|                                             
|---------------------------------------------
|UNITED STATESSECURITIES & EXCHANGE COMMISSION
|                                             
|Washington, D.C. 20549                       
|                                             
|                                             
|                                             
|FORM 10-Q                                    

|                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------
|xThe Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
      For the three months ended September 28, 2007, or         
|                                                                                                                                                              
|o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
  For the transition period from ______________ to ______________.
|                                                                                                                                                              
|Commission File No. 1-5375                                                                                                                                    

|                                                                      
|----------------------------------------------------------------------
|                                                                      
|                                                                      
|TECHNITROL, INC.(Exact name of registrant as specified in its Charter)
|                                                                      

|PENNSYLVANIA                                                         |              | 23-1292472                          
|-------------------------------------------------------------------- | ------------ | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) |              | (IRS Employer Identification Number)
|                                                                     |              |                                     
|1210 Northbrook Drive, Suite 470                                     |              |                                     
|Trevose, Pennsylvania                                                |              | 19053                               
|(Address of principal executive offices)                             |              | (Zip Code)                          
|                                                                     |              |                                     
|Registrants telephone number, including area code:                  | 215-355-2900
|                                                                     |              |                                     

|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.YESxNOo
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Act)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Large accelerated filerx |  | Accelerated filero |  | Non-accelerated filero
|------------------------ |  | ------------------ |  | ----------------------
|                         |  |                    |  |                       

|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
                      YESo NOx
      Indicate the number of shares outstanding of each of the issuers classes of Common Stock, as of November 2, 2007:40,883,391
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1
|-



|TABLE OF CONTENTS
|-----------------
|                 

|PART I      |  | FINANCIAL INFORMATION                                                                 | PAGE | 
|----------- |  | ------------------------------------------------------------------------------------- | ---- | 
|            |  |                                                                                       |      | 
|Item 1.     |  | Financial Statements                                                                  |      | 
|            |  |                                                                                       |      | 
|            |  | Consolidated Balance Sheets (Unaudited)                                               | 3    | 
|            |  | Consolidated Statements of Operations (Unaudited)                                     | 4    | 
|            |  | Consolidated Statements of Cash Flows (Unaudited)                                     | 5    | 
|            |  | Consolidated Statements of Changes in Shareholders Equity (Unaudited)                | 6    | 
|            |  | Notes to Unaudited Consolidated Financial Statements                                  | 7    | 
|            |  |                                                                                       |      | 
|Item 2.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations | 15   | 
|            |  |                                                                                       |      | 
|Item 3.     |  | Quantitative and Qualitative Disclosures about Market Risk                            | 24   | 
|            |  |                                                                                       |      | 
|Item 4.     |  | Controls and Procedures                                                               | 24   | 
|            |  |                                                                                       |      | 
|**PART II** |  | **OTHER INFORMATION**                                                                 |      | 
|            |  |                                                                                       |      | 
|Item 1.     |  | Legal Proceedings                                                                     | 25   | 
|            |  |                                                                                       |      | 
|Item 1a.    |  | Risk Factors                                                                          | 25   | 
|            |  |                                                                                       |      | 
|Item 2.     |  | Unregistered Sales of Equity Securities and Use of Proceeds                           | 25   | 
|            |  |                                                                                       |      | 
|Item 3.     |  | Defaults Upon Senior Securities                                                       | 25   | 
|            |  |                                                                                       |      | 
|Item 4.     |  | Submission of Matters to a Vote of Security Holders                                   | 25   | 
|            |  |                                                                                       |      | 
|Item 5.     |  | Other Information                                                                     | 25   | 
|            |  |                                                                                       |      | 
|Item 6.     |  | Exhibits                                                                              | 25   | 
|            |  |                                                                                       |      | 
|            |  | Exhibit Index                                                                         | 33   | 

|2
|-



|PART I. FINANCIAL INFORMATION
Item 1:  Financial Statements
Technitrol, Inc. and Subsidiaries
Consolidated Balance Sheets
In thousands
|--------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                      

|September 28,
      2007                       |                 | December 29,
      2006 | 
|---------------------------------------------- | --------------- | ----------------------- | 
|
|                                               | **(unaudited)** |                         | 
|Current assets:                                |                 |                         | 
|Cash and cash equivalents                      | $               | 99,595                  | 
|Trade receivables, net                         |                 | 176,101                 | 
|Inventories                                    |                 | 117,467                 | 
|Prepaid expenses and other current assets      |                 | 27,035                  | 
|                                               |                 |                         | 
|Total current assets                           |                 | 420,198                 | 
|                                               |                 |                         | 
|Property, plant and equipment                  |                 | 259,328                 | 
|Less accumulated depreciation                  |                 | 159,906                 | 
|                                               |                 |                         | 
|Net property, plant and equipment              |                 | 99,422                  | 
|Deferred income taxes                          |                 | 16,519                  | 
|Goodwill, net                                  |                 | 230,390                 | 
|Other intangibles, net                         |                 | 30,155                  | 
|Other assets                                   |                 | 14,169                  | 
|                                               |                 |                         | 
|                                               | $               | 810,853                 | 
|                                               |                 |                         | 
|                                               |                 |                         | 
|Liabilities and Shareholders Equity           |                 |                         | 
|Current liabilities:                           |                 |                         | 
|Current installments of long-term debt         | $               |                        | 
|Short-term debt                                |                 |                        | 
|Accounts payable                               |                 | 108,513                 | 
|Accrued expenses and other current liabilities |                 | 80,595                  | 
|                                               |                 |                         | 
|Total current liabilities                      |                 | 189,108                 | 
|                                               |                 |                         | 
|Long-term liabilities:                         |                 |                         | 
|Long-term debt, excluding current installments |                 | 22,975                  | 
|Deferred income taxes                          |                 | 13,875                  | 
|Other long-term liabilities                    |                 | 35,567                  | 
|                                               |                 |                         | 
|Minority interest                              |                 | 10,045                  | 
|                                               |                 |                         | 
|Shareholders equity:                          |                 |                         | 
|Common stock and additional paid-in capital    |                 | 221,683                 | 
|Retained earnings                              |                 | 277,206                 | 
|Other comprehensive income                     |                 | 40,394                  | 
|                                               |                 |                         | 
|Total shareholders equity                     |                 | 539,283                 | 
|                                               |                 |                         | 
|                                               | $               | 810,853                 | 
|                                               |                 |                         | 

|                                                                      
|----------------------------------------------------------------------
|See accompanying Notes to Unaudited Consolidated Financial Statements.

|3
|-



|Technitrol, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)In thousands, except per share data
|----------------------------------------------------------------------------------------------------------------------
|                                                                                                                      

|                                                                                                                                | Three Months Ended |         | Nine Months Ended |  
|------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------- | ----------------- | -
|
|
|Net sales                                                                                                                       | $                  | 257,093 |                   | $
|                                                                                                                               
|Costs and expenses:                                                                                                             |                    |         |                   |  
|Cost of sales                                                                                                                   |                    | 196,708 |                   |  
|Selling, general and administrative expenses                                                                                    |                    | 35,668  |                   |  
|Severance and asset impairment expense                                                                                          |                    | 1,858   |                   |  
|                                                                                                                                |                    |         |                   |  
|                                                                                                                               
|Total costs and expenses applicable to sales                                                                                    |                    | 234,234 |                   |  
|                                                                                                                                |                    |         |                   |  
|                                                                                                                               
|Operating profit                                                                                                                |                    | 22,859  |                   |  
|                                                                                                                               
|Other (expense) income:                                                                                                         |                    |         |                   |  
|Interest expense, net                                                                                                           |                    | (638    | )                 |  
|Other (expense) income, net                                                                                                     |                    | (912    | )                 |  
|                                                                                                                                |                    |         |                   |  
|                                                                                                                               
|Total other (expense)                                                                                                           |                    | (1,550  | )                 |  
|                                                                                                                                |                    |         |                   |  
|Earnings from continuing operations before
     income taxes, minority interest and
     cumulative effect of accounting change |                    | 21,309  |                   |  
|                                                                                                                               
|Income taxes                                                                                                                    |                    | 2,055   |                   |  
|                                                                                                                               
|Minority interest (expense) income                                                                                              |                    | (69     | )                 |  
|                                                                                                                                |                    |         |                   |  
|                                                                                                                               
|Net earnings from continuing
    operations before cumulative
    effect of accounting change                                   |                    | 19,185  |                   |  
|Cumulative effect of accounting change,
     net of income taxes                                                                |                    |        |                   |  
|Net loss from discontinued operations,
     net of income taxes                                                                 |                    |        |                   |  
|                                                                                                                                |                    |         |                   |  
|Net earnings                                                                                                                    | $                  | 19,185  |                   | $
|                                                                                                                                |                    |         |                   |  
|                                                                                                                               
|Basic and diluted earnings per share from
     continuing operations before cumulative
     effect of accounting change         | $                  | 0.47    |                   | $
|Cumulative effect of accounting change,
     net of income taxes                                                                |                    |        |                   |  
|Basic and diluted net loss per share from
     discontinued operations                                                          |                    |        |                   |  
|                                                                                                                                |                    |         |                   |  
|Basic and diluted net earnings per share                                                                                        | $                  | 0.47    |                   | $
|                                                                                                                                |                    |         |                   |  

|                                                                      
|----------------------------------------------------------------------
|See
accompanying Notes to Unaudited Consolidated Financial Statements.

|4
|-



|Technitrol, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
In thousands
|------------------------------------------------------------------------------------------------
|                                                                                                

|                                                                                       | Nine Months Ended |        
|-------------------------------------------------------------------------------------- | ----------------- | -------
|
|
|Cash flows from operating activities:                                                  |                   |        
|Net earnings                                                                           | $                 | 44,838 
|Loss from discontinued operations, net of taxes                                        |                   |       
|Adjustments to reconcile net earnings to net cash provided
   by operating activities: |                   |        
|Cumulative effect of accounting change, net of taxes                                   |                   |       
|Depreciation and amortization                                                          |                   | 24,755 
|Stock incentive plan expense                                                           |                   | 2,820  
|Minority interest in net earnings of consolidated subsidiary                           |                   | 354    
|Severance and asset impairment expense, net of cash payments                           |                   | 7,977  
|Changes in assets and liabilities, net of effect of acquisitions:                      |                   |        
|Trade receivables                                                                      |                   | (9,563 
|Inventories                                                                            |                   | (6,752 
|Prepaid expenses and other current assets                                              |                   | 815    
|Accounts payable and accrued expenses                                                  |                   | 429    
|Other, net                                                                             |                   | (3,072 
|                                                                                       |                   |        
|Net cash provided by operating activities                                              |                   | 62,601 
|                                                                                       |                   |        
|                                                                                      
|Cash flows from investing activities:                                                  |                   |        
|Acquisitions, net of cash acquired                                                     |                   |       
|Capital expenditures                                                                   |                   | (14,875
|Funding of grantor trust                                                               |                   |       
|Proceeds from sale of property, plant and equipment                                    |                   | 7,300  
|Foreign currency impact on intercompany lending                                        |                   | (249   
|                                                                                       |                   |        
|Net cash used in investing activities                                                  |                   | (7,824 
|                                                                                       |                   |        
|                                                                                      
|Cash flows from financing activities:                                                  |                   |        
|Long-term borrowings                                                                   |                   |       
|Principal payments of long-term debt                                                   |                   | (36,668
|Dividends paid                                                                         |                   | (10,716
|Exercise of stock options                                                              |                   | 643    
|                                                                                       |                   |        
|Net cash used in financing activities                                                  |                   | (46,741
|                                                                                       |                   |        
|                                                                                      
|Net effect of exchange rate changes on cash                                            |                   | 4,364  
|                                                                                       |                   |        
|                                                                                      
|Cash flows of discontinued operations:                                                 |                   |        
|Net cash used in operating activities                                                  |                   |       
|                                                                                       |                   |        
|Net decrease in cash and cash equivalents from
              discontinued operations   |                   |       
|                                                                                       |                   |        
|                                                                                      
|Net increase (decrease) in cash and cash equivalents                                   |                   | 12,400 
|                                                                                      
|Cash and cash equivalents at beginning of period                                       |                   | 87,195 
|                                                                                       |                   |        
|                                                                                      
|Cash and cash equivalents at end of period                                             | $                 | 99,595 
|                                                                                       |                   |        

|                                                                      
|----------------------------------------------------------------------
|See accompanying Notes to Unaudited Consolidated Financial
Statements.

