.2~~ January ~~million~~31, ~~is recorded as a customer deposit in our consolidated balance sheet. Included in inventories~~2012, ~~net~~was is $29351.56 million. inWe ~~costs~~expect ~~related~~ to ~~this~~recognize ~~contract,~~most ~~and~~of nothis ~~amounts~~backlog ~~have been recorded~~ in ~~the~~Fiscal ~~consolidated statements of operations through January 31, 2011~~2012.

Backlog ~~Competition~~ of $351.6 million as of January 31, 2012 included a $30.5 million equipment order received in Fiscal 2009 from an affiliate. Revenue recognition from this order is deferred until title to the equipment passes to a third party and all other revenue recognition criteria have been met. A deposit in the amount of $30.5 million is recorded as a customer deposit in our consolidated balance sheet. Included in inventories, net is $24.2 million in costs related to this order.

We operate in highly fragmented and very competitive markets, and, as a result, we compete against numerous businesses. Some of our competitors have achieved substantially more market penetration with respect to certain products, such as coiled tubing and generators, and some of our competitors are larger and have greater financial and other resources. Competition

~~Major competitors~~We ~~for~~operate ~~well~~in ~~stimulation~~highly ~~equipment~~fragmented ~~include~~and ~~Enerflow~~very ~~Industries Inc.,~~competitive ~~United Engines Manufacturing (a subsidiary of United Holdings LLC)~~markets, ~~Dragon Products (a division of Modern Group Inc.)~~ and ~~National Oilwell Varco~~, ~~Inc.~~ ~~For~~as ~~our~~a ~~well servicing~~result, ~~drilling~~we ~~and~~compete ~~coiled~~against ~~tubing~~numerous ~~products,~~businesses. ~~our~~Some ~~major~~of ~~competitor is National Oilwell Varco, Inc. In~~ our ~~rail~~competitors ~~car~~have ~~mover~~achieved ~~product~~substantially ~~line,~~more wemarket ~~compete~~penetration ~~against~~with ~~Trackmobile, Inc.~~respect ~~and~~to ~~Central~~certain ~~Manufacturing Inc.~~products, ~~and~~such weas ~~compete~~coiled ~~with~~tubing ~~Cummins Inc.~~ and ~~Caterpillar~~generators, ~~Inc.~~ and ~~their distributors~~some ~~for generators and other types~~ of ~~engine-driven products. ZF Industries Inc. and Twin Disc Incorporated are~~ our ~~primary~~ competitors ~~for~~are ~~transmissions.~~larger ~~We believe that our customers base their decisions to purchase equipment based on price, lead time~~ and ~~delivery,~~have ~~quality,~~greater ~~and~~financial ~~aftermarket parts~~ and ~~service~~other ~~capabilities~~resources.

~~For aftermarket~~Major ~~parts~~competitors ~~sales,~~for wewell ~~compete~~stimulation ~~with~~equipment ~~distributors~~include ofNational ~~factory-authorized~~Oilwell ~~OEM~~Varco, ~~parts~~Inc., ~~with~~Kirby ~~providers~~Corporation, ofEnerflow ~~non-OEM~~Industries ~~parts~~Inc. and ~~remanufactured~~Dragon ~~parts,~~Products ~~and~~(a ~~other~~division ~~distributors~~ of ~~OEM~~ ~~parts~~Modern Group Inc.). For ~~aftermarket~~our ~~service~~well ~~sales~~servicing, ~~the~~drilling ~~market~~and iscoiled ~~highly~~tubing ~~fragmented~~products, ~~and~~our ~~characterized~~major bycompetitor ~~numerous~~is ~~small,~~National ~~independent~~Oilwell ~~providers~~Varco, Inc. WeIn ~~believe~~our ~~there~~rail ~~are~~car amover ~~number~~product ofline, ~~factors~~we ~~that~~compete ~~affect~~against ~~our customers'~~Trackmobile, Inc. ~~decisions~~and ~~when~~Central ~~choosing~~Manufacturing Inc., ~~their~~and ~~supplier~~we ofcompete ~~aftermarket~~with ~~parts~~Cummins Inc. and ~~service~~Caterpillar, Inc. ~~including~~and ~~the~~their ~~customer's~~distributors ~~preference~~for togenerators ~~use~~and ~~factory~~other types of engine-~~authorized~~driven ~~OEM~~products. ~~parts~~ZF Industries Inc. and ~~service.~~Twin ~~Customers~~Disc ~~also~~Incorporated ~~consider~~are ~~price, parts~~our ~~availability,~~primary ~~level~~competitors ~~and~~for ~~number~~transmissions. ofWe ~~experienced~~believe ~~technicians,~~that ~~proximity~~our customers base their decisions to ~~the~~purchase ~~customer's~~equipment ~~location~~based on price, lead time and ~~flexibility~~delivery, toquality ~~service~~and ~~products~~aftermarket inparts ~~the~~and ~~field.~~service capabilities.

~~Our rental~~For ~~business~~aftermarket ~~focuses~~parts onsales, ~~generators~~we compete with distributors of factory-authorized OEM parts, ~~material~~with ~~handling~~providers ~~equipment~~of non-OEM parts and ~~air~~remanufactured ~~compressors~~parts, and weother ~~compete~~distributors ~~with~~of ~~much~~OEM ~~larger~~parts. ~~companies,~~For ~~including~~aftermarket ~~United~~service ~~Rentals Inc.~~sales, ~~NationsRent Companies Inc.,~~the ~~Hertz~~market ~~Equipment~~is ~~Rental~~highly ~~Corporation~~fragmented and ~~Aggreko plc~~characterized by numerous small, independent providers. We believe there are a number of factors that affect our customers’ ~~base~~decisions when choosing their ~~decisions~~supplier of aftermarket parts and service, including the customer’s preference to ~~rent~~use ~~equipment~~factory-authorized ~~based~~OEM onparts and service. Customers also consider price, parts availability, level and ~~aftermarket~~number ~~parts~~of experienced technicians, ~~support~~ proximity to the customer’s location and flexibility to service. products in the field.

We believe that the significant capital required to obtain and operate manufacturing facilities, acquire and maintain adequate inventory levels, and hire and maintain a highly skilled labor force, along with our long-standing relationships with our six key OEMs, is a disincentive for new market entrants. 7

Table ~~Suppliers~~of ~~and Raw Materials~~ Contents

InOur ~~Fiscal~~rental ~~2010,~~business ~~approximately~~focuses ~~77.2%~~on ofgenerators, ~~our~~material ~~cost~~handling ofequipment ~~goods~~and ~~sold~~air ~~consisted~~compressors ~~of raw materials~~ and ~~component~~we ~~parts,~~compete with ~~the~~much ~~other~~larger ~~22.8% being~~companies, ~~labor~~including ~~and~~United ~~overhead~~Rentals Inc., ~~Approximately~~NationsRent 44Companies Inc.4%, ofHertz ~~the~~Equipment ~~raw~~Rental ~~materials~~Corporation and ~~component~~Aggreko plc. ~~parts~~We inbelieve ~~cost~~our ofcustomers ~~goods~~base ~~sold~~their ~~were~~decisions ~~obtained~~to ~~from~~rent ~~our~~equipment ~~six~~based ~~key~~on ~~OEMs pursuant to long-standing relationships~~price, availability and ~~55.6%~~aftermarket ~~were~~parts, ~~obtained~~support ~~from~~and ~~a variety of other suppliers~~service.

10 We believe that the significant capital required to obtain and operate manufacturing facilities, acquire and maintain adequate inventory levels, and hire and maintain a highly skilled labor force, along with our long-standing relationships with our six key OEMs, is a disincentive for new market entrants.

~~Table~~Suppliers ofand ~~Contents~~raw materials

~~Our supply~~In ~~agreements~~Fiscal ~~with~~2011, ~~our~~approximately ~~six~~79.7% ~~key~~of ~~OEMs are~~our ~~non-exclusive~~cost ~~and~~of ~~typically~~goods ~~short-term~~sold ~~and~~consisted ~~have~~of ~~been~~raw ~~renewed~~materials onand ancomponent ~~ongoing basis~~parts, ~~but~~with nothe ~~assurances~~other ~~can~~20.3% ~~be given~~being ~~that~~labor ~~they~~and ~~will~~overhead. beApproximately ~~renewed beyond their expiration dates~~51.0% ~~We have been the factory-authorized provider~~ of ~~our product offerings from these OEMs in~~ the ~~territories~~raw ~~below~~materials ~~for many years,~~ and ~~our~~ ~~relationships~~component ~~with~~parts ~~these~~in ~~OEMs average~~cost ~~approximately~~of ~~40 years.~~goods ~~The~~sold ~~following~~were ~~table~~obtained ~~lists~~from our six key OEMs, and ~~the~~49.0% ~~products~~were ~~they~~obtained ~~provide,~~from ~~the~~a ~~designated~~variety ~~geographic territories that we serve and the expiration date~~ of ~~our~~other ~~current supply agreements:~~ suppliers.

OEM	Supplier since	Products	Designated geographic territories	Expiration date
Detroit Diesel Corporation	1938	Parts for high-speed diesel engines	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama and Colombia	2017
MTU Friedrichshafen	1938	Heavy-duty high-speed diesel and natural gas engines	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama and Colombia	2011* (Colombia 2012)
Electro-Motive Diesel, Inc.	1956	Heavy-duty medium-speed diesel engines	Texas, Colorado, New Mexico, Oklahoma, Arkansas, Louisiana, Tennessee, Mississippi, Alabama, Mexico, Central America and parts of South America	2013
Hyster Company	1959	Material handling equipment	Texas and New Mexico	No expiration date
Allison Transmission, Inc.	1973	Automatic transmissions, power shift transmissions and torque converters	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama, parts of Utah and Arizona and Colombia	2013
Deutz Corporation	1996	Diesel and natural gas engines	Colorado, Eastern Wyoming, Arizona, New Mexico, Texas, Oklahoma, Kansas, Arkansas, Louisiana, Mississippi, Western Tennessee, Venezuela and Colombia	No expiration date

Our supply agreements with our six key OEMs are non-exclusive and typically short-term and have been renewed on an ongoing basis, but no assurances can be given that they will be renewed beyond their expiration dates. Certain of the supply agreements can be terminated at the option of the OEMs with notice, and others can be terminated by the OEMs for cause. We have been the factory-authorized provider of our product offerings from these OEMs in the territories below for many years, and our relationships with these OEMs average approximately 50 years. The following table lists our key OEMs, the products they provide, the designated geographic territories that we serve and the expiration date of our current supply agreements:

*We continue to operate under our prior agreement and are in the process of renewing this agreement.

OEM	Supplier since	Products	Designated geographic territories	Expiration date
Detroit Diesel Corporation	1938	Parts for high-speed diesel engines	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama and Colombia	2017
Tognum (formerly MTU Friedrichshafen)	1938	Heavy-duty high-speed diesel and natural gas engines	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama and Colombia	2014 (Colombia 2012)
Electro-Motive Diesel, Inc.	1956	Heavy-duty medium-speed diesel engines	Texas, Colorado, New Mexico, Oklahoma, Arkansas, Louisiana, Tennessee, Mississippi, Alabama, Mexico, Central America, parts of South America (including Brasil), Australia, Korea and Singapore	2013
Hyster Company	1959	Material handling equipment	Texas and New Mexico	No expiration date
Allison Transmission, Inc.	1973	Automatic transmissions, power shift transmissions and torque converters	Texas, Colorado, New Mexico, Wyoming, Western Nebraska, South Louisiana, Coastal Mississippi, Coastal Alabama, parts of Utah and Arizona and Colombia	2013
Deutz Corporation	1996	Diesel and natural gas engines	Colorado, Eastern Wyoming, Arizona, New Mexico, Texas, Oklahoma, Kansas, Arkansas, Louisiana, Mississippi, Western Tennessee, Venezuela and Colombia	No expiration date

Our six key OEMs supply us with diesel engines, transmissions, material handling equipment and natural gas engines, as well as the aftermarket parts used to support those components. We also purchase large fluid pumps, generators and hydraulic and electrical components, among many other items, from an extensive supplier base.

We generally have been able to recover component price increases by raising the prices of our goods and services. We expect to continue the practice of raising our prices to offset these increases, but we can give no assurance that we will be able to do so. Our ability to raise our prices depends on market conditions and prices for similar products in the market. In addition, for larger equipment, particularly for customers in the oil and gas industry, we often enter into fixed-price contracts, which are typically performed within one year. Our ability to raise prices on fixed-price contracts is limited.

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Table of Contents

Employees

As of January 31, ~~2011~~2012, we had approximately 2,~~300~~900 employees of whom approximately 2,~~000~~640 were employed in the United States and Canada and approximately ~~300~~260 were employed abroad. Of the approximately 2,~~000~~640 U.S. and Canadian employees, we have approximately 70 engineers, ~~575~~695 service technicians, ~~170~~175 sales and marketing employees and 1,~~200~~700 aftermarket, manufacturing and administrative employees. We consider our current labor relations to be good and do not have any employees in the United States and Canada that are represented by labor unions. ~~See "Item 1A. Risk Factors—Risks related to our business—We may not be able to attract and retain qualified employees."~~

Trademarks and patents

We rely on a combination of patent, trademark, copyright, unfair competition and trade secret laws in the United States and other jurisdictions, astogether ~~well~~with as employee and third-party non-disclosure agreements, license arrangements and domain name registrations, as well as unpatented proprietary know-how and other trade secrets, to protect our products, components, processes and applications. With the exception of the " “Stewart & Stevenson"” trademark and logo, we do not believe any single patent, copyright, trademark or trade name is material to our business as a whole. Any issued patents that cover our proprietary technology and any of our other intellectual property rights may not provide us with adequate protection or be commercially beneficial to us and, if applied for, may not be issued. The issuance of a patent is not conclusive as to its validity or its enforceability. Competitors may also be able to design around our patents. If we are unable to protect our patented technologies, our competitors could commercialize technologies or products which are substantially similar to ours.

With respect to proprietary know-how and other proprietary information, we rely on trade secret laws in the United States and other jurisdictions and confidentiality agreements. Monitoring the unauthorized use of our technology is difficult, and the steps we have taken may not prevent unauthorized use of our technology. The disclosure or misappropriation of our intellectual property could harm our ability to protect our rights and our competitive position.

Environmental, health and safety matters and other regulatory matters

We are subject to a variety of federal, state, local, foreign and provincial environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and remediate contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Many of our operations require environmental permits and controls to prevent and limit air and water pollution. These permits contain terms and conditions that impose limitations on our manufacturing activities, production levels and associated activities and periodically may be subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have or to comply with the terms and conditions of required permits. We believe that we are currently in compliance in all material respects with the terms and conditions of our permits. We are also subject to the federal Occupational Safety and Health Act and similar state and foreign laws, which impose requirements and standards of conduct on our operations for the health and safety of our workers. We periodically review our procedures and policies for compliance with environmental and health and safety requirements. We believe that our operations are generally in compliance with applicable environmental and health and safety regulatory requirements or that any non-compliance will not result in a material liability or cost to achieve compliance. Historically, the costs of achieving and maintaining compliance with environmental and health and safety requirements have not been material.

12Certain environmental laws in the United States, such as the federal Superfund law and similar state laws, impose liability for investigating and remediating contaminated sites on “responsible parties.” These parties include, for example: current owners and operators of the site; parties who owned or operated the site at the time hazardous substances were released or spilled at the site; parties who generated wastes and arranged to send them to the site for disposal; and parties who transported wastes to the site. Liability under such laws is strict, meaning, for example, that current owners or operators can be liable even if all releases of hazardous substances occurred before they owned or operated the site, regardless of the lawfulness of the original disposal activities. Liability under such laws is also joint and several, meaning that a responsible party might be held liable for more than its fair share of investigation or cleanup costs. As a practical matter, however, when more than one responsible party is involved at a site, the costs of investigation and remediation are often allocated among the viable responsible parties on some form of equitable basis. In connection with each of the SSSI Acquisition and the Crown Acquisition, the previous owner retained environmental liabilities relating to pre-closing conditions or occurrences, subject to certain dollar limitations and caps. However, for the reasons set forth above, there could be contamination at some of our current or formerly owned or operated facilities for which we could be liable under applicable environmental laws.

~~Table~~In addition to the environmental health and safety measures described above, the part of ~~Contents~~our business that consists of the sale, distribution, installation and warranty repair of large engines and transmissions used in commercial vehicle applications in Texas requires certain Texas state motor vehicle licenses, which are subject to annual renewal.

Certain environmental laws in the United States, such as the federal Superfund law and similar state laws, impose liability for investigating and remediating contaminated sites on "responsible parties." These parties include, for example: current owners and operators of the site; parties who owned or operated the site at the time hazardous substances were released or spilled at the site; parties who generated wastes and arranged to send them to the site for disposal; and parties who transported wastes to the site. Liability under such laws is strict, meaning, for example, that current owners or operators can be liable even if all releases of hazardous substances occurred before they owned or operated the site, regardless of the lawfulness of the original disposal activities. Liability under such laws is also joint and several, meaning that a responsible party might be held liable for more than its fair share of investigation or cleanup costs. As a practical matter, however, when more than one responsible party is involved at a site, the costs of investigation and remediation are often allocated among the viable responsible parties on some form of equitable basis. In connection with each of the SSSI Acquisition and the Crown Acquisition, the previous owner retained environmental liabilities relating to pre-closing conditions or occurrences, subject to certain dollar limitations and caps. However, for the reasons set forth above, there could be contamination at some of our current or formerly owned or operated facilities for which we could be liable under applicable environmental laws. 9

~~In addition~~Table ~~to the environmental health and safety measures described above, the part~~ of our business that consists of the sale, distribution, installation and warranty repair of large engines and transmissions used in commercial vehicle applications in Texas requires certain Texas state motor vehicle licenses, which are subject to annual renewal. Contents

ITEM 1A. Risk Factors

Periodic economic and industry downturns may adversely impact our operating results.

Our equipment sales and, to a lesser extent, our aftermarket parts and service sales depend primarily on the level of activity in the oil and gas industry. The oil and gas industry traditionally has been volatile, is highly sensitive to supply and demand cycles and is influenced by a combination of long-term and cyclical trends including:

~~Our customers in the~~ · oil and gas ~~industry~~prices ~~historically have tended to delay capital equipment projects, including maintenance~~ and ~~upgrades, during~~ industry ~~downturns.~~perceptions ~~Accordingly, the recent slowdown in the U.S. and worldwide economic activities that followed the global financial crisis resulted in delays in capital equipment projects, impacting the activities~~ of the industries we serve and resulting in significantly lower new orders. Difficulty in accessing credit markets diminished product demand, adversely affected activities in manufacturing and put downward pressure on selling prices. In the United States, producers generally react to declining oil and gas prices by reducing expenditures. This has in the past, and may in the future, ~~adversely~~price ~~affect our business.~~ levels;

~~There can be no assurance that oil and gas prices will remain at current levels or will not decrease significantly. We are unable to predict future oil and gas prices or~~ · the ~~level~~cost of ~~oil and~~exploring ~~gas~~for, ~~industry~~producing ~~activity.~~and Adelivering ~~prolonged low level of activity in the~~ oil and gas; ~~industry would adversely affect the demand for our products~~ and ~~services and our business, financial condition and results of operations.~~

13· the ability of oil and gas companies to generate capital for investment purposes.

~~Table~~Our customers in the oil and gas industry historically have tended to delay capital equipment projects, including maintenance and upgrades, during industry downturns. Accordingly, the recent slowdown in the U.S. and worldwide economic activities that followed the global financial crisis resulted in delays in capital equipment projects, impacting the activities of ~~Contents~~the industries we serve and resulting in significantly lower new orders. Difficulty in accessing credit markets and diminished product demand adversely affected activities in manufacturing and put downward pressure on selling prices. In the United States, producers generally react to declining oil and gas prices by reducing expenditures. This has in the past, and may in the future, adversely affect our business.

There can be no assurance that oil and gas prices will remain at current levels or will not decrease significantly. We ~~face~~are ~~competition~~unable into ~~each~~predict future oil and gas prices or the level of oil and gas industry activity. A prolonged low level of activity in the oil and gas industry would adversely affect the demand for our ~~businesses~~products and services and our business, financial condition and results of operations.

We ~~encounter~~face competition in ~~all~~each ~~areas~~ of our ~~business~~businesses. The principal factors on which we compete include performance, quality, customer service, timely delivery of products, product lead times, global reach and presence, brand reputation, breadth of product line, quality of aftermarket service and support and price. In addition, our customers increasingly demand more technologically advanced and integrated products, and we must continue to develop our expertise and technical capabilities in order to manufacture and market these products and associated services successfully. To remain competitive, we must invest continuously in the education of our workforce, manufacturing capabilities and efficiencies, marketing, client service and support, distribution networks and research and development.

We ~~experience~~ ~~our~~encounter ~~greatest~~competition ~~levels~~in all areas of ~~competition~~our inbusiness. ~~equipment~~The ~~sales~~principal factors on which we compete include performance, inquality, ~~terms~~customer service, timely delivery of ~~both~~products, ~~engineered~~product ~~equipment~~lead ~~and~~times, ~~stand-alone~~global ~~products.~~reach Weand ~~compete~~presence, ~~with~~brand areputation, ~~number~~breadth of ~~large~~product line, ~~well-known~~ ~~OEMs~~quality of aftermarket service and support and price. In addition, ~~manufacturers~~our customers increasingly demand more technologically advanced and ~~distributors~~integrated ~~that~~products, and we must continue to develop our expertise and technical capabilities in ~~some~~order ~~cases,~~to ~~have~~manufacture ~~greater~~and ~~financial~~market these products and ~~human~~associated ~~resources~~services successfully. To remain competitive, aswe ~~well~~must asinvest acontinuously ~~broader~~in ~~geographical~~the ~~presence~~education of our workforce, ~~than~~manufacturing wecapabilities ~~do.~~and efficiencies, marketing, client service and support, distribution networks and research and development.

~~With respect~~We toexperience ~~aftermarket~~our ~~parts~~greatest ~~and~~levels ~~service~~of competition in equipment sales, wein ~~compete~~terms ~~with~~of ~~regional~~both ~~and~~engineered ~~local~~equipment ~~non~~and stand-~~OEM~~alone ~~parts~~products. ~~and~~We ~~service~~compete ~~providers,~~with ~~our~~a ~~customers'~~number ~~in-house~~of ~~service providers~~large, ~~non~~well-~~OEM~~known OEMs, manufacturers and ~~remanufactured~~distributors ~~parts~~that, ~~and~~in ~~service~~some ~~providers~~cases, have greater financial and human resources, ~~for~~as ~~certain~~well ~~product~~as ~~offerings~~a broader geographical presence, ~~other~~than ~~factory-authorized~~we ~~providers~~do.

~~Our rental~~With ~~operations~~respect ~~compete~~to ~~against~~aftermarket ~~large,~~parts ~~well-recognized~~and ~~companies.~~service ~~Maintaining~~sales, awe ~~rental~~compete ~~fleet~~with ~~requires~~regional ~~significant~~and ~~investment~~local ~~from year~~non-~~to-year. If~~OEM ~~our~~parts ~~access~~and toservice ~~capital~~providers, isour ~~substantially~~customers’ ~~limited~~in-house ~~due~~service toproviders, ~~contractual~~non-OEM ~~restrictions~~and orremanufactured ~~otherwise,~~parts orand ifservice ~~capital~~providers ~~becomes more costly~~and, wefor ~~may~~certain ~~not~~product beofferings, ~~able~~other tofactory-authorized ~~make the investments necessary to remain competitive~~providers.

Our ~~international~~rental ~~equipment~~operations ~~sales~~compete ~~and~~against ~~aftermarket~~large, ~~parts~~well-recognized ~~and~~companies. ~~service~~Maintaining ~~operations~~a ~~are~~rental ~~subject~~fleet requires significant investment from year-to-year. ~~risks~~If ~~associated~~our ~~with~~access ~~the~~to ~~political~~capital is substantially limited due to contractual restrictions or otherwise, ~~economic~~or ~~and~~if ~~other~~capital ~~uncertainties~~becomes ~~inherent in~~more ~~foreign~~costly, ~~operations~~we may not be able to make the investments necessary to remain competitive.

WeOur ~~have~~international ~~significant~~ equipment sales ~~to customers outside the United States~~ and ~~also maintain~~ aftermarket parts and service operations ~~outside~~ ~~the~~are ~~United~~subject ~~States. For Fiscal 2010 and Fiscal 2009, we derived approximately 19.4% and 29.9%, respectively, of our revenues from sales of products and services~~ to ~~customers~~risks ~~outside~~associated with the ~~United States~~political, ~~including~~economic ~~sales to U.S. customers for export. We intend to expand our international sales~~ and ~~operations,~~other ~~thereby~~uncertainties ~~increasing~~inherent ~~our~~in ~~exposure~~foreign ~~to risks associated with operating outside of the United States~~operations.

~~Our international~~We have significant equipment sales, ~~manufacturing~~to customers outside the United States and also maintain aftermarket parts and service ~~activities~~operations ~~are~~outside ~~subject~~the toUnited ~~risks~~States. ~~associated~~For ~~with~~Fiscal ~~the~~2011 ~~political~~and Fiscal 2010, ~~economic~~we derived approximately 19.7% and ~~other~~19.4%, ~~uncertainties~~respectively, ~~inherent~~of ~~in foreign~~our ~~operations~~revenues from sales of products and services to customers outside the United States, ~~which~~including ~~include~~sales to U.S. customers for export. We intend to expand our international sales and operations, ~~but~~thereby ~~are~~increasing ~~not~~our ~~limited~~exposure to: risks associated with operating outside of the United States.

Some of the markets in which we operate are politically unstable and are subject to civil and communal unrest. Riots, strikes, the outbreak of war or terrorist attacks in locations where we have operations or conduct business, could also adversely affect our business. 10

14Table of Contents

~~Table~~Our ofinternational ~~Contents~~sales, manufacturing and aftermarket parts and service activities are subject to risks associated with the political, economic and other uncertainties inherent in foreign operations, which include, but are not limited to:

~~Also, we operate in some countries in which~~ · the ~~risk~~effect of ~~bribery~~exchange isrates ~~recognized.~~on Wepurchasing ~~have~~decisions ~~clear policies addressing our prohibition against illegal payments~~ and ~~have~~power ~~a comprehensive training and certification~~ of ~~compliance program. However, a risk remains despite~~ our ~~efforts.~~foreign In such circumstances, we could also face fines, sanctions and other penalties from authorities in the relevant jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions. customers;

~~The occurrence~~· changes ofin ~~any~~exchange ofrates ~~the~~which ~~foregoing~~could ~~factors~~result ~~may have a material adverse effect on our business, financial condition and results of operations. For example, to the extent we make significant investments~~ in ~~foreign~~increases ~~facilities~~ or ~~otherwise~~decreases ~~expand~~in our ~~overseas~~costs ~~presence, the risk that our assets~~ and ~~our income could be adversely affected by fluctuations in the value of local currencies will increase.~~ earnings;

~~In addition,~~· foreign ~~many~~exchange ofrisks ~~our~~resulting ~~customers~~from ~~and~~changes ~~the end-users of our equipment operate~~ in ~~international~~foreign ~~jurisdictions~~exchange ~~and therefore are subject to the foregoing risks~~rates, aswhich ~~well~~could ~~as other~~increase ~~risks associated~~or ~~with~~decrease ~~international operations. The occurrence of any of these factors may have a material adverse impact on the business and operations of~~ our ~~customers~~costs and ~~end-users~~earnings, ~~which~~and ~~in turn~~the ~~may~~implementation ~~have~~of aexchange ~~material adverse effect on us.~~ controls;

· limitations Ifon our ~~arrangements~~ability ~~with~~to ~~our~~reinvest ~~suppliers,~~earnings ~~including~~from ~~our~~operations ~~key~~in ~~OEMs,~~one ~~were~~country to befund ~~adversely~~the ~~affected,~~capital ~~our~~needs ~~equipment~~of ~~sales~~our ~~and~~operations ~~aftermarket~~in ~~parts~~another ~~and~~country; ~~service businesses may suffer.~~ and

We· government ~~currently~~regulation ~~depend~~and onthe aimposition ~~limited number~~ of ~~suppliers for certain important components for our products~~, ~~which~~or ~~include~~unexpected ~~diesel~~adverse ~~engines, transmissions,~~changes ~~fluid pumps and material handling equipment. Our purchases from some of these suppliers are not made pursuant to long-term contracts~~in, ~~and~~foreign ~~our~~laws ~~arrangements~~or ~~with~~regulatory ~~these suppliers may be terminated~~requirements, inincluding ~~the~~those ~~case~~pertaining ofto ~~certain~~import ~~arrangements,~~duties ~~upon certain notifications~~ and, ~~otherwise~~quotas, ~~upon the occurrence of certain events~~taxes, ~~many~~trade ~~of which may be beyond our control. The loss of any of these suppliers could have a material adverse effect on our business, financial condition~~ and ~~results~~employment ~~of operations~~restrictions.

