Military aircraft sales of $80 million were up almost $9 million from a year ago. The big increase was on the F-35, Joint Strike Fighter. Sales of almost $21 million increased by over $7 million from a year ago. Every quarter, I remind you that our F-35 sales include not only revenue from work done in our Company, but also work done in our partner companies, Parker, Hamilton Sundstrand and Curtiss-Wright. Since we are the lead contractor, their work is invoiced to us and becomes part of our revenue as we, in turn, invoice Lockheed Martin. In this quarter, about half of the revenue was generated in our Company and compared to a year ago, the level of effort on the contract for the primary flight controls was up over 50%. The first flight of the F-35 is only a few months away and, as I said last quarter, we and our partners are engaged in the mad dash to get all the hardware and software delivered and tested in preparation for that major milestone.

The other big increase in the quarter was in the aftermarket. Sales were up almost $5 million to $25.7 million.

On the other hand, sales were down $2.4 million on our F-15 equipment. We had fewer deliveries to Boeing for the Korean buy and lower shipments of subassemblies to the Japanese Defense Agency. Also, shipments of flight controls for the Indian Light Combat Aircraft were a little over a million in this quarter, down from almost $3 million a year ago.

There was, in this quarter, a major happening in our Aircraft business. You may remember that we were the supplier of flight-control actuation for the Army's Comanche Helicopter until that program was terminated almost two years ago. We've finally completed the negotiation of our termination claim with Boeing and the Army. Our claim was really with Boeing, but, in these circumstances, Boeing's settlement had to be approved by their Government customer. Termination claims of this magnitude are a rare occurrence and we approach them with trepidation. In the end, you're relying on the representatives of the Government to be fair and reasonable. In this instance, I'm happy to report that our customers did, indeed, look favorably on the case that we presented. They allowed us to recover our costs for effort expended, for aircraft hardware built and for dedicated test equipment, the cost of which would otherwise have been recovered over the delivery of production hardware. The net result of this negotiation was a pickup in pretax profit of $3.8 million. With a result this positive, credit must be given to our very competent government accounting staff. These folks have worked very hard, over the last couple of years, to persuade our customers that this is the result our Company deserved.

So, the Comanche was a big plus. However, there were some offsets in the quarter of a similar magnitude.

For over a year and a half, we have been attempting to install a vendor-supplied software package that would streamline our handling of aftermarket transactions. The team involved in managing this project has reluctantly come to the conclusion that we've paid to vendors $1.1 million for a package that should, perhaps, be described as “vaporware”. As a result, we're writing off that investment. We, of course, will go back to the software supplier for recovery, but who knows where that will wind up. More significant than this write-off, though, is continued cost growth in our Commercial aircraft product line. So, let me now go to Commercial aircraft.

Sales in our Commercial airplane product line of over $47 million were up $9.7 million from a year ago. The big sales increase is in the aftermarket. Sales of $21.4 million in the quarter were up $6.3 million from a year ago. Continued strength in the last three quarters has persuaded us to increase our aftermarket forecast for the year by $10 million.

In the quarter, sales to Boeing Commercial were up $2.2 million to a total of $10.4 million and our sales to Airbus were up almost a million to $4.7 million. Our Boeing revenue does not reflect any of our 787 effort since we're not yet delivering production hardware, but it is a very big program for us. So far this year, we've spent $11.7 million in R&D and we've made substantial investments in tooling and test equipment. As you all know, the 787 is selling very well and we believe that there'll come a day when the 787 program alone is larger than our current book of business with Boeing Commercial.

Our problem category in the aircraft product line continues to be our business jet programs. Sales for the quarter of $6.2 million were actually down slightly from a year ago. As you know, we have a number of development programs underway wherein we're designing entire suites of flight control actuation for aircraft that are in various stages of certification. In previous quarterly reports, I've described, in some detail, the costs associated with particular problems on particular programs. This is apparently one area wherein our reporting is more detailed than it ought to be. It seems that what we report gets back to our customers and they don't feel that the discussion of specific technical issues is either necessary or appropriate. We respect that viewpoint. I had hoped that by now this would not be an issue for us because all of the cost growth would be behind us. Unfortunately, that's not the case. So, in an attempt to avoid offending any particular customer, let me try to summarize the situation as follows. On the development programs that we still have underway, we have a total of 7 specific problems or issues, which will result in cost growth of $2.0 million. Some of these are clearly our problems; actuators, which have to be requalified and hardware which has to be rebuilt as a result of recently discovered material problems, including porosity in 15-5 stainless, if you can believe that. Beyond those kinds of problems, there is the endless effort to finalize and certify software. Then there are some issues having to do with hardware changes required for certification, wherein we'll be able to argue with our customers as to whether we ought to be reimbursed. In addition, we've estimated that the extended duration of these programs will require continuing program and technical support, which, in the end, will add costs of over $900,000. So, in the quarter, we have increased our cost estimates on these contracts to the tune of $2.9 million.

The net effect of all these puts and takes, taken together with a strong base of business, resulted in Aircraft margins for the quarter of 12.8% down from last year's 13.8%, but up a little from the 12.5% last quarter. In a matter of speaking, our good fortune on the Comanche offset the cost growth in our business jet product line and otherwise the Aircraft business achieved respectable margins on strong sales.