UNITED
STATES


SECURITIES
& EXCHANGE COMMISSION





Washington,
D.C. 20549





______________________








FORM
10-Q





x The Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the
quarterly period ended September 25, 2009, or





oTransition 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 470Trevose,
      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.


Yes x                   No  o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes o                   No  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company (as
defined in Rule 12b-2 of the Exchange Act).





Large accelerated
      filer  x
            Accelerated
      filer o
            Non-accelerated
      filer o
            Smaller reporting
      company o




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  o     No
x





Indicate
the number of shares outstanding of each of the issuer’s classes of Common
Stock, as of November 4, 2009: 41,168,543







Table of Contents




TABLEOF CONTENTS





PART
      I
            FINANCIAL
      INFORMATION
            PAGEItem
      1.
            Financial
      StatementsConsolidated Balance Sheets
      (Unaudited)
            3Consolidated Statements of Operations
      (Unaudited)
            4Consolidated Statements of Cash Flows
      (Unaudited)
            5Consolidated Statements of Changes in
      Shareholders’ Equity (Unaudited)
            6Notes to Unaudited Consolidated Financial
      Statements
            7Item
      2.
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            23Item
      3.
            Quantitative and Qualitative Disclosures about Market
      Risk
            32Item
      4.
            Controls and Procedures
            32PART
      II
            OTHER
      INFORMATIONItem
      1.
            Legal Proceedings
            34Item
      1a.
            Risk Factors
            34Item
      2.
            Unregistered Sales of Equity Securities and Use
      of Proceeds
            34Item
      3.
            Defaults Upon Senior Securities
            34Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            34Item
      5.
            Other Information
            34Item
      6.
            Exhibits
            34Exhibit Index
            44


2
 Table of Contents


PART
I.  FINANCIAL INFORMATION





Item 1:  Financial Statements




Technitrol,
Inc. and Subsidiaries


Consolidated Balance Sheets





In
thousands







September
      25,
            
            
            December
      26,Assets
            
            2009
            
            
            2008(Unaudited)Current
      assets:Cash
      and cash equivalents
            
            $
            39,516
            
            
            $
            41,401Accounts
      receivable, net
            
            
            66,823
            
            
            
            128,010Inventories
            
            
            43,124
            
            
            
            127,074Prepaid
      expenses and other current assets
            
            
            19,336
            
            
            
            58,568Assets
      of discontinued operations held for sale
            
            
            85,047
            
            
            
            --Total
      current assets
            
            
            253,846
            
            
            
            355,053Long-term
      assets:Property,
      plant and equipment
            
            
            135,090
            
            
            
            323,847Less
      accumulated depreciation
            
            
            92,502
            
            
            
            171,116Net
      property, plant and equipment
            
            
            42,588
            
            
            
            152,731Deferred
      income taxes
            
            
            33,213
            
            
            
            34,933Goodwill,
      net
            
            
            16,083
            
            
            
            164,778Other
      intangibles, net
            
            
            24,604
            
            
            
            51,351Other
      assets
            
            
            9,788
            
            
            
            11,065$
            380,122
            
            
            $
            769,911Liabilities and Shareholders’
      EquityCurrent
      liabilities:Current
      installments of long-term debt
            
            $
            --
            
            
            $
            17,189Accounts
      payable
            
            
            53,512
            
            
            
            75,511Accrued
      expenses and other current liabilities
            
            
            60,169
            
            
            
            86,477Liabilities
      of discontinued operations held for sale
            
            
            30,092
            
            
            
            --Total
      current liabilities
            
            
            143,773
            
            
            
            179,177Long-term
      liabilities:Long-term
      debt, excluding current installments
            
            
            127,000
            
            
            
            326,000Deferred
      income taxes
            
            
            12,157
            
            
            
            16,255Other
      long-term liabilities
            
            
            38,892
            
            
            
            40,347Shareholders’
      equity:Technitrol,
      Inc. shareholders’ equity:Common
      stock and additional paid-in capital
            
            
            222,892
            
            
            
            225,117Retained
      loss
            
            
            (195,133
            )
            
            
            (1,045
            )Accumulated
      other comprehensive income (loss)
            
            
            19,404
            
            
            
            (26,626
            )Total
      Technitrol, Inc. shareholders’ equity
            
            
            47,163
            
            
            
            197,446Non-controlling
      interest
            
            
            11,137
            
            
            
            10,686Total
      equity
            
            
            58,300
            
            
            
            208,132$
            380,122
            
            
            $
            769,911





See
accompanying Notes to Unaudited Consolidated Financial
Statements.


3
 Table of Contents


Technitrol,
Inc. and Subsidiaries


Consolidated Statements of
Operations





(Unaudited)


In
thousands, except per share data


Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
            
            
            September
      26,
            
            
            September
      25,
            
            
            September
      26,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      sales
            
            $
            101,381
            
            
            $
            168,974
            
            
            $
            293,425
            
            
            $
            501,978Cost
      of sales
            
            
            74,154
            
            
            
            126,339
            
            
            
            220,305
            
            
            
            381,827Gross
      profit
            
            
            27,227
            
            
            
            42,635
            
            
            
            73,120
            
            
            
            120,151Selling,
      general and administrative expenses
            
            
            23,399
            
            
            
            29,144
            
            
            
            66,503
            
            
            
            93,136Severance,
      impairment and other associated costs
            
            
            2,619
            
            
            
            4,860
            
            
            
            82,867
            
            
            
            9,272Operating
      profit (loss)
            
            
            1,209
            
            
            
            8,631
            
            
            
            (76,250
            )
            
            
            17,743Other
      income (expense):Interest
      expense, net
            
            
            (757
            )
            
            
            (1,022
            )
            
            
            (2,091
            )
            
            
            (2,147
            )Other
      income (expense), net
            
            
            3,190
            
            
            
            (833
            )
            
            
            5,083
            
            
            
            6,051Total
      other income (expense)
            
            
            2,433
            
            
            
            (1,855
            )
            
            
            2,992
            
            
            
            3,904Earnings
      (loss) from continuing operations beforeincome
      taxes
            
            
            3,642
            
            
            
            6,776
            
            
            
            (73,258
            )
            
            
            21,647Income
      tax expense (benefit)
            
            
            1,368
            
            
            
            (2,902
            )
            
            
            2,856
            
            
            
            589Net
      earnings (loss) from continuing operations
            
            
            2,274
            
            
            
            9,678
            
            
            
            (76,114
            )
            
            
            21,058Net
      loss from discontinued operations
            
            
            (13,358
            )
            
            
            (4,123
            )
            
            
            (117,523
            )
            
            
            (896
            )Net
      (loss) earnings
            
            
            (11,084
            )
            
            
            5,555
            
            
            
            (193,637
            )
            
            
            20,162Less:
      Net earnings attributable to non-controlling  interest
            
            
            352
            
            
            
            204
            
            
            
            451
            
            
            
            598Net
      (loss) earnings attributable to Technitrol, Inc.
            
            $
            (11,436
            )
            
            $
            5,351
            
            
            $
            (194,088
            )
            
            $
            19,564Amounts
      attributable to Technitrol, Inc. commonshareholders:Net
      earnings (loss) from continuing operations
            
            $
            1,922
            
            
            $
            9,474
            
            
            $
            (76,565
            )
            
            $
            20,460Net
      loss from discontinued operations
            
            
            (13,358
            )
            
            
            (4,123
            )
            
            
            (117,523
            )
            
            
            (896
            )Net
      (loss) earnings
            
            $
            (11,436
            )
            
            $
            5,351
            
            
            $
            (194,088
            )
            
            $
            19,564Per
      share data:Basic
      earnings per share:Net
      earnings (loss) from continuing operations
            
            $
            0.05
            
            
            $
            0.23
            
            
            $
            (1.88
            )
            
            $
            0.50Net
      loss from discontinued operations
            
            
            (0.33
            )
            
            
            (0.10
            )
            
            
            (2.88
            )
            
            
            (0.02
            )Net
      (loss) earnings
            
            $
            (0.28
            )
            
            $
            0.13
            
            
            $
            (4.76
            )
            
            $
            0.48Diluted
      earnings per share:Net
      earnings (loss) from continuing operations
            
            $
            0.05
            
            
            $
            0.23
            
            
            $
            (1.88
            )
            
            $
            0.50Net
      loss from discontinued operations
            
            
            (0.33
            )
            
            
            (0.10
            )
            
            
            (2.88
            )
            
            
            (0.02
            )Net
      (loss) earnings
            
            $
            (0.28
            )
            
            $
            0.13
            
            
            $
            (4.76
            )
            
            $
            0.48





See
accompanying Notes to Unaudited Consolidated Financial
Statements.


4
 Table of Contents


Technitrol,
Inc. and Subsidiaries


ConsolidatedStatements of Cash Flows





(Unaudited)


In
thousands






Nine
      Months EndedSeptember
      25,
              
              
              September
      26,2009
              
              
              2008Cash
      flows from operating activities:Net
      (loss) earnings
              
              $
              (193,637
              )
              
              $
              20,162Net
      loss (earnings) from discontinued operations
              
              
              117,523
              
              
              
              (896
              )Adjustments
      to reconcile net (loss) earnings attributable to Technitrol, Inc. to net
      cash provided by operating activities:Depreciation
      and amortization
              
              
              13,791
              
              
              
              22,041Goodwill
      impairment
              
              
              70,982
              
              
              
              --Changes
      in assets and liabilities, net of divestitures and acquisitions
      affect:Accounts
      receivable
              
              
              2,659
              
              
              
              12,754Inventories
              
              
              10,288
              
              
              
              (679
              )Prepaid
      expenses and other current assets
              
              
              539
              
              
              
              (3,905
              )Accounts
      payable and accrued expenses
              
              
              (1,665
              )
              
              
              (16,745
              )Severance,
      impairment and other associated costs
              
              
              3,956
              
              
              
              (696
              )Other,
      net
              
              
              (499
              )
              
              
              84Net
      cash provided by operating activities
              
              
              23,937
              
              
              
              32,120Cash
      flows from investing activities:Acquisitions,
      net of cash acquired of $6,556
              
              
              --
              
              
              
              (425,999
              )Cash
      received from dispositions
              
              
              207,809
              
              
              
              --Capital
      expenditures
              
              
              (786
              )
              
              
              (9,551
              )Purchases
      of grantor trust investments available for sale
              
              
              (5,899
              )
              
              
              (368
              )Proceeds
      from sale of property, plant and equipment
              
              
              2,110
              
              
              
              6,598Foreign
      currency impact on intercompany lending
              
              
              (2,980
              )
              
              
              (1,082
              )Net
      cash provided by (used in) investing activities
              
              
              200,254
              
              
              
              (430,402
              )Cash
      flows from financing activities:Long-term
      borrowings
              
              
              --
              
              
              
              414,000Principal
      payments of long-term debt
              
              
              (209,000
              )
              
              
              (67,943
              )Dividends
      paid
              
              
              (5,639
              )
              
              
              (10,741
              )Exercise
      of stock options
              
              
              --
              
              
              
              52Net
      cash (used in) provided by financing activities
              
              
              (214,639
              )
              
              
              335,368Net
      effect of exchange rate changes on cash
              
              
              5,605
              
              
              
              3,529Cash
      flows of discontinued operations:Net
      cash provided by operating activities
              
              
              1,053
              
              
              
              9,487Net
      cash used in investing activities
              
              
              (11,474
              )
              
              
              (29,694
              )Net
      cash used in financing activities
              
              
              (7,413
              )
              
              
              --Net
      effect of exchange rate changes on cash
              
              
              792
              
              
              
              4,636Net
      decrease in cash and cash equivalents from discontinued
      operations
              
              
              (17,042
              )
              
              
              (15,571
              )Net
      decrease in cash and cash equivalents
              
              
              (1,885
              )
              
              
              (74,956
              )Cash
      and cash equivalents at beginning of period
              
              
              41,401
              
              
              
              116,289Cash
      and cash equivalents at end of period
              
              $
              39,516
              
              
              $
              41,333






See
accompanying Notes to Unaudited Consolidated Financial
Statements.


5
 Table of Contents


Technitrol,
Inc. and Subsidiaries


ConsolidatedStatement of Changes in Shareholders'
Equity





Nine
Months Ended September 25, 2009





(Unaudited)


In
thousands, except per share data







Common
      stock and
              paid-in capital
            
            
            Retained
              loss
            
            
            Accumulated
              other
              compre-
      hensive
              (loss)
              income
            
            
            Non-
              control-
              ling
              interest
            
            
            Total
      equity
            
            
            Compre-
      hensive lossShares
            
            
            AmountBalance
      at December 26,2008
            
            
            40,998
            
            
            $
            225,117
            
            
            $
            (1,045
            )
            
            $
            (26,626
            )
            
            $
            10,686
            
            
            $
            208,132Stock
      options, awards and related compensation
            
            
            171
            
            
            
            855
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            855Dividends
      declared ($0.075 per share)
            
            
            --
            
            
            
            (3,080
            )
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (3,080
            )Adjustment
      to defined benefit plans
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,772
            
            
            
            --
            
            
            
            1,772Net
      (loss) earnings
            
            
            --
            
            
            
            --
            
            
            
            (194,088
            )
            
            
            --
            
            
            
            451
            
            
            
            (193,637
            )
            
            $
            (193,637
            )Currency
      translation adjustments
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            42,633
            
            
            
            --
            
            
            
            42,633
            
            
            
            42,633Unrealized
      holding gainson
      securities
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,625
            
            
            
            --
            
            
            
            1,625
            
            
            
            1,625Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (149,379
            )Balance
      at September 25, 2009
            
            
            41,169
            
            
            $
            222,892
            
            
            $
            (195,133
            )
            
            $
            19,404
            
            
            $
            11,137
            
            
            $
            58,300




See
accompanying Notes to Unaudited Consolidated Financial Statements.


