Consolidated Review

Sales in the first quarter of 2012 were $65.1 million, up $10.0 million, or 18.2%, from the prior year first quarter sales of $55.1 million. Aerospace sales, which represented approximately 95% of total first quarter sales, increased 23.5% over the prior year period to $62.0 million. Test Systems sales decreased to $3.1 million for the first quarter 2012 compared with last year’s first quarter of $4.9 million.

Net income in the first quarter of 2012 was $6.1 million, or $0.46 per diluted share, compared with net income of $5.2 million, or $0.41 per diluted share, in the same period of last year. Earnings per share for the first quarter of 2011 have been restated to reflect the impact of the one-for-ten Class B stock distribution to shareholders of record on August 16, 2011.

Consolidated operating margin in the 2012 first quarter was 14.2% compared with 14.8% in the prior year period. Leverage from increased aerospace sales was partially offset by increased engineering and development (“E&D”) costs and increased selling, general and administrative (“SG&A”) costs. E&D costs were $10.0 million in the 2012 first quarter compared with $8.3 million in last year’s first quarter and are included in cost of products sold.

SG&A increased $2.5 million compared with the prior year, primarily as a result of $1.2 million in additional SG&A costs associated with the November 2011 acquisition of Ballard Technology as well as increased compensation and legal costs.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Sales to the commercial transport market increased primarily on higher demand for cabin electronics products, as well as increased sales of aircraft lighting, airframe power and the addition of Ballard Technology’s (“Ballard”) avionics databus products. Military sales were down primarily as a result of lower sales of aircraft lighting products partially offset by the addition of Ballard’s avionics databus military sales. Sales to the business jet market were flat when compared with last year’s first quarter. Increased aircraft lighting and avionics databus sales were offset by decreased sales of airframe power products to the business jet market. The increase in first quarter FAA airport sales reflects the timing of projects as this tends to be a nonlinear flow product line.

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