• Net sales for the first quarter of fiscal 2010 were $20,138, down 27% compared with $27,647 for the first quarter of fiscal 2009.

• Orders booked in the first quarter of fiscal 2010 were $8,838, down 68% compared with the first quarter of fiscal 2009, when orders were $27,800.

• Backlog decreased to $37,045 at June 30, 2009, representing a 23% decrease compared with March 31, 2009, when our backlog was $48,290.

• Gross profit margin and operating margin for the first quarter of fiscal 2010 were 41% and 25%, compared with 44% and 30%, respectively, for the first quarter of fiscal 2009.

• Cash and short-term investments at June 30, 2009 were $45,261 compared with $46,209 at March 31, 2009.

We are a global designer and manufacturer of custom-engineered ejectors, vacuum systems, condensers, liquid ring pump packages and heat exchangers. Our equipment is used in critical applications in the petrochemical, oil refinery and electric power generation industries, including cogeneration and geothermal plants. Our equipment can also be found in diverse applications, such as metal refining, pulp and paper processing, shipbuilding, water heating, refrigeration, desalination, soap manufacturing, food processing, pharmaceuticals, heating, ventilating and air conditioning.
Our corporate offices and production facilities are located in Batavia, New York. We also have a wholly-owned foreign subsidiary located in Suzhou, China. Our subsidiary in China serves to support sales orders from Asia and provides engineering support and supervision of subcontracted fabrication. Forward-Looking Statements
This report and other documents we file with the Securities and Exchange Commission include "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results implied by the forward-looking statements. Such factors include, but are not limited to, the risks and uncertainties identified by us under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for fiscal 2009. Forward-looking statements may also include, but are not limited to, statements about:
• the current and future economic environments affecting us and the markets we serve;

• sources of revenue and anticipated revenue, including the contribution from the growth of new products, services and markets;

• plans for future products and services and for enhancements to existing products and services;

• estimates regarding our liquidity and capital requirements;

• our ability to attract or retain customers;

• the outcome of any existing or future litigation; and

• our ability to increase our productivity and capacity.

Forward-looking statements are usually accompanied by words such as "anticipate," "believe," "estimate," "may," "intend," "expect" and similar expressions. Actual results could differ materially from historical results or those implied by the forward-looking statements contained in this report.
Undue reliance should not be placed on these forward-looking statements. Except as required by law, we undertake no obligation to update or announce any revisions to forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. Fiscal 2010 and the Near Term Market Conditions We believe the current downturn in the global economy and reduced demand for petroleum-based products led our customers to defer investment in major capital projects. We believe that the significant increase in construction costs, including raw material costs, which had occurred over the past four to five years, also led to delays in new commitments by our customers as they began to anticipate construction costs to decline (following recent decreases in commodity costs).
Currently, the near-term demand trends that appear to be affecting our customers' investments include:
• a shift away from the U.S. refining market driven by lower demand, lower refinery utilization and uncertainty around U.S. energy policy (and the impact that energy policy may have on production costs);

• delays in North American oil sands investments due to construction costs and the uncertain U.S. energy policy (and its impact on production costs);

• Middle East demand increases, which are beginning to drive renewed activity; the re-starting of delayed projects in both petrochemical and refining industries, such as the Jubail refinery project (as construction costs for this project have reduced by 20%);

• Asia, specifically China, seeing renewed needs in the first half of calendar year 2009, following the calendar year 2008 reductions in demand, are driving new investment in petrochemical and refining projects; and

• South America, specifically Brazil, Venezuela and Columbia refining and petrochemical investments driven by increased local demand.

The consequence of these near-term trends will continue to put pressure on gross margins as the U.S. refining market has historically provided higher margins than certain international

markets and continued volatility in our order pattern. In addition, we are seeing generally smaller value projects (compared with recent years) which will require more orders for us to achieve a similar revenue level.
On a quarterly basis in fiscal 2010, we expect our new order levels to remain volatile, resulting in both good and weak quarters. For example, the past four quarters saw new order levels of $17,451, $8,098, $20,524 and $8,838 sequentially. We believe that looking at our order levels in one quarter will not provide an accurate indication of future expectations or performance. Rather, we believe that looking at our orders and backlog over a rolling four-quarter time period will be a better measure of our business. Shift Back to International Growth Expected to Drive Next Industry Cycle Over the long-term, we expect our customers' markets to regain their historical strength and, while still cyclical, continue to grow. We believe the long-term trends remain strong and that the drivers of future growth include:
Demand Trends
• Global consumption of crude oil, which is estimated to expand significantly over the next two decades, primarily in developing countries. This will offset flat to slightly declining demand in North America and Europe.

• Increased demand is expected for power, refinery and petrochemical products, stimulated by the expanding middle class in Asia.

• Increased need in certain regions for geothermal electrical power plants to meet increased electricity demand is expected.

• Increased global regulations over the refining and petrochemical industries will continue to drive demand for capital activity.

