We've been projecting $124 million for the year in the Space & Defense segment. If we have three more quarters that are close to the first, we will overshoot that forecast. At this point, we can't be certain that the current level of activity in military satellites will continue for the rest of the year, but we are comfortable increasing our forecast to $128 million.

Last year, we had a tough time in terms of margin performance in the Space & Defense segment and finished the year at a modest 2.8%. We had forecasted for the whole of '05 an improvement to 6% and, if the first quarter is any indication, that will turn out to be a very conservative forecast. Margins in the first quarter came in at 9.8%. Over the last few quarters, I've been asked on a number of occasions what I thought it would take to improve the margins in the Space & Defense segment. My answer was increased volume and the first quarter would seem to bear out that thesis. Based on the results in the first quarter, we now feel that we can achieve 8% margins on average for the year.

Industrial, Q1'05

Industrial sales of just under $75 million were up 17%, or $11 million from this time last year. Excluding effects of the strengthened Euro, real growth was very strong at $7.2 million, over 11%.

In terms of markets, the largest growth was in turbine controls, an increase of $1.7 million, to $7.4 million. Over 80% of that increase occurred in China where the turbine controls market is hot these days.

The next big growth step was in gauge controls for steel mills, an increase of $1.7 million, to a total of $5 million. Part of that was in China, but we also had strong demand in Japan.

We've talked about metal forming as a growth market. This quarter was up $1.6 million compared to last year, to a new total of $6.8 million.

Our largest single market, plastics controls, finished the quarter at $15.4 million, up from $14.8 million last year. This increase was achieved in spite of a $2 million decline in plastics sales in Asia. It seems that the current demand in Asia for injection molding machines that produce CD's and DVD's has been satisfied and the plastics market in Asia will not be growing this year like it's grown in the recent past. We're hoping that increased demand in blow molding machinery in Europe will provide our growth in '05.

In addition to the markets we've mentioned already, we saw respectable sales growth in material test systems, in motion simulators, and material handling equipment. The aftermarket was up by almost $1 million. This is the beginning of the season for deliveries to the Formula 1 race car market. Revenues increased by almost 60% to a new total of $1.8 million.

Margins in Industrial were 7.3% for the quarter, down slightly from the similar quarter last year. We continue to be optimistic that, over the course of the year, margins will improve, but we're revising our forecast of industrial margins from 9.5% to 9.0%.

Components Group, Q1'05