QUARTERS ENDED MARCH 28, 2009 AND MARCH 29, 2008

Overview
The Company is engaged in the business of manufacturing over 5,000 different products for industrial, professional and consumer markets. As a global manufacturer with major subsidiaries in Brazil, Scotland, and China, the Company offers a broad array of products to the market through multiple channels of distribution globally. Net sales decreased 29% and 9.5% for the thirteen week and thirty-nine week periods ended March 28, 2009, as compared to to the same periods in fiscal 2008. The severe decline is due to the unprecedented slowdown in the global economy and the rapid strengthening of the U.S. dollar. This is a direct reflection of the financial market crisis, lack of liquidity and weak consumer confidence. The resultant effect has been a massive de-stocking throughout the supply chain which caused the most significant drop in Company sales in a thirteen week period in the past thirty years. Historically, the Company has lagged the economy and we expect the current harsh economic realities will be with the Company for the balance of this calendar year.

The Company continued to experience the severity of the global economic recession during the quarter. A net loss of $(4.8) million, or $(.72) per basic and diluted share, in the third quarter of fiscal 2009 (fiscal 2009 quarter) compared to net income of $2.9 million, or $.43 per basic and diluted share, in the third quarter of fiscal 2008 (fiscal 2008 quarter). The quarter to quarter comparison was negatively impacted by lower sales volume primarily due to unit volume declines and the strengthening of the U.S. dollar upon consolidation of international results. This represents a decrease in net income of $7.6 million comprised of a decrease in gross margin of $7.9 million, an impairment charge for goodwill of $5.3 million and a decrease in other income of $1.4 million. This was offset by a decrease of $2.1 million in selling, general and administrative costs, and a decrease in income tax expense of $4.9 million. These items are discussed in more detail below.

Net Sales
Net sales for the fiscal 2009 quarter were $42.8 million, a decrease of 29% compared to the fiscal 2008 quarter. North American sales decreased $9.9 million or 30%, while international sales excluding North America decreased $7.4 million or 27% (19% in local currency). The decrease in North American sales is related to the widening of the recession to the manufacturing sector in the U.S., lower Evans Rule sales to the construction sector, and decreased sales in Canada. The declines are primarily related to unit volume declines. The impact of any price concessions and new product sales was not material. It is likely that the Company's results will continue to be impacted by the current global economic recession.

The decrease in international sales is driven by the weakening of the Brazilian Real, British Pound, and Australian Dollar against the U.S. Dollar, partially offset by greater penetration into the Chinese markets. Beyond exchange rate effects, the declines were mainly related to unit volume declines relative to the global economic collapse and do not reflect a loss of market share.

Earnings before income taxes
The fiscal 2009 quarter's loss before income taxes of $7.5 million represents a decrease of earnings before income taxes of $12.5 million from the fiscal 2008 quarter's earnings before income taxes of $5.0 million. Approximately $7.9 million of the decrease is at the gross margin line. The gross margin percentage decreased from 31.7% in the fiscal 2008 quarter to 26.0% in the fiscal 2009 quarter. The decrease in gross margin is primarily a result of sales decreases quarter over quarter ($5.0 million gross margin effect) and lower overhead absorption ($2.4 million) at both domestic and international operations due to this lower sales dollar volume.

Selling, general and administrative expense decreased $2.1 million. However, as a percentage of sales, selling and general expenses increased from 25.4% in the fiscal 2008 quarter to 30.8% in the fiscal 2009 quarter. The decrease in selling and general expense is primarily a result of reduced accruals for incentives for the fiscal 2009 quarter ($.3 million), a decrease in bad debt ($.2 million), a decrease in travel ($.3 million), a decrease in shipping costs ($.2 million), a decrease in professional fees ($.3 million), a decrease in salaries ($.5 million), and a decrease in advertising ($.2 million).