~~In addition,~~Some ~~a significant portion~~ of the ~~stand-alone~~markets ~~equipment~~in ~~that~~which we ~~sell~~operate isare ~~manufactured~~politically ~~by,~~unstable and are subject to civil and communal unrest. Riots, instrikes, the ~~case~~outbreak of ~~our~~war ~~engineered~~or ~~equipment,~~terrorist ~~incorporates~~attacks ~~components~~in ~~provided~~locations bywhere we have operations or conduct business, ~~our six~~could ~~key~~also ~~OEMs:~~adversely affect our business.

~~Approximately 44.4%~~Also, ~~and~~we ~~37.1%~~operate ofin ~~our~~some ~~cost~~countries ofin ~~goods~~which ~~sold~~the ~~was~~risk ~~attributable~~of tobribery ~~stand-alone~~is ~~products~~recognized. ~~purchased~~We ~~from~~have ~~these~~clear ~~OEMs in~~policies ~~Fiscal~~addressing ~~2010~~our ~~and~~prohibition ~~Fiscal~~against ~~2009,~~illegal ~~respectively.~~payments ~~In addition,~~and have a ~~material~~comprehensive ~~portion~~training and certification of ~~our~~compliance ~~revenues~~program. ~~was~~However, ~~attributable~~a torisk ~~(1) sales~~remains ofdespite ~~equipment~~our ~~manufactured~~efforts. byIn ussuch circumstances, ~~including~~we ~~components~~could ~~manufactured~~also byface ~~these~~fines, ~~suppliers~~sanctions and ~~(2) servicing~~other ~~and supplying~~penalties ~~parts~~from ~~for~~authorities ~~certain~~in ~~products~~the ~~provided~~relevant ~~by these OEMs~~jurisdictions, including ~~parts~~prohibition ~~and~~of ~~products~~our ~~that~~participating ~~are~~in ~~components~~or curtailment of ~~the~~business ~~equipment~~operations wein ~~manufacture.~~those jurisdictions.

~~Our OEM~~The ~~supplier~~occurrence ~~arrangements~~of any of the foregoing factors may have a material adverse effect on our business, ~~pursuant~~financial condition and results of operations. For example, to ~~which~~the extent we ~~distribute~~make ~~stand-alone~~significant ~~products~~investments ~~manufactured~~in byforeign ~~these~~facilities ~~OEMs,~~or ~~which~~otherwise ~~are~~expand ~~currently~~our ~~effective~~overseas ~~for~~presence, ~~varying~~the ~~periods~~risk ofthat ~~time~~our assets and ~~are~~our ~~not exclusive,~~income ~~are~~could ~~subject~~be toadversely ~~risks~~affected ~~that~~by ~~include:~~fluctuations in the value of local currencies will increase.

15In addition, many of our customers and the end-users of our equipment operate in international jurisdictions and therefore are subject to the foregoing risks, as well as other risks associated with international operations. The occurrence of any of these factors may have a material adverse impact on the business and operations of our customers and end-users, which in turn may have a material adverse effect on us.

~~Table~~If ofour ~~Contents~~arrangements with our suppliers, including our key OEMs, were to be adversely affected, our equipment sales and aftermarket parts and service businesses may suffer.

~~The~~ We currently depend on a limited number of suppliers for certain important components for our products, which include diesel engines, transmissions, fluid pumps and material handling equipment. Our purchases from some of these suppliers are not made pursuant to long-term contracts, and our arrangements with these suppliers may be terminated, in the case of certain arrangements, upon certain notifications and, otherwise, upon the occurrence of certain events, many of which may be beyond our control. The loss of any of these suppliers could have a material adverse effect on our business, financial condition and results of operations. ~~See "Business—Suppliers and raw materials."~~

In Weaddition, ~~generally quote our customers~~ a ~~fixed~~significant ~~price~~portion ~~for~~of the stand-alone equipment that we sell, ~~which~~is ~~exposes~~manufactured usby, toand, in the ~~risk~~case of ~~cost~~our ~~overruns~~engineered ifequipment, weincorporates docomponents ~~not~~provided ~~accurately~~by, ~~estimate~~our ~~the~~six ~~costs associated~~key ~~with the product.~~ OEMs:

~~Most~~· Tognum of(formerly ~~our~~MTU engineered equipment sales contracts are "fixed-price" contracts where the original price may be set at an early stage of the process. The terms of these contracts require us to guarantee the price of products and services that we provide and to assume the risk that the costs to provide such products and services will be greater than anticipated. The profitability of these contracts is therefore dependent on the ability to reasonably predict the costs associated with performing the contracts. These costs may be affected by a variety of factors, some of which are beyond our control. Our failure to accurately estimate the resources required for a project or our failure to complete our contractual obligations in a manner consistent with the project plan upon which our fixed-price contract was based could adversely affect our profitability and could have a material adverse effect on our business, financial condition and results of operations. Friedrichshafen);

· Allison ~~Amounts included in our backlog may not result in actual revenue or translate into profits~~Transmission, Inc. ;

~~Our~~· Electro-Motive ~~backlog may not be realized as revenue or~~Diesel, ~~if realized, may not result in profits. As of January~~ ~~31, 2011, our equipment order backlog was $375~~Inc.0 million. Reductions in backlog due to cancellation by a customer or for other reasons could significantly reduce the revenue and profit we actually receive from contracts included in backlog. If our backlog fails to materialize, we could experience a reduction in revenue and a decline in profitability, which would result in a deterioration of our financial condition, profitability and liquidity. ;

· Detroit ~~Increased~~Diesel ~~regulation of current fracturing techniques could reduce demand for our well stimulation equipment.~~ Corporation;

~~Fracturing~~· Hyster isCompany; ~~a process that results in the creation of fractures in geological formations in order to stimulate production from oil~~ and gas wells. Fracturing seeks to increase the rate and ultimate recovery of oil and natural gas. Concerns have been raised over possible environmental damages related to fluids used in the fracturing process. The FRAC (Fracturing Responsibility and Awareness of Chemicals) Act was introduced in the U.S. Congress in June 2010 seeks to amend the Safe Drinking Water Act so that hydraulic fracturing would be regulated on a federal level. A number of state and provincial regulatory authorities are also considering more stringent regulation of fracturing.

~~Increased regulation~~· Deutz ~~of hydraulic fracturing would likely delay or halt some projects, including unconventional oil and gas projects~~Corporation. Expanded regulations would likely introduce a period of uncertainty as companies determine how to proceed. This could result in a reduction of demand for our products and services and could have a material adverse effect on our business, financial condition and results of operations.

16Approximately 51.0% and 44.4% of our cost of goods sold was attributable to stand-alone products purchased from these OEMs in Fiscal 2011 and Fiscal 2010, respectively. In addition, a material portion of our revenues was attributable to (1) sales of equipment manufactured by us, including components manufactured by these suppliers and (2) servicing and supplying parts for certain products provided by these OEMs, including parts and products that are components of the equipment we manufacture.

~~Table of Contents~~11

Table ~~Our and our customers' operations are subject to a variety~~ of ~~environmental, health and safety laws and regulations that may increase our costs, limit the demand for our products and services or restrict our operations.~~ Contents

Our ~~operations~~OEM ~~and~~supplier ~~the operations of our customers are subject to federal~~arrangements, ~~state,~~pursuant ~~local and foreign laws and regulations relating~~ to ~~the~~ ~~protection~~which ofwe ~~the~~distribute ~~environment~~stand-alone ~~and~~products ofmanufactured ~~human~~by ~~health~~these ~~and safety~~OEMs, ~~including~~which ~~laws~~are ~~and~~currently ~~regulations~~effective ~~governing~~for ~~the~~varying ~~investigation~~periods ~~and clean-up~~ of ~~contaminated~~time ~~properties, as well as air emissions, water discharges, waste management~~ and ~~disposal.~~are ~~Such~~not ~~laws and regulations have~~exclusive, ~~and~~ are ~~expected~~subject to ~~continue~~risks ~~to, become more stringent over time, requiring modifications to our products and operations. These laws and regulations affect the products and services~~ that we design, market and sell, as well as the facilities where we manufacture and service our products. In addition, environmental laws and regulations could limit our customers' activities in the oil and gas sector and subsequently the demand for our products. include:

~~Environmental laws and regulations may provide for "strict liability" for damages to~~ · the ~~environment~~nonrenewal or ~~natural resources or threats to public health and safety~~termination, ~~rendering a party liable without regard to negligence of~~ or ~~fault~~material onchange ~~the~~in part of such party. Sanctions for noncompliance may include revocation of permits, temporary or permanent shutdown of certain operations, corrective action orders, administrative or civil penalties, and criminal prosecution. Some environmental laws and regulations provide for joint and several strict liability for the ~~investigation or remediation of spills and releases of hazardous substances~~terms, ~~rendering a party potentially responsible for more than its proportionate share~~ of, or responsible for the entire, liability. In addition, we may become subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. Pursuant to certain environmental laws and regulations, we may become subject to liability (including with respect to off-site disposal matters or formerly owned or operated facilities) for the conduct of or conditions caused by others, or for our own acts that were in compliance with all applicable laws and regulations at the time such ~~acts~~supplier ~~were performed. Any of these laws and regulations could result in claims, fines, expenditures or other requirements that could have a material adverse effect on our business.~~ contracts;

~~We invest financial and managerial resources to comply with environmental laws and regulations and will continue to do so in~~ · the ~~future.~~acquisition ~~We cannot determine the future cost~~ of ~~compliance~~ one or ~~the~~more ~~impact~~ of ~~environmental regulation on~~ our ~~future~~six ~~operations.~~key ~~In the future, we and our~~ OEMs ~~may~~by ~~not~~one ~~be able to produce adequate supplies~~ of ~~equipment~~our ~~that~~competitors ~~are compliant with increasing emission~~ or ~~other~~another ~~environmental~~entity ~~standards~~that to meet existing demand, which would have an adverse effect on us. The modification of, or changes in the interpretation or enforcement of, existing laws or regulations, or the adoption of new laws or regulations imposing more stringent environmental restrictions, could ~~have~~adversely aaffect ~~material adverse effect on~~ our ~~business, financial condition and results of operations.~~ relationship;

~~Our businesses~~· the ~~are~~inability ~~subject to a variety~~ of ~~other~~our ~~regulatory~~suppliers ~~restrictions, such as those governing workplace safety and health. The failure~~ to ~~comply~~provide us with ~~these~~sufficient ~~rules~~quantities ~~may~~of ~~result~~equipment ~~in civil penalties~~ and ~~criminal~~parts ~~prosecution. Further, laws and regulations in this and other areas are complex and change frequently. Changes in laws or regulations, or in their enforcement or interpretation, could subject us~~ to ~~material~~meet ~~costs. We cannot determine~~ the ~~extent~~demands toof ~~which~~ our ~~future~~customers; ~~operations~~ and ~~earnings may be so affected.~~

~~We also expect that scientific examination of and political attention to issues surrounding~~ · the ~~existence~~appointment ~~and~~by ~~extent~~our ofsuppliers ~~climate change will continue. A variety~~ of ~~regulatory developments,~~additional ~~both~~providers ~~domestic~~in ~~and~~designated ~~international,~~territories ~~have~~in ~~been~~which ~~introduced~~we ~~that~~ are ~~focused~~currently ~~on restricting or managing~~ the ~~emission~~only ~~of carbon dioxide, methane and other greenhouse gases~~provider. These developments and further legislation that may be enacted, or the development or changes within international accords could adversely affect the demand for or suitability of our products and services.

17The occurrence of any of these could have a material adverse effect on our business, financial condition and results of operations. See “Business—Suppliers and raw materials.”

~~Table~~We generally quote our customers a fixed price for the equipment that we sell, which exposes us to the risk of ~~Contents~~cost overruns if we do not accurately estimate the costs associated with the product.

Most ~~Our~~of ~~projects~~our engineered equipment sales contracts are ~~subject~~“fixed-price” contracts where the original price may be set at an early stage of the process. The terms of these contracts require us to ~~numerous~~guarantee ~~hazards~~the price of products and, ~~our~~services ~~record~~that we provide and ~~reputation~~to ~~for~~assume ~~safety~~the isrisk ~~important~~that the costs to ~~our~~provide ~~business~~such products and services will be greater than anticipated. IfThe weprofitability doof ~~not~~these ~~maintain~~contracts anis ~~adequate~~therefore ~~safety~~dependent ~~record,~~on wethe ability to reasonably predict the costs associated with performing the contracts. These costs may be ~~ineligible~~affected toby ~~bid~~a onvariety ~~certain~~of ~~projects~~factors, ~~could~~some beof ~~terminated~~which ~~from~~are ~~existing~~beyond ~~projects~~our ~~and~~control. Our failure to accurately estimate the resources required for a project or our ~~reputation~~failure to complete our contractual obligations in a manner consistent with the project plan upon which our fixed-price contract was based could beadversely ~~harmed~~affect our profitability and could have a material adverse effect on our business, financial condition and results of operations.

~~Our~~Amounts ~~employees~~included ~~and~~in ~~customers are exposed to numerous hazards during the conduct of~~ our ~~business,~~backlog including electrical contacts and flashes, fires, natural gas explosions, mechanical failures and transportation accidents. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and other consequential damages, and may not result in ~~suspension~~actual ofrevenue ~~operations,~~or ~~civil~~translate ~~damage~~into ~~claims and criminal fines and penalties that could have a material adverse effect on our business and results of operations~~profits.

Our ~~safety~~ ~~record~~backlog ismay ~~important.~~not Ifbe ~~serious~~realized ~~accidents~~as revenue or, ~~fatalities~~if ~~occur~~realized, ormay ~~our~~not ~~safety~~result ~~record~~in ~~deteriorates~~profits. As of January 31, 2012, our ~~reputation~~equipment ororder ~~prospects~~backlog ~~for~~was ~~obtaining~~$351.6 million. ~~future~~Reductions ~~business~~in backlog due to cancellation by a customer or for other reasons could besignificantly ~~negatively affected~~reduce the revenue and profit we actually receive from contracts included in backlog. If our backlog fails to materialize, we could experience a reduction in revenue and a decline in profitability, which would result in a deterioration of our financial condition, profitability and liquidity.

Increased ~~The~~regulation ~~occurrence~~ of ancurrent ~~event~~fracturing ~~not~~techniques ~~fully covered by insurance~~ could ~~have~~reduce ademand ~~material~~for ~~adverse effect on~~ our ~~business,~~well ~~financial~~stimulation ~~condition and results of operations~~equipment.

~~Our~~Fracturing ~~insurance~~is ~~does~~a ~~not~~process ~~provide~~that ~~coverage~~results ~~for~~in ~~all~~the ~~risks,~~creation ~~and~~of itfractures ~~may~~in ~~not~~geological beformations ~~adequate~~in order to ~~cover~~stimulate ~~all~~production ~~claims~~from ~~that~~oil ~~may~~and ~~arise~~gas wells. ~~The~~Fracturing ~~occurrence~~seeks ~~of an~~to ~~event~~increase ~~not~~the ~~fully~~rate ~~covered~~and byultimate ~~insurance~~recovery ~~could~~of oil and natural gas. Concerns have abeen ~~material~~raised ~~adverse~~over ~~effect~~possible onenvironmental ~~our~~damages ~~business,~~related ~~financial~~to ~~condition~~fluids ~~and~~used ~~results~~in ofthe ~~operations~~fracturing process. ~~Moreover,~~The ~~particular~~FRAC ~~types~~(Fracturing ofResponsibility ~~insurance~~and ~~coverage~~Awareness ~~may~~of ~~not~~Chemicals) ~~be available~~Act towas usintroduced in the ~~future,~~U.S. weCongress ~~may~~in ~~retain~~June 2009 ~~additional~~seeks ~~risk~~to ~~through~~amend ~~higher~~the ~~insurance~~Safe ~~deductibles~~Drinking orWater weAct ~~may~~so bethat ~~unable~~hydraulic tofracturing ~~continue~~would tobe ~~obtain~~regulated ~~our~~on ~~desired~~a federal level. A number of ~~insurance~~state ~~coverage~~and atprovincial ~~commercially reasonable~~regulatory ~~rates.~~authorities are also considering more stringent regulation of fracturing.

~~Because many~~Increased regulation of ~~our~~hydraulic ~~products~~fracturing ~~and~~would ~~the~~likely ~~products~~delay ~~that~~or wehalt ~~distribute~~some ~~are~~projects, ~~complex~~including ~~and~~unconventional ~~utilize~~oil ~~many~~and ~~components,~~gas ~~processes~~projects. ~~and~~Expanded ~~techniques,~~regulations ~~undetected~~would ~~errors~~likely ~~and~~introduce ~~design~~a ~~flaws~~period ~~may~~of ~~occur.~~uncertainty ~~Product defects~~as ~~result~~companies indetermine ~~higher~~how ~~product~~to ~~service,~~proceed. ~~warranty~~This ~~and~~could ~~replacement~~result ~~costs~~in ~~and~~a ~~may~~reduction ~~cause~~of ~~damage~~demand tofor our ~~customer~~products ~~relationships~~ and ~~industry~~services ~~reputation,~~and ~~all~~could ofhave ~~which~~a ~~may~~material ~~negatively~~adverse ~~impact~~effect on our business, financial condition and results of operations.

~~The industries~~Our ~~that~~and weour ~~serve~~customers’ operations are subject to ~~inherent~~a ~~risks,~~variety ~~including~~of ~~equipment defects~~environmental, ~~malfunctions,~~health ~~failures~~ and ~~natural~~safety ~~disasters.~~laws ~~These risks may expose our customers to liability for personal injury, wrongful death, property damage, pollution~~ and ~~other~~regulations ~~environmental~~that ~~damage. We also~~ may ~~become~~increase ~~involved in litigation related to such matters. Any litigation arising from a catastrophic occurrence involving~~ our ~~equipment or services could result in large claims for damages. Any increase in the frequency or severity of such incidents~~costs, orlimit the ~~general~~demand ~~level~~for ~~of compensation awards with respect to such incidents, could affect~~ our ~~ability~~products toand ~~obtain~~services ~~projects from our customers~~ or ~~acquire~~restrict adequate insurance coverage at commercially reasonable rates. In addition to seeking compensation from us, customers who suffer losses as a result of the occurrence of such events may also reduce or terminate their business with us, which may further harm our ~~results of~~ operations.

Our Weoperations and the operations of our customers are ~~susceptible~~subject to ~~adverse~~federal, ~~weather~~state, ~~conditions~~local ~~affecting~~and foreign laws and regulations relating to the ~~Gulf~~protection ~~Coast~~of the environment and of human health and safety, including laws and regulations governing the investigation and clean-up of contaminated properties, as well as air emissions, water discharges, waste management and disposal. Such laws and regulations have, and are expected to continue to, become more stringent over time, requiring modifications to our products and operations. These laws and regulations affect the products and services that we design, market and sell, as well as the facilities where we manufacture and service our products. In addition, environmental laws and regulations could limit our customers’ activities in the oil and gas sector and subsequently the demand for our products.

Certain areas in and near the Gulf Coast experience hurricanes and other extreme weather conditions on a relatively frequent basis. Our headquarters, manufacturing and aftermarket parts and service facilities in Houston are susceptible to significant damage, and our New Orleans and other Gulf Coast facilities are subject to significant damage or total loss by these storms. Damage caused by high winds and floodwater could potentially cause us to curtail operations at these facilities for a significant period of time until damage can be assessed and repaired. Moreover, even if we do not experience direct damage from any of these storms, we may experience disruptions of our operations because customers may curtail their activities due to damage to their facilities in and near the Gulf of Mexico. 12

18Table of Contents

~~Table~~Environmental laws and regulations may provide for “strict liability” for damages to the environment or natural resources or threats to public health and safety, rendering a party liable without regard to negligence or fault on the part of ~~Contents~~such party. Sanctions for noncompliance may include revocation of permits, temporary or permanent shutdown of certain operations, corrective action orders, administrative or civil penalties, and criminal prosecution. Some environmental laws and regulations provide for joint and several strict liability for the investigation or remediation of spills and releases of hazardous substances, rendering a party potentially responsible for more than its proportionate share of, or responsible for the entire, liability. In addition, we may become subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. Pursuant to certain environmental laws and regulations, we may become subject to liability (including with respect to off-site disposal matters or formerly owned or operated facilities) for the conduct of or conditions caused by others, or for our own acts that were in compliance with all applicable laws and regulations at the time such acts were performed. Any of these laws and regulations could result in claims, fines, expenditures or other requirements that could have a material adverse effect on our business.

~~Due~~ We invest financial and managerial resources to comply with environmental laws and regulations and will continue to do so in the ~~losses~~future. asWe acannot ~~consequence~~determine the future cost of compliance or the ~~hurricanes~~impact ~~that~~of ~~may~~environmental ~~affect~~regulation ~~the~~on ~~Gulf~~our ~~Coast~~future inoperations. In the future, we and our OEMs may not be able to ~~obtain~~produce ~~future~~adequate ~~insurance~~supplies ~~coverage~~of ~~comparable~~equipment tothat ~~our~~are ~~current coverage,~~compliant ~~putting~~with usincreasing atemission aor ~~greater~~other ~~risk~~environmental ofstandards ~~loss due~~ to ~~severe~~meet ~~weather~~existing ~~conditions.~~demand, ~~Future~~which ~~hurricanes~~would inhave ~~the~~an ~~region~~adverse ~~may~~effect ~~increase~~on ~~costs~~us. ~~and~~The ~~deductibles~~modification of, ~~limit~~or ~~maximum~~changes ~~aggregate~~in ~~recoveries~~the ~~under~~interpretation ~~available policies~~or enforcement of, existing laws or ~~decrease~~regulations, or the ~~availability~~adoption of ~~insurance.~~new ~~Any~~laws ~~significant~~or ~~uninsured~~regulations ~~losses~~imposing more stringent environmental restrictions, could have a material adverse effect on our business, financial condition and results of operations.

Our Webusinesses ~~may~~are ~~continue~~subject to ~~expand~~a ~~through~~variety ~~acquisitions~~ of other ~~businesses~~regulatory restrictions, ~~which~~such ~~may~~as ~~divert~~those ~~our~~governing ~~management's~~workplace ~~attention,~~safety and health. The failure to comply with these rules may result in ~~dilution~~civil topenalties ~~our~~and ~~stockholders~~criminal prosecution. Further, laws and ~~consume~~regulations ~~resources that~~in ~~are~~this ~~necessary~~and toother ~~sustain~~areas ~~our~~are ~~business.~~complex Weand ~~may~~change ~~not~~frequently. beChanges ~~able~~in tolaws ~~successfully~~or ~~integrate~~regulations, ~~acquired~~or ~~businesses~~in ~~with~~their ~~our~~enforcement ~~business~~or interpretation, ~~and~~could wesubject ~~may~~us ~~not~~to ~~realize~~material costs. We cannot determine the ~~anticipated~~extent ~~benefits~~to ofwhich ~~such~~our ~~acquisitions~~future operations and earnings may be so affected.

~~Acquiring~~We ~~complementary~~also ~~businesses~~expect ~~from~~that ~~third~~scientific ~~parties~~examination isof, anand ~~important~~political ~~part~~attention to, issues surrounding the existence and extent of ~~our~~climate ~~growth~~change ~~strategy~~will continue. ~~Our~~A ~~acquisition~~variety ~~strategy~~of ~~depends~~regulatory developments, both domestic and international, have been introduced that are focused on restricting or managing the ~~availability~~emission of ~~suitable~~carbon ~~acquisition~~dioxide, ~~candidates~~methane atand ~~reasonable~~other ~~prices~~greenhouse gases. ~~This~~These ~~strategy~~developments ~~also~~and ~~depends~~further onlegislation ~~our~~that ~~ability~~may tobe ~~resolve~~enacted, ~~challenges~~or ~~associated~~the ~~with~~development ~~integrating~~or ~~acquired~~changes ~~businesses~~within ~~into~~international ~~our existing~~accords ~~business.~~could ~~These~~adversely ~~challenges~~affect ~~include:~~the demand for or suitability of our products and services.

~~We cannot~~Our beprojects ~~certain~~are ~~that~~subject to numerous hazards and our record and reputation for safety is important to our business. If we ~~will~~do ~~find~~not ~~suitable~~maintain ~~acquisition~~an ~~candidates~~adequate orsafety ~~that~~record, we ~~will~~may be ~~able~~ineligible to ~~meet~~bid ~~these~~on ~~challenges~~certain ~~successfully.~~projects, could be terminated from existing projects and our reputation could be harmed.

~~An acquisition~~Our ~~could~~employees ~~absorb~~and ~~substantial~~customers ~~cash~~are ~~resources,~~exposed ~~require~~to usnumerous tohazards ~~incur~~during orthe ~~assume~~conduct ~~debt~~of ~~obligations~~our business, orincluding ~~issue~~electrical ~~additional~~contacts ~~common~~and orflashes, ~~preferred~~fires, ~~equity.~~natural ~~Restrictions~~gas inexplosions, ~~the~~mechanical ~~agreements governing~~failures ~~our~~and ~~indebtedness~~transportation ~~may~~accidents. ~~prohibit~~These ushazards ~~from~~can ~~obtaining~~cause ~~additional~~personal ~~financing,~~injury and, ifloss weof ~~are~~life, ~~not~~severe ~~able~~damage to ~~obtain~~or ~~financing~~destruction of property and equipment and other consequential damages, weand may ~~not~~result bein ~~able~~suspension of operations, inability to ~~consummate~~bid ~~acquisitions.~~on certain projects, civil damage claims and criminal fines and penalties that could have a material adverse effect on our business and results of operations.

~~Negotiating these~~Our ~~transactions~~safety ~~can~~record beis ~~time-consuming,~~important. ~~difficult~~If ~~and~~serious ~~expensive,~~accidents ~~and~~or ~~our~~fatalities ~~ability~~occur toor ~~close~~our ~~these~~safety ~~transactions~~record ~~may often be subject to approvals~~deteriorates, ~~including from regulatory authorities, that are beyond~~ our ~~control.~~reputation ~~Consequently,~~or weprospects ~~can~~for ~~make~~obtaining nofuture ~~assurances~~business ~~that~~could ~~these~~be ~~transactions,~~negatively ~~once undertaken and announced, will close~~affected.

~~In addition,~~The ~~following~~occurrence ~~an acquisition, we may have higher expenses and therefore may not achieve the results that we anticipated at the time~~ of ~~the~~an ~~acquisition,~~event ~~especially if we are~~ not ~~able~~ tofully ~~maintain~~covered orby ~~increase~~insurance ~~the~~could ~~revenues~~have ofa ~~the~~material ~~combined~~adverse ~~business.~~effect ~~Acquired~~on ~~entities~~our ~~also may be highly leveraged~~business, ~~dilutive~~financial tocondition ~~our~~and ~~earnings~~results ~~per~~of ~~share or have unknown liabilities~~operations.

Our Weinsurance does not provide coverage for all risks, and it may not be ~~able~~adequate to ~~attract~~cover all claims that may arise. The occurrence of an event not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations. Moreover, particular types of insurance coverage may not be available to us in the future, we may retain ~~qualified~~additional ~~employees~~risk through higher insurance deductibles or we may be unable to continue to obtain our desired level of insurance coverage at commercially reasonable rates.

