UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
_x_ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-5129
MOOG INC.
(Exact name of registrant as specified in its charter)
New York State 16-0757636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
East Aurora, New York 14052-0018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 652-2000
No Change
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Class Outstanding at February 8, 1995
Class A Common Stock, $1.00 par value 6,042,238 Shares
Class B Common Stock, $1.00 par value 1,677,814 Shares
<PAGE>
MOOG INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION 3-15
Consolidated Condensed Balance Sheets
December 31, 1994 and September 30, 1994 4
Consolidated Condensed Statements of Operations
Three Months Ended December 31, 1994 and 1993 5
Consolidated Condensed Statements of Cash Flows
Three Months Ended December 31, 1994 and 1993 6
Notes to Consolidated Condensed Financial
Statements 7-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-15
PART II. OTHER INFORMATION 16
SIGNATURES 17
<PAGE>
PART I: FINANCIAL INFORMATION
<PAGE>
<TABLE> MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
<CAPTION>
Unaudited Audited
As of As of
December 31 September 30
ASSETS 1994 1994
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,180 $ 8,749
Receivables, net 141,213 144,197
Inventories (note 2) 82,748 78,642
Deferred income taxes 16,658 15,392
Prepaid expenses and other current assets 6,415 8,445
TOTAL CURRENT ASSETS 256,214 255,425
PROPERTY, PLANT AND EQUIPMENT, net 143,607 146,472
INTANGIBLE ASSETS, net 17,952 18,154
OTHER ASSETS 4,331 4,405
TOTAL ASSETS $422,104 $424,456
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 10,724 $ 9,569
Current installments of long-term debt
and convertible subordinated debentures 17,602 15,201
Accounts payable 21,560 21,339
Accrued salaries, wages and commissions 18,233 20,641
Contract loss reserves 13,069 14,964
Other accrued liabilities 11,334 11,214
Accrued income taxes 258 391
Customer advances 6,093 10,070
TOTAL CURRENT LIABILITIES 98,873 103,389
LONG-TERM DEBT, excluding current
installments 159,224 160,006
LONG-TERM PENSION OBLIGATION 20,622 20,093
OTHER LONG-TERM LIABILITIES 748 1,195
DEFERRED INCOME TAXES 18,544 16,671
CONVERTIBLE SUBORDINATED DEBENTURES,
excluding current installments 19,398 19,400
MINORITY INTEREST IN SUBSIDIARY COMPANY 1,524 1,518
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY (note 6)
Preferred stock 100 100
Common stock 9,134 9,134
Other shareholders' equity 93,937 92,950
TOTAL SHAREHOLDERS' EQUITY 103,171 102,184
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $422,104 $424,456
See accompanying notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Unaudited
<CAPTION>
Three Months Ended
December 31
1994 1993
<S> <C> <C>
NET SALES $ 86,917 $ 68,818
OTHER INCOME 569 556
87,486 69,374
COSTS AND EXPENSES
Cost of sales 62,184 48,542
Research and development expenses 4,357 5,006
Selling, general and administrative
expenses 15,015 12,885
Interest expense 4,387 2,483
Foreign exchange (gain) loss 10 (129)
Other expenses 58 276
86,011 69,063
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 1,475 311
INCOME TAXES 291 113
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 1,184 198
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (note 3) - 505
NET EARNINGS $ 1,184 $ 703
EARNINGS PER COMMON SHARE
- BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE $.15 $.03
- CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - .06
- NET EARNINGS $.15 $.09
AVERAGE COMMON SHARES OUTSTANDING 7,719,422 7,713,465
See accompanying notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
<CAPTION>
Three Months Ended
December 31
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,184 $ 703
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 4,803 3,484
Provisions for losses 309 903
Deferred income taxes 729 (1,363)
Cumulative effect of change in accounting
principle - (505)
Other 16 26
Changes in assets and liabilities
providing (using) cash:
Receivables 2,214 8,606
Inventories (4,236) (2,158)
Prepaid expenses and other assets 1,800 (714)
Accounts payable and accrued expenses (4,070) (4,539)
Customer advances and other liabilities (3,906) (1,337)
Accrued income taxes 195 (111)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (962) 2,995
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,611) (2,033)
Proceeds from sale of assets 110 152
Other 56 30
NET CASH USED BY INVESTING ACTIVITIES (1,445) (1,851)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes payable 1,210 (810)
Proceeds from revolving lines of credit 2,000 224
Payments on revolving lines of credit - -
Proceeds from issuance of long-term debt 507 960
Payments on long-term debt and capital
lease obligations (870) (2,935)
Purchase of convertible subordinated
debentures (2) -
Preferred stock dividends paid (2) (2)
Proceeds from issuance of treasury stock 14 -
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 2,857 (2,563)
Effect of exchange rate changes on cash (19) (34)
INCREASE (DECREASE) IN CASH 431 (1,453)
Cash at beginning of period 8,749 18,589
Cash at end of period $ 9,180 $17,136
See accompanying notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands except share data)
Unaudited
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements fairly present the
financial position of Moog Inc. as of December 31, 1994, and the
results of its operations and cash flows for the three months ended
December 31, 1994 and 1993. The results of operations for the
three month period ended December 31, 1994 are not necessarily
indicative of the results expected for the full year.
2. Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method of valuation. Inventories are
comprised of the following:
December 31 September 30
1994 1994
Raw materials and purchased parts $16,358 $19,356
Work in process 53,878 48,517
Finished goods 12,512 10,769
$82,748 $78,642
3. In the quarter ended December 31, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." As a result of recording previously
unrecognized deferred tax assets in the United States and Japan in
accordance with SFAS 109, net earnings were increased by $505. The
effect of adopting SFAS 109 has been reported as a Cumulative
Effect of Change in Accounting Principle.
4. On June 17, 1994, the Company concluded the acquisition of the
hydraulic and mechanical actuation product lines (the Product
Lines) of AlliedSignal Inc. located in Torrance, California. The
Product Lines include mechanical drive systems for leading edge
flaps and hydraulic servoactuators for primary and secondary flight
controls used on a variety of commercial and military aircraft.
The purchase price, including payment for specified transition
services to be provided by AlliedSignal over a period of
approximately one year, was $78,000. The Purchase Agreement
provides for an adjustment to the purchase price based upon Net
Assets delivered at closing. The Company has recorded a receivable
from AlliedSignal of $3.6 million at December 31, 1994 and
September 30, 1994, which represents AlliedSignal's initial
calculation of the shortfall in Net Assets delivered at closing.
In addition, notification has been sent to AlliedSignal of several
issues the Company believes require further reduction in the
purchase price. In the event the Company and AlliedSignal cannot
reach a resolution, the Purchase Agreement provides for the use of
an independent arbitrator. The resolution of Net Assets delivered
is not expected to have a material adverse effect on the Company's
future financial position or results of operations, since any
reduction in Net Assets delivered at closing from AlliedSignal's
initial calculation would result in a cash refund to the Company.
The cash refund would be used to reduce outstanding debt, with a
corresponding reduction of intangible assets.
<PAGE>
5. In addition to the cash flow information provided in the
Consolidated Condensed Statements of Cash Flows, the following
supplemental cash flow data is provided:
Three Months Ended
December 31
1994 1993
Cash paid during the period for:
Interest $3,201 $1,794
Income tax 532 1,819
Non cash investing and financing
activities:
Leases capitalized 25 10
6. The changes in shareholders' equity for the three months ended
December 31, 1994 are summarized as follows:
Number of Shares
Class A Class B
Preferred Common Common
Amount Shares Stock Stock
PREFERRED STOCK
Beginning and end of period $ 100 100,000
COMMON STOCK
Beginning and end of period 9,134 6,599,306 2,534,817
ADDITIONAL PAID-IN CAPITAL
Beginning and end of period 47,737
RETAINED EARNINGS
Beginning of period 56,373
Net earnings 1,184
Preferred stock dividends (2)
End of period 57,555
TREASURY STOCK
Beginning of period (17,929) (557,155) (858,003)
Treasury stock issued 14 87 1,000
End of period (17,915) (557,068) (857,003)
EQUITY ADJUSTMENTS
Beginning of period 7,866
Foreign currency translation (264)
End of period 7,602
LOAN TO SAVINGS AND STOCK
OWNERSHIP PLAN (SSOP)
Beginning of period (1,098)
Payments received on loan
to SSOP 56
End of period (1,042)
TOTAL SHAREHOLDERS' EQUITY $103,171 100,000 6,042,238 1,677,814
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING HIGHLIGHTS
(dollars in thousands)
DOMESTIC CONTROLS manufactures and markets precision control components
primarily
for North America.