In response to the downturn in sales volume, the Company has reduced spending on raw materials and MRO and has cut salaries at certain domestic locations by 10% and has reduced hourly labor costs through shortened work weeks, layoffs and attrition. These reductions are done with careful consideration so as not to compromise customer service levels or the retention of key employees. This is expected to have an approximate $2.0 million impact per quarter on cost of sales and selling, general and administrative costs once full implementation takes effect. In addition, more layoffs were instituted in April at certain domestic locations, which will have an approximate $1.1 million impact per quarter on cost of sales and selling, general and administrative costs. Although the Company's recent order activity is down compared to historical levels, this decline is spread relatively proportionately across most of our customers. The Company fully expects order activity to rebound once the supply chain de-stocking abates and excess inventory levels at the Company's distributors are depleted. The Company does not anticipate any liquidity constraints given the adequacy of its working capital and its available credit line. See further discussion under Liquidity and Capital Resources.

Income Taxes
The effective income tax rate is 36.8% in the fiscal 2009 quarter versus 42.4% for the fiscal 2008 quarter. Both rates reflect a combined federal, state and foreign rate adjusted for permanent book/tax differences, the most significant of which is the effect of the deduction allowable for the Brazilian dividend paid in the second quarter of fiscal 2009 and in the third quarter of fiscal 2008. The change in the effective rate percentage reflects the increased impact of the Brazilian dividend and other permanent differences on a lower denominator due to lower forecasted taxable income.

No changes in valuation allowances relating to carryforwards for foreign NOL's, foreign tax credits and certain state NOL's are anticipated for fiscal 2009 at this time other than reversals relating to realization of NOL benefits for certain foreign subsidiaries. The Company continues to believe it is more likely than not that it will be able to utilize its tax operating loss carryforward assets of approximately $4.9 million reflected on the balance sheet.

Net earnings (loss) per share
As a result of the above factors, the Company had a basic and diluted net loss of $.72 per share in the fiscal 2009 quarter compared to a basic and diluted net earnings per share of $.43 in the fiscal 2008 quarter, a decrease of $1.15 per share. Included in the current quarters net loss is a loss of $.79 per share relating to goodwill impairment.

NINE MONTH PERIODS ENDED MARCH 28, 2009 AND MARCH 29, 2008

Overview
The Company had a net loss of $1.0 million, or $.15 per basic and diluted share in the first nine months of fiscal 2009, compared to net income of $8.6 million, or $1.30 per basic and diluted share in the first nine months of fiscal 2008. This represents a decrease in net income of $9.6 million comprised of a decrease in gross margin of $8.5 million, an impairment charge for goodwill of $5.3 million, and a decrease in other income of $1.9 million, offset by a decrease in selling, general and administrative expenses of $.5 million and a decrease in income tax expense of $6.5 million. These items are discussed in more detail below.

Net Sales
Net sales for the first nine months of fiscal 2009 were $164.8 million, down $17.3 million compared to the first nine months of fiscal 2008. Domestic sales were down 15%, while international sales decreased 4% (2% decrease in local currency). North American sales reflect lower U.S., Canadian and Mexican demand and lower Evans Rule sales to Sears, partially offset by the acquisition of Kinemetrics in July 2007. The decline in sales is mainly attributable to unit volume declines.

The relatively small decrease in international sales is driven by strong sales in the Brazilian domestic markets and continued expansion in global markets, including Eastern Europe, the Middle East and China, offset by the weakening of the Brazilian Real and British Pound against the U.S. Dollar.

Earnings (loss) before income taxes
The loss before income taxes for the first nine months of fiscal 2009 was $1.6 million compared to $14.5 million of earnings before income taxes for the first nine months of fiscal 2008.

This represents a decrease of earnings before income taxes of $16.1 million. Approximately $8.5 million of this decrease is at the gross margin line. The gross margin percentage decreased from 31.4% in the first nine months of fiscal 2008 to 29.5% in the first nine months of fiscal 2009. The decrease in gross margin dollars reflects lower sales from period to period ($5.0 million gross margin effect), and decreases of fixed overhead absorption at domestic and foreign manufacturing locations as a result of less capacity utilization ($3.2 million).

This decrease in gross margin is accompanied by an increase of $.5 million in selling, general and administrative expense from the first nine months of fiscal 2008 to the first nine months of fiscal 2009. The increase in selling, general and administrative expense is primarily a result of increases in computer maintenance and support ($.4 million) and additional salaries related primarily to sales and marketing ($.4 million), offset by a decrease in bad debts ($.3 million). Finally a one-time gain of $1.7 million from the sale of the Company's Glendale, Arizona facility during the first nine months of fiscal 2008, primarily contributed to a $1.9 million decrease in other income from the first nine months of fiscal 2008 to the first nine months of fiscal 2009.