|5
|-



|Technitrol, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
Nine Months Ended September 28, 2007
(Unaudited)In thousands, except per share data
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                

|                                                   | Common stock and
      paid-in capital |        | Retained
      earnings |   | Accumulated
      other
      comprehensive
      income |  | Comprehensive
      income |        
|-------------------------------------------------- | -------------------------------------- | ------ | ----------------------- | - | -------------------------------------------------------- |  | -------------------------- | -------
|
|
|
|Balance at December 29, 2006                       |                                        | 40,751 |                         | $ | 218,919                                                  |  | $                          | 243,084
|Stock options, awards and related
    compensation |                                        | 132    |                         |   | 2,764                                                    |  |                            |       
|Dividends declared ($0.2625 per share)             |                                        |       |                         |   |                                                         |  |                            | (10,716
|Currency translation adjustments                   |                                        |       |                         |   |                                                         |  |                            |       
|Unrealized holding gains on securities             |                                        |       |                         |   |                                                         |  |                            |       
|Net earnings                                       |                                        |       |                         |   |                                                         |  |                            | 44,838 
|                                                   |                                        |        |                         |   |                                                          |  |                            |        
|Comprehensive income                               |                                        |        |                         |   |                                                          |  |                            |        
|                                                   |                                        |        |                         |   |                                                          |  |                            |        
|Balance at September 28, 2007                      |                                        | 40,883 |                         | $ | 221,683                                                  |  | $                          | 277,206
|                                                   |                                        |        |                         |   |                                                          |  |                            |        

|                                                                      
|----------------------------------------------------------------------
|See accompanying Notes to Unaudited Consolidated Financial Statements.

|6
|-



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(1)           Accounting policies
For a complete description of the accounting policies of Technitrol, Inc. and its consolidated subsidiaries,
refer to Note 1 of Notes to Consolidated Financial Statements included in Technitrols Form
10-K filed for the year ended December 29, 2006. We sometimes refer to Technitrol as we
or our. We now refer to Pulse as the Electronics Components Group or Electronics
and AMI Doduco as the Electrical Contact Products Group or Electrical.
The results for the three and nine months ended September 28, 2007 and September 29, 2006 have been
prepared by our management without audit by our independent auditors. In the opinion of management,
the financial statements fairly present in all material respects, the financial position and results
of operations for the periods presented. To the best of our knowledge and belief, all adjustments
have been made to properly reflect income and expenses attributable to the periods presented. Except
for severance and asset impairment expenses, all such adjustments are of a normal recurring nature.
Operating results for the nine months ended September 28, 2007 are not necessarily indicative of
annual results.
New accounting pronouncements
In
February 2007, the Financial Accounting Standards Board (FASB) issued Statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). This statement provides the option to report certain financial assets and
liabilities at fair value, with the intent to mitigate volatility in financial reporting that can
occur when related assets and liabilities are recorded on different bases. This statement is effective
for us beginning December 29, 2007. We are currently evaluating the effect that SFAS 159 will have
on our consolidated financial statements.
In September 2006, the
FASB issued Statement No. 157, Fair Value Measurements (SFAS 157). This statement defines fair value, establishes a framework for measuring fair
value in GAAP, and enhances disclosures about fair value measurements. SFAS 157 applies when other
accounting pronouncements require fair value measurements; it does not require new fair value measurements.
We are required to adopt this statement on December 29, 2007 and we are currently evaluating the
effect that SFAS 157 will have on our consolidated financial statements.
In
July 2006, FASB issued its Interpretation No. 48, Accounting for Uncertainty in Income Taxes -an interpretation of FASB Statement No. 109, (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in
an entitys financial statements in accordance with Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a minimum recognition threshold (more likely than not or greater than
50 percent) and measurement attributes for financial statement disclosure of tax positions taken
or expected to be taken on a tax return or otherwise. We adopted this interpretation on December
30, 2006. See Note 6 for details regarding the adoption of this interpretation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7
|-



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(2)           Acquisitions
Larsen Group:  In December 2006, we acquired certain assets which comprise the Larsen Group (Larsen).
Headquartered in Vancouver, Washington, Larsen had production operations in the United States, Mexico,
China and France. We have included the acquired assets in our consolidated balance sheet since the
effective date of the acquisition. The results of Larsens operations are included in our consolidated
net earnings beginning in 2007. Larsen manufactured non-cellular wireless and automotive antennas
and expanded our Electronics antenna division. The purchase price and preliminary fair value of the
acquired assets were not material to our consolidated financial statements.
ERA Group: On January 4, 2006, we acquired all of the capital stock of ERA Group, headquartered in Herrenberg,
Germany with production operations in Germany, China and Tunisia. The results of ERAs operations
have been included in our consolidated financial statements since the effective date of the acquisition.
ERA produced advanced-technology ignition coils, along with a variety of other coils and transformers
used in automotive, heating/ventilation/air conditioning and appliance applications. It became the
foundation of our Electronics automotive division. The purchase price was approximately $53.4 million,
net of cash acquired of $1.3 million, and including acquisition costs of approximately $0.9 million.
The purchase price was financed primarily with bank credit under our multi-currency credit facility.
The fair value of the net tangible assets acquired approximated $12.0 million. In addition to the
fair value of net tangible assets acquired, purchase price allocations included $2.2 million for
intellectual property, $3.1 million for customer relationships and $37.4 million allocated to goodwill.
Each of the identifiable intangibles with finite lives are being amortized, using lives of five years
for intellectual property and customer relationships.
Full Rise Electronic Co., Ltd.: Full Rise Electronic Co., Ltd. (FRE) was headquartered in Taiwan with production operations
in China. FRE manufactured connector products including single and multiple-port jacks, and supplied
products to us under a cooperation agreement. We began making investments in FRE in April 2001. As
of September 28, 2007, our investment in FRE was approximately $31.5 million and our record ownership
was approximately 71%. We also have beneficial ownership of an additional 4% of the common shares outstanding of FRE
for which we have voting authority, rights to any dividends paid, as well as the authority to prevent any
transfers of these shares. Our net earnings therefore reflect FREs net earnings,
after deducting the minority shareholders interest. Purchases of common stock in FRE were allocated,
on a pro rata basis, to goodwill, identifiable intangible assets, and property, plant, and equipment
according to the estimated fair value of such assets as of the date we began consolidating FREs
results with our own. Based on the fair value of net tangible assets acquired and our current ownership
percentage, the allocation of the investment to intangibles was $0.5 million for technology, $0.6
million for trademarks, $2.1 million for customer relationships and $8.8 million of goodwill. All
of the identifiable intangibles are being amortized, using lives of four years for technology and
customer relationships.
(3)           Divestiture
In 2005, we received approximately $6.7 million for the sale of Electricals bimetal and metal
cladding operations. In December of 2006, all remaining fixed assets were sold for approximately
$2.0 million, which resulted in a pretax gain of $0.6 million over the previously carried $1.4 million
net book value. During 2006, all the results of the bimetal and metal cladding operations were reflected
as discontinued operations on the consolidated statements of operations. There were no sales or net
earnings to include in our consolidated statements of operations for the nine months ended September
28, 2007. We recorded no sales and a net loss of $0.1 million in the consolidated statements of operations
for the nine months ended September 29, 2006.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8
|-



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(4)           Inventories
Inventories consisted of the following (in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                  

| |                            | September 28,
      2007 |         | December 29,
      2006 |   |        
| | -------------------------- | ------------------------ | ------- | ----------------------- | - | -------
|
| | Finished goods             | $                        | 44,258  |                         | $ | 37,415 
| | Work in process            |                          | 27,897  |                         |   | 23,843 
| | Raw materials and supplies |                          | 45,312  |                         |   | 45,139 
| |                            |                          |         |                         |   |        
| |                            | $                        | 117,467 |                         | $ | 106,397
| |                            |                          |         |                         |   |        

|                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5)           Goodwill and other intangibles, net
The changes in the carrying amounts of goodwill for the nine months ended September 28, 2007 were as
follows (in thousands):
|                                                                                                                                                                              

| | Balance at December 29, 2006                     | $ | 220,528 |   | 
| | ------------------------------------------------ | - | ------- | - | 
| |                                                  |   |         |   | 
| | Goodwill acquired during the period              |   |        |   | 
| | Purchase price allocations and other adjustments |   | (590    | ) | 
| | Currency translation adjustments                 |   | 10,452  |   | 
| |                                                  |   |         |  
|
| | Balance at September 28, 2007                    | $ | 230,390 |   | 
| |                                                  |   |         |  

|                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------
|The majority of our goodwill and other intangibles relate to our Electronics segment.
Other intangible assets were as follows (in thousands):
|                                                                                                                                             

|September
      28,
      2007                                          |   | December 29,
      2006 |  
|----------------------------------------------------------------------- | - | ----------------------- | -
|                                                                       
|Intangible
      assets subject to amortization(finite lives):          |   |                         |  
|Technology                                                              | $ | 11,520                  |  
|Customer
      relationships                                            |   | 28,029                  |  
|Tradename/trademark                                                     |   | 414                     |  
|Other                                                                   |   | 2,402                   |  
|                                                                        |   |                         |  
|Total                                                                   |   | 42,365                  |  
|                                                                        |   |                         |  
|Accumulated
      amortization:                                         |   |                         |  
|Technology                                                              |   | (8,139                  | )
|Customer
      relationships                                            |   | (7,250                  | )
|Tradename/trademark                                                     |   | (529                    | )
|Other                                                                   |   | (950                    | )
|                                                                        |   |                         |  
|Total                                                                   |   | (16,868                 | )
|                                                                        |   |                         |  
|                                                                       
|Net
      tangible assets subject to amortization                       |   | 25,497                  |  
|                                                                       
|Intangible
      assets not subject to amortization (indefinite lives): |   |                         |  
|Tradename                                                               |   | 4,658                   |  
|                                                                        |   |                         |  
|                                                                       
|Other
      intangibles, net                                            | $ | 30,155                  |  
|                                                                        |   |                         |  