Three Months Ended
12/31/94 12/31/93
Net sales $ 62,528 $ 46,560
Intersegment sales 1,959 2,469
Total sales $ 64,487 $ 49,029
Operating profit $ 6,326 $ 4,706
Earnings before cumulative
effect of change in
accounting principle 1,060 1,320
Backlog 169,437 134,939
INTERNATIONAL CONTROLS manufactures and markets precision control components
for industrialized economies in Europe and the Far East.
Three Months Ended
12/31/94 12/31/93
Net sales $ 24,389 $22,258
Intersegment sales 1,132 1,278
Total sales $ 25,521 $ 23,536
Operating profit (loss) $ 1,001 $ (230)
Earnings (loss) before cumulative
effect of change in
accounting principle 211 (1,218)
Backlog 42,234 27,720
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING HIGHLIGHTS
(dollars in thousands)
CONSOLIDATED SALES AND EARNINGS
Three Months Ended
12/31/94 12/31/93
Net sales $ 86,917 $ 68,818
Operating profit 7,327 4,476
Deductions from operating profit:
Interest expense 4,387 2,483
Foreign exchange (gain) loss 10 (129)
Other expenses-net 1,366 1,970
Eliminations 89 (159)
Total deductions 5,852 4,165
Earnings before income taxes
and cumulative effect
change in accounting
principle 1,475 311
Income taxes 291 113
Earnings before cumulative effect of
change in accounting principle 1,184 198
Cumulative effect of change in
accounting principle - 505
Net earnings $ 1,184 $ 703
Backlog $211,671 $162,659
Operating profit for each segment consists of total revenue less cost of
sales and segment specific operating expenses. The deductions from operating
profit have been charged to the respective segments by being directly
identified with a segment or allocated to the segments on the basis sales or
identifiable net assets.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is an analysis of the first quarter of fiscal 1995
compared with the first quarter of fiscal 1994, unless otherwise noted.
GENERAL - For the first quarter of fiscal 1995, the Company generated net
earnings of $1.2 million, or $.15 per share, compared to $.7 million, or $.09
per share, in the first quarter of fiscal 1994. First quarter fiscal 1995
results were favorably impacted by the $20.6 million in revenues associated
with the June 1994 acquisition of the hydraulic and mechanical actuation
product lines (the Product Lines) of AlliedSignal Inc. First quarter of
fiscal 1994 results included the cumulative effect of a change in accounting
principle of $.5 million from the adoption of SFAS No. 109, "Accounting for
Income Taxes."
Domestic Controls segment operating profit for the first quarter of fiscal
1995 was $6.3 million, or 9.8% of segment sales. This compares to $4.7
million, or 9.5% of segment sales in the first quarter of fiscal 1994. The
increase is due to increased revenue in Aircraft Controls associated with the
Product Line acquisition, and improved operating margins in the Systems
Group. Within Aircraft Controls, the positive impact of the Product Line
acquisition was, in part, offset by the expected decline in revenues and
profit contribution from the B-2 program. Within the Systems Group,
operating profit improved despite slightly lower sales, principally due to
cost reduction measures and lower R&D expenses. The cost reduction efforts
primarily relate to workforce reductions, while reduced R&D expenses are
attributable to unusually high levels of effort in the first quarter of 1994
on radio controls and entertainment motion platforms.
For the International Controls segment, operating profit in the first quarter
of fiscal 1995 was $1.0 million, or 3.9% of segment sales, compared to a loss
of $.2 million, or 1.0% of segment sales, in the first quarter of 1994. The
principal reasons for the improvement was better performance by the Company's
operations in Germany, England and Japan. The improvement in the German and
English operations reflects the general improvement in the European capital
goods markets, improved profitability on defense related contracts, and cost
reduction efforts. In Japan, fiscal 1994 first quarter results were
adversely affected by the warranty replacement of a faulty component supplied
by a subcontractor. Further improvement in International Controls results
was limited due to losses in the Company's plastic controls product line
related to new product introductions.
