Ladish (LDSH) 10-Q 2006 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended    September 30, 2006

Commission File Number    0-23539

LADISH CO., INC.

(Exact name of registrant as specified in its charter)

Wisconsin	31-1145953
(State or other Jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
5481 South Packard Avenue, Cudahy, Wisconsin	53110
(Address of principal executive offices)	(Zip Code)

(414) 747-2611

(Registrant’s telephone number, including area code)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes    X      No        

        Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer             Accelerated filer    X      Non-accelerated filer        

        Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes            No    X  

        Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at September 30, 2006
Common Stock, $0.01 Par Value	14,200,967

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PART I – FINANCIAL INFORMATION

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LADISH CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2006			2005			2006			2005
Net sales	$	90,664		$	64,832		$	275,843		$	196,459
Cost of sales		75,395			54,578			224,034			169,000
Gross profit		15,269			10,254			51,809			27,459
Selling, general and administrative expenses		4,583			4,436			13,721			8,981
Income from operations		10,686			5,818			38,088			18,478
Other income (expense):
Interest expense		(980	)		(504	)		(2,639	)		(1,380	)
Other, net		(155	)		6			(317	)		(27	)
Income before income tax provision
and minority interest		9,551			5,320			35,132			17,071
Income tax provision		3,115			2,044			12,402			6,507
Minority interest in net earnings of subsidiary		23			--			183			--
Net income	$	6,413		$	3,276		$	22,547		$	10,564
Basic earnings per share	$	0.45		$	0.24		$	1.60		$	0.77
Diluted earnings per share	$	0.45		$	0.23		$	1.59		$	0.76
Basic weighted average shares outstanding		14,198,413			13,797,349			14,115,371			13,725,036
Diluted weighted average shares outstanding		14,242,600			13,989,775			14,192,075			13,883,798

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LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share Data)

Assets	September 30, 2006			December 31, 2005
Current assets:
Cash and cash equivalents	$	3,359		$	14,494
Accounts receivable, less allowance of $126 at each date		70,981			51,497
Inventories		119,829			78,151
Deferred income taxes		7,674			7,674
Prepaid expenses and other current assets		1,619			1,860
Total current assets		203,462			153,676
Property, plant and equipment:
Land and improvements		5,803			5,734
Buildings and improvements		48,736			46,797
Machinery and equipment		175,652			169,006
Construction in progress		11,505			6,167
		241,696			227,704
Less - accumulated depreciation		(135,113	)		(128,279	)
Net property, plant and equipment		106,583			99,425
Deferred income taxes		26,314			31,795
Other assets		11,272			11,133
Total assets	$	347,631		$	296,029
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	43,131		$	41,665
Senior bank debt		12,600			12,375
Senior notes		6,000			6,000
Accrued liabilities:
Pensions		5,879			9,127
Postretirement benefits		4,485			4,485
Wages and salaries		5,372			4,789
Taxes, other than income taxes		262			246
Interest		1,162			729
Profit sharing		2,111			664
Paid progress billings		259			413
Other		5,141			2,067
Total current liabilities		86,402			82,560
Long term liabilities:
Senior bank debt		--			14,625
Senior notes		46,000			12,000
Postretirement benefits		29,978			30,994
Pensions		31,143			32,863
Officers' deferred compensation		4,422			4,213
Minority interest in equity of subsidiary		638			1,160
Deferred income taxes		4,167			--
Other noncurrent liabilities		310			145
Total liabilities		203,060			178,560
Stockholders' equity:
Common stock - authorized 100,000,000, issued 14,605,591
shares at each date of $.01 par value		146			146
Additional paid-in capital		115,995			113,569
Retained earnings		69,580			47,033
Treasury stock, 404,624 and 592,538 shares of common stock at each date at cost		(2,962	)		(4,338	)
Accumulated other comprehensive loss		(38,188	)		(38,941	)
Total stockholders' equity		144,571			117,469
Total liabilities and stockholders' equity	$	347,631		$	296,029

