Statements contained in this Quarterly Report on Form 10-Q 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, the length and degree of the current recessionary conditions on customers and markets that we serve, current liquidity issues impacting the U. S. banking system, including more specifically an inability to generate sufficient cost savings to sufficiently mitigate adverse effects of the current recessionary economic conditions, the inability to generate savings from cost reduction initiatives being negotiated with suppliers; the inability to realize anticipated savings from plant consolidations; 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 commercial and 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's revenues by approximately 40% 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 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 the Group's customers 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 over the longer term.

A second initiative in our overall strategy was the continued expansion of our mold texturization business (a part of the Engraving Group) in international locations serving the global automotive industry. An Original Equipment Manufacturer ("OEM") may source components (door panels, dashboards, etc.) from multiple countries, however, all of the textures must match. We have the technology to provide a complete solution to our OEM customers, regardless of their sourcing structure. In addition to the continued growth of the business in China, we opened facilities last year in Turkey and the Czech Republic, two nations with rapidly expanding presences in vehicle component 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 the first nine months of fiscal 2009, we have announced or completed the consolidation of five manufacturing facilities, one from each of our reporting segments. During fiscal 2008, we closed one Engineered Products Group facility and two Engraving Group facilities, and consolidated these operations into other facilities.

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.

Starting in the second quarter of fiscal 2009, the Company has been impacted by the current economic recession across most of its business units. The Company has implemented a number of actions in response to the downturn in market demand.

First, since the beginning of fiscal 2009 we have reduced our U.S.-based salaried staffing levels by approximately 260 positions. Approximately 55% of these reductions occurred during the second quarter and 38% occurred during the third quarter. As of March 31, 2009, the Company had an accrual of $0.4 million related to future payments related to these reductions. The salary and benefit savings resulting from this reduction in staff is approximately $15.3 million on an annual basis. In addition, during the third quarter, except where prohibited by collective bargaining agreements, we have announced that employee salaries will be frozen and employer contributions to defined contribution plans will be suspended through at least the end of calendar year 2009. Finally, we have eliminated all annual incentive bonus payments for fiscal year 2009.

Second, as part of our ongoing efforts to improve the utilization of our manufacturing infrastructure, we accelerated the implementation of plans to consolidate our global manufacturing footprint during the third quarter of 2009.
In our Food Service Equipment Group, we have announced the closure of a facility located in New York. The production from this facility will be relocated to our operations in Mexico and Wyoming and transitional operations have begun. We expect to complete this move by the end of the fourth quarter of this fiscal year. In our Engraving Group, we announced and completed the consolidation of the mold texturizing production from our Detroit facility into our facility located in Canada during the third quarter. In our Engineered Products Group, we have begun consolidating the production from our remaining Canadian operation into existing facilities located in Mexico and China, and expect to complete the process during the fourth quarter of 2009. In addition, during the second quarter we closed a manufacturing operation in the Hydraulics Products Group and consolidated production into an existing facility. Finally, subsequent to March 31, 2009, we announced the consolidation of the Electronics plant acquired by the Company in the first quarter into another operation in the Electronics unit, which will be completed during the first quarter of FY2010.
Annual savings resulting from these plant consolidations is anticipated to be in the range of $3.8 to $4.5 million.

Third, we have entered into negotiations with the majority of suppliers to the Company including those who provide inventory items as well as MRO and services to achieve cost reductions on all of our purchases. From this initiative we have targeted to achieve a minimum run rate of $5-6 million of annual savings by the end of fiscal 2009 fourth quarter as compared to the cost structure in place during the first half of fiscal 2009. Progress made during the third quarter indicates that the Company is on track to achieve or exceed the targeted savings.

Fourth, we continue our strong focus on working capital management and cash flow generation with the intent of improving our liquidity and making additional payments on borrowings under the Company's revolving credit facility. In addition, the Company is repatriating cash in instances where the Company can remit to the U.S. without incurring a significant net tax cost, as well as restricting capital expenditures. The strong operating cash flow from continuing operations of $25.6 million and debt reduction of $21.2 million achieved in the third quarter indicate that these actions have also been successful. The resulting additional borrowing capacity is expected to provide additional flexibility during the foreseeable global deterioration in economic and financial markets.

These new initiatives, in addition to the continued implementation of our long-term strategy, are expected to assist the Company in generating future cost savings of approximately $25 million beginning in fiscal year 2010, sufficient to mitigate adverse effects resulting from continuing world-wide recessionary economic conditions.

