The bearing industry is a highly fragmented multi-billion dollar market. Purchasers of bearings include producers of commercial and military aerospace equipment, automotive and commercial truck manufacturers, industrial equipment and machinery manufacturers, agricultural machinery manufacturers and construction, mining and specialized equipment manufacturers.

Demand for bearings generally follows the market for products in which bearings are incorporated and the economy as a whole. In general, the bearing industry grew through the 1990's and peaked in 1998. A number of factors, including an economic downturn and reduced capital investment, led to a historic reduction in bearings demand between 1998 and 2002. In 2003, the industry began to experience a turnaround, with bearing shipments increasing over the previous year.

According to an industry source, demand for bearings in the U.S. is projected to increase 5.2% per year through 2008. The increased demand for bearings in the diversified industrial market is being influenced by growth in industrial machinery and equipment shipments and increasing nonresidential construction activity. In addition, increased usage of existing machinery will significantly improve aftermarket demand for replacement bearing products. In the aerospace market, aging of the existing commercial aircraft fleet along with carrier traffic growth is expected to continue to expand demand for bearing solutions. Lastly, strong growth in the defense market is being influenced by modernization programs necessitating increased spending on new equipment, as well as continued utilization of deployed equipment supporting robust aftermarket demand for replacement bearings.

Plain bearings are primarily used to rectify inevitable misalignments in various mechanical components, such as aircraft controls, helicopter rotors, or in heavy mining and construction equipment. Such misalignments are either due to machining inaccuracies or result when components change position relative to each other. Plain bearings are produced with either self-lubricating or metal-to-metal designs and consist of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings.

Roller bearings are anti-friction products that utilize cylindrical rolling elements. The Company produces three main designs: tapered roller bearings, needle roller bearings and needle bearing track rollers and cam followers. The Company produces medium sized tapered roller bearings used primarily in heavy truck axle applications. The Company offers several needle roller bearing designs that are used in both industrial applications and certain US military aircraft platforms. These products are generally specified for use where there are high loads and the design is constrained by space considerations. A significant portion of the sales of this product is to the aftermarket. Needle bearing track rollers and cam followers have wide and diversified use in the industrial market and are often prescribed as a primary component in articulated aircraft wings.

Ball bearings are devices which utilize high precision ball elements to reduce friction in high speed applications. The Company specializes in four main types of ball bearings: high precision aerospace, airframe control, thin section and industrial ball bearings. High precision aerospace bearings are primarily sold to customers in the defense industry that require more technically sophisticated bearing products, such as missile guidance systems, providing higher degrees of fault tolerance given the criticality of the applications in which they are used. Airframe control ball bearings are precision ball bearings that are plated to resist corrosion and are qualified under a military specification. Thin section ball bearings are specialized bearings that use extremely thin cross sections and give specialized machinery manufacturers many advantages. The Company produces a general line of industrial ball bearings sold primarily to the aftermarket.

The Company’s other products consist primarily of precision linear precision products and machine tool collets. Linear products are precision ground ball bearing screws that offer repeatable positioning accuracy in defense, machine tools, robotic handling and semiconductor equipment. The Company’s also has several application development programs for linear precision products in progress in guided missile, unmanned aircraft, and "smart bomb" applications. Machine tool collets are cone-shaped metal sleeves, used for holding circular or rodlike pieces in a lathe or other machine, that provide effective part holding and accurate part location during machining operations.

Gross margin was $47.4 million for the nine months ended January 1, 2005, an increase of $13.1 million, or 38.0%, compared to $34.3 million for the nine months ended December 27, 2003.

Operating expense for the nine months ended January 1, 2005, was $2.5 million compared to $0.9 million for the nine months ended December 27, 2003.

Operating income increased by $8.1 million to $22.0 million for the nine months ended January 1, 2005, as compared to $13.9 million for the nine months ended December 27, 2003.

Net income was $0.5 million for the nine months ended January 1, 2005, as compared to a net loss of $0.9 million for the nine months ended December 27, 2003.