|9
|-



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(5)           Goodwill and other intangibles, net, continued
Amortization expense was $3.9 million and $3.8 million for the nine months ended September 28, 2007
and September 29, 2006, respectively. Estimated annual amortization expense for each of the next
five years is as follows (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                            

| | **Year Ending** |  |   |       |  | 
| | --------------- |  | - | ----- |  | 
| |                 |  |   |       |  | 
| | 2008            |  | $ | 4,849 |  | 
| | 2009            |  | $ | 4,271 |  | 
| | 2010            |  | $ | 3,914 |  | 
| | 2011            |  | $ | 2,449 |  | 
| | 2012            |  | $ | 2,329 |  | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6)           Income taxes
We adopted the provisions
of FIN 48 on December 30, 2006 and, at the date of adoption, we had $22.8 million of unrecognized
income tax benefits. Upon adoption of FIN 48, we did not recognize a material adjustment to our liabilities
for unrecognized tax benefits, but we reclassified approximately $17.6 million of unrecognized tax
benefits from current to long-term liabilities. These benefits are not expected to be recognized
within the next twelve months. At September 28, 2007, we have $23.3 million of unrecognized income
tax benefits, $17.6 million of which are classified as long-term liabilities. All of these tax benefits
would affect our effective tax rate, if recognized. Other than financial statement disclosures, the
adoption of this interpretation had no other impact on our consolidated financial statements.
Our continuing practice
is to recognize interest and/or penalties related to income tax matters as income tax expense. As
of September 28, 2007, we have $1.9 million accrued for interest and/or penalties related to uncertain
income tax positions.
We are subject to U.S.
federal income tax as well as income tax in multiple state and non-U.S. jurisdictions. With respect
to federal and state income tax, tax returns for all years after 2002 are subject to future examination
by the respective tax authorities. With respect to material non-U.S. jurisdictions in which we operate,
tax returns for all years after 1999 are subject to future examination by the respective tax authorities.
(7)           Defined benefit plans
In the nine months ended September 28, 2007 we contributed approximately $0.2 million to our principle
defined benefit plans and we expect to contribute approximately $0.4 million for the full fiscal
year in 2007. Our net periodic expense was approximately $0.3 million and $1.0 million in the three
and nine months ended September 28, 2007 and September 29, 2006, respectively, and is expected to
be approximately $1.3 million for the full fiscal year in 2007.
(8)           Accounting for stock-based compensation
We have an incentive compensation plan for our employees. The primary component of this plan is restricted
stock, which grants the recipient the right of ownership of our common stock, conditional on

|10
|--



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(8)           Accounting for stock-based compensation, continued
continued employment for a specified period. Another component is stock options. On December 31, 2005,
we adopted FASB Statement No.123(R) (SFAS 123(R)), which replaces SFAS 123 and supersedes
APB Opinion 25. Under SFAS 123(R), compensation cost relating to stock-based payment transactions
is recognized in the financial statements, and is based on the fair value of the equity or liability
instruments issued. SFAS 123(R) applies to all of our outstanding unvested stock-based payment
awards as of December 31, 2005 and all prior awards using the modified prospective transition method
without restatement of prior periods. As we had previously adopted SFAS 123, as amended by SFAS 148,
at the beginning of the 2003 fiscal year, whereby compensation expense was recorded for all awards
subsequent to adoption, adoption of SFAS 123(R) did not significantly impact our financial position
or our results of operations. Upon adoption of SFAS 123(R), the cumulative effect recorded in the
year ended December 29, 2006 was a gain of $0.1 million, net of taxes.
The following table presents the amount of stock-based compensation expense included in the Consolidated
Statements of Operations during the three and nine months ended September 28, 2007 and September
29, 2006 (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                                                              | Three Months Ended |      | Nine Months Ended |  
|--------------------------------------------------------------------------------------------- | ------------------ | ---- | ----------------- | -
|
|
|Restricted stock                                                                              | $                  | 746  |                   | $
|Stock options                                                                                 |                    | 133  |                   |  
|                                                                                              |                    |      |                   |  
|                                                                                              |                    |      |                   |  
|Total stock-based compensation included
   in selling, general and administrative
   expenses |                    | 879  |                   |  
|Income tax benefit                                                                            |                    | (296 | )                 |  
|                                                                                              |                    |      |                   |  
|Total after-tax stock-based compensation
   expense                                           | $                  | 583  |                   | $
|                                                                                              |                    |      |                   |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Restricted Stock: The value of restricted stock issued is based on the market price of the stock at the award
date. Shares are held by us until the continued employment requirement has been attained. The market
value of the shares at the date of grant is charged to expense on a straight-line basis over the
vesting period. Cash awards, which are intended to assist recipients with their resulting personal
tax liability, are based on the market value of the shares and are accrued over the vesting period.
The expense related to the cash award is fixed based on the value of the awarded stock on the grant
date if the recipient makes an election under Section 83(b) of the Internal Revenue Code. If the
recipient does not make an election under Section 83(b), the expense related to the cash award is
variable based on the market value of the shares.
A summary of the restricted stock activity is as follows (in thousands, except per share data):
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                 | Shares |     | Weighted Average
      Grant
      Price
    (Per Share) |   |      
| | ------------------------------- | ------ | --- | -------------------------------------------------------- | - | -----
|
| | Nonvested at December 29, 2006  |        | 205 |                                                          | $ | 20.48
| | Granted                         |        | 99  |                                                          | $ | 26.33
| | Vested                          |        | (78 | )                                                        | $ | 20.96
| | Forfeited                       |        | (7  | )                                                        | $ | 23.41
| |                                 |        |     |                                                          |   |      
| | Nonvested at September 28, 2007 |        | 219 |                                                          | $ | 22.85
| |                                 |        |     |                                                          |   |      

|11
|--



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(8)           Accounting for stock-based compensation, continued
As of September 28, 2007, there was approximately $2.9 million of total unrecognized compensation cost
related to restricted stock grants. This unrecognized compensation is expected to be recognized over
a weighted-average period of approximately 2.0 years.
Stock Options: Stock options are granted at no cost to the employee and cannot be granted at a price lower
than the fair market value at date of grant. These options expire seven years from the date of grant
and vest equally over four years. There were no options issued during the nine months ended September
28, 2007 or during the year ended December 29, 2006. We value our stock options according to the
fair value method using the Black-Scholes option-pricing model.
A summary of the stock options activity is as follows (in thousands, except per share data):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                      | Shares |     | Weighted
      Average
      Exercise
      Price
      (Per Share) |   | Aggregate
      Intrinsic
      Value | 
| | ------------------------------------ | ------ | --- | ------------------------------------------------------------------- | - | ------------------------------------- | 
|
| | Outstanding as of December 29, 2006  |        | 295 |                                                                     | $ | 18.99                                 | 
| | Granted                              |        |    |                                                                     | $ |                                      | 
| | Exercised                            |        | (33 | )                                                                   | $ | 19.34                                 | 
| | Forfeited/expired                    |        | (54 | )                                                                   | $ | 19.01                                 | 
|
| | Outstanding as of September 28, 2007 |        | 208 |                                                                     | $ | 18.94                                 | 
| | Exercisable at September 28, 2007    |        | 166 |                                                                     | $ | 19.36                                 | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|As of September 28, 2007, there was $0.2 million of total unrecognized compensation cost related to
option grants. This unrecognized compensation is expected to be recognized over a weighted-average
period of approximately 1.0 years.
During the nine months ended September 28, 2007, cash received from stock options exercised was $0.6
million. The total intrinsic value of stock options exercised during the nine months ended September
28, 2007 was $0.3 million and was $0.6 million during the nine months ended September 29, 2006. SFAS
123(R) requires that tax benefits from deductions in excess of the compensation cost of stock options
exercised be classified as a cash inflow from financing. However, there was no effect on the current
year net cash provided by operating activities and net cash used in financing activities due to the
minimal amount of stock options exercised during the nine months ended September 28, 2007. Prior
to adopting SFAS 123(R), we presented these benefits in the operating section of the consolidated
statements of cash flow.
No amounts of stock-based compensation cost have been capitalized into inventory or other assets during
the nine months ended September 28, 2007.
(9)           Earnings per share
Basic earnings per share are calculated by dividing net earnings by the weighted average number of
common shares outstanding (excluding unvested restricted shares) during the period. For calculating
diluted earnings per share, common share equivalents are added to the weighted average number
of

|12
|--



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(9)           Earnings per share, continued
common shares outstanding. Common share equivalents are computed based on the number of outstanding
options to purchase common stock and unvested restricted shares as calculated using the treasury
stock method. There were approximately 185,000 and 213,000 and 173,000 and 193,000 common share equivalents
for the three and nine months ended September 28, 2007 and September 29, 2006, respectively. Also,
there were approximately 208,000 and 327,000 stock options outstanding as of September 28, 2007 and
September 29, 2006, respectively. We had unvested restricted shares outstanding of approximately
219,000 and 233,000 as of September 28, 2007 and September 29, 2006, respectively.
Earnings (loss) per share calculations are as follows (in thousands, except per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                        | Three Months Ended |        | Nine Months Ended |  
|--------------------------------------- | ------------------ | ------ | ----------------- | -
|
|
|Net earnings from continuing operations | $                  | 19,185 |                   | $
|Cumulative effect of accounting change  |                    |       |                   |  
|Net loss from discontinued operations   |                    |       |                   |  
|                                        |                    |        |                   |  
|Net earnings                            | $                  | 19,185 |                   | $
|                                        |                    |        |                   |  
|                                        |                    |        |                   |  
|Basic earnings (loss) per share:        |                    |        |                   |  
|Shares                                  |                    | 40,653 |                   |  
|Continuing operations                   | $                  | 0.47   |                   | $
|Cumulative effect of accounting change  |                    |       |                   |  
|Discontinued operations                 |                    |       |                   |  
|                                        |                    |        |                   |  
|Per share amount                        | $                  | 0.47   |                   | $
|                                        |                    |        |                   |  
|                                        |                    |        |                   |  
|Diluted earnings (loss) per share:      |                    |        |                   |  
|Shares                                  |                    | 40,838 |                   |  
|Continuing operations                   | $                  | 0.47   |                   | $
|Cumulative effect of accounting change  |                    |       |                   |  
|Discontinued operations                 |                    |       |                   |  
|                                        |                    |        |                   |  
|Per share amount                        | $                  | 0.47   |                   | $
|                                        |                    |        |                   |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10)         Severance and asset impairment expense
In
the nine months ended September 28, 2007, we accrued $13.1 million for cost reduction actions primarily
at Electronics. These include severance and related payments of $10.5 million related to the termination
of manufacturing and support personnel and $2.6 million to write down the value of certain fixed
assets to their disposal value. We expect cash payments resulting from these expenses to be paid
by December 28, 2007, except for remaining lease and severance payments of approximately $8.8 million
to be made over a specified term.