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.

Because of the diversity of the Company's businesses, end user markets and geographic locations, management does not use specific external indices to predict the future performance of the Company, other than general information about broad macroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to their businesses and which could impact their performance. Those units report any such information to senior management, which uses it to the extent relevant to assess the future performance of the Company. A description of any such material trends is described below in the applicable segment analysis.

Unless otherwise noted, references to years are to fiscal years.

Results from Continuing Operations:

                                    Three Months Ended                  Nine Months Ended
                                        March 31,                           March 31,
(Dollar amounts in thousands)       2009             2008               2009               2008
Net sales                          $   130,970      $169,002               $  467,175     $516,767
Gross profit margin                      24.4%         28.3%                    28.8%        28.8%
Income (loss) from operations         (19,945)         6,774                  (3,207)       28,897
Backlog as of December 31               95,588       112,905                   95,588      112,905

Net Sales
                                         Three Months Ended                   Nine Months Ended
(In thousands)                             March 31, 2009                       March 31, 2009
Net sales, prior period                      $          169,002                 $          516,767
Components of change in sales:
  Effect of exchange rates                              (4,164)                            (6,497)
  Organic sales change                                 (33,868)                           (43,095)
Net sales, current period                   $           130,970                 $          467,175

Net sales for the third quarter of 2009 decreased $38.0 million, or 22.5%, when compared to the same period of 2008. This net sales decrease was the result of a decrease in organic sales of $33.9 million, or 20.0%, and unfavorable exchange rates of $4.2 million. The decline in organic sales occurred across all reporting segments as a result of continued weakening in our world-wide markets. During the quarter, we saw sales declines across all product groups as customers reduced or delayed capital spending and expansion plans. We continue to experience the largest sales declines in the ADP Group, which is heavily dependent upon new residential construction, and the Hydraulics Products Group, which serves general construction markets.

Net sales for the nine months ended March 31, 2009 decreased $49.6 million, or 9.6% compared to the first nine months of 2008. Organic sales decreased during the period by $43.1 million, or 8.3% and unfavorable foreign exchange of $6.5 million. A further discussion by segment follows.

Gross Profit Margin

Our gross profit margin decreased to 24.4% for the third quarter of 2009 versus 28.3% in the same quarter of last year, due primarily to a $3.5 million writedown in inventory in the ADP Group, as well as lower sales volume which has resulted in an inability to absorb all fixed manufacturing costs of the business.

Our gross profit margin for the nine months ended March 31, 2009 remained flat in the first nine months of 2008. The ADP Group saw increased margins due to higher selling prices and lower materials costs in the first half, however, those were offset by a writedown of inventory built with higher cost metal in the third quarter. Margins were roughly flat in the Food Service Equipment Group, increased marginally for the Engraving Group, and decreased slightly in the Engineered Products Group. Margin gains were partially offset by an inability by the Hydraulics Products Group to absorb its fixed costs due to sales volume decreases.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses for the third quarter of 2009 were $29.2 million, down from $40.8 million reported for the same period a year ago.
This decrease was driven primarily by reduced sales and marketing expenses of $2.8 million due to reduced sales volume, as well as strict cost containment initiatives, including reductions in salaried employee staffing levels, which generated $8.2 million of savings, pay freezes, and elimination of bonus and long term incentive payments for 2009. For the nine months ended March 31, 2009, expenses decreased from $119.6 million for the same period in 2008 to $109.8 million, due primarily to the aforementioned factors.

Income from Operations

Loss from operations for the third quarter of 2009 was ($19.9) million, compared income of $6.8 million reported for the same period a year ago. Operating income was negatively impacted by goodwill and intangible assets impairment of $21.3 million within the Food Service Equipment Group, $1.4 million of restructuring costs incurred during the period, primarily related to the consolidation of three manufacturing facilities during the quarter and additional salaried workforce reductions, as well as an inventory write-down of $3.5 million in the ADP Group. Operating income was favorably impacted by a $3.6 million reversal of bonus accruals. Absent these factors, operating income declined by $4.3 million from the same period last year.

Loss from operations for the first nine months of 2009 was ($3.2) million, $32.1 million lower than the $28.9 million reported for the same period a year ago.
Operating income was negatively impacted by the $21.3 million of goodwill impairment, $6.8 million of restructuring costs incurred during the period related primarily to facility closures and headcount reductions during the year, and partially offset by the reversal of bonus and long term incentive accruals of $3.6 million in the third quarter. Excluding these costs, operating income decreased $4.3 million, or 14.7% from the first nine months of 2008.