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LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	For the Nine Months Ended September 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	22,547		$	10,564
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation		7,644			6,958
Charge in lieu of taxes related to goodwill		30			29
Non-cash compensation related to stock options		--			1,589
Deferred income taxes		12,193			6,278
Minority interest in net earnings of subsidiary		183			--
Loss (gain) on disposal of property, plant and equipment		23			38
Changes in assets and liabilities:
Accounts receivable		(19,089	)		(6,568	)
Inventories		(41,551	)		(16,668	)
Other assets		402			(6,530	)
Accounts payable and accrued liabilities		2,995			3,489
Other long-term liabilities		(2,982	)		(1,445	)
Net cash used in operating activities		(17,605	)		(2,266	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment		(9,389	)		(5,169	)
Proceeds from sale of property, plant and equipment		49			23
Purchase of ZKM stock - minority interest		(521	)		--
Acquisition of business net of cash acquired		(2,849	)		--
Net cash used in investing activities		(12,710	)		(5,146	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) senior bank debt		(14,400	)		15,000
Repayment of senior notes		(6,000	)		(6,000	)
Proceeds from senior notes		40,000			--
Repayment of notes payable		(1,980	)		--
Deferred financing costs		(222	)		--
Issuance of common stock		1,707			1,429
Net cash provided by financing activities		19,105			10,429
Effect of exchange rate changes on cash and cash equivalents		75			--
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(11,135	)		3,017
CASH AND CASH EQUIVALENTS, beginning of period		14,494			2,744
CASH AND CASH EQUIVALENTS, end of period	$	3,359		$	5,761

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LADISH CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share Data)

(1) Basis of Presentation

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly its financial position at September 30, 2006 and its results of operations and cash flows for the interim periods presented. All adjustments are of a normal recurring nature.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Article 10 of Regulation S-X and therefore do not include all disclosures required for annual financial statements presented in conformity with accounting principles generally accepted in the United States of America. The Company has filed a report on Form 10-K which contains audited consolidated financial statements that include all information and footnotes necessary for a fair presentation of its financial position at December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2005, 2004 and 2003.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results will likely differ from those estimates, but management believes such differences will not be material.

The results of operations for any interim period are not necessarily indicative of the results to be expected for a full year.

(2) Inventories

	September 30, 2006			December 31, 2005
Raw material and supplies	$	46,195		$	20,527
Work-in-process and finished goods		74,431			58,275
Less progress payments		(797	)		(651	)
Total inventories	$	119,829		$	78,151

(3) Interest and Income Tax Payments

	For the Nine Months Ended September 30,
	2006		2005
Interest paid	$	2,396	$	1,804
Income taxes paid		661		241

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(4) Cash and Cash Equivalents

Cash in excess of daily requirements is invested in marketable securities consisting of commercial paper and money market instruments which mature in three months or less. Such investments are deemed to be cash equivalents. Outstanding payroll and accounts payable checks related to certain bank accounts are recorded as accounts payable on the balance sheets. These checks amounted to $8,228 and $10,011 as of September 30, 2006 and December 31, 2005, respectively.

(5) Revenue Recognition

Sales revenue is recognized when the title and risk of loss have passed to the customer, there is pervasive evidence of an arrangement, delivery has occurred or the services have been provided, the sales price is determinable and collectibility is reasonably assured. This generally occurs at the time of shipment. Net sales include freight out as well as reductions for returns and allowances, and sales discounts. Progress payments on contracts are generally recognized as reductions of the related inventory costs. Progress payments in excess of inventory costs are reflected as a liability.

(6) Income Taxes

The year-to-date tax provisions for 2006 and 2005 are based on annualized combined federal, state and foreign effective tax rates of 35% and 38%, respectively. The principal difference, if any, from the expected federal tax rate of 35% is due primarily to state income taxes, offset by the impact of lower income tax rates in Poland and the benefit of the Extra-Territorial Income (“ETI”) exclusion related to export sales.

