Certain statements in this document constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, economic, competitive, governmental, and technological factors affecting our operations, markets, products, services, and prices. The cautionary statements made pursuant to the Reform Act herein and elsewhere by us should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. In addition, readers are urged to consider statements that include the terms "believes," "belief," "expects," "plans," "objectives," "anticipates," "intends," or the like to be uncertain and forward-looking. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and harmful to our stockholders' interest. Many important factors that could cause such a difference are described under the caption "Risk Factors," in Item 1A of this Annual Report, which you should review carefully.

INTRODUCTION

We are a recognized leader in the design, manufacture, and installation of laboratory and technical furniture products. Laboratory furniture products include both steel and wood cabinetry, fume hoods, flexible systems, and worksurfaces. Technical furniture products include workstations, workbenches, computer enclosures, and network storage systems. Our corporate headquarters are located in Statesville, North Carolina, and our manufacturing facilities are located in Statesville and Bangalore, India. We also have subsidiaries in Singapore and Bangalore that serve the Asian and Middle East markets. Although only approximately 13.2% of our sales were through our international subsidiaries in fiscal year 2009, these sales are considered an important part of our long-term growth strategy.

Our products are primarily sold through purchase orders and contracts submitted by customers through our dealers and commissioned agents, a national distributor, and through competitive bids submitted by us and our subsidiaries. Products are sold principally to pharmaceutical, biotechnology, industrial, chemical, and commercial research laboratories, educational institutions, healthcare institutions, governmental entities, manufacturing facilities, and users of networking furniture. We consider the markets in which we compete to be highly competitive, with a significant amount of the business involving competitive public bidding.

It is common in the laboratory furniture industry for customer orders to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed. Changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale. Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product. The impact of such possible increases is considered when determining the sales price. The principal raw materials and products manufactured by others and used in our products are cold-rolled carbon and stainless steel, hardwood lumbers and plywood, paint, chemicals, resins, hardware, plumbing and electrical fittings. Such materials and products are purchased from multiple suppliers and are typically readily available.

CRITICAL ACCOUNTING POLICIES

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations, and require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

A portion of our product sales result from fixed-price construction contracts that involve a signed contract for a fixed price to provide our laboratory furniture and fume hoods for a construction project. We are usually in the role of a subcontractor, but in some cases may enter into a contract directly with the end-user of the products. Our contract arrangements normally do not contain a general right of return relative to the delivered items. Product sales resulting from fixed-price construction contracts are generated from multiple-element arrangements that require separate units of accounting and estimates regarding the fair value of individual elements. The Company has determined that its multiple-element arrangements that qualify as separate units of accounting are (1) product sales and (2) installation services. There is objective and reliable evidence of fair value for both the product sales and installation services, and allocation of arrangement consideration for each of these units is based on their relative fair values. Each of these elements represents individual units of accounting, as the delivered item has value to a customer on a stand-alone basis. The Company's products are regularly sold on a stand-alone basis to customers which provides vendor-specific objective evidence of fair value. The fair value of installation services is separately calculated using expected costs of installation services. Many times the value of installation services is calculated using price quotations from subcontractors to the Company, who perform installation services on a stand-alone basis. Assuming all other criteria for revenue recognition have been met, we recognize revenue for product sales at the date of shipment. Product sales resulting from purchase orders involve a purchase order received by us from our dealers or our stocking distributor. This category includes product sales for standard products, as well as products which require some customization. These sales are recognized under the terms of the purchase order which generally are freight on board ("FOB") shipping point and do not include rights of return. Accordingly, these sales are recognized at the time of shipment.

Allowance for Doubtful Accounts

Evaluation of the allowance for doubtful accounts involves management judgments and estimates. We evaluate the collectability of our trade accounts receivable based on a number of factors. In circumstances where management is aware of a customer's inability to meet its financial obligations to us, or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected, a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, a general reserve for bad debts is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding.

Inventories

Inventories are valued at the lower of cost or market. The cost of the majority of inventories is measured on the last in, first out ("LIFO") method. The LIFO method allocates the most recent costs to cost of products sold, and, therefore, recognizes into operating results fluctuations in raw materials and other inventoriable costs more quickly than other methods. Inventories at our international subsidiaries are measured at actual cost.

Pension Benefits

We sponsor pension plans covering all employees who met eligibility requirements as of April 30, 2005. In February 2005, our pension plans were amended as of April 30, 2005. No further benefits have been, or will be, earned under the plans subsequent to the amendment date, and no additional participants have been, or will be, added to the plans. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the pension plans. These factors include assumptions about the discount rate used to calculate and determine benefit obligations and expected return on plan assets within certain guidelines. The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may significantly affect the amount of pension income or expense recorded by us in future periods.

RESULTS OF OPERATIONS

Sales for fiscal year 2009 were $104.0 million, an increase of 16% from fiscal year 2008 sales of $89.5 million. Domestic Operations sales for the year were $90.3 million, an increase of 22% from the prior year. As reflected in the growth of our order backlog, incoming order activity was strong throughout the year, as a healthy domestic laboratory furniture marketplace more than offset the impact of a soft Asian marketplace. International Operations sales for the year were $13.7 million, a decrease of 13% over the prior year.

