Our Components Group had a great quarter. Sales were just over $35 million, up 13% from the first quarter of last year. The growth was primarily in industrial product lines in which the sales increased by 45%, or over $5 million, to a new total of $16.2 million. Of this total, $8.1 million, or 50%, are sales to the medical equipment industry. Curiously enough, in this quarter, both medical equipment and other industrial sales grew by the same amount, $2.5 million, to the same new total of $8.1 million apiece. The growth in the medical equipment business was primarily in delivery of fiber-optic slip rings to Philips Medical and increased delivery of electric motors to Respironics for use in their sleep apnea equipment. Growth in the other industrial business was spread among a variety of customers for both slip rings and electric motors.

In the quarter, the aircraft business at Components was down by $1.4 million to a total of $13.7 million. In the quarter, we saw reduced sales of slip rings for the Black Hawk helicopter and for AWACS aircraft. Even though sales were down slightly for Black Hawk equipment, at $4.3 million, it was the single biggest aircraft program and 80% of those revenues were aftermarket sales. The next biggest program in terms of revenue was the V-22 at $1.6 million.

Components sales in space and defense totaled $5.2 million, up 8% from the same quarter last year. The sales increases were spread over a number of satellite programs, increased sales of fiber-optic modems to Egypt, and OEM and aftermarket sales on the Bradley Fighting Vehicle.

If we look at the first quarter sales by product, about 42% of the total was slip rings, 41% motors, and the balance of 17% included electromechanical instrumentation, actuators and fiber-optic devices. Given the results of the first quarter in both sales and order input, we're increasing our forecast to $140 million for the year.

Margins for the Components Group were 13.3% in the quarter, which matches our forecast for the year. It's up from 8.5% in the first quarter of last year. You'll remember, though, that, in the first quarter of last year, we had a number of purchase accounting adjustments which depressed earnings substantially. Since the first quarter margins matched our forecast, we're sticking with 13.3% margins for the year.

Summary of Updated Guidance

So, let me summarize the changes we made as a result of what we've seen in the first quarter and a revised forecast that we've put together at the end of the quarter. We now think that, for the year, sales in the Aircraft Group will be $424 million, up $12 million from a year ago, and up $7 million from our most recent guidance. We've tweaked margins in Aircraft from 15.3% to 15.4%. 15.4% is what we achieved last year.

In Space & Defense, we're now expecting $128 million for the year, up $12 million from last year, and up $4 million from our most recent guidance. We're much more optimistic about the margins in the Space & Defense business given the fact that we achieved almost 10% in the first quarter. So, we're moving Space & Defense margins to 8%, up from our earlier forecast of 6%.

In the Industrial business, we're sticking with the original forecast of a range between $296 and $316 million, with a midpoint of $306 million. Based on performance in the first quarter that was below expectations, we're reducing our margin forecast from 9.5% to 9%.

The Components Group had a very strong first quarter and, based on that and the order rate we're experiencing, we're moving our forecast up to $140 million, an increase of $10 million over last year and $4 million over our previous guidance. Margins in the first quarter were right on our target for the year of 13.3%, so we'll stick with that margin forecast.

Taken altogether, we're now projecting a mid-range forecast of $998 million, plus or minus $10 million. If we achieve the middle of the range, we'd expect overall operating margins of 12.2% for the entire year. Our previous projection was 12.1%. However, we do have some offsetting increases in non-operating expense. Our previous forecast for interest expense anticipated that we would issue $120 million of high-yield bonds and then swap half of that amount back for lower variable rates. We actually issued $150 million and, based on the current yield curve, the swap no longer makes sense. So, our interest expense for the year is now projected at $13.3 million, up $800K from our projection in November. In addition, we had expected to be further along in some of our European reorganization, which would influence our tax rate. The process is moving more slowly than we'd like and, as a result, we think it's prudent to project a tax rate for the year of 33%. The net effect is that our mid-range forecast for earnings is up slightly to $64.3 million, or $2.44 a share. We now expect to be in the range of $2.40 to $2.48.