~~There~~Because ismany ~~significant~~of ~~demand in~~ our ~~industry~~products ~~for skilled technicians~~ and ~~other~~the ~~qualified~~products ~~employees,~~that ~~including~~we ~~specialty~~distribute ~~servicing~~are complex and ~~material~~ ~~handling~~utilize ~~technicians~~many components, ~~direct~~processes ~~manufacturing labor~~ and ~~engineers.~~techniques, ~~This~~undetected ~~demand~~errors ~~is more pronounced in certain locations in which we operate where the demand for skilled workers is high. The delivery of our products~~ and ~~services~~design ~~requires~~flaws ~~personnel~~may ~~with specialized skills~~occur. AProduct ~~significant~~defects ~~increase in the wages paid by competing employers could~~ result in ahigher ~~reduction~~product ~~of our skilled labor force~~service, ~~increases~~warranty inand ~~the~~replacement ~~wage~~costs ~~rates~~and ~~that~~may wecause ~~must~~damage ~~pay~~to orour ~~both.~~customer Ifrelationships ~~either~~and ofindustry ~~these events were to occur~~reputation, ~~our~~all ~~capacity~~of ~~and~~which ~~profitability~~may ~~could~~negatively beimpact ~~diminished and~~ our ~~growth~~results ~~potential~~of ~~could be impaired~~operations.

1913

Table of Contents

The ~~Failure~~industries that we serve are subject to ~~maintain~~inherent ~~key~~risks, ~~licenses~~including equipment defects, malfunctions, failures and natural disasters. These risks may expose our customers to liability for personal injury, wrongful death, property damage, pollution and other environmental damage. We also may become involved in litigation related to such matters. Any litigation arising from a catastrophic occurrence involving our equipment or services could ~~have~~result in large claims for damages. Any increase in the frequency or severity of such incidents, or the general level of compensation awards with respect to such incidents, could affect our ability to obtain projects from our customers or acquire adequate insurance coverage at commercially reasonable rates. In addition to seeking compensation from us, customers who suffer losses as a ~~material~~result ~~impact~~of onthe occurrence of such events may also reduce or terminate their business with us, which may further harm our results of operations.

~~The~~We part of our business that consists of the sale, distribution, installation and warranty repair of large engines and transmissions used in commercial vehicle applications in Texas requires certain Texas state motor vehicle licenses that are ~~subject~~susceptible to ~~annual~~adverse ~~renewal.~~weather ~~While~~conditions ~~these~~affecting ~~licenses historically have been renewed on a regular basis, there can be no assurance that any particular license will be renewed in~~ the ~~future.~~Gulf ~~The termination of, or failure to renew, licenses could have a material adverse effect on our financial position, results of operations and cash flows~~Coast.

Certain Weareas ~~may~~in beand ~~unable~~near tothe ~~adequately~~Gulf ~~protect~~Coast orexperience ~~enforce~~hurricanes ~~our~~and ~~intellectual~~other ~~property~~extreme ~~rights~~weather orconditions ~~the~~on ~~value~~a ~~thereof~~relatively frequent basis. Our headquarters, ~~including~~manufacturing and aftermarket parts and service facilities in Houston are susceptible to significant damage, and our ~~rights~~New Orleans and other Gulf Coast facilities are subject to ~~use~~significant ~~the~~damage ~~"Stewart &~~or ~~Stevenson" trademark,~~total ~~which~~loss by these storms. Damage caused by high winds and floodwater could ~~have~~potentially cause us to curtail operations at these facilities for a ~~material~~significant ~~adverse~~period ~~effect~~of ontime until damage can be assessed and repaired. Moreover, even if we do not experience direct damage from any of these storms, we may experience disruptions of our ~~business~~operations because customers may curtail their activities due to damage to their facilities in and near the Gulf of Mexico.

~~The~~Due ~~protection~~to the losses as a consequence of ~~our~~the ~~patents,~~hurricanes ~~trademarks,~~that ~~service~~may ~~marks,~~affect ~~copyrights,~~the ~~trade~~Gulf ~~secrets~~Coast in the future, ~~domain~~we ~~names~~may ~~and~~not ~~other~~be ~~intellectual~~able ~~property rights,~~to ~~including~~obtain ~~know-how,~~future ~~confidential~~insurance orcoverage ~~proprietary~~comparable ~~technical~~to ~~and~~our ~~business~~current ~~information~~coverage, isputting ~~important~~us at a greater risk of loss due to ~~our~~severe ~~businesses~~weather conditions. InFuture ~~particular~~hurricanes in the region may increase costs and deductibles, ~~our~~limit ~~rights~~maximum toaggregate recoveries under available policies or decrease the ~~"Stewart &~~availability ~~Stevenson" trademark~~of ~~and~~insurance. ~~logo~~Any ~~are~~significant ~~important~~uninsured tolosses could have a material adverse effect on our ~~sales~~business, financial condition and ~~marketing~~results ~~efforts.~~of operations.

~~To protect~~We ~~our~~may ~~intellectual~~continue ~~property,~~to ~~including~~expand ~~our~~through ~~know-how~~acquisitions ~~and~~of other ~~proprietary information~~businesses, wewhich ~~rely~~may ondivert aour ~~combination~~management’s ~~of copyright~~attention, ~~patent,~~result ~~trademark,~~in ~~domain~~dilution ~~name,~~to ~~trade secret~~our ~~and~~stockholders ~~unfair competition laws, along with confidentiality procedures, contractual provisions~~ and ~~other~~consume ~~similar measures.~~resources ~~While~~that weare ~~have~~necessary ~~registrations~~to ~~for~~sustain ~~some of~~ our ~~trademarks~~business. inWe ~~certain countries, including the United States, protection for intellectual property rights is territorial, and~~ may not be ~~available or~~able ~~enforceable in every country in which our intellectual property and technology is used. Accordingly, we cannot ensure our ability~~ to ~~use,~~successfully onintegrate anacquired ~~exclusive~~businesses ~~basis~~with ~~or otherwise, without risk,~~ our ~~intellectual~~ ~~property~~business, ~~including the "Stewart & Stevenson" trademark~~ and ~~logo, particularly in countries where~~ we, ormay ~~our licensors, do~~ not ~~have~~realize ~~trademark~~the ~~registrations,~~anticipated ~~patents~~benefits for our technology or copyright protection. The risks relating to our intellectual property include, among others, potentially being sued for infringement or other violations, paying related damage awards or other fees and costs or having to redesign or cease use of ~~our intellectual property in a country where a third party has previously established rights in~~ such ~~intellectual property~~acquisitions.

~~With respect~~Acquiring tocomplementary ~~intellectual~~businesses ~~property~~from ~~for~~third ~~which~~parties weis oran important part of our ~~licensors~~growth ~~currently~~strategy. ~~have~~Our ~~protection,~~acquisition ~~there~~strategy isdepends ~~also~~on the ~~risk~~availability ~~that:~~of suitable acquisition candidates at reasonable prices. This strategy also depends on our ability to resolve challenges associated with integrating acquired businesses into our existing business. These challenges include:

~~Policing and~~· integration ~~enforcing our intellectual property rights, protecting our trade secrets and other know-how, and determining the validity and scope~~ of ~~our~~product ~~intellectual property and related rights is important~~lines, ~~but~~sales ~~requires significant resources~~forces, ~~particularly~~customer iflists ~~litigation is necessary. Potential litigation could divert our management's time, attention~~ and ~~resources,~~manufacturing delay our product shipments or require us to enter into royalty or license agreements, which may not be available under commercially reasonable terms, if at all. Moreover, the value of our intellectual property rights may be impaired without infringement occurring. facilities;

20· development of management expertise outside of our existing business;

~~Table~~· diversion of ~~Contents~~management time and resources;

~~Our level of indebtedness could negatively affect our financial condition, adversely affect our ability to raise additional capital and~~ · harm ~~our ability~~ to ~~react to changes to~~ our existing business. relationships;

At· potential ~~January 31,~~loss ~~2011, we had approximately $192.6 million~~ of ~~indebtedness,~~key ~~consisting~~employees of $35.2 million outstanding under our asset-based revolving credit facility, $150.0 million of outstanding senior notes and $7.4 million of other notes payable. We may make additional borrowings at any time under our revolving credit facility, which provides for maximum borrowings of $250.0 million (expandable, subject to certain conditions and commitments, to $325.0 million). Borrowings under our revolving credit facility accrue interest at a floating rate and, accordingly, an increase in interest rates would result in a corresponding increase in our debt servicing requirements. Subject to restrictions in our revolving credit facility and the ~~indenture~~acquired ~~governing~~business; ~~our senior notes, we may also incur additional indebtedness.~~ and

~~Our level~~· possible ~~of indebtedness could have important consequences to you~~divestitures, ~~including~~inventory ~~the~~write-offs ~~following:~~and other charges.

We ~~Our~~cannot ~~revolving~~be ~~credit~~certain ~~facility~~that ~~and~~we ~~the~~will ~~indenture~~find ~~governing~~suitable ~~our~~acquisition ~~senior~~candidates ~~notes~~or ~~impose~~that ~~significant~~we ~~operating~~will ~~and~~be ~~financial~~able ~~restrictions~~to onmeet ~~us,~~these ~~which~~challenges ~~may prevent us from pursuing our business strategies or favorable business opportunities~~successfully.

~~Our~~An ~~revolving~~acquisition ~~credit~~could ~~facility~~absorb ~~and~~substantial cash resources, require us to incur or assume debt obligations, or issue additional common or preferred equity. Restrictions in the ~~indenture~~agreements governing our ~~senior~~indebtedness ~~notes~~may ~~impose~~prohibit ~~significant~~us ~~operating~~from obtaining additional financing, and, ~~financial~~if ~~restrictions~~we ~~on us.~~are ~~These~~not ~~restrictions~~able ~~limit~~to orobtain ~~prohibit~~financing, ~~among~~we ~~other~~may ~~things,~~not ~~our~~be ~~ability~~able to: consummate acquisitions.

21Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may often be subject to approvals, including from regulatory authorities, that are beyond our control. Consequently, we can make no assurances that these transactions, once undertaken and announced, will close.

~~Table~~In addition, following an acquisition, we may have higher expenses and therefore may not achieve the results that we anticipated at the time of ~~Contents~~the acquisition, especially if we are not able to maintain or increase the revenues of the combined business. Acquired entities also may be highly leveraged, dilutive to our earnings per share or have unknown liabilities.

The revolving credit facility and the indenture governing the senior notes contain financial and operating covenants with which we must comply during the term of the agreements. These covenants include the maintenance of certain financial ratios, restrictions related to the incurrence of certain indebtedness and investments, and a prohibition on the creation of certain liens. The financial covenant for the revolving credit facility requires that we maintain a fixed charge coverage ratio, as defined in the credit agreement, of at least 1.1 to 1.0 at such time that our available borrowing capacity under the revolving credit facility is $30.0 million or less. The financial covenant for the senior notes, which is applicable were we to incur additional indebtedness (subject to various exceptions set forth in the underlying indenture), requires that, after giving effect to the incurrence of such additional indebtedness, we have a fixed charge coverage ratio, as described in the indenture, of at least 2.5 to 1.0. 14

~~A breach~~Table of any of these covenants could result in a default under our revolving credit facility or our senior notes. If any such default occurs, the lenders under our revolving credit facility and the holders of our senior notes may declare all outstanding amounts, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under our revolving credit facility also have the right in these circumstances to terminate any commitments they have to provide further funds. In addition, following an event of default under our revolving credit facility, the lenders under the revolving credit facility will have the right to proceed against the collateral granted to them to secure the amounts payable thereunder, and which force us into bankruptcy or liquidation. A default on certain other indebtedness could give rise to cross-default or cross-acceleration rights under our revolving credit facility or our senior notes. Contents

We Asmay annot ~~SEC~~be ~~reporting~~able ~~company, we are subject~~ to ~~additional~~attract ~~regulation~~ and ~~will~~retain ~~incur~~qualified ~~additional administrative costs relating to compliance with U~~employees.~~S. securities laws.~~

WeThere ~~are~~is ~~subject~~significant todemand ~~reporting~~in our industry for skilled technicians and other ~~obligations~~qualified ~~under~~employees, ~~the~~including ~~Securities~~specialty ~~Exchange~~servicing ~~Act~~and ofmaterial ~~1934.~~handling ~~These~~technicians, ~~requirements~~direct ~~include~~manufacturing ~~the~~labor ~~preparation~~ and ~~filing~~engineers. ofThis ~~detailed~~demand ~~annual,~~is ~~quarterly~~more ~~and~~pronounced ~~current~~in ~~reports.~~certain Inlocations ~~addition,~~in which we ~~are~~operate ~~required~~where tothe ~~keep~~demand ~~abreast~~for ofskilled ~~and~~workers ~~comply~~is ~~with~~high. ~~material~~The ~~changes~~delivery inof ~~the~~our ~~applicable~~products ~~rules~~ and ~~regulations~~services ~~promulgated~~requires ~~by the~~personnel ~~SEC,~~with ~~including~~specialized ~~the~~skills. ~~changes~~A ~~and~~significant ~~requirements~~increase ~~mandated~~in by the ~~Sarbanes-Oxley~~wages ~~Act~~paid ofby ~~2002.~~competing ~~Compliance~~employers ~~with~~could ~~these~~result ~~rules~~in ~~and~~a ~~regulations~~reduction ~~has~~of ~~resulted~~our inskilled anlabor ~~ongoing~~force, ~~increase~~increases in ~~our~~the ~~legal,~~wage ~~audit~~rates ~~and financial~~that ~~compliance~~we ~~costs,~~must ~~the~~pay ~~diversion~~or both. If either of ~~management~~these ~~attention~~events ~~from~~were ~~operations~~to ~~and~~occur, ~~strategic~~our ~~opportunities~~capacity and ~~has~~profitability ~~made~~could ~~legal,~~be ~~accounting~~diminished and ~~administrative~~our ~~activities~~growth ~~more time-consuming~~potential ~~and~~could ~~costly.~~be impaired.

Failure ~~If we fail~~ to maintain ankey ~~effective~~licenses ~~system~~could ofhave ~~internal~~a ~~controls,~~material weimpact ~~may~~on ~~not be able to report~~ our ~~financial results accurately or prevent fraud~~operations.

WeThe ~~produce~~part ~~our financial statements in accordance with the requirements~~ of ~~U.S. generally accepted accounting principles ("GAAP"); however, while we have performed~~ our ~~own~~business ~~analysis~~that asconsists toof the ~~effectiveness~~sale, ~~of our internal control over financial reporting~~distribution, ~~our~~installation ~~independent~~and ~~registered~~warranty ~~public~~repair ~~accounting firm has not attested to the effectiveness~~ of ~~our~~large ~~internal~~engines ~~accounting~~and ~~control~~transmissions ~~over~~used ~~financial~~in ~~reporting~~commercial ~~pursuant~~vehicle toapplications ~~Section 404~~in ofTexas ~~the~~requires ~~Sarbanes-Oxley~~certain ~~Act~~Texas ~~("Section 404").~~state ~~Effective~~motor ~~internal~~vehicle ~~controls~~licenses that are ~~necessary~~subject ~~for us~~ to ~~provide~~annual ~~reliable financial reports and to prevent fraud~~renewal. ~~Our~~While ~~efforts~~these tolicenses ~~maintain~~historically anhave ~~effective~~been ~~system~~renewed ofon ~~controls~~a ~~may~~regular ~~not be successful~~basis, ~~and~~there wecan ~~may~~ be ~~unable~~no toassurance ~~maintain~~that ~~adequate~~any ~~controls~~particular ~~over our~~license ~~financial~~will ~~processes~~be ~~and~~renewed ~~reporting~~ in the future~~, including compliance with the obligations under Section 404~~. ~~Any~~The ~~failure~~termination ~~to maintain effective internal controls~~of, ~~difficulties encountered in their implementation~~ or ~~other~~failure ~~effective improvement of our internal controls could impact our operating results or cause us~~ to ~~fail to meet our reporting obligations. Given the difficulties inherent in the design and operation of internal controls over financial reporting~~renew, inlicenses ~~the~~could ~~future,~~have ~~we may not be able to conclude that our internal control is effective. Ineffective internal controls may subject us to regulatory scrutiny and~~ a ~~loss~~material ofadverse ~~confidence~~effect inon our ~~reported~~ financial ~~information~~position, ~~which~~results ~~could~~of ~~have~~operations anand ~~adverse~~cash ~~effect on our business~~flows.

22We may be unable to adequately protect or enforce our intellectual property rights or the value thereof, including our rights to use the “Stewart & Stevenson” trademark, which could have a material adverse effect on our business.

~~Table~~The protection of ~~Contents~~our patents, trademarks, service marks, copyrights, trade secrets, domain names and other intellectual property rights, including know-how, confidential or proprietary technical and business information, is important to our businesses. In particular, our rights to the “Stewart & Stevenson” trademark and logo are important to our sales and marketing efforts.

To ~~The~~protect ~~interests~~our intellectual property, including our know-how and other proprietary information, we rely on a combination of ~~the~~copyright, ~~controlling~~patent, ~~holder~~trademark, domain name, trade secret and unfair competition laws, along with confidentiality procedures, contractual provisions and other similar measures. While we have registrations for some of our ~~common~~trademarks ~~equity~~in certain countries, including the United States, protection for intellectual property rights is territorial, and may not be ~~aligned~~available ~~with~~or ~~your~~enforceable ~~interests~~in every country in which our intellectual property and technology is used. Accordingly, we cannot ensure our ability to use, on an exclusive basis or otherwise, without risk, our intellectual property, including the “Stewart & Stevenson” trademark and logo, particularly in countries where we, or our licensors, do not have trademark registrations, patents for our technology or copyright protection. The risks relating to our intellectual property include, among others, potentially being sued for infringement or other violations, paying related damage awards or other fees and costs or having to redesign or cease use of our intellectual property in a country where a third party has previously established rights in such intellectual property.

~~Mr. Hushang~~With ~~Ansary,~~respect ~~our Chairman of the Board of Directors, indirectly beneficially owns a substantial majority of our common equity. As a result, Mr. Ansary is in a position~~ to ~~control~~intellectual ~~our~~property ~~affairs,~~for ~~policies and decisions to enter into any transaction. In this context, circumstances may occur in~~ which ~~the~~we ~~interests~~or ~~of Mr. Ansary as an equity owner may conflict with the interests of holders of~~ our ~~senior~~licensors ~~notes.~~currently ~~In addition, Mr. Ansary may~~ have ~~an interest in pursuing acquisitions~~protection, ~~divestitures~~there oris ~~other transactions~~also ~~that~~the ~~could~~risk ~~enhance his equity investment in us, even though such transactions might involve risks to holders of our senior notes.~~ that:

· the ~~ITEM~~patents, ~~1B. Unresolved~~copyrights, ~~Staff~~trademarks, ~~Comments~~ domain names, intellectual property licenses and other intellectual property held by, used and/or licensed to us, may be challenged, rejected or determined to be invalid; or

~~None~~· the confidentiality procedures that we have in place for maintaining trade secrets and other proprietary information may not be properly followed, which may result in the loss of such rights.

Policing ~~ITEM~~and 2enforcing our intellectual property rights, protecting our trade secrets and other know-how, and determining the validity and scope of our intellectual property and related rights is important, but requires significant resources, particularly if litigation is necessary. ~~Properties~~ Potential litigation could divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or license agreements, which may not be available under commercially reasonable terms, if at all. Moreover, the value of our intellectual property rights may be impaired without infringement occurring.

InOur ~~addition~~level ~~to our leased headquarters in the central business district~~ of ~~Houston,~~indebtedness ~~Texas,~~could wenegatively ~~also~~affect ~~maintain~~our ~~over~~financial ~~2.5 million square feet of manufacturing~~condition, ~~service~~adversely ~~and~~affect ~~sales~~our ~~facilities~~ability ~~throughout~~to ~~the~~raise ~~central~~additional ~~United~~capital ~~States, Canada, Colombia~~ and ~~Venezuela,~~harm asour ~~well~~ability asto ~~sales~~react ~~offices~~to inchanges ~~Beijing~~to ~~and~~our ~~Moscow~~business. ~~We have a total of 57 facilities, of which 48 are located in the United States and Canada (17 are owned and 31 are leased), and the remaining nine, all of which are leased, are located abroad.~~

~~Our facilities~~At ~~are~~January 31, ~~located~~2012, ~~close~~we had approximately $243.7 million of indebtedness, consisting of $86.8 million outstanding under our asset-based revolving credit facility, $150.0 million of outstanding senior notes and $6.9 million of other notes payable. We may make additional borrowings at any time under our revolving credit facility, which provides for maximum borrowings of $250.0 million (expandable, subject to ~~major~~certain ~~onshore~~conditions and ~~offshore~~commitments, ~~petroleum~~to ~~producing~~$375.0 million). ~~regions~~Borrowings inunder ~~the~~our ~~United~~revolving ~~States~~credit facility accrue interest at a floating rate and, accordingly, an increase in interest rates would result in a ~~number~~corresponding ofincrease ~~the~~in ~~world's~~our ~~energy~~debt ~~producing~~servicing ~~nations~~requirements. ASubject ~~summary~~to ofrestrictions in our ~~major~~ ~~locations~~revolving iscredit ~~shown~~facility ~~below:~~and the indenture governing our senior notes, we may also incur additional indebtedness.

Location	Leased /Owned	Segment
Dallas, TX	Owned	Distribution
Houston, TX (East)	Owned	Distribution
Houston, TX (Northwest)	Owned	Manufacturing
Odessa, TX	Owned	Distribution
Denver, CO	Owned	Distribution
San Antonio, TX	Owned	Distribution
New Orleans, LA	Owned/Leased	Distribution
Farmington, NM	Owned	Distribution
Corpus Christi, TX	Owned	Distribution
Odessa, TX	Leased	Manufacturing
Edmond, OK	Leased	Manufacturing
Victoria, TX	Leased	Manufacturing
Calgary, Canada	Leased	Manufacturing

~~For the~~Table ~~fiscal year ended January 31, 2011, our international assets represented approximately 10.7%~~ of ~~our total assets.~~ Contents

23Our level of indebtedness could have important consequences to you, including the following:

~~Table~~· our use of ~~Contents~~a substantial portion of our cash flow from operations to pay interest on our indebtedness will reduce the funds available to us for operations and other purposes;

· our ~~ITEM~~ability ~~3. Legal~~to ~~Proceedings~~ obtain additional debt or equity financing for working capital, capital expenditures, product development, debt service requirements, acquisitions or general corporate purposes may be impaired;

In· our ~~July~~level ~~2009, we settled an arbitration action brought against one~~ of ~~our~~indebtedness ~~suppliers~~could ~~and~~place us. ~~Fiscal~~at ~~2009~~a ~~results~~disadvantage ofcompared ~~operations,~~to ~~after insurance~~our ~~proceeds~~competitors ~~and~~that ~~receipt~~may ofhave ~~certain~~proportionately ~~inventory,~~less were negatively impacted by approximately $3.5 million, which is recorded in selling and administrative expenses. The settlement resolved the arbitration action and resulted in dismissal and release of all claims alleged. debt;

~~During Fiscal~~· our ~~2009,~~flexibility ~~the~~in ~~State~~planning ~~of Texas began conducting a sales and use tax audit~~ for ~~Fiscal 2006~~, ~~2007~~or ~~and~~reacting ~~2008. Recently, the audit period has been expanded~~ to ~~include Fiscal 2009. In the second quarter of Fiscal 2009~~, wechanges ~~completed a preliminary analysis and recorded our then best estimate of probable loss as a charge to selling and administrative expenses and other current liabilities~~ in our ~~consolidated financial~~business ~~statements. As the audit process~~ and ~~periods have evolved, we have continued to evaluate this analysis and have recorded adjustments to~~ the ~~accrual~~industry ~~reflecting our best estimate of probable loss. The audit remains~~ in ~~process~~which ~~and,~~we ~~accordingly,~~operate ~~our~~may ~~ultimate loss could~~ be ~~greater,~~limited; ~~or less, than the amounts we have recorded.~~ and

~~We are also a defendant in a number of lawsuits relating to matters normally incident to~~ · our ~~business.~~level ~~No individual case, or group~~ of ~~cases~~indebtedness ~~presenting~~makes ~~substantially~~us ~~similar~~more ~~issues~~vulnerable ~~of law or fact, is expected~~ to ~~have~~economic adownturns material effect on the manner in which we conduct our business or on our consolidated results of operations, financial position or liquidity. We maintain certain insurance policies that provide coverage for product liability and personal injury cases. These insurance policies are subject to a self-insured retention for which we are responsible, which is generally $500,000 for newer cases and $1.0 million for cases initiated before Fiscal 2009. We have established reserves that we believe to be adequate based on current evaluations and our experience in these types of claim situations. Nevertheless, an unexpected outcome or adverse ~~development~~developments in ~~any such case could have a material adverse impact on~~ our ~~consolidated results of operations in the period in which it occurs~~business.

Our ~~ITEM~~revolving ~~4. [Removed~~credit facility and ~~Reserved]~~ the indenture governing our senior notes impose significant operating and financial restrictions on us, which may prevent us from pursuing our business strategies or favorable business opportunities.

24Our revolving credit facility and the indenture governing our senior notes impose significant operating and financial restrictions on us. These restrictions limit or prohibit, among other things, our ability to:

~~Table~~· incur or assume indebtedness, or provide guarantees in respect of ~~Contents~~obligations of other persons;

· purchase, redeem ~~PART~~or II repay subordinated indebtedness prior to stated maturities;

· pay ~~ITEM~~dividends ~~5. Market~~on ~~for~~or ~~Registrant's~~redeem ~~Common~~or ~~Equity,~~repurchase ~~Related~~our ~~Stockholder~~stock ~~Matters~~or ~~and~~make ~~Issuer~~other ~~Purchases of Equity Securities~~distributions;

~~As of~~· issue ~~January 31,~~redeemable ~~2011,~~stock ~~there~~and ~~were~~preferred ~~four record holders of our outstanding units. There is no established public trading market for any class of our common equity.~~ stock;

~~Our income is reported for federal and certain states by our shareholders. We~~ · make ~~quarterly distributions to them to fund these tax obligations. During Fiscal 2010~~loans, ~~2009~~investments ~~and~~or ~~2008, $0.3 million, $5.6 million and $33.6 million, respectively, was distributed to shareholders for their tax obligations.~~ acquisitions;

· incur ~~ITEM 6. Selected Financial Data~~ liens;

~~The~~· engage following table sets forth our selected historical consolidated financial data as of and for each of the five years ended January 31, 2007, 2008, 2009, 2010 and 2011. The selected historical consolidated financial data was derived from our audited consolidated financial statements included elsewhere in ~~this~~sale/leaseback Annual Report or in our previous SEC filings. The selected historical financial data for the year ended January 31, 2008 includes the results of the Crown Acquisition from the date of its acquisition on February 26, 2007. You should read this information in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this Annual Report. transactions;

25· restrict dividends, distributions, loans or other payments or asset transfers from our subsidiaries;

~~Table~~· sell or otherwise dispose of ~~Contents~~assets, including capital stock of our subsidiaries;

	Year ended January 31,
(Dollars and units in thousands)	2007			2008			2009			2010			2011
Statement of operations data:
Sales	$	942,148		$	1,335,427		$	1,217,142		$	688,676		$	861,234
Cost of sales		774,060			1,070,396			1,002,166			577,028			715,967
Gross profit		168,088			265,031			214,976			111,648			145,267
Selling and administrative expenses		108,005			139,947			138,141			114,188			104,252
Impairment of goodwill and indefinite-lived intangible assets(1)		—			—			—			—			31,487
Other (income) expense, net		(1,900	)		(989	)		(1,311	)		54			(1,026	)
Operating profit (loss)		61,983			126,073			78,146			(2,594	)		10,554
Interest expense, net		19,756			29,058			24,931			20,489			19,886
Earnings (loss) before income taxes		42,227			97,015			53,215			(23,083	)		(9,332	)
Income tax expense(2)		742			5,192			2,659			816			700
Net earnings (loss)		41,485			91,823			50,556			(23,899	)		(10,032	)
Preferred dividends		(4,017	)		—			—			—			—
Net earnings (loss) available for common unit holders	$	37,468		$	91,823		$	50,556		$	(23,899	)	$	(10,032	)
Net earnings (loss) per unit:
Basic	$	0.51		$	0.92		$	0.51		$	(0.24	)	$	(0.10	)
Diluted	$	0.41		$	0.92		$	0.51		$	(0.24	)	$	(0.10	)
Net earnings (loss) available for common unit holders per common unit:
Basic	$	0.46		$	0.92		$	0.51		$	(0.24	)	$	(0.10	)
Diluted	$	0.41		$	0.92		$	0.51		$	(0.24	)	$	(0.10	)
Weighted average units outstanding:
Basic		80,745			100,005			100,005			100,005			100,005
Diluted		100,005			100,005			100,005			100,005			100,005
Balance sheet data (end of period):
Working capital(3)	$	214,718		$	318,072		$	313,574		$	245,485		$	238,271
Cash & cash equivalents		5,852			12,382			2,006			3,321			9,168
Property, plant and equipment, net		61,303			82,606			93,170			79,206			75,077
Total assets		456,801			673,621			653,962			514,525			567,603
Total debt		204,474			294,592			285,370			228,113			192,622
Total shareholders' equity		94,872			174,941			179,944			155,622			149,034

· enter into certain transactions with affiliates;

· consolidate ~~(1)See discussion~~or ofmerge ~~this~~with ~~impairment~~or ~~in Item 7—"Critical accounting policies—Goodwill and indefinite-lived intangible assets." (2)We conduct our operations as Stewart & Stevenson LLC~~into, aor ~~limited~~sell ~~liability~~substantially ~~company,~~all ~~and, as a result, U.S. federal and certain state income taxes are paid by the holders~~ of our ~~equity~~assets ~~interests. Therefore~~to, noanother U.S. federal income tax expense was recorded in our statements of operations. The amounts shown reflect income tax expense associated with foreign jurisdictions and certain state taxes. (3)Working capital is total current assets minus total current liabilities. person;

26· enter into new lines of business; and

~~Table~~· otherwise ofconduct ~~Contents~~necessary corporate activities.

