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 general and international economic conditions, 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 hot side 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. 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 fiscal 2008, we closed one Engineered Products Group facility and two Engraving Group facilities, and consolidated these operations into other facilities. During the first quarter of fiscal 2009, we closed an additional facility in the ADP Group.

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.

During the second quarter, the Company, like many manufacturing companies in the U.S., began to experience the impact of the current economic recession across most of its business units. The Company has implemented or is in the process of initiating a number of actions in response to the downturn in our market demand.

First, since the beginning of fiscal 2009 we have reduced our U.S.-based salaried staffing levels by over 190 positions, or 20%. Approximately 75% of these reductions occurred in December. We incurred restructuring expense of approximately $0.7 million during the quarter in conjunction with this staff reduction. The salary and benefit savings resulting from this reduction in staff is approximately $11 million on an annual basis. In addition, we have announced that all non-union employee salaries will be frozen for a period of at least 12 months.

Second, as part of our ongoing efforts to improve the utilization of our manufacturing infrastructure, we have announced the consolidation of three additional manufacturing locations subsequent to the completion of the second quarter. In our Food Service Group, we have announced the closure of a facility in our Cooking Solutions unit that is located in New York. The production from this facility will be relocated to our operations in Mexico and Wyoming. In our Engraving Group, we are consolidating the mold texturizing production from our Detroit facility into our facility located in Canada. In our Engineered Products Group, we are consolidating the production from our remaining Canadian operation into existing facilities located in Mexico and China. The relocation of the production for these consolidations will occur during the third and fourth quarters of the current fiscal year. We expect to record restructuring expenses in the range of $1.8 to $2.2 million during the second half of fiscal 2009 and the first quarter of fiscal 2010. In addition, during the second quarter we closed a manufacturing operation in the Hydraulics Products Group and consolidated the production into an existing facility. Annual savings resulting from these plant consolidations will be in range of $3.8 to $4.5 million. We expect to realize the full year savings resulting from these plant consolidations beginning with the first quarter of fiscal year 2010.

Third, we have entered into negotiations with the majority of suppliers of the Company including those who provide inventory items as well as MRO and services to achieve cost reductions on all of our purchases. These negotiations are on going and we expect that savings from these negotiations will begin during the current third quarter and continue into the fourth quarter as these negotiations come to completion. 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.

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 to the aforementioned cost reduction initiatives, the Company is repatriating cash in instances where the Company can remit to the U.S. without associated net tax cost, as well as restricting capital expenditures and aggressively managing working capital. The resulting additional borrowing capacity would provide additional flexibility in the event of a prolonged economic downturn.

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 sufficient to mitigate adverse effects resulting from continuing recessionary economic conditions.

There are a number of key external factors other than general business and economic conditions that can impact the performance of our businesses. The key factors affecting each business are described below in the 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                           Six Months Ended
                                                December 31,                                December 31,
(Dollar amounts in thousands)           2008                      2007                  2008              2007
Net sales                                  $   155,510                $172,245         $   336,205        $347,765
Gross profit margin                              29.3%                   29.8%               30.5%           29.0%
Income from operations                           5,987                  11,277              16,738          22,123
Backlog as of December 31                      124,571                 114,379             124,571         114,379

                                                   Three Months Ended                    Six Months Ended
(In thousands)                                     December 31, 2008                     December 31, 2008
Net sales, prior period                              $           172,245                        $          347,765
Components of change in sales:
  Effect of exchange rates                                       (3,489)                                   (2,333)
  Organic sales change                                          (13,246)                                   (9,227)
Net sales, current period                            $           155,510                        $          336,205

Net sales for the second quarter of 2009 decreased $16.7 million, or 9.7%, when compared to the same period of 2008. This net sales decrease was the result of a decrease in organic sales of $13.2 million, or 7.7%, and unfavorable exchange rates of $3.5 million. The decline in organic sales occurred in each Group except the Engineered Products Group. During the quarter, we saw sales declines in both the Food Service Equipment and Engraving Groups as customers reduced or delayed capital spending and expansion plans. We continue to experience significant sales declines in the ADP and Hydraulics Products Groups, which are the most dependent on new construction and development and are the segments hardest hit thus far by the current recession.

Net sales for the six months ended December 31, 2008 decreased $11.6 million, or 3.3% compared to the first half of 2008. Organic sales decreased during the period by $9.2 million, or 2.7% and unfavorable foreign exchange of $2.3 million. A further discussion by segment follows.

Gross Profit Margin

Our gross profit margin decreased to 29.3% for the second quarter of 2009 versus 29.8% in the same quarter of last year. This was driven by lower margins in the Engineered Products Group, where prior year results were positively impacted by payments for high-margin design and tooling work performed by the Group, and in the Hydraulics Products Group, where lower sales volume impacted margins, offset by higher margins in ADP, which benefited from higher sales prices and lower material costs.