|13
|--



|Technitrol, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(10)         Severance and asset impairment expense, continued
Changes
in our severance and asset impairment accrual are summarized on a year-to-date basis for 2007 as
follows (in millions):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                

| |                                                           | Electrical |      | Electronics |   | Total |  
| | --------------------------------------------------------- | ---------- | ---- | ----------- | - | ----- | -
|
| | Balance accrued at December 29, 2006                      | $          | 0.5  |             | $ | 3.8   |  
| | Accrued during the nine months ended
  September 28, 2007 |            | 0.1  |             |   | 13.0  |  
| | Severance and other cash payments                         |            | (0.1 | )           |   | (4.8  | )
| | Non-cash asset disposals                                  |            | (0.1 | )           |   | (2.1  | )
| |                                                           |            |      |             |   |       |  
| | Balance accrued at September 28, 2007                     | $          | 0.4  |             | $ | 9.9   |  
| |                                                           |            |      |             |   |       |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11)         Business segment information
For the nine months ended September 28, 2007 and September 29, 2006 there were immaterial amounts of
intersegment revenues eliminated in consolidation. There has been no material change in segment assets
from December 29, 2006 to September 28, 2007. In addition, the basis for determining segment financial
information has not changed from 2006. However, we now refer to Pulse as the Electronic Components
Group (Electronics) and AMI Doduco as the Electrical Contact Products Group (Electrical).
Specific segment data are as follows (in thousands):
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                                                                                                                                     | Three Months Ended |         | Nine Months Ended |  
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------ | ------- | ----------------- | -
|
|
|Net sales:                                                                                                                           |                    |         |                   |  
|Electronics                                                                                                                          | $                  | 171,231 |                   | $
|Electrical                                                                                                                           |                    | 85,862  |                   |  
|                                                                                                                                     |                    |         |                   |  
|Total                                                                                                                                | $                  | 257,093 |                   | $
|                                                                                                                                     |                    |         |                   |  
|                                                                                                                                     |                    |         |                   |  
|Earnings from continuing operations before
   income taxes, minority interest and
   cumulative effect of accounting change:         |                    |         |                   |  
|Electronics                                                                                                                          | $                  | 17,045  |                   | $
|Electrical                                                                                                                           |                    | 5,814   |                   |  
|                                                                                                                                     |                    |         |                   |  
|Operating profit                                                                                                                     | $                  | 22,859  |                   | $
|Other expense, net                                                                                                                   |                    | (1,550  | )                 |  
|                                                                                                                                     |                    |         |                   |  
|Earnings from continuing operations
        before income taxes, minority interest
       and cumulative effect of accounting change | $                  | 21,309  |                   | $
|                                                                                                                                     |                    |         |                   |  

|14
|--



|Item 2:     Managements Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
This discussion and analysis of our financial condition and results of operations as well as other
sections of this report contain certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties.
Actual results may differ materially from those anticipated in these forward-looking statements for
many reasons, including the risks faced by us described in Risk Factors section of this
report on page 26 through 32.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted
accounting principles requires us to make judgments, assumptions and estimates that affect the amounts
reported in the Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated
Financial Statements in our Annual Report on Form 10-K for the period ended December 29, 2006 describes
the significant accounting policies and methods used in the preparation of the Consolidated Financial
Statements. Actual results could differ from these estimates.
The following critical accounting policies are impacted significantly by judgments, assumptions and
estimates and were used in the preparation of the Consolidated Financial Statements:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |      inventory valuation;                         
| | ---------------------------------------------------
| |                                                    
| |      impairment of goodwill and other intangibles;
| |                                                    
| |      severance and asset impairment expense;      
| |                                                    
| |      income taxes; and                            
| |                                                    
| |      contingency accruals.                        

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Please see information concerning our critical accounting policies in Item 7 - Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form
10-K for the period ended December 29, 2006.
Overview
We are a global producer of precision-engineered electronic components and electrical contact products
and materials. We believe we are a leading global producer of these products and materials in the
primary markets we serve based on our estimates of the size of our primary markets in annual revenues
and our share of those markets relative to our competitors.
We operate our business in two segments:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |  | our Electronic Components Group (Electronics) which is known in its markets as Pulse, and        
| | - | ---------------------------------------------------------------------------------------------------
| |   |                                                                                                    
| |  | our Electrical Contact Products Group (Electrical) which is known in its markets as AMI
  Doduco.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|General.  We define net sales as gross sales less returns and allowances. We sometimes refer to net sales
as revenue.
Historically, the gross margin at Electronics has been significantly higher than at Electrical. As
    a result, the mix of net sales generated by Electronics and Electrical during a period affects our
    consolidated gross margin. Our gross margin is also affected by our acquisitions, product mix within
    each segment and capacity utilization, particularly in higher fixed-cost operations in Electrical
    and Electronics antenna and automotive divisions. Gross margin in Electrical is also affected
    by prices of

|15
|--



|precious and non-precious metals, which are passed through to customers at varying margins. Electronics
markets are characterized by relatively short product life cycles compared to those of our Electrical
segment. As a result, significant product turnover occurs each year in Electronics. Electrical has
a relatively long-term and mature product line, with less turnover, and with less frequent variation
in the prices of product sold, relative to Electronics. Many of Electricals products are sold
under annual (or longer) purchase contracts. Therefore, Electricals revenues historically have
not been subject to significant price fluctuations. Changes in unit volume and unit prices will affect
our net sales and gross margin from period to period. However, due to the constantly changing amount
of part numbers we offer and frequent changes in our average selling prices, we cannot quantify the
impact of changes in unit volume and unit prices on our net sales and gross margin in any given period.
Changes in foreign exchange rates, especially the U.S. dollar to the euro and the U.S. dollar to
the Chinese renminbi, also affect U.S. dollar reported sales in the majority of the Electrical segment
and certain divisions of Electronics.
Acquisitions.  Acquisitions have been an important part of our growth strategy. In many cases, our move into
new product lines and extensions of our existing product lines or markets have been facilitated by
acquisitions. Our acquisitions continually change the mix of our net sales. We have made numerous
acquisitions in recent years which have increased our penetration into our primary markets and expanded
our presence in new markets. LK was acquired in September 2005 for approximately $111.1 million,
net of cash acquired. LK was based in Kempele, Finland, and was a producer of internal antennas and
integrated modules for mobile communications and information devices. ERA was acquired in January
2006 for approximately $53.4 million, net of cash acquired. ERA was based in Herrenberg, Germany
and was a leading producer of electronic coils and transformers primarily for the European automotive,
heating/ventilation/air conditioning and appliance markets. We purchased Larsen in December 2006.
Larsen was headquartered in Vancouver, Washington and manufactured advanced antenna systems for non-cellular
wireless and automotive applications. We plan to continue pursuing acquisition opportunities.
Technology. Our products must change along with changes in technology, design, and preferences of consumers and
other end users of our products, as well as changes in regulatory requirements. We address this need
by continuing to invest in new product development and by maintaining a diverse product portfolio
which contains both mature and emerging technologies in order to meet customer demands.
Management Focus.  Our executives focus on a number of important factors in evaluating our financial condition
and operational performance. For example, we use economic profit, revenue growth, gross profit as
a percentage of revenue, and operating profit as a percent of revenue. We define economic profit
as after-tax operating profit less our cost of capital. Operating leverage or incremental operating
profit as a percentage of incremental sales is a factor that is discussed, as this is believed to
reflect the benefit of absorbing fixed overhead and operating expenses. In evaluating working capital
management, liquidity and cash flow, our executives also use performance measures such as days sales
outstanding, days payable outstanding, inventory turnover, cash conversion efficiency and free cash
flow. Additionally, as the continued success of our business is largely dependent on meeting and
exceeding our customers expectations, non-financial performance measures relating to on-time
delivery and quality assist our management in monitoring customer satisfaction on an on-going basis.
Cost Reduction Programs. As a result of our focus on both economic and operating profit, we continue to aggressively size
both segments so that costs are optimally matched to current and anticipated future revenues and
unit demand. The amounts of additional charges will depend on specific actions taken. The actions
taken over the past several years such as plant closures, plant relocations, asset impairments and
reduction in personnel at the affected locations have resulted in the elimination of a variety of
costs. The majority of these eliminated costs represent the annual salaries and benefits of terminated
employees, including both those directly related to manufacturing and those providing selling, general
and administrative services. The eliminated costs also include depreciation savings from disposed
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--



|equipment and rental payments from the termination of lease agreements. We have also lowered overhead
costs as a result of relocating factories to lower-cost locations.
In the nine months ended September 28, 2007, we accrued $13.1 million for a number of cost reduction
actions at Electronics and Electrical. These include severance and related payments of $10.5 million
for the termination of manufacturing and support personnel primarily in conjunction with our plan
to transfer a part of Electronics automotive production from Germany and Tunisia to the Peoples
Republic of China (PRC) and $2.6 million to write down the value of certain fixed assets
to their disposal value primarily at the Electronics consumer division. Cash payments resulting from
these expenses are expected to be made by December 28, 2007, except for remaining lease and severance
payments of approximately $8.8 million to be made over a specified term.
In
the year ended December 29, 2006, we accrued $8.8 million which included severance and related payments
to manufacturing and support personnel of $6.8 million and $2.0 million to write down the value of
certain fixed assets to their disposal values.
International Operations. As of September 28, 2007, we had manufacturing operations in six countries and had significant net
sales in the euro and Chinese renminbi in addition to the U.S. dollar. A majority of our sales in
recent years has been outside of the United States. Changing exchange rates often impact our financial
results and our period-over-period comparisons. This is particularly true of movements in the exchange
rate between the U.S. dollar, renminbi and the euro. Electricals European operations and
Electronics automotive division sales are denominated primarily in euro. Electronics
antenna division sales are denominated primarily in euro and renminbi. Sales and earnings denominated
in currencies other than the U.S. dollar may result in higher or lower dollar sales and net earnings
upon translation for our U.S. consolidated financial statements. We may also experience a positive
or negative translation adjustment to equity because our investments in our non-U.S. dollar-functional
subsidiaries may be worth more or less in U.S. dollars after translation for our U.S. consolidated
financial statements. Foreign currency gains or losses may also be incurred when non-functional currency-denominated
transactions are remeasured to an operations functional currency for financial reporting purposes.
If a higher percentage of our transactions are denominated in non-U.S. currencies, increased exposure
to currency fluctuations may result.
In order to reduce our exposure to currency fluctuations, we may purchase currency exchange forward
contracts and/or currency options. These contracts guarantee a predetermined range of exchange rates
at the time the contract is purchased. This allows us to shift the majority of the risk of currency
fluctuations from the date of the contract to a third party for a fee. In determining the use of
forward exchange contracts and currency options, we consider the amount of sales, purchases and net
assets or liabilities denominated in local currencies, the type of currency, and the costs associated
with the contracts. As of September 28, 2007, we did not have any forward contracts or currency options
in place.
Precious Metals. Our Electrical segment uses silver, as well as other precious metals, in manufacturing some of its
electrical contacts, contact materials and contact subassemblies. Historically, we have leased or
held these materials through consignment-type arrangements with our suppliers. Leasing and consignment
costs have typically been lower than the costs to borrow funds to purchase the metals and, more importantly,
these arrangements eliminate the effects of fluctuations in the market price of owned precious metal
and enable us to minimize our inventories. Electricals terms of sale generally allow us to
charge customers for precious metal content based on the market value of precious metal on the day
after shipment to the customer. Thus far, we have been successful in managing the costs associated
with our precious metals. While limited amounts are purchased for use in production, the majority
of our precious metal inventory continues to be leased or held on consignment. If our leasing/consignment
fees increase significantly in a short period of time, and we are unable to recover these increased
costs through higher sale prices, a negative impact on our results of operations and liquidity may
result. Leasing/consignment fee increases are primarily caused by increases in interest rates or
volatility in the price of the consigned material.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--