FINANCIAL CONDITION AND LIQUIDITY - Cash used by operating activities was
$1.0 million in the first quarter of fiscal 1995, compared to cash provided
of $3.0 million in the same fiscal 1994 quarter. The most significant
factors contributing to the decline were reductions in liabilities associated
with customer advances and contract loss reserves.
As of December 31, 1994, the Company has worldwide unused lines of credit of
$25.1 million, plus cash and cash equivalents of $9.2 million. In
comparison, the Company had worldwide unused lines of credit of $33.9 million
and cash of $8.7 million at September 30, 1994.
Consolidated assets at December 31, 1994 declined to $422 million compared
with $424 million at September 30, 1994, principally due to fiscal 1995 first
quarter depreciation and amortization being well above capital expenditures.
<PAGE>
Capital expenditures for the first three months of 1995 were $1.6 million
compared with depreciation of $4.4 million. Capital expenditures in the
first quarter of 1994 were $2.0 million compared with $3.4 million of
depreciation. Additions to property, plant and equipment for all of 1995 are
expected to remain well below depreciation levels.
The Company monitors total debt to equity as a key financial ratio. The
ratio includes short-term and long-term debt and subordinated debentures.
The ratio at December 31, 1994 and September 30, 1994 was 2.0.
Working capital at December 31, 1994 was $157 million compared with $152
million at September 30, 1994. The current ratio was 2.59 at December 31,
1994, compared to 2.47 at September 30, 1994. The increase in working
capital and the current ratio principally relates to reductions in both
contract loss reserves and customer advances on various long-term programs.
The Company refinanced its Domestic credit facilities on June 15, 1994,
closing on a $152,000 Revolving Credit and Term Loan Agreement with a banking
group. The agreement provides for an $85,000 revolving credit facility and
a $67,000 term loan facility. Interest on both the revolving and term
facilities is LIBOR plus 2.125%. To provide interest rate protection, the
Company has entered into interest rate swap arrangements for $60,000,
effectively converting this amount to fixed rate debt at 8.2% through June of
1996. The proceeds from the refinancing were used principally to acquire the
AlliedSignal hydraulic and mechanical actuation product lines and pay off
existing Domestic term loans. The new $152 million Credit Facilities along
with a pre-existing $20 million term loan are secured by substantially all of
the Company's domestic assets. In addition, the stock of all domestic and
foreign subsidiaries has been pledged. The Credit Facilities and amended
term loan include customary covenants for transactions of this nature,
including requirements to maintain various financial ratios.
NET SALES for the first quarter were $86.9 million, 26.3% above net sales of
$68.8 million in the previous first quarter. Net sales for the Domestic
Controls segment in the first quarter were $62.5 million, an increase of
34.3% over the $46.6 million from the 1994 first quarter. The Domestic
segment sales increase is attributable to the acquired Product Lines, which
added $20.6 million in revenue. Without the product line acquisition,
Domestic segment sales would have declined 10%. Within the Aircraft Controls
Group, the decline is primarily on the B-2 program. Within the Systems
Group, sales were down slightly, principally attributable to declines in the
missiles and electronics product lines, in part offset by stronger sales on
the space products line. The decline in missiles sales reflects reductions
in defense spending, while the electronics product line had unusually strong
sales in the first quarter of 1994 associated with a new carpet tufting
controls applications. Conversely, space products rebounded from an
unusually low sales level in the first quarter of 1994. International
Controls segment sales increased 9.6% from $22.3 million in the first quarter
of fiscal 1994 to $24.4 million in the current quarter. Excluding currency
effects, sales increased 1.2%. While the International Segment had nominal
real sales growth, the backlog increase in real terms of 45.3% from a year
ago is indicative of the strength of the International markets. Within the
Company's International activities, operations are conducted in more than ten
countries. Accordingly, the Company experiences a leveling effect from
currencies after translation of operating results into U.S. dollars.
OTHER INCOME was $.6 million in the first quarter of 1995 compared with $.6
million a year ago. Other income generally includes rental income, interest,
gains on sales of equipment, and royalty income.
