RESULTS OF OPERATIONS

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 conditions in the financial and banking markets general and international recessionary economic conditions, including the impact, length and degree of the current recessionary conditions on the customers and markets we serve and more specifically conditions in the automotive, aerospace, energy, housing and general transportation markets, 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, an inability to realize the expected cost savings from effective completion of plant consolidations, cost reduction efforts, productivity enhancements and the implementation of lean enterprise manufacturing techniques, the inability to achieve the savings expected from the sourcing of raw materials from and diversification efforts in emerging markets 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, Engineering Technologies Group, and Electronics and Hydraulics. We are a manufacturer of products sold to commercial and industrial customers. This has enabled us to align all of our businesses with our core manufacturing competencies. Our continuing 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.

In the recessionary environment in which we have operated during the past year, our focus has been on aggressively reducing the costs throughout all of our operations in order to permanently reposition the cost structure of the company.
To that end, we have reduced the total size of the US based work force, including both office and shop floor personnel, by approximately 25% during the course of the year. Since the beginning of fiscal 2009 we reduced our U.S.-based salaried and indirect labor staffing levels by approximately 260 positions resulting in annual savings of approximately $14 million. In addition, during the third quarter of 2009, except where prohibited by collective bargaining agreements, we announced that employee salaries would be frozen and employer contributions to defined contribution plans would be

suspended through at least the end of calendar year 2009. Finally, we eliminated all annual incentive bonus payments and long term management incentive payouts for fiscal year 2009.

We also, as part of our ongoing efforts to improve the utilization of our manufacturing infrastructure, have accelerated the implementation of plans to consolidate our global manufacturing footprint as outlined below:

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In our ADP Group we closed our Bartonville, Illinois, facility during the first quarter of 2009 and transferred its production to two of our existing ADP facilities.

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In our Food Service Equipment Group we announced the closure of a facility located in New York in the third quarter and successfully completed the transfer of the production from this facility to our operations in Mexico and Wyoming.
Also during the fourth quarter, we began the consolidation of another Food Service Equipment Group facility, the APW Wyott facility located in Dallas, into our Nogales, Mexico facility. We expect to complete this latest consolidation by the end of calendar 2009.

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In our Engraving Group, we completed the consolidation of two roll engraving operations into our Richmond, Virginia facility during the first quarter of 2009. In the third quarter of 2009, we consolidated the mold texturizing production at our Detroit facility into our facility located in Canada.

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In our Electronics and Hydraulics Group, we completed the consolidation of the production from our remaining Canadian Electronics operation into existing facilities located in Mexico and China during the fourth quarter. We also announced the consolidation of the production of the BG Labs business which we acquired in August 2008 into our facilities in Cincinnati, Ohio. This consolidation was completed in the first quarter of 2010. We closed a manufacturing operation in the Hydraulics unit during the second quarter of 2009 and consolidated production into an existing facility.

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During the first quarter of fiscal 2010 we began a series of restructuring initiatives in our European engraving operations. We expect to spend approximately $1.5 million on restructuring projects in Europe during the course of FY10 which will generate annual savings of approximately $1.6 million.

The annual savings to be achieved by the plant consolidations completed last year is estimated to be $10 million. The combination of the Food Service plant consolidation and European engraving restructuring done in 2010 will deliver a total of $4 million in additional savings.

In addition to headcount reductions, we achieved cost reductions in all aspects of procurement including purchase of inventory items, maintenance and repair supplies and services. We also focused on driving improved productivity from our internal operations including shop floor productivity, reduced scrap and warranty expense and reductions in other controllable expense categories. In the procurement and productivity cost categories we achieved annual cost savings in excess of $12 million which became fully implemented at the end of 2009.

Further, 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 resulting additional borrowing capacity is expected to provide additional financial flexibility for the foreseeable future.

The cost reduction initiatives outlined above that were completed in 2009 will deliver a total of $36 million in annualized savings. Approximately $15.5 million of this total savings was realized in 2009 and the remaining

$20.5 million will be realized in 2010. Further restructuring initiatives planned for 2010 are expected to yield annual savings of approximately $4 million upon full implementation.

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.

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.

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

Results from Continuing Operations:

                               Three Months Ended September 30,
(Dollar amounts in thousands)       2009               2008
Net sales                         $    152,109        $   180,695
Gross profit margin                      32.3%              31.6%
Income from operations                  13,058             10,751
Backlog as of September 30             101,913            134,619




Net Sales
                                Three Months Ended
(In thousands)                  September 30, 2009
Net sales, prior period         $           180,695
Components of change in sales:
  Effect of exchange rates                  (2,125)
  Organic sales change                     (26,461)
Net sales, current period       $           152,109

Net sales for the first quarter of 2010 decreased $28.6 million, or 15.8%, when compared to the same period of 2009. This change was primarily impacted by organic sales decreases of $26.5 million, or 14.6%, and additionally impacted by unfavorable exchange rates. The decline in sales is across all reporting segments except for Engineering Technologies as a result of recessionary conditions in our world-wide markets during the past year. We continue to see the largest declines in the ADP Group and the Hydraulics unit of our Electronics and Hydraulics Group, which are most dependent on new residential construction and general construction markets, respectively. A further discussion by segment follows.

