Industrial Update for '06

Based on incoming orders received to date, we're projecting sales of about $95 million for the fourth quarter. This will be a relatively strong performance for a September-ending quarter. Activity tends to slow noticeably in Europe during the summer vacation months and because of the relatively short-lead time for industrial products this has an effect on shipments in our fourth quarter. This sales level would bring us to total Industrial sales for the year of $381 million. On our last quarter's conference call, we were predicting an Industrial level of $397 million, but we were including $16 million of sales in medical devices. We have now decided to report those sales separately and, therefore, our current $381 million forecast is identical to our forecast of 90 days ago. We're expecting that margins will hold up in the fourth quarter and, as a result, we're projecting year-end margins of 12.3%.

Industrial Forecast for '07

Our Industrial forecast for fiscal '07 projects sales in a range between $412 million and $432 million. The midpoint of the range, at $422 million, would be an 11% increase from this year. A couple of our major markets, turbine controls and steel mills, will stabilize, but metal forming and test equipment will continue to grow and plastic controls will resume its growth pattern.

We are projecting margins of 12.5% for the year, a slight improvement over a very strong '06 performance.

Components Group Q3'06.

Our Components Group had another killer quarter. Sales of $61.3 million were up 52% from a year ago. I know that some of you will be curious as to how much of the $21 million sales increase came as a result of the Kaydon acquisition and how much was organic. As I mentioned last quarter, we have integrated the slip ring operations in Blacksburg to the extent that we're no longer able to distinguish which are shipments from the Kaydon Electro-Tec Company and which are from the legacy Moog Company. My guess is that about two-thirds of the sales growth came from the Kaydon product lines and organic growth in the legacy Moog products was slightly under 20%.

Aircraft products continue to generate about a third of the Components Group sales. Military and commercial aircraft sales were almost $21 million this quarter, up 28% from last year. Of that total about 26% was aftermarket. The biggest of the aircraft programs is the CH-47. For the quarter, we delivered $1.6 million worth of the instruments and actuators to Boeing and the Government for use on this helicopter. Other important platforms include the F-18, on which we supply both slip rings and twist caps for use on the FLIR system. We're supplying both production and aftermarket slip rings for the Sikorsky Blackhawk helicopter and we have similar products on Raytheon's multi-spectral target system, which is used on both the Predator and the Blackhawk.

Space and defense sales were just over $10 million, up almost $5 million from a year ago. Of that total about $1.2 million was aftermarket. In the defense segment, the largest programs are slip rings used in the Bradley fighting vehicle, the Abrams tank and in the Stryker mobile gun system.

Sales of components used in medical equipment were up 11% to $10.9 million. Compared to a year ago, sales of electric motors to Respironics for sleep apnea equipment were up 20% to just under $7 million. Sales of electric and fiber optic slip rings to manufacturers of CT Scan equipment had more modest growth in this quarter. The increase was only 6% to a total of just under $3 million.

Part of the Kaydon acquisition was the Focal product line. The Focal products are used primarily in the marine industry and in the most recent quarter generated $6.3 million in sales. This is a market that Moog wasn't in a year ago.