<PAGE>
COST OF SALES for the first quarter of the current year was 71.5% of sales,
compared to 70.5% in the prior year first quarter. First quarter fiscal 1995
was negatively affected by the transition costs associated with the Product
Line acquisition. Further, the first quarter of fiscal 1994 was positively
affected by favorable cost experience on a major contract within Aircraft
Controls.
RESEARCH AND DEVELOPMENT EXPENSE was $4.4 million, or 5.0% of net sales in
the current quarter, compared to $5.0 million, or 7.3% of net sales in the
first quarter of 1994. The relative decrease in R&D in the quarter reflects
unusually high levels of effort last year on entertainment simulators in the
Motion Systems product line, brushless motor development and radio controls
within the Electronics and Systems product line, and work related to
developing a high performance engine valve within the Engine Controls product
line.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES were $15.0 million in the first
quarter of 1995, or 17.3% of net sales, compared to $12.9 million in the
prior first quarter, or 18.7% of sales. The increase in absolute terms
relates to the acquired Product Lines. Cost reduction measures in the U.S.
and Europe were key factors in limiting any real increase.
INTEREST EXPENSE was $4.4 million in the current quarter compared with $2.5
million in the first quarter of 1994. The increase in interest expense
results from higher debt related to the Product Line acquisition and
increasing interest rates. For the current quarter, interest expense was
5.0% of sales compared to 3.6% of net sales in the prior first quarter.
INCOME TAXES - The effective tax rate at December 31, 1994 was 19.7%. The
determination of this rate assumes that the operating results of the
Company's German subsidiary, which has available $6.7 million of net
operating loss carryforwards at September 30, 1994, will continue to improve.
The effective tax rate in 1994 was 36.3%.
The Company adopted Statement No. 109, "Accounting for Income Taxes" in last
year's first quarter. The effect of this change in accounting principle was
to increase net earnings by $.5 million, primarily resulting from the
recognition of deferred tax assets in the U.S. and Japan.
BACKLOG was $212 million at December 31, 1994 compared with $217 million at
September 30, 1994 and with $163 million at December 31, 1993. Backlog for
the Domestic Controls segment was $169 million at December 31, 1994 compared
with $181 million at September 30, 1994 and with $135 million at December 31,
1993. Domestic backlog at December 31, 1994 includes $55 million related to
the acquired Product Lines. Excluding the acquired Product Lines, Domestic
backlog declined to $114 million, primarily attributable to the Aircraft
Controls product line, particularly the B-2 program. International Controls
segment backlog was $42.2 million at December 31, 1994 compared with $35.9
million at September 30, 1994 and with $27.7 million at December 31, 1993.
Backlog for the European operations increased 17.0% from September 30, 1994
levels, while backlog for the Pacific operations has increased 34.6% over the
same period. In Europe and the Pacific, backlog levels have increased 70.6%
and 30.7%, respectively, when compared to December 31, 1993. The improvement
in backlog relates principally to industrial product lines, and for Europe in
particular reflects the beginning of the recovery in capital goods markets.
<PAGE>
ENVIRONMENTAL MATTERS - The Company continues to participate as a Potentially
Responsible Party (PRP) in the clean-up of two Superfund sites in Western New
York. With respect to one of these sites, a preliminary settlement has been
reached. In addition, the Company was notified in 1993 by a PRP group at a
related site that it will seek contribution from the Company and others to
the extent the group is responsible for remediation costs at the related
site. The Company is also in the process of evaluating potential
environmental remediation actions at a Company owned facility leased to a
third party. At December 31, 1994, the Company believes adequate reserves
have been established for environmental issues. Because of the uncertainties
associated with environmental matters, the Company could be requested to
participate in future remediation activities, if any, at the two Superfund
sites. With respect to the related site referenced above, the clean-up
effort has not progressed sufficiently to allow an accurate assessment of
total clean-up costs or the Company's relative responsibility for those
costs.
Based upon currently available data, while it is difficult to predict with
certainty, the Company does not expect that these environmental matters will
have a material affect on the financial position of the Company in excess of
amounts currently reserved.