Our order backlog was $62.7 million at April 30, 2009, as compared to $58.7 million at April 30, 2008, and $51.1 million at April 30, 2007.

Sales for fiscal year 2008 were $89.5 million, an increase of 10% from fiscal year 2007 sales of $81.4 million. Domestic Operations sales for fiscal year 2008 were $73.8 million, an increase of 11% from the prior year. International Operations sales for fiscal year 2008 were $15.8 million, an increase of 6% over the prior year.

Gross profit represented 20.6%, 21.4%, and 18.5% of sales in fiscal years 2009, 2008, and 2007, respectively. The decrease in gross profit margin in fiscal year 2009 from fiscal year 2008 was primarily due to higher costs for certain key raw materials, higher energy and transportation costs, and increased competitive pricing in the marketplace. The increase in the gross profit margin in fiscal year 2008 from fiscal year 2007 was primarily due to improved manufacturing efficiencies related to capital projects completed in prior years, continued implementation of lean manufacturing techniques, and lower cost global supply sources for certain materials and components.

Operating expenses were $14.3 million, $13.6 million, and $11.7 million in fiscal years 2009, 2008, and 2007, respectively, and 13.7%, 15.1%, and 14.4% of sales, respectively. The increase in operating expenses for fiscal year 2009 as compared to fiscal year 2008 included an increase of $161,000 in pension expense, an increase of $175,000 in depreciation expense for computer systems, and an increase of $116,000 in sales commissions due to the increase in sales. The increase in operating expenses for fiscal year 2008 as compared to fiscal year 2007 included an increase of $339,000 in compensation earned under performance incentive plans, an increase of $335,000 in sales and marketing expenses, an increase of $93,000 in sales commissions due to the increase in sales, and Sarbanes-Oxley consulting costs of $216,000.

Other expense was $28,000 in fiscal year 2009. Other income was $47,000 and $53,000 in fiscal years 2008 and 2007, respectively.

Interest expense was $280,000, $294,000, and $670,000 in fiscal years 2009, 2008, and 2007, respectively. The decrease in interest expense in fiscal year 2009 resulted primarily from lower interest rates. The decreased interest expense in fiscal year 2008 from fiscal year 2007 was primarily from lower levels of bank borrowings.

Income tax expense of $2,264,000, or 33.4% of pretax earnings, was recorded in fiscal year 2009. Income tax expense of $1,733,000, or 32.3% of pretax earnings, was recorded in fiscal year 2008. Income tax expense of $902,000, or 32.9% of pretax earnings, was recorded in fiscal year 2007. The effective tax rate for each of these years is lower than the statutory rate due to the favorable impact of tax rates for the Company's international subsidiaries and the impact of state and federal tax credits.

Minority interest related to our two subsidiaries that are not 100% owned by us were $265,000, $499,000, and $299,000, for fiscal years 2009, 2008, and 2007, respectively. The changes in minority interest for each year were due to changes in the levels of net income of the subsidiaries.

Net earnings in fiscal year 2009 were $4,247,000, or $1.66 per diluted share. Net earnings in fiscal year 2008 were $3,134,000, or $1.23 per diluted share. Net earnings in fiscal year 2007 were $1,540,000, or $0.62 per diluted share.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancelable operating leases or capital leases. We believe that these sources of funds will be sufficient to support ongoing business requirements, including capital expenditures, through fiscal year 2010.

At April 30, 2009, we had advances of $5.7 million outstanding under our unsecured $14 million revolving credit facility. The credit facility matures in September 2010, and we intend to extend or replace it with a new facility prior to the maturity date, although there can be no assurance as to the availability or terms of any such extension or replacement. See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information concerning our credit facility.

During fiscal years 2009 and 2007, we entered into capital lease arrangements related to costs of $307,000 and $300,000, respectively, associated with a new enterprise resource planning (ERP) system that was implemented in the fourth quarter of fiscal year 2008. These lease arrangements, as well as most of our leases for machinery and equipment, provide us with renewal and purchase options and certain early cancellation rights.

The following table summarizes the cash payment obligations including interest, if applicable, for our lease arrangements as of April 30, 2009:

                             PAYMENTS DUE BY PERIOD

                                ($ in thousands)



Contractual Obligations                    Total    1 Year     2-3 Years     4-5 Years     After 5 years
Operating Leases                          $ 6,357   $ 1,823   $     2,923   $     1,141   $           470
Capital Leases                                471       251           183            37                -

Total Contractual Cash Obligations        $ 6,828   $ 2,074   $     3,106   $     1,178   $           470

We do not have any off balance sheet arrangements at April 30, 2009.

