RESULTS OF OPERATIONS

Statements contained in this Annual Report on Form 10-K that are not based on historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as "should," "could," "may," "will," "expect," "believe," "estimate," "anticipate," "intends," "continue," or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company's business and the results of its operations and may cause the actual results of operations in future periods to differ materially from those currently expected or desired. These factors include, but are not limited to general and international economic conditions, current liquidity issues impacting the U. S. banking system, including more specifically conditions in the automotive, aerospace, energy, housing and general transportation markets, specific business conditions in one or more of the industries served by the Company, lower-cost competition, the relative mix of products which impact margins and operating efficiencies, both domestic and foreign, in certain of our businesses, the impact of higher raw material and component costs, particularly steel, petroleum based products and refrigeration components, uncertainty in the mergers and acquisitions market generally, an inability to realize the expected cost savings from the implementation of lean enterprise manufacturing techniques, the inability to achieve the savings expected from the sourcing of raw materials from and implementation of manufacturing in China and the inability to achieve synergies contemplated by the Company. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management's estimates change.

Overview

We are a leading manufacturer of a variety of products and services for diverse industrial market segments. We have five reporting segments: Food Service Equipment Group, Air Distribution Products Group (ADP), Engraving Group, Engineered

Products Group and Hydraulics Products Group. Through the execution of our focused diversity strategy, we have transformed ourselves from a company comprised of a mix of consumer and industrial businesses to one that is now exclusively a manufacturer of products sold to commercial and industrial customers. Our objective is to identify those of our businesses which hold the greatest potential for profitable growth, and direct our resources to supporting both organic growth and acquisition opportunities in those businesses.

Over the past two years, we have taken important steps in the implementation of our strategy. Through two significant acquisitions which we made in our Food Service Equipment Group in fiscal 2007, we increased the size of that Group by approximately 40% in terms of revenues and greatly diversified the Group's product offerings to include, among other things, a broad-based line of "hot side" products to complement not only our existing hot side product offerings, but also what was already a strong presence in our "cold side" product offerings.

We continue to take advantage of both sales and cost synergies from the increased size and breadth of the Food Service Equipment Group. First, the ability to offer customers of certain of the Group's products a broader array of product offerings allowed us to strengthen our relationships with key customers and add new customers to our existing base. Second, the increased size of the Group and the greater purchasing leverage resulting from consolidating the purchase of various commodities and components across our food service businesses allowed us to achieve reductions in freight costs, and in the cost of raw materials such as steel, a material common to most of the Group's products.
The initiatives that the Group has undertaken are expected to be principal factors in improving the Group's sales and earnings, despite a challenging economic environment in many of the markets served by the Group.

A second initiative in our overall strategy was the continued expansion of our mold texturization business in international locations. In addition to the continued growth of that business, which primarily serves the global automotive industry, in China, we opened facilities last year in Turkey and the Czech Republic, two nations with rapidly expanding presences in vehicle manufacturing.

Third, we have continued our effort to consolidate manufacturing operations to improve the leverage of our manufacturing infrastructure and to reduce fixed overhead expenses. During fiscal 2008, we closed one Engineered Products Group facility and two Engraving Group facilities, and consolidated the operations conducted at those locations into other facilities. During the fiscal quarter just ended, we closed an additional facility in the ADP Group.

Fourth, we have taken significant additional steps, including sourcing an increasing percentage of our raw materials and components from lower cost producers, primarily offshore, relocating manufacturing operations to lower cost countries such as Mexico and China, substituting materials and standardizing common product components where appropriate, implementing lean manufacturing processes throughout our operations, and analyzing whether it is more economical to acquire certain components from outside suppliers, rather than produce them internally.

Although the continued implementation of our strategy facilitated improvements in sales and earnings in fiscal 2009, we do have businesses which were affected this past quarter by difficult economic conditions in their markets. Sales in our ADP Group continue to be impacted by the decline in the new residential housing market. Sales and earnings in the Hydraulics Products Group also declined, due to a variety of factors including high fuel prices, reduced releases of governmental highway spending funds, and an excess of new, used and repossessed equipment in the marketplace.