6
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notesto 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, Inc.’s Form 10-K filed for the year ended
December 26, 2008. We sometimes refer to Technitrol, Inc. as “Technitrol,” “we”
or “our”.  We operate our continuing business in a single segment, our
Electronic Components Group, which we refer to as Electronics and is known as
Pulse in its markets.  A second segment, the Electrical Contact
Products Group or Electrical, as we refer to it, or AMI Doduco, as it is known
in its markets, is held for sale and classified as discontinued operations in
our Consolidated Financial Statements.





The
results for the nine months ended September 25, 2009 and September 26, 2008 have
been prepared by our management without audit by our independent registered
public accountants. In the opinion of management, the consolidated financial
statements fairly present in all material respects, the financial position,
results of operations and cash flows 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, impairment and other associated
costs, all such adjustments are of a normal recurring nature. Operating results
for the nine months ended September 25, 2009 are not necessarily indicative of
annual results.





Recently Adopted Accounting
Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162 (“SFAS 168”). This is FASB’s
last SFAS as this statement established the FASB Accounting Standards
Codification (“ASC”) as the authoritative source of U.S. Generally Accepted
Accounting Principles (“GAAP”). This pronouncement is now codified as ASC Topic
105, Generally Accepted
Accounting Principles (“ASC 105”).  ASC 105 does not change
current GAAP, but is intended to simplify user research by providing all FASB
literature in a topical manner and in a single set of rules. All existing
accounting standard documents are superseded and all other accounting literature
not included in the ASC is considered non-authoritative. These provisions of ASC
105 are effective for fiscal years and interim periods ending after
September 15, 2009. We adopted this statement as of September 15, 2009, and
we have revised our disclosures by eliminating all references to
pre-codification standards as required by ASC 105.





In
May 2009, FASB issued guidance codified as ASC Topic 855, Subsequent Events (“ASC
855”), which establishes general standards of accounting for, and disclosures
of, events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. ASC 855 is effective for
interim or fiscal periods ending after June 15, 2009. We adopted ASC 855 on
June 26, 2009 and the adoption of these provisions did not have a material
impact on our consolidated financial position, results of operations or cash
flows. We have evaluated and recognized no material subsequent events for the
period from September 25, 2009, the date of these financial statements,
through November 4, 2009, which is the date these financial statements were
issued.





In April
2009, FASB issued ASC Topic 820, Fair Value Measurements and
Disclosures (“ASC 820”), which provides additional guidance on estimating
fair value when the volume and level of activity for an asset or liability has
significantly decreased in relation to the normal market activity for the asset
or liability.  Also, ASC 820 provides guidance on circumstances that
may indicate that a transaction is not orderly. These additions to ASC 820 were
effective for interim and annual periods ending after June 15, 2009. We
adopted the provisions of ASC 820 as of June 15, 2009 and the adoption had no
impact on our financial statements.




7
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(1)           Accounting policies,
continued





In
November 2008, FASB issued guidance codified in ASC Topic 323, Investments – Equity Method and
Joint Ventures (“ASC 323”), which clarifies the accounting for certain
transactions and impairment considerations involving equity method
investments.  We adopted these provisions of ASC 323 as of December
27, 2008 and this adoption had no impact on our financial
statements.





In
June 2008, FASB issued guidance codified in ASC Topic 260, Earnings Per Share (“ASC
260”). Under ASC 260, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents are required to be
treated as participating securities and should be included in the two-class
method of computing earnings per share. Adoption of these additions to ASC 260
is retrospective, therefore, all previously reported earnings per share data is
restated to conform with the requirements of this pronouncement. We adopted
these provisions of ASC 260 as of December 27, 2008 and calculated basic and
diluted earnings per share under both the treasury stock method and the
two-class method.  For both the three and nine months ended September
25, 2009 and September 26, 2008, there were not significant differences in the
per share amounts calculated under the two methods, therefore, we have not
presented the reconciliation of earnings per share under the two class
method.  See Note 10 regarding adoption of this guidance.





In April
2008, FASB issued guidance codified in ASC Topic 350, Intangibles – Goodwill and
Other (“ASC 350”), which amends the factors an entity should consider in
developing renewal or extension assumptions used in determining the useful life
of recognized intangible assets.  These additions to ASC 350 apply
prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset
acquisitions.  We adopted these provisions of ASC 350 as of December
27, 2008 and the adoption had no impact on our financial
statements.





In March
2008, FASB issued guidance codified in ASC Topic 815, Derivatives and Hedging (“ASC
815”), which applies to the disclosure requirements for all derivative
instruments and hedged items. These additions to ASC 815 amend and expand
previous disclosure requirements, requiring qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts and gains and losses on derivative instruments, and
disclosures about the credit risk related contingent features in derivative
agreements.  We adopted these provisions of ASC 815 as of December 27,
2008 and have expanded our disclosures as required.  See Note 12
regarding adoption of this guidance.





In December 2007, FASB issued guidance
codified in ASC Topic 810, Consolidation (“ASC 810”).
These provisions of ASC 810 changed the accounting and reporting for minority
interests, which were recharacterized as non-controlling interests and
classified as a component of equity.  In addition, companies are
required to report a net income (loss) measure that includes the amounts
attributable to such non-controlling interests. We adopted these additions to
ASC 810 as of December 27, 2008 and they were applied prospectively to all
non-controlling interests. However, the presentation and disclosure requirements
of these additions to ASC 810 were applied retrospectively for all periods
presented.





In
December 2007, FASB issued guidance codified in ASC Topic 805, Business Combinations (“ASC
805”), which changed the accounting for business combinations in a number of
areas including the treatment of contingent consideration, contingencies,
acquisition costs, in-process research and development costs and restructuring
costs.  In addition, these provisions of ASC 805 change the method of
measurement for deferred tax asset valuation allowances and acquired income tax
uncertainties in a business combination.  We adopted these additions
to ASC 805 as of December 27, 2008 and the adoption had no impact on our
financial statements.





8
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(1)           Accounting policies,
continued





New Accounting
Pronouncements





In June
2009, FASB issued additional guidance codified in ASC 810, which requires
reporting entities to evaluate former Qualified Special Purpose Entities
(“QSPE”) for consolidation, changing the approach to determine a Variable
Interest Entity’s (“VIE”) primary beneficiary from a quantitative to a
qualitative assessment and increasing the frequency of reassessments for
determining whether a company is the primary beneficiary of a
VIE.  This guidance also clarifies the characteristics that identify a
VIE.  These provisions of ASC 810 are effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2009.  We are currently evaluating the effect that this
pronouncement may have on our financial statements.





In
December 2008, FASB issued guidance codified in ASC Topic 715, Compensation – Retirement
Benefits (“ASC 715”), which provides guidance on an employer’s
disclosures about plan assets of a defined benefit pension plan or other
postretirement plans.  Specifically, these provisions of ASC 715
provide guidance on concentrations of risk in pension and postretirement plans,
and are effective for financial statements issued for fiscal years and interim
periods beginning after December 15, 2009. We are currently evaluating the
effect that this pronouncement may have on our financial
statements.





Reclassifications





Certain amounts in the prior-year
financial statements have been reclassified to conform with the current-year
presentation.





(2)           Divestitures





Electrical:  In 2009, our
board of directors approved a plan to divest our Electrical Contact Products
Group (“Electrical”).  Electrical’s manufacturing facilities in
Germany, Spain, China, Mexico and the United States produce a full array of
precious metal electrical contact products that range from materials used in the
fabrication of electrical contacts to completed contact subassemblies. The
divestiture is expected to be completed by the end of June 2010.  We
have reflected the results of Electrical as a discontinued operation on the
Consolidated Statements of Operations for all periods presented.





Electrical’s
net sales and (loss) earnings before income taxes were as follows (in thousands):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
            
            
            September
      26,
            
            
            September
      25,
            
            
            September
      26,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      sales
            
            $
            63,474
            
            
            $
            97,374
            
            
            $
            177,898
            
            
            $
            311,426(Loss)
      earnings before income taxes
            
            
            (5,897
            )
            
            
            2,137
            
            
            
            (66,520
            )
            
            
            14,198





Electrical’s
loss before income taxes includes interest expense allocated pro-rata based upon
the debt expected to be retired from the Electrical disposition, an estimate of
the write down of Electrical’s net assets to the expected net proceeds we
anticipate receiving on the completion of the sale, an estimate of the
settlement of certain retirement plan benefits under the Technitrol, Inc.
Supplemental Retirement Plan that will result from the sale of substantially all
of Electrical and other charges.  These charges were approximately
$4.7 million and $0.7 million for the three months ended September 25, 2009 and
September 26, 2008, respectively, and approximately $59.3 million and $1.7
million for the nine months ended September 25, 2009 and September 26, 2008,
respectively.




9
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(2)           Divestitures,
continued





We also
expect to record a curtailment and settlement related to the Technitrol, Inc.
Retirement Plan, however, these amounts were not estimable as of September 25,
2009.  These adjustments will be recorded upon the earlier of the
Electrical divestiture or when such amounts are estimable.





Electrical
has approximately $83.9 million of assets and $29.1 million of liabilities that
are considered held for sale and are included in current assets and current
liabilities, respectively, on the September 25, 2009 Consolidated Balance
Sheet.  The assets are available for immediate sale in their present
condition subject only to terms that are usual and
customary.  Although we continue to manufacture Electrical products,
we expect that open customer orders will be transferred to the buyer in the
divestiture.




Medtech:  On
June 25, 2009, we completed the disposition of our Medtech components business
(“Medtech”) to Altor Fund III (“Altor”). Medtech is headquartered in Roskilde,
Denmark with manufacturing facilities in Denmark, Poland and Vietnam producing
the former Sonion A/S (“Sonion”) components for the hearing aid, high-end audio
headset and medical device markets.  We received approximately $201.4
million in cash. However, these proceeds are subject to final working capital
and financial indebtedness adjustments.  The net proceeds were used
primarily to repay outstanding debt under our credit facility.  We
have reflected the results of Medtech as a discontinued operation on the
Consolidated Statement of Operations for all periods presented.





Medtech’s
net sales and loss before income taxes were as follows (in thousands):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
            
            
            September
      26,
            
            
            September
      25,
            
            
            September
      26,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      sales
            
            $
            --
            
            
            $
            26,851
            
            
            $
            49,704
            
            
            $
            70,960Loss
      before income taxes
            
            
            (9,751
            )
            
            
            (2,504
            )
            
            
            (44,975
            )
            
            
            (12,668
            )





Medtech’s
loss before income taxes includes interest expense allocated pro-rata based upon
the debt retired from the proceeds of the Medtech disposition, a charge recorded
to write down our net investment in Medtech to the net proceeds received,
including an adjustment of $9.4 million in the three months ended September 25,
2009, a charge for the curtailment and settlement of certain retirement plan
benefits under the Technitrol, Inc. Supplemental Retirement Plan that was
triggered by the Medtech sale and other charges.  These charges were
approximately $9.8 million and $1.9 million for the three months ended September
25, 2009 and September 26, 2008, respectively, and approximately $49.6 million
and $4.9 million for the nine months ended September 25, 2009 and September 26,
2008, respectively.





All open
customer orders were transferred to Altor upon disposition.  We have
no material continuing involvement with the Medtech business after its June 25,
2009 disposition.





MEMS:
During the year ended December 26, 2008, our board of directors approved a plan
to divest our non-core microelectromechanical systems (“MEMS”) microphone
business located in Denmark and Vietnam. In the second quarter of 2009, we
received an amount immaterial to our Consolidated Financial Statements for the
assets of MEMS.  To reflect MEMS’ net assets at their net sales
proceeds, we recorded a $2.7 million charge during 2009.  We have
reflected the results of MEMS as a discontinued operation on the Consolidated
Statements of Operations for all periods presented.




10
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(2)           Divestitures,
continued





Net sales
and earnings (loss) before income taxes were as follows (in thousands):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
            
            
            September
      26,
            
            
            September
      25,
            
            
            September
      26,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      sales
            
            $
            626
            
            
            $
            2,857
            
            
            $
            1,438
            
            
            $
            6,039Earnings
      (loss) before income taxes
            
            
            413
            
            
            
            (425
            )
            
            
            (6,216
            )
            
            
            (1,462
            )





MEMS was
purchased as part of the Sonion acquisition. There is approximately $1.1 million
of assets and $1.0 million of liabilities remaining at MEMS that are considered
held for sale and are included in current assets and current liabilities,
respectively, on the September 25, 2009 Consolidated Balance
Sheet.  We are contractually obligated to fulfill an immaterial amount
of customer orders before we can fully exit MEMS.  The assets and
liabilities that remain on our Consolidated Balance Sheet as of September 25,
2009 primarily relate to these customer orders.





(3) Acquisitions





Sonion
A/S:  On
February 28, 2008, we acquired all of the capital stock of Sonion, headquartered
in Roskilde, Denmark with manufacturing facilities in Denmark, Poland, China and
Vietnam.  The results of Sonion’s operations have been included in the
consolidated financial statements since February 29, 2008.  Sonion
produced components used in hearing instruments, medical devices and mobile
communications devices. Our total investment was $426.4 million, which included
$243.3 million, net of cash acquired of $6.6 million, for the outstanding
capital stock, $177.8 million of acquired debt which was repaid concurrent with
the acquisition and $5.3 million of costs directly associated with the
acquisition. We financed the acquisition with proceeds from our multi-currency
credit facility and with cash on hand. The fair value of the net tangible assets
acquired, excluding the assumed debt, approximated $99.7 million.  In
addition to the fair value of assets acquired, purchase price allocations
included $73.5 million for customer relationship intangibles, $27.7 million for
technology intangibles and $232.1 million allocated to goodwill. For goodwill
impairment testing purposes, Sonion’s mobile communications group is included in
Electronics’ wireless group.  Prior to its disposition in June 2009,
Sonion’s Medtech components business was treated as a separate reporting
unit.





