FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
Commission file number 1-5129
MOOG INC.
(Exact Name of Registrant as Specified in its Charter)
New York 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
Securities registered pursuant to
Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
_____________________________________ ________________________
Class A Common Stock, $1.00 Par Value American Stock Exchange
Class B Common Stock, $1.00 Par Value American Stock Exchange
10% Series B Senior Subordinated PORTAL
Notes due 2006
_____________________________________ ________________________
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The aggregate market value of the Common Stock outstanding and held by non-
affiliates (as defined in Rule 405 under the Securities Act of 1933) of the
registrant, based upon the closing sale price of the Common Stock on the
<PAGE>
American Stock Exchange on December 6, 1996 was approximately $119.6
million.
The number of shares of Common Stock outstanding as of the close of
business on December 6, 1996 was:
Class A 5,403,445; Class B 1,586,267.
The Documents listed below have been incorporated by reference into this
Annual Report on Form 10-K
(1) Specific sections of the Annual Report to Shareholders for the
fiscal year ended September 30, 1996 (the "1996 Annual Report")
(2) Specific sections of the Proxy Statement to Shareholders dated
January 10, 1997 (the "1997 Proxy")
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MOOG INC.
FORM 10-K INDEX
PART I PAGE
Item 1 - Business 18-19
Item 2 - Properties 19
Item 3 - Legal Proceedings 19
Item 4 - Submission of Matters to a 19
Vote of Security Holders
PART II
Item 5 - Market for the Registrant's 19
Common Equity and Related
Stockholder Matters
Item 6 - Selected Financial Data 19-20
Item 7 - Management's Discussion and 21-23
Analysis of Financial Condition
and Results of Operations
Item 8 - Financial Statements and 24-36
Supplementary Data
Item 9 - Changes in and Disagreements with 37
Accountants on Accounting and
Financial Disclosure
PART III
Item 10 - Directors and Executive Officers 37
of the Registrant
Item 11 - Executive Compensation 38
Item 12 - Security Ownership 38
of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and 38
Related Transactions
PART IV
Item 14 - Exhibits, Financial Statement 38-40
Schedules, and Reports
on Form 8-K
Cautionary Statement
Information included or incorporated by reference which are
not historical facts are forward looking statements. Such
forward looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward looking statements involve a number of risks
and uncertainties, including but not limited to, contracting with
various governments, changes in economic conditions, demand for
the Company's products, pricing pressures, intense competition in
the industries in which the Company operates, the need for the
<PAGE>
Company to keep pace with technological developments and timely
response to changes in customer needs, and other factors
identified in the Company's Securities and Exchange Commission
filings.
Part I
The Registrant, Moog Inc., a New York corporation formed in
1951, is referred to in this Annual Report on Form 10-K as
"Moog," "the Company" or in the nominative "we" or the possessive
"our."
ITEM 1. Business.
Certain information required herein is contained in part in
the 1996 Annual Report, specific pages of which are referred to
in parentheses.
Description of the Company's Business. (See pages 2 through
16.)
Distribution. Moog's sales and marketing organization is
comprised of individuals possessing highly specialized technical
expertise. Such expertise is required in order to effectively
evaluate the customer's precision control requirements and in
facilitating communication between the customer's engineering
staff and the Moog engineering staff. Manufacturers'
representatives are used to cover certain aerospace and selected
industrial markets.
Industry and Competitive Conditions. The Company
experiences considerable competition in each of its five major
product lines. However, the Company is the only precision motion
control specialist which competes globally in all markets and all
drive technologies.
Many of its competitors have greater financial and other
resources than the Company. In Aircraft Controls, the Company's
principal competitors include Parker Hannifin Corporation,
Curtiss-Wright Corp., HR Textron, a subsidiary of Textron, Inc.
("HR Textron"), Teijin Seiki Limited and E-Systems Inc., a
Raytheon company, ("E-Systems"). In Space and Missiles, the
Company's principal competitors are AlliedSignal Inc. and HR
Textron. For the Industrial Hydraulics product line, competitors
are Robert Bosch AG, Mannesmann Rexroth AG and E-Systems.
Competitors in the Industrial Electrics product line include
Barber-Coleman Company, Siemens AG, Indramat GmbH, Pacific
Scientific Company and Yaskawa Electric Corp.
Competition in each of the product lines is based upon
design capability, product performance and life, service, price
and delivery time. In certain product lines technological
considerations predominate over price considerations, while in
others price considerations are paramount. The Company believes
it competes effectively on all of these bases.
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Backlog. Substantially all backlog will be realized as
sales in the next twelve months. The information required herein
is incorporated by reference to Item 6, Selected Financial Data,
on page 20.
Raw Materials. Materials, supplies and components are
purchased from numerous suppliers. The loss of any one supplier
would not materially affect the Company's operations.
Working Capital. The information required herein is
incorporated by reference to Note 1 of Item 8 on page 28.
Seasonality. Moog's business is generally not seasonal.
Patents. Moog has numerous patents and has filed
applications for others. While the aggregate protection afforded
by these is of value, the Company does not consider the
successful conduct of any material part of its business dependent
upon such protection. The Company's patents and patent
applications, including U.S., Canadian, European and Japanese
patents, relate to electrohydraulic, pneumatic and mechanical
actuation mechanisms and control valves, electronic control
component systems and interface devices.
Research Activities. Research and product development
activity has been and continues to be significant to the Company.
The information required herein is incorporated by reference to
Item 6, Selected Financial Data, on page 20.
Employees. The information required herein is incorporated
by reference to Item 6, Selected Financial Data, on page 20.
Segment Financial Information. The information required
herein is incorporated by reference to Notes 10 and 11 of Item 8
on page 34.
Customers. The information required herein is incorporated
by reference to pages 2 through 16 and 34. In aggregate, the
Company markets its products to a wide variety of customers. The
Boeing Commercial Airplane Co. represents 7.5% of fiscal 1996
sales, with prime U.S. government contractors, including
McDonnell Douglas, Lockheed Martin, Bell-Boeing, and the U.S.
government, representing 37.8% of sales. The concentration of
customers varies within product lines. In the Commercial and
Military Aircraft product lines as well as Space and Missiles, a
few customers provide the majority of revenues, while in the
Industrial Hydraulics and Industrial Electrics product lines
revenues are spread over a wide customer base.
International Operations. Moog's International Controls
segment is an aggregate of operations located predominantly in
Europe and the Asian-Pacific region. (See pages 2 through 16, 34
and 39.) The Company's international operations are subject to
the usual risks inherent in international trade, including
currency fluctuations, local governmental foreign investment
restrictions, exchange controls, regulation of the import and
distribution of foreign goods, as well as changing economic and
social conditions in countries in which such operations are
conducted.
<PAGE>
Environmental Matters. See pages 23 and 35.
ITEM 2. Properties.
Corporate headquarters are located in East Aurora, New York.
Principal manufacturing facilities for the Domestic Controls
segment are located in East Aurora, New York and Torrance,
California. These facilities consist of 756,000 square feet
which are owned, and 54,000 square feet which are under capital
lease and financed primarily by industrial revenue bonds which
allow the Company to purchase the facilities at nominal prices
upon expiration. The Domestic Controls segment leases 140,000
square feet in East Aurora and 7,200 square feet in Torrance
under operating leases. With respect to the Company's
facilities, third parties have subleased 67,000 square feet of
leased space through August 1997. Outside of the U.S., the
Domestic Controls segment owns manufacturing centers in the
Philippines and India. The Philippines facility consists of
64,000 square feet and the India facility consists of 23,000
square feet.
The International Controls segment maintains major
manufacturing facilities in Germany, England and Japan. Of the
major European facilities, 4,000 square feet are owned and
200,000 square feet are leased under operating lease agreements.
The Japanese facility, consisting of 68,000 square feet, is
owned. A specialty manufacturing operation with 26,000 square
feet which is owned is located in Ireland. In various other
major markets, including Italy, France, Spain, Sweden, Finland,
Denmark, Brazil, Australia, South Korea, Hong Kong and Singapore,
the Company has sales and applications engineering offices. Of
these facilities, 30,000 square feet are owned and 48,000 square
feet are leased under operating leases. Operating leases of the
International facilities expire at varying times from December
1996 through June 2013.
The capacity of Moog's manufacturing facilities is
considered adequate based on current production requirements.
ITEM 3. Legal Proceedings.
Legal proceedings presently pending by or against Moog or
its subsidiaries are not expected to have a material adverse
effect on the financial condition or results of operations of
Moog and its subsidiaries taken as a whole.
In connection with the Company's October 1996 acquisition of
assets and assumption of certain liabilities related to the
industrial hydraulic servocontrols business (the U.S. Industrial
Hydraulics Business) of International Motion Control Inc.,
certain lawsuits and motions initiated by the U.S. Industrial
Hydraulics Business and by the Company relating to trade names
and rental agreements have been discontinued.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
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Part II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend restrictions are detailed in Note 6 on page 30 of
Item 8. Other information required herein is incorporated by
reference to pages 20, 40 and 42.
ITEM 6. Selected Financial Data - Notes and Discussion.
Refer to the table on the following page for the Selected
Financial Data for the five year fiscal period 1992 - 1996. For
a more detailed discussion of 1994 through 1996 refer to
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 21 through 23 and Notes to
Consolidated Financial Statements on pages 28 through 36.
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<TABLE>
<CAPTION>
ITEM 6. Selected Financial Data.
(dollars in thousands except per share data)
Years Ended September 30 1996 1995 1994(1),(2) 1993 1992(2)
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
RESULTS FROM OPERATIONS
Net sales $ 407,237 $ 374,284 $ 307,370 $ 293,680 $ 307,004
Government 45% 49% 57% 57% 60%
Commercial 55% 51% 43% 43% 40%
Earnings (loss) before extraordinary
item and cumulative effect of change
in accounting for income taxes $ 11,219 $ 7,761 $ 1,618 $ 5,118 $ (6,773)
Net earnings (loss) $ 10,709 $ 7,761 $ 2,123 $ 4,761 $ (6,773)
Per share
Earnings (loss) before extraordinary
item and cumulative effect of
change in accounting for income
taxes $ 1.47 $ 1.00 $ .21 $ .66 $ (.88)
Net earnings (loss) $ 1.40 $ 1.00 $ .27 $ .62 $ (.88)
Average common and common equivalent
shares outstanding 7,639,312 7,721,927 7,714,444 7,713,465 7,717,791
____________________________________________________________________________________________________
FINANCIAL POSITION
Total assets $ 449,558 $ 424,957 $ 424,456 $ 318,130 $ 335,986
Working capital 187,971 166,985 150,850 123,533 114,694
Indebtedness - senior 91,262 170,361 183,376 115,515 121,721
- subordinated 120,000 19,400 20,800 22,082 22,264
Shareholders' equity 104,743 108,636 102,184 92,561 97,374
Equity per outstanding common share 15.01 14.06 13.25 12.00 12.61
____________________________________________________________________________________________________
SUPPLEMENTAL FINANCIAL DATA
Earnings before interest, income
taxes, depreciation and
amortization (EBITDA) $ 53,296 $ 45,957 $ 30,647 $ 34,858 $ 24,829
Capital expenditures 10,885 10,232 8,893 10,216 15,295
Depreciation and amortization 19,632 19,675 15,700 15,621 17,767
R&D - company funded 17,303 15,783 18,668 16,128 17,927
- customer funded 24,411 21,603 25,332 30,986 29,220
Backlog - Domestic 205,516 195,908 181,405 149,035 169,800
- International 37,794 42,033 35,856 32,046 42,300
____________________________________________________________________________________________________
ADDITIONAL DATA
Number of employees 3,229 3,003 3,140 2,824 2,886
Number of shareholders - Class A 1,904 2,114 2,424 2,665 2,855
- Class B 898 966 1,088 1,201 1,257
____________________________________________________________________________________________________
RATIOS
Net return on sales 2.6% 2.1% .7% 1.6% N/A
Return on equity 10.0% 7.4% 2.2% 5.0% N/A
EBITDA as a percentage of sales 13.1% 12.3% 10.0% 11.9% 8.1%
Current ratio 2.89 2.76 2.46 2.33 2.14
Debt to equity 2.02 1.75 2.00 1.49 1.48
Long-term senior debt to capitalization 25.6% 55.5% 56.8% 40.8% 42.8%
Long-term debt to capitalization 65.3% 61.8% 63.7% 51.7% 53.5%
____________________________________________________________________________________________________
(1) Includes the effects of the June 1994 acquisition of the hydraulic and mechanical actuation
product lines of AlliedSignal Inc. See Note 2 to the Consolidated
Financial Statements.
