McNally Industries is pleased to announce the completion of contract negotiations with foreign entities for the provision of Mk6 Ammunition Hoist to support in country needs. In September a contract was completed to provide product to Spain and in October a contract was completed to provide a training hoist to Australia. These important contracts will nicely accompany McNally's long term contract with the US Navy for overhaul and repair of ammo hoists for the US Cruiser fleet.

McNally Industries has received a major contract to overhaul and repair all three mortar bipods currently in the US inventory. This program entails the manufacture of worn or defective parts and then re-assembling and testing the bipods to meet original product specifications. The systems involved include the 120mm mortar, the 81mm and the 60mm mortar systems. This significant contract encompassing several hundred systems will be completed by early 2009.

McNally Industries, LLC is pleased to announce that it has received a long term Basic Ordering Agreement (BOA) from the United States Navy to overhaul and upgrade existing Mk6 ammunition hoists which feed 5" rounds into the Mk 45 deck weapon. This effort is in conjunction with the Navy plans for Cruiser (CG-47 Class ships) Modernization and the intent to keep these ships in service for the longer term. The program will include 23 ships which will encompass 46 ammunition hoists during the next 5 years. This effort coupled with our US Naval official Depot designation will mean important work for the northwest Wisconsin facility.

McNally Industries today announced that it has taken lease of additional floor space in the adjacent Industrial Park development. This new 20,000 square foot building will accommodate the current needs for additional floor space for machining and assembly due to expanding business. Additional growth anticipated in the coming year may necessitate additional floor space growth on the existing McNally campus.

McNally Industries has been awarded a long-term contract from Raytheon for re-engineering a major weapon system they produce not only for the United States Navy but also for numerous international customers. The McNally role will include re-engineering much of the components in the weapon system and providing a fully functional technical data package to Raytheon as well as manufacturing qualification quantities of items prior to production manufacturing.

McNally Industries is pleased to announce that they have been assigned by the Department of the Navy as a Designated Overhaul Point (DOP) for the Mk 6 Ammunition Hoist which handles ammunition for the 5" Mk45 Gun. This weapon is found on ships in the CG-47 Cruiser and DDG-51 Destroyer classes as well as many navies of the free world.

This DOP certification indicates that all ammunition hoists in the US fleet will be overhauled, repaired and upgraded under the direction and contracting of McNally Industries, LLC.

McNally Industries, LLC produces complex systems and components for Military applications that demand the highest product quality and consistent on-time performance. To do this effectively, they have adopted and practice "lean" manufacturing principles in a cellular manufacturing environment. Over the last two years McNally has expanded their relationship with the University of Wisconsin at Madison to incorporate Quick Response Manufacturing (QRM) into their manufacturing philosophies. QRM is an extension of "lean" that places a focus on order fulfillment and Customer satisfaction through demonstrated product and process lead-time reductions. With the support of the University, McNally has increased efficiencies of their production cells through implementation of production modeling software, expanding one-man two and three machine cell arrangement, developing a robust 5S program (coupled with continuous improvement work force involvement initiatives) and completing in-depth process mapping of key parts/programs to determine Manufacturing Critical Path (MCT) lead-times. Implementation of these new business philosophies has allowed McNally Industries to reduce product and process lead times from days down to hours, and months to weeks. While McNally continues to strive for excellence in their business philosophies and practices, they remain committed to investing in people, systems and general business infrastructure. By doing this, they feel that they are building for their future, and a big part of that future will continue to be an on-going relationship with the University of Wisconsin.

Contact:

• Ellis Brachman, Obey
• Joe Bonfiglio
• Lynn Becker, Kohl

DEFENSE BILL INCLUDES $4.8 MILLION FOR McNALLY INDUSTRIES IN GRANTSBURG, OBEY & KOHL ANNOUNCE

WASHINGTON, DC B U.S. Senator Herb Kohl (D-WI) and Congressman Dave Obey (D-WI) announced today that the FY2007 Defense Appropriations Bill, which was given final approval by Congress this week, includes $4.8 million for McNally Industries in Grantsburg. The funding will be used to manufacture small batches of replacement parts to meet the military's demand for quick acquisition of hard to find or out-of-production components. Obey, the senior Democrat on the House Appropriations Committee, and Kohl, who serves on the Senate Appropriations Committee, identified this project as a priority for funding.

"Wisconsin is home to some solid defense research and development, and this project is an example of how it contributes to a more efficient, more adaptable military. The Department of Defense is increasingly taking notice of the innovative work happening in our state," Kohl said.

"Because many manufacturers or subcontractors of our aircraft, ships and military vehicles are no longer in business or providing product support, our military has a hard time maintaining its readiness. Missing parts can mean critical military equipment sits idle," said Obey. "To meet that challenge, the Pentagon is depending on McNally Industries and its partners to use their expertise in engineering, assembly and testing to produce or re-engineer some of the parts that are so integral to our military's readiness. This funding should help continue to enhance the capability of our armed forces while helping maintain good jobs in the Grantsburg area."

The objective of the McNally Industries program is to increase Army aviation equipment readiness through the development and application of advanced processing technologies to facilitate the production of vanishing domestic manufacturers' spare parts. Using flexible manufacturing processes will enable efficient small lot production and new ways of refurbishing parts. These methods will be documented so that the Department of Defense (DoD) can duplicate these efforts elsewhere. These efforts will provide DoD with better short term support of its legacy weapons systems, and an expanded industrial capability for timely acquisition in the future.

As 2006 begins, McNally Industries has completed all current phases of building addition and renovation. In addition to the 25,000 sq. ft. of building addition completed earlier in 2005, the company has also added 10,000 sq. ft. of new office and conference space within the new manufacturing facility. McNally Industries also purchased an adjacent building (6,000 sq. ft.) which was completely renovated into offices and laboratory space for engineering purposes. That building has become the Technology Center for the Army aviation program.

The entire McNally campus has now become a state of the art facility where the University of Wisconsin-Madison School of Engineering has been contracted by the company to employ "Quick Response Manufacturing".

WASHINGTON, DC – Seventh District Congressman Dave Obey (D-WI) Announced today that the final budget for the Department of Defense includes $6 million that he secured to help Grantsburg-based McNally Industries continue the three-year program it is involved in to meet the Army’s demand for quick acquisition of hard to find replacement parts.

Our military faces obstacles in maintaining its readiness when the original equipment manufacturers or subcontractors of our aircraft, ships and military vehicles are no longer in business or providing product support. Missing parts can mean critical military equipment sits idle," said Obey. "To meet this challenge, the Pentagon is depending on McNally Industries and its partners to use their expertise in engineering, assembly and testing to produce or re-engineer some of the helicopter parts that are so integral to our military’s readiness. This money should enhance the capability of our armed forces while helping maintain jobs in the Grantsburg area."

 The money is contained in the annual Defense Appropriations bill which funds the Pentagon and intelligence activities. The bill was approved by the House early this morning and is expected to be passed by the Senate and signed into law by the President soon.