|Income Taxes. Our effective income tax rate is affected by the proportion of our income earned in high-tax jurisdictions
such as those in Europe and the U.S. and income earned in low-tax jurisdictions, such as Tunisia,
Hong Kong and the PRC. This mix of income can vary significantly from one period to another. We have
benefited over recent years from favorable tax incentives, however, there is no guarantee as to how
long these benefits will continue to exist.
Except in limited circumstances, we have not provided for U.S. federal income and foreign withholding
taxes on our non-U.S. subsidiaries undistributed earnings as per APB 23. Such earnings may
include pre-acquisition earnings of foreign entities acquired through stock purchases, and, with
the exception of approximately $40.0 million, are intended to be reinvested outside of the U.S. indefinitely.
We may remit subsidiary earnings if excess cash accumulates in our non-U.S. subsidiaries and it is
advantageous for tax and operational reasons to distribute the earnings.
Results of Operations
Three months ended September 28, 2007 compared to the three months ended September 29, 2006
The table below shows our results of operations and the absolute and percentage change in those results
from period to period (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                  |   |         | $ Change
      Favorable
      (Unfavorable) |   | % Change
      Favorable
      (Unfavorable) |   |   |       
|------------------------------------------------------------------------------------------------- | - | ------- | -------------------------------------------- | - | -------------------------------------------- | - | - | ------
|
|
|
|Net sales                                                                                         | $ | 257,093 |                                              | $ | 257,683                                      |   | $ | (590  
|Cost of sales                                                                                     |   | 196,708 |                                              |   | 196,058                                      |   |   | (650  
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                  |   |         |                                              |   |                                              |   |   |       
|                                                                                                 
|Gross profit                                                                                      |   | 60,385  |                                              |   | 61,625                                       |   |   | (1,240
|                                                                                                 
|Selling, general and
   administrative expenses                                                   |   | 35,668  |                                              |   | 39,167                                       |   |   | 3,499 
|Severance and asset
   impairment expense                                                         |   | 1,858   |                                              |   | 2,604                                        |   |   | 746   
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                  |   |         |                                              |   |                                              |   |   |       
|                                                                                                 
|Operating profit                                                                                  |   | 22,859  |                                              |   | 19,854                                       |   |   | 3,005 
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                 
|Interest expense, net                                                                             |   | (638    | )                                            |   | (2,085                                       | ) |   | 1,447 
|Other expense, net                                                                                |   | (912    | )                                            |   | (775                                         | ) |   | (137  
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                  |   |         |                                              |   |                                              |   |   |       
|                                                                                                 
|Earnings from
   continuing operations
   before income tax and
   minority interest              |   | 21,309  |                                              |   | 16,994                                       |   |   | 4,315 
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                 
|Income taxes                                                                                      |   | 2,055   |                                              |   | 1,953                                        |   |   | (102  
|Minority interest
   (expense) income                                                             |   | (69     | )                                            |   | 233                                          |   |   | (302  
|                                                                                                  |   |         |                                              |   |                                              |  
|                                                                                                  |   |         |                                              |   |                                              |   |   |       
|                                                                                                 
|Net earnings from
   continuing operations
   before cumulative
   effect of accounting
   change | $ | 19,185  |                                              | $ | 15,274                                       |   | $ | 3,911 
|                                                                                                  |   |         |                                              |   |                                              |   |   |       
|                                                                                                  |   |         |                                              |   |                                              |  

|18
|--



|Net Sales. Our consolidated net sales are consistent with the comparable period in the prior year. However,
we have experienced sales increases as a result of higher euro-to-U.S. dollar exchange rates, higher
pass-through costs for silver and other metals at Electrical and the inclusion of net sales from
the Larsen acquisition at Electronics. These increases were offset by a decrease in demand for certain
communications and power products sold by Electronics.
The following table shows our net sales by segment (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|            | Three Months Ended |         | $ ChangeFavorable 
    (Unfavorable) |   | % ChangeFavorable 
    (Unfavorable) | 
|----------- | ------------------ | ------- | ------------------------------------ | - | ------------------------------------ | 
|
|
|           
|Electronics | $                  | 171,231 |                                      | $ | 173,977                              | 
|Electrical  |                    | 85,862  |                                      |   | 83,706                               | 
|            |                    |         |                                      |   |                                      | 
|Total       | $                  | 257,093 |                                      | $ | 257,683                              | 
|            |                    |         |                                      |   |                                      | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cost of Sales.  Our consolidated gross margin for the three months
ended September 28, 2007 was 23.5% compared
to 23.9% for the three months ended September 29, 2006. The primary factors that caused the slight decrease
in our consolidated gross margin in the current period were a decline in operating leverage as a
result of decreased sales of Electronics communications and power products noted above, continuing
integration expenses of the Electronics automotive division, increased production costs and taxes
in China and a decrease in factory utilization at Electricals North American operations.
Selling, General and Administrative Expenses. Total selling, general and administrative expenses decreased due to lower research, development and
engineering expenses, intangible amortization and general and administrative expenses. In addition,
our selling, general and administrative expenses decreased due to various restructuring actions that
we took over the last year to reduce costs.
Research, development and engineering expenses are included in selling, general and administrative
expenses. We refer to research, development and engineering expenses as RD&E. For the three months
ended September 28, 2007 and September 29, 2006, respectively, RD&E by segment was as follows
(in thousands):
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                             | 2007 |       | 2006 |   |       
| | --------------------------- | ---- | ----- | ---- | - | ------
|
| | Electronics                 | $    | 8,736 |      | $ | 10,372
| | Percentage of segment sales |      | 5.1   | %    |   | 6.0   
|
| | Electrical                  | $    | 1,322 |      | $ | 1,115 
| | Percentage of segment sales |      | 1.5   | %    |   | 1.3   

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|We believe that future sales in the electronic components markets will be driven by next-generation
products. As a result, design and development activities with our OEM customers continue at an aggressive
pace.
Severance and Asset Impairment Expense. We recorded approximately $1.9 million of primarily severance expenses during the three months ended
September 28, 2007, mainly in connection with our previously announced plan to transfer production
operations from Tunisia to China.
Interest.  Silver leasing fees, which are included in net interest expense, were $0.7 million lower in
2007 over the comparable period in 2006. Additionally, net interest charges decreased as a result
of lower average debt balances and higher average invested cash balances during the three months
ended September 28, 2007 as compared to the same period of 2006.

|19
|--



|Other. The increase in other expense is primarily attributable to more foreign exchange losses realized
during the three months ended September 28, 2007, as compared to the three months ended September
29, 2006.
Income Taxes.  The effective income tax rate for the three months ended September 28, 2007 was 9.6% compared
to 11.5% for the three months ended September 29, 2006. The reduction in the effective tax rate is
primarily a result of increased earnings in lower tax jurisdictions in 2007 as compared to the same
period in 2006.
Nine months ended September 28, 2007 compared to the nine months ended September 29, 2006
The
table below shows our results of operations and the absolute and percentage change in those results
from period to period (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                                                                                  | Nine Months Ended |         | $ ChangeFavorable
    (Unfavorable) |   | % ChangeFavorable
    (Unfavorable) |   | Results as % 
      of Net Sales |        
|------------------------------------------------------------------------------------------------- | ----------------- | ------- | ----------------------------------- | - | ----------------------------------- | - | -------------------------------- | -------
|
|
|Net sales                                                                                         | $                 | 770,037 |                                     | $ | 718,014                             |   | $                                | 52,023 
|Cost of sales                                                                                     |                   | 597,630 |                                     |   | 548,788                             |   |                                  | (48,842
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                  |                   |         |                                     |   |                                     |   |                                  |        
|                                                                                                 
|Gross profit                                                                                      |                   | 172,407 |                                     |   | 169,226                             |   |                                  | 3,181  
|                                                                                                 
|Selling, general and
   administrative expenses                                                   |                   | 106,142 |                                     |   | 108,519                             |   |                                  | 2,377  
|Severance and asset
   impairment expense                                                         |                   | 13,081  |                                     |   | 6,415                               |   |                                  | (6,666 
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                  |                   |         |                                     |   |                                     |   |                                  |        
|                                                                                                 
|Operating profit                                                                                  |                   | 53,184  |                                     |   | 54,292                              |   |                                  | (1,108 
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                 
|Interest expense, net                                                                             |                   | (2,876  | )                                   |   | (4,546                              | ) |                                  | 1,670  
|Other income, net                                                                                 |                   | 357     |                                     |   | 2,420                               |   |                                  | (2,063 
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                  |                   |         |                                     |   |                                     |   |                                  |        
|                                                                                                 
|Earnings from
   continuing operations
   before income tax and
   minority interest              |                   | 50,665  |                                     |   | 52,166                              |   |                                  | (1,501 
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                 
|Income taxes                                                                                      |                   | 5,473   |                                     |   | 8,367                               |   |                                  | 2,894  
|Minority interest expense                                                                         |                   | (354    | )                                   |   | (1,322                              | ) |                                  | 968    
|                                                                                                  |                   |         |                                     |   |                                     |  
|                                                                                                  |                   |         |                                     |   |                                     |   |                                  |        
|                                                                                                 
|Net earnings from
   continuing operations
   before cumulative
   effect of accounting
   change | $                 | 44,838  |                                     | $ | 42,477                              |   | $                                | 2,361  
|                                                                                                  |                   |         |                                     |   |                                     |   |                                  |        

|                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net Sales. Our sales increase from the comparable period in the prior year was primarily attributable to higher
euro-to-U.S. dollar exchange rates, increased demand for the communication products of Electronics,
higher pass-through costs for silver and other metals at Electrical and the inclusion of net sales
from the Larsen acquisition by Electronics, which were partially offset by decreased demand for Electronics
power products.

|20
|--



|The following table shows our net sales by segment (in thousands):
|------------------------------------------------------------------
|                                                                  

|            | Nine Months Ended |         | $ ChangeFavorable
    (Unfavorable) |   | % ChangeFavorable
    (Unfavorable) | 
|----------- | ----------------- | ------- | ----------------------------------- | - | ----------------------------------- | 
|
|
|            |                   |         |                                     |   |                                     | 
|Electronics | $                 | 501,420 |                                     | $ | 473,544                             | 
|Electrical  |                   | 268,617 |                                     |   | 244,470                             | 
|            |                   |         |                                     |   |                                     | 
|Total       | $                 | 770,037 |                                     | $ | 718,014                             | 
|            |                   |         |                                     |   |                                     | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cost of Sales.  As a result of higher sales, our cost of sales increased. Our consolidated gross margin for
the nine months ended September 28, 2007 was 22.4% compared to 23.6% for the nine months ended September
29, 2006. The primary factors that resulted in our consolidated gross margin decrease in the current
period were the continuing integration costs of the Electronics automotive division, and increased
production costs and taxes in China.
Selling,
General and Administrative Expenses. Total selling, general and administrative expenses have decreased primarily due to
lower compensation
and selling expenses. Additionally, the restructuring actions that we
took over the last year and lower spending, despite revenue increases, contributed to the reduction
of operating expenses as a percent of our net sales.
Research, development and engineering expenses are included in selling, general and administrative
expenses. We refer to research, development and engineering expenses as RD&E. For the nine months
ended September 28, 2007 and September 29, 2006, respectively, RD&E by segment was as follows
(in thousands ):
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                             | 2007 |        | 2006 |   |       
| | --------------------------- | ---- | ------ | ---- | - | ------
|
| | Electronics                 | $    | 26,371 |      | $ | 26,484
| | Percentage of segment sales |      | 5.3    | %    |   | 5.6   
| |                             |      |        |      |   |       
| | Electrical                  | $    | 3,902  |      | $ | 3,440 
| | Percentage of segment sales |      | 1.5    | %    |   | 1.4   