Gross Profit Margin

Our gross profit margin increased to 32.3% for the first quarter of 2010 versus 31.6% in the same quarter of last year. This was driven primarily by significantly increased margins in the Food Service Equipment and Engineering Technologies Groups. These gains were offset by decreased margins at the ADP Group, where 2009 results benefitted from then newly-implemented price increases and the use of lower-cost metal purchased during a price trough. The Engraving and Electronics and Hydraulics Groups showed slight decreases in margin during the period.

Selling, General, and Administrative Expenses

Selling, General, and Administrative Expenses for the first quarter of 2010 were $34.6 million, down from $42.0 million reported for the same period a year ago.
This decrease was driven primarily by cost reduction measures taken during 2009, including the aforementioned headcount reductions, plant consolidations, and procurement savings.

Income from Operations

Income from operations for the first quarter of 2010 was $13.1 million, 21.5% higher than the $10.8 million reported for the same period a year ago.
Operating income was negatively impacted in both periods by restructuring costs
- $4.3 million of restructuring costs incurred in 2009 related primarily to closure of the ADP facility in Bartonville, Illinois, and $1.6 million of costs in the current quarter primarily related to the closure of Food Service Equipment Group facilities in New York and Texas. Excluding these costs, operating income decreased by $0.5 million or 3.0%, driven primarily by decreased sales in the current recessionary conditions. This decrease was offset by significant improvements in Income from Operations at the Food Service Equipment and Engineering Technologies Groups, which serve end user markets which have been less affected in the current recessionary environment than those served by our other groups.

Interest Expense

Interest expense for the first quarter of 2010 decreased $0.8 million, or 45.6%, to $0.9 million due to decreased borrowings on the Company's revolving credit facility and lower effective aggregate interest rate. The lower interest rate was due to the retirement of substantially all of our private placement debt during 2009 and by the expiration of two interest rate swaps early in the quarter that fixed our interest rate payments on $28.5 million of our revolving credit facility above the current historically low LIBOR rates.

Other Non-Operating Income

Other non-operating income for the quarter totaled $0.2 million, a 68.4% decrease from prior period income of $0.8 million. The 2009 amount consisted primarily of a $1.1 million gain on the portion of proceeds from a life insurance policy triggered by the death of a former executive.

Income Taxes

Our effective tax rate for the three months ended September 30, 2009 was 32.2% compared with 27.6% for the same period last year. The lower effective tax rate in the first quarter of 2009 is primarily due to the receipt of nontaxable life insurance proceeds during the quarter.

Backlog

Backlog at September 30, 2009 decreased $32.7 million, or 24.3%, compared to September 30, 2008. This decrease is across all segments except ADP, which increased $0.3 million compared to prior year, and is attributable to reduced sales in the current macroeconomic environment.

Segment Analysis

Net Sales

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


                                  Three Months Ended September 30,
                                      2009                2008
Food Service Equipment Group         $    91,773         $   101,756
Air Distribution Products Group           14,322              23,788

Engraving Group                         19,187         21,568
Engineering Technologies Group          14,636         13,041
Electronics and Hydraulics Group        12,191         20,542
    Total                         $    152,109    $   180,695

Food Service Equipment Group

Net sales in the first quarter of 2010 decreased $10.0 million, or 9.8%, from the same period last year due primarily to the impact of weak market conditions. The effect of foreign exchange rates accounted for about $0.8 million of the decline. When removing the effect of foreign exchange rate impact, sales decreased $9.2 million, or 9.0%, when compared with the same period one year earlier. While overall market softness in the majority of the Food Service Equipment segments Standex serves has led to volume decline, we have seen market share gains at the Cooking Solutions and Custom Solutions businesses through penetration of strategically important dealer buying groups. We continue to leverage these relationships and other cross-selling opportunities across the Group.

Air Distribution Products Group

Sales for the ADP Group in the first quarter of fiscal 2010 declined $9.5 million from the same quarter one year earlier, a 39.8% reduction. The change in sales was the result of lower year over year volume caused by a decline in residential housing construction and price reductions driven by strong market competition. Partially offsetting these factors were increased market share and the introduction of a new adjacent product line, flex duct. This addition of this line allows us to provide our wholesale customers a broader product offering.

