Before we begin, we call your attention to the fact that we may make forward-looking statements during the course of this conference call. These forward-looking statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors that could cause actual performance to differ materially from such statements. A description of these risks, uncertainties and other factors is contained in our news release of today’s date, our Form 10-Q for the quarter ended September 30, 2001, and in certain of our other public filings with the SEC.


Good morning, everybody. Thanks for joining us today. This morning we’re reporting results for the first quarter of fiscal 2002. We’ll also discuss the trends that have developed and their implications for the rest of the year.

The first quarter of fiscal ’02 was another good, solid quarter. Sales were up from a year ago. Earnings were on target. Net margins improved. All this occurred in the midst of economic conditions that were, at best, uncertain. Sales of $174 million were up 10%. Net earnings of $8.2 million were up 26% from the year previous. Our earnings this quarter do include the benefit of the FAS 142 addback of goodwill but, even if last year’s results are adjusted to make them comparable, our net earnings in the quarter were up by 9%. Earnings per share of $.58 were up 18% from last year.

In making comparisons to last year’s first quarter, we saw some of the typical variations that occur in our cost structure. In the first quarter, our gross margin was up nicely from a year ago. We spent 4.3% of sales on R&D in the quarter, which is an increase over last year and a little bit higher than our average for the year. SG&A as a percent of sales was up a little to 16.4%. Our interest expense was down by almost a million dollars. Our tax rate of 31% is much lower than last year but, after our secondary issue in November, we have 6.4% more shares outstanding.

Let me go now to the segments.

Aircraft

Aircraft sales for the quarter of $86 million were up 11% from last year. The increase of almost $9 million in this quarter compares to a $20 million increase that we were planning for the whole year.

Military aircraft sales of $45 million were up 28%. We had a very big quarter on the F-18 Program and in the aftermarket. The military aftermarket of $19.2 million was up over $5 million from the level the year previous. That’s the kind of increase that we’re planning on in fiscal ’02.

On the other hand, our commercial aircraft sales for the quarter of $41 million are down about $1 million from a year ago. The reduction is all in aftermarket activity, and particularly lower sales of spares to airlines. Repairs and overhaul revenue held up well in spite of reduced airline capacity. In total, though, commercial aftermarket sales of $11.3 million were down 11% from last year’s very light first quarter. Sales of OEM equipment to Boeing were actually up from last year’s first quarter but last year we had a big jump in the second quarter to a higher rate. This year, instead of an increase in quarterly sales, we’re prepared for a lower sales rate as Boeing adjusts their production rate downwards.

Given what’s occurred in the first quarter, we now think that total aircraft revenues for the year will hit $364 million, a $4 million increase from our earlier projection. The increase will all be in military, mostly F-18, so our military target will be $206 million and our commercial plan will stay at $158 million.