Our gross profit margin for the six months ended December 31, 2008 increased to 30.5% from 29.0% in the first half of 2008. The Air Distribution Products Group saw increased margins due to higher selling prices and lower materials costs as compared to the prior year period. Margins were roughly flat in the Food Service Equipment Group, and increased slightly for the Engraving Group. The Engineered Products and the Hydraulics Products Groups offset these margin gains due to the aforementioned factors affecting the current quarter.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses for the second quarter of 2009 were $38.5 million, down from $40.0 million reported for the same period a year ago. This decrease was driven primarily by reduced sales and marketing expenses of $1.0 million due to reduced sales volume, as well as strict cost containment initiatives, including reductions in salaried employee staffing levels. For the six months ended December 31, 2008, expenses increased to $80.6 million from $78.8 million for the same period in 2008, due primarily to increased health insurance costs for the period.

Income from Operations

Income from operations for the second quarter of 2009 was $6.0 million, 46.9% lower than the $11.3 million reported for the same period a year ago. Operating income was negatively impacted by $1.1 million of restructuring costs incurred during the period, primarily related to the salaried workforce reduction occurring in December. Excluding these costs, operating income decreased by $4.2 million or 37.3%, driven by sales declines which outpaced cost reduction actions.

Income from operations for the first half of 2009 was $16.7 million, 24.3% lower than the $22.1 million reported for the same period a year ago. Operating income was negatively impacted by $5.4 million of restructuring costs incurred during the period, related primarily to closure of the ADP facility in Bartonville, Illinois. Excluding these costs, operating income was flat compared to the prior period.

Interest Expense

Interest expense for the second quarter of 2009 decreased $0.9 million to $1.8 million compared to the second quarter of 2008 due to lower borrowing levels and lower interest rates. Additionally, the payment of fixed rate debt during the quarter using lower cost borrowings from the revolving credit agreement favorably altered the weighted average interest rate applicable to our total outstanding borrowings. For the first half of the year, interest expense decreased from $5.4 million to $3.5 million compared to the first half of 2008, also due to the aforementioned factors.

Other Non-Operating Income

Other non-operating income for the three and six months ended December 31, 2008 was $0.2 million and $0.9 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.

Income Taxes

Our effective income tax rate for the second quarter of 2009 was 20.8% compared to 33.5% for the second quarter of 2008. The lower effective tax rate is due to the impact of several discrete items during the quarter, including the reinstatement of the research and development tax credit by Congress in October 2008. For the first half of 2009, the effective rate was 25.5% compared to 34.8% in the first half of 2008. The lower rate is primarily due to the impact of the life insurance proceeds in other non-operating income, which were not subject to income tax, as well as the second quarter discrete items.

Backlog

Backlog at December 31, 2008 increased $10.2 million, or 8.9%, compared to December 31, 2007. Backlog increased $6.1 million and $8.8 million for the Engraving and Engineered Products Groups, respectively, offset by decreased backlog of $2.5 million, $1.8 million, and $0.4 million at the Food Service Equipment, Hydraulics Products, and ADP Groups, respectively. 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           Six Months Ended
                                      December 31,                December 31,
                                    2008          2007          2008         2007
Food Service Equipment Group     $    87,947    $  94,918    $   189,703    $191,879
Air Distribution Products Group       19,567       23,164         43,355      50,514
Engraving Group                       19,887       23,631         41,455      44,034
Engineered Products Group             22,826       22,677         48,081      44,481
Hydraulics Products Group              5,283        7,855         13,611      16,857
    Total                        $   155,510     $172,245    $   336,205    $347,765

Food Service Equipment Group

Net sales in the second quarter of fiscal 2009 declined $7.0 million, or 7.3%, from the same period one year earlier. The effects of foreign exchange rates accounted for about $1.3 million of the decline. When removing the effect of foreign exchange rate impact, sales decreased $5.7 million, or 6.0%, when compared with the same period one year earlier. The major contributor to the decrease in sales was the overall market decline in the majority of the Food Service Equipment segments Standex serves. Despite the market decline, slight growth was noted in our Refrigeration Solutions businesses (walk-in cooler and refrigerated cabinets) due to Food Service Equipment market share gains, strength in the drug retail and health care segments, and nominal price increases. An acceleration of weakness in the casual dining and independent pizzeria markets and inventory adjustments in the distribution channel led to a year-over-year decline of 12.3% (excluding the impact of currency exchange) in our Cooking Solutions and Custom Solutions businesses. The group was successful in obtaining contracts during the quarter with large food service providers, who supply the Group's equipment to large university and hospital projects.

Net sales in the six months ended December 31, 2008 decreased $2.2 million, or 1.1%, from the same period one year earlier. The effects of foreign exchange rates accounted for half of the decline. When removing the effect of foreign exchange rate impact, sales decreased $1.0 million, or 0.5%, when compared with the same period one year earlier. Organic growth of 4.4% was achieved in our Refrigeration Solutions businesses (walk-in cooler and refrigerated cabinets), generally due to market share gains and nominal price increases. Our Cooking Solutions and Custom Solutions businesses experienced a decline of 5.4%, primarily due to the market deterioration in the second fiscal quarter.