(2) The results of operations in 1994 and 1992 include pre-tax restructuring charges of $4.7 million
and $13.8 million, respectively.
(3) Capitalization is equal to total long-term debt, excluding current maturities, and shareholders'
equity.
(4) EBITDA is presented herein to facilitate a supplemental analysis of the Company's financial
condition and is not intended to represent results of operations or cash flows in accordance with
generally accepted accounting principles.
</TABLE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company is a leading global designer and manufacturer of
a broad range of high performance precision motion and fluid
control products and systems for aerospace and industrial
applications. Moog's servoactuation systems are critical in
controlling the flight of commercial and military aircraft,
controlling the thrust of space launch vehicles, steering
tactical and strategic missiles, satellite positioning and are
used in a wide variety of electric and hydraulic industrial
applications that require the precise control of position,
velocity and force.
The Company has two industry segments, Domestic Controls and
International Controls. These industry segments consist of five
principal product lines: Commercial Aircraft, Military Aircraft,
Space and Missiles (collectively referred to as aerospace),
Industrial Hydraulics and Industrial Electrics (collectively
referred to as industrial controls). Domestic Controls designs
and manufactures products primarily for North American markets,
while International Controls designs and manufactures products
for markets in Europe and the Far East. The majority of Domestic
Controls segment sales relate to aerospace, with a smaller
portion of sales related to industrial controls. International
Controls segment sales relate principally to industrial controls,
with a relatively small portion related to aerospace.
The Company considers select acquisitions to broaden its
product lines, enhance market share and improve manufacturing and
engineering capabilities and utilization. In 1994, Moog acquired
certain hydraulic and mechanical actuation product lines of
AlliedSignal Inc. located in Torrance, California (the Aircraft
Controls Acquisition). The adjusted purchase price, excluding
$5.0 million for specified transition services, was $63.8
million. On December 15, 1995, the Company purchased for $5.0
million, the industrial servovalve product line of Ultra
Hydraulics Limited ("Ultra"). On October 26, 1996, the Company
acquired the assets of and assumed certain liabilities related to
the industrial hydraulic servocontrols business (the U.S.
Industrial Hydraulics Business) of International Motion Control
Inc., (IMC), an unrelated third party. The U.S. Industrial
Hydraulics Business, which operated under the name Moog Controls
Inc., was spun off by the Company in February 1988. The purchase
price for the U.S. Industrial Hydraulics Business was $48.6
million.
Sales. Commercial aerospace and industrial controls
accounted for 55% of fiscal 1996 sales, with the balance to U.S.
and foreign governments for military and space hardware. Over the
past five years, the percentage of government sales to total
sales has declined as the Company has increased its focus on the
development and acquisition of commercial aerospace and
industrial controls product lines. In fiscal 1992, government
sales were 60% and commercial sales were 40%. Moog expects the
percentage of commercial sales to continue to increase based upon
expected growth in commercial aerospace and industrial controls.
<PAGE>
In Commercial Aircraft, the Company's sales are dependent on
the aircraft production cycle of the major OEMs. In industrial
controls, the Company is subject to the normal fluctuations in
capital goods spending in regional markets. Sales related to the
Military Aircraft and Space and Missiles product lines are
subject to changes in procurement and spending levels on programs
in which the Company participates. While each of its product
lines is subject to cyclicality, the Company believes the impact
is mitigated by their diversity and broad geographic
distribution.
Cost of Sales. The Company's business requires substantial
investments in capital equipment, buildings and related support
costs. Cost of sales can be affected by changes in both volume
and product mix. The Company has a highly skilled workforce, and
an infrastructure of engineering and related support costs.
Accordingly, short-term changes in volume can have a significant
effect on gross margins. These short-term changes can be tempered
by the long-term nature of the aerospace business and the
production cycle of major industrial capital goods manufacturers.
Selling, General and Administrative Expenses. The Company's
selling, general and administrative expenses are typically higher
in industrial controls than in aerospace. The industrial products
generally have higher gross margins, but also require higher
sales and support effort. Accordingly, shifts in the sales mix to
or from industrial controls will affect selling, general and
administrative expenses as a percentage of sales. These expenses
are also affected by the amount of bid and proposal work on
government contracts and commission sales.
Research and Development. Research and development expenses
vary depending on whether the engineering staff is engaged in
customer-funded design and development, sales support, production
support or Company-funded research and development activities.
The Company's annual research and development expenses have
averaged $17.2 million over the past five fiscal years. Revenue
from design and development activities averaged $26.3 million or
7.8% of average sales.
Results of Operations - Fiscal 1996 Compared with Fiscal 1995
Net sales for fiscal 1996 were $407.2 million, an increase
of 8.8% over the same period a year ago. Net sales for the
Domestic Controls segment were $276.5 million, 8.9% above net
sales of $253.9 million a year ago. The Domestic Controls net
sales increase is attributable to increased volumes in both the
Commercial and Military Aircraft product lines, along with higher
volumes in satellite and space propulsion controls. For the
International Controls segment, net sales increased 8.6% to
$130.7 million in fiscal 1996 compared with $120.4 million a year
ago. The International Controls net sales growth relates
principally to increased volumes due to stronger demand for
Industrial Hydraulics throughout Europe and, to a lesser degree,
the December 1995 acquisition of the industrial servovalve
product line of Ultra. The movement in the value of certain
foreign currencies relative to the U.S. dollar in fiscal 1996 did
not have a significant impact on sales.
<PAGE>
Cost of sales for fiscal 1996 was $281.7 million, or 69.2%
of net sales, compared to $265.0 million, or 70.8% of net sales
in the prior fiscal year. The decrease as a percentage of sales
is primarily due to the absence of transition costs in 1996
related to the Aircraft Controls Acquisition and to increased
sales in the higher margin Industrial Hydraulics and Space and
Missiles product lines.
Research and development expense was $17.3 million or 4.2%
of net sales for fiscal 1996, compared with $15.8 million or 4.2%
of net sales in the same period of fiscal 1995. The increase
principally relates to the development of advanced actuation
technology and related electronics and active vibration
development efforts in the U.S. related to the Commercial and
Military Aircraft product lines. Revenue from design and
development activities was $24.4 million in fiscal 1996, compared
to $21.6 million in fiscal 1995.
Selling, general and administrative expenses were $75.7
million or 18.6% of net sales in fiscal 1996, compared to $68.5
million or 18.3% of sales in the same period a year ago. The
increase as a percentage of sales is primarily attributable to
legal costs, stock appreciation rights, amortization of debt
issuance costs and certain duplicate international management
costs.
Operating profit for the Domestic Controls segment was $32.7
million for fiscal 1996, or 11.4% of segment sales. This compares
with $25.2 million, or 9.6% of segment sales a year ago. The
increase is attributable to a 9.1% increase in segment sales, and
the absence in fiscal 1996 of transition costs associated with
the Aircraft Controls Acquisition. For the International Controls
segment, operating profit for fiscal 1996 was $11.8 million, or
8.1% of segment sales, compared to $8.5 million, or 6.8% of
segment sales a year ago. The increase is a result of higher
segment sales due to improved European capital goods market
conditions.
Interest expense was $18.1 million for fiscal 1996, compared
with $17.5 million for fiscal 1995. While the Recapitalization,
as defined under Financial Condition and Liquidity, resulted in
higher interest expense for the third and fourth quarters of
fiscal 1996, interest expense declined to 4.5% of sales in the
current year from 4.7% a year ago.
The effective tax rate for fiscal 1996 was 30.1%, compared
to 11.7% for fiscal 1995. The effective tax rates are
significantly affected by the utilization of net operating loss
carryforwards at the German subsidiary. In fiscal 1996, the
Company continued to reduce its valuation allowance for deferred
tax assets principally related to the improving financial
position of its German subsidiary. The lower tax rate in fiscal
1995 reflected the fact that a larger proportion of fiscal 1995
earnings before taxes were generated by the German subsidiary
relative to fiscal 1996.
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The extraordinary item of $.5 million represents prepayment
and amendment fees and the write-off of deferred debt issuance
costs associated with the Recapitalization, as defined under
Financial Condition and Liquidity.
As a result of the factors discussed above, net earnings for
fiscal 1996 increased to $10.7 million, or $1.40 per share
compared with $7.8 million, or $1.00 per share, a year ago.
Results of Operations - Fiscal 1995 Compared with Fiscal 1994
Net sales in fiscal 1995 of $374.3 million were 21.8% higher
than fiscal 1994 net sales of $307.4 million. For the Domestic
Controls segment, net sales increased 19.1% in fiscal 1995 to
$253.9 million compared to $213.3 million in fiscal 1994. The
increase was attributable primarily to the Aircraft Controls
Acquisition and unit volume increases, in part offset by lower
revenue on the B-2 program and certain missile programs.
International Controls segment net sales increased 27.9% in
fiscal 1995 to $120.4 million from $94.1 million in the prior
fiscal year. The increase reflected the improvement in European
capital goods markets, and to a much lesser extent, the increase
in value of certain foreign currencies relative to the U.S.
dollar. Excluding the effect of changing currency values,
International Controls segment net sales increased 18.0%. In
total, there were minimal pricing changes in most European
markets, while in Japan, the Company experienced overall declines
in pricing due to worldwide competitive pressures.
Cost of sales increased to $265.0 million, or 70.8% of net
sales, in fiscal 1995 compared with $213.5 million, or 69.5% of
net sales in fiscal 1994. The increase as a percentage of sales
was principally due to transition costs associated with the
Aircraft Controls Acquisition and a change in product mix.
Research and development expenses were $15.8 million, or
4.2% of net sales, in fiscal 1995 compared to $18.7 million, or
6.1% of net sales, in fiscal 1994. The decline was attributable
to significant expenditures in fiscal 1994 on brushless motor
development for entertainment motion platforms, radio controls,
engine thrust vectoring controls, and helicopter vibration
controls. Further, more engineering resources were utilized on
production related activity in fiscal 1995. Revenue from design
and development activities was $21.6 million in fiscal 1995
compared with $25.3 million in fiscal 1994.
Selling, general and administrative expenses in fiscal 1995
were $68.5 million, or 18.3% of net sales compared to $58.3
million, or 19.0% of net sales, in fiscal 1994. In absolute
terms, the increase was primarily due to a full year of costs in
fiscal 1995 related to the Aircraft Controls Acquisition.
Further, $2.6 million of the increase reflected the higher
average value of foreign currencies relative to the U.S. dollar.