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Higher RD&E spending in 2007 over the comparable period in 2006 is a result of increased spending
at Electricals European operations. As a percentage of sales, RD&E spending at Electronics
was lower in 2007 than in 2006. Net sales have increased more rapidly than RD&E spending at Electronics
due to strong end-user demand. We believe that future sales in the electronic components markets
will be driven by next-generation products. As a result, design and development activities with our
OEM customers continue at an aggressive pace.
Severance and Asset Impairment Expense. We recorded approximately $13.1 million for severance and asset impairment expense for the nine months
ended September 28, 2007, which was primarily in connection with our plan to transfer production
from Electronics German and Tunisian locations to China and asset impairment expenses related
to Electronics consumer division.
Interest.  The decrease in net interest expense in 2007 is due to lower interest charges resulting from
decreased borrowings from our multi-currency credit facility and decreased precious metal leasing
costs.
Other.  The decrease in other income is primarily a result of less foreign exchange gains realized
during the nine months ended September 28, 2007 as compared to the nine months ended September 29,
2006.

|21
|--



|Income Taxes.  The effective income tax rate for the nine months ended September 28, 2007 was 10.8% compared
to 16.0% for the nine months ended September 29, 2006. The decrease in the effective income tax rate
is primarily a result of realizing retroactive tax benefits due to the restructuring of non-U.S.
subsidiaries during the nine months ended September 28, 2007 and a higher proportion of net earnings
being recognized in lower tax jurisdictions in 2007 as compared to the same period in 2006.
Liquidity and Capital Resources
Working capital as of September 28,
2007 was $231.1 million, compared to $189.0 million as of December 30, 2006.
This increase of $42.1 million was primarily due to increases in cash, trade
receivables, inventories and a reclassification of approximately $17.6 million
of tax reserves from current to long-term liabilities in connection with our
adoption of FASB Interpretation No. 48 which were partially offset by an increase in accounts payable. Cash and cash equivalents, which are
included in working capital, were $99.6 million as of September 28, 2007 as
compared to $87.2 million as of December 29, 2006.
We present our statement of cash flows using the indirect method as permitted under Financial Accounting
Standards Board Statement No. 95, Statement of Cash Flows. Our management has found that investors and analysts typically refer to changes in accounts receivable,
inventory, and other components of working capital when analyzing operating cash flows. Also, changes
in working capital are more directly related to the way we manage our business for cash flow than
are items such as cash receipts from the sale of goods, as would appear using the direct method.
Net cash provided by operating activities was $62.6 million for the nine months ended September 28,
2007 as compared to $36.5 million in the comparable period of 2006, an increase of $26.1 million.
This increase was primarily attributable to improved net earnings and the positive impact of lower
accounts receivable and higher accounts payable, offset by higher inventories.
Capital expenditures were $14.9 million during the nine months ended September 28, 2007 and $16.5
million in the comparable period of 2006. The decrease of $1.6 million in the 2007 period compared
to 2006 was due primarily to lower expenditures at Electronics. We make capital expenditures to expand
production capacity and to improve our operating efficiency and we plan to continue making such expenditures
in the future as necessary.
We used $10.7 million for dividend payments during the nine months ended September 28, 2007. On July
27, 2007 we announced a quarterly cash dividend of $0.0875 per common share, payable on October 19,
2007 to shareholders of record on October 5, 2007. This quarterly dividend will result in a cash
payment to shareholders of approximately $3.6 million in the fourth quarter of 2007. We expect to
continue making quarterly dividend payments for the foreseeable future.
We entered into a credit agreement on October 14, 2005 providing for $200.0 million of credit capacity.
The facility consists of an aggregate U.S. dollar-equivalent revolving line of credit in the principal
amount of up to $200.0 million, and provides for borrowings in multiple currencies including but
not limited to U.S. dollars, euros, and Japanese yen, including individual sub-limits of:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |  | a U.S. dollar-based swing-line loan not to exceed $20.0 million;                                                                                                
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                 
| |  | a multicurrency facility providing for the issuance of letters of credit in an aggregate amount not
  to exceed the U.S. dollar equivalent of $25.0 million; and
| |   |                                                                                                                                                                 
| |  | a Singapore sub-facility not to exceed the U.S. dollar equivalent of $50.0 million.                                                                             

|                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The credit agreement permits us to request one or more increases in the total commitment not to exceed
$100.0 million, provided the minimum increase is $25.0 million, subject to bank approval.

|22
|--



|                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|The total amount outstanding under the credit facility may not exceed $200.0 million, provided we do
not request an increase in total commitment as noted above.

|Outstanding borrowings are subject to two financial covenants, both of which are computed on a rolling
twelve-month basis as of the most recent quarter-end. The first is maximum debt outstanding amounting
to three and one-half times our earnings before interest, taxes, depreciation and amortization (EBITDA),
as defined by the credit agreement. The second is maximum debt service expenses amounting to two
and one-half times our cash interest expense, as defined by the credit agreement. The credit agreement
also contains covenants specifying capital expenditure limitations and other customary and normal
provisions. We are in compliance with these covenants as of September 28, 2007.
As of September 28, 2007, we had $15.7 million of outstanding borrowings under this five-year revolving
credit agreement, primarily to fund acquisitions. Our total credit available, including standby letters
of credit, as of September 28, 2007 was approximately $182.6 million.
We pay a commitment fee on the unborrowed portion of the commitment, which ranges from 0.15% to 0.25%
of the total commitment, depending on our debt-to-EBITDA ratio, as defined above. The interest rate
for each currencys borrowing will be a combination of the base rate for that currency plus
a credit margin spread. The base rate is different for each currency. The credit margin spread is
the same for each currency and is 0.60% to 1.25%, depending on our debt-to-EBITDA ratio, as defined
in the credit agreement. Each of our domestic subsidiaries with net worth equal to or greater than
$10 million has guaranteed all obligations incurred under the credit facility.
We also have an obligation outstanding due in August 2009 under an unsecured term loan agreement in
Germany for the borrowing of approximately 5.1 million euros.
We had six standby letters of credit outstanding at September 28, 2007 in the aggregate amount of $1.7
million securing transactions entered into in the ordinary course of business.
We had commercial commitments outstanding at September 28, 2007 of approximately $178.6 million due
under precious metal consignment-type leases. This represents an increase of $42.8 million from the
$135.8 million outstanding as of December 29, 2006 and is primarily attributable to an increased quantity of leased
precious metal at September 28, 2007.
We believe that the combination of cash on hand, cash generated by operations and, if necessary, borrowings
under our credit agreement will be sufficient to satisfy our operating cash requirements in the foreseeable
future. In addition, we may use internally generated funds or obtain borrowings or additional equity
offerings for acquisitions of suitable businesses or assets. We have not experienced any significant
liquidity restrictions in any country in which we operate and none are foreseen. However, foreign
exchange ceilings imposed by local governments and the sometimes lengthy approval processes which
foreign governments require for international cash transfers may delay our internal cash movements
from time to time.
We have a significant amount of retained earnings indefinitely invested outside of the United States.
We have not accrued U.S. income and foreign withholding taxes on such foreign earnings because we
anticipate that a significant portion of our opportunities for growth in the coming years will be
abroad. If these earnings were brought back to the United States, significant tax liabilities could
be incurred as several countries in which we operate have tax rates significantly lower than the
U.S. statutory rate. We may remit subsidiary earnings if excess cash accumulates in our non-U.S.
subsidiaries and it is advantageous for tax and operational purposes to distribute the earnings.
As of September 28, 2007, we have accrued U.S. income and foreign withholding taxes on approximately
$40.0 million of foreign earnings which we expect to remit to the United States.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23
|--



|All retained earnings are free from legal or contractual restrictions as of September 28, 2007, with
the exception of approximately $21.4 million of retained earnings primarily in the PRC, that are
restricted in accordance with Section 58 of the PRC Foreign Investment Enterprises Law. Included
in the $21.4 million is $2.2 million of retained earnings of FRE of which we own 71%. The amount
restricted in accordance with the PRC Foreign Investment Enterprise Law is applicable to all foreign investment enterprises
doing business in the PRC. The restriction applies to 10% of our net earnings in the PRC, limited
to 50% of the total capital invested in the PRC.
Item 3:   Quantitative and Qualitative Disclosures about Market Risk
There were no material changes in market risk exposures that affect the quantitative and qualitative
disclosures presented in our Form 10-K for the year ended December 29, 2006.
Item 4:   Controls and Procedures
An
evaluation was performed under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure
controls and procedures pursuant to Rule 13a-15 under the Exchange Act of 1934 as of September 28,
2007. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded
that the disclosure controls and procedures are effective to ensure that information required to
be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported,
as specified in the Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed
by an issuer in the reports that it files or submits under the Act is accumulated and communicated
to the issuers management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in these controls or procedures that occurred during the three months ended September
28, 2007 that have materially affected, or are reasonably likely to materially affect, these controls
or procedures.
A companys internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
A companys internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the companys assets that could have a material effect on the financial
statements. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|24
|--



|PART II. OTHER INFORMATION
|--------------------------
|                          

|Item 1.  |  | Legal Proceedings                                           |  | None | 
|-------- |  | ----------------------------------------------------------- |  | ---- | 
|         |  |                                                             |  |      | 
|Item 1a. |  | Risk Factors                                                |  |      | 
|         |  |                                                             |  |      | 
|         |  | Risk Factors are on page 26.                                |  |      | 
|         |  |                                                             |  |      | 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | None | 
|         |  |                                                             |  |      | 
|Item 3.  |  | Defaults Upon Senior Securities                             |  | None | 
|         |  |                                                             |  |      | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders         |  | None | 
|         |  |                                                             |  |      | 
|Item 5.  |  | Other Information                                           |  | None | 
|         |  |                                                             |  |      | 
|Item 6.  |  | Exhibits                                                    |  |      | 
|         |  |                                                             |  |      | 
|         |  | (a) Exhibits                                                |  |      | 
|         |  |                                                             |  |      | 
|         |  | The Exhibit Index is on page 33.                            |  |      | 