(7) Pension and Postretirement Benefits

The components of net periodic benefit costs recognized for the nine-month periods ending September 30, 2006 and 2005 are presented in the table below.

	Pension Benefits						Other Postretirement Benefits
	2006			2005			2006		2005
Service cost	$	677		$	602		$	89	$	180
Interest cost		8,491			8,656			1,594		1,615
Expected return on plan assets		(10,856	)		(11,600	)		--		--
Amortization of prior service cost		320			398			--		--
Amortization of the net (gain) loss		3,236			1,829			95		(149	)
Net periodic benefit cost (income)	$	1,868		$	(115	)	$	1,778	$	1,646

Contributions:

The Company previously disclosed in its financial statements for the year ended December 31, 2005, that it expected to contribute $7,905 to its pension plans in 2006. As of September 30, 2006, the Company has made $5,474 of cash contributions to the pension plans versus $3,037 during the same period in 2005. The Company currently estimates its total contributions to its pension plans in 2006 will be $5,515.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was enacted. In May 2004, the FASB issued FASB Staff Position No. 106-2,Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in response to the new law which may provide a federal subsidy to sponsors of retiree healthcare benefit plans. The Company has concluded that certain benefits provided by its postretirement benefit plan are actuarially equivalent to Medicare Part D under the Act and has filed a refund request with the Claims Management Services, a division of the Health and Human Services Department. To date, the Company has not received the refund and has not recognized the effect of the estimated refund in its financial statements.

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(8) Debt

The Company sold $30,000 of Series A senior notes (the “Series A Notes”) in a private placement to certain institutional investors on July 20, 2001. The Series A Notes are unsecured and bear interest at a rate of 7.19% per annum with the interest being paid semiannually. The Series A Notes have a seven-year duration with the principal amortizing equally over the duration after the third year. Amortization payments of $6,000 annually were made on July 20, 2004, 2005 and 2006.

On May 16, 2006, the Company sold $40,000 of Series B senior notes (the “Series B Notes”) in a private placement to certain institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the principal amortizing equally over the duration after the third year.

The Company and a syndicate of Lenders have entered into a revolving credit facility (the “Facility”) which was most recently renewed on April 28, 2006. The Facility consists of a $35,000 unsecured revolving line of credit which bears interest at a rate of LIBOR plus 1.25%. At September 30, 2006, there were $12,600 of borrowings under the Facility and $22,400 was available pursuant to the terms of the Facility.

(9) Earnings Per Share

The incremental difference between basic weighted average shares outstanding and diluted weighted average shares outstanding is due to the dilutive impact of outstanding options and warrants.

(10) Stockholders’Equity

The Company has a Long-Term Incentive Plan (the “Plan”) that covers certain employees. Under the Plan, incentive stock options for up to 983,333 shares may be granted to employees of the Company, of which 943,833 options have been granted. These options expire ten years from the grant date. Options granted vest over two years. There were no options granted in the nine months ended September 30, 2006. As of September 30, 2006, 65,836 options granted under the Plan remain outstanding and exercisable. During the first nine months of 2006, 187,914 options were exercised (for cash of $1,707) and shares were issued from Treasury Stock.

(11) Legal Proceedings

From time to time the Company is involved in legal proceedings relating to claims arising out of its operations in the normal course of business. Although the Company believes that there are no material legal proceedings pending or threatened against the Company or any of its properties, the Company has been named as a defendant in a number of asbestos cases in Mississippi and six asbestos cases in Illinois. As of the date of this filing, the Company has been dismissed from a majority of the cases in Mississippi and four of the cases in Illinois. The Company has never manufactured or processed asbestos. The Company’s only exposure to asbestos involves products the Company purchased from third parties. The Company has notified its insurance carriers of these claims and is vigorously defending these actions.

