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CORRESP
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corresp

October 27, 2005

VIA EDGAR

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549-7010

Attn: Mr. Nili Shah

Dear Mr. Shah:

We have received your letter dated September 13, 2005 regarding our Form 10-K for the fiscal year
ended December 31, 2004, our Form 10-Q for the quarter ended March 31, 2005 and our Form 10-Q for
the quarter ended June 30, 2005 (SEC File No. 0-00822). The Company’s responses to your comments
are provided below. For your convenience we have reproduced the section headings and comments from
the letter in italicized text.

Form 10-K for the year ended December 31, 2004

(8) Other Non-Operating Income, Net, page 36

    1.

    We have reviewed your response to prior comment 6 in our letter dated July 6, 2005.

We have the following comments:

    •

    Please tell us your consideration of paragraph 45 of SFAS 144, whereby gains and
losses on the sale of assets are included in operating income, not as a non-operating
item. Please also tell us the amount of these gains or losses for each period
presented.

    RESPONSE:

    The Company generates gains or losses from the sale of long-lived assets such as machine
tools, manufacturing equipment, computers, software and automobiles. Typically, these are
single asset transactions in which the asset being sold is completely depreciated. The
Company has historically and consistently presented these gains and losses as non-operating
income. These gains and losses have not been material to the historical financial
statements. (See SEC Staff Accounting Bulletin: No. 99 – Materiality (“SAB No. 99”)
analysis at Attachment I). In future filings the Company will classify these gains and
losses in operating income in the income statement to
comply with paragraph 45 of SFAS 144.

    6 months

    3 months

    For year

    For year

    For year

    ended

    ended

    ended

    ended

    ended

    6-30-2005

    3-31-2005

12-31-2004

    12-31-2003

    12-31-2002

    Gain (loss) on sale of assets

    $
    (21,557
    )

    (8,383
    )

    67,951

    6,034

    (71,433
    )

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 2

    •

    We note on page 17 of your amended June 30, 2005 Form 10-Q that cash discounts
earned from vendors are also included in non-operating income.
Please tell us how you determine it is appropriate to classify such discounts as
non-operating income, instead of as a reduction of cost of sales. See EITF 02-16.
Please also tell us the amount of these discounts for each period presented.

    RESPONSE: The guidance in EITF 02-16 addresses consideration that may take a variety of
different forms including “credits” that the customer can apply against trade amounts owed
to the vendor. Based upon our interpretation of this guidance, the Company determined it
inappropriately classified such discounts, and has assessed the materiality of this error
in accordance with SAB No. 99 and has concluded that the error is not material. In future filings the Company will classify
discounts earned as a reduction in
cost of sales in the income statement. See
Attachment II for further discussion.

    6 months

    3 months

    For year

    For year

    For year

    ended

    ended

    ended

    ended

    ended

6-30-2005

    3-31-2005

    12-31-2004

    12-31-2003

    12-31-2002

    Cash discounts

    $
    5,053

    3,304

    9,509

    76,108

    83,118

    •

    Alternatively, if material, please amend your December 31, 2004 Form 10-K and
subsequent 2005 Forms 10-Q to correct these classifications. If immaterial, please
provide us with your quantitative and qualitative considerations of materiality
pursuant to SAB 99.

    See each of our SAB 99 analyses noted above as Attachment I and Attachment II. As both of
these misstatements impact operating earnings, we also analyzed these misstatements in the
aggregate in assessing their materiality to the financial statements. See Attachment II.

 (12) Commitments and Contingencies, page 46

    2.

    We have reviewed your response to prior comment 7 in our letter dated July 6, 2005.

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 3

Please be advised that loss contingencies should be evaluated independently from any potential
claim for recovery for accounting and disclosure purposes. See question 1
Of SAB Topic 5-Y. Accordingly:

    •

    Please disclose the nature of each loss contingency, independent of your insurance
recovery, where there is at least a reasonable possibility that a loss may have been
incurred. Please also disclose an estimate of the possible loss or range of loss.
Refer to paragraph 10 of SFAS No. 5. Based on your response to prior comment 7, it
appears that, at a minimum, your product liability lawsuits in France and England
require disclosure in accordance with SFAS No. 5.