Impact of Demand Trends
• Construction of new petrochemical plants in the Middle East, where natural gas is plentiful and less expensive, is expected to continue.

• Increased new power investments in Asia and South America to meet consumer needs.

• Global oil refining capacity needs, which are expected to be addressed through new facilities, refinery upgrades, revamps and expansions.

• Long-term growth potential exists in emerging energy market opportunities, such as coal-to-liquids, gas-to-liquids and other emerging technologies, such as biodiesel, ethanol and waste-to-energy.

We believe that all of the above factors offer long-term growth opportunity for us as major project work will be necessary to meet our customers' expected capital project needs. In addition, we believe we can continue to grow our less cyclical smaller product lines and aftermarket businesses.
Emerging markets require petroleum-based products and continue to grow at rates faster than the U.S. We, therefore, expect international opportunities will be more plentiful relative to domestic projects. Our domestic sales as a percentage of product sales increased over the past three fiscal years from 50% in fiscal 2007 to 54% in fiscal 2008 to 63% in fiscal 2009. The economic strength of the U.S., especially the U.S. refining market drove this trend. As we look at fiscal 2010 and beyond, we believe this trend will reverse itself and international sales will be

at a similar level as domestic sales over the next few years and could surpass domestic sales as early as fiscal 2010. For the first quarter of fiscal 2010, domestic sales had decreased to 51%.
Results of Operations
For an understanding of the significant factors that influenced our performance, the following discussion should be read in conjunction with our condensed consolidated financial statements and the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following table summarizes our results of operations for the periods indicated:

                                            Three Months Ended June 30,
                                              2009               2008

             Net sales                   $     20,138        $     27,647
             Net income                  $      3,518        $      5,684
             Diluted income per share    $       0.35        $       0.56
             Identifiable assets         $     87,857        $     78,889

The First Quarter of Fiscal 2010 Compared With the First Quarter of Fiscal 2009 Sales for the first quarter of fiscal 2010 were $20,138, a 27% decrease as compared with sales of $27,647 for the first quarter of fiscal 2009. The decrease in the current quarter's sales was due to lower sales in all product lines except for condensers. Comparable sales in the first quarter of fiscal 2009 were higher due to three large refinery orders for aftermarket and pump packages. International sales accounted for 49% and 33% of total sales for the first quarter of fiscal 2010 and fiscal 2009, respectively. International sales year-over-year increased $832, or 9%, driven by a $5,178, or 173%, increase in Asia, offset by decreases across most other international regions, primarily the Middle East, Canada and South America. Domestic sales decreased $8,341, or 45% in the first quarter of fiscal 2010 compared with the first quarter of fiscal 2009. Fluctuations in sales among products and geographic locations can vary measurably from quarter-to-quarter based on timing and magnitude of projects. We do believe this shift back toward a higher international sales mix will continue in fiscal 2010. Sales in the three months ended June 30, 2009 were 46% to the refining industry, 23% to the chemical and petrochemical industries and 31% to other industrial applications, including electrical power. Sales in the three months ended June 30, 2008 were 52% to the refining industry, 19% to the chemical and petrochemical industries and 29% to other industrial applications, including electrical power. For additional information on future sales and our markets, see "Orders and Backlog" below.
Our gross profit percentage for the first quarter of fiscal 2010 was 41% compared with 44% for the first quarter of fiscal 2009. Gross profit dollars for the first quarter of fiscal 2010 decreased 32% compared with fiscal 2009. Gross profit percentage and dollars decreased primarily due to product mix and 27% decrease in sales volume.
Selling, general and administrative ("SG&A") expenses as a percent of sales for the three-month periods ended June 30, 2009 and 2008 were 16% and 14%, respectively. Actual costs in fiscal 2010 decreased $574, or 15%, compared with the first quarter of fiscal 2009. SG&A expenses decreased due to the restructuring which occurred in the fourth quarter of fiscal 2009 as well as lower variable costs (e.g., sales commissions, variable compensation) related to lower sales and income.

Interest income for the three month-periods ended June 30, 2009 and 2008 was $18 and $131, respectively. Decreased interest income resulted from a decrease in interest rates.
Interest expense was $1 for the quarter ended June 30, 2009, reflecting no change from $1 for the quarter ended June 30, 2008.
Our effective tax rate in fiscal 2010 is projected to be between 30% and 31%, which represents the tax rate used to reflect income tax expense in the current quarter. The actual effective tax rate for fiscal 2009 was 35%. The decrease was due to a lower level of pre-tax income relative to our allowable level of tax deductions.
Net income for the first three months of fiscal 2010 compared with the first three months of fiscal 2009 was $3,518 and $5,684, respectively. Income per diluted share was $0.35 and $0.56 for the respective periods. Liquidity and Capital Resources
The following discussion should be read in conjunction with our Condensed Consolidated Statements of Cash Flows: