Industrial Q1’06

Industrial sales of just over $90 million were up 20% or $15.3 million from the same quarter last year. The acquisitions of FCS Controls and Flo-Tork provided a total of $12 million in sales in the quarter. That leaves organic growth of just over $3 million or about 5%. However, that was achieved in spite of an adverse currency effect of nearly $4 million. On a constant currency basis, organic sales growth in the quarter was a very respectable 10%.

The major growth drivers in the legacy product line were turbine controls which were up 44% to almost $11 million, material test equipment and components, up 47% to $5.5 million, and sales of controls for steel mills, up 19% to $6 million. Our legacy simulator business jumped 39% to $4.7 million, and with the acquisition of FCS, our total for the simulator product line was double that at $9.4 million. In addition, the FCS acquisition provided over $6 million in test equipment business, most of that for the aerospace industry.

For the year, we had forecasted Industrial sales in a range of $369 to $389 million centered around $379 million. In spite of the fourteen-week quarter, we’re running on the low end of that range in the first quarter. The December-ending quarter, though, is generally not a particularly strong quarter for our Industrial business, so we’re still optimistic that we’ll finish the year close to the midpoint of the range.

The really good news is that margins in our Industrial business were a remarkable 12.8%. It’s been a number of years since we’ve seen Industrial margins of over 10%. This was a quarter in which everything went right. Volume was up, product mix was favorable and FCS was nicely profitable. We’d love to project three more quarters with these margins but we know that the product mix we’ve forecasted won’t produce 12.8% margins. We are, however, increasing our margin forecast for the year from 9.5% to 10.4%

Components Group Q1’06.

Our Components Group had a spectacular quarter. Sales of $55.8 million were up 59% from a year ago, an increase of almost $21 million. Nearly $14 million of that was a result of the acquisition of Kaydon’s Power and Data Technologies Group. Even without the Kaydon acquisition, though, sales would have been close to $42 million or a 20% increase over last year. Once again, the growth story is in the medical equipment business. Sales in that category were up 58% to $12 million. Sales of motors to Respironics were up 48% to a total of well over $7 million. We sold nearly $3 million worth of slip rings and fiber optic rotary joints to various manufacturers of CT Scan equipment, but particularly Phillips Medical. Our space and defense category was up $5.4 million to a total of $10.6 million and only half of the sales growth came from the Kaydon acquisition. We’ve begun delivering fiber optic modems to the Egyptian Army, an order that we’d been anticipating for some time. Sales of slip rings for the Abrams tank were up sharply, as were motor sales for the Amraam missile.

Sales of components used on aircraft were strong at over $17 million, up over $3 million from a year ago. The largest program content was in slip rings for the Blackhawk Helicopter, in fiber optic controls for the Typhoon Eurofighter, and various components used on the Arrowhead Target Acquisition System. The aircraft aftermarket was brisk. Sales were up $2 million to a total of $4.7 million.

The Kaydon acquisition provided $4.5 million in aircraft, space and defense sales, $4.3 million in industrial sales, and $5 million in sales of components to the marine industry for a total of $13.8 million in the quarter. We’re in the process of integrating the Kaydon slip ring company in Blacksburg, VA. with our Company in Blacksburg. By next quarter, we won’t be able to associate particular sales with the Kaydon acquisition.

For the year, we had forecasted the Components Group at just under $200 million including $41 million in sales from the acquisition of Kaydon. Clearly, we’re off to a very strong start, and, based on the performance in the first quarter, we are now changing our forecast to $205 million.