The ~~ITEM~~revolving ~~7. Management's~~credit ~~Discussion~~facility and ~~Analysis~~the indenture governing the senior notes contain financial and operating covenants with which we must comply during the term of ~~Financial~~the ~~Condition~~agreements. These covenants include the maintenance of certain financial ratios, restrictions related to the incurrence of certain indebtedness and ~~Results~~investments, and a prohibition on the creation of ~~Operations~~certain liens. The financial covenant for the revolving credit facility requires that we maintain a fixed charge coverage ratio, as defined in the credit agreement, of at least 1.1 to 1.0 at such time that our available borrowing capacity under the revolving credit facility is $25.0 million or less. The financial covenant for the senior notes, which is applicable were we to incur additional indebtedness (subject to various exceptions set forth in the underlying indenture), requires that, after giving effect to the incurrence of such additional indebtedness, we have a fixed charge coverage ratio, as described in the indenture, of at least 2.5 to 1.0.

~~The following~~As ~~discussion~~of ~~should~~January 31, be2012, ~~read~~our inavailable ~~conjunction~~borrowing ~~with~~capacity ~~"Selected~~under ~~Financial~~the ~~Data"~~revolving ~~and~~credit ~~our~~facility ~~consolidated~~was ~~financial~~approximately ~~statements~~$104.9 ~~and~~million. ~~related~~Our ~~notes~~available ~~included elsewhere~~borrowing incapacity ~~this~~varies ~~Annual~~with ~~Report.~~our ~~The~~borrowing ~~following~~base, ~~information~~which ~~contains~~depends ~~forward-looking~~on ~~statements,~~the ~~which~~value ~~are~~of ~~subject~~certain toof ~~risks~~our ~~and uncertainties~~assets. ~~Should~~If ~~one~~the orvalue ~~more~~ of ~~these~~our ~~risks~~assets orwere ~~uncertainties materialize~~to decrease significantly, our ~~actual~~available ~~results~~borrowing ~~may~~capacity ~~differ~~would ~~from~~also ~~those~~decrease, ~~expressed~~which orcould ~~implied~~have byan ~~the~~adverse ~~forward-looking~~effect ~~statements.~~on our liquidity.

A ~~Overview~~ breach of any of these covenants could result in a default under our revolving credit facility or our senior notes. If any such default occurs, the lenders under our revolving credit facility and the holders of our senior notes may declare all outstanding amounts, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under our revolving credit facility also have the right in these circumstances to terminate any commitments they have to provide further funds. In addition, following an event of default under our revolving credit facility, the lenders under the revolving credit facility will have the right to proceed against the collateral granted to them to secure the amounts payable thereunder, which may force us into bankruptcy or liquidation. A default on certain other indebtedness could give rise to cross-default or cross-acceleration rights under our revolving credit facility or our senior notes.

~~Our wide~~Table ~~range~~ of products covers hydraulic fracturing, well stimulation, workover, intervention and drilling operations. These products include well stimulation equipment; pumping, acidizing, coiled tubing, cementing and nitrogen units; drilling rigs and workover rigs; power generation systems; and electrical support and distribution systems, as well as engines, transmissions, prime movers and material handling equipment. We have a substantial installed base of products, which provides us with significant opportunities for recurring, higher-margin aftermarket parts and service revenues from customers in the oil and gas, power generation and various other industries. In addition, we provide rental equipment to our customers, including generator sets, air compressors, rail car movers and material handling equipment. Contents

~~EBITDA means~~As ~~earnings~~an ~~before~~SEC ~~interest,~~reporting ~~taxes~~company, ~~depreciation, amortization and impairment of goodwill and indefinite-lived intangible assets and is a non-GAAP financial measure. We use EBITDA because~~ we ~~believe~~are ~~that~~subject ~~such a measurement is a widely accepted financial indicator used by investors and analysts~~ to ~~analyze~~additional ~~and~~regulation ~~compare companies on the basis of operating performance~~ and ~~that~~will ~~this~~incur ~~measurement~~additional ~~may~~administrative becosts ~~used~~relating ~~by some investors and others~~ to ~~make~~compliance ~~informed investment decisions. You should not consider it in isolation from or as a substitute for net income or cash flow measures prepared in accordance~~ with GAAP or as a measure of profitability or liquidity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. ~~GAAP.~~ ~~Some~~securities ~~of the limitations are:~~ laws.

~~In Fiscal~~We ~~2010,~~are wesubject ~~generated~~to ~~revenues~~reporting ofand ~~$861.2 million,~~other ~~operating~~obligations ~~profit~~under the Securities Exchange Act of ~~$10~~1934.~~6 million~~ These requirements include the preparation and ~~EBITDA~~filing of ~~$59.1 million~~detailed annual, ~~compared~~quarterly ~~with~~and ~~revenues~~current ~~of $688~~reports.~~7 million~~ In addition, ~~operating~~we ~~loss~~are required to keep abreast of ~~$2.6~~and comply with material changes in the applicable rules ~~million~~and regulations promulgated by the SEC, including the changes and ~~EBITDA~~requirements mandated by the Sarbanes-Oxley Act of ~~$15~~2002.8 Compliance with these rules ~~million~~and regulations has resulted in ~~Fiscal~~ongoing ~~2009~~legal, audit and ~~revenues~~financial ofcompliance $1costs,~~217.1 million,~~ ~~operating~~the ~~profit~~diversion of ~~$78.1 million~~management attention from operations and ~~EBITDA~~ ofstrategic ~~$97.0 million~~opportunities inand ~~Fiscal~~has ~~2008.~~made legal, accounting and administrative activities more time-consuming and costly.

27If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud.

~~Table~~We produce our financial statements in accordance with the requirements of ~~Contents~~U.S. generally accepted accounting principles (“GAAP”); however, while we have performed our own analysis as to the effectiveness of our internal control over financial reporting, our independent registered public accounting firm has not attested to, and is not required to attest to, the effectiveness of our internal accounting control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”). Effective internal controls are necessary for us to provide reliable financial reports and to prevent fraud. Our efforts to maintain an effective system of controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including compliance with the obligations under Section 404. Any failure to maintain effective internal controls, difficulties encountered in their implementation or other effective improvement of our internal controls could impact our operating results or cause us to fail to meet our reporting obligations. Given the difficulties inherent in the design and operation of internal controls over financial reporting, in the future, we may not be able to conclude that our internal control is effective. Ineffective internal controls may subject us to regulatory scrutiny and a loss of confidence in our reported financial information, which could have an adverse effect on our business.

~~EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company.~~ The ~~following~~interests ~~table~~of ~~provides~~the acontrolling ~~reconciliation~~holder of ~~net~~our ~~earnings~~common ~~(loss)~~equity (amay ~~GAAP financial~~not ~~measure)~~be toaligned ~~EBITDA~~with (ayour ~~non-GAAP financial measure):~~ interests.

		Fiscal Year ended January 31,
(Dollars in thousands)		2011			2010			2009
Net (loss) earnings		$	(10,032	)	$	(23,899	)	$	50,556
Add:
	Interest expense, net		19,886			20,489			24,931
	Income tax expense		700			816			2,659
	Depreciation and amortization		17,053			18,402			18,869
	Impairment of goodwill and indefinite-lived intangible assets		31,487			—			—
EBITDA (unaudited)		$	59,094		$	15,808		$	97,015

Mr. Hushang Ansary, our Chairman of the Board of Directors, indirectly beneficially owns a substantial majority of our common equity. As a result, Mr. Ansary is in a position to control our affairs, policies and decisions to enter into any transaction. In this context, circumstances may occur in which the interests of Mr. Ansary as an equity owner may conflict with the interests of holders of our senior notes. In addition, Mr. Ansary may have an interest in pursuing acquisitions, divestitures or other transactions that could enhance his equity investment in us, even though such transactions might involve risks to holders of our senior notes.

ITEM ~~Business~~1B. ~~drivers~~Unresolved ~~and~~Staff ~~measures~~ Comments

~~Revenue factors~~ None.

~~Oil~~ITEM and gas industry capital expenditures. Sales of our equipment are significantly driven by the capital spending programs of our customers. Growing worldwide demand for energy has resulted in significantly increased capital expenditures by oil and gas producers in recent years. We believe that we are well positioned for the rapid growth in the development of unconventional oil and gas resources, particularly in North America, which require utilization of technologically advanced well stimulation equipment of the nature that we provide. Although commodity price fluctuations may impact the level of oil and gas exploration activity in the long term, we believe the capital spending programs of our customers at this time continue to be strong. A decrease in the capital spending programs of our customers would adversely impact our equipment sales and, to a lesser extent, our aftermarket parts and service and rental sales. Approximately 77.6% and 72.2~~% of our revenues in Fiscal 2010 and Fiscal 2009, respectively, came from customers in the oil and gas industry~~. Properties

~~Non-oil~~In ~~and~~addition ~~gas~~to ~~industries. We~~our ~~believe~~leased ~~that~~headquarters ~~many~~in the central business district of Houston, Texas, we also maintain approximately 2.6 million square feet of manufacturing, service and sales facilities throughout the ~~non-oil~~central United States, Canada, Colombia and ~~gas~~Venezuela, ~~industries~~as wewell ~~serve~~as sales offices in Beijing and Moscow. We have a total of 55 facilities, ~~particularly~~of which 48 are located in the ~~commercial vehicle~~United States and ~~material~~Canada ~~handling~~(18 ~~industries~~are owned and 30 are leased), ~~provide~~and usthe ~~with~~remaining ~~opportunities~~seven, toall ~~continue~~of towhich ~~grow~~are ~~our~~leased, ~~business.~~are located abroad.

~~Aftermarket~~Our ~~parts~~facilities ~~and~~are ~~service~~located ~~demand. In~~close ~~addition,~~to wemajor ~~provide~~onshore ~~aftermarket parts~~ and ~~service~~offshore ~~and~~petroleum ~~rent~~producing ~~equipment~~regions ~~to customers~~ in the ~~oil and~~United ~~gas,~~States ~~power generation, marine, mining, construction, commercial vehicle~~ and ~~material~~in ~~handling~~a ~~industries.~~number ~~These sales generated approximately 34.9% and 39.8%~~ of ~~our~~the ~~revenues~~world’s ~~during~~energy ~~Fiscal~~producing ~~2010 and Fiscal 2009, respectively~~nations. WeA ~~provide~~summary ~~aftermarket~~of ~~parts and service for equipment manufactured by approximately 100 manufacturers, including products manufactured by us and~~ our ~~key~~major ~~OEMs,~~locations ~~and~~is ~~our~~shown ~~aftermarket business provides us with a recurring revenue stream. Our rental revenue includes generators, compressors and material handling equipment.~~ below:

Backlog. Among the metrics we track to monitor demand in our business is equipment order backlog. We define backlog as unfilled equipment orders that consist of written purchase orders or signed contracts accompanied, if required by our credit policies, by credit support (typically down payments or letters of credit). As of January 31, 2011, our equipment order backlog was $375.0 million, compared to $203.2 million as of January 31, 2010. 17

28Table of Contents

~~Table~~Location ofLeased ~~Contents~~/Owned Segment Dallas, TX Owned Distribution Houston, TX (East) Owned Distribution Houston, TX (Northwest) Owned Manufacturing Odessa, TX Owned Distribution Denver, CO Owned Distribution San Antonio, TX Owned Distribution New Orleans, LA Owned/Leased Distribution Farmington, NM Owned Distribution Corpus Christi, TX Owned Distribution Odessa, TX Leased Manufacturing Edmond, OK Leased Manufacturing Victoria, TX Leased Manufacturing Calgary, Canada Leased Manufacturing

~~Backlog of~~In ~~$375.0 million~~Fiscal ~~as of January 31~~2012, ~~2011~~the ~~includes~~leases ~~$37.5 million~~on ~~of related party transactions reflecting an order in Fiscal 2009 from an affiliate. Revenue recognition from this transaction will be deferred until title to~~ the ~~product~~facilities ~~passes~~at toOdessa aand ~~third~~Victoria, ~~party~~Texas and ~~all~~Edmond, ~~other~~Oklahoma ~~revenue~~expired ~~recognition~~and ~~criteria~~we ~~have~~purchased ~~been~~these ~~met.~~facilities ~~A deposit~~ in ~~the amount of $31.2~~March ~~million is recorded as a customer deposit in our consolidated balance sheet~~2012. ~~Included~~In ~~in inventories~~addition, ~~net~~the isCalgary, ~~$29.5 million~~Canada infacility ~~costs~~was ~~related~~purchased toby ~~this~~an ~~contract~~affiliate, ~~and~~which ~~no amounts have been recorded~~ in ~~the~~turn ~~consolidated~~has ~~statements~~leased ofthis ~~operations~~facility ~~through~~to ~~January 31, 2011~~us.

~~Seasonality. Our~~For ~~revenues~~the ~~are~~fiscal ~~not~~year ~~significantly~~ended ~~affected~~January 31, by2012, ~~seasonality~~our international assets represented approximately 8.6% of our total assets.

ITEM ~~Operational~~3. ~~factors~~ Legal Proceedings

~~Ensuring~~In ~~timely~~July 2009, ~~supply~~we ofsettled ~~components. While~~an wearbitration ~~believe~~action ~~that~~brought ~~the~~against ~~opportunities~~one toof ~~grow~~ our ~~business~~suppliers ~~are significant, there are also challenges~~ and ~~uncertainties~~ ~~we face in executing our business plans~~us. InFiscal ~~the~~2009 ~~current~~results ~~environment~~ of ~~strong~~operations, ~~demand~~after ~~for~~insurance ~~products~~proceeds and ~~services~~receipt of ~~the~~certain ~~type we provide~~inventory, ~~our~~were ~~ability~~negatively toimpacted ~~procure~~by ~~certain~~approximately ~~components~~$3.5 million, onwhich ~~a timely~~is ~~basis~~recorded toin ~~meet~~selling ~~the~~and ~~delivery~~administrative ~~needs of our customers is a concern~~expenses. A ~~substantial~~The ~~portion~~settlement ofresolved the ~~products~~arbitration weaction ~~sell~~and ~~includes~~resulted ~~components~~in ~~provided~~dismissal ~~by our six key OEMs~~ and onrelease ~~occasion we need to rely upon alternative sources~~ of ~~supply~~all ~~for~~claims ~~those components because of the current levels of high demand for the components we require~~alleged. ~~Our ability to satisfy the delivery requirements of a customer on a timely basis is critical to our success.~~

~~Labor~~During ~~market~~Fiscal ~~constraints. Although~~2009, ~~we have~~ the ~~benefit~~State of Texas began conducting a ~~highly~~sales ~~trained~~and use tax audit of one of the Company’s subsidiaries for Fiscal 2006, 2007 and ~~experienced~~2008. ~~workforce~~The audit period was subsequently expanded to include Fiscal 2009. In the second quarter of Fiscal 2009, we ~~believe~~completed ~~that~~a ~~attracting~~preliminary analysis and ~~retaining~~ ~~high quality~~recorded ~~and~~our ~~experienced~~then ~~personnel~~best isestimate of probable loss as a ~~significant~~charge ~~challenge~~to inselling ~~the~~and ~~current~~administrative ~~competitive~~expenses ~~environment,~~and ~~particularly~~other current liabilities in ~~oil-~~our ~~and~~consolidated ~~gas-related~~financial ~~activities~~statements. ~~Accordingly~~As the audit process and periods evolved, we ~~place particular~~continued ~~emphasis~~to onupdate ~~career~~this ~~development~~analysis ~~programs~~and ~~that~~recorded ~~seek~~adjustments to ~~improve~~the accrual reflecting our best estimate of probable loss. During the ~~retention~~third quarter of ~~employees~~Fiscal 2011, ~~including~~the ~~senior~~State of Texas and ~~middle~~the ~~management~~Company’s subsidiary resolved and settled the audit in full for these fiscal years. The resolution and settlement of the audit was for an amount that approximated the Company’s accrual and did not impact the Company’s results of operations for the third quarter of Fiscal 2011.

In ~~Presentation~~August 2011, a $10.8 million judgment against the Company was entered in the 80th Judicial District Court of ~~historical~~Harris ~~financial~~County, ~~information~~ Texas in the matter of Brady Foret v. Stewart & Stevenson, et al. Our insurer has defended, and is continuing to defend, the Company in this case and has indicated that the judgment will be appealed. Our self-insurance retention for this matter is $1.0 million, which amount has been accrued in a prior year. Any costs associated with the appeal and any payment required by an eventual final judgment will be covered by our insurance policies. This matter is not expected to have a material adverse effect to our consolidated balance sheets, results of operations or cash flows.

~~Our~~We ~~fiscal~~are ~~year~~also ~~begins~~a ondefendant ~~February 1~~in a number of lawsuits relating to matters normally incident to our business. No individual case, or group of cases presenting substantially similar issues of law or fact, is expected to have a material effect on the ~~stated~~manner ~~year~~in ~~and~~which ~~ends~~we conduct our business or on ~~January 31~~our consolidated results of ~~the~~operations, ~~following~~financial ~~year~~position or liquidity. ~~For~~We ~~example~~maintain certain insurance policies that provide coverage for product liability and personal injury cases. These insurance policies are subject to a self-insured retention for which we are responsible, ~~Fiscal 2010~~which ~~began~~is ongenerally ~~February 1~~$500,000 ~~2010~~for ~~and~~newer ~~ended~~cases onand ~~January~~$1.0 ~~31,~~million ~~2011~~for cases initiated before Fiscal 2009. We ~~report~~have ~~results~~established reserves that we believe to be adequate based on ~~the~~current ~~fiscal~~evaluations ~~quarter~~and ~~method,~~our ~~with~~experience ~~each~~in ~~quarter~~these ~~comprising~~types ~~approximately~~of ~~13 weeks~~claim situations. Nevertheless, an unexpected outcome or adverse development in any such case could have a material adverse impact on our consolidated results of operations in the period in which it occurs.

~~Operation as an LLC~~ 18

WeTable ~~have conducted our operations through Stewart & Stevenson LLC, a limited liability company, and, as a result, U.S. federal and certain state income taxes were paid by the holders~~ of our equity interests. Therefore, no U.S. federal income tax expense is recorded in our statement of operations. The amounts shown under "income taxes" in our audited consolidated financial statements reflect income tax expense associated with foreign jurisdictions and certain state taxes. Contents

ITEM ~~Segment~~4. ~~presentation~~ Mine Safety Disclosures

~~We recently revised our segment presentation to present the following reportable segments:~~ None.

29PART II

~~For more~~As ~~information~~of onJanuary 31, ~~our segments~~2012, ~~see~~there ~~"—Segment~~were ~~data~~five record holders of our outstanding units." There is no established public trading market for any class of our common equity.

~~In our~~Our ~~prior~~income ~~reports~~is ~~filed~~reported ~~with~~for ~~the~~federal ~~SEC,~~and wecertain ~~presented~~states ~~four~~by ~~segments:~~our ~~equipment,~~unitholders. ~~aftermarket~~We ~~parts~~make ~~and~~quarterly ~~service,~~distributions ~~rental~~to ~~and~~them ~~corporate~~to fund these tax obligations. ~~The~~During ~~audited~~Fiscal ~~consolidated~~2011, ~~financial~~2010 ~~statements included~~and ~~elsewhere~~2009, in$28.1 million, ~~this~~$0.3 million ~~Annual~~and ~~Report~~$5.6 million, ~~have~~respectively, ~~been~~was ~~recast~~distributed to ~~reflect~~ our ~~new~~unitholders ~~segment~~for ~~presentation.~~their tax obligations.

~~Critical accounting policies~~ 19

Table ~~Use~~ of ~~estimates and assumptions~~ Contents

~~The~~ITEM preparation of financial statements in conformance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period6. WeSelected ~~evaluate~~Financial our estimates on an ongoing basis, based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. Data

The ~~Revenue~~following ~~recognition~~ table sets forth our selected historical consolidated financial data as of and for each of the years ended January 31, 2008, 2009, 2010, 2011 and 2012. The selected historical consolidated financial data was derived from our audited consolidated financial statements included elsewhere in this Annual Report or in our previous SEC filings. The selected historical financial data for the year ended January 31, 2008 includes the results of the Crown Acquisition from the date of its acquisition on February 26, 2007. You should read this information in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report.

Revenue from equipment and parts sales is recognized when the product is shipped, collection is reasonably assured, risks of ownership have been transferred to and accepted by the customer and contract terms are met. Cash discounts or other incentives to customers are recorded as a reduction of revenue. Revenue from service agreements is recognized as earned when services have been rendered. Revenue from rental agreements is recognized on a straight-line basis over the rental period. We report revenue net of any revenue-based taxes assessed by governmental authorities.

	Fiscal Year Ended January 31,
	2008(5)			2009			2010			2011			2012
(Dollars and units in thousands)
Statement of operations data:
Sales	$	1,335,427		$	1,217,142		$	688,676		$	861,234		$	1,324,007
Cost of sales	1,070,396			1,002,166			577,028			715,967			1,066,454
Gross profit	265,031			214,976			111,648			145,267			257,553
Selling and administrative expenses	139,947			138,141			114,188			104,252			137,188
Impairment of goodwill and indefinite-lived intangible assets (1)	-			-			-			31,487			-
Other (income) expense, net	(989		)	(1,311		)	54			(1,026		)	286
Operating profit (loss)	126,073			78,146			(2,594		)	10,554			120,079
Interest expense, net	29,058			24,931			20,489			19,886			19,888
Earnings (loss) before income taxes	97,015			53,215			(23,083		)	(9,332		)	100,191
Income tax expense (2)	5,192			2,659			816			700			2,282
Net earnings (loss) available for common unitholders	$	91,823		$	50,556		$	(23,899	)	$	(10,032	)	$	97,909

Net earnings (loss) available for common unitholders per common unit:
Basic	$	1.64		$	0.90		$	(0.43	)	$	(0.18	)	$	1.74
Diluted	$	1.64		$	0.90		$	(0.43	)	$	(0.18	)	$	1.74
Weighted average units outstanding (3):
Basic	56,025			56,025			56,025			56,025			56,129
Diluted	56,025			56,025			56,025			56,025			56,129
Balance sheet data (end of period):
Working capital (4)	$	318,072		$	313,574		$	245,485		$	238,271		$	335,356
Cash and cash equivalents	12,382			2,006			3,321			9,168			4,211
Property, plant and equipment, net	82,606			93,170			79,206			75,077			94,624
Total assets	673,621			653,962			514,525			567,603			768,001
Total debt	294,592			285,370			228,113			192,622			243,720
Total shareholders’ equity	174,941			179,944			155,622			149,034			220,992

~~With respect~~(1) See todiscussion ~~long-term equipment contracts, revenue is recognized using the percentage-~~of~~-completion~~ ~~method.~~this ~~The~~impairment majority of our contracts are fixed-price contracts, and measurement of progress toward completion is based on direct labor hours incurred. For long-term equipment contracts to build land-based drilling, workover and service rigs, measurement of progress toward completion is based on the cost-to-cost method. Changes in ~~estimates~~Item 7—“Critical ~~for~~accounting ~~revenues,~~policies—Goodwill ~~costs to complete~~ and profit margins are recognized in the period in which they are reasonably determinable. Any anticipated losses on uncompleted contracts are recognized whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. With respect to costindefinite-~~plus-fixed-fee~~lived ~~contracts,~~intangible ~~we recognize the fee ratably as the actual costs are incurred, based upon the total fee amounts expected to be realized upon completion of the contracts~~assets. ~~Bid and proposal costs are expensed as incurred.~~ ”

~~Recoverable costs and accrued profits not yet billed~~ (~~"Unbilled Revenue"~~2) We ~~represent~~conduct ~~the~~our ~~cumulative~~operations ~~revenue~~as ~~recognized~~Stewart & ~~less~~Stevenson LLC, ~~the~~a ~~cumulative~~limited ~~billings~~liability tocompany, ~~the~~and, ~~customer.~~as ~~Any~~a ~~billed~~result, ~~revenue that~~U.S. ~~has~~federal ~~not~~and ~~been~~certain ~~collected~~state isincome ~~reported~~taxes asare ~~accounts~~paid ~~receivable.~~by ~~The~~the ~~timing~~holders of ~~when we bill~~ our ~~customers~~units. isTherefore, ~~generally~~no ~~based~~U.S. ~~upon~~federal ~~advance~~income ~~billing~~tax ~~terms~~expense orwas ~~contingent~~recorded ~~upon~~in ~~completion~~our ofstatements ~~certain phases~~ of ~~the work, as stipulated in the contract~~operations. ~~Billings~~The inamounts ~~excess~~shown ofreflect ~~incurred~~income ~~costs~~tax ~~represent~~expense ~~progress~~associated ~~billings~~with inforeign ~~excess~~jurisdictions ofand ~~Unbilled~~certain ~~Revenue.~~state taxes.

~~We frequently~~(3) All ~~sell~~periods ~~equipment~~reflect ~~together with "start-up" services, which typically involve adding fuel to the engine, starting the equipment for the first time and observing it to ensure that it is operating properly~~1:1.785 Inreverse ~~cases~~split ~~where~~of ~~start-up~~our ~~services~~common ~~are~~units ~~required~~effected onMay ~~an equipment sale~~31, ~~the estimated start-up costs are accrued when revenue from the equipment sale is recognized~~2011.

30(4) Working capital is total current assets minus total current liabilities.

~~Table~~(5) Our results of ~~Contents~~operations for the year ended January 31, 2008 include the results of operations of Crown from February 26, 2007, the date we consummated the Crown Acquisition.