As of the date of this report, the current distressed conditions in the financial and credit markets have not had a material impact on our overall financial condition or liquidity. Management continues to monitor the financial markets and their impact on global economic conditions affecting our segments.
If changes in global and US financial markets were to negatively impact operations, we would expect to rely on available cash and our existing revolving credit facility to provide funding.

There are a number of key external factors other than general business and economic conditions that can impact the performance of our businesses. The key factors affecting each business are described below in the segment analysis.

We monitor a number of key performance indicators including net sales, income from operations, backlog and gross profit margin. A discussion of these key performance indicators is included within the discussion below. Unless otherwise noted, references to years are to fiscal years.

Results from Continuing Operations:


                               Three Months Ended September 30,
(Dollar amounts in thousands)      2008                2007
Net sales                         $   180,695        $    175,520
Gross profit margin                     31.6%               28.3%
Income from operations                 10,751              10,846
Backlog as of September 30            134,619             118,728



Net Sales
                               Three Months Ended
(In thousands)                 September 30, 2008
Net sales, prior period         $          175,520
Components of change in sales:
  Effect of exchange rates                   1,156
  Organic sales change                       4,019
Net sales, current period       $          180,695

Net sales for the first quarter of 2009 increased $5.2 million, or 2.9%, when compared to the same period of 2008. This net sales increase was positively impacted by organic sales growth of $4.0 million, or 2.3%, and favorable exchange rates. The organic sales growth is primarily due to strong sales increases for the Engineered Products and Food Service Equipment Groups. These increases were partially offset by a continued deterioration in market conditions in the ADP and Hydraulics Groups, related to new residential construction and the heavy construction vehicle market, respectively. Sales in the Engraving Group were slightly higher than the same period last year. A further discussion by segment follows.

Gross Profit Margin

Our gross profit margin increased to 31.6% for the first quarter of 2009 versus 28.3% in the same quarter of last year. With the exception of the Engineered Products Group, margins increased across each of our segments when compared to the same period last year. The largest increases occurred in ADP due primarily to the implementation of price increases implemented to offset future anticipated material cost increases and to a lesser extent savings from factory consolidations and material cost reductions, and in the Engraving Group, driven by facility consolidation and cost reduction efforts. These improvements were offset by lower margins in the Engineered Products Group, where prior year results were positively impacted by a payment made under the terms of a long-term contract. These payments have been completed, resulting in a difficult comparison in the first quarter of fiscal 2009 and will similarly affect each subsequent quarter for the remainder of the fiscal year.

Selling, General, and Administrative Expenses

Selling, General, and Administrative Expenses for the first quarter of 2009 were $42.0 million, up from $38.7 million reported for the same period a year ago.
This increase was driven primarily by health insurance costs, sales commissions, and distribution costs.

Income from Operations

Income from operations for the first quarter of 2009 was $10.75 million, 0.9% lower than the $10.84 million reported for the same period a year ago.
Operating income was negatively impacted by $4.3 million of restructuring costs incurred during the period related primarily to closure of the ADP facility in Bartonville, Illinois. Excluding these costs, operating income increased by $4.2 million or 39.0%, driven primarily by significant improvements in the Engraving and ADP Groups, offset by slight decreases for the Hydraulics Products Groups, as described in more detail in the Segment Analysis of Income from Operations.

Interest Expense

Interest expense for the first quarter of 2009 decreased $1.0 million, or 35.8%, to $1.7 million due to decreased borrowings on the Company's revolving credit facility as well as reduced interest rates during the period.

Other Non-Operating Income

Other operating income for the quarter totaled $0.8 million. This amount consisted primarily of a $1.1 million gain on the portion of proceeds from a life insurance policy triggered by the death of a former executive.

Income Taxes

Our effective income tax rate for the first quarter of 2009 was 27.6% compared to 36.1% for the first quarter of 2008. The lower effective tax rate is primarily due to the impact of the life insurance proceeds in Other Non-Operating Income, which were not subject to income tax.