Interest Expense

Interest expense for the third quarter of 2009 decreased 38.1%, or $0.9 million, to $1.4 million compared to the third quarter of 2008 due to lower borrowing levels and lower interest rates.

For the first nine months of the year, interest expense decreased 36.4% from $7.7 million to $4.9 million compared to the same period in 2008 due to the aforementioned factors. Additionally the maturity of high-interest, fixed-rate debt during the second quarter, and its repayment using lower cost borrowings from the revolving credit agreement, favorably altered the weighted average interest rate applicable to our total outstanding borrowings.

Other Non-Operating Income

Other non-operating income (expense) for the three and nine months ended March 31, 2009 was ($0.1) million and $0.8 million, respectively. The Company recorded a $1.1 million gain on the portion of proceeds received from a life insurance policy triggered by the death of a former executive during the first quarter, offset by losses on the cash surrender value of the Company's other life insurance policies.

Income Taxes

We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period they occur.

The Company's income tax provision for the three months ended March 31, 2009 was a benefit of $3.3 million, or an effective rate of 15.1%, compared to $1.3 million, or a effective rate of 32.8%, for the same period in the prior year.
The provision for the three months ended March 31, 2009 is impacted significantly by (i) the $21.3 million impairment for which only $1.3 of tax benefit could be realized as the goodwill had no tax basis and (ii) a discrete benefit totaling $1.7 million from the reversal of a deferred tax liability that was no longer required due to a change in the U.S. tax classification of one of our foreign entities.

The Company's income tax provision for the nine months ended March 31, 2009 was a $366,000, or an effective rate of (5.0%), compared to $7.1 million, or an effective rate of 34.4%, for the same period in the prior year. The provision for the nine months ended March 31, 2009 reflects an expected full year effective tax rate of 30.4% on continuing operations. However, the recorded provision is significantly impacted by the following discrete items (i) the $21.3 million impairment for which only $1.3 of tax benefit could be realized as the goodwill had no tax basis (ii) a benefit totaling $1.7 million from the reversal of the deferred tax liability that was no longer required due to a change in the U.S. tax classification of one of our foreign entities, (iii) a benefit of $553,000 related primarily to the retroactive extension of the R&D credit recorded during the second quarter and (iv) a benefit related to the receipt of $1.1 million of nontaxable life insurance proceeds during the first quarter and other minor adjustments.

Backlog

Backlog at March 31, 2009 decreased $17.3 million, or 15.3%, to $95.6 million at March 31, 2009, compared to $112.9 million at March 31, 2008. Backlog increased $2.5 million in the Engraving Group, offset by decreased backlog in our remaining segments. Our backlog is generally realized within one year for all segments except the Engineered Products Group, where the nature of aerospace and defense contracts serviced by the Group can result in longer realization periods.

Segment Analysis

Net Sales

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

                                   Three Months Ended          Nine Months Ended
                                        March 31,                  March 31,
                                    2009          2008          2009         2008
Food Service Equipment Group     $    74,119    $  90,604    $   263,822    $282,483
Air Distribution Products Group       11,657       19,468         55,012      69,982
Engraving Group                       18,364       24,278         59,819      68,312
Engineered Products Group             21,959       25,395         70,040      69,876
Hydraulics Products Group              4,871        9,257         18,482      26,114
    Total                        $   130,970     $169,002    $   467,175    $516,767

Food Service Equipment Group

Net sales in the third quarter of fiscal 2009 declined $16.5 million, or 18.2%, from the same period one year earlier. The effects of foreign exchange rates accounted for approximately $1.3 million of the decline. When removing the effect of foreign exchange rate impact, sales decreased $15.2 million, or 16.8%, when compared with the same period one year earlier. The major contributor of the volume decline was overall global market softness in the majority of the Food Service Equipment segments Standex serves, coupled with inventory adjustments in the sales channel. Our walk-in cooler and refrigerated cabinets business experienced a lesser decline of 6.8% due to the ability of the business to offset the general market decline with market share gains, strength in the drug retail and health care segments, and nominal price increases. Our hot side business experienced a 25.2% decline in sales, substantially driven by declines in sales to local, independent restaurants and pizzerias.