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(12) New Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143,”Accounting for Asset Retirement Obligations requires that an entity recognize the fair value of a liability for a conditional asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. An asset retirement obligation would be reasonably estimable if (a) it is evident that the fair value of the obligation is embodied in the acquisition price of the asset, (b) an active market exists for the transfer of the obligation, or (c) sufficient information exists to apply an expected present value technique. FASB Interpretation No. 47 became effective for calendar year enterprises as of December 31, 2005. In applying this Statement to the Company, it was necessary to determine if the Company will undertake any major renovation, sell, dispose or abandon its factory and factory related assets; what liability would be associated with such action; and the date such action would be taken. The Company has four factories in the United States which may be subject to certain conditional retirement obligations. The Company believes it does not have sufficient information to estimate the fair value of any asset retirement obligation because the settlement date or range of potential settlement dates has not been specified by others and information is not available to apply an expected present value technique. There are no plans to demolish or undertake any major renovation to the factories that would result in any retirement obligations. The factories have been and are expected to be maintained by repairs and maintenance activities that would not involve activities resulting in a retirement obligation. Furthermore, there has not been any need identified for major renovations caused by technology changes, operational changes, or other factors.

The Company adopted FASB Statement No. 123 (revised), “Share-Based Payment,” on October 1, 2005. Because the Company has no unvested options, adoption had no material effect on its financial position or results of operations for the first nine months of 2006.

FASB Statement 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,”amends the guidance in ARB No. 43, Chapter 4 “Inventory Pricing” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This Statement requires that those items be reflected as current period charges to expense and that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. The provisions of this Statement became effective for inventory costs incurred by the Company beginning January 1, 2006. As the Company already applies this approach to inventory pricing, there was no effect on its financial position and results of operations for the first nine months of 2006.

FASB Statement 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” requires public companies to recognize on their balance sheet the funded status of their defined benefit, pension and postretirement plans, as of December 31, 2006. As of that date, the Company will recognize actuarial gains and losses, prior service cost, and any remaining transition amounts from the initial application of FASB Statement 87, “Employers’ Accounting for Pensions,” and FASB Statement 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” as they relate to the plan’s funded status. The offset to this liability will be to accumulated other comprehensive income (loss) in equity. At this time, management does not anticipate a significant adjustment to the balance sheet relative to the liability and funded status of these defined benefits. The reduction in equity will not affect the Company’s ability to comply with debt covenant provisions.

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MANAGEMENT’S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND
CHANGES IN FINANCIAL POSITION
(Dollars in Thousands)

RESULTS OF OPERATIONS

Third Quarter 2006 Compared to Third Quarter 2005

Net sales for the three months ended September 30, 2006 were $90,664 compared to $64,832 for the same period in 2005. The 40% increase in sales for the third quarter of 2006 versus 2005 was due to the overall improvement in the jet engine and general aerospace industries along with a stronger demand for industrial forgings and a full quarter of ZKM sales. Gross profit for the third quarter of 2006 increased to 16.8% of sales in contrast to 15.8% of sales in the third quarter of 2005 primarily as a result of increased sales, which resulted in better absorption of fixed costs, along with improved pricing of by-product sales in 2006, partially offset by a more profitable mix of products in 2005.

Selling, general and administrative expenses, as a percentage of sales, were 5.1% for the third quarter of 2006 compared to 6.8% for the same period in 2005. The third quarter of 2005 SG&A was increased by a $2,032 charge in accordance with FASB Interpretation No. 44 (“FIN 44”) on the variable pricing portion of the Company’s stock option program. The 2005 SG&A rate would have been 3.7% without the foregoing charge. The increase in SG&A expenses between the periods, excluding the FIN 44 charge in 2005, was attributable to the Company’s growing international sales which carry a higher SG&A rate due to travel and sales representation expenses in addition to an increased provision for incentive compensation.