    RESPONSE:

    We have reviewed Question 1 of SAB Topic 5-Y and the provisions of SOP 96-1 and
do not believe that the provisions of SOP 96-1 relating to the presentation of a gross
liability independent of the asset is appropriate for product liability contingencies.
Although Question 1 of SAB Topic 5-Y makes reference to SOP 96-1 it specifically
addresses whether an environmental remediation liability or product liability should
be recognized on a discounted basis and references paragraph 132 of SOP 96-1 to make
that assessment. In addition, the scope paragraphs (100-101) of SOP 96-1,
“Environmental Remediation Liabilities” indicate that the SOP only relates to
environmental remediation liabilities. As such we believe the nature of the Company’s
product liability loss contingencies are outside of the scope of SOP 96-1 per
paragraphs 100-101 and should be assessed in the context of SFAS 5.

    Below is a summary of our product liability cases and our consideration of SFAS 5
as it relates to each case:

    We are one of numerous third party defendants in three product liability cases
filed in 1987, 1988 and 1989 by the USS Great Lakes Fleet. All three cases allege
that the plaintiff sustained injury as a result of exposure to toxic materials. Cases
of this type, known as MARDOC, were transferred under the jurisdiction of US District
Judge Weiner. In 1996, Judge Weiner “administratively dismissed” the MARDOC cases.
For plaintiffs to reactivate a case they must show a related disease and product
identification for each defendant. The insurance company’s attorneys are defending us
in these claims but these cases have had no activity since 1996 and we expect little
or no activity in these cases. The Company does not believe that it is probable or

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 4

    reasonably possible that a loss has been incurred in these cases or that disclosure is
warranted.

    On June 28, 1995, an employee had an auto accident and a lawsuit was filed
against the Company. In 1996, the claim was settled by the insurance company for the
property damage (approximately $4,000) and two adult claimants signed release
statements and received a total of approximately $9,000. A third claimant, a minor,
had her complaint dismissed without prejudice and can
have her complaint filed at any time between now and 2 years beyond her
eighteenth birthday (which will be 04/21/07). As of October 26,
2005, a complaint has
not been filed. The Company does not believe that it is probable or reasonably
possible that a loss has been incurred in this case or that
disclosure is warranted.

    The Company is a defendant in a product liability case claiming that an Oilgear
pressure valve installed in an extrusion press approximately 10 years prior ruptured
on October 8, 2001. The plaintiff claims that damages are approximated at $350,000.
The company that sold the casting to Oilgear was also named in the suit. A
metallurgical test was performed on the metal in January 2003. We have not received
the results from the test and we have had no communication from the plaintiff since
that time. Since we have not heard anything from them, the insurance company
attorney’s opinion is that the test results were in Oilgear’s favor. We do not
anticipate any substantive amount of settlement. The Company does not believe that it
is probable or reasonably possible that a loss has been incurred in this case or that
disclosure is warranted.

    The Company was a defendant in a product liability case claiming that the piping
on a machine purchased from an Oilgear subsidiary in England was dirty and caused the
machine to stop working in 1998. The plaintiff’s claim was for 750,000 British
Sterling Pounds. In September 2005 the plaintiff settled for approximately 53,000
British Sterling Pounds (approximately $95,000). The insurance company paid the entire defense costs and the settlement cost.
There was no deductible to be paid by Oilgear. Due to the insignificance of the
settlement and the fact that the claim was fully covered by insurance, no disclosure
was made regarding this settlement.

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 5

    The Company is a defendant in a product liability case in France. The plaintiff
is claiming that in 1999 a cracked manifold supplied by Oilgear caused a loss of
production on a forging press. On April 12, 2005 a French court ordered the Company’s
subsidiary, Oilgear Towler S.A., to pay approximately EUR 1,255,000 (approximately
$1,506,000) plus interest to the claimant. According to our attorney the plaintiff
now has to generate documents supporting the financial damages number. The plaintiff
still has not supplied these documents. When they do, the Company will go back to
court to challenge their documents and other technical issues in this case. This case
is at least a year away from a settlement and the final loss is undeterminable even
though the range of potential exposure has been identified. The insurance company has
been handling the case. Management believes that any settlement will be covered by the product liability
insurance policy, which has no deductible.

