• Net sales of $65.2 million decreased $9.9 million (13%) compared to $75.2 million in the first quarter of fiscal 2009. The recession and related economic uncertainty lowered Engineered Films and Applied Technology sales volumes. Electronic Systems and Aerostar sales were not directly impacted.

• Gross margins of 29.1% decreased slightly from 29.3% in the first quarter of fiscal 2009 stemming from a five point contraction in Applied Technology gross margins partially offset by increased Engineered Films and Electronic Systems margins.

• Net income decreased 15% to $9.2 million versus $10.9 million in the first quarter of fiscal 2009.

• The company generated first quarter operating cash flow of $19.7 million versus $5.1 million in the year ago quarter. The increase was driven by improved inventory management and accelerated collections of accounts receivable.

• The company paid dividends of $2.3 million during the first quarter of fiscal 2010.

Seasonality
The Applied Technology segment is predominately focused on the agricultural market and quarterly financial results have typically been impacted by the inherent seasonality of this market. Historically, Applied Technology's first quarter results are the strongest and the second quarter the weakest. Results of Operations (Q1 fiscal 2010 versus Q1 fiscal 2009) Net sales decreased $9.9 million (13%) to $65.2 million from $75.2 million. The decrease was driven primarily by lower Applied Technology and Engineered Films sales partially offset by stronger Electronic Systems and Aerostar sales. Applied Technology sales decreased $5.4 million (16%) to $29.4 million as a result of a less robust agricultural market. Engineered Films sales decreased $8.6 million (39%) to $13.4 million versus $22.0 million due to decreased demand for pit liners and construction film reflecting depressed oil and gas drilling and construction activity. Additionally, downward pressure on Engineered Films selling prices contributed to the year-over-year revenue decline. Electronic Systems sales increased $2.9 million (22%) to $16.2 million from $13.3 million reflecting stronger sales of printed circuit board assemblies for the aviation industry and secure communication devices. Aerostar sales increased $546,000 (9%) to $6.6 million versus $6.0 million due to increased shipments of tethered aerostats and inflatable decoys.
Operating income decreased $2.5 million (15%) to $14.1 million from $16.6 million. Higher profits at Electronic Systems were offset by lower Applied Technology and Engineered Films results. Applied Technology operating income decreased $3.9 million (29%) to $9.6 million from $13.5 million due to lower sales volume and negative operating leverage stemming from the drop in revenue on a higher cost base versus a year ago. Engineered Films operating income decreased 30% to $2.7 million from $3.9 million reflecting the 39% drop in sales (roughly 27% volume and 12% price) partially offset by more favorable plastic resin costs, the primary component of plastic films. Electronic Systems operating income increased $1.9 million to $2.5 million from $640,000 in fiscal 2009 as a result of increased sales, positive operating leverage, and efficiency gains. Aerostar's operating income increased to $1.2 million from $806,000 reflecting increased efficiencies and positive operating leverage gained though higher sales volume.

RESULTS OF OPERATIONS - SEGMENT ANALYSIS (Q1 fiscal 2010 versus Q1 fiscal 2009) Applied Technology
Applied Technology provides electronic and Global Positioning System (GPS) products designed to reduce operating costs and improve yields for the agriculture market.
Net sales of $29.4 million decreased $5.4 million (16%) and operating income of $9.6 million decreased $3.9 million (29%). Several factors contributed to the relative change:
• Worldwide agricultural conditions remained fairly strong as a result of good prices for corn, soybeans and other feed grains. However, grower and custom spray applicator purchasing decisions were deferred as a result of uncertainty regarding global economic conditions causing a decline in sales across substantially all of the segment's product categories. The volume decrease was partially offset by a modest selling price increase.

• First quarter international sales of $5.8 million fell $900,000 (13%) year-over-year. Although foreign revenue decreased from last year it accounted for a larger share of Applied Technology sales, increasing from 19% of segment sales one year ago to 20%. While some markets experienced volatile conditions, revenues were enhanced by expanding sales efforts in regions not previously served. This caused the relative decline in international sales to be less than the drop in U.S. sales.

• New product sales declined. In the first three months of last year, the division's Cruizer™ product was introduced. This simple and affordable guidance system targeted new entrants to the precision agricultural market and was well received in the marketplace.