~~Accounts receivable~~ 20

~~Accounts~~Table ~~receivable are recorded when billed and represent claims against third parties that will be settled in cash. The carrying value~~ of our accounts receivable, net of the allowance for doubtful accounts, represents the estimated net realizable value. We maintain an allowance for doubtful accounts for estimated losses related to credit extended to our customers. We base such estimates on our current accounts receivable aging and historical collections and settlements experience, existing economic conditions and any specific customer collection issues we have identified. Uncollectible accounts receivable are written off when we determine that the balance cannot be collected. Contents

ITEM ~~Inventories~~ 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Inventories~~The ~~are~~following ~~stated~~discussion atshould ~~the~~be ~~lower~~read ofin ~~cost~~conjunction ~~or market,~~ with ~~cost~~“Selected ~~primarily~~Financial ~~determined~~Data” onand aour ~~first-in,~~consolidated ~~first-out ("FIFO")~~financial ~~basis~~statements and ~~market~~related ~~determined~~notes onincluded ~~the~~elsewhere ~~basis~~in ofthis ~~estimated~~Annual ~~realizable values~~Report. WeThe ~~purchase~~following ainformation ~~considerable~~contains ~~amount~~forward-looking ofstatements, ~~our~~which ~~inventory~~are ~~for~~subject ~~resale from independent manufacturers pursuant~~ to ~~distribution agreements.~~risks ~~Cost represents invoice or production cost for new items~~ and ~~original cost less allowance for condition for used equipment inventory~~uncertainties. ~~Production~~Should ~~cost~~one ~~includes~~or ~~material,~~more ~~labor~~of ~~and manufacturing~~these ~~overhead.~~risks ~~When~~or ~~circumstances~~uncertainties ~~dictate~~materialize, weour ~~write~~actual ~~inventory~~results ~~down~~may todiffer ~~its~~from ~~estimated~~those ~~realizable~~expressed ~~value~~or ~~based~~implied ~~upon~~by ~~assumptions about future demand, technological innovations, market conditions, plans for disposal and~~ the ~~physical~~forward-looking ~~condition of products~~statements. See ~~Shipping~~“Special ~~and~~Note ~~handling~~Regarding ~~costs~~Forward-Looking ~~are expensed as incurred in cost of sales~~Statements. ~~Shipping and handling costs billed to customers are recorded as sales.~~ ”

~~Goodwill and indefinite-lived intangible assets~~ Overview

We ~~perform~~are ana ~~impairment~~leading ~~test~~designer, ~~for~~manufacturer ~~goodwill~~ and ~~indefinite-lived~~provider ~~intangible assets annually during the fourth quarter, or earlier if indicators~~ of ~~potential~~specialized ~~impairment~~equipment ~~exist.~~and ~~Our~~aftermarket ~~goodwill~~parts ~~impairment~~and ~~test~~service ~~involves a comparison of the fair value of each of our reporting units with their carrying value. Our impairment test~~ for ~~indefinite-lived~~ ~~intangible assets involves~~ the ~~comparison~~oil ~~of the fair value of the intangible asset~~ and ~~its~~gas ~~carrying~~industry ~~value. The fair value is determined using discounted cash flows ("income approach")~~ and other ~~market-related~~industries valuation models, including earnings multiples ("public company market approach") and comparable asset market values ("transaction approach"). Certain estimates and judgments are required in the application of these fair value models. The income approach consists of estimating the future cash flows that are directly associated with each of our reporting units. There are significant inherent uncertainties and management judgment involved in estimating the fair value of each reporting unit, including historical experience and future expectations such as budgets and industry projections. We believe we have ~~made~~served ~~reasonable~~for ~~estimates~~over ~~and assumptions to estimate the fair value of our reporting units~~100 years.

~~We performed~~Our ~~the~~wide ~~first~~range ~~step~~of ~~for~~products ~~our~~covers ~~annual~~hydraulic ~~impairment test~~fracturing, ~~which~~well ~~compares~~stimulation, ~~the fair value of our reporting units to their carrying values~~workover, ~~during~~intervention ~~the Fiscal 2010 fourth quarter~~ and ~~the result~~drilling ~~of this test indicated that a probable impairment existed for our Crown reporting unit. The Fiscal 2010 results of~~ operations ~~for~~These ~~the~~products ~~Crown~~include ~~reporting~~pumping, ~~unit~~acidizing, ~~did~~coil ~~not~~tubing, ~~achieve~~cementing ~~our~~and ~~expectations.~~nitrogen ~~In particular~~units, ~~the~~drilling ~~anticipated~~rigs, ~~rebound~~workover ~~for~~rigs, ~~and~~power ~~growth~~generation insystems ~~rig~~ and ~~well~~electrical ~~stimulation~~support ~~equipment sales~~ and ~~backlog~~distribution ~~growth~~systems, ~~for~~as ~~the~~well ~~Crown~~as ~~reporting~~engines, ~~unit~~transmissions ~~have~~and ~~not~~material ~~reached~~handling ~~pre-2009 levels~~equipment. ~~These assumptions~~We ~~had~~have ~~been~~a ~~factored~~substantial ~~into~~installed ~~our~~base ~~budgets~~of ~~and~~products, ~~forecasts~~which ~~and~~provides ~~specific~~us ~~sales~~with ~~were~~significant ~~anticipated~~opportunities tofor ~~occur during Fiscal 2010~~recurring, ~~including~~higher-margin ~~the~~aftermarket ~~fourth~~parts ~~quarter,~~and ~~coupled~~service ~~with~~revenues ~~growth~~from customers in ~~backlog~~the ~~for these products. Because~~ oil ~~prices~~and ~~have risen~~gas, itpower ~~was~~generation ~~anticipated~~and ~~that~~various ~~capital~~other ~~spending~~industries. ~~for~~In ~~land-based drilling~~addition, ~~workover~~we ~~and~~provide ~~service~~rental ~~rigs would return and be reflected in backlog and~~ equipment ~~ordering~~ ~~trends.~~to Asour acustomers, ~~result~~including ofgenerator ~~this~~sets, ~~prolonged~~air ~~downturn~~compressors, ~~our~~rail ~~cash~~car ~~flow~~movers ~~projections~~and ~~for~~material ~~Crown~~handling ~~have been substantially revised downward~~equipment.

31EBITDA means earnings before interest, taxes, depreciation and amortization and is a non-GAAP financial measure. Adjusted EBITDA means EBITDA, as further adjusted to add back impairment of goodwill and indefinite-lived intangible assets and is also a non-GAAP financial measure. We use EBITDA and Adjusted EBITDA because we believe that such a measurements are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and that these measures may be used by some investors and others to make informed investment decisions. You should not consider them in isolation from or as a substitute for net income or cash flow measures prepared in accordance with GAAP or as measures of profitability or liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations are:

~~Table~~· EBITDA ofand ~~Contents~~Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

~~The Crown~~· EBITDA ~~reporting unit had goodwill of $28.7 million~~ and ~~indefinite-lived~~Adjusted ~~intangible~~EBITDA ~~assets~~do ~~(trademarks)~~not ofreflect ~~$4.1 million~~changes ~~subject to this annual impairment test. In determining the fair value~~ in ~~the step one test~~, ~~the~~or ~~material assumptions used for the income approach included a weighted average cost of capital of 21.4% and a long-term growth rate of 4.1%. Based on our future~~ cash ~~flow~~requirements ~~projections~~ for ~~the Crown reporting unit~~, ~~the~~our ~~result~~working ofcapital the income approach indicated the carrying amount of the Crown reporting unit exceeded its estimated fair value. In addition, these cash flow projections did not result in meaningful market-related comparisons under the public company market and transaction approaches. Therefore, under the second step of the impairment test, we allocated the estimated fair value indicated by the income approach to the identifiable tangible and intangible assets and liabilities based on their respective values. This allocation indicated a partial impairment for the indefinite-lived intangible assets and no residual value for goodwill. needs;

~~The below~~· EBITDA ~~table~~and ~~details~~Adjusted ~~the~~EBITDA ~~impact~~do ofnot ~~this~~reflect ~~impairment~~the ~~charge,~~significant ~~which~~interest ~~resulted~~expense, inor anthe ~~overall~~cash ~~decrease~~requirements necessary to ~~goodwill~~service ~~and~~interest ~~intangibles,~~or ~~net~~principal inpayments on our ~~consolidated~~debt; ~~balance sheets of $31.5 million as follows:~~ and

	Indefinite-Lived Intangible Assets			Goodwill
Crown reporting unit before impairment test	$	4,084		$	28,653
Impairment charges		(2,834	)		(28,653	)
Crown reporting unit after impairment test	$	1,250		$	—

· although depreciation and amortization are non-cash charges, certain of these assets are being depreciated and amortized and will have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and

~~We recorded~~· although impairment of goodwill and indefinite-lived intangible assets is a ~~$31.5 million~~non-cash ~~impairment~~charge, the charge reflects a decrease in our ~~consolidated~~total ~~results~~assets ofuseful ~~operations~~ for ~~Fiscal~~generating ~~2010.~~our sales, and Adjusted EBITDA does not reflect any cash we may need to invest in additional assets useful to our business.

In ~~Long-lived~~Fiscal ~~assets~~ 2011, we generated revenues of $1,324.0 million, operating profit of $120.1 million and Adjusted EBITDA of $138.8 million, compared with revenues of $861.2 million, operating profit of $10.6 million and Adjusted EBITDA of $59.1 million in Fiscal 2010 and revenues of $688.7 million, operating loss of $2.6 million and Adjusted EBITDA of $15.8 million in Fiscal 2009.

~~Long-lived~~EBITDA ~~assets, which include property, plant~~ and ~~equipment~~Adjusted ~~and~~EBITDA ~~acquired~~calculations ~~definite-lived~~by ~~intangible~~one ~~assets,~~company ~~comprise~~may ~~a significant~~not ~~amount~~be ofcomparable ~~our~~to ~~total~~calculations ~~assets.~~made Weby ~~carry~~another ~~our property, plant and equipment at cost less accumulated depreciation~~company. ~~Maintenance~~The ~~and~~following ~~repairs~~table ~~are~~provides ~~expensed~~a asreconciliation ~~incurred~~of ~~and~~net ~~expenditures~~earnings ~~for renewals,~~(loss) ~~replacements~~(a ~~and~~GAAP ~~improvements~~financial ~~are~~measure) ~~capitalized.~~to WeEBITDA ~~depreciate our property, plant~~ and ~~equipment~~Adjusted onEBITDA ~~a straight~~(non-~~line~~GAAP ~~basis over~~financial ~~their estimated useful lives. Definite-lived intangibles are amortized on a straight-line basis over their estimated useful lives.~~ measures):

In accounting for long-lived assets, we must make estimates about the expected useful lives of the assets and the potential for impairment based on the fair value of the assets and the cash flows they are expected to generate. The value of the long-lived assets is then amortized over their expected useful lives. A change in the estimated useful lives of our long-lived assets would have an impact on our results of operations. We estimate the useful lives of our long-lived asset groups as follows: 21

Buildings		10 - 25 years
Leasehold improvements		Lesser of lease term or asset life
Rental equipment		2 - 8 years
Machinery and equipment		4 - 7 years
Computer hardware and software		3 - 4 years
Intangible assets		4 months - 27 years

Table of Contents

In estimating the useful lives of our property, plant and equipment, we rely primarily on our actual experience with the same or similar assets. The useful lives of our definite-lived intangible assets are determined by the years over which we expect the assets to generate a benefit based on legal, contractual or regulatory terms.

	Fiscal Year Ended January 31,
	2012			2011				2010
(Dollars in thousands)
Net earnings (loss)		$	97,909		$	(10,032	)		$	(23,899	)
Add:
Interest expense, net			19,888			19,886				20,489
Income tax expense			2,282			700				816
Depreciation and amortization			18,677			17,053				18,402
EBITDA (unaudited)			138,756			27,607				15,808
Impairment of goodwill and indefinite-lived intangible assets			-			31,487				-
Adjusted EBITDA (unaudited)		$	138,756		$	59,094			$	15,808

32Business drivers and measures

Revenue ~~Table of Contents~~ factors

WeOil ~~assess~~and ~~the~~gas ~~valuation~~industry capital expenditures. Sales of ~~components~~our equipment are significantly driven by the capital spending programs of our ~~property,~~customers. ~~plant~~Growing ~~and~~worldwide ~~equipment~~demand ~~and~~for ~~definite-lived~~energy ~~intangible~~has ~~assets~~resulted ~~whenever~~in ~~events~~significantly orincreased ~~circumstances~~capital ~~dictate~~expenditures ~~that~~by ~~the carrying~~oil ~~value~~and ~~might~~gas ~~not~~producers bein ~~recoverable~~recent years. We ~~base~~believe ~~our~~that ~~evaluation~~we onare ~~indicators~~well ~~such~~positioned asfor the ~~nature~~rapid ofgrowth in the ~~assets,~~development ~~the~~of ~~future~~unconventional ~~economic~~oil ~~benefit~~and ofgas ~~the~~resources, ~~assets~~particularly in North America, ~~any~~which ~~historical~~require orutilization ~~future~~of ~~profitability measurements~~technologically ~~and~~advanced ~~other~~well ~~external~~stimulation ~~market~~equipment ~~conditions~~of orthe ~~factors~~nature that ~~may~~we ~~be present~~provide. IfAlthough ~~such~~commodity ~~factors~~price ~~indicate~~fluctuations ~~that~~may impact the ~~carrying~~level ~~amount~~ of anoil ~~asset~~and orgas ~~asset~~exploration ~~group~~activity ~~may~~in ~~not~~the belong ~~recoverable~~term, we ~~determine whether~~believe ~~impairment~~the ~~has~~capital ~~occurred~~spending byprograms ~~analyzing~~of anour ~~estimate~~customers ofat ~~undiscounted~~this ~~future~~time ~~cash~~continue ~~flows~~to atbe strong; however, the ~~lowest~~recent ~~level~~short-term ~~for~~decrease ~~which~~in ~~identifiable~~gas ~~cash~~prices ~~flows~~has ~~exist.~~caused Ifsome lessening and/or delay in demand for our ~~estimate~~products ofas ~~undiscounted~~evidenced ~~future~~by ~~cash flows~~our ~~during~~equipment ~~the~~order ~~estimated~~backlog. While ~~useful~~we ~~life~~do ofnot ~~the~~anticipate ~~asset~~this isdevelopment ~~less~~to ~~than~~significantly affect us in the ~~carrying~~first ~~value~~half of the ~~asset~~year, wethis ~~recognize~~could aresult ~~loss~~in ~~for~~decreased activity in the ~~difference~~second ~~between~~half of Fiscal 2012. A decrease in the ~~carrying~~capital ~~value~~spending programs of ~~the~~our ~~asset~~customers would adversely impact our equipment sales and, ~~its~~to ~~estimated~~a ~~fair value~~lesser extent, ~~measured~~our byaftermarket ~~the~~parts ~~present~~and ~~value~~service and rental sales. Approximately 70.3% and 77.6% of ~~estimated~~our ~~future~~revenues ~~cash~~in ~~flows~~Fiscal or2011 ~~other~~and ~~means~~Fiscal 2010, asrespectively, ~~appropriate~~came ~~under~~from customers in the ~~circumstances.~~oil and gas industry.

Non-oil ~~Warranty~~and ~~costs~~ gas industries. We believe that many of the non-oil and gas industries we serve, particularly the commercial vehicle and material handling industries, provide us with opportunities to continue to grow our business.

~~Generally,~~Aftermarket ~~the~~parts ~~only~~and ~~warranty~~service ~~provided~~demand. We toprovide ~~our~~aftermarket ~~customers~~parts ~~for~~and ~~products~~service weand ~~sell~~rental ~~that~~equipment ~~were~~to ~~originally~~customers ~~manufactured~~in bythe ~~others~~oil and gas, ~~including~~power ~~our key~~generation, ~~OEMs~~marine, ismining, ~~the~~construction, ~~warranty~~commercial ~~provided~~vehicle byand ~~those~~material ~~original~~handling ~~manufacturers~~industries. WeThese ~~warrant~~sales ~~products~~generated ~~manufactured,~~approximately 28.2% and ~~services~~34.9% ~~provided, by us for periods~~ of ~~three~~our torevenues ~~18 months.~~during ~~Based~~Fiscal on2011 ~~historical experience~~ and ~~contract~~Fiscal ~~terms~~2010, werespectively. ~~accrue~~We ~~the~~provide ~~estimated~~aftermarket ~~cost~~parts ~~of our product~~ and service ~~warranties~~for atequipment ~~the~~manufactured ~~time~~by ofapproximately ~~sale~~100 ormanufacturers, inincluding ~~some~~products ~~cases,~~manufactured ~~when~~by ~~specific~~us ~~warranty exposures are identified~~ and ~~quantifiable.~~ ~~Accrued~~our ~~warranty~~six ~~costs~~key ~~are~~OEMs, ~~adjusted periodically to reflect actual experience. Certain warranty~~ and ~~other~~our ~~related~~aftermarket ~~claims~~business ~~involve~~provides ~~matters~~us ofwith ~~dispute that ultimately are resolved by negotiation, arbitration or litigation. Occasionally,~~ a ~~material warranty~~recurring ~~issue~~revenue ~~can arise that is beyond our historical experience~~stream. WeOur ~~accrue~~rental ~~for~~revenue ~~any~~includes ~~such~~generators, ~~warranty~~compressors ~~issues~~and asmaterial ~~they~~handling ~~become known and estimable~~equipment.

Backlog. Among ~~Customer~~the ~~deposits~~ metrics we track to monitor demand in our business is equipment order backlog. We define backlog as unfilled equipment orders that consist of written purchase orders or signed contracts accompanied, if required by our credit policies, by credit support (typically down payments or letters of credit). As of January 31, 2012, our equipment order backlog was $351.6 million, compared to $375.0 million as of January 31, 2011. Our equipment order backlog continued to increase throughout Fiscal 2011 up to October, when it reached over $400 million. Since that time, backlog has decreased as underlying orders have been delivered. While new equipment orders have been booked, during this time the price of gas has fluctuated and certain anticipated orders have been delayed, pending our customers’ evaluation of both the oil and gas markets and economic climate, as well as their own customers’ needs.

WeBacklog ~~sometimes~~of ~~collect~~$351.6 ~~advance~~million ~~customer~~as ~~deposits~~of toJanuary 31, ~~secure~~2012 ~~customers'~~included ~~obligations~~a to$30.5 ~~pay~~million ~~the~~equipment ~~purchase~~order ~~price~~received ofin ~~ordered~~Fiscal ~~equipment.~~2009 ~~For long-term~~from ~~construction~~an ~~contracts,~~affiliate. ~~these~~Revenue ~~customer~~recognition ~~deposits~~from ~~are~~this ~~recorded~~order asis ~~current~~deferred ~~liabilities~~ until ~~construction~~title ~~begins.~~to ~~During~~the ~~construction,~~equipment ~~the~~passes ~~deposit~~to ~~liability~~a isthird ~~reclassified~~party ~~into billings~~and inall ~~excess~~other ofrevenue ~~incurred~~recognition ~~costs~~criteria ~~and,~~have ~~ultimately,~~been ~~recognized~~met. ~~into~~A ~~revenue~~deposit ~~under~~in the ~~percentage-~~amount of~~-completion~~ ~~method~~$30.5 ~~For~~million ~~all~~is ~~other~~recorded ~~sales,~~as ~~these~~a ~~deposits~~customer ~~are~~deposit ~~recorded~~in ~~as current~~our ~~liabilities~~consolidated ~~until~~balance ~~revenue~~sheet. Included in inventories, net is ~~recognized~~$24.2 million in costs related to this order.

Seasonality. Our ~~Insurance~~ revenues are not significantly affected by seasonality.

WeOperational maintain a variety of insurance for our operations that we believe to be customary and reasonable. We are self-insured up to certain levels in the form of deductibles and retentions for general liability, vehicle liability, group medical and workers' compensation claims. Other than normal business and contractual risks that are not insurable, our risks are commonly insured against and the effect of a loss occurrence is not expected to be significant. We accrue for estimated self-insurance costs and uninsured exposures based on estimated development of claims filed and an estimate of claims incurred but not reported as of each balance sheet date. We regularly review estimates of reported and unreported claims and provide for losses accordingly. factors

Ensuring ~~Comparison~~timely supply of ~~results~~components. While we believe that the opportunities to grow our business are significant, there are also challenges and uncertainties we face in executing our business plans. In the current environment of ~~operations—Fiscal~~strong ~~2010~~demand for products and ~~Fiscal~~services ~~2009~~ of the type we provide, our ability to procure certain components on a timely basis to meet the delivery needs of our customers is a concern. A substantial portion of the products we sell includes components provided by our six key OEMs and on occasion we need to rely upon alternative sources of supply for those components because of the current levels of high demand for the components we require. Our ability to satisfy the delivery requirements of a customer on a timely basis is critical to our success.

~~Sales~~ 22

InTable ~~Fiscal 2010, our sales were $861.2 million, an increase~~ of $172.6 million, or 25.1%, compared to the same period of Fiscal 2009 sales of $688.7 million. The increase in sales impacted both segments and was attributable primarily to an overall increase in equipment sales in the manufacturing segment to customers in the oil and gas industry for our well stimulation equipment. Parts and service sales increased in both segments and higher transmission sales for oilfield equipment were primarily responsible for the increase in equipment sales for the distribution segment. Contents

33Labor market constraints. Although we have the benefit of a highly trained and experienced workforce, we believe that attracting and retaining high quality and experienced personnel is a significant challenge in the current competitive environment, particularly in oil- and gas-related activities. Accordingly, we place particular emphasis on career development programs that seek to improve the retention of employees, including senior and middle management.

~~Table~~Presentation of ~~Contents~~historical financial information

~~A breakdown~~Our fiscal year begins on February 1 of ~~sales~~the ~~for~~stated year and ends on January 31 of the ~~periods~~following isyear. asFor ~~follows:~~example, Fiscal 2011 began on February 1, 2011 and ended on January 31, 2012. We report results on the fiscal quarter method, with each quarter comprising approximately 13 weeks.

				For the Year Ended January 31,						Change
(Dollars in thousands)				2011			2010			$			%
Manufacturing segment
		Equipment		$	321,008		$	230,796		$	90,212			39.1	%
		Parts and service			21,386			15,558			5,828			37.5	%
			Total manufacturing sales	$	342,394		$	246,354		$	96,040			39.0	%
Distribution segment
		Equipment		$	216,251		$	164,846		$	51,405			31.2	%
		Parts and service			279,341			258,082			21,259			8.2	%
		Rentals			23,248			19,394			3,854			19.9	%
			Total distribution sales	$	518,840		$	442,322		$	76,518			17.3	%
		Total sales		$	861,234		$	688,676		$	172,558			25.1	%
Operating profit (loss)
	Manufacturing(1)			$	11,277		$	15,875		$	(4,598	)		(29.0	)%
	Distribution				37,481			23,640			13,841			58.5	%
	Corporate and shared services				(38,204	)		(42,109	)		3,905			(9.3	)%
	Total operating profit			$	10,554		$	(2,594	)	$	13,148
Operating profit percentage
	Manufacturing(1)				3.3	%		6.4	%
	Distribution				7.2	%		5.3	%
	Consolidated				1.2	%		(0.4	)%

Operation as an LLC

We ~~(1)The Fiscal~~have ~~2010~~conducted ~~operating~~our ~~profit~~operations ~~for~~through ~~the~~Stewart & ~~manufacturing~~Stevenson LLC, ~~segment~~a ~~includes~~limited liability company, and, as a result, U.S. federal and certain state income taxes were paid by the ~~impact~~holders of ~~the~~our ~~$31~~common units.5 ~~million~~Therefore, ~~goodwill~~no ~~and~~U.S. ~~indefinite-lived~~federal ~~intangible~~income ~~assets impairment~~tax ~~charge~~expense ~~for~~is ~~Crown~~recorded in our statement of operations. The amounts shown under “income taxes” in our audited consolidated financial statements reflect income tax expense associated with foreign jurisdictions and certain state taxes.

~~Manufacturing sales~~Segment increased by 39.0%, or $96.0 million, during Fiscal 2010 compared to Fiscal 2009, of which $90.2 million of this increase was related to equipment sales and $5.8 million was related to an increase in parts and service sales. The increase in equipment sales was primarily attributable to higher sales volumes for well stimulation equipment, which was partially offset by lower sales volumes in power generation (associated with deepwater drilling rig build cycles) and rigs as follows: presentation

			For the Fiscal Year Ended
							Change
			January 31, 2011		January 31, 2010
(Dollars in thousands)							$			%
Manufacturing equipment sales
	Well stimulation		$	275,271	$	60,016	$	215,255			358.7	%
	Power generation			17,889		116,749		(98,860	)		(84.7	)%
	Rigs			14,673		42,215		(27,542	)		(65.2	)%
	Seismic products			6,192		2,220		3,972			178.9	%
	Electric products			5,382		6,931		(1,549	)		(22.3	)%
	Other			1,601		2,665		(1,064	)		(39.9	)%
		Total equipment	$	321,008	$	230,796	$	90,212			39.1	%

Our reportable segments are as follows:

34· Manufacturing, which includes the design, manufacture and marketing of equipment for oilfield service providers, drilling and workover contractors, U.S. and international oilfield service companies, and national oil companies. We provide parts and service to customers primarily in the oil and gas industry.

~~Table~~· Distribution, which includes the distribution of ~~Contents~~stand-alone products and the provision of aftermarket parts and service for products manufactured by us, our key OEMs and other manufacturers, as well as the renting of equipment, including generator sets, rail car movers and material handling equipment.

~~Distribution sales~~· Corporate ~~increased~~and byshared ~~$76.5 million to $518.8 million in Fiscal 2010 compared to $442.3 million in Fiscal 2009. The increase in distribution sales was due to increased equipment sales of $51.4 million~~services, ~~parts~~which ~~and~~includes ~~service~~administrative ofoverhead ~~$21.3 million~~normally ~~and~~not ~~rentals~~associated ofwith ~~$3.8 million.~~specific ~~The~~activities ~~increase~~within ~~in transmissions is due to higher sales volumes for oilfield equipment. Equipment sales increased due to the following changes in~~ our ~~distribution~~operating ~~products:~~ segments.

			For the Year Ended January 31,				Change
(Dollars in thousands)			2011		2010		$			%
Distribution equipment sales
	Power generation		$	48,427	$	48,348	$	79			0.2	%
	Engines			28,845		32,631		(3,786	)		(11.6	)%
	Transmissions			47,661		17,769		29,892			168.2	%
	Prime movers			34,488		26,962		7,526			27.9	%
	Material handling			31,099		24,609		6,490			26.4	%
	Rail car movers			11,638		8,390		3,248			38.7	%
	Other			14,093		6,137		7,956			129.6	%
		Total equipment sales	$	216,251	$	164,846	$	51,405			31.2	%

For more information on our segments, see “—Segment data.”

Critical ~~Gross~~accounting ~~profit~~ policies

~~Our~~Use ~~gross~~of ~~profit~~estimates was $145.3 million for Fiscal 2010 compared to $111.6 million for Fiscal 2009, reflecting an increase in gross profit margin from 16.2% to 16.9%. Our gross profit margin increased by 0.7 points due to higher sales volumes and ~~product mix. The manufacturing segment gross profit margin increased from 15.4% to 17.0%, an increase of 1.6 points. The distribution segment gross profit margin remained flat at 16.8%.~~ assumptions

The ~~Selling~~preparation of financial statements in conformance with accounting principles generally accepted in the United States requires management to make estimates and ~~administrative~~assumptions ~~expenses~~ that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

~~Selling~~Revenue and administrative expenses decreased by $9.9 million to $104.3 million for Fiscal 2010, primarily as a result of the following items, which impacted Fiscal 2009: (i) an accrual for a probable sales tax liability ($3.4 million); (ii) the settlement and defense of a claim ($3.5 million); and (iii) the closure of a facility ($0.9 million). Further decreases in overall selling and administrative expenses have been experienced in Fiscal 2010, including lower professional and legal fees, bad debt expense and depreciation, partially offset by higher compensation expense. As a result, selling and administrative expenses as a percentage of sales decreased to 12.1% in Fiscal 2010 from 16.6% for Fiscal 2009. recognition

Revenue ~~Other~~from ~~(income)~~equipment ~~expense~~and parts sales is recognized when the product is shipped, collection is reasonably assured, risks of ownership have been transferred to and accepted by the customer and contract terms are met. Cash discounts or other incentives to customers are recorded as a reduction of revenue. Revenue from service agreements is recognized as earned when services have been rendered. Revenue from rental agreements is recognized on a straight-line basis over the rental period. We report revenue net of any revenue-based taxes assessed by governmental authorities.

~~Other~~With ~~income~~respect ~~increased~~to bylong-term ~~$1.1 million~~equipment tocontracts, $1revenue is recognized using the percentage-of-completion method.~~0 million~~ ~~for~~The ~~Fiscal~~majority ~~2010,~~of ~~mainly~~our ascontracts ~~the~~are ~~result~~fixed-price contracts, and measurement of ~~gains~~progress ~~associated~~toward ~~with foreign~~completion ~~currency~~is ~~derivative~~based ~~instruments~~on indirect ~~Fiscal~~labor ~~2010~~hours incurred. For long-term equipment contracts to build land-based drilling, workover and ~~lower~~service ~~foreign~~rigs, ~~currency~~measurement ~~transaction~~of ~~losses~~progress ~~associated~~toward ~~with~~completion ~~our~~is ~~foreign~~based ~~subsidiaries~~on the cost-to-cost method. Changes in ~~Fiscal~~estimates ~~2010~~for asrevenues, ~~compared~~costs to ~~Fiscal~~complete ~~2009.~~and ~~Our~~profit ~~foreign subsidiaries~~margins are recognized in ~~Canada,~~the ~~Colombia~~period ~~and~~in ~~Venezuela~~which ~~generated~~they ~~4.0%,~~are 3reasonably determinable.9% ~~and~~Any 0anticipated losses on uncompleted contracts are recognized whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.3% With respect to cost-plus-fixed-fee contracts, ~~respectively~~we recognize the fee ratably as the actual costs are incurred, ofbased ~~our~~upon ~~sales~~the ~~for~~total ~~Fiscal~~fee ~~2010~~amounts expected to be realized upon completion of the contracts. Bid and proposal costs are expensed as incurred.