Income Taxes
The effective income tax rate is a 39.6% provision for the first nine months of fiscal 2009 versus a 40.6% tax rate for the first nine months of fiscal 2008. Both rates reflect a combined federal, state and foreign worldwide rate adjusted for permanent book/tax differences, the most significant of which is the deduction allowable for the Brazilian dividend paid in December 2008 and December 2007. The change in the effective income tax rate percentage primarily reflects the larger impact of the Brazilian dividend and other permanent differences on a lower denominator due to lower anticipated earnings for fiscal 2009.

The Company continues to believe it is more likely than not that it will be able to utilize its tax operating loss carryforward of approximately $4.9 million reflected on the balance sheet.

Net earnings (loss) per share
As a result of the above factors, the Company had a basic and diluted net loss per share for the first nine months of fiscal 2009 of $.15 per share compared to an earnings per share of $1.30 in the first nine months of fiscal 2008, a decrease of $1.45 per share. Included in the loss for the first nine months of fiscal 2009 is a loss of $.79 per share relating to goodwill impairment. Included in the $1.30 earnings per share for the first nine months of fiscal 2008 is $.15 per share related to the sale of the Glendale facility.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows (in thousands)                      13 Weeks Ended              39 Weeks Ended
                                            3/28/09       3/29/08       3/28/09       3/29/08

Cash (used by) provided by operations      $  (1,510 )   $   3,452     $  (4,867 )   $  17,989
Cash (used in) provided from investing
activities                                      (553 )      (1,673 )         435       (15,265 )
Cash provided from (used in) financing
activities                                     5,463        (1,697 )       9,109        (3,178 )

Cash provided by operations in the current quarter decreased by $5.0 million compared to the same quarter a year ago. This decrease is primarily a result of the decrease in net earnings ($(7.6) million), offset by an increase in non-cash items and working capital changes ($2.6 million).

Cash provided by operations decreased significantly in the current nine month period compared to the same nine month period a year ago. This decrease is primarily a result of an increase in inventories ($15.8 million change), a decline in net earnings ($9.6 million), and a decrease ($4.6 million) in current liabilities in the current nine month period versus the prior nine month period, which is partially offset by a decrease in non-cash items (excluding the $5.3 million relating to goodwill impairment) and other working capital changes ($1.9 million).

The decline in the nine month period was driven by a build up of inventories at locations throughout the world as the slowdown in production and sales caused a temporary build up of raw materials. Purchase activity has been adjusted and it is expected that inventory levels will decrease over the next three quarters. Sufficient cash balances for operations are maintained at each location worldwide with 10% of consolidated cash maintained in foreign bank accounts, excluding UK accounts. The balances in the UK banks are highly liquid and readily transferable to the U.S.

The Company's investing activities for the current quarter and nine month period consist of expenditures for plant and equipment and the investment of cash not immediately needed for operations. Expenditures for plant and equipment decreased $.3 million from the current quarter to the same period a year ago, reflecting lower equipment purchases at various manufacturing locations. Such expenditures for the nine month period increased $1.0 million compared to the same period a year ago, reflecting equipment purchases at various manufacturing locations. The proceeds from the sale of the Glendale distribution facility is included in the prior nine month period. The purchase of Kinemetrics was completed in the first quarter of fiscal 2008 and is included in the prior nine month period.

Cash flows related to financing activities are primarily the payment of dividends and repayments of debt.

Liquidity and credit arrangements
The Company believes it maintains sufficient liquidity and has the resources to fund its operations in the near term. If the Company is unable to maintain consistent profitability, additional steps, beyond the salary reductions, layoffs, shortened work weeks as noted above, will have to be taken in order to maintain liquidity, including plant consolidations and work force and dividend reductions (see Strategic and Other Activities below). In addition to its cash and investments, the Company had maintained a $10 million line of credit, of which, as of March 28, 2009, $975,000 is being utilized in the form of standby letters of credit for insurance purposes. On April 28, 2009, the Company signed an amendment to its existing line of credit agreement extending the termination date of such agreement from April 28, 2009 to June 15, 2009. With this amendment, the scheduled principal payment of $2.4 million due under the Reducing Revolver was extended to June 15, 2009. The Company is currently in compliance with debt covenants referenced in this amendment. Under the current credit line, our interest rate for the Reducing Revolver is LIBOR plus 1.5% and 3.25% (Prime) for the line of credit. In advance of the termination date of the line of credit agreement, the Company has solicited competitive bids and is in the process of reviewing offers from several potential lenders including the Company's current lender, Bank of America. The Company has a working capital ratio of 4.0 to one as of March 28, 2009 and 4.8 to one as of June 28, 2008.