• Gross margins of 38.5% contracted from 43.6% as result of negative operating leverage stemming from decreased sales volume.

• First quarter selling expense of $1.8 million was up from the prior year's first quarter, increasing $121,000 (7%) due mainly to higher personnel cost. As a percentage of sales, selling expense increased to 6.0% versus 4.7% due to higher expense on lower sales volume.

Engineered Films
Engineered Films produces rugged reinforced plastic sheeting for industrial, construction, geomembrane and agricultural applications.
Net sales of $13.4 million decreased $8.6 million (39%) and operating income of $2.7 million decreased $1.2 million (30%).
The following factors contributed to the comparative change:
• Sales volume declined approximately 27% due to the freefall of business activity in the fourth quarter of fiscal 2009 as customers in the construction market adapted to a weakening economic outlook and the scarcity of credit. In addition, deliveries of pit liners to the energy exploration market declined from prior year levels. Drilling activity slowed due to lower oil prices and reductions in forecasted demand.

• Selling prices declined by roughly 12% year-over-year driven by competitive pricing pressure.

• Gross margins increased from 22.3% to 25.8% in the current quarter due to lower plastic resin costs. Opportune purchases of prime-grade plastic resins resulted in approximately $1.3 million of one-time material savings.

• First quarter selling expense of $725,000 decreased $260,000 from one year earlier reflecting a reduction in sales personnel and constrained discretionary spending due to the lower sales volume. As a result of the decrease in sales activity, selling expense as a percentage of sales increased to 5.4% versus 4.5%.

Electronic Systems
Electronic Systems is a total-solutions provider of electronics manufacturing services, primarily to North American original equipment manufacturers. Net sales of $16.2 million increased $2.9 million (22%) and operating income of $2.5 million rose $1.9 million (290%).
The relative change is primarily the result of the following:
• The sales improvement was substantially due to higher volume of aviation electronics shipments resulting from increased customer demand.

• First quarter hand-held bed control shipments were flat compared with the depressed levels of one year ago due to steadying of consumer spending on non-essential home-related products.

• Gross margins expanded from 7.2% to 17.3% for the current quarter. The improvement was attributable to positive operating leverage generated through increased sales. Staff reductions, and facility consolidations helped reduce costs and improve efficiencies.

• Selling expense was flat year-over-year and as a percentage of sales fell from 2.3% to 1.9%.

Aerostar
Aerostar manufactures military parachutes, protective wear, custom shaped inflatable products, and high-altitude aerostats for government and commercial research.
Net sales of $6.6 million increased $546,000 (9%) and operating income of $1.2 million increased $352,000 (44%).
The comparative change is primarily due to the following:
• Sales volume of tethered aerostats and inflatable decoys were up from one year earlier.

• Improved efficiencies on the parachute and protective wear product lines resulted in expanded gross margins to 20.6% from 16.9%.

• Selling expense as a percentage of sales decreased to 3.0% from 3.5% due to relatively flat selling expense and increased sales.

Corporate Expenses (administrative expenses, interest income and other, net and

income taxes)

                                                       Three Months Ended
                                                    April 30,      April 30,
         Dollars in thousands                          2009           2008

         Administrative expenses                    $  1,893       $   2,186
         Administrative expenses as a % of sales         2.9 %           2.9 %
         Interest income and other, net             $      1       $     118
         Effective tax rate                             34.6 %          35.1 %

First quarter administrative expenses of $1.9 million decreased 13% from $2.2 million reported a year ago. The decrease was due primarily to lower compensation expense.
"Interest income and other, net" consists mainly of interest income, bank fees and foreign currency transaction gain or loss. Interest income declined year-over-year due to lower interest rates.
The decrease in the effective tax rate is attributable to reinstatement of the U.S. research and development tax credit in October 2008.
OUTLOOK
Fiscal 2010 first quarter results were notably affected by the global economic recession and its impact on the company's markets. This is expected to continue throughout the remainder of the current fiscal year, making comparisons to last year's record results challenging. Management does not expect to beat last year's record sales and earnings levels and anticipates second quarter results to be down from one year earlier.
Applied Technology
Second quarter sales are expected to continue to fall significantly short of last year's levels. Current year revenue is forecast to be affected by the economic slowdown, in contrast to the strong market environment one year ago. Sequentially, second quarter revenue is expected to decrease due to seasonality. This segment entered into an agreement to distribute select products through John Deere dealers starting in August 2009. The benefit from this agreement is expected to be material to fiscal 2011 results but its impact on the current year cannot be determined. Staff cuts and spending constraints implemented late in the first quarter will decrease the cost base going forward but are not expected to offset the effect of the lower sales volume on profits for the full year.
Engineered Films
Management expects second quarter revenues to remain depressed and gross margins to decline. Included in the first quarter results were approximately $1.3 million of material savings due to opportune purchases of resin. This is not expected to be repeated in subsequent quarters. Year-over-year revenue comparisons are expected to remain significantly unfavorable over the course of the fiscal year as management does not anticipate a recovery from current economic conditions to occur until next fiscal year. The two