~~Operating profit~~ 23

~~Our~~Table ~~operating profit increased to $10.6 million, or 1.2%~~ of sales, during Fiscal 2010 from an operating loss of $2.6 million, or 0.4% of sales, in Fiscal 2009, primarily as the result of higher sales volumes, gross profit margins and lower selling and administrative expenses; however, operating profit margin was significantly reduced by the impact of the goodwill and indefinite-lived intangible assets impairment charge of $31.5 million. See discussion of this impairment in Item 7— "Critical accounting policies—Goodwill and indefinite-lived intangible assets." Contents

35Recoverable costs and accrued profits not yet billed (“Unbilled Revenue”) represent the cumulative revenue recognized less the cumulative billings to the customer. Any billed revenue that has not been collected is reported as accounts receivable. The timing of when we bill our customers is generally based upon advance billing terms or contingent upon completion of certain phases of the work, as stipulated in the contract. Billings in excess of incurred costs represent progress billings in excess of Unbilled Revenue.

~~Table~~Customer ~~of Contents~~deposits

We ~~Interest~~sometimes ~~expense~~collect advance customer deposits to secure customers’ obligations to pay the purchase price of ordered equipment. For long-term construction contracts, ~~net~~ these customer deposits are recorded as current liabilities until construction begins. During construction, the deposit liability is reclassified into billings in excess of incurred costs and, ultimately, recognized into revenue under the percentage-of-completion method. For all other sales, these deposits are recorded as current liabilities until revenue is recognized.

~~Interest~~Accounts expense, net for Fiscal 2010 decreased by $0.6 million compared to Fiscal 2009, primarily as a result of lower outstanding borrowings and interest rates for our revolving credit facility during Fiscal 2010, partially offset by higher interest income during Fiscal 2009. receivable

Accounts ~~Comparison~~receivable are recorded when billed and represent claims against third parties that will be settled in cash. The carrying value of ~~the~~our ~~results~~accounts receivable, net of ~~operations—Fiscal~~the ~~2009~~allowance for doubtful accounts, represents the estimated net realizable value. We maintain an allowance for doubtful accounts for estimated losses related to credit extended to our customers. We base such estimates on our current accounts receivable aging and ~~Fiscal~~historical ~~2008~~ collections and settlements experience, existing economic conditions and any specific customer collection issues we have identified. Uncollectible accounts receivable are written off when we determine that the balance cannot be collected.

~~Sales~~ Inventories

~~For~~Inventories ~~Fiscal~~are ~~2009,~~stated ~~our~~at ~~sales~~the ~~were~~lower ~~$688.7 million~~of cost or market, with cost primarily determined on a ~~decrease~~first-in, first-out (“FIFO”) basis and market determined on the basis of ~~$528.5 million,~~estimated orrealizable 43values.~~4%,~~ ~~compared~~We topurchase ~~Fiscal~~a ~~2008~~considerable ~~sales~~amount of ~~$1,217~~ our inventory for resale from independent manufacturers pursuant to distribution agreements.~~1 million.~~ ~~The~~Cost ~~decrease~~represents ininvoice ~~sales~~or ~~impacted~~production ~~both~~cost ~~segments~~for new items and ~~resulted~~original ~~from~~cost ~~low~~less ~~customer~~allowance ~~confidence~~for ~~due~~condition tofor ~~the~~used ~~weak~~equipment Uinventory.S. Production cost includes material, labor and ~~global~~manufacturing ~~economies~~overhead. When circumstances dictate, ~~tight~~we ~~credit~~write ~~markets~~inventory down to its estimated realizable value based upon assumptions about future demand, technological innovations, market conditions, plans for disposal and ~~unstable~~the ~~gas~~physical condition of products. Shipping and ~~oil prices~~handling costs are expensed as incurred in cost of sales. Shipping and handling costs billed to customers are recorded as sales.

~~A breakdown~~Goodwill ofand ~~sales~~indefinite-lived ~~for~~intangible ~~these periods is as follows:~~ assets

				For the Year Ended January 31,						Change
(Dollars in thousands)				2010			2009			$			%
Manufacturing segment
		Equipment		$	230,796		$	485,165		$	(254,369	)		(52.4	)%
		Parts and service			15,558			34,890			(19,332	)		(55.4	)%
			Total manufacturing sales	$	246,354		$	520,055		$	(273,701	)		(52.6	)%
Distribution segment
		Equipment		$	164,846		$	307,754		$	(142,908	)		(46.4	)%
		Parts and service			258,082			347,898			(89,816	)		(25.8	)%
		Rentals			19,394			41,435			(22,041	)		(53.2	)%
			Total distribution sales	$	442,322		$	697,087		$	(254,765	)		(36.5	)%
		Total sales		$	688,676		$	1,217,142		$	(528,466	)		(43.4	)%
Operating profit (loss)
	Manufacturing			$	15,875		$	50,110		$	(34,235	)		(68.3	)%
	Distribution				23,640			66,456			(42,816	)		(64.4	)%
	Corporate and shared services				(42,109	)		(38,420	)		(3,689	)		9.6	%
	Total operating (loss) profit			$	(2,594	)	$	78,146		$	(80,740	)		(103.3	)%
Operating (loss) profit percentage
	Manufacturing				6.4	%		9.6	%
	Distribution				5.3	%		9.5	%
	Consolidated				(0.4	)%		6.4	%

We perform an impairment test for goodwill and indefinite-lived intangible assets annually during the fourth quarter, or earlier if indicators of potential impairment exist. Our goodwill impairment test involves a comparison of the fair value of each of our reporting units with their carrying value. Our impairment test for indefinite-lived intangible assets involves the comparison of the fair value of the intangible asset and its carrying value. The fair value is determined using discounted cash flows (“income approach”) and other market-related valuation models, including earnings multiples (“public company market approach”) and comparable asset market values (“transaction approach”). Certain estimates and judgments are required in the application of these fair value models. The income approach consists of estimating the future cash flows that are directly associated with each of our reporting units. There are significant inherent uncertainties and management judgment involved in estimating the fair value of each reporting unit, including historical experience and future expectations such as budgets and industry projections. We believe we have made reasonable estimates and assumptions to estimate the fair value of our reporting units.

36We performed the first step for our annual impairment test, which compares the fair value of our reporting units to their carrying values. The results of our Fiscal 2011 annual impairment test indicated that the fair values of our reporting units were greater than their carrying values and no impairments existed. The results of our Fiscal 2010 annual impairment test indicated that a probable impairment existed for our Crown reporting unit.

~~Table~~The Fiscal 2010 results of ~~Contents~~operations for the Crown reporting unit did not achieve our expectations. In particular, the anticipated rebound for and growth in rig and well stimulation equipment sales and backlog growth for the Crown reporting unit had not reached pre-2009 levels. These assumptions were factored into our budgets and forecasts and specific sales were anticipated to occur during Fiscal 2010, including the fourth quarter, coupled with growth in backlog for these products. Because oil prices have risen, we anticipated that capital spending for land-based drilling, workover and service rigs would return and be reflected in backlog and equipment ordering trends. As a result of this prolonged downturn, our cash flow projections for Crown were substantially revised downward.

~~Manufacturing sales~~The ~~decreased~~Crown byreporting ~~52.6%,~~unit orhad goodwill of $~~273~~28.7 million, ~~during~~and ~~Fiscal~~indefinite-lived ~~2009~~intangible ~~compared~~assets (trademarks) of $4.1 million subject to ~~Fiscal~~this ~~2008~~annual impairment test. ~~The~~In ~~decrease~~determining the fair value in ~~sales~~the ~~was~~step ~~attributable~~one totest, ~~lower~~the ~~equipment~~material ~~sales~~assumptions used for the income approach included a weighted average cost of ~~$254~~ capital of 21.4 ~~million~~% and ~~net~~a ~~decreases~~long-term ingrowth ~~parts~~rate ~~and service~~ of ~~$19~~4.~~3 million~~1%. ~~Equipment~~Based ~~sales~~on ~~decreased~~our future cash flow projections for ~~all~~the ~~products~~Crown reporting unit, ~~except~~the ~~power~~result ~~generation~~of ~~equipment~~the ~~(due~~income toapproach ~~higher~~indicated ~~demand~~the ~~associated with~~carrying ~~deepwater~~amount ~~drilling~~of ~~rig~~the ~~build~~Crown ~~cycles)~~reporting unit exceeded its estimated fair value. In addition, these cash flow projections did not result in meaningful market-related comparisons under the public company market and ~~other~~transaction ~~equipment~~approaches. Therefore, asunder the second step of the impairment test, we allocated the estimated fair value indicated inby the ~~following~~income ~~chart:~~approach to the identifiable tangible and intangible assets and liabilities based on their respective values. This allocation indicated a partial impairment for the indefinite-lived intangible assets and no residual value for goodwill.

			For the Year Ended January 31,				Change
(In thousands)			2010		2009		$			%
Manufacturing equipment sales
	Well stimulation		$	60,016	$	255,343	$	(195,327	)		(76.5	)%
	Rigs			42,215		121,145		(78,930	)		(65.2	)%
	Power generation			116,749		58,141		58,608			100.8	%
	Seismic			2,220		36,776		(34,556	)		(94.0	)%
	Electric products			6,931		12,131		(5,200	)		(42.9	)%
	Other			2,665		1,629		1,036			63.6	%
		Total equipment sales	$	230,796	$	485,165	$	(254,369	)		(52.4	)%

~~Distribution sales~~Table fell by 36.5%, or $254.8 million, to $442.3 million during Fiscal 2009 from $697.1 million in Fiscal 2008. Equipment sales fell by $142.9 million, parts and service sales fell by $89.8 million, and rental sales fell by $22.1 million. Rental sales during Fiscal 2008 included revenues of ~~approximately $11.2 million related to Hurricanes Gustav and Ike, which were not repeated during Fiscal 2009. Sales of equipment by product decreased as follows:~~ Contents

			For the Year Ended January 31,				Change
(In thousands)			2010		2009		$			%
Distribution equipment sales
	Power generation		$	48,348	$	58,358	$	(10,010	)		(17.2	)%
	Engines			32,631		65,344		(32,713	)		(50.1	)%
	Transmissions			17,769		49,757		(31,988	)		(64.3	)%
	Prime movers			26,962		52,658		(25,696	)		(48.8	)%
	Material handling			24,609		52,468		(27,859	)		(53.1	)%
	Rail king			8,390		20,230		(11,840	)		(58.5	)%
	Other			6,137		8,939		(2,802	)		(31.3	)%
		Total equipment sales	$	164,846	$	307,754	$	(142,908	)		(46.4	)%

The below table details the impact of this impairment charge, which resulted in an overall decrease to goodwill and intangibles, net in our consolidated balance sheets of $31.5 million as follows:

Gross profit

	Indefinite-Lived Intangible Assets			Goodwill
(Dollars in thousands)
Crown reporting unit before impairment test	$	4,084		$	28,653
Impairment charges	(2,834		)	(28,653		)
Crown reporting unit after impairment test	$	1,250		$	—

~~Our~~We ~~gross~~recorded ~~profit was $111.6 million for Fiscal 2009,~~ a ~~decrease of~~ $~~103~~31.45 million, ~~compared~~impairment tocharge ~~$215.0 million~~ in ~~Fiscal~~ ~~2008,~~our ~~reflecting~~consolidated aresults decline in gross profit margin from 17.7% to 16.2%, due to lower sales volumes, product mix and pricing pressures. The manufacturing segment gross profit margin increased slightly from 14.6% to 15.4%, primarily driven by changes in product mix. The distribution segment gross profit margin decreased from 20.1% to 16.8%, as a result of ~~changes~~operations infor ~~product~~Fiscal ~~mix, pricing pressures and increases in indirect costs such as inventory reserves~~2010.

37Long-lived assets

~~Table~~Long-lived assets, which include property, plant and equipment and acquired definite-lived intangible assets, comprise a significant amount of ~~Contents~~our total assets. We carry our property, plant and equipment at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred and expenditures for renewals, replacements and improvements are capitalized. We depreciate our property, plant and equipment on a straight-line basis over their estimated useful lives. Definite-lived intangibles are amortized in a manner over which the expected benefits of those assets are realized pursuant to their estimated useful lives.

In ~~Selling~~accounting for long-lived assets, we must make estimates about the expected useful lives of the assets and ~~administrative~~the ~~expenses~~ potential for impairment based on the fair value of the assets and the cash flows they are expected to generate. The value of the long-lived assets is then amortized over their expected useful lives. A change in the estimated useful lives of our long-lived assets would have an impact on our results of operations. We estimate the useful lives of our long-lived asset groups as follows:

Selling and administrative expenses decreased by $23.9 million to $114.2 million in Fiscal 2009 compared to $138.1 million in Fiscal 2008. Selling and administrative expenses as a percentage of sales increased to 16.6% from 11.3% for Fiscal 2009, primarily as a result of the impact of lower sales volumes and our fixed costs. The decrease of $23.9 million during Fiscal 2009 was partially offset by approximately $3.4 million related to an accrual for a probable sales tax liability and $3.5 million related to the settlement and defense of a claim. Fiscal 2008 included legal and professional expenses of approximately $2.6 million associated with the pursuit of strategic alternatives, $1.6 million related to Sarbanes-Oxley 404 internal controls implementation costs, and $3.2 million of non-cash amortization of other intangible assets.

Buildings		10 - 25 years
Leasehold improvements		Lesser of lease term or asset life
Rental equipment		2 - 8 years
Machinery and equipment		4 - 7 years
Computer hardware and software		3 - 4 years
Intangible assets		4 months - 27 years

In ~~Other~~estimating ~~expense~~the ~~(income)~~useful lives of our property, ~~net~~ plant and equipment, we rely primarily on our actual experience with the same or similar assets. The useful lives of our definite-lived intangible assets are determined by the years over which we expect the assets to generate a benefit based on legal, contractual or regulatory terms.

~~Other~~We ~~expense~~assess ~~was~~the $0valuation of components of our property, plant and equipment and definite-lived intangible assets whenever events or circumstances dictate that the carrying value might not be recoverable.~~1 million~~ inWe ~~Fiscal~~base ~~2009~~our evaluation on indicators such as the nature of the assets, athe ~~decrease~~future economic benefit of ~~$1.4 million~~the ~~compared~~assets, toany historical or future profitability measurements and other ~~income~~external ofmarket $1conditions or factors that may be present.~~3 million in~~ ~~Fiscal~~If ~~2008,~~such ~~mainly~~factors asindicate that the ~~result~~carrying amount of ~~foreign~~an ~~currency~~asset ~~transaction~~or ~~losses~~asset ~~associated~~group ~~with~~may ~~our~~not ~~Canadian~~be ~~subsidiary~~recoverable, ~~partially~~we ~~offset~~determine bywhether ~~realized~~impairment ~~gains~~has ~~associated~~occurred ~~with~~by ~~our~~analyzing ~~foreign~~an ~~currency~~estimate ~~derivative instruments~~of inundiscounted ~~place~~future cash flows at ~~that~~the ~~time~~lowest level for which identifiable cash flows exist. If our estimate of undiscounted future cash flows during the estimated useful life of the asset is less than the carrying value of the asset, we recognize a loss for the difference between the carrying value of the asset and its estimated fair value, measured by the present value of estimated future cash flows or other means, as appropriate under the circumstances.

Warranty ~~Operating (loss) profit~~ costs

~~Our~~Generally, ~~operating~~the ~~loss~~only ~~was~~warranty ~~$2.6 million~~provided to our customers for products we sell that were originally manufactured by others, orincluding 0our key OEMs, is the warranty provided by those original manufacturers.4% ofWe ~~sales~~warrant products manufactured, inand ~~Fiscal~~services ~~2009~~provided, ~~compared~~by tous ~~operating~~for ~~profit~~periods of ~~$78.1~~three to 18 ~~million~~months. Based on historical experience and contract terms, ~~or 6.4%~~we accrue the estimated cost of ~~sales~~our product and service warranties at the time of sale or, in ~~Fiscal~~some ~~2008~~cases, ~~primarily~~when asspecific ~~the~~warranty ~~result~~exposures ofare ~~lower~~identified ~~sales~~and quantifiable. Accrued warranty costs are adjusted periodically to reflect actual experience. Certain warranty and ~~gross~~other ~~profit~~related ~~margins~~claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. Occasionally, a material warranty issue can arise that is beyond our historical experience. We accrue for any such warranty issues as they become known and estimable.

~~Interest expense, net~~ 25

~~Net~~Table ~~interest expense was $20.5 million in Fiscal 2009, a decrease~~ of $4.4 million compared to net interest expense of $24.9 million in Fiscal 2008. The decrease in interest expense was primarily a result of lower outstanding balances and lower interest rates for our revolving credit facility and an increase in interest income as compared to Fiscal 2008. Contents

Share-based ~~Segment data~~ Compensation

InCompensation ~~our~~expense ~~prior~~for ~~reports~~our ~~filed~~share-based ~~with~~compensation ~~the~~plans ~~SEC,~~is wemeasured ~~presented~~using ~~four~~the ~~segments:~~fair ~~equipment,~~value ~~aftermarket~~for ~~parts~~these ~~and~~awards ~~service, rental~~ and ~~corporate.~~amortizing ~~We have revised our segments~~ to expense the ~~following~~fair ~~three~~value ~~segments:~~using ~~manufacturing,~~the ~~distribution~~straight-line ~~and~~method ~~corporate~~over ~~and~~the ~~shared~~vesting ~~services.~~period ~~The~~for ~~audited~~the ~~consolidated~~underlying ~~financial statements included elsewhere in this Annual Report have been recast to reflect our new segment presentation~~award.

Through our two operating segments, we design, manufacture and market a wide range of equipment and provide aftermarket parts and service to a broad range of customers. We also provide rental equipment through our distribution segment. These products and services are consistent with our activities in prior periods and were reported in prior periods as three distinct operating segments. We now report these same product categories within our two operating segments, which reflect our internal management structure. Insurance

~~This operational~~We ~~and~~maintain ~~management~~a ~~structure~~variety ~~was~~of ~~clarified~~insurance for our operations that we believe to be customary and ~~defined~~reasonable. inWe ~~the~~are ~~fourth~~self-insured ~~quarter~~up ofto ~~Fiscal~~certain ~~2010~~levels asin the ~~result~~form of ~~senior~~deductibles ~~management's~~and ~~assessment~~retentions ~~and~~for ~~recommendations~~general ~~made~~liability, tovehicle ~~the board~~liability, ofgroup ~~directors~~medical and workers’ compensation claims. ~~This~~Other ~~operational~~than normal business and ~~management~~contractual ~~realignment~~risks ~~was~~that ~~approved~~are bynot insurable, our ~~board~~risks ~~and~~are iscommonly ~~reflected~~insured inagainst and the ~~segments~~effect weof ~~now~~a ~~report.~~loss Weoccurrence ~~believe~~is ~~that~~not ~~the~~expected ~~two~~to ~~operating~~be ~~segment~~significant. ~~presentation continues~~We toaccrue ~~report~~for ~~the~~estimated ~~products~~self-insurance costs and ~~services~~uninsured weexposures ~~provide,~~based ~~while~~on ~~also~~estimated ~~providing~~development aof ~~view~~claims filed and an estimate of ~~how~~claims weincurred ~~manage~~but ~~our~~not ~~business~~reported ~~and~~as aof ~~better~~each ~~platform~~balance ~~from~~sheet ~~which~~date. toWe ~~explain~~regularly ~~the~~review ~~key~~estimates ~~activities~~of ~~within,~~reported and ~~drivers~~ unreported claims and provide for, ~~our~~losses ~~business~~accordingly.

38Comparison of results of operations—Fiscal 2011 and Fiscal 2010

~~Table of Contents~~Sales

~~Our reportable~~In Fiscal 2011, our sales were $1,324.0 million, an increase of $462.8 million, or 53.7%, compared to Fiscal 2010 sales of $861.2 million. This substantial increase in sales effectively returns our business to the levels of Fiscal 2008 and Fiscal 2007 and reflected the strong and continued growth and demand in the oil and gas industry, in particular for well stimulation equipment. The increase in equipment sales impacted both segments ~~are~~and we asexperienced ~~follows:~~increased sales for nearly all our products. Parts and service sales increased in both segments.

A ~~Manufacturing~~ breakdown of sales for the periods is as follows:

We design, manufacture and market equipment for U.S. and international oilfield service providers and drilling and workover contractors, as well as national oil companies that require integrated and customized product solutions. We manufacture equipment specifically for hydraulic fracturing, well stimulation, well workover, intervention and drilling operations. Our manufactured products include integrated solutions, which incorporate a variety of components into a single system, for a wide range of oilfield services and support applications. In addition, we provide parts and service to customers primarily in the oil and gas industry.

	Fiscal Year Ended January 31,								Change
	2012				2011				$			%
(Dollars in thousands)
Manufacturing segment
Equipment	$	574,203			$	321,008			$	253,195		78.9%
Parts and service	25,022				21,386				3,636			17.0%
Total manufacturing sales	$	599,225			$	342,394			$	256,831		75.0%

Distribution segment
Equipment	$	340,734			$	216,251			$	124,483		57.6%
Parts and service	350,106				279,341				70,765			25.3%
Rentals	33,942				23,248				10,694			46.0%
Total distribution sales	$	724,782			$	518,840			$	205,942		39.7%

Total sales	$	1,324,007			$	861,234			$	462,773		53.7%

Operating profit (loss)
Manufacturing (1)	$	115,215			$	11,277			103,938			921.7%
Distribution	56,826				37,481				19,345			51.6%
Corporate and shared services	(51,962		)		(38,204		)		(13,758		)	-36.0%
Total operating profit	$	120,079			$	10,554			$	109,525

Operating profit percentage
Manufacturing (1)	19.2			%	3.3			%
Distribution	7.8				7.2
Consolidated	9.1			%	1.2			%

(1) Fiscal ~~Distribution~~ 2010 operating profit for the manufacturing segment includes the impact of the $31.5 million goodwill and indefinite-lived intangible assets impairment charge for Crown.

We provide stand-alone products and aftermarket parts and service for products manufactured by us, our six key OEMs and other manufacturers. In addition, we provide rental equipment including generator sets, air compressors, rail car movers and material handling equipment to our customers. Our aftermarket parts and service operations, which provide us with a recurring, higher-margin source of revenue, serve customers engaged in the oil and gas, power generation, marine, mining, construction, commercial vehicle and material handling industries, as well as other industries. 26

Table ~~Corporate~~of ~~and shared services~~ Contents

~~Our~~Manufacturing ~~corporate~~segment ~~and~~sales ~~shared~~increased ~~services~~by ~~segment~~75.0%, ~~includes~~or ~~administrative~~$256.8 million, ~~overhead~~during ~~normally~~Fiscal ~~not~~2011 ~~associated~~compared ~~with~~to ~~specific~~Fiscal ~~activities~~2010, ~~within~~of ~~the operating~~which ~~segments~~$253.2 million ~~These~~was ~~expenses~~related ~~include~~to ~~legal,~~equipment ~~finance~~sales and ~~accounting,~~$3.6 million ~~internal~~was ~~audit,~~related ~~human~~to ~~resources,~~an ~~information~~increase ~~technology,~~in ~~marketing~~parts and service sales. The increase in equipment sales was primarily attributable to well stimulation equipment, ~~supply~~though ~~chain~~we ~~and~~recorded ~~similar~~higher ~~corporate~~sales ~~office~~volumes ~~costs~~in all categories except power generation equipment (associated with deepwater drilling rig build cycles). Seismic products sales increased as our customer’s business has grown significantly over the past year. The table below reflects our manufacturing equipment sales as follows:

Intra-segment revenues and costs are eliminated, and operating profit (loss) represents earnings (loss) before interest and income taxes.

	Fiscal Year Ended January 31,				Change
	2012		2011		$		%
(Dollars in thousands)
Manufacturing equipment sales
Well stimulation	$	492,034	$	275,271	$	216,763	78.7%
Rigs	33,626		14,673		18,953		129.2%
Seismic products	30,510		6,192		24,318		392.7%
Electric products	12,140		5,382		6,758		125.6%
Power generation	4,156		17,889		(13,733)		-76.8%
Other	1,737		1,601		136		8.5%
Total equipment sales	$	574,203	$	321,008	$	253,195	78.9%

Distribution ~~Segment~~segment ~~results~~sales ~~comparison—~~increased by $205.9 million to $724.8 million in Fiscal 2011 compared to $518.8 million in Fiscal 2010. The increase in distribution sales was due to increased equipment sales of $124.5 million, parts and ~~Fiscal~~service ~~2009~~ of $70.7 million and rentals of $10.7 million. All distribution products recognized increases in sales over the prior year. These increases were driven primarily by the oil and gas industry customers’ replacement of equipment components for their products due to increased use and service intensity. We experienced high demand for power generation equipment in connection with non-conventional oil and gas plays. Equipment sales increased due to the following changes in our distribution products:

Manufacturing

	Fiscal Year Ended January 31,				Change
	2012		2011		$		%
(Dollars in thousands)
Distribution equipment sales
Transmissions	$	79,120	$	47,661	$	31,459	66.0%
Prime movers	73,519		34,488		39,031		113.2%
Power generation	67,913		48,427		19,486		40.2%
Material handling	44,843		31,099		13,744		44.2%
Engines	39,506		28,845		10,661		37.0%
Rail car movers	15,277		11,638		3,639		31.3%
Other	20,556		14,093		6,463		45.9%
Total equipment sales	$	340,734	$	216,251	$	124,483	57.6%

~~Operating~~Gross profit generated by our manufacturing segment decreased to $11.3 million, or 3.3% of sales, for Fiscal 2010, from $15.9 million, or 6.4% of sales for Fiscal 2009. The $4.6 million decrease in operating profit was attributable to a goodwill and indefinite-lived intangible asset impairment charge of $31.5 million. This impairment charge was offset by increases of $14.8 million in sales volume, $5.5 million in increases due to a higher average profit margin, a $3.8 million decrease in selling and administrative expenses and a $2.8 million decrease in other expense. The decrease in selling and administrative expenses primarily related to lower depreciation, rent and facility-related costs and lower bad debt expense. The decrease in other expense was the result of foreign currency transaction losses attributable to our Canadian subsidiary in Fiscal 2009 that were lower in Fiscal 2010.

Our ~~manufacturing~~ ~~backlog~~gross asprofit ~~of January 31, 2011~~ was $~~273~~257.6 million, asfor Fiscal 2011 compared to $~~158~~145.63 million onfor ~~January 31,~~Fiscal 2010, ~~an increase of 72.5%. Backlog of $273.6 million as of January 31, 2011 includes a $37.5 million related party transaction,~~ reflecting an ~~order~~increase in ~~Fiscal~~gross ~~2009~~profit margin from ~~an affiliate~~16.9% ~~Revenue~~to ~~recognition~~19.8%. ~~from~~Our ~~this transaction~~gross ~~will~~profit bemargin ~~deferred~~increased ~~until~~by ~~title~~2.9 topoints ~~the~~due ~~product passes~~ to ahigher ~~third~~sales ~~party~~volumes and ~~all~~product ~~other~~mix. ~~revenue~~The ~~recognition~~manufacturing ~~criteria~~segment ~~have~~gross ~~been~~profit ~~met.~~margin ~~Cash~~increased ~~payments~~from ~~received~~17.0% ~~pursuant~~ to ~~this~~23.1%, ~~transaction~~an ~~are recorded~~increase asof ~~customer~~6.1 ~~deposits~~points inthat ~~the~~was ~~consolidated~~driven ~~balance~~by ~~sheet~~an ~~and~~overall ~~amounted~~strong todemand ~~$31.2 million~~for asour ~~of January 31, 2011~~equipment. ~~Included~~The indistribution ~~inventories,~~segment ~~net~~gross isprofit ~~$29.5 million~~margin ofdecreased ~~costs related~~from 16.8% to ~~this~~16.5% ~~transaction,~~ and noreflected ~~amounts~~both ~~have~~product ~~been~~mix ~~recorded~~and ina ~~the~~competitive ~~consolidated statement of operations for this transaction to date~~environment.