|25
|--



|Item 1a:   Risk Factors
Factors That May Affect Our Future Results (Cautionary Statements for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995)
Our disclosures and analysis in this report contain forward-looking statements. Forward-looking statements
reflect our current expectations of future events or future financial performance. You can identify
these statements by the fact that they do not relate strictly to historical or current facts. They
often use words such as anticipate, estimate, expect, project,
intend, plan, believe, and similar terms. These forward-looking
statements are based on our current plans and expectations.
Any or all of our forward-looking statements in this report may prove to be incorrect. They may be
affected by inaccurate assumptions we might make or by risks and uncertainties which are either unknown
or not fully known or understood. Accordingly, actual outcomes and results may differ materially
from what is expressed or forecasted in this report.
We
sometimes provide forecasts of future financial performance. The risks and uncertainties described
under Risk Factors as well as other risks identified from time to time in other Securities
and Exchange Commission reports, registration statements and public announcements, among others,
should be considered in evaluating our prospects for the future. We undertake no obligation to release
updates or revisions to any forward-looking statement, whether as a result of new information, future
events or otherwise.
The
following factors represent what we believe are the major risks and uncertainties in our business.
They are listed in no particular order.
Cyclical changes in the markets we serve could result in a significant decrease in demand for our products
and reduce our profitability.
Our components are used in various products for the electronic and electrical equipment markets. These
markets are highly cyclical. The demand for our components reflects the demand for products in the
electronic and electrical equipment markets generally. A contraction in demand would result in a
decrease in sales of our products, as our customers:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |      may cancel many existing orders;     
| | -------------------------------------------
| |                                            
| |      may introduce fewer new products; and
| |                                            
| |      may decrease their inventory levels. 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A decrease in demand for our products would have a significant adverse effect on our operating results
and profitability. Accordingly, we may experience volatility in both our revenues and profits.
Reduced prices for our products may adversely affect our profit margins if we are unable to reduce
our costs of production.
The average selling prices for our products tend to decrease over their life cycle. In addition, foreign
currency movements and the desire to retain market share increase the pressure on our customers to
seek lower prices from their suppliers. As a result, our customers are likely to continue to demand
lower prices from us. To maintain our margins and remain profitable, we must continue to meet our
customers design needs while reducing costs through efficient raw material procurement and
process and product improvements. Our profit margins will suffer if we are unable to reduce our costs
of production as sales prices decline.

|26
|--



|An inability to adequately respond to changes in technology or customer needs may decrease our sales.
Electronics
operates in an industry characterized by rapid change caused by the frequent emergence of new technologies.
Generally, we expect life cycles for our products in the electronic components industry to be relatively
short. This requires us to anticipate and respond rapidly to changes in industry standards and customer
needs and to develop and introduce new and enhanced products on a timely and cost effective basis.
Our engineering and development teams place a priority on working closely with our customers to design
innovative products and improve our manufacturing processes. Similarly, at Electrical, the performance
and cost of electrical contacts are closely linked to alloys used in their production. Improving
performance and reducing costs for our customers requires continuing development of new alloys and
products. Our inability to react to changes in technology or customer needs quickly and efficiently
may decrease our sales, thus reducing profitability.
If our inventories become obsolete, our future performance and operating results will be adversely
affected.
The life cycles of our products depend heavily upon the life cycles of the end products into which
our products are designed. Many of Electronics products have very short life cycles which are
measured in quarters. Products with short life cycles require us to closely manage our production
and inventory levels. Inventory may become obsolete because of adverse changes in end market demand.
During market slowdowns, this may result in significant charges for inventory write-offs. Our future
operating results may be adversely affected by material levels of obsolete or excess inventories.
An inability to capitalize on our recent or future acquisitions may adversely affect our business.
We have completed several acquisitions in recent years. We continually seek acquisitions to grow our
business. We may fail to derive significant benefits from our acquisitions. In addition, if we fail
to achieve sufficient financial performance from an acquisition, goodwill and other intangibles could
become impaired, resulting in our recognition of a loss. The success of any of our acquisitions depends
on our ability to:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |  | successfully integrate or consolidate acquired operations into our existing businesses;                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                              
| |  | develop or modify the financial reporting and information systems of the acquired entity to ensure
  overall financial integrity and adequacy of internal control procedures;
| |   |                                                                                                                                                                              
| |  | identify and take advantage of cost reduction opportunities; and                                                                                                             
| |   |                                                                                                                                                                              
| |  | further penetrate the markets for the product capabilities acquired.                                                                                                         

|                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Integration of acquisitions may take longer than we expect and may never be achieved to the extent
originally anticipated. This could result in lower than anticipated business growth or higher than
anticipated costs. In addition, acquisitions may:
|                                                                                                                                                                                                                                                       

| |  | cause a disruption in our ongoing business;                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                             
| |  | distract our managers;                                                                                                                                      
| |   |                                                                                                                                                             
| |  | unduly burden our other resources; and                                                                                                                      
| |   |                                                                                                                                                             
| |  | result in an inability to maintain our historical standards, procedures and controls, which may result
in non-compliance with external laws and regulations.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Integration of acquisitions into the acquiring segment may limit the ability of investors to track
the performance of individual acquisitions and to analyze trends in our operating results.
Our historical practice has been to rapidly integrate acquisitions into the existing business of the
acquiring segment and to report financial performance on the segment level. As a result of this practice,
we do not separately track the standalone performance of acquisitions after the date of the transaction.

|27
|--



|Consequently, investors cannot quantify the financial performance and success of any individual acquisition
or the financial performance and success of a particular segment excluding the impact of acquisitions.
In addition, our practice of rapidly integrating acquisitions into the financial performance of each
segment may limit the ability of investors to analyze any trends in our operating results over time.
An inability to identify additional acquisition opportunities may slow our future growth.
We intend to continue to identify and consummate additional acquisitions to further diversify our business
and to penetrate important markets. We may not be able to identify suitable acquisition candidates
at reasonable prices. Even if we identify promising acquisition candidates, the timing, price, structure
and success of future acquisitions are uncertain. An inability to consummate attractive acquisitions
may reduce our growth rate and our ability to penetrate new markets.
If our customers terminate their existing agreements, or do not enter into new agreements or submit
additional purchase orders for our products, our business will suffer.
Most of our sales are made on a purchase order basis, as needed by our customers. In addition, to the
extent we have agreements in place with our customers, most of these agreements are either short
term in nature or provide our customers with the ability to terminate the arrangement with little
or no prior notice. Such agreements typically do not provide us with any material recourse in the
event of non-renewal or early termination. We will lose business and our revenues will decrease if
a significant number of customers:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |       do not submit additional purchase orders;     
| | -----------------------------------------------------
| |                                                      
| |       do not enter into new agreements with us; or  
| |                                                      
| |       elect to terminate their relationship with us.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|If we do not effectively manage our business in the face of fluctuations in the size of our organization,
our business may be disrupted.
We have grown both organically and as a result of acquisitions. However, we significantly reduce or
expand our workforce and facilities in response to rapid changes in demand for our products due to
prevailing global market conditions. These rapid fluctuations place strains on our resources and
systems. If we do not effectively manage our resources and systems, our businesses may be adversely
affected.
Uncertainty in demand for our products may result in increased costs of production, an inability to
service our customers, or higher inventory levels which may adversely affect our results of operations
and financial condition.
We have very little visibility into our customers purchasing patterns and are highly dependent
on our customers forecasts. These forecasts are non-binding and often highly unreliable. Given
the fluctuation in growth rates and cyclical demand for our products, as well as our reliance on
often-imprecise customer forecasts, it is difficult to accurately manage our production schedule,
equipment and personnel needs and our raw material and working capital requirements. Our failure
to effectively manage these issues may result in:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |       production delays;                                         
| | ------------------------------------------------------------------
| |                                                                   
| |       increased costs of production;                             
| |                                                                   
| |       excessive inventory levels and reduced financial liquidity;
| |                                                                   
| |       an inability to make timely deliveries; and                
| |                                                                   
| |       a decrease in profits.                                     

|28
|--



|A decrease in availability of our key raw materials could adversely affect our profit margins.
We use several types of raw materials in the manufacturing of our products, including:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                     

| |        precious metals such as silver;                
| | -------------------------------------------------------
| |                                                        
| |        other base metals such as copper and brass; and
| |                                                        
| |        ferrite cores.                                 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Some of these materials are produced by a limited number of suppliers. We may be unable to obtain these
raw materials in sufficient quantities or in a timely manner to meet the demand for our products.
The lack of availability or a delay in obtaining any of the raw materials used in our products could
adversely affect our manufacturing costs and profit margins. In addition, if the price of our raw
materials increases significantly over a short period of time due to increased market demand or shortage
of supply, customers may be unwilling to bear the increased price for our products and we may be
forced to sell our products containing these materials at prices that reduce our profit margins.
Costs associated with precious metals and base metals may not be recoverable.
Some of our raw materials, such as precious metals and certain base metals, are considered commodities
and are subject to price volatility. We attempt to limit our exposure to fluctuations in the cost
of precious materials, including silver, by holding the majority of our precious metal inventory
through leasing or consignment arrangements with our suppliers. We then typically purchase the precious
metal from our supplier at the current market price on the day after delivery to our customer and
pass this cost on to our customer. We try to limit our exposure to base metal price fluctuations
by attempting to pass through the cost of base metals to our customers, typically by indexing the
cost of the base metal, so that our cost of the base metal closely relates to the price we charge
our customers, but we may not always be successful in indexing these costs or fully passing through
costs to our customers.
Leasing/consignment fee increases are primarily caused by increases in interest rates or volatility
in the price of the consigned material. Fees charged by the consignor are driven by interest rates
and the market price of the consigned material. The market price of the consigned material is determined
by the supply of, and the demand for, the material. Consignment fees may increase if interest rates
or the price of the consigned material increase.
Our results of operations and liquidity will be negatively impacted if:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |  | we are unable to enter into new leasing or consignment arrangements with similarly favorable terms
  after our existing agreements terminate;                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                      
| |  | our leasing or consignment fees increase significantly in a short period of time and we are unable
  to recover these increased costs through higher sale prices; and
| |   |                                                                                                                                                                      
| |  | we are unable to pass through higher base metals costs to our customers.                                                                                             

|                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Competition may result in lower prices for our products and reduced sales.
Both Electronics and Electrical frequently encounter strong competition within individual product lines
from various competitors throughout the world. We compete principally on the basis of:
|                                                                                                                                                                                                                                                                         

| |       product quality and reliability;             
| | ----------------------------------------------------
| |                                                     
| |       global design and manufacturing capabilities;
| |                                                     
| |       breadth of product line;                     
| |                                                     
| |       customer service;                            
| |                                                     
| |       price; and                                   
| |                                                     
| |       on-time delivery.                            

