For the year '05, we are now projecting a reduction in F-35 revenues of about $12 million, reflecting the fact that in '05 we'll produce less new hardware, less new software, and a lot less test equipment than in '04. This year will be devoted primarily to integration testing. So, reduced F-35 revenues in the quarter of about $4 million are about what we had anticipated. As a result of the reduced revenues on the F-35, we're now projecting a modest $3 million reduction for the year in military aircraft sales. So, the fact that we have a favorable comparison first quarter to first quarter is not exactly a precursor of what's going to happen in subsequent quarters.

On the other hand, we do expect commercial airplane sales to be up for the year, and the first quarter established that trend. Sales of just over $34 million were up 4%, or $1.3 million from last year.

OEM sales to Boeing were up $500K to $8.6 million and we expect that Boeing revenues will increase over the course of the year to a total of $36 million.

Aftermarket sales were up $1 million to $13.4 million. For the year, we're looking for a $4 million increase in the aftermarket. So, the first quarter is right on track.

Sales in our business jet product line of just under $5 million were down almost $1 million from the first quarter of last year, and the change is all related to a reduction in revenues on the Bombardier Challenger. Last year, in the first quarter, we had $3.8 million in sales in that program. This year, we're down to $1.5 million.

During the quarter, we increased our estimate of cost to complete the development program on the Hawker Horizon by $1.5 million. This change reflects a conservative stance with respect to our success in scope change negotiations that are currently underway.

Primarily, as a result of the increased costs on the Hawker Horizon, our margins in the aircraft business were 14.2% for the quarter, down from 16.5% last year, and also down from our expectation of 15.3% for the whole of '05. Were it not for the cost increases on the Horizon, our margins would have exceeded our guidance for the year and, so, we think that over the next three quarters we'll be able to catch up and achieve margins for the year of 15.4%, comparable to our Aircraft margins of last year.

Space & Defense, Q1'05

Sales in this segment of $33.2 million were up 17% from a year ago, an increase of $4.8 million. The increase was generated by two product lines. Our satellite business had a great quarter, $10.4 million, as a result of some recent new orders in military satellites. The other increase was in the defense controls business. Sales were $8.4 million, a 29% increase from the year previous.

On the other hand, our tactical missile business at just under $5 million was down over $2 million from the first quarter of last year. Last year's first quarter was an unusual quarter in tactical missiles, though. The average quarter for last year was only a little bit higher than this current quarter.

The launch vehicle business was down a little bit from last year, and close to our plan for the year. About half of that business is on the Atlas Centaur. Our Minuteman Refurbishment Program is moving along nicely, but our missile defense programs were down about $1 million down from last year. In total, our launch vehicle, strategic missile and missile defense programs were down $900K from last year. We'll be looking for some strengthening in those product lines as the year progresses.