largest Engineered Films markets are energy (oil and gas drilling) and construction, both of which are dependent on a reversal of the current economic situation in order for sales to recover to prior year levels. Electronic Systems
Electronic Systems second quarter revenue is targeted to increase sequentially and year-over-year due to increased demand for secure communication and aviation electronics. Gross margins in the first quarter benefited from a favorable product mix and are expected to decline during the year. Aerostar
Management expects second quarter sales to be up slightly as compared with one year earlier as lower protective wear sales are expected to be offset by higher MC-6 parachute deliveries. Gross profit rates are expected to be lower than in the first quarter due to a less favorable product mix.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity and capital resources are strong despite the global economic recession. Management focuses on the current cash balance and operating cash flows in considering liquidity as operating cash flows have historically been the company's primary source of liquidity. Management expects that current cash combined with the generation of positive operating cash flows will be sufficient to fund the company's operating, investing, and financing activities. The company's cash needs are seasonal, with working capital demands strongest in the first quarter. Consequently, the discussion of trends in operating cash flows focuses on the primary drivers of year-over-year variability in working capital.
Cash, cash equivalents, and short-term investments totaled $32.3 million at April 30, 2009, a $16.0 million increase compared to cash, cash equivalents, and short-term investments at January 31, 2009 of $16.3 million. The comparable balances one year earlier totaled $21.6 million. In November 2008, the company paid a special cash dividend of $22.5 million. Operating Activities
Cash provided by operating activities was $19.7 million in the first quarter of fiscal 2010 compared to $5.1 million in the first quarter of fiscal 2009. The company's operating cash flows result primarily from cash received from customers offset by cash payments for inventories, services, and employee compensation. The increase in quarterly operating cash flows reflects improved working capital management. Specifically, receivables from agricultural customers were lower as a result of accelerated payment terms during the first quarter of fiscal 2010 and inventory declined due to lower plastic resin costs and lower expected demand for Applied Technology and Engineered Films products. Investing Activities
Cash used in investing activities totaled $1.3 million in the first quarter of fiscal 2010, a $1.4 million decrease compared to the first quarter of fiscal 2009. The variance was caused primarily by decreased purchases of short-term investments. Net short-term investment purchases totaled $1.8 million one year ago versus none in the current quarter. Capital expenditures totaled $1.1 million during the current quarter compared to $1.0 million in the year ago quarter. Capital expenditures are expected to be in the $3 million range for the current fiscal year.
Financing Activities
Financing activities consumed cash of $2.3 million for the three months ended April 30, 2009 compared to $5.3 million used in last year's comparable period. Cash used in financing activities is primarily for dividend payments and repurchases of common stock. The reduced spending was caused by suspension of the share repurchase program in July 2008. Dividends of $2.3 million or 13 cents per share were paid during the current quarter compared to $2.4 million in the year ago quarter.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS There have been no material changes since the fiscal year ended January 31, 2009.
NEW ACCOUNTING STANDARDS
At the beginning of fiscal 2010 the company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about (a) how and why derivative

instruments are used, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. The adoption of SFAS No. 161 did not have a material impact on the company's consolidated results of operations, financial condition or cash flows. At the beginning of fiscal 2010 the company adopted FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets. The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets, and (2) intangible assets acquired in both business combinations and asset acquisitions. Under FSP No. FAS 142-3, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. The adoption of FSP No. FAS 142-3 did not have a material impact on the company's consolidated results of operations, financial condition or cash flows.
New pronouncements issued but not effective until after April 30, 2009, are not expected to have a material impact on the company's consolidated results of operations, financial condition, or cash flows.