Backlog

Backlog at September 30, 2008 increased $15.9 million, or 13.4%, compared to September 30, 2007. Backlog increased $4.2 million and $17.4 million for the Engraving and Engineered Products Groups, respectively, offset by decreased backlog of $4.3 million and $1.3 million at the Food Service Equipment and Hydraulics Products Groups, respectively. Backlog at the ADP Group approximated that of September 30, 2007.

Segment Analysis

Net Sales

The following table presents net sales by business segment (in thousands):


                                  Three Months Ended September 30,
                                      2008                2007
Food Service Equipment Group         $   101,756         $    96,961
Air Distribution Products Group           23,788              27,350
Engraving Group                           21,568              20,403
Engineered Products Group                 25,255              21,804
Hydraulics Products Group                  8,328               9,002
    Total                            $   180,695         $   175,520

Food Service Equipment Group

Net sales in the first quarter of 2009 increased $4.8 million, or 4.9%, over the same period last year due to organic growth and pricing initiatives. Strong sales improvements continued in our walk-in cooler product segments in our Refrigeration Solutions Group. On the Cooking Solutions side of the business, strength in the retail supermarket channels offset lower volume due to a delay in orders by a national fast food chain account, and weakness in the casual dining and independent pizzeria market segments.

Air Distribution Products Group

Sales for the ADP Group declined $3.6 million from 2008 levels, a 13.0% reduction. Price increases of $4.4 million during the quarter and market share gains partially offset year over year volume decreases which were the result of a continued decline in new residential construction. Standex evaluates the available market for ADP by monitoring new housing start data, published monthly by the U.S. Department of Housing and Urban Development. Sales to the Group's customers typically lag new home starts by three to four months. Comparing the first quarter 2009 to the same period one year earlier, housing starts deteriorated 33%. Excluding price increases, ADP's unit volume was lower by 29% from the same quarter last year. ADP continues to pursue market share gains through its traditional wholesaler channels by expanding its sales force, focusing on underpenetrated markets, and by emphasizing our ability to service nationwide wholesalers and large "do-it-yourself" retailers through our network of factory locations. These initiatives have resulted in market share gains; however, the additional sales volume resulting from these efforts has not been sufficient to offset the decline in the overall market.

Engraving Group

Net sales increased by $1.2 million, or 5.7%, when compared to the same period one year ago. The increase is attributable to changes in foreign exchange rates. The roll and mold texturization businesses worldwide remained steady for the quarter, and the Group's China business generated year over year sales growth of 24%, net of foreign exchange. Continued slowdowns in housing, global automotive and capital spending are expected to have an impact in the second quarter.

Engineered Products Group

Net sales increased $3.5 million or 15.8%, when compared to the same period one year earlier. The increase was primarily driven by new sales of marine components and turbine energy hardware at our metal spinning and fabrication businesses where we continue to see ongoing robust demand across our energy, aviation and aerospace end-user markets. The extension of two customers' major aerospace rocket contracts through 2012 should provide a solid sales base going forward. Sales at our electronics business were negatively impacted by accelerated weakness in the automotive segment and continued softness in the security, HVAC and white goods markets. The sales shortfall at our electronics business was offset by gains from a recent acquisition and sales growth in the medical and industrial markets resulting in flat sales quarter over quarter.

Hydraulics Products Group

Net sales decreased $0.7 million, or 7.5%, from the first quarter of fiscal 2008. The decrease was attributable to the continued depressed conditions in the domestic dump truck/dump trailer market, which were exacerbated by the price of fuel, excess inventory, and the general domestic economic situation. The tightening of the US credit markets has had a negative impact on the OEM marketplace by limiting procurement of new trucks and dump trailers. We are continuing to cultivate new market opportunities in Europe, China, and the Middle East in order to diversify our revenue base into other global regions and decrease dependence on the North American market.