(4)           Inventories





Inventories
consisted of the following (in
thousands):





September
      25,
            
            
            December
      26,2009
            
            
            2008Finished
      goods
            
            $
            19,047
            
            
            $
            46,747Work
      in process
            
            
            5,023
            
            
            
            29,451Raw
      materials and supplies
            
            
            19,054
            
            
            
            50,876$
            43,124
            
            
            $
            127,074





(5)           Goodwill and other
intangibles, net





We perform an annual review of goodwill
in our fourth fiscal quarter of each year, or more frequently if indicators of a
potential impairment exist, to determine if the carrying amount of our goodwill
is impaired.  The test is a two-step process.  The first
step of the impairment review is to compare the fair 11
 Table of Contents


Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued




(5)           Goodwill and other
intangibles, net, continued







Our reviews incorporate both an income
and a comparable-companies market approach to estimate the
impairment.  The income approach is based on estimating future cash
flows using various growth assumptions and discounting based on a present value
factor.  The growth rates we use are estimated based on the future
growth of the industries in which we participate.  Our discount rate
assumption is based on our estimated cost of capital, which we determine based
on our estimated costs of debt and equity relative to our capital
structure.





The
comparable-companies market approach considers the trading multiples of our peer
companies to compute our estimated fair value.   We, as well as
substantially all of the comparable companies utilized in our
evaluation, are included in the Dow Jones U.S. Electrical Components and
Equipment Industry Group Index.  We believe the use of multiple
valuation techniques results in a more accurate indicator of the fair value of
each reporting unit, rather than only using the income approach.





We
performed step one of the goodwill impairment test during the first quarter of
2009 as a result of the decline in our stock price and a decrease in our
forecasted operating profit.  Our wireless group did not pass the
first step of the impairment test.  The second step of the impairment
test yielded a $71.0 million goodwill impairment at the wireless group as of
March 27, 2009, $68.9 million of which was recorded as an estimate in the first
quarter of 2009.  This analysis was finalized during the second
quarter of 2009 resulting in an additional charge of $2.1 million.





We also assess the impairment of
long-lived assets, including identifiable intangible assets subject to
amortization and property, plant and equipment, whenever events or changes in
circumstances indicate the carrying value may not be
recoverable.  Factors we consider important that could trigger an
impairment review include significant changes in the use of any asset, changes
in historical trends in operating performance, changes in projected operating
performance, stock price and significant negative economic
trends.  The impairment review was also triggered by our declined
stock price and our lower operating profit forecast in the first quarter of
2009. Prior to completing the review of goodwill in the first quarter of 2009,
we performed a recoverability test on certain definite and indefinite-lived
intangible assets.  The recoverability test performed as of March 27,
2009 yielded no impairment of identifiable intangible assets.





Changes in the carrying amount of
goodwill for the nine months ended September 25, 2009 were as follows (in thousands):





Balance
      at December 26, 2008
            
            $
            164,778Goodwill
      impairment
            
            
            (70,982
            )Goodwill
      of divested reporting unit
            
            
            (77,816
            )Currency
      translation adjustment
            
            
            103Balance
      at September 25, 2009
            
            $
            16,083




12
 Table of Contents





Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(5)           Goodwill and other
intangibles, net, continued





Other
intangible assets were as follows (in thousands):





September
      25,
            
            
            December
      26,2009
            
            
            2008Intangible
      assets subject to amortization (definite
      lives):Technology
            
            $
            6,738
            
            
            $
            27,210Customer
      relationships
            
            
            26,332
            
            
            
            30,999Tradename
      / trademark
            
            
            425
            
            
            
            408Other
            
            
            2,379
            
            
            
            2,567Total
            
            $
            35,874
            
            
            $
            61,184Accumulated
      amortization:Technology
            
            $
            (1,737
            )
            
            $
            (2,370
            )Customer
      relationships
            
            
            (10,641
            )
            
            
            (8,746
            )Tradename
      / trademark
            
            
            (425
            )
            
            
            (408
            )Other
            
            
            (1,377
            )
            
            
            (1,219
            )Total
            
            $
            (14,180
            )
            
            $
            (12,743
            )Net
      intangible assets subject to amortization
            
            $
            21,694
            
            
            $
            48,441Intangible
      assets not subject to amortization (indefinitelives):Tradename
            
            
            2,910
            
            
            
            2,910Other
      intangibles, net
            
            $
            24,604
            
            
            $
            51,351





Amortization expense was approximately
$2.5 million and $4.2 million for the nine months ended September 25, 2009 and
September 26, 2008, respectively.  The decrease in amortization
expense is the result of lower amortizing intangibles in the nine months ended
September 25, 2009 as compared to the same period of 2008, due to the intangible
impairment recorded in the fourth quarter of 2008.  Estimated annual
amortization expense for each of the next five years is as follows (in thousands):





Year Ending2010
            
            $
            3,8172011
            
            $
            3,5402012
            
            $
            3,4342013
            
            $
            3,4342014
            
            $
            2,963





(6)           Income
taxes





At September 25, 2009, we had
approximately $20.3 million of unrecognized tax benefits, $18.2 million of which
are classified as other long-term liabilities and are not expected to be
realized within the next twelve months.  All of these tax benefits
would affect our effective tax rate, if recognized.





Our continuing practice is to recognize
interest and penalties, if any, related to income tax matters as income tax
expense.  As of September 25, 2009, we have $0.9 million accrued for
interest and penalties related to uncertain income tax positions.




13
 Table of Contents





Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(6)           Income taxes,
continued





We are subject to U.S. federal income
tax as well as income tax in multiple state and non-U.S.
jurisdictions.  Federal and state income tax returns for all years
after 2005 are subject to future examination by the respective tax
authorities.  With respect to material non-U.S. jurisdictions where we
operate, we have open tax years ranging from 2 to 10 years.





The
effective tax rate of (3.9)% for the nine months ended September 25, 2009 was
impacted primarily by the $71.0 million goodwill impairment charge recorded in
2009. The goodwill impairment was non-deductible for income tax
purposes.  Also, certain losses incurred related to our divestitures
are not expected to be deductible for income tax purposes.  Excluding
the $71.0 million impairment charge, the effective tax rate would have been
13.7% for the nine months ended September 25, 2009.





(7)           Defined benefit
plans





The
Medtech disposition triggered a curtailment and settlement of certain retirement
plan benefits related to the Technitrol, Inc. Supplemental Retirement Plan that
totaled $4.9 million. The disposition of substantially all of the business of
Electrical will also result in the acceleration of certain retirement plan
benefits under the Technitrol, Inc. Supplemental Retirement Plan.  We
recorded a charge of $5.1 million as an estimate of this benefit. Our net
periodic expense, excluding these charges, was approximately $0.1 million and
$0.3 million for the three months ended September 25, 2009 and September 26,
2008, respectively, and $0.4 and $0.8 million for the nine months ended
September 25, 2009 and September 26, 2008, respectively. Our net periodic
expense, also excluding the settlement charges, is expected to be approximately
$0.5 million for 2009.  In the nine months ended September 25, 2009,
we contributed approximately $6.1 million to our principal defined benefit plans
and we expect to contribute approximately $11.0 million in the 2009 fiscal year.
Of the $11.0 million we expect to contribute, approximately $4.9 million is
contingent upon the sale of substantially all of the Electrical
business.





(8)           Debt





We were
in compliance with the covenants of our credit agreement as of September 25,
2009.  On June 8, 2009, we finalized an amendment to our credit
agreement that allowed for the divestiture of Medtech and Electrical and
adjusted certain debt covenants and other provisions in connection with such
divestitures (“the amendment”).





On
February 20, 2009, we amended and restated our February 28, 2008 credit
agreement (“restated credit agreement”).  The restated credit
agreement, as further amended on June 8, 2009, provided for a $200.0 million
senior term loan facility and a senior revolving credit facility consisting of
an aggregate U.S. dollar-equivalent revolving line of credit in the principal
amount of up to $175.0 million, and provides for borrowings in U.S. dollars,
euros and yen, including individual sub limits of:





- a
multicurrency facility providing for the issuance of letters of credit in an
aggregate amount not to exceed the U.S. dollar equivalent of $10.0 million;
and
 - a
Singapore sub-facility not to exceed the U.S. dollar equivalent of $29.2
million.





The $200 million senior term loan
facility was retired in connection with the Medtech divestiture during the
second quarter of 2009, but the $175.0 million senior revolving credit facility
and all related terms remain in effect.  However, upon the completion
of the Electrical disposition, the $29.2 million Singapore sub-facility will be
eliminated, thereby decreasing our total line of credit to $145.8
million.




14
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(8)           Debt,
continued





Neither the restated credit agreement
nor the amendment permit us to increase the total commitment without the consent
of our lenders. Therefore, the total amount outstanding under the revolving
credit facility may not exceed $175.0 million, or $145.8 million after the
completion of the Electrical divestiture. Of the $175.0 million currently
available to borrow, the amount outstanding as of September 25, 2009 was $127.0
million.





Outstanding borrowings are subject to
leverage and fixed charges covenants, which are computed on a rolling
twelve-month basis as of the most recent quarter-end.  Each covenant
requires the calculation of EBITDA according to a definition prescribed by the
restated credit agreement and the amendment.  The restated credit
agreement’s leverage covenant requires our total debt outstanding to not exceed
the following multiples of our prior four quarters’ EBITDA:




Applicable
      date
              
              EBITDA(Period or quarter
      ended)
              
              MultipleMarch
      2009 to December 2009
              
              4.50xMarch
      2010
              
              4.00xJune
      2010
              
              3.75xSeptember
      2010
              
              3.50xThereafter
              
              3.00x
 
 Upon the disposition of Electrical, the
amendment reduces our leverage covenant and requires that our total debt
outstanding cannot exceed the following multiples of our prior four quarters’
EBITDA:
 
 Applicable
      date
              
              EBITDA(Period or quarter
      ended)
              
              MultipleSeptember
      2009
              
              4.00xDecember
      2009
              
              3.50xMarch
      2010
              
              3.00xThereafter
              
              2.75x
 
 The
restated credit agreement’s fixed charges covenant requires that our EBITDA
exceed total fixed charges, as defined by the restated credit agreement, by the
following multiples:
 
 Applicable
      date
              
              EBITDA(Period or quarter
      ended)
              
              MultipleSeptember
      2009 to March 2010
              
              1.75xJune
      2010 to December 2010
              
              1.50xThereafter
              
              1.25x
 
 Upon the
disposition of Electrical, the amendment’s fixed charges covenant requires our
EBITDA to exceed total fixed charges, as defined by the amendment, by the
following multiples:
 
 Applicable
      date
              
              EBITDA(Period or quarter
      ended)
              
              MultipleSeptember
      2009 to December 2009
              
              1.25xThereafter
              
              1.50x


15
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(8)           Debt,
continued





The fee
on the unborrowed portion of the commitment ranges from 0.225% to 0.450% of the
total commitment, depending on the following debt-to-EBITDA ratios:





Total debt-to-EBITDA ratio
            Commitment fee
percentageLess
      than 0.75
            0.225
      %Less
      than 1.50
            0.250
      %Less
      than 2.25
            0.300
      %Less
      than 2.75
            0.350
      %Less
      than 3.25
            0.375
      %Less
      than 3.75
            0.400
      %Greater
      than 3.75
            0.450
      %





The
interest rate for each currency’s borrowing is 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 maintained from the restated credit agreement to the
amendment. The percentage is the same for each currency and ranges from 1.25% to
3.25%, depending on the following debt-to-EBITDA ratios:





Total debt-to-EBITDA ratio
            Credit margin spreadLess
      than 0.75
            1.25
      %Less
      than 1.50
            1.50
      %Less
      than 2.25
            2.00
      %Less
      than 2.75
            2.50
      %Less
      than 3.25
            2.75
      %Less
      than 3.75
            3.00
      %Greater
      than 3.75
            3.25
      %





The
weighted-average interest rate, including the credit margin spread, was
approximately 3.3% as of September 25, 2009.





Also,
effective for dividends after February 2009, both the restated credit agreement
and the amendment limit our annual cash dividends to $5.0 million while our debt
outstanding exceeds two and one-half times our EBITDA. Also, there are covenants
specifying capital expenditure limitations and other customary and normal
provisions.





Multiple
subsidiaries, both domestic and international, have guaranteed the obligations
incurred under the restated credit agreement and the amendment.  In
addition, certain domestic and international subsidiaries have pledged the
shares of certain subsidiaries, as well as selected accounts receivable,
inventory, machinery and equipment and other assets as collateral. If we default
on our obligations, our lenders may take possession of the collateral and may
license, sell or otherwise dispose of those related assets in order to satisfy
our obligations.





During 2009, we incurred approximately
$4.9 million in conjunction with the negotiation and finalization of both the
amendment and the restated credit agreement.  In addition, we recorded
a charge of approximately $5.5 million to impair the capitalized fees and costs
for our February 28, 2008 credit agreement and its related
amendments.  Of the $5.5 million of charges, $4.3 million was
allocated to discontinued operations on a pro-rata basis for the nine months
ended September 25, 2009, based upon the debt expected to be retired from the
dispositions compared to our total debt outstanding.  Each of these
fees is classified as interest expense on our Consolidated Statement of
Operations.


16
 Table of Contents


Technitrol, Inc. and
Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(8)           Debt,
continued





We had four standby letters of credit
outstanding at September 25, 2009 in the aggregate amount of $1.9 million
securing transactions entered into in the ordinary course of
business.