The decline, as a percentage of net sales, reflected the
additional sales from the Aircraft Controls Acquisition and
increased sales in the International Controls segment.
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Operating profit for the Domestic Controls segment was $25.2
million in fiscal 1995, representing 9.6% of segment sales,
compared with $20.4 million, or 9.2% of segment sales, in fiscal
1994. The increase in operating profit was due to the Aircraft
Controls Acquisition, in part offset by declining revenue on the
B-2 program and certain missile programs, as well as one-time
transition services costs resulting from the Aircraft Controls
Acquisition. Fiscal 1994 also included $3.4 million of inventory
obsolescence and restructuring charges. Operating profit for the
International Controls segment in fiscal 1995 was $8.5 million,
or 6.8% of segment sales compared with $1.1 million, or 1.1% of
segment sales, in fiscal 1994, which included $1.3 million of
restructuring and inventory obsolescence charges. Excluding these
charges, operating profit would have been $2.4 million, or 2.4%
of segment sales. The improvement in capital goods markets in
Europe, along with cost reduction measures, led to a significant
improvement in European operating profit. Within the Pacific
region, operating profit was down from fiscal 1994, primarily due
to costs of penetrating new Asian markets.
Interest expense increased in fiscal 1995 to $17.5 million,
or 4.7% of net sales, compared to $11.4 million, or 3.7% of net
sales, in fiscal 1994. The increase in interest expense was due
to the additional debt associated with the Aircraft Controls
Acquisition.
Foreign currency exchange losses of $.1 million in fiscal
1995 compared with a gain of $.5 million in fiscal 1994. The
fiscal 1994 gain primarily related to a short-term Deutsche Mark
loan between Moog and its German subsidiary.
The effective income tax rate was 11.7% for 1995 compared
with the fiscal 1994 effective rate of 46.8%. The effective tax
rate for fiscal 1995 reflected the relatively strong earnings at
the Company's German operation, which benefitted from its net
operating loss carryforward position. Conversely, the higher
effective tax rate for fiscal 1994 resulted from losses at the
German subsidiary which provided limited tax benefits. In the
fourth quarters of fiscal 1995 and 1994, the Company reduced its
valuation allowance for deferred tax assets to reflect the
improved German operating results.
As a result of the factors discussed above, net earnings in
fiscal 1995 were $7.8 million, or $1.00 per share, compared with
net earnings in fiscal 1994 of $2.1 million, or $.27 per share.
Financial Condition and Liquidity
The Company completed a Recapitalization (the
Recapitalization) in May 1996. The Recapitalization enhanced the
Company's long-term capital base while providing additional
senior capacity to fund growth. It further allowed the Company to
retire subordinated debentures convertible to common stock at
favorable prices, and repurchase 9.3% of its Common Stock.
The principal elements of the Recapitalization were the
issuance of $120 million Senior Subordinated Notes, amending the
<PAGE>
U.S. Bank Credit facility and reducing outstanding borrowings
under this facility by approximately $69.1 million, redeeming
$18.0 million of Convertible Subordinated Debentures, prepaying a
10 1/4% Note for $16.4 million, and repurchasing 714,600 Class A
shares for $12.9 million.
As of September 30, 1996, the Company had worldwide unused
lines of credit of $112.7 million, plus cash and cash equivalents
of $9.6 million. In connection with the acquisition of the U.S.
Industrial Hydraulics Business on October 26, 1996, the Company
utilized approximately $49 million that was available under the
U.S. Revolving Credit and Term Loan Facility.
The percentage of long-term debt to capitalization as of
September 30, 1996 was 65.3% compared to 61.8% as of
September 30, 1995. The increase is a result of the
Recapitalization.
Cash provided by operating activities was $15.2 million in
fiscal 1996 and fiscal 1995 and $11.1 million in 1994. Higher
working capital at September 30, 1996 (see below) was offset by
increased earnings. The increase in fiscal 1995 was principally
due to increased earnings.
Working capital at September 30, 1996 was $188.0 million
compared with $167.0 million at September 30, 1995. The current
ratio was 2.89 at September 30, 1996, compared to 2.76 at
September 30, 1995. The increase in working capital and the
current ratio principally related to increased receivables and
inventory levels due to the acquisition of Ultra and an effort to
reduce lead times.
Capital expenditures for fiscal 1996 were $10.9 million
compared with depreciation and amortization of $19.6 million.
Capital expenditures in fiscal 1995 were $10.2 million compared
with $8.9 million in fiscal 1994. Capital expenditures were well
below depreciation and amortization levels of $19.7 million in
fiscal 1995 and $15.7 million in fiscal 1994. Capital
expenditures for fiscal 1997 are expected to be approximately $15
million.
Foreign exchange instruments are used to hedge the Company's
equity in, and long-term advances to, various International
subsidiaries. In addition, the Company periodically utilizes
foreign currency forward contracts to hedge known foreign
currency cash flows. The Company has also entered into interest
rate swaps to manage its exposure to increases in interest rates
on a floating-rate credit facility. The Company does not hold or
issue financial instruments for trading purposes.
Recent Accounting Pronouncements
The Company is required to adopt SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed of," and SFAS No. 123, "Accounting for Stock-Based
Compensation," in fiscal 1997. The Company does not believe that
the adoption of either standard will have a material effect on
its fiscal 1997 consolidated financial statements.
<PAGE>
Backlog
Backlog consists of that portion of open orders for which
sales are expected to be recognized over the next twelve months.
Backlog was $243.3 million at September 30, 1996 compared with
$237.9 million at September 30, 1995. Backlog for the Domestic
Controls segment was $205.5 million at September 30, 1996
compared with $195.9 million at September 30, 1995. The increase
in the Domestic backlog from a year ago relates to strong growth
in the Space and Missiles product line. International Controls
segment backlog was $37.8 million at September 30, 1996 compared
with $42.0 million at September 30, 1995. The decline for
International Controls relates to lower relative currency values
and improved delivery performance.
General
Environmental Matters - At September 30, 1996, the Company
believes that adequate reserves have been established for
environmental issues, and does not expect environmental matters
will have a material effect on the financial position of the
Company.
Foreign Exchange - The Company's International activities
are conducted in more than ten countries. This generally helps to
reduce the level of exposure of foreign currency movements on
operating results.
Government Contracting
The Company shares risks of cancellation as a participant in
government sponsored programs similar to the risks assumed by all
government contractors. 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.
The Company believes that adequate reserves have been established
for any issues on which financial exposure is known and
quantifiable.
<PAGE>
ITEM 8. Financial Statements and Supplementary Data.
<TABLE>
MOOG INC.
Consolidated Statements of Income
<CAPTION>
____________________________________________________________________________________________________
(dollars in thousands except
per share data) Years ended September 30 1996 1995 1994
____________________________________________________________________________________________________
<S> <C> <C> <C>
NET SALES $ 407,237 $ 374,284 $ 307,370
OTHER INCOME 2,380 2,166 2,489
__________ __________ __________
409,617 376,450 309,859
__________ __________ __________
COSTS AND EXPENSES
Cost of sales 281,710 265,033 213,530
Research and development 17,303 15,783 18,668
Selling, general and administrative 75,707 68,457 58,324
Interest 18,124 17,492 11,402
Foreign currency exchange (gain) loss (88) 143 (451)
Other expenses 811 752 665
Restructuring charges (note 4) - - 4,681
__________ __________ __________
393,567 367,660 306,819
__________ __________ __________
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 16,050 8,790 3,040
INCOME TAXES (note 7) 4,831 1,029 1,422
__________ __________ __________
EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING FOR INCOME TAXES 11,219 7,761 1,618
EXTRAORDINARY ITEM, LOSS FROM EARLY EXTINGUISHMENT OF DEBT,
NET OF INCOME TAXES OF $300 (note 6) (510) - -
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES - - 505
__________ __________ __________
NET EARNINGS $ 10,709 $ 7,761 $ 2,123
========== ========== ==========
<PAGE>
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Before extraordinary item and cumulative effect of
change in accounting for income taxes $ 1.47 $ 1.00 $ .21
Extraordinary item (.07) - -
Cumulative effect of change in accounting for income taxes - - .06
__________ __________ __________
Net earnings $ 1.40 $ 1.00 $ .27
========== ========== ==========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,639,312 7,721,927 7,714,444
___________________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
Consolidated Balance Sheets
<CAPTION>
___________________________________________________________________________
(dollars in thousands) As of September 30 1996 1995
___________________________________________________________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,639 $ 7,576
Receivables (note 3) 155,972 148,915
Inventories (note 4) 99,318 86,176
Deferred income taxes (note 7) 19,708 16,816
Prepaid expenses and other current assets 2,939 2,275
________ ________
TOTAL CURRENT ASSETS 287,576 261,758
PROPERTY, PLANT AND EQUIPMENT (notes 5 and 6) 131,371 139,131
INTANGIBLE ASSETS, net of accumulated amortization
of $4,676 in 1996, and $3,213 in 1995 16,024 14,093
OTHER ASSETS 14,587 9,975
________ ________
TOTAL ASSETS $449,558 $424,957
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (note 6) $ 3,420 $ 6,606
Current installments of long-term debt (note 6) 10,491 7,080
Accounts payable 21,597 25,781
Accrued salaries, wages and commissions 24,504 21,065
Contract loss reserves 10,966 12,872
Accrued interest 6,160 1,589
Other accrued liabilities 14,208 9,844
Customer advances 8,259 9,936
________ ________
TOTAL CURRENT LIABILITIES 99,605 94,773
LONG-TERM DEBT, excluding current installments (note 6)
Senior debt 77,351 158,075
Senior subordinated notes 120,000 -
Convertible subordinated debentures - 18,000
OTHER LONG-TERM LIABILITIES (notes 7 and 8) 47,859 45,473
________ ________
TOTAL LIABILITIES 344,815 316,321
________ ________
COMMITMENTS AND CONTINGENCIES (note 12) - -
SHAREHOLDERS' EQUITY (see page 27 and notes 8 and 9)
9% Series B Cumulative, Convertible, Exchangeable
Preferred stock - Par Value $1.00
Authorized 200,000 shares. Issued 100,000 shares. 100 100
Common Stock - Par Value $1.00
Class A - Authorized 30,000,000 shares. Issued
6,629,245 shares in 1996 and 6,599,206 shares
in 1995. 6,629 6,599
<PAGE>
Class B - Authorized 10,000,000 shares.
Convertible to Class A on a one for one basis.