Income from Operations

The following table presents income from continuing operations by business
segment (in thousands):


                                  Three Months Ended September 30,
                                      2008                2007
Food Service Equipment Group          $    9,670         $     9,648
Air Distribution Products Group            3,112                 397
Engraving Group                            2,430               1,271
Engineered Products Group                  3,106               2,914
Hydraulic Products Group                   1,196               1,219
Corporate and Other                      (4,442)             (4,603)
Restructuring                            (4,321)                   -
    Total                            $    10,751         $    10,846

Food Service Equipment Group

Income from operations for the first quarter of 2009 was flat when compared to the same period one year earlier. Labor and material productivity improvements were negatively impacted by sales mix, as during the quarter the Refrigerated Solutions businesses experienced higher sales volumes of lower margin coolers and freezers and lower sales volumes of higher-margin scientific products and reach-in cabinets. In the Cooking Solutions businesses we experienced lower sales of higher margin cooking solutions products due to delayed orders from a large quick service restaurant chain and softness from the casual dining and independent pizzeria segment

Air Distribution Products Group

Income from operations in the ADP segment increased to $3.1 million, a $2.7 million increase over 1st quarter 2008. The improved results are primarily due to price increases totaling 30.4% and to a lesser extent from savings resulting from factory consolidations and material cost reductions implemented during the 1st quarter. We expect the group to operate profitably in the second quarter as we continue to benefit from lower cost on-hand metal inventory, but expect to be focused on maintaining break-even performance in the second half of fiscal 2009 as we begin to utilize higher cost metal currently on order.

Engraving Group

Income from operations increased by $1.2 million, or 91.2%, when compared to the same quarter in the prior year. The Group's North American operations contributed increased operating income due to factory consolidations, cost reduction efforts, and productivity improvements at our domestic divisions. We exited the quarter with a good backlog in North America, giving us reason for optimism about the near-term prospects for this business.

Internationally, we have begun to see some automotive platform delays that we expect will continue for the near term. During the quarter, operating income was impacted by an unfavorable sales mix which included higher non-automotive industry sales as compared to higher-margin automotive industry platform program sales in the Group's European operations.

Engineered Products Group

First quarter operating income was up $0.2 million, or 6.6% from 2008. Earnings in our Electronics business increased as the result of the plant consolidations and cost reduction actions that were completed in the fourth quarter of 2008. Operating income in the Spincraft business increased only slightly as prior year results were positively impacted by a payment made under the terms of a long-term contract. These payments have been completed, resulting in a difficult comparison in the first quarter of fiscal 2009 and continuing through subsequent quarters this year.

Hydraulics Products Group

Income from operations was flat when compared to the same period one year earlier. Savings generated by improved operating efficiencies, a reduction in employees, and a slightly more favorable product mix were not able to offset operating income decreases due to sales declines.

Corporate and Other

Corporate expenses of approximately $4.4 million in the first quarter of 2009 decreased $0.2 million or 3.5% compared to 2008 due to benefit cost decreases during the year.

Restructuring Costs

On July 25, 2008, the Company announced the closure of the ADP production facility located in Bartonville, Illinois. This facility manufactured metal duct and fittings for the residential HVAC market and had 64 employees. The sales and production activities at the Bartonville facility were relocated to other ADP facilities. The Company's decision to close the Bartonville facility is in response to the downturn in the new residential construction market.
Standex recorded a $4.1 million pre-tax expense related to the closure of the Bartonville facility in the first quarter of 2009.

Discontinued Operations

As more fully discussed in our Annual Report on Form 10-K for the year ended June 30, 2008, we are accounting for three recently exited businesses (USECO, Standard Publishing and Berean Christian Stores) as discontinued operations.

Also included in discontinued operations are expenses related to the former location of the Club Products and Monarch Aluminum divisions. In 2008, the Company entered into an Administrative Order of Consent with the U.S. Environmental Protection Agency related to the removal of various PCB-contaminated materials and soils at a site where the Company leased a building and conducted operations from 1967 to 1979 and concurrently established an accrual of $2.0 million related to the matter. In the first quarter of 2009, the Company updated its assessment of the expected remediation efforts and determined that an additional accrual of $3.0 million ($2.0 million net of tax) was required.

Liquidity and Capital Resources

Cash Flows - Three Months Ended September 30, 2008

Operating activities from continuing operations during the three months ended September 30, 2008 used $2.8 million of cash, compared to the generation of $13.2 million in cash for the same period last year. The decrease in cash flow is primarily attributable to an increase in working capital during the prior twelve months. Net working capital levels for continuing operations (defined as accounts receivable plus inventories less accounts payable) increased $6.4 million in the last twelve months. Investing activities from continuing operations used $1.0 million in cash during the three months ended September 30, 2008 due primarily to an acquisition in the Engineered Products Group and capital expenditures, offset by life insurance proceeds.

