Annual Meeting Remarks, 1/12/05

01 / 12 / 2005

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During fiscal '04, the technology development for the actuators was completed. They work beautifully and they are under their weight limit. It's been a very successful development program. In just a couple minutes, Mark Trabert will describe our current status on the program.

Over two years ago, the Boeing Commercial Airplane Company invited all their traditional suppliers to provide a team in Seattle to help the Boeing Company develop the basic architecture for their next new airplane, the 7E7 Dreamliner. Based on the work done by our team, and our 35-year history of supplying to Boeing Commercial, we were one of three companies invited to submit proposals for the primary flight controls in this new airplane. The proposal itself was a huge effort. And, as we said in our press release when we announced our success in this competition, there is no other job in the commercial airplane business which we would have preferred to win. John Scannell will discuss the 7E7 in a minute.

Joint Common Missile

The problem statement that put our Company in business some 54 years ago, was the design of a fin control system for a tactical missile. We've been in that business ever since. During fiscal '04, a winner was selected in the competition for the Joint Common Missile. This missile is a joint development of the Army and the Navy. It's intended to replace Hellfire and Maverick. The current plan is to build 55,000 missiles, starting production in 2008. In the tactical missile business, success in this campaign was as important as success in the aircraft business on the JSF or the 7E7. Three companies competed for the prime contract on the missile. Two of them, Lockheed and Raytheon, had selected our electromechanical fin control package. Lockheed was the winner. Although this program is not scheduled for full production until ’08, this victory in ’04 was a real milestone in the Space and Defense segment of our business.

Hellfire Will Substitute if JCM Discontinued

To succeed in the defense business, you have to be resilient and take the long view. After pursuing the Joint Common Missile for years and winning the job just last spring, there is already talk in the Pentagon of canceling the program – just as we’ve begun development. This could be discouraging news but, we’ve seen programs survive in spite of DoD ambivalence. In addition, we believe that if JCM doesn’t go forward, then our current Hellfire production will continue as a replacement.

Although our Company began life in the missile business, and we're categorized in the analytical community as an aerospace company, in fiscal '04, 35% of our revenues were industrial. In the early '60's, our Company introduced our kind of high-performance servocontrols for use in industrial machinery. We have been a technology innovator ever since. We have capabilities in both electrohydraulic and electromechanical drive systems. Oftentimes, it has been our role to lead the transition from electrohydraulics to high-performance electric actuation systems. In a few minutes, Dave Fijas will describe just such a transition and the product development of electrically-driven motion bases for pilot training. It's a wonderful example of how our Company has strengthened our position in the market by leading the technology advancement, relying on the extraordinary capabilities of our technical staff.

The fact that our Company has the ability to advance the state of the art in our chosen field is important to our success. The fact that our planning processes continue to improve so that we can decide when and where to make the advance is important. But, in today's global economy, there's another element in the equation that is equally important, or perhaps more important, and that is maintaining and enhancing relationships with key customers. Over the last year, a lot of us from the legacy Company have had the opportunity to get acquainted with the people, the operations, and the customers of our new Components Group. Throughout all of our segments, I've not seen any relationship more collaborative or more constructive than the one between our Components Group and their major customer, Respironics, and Larry Ball will describe that relationship in a little more detail in just a minute.

Now, let me introduce my friends who will describe some of the achievements I've mentioned in a little more detail.

Let me introduce you to Mark Trabert. Mark is a Deputy General Manager of the Aircraft Group and Program Director for our F-35 Programs. Mark is a Buffalo boy. He grew up in Kenmore. He has a B.S. and an M.B.A. from Canisius College. He was a Program Manager at Calspan when we met him in 1984. At that time, we had a couple of programs - the B-2 Bomber and the MX Missile, wherein we were very much dependent on subcontractors for big portions of the systems we were delivering. Mark came in to manage those major subcontracts. Shortly thereafter, he became a Program Manager on the B-2, and then our helicopter programs, the Comanche and the V-22 Osprey. In '92, we asked him to go to Walnut Creek, California, to become General Manager of a company we'd acquired, Esprit Technologies. Three years later, we asked him to pack up that company and bring it back to East Aurora. Mark then became Director of Sales and Marketing in the Aircraft Group and began playing a broader role in the senior management of that Group. In 2001, after he and his team had succeeded in winning the jobs we have on the Joint Strike Fighter, Mark became the Director of Programs on the
F-35. At about that time, Mark became Deputy General Manager of the Aircraft Division. Here's Mark.

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