Margins in the Space and Defense segment improved a lot in this quarter. They achieved 12.1%. It's been a number of years since we've seen this kind of margin performance in Space and Defense. Last quarter, margins would have been 8.9% were it not for the effect of the termination of a sales rep. Based on performance in the first half but anticipating slightly lower second half sales, we're increasing our margin forecast for the year for Space and Defense to 9.2%.

Industrial Q2'06

Sales of $96.7 million in Industrial were up 23% from a year ago, an increase of almost $18 million. Of that, a little under $10 million came from the acquisitions of FCS Controls and Flo-Tork. Excluding those, our organic growth would have been close to 10%. This is a remarkable result in light of the fact that nearly half of our Industrial sales are transacted in Euros and the Euro has weakened against the dollar. On a constant currency basis, our organic growth would have been well into double digits.

Looking at the major product lines, our largest, plastic controls, did just under $16 million in the quarter. It's the only major product line that showed a measurable decline. Were it not for the weaker Euro, it would be up slightly.

On the other hand, our turbine controls business at $10.5 million is up 25%. Two-thirds of this business is in Asia and it's driven by the development of power generating plants in China.

Controls for steel mills at $6.6 million were up 60% from last year. Our business is split between Europe and Asia, but even the European steel mill builders, Danielli and SMS, are focused on the demand in China. This market is very strong at the moment.

Motion simulation at $9.7 million is now our third largest industrial market. Sales were nearly three times last year's second quarter. At $5.3 million, the Moog legacy business was up 61% from a year ago, and the FCS acquisition added $4.4 million. We're now forecasting simulator sales for the year of just under $38 million.

Last quarter, we had forecasted Industrial segment sales for the year in the range of $370 to $390 million with a midpoint at $380 million. There have been some product line shifts, which, in total, have added a million to the sales total, but we're also including, in our Industrial segment, a forecast of $16 million in medical devices through our acquisition of Curlin Medical, which closed in April. So, our Industrial forecast is now a range centered around $397 million. Last quarter, we reported Industrial margins at a remarkable 12.8% level. We, also, suggested that margins would moderate as the year went on. In this most recent quarter, they were 12.1%, which is still very strong performance for this segment. We're now optimistic that the most recent quarter's performance will continue and, if it turns out that way, the average margins for the Industrial business for the year will be 12.3%, a dramatic improvement from the 8.6% of the last two years.

Components Group Q2'06.

The good news continues. The Components Group had another great quarter. Sales of $58.9 million were up 61% from the $36.6 million of year ago. Of this $22 million increase, $14 million came through the companies acquired from Kaydon. Organic growth then was in excess of 20%. This segment is doing very well.