Standex evaluates the available market for ADP by monitoring new housing start data, published monthly by the U.S. Department of Housing and Urban Development. Sales to the Group's customers typically lag new home starts by three to four months. Comparing the first quarter fiscal 2010 to the same period one year earlier, housing starts deteriorated 47.8%. ADP's unit volume was lower by 22.9% from the same quarter last year. ADP continues to pursue market share gains through its traditional wholesaler channels by expanding its sales force, focusing on underpenetrated markets, and by emphasizing our ability to service nationwide wholesalers and large "do-it-yourself" retailers through our network of factory locations. These initiatives have resulted in market share gains; however, the additional sales volume resulting from these efforts has not been sufficient to offset the decline in the overall market.

Engraving Group

Net sales decreased by $2.4 million, or 11.0%, when compared to the same period one year ago. The Group continues to experience lower sales of mold texturing for automotive OEM platform work in most geographic regions, although some strengthening of sales in Europe was noticed during the quarter. Lower automotive sales were the result of OEM's launching fewer new auto platforms and delaying current programs, including programs affected by automaker bankruptcy filings earlier in the calendar year. Lower mold texturing sales were partially offset by stronger sales in our Innovent business. North American operations sales declined 8.3% and our international operations sales declined 15.4%, when compared to the same period one year ago. Continued uncertainty in the global automotive, housing markets and capital spending are expected to keep sales relatively flat in the second quarter.

Engineering Technologies Group

Net sales increased $1.6 million or 12.2%, when compared to the same period one year earlier. The increase was primarily driven by new sales of aerospace and turbine energy hardware at our metal spinning and fabrication businesses. We continue to see ongoing, robust demand across our energy, aviation, and aerospace end user markets. Additionally, we expect aerospace projects related to the space shuttle replacement that had previously been on hold to resume activity during the third quarter.

Electronics and Hydraulics Group

Sales for the Group were down $8.4 million or 40.7% in 2010 when compared to the first quarter of 2009. The decline at the Electronics unit is attributable to the general overall economic weakness in industrial markets, white goods and HVAC businesses, while the decrease for the Hydraulics unit remains the result of continued depressed conditions in the domestic and international dump truck/dump trailer markets. The Electronics unit experienced improved sales for its automotive and aerospace customers versus prior quarter, however our automotive business continues to perform below previous year's volumes. The Hydraulics Unit has established new market opportunities in Thailand, Singapore, Indonesia and Australia, and we are beginning to see positive results via quoting activity and a firm order from Australia.

Income from Operations

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


                                   Three Months Ended September 30,
                                       2009                2008
Food Service Equipment Group          $    13,301         $     9,670
Air Distribution Products Group                95               3,112
Engraving Group                             2,361               2,430
Engineering Technologies Group              2,830               1,910
Electronics and Hydraulics Group              786               2,392
Corporate and Other                       (4,758)             (4,442)
Restructuring                             (1,557)             (4,321)
    Total                             $    13,058         $    10,751

Food Service Equipment Group

Income from operations for the first quarter of 2010 was up $3.6 million, or 37.5%, from the same period last year. The Group's return on sales grew from 9.5% to 14.5% for the quarter. The impact of the $10.0 million volume decline was more than offset by aggressive cost actions across the business, including staffing and supply chain cost reductions and labor productivity increases. The consolidation of our Bakers Pride manufacturing facility in New Rochelle, NY into our Mexico and Cheyenne facilities has been completed with negligible disruption. The consolidation of the APW Dallas facility into our Mexico operation is presently proceeding on schedule.

Air Distribution Products Group

Income from operations in the ADP segment declined to $0.1 million, a $3.0 million decrease from the first quarter of 2009. The decline in profit is the result of lower sales volume and selling price declines and was partially offset by cost reduction initiatives implemented in the third quarter of 2009.
Additionally, 2009 results were buoyed by the use of lower cost metal purchased as part of a strategic buying opportunity during late 2008.

Engraving Group

Income from operations decreased by $0.1 million, or 2.8%, when compared to the same period one year ago. Over the past year, restructuring in North America and significant cost reduction efforts yielded a 104 basis point increase in return on sales when compared to the same period one year ago. In Europe, we benefitted from productivity improvements and a favorable product mix associated with stronger sales volume to automotive customers. We also began restructuring in our European operations during the quarter. The resulting lower cost structure from our facility closings and cost reduction efforts positions the Group for better performance in this time of economic recession. The Group continues to expand the use of Lean enterprise

techniques throughout its operations in order to further improve profitability and responsiveness to our customers.

