Annual Meeting Remarks 1/11/06

01 / 11 / 2006

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The principal focus of our presentation, this morning, will be a description of our recent acquisitions and a discussion of how they relate to the strategies of the segments of our Company in which they will reside. Marty Berardi will describe FCS Control Systems, Larry Ball will discuss the Kaydon Power and Data Transmission Group, and Jay Hennig will describe the Flo-Tork Corporation. Then I’ll come back and talk about our expectations for ’06.

Before we get to that though, I want to make a few observations about fiscal ’05. Also, I’ll describe how the nature of our business enables us to pursue the acquisition strategy that Marty, Larry and Jay will outline.

First, a few words about ’05. There were some remarkable things about fiscal ’05, which are worthy of note. First of all, sales exceeded a billion dollars for the first time in the history of our Company. Perhaps more importantly, our market capitalization exceeded a billion dollars, and our firm value (market cap and total debt) is close to $1.5 billion.

We now employ on a worldwide basis about 6,700 people, and we have 37 major locations in the US and around the world.

Net earnings in ’05 were almost $65 million, over 6% of sales and up 13% from the year previous. This increase was achieved in spite of a huge increase in R&D, and the expense associated with our first Sarbanes Oxley attestation. More precisely, we generated a $12 million increase in pretax profits in spite of increasing R&D by $14 million and spending over $2 million on Sarbanes.

Fiscal ’05 was our eleventh consecutive year of growth in earnings per share. In ten of those eleven years, our growth rate has exceeded 10%. Occasionally, we’re asked to explain how it is that the Company has been able to be that consistent for over a decade. The answer goes back to the fundamental nature of our Company’s capability. We are not a Company that sells a product or a collection of products to a particular market. Our Company provides to our customers the capability to design and produce highly specialized, high-performance motion controls. The solutions that we provide may take the form of single components, a set of related components, or an integrated system. Most importantly, our capability provides the essential control element in motion control systems that are used in a broad range of industries around the globe.

To illustrate my point, I’ll do a quick review of some of the major projects that were important in ’05. Let me ask you to forget, for a moment, that we operate in four segments, and remember that all of this work is done in One Company.

We’re designing and building flight-control actuation for the F-35 Joint Strike Fighter, the most important military aircraft development program in the world. It’s a US program, of course, but it involves a number of our European allies. We’re doing flight controls for the A400 M, a military cargo aircraft under development by the Airbus Consortium, and for an Unmanned Combat Air Vehicle designed by Northrop Grumman. On the Commercial side, we’re designing flight controls for the new Boeing 787 Dreamliner, and we’re finishing certification for three new business jets; the Raytheon Hawker Horizon, the Bombardier Challenger 300, and the Gulfstream G450.

In addition to all of that development work on new aircraft, over a third of our revenues are generated by supplying original equipment, and repair and overhaul for the military and commercial airplane fleets that are currently in production and in operation.

We provide steering controls for the vehicles that launch military and commercial satellites, and controls that position those satellites on orbit. In a similar fashion, we steer strategic missiles, and the boosters that will be used in the strategic missile defense system. We supply sheering controls for tactical missiles and systems that position howitzers on military vehicles all over the world.

In ’05, well over a third of our revenues came in product lines that have nothing to do with aerospace or defense. Our companies provided high-performance motion controls used in plastic-making machines, metal forming machines and presses, power generating turbines, steel mills, power transmission equipment for offshore oil rigs, flight-training simulators, materials testing machinery, CT Scan machines and sleep apnea equipment.

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