STRATEGIC AND OTHER ACTIVITIES
Globalization has had a profound impact on product offerings and buying behaviors of industry and consumers in North America and around the world, forcing the Company to adapt to this new, highly competitive business environment. The Company continuously evaluates most all aspects of its business, aiming for new world-class ideas to set itself apart from its competition.

The strategic focus has shifted from manufacturing locations to global brand building through product portfolio and distribution channel management while reducing costs through lean manufacturing, plant consolidations, global sourcing and improved logistics.

The execution of these strategic initiatives has expanded the Company's manufacturing and distribution in developing economies which has increased its international sales revenues to approximately 48% of its consolidated sales.

On September 21, 2006, the Company sold its Alum Bank, PA level manufacturing plant and relocated the manufacturing to the Dominican Republic, where production began in fiscal 2005. The tape measure production of the Evans Rule Division facilities in Puerto Rico and Charleston, SC has been transferred to the Dominican Republic. The Company vacated and plans to sell its Evans Rule facility in North Charleston, SC. The Company's goal is to achieve labor savings and maintain margins while satisfying the demands of its customers for lower prices. The Company has closed three warehouses, the most recent being the Glendale, AZ facility, which was sold in fiscal 2008. Also during fiscal 2006, the Company began a lean manufacturing initiative in its Athol, MA facility, which has reduced costs over time. Lean has been expanded to encompass other operations including Mt. Airy, N.C., Charleston, S.C., Tru-Stone Technologies, MN, and hand tools in the Dominican Republic This initiative has continued through fiscal 2007, 2008 and 2009.

The Tru-Stone acquisition in April 2006 represented a strategic acquisition for the Company in that it provided an enhancement of the Company's granite surface plate capabilities. Profit margins for the Company's standard plate business have improved as the Company's existing granite surface plate facility was consolidated into Tru-Stone, where average gross margins have been higher. Along the same line, the Kinemetric Engineering acquisition in July 2007 represented another strategic acquisition in the field of precision video-based metrology which, when combined with the Company's existing optical projection line, has provided a very comprehensive product offering.

If the Company continues to be impacted by the worldwide recession, there will likely be additional layoffs, shortened hours per week and possible temporary idling of manufacturing plants to reduce costs in the short-term.

INFLATION

The Company has experienced modest inflation relative to its material cost, much of which cannot be passed on to the customer through increased prices.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any material off-balance sheet arrangements as defined under the Securities and Exchange Commission rules.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. The first footnote to the Company's Consolidated Financial Statements included in the Form 10-K for the fiscal year ended June 28, 2008 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Judgments, assumptions, and estimates are used for, but not limited to, impairment analysis of the allowance for doubtful accounts receivable and returned goods; inventory allowances; income tax reserves; employee turnover, discount and return rates used to calculate pension obligations and normal expense accruals for such things as workers' compensation and employee medical expenses.

Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may differ from those estimates, and such differences may be material to the Company's Consolidated Financial Statements. The following sections describe the Company's critical accounting policies.

Sales of merchandise and freight billed to customers are recognized when title passes and substantially all risks of ownership change, which occurs either upon shipment or upon delivery based upon contractual terms. Sales are net of provision for cash discounts, returns, customer discounts (such as volume or trade discounts), cooperative advertising and other sales related discounts. Cash discounts are recognized when taken by the customer. Volume discounts, trade discounts and sales incentives are calculated and recorded at the time of sale based on an estimate considering historical data and future trends. Cash discounts, volume discounts, trade discounts and sales incentives are charged against sales and appear in the sales line of the Consolidated Statement of Operations.

The Company has no advertising expenditures for direct response advertising. Cooperative advertising payments made to customers and other advertising costs are charged to advertising expense as incurred and are shown in the selling, general and administrative expense line of the consolidated statement of operations. No advertising costs were amortized.