3927

Table of Contents

Selling ~~Distribution~~ and administrative expenses

~~Operating~~Selling ~~profit~~and ~~generated~~administrative byexpenses ~~the~~increased ~~distribution~~by ~~segment~~$32.9 million ~~increased~~ to $37137.52 million infor Fiscal ~~2010~~2011, ~~from~~primarily ~~$23.6 million~~as a result of increases in ~~Fiscal~~ ~~2009~~salaries and wages attributable to increased headcount, ~~representing~~a ancompany-wide pay increase inas ~~operating~~of ~~profit~~February 1, ~~percentage~~2011 ~~from~~of ~~5.3~~approximately 4% toand ~~7.2%.~~increased ~~The~~bonus accruals ($1319.9 8 million), ~~increase~~expenses inrelated ~~operating~~to ~~profit~~our ~~was~~proposed ~~attributable~~initial topublic ~~increases~~offering of($2.8 million), share-based compensation expense ($122.9 0 million), ~~in sales~~travel, ~~volume~~new product development costs, depreciation and ~~decreases~~as a result of the inclusion of operations of EMDSI, all of which totaled approximately $15.7 2 million. These increases were partially offset by decreases in ~~selling~~bad debt and ~~administrative~~legal and professional expenses. The remaining increase is attributable to, ~~partially~~and ~~offset~~reflective byof, athe ~~$0.2 million~~overall ~~decrease~~increase in ~~average~~our ~~gross~~business ~~profit~~activity. ~~margin~~As a result, selling and anadministrative ~~increase~~expenses as a percentage of $0 sales decreased to 10.~~5 million~~4% in ~~other~~Fiscal ~~expense~~2011 from 12.1% for Fiscal 2010.

~~Our distribution~~Other ~~backlog~~(income) ~~as of January 31~~expense, ~~2011 was $101.4 million, as compared to $44.7 million on January 31, 2010 an increase of 126.8%.~~ net

Other ~~Corporate~~(income) expense, net decreased by $1.3 million to expense of $0.3 million for Fiscal 2011, mainly as the result of gains associated with foreign currency derivative instruments in Fiscal 2010 and ~~shared~~higher ~~services~~ losses with foreign currency transactions associated with our foreign subsidiaries in Fiscal 2011 as compared to Fiscal 2010. Our foreign subsidiaries in Canada, Colombia and Venezuela generated 5.0%, 3.2% and 0.2%, respectively, of our sales for Fiscal 2011.

~~Corporate~~Operating and shared services expenses decreased to $38.2 million in Fiscal 2010 compared to $42.1 million in Fiscal 2009, primarily as a result of the following items that impacted Fiscal 2009: an accrual for a probable sales tax liability ($3.4 million) and the settlement and defense of a claim ($3.5 million). These decreases were offset by an increase in bonuses ($2.8 million). As a result of these decreases, and due to higher sales volumes, corporate and shared services expenses decreased from 6.1% to 4.4% as a percentage of sales. profit

Our ~~Segment~~operating ~~results~~profit ~~comparison—~~increased to $120.1 million, or 9.1% of sales, during Fiscal ~~2009~~2011 from $10.6 million, or 1.2% of sales, in Fiscal 2010, primarily as the result of higher sales volumes and gross profit margins partially offset by higherer selling and administrative expenses. In addition, operating profit in Fiscal ~~2008~~ 2010 was significantly reduced by the impact of the goodwill and indefinite-lived intangible assets impairment charge of $31.5 million. See discussion of this impairment above under “Critical accounting policies—Goodwill and indefinite-lived intangible assets.”

Interest ~~Manufacturing~~ expense, net

~~Operating~~Interest ~~profit~~expense, ~~generated~~net byfor ~~the~~Fiscal ~~manufacturing~~2011 ~~segment~~remained ~~decreased~~flat toat $1519.9 million incompared to Fiscal ~~2009 from $50~~2010.~~1 million~~ While ~~in Fiscal~~our ~~2008,~~borrowings aincreased ~~decrease in operating profit margin~~ from ~~9.6%~~Fiscal ~~to 6.4%~~2010, ~~primarily~~the ~~due~~majority ~~to higher costs and lower sales volumes. The $34.2 million decrease in operating profit was attributable to a decrease~~ of ~~$39.9 million~~this ~~in sales volume and an~~ increase inoccurred ~~other expense of $7.3 million, partially offset by $10.9 million decrease~~ in ~~selling~~the ~~and~~fourth ~~administrative~~quarter ~~expenses and an increase~~ of ~~$2.1 million in our average profit margin. The increase in other expense resulted from foreign currency transaction gains in~~ Fiscal ~~2008~~2011 ~~for~~and ~~our~~interest ~~Canadian~~rates ~~subsidiary,~~were ~~while foreign~~lower ~~currency transaction losses occurred~~ in Fiscal ~~2009.~~2011 ~~Selling and administrative expenses decreased~~ as acompared ~~result~~to ofFiscal ~~lower salaries and wages, including the impact of headcount reductions, depreciation, facilities costs and other items~~2010.

~~Our manufacturing~~Comparison ~~backlog~~of asresults of ~~January 31,~~operations—Fiscal 2010 ~~was $158.6 million compared to $223.7 million as of January 31, 2009, a decrease of 31.7%. We experienced significant declines in demand in fiscal 2009 for our well stimulation~~ and drilling rig products as a result of lower oil and gas prices, the tight credit markets and the weak U.S. and global economies. Backlog of $158.6 million as of January 31, 2010 includes $37.5 million of related party transaction reflecting an order in Fiscal 2009 from an affiliate. Revenue recognition from this transaction will be deferred until title to the product passes to a third party and all other revenue recognition criteria have been met. A deposit in the amount of $9.4 million is recorded as a customer deposit in our consolidated balance sheet. Included in inventories, net is $5.8 million in costs related to this contract, and no amounts have been recorded in the consolidated statements of operations through January 31, 2010.

40Sales

~~Table~~In Fiscal 2010, our sales were $861.2 million, an increase of ~~Contents~~$172.6 million, or 25.1%, compared to Fiscal 2009 sales of $688.7 million. The increase in sales impacted both segments and was attributable primarily to an overall increase in equipment sales in the manufacturing segment to customers in the oil and gas industry for our well stimulation equipment. Parts and service sales increased in both segments and higher transmission sales for oilfield equipment were primarily responsible for the increase in equipment sales for the distribution segment.

~~Distribution~~ 28

~~Operating~~Table profit generated by the distribution segment decreased to $23.6 million in Fiscal 2009 from $66.4 million in Fiscal 2008, while operating profit margin decreased from 9.5% to 5.3%. The $42.8 million decrease in operating profit was attributable to decreases of $51.2 million in sales volume and $14.6 million in our average profit margin. Decreases in selling and administrative expenses of $21.7 million and $1.3 million in other expense partially offset the overall decrease in operating profit. Selling and administrative expenses decreased due to lower salaries and wages, including the impact of headcount reductions, depreciation, rent and facility costs, among other items. The decrease in other expense is primarily attributable to foreign currency transaction losses occurring in our Venezuelan subsidiary in Fiscal 2008 that did not occur in Fiscal 2009. Contents

~~Our distribution~~A ~~backlog~~breakdown as of ~~January 31,~~sales ~~2010~~for ~~was~~the ~~$44.7 million,~~periods is as ~~compared to $64.2 million on January 31, 2009, a decrease of 30.4%.~~ follows:

Corporate and shared services

	Fiscal Year Ended January 31,						Change
	2011			2010			$		%
(Dollars in thousands)
Manufacturing segment
Equipment	$	321,008		$	230,796		$	90,212	39.1%
Parts and service	21,386			15,558			5,828		37.5%
Total manufacturing sales	$	342,394		$	246,354		$	96,040	39.0%

Distribution segment
Equipment	$	216,251		$	164,846		$	51,405	31.2%
Parts and service	279,341			258,082			21,259		8.2%
Rentals	23,248			19,394			3,854		19.9%
Total distribution sales	$	518,840		$	442,322		$	76,518	17.3%

Total sales	$	861,234		$	688,676		$	172,558	25.1%

Operating profit (loss)
Manufacturing (1)	$	11,277		$	15,875		(4,598)		-29.0%
Distribution	37,481			23,640			13,841		58.5%
Corporate and shared services	(38,204)			(42,109)			3,905		9.3%
Total operating profit	$	10,554		$	(2,594)		$	13,148

Operating profit percentage
Manufacturing (1)	3.3		%	6.4		%
Distribution	7.2			5.3
Consolidated	1.2		%	(0.4)		%

~~Corporate and shared services expenses increased to $42.~~(1 ~~million~~) The in Fiscal ~~2009~~2010 ~~compared~~operating toprofit ~~$38.4 million~~for inthe ~~Fiscal~~manufacturing ~~2008 and~~segment ~~increased~~includes asthe aimpact ~~percentage~~ of ~~sales from 3.2% to 6.1% as a result of lower sales volumes. Corporate and shared services expenses in Fiscal 2009 included $3.4 million of charges related to~~ the ~~accrual for a probable sales tax liability,~~ $331.5 ~~million~~ ~~in defense and settlement of a claim, an increase of $2.7~~ million ingoodwill ~~facility related expenses~~ and anindefinite-lived ~~increase~~intangible ~~of $1.0 million~~assets inimpairment ~~warranty~~charge ~~expense.~~for Crown.

Manufacturing ~~Liquidity~~sales increased by 39.0%, or $96.0 million, during Fiscal 2010 compared to Fiscal 2009, of which $90.2 million of this increase was related to equipment sales and ~~capital~~$5.8 million ~~resources~~ was related to an increase in parts and service sales. The increase in equipment sales was primarily attributable to higher sales volumes for well stimulation equipment, which was partially offset by lower sales volumes in power generation (associated with deepwater drilling rig build cycles) and rigs as follows:

Our principal source of liquidity is cash generated by operations. We also have a $250.0 million asset-based revolving credit facility, which we draw upon when necessary to satisfy our working capital needs and generally pay down with available cash. Our liquidity needs are primarily driven by changes in working capital associated with execution of large manufacturing projects. While many of our contracts include advance customer deposits and progress billings, some international contracts provide for substantial portions of funding under confirmed letters of credit upon delivery of the products.

	Fiscal Year Ended January 31,				Change
	2011		2010		$		%
(Dollars in thousands)
Manufacturing equipment sales
Well stimulation	$	275,271	$	60,016	$	215,255	358.7%
Power generation	17,889		116,749		(98,860)		-84.7%
Rigs	14,673		42,215		(27,542)		-65.2%
Seismic products	6,192		2,220		3,972		178.9%
Electric products	5,382		6,931		(1,549)		-22.3%
Other	1,601		2,665		(1,064)		-39.9%
Total equipment sales	$	321,008	$	230,796	$	90,212	39.1%

We have funded, and expect to continue to fund, operations through cash flows generated by operating activities and borrowings under our revolving credit facility. We also expect that ongoing requirements for debt service and capital expenditures will be funded from these sources. 29

~~Our future~~Table liquidity requirements will be for working capital, capital expenditures, debt service and general corporate purposes. Our borrowing capacity under the revolving credit facility is impacted by, among other factors, the amount of working capital and qualifying assets therein. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facility, will be adequate to meet our short-term and long-term liquidity needs. However, our ability to meet our working capital and debt service requirements is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If we are not able to meet such requirements, we may be required to seek additional sources of capital. Contents

Distribution ~~Cash~~sales ~~Flows~~ increased by $76.5 million to $518.8 million in Fiscal 2010 compared to $442.3 million in Fiscal 2009. The increase in distribution sales was due to increased equipment sales of $51.4 million, parts and service of $21.3 million and rentals of $3.8 million. The increase in transmissions is due to higher sales volumes for oilfield equipment. Equipment sales increased due to the following changes in our distribution products:

	Year ended January 31,
	Fiscal Year Ended January 31,						Change
(Dollars in thousands)	2011			2010			2009
	2011			2010			$			%
Net cash provided by operating activities	$	56,864		$	66,321		$	58,470
(Dollars in thousands)
Net cash used in investing activities		(14,924	)		(2,940	)		(27,776	)
Distribution equipment sales
Net cash used in financing activities		(36,150	)		(63,733	)		(42,364	)
Power generation	$	48,427		$	48,348		$	79		0.2%
Transmissions	47,661			17,769			29,892			168.2%
Prime movers	34,488			26,962			7,526			27.9%
Material handling	31,099			24,609			6,490			26.4%
Engines	28,845			32,631			(3,786)			-11.6%
Rail car movers	11,638			8,390			3,248			38.7%
Other	14,093			6,137			7,956			129.6%
Total equipment sales	$	216,251		$	164,846		$	51,405		31.2%

41Gross profit

~~Table~~Our gross profit was $145.3 million for Fiscal 2010 compared to $111.6 million for Fiscal 2009, reflecting an increase in gross profit margin from 16.2% to 16.9%. Our gross profit margin increased by 0.7 points due to higher sales volumes and product mix. The manufacturing segment gross profit margin increased from 15.4% to 17.0%, an increase of ~~Contents~~1.6 points. The distribution segment gross profit margin remained flat at 16.8%.

~~As of~~Selling ~~January 31, 2011, our cash~~ and ~~cash~~administrative ~~equivalent balance was $9.2 million. The level of cash and cash equivalents is impacted by the timing of cash receipts, disbursements and borrowings and payments under our revolving credit facility.~~ expenses

Selling and administrative expenses decreased by $9.9 million to $104.3 million for Fiscal 2010, ~~compared~~primarily as a result of the following items, which impacted Fiscal 2009: (i) an accrual for a probable sales tax liability ($3.4 million); (ii) the settlement and defense of a claim ($3.5 million); and (iii) the closure of a facility ($0.9 million). Further decreases in overall selling and administrative expenses have been experienced in Fiscal 2010, including lower professional and legal fees, bad debt expense and depreciation, partially offset by higher compensation expense. As a result, selling and administrative expenses as a percentage of sales decreased to 12.1% in Fiscal 2010 from 16.6% for Fiscal 2009 .

~~Operating~~Other ~~cash~~(income) flow for Fiscal 2010 decreased by $9.5 million compared to Fiscal 2009. Fiscal 2009 reflects the conversion of working capital to cash given the completion of large jobs and the overall decrease in business activity. Fiscal 2010 reflects the overall increase in business activity and resultant build-up for long-term contracts and inventory. These increases were funded in large part by customer depositsexpense, ~~thus offsetting the cash outlays.~~ net

~~Cash flow~~Other ~~used~~income ~~in investing activities~~ increased by $121.1 million to $1.0 million for Fiscal 2010, ~~compared~~mainly toas ~~Fiscal~~the ~~2009.~~result ~~This~~of ~~increase~~gains isassociated ~~due~~with toforeign ~~the~~currency ~~substantial~~derivative ~~curtailment~~instruments ofin ~~capital expenditures during~~ Fiscal ~~2009~~2010, asand alower ~~result~~foreign ofcurrency ~~the~~transaction ~~overall~~losses ~~economic~~associated ~~and~~with ~~business~~our ~~conditions~~foreign ~~due~~subsidiaries toin ~~the~~Fiscal ~~global~~2010 ~~recession,~~as ~~tight~~compared ~~credit~~to ~~markets~~Fiscal ~~and~~2009. ~~unstable~~Our ~~gas~~foreign ~~and~~subsidiaries ~~oil~~in ~~prices.~~Canada, ~~Given~~Colombia ~~the~~and ~~increase~~Venezuela ingenerated ~~our business activity~~4.0%, ~~capital~~3.9% ~~spending~~and ~~increased~~0.3%, inrespectively, ~~Fiscal~~of ~~2010,~~our ~~particularly~~sales for ~~our~~Fiscal ~~rental business~~2010.

~~Cash flow~~Operating used in financing activities decreased by $27.6 million for Fiscal 2010 compared to Fiscal 2009 and primarily relates to lower payments in Fiscal 2010 under our revolving credit facility. This overall decrease in payments under our revolving credit facility results from the use of cash flow for investing activities and lower overall cash flow from operations in Fiscal 2010, whereas cash flow was used to pay down our revolving credit facility in Fiscal 2009. profit

Our ~~Fiscal~~operating ~~2009~~profit ~~compared~~increased to $10.6 million, or 1.2% of sales, during Fiscal ~~2008~~ 2010 from an operating loss of $2.6 million, or 0.4% of sales, in Fiscal 2009, primarily as the result of higher sales volumes, gross profit margins and lower selling and administrative expenses; however, operating profit margin was significantly reduced by the impact of the goodwill and indefinite-lived intangible assets impairment charge of $31.5 million. See discussion of this impairment in Item 7— “Critical accounting policies—Goodwill and indefinite-lived intangible assets.”

~~Operating~~Interest ~~cash flow increased by $7.9 million in Fiscal 2009 as compared Fiscal 2008~~expense, ~~despite a~~ net loss of $23.9 million. This increase stems from working capital being converted to cash flow as large projects were completed and paid and a lack of further build-up of inventory due to the slow-down in business activity.

~~Cash flow~~Interest ~~used~~expense, innet ~~investing~~for ~~activities~~Fiscal 2010 decreased by $240.96 million incompared to Fiscal 2009, primarily as ~~compared~~a toresult ~~Fiscal~~of ~~2008.~~lower ~~This~~interest ~~decrease~~expense ~~was~~ due to ~~the~~lower ~~substantial~~outstanding ~~curtailment~~borrowings ofand ~~capital expenditures~~interest ~~during~~rates ~~Fiscal~~for ~~2009~~our asrevolving acredit ~~result~~facility ofduring ~~overall~~Fiscal ~~economic~~2010, ~~and~~which ~~business~~was ~~conditions~~partially ~~due~~offset toby ~~the~~higher ~~global~~interest ~~recession,~~income ~~tight~~during ~~credit~~Fiscal ~~markets and unstable gas and oil prices~~2009.

Cash flow used in financing activities increased by $21.4 million in Fiscal 2009 as compared to Fiscal 2008. This increase was attributable to increased payments under our revolving credit facility of $49.0 million as a result of increased available cash flow from operations and lower investments of cash outflows. This increase was partially offset by a $28.0 million decrease in distributions to shareholders for tax obligations, which was attributable to the overall net loss for Fiscal 2009. 30

Table ~~Financing~~of ~~sources~~ Contents

WeSegment have an asset-based revolving credit facility in the amount of $250.0 million with a $25.0 million sub-facility to be used by our Canadian subsidiary. The $250.0 million revolving credit facility, which matures in February 2012, is secured by substantially all accounts receivable, inventory and property, plant and equipment and provides for borrowings at LIBOR, plus a margin ranging from 1.25% to 2.00% per annum, based on our leverage ratios, as specified in the credit agreement. Based on the outstanding borrowings, letters of credit issued and the terms of the asset-based revolving credit facility, our available borrowing capacity was approximately $124.3 million at January 31, 2011. While we expect to be able to refinance or renew our revolving credit facility, there are no guarantees we will be able to do so, at all or on substantially similar terms and conditions. data

~~In June~~Our ~~2006,~~reportable wesegments ~~issued $150.0 million in principal amount of 10% Senior Notes due 2014. The senior notes~~ are ~~unsecured~~as ~~and are guaranteed on an unsecured basis by our domestic restricted~~ follows:

42Manufacturing

~~Table~~We design, manufacture and market equipment for U.S. and international oilfield service providers and drilling and workover contractors, as well as national oil companies that require integrated and customized product solutions. We manufacture equipment specifically for hydraulic fracturing, well stimulation, well workover, intervention and drilling operations. Our manufactured products include integrated solutions, which incorporate a variety of ~~Contents~~components into a single system, for a wide range of oilfield services and support applications. In addition, we provide parts and service to customers primarily in the oil and gas industry.

~~subsidiaries. The senior notes mature on July 15, 2014, and interest is payable semi-annually on January 15 and July 15.~~ Distribution

~~Borrowings under~~We provide stand-alone products and aftermarket parts and service for products manufactured by us, our ~~revolving~~six ~~credit~~key ~~facility~~OEMs and other manufacturers. In addition, we provide rental equipment including generator sets, air compressors, rail car movers and material handling equipment to our ~~senior~~customers. ~~notes~~Our ~~were~~aftermarket asparts ~~follows~~and asservice operations, which provide us with a recurring, higher-margin source of revenue, serve customers engaged in the ~~dates~~oil ~~indicated:~~and gas, power generation, marine, mining, construction, commercial vehicle and material handling industries, as well as other industries.

(Dollars in thousands)	January 31, 2011		January 31, 2010
Revolving credit facility	$	35,181	$	70,870
Unsecured senior notes		150,000		150,000
Total	$	185,181	$	220,870

Corporate and shared services

~~The revolving~~Our ~~credit~~corporate ~~facility~~ and ~~the~~shared ~~senior~~services ~~notes~~segment ~~contain~~includes ~~financial~~administrative ~~and~~overhead ~~operating~~normally ~~covenants~~not associated with ~~which~~specific weactivities ~~must~~within ~~comply during~~ the ~~terms~~operating ~~of the agreements~~segments. These ~~covenants~~ expenses include ~~the maintenance of certain financial ratios~~legal, ~~restrictions~~finance ~~related to the incurrence of certain indebtedness~~ and ~~investments~~accounting, ~~and~~internal ~~prohibition of the creation of certain liens. We were in compliance with all covenants as of January 31~~audit, ~~2011.~~human ~~The financial covenant for the revolving credit facility requires that we maintain a fixed charge coverage ratio~~resources, asinformation ~~defined in the agreement~~technology, ~~of at least 1.1 to 1.0; however~~marketing, ~~this~~supply ~~covenant~~chain ~~does~~and ~~not~~similar ~~take~~corporate ~~effect~~office ~~until our available borrowing capacity is $30~~costs.0 million or less. The covenants in the senior notes indenture require that, if were we to incur additional indebtedness, pay dividends or make certain other restricted payments (in each case, subject to various exceptions set forth in the indenture), after giving effect to the incurrence of such additional indebtedness, we have a fixed charge coverage ratio, as described in the indenture, of at least 2.5 to 1.0.

Intra-segment ~~Capital~~revenues ~~expenditures~~ and costs are eliminated, and operating profit (loss) represents earnings (loss) before interest and income taxes.

~~Our~~Segment ~~estimated~~results ~~capital expenditures for~~ comparison—Fiscal 2011 ~~are not anticipated to exceed $30.0 million,~~ and upFiscal ~~to $19.0 million of this amount is available for rental equipment additions.~~ 2010

~~Contractual obligations and commitments~~ Manufacturing

Operating profit generated by our manufacturing segment increased to $115.2 million, or 19.2% of sales, for Fiscal 2011, from $11.3 million, or 3.3% of sales for Fiscal 2010. The ~~following~~$103.9 million ~~table~~increase ~~summarizes~~in ~~the~~operating ~~scheduled~~profit ~~maturities~~was ~~under~~attributable ~~our~~to ~~revolving~~increases ~~credit~~of ~~facility~~$59.3 million ~~and~~in ~~our~~sales ~~senior~~volume, ~~notes~~$20.7 million in higher average profit margins and ~~our~~a ~~expected payments~~$0.5 million ~~for~~decrease in other ~~significant~~expense, ~~contractual~~partially ~~obligations~~offset asby an increase of ~~January~~ $8.1 million in sales and administrative expense. In addition, operating profit in Fiscal 2010 was impacted by an impairment charge of $31.5 million. The increase in selling and administrative expenses primarily related to higher salaries and wages, ~~2011:~~including bonus expense, new product development and facility costs.

Description			Fiscal 2011		Fiscal 2012		Fiscal 2013		Fiscal 2014		Fiscal 2015		Thereafter		Total
(Dollars in thousands)
Senior notes			$	—	$	—	$	—	$	150,000	$	—	$	—	$	150,000
Revolving credit facility				—		35,181		—		—		—		—		35,181
Notes payable(1)				7,441		—		—		—		—		—		7,441
Interest on senior debt(1)				16,516		15,063		15,000		7,500		—		—		54,079
Operating leases:
	Equipment			1,267		590		482		66		17		—		2,422
	Property			5,958		2,897		1,848		1,323		896		192		13,114
	Vehicles			2,245		1,166		530		364		24		—		4,329
		Total operating leases	$	9,470	$	4,653	$	2,860	$	1,753	$	937	$	192	$	19,865
		Total	$	33,427	$	54,897	$	17,860	$	159,253	$	937	$	192	$	266,566

Our manufacturing backlog as of January 31, 2012 was $196.9 million, as compared to $273.6 million on January 31, 2011, a decrease of 28.0%. Backlog of $196.9 million as of January 31, 2012 included a $30.5 million equipment order received in Fiscal 2009 from an affiliate. Revenue recognition from this order is deferred until title to the equipment passes to a third party and all other revenue recognition criteria have been met. A deposit in the amount of $30.5 million is recorded as a customer deposit in our consolidated balance sheet. Included in inventories, net is $24.2 million in costs related to this order.

~~(1)Interest in respect of our revolving credit facility and notes payable is calculated assuming the outstanding balance and the current average borrowing rate at January~~ 31~~, 2011 remain unchanged over the terms of the agreements.~~

Table ~~Off-balance~~of ~~sheet arrangements~~ Contents

We did not have material off-balance sheet arrangements as of January 31, 2011. We lease certain facilities and equipment from third parties under operating lease arrangements. For more information about these leases, see Note 13 to our audited consolidated financial statements included elsewhere in this Annual Report. Distribution

43Operating profit generated by the distribution segment increased to $56.8 million in Fiscal 2011 from $37.5 million in Fiscal 2010, representing an increase in operating profit percentage from 7.2% to 7.8%. The $19.3 million increase in operating profit was attributable to increases of $33.9 million in sales volume, partially offset by increases of $12.5 million in selling and administrative expenses, $1.6 million decrease in average gross profit margin and an increase of $0.5 million in other expense. The decrease in average gross profit margin reflected both product mix and the competitive environment in which this segment operates. The increase in selling and administrative expenses primarily related to higher salaries and wages, including bonus expense, depreciation and travel expenses.

~~Table~~Our distribution backlog as of ~~Contents~~January 31, 2012 was $154.7 million, as compared to $101.4 million on January 31, 2011 an increase of 52.6%.

Corporate ~~Effects~~and ofshared ~~inflation~~ services

WeCorporate doand ~~not~~shared ~~believe~~services ~~that~~expenses ~~inflation~~increased ~~has~~to ~~had~~$52.0 million ain ~~material~~Fiscal ~~adverse~~2011 ~~effect~~compared onto ~~our~~$38.2 million ~~financial condition or results of operations~~ in ~~recent~~Fiscal ~~years. However~~2010, toprimarily ~~the~~as ~~extent~~a ~~that~~result ~~the cost~~ of ~~components~~ ~~and~~increases ~~other~~in ~~supplies~~salaries ~~that we purchase rise~~ and wewages, ~~are~~including ~~unable~~bonus ~~to pass those price increases on to our customers~~expense, ~~our~~increased ~~financial~~headcount ~~condition~~ and ~~results~~an ofapproximate ~~operations~~4% ~~would~~salary beincrease ~~adversely~~at ~~affected. In instances in which we enter into contracts, such as for~~ the ~~manufacture~~beginning of ~~certain~~Fiscal ~~equipment~~2011, ~~that~~expenses ~~requires~~related ~~lead~~to ~~time~~our ~~between~~proposed ~~the~~initial ~~placing~~public ofoffering, ~~the~~share-based ~~order~~compensation expense and ~~delivery~~travel, ~~the~~partially ~~majority~~offset ofby ~~those~~decreases ~~contracts are~~in atlegal aand ~~fixed~~other ~~price~~expenses. ~~Any~~As ~~increase~~a inresult ~~component~~of ~~and~~higher ~~other~~sales ~~supply~~volumes, ~~costs~~corporate ~~over~~and ~~the~~shared ~~term~~services ofexpenses ~~these~~decreased ~~contracts~~from ~~would~~4.4% ~~reduce~~to ~~our~~3.9% ~~profit~~as ~~margin~~a onpercentage ~~those~~of ~~products~~sales.

