Based on industry data supplied by Penton Information Services, it is estimated that industrial power transmission products generated worldwide revenues of approximately $75.6 billion in 2005, of which approximately $30.3 billion was generated in the United States. These products are used to generate, transmit, control and transform mechanical energy. The industrial power transmission industry can be divided into three areas: MPT products; motors and generators; and adjustable speed drives.

The global MPT market is highly fragmented, with over 1,000 small manufacturers. While smaller companies tend to focus on regional niche markets with narrow product lines, larger companies that each generate annual sales over $100 million offer a much broader range of products and have global capabilities. The industry’s customer base is broadly diversified across many sectors of the economy and typically places a premium on factors such as quality, reliability, availability and design and application engineering support.

The Company’s industrial products include clutches and brakes with specially designed controls for material handling, forklift, elevator, medical mobility, mobile off-highway, baggage handling and plant productivity applications. The Company also offers a line of clutch and brake products for walk-behind mowers, residential lawn tractors and commercial mowers. While industrial applications are predominant, the Company also manufactures several vehicular niche applications including on-road refrigeration compressor clutches and agricultural equipment clutches.

Specific product lines include the Formsprag and Stieber indexing and backstopping clutches. Primary industrial applications include conveyors, gear reducers, hoists and cranes, mining machinery, machine tools, paper machinery, packaging machinery, pumping equipment and other specialty machinery.

The Company’s heavy duty clutch and brake product lines serve various markets including metal forming, off-shore and land-based oil and gas drilling platforms, mining material handling, marine applications and various off-highway and construction equipment segments.

The Company designs and manufactures a broad range of gearing products under the Boston Gear, Nuttall Gear and Delroyd Worm Gear brand names. The Company’s coupling product line includes gear couplings, high-speed disc and diaphragm couplings, grid couplings, universal joints and spindles. The Company’s coupling products are used in the power generation, steel and custom machinery industries.

The Company’s engineered bearing assembly product line includes ball bearings, roller bearings, thrust bearings, track rollers, stainless steel bearings, polymer assemblies, housed units and custom assemblies. The Company manufactures a broad range of engineered bearing products under the Kilian brand name. The Company sells bearing products to a wide range of end markets, including the general industrial and automotive markets, with a particularly strong OEM customer focus.

Specific product lines include linear actuators, miniature and small precision couplings, air motors, friction materials and other various items. The Company manufactures or markets a broad array of power transmission components under several businesses including Bear Linear, Huco Dynatork, Safetek, Boston Gear, Warner Electric and Matrix.

Gross profit increased $18.9 million, or 41.8%, from $45.2 million (24% of net sales), in the six months ended July 1, 2005 to $64.1 million (27.3% of net sales) in the same period of 2006.

Selling, general and administrative expenses increased $6.7 million, or 21.7%, from $31.1 million in the six months ended July 1, 2005 to $37.8 million in the six months ended June 30, 2006.

Research and development expenses increased $0.2 million, or 8.7%, from $2.3 million in the six months ended July 1, 2005 to $2.5 million in the six months ended June 30, 2006.

Interest expense was $12.8 million during the six months ended June 30, 2006, which was an increase of $3.0 million, or 31.2%, from the six months ended July 1, 2005.