The days sales outstanding for accounts receivable were 59 days and 60 days, at March 28, 2009 and June 28, 2008, respectively.

The allowance for doubtful accounts and sales returns of $.9 million and $1.2 million as of March 28, 2009 and June 28, 2008, respectively, is based on our assessment of the collectibility of specific customer accounts, the aging of our accounts receivable and trends in product returns. While we believe that our allowance for doubtful accounts and sales returns is adequate, if there is a deterioration of a major customer's credit worthiness, actual defaults are higher than our previous experience, or actual future returns do not reflect historical trends, our estimates of the recoverability of the amounts due us and our sales could be adversely affected.

Inventory purchases and commitments are based upon future demand forecasts. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changing technology and requirements, we may be required to increase our inventory reserve and, as a result, our gross profit margin could be adversely affected.

The Company generally values property, plant and equipment (PP&E) at historical cost less accumulated depreciation. Impairment losses are recorded when indicators of impairment, such as plant closures, are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. The Company continually reviews for such impairment and believes that PP&E is being carried at its appropriate value. Events may occur that would adversely affect the reported value of the Company's assets. Once per quarter, the Company looks at decreases in the market prices of long-lived assets, adverse changes in long-lived asset usage, changes in legal factors, accumulated costs significantly in excess of the expected acquisition costs and current period operating or cash flow loss in conjunction with prior or projected operating and cash flow losses of long-lived assets.

For assets to be disposed of, the Company accumulates the assets that will be offered for sale as a group and evaluates the group of impairment once per quarter. Impairment for long-lived assets from continuing operations are evaluated by grouping assets with liabilities at the lowest level of identifiable cash flows.

The Company may utilize a quoted current market price or the income approach to estimate the fair value of an asset depending on the current circumstances.

The Company utilizes the capital asset pricing model or the build-up method to estimate the discount rate utilized in discounting the future cash flow of the asset group. Projections of cash flow are generated by the Company utilizing estimates from sales, operations and finance to arrive at the projected cash flows. Sensitivity analysis is utilized to estimate potential beneficial or detrimental impacts on cash flow and discount rate from the most likely outcome derived by management. The Company estimates that a 1% change in the discount rate would have a 3% change in cash flow.

Goodwill testing is done on an annual basis at the Company's fiscal year end. The Company tests for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit. Examples of events or circumstances include:

o A significant adverse change in legal factors or in the business climate

o An adverse action or assessment by a regulator

o Unanticipated competition

o A loss of key personnel

o A more likely than not expectation that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed of

o The testing for recoverability of significant long lived asset groups under FAS 144.

The Company assesses the fair value of its goodwill, generally based upon a discounted cash flow methodology. The discounted cash flows are estimated utilizing various assumptions regarding future revenue and expenses, working capital, terminal value, and market discount rates. If the carrying amount of the goodwill is greater than the fair value, goodwill impairment may be present. An impairment charge is recognized to the extent the recorded goodwill exceeds the implied fair value of goodwill. As noted in Footnote 4 of the Financial Statements, a $5.3 million impairment was recorded during the fiscal quarter related to Tru-Stone.

Accounting for income taxes requires estimates of our future tax liabilities. Due to timing differences in the recognition of items included in income for accounting and tax purposes, deferred tax assets or liabilities are recorded to reflect the impact arising from these differences on future tax payments. With respect to recorded tax assets, we assess the likelihood that the asset will be realized. If realization is in doubt because of uncertainty regarding future profitability or enacted tax rates, we provide a valuation allowance related to the asset. Tax reserves are also established to cover risks associated with activities or transactions that may be at risk for additional taxes. Should any significant changes in the tax law or our estimate of the necessary valuation allowances or reserves occur, we would record the impact of the change, which could have a material effect on our financial position or results of operations.

Pension and postretirement medical costs and obligations are dependent on assumptions used by our actuaries in calculating such amounts. These assumptions include discount rates, healthcare cost trends, inflation, salary growth, long-term return on plan assets, retirement rates, mortality rates, and other factors. These assumptions are made based on a combination of external market factors, actual historical experience, long-term trend analysis, and an analysis of the assumptions being used by other companies with similar plans. Actual . . .