Interest expense for the third quarter of 2006 was $980 in contrast to $504 for the same period in 2005. The higher interest expense in 2006 reflects higher loan balances under the Company’s credit facility along with the issuance of the $40,000 of Series B notes in the second quarter of 2006. During the third quarter of 2006, the Company’s revolving line of credit had an interest rate equal to the LIBOR rate plus 1.25% per annum. The two series of senior notes bore interest at the rate of 7.19% and 6.14%, respectively, per annum. The Company had $12,600 borrowings under the revolving line of credit facility and had $52,000 of senior notes outstanding at the end of the third quarter of 2006.

The 2006 and 2005 third quarter income tax provisions are based on annualized effective tax rates of 33% and 38%, respectively. The Company has significant net operating loss (“NOL”) carryforwards which largely offset current income taxes payable. For financial statement purposes, the Company previously recorded a deferred tax asset for the tax benefits attributable to the NOL carryforwards. Therefore, the Company uses an effective tax rate which reflects federal and state taxes without a reduction for actual NOL usage. See Note 6 to the consolidated financial statements and “Liquidity and Capital Resources.”

The Company’s net income for the third quarter of 2006 was $6,413, a $3,137 increase from the same period in 2005. The increase in profitability was due to the above described sales increase in 2006 which resulted in the improved absorption of fixed costs along with favorable by-product sales. The Company’s contract backlog at September 30, 2006 was $558,702 as the Company received $123,666 of new orders in the third quarter of 2006, in comparison to a backlog of $394,913 at September 30, 2005 and $83,493 of new orders in the third quarter of 2005.

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First Nine Months of 2006 Compared to First Nine Months of 2005

In the first nine months of 2006, the net sales of the Company were $275,843, a 40% increase from the $196,459 of net sales in the same period of 2005. The 2006 growth in sales is attributable to continued strength in the jet engine and general aerospace industries and nine months of sales from the Company’s Polish subsidiary ZKM. The high sales level in the first nine months of 2006 resulted in improved absorption of fixed costs which contributed to the gross profit of $51,809, or 18.8% of sales, in comparison to $27,459 of gross profit, or 14.0% of sales, in the same period of 2005.

SG&A expense for the first nine months of 2006 was $13,721, or 5.0% of sales, compared to $8,981, or 4.6% of sales, for the same period in 2005. The variation between the two periods is due to increased selling expenses associated with the higher level of foreign sales in 2006 in addition to an increased provision for incentive compensation. SG&A expense in the first nine months of 2005 was also impacted by a $1,589 charge from the application of FIN 44 and would have been $7,392, or 3.8% of sales, excluding the FIN 44 charge.

Interest expense for the nine months ended September 30, 2006 was $2,639, an increase of $1,259 over interest expense for the first nine months of 2005. The increase in interest expense in 2006 was a reflection of higher loan balances under the senior credit facility along with the issuance of the $40,000 of Series B notes in the second quarter of 2006.

The tax provision for the nine months ended September 30, 2006 was $12,402 reflecting an effective tax rate of 35% in comparison to $6,507 and an effective tax rate of 38% for the same period in 2005. The Company has significant NOL carryforwards which largely offset current income taxes payable. For financial statement purposes, the Company previously recorded a deferred tax asset for the tax benefits attributable to the NOL carryforwards. Therefore, the Company uses an effective tax rate which reflects the impact of federal, state and foreign income taxes without a reduction for actual NOL usage. See Note 6 to the consolidated financial statements and “Liquidity and Capital Resources.”

Net income for the first nine months of 2006 was $22,547, or $1.59 per share on a diluted basis, in contrast to $10,564, or $0.76 per share, for the first nine months of 2005. The improvement in net income is due to higher sales with improved absorption of fixed costs, strong by-product sales, operating efficiencies at all of the Company’s operating units and a favorable product mix.

The Company received $379,566 of new orders in the first nine months of 2006 which brought the contract backlog to $558,702 as of September 30, 2006. During the comparable period of 2005, the Company received $318,613 of new orders and ended the month of September 2005 with a contract backlog of $394,913.

