In our presentation this morning, I’ll provide an overview that looks back at our performance in fiscal ’02 and tries to put that in perspective. I’ll discuss the current state of our business segments and what we’re projecting for ’03. Bob Banta, the architect of our financial structure, will discuss our current situation and some potential rearrangements. Bob Maskrey will introduce three members of our technical staff who will provide for you three brief presentations describing work that’s been done in some of the most interesting markets in which we participate. You needn’t be concerned. We’ve asked our presenters to go easy on the technical detail and the jargon, and there’ll be no quiz at the end of our program.

It’s always a pleasure to be able to open this section of the program saying sales are up, earnings are up, and the stock price is up, and we’re in that fortunate circumstance today. In fiscal ’02, sales reached $719 million, an increase over the previous year, admittedly a small increase, less than 3%. But, considering the environment, we’re pleased with that result. This is a fiscal year that began three weeks after 9/11, and during which the airlines reduced their flight schedules by 20%. Boeing reduced its production schedule of commercial airplanes by over 25%. The telecommunications bubble had burst and the impact of that was being felt in our commercial satellite business, and we were working through a very slow industrial economy. In those circumstances, a sales increase of any magnitude was a welcome accomplishment.

Our earnings increase was more dramatic, 18%. We did get some help from a change in accounting rules. FAS-142 removed the requirement to expense goodwill and that accounted for about half our earnings increase. When the FAS-142 change was announced, we all wondered if stock prices would go up or if there’d be a compression in price earnings ratio. In our case, it seems that the market accepted the new level of earnings as the appropriate benchmark. Our stock price behaved quite nicely in the last twelve months. The percentage increase depends on which time period you pick for comparison. Preparing this presentation we used a cutoff of last Friday and, on that basis, our stock price increased by 19% over the preceding 12 months.

That, by itself, is a satisfying increase, but it’s made even more dramatic when you look over the same period at the performance of a number of other big-name companies that make up the aerospace industry. The list on the left are companies whose business is more military than commercial. Each of them has their own story, of course, but the best of them were down a little. The group on the right are companies associated with the commercial airplane business and, in general, they had a much tougher time. Against that backdrop, our 19% increase looks a lot better.

On the other hand, if we look at the valuation of our Company as reflected in the price earnings ratio, in spite of the relative increase in the price of our stock over the last 12 months, our PE of less than 12 puts us in the company of the commercial guys on the list. Hopefully, if we continue to generate consistent performance, we can move more towards the PE’s on the left side of the list.

We describe our business in three segments which is principally a reflection of the way the business is organized and managed. Both military and commercial aircraft activities are part of the Aircraft Group and the total of that activity makes up a little more than half our sales. The other half is split between the Space and Missiles business and our Industrial segment. If you look carefully at this chart, you can see that the impetus for the growth of our Company over the years ’01, ’02 and ’03 is principally the activity in the military aircraft business. Let me describe, very briefly, what’s going on in the Aircraft segment.

F-18 sales are about $30 Million per year. We get a little boost each year by the increasing production rate on the aircraft. The delivery rate described here is for the current production version, the F-18 E/F. However, there are a lot of F-18’s in service and it’s an important platform in our aftermarket business.

The V-22 production rate has been stable at about one per month through the last couple years. As you may know, the aircraft, after its problems, has returned to flight test and has been performing flawlessly so far. If that performance continues, I think there’s a very good chance it will go into production. The production rate was originally scheduled to get to 36 aircraft per year. We have $1.5 million worth of equipment on each aircraft. So, if it succeeds, it can be a big program for us.

The big new military aircraft program, though, is the Joint Strike Fighter. Bob Maskrey described this program in some detail last year. At about the time of our Annual Meeting last year, we were getting ready to sign the first contract for primary flight controls. Over the period from February to September, we generated $11 million in revenue on a cost-plus contract. We had some help from our partners, Parker Hannifin and Hamilton Sundstrand. Although we operate as partners, we are the lead contractor and their activities come through to us on a subcontract basis. So, they represent 30% - 40% of our billings. The big jump in the Joint Strike Fighter activity will occur in ’03. In the first quarter, we generated $9 million in sales and we’re anticipating that the year will turn out to be about $40 million.

The big sales increase in the military aircraft business occurred, however, in the aftermarket. This activity includes repair, overhaul and spares provisioning on a wide range of programs. Some of the important ones are pictured here – spares for the Blackhawk Helicopter, repair and overhaul for the F-15, the F-16 and the F-18. I think this next chart demonstrates the importance of the aftermarket in our military aircraft business. Aftermarket revenues went from $71 million in ’01 to $89 million in ’02, an increase of $18 million on a $70 million base. This was the culmination of a lot of effort and activity by a lot of people over a number of years, and it came at a convenient time in the sales history of our Company.

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