Segment ~~Recent~~results ~~Accounting~~comparison—Fiscal ~~Pronouncements~~ 2010 and Fiscal 2009

Revenue recognition for arrangements with multiple deliverables. In October 2009, the Financial Accounting Standards Board issued an update to existing guidance on revenue recognition for arrangements with multiple deliverables. This update will allow companies to allocate consideration received for qualified separate deliverables using estimated selling price for both delivered and undelivered items when vendor-specific objective evidence or third-party evidence is unavailable. Additional disclosures discussing the nature of multiple element arrangements, the types of deliverables under the arrangements, the general timing of their delivery, and significant factors and estimates used to determine estimated selling prices are required. We will adopt this update for new revenue arrangements entered into beginning, or materially modified on or after, February 1, 2011. We do not expect the provisions of this update to have a material impact on our consolidated financial statements. Manufacturing

Operating ~~ITEM~~profit 7Agenerated by our manufacturing segment decreased to $11. ~~Quantitative~~3 million, or 3.3% of sales, for Fiscal 2010, from $15.9 million, or 6.4% of sales for Fiscal 2009. The $4.6 million decrease in operating profit was attributable to a goodwill and ~~Qualitative~~indefinite-lived ~~Disclosures~~intangible ~~about~~asset ~~Market~~impairment ~~Risk~~ charge of $31.5 million. This impairment charge was offset by increases of $14.8 million in sales volume, $5.5 million in increases due to a higher average profit margin, a $3.8 million decrease in selling and administrative expenses and a $2.8 million decrease in other expense. The decrease in selling and administrative expenses primarily related to lower depreciation, rent and facility-related costs and lower bad debt expense. The decrease in other expense was the result of foreign currency transaction losses attributable to our Canadian subsidiary in Fiscal 2009 that were lower in Fiscal 2010.

WeOur ~~are~~manufacturing ~~exposed~~backlog toas ~~certain~~of ~~market~~January 31, ~~risks~~2011 was $273.6 million, as ~~part~~compared ofto ~~our~~$158.6 million ~~ongoing~~on ~~business~~January 31, ~~operations~~2010, ~~including~~an ~~risks~~increase ~~from~~of ~~changes~~72.5%. inBacklog ~~interest~~of ~~rates~~$273.6 ~~and commodity~~million ~~prices~~as of January 31, ~~which~~2011 ~~could~~included ~~impact~~a ~~our~~$37.5 ~~financial~~million ~~condition,~~equipment ~~results~~order ofreceived ~~operations~~in ~~and~~Fiscal ~~cash~~2009 ~~flows~~from an affiliate. WeRevenue ~~plan~~recognition from this order is deferred until title to ~~manage~~the ~~our~~equipment ~~exposure~~passes to ~~these~~a third party and all other ~~market~~revenue ~~risks~~recognition ~~through~~criteria ~~regular~~have ~~operating~~been ~~and financing~~met. ~~activities~~A ~~and~~deposit onin the amount of $31.2 million is recorded as a ~~limited~~customer ~~basis,~~deposit ~~the~~in ~~use~~our ofconsolidated ~~derivative~~balance ~~financial~~sheet. ~~instruments~~Included in inventories, net is $29.5 Wemillion ~~intend~~in costs related to ~~use~~this ~~such~~order, ~~derivative~~and ~~financial~~no ~~instruments~~amounts ashave ~~risk~~been ~~management~~recorded ~~tools~~in ~~and~~the ~~not~~consolidated statement of operations for ~~speculative investment~~this ~~purposes.~~transaction to date.

~~Foreign Exchange Risk~~ Distribution

~~Our~~Operating ~~international~~profit ~~subsidiaries~~generated inby ~~Colombia~~the ~~and~~distribution ~~Venezuela~~segment ~~transact~~increased ~~most~~to of$37.5 million ~~their~~in ~~business~~Fiscal in2010 ~~their~~from ~~respective~~$23.6 million ~~local~~in ~~currencies~~Fiscal 2009, ~~while our~~representing ~~Canadian~~an ~~subsidiary~~increase ~~conducts~~in ~~its~~operating ~~business~~profit inpercentage ~~both~~from ~~Canadian~~5.3% ~~and~~to U7.S2%. ~~dollars~~The $13.9 million ~~Revenues~~increase ~~generated~~in byoperating ~~our~~profit ~~Canadian,~~was ~~Colombian~~attributable ~~and~~to ~~Venezuelan~~increases ~~subsidiaries~~of ~~comprised 4~~$12.~~0%, 3.~~9% million in sales volume and ~~0.3%,~~decreases ~~respectively,~~ of ~~our~~$1.7 million ~~total~~in ~~revenue~~selling ~~during~~and ~~Fiscal~~administrative ~~2010.~~expenses, ~~Our~~partially ~~results~~offset ofby ~~operations~~a ~~were~~$0.2 million ~~not~~decrease ~~significantly~~in ~~impacted~~average bygross ~~changes~~profit inmargin ~~currency~~and ~~exchange~~an ~~rates~~increase of $0.5 million in other expense.

~~During the~~Our ~~second~~distribution ~~quarter~~backlog ofas Fiscal 2010, we entered into four short-term foreign currency exchange rate contracts to manage our exposure to fluctuations in foreign currency for certain purchase orders that were denominated in Euros. As of ~~October~~January 3031, ~~2010,~~2011 ~~all~~was ~~of these contracts were closed and we recognized a~~ $0101.84 million ~~realized gain~~, ~~which~~as ~~was~~compared recorded in other (income) expense, net within our consolidated statements of operations. We did not apply hedge accounting for these derivative instruments. We entered into a short-term foreign currency exchange rate derivative instrument in January 2009 to manage our exposure to fluctuations in foreign currency exchange rates for certain contracts of our Canadian subsidiary that were not denominated in its functional currency. This derivative was settled in the second quarter of Fiscal 2009 and resulted in a realized gain of $144.47 million, ~~which~~on ~~was recorded in other (income) expense~~January 31, ~~net~~2010 ~~within~~an ~~our~~increase ~~consolidated statements~~ of ~~operations~~126. 8%.

44Corporate and shared services

~~Table~~Corporate and shared services expenses decreased to $38.2 million in Fiscal 2010 compared to $42.1 million in Fiscal 2009, primarily as a result of ~~Contents~~the following items that impacted Fiscal 2009: an accrual for a probable sales tax liability ($3.4 million) and the settlement and defense of a claim ($3.5 million). These decreases were offset by an increase in bonuses ($2.8 million). As a result of these decreases, and due to higher sales volumes, corporate and shared services expenses decreased from 6.1% to 4.4% as a percentage of sales.

A 10% depreciation of the Canadian dollar with respect to the U.S. dollar would have caused our Canadian subsidiary's assets and sales as of and for the year ended January 31, 2011 to decrease in U.S. dollar terms by approximately $5.5 million and $4.3 million, respectively. A 10% depreciation of the Colombian peso with respect to the U.S. dollar would have caused our Colombian subsidiary's assets and sales as of and for the year ended January 31, 2011 to decrease in U.S. dollar terms by approximately $2.0 million and $3.1 million, respectively. 32

~~On January 10,~~Table 2010, the Venezuelan government devalued its currency from 2.15 Bolivars per U.S. dollar to 4.30 Bolivars per U.S. dollar ("the official rate") and the Venezuelan economy has since been designated as hyperinflationary. We have historically utilized the official rate for our Venezuelan operations. Beginning February 1, 2010, we utilized the U.S. dollar as the functional currency for our Venezuelan subsidiary and remeasured its financial statements into U.S. dollars at the official rate. Accordingly, using "hyperinflationary accounting," we recognized the related losses or gains from such remeasurement of its balance sheet in the consolidated statements of its operations. During Fiscal 2010, the official rate for Venezuela did not fluctuate significantly. As a result, the effect of remeasuring our Venezuelan subsidiary was insignificant. Contents

~~At January 31,~~Liquidity ~~2011, we evaluated the rate at which we remeasure our Venezuelan subsidiary~~ and ~~concluded~~capital that based on the continued slow-down of its economy and resultant constraints presently impacting the banking environment and associated limitations therein, that the SITME rate of 5.30 Bolivars per U.S. dollar was a more appropriate remeasurement rate. The result of this change in remeasurement rate did not have a material impact to our financial statements. The total assets for our Venezuela subsidiary are approximately $4.0 million. resources

Our ~~Interest~~principal ~~Rate~~source ~~Risk~~ of liquidity is cash generated by operations. We also have a $250.0 million asset-based revolving credit facility, which we draw upon when necessary to satisfy our working capital needs and generally pay down with available cash. Our liquidity needs are primarily driven by changes in working capital associated with execution of large manufacturing projects. While many of our contracts include advance customer deposits and progress billings, some international contracts provide for substantial portions of funding under confirmed letters of credit upon delivery of the products.

We ~~use~~have ~~variable-rate~~funded, ~~debt~~and expect to ~~finance~~continue ~~certain~~to offund, ~~our~~ operations ~~and~~through ~~capital~~cash ~~expenditures.~~flows ~~Assuming~~generated ~~the~~by ~~entire $250.0 million~~operating activities and borrowings under our revolving credit facility. ~~were~~We ~~drawn,~~also ~~each~~expect ~~quarter~~that ~~point~~ongoing ~~change~~requirements infor ~~interest~~debt ~~rates~~service ~~would~~and ~~result~~capital inexpenditures awill ~~$0.6 million~~be ~~change~~funded infrom ~~annual~~these ~~interest expense~~sources.

Our ~~ITEM~~future 8liquidity requirements will be for working capital, capital expenditures, debt service and general corporate purposes. ~~Financial~~ ~~Statements~~Our borrowing capacity under the revolving credit facility is impacted by, among other factors, the amount of working capital and ~~Supplementary~~qualifying ~~Data~~ assets therein. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facility, will be adequate to meet our short-term and long-term liquidity needs. However, our ability to meet our working capital and debt service requirements is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If we are not able to meet such requirements, we may be required to seek additional sources of capital.

~~The~~Cash ~~information required by this item is incorporated by reference to our Consolidated Financial Statements beginning on Page F-1.~~ Flows

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

	Fiscal Year Ended January 31,
	2012		2011		2010
(Dollars in thousands)
Net cash provided by operating activities	$	29,526	$	56,864	$	66,321
Net cash used in investing activities	(55,374)		(14,924)		(2,940)
Net cash provided by (used in) financing activities	20,879		(36,150)		(63,733)

~~None~~As of January 31, 2012, our cash and cash equivalent balance was $4. 2 million. The level of cash and cash equivalents is impacted by the timing of cash receipts, disbursements and borrowings and payments under our revolving credit facility.

Fiscal ~~ITEM~~2011 ~~9A. Controls~~compared ~~and~~to ~~Procedures~~ Fiscal 2010

Operating ~~Effectiveness~~cash flow for Fiscal 2011 decreased by $27.3 million compared to Fiscal 2010. While we generated a significant increase in net earnings in Fiscal 2011, increased cash flow was used to fund our working capital needs, particularly the increase in inventory driven by our increased business activity. Due to the timing and receipt of ~~Disclosure~~customer ~~Controls~~deposits, including the overall decrease in equipment backlog, and ~~Procedures~~ purchasing of inventory, customer deposits did not fund a significant portion of the increase in inventory. Thus, increased accounts payable resulted to fund this increase in inventory. In addition, inventory orders have been placed to ensure product availability and adherence to build and delivery schedules into Fiscal 2012. The increase in accounts receivable further reduced cash flow from operations due to the timing of billings and collections.

WeCash ~~maintain~~flow aused ~~set of disclosure controls and procedures designed to ensure that information we are required to disclose~~ in ~~reports~~investing ~~that we~~activities ~~file~~increased ~~with or submit to the SEC is recorded, processed, summarized and reported within the time periods specified~~ by ~~the SEC~~$40.5 million Anfor ~~evaluation~~Fiscal ~~was~~2011 ~~carried~~compared ~~out~~to ~~under~~Fiscal the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report2010. ~~Based~~This onincrease ~~that~~is ~~evaluation,~~due ~~the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective~~ to ~~provide reasonable assurance that information required to be disclosed by us in reports we file with~~ the ~~SEC~~EMDSI isAcquisition ~~recorded, processed, summarized~~ and ~~reported~~substantial ~~within~~additions ~~the time periods required by the SEC, and is accumulated and communicated~~ to ~~management including~~ our ~~CEO~~rental ~~and CFO~~equipment, asalong ~~appropriate,~~with toincreased ~~allow~~capital ~~timely decisions regarding disclosure~~expenditures.

45Financing cash flow increased by $57.0 million for Fiscal 2011 compared to Fiscal 2010 and primarily relates to increased borrowings in Fiscal 2011 under our revolving credit facility. In addition, our net earnings resulted in distributions to our unitholders for their tax obligations in the amount of $28.1 million. The increase in our revolving credit facility borrowings were used, in part, to fund the increase in working capital, particularly inventory, and distributions to our unitholders for their tax obligations.

~~Table~~Fiscal of2010 ~~Contents~~compared to Fiscal 2009

Operating ~~Management's~~cash ~~Report~~flow onfor ~~Internal~~Fiscal ~~Control~~2010 ~~Over~~decreased ~~Financial~~by ~~Reporting~~ $9.5 million compared to Fiscal 2009. Fiscal 2009 reflects the conversion of working capital to cash given the completion of large jobs and the overall decrease in business activity. Fiscal 2010 reflects the overall increase in business activity and resultant build-up for long-term contracts and inventory. These increases were funded in large part by customer deposits, thus offsetting the cash outlays.

~~Management~~Cash offlow ~~the~~used ~~Company,~~in ~~including~~investing ~~the~~activities ~~CEO,~~increased isby ~~responsible~~$12.0 million for ~~establishing~~Fiscal ~~and~~2010 ~~maintaining~~compared ~~adequate~~to ~~internal~~Fiscal ~~control~~2009. ~~over~~This ~~financial reporting,~~increase asis ~~defined~~due into ~~Rules 13a-15(f)~~the ~~and~~substantial ~~15d-15(f)~~curtailment of ~~the~~capital ~~Securities~~expenditures ~~Exchange~~during ~~Act~~Fiscal of2009 ~~1934,~~ as ~~amended.~~a ~~Our~~result ~~internal~~of ~~controls~~the ~~were~~overall ~~designed~~economic toand ~~provide~~business ~~reasonable assurance~~conditions asdue to ~~(i)~~ the ~~reliability~~global ofrecession, ~~our~~tight ~~financial~~credit ~~reporting~~markets and ~~(ii) the~~unstable ~~reliability~~gas ~~of the preparation~~ and ~~presentation~~oil ofprices. Given the ~~consolidated~~increase ~~financial~~in ~~statements~~our ~~for~~business ~~external~~activity, ~~purposes in~~capital ~~accordance~~spending ~~with~~increased ~~accounting~~in ~~principles~~Fiscal ~~generally~~2010, ~~accepted~~particularly infor ~~the~~our ~~United~~rental ~~States~~business.

We conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 2011 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. There are inherent limitations in the effectiveness of any system of internal control over financial reporting; however, based on our evaluation, we have concluded that our internal control over financial reporting was effective as of January 31, 2011. 33

~~This Annual~~Table ~~Report does not include an attestation report~~ of ~~our registered public accounting firm regarding internal control over financial reporting, which is not required by voluntary filers pursuant to the rules of the Securities and Exchange Commission.~~ Contents

Cash ~~Changes~~flow used in ~~Internal~~financing ~~Control~~activities ~~over~~decreased ~~Financial~~by ~~Reporting~~ $27.6 million for Fiscal 2010 compared to Fiscal 2009 and primarily relates to lower payments in Fiscal 2010 under our revolving credit facility. This overall decrease in payments under our revolving credit facility results from the use of cash flow for investing activities and lower overall cash flow from operations in Fiscal 2010, whereas cash flow was used to pay down our revolving credit facility in Fiscal 2009.

~~Management,~~Financing including our CEO and CFO, evaluated the changes in our internal control over financial reporting during the quarter ended January 31, 2011. We determined that there were no changes in our internal control over financial reporting during the quarter ended January 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. sources

We ~~ITEM~~renewed 9Bin December 2011 our $250 million asset-based revolving credit facility, which is expandable by a $125 million accordion, and it is secured by substantially all accounts receivable, inventory and property, plant and equipment of the Company and expires in December 2016. ~~Other~~ ~~Information~~ Borrowings bear interest based on a pricing grid that is determined by the available borrowing capacity under the revolving credit facility and the interest rate selected: LIBOR plus a margin ranging from 1.75% to 2.25% per annum or Prime Rate plus a margin ranging from 0.75% to 1.25%. These ranges may be further reduced by 0.25% (25 basis points) based on our leverage ratios, all as specified further in the credit agreement. Commitment fees are charged for the undrawn portion of the revolving credit facility based on the usage of the revolving credit facility with 0.50% per annum being charged for usage less than or equal to 35% ($87.5 million) and 0.375% per annum being charged for usage greater than 35%. Interest payments are due monthly, or as LIBOR contracts expire. The revolving credit facility also has a $50.0 million sub-facility which may be used for letters of credit. The credit agreement limits available borrowings to certain percentages of our assets. As of January 31, 2012, there were $26.4 million of letters of credit outstanding. Based on the outstanding borrowings, letters of credit issued and the terms of the asset-based revolving credit facility, our available borrowing capacity was approximately $104.9 million at January 31, 2012. As required by the terms of the revolving credit facility, our available borrowing capacity is required to be reduced by the principal amount of senior notes outstanding plus $25 million in the event the senior notes are not repaid by the date which is 60 days prior to their stated maturity of July 2014 or the maturity of the senior notes is not otherwise extended to at least 90 days beyond the maturity of the revolving credit facility.

~~None~~In June 2006, we issued $150.0 million in principal amount of 10% Senior Notes due 2014. The senior notes are unsecured and are guaranteed on an unsecured basis by our domestic restricted subsidiaries. The senior notes mature on July 15, 2014, and interest is payable semi-annually on January 15 and July 15.

46Borrowings under our revolving credit facility and our senior notes were as follows as of the dates indicated:

Table of Contents

	As of January 31
	2012		2011
(Dollars in thousands)
Revolving credit facility	$	86,772	$	35,181
Unsecured senior notes	150,000		150,000
Total	$	236,772	$	185,181

The revolving ~~PART~~credit ~~III~~ facility and the senior notes contain financial and operating covenants with which we must comply during the terms of the agreements. These covenants include the maintenance of certain financial ratios, restrictions related to the incurrence of certain indebtedness and investments, and prohibition of the creation of certain liens. We were in compliance with all covenants as of January 31, 2012. The financial covenant for the revolving credit facility requires that we maintain a fixed charge coverage ratio, as defined in the agreement, of at least 1.1 to 1.0; however, this covenant does not take effect until our available borrowing capacity is $25.0 million or less. The covenants in the senior notes indenture require that, if we were to incur additional indebtedness, pay dividends or make certain other restricted payments (in each case, subject to various exceptions set forth in the indenture), after giving effect to the incurrence of such additional indebtedness, we have a fixed charge coverage ratio, as described in the indenture, of at least 2.5 to 1.0.

Capital ~~ITEM 10. Directors, Executive Officers and Corporate Governance~~ expenditures

Our ~~Executive~~estimated ~~Officers~~capital ~~and~~expenditures ~~Directors~~ for Fiscal 2012 are not anticipated to exceed $38.0 million, with up to $12.0 million of this amount available for additions to our rental fleet.

~~The following table sets forth information with respect to our directors and executive officers as of April 30, 2011:~~ 34

Name		Position(s)
Hushang Ansary	83	Chairman of the Board of Directors
Frank Carlucci	80	Vice Chairman and Director
Robert L. Hargrave	70	Vice Chairman and Director
Steve Fulgham	50	Chief Executive Officer and Director
John B. Simmons	58	Chief Financial Officer and Director
Andrew M. Cannon	37	Chief Accounting Officer
Jack L. Pieper	40	Vice President—Operational Finance
David C. Sulkis	54	General Counsel
Kenneth W. Simmons	55	Vice President—Domestic Sales and Aftermarket
Charles T. Hatcher	62	Vice President—Human Resources
David E. Christensen	56	Senior Vice President—Manufacturing and Engineering
Nina Ansary	44	Director
James Crystal	73	Director
Munawar Hidayatallah	66	Director
John Macomber	83	Director
Anthony G. Petrello	56	Director
J. Robinson West	64	Director

Table of Contents

~~Hushang~~Contractual ~~Ansary~~obligations ~~(Chairman). Mr. Ansary is a Houston oil industry entrepreneur~~ and philanthropist. He has been our Chairman of the Board since January 2006. He has served as Chairman of the Board of Parman Capital Group LLC since December 2005 and is our principal stockholder. From March 1995 to June 2000, Mr. Ansary was Chairman and Chief Executive Officer of IRI International Corporation (IRI), a New York Stock Exchange oilfield equipment company. From June 2000 to March 2005, Mr. Ansary served on the board of directors of National Oilwell, Inc. Mr. Ansary is a former Economic and Finance Minister of Iran, Iranian Ambassador to the United States and Chairman and Chief Executive Officer of National Iranian Oil Company. commitments

~~Frank~~The C.following ~~Carlucci~~table ~~(Vice~~summarizes ~~Chairman~~the ~~and~~scheduled ~~Director). Mr. Carlucci~~maturities ~~has~~under ~~been a member of~~ our ~~board~~revolving ~~of directors~~credit ~~since~~facility ~~January 2006~~ and ~~the Vice Chairman of~~ our ~~board~~senior ofnotes ~~directors since March 2006. From 1993 to January 2003, Mr. Carlucci was Chairman,~~ and ~~from~~our ~~2003~~expected topayments ~~2005,~~for ~~Chairman~~other ~~Emeritus,~~significant ~~of The~~contractual ~~Carlyle~~obligations ~~Group, a private equity firm. From June 2000 to November 2005, he was a member of the board of directors of IRI. Mr. Carlucci served~~ as ~~National Security Advisor to the U.S. President and the U.S. Secretary~~ of ~~Defense in the Reagan Administration. Mr.~~January ~~Carlucci~~31, ~~is a Trustee of the RAND Corporation.~~ 2012:

Robert L. Hargrave (Vice Chairman and Director). Mr. Hargrave has been our Vice Chairman since February 2011. Prior to that, he was our Chief Executive Officer from January 2007 to January 2011. From 1999 to 2007, he was a private entrepreneur. He served as President and Chief Executive Officer of Stewart & Stevenson Services, Inc. from 1997 to 1999 and its Chief Financial Officer from 1983 to 1997. Mr. Hargrave served as Vice Chairman and Chief Financial Officer at IRI from 1999 to 2000.

Description	Fiscal 2012		Fiscal 2013		Fiscal 2014		Fiscal 2015		Fiscal 2016		Thereafter		Total
(Dollars in thousands)
Senior note obligations	$	-	$	-	$	150,000	$	-	$	-	$	-	$	150,000
Revolving credit facility	-		-		-		-		86,772		-		86,772
Notes payable (1)	6,948		-		-		-		-		-		6,948
Interest on senior debt (1)	17,721		17,721		10,221		2,721		2,494		-		50,878
Operating leases:
Equipment	707		504		66		17		-		-		1,294
Property	3,476		2,505		1,983		1,576		888		2,381		12,809
Vehicles	2,602		1,893		1,692		879		16		-		7,082
	$	6,785	$	4,902	$	3,741	$	2,472	$	904	$	2,381	$	21,185

Total	$	31,454	$	22,623	$	163,962	$	5,193	$	90,170	$	2,381	$	315,783

47(1) Interest in respect of our revolving credit facility and notes payable is calculated assuming the outstanding balance and the current average borrowing rate at January 31, 2012 remain unchanged over the terms of the agreements.

~~Table~~Off-balance ofsheet ~~Contents~~arrangements

~~Steve~~We ~~Fulgham~~did ~~(Chief~~not ~~Executive~~have ~~Officer~~material ~~and~~off-balance ~~Director). Mr. Fulgham~~sheet ~~has~~arrangements ~~been~~as ~~our~~of ~~Chief~~January 31, ~~Executive Officer and Director since February 2011~~2012. ~~He was~~We ~~most~~lease ~~recently~~certain ~~with~~facilities ~~Schlumberger,~~and ~~where~~equipment hefrom ~~served~~third ~~for~~parties ~~27 years~~under inoperating ~~several~~lease ~~capacities, most recently as President—Schlumberger North America Land~~arrangements. ~~His~~For ~~other~~more ~~management~~information ~~positions covered~~about ~~locations~~these ~~in Africa~~leases, ~~Asia~~see ~~and~~Note 11 ~~Europe.~~to Heour ~~holds~~audited aconsolidated ~~B.S.~~financial instatements ~~Petroleum~~included ~~Engineering~~elsewhere ~~and~~in isthis aAnnual ~~member of several oil and gas associations~~Report.

~~John~~Effects B.of Simmons (Chief Financial Officer and Director). Mr. Simmons has been our Chief Financial Officer and Director since September 2010. From February 2007 to August 2010, Mr. Simmons was a private entrepreneur. From January 2006 to January 2007, Mr. Simmons was our Vice Chairman and Chief Executive Officer. inflation

~~Andrew~~We M.do ~~Cannon~~not ~~(Chief~~believe ~~Accounting~~that ~~Officer). Mr. Cannon~~inflation has ~~been~~had a material adverse effect on our ~~Chief~~financial ~~Accounting~~condition ~~Officer~~or ~~since~~results ~~January~~of ~~2009.~~operations ~~Mr. Cannon is~~in ~~a Certified~~recent ~~Public~~years. ~~Accountant~~However, ~~most~~to ~~recently~~the ~~with~~extent ~~Ernst &~~that ~~Young LLP~~the ~~from~~cost ~~November~~of ~~2002~~components ~~through~~and ~~December~~other ~~2008~~supplies that we purchase rise and we are unable to pass those price increases on to our customers, our financial condition and ~~has~~results ~~worked~~of ~~primarily~~operations ~~with~~would ~~the~~be ~~oilfield~~adversely ~~services~~affected. In instances in which we enter into contracts, ~~energy~~such as for the manufacture of certain equipment that requires lead time between the placing of the order and ~~related supporting~~delivery, ~~industries~~the majority of those contracts are at a fixed price. Any increase in component and other supply costs over the term of these contracts would reduce our profit margin on those products.

~~Jack~~Recent L.Accounting Pieper (Vice President—Operational Finance). Mr. Pieper has been our Vice President—Operational Finance since January 2009. Prior to that, he was our Corporate Controller and has served in several roles in his 15 year tenure with Stewart & Stevenson. He is a Certified Public Accountant. Pronouncements

~~David~~On C.February ~~Sulkis~~1, ~~(General~~2011, ~~Counsel). Mr. Sulkis~~we ~~has~~adopted ~~been~~an ~~our~~update ~~General~~to ~~Counsel~~existing ~~since~~guidance ~~January~~on ~~2007~~revenue recognition for arrangements with multiple deliverables. ~~From~~This ~~2002~~update allows companies to ~~2007,~~allocate Mrconsideration for qualified separate deliverables using estimated selling price for both delivered and undelivered items when vendor-specific objective evidence or third-party evidence is unavailable. ~~Sulkis practiced law~~ atAdditional ~~Baker~~disclosures ~~Botts L~~are required that discuss the nature of multiple element arrangements, the types of deliverables under the arrangements, the general timing of their delivery, and significant factors and estimates used to determine estimated selling prices.~~L.P.~~ The adoption of this update did not have a material impact on our consolidated financial statements.

~~Kenneth~~In W.June ~~Simmons~~2011, ~~(Vice~~the ~~President,~~Financial ~~Domestic~~Accounting ~~Sales~~Standards ~~and~~Board ~~Aftermarket~~(“FASB”)~~. Mr. Simmons~~ ~~has~~issued ~~been~~Accounting ~~our~~Standards ~~Vice~~Update ~~President~~(“ASU”) ofNo. ~~Domestic~~2011-05, ~~Sales~~“Presentation ~~and Aftermarket since~~of ~~November~~Comprehensive ~~2006.~~Income” ~~From~~which ~~January~~requires ~~2006~~that toall ~~October~~nonowner ~~2006,~~changes hein ~~served~~equity asbe ~~Vice~~presented ~~President~~in ofa ~~North~~single ~~Region~~continuous ~~Distribution~~statement ~~and~~of ~~Rental~~comprehensive ~~Operations.~~income ~~From~~or ~~January~~in ~~2005~~two toseparate ~~January~~but ~~2006,~~consecutive Mrstatements. ~~Simmons~~ ~~was~~This ~~Vice President~~accounting ofupdate ~~North~~is ~~Region~~effective ~~Distribution~~for ~~Rental~~interim ~~Operations~~ and ~~from~~annual ~~August~~periods ~~2003~~beginning toafter December ~~2004~~15,

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