During the three months ended September 30, 2008, we used $1.0 million of cash for financing activities. We paid dividends of $2.6 million and borrowed $2.5 million in to fund operating cash flow needs during the quarter.

We have in place a five year, $150 million unsecured revolving credit facility (the "facility") with seven participating banks which was originated in September 2007. Funds available under the facility may be used for general corporate purposes or to provide financing for acquisitions. The agreement contains certain covenants including funded debt to EBITDA and EBIT to interest expense. Borrowings under the agreement bear interest at a rate equal LIBOR plus an applicable percentage based on our consolidated leverage ratio, as defined by the agreement. As of September 30, 2008, the effective rate of interest for outstanding borrowings under the facility was 4.14%. We are required to pay an annual fee of 0.15% on the maximum credit line. As of September 30, 2008, we had borrowings of $91.0 million under the revolving facilities and the ability to borrow an additional $59.0 million under the facility. At September 30, 2008, the debt of all syndicate members in the revolving credit agreement was rated investment grade.

The Company's long-term debt also includes amounts associated with note purchase agreements with institutional investors. As of September 30, 2008, we had two note purchase agreements with institutional investors of $25.0 million each, dated October 2002 and October 1998. The notes bear interest at annual rates of 5.94% and 6.80%, respectively. Each note purchase agreement requires payment of interest semi-annually. The note purchase agreement dated October 2002 requires annual payments of $3.6 million that commenced in October 2006. The note purchase agreement dated October 1998 is due and payable in October 2008. As of September 30, 2008, the balance outstanding under the note purchase agreements aggregated $42.9 million. The Company made repayments of $28.6 million of this debt in October 2008 using additional borrowings under our revolving credit facility. These maturities resulted in the reduction of available borrowings under the facility to $29 million as of October 24, 2008. At September 30, 2008, the debt of all holders of the Company's note purchase agreements was investment grade. We intend to replace the debt that was repaid in October 2008 with new private placement debt when capital markets return to a more normalized state. We believe that we have sufficient capacity under the revolving credit facility to meet the liquidity needs of the Company until this normalization occurs.

In July 2008, we entered into a series of swap agreements with one and two year terms effectively converting interest payments on our long-term debt from variable to fixed rates. We converted interest payments on $88.5 million of debt due under our revolving credit agreement from variable rates based on LIBOR to a weighted average fixed rate of 3.23% for an effective rate of 4.01% based on our current leverage ratio.

At September 30, 2008, we were in compliance with the financial covenants of our debt agreements, and based upon our current plans and outlook, we believe that we will continue to be in compliance with these covenants during the coming twelve-month period.

The following table sets forth our capitalization at September 30, 2008 and June 30, 2008:

                         September 30,     June 30,
                             2008            2008
Short-term debt           $     28,571    $    28,579
Long-term debt                 108,586        106,086
    Total debt                 137,157        134,665
Less cash                       21,862         28,657
    Net debt                   115,295        106,008
Stockholders' equity           220,312        223,158
    Total capitalization  $    335,607    $   329,166

We sponsor a number of defined benefit and defined contribution retirement plans. We have evaluated the current and long-term cash requirements of these plans. Our operating cash flows from continuing operations are expected to be sufficient to cover required contributions under ERISA and other governing regulations.

We have an insurance program in place to fund supplemental retirement income benefits for certain retired executives. Current executives and new hires are not eligible for this program. At September 30, 2008, the underlying policies have a cash surrender value of $20.0 million, less policy loans of $11.5 million. As we have the legal right of offset, these amounts are reported net on our balance sheet. The aggregate present value of future obligations was approximately $1.6 million and $1.7 million at September 30, 2008 and June 30, 2008, respectively. During the first quarter of 2009, the Company received $1.9 million of cash proceeds upon the death of a former executive covered by this program.

The Company is a guarantor of certain assigned leases to Berean Christian Bookstores, one of our discontinued operations. The total guarantee . . .