(9)           Accounting for stock-based
compensation





We have
an incentive compensation plan for our employees.  One component of
this plan is restricted stock, which grants the recipient the right of ownership
of our common stock, generally conditional on continued employment for a
specified period.  Another component is stock options. 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 25, 2009 and September 26, 2008 (in thousands):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
              2009
            
            
            September
      26,
              2008
            
            
            September
      25,
              2009
            
            
            September
      26,
              2008Restricted
      stock
            
            $
            570
            
            
            $
            835
            
            
            $
            1,084
            
            
            $
            2,160Stock
      options
            
            
            --
            
            
            
            50
            
            
            
            --
            
            
            
            150Total
      stock-based compensation included inselling,
      general and administrative expenses
            
            
            570
            
            
            
            885
            
            
            
            1,084
            
            
            
            2,310Income
      tax benefit
            
            
            (200
            )
            
            
            (275
            )
            
            
            (379
            )
            
            
            (704
            )Total
      after-tax stock-based compensationexpense
            
            $
            370
            
            
            $
            610
            
            
            $
            705
            
            
            $
            1,606





Restricted
Stock:  The value of restricted stock issued is based on the
market price of the stock at the award date.  We retain the shares
until the continued employment requirement has been met.  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 and is 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), our accrual relating to
the cash award will fluctuate based on the current market value of the shares
subject to limitation as set forth in our restricted stock plan.





A summary
of the restricted stock activity is as follows (in thousands, except per share
data):





Shares
            
            
            Weighted
              Average
      Stock
              Grant
      Price
              (Per Share)Nonvested
      at December 26, 2008
            
            
            208
            
            
            $
            24.59Granted
            
            
            131
            
            
            $
            5.48Vested
            
            
            (75
            )
            
            $
            24.13Forfeited/cancelled
            
            
            (10
            )
            
            $
            22.89Nonvested
      at September 25, 2009
            
            
            254
            
            
            $
            13.37


17
 Table of Contents





Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements,continued





(9)           Accounting for stock-based
compensation, continued





As of
September 25, 2009, there was approximately $1.6 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 1.5 years.





Stock
Options: Stock options were granted at no cost to the employee and were
not 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 have been no options granted
since 2004. 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
              Option
      Grant
              Price
              (Per Share)
            
            
            Aggregate
      Intrinsic ValueOutstanding
      as of December 26, 2008
            
            
            125
            
            
            $
            17.99Granted
            
            
            --
            
            
            
            --Exercised
            
            
            --
            
            
            
            --Forfeited/cancelled
            
            
            (43
            )
            
            $
            18.90Outstanding
      as of September 25, 2009
            
            
            82
            
            
            $
            17.53
            
            
            
            --Exercisable
      at September 25, 2009
            
            
            82
            
            
            $
            17.53
            
            
            
            --





As of
September 25, 2009, all compensation cost related to option grants had been
recognized.  During the nine months ended September 25, 2009, no stock
options were exercised.  For the nine months ended September 26, 2008,
both the cash received on stock options exercised and the intrinsic value of
stock options exercised were less than $0.1 million.  Tax benefits
from the deductions in excess of the compensation cost of stock options
exercised are required to be classified as a cash inflow from
financing.  There was no effect on the current year net cash provided
by operating activities or net cash used in financing activities as there were
no stock options exercised during the nine months ended September 25,
2009.  We have not capitalized any stock-based compensation costs into
inventory or other assets during the nine months ended September 25,
2009.





(10)           Earnings per
share





Basic
earnings per share are calculated by dividing net earnings by the weighted
average number of common shares outstanding, excluding restricted shares which
are considered to be contingently issuable. For calculating diluted earnings per
share, common share equivalents are added to the weighted average number of
common shares outstanding. Common share equivalents are computed based on the
number of outstanding options to purchase common stock and restricted shares as
calculated using the treasury stock method.  However, in periods when
we have a net loss or the exercise price of stock options, by grant, are greater
than the actual stock price as of the end of the period, those common share
equivalents will be excluded from the calculation of diluted earnings per
share.  As a result of positive net earnings from continuing
operations, we included approximately 64,000 common share equivalents
for the three months ended September 25, 2009. For the nine months ended
September 25, 2009, there were no common share equivalents included in the
calculation of diluted earnings per share due to our net loss.  There
were approximately 52,000 and 92,000 common share equivalents for the three and
nine months ended September 26, 2008, respectively.  We had
approximately 82,000 and 130,000 stock options outstanding as of September 25,
2009 and September 26, 2008, respectively.  There were unvested
restricted shares





18
 Table of Contents




Technitrol, Inc. and
Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(10)           Earnings per share,
continued







Unvested
share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents are required to be treated as participating securities.
Under our restricted stock plan, non-forfeitable dividends are paid on unvested
shares of restricted stock, which meets the qualifications of participating
securities and requires the two-class method of calculating earnings per share
to be applied. We have calculated basic and diluted earnings per share under
both the treasury stock method and the two-class method.  For the
three and nine months ended September 25, 2009 and September 26, 2008, there
were no significant differences in the per share amounts calculated under the
two methods, therefore, we have not presented the reconciliation of earnings per
share under the two class method.  Earnings per share calculations are
as follows (in thousands,
except per share amounts):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
              2009
            
            
            September
      26,
              2008
            
            
            September
      25,
              2009
            
            
            September
      26,
              2008Net
      earnings (loss) from continuing operations
            
            $
            2,274
            
            
            $
            9,678
            
            
            $
            (76,114
            )
            
            $
            21,058Net
      loss from discontinued operations
            
            
            (13,358
            )
            
            
            (4,123
            )
            
            
            (117,523
            )
            
            
            (896
            )Less:
      Net earnings attributable to
      non-controlling interest
            
            
            352
            
            
            
            204
            
            
            
            451
            
            
            
            598Net
      (loss) earnings attributable to Technitrol, Inc.
            
            $
            (11,436
            )
            
            $
            5,351
            
            
            $
            (194,088
            )
            
            $
            19,564Basic
      (loss) earnings per share:Shares
            
            
            40,886
            
            
            
            40,774
            
            
            
            40,831
            
            
            
            40,734Continuing
      operations
            
            $
            0.05
            
            
            $
            0.23
            
            
            $
            (1.88
            )
            
            $
            0.50Discontinued
      operations
            
            
            (0.33
            )
            
            
            (0.10
            )
            
            
            (2.88
            )
            
            
            (0.02
            )Per
      share amount
            
            $
            (0.28
            )
            
            $
            0.13
            
            
            $
            (4.76
            )
            
            $
            0.48Diluted
      (loss) earnings per share:Shares
            
            
            40,950
            
            
            
            40,826
            
            
            
            40,831
            
            
            
            40,826Continuing
      operations
            
            $
            0.05
            
            
            $
            0.23
            
            
            $
            (1.88
            )
            
            $
            0.50Discontinued
      operations
            
            
            (0.33
            )
            
            
            (0.10
            )
            
            
            (2.88
            )
            
            
            (0.02
            )Per
      share amount
            
            $
            (0.28
            )
            
            $
            0.13
            
            
            $
            (4.76
            )
            
            $
            0.48





(11)           Severance, impairment and
other associated costs





As a result of our continuing focus on
both economic and operating profit, we continue to aggressively size our
operations so that costs are optimally matched to current and anticipated future
revenue and unit demand.  The amounts and timing of charges will
depend on specific actions taken.  The actions taken include closures,
plant relocations, asset impairments and reductions in personnel worldwide, and
have resulted in the elimination of a variety of costs.  The majority
of the non-impairment related costs represent the annual salaries and benefits
of terminated employees, both those directly related to manufacturing and those
providing selling, general and administrative services. The eliminated costs
also include depreciation from disposed equipment and rental payments from the
termination of lease agreements.  We continued restructuring
initiatives during the nine months ended September 25, 2009 that were
implemented in the years ended December 26, 2008 and December 28, 2007 in order
to reduce our cost structure and capacity.




19
 Table of Contents




Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(11)           Severance, impairment and
other associated costs, continued





During
the nine months ended September 25, 2009, we determined that approximately $71.0
million of goodwill was impaired.  Refer to Note 5 for further
details.  Additionally, we incurred a charge of $11.9 million for a
number of cost reduction actions.  These accruals include severance
and related payments of $3.0 million and fixed asset impairments of $8.9
million.  The impaired assets include production lines associated with
products that have no expected future demand and two properties which were
disposed.





Of the $3.0 million severance charges
incurred during the nine months ended September 25, 2009, approximately $1.1
million related to the transfer of production operations from our facilities in
Europe and North Africa to China.  This program began in 2007 and is
now substantially completed.  The $1.1 million consists of a $1.6
million charge to adjust the liability to reflect the final negotiated benefits
for approximately 45 employees which was reduced by a $0.5 million adjustment in
the accrual to reflect final benefit projections for approximately 90
employees.





During the year ended December 26,
2008, we initiated a restructuring program at our European, Asian and North
American operations to reduce company-wide costs, which included direct and
indirect labor reductions.  During the nine months ended September 25,
2009, we incurred a charge for severance of $1.6 million and other associated
costs of $0.3 million in conjunction with this program.  There were
approximately 320 employees severed under these programs. We expect these plans
to be completed by the end of 2009.





The
change in our accrual related to severance, impairment and other associated
costs is summarized as follows (in millions):





ElectronicsBalance
      accrued at December 26, 2008
            
            $
            7.5Expensed
      during the nine months endedSeptember 25, 2009
            
            
            11.9Severance
      payments
            
            
            (7.1
            )Other
      associated costs
            
            
            (0.9
            )Fixed
      asset impairments and currency translation adjustments
            
            
            (9.8
            )Balance
      accrued at September 25, 2009
            
            $
            1.6





(12)          Financial
instruments





We utilize derivative financial
instruments, primarily forward exchange contracts, to manage foreign currency
risk. While these instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposure being
hedged. During the nine months ended September 25, 2009, we utilized forward
contracts to sell forward U.S. dollars to receive Danish krone and to sell
forward euro to receive Chinese renminbi.  These contracts were used
to mitigate the risk of currency fluctuations at our former operations in
Denmark and our current operations in the Peoples Republic of China
(“PRC”).  At September 25, 2009, we had eight foreign exchange forward
contracts outstanding to sell forward approximately 8.0 million euro, or
approximately $11.7 million, to receive Chinese renminbi.  For the
nine months ended September 25, 2009 and September 26, 2008, no financial
instruments were designated as hedges.




20
 Table of Contents





Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(12)          Financial
instruments, continued





The following presents the
classifications and fair values of our derivative instruments not designated as
hedges in our Consolidated Balance Sheets and our Consolidated Statements of
Operations (in thousands):







Consolidated
Balance Sheets
 (Asset
derivative)





Derivatives
            
            Classification
            
            September
      25, 2009
            
            
            September
      26,2008Foreign
      exchangeforward contracts
            
            Prepaid
      expenses andother current assets
            
            $
            (0.9
            )
            
            $
            0.1Total
            
            
            
            $
            (0.9
            )
            
            $
            0.1







Consolidated
      Statements of Operations
              (Unrealized/realized
      gains/(losses))Three
      Months Ended
            
            
            Nine
      Months EndedSeptember
      25,
            
            
            September
      26,
            
            
            September
      25,
            
            
            September
      26,Derivatives
            
            Classification
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Foreign
      exchangeforward
      contracts
            
            Other
      income(expense),
      net
            
            $
            (0.6
            )
            
            $
            0.1
            
            
            $
            (0.6
            )
            
            $
            0.1Total
            
            
            
            $
            (0.6
            )
            
            $
            0.1
            
            
            $
            (0.6
            )
            
            $
            0.1





We have categorized our recurring
financial assets and liabilities on our Consolidated Balance Sheets into a
three-level fair value hierarchy based on inputs used for valuation, which are
categorized as follows:





Level 1
–  Financial assets and liabilities whose values are based on quoted
prices for identicalassets or liabilities in an active public
market.





Level 2
–  Financial assets and liabilities whose values are based on quoted
prices in markets thatare not active or a valuation using model inputs that are
observable for substantially the full term ofthe asset or
liability.





Level 3
–  Financial assets and liabilities whose values are based on prices
or valuation techniquesthat require inputs that are both unobservable and
significant to the overall fair value measurement.These inputs reflect
management’s assumptions and judgments when pricing the asset or
liability.


21
 Table of Contents


Technitrol,
Inc. and Subsidiaries


Notes to Unaudited Consolidated
Financial Statements, continued





(12)           Financial
instruments, continued





The following table presents our fair
value hierarchy for those financial assets and liabilities measured at fair
value on a recurring basis in our Consolidated Balance Sheets as of September
25, 2009 (in millions):





September
      25,
              2009
            
            
            Quoted
      Prices
              In
      Active Markets for
              Identical
      Assets
              (Level 1)
            
            
            Significant
              Other
              Observable
              Inputs
              (Level 2)
            
            
            Significant
              Unobservable
              Inputs
              (Level 3)AssetsAvailable-for-sale
      securities (1)
            
            $
            7.2
            
            
            $
            7.2
            
            
            $
            --
            
            
            $
            --Other
      (2)
            
            
            (0.9
            )
            
            
            --
            
            
            
            (0.9
            )
            
            
            --Total
            
            $
            6.3
            
            
            $
            7.2
            
            
            $
            (0.9
            )
            
            $
            --





(1) Amounts
include grantor trust investments in our Consolidated Balance
Sheets.


(2) Amounts
include forward contracts outstanding in our Consolidated Balance
Sheets.





We currently have non-financial assets
and non-financial liabilities that are required to be measured at fair value on
a recurring basis.  Management believes that there is no material risk
of loss from changes in inherent market rates or prices in our financial
instruments due to the immateriality of our financial instruments in relation to
our Consolidated Balance Sheets.





Our financial instruments, including
cash and cash equivalents and long-term debt, our financial assets, including
accounts receivable and inventories, and our financial liabilities, including
accounts payable and accrued expenses, are exposed to both interest rate risk
and foreign currency risk.  We have policies relating to these
financial instruments and their associated risks and continually monitor
compliance with these policies.  All of our financial instruments and
financial assets approximate fair value, as presented on our Consolidated
Balance Sheets.  Particularly, all the outstanding borrowings under
our current credit facilities have variable interest rates that approximate
their fair value.