Issued 2,504,878 shares in 1996 and 2,534,917
shares in 1995. 2,505 2,535
Additional paid-in capital 47,611 47,709
Retained earnings 74,825 64,125
Treasury shares (31,803) (17,841)
Equity adjustments 5,377 6,158
Loan to Savings and Stock Ownership Plan (501) (749)
________ ________
TOTAL SHAREHOLDERS' EQUITY 104,743 108,636
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $449,558 $424,957
_________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
Consolidated Statements of Cash Flow
<CAPTION>
____________________________________________________________________________________________________
(dollars in thousands) Years ended September 30 1996 1995 1994
____________________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 10,709 $ 7,761 $ 2,123
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 19,632 19,675 15,700
Provisions for losses 6,444 3,761 5,860
Deferred income taxes (584) 1,565 4,926
Extraordinary item, loss from early extinguishment of
debt, pre-tax 810 - -
Other 485 (84) 418
Change in assets and liabilities providing (using) cash:
Receivables (13,465) (7,876) (10,813)
Inventories (17,662) (8,627) (1,376)
Other assets (1,486) 952 (4,844)
Accounts payable and accrued liabilities 5,604 (3,189) 3,519
Other liabilities 6,354 1,381 (4,290)
Customer advances (1,665) (144) (127)
__________ __________ __________
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,176 15,175 11,096
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions and investments, including 1995 purchase
price settlement (note 2) (6,752) 9,200 (78,000)
Purchase of property, plant and equipment (10,288) (9,974) (7,741)
Proceeds from sale of assets 202 362 527
Payments received on loan to Savings and Stock Ownership Plan 248 349 176
__________ __________ __________
NET CASH USED IN INVESTING ACTIVITIES (16,590) (63) (85,038)
__________ __________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (3,357) (2,738) (10,635)
Proceeds from revolving lines of credit 92,272 - 70,000
Payments on revolving lines of credit (149,657) (1,000) (151)
Proceeds from issuance of long-term debt 125,213 7,610 69,695
Payments on long-term debt (46,181) (18,884) (64,558)
Purchase of outstanding shares for treasury (14,605) - -
Proceeds from issuance of treasury stock 545 60 30
Other (435) (9) (9)
__________ __________ __________
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 3,795 (14,961) 64,372
__________ __________ __________
Effect of exchange rate changes on cash (318) (136) (317)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,063 15 (9,887)
Cash and cash equivalents at beginning of year 7,576 7,561 17,448
__________ __________ __________
Cash and cash equivalents at end of year $ 9,639 $ 7,576 $ 7,561
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for: Interest $ 12,856 $ 17,598 $ 11,359
Income taxes, net of refunds 2,739 (3,189) 367
Non-cash investing and financing activities:
Equity adjustment from change in pension liability versus
unrecognized prior service cost 1,329 (1,231) 5,568
Adjustment required to recognize minimum pension
liability (note 8) (2,019) 1,083 (5,654)
Leases capitalized, net of leases terminated 597 260 1,160
___________________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
Consolidated Statements of Shareholders' Equity
<CAPTION>
____________________________________________________________________________________________________
(dollars in thousands except
per share data) Years ended September 30 1996 1995 1994
____________________________________________________________________________________________________
<S> <C> <C> <C>
PREFERRED STOCK (note 9) $ 100 $ 100 $ 100
__________ __________ __________
COMMON STOCK (note 9) 9,134 9,134 9,134
__________ __________ __________
ADDITIONAL PAID-IN CAPITAL
Beginning of year 47,709 47,737 47,780
Issuance of Treasury Shares at less than cost (98) (28) (43)
__________ __________ __________
End of year 47,611 47,709 47,737
__________ __________ __________
RETAINED EARNINGS
Beginning of year 64,125 56,373 54,259
Net earnings 10,709 7,761 2,123
Preferred dividends ($.09 per share in 1996, 1995 and 1994) (9) (9) (9)
__________ __________ __________
End of year 74,825 64,125 56,373
__________ __________ __________
TREASURY SHARES, AT COST*
Beginning of year (17,841) (17,929) (18,002)
Shares issued related to options (1996 - 46,800 Class A
shares and 500 Class B shares; 1995 - 6,000 Class A shares
and 1,000 Class B shares; 1994 - 5,500 Class A shares) 568 87 73
Shares issued related to conversion of convertible
subordinated debentures (1996 - 6,204 Class A shares;
1995 - 87 Class A shares) 75 1 -
Shares acquired through purchase (1996 - 721,086 Class A
shares, 80,000 Class B shares and 5,117 Series B
Preferred shares) (14,605) - -
__________ __________ __________
End of year (31,803) (17,841) (17,929)
__________ __________ __________
EQUITY ADJUSTMENTS**
Beginning of year 6,158 7,867 564
Adjustment from foreign currency translation (2,110) (478) 1,735
<PAGE>
Adjustment from change in pension liability versus
unrecognized prior service cost 1,329 (1,231) 5,568
__________ __________ __________
End of year 5,377 6,158 7,867
__________ __________ __________
LOAN TO SAVINGS AND STOCK OWNERSHIP PLAN (SSOP) (note 8)
Beginning of year (749) (1,098) (1,274)
Payments received on loan to SSOP 248 349 176
__________ __________ __________
End of year (501) (749) (1,098)
__________ __________ __________
TOTAL SHAREHOLDERS' EQUITY $ 104,743 $ 108,636 $ 102,184
___________________________________________________________________________________________________
* Class A Common Stock in treasury: 1,219,050 shares as of September 30, 1996; 550,968 shares as
of September 30, 1995; 557,055 shares as of September 30, 1994.
Class B Common Stock in treasury: 936,603 shares as of September 30, 1996; 857,103 shares as of
September 30, 1995; 858,103 shares as of September 30, 1994.
Preferred Stock in treasury: 5,117 shares as of September 30, 1996.
** End of year balance includes cumulative foreign currency translation, net of applicable
deferred taxes, of 1996- $5,377; 1995 - $7,487; 1994 - $7,965; and cumulative minimum pension
liability adjustments of 1996 - $0; 1995 - ($1,329); 1994 - ($98). Included in adjustment from
foreign currency translation are net deferred (gains) losses of $(246) in 1996, $1,138 in 1995,
and $317 in 1994 related to hedging net investments in, and long-term advances to, various
international subsidiaries.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Notes To Consolidated Financial Statements
(dollars in thousands except per share data)
Note 1 - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include
the accounts of Moog Inc. and all of its U.S. and International
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents: All highly liquid investments
with an original maturity of three months or less are considered
cash equivalents. Cash and cash equivalents are carried at
amounts which approximate fair value.
Revenue Recognition: The percentage of completion
(cost-to-cost) method of accounting is followed for long-term
contracts. Under this method, revenues are recognized as the work
progresses toward completion. Contract incentive awards affect
earnings when the amounts can be determined. For contracts with
anticipated losses at completion, the projected loss is accrued.
Revenues other than on long-term contracts are recognized as
units are delivered.
Inventories: Inventories are stated at the lower of cost or
market using the first-in, first-out (FIFO) method of valuation.
Consistent with industry practice, aerospace related inventories
include amounts relating to contracts having long production and
procurement cycles, portions of which are not expected to be
realized within one year.
Foreign Currency: Foreign subsidiaries' assets and
liabilities are translated using rates of exchange as of the
balance sheet date and the statements of income are translated at
the average rates of exchange for the year. Transaction gains and
losses from certain long-term advances to foreign subsidiaries
and hedges of these advances to, and net investments in these
subsidiaries are accumulated in the equity section as "Equity
Adjustments." Gains and losses resulting from all other foreign
currency transactions are included in income.
Depreciation and Amortization: Plant and equipment are
depreciated principally using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements and
assets considered capital leases are amortized on a straight-line
basis over the term of the lease or the estimated useful life of
the asset, whichever is shorter.
Intangibles associated with acquisitions are amortized on a
straight-line basis over periods not to exceed 30 years. The
Company monitors its intangibles for evidence of impairment. In
the event that such evidence exists, the Company uses forecasted
undiscounted cash flow analysis to determine the amount of
impairment, if any.
Financial Instruments and Credit Concentration: Instruments
which potentially subject the Company to concentrations of credit
<PAGE>
risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary investments in
highly rated financial institutions and for maturities of
generally three months or less. Concentrations of credit risk
with respect to trade receivables are limited due to the
significant amount of business with large commercial aerospace
companies or prime U.S. Government contractors and to the number
of customers and their dispersion over a large geographic area.
Use of Estimates: Management has made a number of estimates
and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
Note 2 - Acquisitions
In June of 1994 the Company acquired 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 wide variety of commercial and military
aircraft. The adjusted purchase price, excluding $5,000 for
specified transition services, was $63,800. The acquisition
resulted in Product Line intangible assets of $14,565, which are
being amortized over a 12 year period.
On December 15, 1995, the Company purchased, for $5,012 net
of cash acquired, the industrial servovalve product line of Ultra
Hydraulics Limited located in the United Kingdom. On May 24,
1996, the Company acquired the propellant valve product line of
Parker Hannifin Corporation for $890.
On October 26, 1996, the Company acquired the assets of and
assumed certain liabilities related to the industrial hydraulic
servocontrols business (the U.S. Industrial Hydraulics Business)
of International Motion Control Inc., (IMC), an unrelated third
party. The U.S. Industrial Hydraulics Business, which operated
under the name Moog Controls Inc., was spun off by the Company in
February 1988. The purchase price was $48,600. Based on a
preliminary purchase price allocation, which is subject to
finalization, intangible assets resulting from this acquisition
should approximate $37,000. For the 12 month period ended
September 30, 1996, the unaudited results of operations of the
U.S. Industrial Hydraulics Business consisted of net sales
totalling approximately $29,600 and operating profit of
approximately $4,900, after deducting depreciation expense of
$900. The historical results of the U.S. Industrial Hydraulics
Business are not intended to be a projection of future results.
In a related transaction, the Company acquired a nearly completed
manufacturing facility which IMC originally intended for use by
the U.S. Industrial Hydraulics Business. The Company has since
reached an agreement in principle to sell the building to a third
party. The acquisition was principally financed with proceeds
<PAGE>
from the Company's U.S. Revolving Credit and Term Loan Facility
(the Bank Credit Facility).
All of the Company's acquisitions are accounted for under
the purchase method, and accordingly, the operating results for
the acquired companies are included in the Consolidated
Statements of Income from the date of acquisition.
On May 13, 1996, a joint venture called Moog Hydrolux LLC,
in which the Company has a 50% interest, was formed. The Company
accounts for this investment on the equity method.
Note 3 - Receivables
Receivables consist of:
_______________________________________________________________
September 30 1996 1995
_______________________________________________________________
Long-term contracts:
Amounts billed $ 37,068 $ 38,542
Unbilled recoverable costs and profits 71,101 61,400
Unbilled costs and profits subject to
negotiation 1,518 116
_________ _________
Total long-term contract receivables 109,687 100,058
Trade 45,710 45,582
Refundable income taxes 183 3,331
Other 1,724 1,323
_________ _________
Total receivables 157,304 150,294
Less allowance for doubtful accounts (1,332) (1,379)
_______________________________________________________________
Receivables $ 155,972 $ 148,915
_______________________________________________________________
The long-term contract amounts are primarily associated with
prime U.S. Government contractors and major commercial aircraft
manufacturers. These amounts include retainage in accordance with
the terms of the contracts. Unbilled costs and profits subject to
negotiation represent claims on terminated contracts.
Substantially all unbilled amounts are expected to be collected
within one year. In situations where billings exceed revenues
recognized, the excess is included in customer advances.
Note 4 - Inventories
Inventories consist of the following:
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Raw materials and purchased parts $ 30,609 $ 23,028
Work in process 55,789 52,839
Finished goods 12,920 10,309
_______________________________________________________________
Inventories $ 99,318 $ 86,176
_______________________________________________________________
<PAGE>
In 1994, the Company recorded a pre-tax restructuring charge
of $4,681 of which $2,574 related to the write-off of obsolete
Domestic Controls segment inventory. This write-off reflected a
decline in repair activities and spare part requirements on
various government programs. The restructuring charge also
included $2,107 related to workforce reductions and other
restructuring actions taken in response to U.S. defense spending
reductions and weak capital goods markets in Europe.
