For the year, it's very much the same story. Aircraft margins finished at 12.6%, down from the 14.1% of the year previous. However, during the year, R&D in our Aircraft Group was close to $40 million, and, of that, $31 million was the 787. Last year, total aircraft R&D was just over $21 million. So, we're very pleased with the margin performance of the Aircraft Group in this year of very heavy R&D expense.

Aircraft '07

We're reaffirming our '07 sales forecast for the Aircraft Group. We're projecting total sales of $548 million, which will represent an increase of 4% over this year. The increase will all be on the commercial side. Commercial sales will be up $30 million in '07 to $227 million, driven by a $17 million increase in OEM sales to Boeing, including the initial revenues on the 787, and an $8 million increase in Business Jet sales. At the moment, we're projecting a modest increase in the commercial aftermarket. We're forecasting aftermarket sales in '07 of $86 million, which would be a continuation of the average level we've seen in the last three quarters.

On the other hand, military aircraft sales will actually be down about $10 million in '07 to a total of $321 million. The decrease is the result of lower revenue on the F-35. We're projecting F-35 sales of about $66 million as the development program completes and we prepare for production. Other than that, in total the military aircraft business is fairly stable. There are small reductions in a number of programs offset by an 8% increase in the aftermarket to a level of $121 million.

We're projecting margins in the aircraft business of 11.9% next year, a slight reduction from what we achieved in '06. Although R&D expense was very high in '06, we anticipate that we'll maintain that level in '07. As I said ninety days ago, we are budgeting on the basis that there will be work on 787 derivatives and an all new A350 XWB. In addition, our aircraft product mix will be shifting in '07. The growth areas are mostly commercial OEM, which is not the most profitable part of our aircraft business. All that said, our aircraft business, at the projected margin level, will still be the major provider of operating profit for the whole of Moog Inc.

Space & Defense Q4'06

Space and Defense had another solid quarter. Sales were up 7% to almost $36 million. The revenue increase was in two areas. Sales of propulsion controls and mechanisms for satellites and space vehicles were up about $2 million to just over $11 million. This represents an uptick in the commercial satellite business. The bigger increase, though, was in Defense Controls. Sales were up over $4 million to a total of $11 million. The drivers were the Marines' Light-Armored Vehicle in the US and the CV90-30 programs in Europe. The rest of the Space and Defense business was actually down in the quarter. Launch Vehicles practically took the quarter off with sales of less than $1 million. Strategic Missiles and Missile Defense, taken together, were down from $5.5 million to $3.6 million and the Tactical Missile business was down from $7 million to $5.4 million. So in the quarter, the strength was in Defense Controls.

Space and Defense '06 Total

Overall, Space and Defense made real progress in '06. Sales were up 15%, an increase of almost $20 million, to a total of $148 million. We saw a $5 million increase in propulsion controls and mechanisms for satellites and spacecraft to a total of $44 million. But, the big increase was in defense controls, a $10 million increase to just under $35 million. The big new programs were the LAV-25 and Stryker Mobile Gun System. Also, we're seeing increased spares activity for other programs we've fielded in recent years. The Launch Vehicle business for the year was down a couple million to $6 million. Strategic Missiles and Missile Defense were pretty stable totaling $19 million and for the year '06 the Tactical Missile business was up $5 million to a total of $27 million, largely the result of foreign military deliveries of Maverick and resumed production on the TOW missile.

Margins in Space and Defense continued to improve. We made 8.9% in the quarter, which brought the year in at 9%, up from 8.6% last year.

Space and Defense for '07