Air Distribution Products Group

During the three months ended December 31, 2008, sales for the Air Distribution Products Group declined $3.6 million from fiscal 2008 levels, a 15.5% reduction. Volume, as adjusted for price changes, was down 36.6% from second quarter 2008.
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 big box home improvement retailers through our network of manufacturing facilities. These initiatives in conjunction with some smaller competitors exiting the business have resulted in market share gains; however, the sales volume increases resulting from these gains are marginal compared to overall market deterioration.

Net sales for the six months ending December 31, 2008 declined 14.2% or $7.2 million and volume declined 32.5% under circumstances similar to the current quarter.

Engraving Group

Net sales in the second quarter decreased by $3.7 million, or 15.8%, when compared to the same quarter in the prior year. The Group experienced decreased sales in mold texturizing automotive OEM platform work in most geographic regions. The lower automotive sales were the result of the automotive OEM's launching fewer new auto platforms in the current quarter. Lower automotive sales were partially offset by higher non-automotive mold texturizing, engraved rolls and machinery sales, as the Group had success in diversifying its customer base away from the automotive market.

Net sales for the six months ended December 31, 2008 decreased by $2.6 million, or 5.9%, when compared to the first half of the prior fiscal year. The overall net decrease is again attributable to lower mold texturizing sales for automotive OEM platform work as these customers launched fewer new platforms during the half. It is expected that the balance of the year will show flat automotive-related sales.

Engineered Products Group

Net sales in the second quarter have increased by $0.1 million, or 0.7%, for the three months ended December 31, 2008 when compared with the three months ended December 31, 2007. While Spincraft continued to experience robust 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 the new ARES rocket program, destined to replace the Space Shuttle. This program is expected to provide a solid baseline for future sales.

Net sales in the first half of this fiscal year increased $3.6 million or 8.1%, when compared to the same six month 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, especially in the automotive sector, during the first half of the year.

Hydraulics Products Group

Net sales decreased $2.6 million or 32.7%, for the three months ended December 31, 2008 when compared with the three months ended December 31, 2007.
Conditions in the domestic dump truck and dump trailer market declined significantly as a direct result of the economic downturn and lack of credit availability for our OEM customers and for construction projects. The Group's export business has not experienced as dramatic a decline as the domestic markets, yet a general slowdown is being experienced globally by the Group.

Net sales decreased $3.2 million, or 19.3%, for the six month period ending December 31, 2008 as compared to the six month period ending December 31, 2008.
The decrease was attributable to the continued exceptionally weak market conditions in the dump truck and dump trailer business.

Income from Operations

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


                                  Three Months Ended          Six Months Ended
                                     December 31,               December 31,
                                   2008         2007          2008         2007
Food Service Equipment Group     $    5,279    $  8,206    $    14,949     $17,854
Air Distribution Products Group       2,209           1          5,321         398
Engraving Group                       1,628       2,628          4,058       3,899
Engineered Products Group             2,963       3,487          6,069       6,401
Hydraulic Products Group              (295)       1,025            901       2,244
Corporate and Other                 (4,716)     (4,070)        (9,158)     (8,673)
Restructuring                       (1,081)           -        (5,402)           -
    Total                        $    5,987     $11,277    $    16,738     $22,123

Food Service Equipment Group

Income from operations for the second quarter of fiscal 2009 decreased $2.9 million, or 35.7%, when compared to the same period one year earlier. The principal reasons for the decline were the year-over-year drop in sales and a change in sales mix which included higher volumes of lower margin walk-in freezer/coolers for the food service markets and lower volumes of higher margin "hot" side products, refrigerated reach-in cabinets and walk-ins for scientific applications. Increases in commodity prices during the quarter were largely mitigated by material and labor productivity improvements coupled with nominal price increases.

Income from operations for the first half of 2009 declined $2.9 million, or 16.3%, when compared to the same period one year earlier. The decline in profitability was the result of lower sales volume and unfavorable sales mix as discussed above. In addition, material and labor productivity improvements, coupled with nominal price increases, were offset by commodity cost increases.

Air Distribution Products Group

Fiscal 2009 second quarter income from operations increased from break-even to $2.2 million. The improved results are due to a combination of price increases, favorable material costs, and to a lesser extent a manufacturing facility consolidation completed in the first quarter, improving capacity utilization in the period.

Operating income for the six months ending December 31, 2008 increased to $5.3 million from $0.4 million for the same period one year earlier. While the Group has benefited from lower materials cost during the first half of the year, materials expected to be used in the second half of the year were purchased at a higher cost and, as such, the Group expects increased material costs during the remainder of the year.

Engraving Group

Income from operations for the quarter ended December 31, 2008 decreased by $1.0 million, or 38.1%, when compared to the same quarter last year.

Income from operations in the first half of 2009 increased by $0.2 million, or 4.1%, when compared to the first half of the prior fiscal year. Even with sales declines of 5.7%, aggressive action in reducing costs and consolidating factories, particularly in North America, resulted in improved operating income performance. The international business continues to be impacted by an unfavorable sales mix of increased non-automotive industry sales as opposed to higher margin automotive OEM platform program sales in the European region.

Engineered Products Group

Income from operations decreased by $0.5 million, or 15%, despite higher sales when compared to the same three month period one year earlier. At Spincraft, the decrease was primarily due to milestone and engineering and development . . .