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Land $ 7,553 $ 7,864
Buildings and improvements 87,945 89,323
Machinery and equipment 214,880 212,026
Property, plant and equipment, at cost 310,378 309,213
Less accumulated depreciation and
amortization (179,007) (170,082)
________________________________________________________________
Property, plant and equipment $ 131,371 $ 139,131
________________________________________________________________
Assets under leases that have been accounted for as capital
leases and included in property, plant and equipment are
summarized as follows:
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Capital leases at cost $ 6,711 $ 6,945
Less accumulated amortization (2,721) (2,841)
_________________________________________________________________
Net assets under capital leases $ 3,990 $ 4,104
_________________________________________________________________
Note 6 - Indebtedness
The Company maintains short-term lines of credit with
various banks throughout the world. The short-term credit lines
are principally demand lines and subject to revision by the
banks. These shortterm lines of credit, along with $94,000
available on the Bank Credit Facility, provided credit
availability of $112,744 at September 30, 1996. In connection
with the acquisition of the U.S. Industrial Hydraulics Business
on October 26, 1996, the Company utilized approximately $49,000
that was available under the Bank Credit Facility. Commitment
fees are charged on some of these arrangements based on a
percentage of the unused amounts available. At September 30,
1996, the International Controls segment had $3,420 of notes
payable to banks at an average rate of 11.7% outstanding under
these lines of credit. During 1996, an average of $5,739 in notes
payable were outstanding at an average interest rate of 7.3%.
Notes payable are carried at amounts which approximate fair
value.
<PAGE>
Long-term debt consists of the following:
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Bank Credit Facility
- revolving credit $ 41,000 $ 95,299
- term loan 30,000 30,000
10 1/4% senior secured note - 18,350
International and other U.S. term
loan agreements 13,254 16,452
Obligations under capital leases 3,588 3,654
_________ _________
Senior debt 87,842 163,755
10% senior subordinated notes 120,000 -
9 7/8% convertible subordinated debentures - 19,400
_________ _________
Total long-term debt 207,842 183,155
Less current installments (10,491) (7,080)
_________________________________________________________________
Long-term debt $ 197,351 $ 176,075
_________________________________________________________________
On May 14, 1996, the Company completed a recapitalization
(the "Recapitalization"), the principal elements of which were
the following:
(1) The redemption (the "Debenture Redemption") on April 26,
1996 of the Company's 9 7/8% Convertible Subordinated Debentures
due 2006 using funds available under the Bank Credit Facility. Of
the total principal balance outstanding of $18,000 on April 26,
1996, principal of $17,858 was redeemed with $142 of principal
converted into 6,204 Class A Common shares.
(2) The completion on May 14, 1996 of a $120,000 offering
(the "Offering") of 10% Senior Subordinated Notes due 2006 (the
"Notes"), the proceeds of which were $116,438 net of discounts
and expenses of the Offering. The Notes have a single maturity
with the aggregate principal amount due on May 1, 2006. The Notes
are redeemable at the option of the Company, in whole or in part,
at any time on or after May 1, 2001 initially at 105% of their
principal amount, plus accrued interest, declining ratably to
100% of their principal amount, plus accrued interest, on or
after May 1, 2003.
(3) The Company used such net proceeds to repurchase 714,600
shares of its Class A Common Stock for $12,863; prepay in its
entirety the principal balance of $16,400 on the Company's
10 1/4% Senior Secured Note due 2001; repay $86,481 of its
revolving borrowings under the Bank Credit Facility, which
included $17,858 borrowed for the Debenture Redemption; and pay
prepayment and amendment fees. These fees and the write-off of
related debt issuance costs resulted in an extraordinary pre-tax
charge of $810.
The Notes are unsecured, general obligations of the Company
subordinated in right of payment to all existing and future
senior indebtedness. The Note indenture includes certain
<PAGE>
covenants limiting, subject to certain exceptions, the incurrence
of additional indebtedness, payment of dividends, redemption of
capital stock, asset sales and certain mergers and
consolidations.
The Bank Credit Facility consists of a $135,000 revolving
credit facility and a $30,000 term loan. The revolving credit
facility expires in October 2000. The term loan is for six years
through July 2001, with quarterly principal payments of $1,500
commencing October 1, 1996.
Interest on the Bank Credit Facility is LIBOR plus 1.75%. In
order to provide for interest rate protection, the Company has
entered into interest rate swap agreements for $60,000,
effectively converting this amount to fixed rate debt averaging
8.2%. The swaps expire at various times in 1997 and 1998.
The Bank Credit Facility contains various covenants which,
among others, specify minimum interest coverage, limits senior
debt to a defined capital base, limits capital expenditures and
prohibits payment of cash dividends on common stock. The Bank
Credit Facility is secured by substantially all of the Company's
U.S. assets and the common shares of all Domestic and
International subsidiaries.
International and other U.S. term loan agreements of $13,254
at September 30, 1996 consist principally of financing provided
by various banks to individual International subsidiaries. These
term loans are being repaid through 2003, and carry interest
rates ranging from 1.4% to 13.5%.
Maturities of long-term debt for the next five years are
$10,491 in 1997, $12,917 in 1998, $8,807 in 1999, $6,936 in 2000,
$48,004 in 2001, and $120,687 thereafter.
The fair value of long-term debt was estimated based on
quoted market prices and discounted cash flow analysis using
current rates offered to the Company for debt with the same
remaining maturities. At September 30, 1996, the estimated fair
value of long-term debt was $210,242.
At September 30, 1996, the Company has pledged assets with a
net book value of $278,487 as security for long-term debt.
Note 7 - Income Taxes
The reconciliation of the provision for income taxes with
the amount computed by applying the U.S. federal statutory tax
rate of 34% to earnings before income taxes, extraordinary item
and cumulative effect of change in accounting for income taxes is
as follows:
<PAGE>
_________________________________________________________________
1996 1995 1994
_________________________________________________________________
Earnings before income taxes,
extraordinary item and cumulative
effect of change in accounting for
income taxes:
Domestic $ 10,979 $ 6,042 $ 6,054
Foreign 6,272 2,967 (3,440)
Eliminations (1,201) (219) 426
_________________________________________________________________
Total $ 16,050 $ 8,790 $ 3,040
_________________________________________________________________
Computed expected tax expense $ 5,457 $ 2,988 $ 1,034
Increase (decrease) in income taxes
resulting from:
Foreign tax rates 1,102 356 (419)
Nontaxable FSC earnings (76) (280) (350)
State taxes net of federal benefit 141 226 79
Change in beginning of the year
valuation allowance (2,541) (2,709) 634
Other 748 448 444
_________________________________________________________________
Income taxes $ 4,831 $ 1,029 $ 1,422
_________________________________________________________________
Effective income tax rate 30.1% 11.7% 46.8%
_________________________________________________________________
At September 30, 1996, certain International subsidiaries
had net operating loss carryforwards totalling $1,870. These loss
carryforwards do not expire and can be used to reduce current
taxes otherwise due on future earnings of those subsidiaries.
No provision has been made for U.S. federal or foreign taxes
on that portion of certain International subsidiaries'
undistributed earnings ($23,532 at September 30, 1996) considered
to be permanently reinvested. It is not practicable to determine
the amount of tax that would be payable if these amounts were
repatriated to the Company.
The components of income taxes excluding the extraordinary
item and cumulative effect of change in accounting for income
taxes are as follows:
_________________________________________________________________
1996 1995 1994
_________________________________________________________________
Current:
Federal $ 2,817 $ (828) $ (3,255)
Foreign 2,518 292 (249)
State 80 - -
________ ________ ________
Total current 5,415 (536) (3,504)
________ ________ ________
<PAGE>
Deferred:
Federal 1,220 2,466 5,440
Foreign (1,937) (1,243) (634)
State 133 342 120
________ ________ ________
Total deferred (584) 1,565 4,926
_________________________________________________________________
Total income taxes $ 4,831 $ 1,029 $ 1,422
_________________________________________________________________
The tax effects of temporary differences that generated
deferred tax assets and liabilities are detailed in the following
table. Realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers projected future taxable income and tax planning
strategies in making its assessment of the recoverability of
deferred tax assets. The impact of the change in beginning of the
year valuation allowance in fiscal 1996 and 1995 relates
primarily to the improved financial results of the Company's
German subsidiary which had accumulated net operating loss
carryforwards prior to 1995.
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Deferred tax assets:
Contract loss reserves not currently
deductible $ 4,739 $ 5,890
Tax benefit carryforwards 2,044 2,578
Accrued vacation 5,025 4,440
Deferred compensation 4,156 4,099
Accrued expenses not currently deductible 2,463 2,392
Inventory 3,633 3,031
Other 505 62
_________ _________
Total gross deferred tax assets 22,565 22,492
Less: Valuation reserve (456) (3,366)
_________ _________
Net deferred tax assets 22,109 19,126
_________ _________
Deferred tax liabilities:
Differences in bases and depreciation
of property, plant and equipment 21,314 20,720
Prepaid pension 207 552
Other 996 712
_________ _________
Total gross deferred tax liabilities 22,517 21,984
_________________________________________________________________
Net deferred tax liabilities $ 408 $ 2,858
_________________________________________________________________
<PAGE>
Note 8 - Employee Benefit Plans
<TABLE>
The Company maintains a number of defined benefit pension plans. The funded status of these plans at September 30, 1996 and
1995 is as follows:
<CAPTION>
__________________________________________________________________________________________________________________________________
1996 1995
_________________________________________ ___________________________________________________
U.S. Employee Other U.S. Employee Other
Plan with Other Plans Plans with Plan with Other Plans Plans with
Assets in with Assets Accumulated Accumulated with Assets Accumulated
Excess of in Excess Benefits in Benefits in in Excess of Benefits in
Accumulated of Accumulated Excess of Excess of Accumulated Excess of
Benefits Benefits Assets Assets Benefits Assets
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Accumulated benefit obligation
- Vested $ 100,232 $ 4,723 $ 14,883 $ 97,791 $ 3,685 $ 13,453
- Nonvested 670 - 3,545 573 - 3,599
_________ _________ _________ _________ _________ _________
- Total $ 100,902 $ 4,723 $ 18,428 $ 98,364 $ 3,685 $ 17,052
_________ _________ _________ _________ _________ _________
Projected benefit obligation (PBO) $ 112,357 $ 5,029 $ 23,553 $ 106,854 $ 3,838 $ 22,175
Plan assets at fair value 112,119 6,029 1,447 97,773 4,741 1,653
_________ _________ _________ _________ _________ _________
Plan assets in excess of
(or less than) PBO (238) 1,000 (22,106) (9,081) 903 (20,522)
Unrecognized cumulative experience
loss (gain) 1,426 (482) (2,446) 12,290 (986) (1,667)
Unrecognized net (asset) liability
from SFAS no. 87 adoption date,
amortized over 15 years (2,104) - 1,909 (2,472) (2) 2,155
Unrecognized prior service cost 35 - 273 40 - 303
Adjustment required to recognize
minimum liability - - (53) (1,368) - (704)
_________________________________________________________________________________________________________________________________
Accrued pension (liability) asset $ (881) $ 518 $ (22,423) $ (591) $ (85) $ (20,435)
_________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
Plan assets consist primarily of publicly traded stocks,
bonds, mutual funds and $13,800 in Company stock. The Company's
funding policy is to contribute at least the amount required by
law in the various jurisdictions in which the plans are
domiciled. The principal actuarial assumptions weighted for all
defined benefit plans are:
_________________________________________________________________
1996 1995
_________________________________________________________________
Discount rate 7.6% 7.4%
Return on assets 8.6% 8.2%
Rate of compensation increase 3.8% 3.6%
_________________________________________________________________
In addition, the Company maintains various defined
contribution plans. These defined contribution plans, along with
the defined benefit plans, cover substantially all employees.
