On the Military side, sales of just over $80 million were up $6.6 million from a year ago. The big increase was in the Aftermarket, an increase of over $7 million to a total of $29.3 million. Aftermarket sales, of course, involve equipment on a broad range of aircraft programs, but the platforms getting the most attention these days and the biggest sales increases are the F-18 and the Blackhawk Helicopter.

F-35 sales in the quarter of $17.6 million were up about $2 million from a year ago. The activity in our Company generated $9.8 million of the total up from $7.3 million a year ago. The rest of the sales were the pass-through of our partners' costs, which are billed to us and then we bill them to Lockheed. Total activity on the F-35 was down from the second quarter when sales were almost $21 million and the Moog activity was close to $11 million.

We have delivered all the first-aircraft hardware for the A version of the F-35. Our equipment is currently in safety-of-flight testing, which is scheduled to complete in September. On the B version, the STOVL aircraft, we have hardware in process, scheduled to deliver in the fall. The design for the C version, the Navy airplane, is just now coming together. We're expecting a Preliminary Design Review in the fall and a Critical Design Review early next spring. The F-35 development program has been a huge effort for our Company and for our partners as well.

It's rare that development programs proceed and complete without encountering some problems. You'll remember that we're developing three different flight-control actuators for the Airbus A400M cargo aircraft. Up until recently, that program has proceeded so smoothly that it was eerie. But recently we've encountered two problems, an electromagnetic interference problem with the electronics, which requires some redesign and, more importantly, a performance problem at low temperature on the hydraulic actuation. The extent of the redesign for the low-temperature problem is not yet completely resolved, but given our best estimate at the moment, we've increased our loss reserve on the A400M by $1 million from last quarter end.

On the Commercial aircraft side, the report, this quarter, is quite positive. Sales of $49.7 million were up 25% from a year ago, an increase of almost $10 million. Our OEM revenues to Boeing Commercial increased by $3.5 million to $12.5 million. Airbus revenues of just under $4 million were stable from a year ago. On the other hand, our Business Jet sales were up $3.4 million to a total of $8.4 million. In this quarter, for the first quarter in a long time, our estimates at completion for our Business Jet programs saw increases so nominal that they aren't worth mentioning.

Aftermarket sales of $20.4 million were up over $3 million from a year ago. On a year-to-date basis, we're at $61.7 million. At this rate, our previous forecast for the year-end of just under $80 million looks too conservative.

I mentioned earlier that we had a big R&D quarter on the 787 at $8.7 million, up from $6.7 million last quarter. This is very likely a peak level of R&D spending on this program. We have development and qualification hardware in test. We're manufacturing first-aircraft hardware, and we're in the midst of delivering equipment to Boeing for their Integration Test Facility. On this program, we are providing the Ironbird test equipment that in all previous programs would have been the responsibility of the air framer. As in the case of the JSF, we are racing to the finish line. We are optimistic that we're going to deliver hardware and complete all the required testing in time to meet Boeing's very aggressive flight schedule.

Aircraft Update for '06

On a year-to-date basis, our aircraft sales are about $10 million ahead of what we had last forecasted. This is largely a result of the continued high-level of effort on the F 35 and, also, the strength in the aftermarket, both military and commercial. In the fourth quarter, we are expecting another $20 million quarter on the F-35. And, that taken together with our forecast of the aftermarket would result in sales for the quarter of just over $129 million. That would bring our Aircraft total for the year to $514 million made up of $319 million military and $195 million commercial.

We had been expecting a slight improvement in Aircraft margins in the third and fourth quarter. However, given the cost increases on the A400M and the higher levels of R&D, margins in the third quarter were actually down from previous quarters and on a year-to-date basis, we're currently at 12.5%. It now appears that we'll end the year at 12.5%.