Engineering Technologies Group

First quarter operating income was up $0.9 million, or 48.2% from 2009 primarily due to increased sales volume, product mix, and improved manufacturing efficiencies, particularly at our Wisconsin facility, where we are beginning to see the operational benefits of recently-installed equipment.

Electronics and Hydraulics Group

Income from operations decreased $1.6 million compared to the same period last year. Aggressive cost reduction measures and plant closures combined with a favorable product mix at the Electronics unit were offset by the impact of spreading our remaining fixed manufacturing costs over reduced sales volume.
Cost reductions included the closure of our New York Electronics facility during the first quarter with the business relocated to our Cincinnati facility.
The full impact of the New York facility closure was not reflected in the first quarter results. While the sales decline has been rapid for the Hydraulics unit, cost reduction initiatives have been implemented to align our cost structure with current sales and, as a result, the unit saw a 6.5% return on sales in the first quarter of fiscal 2010.

Corporate and Other

Corporate expenses of approximately $4.8 million in the first quarter of 2010 increased $0.3 million or 7.1% compared to 2009 due to increased self-insured health insurance costs and other professional service fees.

Restructuring Costs

During the first quarter of 2010, the Company incurred restructuring charges of $1.6 million. These charges were primarily driven by the closure of Food Service Equipment Group facilities in New York and Dallas, and include a $0.8 million pre-tax loss on the sale of the former Bakers Pride facility in New Rochelle, NY. Other restructuring charges during the period include severance and related charges associated with our ongoing headcount reduction initiative.

During the first quarter of 2009, the Company announced the closure of the ADP production facility located in Bartonville, Illinois. This facility manufactured metal duct and fittings for the residential HVAC market and had 64 employees. The sales and production activities at the Bartonville facility were relocated to other ADP facilities. The Company's decision to close the Bartonville facility is in response to the downturn in the new residential construction market. The Company recorded a $4.1 million pre-tax expense related to the closure of the Bartonville facility in the first quarter of 2009.

Discontinued Operations

During 2008, the Company entered into an Administrative Order of Consent with the U.S. Environmental Protection Agency ("EPA") related to the removal of various PCB-contaminated materials and soils at a site where the Company leased a building and conducted operations from 1967-1979. As the site is the former location of the Club Products and Monarch Aluminum divisions, the charges have been included in results from discontinued operations for the respective periods. The Company established an accrual of $2.0 million related to the matter in 2008 and an additional $2.0 million accrual in 2009. Remediation efforts were substantially completed during the third quarter of 2009, and the Company received a closure letter from the EPA in the first half of 2010.

The Company has been actively negotiating with our legacy insurance carriers regarding cost recovery of amounts spent on environmental remediation at this site. Based on the current status of these negotiations, the company has determined that a settlement was probable at September 30, 2009, and recorded $2.3 million ($1.4 million net of tax) related to the expected recovery of costs previously incurred in carrying out the terms of the AOC, net of costs incurred to negotiate the settlement.

Liquidity and Capital Resources

Cash flows provided by continuing operations for the three months ended September 30, 2009, were $8.6 million compared to a use of $2.8 million for the same period last year. Contributing to the inflows was an increase in income from continuing operations of $1.3 million, as well as improved working capital management during the period, as cash outflows from changes in operating assets and liabilities improved $12.6 million over the prior year quarter, and offset by higher non-cash restructuring charges in the first quarter of 2009. During the three months ended September 30, 2009, we used $7.9 million of cash for financing activities. We paid dividends of $0.6 million and made net repayments of debt of $7.0 million during the period.

Our customer base in the food service equipment, automotive, U. S. residential housing and general industrial sectors have all experienced difficult recessionary market conditions. These recessionary trends have led to a reduction in our sales volume. To offset the impact of the reduced sales volume, management has implemented a number of cost reduction and cash management initiatives as described above that will save the Company in excess of $40 million annually. In addition, we have reduced our level of capital expenditures and emphasized working capital management. With respect to this effort we have improved our working capital turns from 5.3 at September 30, 2008 to 5.6 at September 30, 2009. We also increased days payable outstanding from 40 days to 44 days as compared to September 30, 2008. We anticipate that these efforts will provide us with sufficient near term liquidity.

We have in place a five year, $150 million unsecured revolving credit facility (the "facility") with seven participating banks which originated in September 2007. The Company also has an optional $75 million accordion feature under the facility. Funds available under the facility may be used for general corporate purposes or to provide financing for acquisitions. Borrowings under the agreement bear interest at a rate equal to LIBOR plus an applicable percentage based on our consolidated leverage ratio, as defined by the agreement. As of September 30, 2009, the effective rate of interest for outstanding borrowings under the facility was 3.41%. We are required to pay an annual fee of 0.15% on the maximum credit line.

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