Net sales in the nine months ended March 31, 2009 decreased $18.7 million, or 6.6%, from the same period one year earlier. The effects of foreign exchange rates accounted for $2.5 million of the decline. When removing the effect of foreign exchange rate impact, sales decreased $16.2 million, or 5.7%, when compared with the same period one year earlier. Organic growth of 1.6% was achieved in our walk-in cooler and refrigerated cabinets business due to market share gains and nominal price increases. Our hot side and custom solutions businesses experienced sales declines primarily due to the market deterioration that began in the second quarter.

Air Distribution Products Group

During the three months ended March 31, 2008, sales for the ADP Group declined $7.8 million from fiscal 2008 levels, a 40.1% reduction, due to continuing deterioration in housing starts. Volume, as adjusted for price changes, was down 46.2% from third quarter 2008. ADP continues to pursue market share gains and expand product offerings through its traditional wholesaler and "do-it-yourself" big box retailer channels by strengthening its sales force, focusing on underpenetrated markets, and by adding a new adjacent product offering, flex duct. The sales volume increases resulting from these initiatives are marginal compared to overall market deterioration.

Net sales for the nine months ending March 31, 2008, declined 21.4%, or $15.0 million and volume, as adjusted for price increases, declined 36.3% under circumstances substantially similar to the current quarter.

Engraving Group

Net sales in the third quarter decreased by $5.9 million ($3.9 million net of foreign exchange impact), or 24.4%, when compared to the same quarter in the prior year. The Group experienced decreased sales on a world-wide basis in mold texturizing automotive OEM platform work. The lower automotive sales were the result of the automotive OEM's launching fewer new auto platforms in the current quarter, and we expect to see the economic downturn in the automotive sector continue through the end of the calendar year. Lower mold texturizing sales were partially offset by stronger sales in our roll embossing and Innovent businesses.

Net sales for the nine months ended March 31, 2009 decreased by $8.5 million, or 12.4%, when compared to the first nine months of the prior fiscal year. The overall net decrease is again attributable to lower mold texturizing sales globally for automotive OEM platform work, as these customers launched fewer new platforms during this time period.

Engineered Products Group

Net sales in the third quarter have decreased by $3.4 million, or 13.5%, for the three months ended March 31, 2009 when compared with the same period in 2008.
While Spincraft continued to experience good demand across its energy, aviation and aerospace end-user markets, as evidenced by contracts with United Launch Alliance, Bell Helicopter, and Boeing, this was offset by continued weakness in the automotive, HVAC, and white goods sectors affecting Standex Electronics.
During the quarter, Spincraft also began delivery of hardware for a new high-altitude unmanned aerial vehicle program, which is expected to provide a solid baseline for future sales.

Net sales in the first nine months of this fiscal year increased $0.2 million or 0.2%, when compared to the same period one year earlier. At Spincraft, demand across our energy, aviation and aerospace sectors has been steady, while the Group has seen significant growth within the turbine energy market. The Electronics business offset Spincraft's sales gains due to the current economic downturn, particularly sales to the automotive and housing-related sectors, which have significantly decreased during the year.

Hydraulics Products Group

Net sales decreased $4.4 million or 47.3%, for the three months ended March 31, 2009 when compared with the three months ended March 31, 2008. Conditions in the domestic dump truck and dump trailer market continued to decline significantly, and the deterioration has spread to international markets. A lack of credit availability for construction projects has affected our OEM customers and is a major driving force behind this decline. As such, the export business has now experienced a similar decline this quarter.

Net sales decreased $7.6 million, or 29.2%, for the nine month period ending March 31, 2009 as compared to the nine month period ending March 31, 2008. The decrease was attributable to the continued exceptionally weak market conditions in the dump truck and dump trailer business previously mentioned.

Income from Operations

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


                                   Three Months Ended         Nine Months Ended
                                       March 31,                  March 31,
                                    2009         2008          2009         2008
Food Service Equipment Group     $  (15,640)    $  6,143    $     (691)     $23,997
Air Distribution Products Group      (4,810)       (481)            511        (83)
Engraving Group                        1,791       2,712          5,849       6,611
Engineered Products Group              3,081       2,424          9,150       8,825
Hydraulic Products Group               (285)       1,105            616       3,349
Corporate and Other                  (2,717)     (4,915)       (11,875)    (13,588)
Restructuring                       (1,365)        (214)        (6,767)       (214)
    Total                        $  (19,945)    $  6,774    $   (3,207)     $28,897

Food Service Equipment Group

Loss from operations for the third quarter of fiscal 2009 was ($15.6) million, a . . .