Pension expense for all plans for 1996, 1995 and 1994 is as
follows:
_________________________________________________________________
1996 1995 1994
_________________________________________________________________
Service cost - benefits
earned during the year $ 4,635 $ 4,523 $ 4,217
Interest cost on projected
benefit obligation 9,827 9,019 8,472
Actual return on plan assets (17,231) (16,939) (3,017)
Net amortization, deferral
and other 9,816 9,038 (3,005)
________ ________ ________
Pension expense for defined
benefit plans 7,047 5,641 6,667
Pension expense for other plans 268 317 383
_________________________________________________________________
Total pension expense $ 7,315 $ 5,958 $ 7,050
_________________________________________________________________
Employee and management profit share plans provide for the
computation of profit share based on net earnings as a percent of
net sales multiplied by base wages, as defined. The profit share
plan was suspended for 1995. Profit share expense was $2,602 in
1996, $0 in 1995 and $459 in 1994.
The Company has a Savings and Stock Ownership Plan (SSOP)
which includes an Employee Stock Ownership Plan. As one of the
investment alternatives, participants in the SSOP can acquire
Company stock at market value, with the Company providing a 25%
share match. The SSOP purchase of the matching Class B shares was
funded by a Company loan. The loan is repaid with Company
contributions. Interest on the loan is computed at the Bank
Credit Facility borrowing rate. Shares are allocated and
compensation expense is recognized as the employer share match is
earned. Compensation expense was $306 in 1996, $446 in 1995 and
$180 in 1994. At September 30, 1996, the SSOP owned (allocated
and unallocated) 113,821 Class A shares and 499,542 Class B
shares.
<PAGE>
The Company provides postretirement health care benefits to
certain retirees. Expenses under this plan were $1,158, $1,011
and $1,075 in 1996, 1995 and 1994, respectively. A reconciliation
of the funded status of the plan with the accrued liability at
September 30, 1996 and 1995 is shown below. There were no plan
assets at September 30, 1996 or 1995.
_________________________________________________________________
September 30 1996 1995
_________________________________________________________________
Accumulated postretirement benefit
obligation (APBO)
- Inactives $ (5,147) $ (5,307)
- Actives fully eligible (395) (367)
- Actives not fully eligible (2,800) (2,724)
_________ _________
Total APBO (funded status) (8,342) (8,398)
Unrecognized transition obligation 6,704 7,098
Unrecognized gains (343) (158)
_________________________________________________________________
Accrued postretirement benefit liability $ (1,981) $ (1,458)
_________________________________________________________________
Discount rate 8.0% 7.75%
_________________________________________________________________
The effect of a one percentage point increase in the health
care cost trend rate, currently assumed at 2.5%, would not have a
significant impact on the accumulated postretirement benefit
obligation as of September 30, 1996.
Note 9 - Shareholders' Equity
Class A and Class B Common Stock share equally in the
earnings of the Company, and are identical in most respects
except (i) Class A has limited voting rights, each share of
Class A being entitled to one-tenth of a vote on most matters and
each share of Class B being entitled to one vote, (ii) Class A
shareholders are entitled to elect at least 25% of the Board of
Directors (rounded up to the nearest whole number) with Class B
shareholders entitled to elect the balance of the directors,
(iii) cash dividends may be paid on Class A without paying a cash
dividend on Class B and no cash dividend may be paid on Class B
unless at least an equal cash dividend is paid on Class A, and
(iv) Class B shares are convertible at any time into Class A on a
one-for-one basis at the option of the shareholder. The number of
common shares issued reflects conversion of Class B to Class A of
30,039 shares in 1996 and 317 shares in 1994. Convertible
subordinated debentures were also converted into 6,204 Class A
shares in 1996 and 87 Class A shares in 1995.
The Company is authorized to issue up to 10,000,000 shares
of preferred stock. Series B Preferred Stock is 9% Cumulative,
Convertible, Exchangeable Preferred Stock with a $1.00 par value.
Series B Preferred Stock consists of 100,000 issued shares and
94,883 outstanding shares, and are convertible into Class A
Common shares (.08585 shares of Class A Common Stock per share of
Series B Preferred Stock). The Series B Preferred Stock is owned
by nine principal officers of the Company. The Board of Directors
<PAGE>
may authorize, without further shareholder action, the issuance
of additional preferred stock which ranks senior to both classes
of Common Stock of the Company with respect to the payment of
dividends and the distribution of assets on liquidation. The
preferred stock, when issued, would have such designations
relative to voting and conversion rights, preferences, privileges
and limitations as determined by the Board of Directors.
Of the Class B Common Stock, 129,912 shares are reserved for
issuance under the 1983 Non-Statutory Stock Option Plan. Class A
shares reserved for issuance at September 30, 1996 are as
follows:
_________________________________________________________________
Shares
_________________________________________________________________
Conversion of Class B to Class A shares 2,634,790
1983 Incentive Stock Option Plan 322,600
Conversion of Series B Preferred Stock to
Class A shares 8,585
_________________________________________________________________
2,965,975
_________________________________________________________________
The 1983 Non-Statutory Stock Option Plan granted options on
Class B shares to directors, officers, and key employees. Stock
appreciation rights were granted in tandem with the options and
are exercisable only to the extent the options are exercised. The
1983 Incentive Stock Option Plan granted options on Class A
shares to officers and key employees. The Plans terminated on
December 31, 1992 and outstanding options expire no later than
ten years after the date of grant.
Options were granted at prices not less than market value on
the date of the grant. Shares under option are as follows:
_________________________________________________________________
Non-Statutory Incentive
Plan Plan
(Class B) (Class A)
_________________________________________________________________
Outstanding at September 30, 1993: 139,716 389,300
Cancelled or expired in 1994 (6,304) (3,800)
Exercised in 1994 - (5,500)
_______ _______
Outstanding at September 30, 1994: 133,412 380,000
Cancelled or expired in 1995 (500) (3,400)
Exercised in 1995 (1,000) (6,000)
_______ _______
Outstanding at September 30, 1995: 131,912 370,600
Cancelled or expired in 1996 (1,500) (1,200)
Exercised in 1996 (500) (46,800)
_______ _______
Outstanding and exercisable
at September 30, 1996:
Class A ($5.625 to $10.50 per share) 322,600
Class B ($11.00 to $14.75 per share) 129,912
_________________________________________________________________
<PAGE>
Note 10 - Industry Segments
<TABLE>
The Company reports information for two industry segments: Domestic
Controls which manufactures and markets precision control components primarily
for North America, and International Controls which manufactures and markets
precision control components for industrialized economies outside of North
America.
<CAPTION>
_______________________________________________________________________________
1996 1995 1994
_______________________________________________________________________________
<S> <C> <C> <C>
Domestic Controls
Net sales:
Government $ 169,408 $ 163,714 $ 157,928
Commercial 107,167 90,212 55,322
Intersegment sales 11,912 10,446 7,804
_________ _________ ________
Total sales $ 288,487 $ 264,372 221,054
========= ========= ========
Operating profit (O.P.) $ 32,744 $ 25,242 $ 20,373
Restructuring charges included in O.P. - - 3,390
Net earnings 5,863 4,030 4,394
Identifiable assets 297,445 282,323 290,644
Capital expenditures 4,973 5,633 5,263
Depreciation and amortization expense 10,103 10,363 7,725
______________________________________________________________________________
International Controls
Net sales:
Government $ 15,512 $ 18,064 $ 16,385
Commercial 115,150 102,294 77,735
Intersegment sales 14,983 4,728 5,634
_________ _________ ________
Total sales $ 145,645 $ 125,086 $ 99,754
========= ========= ========
Operating profit (O.P.) $ 11,796 $ 8,464 $ 1,135
Restructuring charges included in O.P. - - 1,291
Net earnings (loss) 5,691 3,918 (2,366)
Identifiable assets 126,732 120,499 100,261
Capital expenditures 4,468 3,977 3,019
Depreciation and amortization expense 4,913 5,337 5,129
______________________________________________________________________________
Consolidated operations
Net sales $ 407,237 $ 374,284 $307,370
========= ========= ========
Operating profit (O.P.), net of
intercompany eliminations $ 43,339 $ 33,487 $ 21,936
Restructuring charges included in O.P. - - 4,681
Deductions from O.P.:
Interest expense 18,124 17,492 11,402
Currency (gain) loss (88) 143 (451)
Other expenses, net 9,253 7,062 7,945
_________ _________ ________
<PAGE>
Earnings before income taxes,
extraordinary item and cumulative effect
of change in accounting for income taxes $ 16,050 $ 8,790 $ 3,040
========= ========= ========
Total identifiable assets $ 424,177 $ 402,822 $390,905
Corporate assets 45,976 39,864 50,179
Eliminations (20,595) (17,729) (16,628)
_________ _________ ________
Net assets $ 449,558 $ 424,957 $424,456
</TABLE>
Intersegment sales, which are transacted and accounted for
at factory cost plus applicable general and administrative
expenses and profit, have been eliminated in net sales.
Operating profit is total revenue less cost of sales and
other operating expenses. The deductions from operating profit
have been charged to the respective segments by being directly
identified with the segments or allocated on the basis of assets
or sales.
Included in net sales for Domestic Controls is $153,865 in
1996, $136,261 in 1995, and $118,807 in 1994, in sales to the
U.S. government or to prime U.S. government contractors.
Note 11 - Geographic Areas and Export Sales
<TABLE>
<CAPTION>
___________________________________________________________________________
United Europe Pacific & Corporate & Consol-
States Other Eliminations idated
___________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Identifiable Assets:
1996 $ 297,445 $ 92,206 $ 34,526 $ 25,381 $ 449,558
1995 282,323 79,910 40,589 22,135 424,957
1994 290,644 66,086 34,175 33,551 424,456
Sales to Unaffiliated Customers:
1996 $ 276,575 $ 101,093 $ 29,569 $ 407,237
1995 253,926 90,076 30,282 374,284
1994 213,250 67,568 26,552 307,370
Inter-area Sales to Affiliates:
1996 $ 11,912 $ 13,529 $ 1,454 $ 26,895
1995 10,446 4,062 666 15,174
1994 7,804 4,738 896 13,438
Export Sales:
1996 $ 57,350 $ 27,023 $ 2,220 $ 86,593
1995 54,364 25,370 1,610 81,344
1994 41,698 18,575 1,867 62,140
Net Earnings (Loss):
1996 $ 5,863 $ 5,005 $ 686 $ (845) $ 10,709
1995 4,030 4,082 (164) (187) 7,761
1994 4,394 (3,583) 1,217 95 2,123
___________________________________________________________________________
</TABLE>
<PAGE>
Sales between geographic areas are generally transacted and
accounted for at factory cost plus applicable general and
administrative expenses and profit. Export sales from the United
States are primarily to areas other than Europe. Export sales
from Europe and all other geographic areas are principally to
countries within their geographic area.
Note 12 - Commitments and Contingencies
The Company, over the past five years, has been named as a
potentially responsible party (PRP) with respect to three
Superfund sites. The clean up actions with regard to the three
Superfund sites has been completed, and the Company's share of
the related financial accommodations was not significant. No
further actions have been initiated by Federal or State
regulators. In addition, the Company was notified in August 1993
by a PRP group at a site related to one of the Superfund sites
referenced above that it will seek contribution from the Company
to the extent the PRP group is responsible for remediation costs.
At September 30, 1996, the Company believes that adequate
reserves have been established for environmental issues, and does
not expect these environmental matters will have a material
effect on the financial position of the Company in excess of
amounts previously reserved.