(13)          Business segment
information





For the three and nine months ended
September 25, 2009 and September 26, 2008, there were immaterial amounts of
intersegment revenues eliminated in consolidation. During the second quarter of
2009, the basis for determining segment financial information changed due to the
classification of our Electrical segment as a held-for-sale discontinued
operation.  We currently have one reportable segment,
Electronics.  As a result, segment disclosures required under ASC
Topic 280, Segment
Reporting (“ASC 280”) are no longer required.  We will continue
to disclose enterprise-wide information in our Annual Report on Form 10-K to the
extent required.





22
 Table of Contents


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 the “Risk Factors”
section of this report on pages 35 through 43.





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 26, 2008 describes the significant accounting policies and methods used
in the preparation of the Consolidated Financial Statements including certain
judgments, assumptions and 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;


· Purchase
accounting;


· Goodwill
and identifiable intangibles;


· Income
taxes;


· Defined
benefit plans;


· Contingency
accruals; and


· Severance,
impairment and other associated costs.





Actual
results could differ from these estimates. 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 26, 2008.





Overview





In
February 2009, we announced our intention to explore monetization alternatives
with respect to our Electrical segment, a producer of a full array of precious
metal electrical contact products that range from materials used in the
fabrication of electrical contacts to completed contact
subassemblies.  During the second quarter of 2009, we determined that
Electrical met the qualifications to be reported as a discontinued operation in
our Consolidated Statement of Operations for all periods
presented.  Also, the assets and liabilities of Electrical are
considered held for sale and reported as current on our Consolidated Balance
Sheet.  Whether in whole or in part, we expect a disposition to be
completed by the end of June 2010.  In addition, on June 25, 2009, we
divested Electronics’ Medtech components business for approximately $201.4
million. These proceeds are subject to final working capital and financial
indebtedness adjustments. All open customer orders were transferred at the date
of sale. We have no material continuing involvement with the operations of
Medtech after June 25, 2009.





As a
result of reporting Electrical as a discontinued operation, we only have one
reportable segment, our Electronic Components Group, which we refer to as
Electronics and is known as Pulse in its markets.  Electronics is a
world-wide producer of precision-engineered electronic components. 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 annual revenues of our primary
markets and our share of those markets relative to our competitors.




23
 Table of Contents





General.  We define
net sales as gross sales less returns and allowances. We sometimes refer to net
sales as revenue.





Historically,
our gross margin has been significantly affected by acquisitions, product mix
and capacity utilization.  Our markets are characterized by relatively
short product life cycles.  As a result, significant product turnover
occurs each year and, subsequently, there are frequent variations in the prices
of products sold.  Due to the constantly changing quantity of part
numbers we offer and frequent changes in our average selling prices, we cannot
isolate 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.





We
believe our focus on acquisitions, technology and cost reduction programs
provides us opportunities for future growth in net sales and operating
profit.  However, unfavorable economic and market conditions may
result in a reduction in demand for our products, thus, negatively impacting our
financial performance.





Acquisitions.  Acquisitions
have been an important part of our growth strategy.  In many cases,
our moves into new product lines and extensions of our existing product lines or
markets have been facilitated by acquisitions. Our acquisitions continually
change our product mix.  We have made numerous acquisitions in recent
years which have broadened our product offerings in new or existing
markets.  We may pursue additional acquisition opportunities in the
future.





Divestitures. We engage in
divestitures to streamline our operations, focus on our core businesses and
strengthen our financial position. For example, in June 2009 we divested our
Medtech components business for approximately $201.4 million, subject to final
working capital and financial indebtedness adjustments.  Medtech was
purchased as part of the Sonion acquisition. Also, in April 2009 we divested our
non-core MEMS business for an amount immaterial to our Consolidated Financial
Statements.  In February 2009, we announced our intention to explore
monetization alternatives with respect to Electrical.  As of September
25, 2009, the assets and liabilities of Electrical and the remaining assets and
liabilities of MEMS are classified as held for sale in our Consolidated Balance
Sheet.  Medtech, MEMS and Electrical are classified as discontinued
operations on our Consolidated Statements of Operations for all periods
presented.





Technology.  Our
products must evolve along with changes in technology, availability and price of
raw materials, design and preferences of the end users of our products. Also,
regulatory requirements occasionally impact the design and functionality of our
products. We address these conditions, as well as our customers’ demands, by
continuing to invest in product development and by maintaining a diverse product
portfolio which contains both mature and emerging technologies.





Management
Focus.  Our executives focus on a number of important metrics
to evaluate our financial condition and operating performance.  For
example, we use revenue growth, gross profit as a percentage of revenue,
operating profit as a percentage of revenue and economic profit as performance
measures.  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 also reviewed, as this
reflects 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 free cash flow,
days sales outstanding, days payables outstanding, inventory turnover and cash
conversion efficiency. Additionally, as the continued success of our business is
largely dependent on meeting and exceeding customers’ expectations,
non-financial performance measures relating to product development, 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 our operations so that
capacity is optimally matched to current and anticipated future revenues and
unit demand. Future expenses associated with these programs will depend on
specific


24
 Table of Contents







During
the nine months ended September 25, 2009, we determined that approximately $71.0
million of our wireless group’s goodwill was impaired.  Refer to Note
5 in the Notes to the Unaudited Consolidated Financial Statements for further
details.  Additionally, we incurred a charge of $11.9 million for a
number of cost reduction actions.  These accruals include severance
and related payments of $3.0 million and fixed asset impairments of $8.9
million.  The impaired assets include production lines associated with
products that have no expected future demand and two properties which were
disposed.





During
the year ended December 26, 2008, we determined that $310.4 million of goodwill
and other intangibles were impaired, including $170.3 goodwill and identifiable
intangibles of a discontinued operation.  Additionally, we incurred a
charge of $13.2 million to our continuing operations for a number of cost
reduction actions.  These accruals include severance and related
payments and other associated costs of $5.5 million resulting from the
termination of manufacturing and support personnel at Electronics’ operations
primarily in Asia, Europe and North America and $4.1 million of other costs
primarily resulting from the transfer of manufacturing operations from Europe
and North Africa to Asia.  Additionally, we recorded fixed asset
impairments of $3.6 million.





International Operations. At
September 25, 2009, we had manufacturing operations in five countries, three of
which only manufacture Electrical products, and had significant net sales in
U.S. dollars, euros and Chinese renminbi.  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 and the renminbi and the U.S. dollar and the euro and each of these and
other foreign currencies relative to each other.  Sales and net
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.  Certain divisions of our wireless
and power groups’ sales are denominated primarily in euros and
renminbi.  Net earnings may also be affected by the mix of sales and
expenses by currency within each group.  We may also experience a
positive or negative translation adjustment to equity because our investments in
non-U.S. dollar-functional subsidiaries may translate to more or less U.S.
dollars 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
currency to be hedged and the costs associated with the contracts.  At
September 25, 2009, we had eight foreign exchange forward contracts outstanding
to sell forward approximately 8.0 million euro, or approximately $11.7 million,
to receive Chinese renminbi.   The fair value of these forward
contracts was $(0.9) million as determined through use of Level 2 fair value
inputs.  These contracts are used to mitigate the risk of currency
fluctuations at our Chinese operations.




25
 Table of Contents


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 Hong Kong and the PRC.  This mix of income can
vary significantly from one period to another. Additionally, our effective
income tax rate will be impacted from period to period by significant
transactions and the deductibility of severance, impairment, financing and other
associated costs.  We have benefited over the years from favorable tax
incentives and other tax policies, however, there is no guarantee as to how long
these benefits will continue to exist.  Also, changes in operations,
tax legislation, estimates, judgments and forecasts may affect our tax rate from
period to period.





Except in
limited circumstances, we have not provided for U.S. income and foreign
withholding taxes on our non-U.S. subsidiaries’ undistributed earnings. Such
earnings may include our pre-acquisition earnings of foreign entities acquired
through stock purchases, which, with the exception of approximately $40.0
million, are intended to be reinvested outside of the U.S.
indefinitely.





Results
of Operations





Three
months ended September 25, 2009 compared to the three months ended September 26,
2008





The table below presents our results
from continuing operations and the changes in those results from period to
period in both U.S dollars and percentage (in thousands):






Three
      Months Ended
            
            
            
            
            
            
            
            
            Results
      as %September
      25,
            
            
            September
      26,
            
            
            Change
            
            
            Change
            
            
            of
      Net Sales2009
            
            
            2008
            
            
            $
            
            
            %
            
            
            2009
            
            
            2008Net
      sales
            
            $
            101,381
            
            
            $
            168,974
            
            
            $
            (67,593
            )
            
            
            (40.0
            )%
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            74,154
            
            
            
            126,339
            
            
            
            52,185
            
            
            
            41.3
            
            
            
            (73.1
            )
            
            
            (74.8
            )Gross
      profit
            
            
            27,227
            
            
            
            42,635
            
            
            
            (15,408
            )
            
            
            (36.1
            )
            
            
            26.9
            
            
            
            25.2Selling,
      general and  administrative expenses
            
            
            23,399
            
            
            
            29,144
            
            
            
            5,745
            
            
            
            19.7
            
            
            
            (23.1
            )
            
            
            (17.2
            )Severance,
      impairment and other associated costs
            
            
            2,619
            
            
            
            4,860
            
            
            
            2,241
            
            
            
            46.1
            
            
            
            (2.6
            )
            
            
            (2.9
            )Operating
      income
            
            
            1,209
            
            
            
            8,631
            
            
            
            (7,422
            )
            
            
            (86.0
            )
            
            
            1.2
            
            
            
            5.1Interest
      expense, net
            
            
            (757
            )
            
            
            (1,022
            )
            
            
            265
            
            
            
            25.9
            
            
            
            (0.7
            )
            
            
            (0.6
            )Other
      income (expense), net
            
            
            3,190
            
            
            
            (833
            )
            
            
            4,023
            
            
            
            483.0
            
            
            
            3.1
            
            
            
            (0.5
            )Earnings
      from continuingoperations
      before incometaxes
            
            
            3,642
            
            
            
            6,776
            
            
            
            (3,134
            )
            
            
            (46.3
            )
            
            
            3.6
            
            
            
            4.0Income
      tax expense (benefit)
            
            
            1,368
            
            
            
            (2,902
            )
            
            
            (4,270
            )
            
            
            (147.1
            )
            
            
            (1.3
            )
            
            
            1.7Net
      earnings from continuing operations
            
            $
            2,274
            
            
            $
            9,678
            
            
            $
            (7,404
            )
            
            
            (76.5
            )%
            
            
            2.3
            %
            
            
            5.7
            %




Net Sales.  Our
consolidated net sales decreased by 40.0% as a result of the decline in customer
demand resulting from the adverse developments in the global
economy.  Specifically, decreased demand for certain Electronics’
wireless, network communications and power products negatively affected sales in
the third quarter of 2009 as compared to the same period of
2008.  Also, a stronger U.S. dollar relative to




26
 Table of Contents


Cost of Sales.  As
a result of lower sales, our cost of sales decreased.  Our
consolidated gross margin for the three months ended September 25, 2009 was
26.9% compared to 25.2% for the three months ended September 26,
2008.  The primary factors that caused our consolidated gross margin
increase were the positive effects of cost-reducing and price-increasing
activities initiated in late 2008 as a response to the adverse conditions in the
global economy.





Selling, General and Administrative
Expenses.  Total selling, general and administrative expenses
decreased primarily due to our overall emphasis on cost reducing measures
initiated in late-2008.  Expenses were reduced in virtually all
areas.  Intangible amortization expense declined compared to the 2008
period as a result of the impairment charges incurred in the fourth quarter of
2008.  Partially offsetting these decreases were $1.2 million of
unplanned legal expenses and dispute settlements.





Research,
development and engineering expenses (“RD&E”) are included in selling,
general and administrative expenses. For the three months ended September 25,
2009 and September 26, 2008, respectively, RD&E was as follows (in thousands):





2009
            
            
            2008RD&E
            
            $
            7,022
            
            
            $
            9,538Percentage
      of sales
            
            
            6.9
            %
            
            
            5.6
            %




The
decrease in research, development and engineering expenses is due to cost
reducing measures initiated in late 2008.  However, as a percentage of
sales, 2009 spending was at a higher level than the 2008 period.  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, Impairment and Other
Associated Costs.  We recorded approximately $2.6 million of
severance and fixed asset impairments during the three months ended September
25, 2009.  These charges primarily relate to writing down a property
held for sale prior to its disposal.





Interest.  Net
interest expense decreased primarily as a result of decreased debt levels and
lower interest rates incurred during the three months ended September 25,
2009 as compared to the comparable period ended September 26,
2008.  Interest expense on our outstanding loans was allocated between
continuing and discontinued operations on a pro-rata basis for the third
quarters of 2009 and 2008, based upon the debt expected to be retired from the
dispositions compared to total debt outstanding.  Amortization of our
capitalized loan fees was also allocated in a similar manner.





Other.  The change
from other expense to other income from the third quarter of 2008 to the
comparable period in 2009 is primarily attributable to net foreign exchange
gains of approximately $3.0 million realized during the three months ended
September 25, 2009, as compared to foreign exchange losses of approximately $0.8
million realized during the comparable period of 2008.  The increase
in foreign exchange gains was due to the effects of the overall strengthening of
the U.S. dollar to euro in the third quarter of 2009 as compared to the same
period of 2008.  Gains were also realized as a result of remeasuring
intercompany advances and loans into their respective functional
currencies.




Income Taxes.  The
effective tax rate for the three months ended September 25, 2009 was 37.6%
compared to a benefit of (42.8)% for the three months ended September 26,
2008.  The increase in the effective tax rate is primarily due to
certain losses and restructuring charges incurred by entities in high-tax
jurisdictions where the future tax benefit is unlikely to be
realized.