    •

    Please accrue for those loss contingencies that meet the conditions of paragraph 8
of SFAS No. 5, independent of your insurance recoveries. In other words, please
present the gross liability associated with your loss contingencies separately from
the related claim for recovery.

    RESPONSE:

    The Company believes no accruals are warranted for any of the aforementioned cases. In
addition, we believe no specific disclosure is warranted for these cases as we believe
there is no exposure to the Company due to the product liability insurance policies in
place or such disclosures are already covered by our general commitments and
contingencies disclosure. The Company believes its general disclosure of product
liability exposure in Item 3 and Footnote 12 to the financial statements included in
the 2004 Form 10-K is sufficient based on its current open cases and its assessment of the
exposure.

    •

    If material, please amend your December 31, 2004 Form 10-K and subsequent
2005 Forms 10-Q to reflect these amounts. If immaterial, please provide us with your
quantitative and qualitative considerations of materiality pursuant to

SAB 99.

    RESPONSE:

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 6

    Please refer to our response above. We believe that these
items are accounted for appropriately and
thus do not require restatement.

Item 9A. Controls and Procedures, page 50

    3.

    We have reviewed your proposed revisions in response to prior comment 8 in our
Letter dated July 6, 2005, and the revised disclosure provided on page 21 of the June
30, 2005 Form 10-Q. Your definition of disclosure controls and procedures does not conform to
the definition in Exchange Act Rule 13a-15(e). Therefore, in future filings, please revise
your disclosure to clarify, if true, that your officers concluded that your disclosure controls
and procedures are also not effective to ensure that information required to be disclosed in
the reports that you file or submit under the Exchange Act is accumulated and communicated to
your management, including your chief executive officer and chief financial officer, to allow
timely decisions regarding required disclosure.

    RESPONSE:

    The following language will be used in future filings until such time as the Company’s CEO
and CFO conclude that the Company’s disclosure controls and
procedures are effective:

The Company’s management, under the supervision and with the participation of the Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period
covered by this report. Based on the evaluation, the Chief Executive Officer and the Chief
Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and
procedures are not adequate and effective in recording, processing, summarizing and reporting, on a
timely basis, information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act and our disclosure controls and procedures are also not effective to
ensure that information required to be disclosed in the reports the Company files or submits under
the Exchange Act is accumulated and communicated to the Company’s management, including the Chief
Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure. Based on the evaluation, the Chief Executive Officer and the Chief Financial Officer
have concluded that, as of the end of such period, the Company’s

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 7

disclosure controls and procedures
are not adequate and effective in recording, processing, summarizing and reporting, on a timely
basis, information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act.

Consolidated Statements of Cash Flows, page 5

    4.

    We have reviewed your response to prior comment 10 in our letter dated July 6, 2005.

We have the following comments:

    •

    In future filings, please disclose in further detail the components of “other,
net” in your statement of cash flows.

    RESPONSE:

    We will disclose further detail to the components of “other, net” in future filings.

    •

    We note that you had classified $1,059,000 in financing fees as an operating
activity for the quarter ended March 31, 2005, instead of as a financing activity. We
also note that you have classified $520,000 in financing fees as an operating activity
for the year ended December 31, 2004, instead of as a financing activity.
Please amend your December 31, 2004 Form 10-K and subsequent 2005 Forms 10-Q to
correct these classifications. Alternatively, if you believe these misclassifications
are immaterial, please provide us with your quantitative and qualitative
considerations of materiality pursuant to SAB99.

    RESPONSE: We have concluded that the proposed
reclassification adjustments are not material.
See Attachment III for our evaluation of materiality.

Form 10-Q/A for the quarter ended June 30, 2005

Financial Statements

    7.

    Gain on Investments, page 12

    5.

    We have reviewed your response to prior comment 9 in our letter dated July 6, 2005 and note
your revised disclosure here and on page 16. Please explain in detail how you determined

Mr. Nili Shah

U.S. Securities and Exchange Commission

October 27, 2005

Page 8

    that
the shares of the insurance company belonged to you, rather than the pension plan, given that
the original memb