Legal proceedings pending by or against the Company and its
subsidiaries are not expected to have a material effect on the
financial condition or results of operations of the Company and
its subsidiaries taken as a whole.
In the ordinary course of business, subsidiaries of the
Company have discounted promissory notes received in settlement
of trade receivables at banks. The aggregate proceeds from
discounted notes were $3,983 in 1996, $8,091 in 1995, and $14,809
in 1994. Under the recourse provisions of such transactions, the
subsidiaries are contingently liable for $889 at September 30,
1996.
The Company has $3,532 in open letters of credit at
September 30, 1996, which principally relate to cash advances
received on a contract.
The Company leases certain facilities under operating lease
arrangements. These arrangements may include fair market renewal
or purchase options. Rent expense under operating leases
amounted to $7,191 in 1996, $6,957 in 1995 and $7,049 in 1994.
Future minimum rental payments required under noncancelable
operating leases are $5,668 in 1997, $4,888 in 1998, $3,809 in
1999, $2,851 in 2000, $1,997 in 2001 and $10,157 thereafter.
The Company subleases various facilities to third parties.
Gross rental income from such activities was $1,291 in 1996,
$1,535 in 1995 and $1,247 in 1994. Future minimum rental income
under noncancelable operating leases is $323 in 1997.
<PAGE>
Note 13 - Financial Instruments
The Company uses a variety of financial instruments,
including foreign exchange instruments, letters of credit (see
note 12) and interest rate swaps (see note 6) to reduce financial
risk. The Company does not hold or issue financial instruments
for trading purposes. The Company is exposed to credit loss in
the event of nonperformance by the counter-parties to the
instruments. The Company, however, does not expect
nonperformance by the counter-parties.
Foreign exchange instruments are used to hedge the Company's
equity in, and long-term advances to, various International
subsidiaries. At September 30, 1996 and 1995, the Company had
$4,484 and $6,107, respectively, of such instruments outstanding
at fair value. Gains and losses on these hedges of equity and
long-term advances are included in shareholders' equity. Foreign
currency forward contracts are periodically utilized to hedge
known foreign currency cash flows. Gains and losses on such
contracts are netted against the gain or loss on the underlying
amounts receivable or payable. Foreign currency forward
contracts outstanding at fair value on September 30, 1996 were
$1,717.
<PAGE>
Note 14 Quarterly Data - Unaudited
<TABLE>
<CAPTION>
Net Sales and Earnings
(dollars in thousands except per share data)
________________________________________________________________________________________________________________________
Year Ended Year Ended
September 1996 September 1995
_____________________________________________ _____________________________________________
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 93,233 $106,822 $103,107 $104,075 $407,237 $ 86,917 $ 91,372 $ 99,450 $ 96,545 $374,284
Gross profit 28,526 32,324 32,573 32,104 125,527 24,733 27,869 28,750 27,899 109,251
Earnings before
income taxes and
extraordinary item 3,226 4,431 4,299 4,094 16,050 1,475 2,471 2,471 2,373 8,790
Earnings before
extraordinary item 2,350 3,044 3,022 2,803 11,219 1,184 1,963 2,305 2,309 7,761
Extraordinary item - - (510) - (510) - - - - -
________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Net earnings $ 2,350 $ 3,044 $ 2,512 $ 2,803 $ 10,709 $ 1,184 $ 1,963 $ 2,305 $ 2,309 $ 7,761
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Net earnings per common
and common equivalent
share before extra-
ordinary item $ .30 $ .40 $ .40 $ .39 $ 1.47 $ .15 $ .25 $ .30 $ .30 $ 1.00
Extraordinary item - - (.07) - (.07) - - - - -
________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Net earnings $ .30 $ .40 $ .33 $ .39 $ 1.40 $ .15 $ .25 $ .30 $ .30 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Note: The 1996 quarterly Earnings Per Share do not add to the total due to rounding.
________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors of Moog Inc.:
We have audited the consolidated financial statements of Moog
Inc. and subsidiaries listed in Item 14(a)(1) of the annual
report on Form 10-K for the fiscal year 1996. In connection with
our audits of the consolidated financial statements, we also have
audited the financial statement schedule listed in Item 14(a)(2)
of the annual report on Form 10-K for the fiscal year 1996.
These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on
our audits. We did not audit the financial statements or
schedule of certain wholly-owned consolidated subsidiaries, which
statements reflect total assets constituting 15% as of September
30, 1996 and 1995 and total net sales constituting 20%, 21% and
18% of the related consolidated totals for the years ended
September 30, 1996, 1995 and 1994, respectively. Those
statements and schedule were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for such consolidated
subsidiaries, is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the
other auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Moog Inc. and subsidiaries as of September 30, 1996
and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended
September 30, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
Buffalo, New York
November 18, 1996
KPMG Peat Marwick LLP
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III
ITEM 10. Directors and Executive Officers of the Registrant.
The information required herein with respect to directors of
the Company is incorporated by reference to "Election of
Directors" in the 1997 Proxy.
Executive Officers of the Registrant
The names and ages of all executive officers of Moog are set
forth below.
Other than John B. Drenning, the principal occupations of
the following officers for the past five years have been their
employment with the Company. Mr. Drenning's principal occupation
is partner in the law firm of Phillips, Lytle, Hitchcock,
Blaine & Huber.
_________________________________________________________________
Executive Officers and Positions Held Age Year First
Elected
Officer
_________________________________________________________________
Robert T. Brady
Chairman of the Board;
President; Chief Executive Officer;
Director; Member, Executive Committee 55 1967
Richard A. Aubrecht
Vice Chairman of the Board;
Vice President - Strategy and Technology;
Director; Member, Executive Committee 52 1980
Joe C. Green
Executive Vice President;
Chief Administrative Officer;
Director; Member, Executive Committee 55 1973
Robert R. Banta
Executive Vice President;
Chief Financial Officer; Assistant Secretary;
Director; Member, Executive Committee 54 1983
Kenneth D. Garnjost
Vice President 70 1961
Philip H. Hubbell
Vice President - Contracts and Pricing 57 1988
Stephen A. Huckvale
Vice President - International 47 1990
<PAGE>
Robert H. Maskrey
Vice President 55 1985
Richard C. Sherrill
Vice President 58 1991
William P. Burke
Treasurer 61 1985
John B. Drenning
Secretary 59 1989
Donald R. Fishback
Controller 40 1985
ITEM 11. Executive Compensation.
The information required herein is incorporated by reference
to "Compensation Committee Report," "Stock Price Performance
Graph," "Summary Compensation Table," "Fiscal Year-End Option/SAR
Values," "Employees' Retirement Plan," "Supplemental Retirement
Plan," "Employment Termination Benefits Agreements" and
"Compensation of Directors" in the 1997 Proxy.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required herein is incorporated by reference
to "Certain Beneficial Owners" and "Election of Directors" in the
1997 Proxy.
ITEM 13. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference
to "Transactions With Moog Controls Inc." in the 1997 Proxy.
Part IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) Documents filed as part of this report:
1. Index to Financial Statements.
The following financial statements are included:
(i) Consolidated Statements of Income for the years ended
September 30, 1996, 1995, and 1994.
(ii) Consolidated Balance Sheets as of September 30, 1996
and 1995.
(iii) Consolidated Statements of Cash Flows for the years
ended September 30, 1996, 1995, and 1994.
(iv) Consolidated Statements of Shareholders' Equity for the
years ended September 30, 1996, 1995, and 1994.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Auditors.
<PAGE>
2. Index to Financial Statement Schedules.
The following Financial Statement Schedule as of and for the
years ended September 30, 1996, 1995, and 1994, is included in
this Annual Report on Form 10-K:
II. Valuation and Qualifying Accounts.
Schedules other than that listed above are omitted because
the conditions requiring their filing do not exist, or because
the required information is provided in the Consolidated
Financial Statements, including the notes thereto.
3. Exhibits.
The exhibits required to be filed as part of this Annual
Report on Form 10-K have been included as follows:
(2) Stock Purchase Agreement between Moog Inc., Moog Torrance
Inc. and AlliedSignal Inc., incorporated by reference to
exhibit 2.1 of the Company's report on Form 8-K dated
June 15, 1994.
(3) Restated Certificate of Incorporation and By-laws of the
Company, incorporated by reference to exhibit (3) of the
Company's Annual Report on Form 10-K for its fiscal year
ended September 30, 1989.
(4) Form of Indenture between Moog Inc. and Fleet National Bank,
as Trustee, dated May 10, 1996 relating to the 10% Senior
Subordinated Notes due 2006, incorporated by reference to
exhibit (iv) to Form 8-K dated May 10, 1996.
(9) (i) Agreement as to Voting, effective October 15, 1988,
incorporated by reference to exhibit (i) of October 15,
1988 Report on Form 8-K dated November 30, 1988.
(ii) Agreement as to Voting, effective November 30, 1983,
incorporated by reference to exhibit (i) of November
1983 Report on Form 8-K dated December 9, 1983.
(10) Material contracts.
(i) Management Profit Sharing Plan, incorporated by
reference to exhibit 10(i) of the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1991.
(ii) Supplemental Retirement Plan dated October 1980, as
amended, incorporated by reference to exhibit (iv) of
November 1983 Report on Form 8-K, dated December 9,
1983, as amended, and reported in August 30, 1988
Report on Form 8-K, dated October 3, 1988, and amended
on October 20, 1988, incorporated by reference thereto.
(iii) Deferred Compensation Plan for Directors and Officers,
incorporated by reference to exhibit (i) of November
1985 Report on Form 8-K, dated December 3, 1985.
(iv) Incentive Stock Option Plan, incorporated by reference
to exhibit 4(b) of the Registration Statement on Form
S-8, File No. 33-36721, filed with the Securities and
Exchange Commission on September 7, 1990.
(v) Non-Statutory Stock Option Plan, as amended,
incorporated by reference to exhibits 10(v) and 10(vi)
of the Company's Annual Report on Form 10-K for its
fiscal year ended September 30, 1989.
<PAGE>
(vi) Savings and Stock Ownership Plan, incorporated by
reference to exhibit 4(b) of the Company's Annual
Report on Form 10-K for its fiscal year ended
September 30, 1989.
(vii) Executive Termination Benefits Agreement incorporated
by reference to January 29, 1988 Report on Form 8-K
dated February 4, 1988.
(viii) Indemnity Agreement, incorporated by reference to
Annex A to 1988 Proxy Statement dated January 4, 1988.
(ix) Revolving Credit and Term Loan Agreement dated June 15,
1994, incorporated by reference to Exhibit 10(ix) to
the Company's Report on Form 10-K for its fiscal year
ended September 30, 1994.
(x) Amendment No. 2 to the Bank Credit Facility,
incorporated by reference to Exhibit (ii) to the
Company's Report on Form 8-K dated March 13, 1996.
(xi) Amendment No. 3 to the Bank Credit Facility,
incorporated by reference to Exhibit (v) to the
Company's Report on Form 8-K dated May 10, 1996.
(xii) Amendment No. 4 to the Bank Credit Facility, dated
June 18, 1996. (Filed herewith)
(11) Statement re: Computation of per share earnings.
(13) 1996 Annual Report to Shareholders. (Except for those
portions which are expressly incorporated by reference to
the Annual Report on Form 10-K, this exhibit is furnished
for the information of the Securities and Exchange
Commission and is not deemed to be filed as part of this
Annual Report on Form 10-K.)
(21) Subsidiaries of the Company.