27
 Table of Contents


Nine
months ended September 25, 2009 compared to the nine months ended September 26,
2008





The table below presents our results
from continuing operations and the changes in those results from period to
period in both U.S dollars and percentage (in thousands):







Nine
      Months Ended
            
            
            
            
            
            
            
            
            Results
      as %September
      25,
            
            
            September
      26,
            
            
            Change
            
            
            
            Change
            
            
            
            of
      Net Sales2009
            
            
            2008
            
            
            $
            
            
            
            %
            
            
            
            2009
            
            
            
            2008Net
      sales
            
            $
            293,425
            
            
            $
            501,978
            
            
            $
            (208,553
            )
            
            
            (41.5
            )%
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            220,305
            
            
            
            381,827
            
            
            
            161,522
            
            
            
            42.3
            
            
            
            (75.1
            )
            
            
            (76.1
            )Gross
      profit
            
            
            73,120
            
            
            
            120,151
            
            
            
            (47,031
            )
            
            
            (39.1
            )
            
            
            24.9
            
            
            
            23.9Selling,
      general and  administrative expenses
            
            
            66,503
            
            
            
            93,136
            
            
            
            26,633
            
            
            
            28.6
            
            
            
            (22.7
            )
            
            
            (18.6
            )Severance,
      impairment and other associated costs
            
            
            82,867
            
            
            
            9,272
            
            
            
            (73,595
            )
            
            
            (793.7
            )
            
            
            (28.2
            )
            
            
            (1.8
            )Operating
      (expense) income
            
            
            (76,250
            )
            
            
            17,743
            
            
            
            (93,993
            )
            
            
            (529.7
            )
            
            
            (26.0
            )
            
            
            3.5Interest
      expense, net
            
            
            (2,091
            )
            
            
            (2,147
            )
            
            
            56
            
            
            
            (2.6
            )
            
            
            (0.7
            )
            
            
            (0.4
            )Other
      income, net
            
            
            5,083
            
            
            
            6,051
            
            
            
            968
            
            
            
            16.0
            
            
            
            1.7
            
            
            
            1.2(Loss)
      earnings fromcontinuing
      operationsbefore
      income taxes
            
            
            (73,258
            )
            
            
            21,647
            
            
            
            (94,905
            )
            
            
            (438.4
            )
            
            
            (25.0
            )
            
            
            4.3Income
      tax expense
            
            
            2,856
            
            
            
            589
            
            
            
            (2,267
            )
            
            
            (384.9
            )
            
            
            (1.0
            )
            
            
            (0.1
            )Net
      (loss) earnings fromcontinuing
      operations
            
            $
            (76,114
            )
            
            $
            21,058
            
            
            $
            (97,172
            )
            
            
            (461.4
            )%
            
            
            (26.0
            )%
            
            
            4.2
            %





Net Sales.  Our
consolidated net sales decreased by 41.5% as a result of the decline in customer
demand resulting from the adverse developments in the global
economy.  Specifically, decreased demand for certain Electronics’
wireless, network communications and power products negatively affected sales in
the nine months ended September 25, 2009 as compared to the comparable period of
2008.  Also, a stronger U.S. dollar relative to the euro experienced
during the nine months ended September 25, 2009 as compared to the same period
of 2008 resulted in lower U.S. dollar reported sales.





Cost of Sales.  As
a result of lower sales, our cost of sales decreased.  Our
consolidated gross margin for the nine months ended September 25, 2009 was 24.9
% compared to 23.9 % for the nine months ended September 26,
2008.  The primary factors that caused our consolidated gross margin
increase were the positive effects of cost-reduction and price increasing
activities initiated in late 2008 as a response to the adverse conditions in the
global economy.  Results for the nine months ended September 26, 2008
were also negatively affected by increased training and overtime costs caused by
a temporary decline in China’s workforce, which were partially offset by a
decline in operating leverage as a result of decreased sales of Electronics’
wireless, network communications and power products during 2009.





Selling, General and Administrative
Expenses.  Total selling, general and administrative expenses
decreased primarily due to our overall emphasis on cost reducing measures
initiated in late-2008.  Expenses were reduced in virtually all
areas.  Also, intangible amortization expense declined compared to the
2008 period as a result of the impairment charges incurred in the fourth quarter
of 2008.




28
 Table of Contents





Research,
development and engineering expenses (“RD&E”) are included in selling,
general and administrative expenses. For the nine months ended September 25,
2009 and September 26, 2008, respectively, RD&E was as follows (in thousands):





2009
            
            
            2008RD&E
            
            $
            20,087
            
            
            $
            29,944Percentage
      of sales
            
            
            6.8
            %
            
            
            6.0
            %





The
decrease in research, development and engineering expenses is due to cost
reducing measures initiated in 2008.  However, as a percentage of
sales, 2009 spending was at a higher level as compared to the 2008
period.  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
that is consistent with market activity.





Severance, Impairment and Other
Associated Costs.  During the nine months ended September 25,
2009, we determined that approximately $71.0 million of our wireless group’s
goodwill was impaired.  Refer to Note 5 in the Notes to the Unaudited
Consolidated Financial Statements for further details.  Additionally,
we incurred a charge of $11.9 million for a number of cost reduction
actions.  These accruals include severance and related payments of
$3.0 million and fixed asset impairments of $8.9 million.  The
impaired assets include production lines associated with products that have no
expected future demand and two properties which were disposed.





Interest.  Net
interest expense in the nine months ended September 25, 2009 was equivalent to
the amount realized in the same period of 2008. Interest on our outstanding
loans was allocated between continuing and discontinued operations on a pro-rata
basis for the nine months ended September 25, 2009 and the comparable period in
2008, based upon the actual and expected debt to be retired from the
dispositions compared to total debt outstanding.  Amortization of our
capitalized loan fees was also allocated in a similar manner.





Other.  The
decrease in other income is primarily attributable to lower net foreign exchange
gains of approximately $4.8 million realized during the nine months ended
September 25, 2009, as compared to foreign exchange gains of approximately $5.9
million realized during the comparable period of 2008.  The primary
reason for the decrease in foreign exchange gains during the nine months ended
September 25, 2009 was due to the effects of a larger strengthening of the U.S.
dollar to euro during 2008 as compared to 2009.





Income Taxes.  The
effective tax rate for the nine months ended September 25, 2009 was an expense
of (3.9)% as compared to an expense of 2.7% for the nine months ended September
26, 2008.  The 2009 effective tax rate was impacted by the $71.0
million of goodwill impairment charges recorded in 2009 which were
non-deductible.  In addition, the 2009 tax rate was negatively
impacted by certain losses and restructuring charges incurred by entities in
high-tax jurisdictions where the future tax benefit is unlikely to be realized.
Excluding the $71.0 million impairment charge, the effective tax rate would have
been 13.7% for the nine months ended September 25, 2009.




Business
Outlook





The
adverse developments in the financial markets and the dramatic contractions in
the global economy that began in 2008 have increased our exposure to liquidity
and credit risks. We are exposed to market risk resulting from changes in prices
of commodities, such as non-precious metals, fuels and plastic
resins.  To the extent we cannot transfer these costs to our
customers, fluctuations in commodity prices will impact our gross margin and
available cash.  We are also exposed to financial risk resulting from
changes in interest and foreign currency rates, as well as credit risk of
our customers.




29
 Table of Contents





Considering the issues mentioned above,
as well as other risks inherent in our business and taking into account our
significant reduction of debt as a result of the Medtech sale, we believe we
have ample liquidity to fund our business requirements.  This belief
is based on our current balances of cash and cash equivalents, our history of
positive cash flows from continuing operations, including $23.9 million for the
nine months ended September 25, 2009, and access to our multi-currency credit
facility.  However, our credit agreement requires that we maintain
certain financial covenants which are measured at the end of each fiscal
quarter.  The primary covenants are total debt and fixed charges
compared to our rolling twelve-month EBITDA.  If we are not able to
maintain the EBITDA level required relative to our total debt or fixed charges,
we would default on our covenants.  However, we believe that we will
continue generating sufficient EBITDA and free cash flows in the foreseeable
future to remain compliant with our covenants.





Net sales in the three months ended
September 25, 2009 exceeded net sales for the three months ended June 26, 2009
in each of our product groups.  Although we expect net sales to
continue to improve in the three months ended December 25, 2009, customer and
product mix will impact our gross margin, net income, EBITDA and cash available
to repay our debt.  For example, while handset production generally
has begun to recover from earlier in 2009, a significant portion of handset
antenna business currently served by our communication group has begun a
transition away from original equipment manufacturer (“OEM”) driven hardware
development and manufacturing, a transition led by a large OEM customer seeking
to purchase full handset modules and all components within from single
manufacturing sources in order to reduce costs.  Accordingly, our
communication group is adjusting its marketing and engineering efforts to
significantly increase its support for OEMs which have not embraced this
sourcing change and for the sources which will provide full handsets to the OEM
principally driving this change.





Liquidity
and Capital Resources





We have presented all assets and
liabilities of Electrical and MEMS as current due to their classification as
held for sale.  Such classification resulted in approximately $10.6
million of assets and $0.2 million of liabilities to be classified as current
which would otherwise be considered long-term.





Including
assets and liabilities held for sale, working capital as of September 25, 2009
was $110.1 million, compared to $175.9 million as of December 26,
2008.  This $65.8 million decrease was primarily due to decreases in
trade receivables, prepaid expenses and inventories that resulted primarily from
the Medtech disposition.  Partially offsetting these decreases were
reductions in accounts payable, accrued expenses and other current liabilities
and the elimination of current installments of long-term debt.  Cash
and cash equivalents, which are included in working capital, decreased from
$41.4 million as of December 26, 2008 to $39.5 million as of September 25,
2009.





We
present our statement of cash flows using the indirect method.  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.  Cash flows from discontinued operations have been
separated from continuing operations and are disclosed in the aggregate by each
cash flow activity.





Net cash
provided by operating activities was $23.9 million for the nine months ended
September 25, 2009 as compared to $32.1 million in the comparable period of
2008, a decrease of $8.2 million. The decrease is primarily a result of lower
earnings incurred in the nine months ended September 25, 2009 as compared to the
nine months ended September 26, 2008 which was offset by overall reductions in
working capital in 2009 as compared to increases in 2008.





Capital
expenditures were $0.8 million during the nine months ended September 25, 2009
and $9.6 million in the comparable period of 2008. The decrease of $8.8 million
in the 2009 period was due primarily to a concentrated effort in 2009 to limit
new investment to only key programs.  We make capital




30
 Table of Contents







During
the nine months ended September 25, 2009, we received approximately $207.8
million upon the sale of Medtech and MEMS.  The majority of these net
proceeds were applied to our outstanding debt.





We used
$5.6 million for dividend payments during the nine months ended September 25,
2009.  On August 3, 2009, we announced a quarterly cash dividend of
$0.025 per common share, payable on October 16, 2009 to shareholders of record
on October 2, 2009.  This quarterly dividend resulted in a cash
payment to shareholders of approximately $1.0 million in the fourth quarter of
2009.  We expect to continue making quarterly dividend payments for
the foreseeable future.  Effective for dividends after February 2009,
our credit agreement prohibits us from paying more than $5.0 million in cash
dividends per year until our debt outstanding is lower than two and one-half
times our EBITDA.





In the
nine months ended September 25, 2009, we contributed approximately $6.1 million
to our principal defined benefit plans and we expect to contribute approximately
$11.0 million in the 2009 fiscal year.  Of the $11.0 million we expect
to contribute, approximately $4.9 million is contingent upon the sale of
substantially all of the Electrical business.





We were in compliance with all
covenants of our credit agreement in effect as of September 25,
2009.  On June 8, 2009, we finalized an amendment to our credit
agreement that allowed for the divestiture of Medtech and Electrical and
adjusted certain debt covenants and other provisions in connection with such
divestitures. Our credit agreement requires that we maintain certain financial
covenants which are measured at the end of each fiscal quarter.  The
primary covenants are total debt and fixed charges compared to our rolling
twelve-month EBITDA.  If we are not able to maintain the EBITDA level
required relative to our total debt or fixed charges, we would default on our
covenants.  As of September 25, 2009, we had $127.0 million of total
outstanding borrowings under our amended agreement’s credit facility. Refer to
Note 8 to our Unaudited Consolidated Financial Statements for further
details.





Electrical,
a discontinued operation, uses silver and other precious metals in manufacturing
some of its electrical contacts, contact materials and contact subassemblies.
Historically, Electrical has leased or held these materials through
consignment-type arrangements with its 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 Electrical to minimize
its inventories. Electrical’s terms of sale generally allow it to charge
customers for precious metal content based on the market value of precious metal
on the day after shipment to the customer.  Suppliers invoice
Electrical based on the market value of the precious metal on the day after
shipment to the customer as well.  Thus far, Electrical has been
successful in managing the costs associated with its precious metals. While
limited amounts are purchased for use in production, the majority of precious
metal inventory continues to be leased or held on consignment. If leasing or
consignment costs increase significantly in a short period of time, and
Electrical is unable to recover these increased costs through higher sales
prices, a negative impact on Electrical’s results of operations and liquidity
may result. Leasing and consignment fee increases are caused primarily by
increases in interest rates or volatility in the price of the consigned
material.  Similarly, if Electrical is unable to maintain the
necessary bank commitments and credit limits necessary for its precious metal
leasing and consignment facilities, or obtain alternative facilities on a timely
basis, Electrical may be required to finance the direct purchase of precious
metals, reduce its production volume or take other actions that could negatively
impact its financial condition and results of operations.