1994 ACQUISITION - On June 17, 1994, the Company concluded the acquisition of
the hydraulic and mechanical actuation product lines (the Product Lines) of
AlliedSignal Inc. located in Torrance, California. The Product Lines include
mechanical drive systems for leading edge flaps and hydraulic servoactuators
for primary and secondary flight controls used on a variety of commercial and
military aircraft. The purchase price, including payment for specified
transition services to be provided by AlliedSignal over a period of
approximately one year, was $78,000. The Purchase Agreement provides for an
adjustment to the purchase price based upon Net Assets delivered at closing.
The Company has recorded a receivable from AlliedSignal of $3.6 million at
December 31, 1994 and September 30, 1994, which represents AlliedSignal's
initial calculation of the shortfall in Net Assets delivered at closing. In
addition, notification has been sent to AlliedSignal of several issues the
Company believes require further reduction in the purchase price. In the
event the Company and AlliedSignal cannot reach a resolution, the Purchase
Agreement provides for the use of an independent arbitrator. The resolution
of Net Assets delivered is not expected to have a material adverse effect on
the Company's future financial position or results of operations, since any
reduction in Net Assets delivered at closing from AlliedSignal's initial
calculation would result in a cash refund to the Company. The cash refund
would be used to reduce outstanding debt, with a corresponding reduction of
intangible assets.
GOVERNMENT CONTRACTING ENVIRONMENT - In fiscal 1995, the Company expects over
half of its revenue to come from commercial and industrial business.
Comparatively, in 1994 and prior years, more than half of the Company's sales
were to either the U.S. Government or various foreign governments for
military and space hardware on programs that extend over many years. Current
defense industry conditions continue to represent significant challenges to
the Company. Further, the Company shares risks of cancellation as a
participant in these programs similar to the risks assumed by all government
contractors.
<PAGE>
Many of the Company's products are on the leading edge of new technologies.
Development problems on projects on which the Company is performing under
fixed-price contracts and is unable to recover the additional costs are part
of the risks of being on the forefront of such technology. In this regard,
the Company's risk of technical development and design problems is similar to
other high-technology companies. Since the production of these products
involves highly precise, complex operations and vendor supplied component
parts, a similar risk exists for products in the production phase.
Continued government emphasis on audit and investigative activity in the U.S.
Defense Industry presents risks of unanticipated financial exposure for
companies with substantial activity in government contract work. The audit
process is an on-going one which includes post-award reviews and audits of
compliance with the various procurement requirements. Although government
regulations provide that under certain circumstances a contractor may be
fined, penalized, have its progress payments withheld or be debarred from
contracting with the government, the Company does not anticipate a material
financial impact from the various and on-going procurement reviews. The
Company believes that adequate reserves have been established for any issues
on which financial exposure is known and quantifiable as of December 31,
1994.
The last 30 years have produced a continuing stream of opportunities for the
Company on precision hydraulic servosystems. However, continual improvements
in the power density of electric motors and the current carrying capacity of
controller circuitry continually erode the application base for hydraulic
controls. Recognizing this phenomenon, the Company broadened its purview and
is a supplier of high performance industrial control systems rather than just
a supplier of components for hydraulic systems. The industrial world today
is shifting to digital control for increased functionality. The Company
plans to provide increasingly intelligent digital control as part of its
electric drive systems and as a complement to its hydraulic controls. The
Company's objective is to offer the world's most advanced systems capability
together with the world's highest performance hydraulic and electric drives,
to manufacture these products in world class facilities and to present them
to markets around the world through a network of sales and application
engineering subsidiaries.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of
Shareholders held on February 8, 1995, the
nominees to the Board of Directors were re-
elected based upon the following results:
Nominee For Withheld
Class B
Arthur S. Wolcott 1,538,349 9,247
Class A
Robert R. Banta 5,374,192 31,922
In addition, KPMG Peat Marwick was ratified to
continue as auditors based upon the following
votes: Class A: For, 5,371,367; Against,
18,091; Abstain, 16,656; Class B: For,
1,539,696; Against, 2,097; Abstain, 5,803.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
None.
b. Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Moog Inc.
(Registrant)
Date: February 13, 1995 By S/Robert R. Banta/S
Robert R. Banta
Executive Vice President
Chief Financial Officer
(Principal Financial Officer)
Date: February 13, 1995 By S/Donald R. Fishback
Donald R. Fishback
Controller
(Principal Accounting Officer)
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