|29
|--



|Our inability to successfully compete on any or all of the above factors may result in reduced sales.
Fluctuations in foreign currency exchange rates may adversely affect our operating results.
We manufacture and sell our products in various regions of the world and export and import these products
to and from a large number of countries. Fluctuations in exchange rates could negatively impact our
cost of production and sales which, in turn, could decrease our operating results and cash flow.
In addition, if the functional currency of our manufacturing costs strengthened compared to the functional
currency of our competitors manufacturing costs, our products may become more costly than our
competitors. Although we engage in limited hedging transactions, including foreign currency
contracts, to reduce our transaction and economic exposure to foreign currency fluctuations, these
measures may not eliminate or substantially reduce our risk in the future.
Our international operations subject us to the risks of unfavorable political, regulatory, labor and
tax conditions in other countries.
We manufacture and assemble most of our products in locations outside the United States, including
the Peoples Republic of China, or PRC and Tunisia and a majority of our revenues
are derived from sales to customers outside the United States. Our future operations and earnings
may be adversely affected by the risks related to, or any other problems arising from, operating
in international locations and markets.
Risks inherent in doing business internationally may include:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |  | the ability to repatriate cash on a timely basis;                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                      
| |  | economic and political instability;                                                                                                  
| |   |                                                                                                                                      
| |  | expropriation and nationalization;                                                                                                   
| |   |                                                                                                                                      
| |  | trade restrictions;                                                                                                                  
| |   |                                                                                                                                      
| |  | capital and exchange control programs;                                                                                               
| |   |                                                                                                                                      
| |  | transportation delays;                                                                                                               
| |   |                                                                                                                                      
| |  | foreign currency fluctuations; and                                                                                                   
| |   |                                                                                                                                      
| |  | unexpected changes in the laws and policies of the United States or of the countries in which we manufacture
  and sell our products.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Electronics has the majority of its manufacturing operations in the PRC, except for the automotive
division. Our presence in the PRC has enabled Electronics to maintain lower manufacturing costs and
to adjust our work force to demand levels for our products. Although the PRC has a large and growing
economy, the potential economic, political, legal and labor developments entail uncertainties and
risks. For example, wages have been increasing over the last several years in the southern coastal
provinces. While the PRC has been receptive to foreign investment, we cannot be certain that its
current policies will continue indefinitely into the future. In the event of any changes that adversely
affect our ability to conduct our operations within the PRC, our businesses may suffer. We also have
manufacturing operations in Tunisia, which is subject to unique risks, including earthquakes and
those associated with Middle East geo-political events.
We have benefited over recent years from favorable tax treatment as a result of our international operations.
We operate in countries where we realize favorable income tax treatment relative to the U.S. statutory
rate. We have also been granted special tax incentives commonly known as tax holidays in countries
such as the PRC and Tunisia. This favorable situation could change if these countries were to increase
rates or revoke the special tax incentives, or if we discontinue our manufacturing operations in
any of these countries and do not replace the operations with operations in other locations with
favorable tax incentives. Accordingly, in the event of changes in laws and regulations affecting
our international operations, we may not be able to continue to take advantage of similar benefits
in the future.

|30
|--



|Shifting our operations between regions may entail considerable expense.
In
the past we have shifted our operations from one region to another in order to maximize manufacturing
and operational efficiency. We may close one or more additional factories in the future. This could
entail significant one-time earnings charges to account for severance, equipment write-offs or write
downs and moving expenses, as well as certain adverse tax consequences including the loss of specialized
tax incentives or non-deductible expenses. In addition, as we implement transfers of our operations
we may experience disruptions, including strikes or other types of labor unrest resulting from layoffs
or termination of employees.
Liquidity requirements could necessitate movements of existing cash balances which may be subject to
restrictions or cause unfavorable tax and earnings consequences.
A significant portion of our cash is held offshore by our international subsidiaries and is predominantly
denominated in currencies other than the U.S. dollar. While we intend to use a significant amount
of the cash held overseas to fund our international operations and growth, if we encounter a significant
domestic need for liquidity that we cannot fulfill through borrowings, equity offerings, or other
internal or external sources, we may experience unfavorable tax and earnings consequences if this
cash is transferred to the United States. These adverse consequences would occur if the transfer
of cash into the United States is taxed and no offsetting foreign tax credit is available to offset
the U.S. tax liability, resulting in lower earnings. In addition, we may be prohibited from transferring
cash from the PRC. For example, foreign exchange ceilings imposed by local governments and sometimes
lengthy approval processes which foreign governments require for international cash transfers may
delay our internal cash transfers from time to time. We have not experienced any significant liquidity
restrictions in any country in which we operate and none are presently foreseen.
With the exception of approximately $21.4 million of retained earnings as of September 28, 2007 in
primarily the PRC that are restricted in accordance with the PRC Foreign Investment Enterprises Law,
substantially all retained earnings are free from legal or contractual restrictions. This law restricts
10% of our net earnings in the PRC, up to a maximum amount equal to 50% of the total capital we have
invested in the PRC.
Losing the services of our executive officers or our other highly qualified and experienced employees
could adversely affect our business.
Our success depends upon the continued contributions of our executive officers and management, many
of whom have many years of experience and would be extremely difficult to replace. We must also attract
and maintain experienced and highly skilled engineering, sales and marketing and managerial personnel.
Competition for qualified personnel is intense in our industries, and we may not be successful in
hiring and retaining these people. If we lose the services of our executive officers or cannot attract
and retain other qualified personnel, our businesses could be adversely affected.
Public health epidemics (such as flu strains, or severe acute respiratory syndrome) or other natural
disasters (such as earthquakes or fires) may disrupt operations in affected regions and affect operating
results.
Electronics maintains extensive manufacturing operations in the PRC and other emerging economies, as
do many of our customers and suppliers. A sustained interruption of our manufacturing operations,
or those of our customers or suppliers, as a result of complications from severe acute respiratory
syndrome or another public health epidemic or other natural disasters, could have a material adverse
effect on our business and results of operations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31
|--



|The unavailability of insurance against certain business risks may adversely affect
our future operating results.
As
part of our comprehensive risk management program, we purchase insurance coverage against certain
business risks. If any of our insurance carriers discontinues an insurance policy or significantly
reduces available coverage or increases in the deductibles and we cannot find another insurance carrier
to write comparable coverage, we may be subject to uninsured losses which may adversely affect
our operating results.
Environmental liability and compliance obligations may affect our operations and results.
Our manufacturing operations are subject to a variety of environmental laws and regulations as well
as internal programs and policies governing:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |  | air emissions;                                                                                         
| | - | -------------------------------------------------------------------------------------------------------
| |   |                                                                                                        
| |  | wastewater discharges;                                                                                 
| |   |                                                                                                        
| |  | the storage, use, handling, disposal and remediation of hazardous substances, wastes and chemicals; and
| |   |                                                                                                        
| |  | employee health and safety.                                                                            

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|If violations of environmental laws should occur, we could be held liable for damages, penalties, fines
and remedial actions. Our operations and results could be adversely affected by any material obligations
arising from existing laws, as well as any required material modifications arising from new regulations
that may be enacted in the future. We may also be held liable for past disposal of hazardous substances
generated by our business or businesses we acquire. In addition, it is possible that we may be held
liable for contamination discovered at our present or former facilities.
We are aware of environmental issues at one location. A property in Leesburg, Indiana, which was acquired
with our acquisition of GTI in 1998, is the subject of a 1994 Corrective Action Order to GTI by the
Indiana Department of Environmental Management (IDEM). Although we sold the property in early 2005,
we retained the responsibility for existing environmental issues at the site. The order requires
us to investigate and take corrective actions. Substantially all of the corrective actions relating
to impacted soil have been completed and IDEM has issued us no further action letters
for all of the remediated areas. We anticipate making additional environmental expenditures in the
future to continue our environmental studies, analysis and remediation activities with respect to
the impacted groundwater. Based on current knowledge, we do not believe that any future expenses
or liabilities associated with environmental remediation will have a material impact on our operations
or our consolidated financial position, liquidity or operating results. However, we may be subject
to additional costs and liabilities if the scope of the contamination or the cost of remediation
exceeds our current expectations.

|32
|--



|Exhibit Index
|-------------
|             

|3.1     | Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Form 10-K for the year ended December 26, 2003).                                                                                                                                                                                                          
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                           
|3.3     | By-laws (incorporated by reference to Exhibit 3.3 to our Form 10-K for the year ended December 27, 2002).                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                           
|4.1     | Rights Agreement, dated as of August 30, 1996, between Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 3 to our Registration Statement on Form 8-A dated October 24, 1996).                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                           
|4.2     | Amendment No. 1 to the Rights Agreement, dated March 25, 1998, between Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 4 to our Registration Statement on Form 8-A/A dated April 10, 1998).                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                           
|4.3     | Amendment No. 2 to the Rights Agreement, dated June 15, 2000, between Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 5 to our Registration Statement on Form 8-A/A dated July 5, 2000).                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.1    | Technitrol, Inc. 2001 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8 dated June 28, 2001, File Number 333-64060).                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.1(1) | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.1(1) to our Form 10-Q for the nine months ended October 1, 2004).                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.2    | Technitrol, Inc. Restricted Stock Plan II, as amended and restated as of April 30, 2003 (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the six months ended June 29, 2007).                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.3    | Technitrol, Inc. 2001 Stock Option Plan (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8 dated June 28, 2001, File Number 333-64068).                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.4    | Technitrol, Inc. Board of Directors Stock Plan, as amended (incorporated by reference to Exhibit 10 to our Form 8-K dated May 18, 2005).                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.5    | Credit Agreement, by and among Technitrol, Inc. and certain of its subsidiaries, Bank of America N.A. as Administrative Agent and Lender, and certain other Lenders that are signatories thereto, dated as of October 14, 2005 (incorporated by reference to Exhibit 10.1 to our Form 8-K dated October 20, 2005).                                        
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.6    | Lease Agreement, dated October 15, 1991, between Ridilla-Delmont and AMI Doduco, Inc. (formerly known as Advanced
          Metallurgy Incorporated), as amended September 21, 2001 (incorporated by reference to Exhibit 10.6 to the Companys Amendment No. 1 to Registration Statement on Form S-3 dated February 28,
    2002, File Number 333-81286).
|        |                                                                                                                                                                                                                                                                                                                                                           
|10.7    | Incentive Compensation Plan of Technitrol, Inc. (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to our Registration Statement on Form S-3 filed on February 28, 2002, File Number 333-81286).                                                                                                                                               

|33
|--



|Exhibit Index, continued
|------------------------
|                        
|10.8                    
|                        
|10.8(1)                 
|                        
|10.9                    
|                        
|10.10                   
|                        
|10.10(1)                
|                        
|10.11                   
|                        
|10.12                   
|                        
|10.13                   
|                        
|10.13(1)                
|                        
|10.14                   
|                        
|10.14(1)                
|                        
|10.15                   
|                        
|10.16                   
|                        

|34
|--



|Exhibit Index, continued
|------------------------
|                        
|10.17                   
|                        
|10.17(1)                
|                        
|10.17(2)                
|                        
|10.18                   
|                        
|10.18(1)                
|                        
|10.19                   
|                        
|10.21                   
|                        
|10.22                   
|                        
|10.23                   
|                        
|10.24                   
|                        
|10.25                   

|35
|--



|Exhibit Index, continued
|------------------------
|                        
|10.26                   
|                        
|10.30                   
|                        
|31.1                    
|                        
|31.2                    
|                        
|32.1                    
|                        
|32.2                    

|36
|--



|Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                   

|                 |  | Technitrol, Inc.                                       
|---------------- |  | -------------------------------------------------------
|                 |  |                                                        
|                 |  | (Registrant)                                           
|                 |  |                                                        
|                 |  |                                                        
|November 5, 2007 |  | /s/ Edward J. Prajzner                                 
|                 |  |                                                        
|(Date)           |  | Edward J. Prajzner                                     
|                 |  | Vice President, Corporate Controller and               
|                 |  | Chief Accounting Officer                               
|                 |  | (duly authorized officer, principal accounting officer)

|37
|--