Electrical
had commercial commitments outstanding at September 25, 2009 of approximately
$124.6 million due under precious metal consignment-type leases. This represents
an increase of $1.8 million from the $122.8 million outstanding as of December
26, 2008, which was caused by higher average silver prices offset by a
significant decrease in volume of silver leased.




31
 Table of Contents




The
principal material changes in our contractual obligations during the nine months
ended September 25, 2009 was the amendment of our credit facility that was
finalized on June 8, 2009, the incremental benefits recognized on the Technitrol
Inc. Supplemental Retirement Plan and the elimination of any obligations related
to our former Medtech business.





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 expect to reinvest earnings outside of the
United States, with the exception of approximately $40.0 million, because we
anticipate that a significant portion of our opportunities for growth in the
coming years will be abroad.  We have not accrued U.S. income and
foreign withholding taxes on foreign earnings that have been indefinitely
invested abroad. If these earnings were brought back to the United States,
significant tax liabilities could be incurred in the United States as several
countries in which we operate have tax rates significantly lower than the U.S.
statutory rate.





All
retained earnings are free from legal or contractual restrictions as of
September 25, 2009, with the exception of approximately $27.9 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 $27.9 million is $5.2 million of retained earnings of a majority owned
subsidiary.  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.





New
and Recently Adopted Accounting Pronouncements





Please see Note 1 to the Notes to
Unaudited Consolidated Financial Statements beginning on page 7 for a
description of new and recently adopted accounting pronouncements.





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 26, 2008.





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 25, 2009.  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 nine
months ended September 25, 2009 that have materially affected, or are reasonably
likely to materially affect, these controls or procedures.




32
 Table of Contents





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.




33





PART II. OTHER INFORMATION





Item
      1
            Legal Proceedings
            NoneItem
      1a
            Risk FactorsRisk
      Factors are on page 35.Item 2
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            NoneItem 3
            Defaults
      Upon Senior Securities
            NoneItem 4
            Submission
      of Matters to a Vote of Security Holders
            NoneItem 5
            Other
      Information
            NoneItem 6
            Exhibits(a)
      ExhibitsThe
      Exhibit Index is on page 44.


34
 Table of Contents




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, which may reduce our profitability and/or our ability to
retire debt.





Our
components are used in various products sold in the electronics market. Markets
are cyclical. Generally, the demand for our components reflects the demand for
products in the electronics market.  A contraction in demand would
result in a decrease in sales of our products, as our customers:





·  may
cancel existing orders;


·  may
introduce fewer new products;


·  may
discontinue current products; and


·  may
decrease their inventory levels.





A
decrease in demand for our products could have a significant adverse effect on
our operating results, profitability and cash flows which may adversely affect
our liquidity, our ability to retire debt or our ability to comply with debt
covenants.  Accordingly, we may experience volatility in our revenues,
profits and cash flows.





Reduced
prices for our products may adversely affect our profit margins if we are unable
to reduce our cost structure.





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 concurrently reducing costs through
efficient raw material procurement, process and product improvements and
focusing operating expense levels. Our profit margins and cash flows may suffer
if we are unable to reduce our overall cost structure relative to decreases in
sales prices.




35
 Table of Contents





Rising
raw material and production costs may decrease our gross margin.





We use commodities such as copper,
brass, aluminum, nickel and plastic resins in manufacturing our
products.  Prices of these and other raw materials have experienced
significant volatility in the recent past.  Other manufacturing costs,
such as direct and indirect labor, energy, freight and packaging costs, also
directly impact the costs of our products.  If we are unable to pass
increased costs through to our customers or recover the increased costs through
production efficiencies, our gross margins may suffer.





An
inability to adequately respond to changes in technology, applicable standards
or customer needs may decrease our sales.





We operate in an industry characterized
by rapid change caused by the frequent emergence of new technologies and
standards.  Generally, we expect life cycles for 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.  Improving performance and
reducing costs for our customers requires continuing development of new alloys
and products.  Our inability to react quickly and efficiently to
changes in technology, standards or customers’ needs may decrease our sales or
margins.





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.  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 prior or future acquisitions or our decisions to
strategically divest our current businesses may adversely affect our
business.





We have
completed several acquisitions in recent years and we continually seek
acquisitions to grow our businesses. We may fail to derive significant benefits
from our acquisitions. In addition, if we fail to achieve sufficient financial
performance from an acquisition, long-lived assets, such as property, plant and
equipment, goodwill and other intangibles, could become impaired and result in
the recognition of an impairment loss similar to the loss recorded in the nine
months ended September 25, 2009 and the year ended December 26,
2008.


The
success of any of our acquisitions depends on our ability to:
 
 ·
              successfully
      execute the integration or consolidation of the 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.
  36
  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;
 ·
              increase
      our debt and leverage;
 ·
              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.
 
 Alternatively,
we may also consider making strategic divestitures, which 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.
 
 In
addition, we may record impairment losses in the future.  We assess
the impairment of long-lived assets whenever events or changes in circumstances
indicate the carrying value may not be recoverable.  Factors we
consider important that could trigger an impairment review include significant
changes in the use of any asset, changes in historical trends in operating
performance, a significant decline in the price of our common stock, changes in
projected operating performance and significant negative economic
trends.
 
 Integration
of acquisitions 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 our existing
business and to report financial performance on a company-wide
level.  As a result of this practice, we do not separately track the
standalone performance of acquisitions after the date of the
transaction.  Consequently, investors cannot quantify the financial
performance and success of any individual acquisition or our consolidated
financial performance and success excluding the impact of
acquisitions.  In addition, our practice of rapidly integrating
acquisitions into our financial results may limit the ability of investors to
analyze any trends in our operating results over time.
 
 An
inability to identify, consummate or integrate acquisitions may slow our future
growth.
 
 We plan
to continue to identify and consummate additional acquisitions to further
diversify our businesses and to penetrate or expand 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 or integrate attractive acquisitions may reduce our growth rate and
our ability to penetrate new markets.
 
 If
any of our major customers terminates a substantial amount of existing
agreements, chooses not to enter into new agreements or elects not to submit
additional purchase orders for our products, our business may
suffer.
 
 Most of
our sales are made on a purchase order basis.  We have a concentration
of several primary customers that we rely on for a material amount of these
purchase orders.  To the extent we have agreements in place with these
customers, most of these agreements are either short-term in nature or provide
these customers with the ability to terminate the arrangement.  Such
agreements typically do not provide us with any material recourse in the event
of non-renewal or early termination.
  37
 
 We will
lose business and our revenues may decrease if one of these major
customers:
 
 ·
              does
      not submit additional purchase
orders;
 ·
              does
      not enter into new agreements with us;
or
 ·
              elects
      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 business 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’ future 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 or cash flows.
 
 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:
 
 ·
              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 lower prices causing a reduction in our
profit margins.
 
 Costs
associated with precious metals and base metals may not be
recoverable.
 
 Some of
Electrical’s raw materials, such as precious metals and certain base metals, are
considered commodities and are subject to price volatility. Electrical attempts
to limit its exposure to fluctuations in the cost of precious materials,
including silver, by obtaining the majority of the precious metal in its
facilities through leasing or consignment arrangements with suppliers.
Electrical then typically purchases the precious metal from its supplier at the
current market price on the day after shipment to the customer
  38
 
   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
its supply and demand. Consignment fees may increase if interest rates or the
price of the consigned material increase.
 
 Electrical’s
results of operations and liquidity may be negatively impacted if:
 
 ·
              Electrical
      is unable to enter into new leasing or consignment arrangements with
      similarly favorable terms after its existing agreements
      terminate;
 ·
              leasing
      or consignment fees increase significantly in a short period of time and
      Electrical is unable to recover these increased costs through higher sale
      prices;
 ·
              Electrical
      is unable to pass through higher base metals’ costs to its customers;
      or
 ·
              Electrical
      is unable to comply with existing leasing or consignment
      obligations.
 
 Competition
may result in reduced demand for our products and reduced sales.
 
 We
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;
 ·
              price;
 ·
              customer
      service; and
 ·
              delivery
      time.
 
 Our
inability to successfully compete on any or all of the above or other 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 exchange
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, such as China, 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.
  39
 
 Risks
inherent in doing business internationally may include:
 
 ·
              the
      inability to repatriate or transfer cash on a timely or efficient
      basis;
 ·
              economic
      and political instability;
 ·
              expropriation
      and nationalization;
 ·
              trade
      restrictions;
 ·
              capital
      and exchange control programs;
 ·
              transportation
      delays;
 ·
              uncertain
      rules of law;
 ·
              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.
 
 The
majority of our manufacturing occurs in the PRC.  Although the PRC has
a large and growing economy, political, legal and labor developments entail
uncertainties and risks. For example, wages have been increasing rapidly over
the last several years in southern China.  While China has been
receptive to foreign investment, its investment policies may not continue
indefinitely into the future and future policy changes may adversely affect our
ability to conduct our operations in these countries or the costs of such
operations.
 
 We have
benefited in prior years from favorable tax incentives and we operate in
countries where we realize favorable income tax treatment relative to the U.S.
statutory rate.  We have been granted special tax incentives,
including tax holidays, in jurisdictions such as the PRC.  This
favorable situation could change if these countries were to increase rates or
discontinue 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 similar tax incentives or policies.
Accordingly, in the event of changes in laws and regulations affecting our
international operations, we may not be able to continue to recognize or take
advantage of similar benefits in the future.
 
 Shifting
our operations between regions may entail considerable expense, capital usage
and opportunity costs.
 
 Within countries in which we operate,
particularly China, we sometimes shift 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
earnings charges and cash payments to account for severance, asset impairments,
write-offs, write-downs, moving expenses, start-up costs and inefficiencies, as
well as certain adverse tax consequences including the loss of specialized tax
incentives, non-deductible expenses or value-added tax
consequences.
 
 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 international subsidiaries
and may be 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 need for liquidity domestically or at a particular location that we
cannot fulfill through borrowings, equity offerings, or other internal or
external sources, we may experience unfavorable tax and earnings consequences
due to cash transfers.  These adverse consequences would occur, for
example, 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 a country such as the PRC. 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 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.
 
 40
 
 With the
exception of approximately $27.9 million of retained earnings as of September
25, 2009 primarily in 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. The $27.9 million includes $5.2 million of
retained earnings of a majority owned subsidiary.
 
 Losing
the services of our executive officers or our other highly qualified and
experienced employees could adversely affect our businesses.
 
 Our
success depends upon the continued contributions of our executive officers and
senior management, many of whom have numerous years of experience and would be
extremely difficult to replace. We must also attract and maintain experienced
and highly skilled engineering, sales and marketing, finance and manufacturing
personnel.  Competition for qualified personnel is often intense, and
we may not be successful in hiring and retaining these people. If we lose the
services of these key employees or cannot attract and retain other qualified
personnel, our businesses could be adversely affected. Our CEO has announced his
retirement effective no later than March 31, 2010 and our board of directors is
currently conducting a search for his successor.
 
 Public
health epidemics (such as flu strains or severe acute respiratory syndrome) or
natural disasters (such as earthquakes or fires) may disrupt operations in
affected regions and affect operating results.
 
 We
maintain extensive manufacturing operations in the PRC as do many of our
customers and suppliers.  A sustained interruption of our
manufacturing operations, or those of our customers or suppliers, resulting from
complications caused by a public health epidemic or natural disasters could have
a material adverse effect on our business and results of
operations.
 
 The
unavailability of insurance against certain business and product liability
risks may adversely affect our future operating results.
 
 As part of our comprehensive risk
management program, we purchase insurance coverage against certain business and
product liability risks.  However, not all risks are insured, and
those that are insured differ in covered amounts by type of risk, end market and
customer location. If any of our insurance carriers discontinues an insurance
policy, significantly reduces available coverage or increases our deductibles
and we cannot find another insurance carrier to write comparable coverage at
similar costs, or if we are not fully insured for a particular risk in a
particular place, then we may be subject to increased costs of uninsured or
under-insured losses which may adversely affect our operating
results.
 
 Also, our components, modules and other
products are used in a broad array of representative end products.  If
our insurance program does not adequately cover liabilities arising from the
direct use of our products or as a result of our products being used in our
customers’ products, we may be subject to increased costs of uninsured losses
which may adversely affect our operating results.
 
 Environmental
liability and compliance obligations may adversely 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.
 
 41
 
 If
violations of environmental laws should occur, we could be held liable for
damages, penalties, fines and remedial actions for contamination discovered at
our present or former facilities.  Our operations and results could be
adversely affected by any material obligations arising from existing laws or 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.
 
 Our
debt levels could adversely affect our financial position, liquidity and
perception of our financial condition in the financial markets.
 
 We were in compliance with the
covenants in our amended credit agreement as of September 25,
2009.  Outstanding borrowings against this agreement was $127.0
million at September 25, 2009.  We believe the severe economic crisis
that began in late 2008 and continues into 2009 has resulted in the mere
existence of this debt having a significant adverse affect on our share
price.  Our share price may continue to be depressed until the
perception of our leverage improves.
 
 Covenants with our lenders require
compliance with specific financial ratios that may make it difficult for us to
obtain additional financing on acceptable terms for future acquisitions or other
corporate needs.  Although we anticipate meeting our covenants in the
normal course of operations, our ability to remain in compliance with the
covenants may be adversely affected by future events beyond our
control.  Violating any of these covenants could result in being
declared in default, which may result in our lenders electing to declare our
outstanding borrowings immediately due and payable and terminate all commitments
to extend further credit.  If the lenders accelerate the repayment of
borrowings, we cannot provide assurance that we will have sufficient liquid
assets to repay our credit facilities and other indebtedness.  In
addition, certain domestic and international subsidiaries have pledged the
shares of certain subsidiaries, as well as selected accounts receivable,
inventory, machinery and equipment and other assets as collateral.  If
we default on our obligations, our lenders may take possession of the collateral
and may license, sell or otherwise dispose of those related assets in order to
satisfy our obligations.
 
