In addition to dramatic sales growth in the Components Group, the other spectacular aspect of the quarter was the margin performance. Margins came in at 18.2%, dramatically higher than last year’s 13.3%, and our projection for the year of 13.2%. As in Industrial, this remarkable profit performance came about because everything went right. The increased volume was beneficial, we had a very favorable product mix, and the acquired companies performed better than we had projected. But like Industrial, we’re not inclined to simply extrapolate one quarter’s results. If the balance of the year drops back to a more normal margin, we will still finish the year at 14.6% overall.

Summary of Current Guidance

Now, let me try to summarize what occurred in the quarter, and relate that to our updated guidance for the year.

There were three unusual expenses in the quarter. We had unusually high stock options expense and the after tax effect was about 2 cents a share over what we’d planned. Secondly, we took the total expense for an obligation we incurred in terminating a long-time sales representative which hurt margins, particularly in Space and Defense. That effect was about 3 cents a share after tax. In spite of those expenses, the very strong sales volume in the quarter and the excellent margin performance in the Industrial and Components segments provided very strong pretax earnings in the quarter. The third unusual item was a write-down of a tax asset in the UK. The writeoff increased our tax expense by $.05 per share for the quarter. In spite of all these adverse effects, we still produced earnings of $16.8 million or 43 cents a share.

For those of you who haven’t already done the arithmetic, were it not for these three unusual effects, we might have produced earnings in the quarter of over $20 million or 53 cents a share. One might wonder whether we will sustain that level for the next three quarters. That’s not our expectation. There are a number of reasons why.

I mentioned, at the outset, this quarter was a fourteen-week quarter and subsequent quarters will be 7% shorter. In Aircraft, we are not forecasting a continuation of the first quarter sales level on the F 35 or in the commercial aftermarket. In Space, we’re anticipating a lower activity level in military satellites. In Industrial, we’re forecasting higher sales but not the same very profitable product mix. In the Components Group, we’re projecting slightly lower sales and we’re hedging our bets on margins until we see more history at the high numbers. All that said, we’re now forecasting a total for the year in a range of $1.198 billion to $1.218 billion. If we hit the middle of the range, that suggests three quarters at just under $300 million, and, at that level, we’re comfortable with our previous guidance for these quarters at 45 cents, 47 cents, and 50 cents. This would bring us to a midrange estimate for the year of $1.85, a 13% increase over the $1.64 we reported in FY’05 and a 16% increase over our ’05 results, if they were restated, to take into account the pro forma expense for stock options.

All in all, we’re very happy with the start we got for FY’06. It’s a very busy time for our Company. Many of our major programs are approaching major milestones and we’re getting acquainted with each of our recent acquisitions. We continue to be optimistic about the future of all four of our business segments.

Here’s Bob Banta to discuss cash, debt and other financial details.

We required quite a bit of working capital to support the surge in first quarter sales. In fact, we increased working capital by $22.8 million from September 30 levels. Of that amount, $5.3 million related to Flo-Tork, the acquisition we closed during the quarter. The difference of $17.5 million is the amount of receivables and inventories built up to support the strong growth in core sales that occurred in the quarter. We also put $6 million into our U.S. defined benefit pension plan. That’s $3 million more than we planned. We do get cash tax benefits of about 38% for every dollar we put into the plan, so we’ll have a smaller tax check to send to the IRS and New York State later this year. We also spent $16.9 million on capital expenditures in the quarter.

After factoring out the $24 million used to close Flo-Tork in the quarter, our debt, net of cash balances, went up $1 million. Cash flow from operations, before the capital expenditures, was $16.9 million down from the $43 million generated in Q1 last year. Back in that quarter, receivables actually went down and we received some sizable advances from customers. Capital expenditures in the last year’s first quarter were $9 million. This quarter we nearly finished up $2.9 million of construction on building expansions in the Philippines and Luxembourg and spent $2.0 million on test equipment and tooling for the 787 Program.

Looking forward, we’re anticipating debt reduction for all of ’06 of about $40 million as the early pace of capital expenditures slows down, and we reduce inventories, which are now in the pipeline to meet customer orders, and we collect our customer’s receivables. Pension contributions should amount to about $9 million more during the balance of ’06 for our U.S. plan.