Operating activities provided cash of $2.1 million in fiscal year 2009, primarily from operating earnings and a decrease in prepaid income taxes, partially offset by increases in accounts receivable and inventory. Operating activities provided cash of $3.4 million in fiscal year 2008, primarily from operating earnings and an increase in accounts payable, partially offset by increases in accounts receivable and inventory, and a decrease in deferred revenue. Operating activities provided cash of $8.6 million in fiscal year 2007, primarily from operating earnings, a reduction in accounts receivable, and an increase in deferred revenue. The majority of the April 30, 2009 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2010, with the exception of retention amounts on fixed-price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner.

As discussed above, no further benefits have been, or will be, earned under our pension plans after April 30, 2005, and no additional participants have been, or will be, added to the plans. We did not make any contributions to the plans in fiscal years 2009, 2008, and 2007, and do not expect to make any contributions to the plans in fiscal year 2010.

Capital expenditures were $1.5 million, $2.5 million, and $1.7 million in fiscal years 2009, 2008, and 2007, respectively. Capital expenditures in fiscal years 2009, 2008, and 2007 were funded primarily from cash generated by operating activities. Capital assets related to the new ERP system in the amounts of $307,000 and $300,000 were funded under capital leases in fiscal years 2009 and 2007, respectively. Fiscal year 2010 capital expenditures are anticipated to be approximately $2.0 million and are expected to be funded primarily by cash from operating activities.

Working capital increased to $18.9 million at April 30, 2009, from $15.9 million at April 30, 2008, and the ratio of current assets to current liabilities increased to 2.0-to-1 at April 30, 2009, from 1.9-to-1 at April 30, 2008. The increase in working capital for fiscal year 2009 was primarily due to increases in accounts receivable, and inventory, offset by increases in short-term borrowings.

We paid cash dividends of $0.32 per share in fiscal year 2009. We paid cash dividends of $0.28 per share for each of the fiscal years 2008 and 2007. The quarterly cash dividend was increased to eight cents per outstanding share in May 2008. We expect to pay dividends in the future in line with our actual and anticipated future operating results.

RECENT ACCOUNTING STANDARDS

New Accounting Standards In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 159, "the Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which allows measurement of specified financial instruments, warranty, and insurance contracts at fair value on a contract by contract basis, with changes in fair value recognized in earnings in each period. SFAS 159 was effective at the beginning of the fiscal year that began after November 15, 2007. The Company adopted SFAS 159 in fiscal year 2009. The adoption of this standard did not have a significant impact on the Company's consolidated financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R, "Business Combinations" ("SFAS 141R"), which requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in business combinations to be recorded at "full fair value." SFAS 141R also requires that the direct costs of acquisitions be expensed as incurred, and that the estimated fair value of contingent consideration be recorded at the date of purchase, with changes in the estimated fair value recorded in the income statement. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008, and will be effective for the Company in fiscal year 2010. The Company has not yet determined the effect, if any, that the adoption of this standard will have on its consolidated financial position or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51." The statement establishes accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest should be classified as a separate component of equity. Among other items, it also changes how income attributable to the parent and the non-controlling interest are presented on the consolidated income statement. The statement is effective for fiscal years beginning on or after December 15, 2008, and will be effective for the Company in fiscal year 2010. The Company has not yet determined the effect, if any, that the adoption of this standard will have on its consolidated financial position or results of operations.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an Amendment of FASB Statement No. 133" (SFAS 161). SFAS 161 amends and expands disclosures about derivative instruments and hedging activities. SFAS 161 requires qualitative disclosures about the objectives and strategies of derivative instruments, quantitative disclosures about the fair value amounts of and gains and losses on derivative instruments, and disclosures of credit-risk-related contingent features in hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008 and will be effective for the Company in fiscal year 2010. Early adoption is prohibited; however, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The Company has not yet determined the effect, if any, that the adoption of this standard will have on its consolidated financial position or results of operations.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 163, "Accounting for Financial Guarantee Insurance Contracts" (SFAS 163). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective for fiscal years beginning after December 15, 2008. The Company will adopt SFAS 163 in fiscal year 2010 and believes it will not have a significant impact on its consolidated financial position or results of operations.

OUTLOOK

Our current expectations are that fiscal year 2010 will again be profitable for the Company. However, the financial markets in the United States, Europe, and Asia have been experiencing extreme disruptions in recent months, and among other things, the Company expects higher pension costs as a result of investment losses in our pension portfolio in fiscal year 2009. We are unable to predict the likely duration and severity of the current disruptions and adverse economic conditions in the United States and other countries and the impact these events may have on our operations and the laboratory furniture industry in general. The future demand for our products also continues to be limited given the Company's role as subcontractor or supplier to dealers for subcontractors. In addition to the above factors affecting the Company and our markets, demand for our products is also dependent upon the number of laboratory construction projects planned and/or current progress in projects already under construction. Our earnings are also impacted by increased costs of raw materials, including stainless steel, wood, and epoxy resin, and whether we are able to increase product prices to customers in amounts that correspond to such increases without materially and adversely affecting sales. Additionally, since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor and material costs between the quotation of an order and delivery of a product.