 Our
results may be negatively affected by changing interest rates.
 
 We are subject to market risk from
exposure to changes in interest rates.  To mitigate the risk of
changing interest rates, we may utilize derivatives or other financial
instruments. We do not expect changes in interest rates to have a material
effect on our income or cash flows for the foreseeable future, although there
can be no assurances that interest rates will not significantly change or that
our results would not be negatively affected by such changes.
 
 Our
intellectual property rights may not be adequately protected.
 
 We may
not be successful in protecting our intellectual property through patent laws,
other regulations or by contract. As a result, other companies may be able to
develop and market similar products which could materially and adversely affect
our business. We may be sued by third parties for alleged infringement of their
proprietary rights and we may incur defense costs and possibly royalty
obligations or lose the right to use technology important to our
business.
 
 From time
to time, we receive claims by third parties asserting that our products violate
their intellectual property rights.  Any intellectual property claims,
with or without merit, could be time consuming and expensive to litigate or
settle and could divert management attention from administering our
business.  A third party asserting infringement claims against us or
our customers with respect to our current or future products may materially and
adversely affect us by, for example, causing us to enter into costly royalty
arrangements or forcing us to incur settlement or litigation costs.
  42
 
 Our
stock price, like that of many technology companies, has been and may continue
to be volatile.
 
 The
market price of our common stock may fluctuate as a result of variations in our
quarterly operating results and other factors, some of which may be beyond our
control.  These fluctuations may be exaggerated if the trading volume
of our common stock is low.  In addition, the market price of our
common stock may rise and fall in response to a variety of factors,
including:
 
 ·
              announcements
      of technological or competitive
developments;
 ·
              acquisitions
      or strategic alliances by us or our
competitors;
 ·
              divestitures
      of core and non-core businesses;
 ·
              the
      gain or loss of a significant customer or
order;
 ·
              the
      existence of debt levels which significantly exceed our cash
      levels;
 ·
              changes
      in our liquidity, capital resources or financial
  position;
 ·
              changes
      in estimates or forecasts of our financial performance or changes
      in  recommendations  by securities analysts regarding
      us or our industry; or
 ·
              general
      market or economic conditions.
  Worldwide
recession and disruption of financial markets.
  The
current slowdown in economic activity caused by the ongoing global recession and
the reduced availability of liquidity and credit has adversely affected our
business.  A continuation or worsening of the current difficult
financial and economic conditions could adversely affect our customers’ ability
to meet the terms of sale or our suppliers’ ability to fully perform according
to their commitments to us.
 
 Item
1b    Unresolved Staff Comments
 
 None


43
 Table of Contents




Exhibit Index2.1
                Share
      Purchase Agreement dated June 2, 2009 between Pulse Denmark ApS and
      Xilco A/S (incorporated by reference to Exhibit 2.1 to our Form 8-K dated
      June 2, 2009).3.1
                Amended
      and Restated Articles of Incorporation (incorporated by reference to
      Exhibit 3.1 to our Form 8-K dated December 27, 2007).3.3
                By-laws
      (incorporated by reference to Exhibit 3.3 to our Form 8-K dated December
      27, 2007).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).4.4
                Amendment
      No. 3 to the Rights Agreement, dated September  9, 2006, between
      Technitrol, Inc. and  Registrar and Transfer Company, as Rights
      Agent (incorporated by reference to Exhibit 4.4 to our Form 10-Q for the
      nine months ended September 26, 2008).4.5
                Amendment
      No. 4 to the Rights Agreement, dated September 5, 2008, between
      Technitrol, Inc. and Registrar and Transfer Company, as Rights Agent
      (incorporated by reference to Exhibit 4.5 to our Form 10-Q for the nine
      months ended September 26, 2008).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 February 15,
      2008 (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the
      three months ended March 28, 2008).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 10.4 to our Form 8-K dated May 15, 2008).10.5
                Credit
      Agreement, amended and restated as of February 19, 2009, among Technitrol,
      Inc. and certain of its subsidiaries, JPMorgan Chase Bank, N.A. as
      administrative agent, swing line lender and a letter of credit issuer, and
      other lenders party thereto (incorporated by reference to Exhibit 10.5 to
      our Form 10-Q for the three months ended March 27,
  2009).10.5(1)
                Amendment
      No. 1 dated as of June 2, 2009 among Technitrol, Inc. and certain of its
      subsidiaries, JPMorgan Chase Bank, N.A. and other lenders party thereto
      (incorporated by reference to Exhibit 10.5(1) to our Form 8-K dated June
      8, 2009).10.5(2)
                Waiver
      dated as of June 10, 2009 among Technitrol, Inc., JPMorgan Chase Bank,
      N.A. and other lenders party thereto (incorporated by reference to Exhibit
      10.5(2) to our Form 8-K dated June 15,
2009).
  44
 Table of Contents
  Exhibit Index,
      continued10.6
                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 our Registration Statement on Form S-3
      filed on February 28, 2002, File Number 333-81286).10.8(1)
                Technitrol,
      Inc. Grantor Trust Agreement dated July 5, 2006 between Technitrol, Inc.
      and Wachovia Bank, National Association (incorporated by reference to
      Exhibit 10.8(1) to our Form 8-K dated July 11, 2006).10.8(2)
                Technitrol,
      Inc. Supplemental Retirement Plan amended and restated effective December
      31, 2004 (incorporated by reference to Exhibit 10.8(2) to our Form 8-K
      dated December 31, 2008).10.8(3)
                Agreement
      dated September 24, 2009 (incorporated by reference to Exhibit 10.8(3) to
      our Form 8-K dated September 24, 2009).10.9
                Agreement
      between Technitrol, Inc. and James M. Papada, III, dated July 1, 1999, as
      amended April 23, 2001, relating to the Technitrol, Inc. Supplemental
      Retirement Plan (incorporated by reference to Exhibit 10.9 to Amendment
      No. 1 to our Registration Statement on Form S-3 filed on February 28,
      2002, File Number 333-81286).10.10
                Letter
      Agreement between Technitrol, Inc. and James M. Papada, III, dated April
      16, 1999, as amended October 18, 2000 (incorporated by reference to
      Exhibit 10.10 to Amendment No. 1 to our Registration Statement on Form S-3
      filed on February 28, 2002, File Number 333-81286).10.10(1)
                Letter
      Agreement between Technitrol, Inc. and James M. Papada, III dated April
      25, 2007 (incorporated by reference to Exhibit 10.10(1) to our Form 8-K
      dated May 1, 2007).10.10(2)
                Modification
      to Letter Agreement agreed to on February 15, 2008 (incorporated by
      reference to Exhibit 10.10(2) to our Form 8-K dated February 22,
      2008).10.11
                Form
      of Indemnity Agreement (incorporated by reference to Exhibit 10.11 to our
      Form 10-K for the year ended December 28, 2001).10.12
                Technitrol
      Inc. Supplemental Savings Plan (incorporated by reference to Exhibit 10.15
      to our Form 10-Q for the nine months ended September 26,
      2003).10.13
                Technitrol,
      Inc. 401(k) Retirement Savings Plan, as amended (incorporated by reference
      to post-effective Amendment No. 1, to our Registration Statement on Form
      S-8 filed on October 31, 2003, File Number 033-35334).10.13(1)
                Amendment
      No. 1 to Technitrol, Inc. 401(k) Retirement Savings Plan, dated December
      31, 2006 (incorporated by reference to Exhibit 10.13(1) to our Form 10-K
      for the year ended December 29, 2006).10.14
                Pulse
      Engineering, Inc. 401(k) Plan as amended (incorporated by reference to
      post-effective Amendment No. 1, to our Registration Statement on Form S-8
      filed on October 31, 2003, File Number 033-94073).10.14(1)
                Amendment
      No. 1 to Pulse Engineering, Inc. 401(k) Plan, dated December 31, 2006
      (incorporated by reference to Exhibit 10.14(1) to our Form 10-K for the
      year ended December 29, 2006).
   45
 Table of Contents
  Exhibit Index,
      continued10.15
                Amended
      and Restated Short-Term Incentive Plan (incorporated by reference to
      Exhibit 10.15 to our Form 10-K for the year ended December 31,
      2005).10.18(1.0)
                Amended
      and Restated Fee Consignment and/or Purchase of Silver Agreement dated
      August 4, 2006 among The Bank of Nova Scotia, AMI Doduco, Inc., AMI Doduco
      Espana, S.L. and AMI Doduco GmbH (incorporated by reference to Exhibit
      10.18 to our Form 10-K for the year ended December 28,
    2007).10.18(1.1)
                Letter
      Amendment dated  November 7, 2007
      among  The  Bank  of  Nova  Scotia,  AMI  Doduco,  Inc.,
      AMI  Doduco Espana, S.L. and AMI Doduco GmbH (incorporated
      by  reference to  Exhibit 10.18 (1) to  our
      Form 10-K for the year ended December 28, 2007).10.18(1.2)
                Letter  Amendment  dated
      May  8, 2008  among The Bank  of
      Nova  Scotia, AMI Doduco, Inc., AMI Doduco Espana, S.L.
      and  AMI Doduco  GmbH  (incorporated by
      reference to Exhibit 10.18 (1.2) to our Form 10-Q for the six months ended
      September 26, 2008).10.18(1.3)
                Amendment
      dated March 19, 2009 among the Bank of Nova Scotia, AMI Doduco, Inc., AMI
      Doduco Espana, S.L., AMI Doduco GmbH and AMI Doduco (Mexico) S. de R.L. de
      C.V. (incorporated by reference to Exhibit 10.18(1.0) to our Form 10-Q for
      the three months ended March 27, 2009).10.18(2.0)
                Consignment  and/or  Purchase
      of Silver Agreement dated  November 9, 2007 between The Bank
      of  Nova Scotia and AMI Doduco, Inc. (incorporated by reference
      to Exhibit 10.18 (2)  to our Form 10-K for the year ended
      December 28, 2007).10.18(2.1)
                Letter
      Amendment dated May 8, 2008 between The Bank of Nova Scotia and AMI
      Doduco, Inc.  (incorporated by reference to Exhibit 10.18(2.1)
      to our Form 10-Q for the six months ended September 26,
    2008).10.18(3)
                Guarantee
      dated September 8, 2006 executed by Technitrol, Inc. in favor
      of  The  Bank  of  Nova  Scotia
      (incorporated by reference to Exhibit 10.18(3) to our Form 10-K for the
      year ended December 28, 2007).10.19(1)
                Consignment
      Agreement dated September 24, 2005 between Mitsui &
      Co.  Precious Metals Inc., and AMI Doduco, Inc. (incorporated by
      reference to Exhibit 10.19 to our Form 8-K dated March 28,
      2006).10.19(2)
                Amendment
      to Consignment Agreement dated April 2, 2009 among Mitsui & Co.
      Precious Metals, Inc., AMI Doduco, Inc., AMI Doduco GmbH and AMI Doduco
      Espana, S.L. (incorporated by reference to Exhibit 10.19(1) to our Form
      10-Q for the three months ended March 27, 2009).10.19(3)
                Corporate
      Guaranty dated November 1, 2004 by Technitrol, Inc. in favor of Mitsui
      & Co. Precious Metals, Inc. (incorporated by reference to Exhibit
      10.21 to our Form 10-Q for the nine months ended October 1,
      2004).10.20
                Form
      of Silver Consignment/Purchase Agreement dated April 20, 2009 between
      Misubishi International Corporation and each of AMI Doduco Espana, S.L.,
      AMI Doduco GmbH, AMI Doduco, Inc. and AMI Doduco (Mexico) S. de R.L. de
      C.V. (incorporated by reference to Exhibit 10.20 to our Form 8-K dated May
      11, 2009).
   46
 Table of Contents
  Exhibit Index,
      continued10.22
                Amended
      and Restated Fee Consignment and/or Purchase of Silver Agreement dated
      February 12, 2008 among HSBC Bank USA, National Association, AMI Doduco,
      Inc. and Technitrol, Inc. (incorporated by reference to Exhibit 10.22 to
      our Form 8-K dated February 22, 2008).10.25
                CEO
      Annual and Long-Term Equity Incentive Process (incorporated by reference
      to Exhibit 10.25 to our Form 10-Q for the three months ended March 28,
      2008).10.26
                Letter
      Agreement between Technitrol, Inc. and Michael J. McGrath dated March 7,
      2007 (incorporated by reference to Exhibit 10.2 to our Form 10-Q for the
      nine months ended September 28, 2007).10.27
                Letter
      Agreement between Technitrol, Inc. and Drew A. Moyer dated July 23, 2008
      (incorporated  by reference to Exhibit 10.27 to our Form 8-K
      dated July 29, 2008).10.28
                Letter
      Agreement between Technitrol, Inc. and Toby Mannheimer dated August 11,
      2008 (incorporated by reference to Exhibit 10.28 to our Form 10-Q for the
      nine months ended September 26, 2008).10.29
                Letter
      Agreement among Technitrol Inc., Pulse Engineering, Inc. and Alan H.
      Benjamin dated July 22, 2009 (incorporated by reference to Exhibit 10.29
      to our Form 8-K dated August 7, 2009).10.30
                Schedule
      of Board of Director and Committee Fees (incorporated by reference to
      Exhibit 10.30 to our Form 10-Q for the three months ended March 30,
      2007).31.1
                Certification of Principal Executive Officer pursuant to
      Section 302(a) of the Sarbanes-Oxley Act of 2002.31.2
                Certification of Principal Financial Officer pursuant to
      Section 302(a) of the Sarbanes-Oxley Act of 2002.32.1
                Certification of Principal Executive Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                Certification of Principal Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.


47
 Table of Contents





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
      4, 2009
            
            /s/
      Michael P. Ginnetti(Date)
            
            Michael
      P. GinnettiCorporate
      Controller and Chief Accounting Officer
              (duly
      authorized officer, principal accounting
  officer)