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Liquidity and Capital Resources

The Company’s cash position as of September 30, 2006 is $11,135 less than its position at December 31, 2005. The year-to-date decrease in cash is a result of $61,162 of increases in accounts receivable and inventory partially offset by a $1,466 increase in trade payables. In addition, cash was reduced in the first nine months of 2006 by $9,389 for capital expenditures.

On July 20, 2001, the Company sold $30,000 of Series A Notes in a private placement to certain institutional investors. The Series A Notes are unsecured and bear interest at a rate of 7.19% per annum with the interest being paid semiannually. The Series A Notes have a seven-year duration with the principal amortizing equally over the duration after the third year. Amortization payments of $6,000 annually were made on July 20, 2004, 2005 and 2006.

On May 16, 2006, the Company sold $40,000 of Series B Notes in a private placement to certain institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the principal amortizing equally over the duration after the third year.

In addition, the Company and a syndicate of Lenders have entered into the Facility which was most recently renewed on April 28, 2006. The Facility consists of a $35,000 unsecured revolving line of credit which bears interest at a rate of LIBOR plus 1.25%. At September 30, 2006, there were $12,600 of borrowings under the Facility and $22,400 of credit was available pursuant to the terms of the Facility.

The Company has NOL carryforwards that were generated prior to its 1993 reorganization, as well as NOL carryforwards that were generated in subsequent years. The total remaining NOL carryforwards were $29,981 as of December 31, 2005. The NOL carryforwards expire gradually in the years 2008 through 2024.

The Company’s initial public offering in March 1998 created an ownership change as defined by the IRS. This ownership change generated an IRS imposed limitation on the utilization of NOL carryforwards on future tax returns. The annual use of the NOL carryforwards is limited to the lesser of the Company’s taxable income or the amount of the IRS imposed limitation. The NOL carryforwards available for use annually is $11,865. Of the $11,865 annual limitation, $2,142 relates to a previous restriction on NOL carryforwards generated prior to the 1993 reorganization.

Realization of the net deferred tax assets, including those attributable to the NOL carryforwards, over time is dependent upon the Company generating sufficient taxable income in future periods. In determining that realization of the net deferred tax assets was more likely than not, the Company has given consideration to a number of factors including its recent earnings history, expectations for earnings in the future, the timing of reversal of temporary differences, tax planning strategies available to the Company and the expiration dates associated with NOL carryforwards. If, in the future, the Company determines that it is no longer more likely than not that the net deferred tax assets will be realized, a valuation allowance will be established against all or part of the net deferred tax assets with an offsetting charge to the income tax provision.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

The Company believes that its exposure to market risk related to changes in foreign currency exchange rates and trade accounts receivable is immaterial as the vast majority of the Company’s sales are made in U.S. dollars. The Company does not consider itself subject to the market risks addressed by Item 305 of Regulation S-K.

_________________

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

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

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

Item 4.    Controls and Procedures

Under the direction of the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2006. Based on that evaluation, the Company has concluded that its disclosure controls and procedures were effective in providing reasonable assurance that material information required to be disclosed is included on a timely basis in the reports filed with the Securities and Exchange Commission.

There were no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls during the quarter ended September 30, 2006, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II – OTHER INFORMATION

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

No matters were submitted to the Stockholders of the Company during the period covered by this report.

Item 6.    Exhibits

Exhibit 31.1 is the written statement of the chief executive officer of the Company certifying this Form 10-Q complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934.

Exhibit 31.2 is the written statement of the chief financial officer of the Company certifying this Form 10-Q complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934.

Page 14 of 14

Exhibit 32.1 is the written statement of the chief executive officer and chief financial officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LADISH CO., INC.
Date:    October 27, 2006	By:/s/ WAYNE E. LARSEN
	Wayne E. Larsen
	Vice President Law/Finance
	& Secretary