Subsidiaries of the Company are listed below:
(i) Moog AG, Incorporated in Switzerland, wholly-owned
subsidiary with branch operation in Ireland
(ii) Moog Australia Pty. Ltd., Incorporated in Australia,
wholly-owned subsidiary
(iii) Moog do Brasil Controles Ltda., Incorporated in Brazil,
wholly-owned subsidiary
(iv) Moog Buhl Automation, a branch office of Moog Inc.
operating under Danish law
(v) Moog Controls Corporation, Incorporated in New York,
wholly-owned subsidiary with branch operation in the
Republic of the Philippines
(vi) Moog Controls Hong Kong Ltd., Incorporated in Hong
Kong, wholly-owned subsidiary
(vii) Moog Controls (India) Private Ltd., Incorporated in
India, wholly-owned subsidiary
(viii) Moog Controls Ltd., Incorporated in the United Kingdom,
wholly-owned subsidiary
(a) Moog Norden A.B., Incorporated in Sweden,
wholly-owned subsidiary of Moog Controls Ltd.
(b) Moog OY, Incorporated in Finland, wholly-owned
subsidiary of Moog Controls Ltd.
(ix) Moog FSC Ltd., Incorporated in the Virgin Islands,
wholly-owned subsidiary
(x) Moog GmbH, Incorporated in Germany, wholly-owned
subsidiary
<PAGE>
(a) Moog Italiana S.r.l., Incorporated in Italy,
wholly-owned subsidiary, 90% owned by Moog GmbH;
10% owned by Moog Inc.
(xi) Moog Industrial Controls Corporation, Incorporated in
New York, wholly-owned subsidiary
(xii) Moog Japan Ltd., Incorporated in Japan, 90% owned
subsidiary
(xiii) Moog Korea Ltd., Incorporated in South Korea,
wholly-owned subsidiary
(xiv) Moog Properties, Inc., Incorporated in New York,
wholly-owned subsidiary
(xv) Moog Sarl, Incorporated in France, wholly-owned
subsidiary, 95% owned by Moog Inc; 5% owned by Moog
GmbH.
(xvi) Moog Singapore Pte. Ltd., Incorporated in Singapore,
wholly-owned subsidiary
(23) (ii) Consent of KPMG Peat Marwick LLP; Consents and Audit
Reports of Coopers & Lybrand LLP. (Filed herewith)
(27) Financial Data Schedule. (Filed herewith)
(99) Additional Exhibits.
Information, Financial Statements and Exhibits required by
Form 11-K for the Moog Inc. Savings and Stock Ownership Plan
(to be filed by amendment).
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated September 23,
1996 reporting pursuant to items 5 and 7.
<PAGE>
<TABLE> Schedule II
MOOG INC.
Valuation and Qualifying Accounts - Years ended September 30, 1996, 1995 and 1994
(dollars in thousands)
<CAPTION>
Additions
Balance at charged to Acquisitions/ Balance
beginning costs and Exchange at end
Description of period expenses Deductions rate changes 1/ of period
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended 1994:
Reserve for contract losses $ 5,396 $ 998 $ 2,654 $11,224 $14,964
Allowance for doubtful
accounts 1,864 329 725 25 1,493
Reserve for inventory
valuation 5,072 4,533 6,240 121 3,486
______________________________________________________________________
Year ended 1995:
Reserve for contract losses $14,964 $ 986 $ 7,369 $ 4,291 $12,872
Allowance for doubtful
accounts 1,493 352 501 35 1,379
Reserve for inventory
valuation 3,486 2,423 1,209 2,892 7,592
______________________________________________________________________
Year ended 1996:
Reserve for contract losses $12,872 $ 1,965 $ 3,871 $ - $10,966
Allowance for doubtful
accounts 1,379 462 479 (30) 1,332
Reserve for inventory
valuation 7,592 4,017 2,237 (37) 9,335
______________________________________________________________________
Note:
1/ Represents the impact of changes in currency exchange rates during the year and, in 1995 and
1994, reserves for contract losses related to the acquisition of the Product Lines (Note 2).
</TABLE>
<PAGE>
Quarterly Stock Prices
Stock Prices
Fiscal Year Class B Class A
Ended High Low High Low
_______________________________________________________________
Sept. 30, 1996
1st Quarter $ 18 $ 14 7/8 $ 17 1/2 $ 12 7/8
2nd Quarter 19 1/2 17 7/8 19 1/4 16 3/4
3rd Quarter 24 5/8 18 5/8 24 1/2 18 1/8
4th Quarter 24 5/8 21 1/4 24 3/4 19
_______________________________________________________________
Sept. 30, 1995
1st Quarter $ 15 1/8 $ 12 $ 9 1/2 $ 7 1/2
2nd Quarter 14 7/8 11 5/8 9 5/8 8 5/8
3rd Quarter 15 12 1/4 13 9 1/2
4th Quarter 15 1/2 14 3/8 14 3/8 12 1/4
_______________________________________________________________
<PAGE>
Signatures
Pursuant to the requirements of Section 13, or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Moog Inc.
(Registrant)
Date: December 12, 1996
By ROBERT T. BRADY
Robert T. Brady
Chairman of the Board,
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
By ROBERT R. BANTA
Robert R. Banta
Executive Vice President,
Chief Financial Officer,
and Director
(Principal Financial Officer)
By DONALD R. FISHBACK
Donald R. Fishback
Controller (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and on the dates indicated.
By RICHARD A. AUBRECHT By PETER P. POTH
Richard A. Aubrecht Peter P. Poth
Director, December 12, 1996 Director, December 12, 1996
By JOE C. GREEN By ARTHUR S. WOLCOTT
Joe C. Green Arthur S. Wolcott
Director, December 12, 1996 Director, December 12, 1996
By KENNETH J. McILRAITH By JOHN D. HENDRICK
Kenneth J. McIlraith John D. Hendrick
Director, December 12, 1996 Director, December 12, 1996
<PAGE>
EXHIBIT (10)(xii)
FOURTH AMENDMENT TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 18th day of June, 1996
among the banks identified in Exhibit A attached to and made a
part of this Agreement (collectively the "Banks" and individually
a "Bank"), Marine Midland Bank, a New York banking corporation
having its chief executive office at One Marine Midland Center,
Buffalo, New York 14203, ("Marine"), as agent for the Banks, and
Moog Inc., a New York business corporation having its chief
executive office at Jamison Road and Seneca Street, East Aurora,
New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, a First Amendment to Revolving and
Term Loan Agreement dated as of November 14, 1995, a Consent and
Second Amendment to Revolving and Term Loan Agreement dated as of
March 22, 1996 and a Consent and Third Amendment to Revolving and
Term Loan Agreement dated as of May 13, 1996 (as so amended, the
"Loan Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement;
NOW, THEREFORE, effective on the date described in
Section 4(a) of this Agreement, the Banks, Marine as agent for
the Banks and the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENTS.
a. Section 6(d) of the Loan Agreement shall be
amended to read in its entirety as follows:
d. Senior Debt to Net Capital Base Ratio.
Maintain at the end of each fiscal quarter of the
Borrower the Senior Debt to Net Capital Base Ratio so
that it does not exceed the following applicable
percentage: (i) for any such fiscal quarter ending on
or before June 30, 1997, 65%, (ii) for any such fiscal
quarter ending after June 30, 1997 and on or before
June 30, 1998, 55% and (iii) for any such fiscal
quarter ending thereafter, 45%;
b. A new Section 12(pp-1) shall be added to the Loan
Agreement immediately after Section 12(pp) to read in its
entirety as follows:
pp-1. Net Capital Base. "Net Capital Base" means
an amount equal to the consolidated tangible net worth
<PAGE>
of the Borrower plus the outstanding principal balance
of the Subordinated Debentures. For purposes of
calculating such amount, tangible net worth means
shareholders' equity, but excluding therefrom any
intangible assets (including, but not limited to,
goodwill).
c. Section 12(uu) of the Loan Agreement shall be
amended (i) to add the word "other" immediately before the word
"Investments" in subclause (i)(F) and (ii) to delete the word
"or" immediately before clause (H) and to add the words "or (I)
other Investments aggregating not more than $15,000,000 at any
time for the Borrower in all Foreign Subsidiaries" immediately
before clause (ii).
d. New Sections 12(eee-1) and 12(eee-2) shall be
added to the Loan Agreement immediately after Section 12(eee) to
read in their entirety as follows:
eee-1. Senior Debt. "Senior Debt" means all
Indebtedness of the Borrower and all Subsidiaries
arising from the borrowing of any money or the deferral
of the payment of the purchase price of any asset other
than the outstanding principal balance of the
Subordinated Debentures.
eee-2. Senior Debt to Net Capital Base Ratio.
"Senior Debt to Net Capital Base Ratio" means the
ratio, expressed as a percentage, of the Senior Debt as
of the end of any fiscal quarter of the Borrower to the
Net Capital Base as of the end of such fiscal quarter.
3. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the receipt by each Bank at or before
the time such Loan is to be made of the following, in form and
substance satisfactory to each Lending Entity:
a. If such Loan is the first Revolving Loan after the
effective date of this Agreement, a certificate executed by a
Designated Officer and a Designated Financial Officer updating
each representation and warranty previously made in or pursuant
to the Loan Agreement and stating that (i) there did not occur or
exist at any time during the period beginning on the date of the
Loan Agreement and ending at the time such Loan is to be made and
there does not exist at the time such Loan is to be made any
Event of Default or Default and (ii) each representation and
warranty made in the Loan Agreement, as amended by this
Agreement, was true and correct as of all times during the period
beginning on the date of the Loan Agreement and ending at the
time such Loan is to be made and is true and correct as of the
time such Loan is to be made, except to the extent updated in a
certificate executed by a Designated Officer and a Designated
Financial Officer and received by each Lending Entity before the
time such Loan is to be made; and
<PAGE>
b. Payment of all costs and expenses payable pursuant
to the first sentence of Section 9(a) of the Loan Agreement at or
before the time such Loan is to be made.
4. GENERAL.
a. Term. This Agreement shall become effective upon
its execution by the Borrower, the Agent and the Required Banks.
The term of this Agreement shall be the same as the term of the
Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement contained in this Agreement
shall survive the making of each Loan and the execution and
delivery of each Loan Document and shall continue in full force
and effect during the term of this Agreement, except to the
extent modified in accordance with the terms of this Agreement.
Each such representation, warranty, covenant and agreement shall
be presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination.
d. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to
principles of conflict of laws.
e. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
<PAGE>
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by this
Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to "this Agreement" or words of
similar effect shall be deemed to be references to the Loan
Agreement as amended by this Agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, each Lending Entity and the
Borrower have caused this Agreement to be duly executed as of the
date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By /s/ Hugh C. McLean
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By
Title
FLEET BANK
By
Title
THE BANK OF TOKYO-MITSUBISHI BANK, LTD.,
NEW YORK BRANCH, SUCCESSOR BY
MERGER TO THE MITSUBISHI BANK,
LIMITED
By
attorney-in-fact
THE SUMITOMO BANK, LIMITED
By
Title
By
Title
BARNETT BANK OF PINELLAS COUNTY
By /s/ Michael S. Crowe
Michael S. Crowe, SVP Title
NATIONAL BANK OF CANADA
By
Title
<PAGE>
By
Title
MARINE MIDLAND BANK, AS AGENT
By /s/ Hugh C. McLean
Hugh C. McLean, Vice President
MOOG INC.
By /s/ Robert R. Banta
Robert R. Banta, Executive Vice
President
<PAGE>
EXHIBIT A
Banks that are a Party to
this Agreement
Marine Midland Bank
Manufacturers and Traders Trust Company
Fleet Bank
The Sumitomo Bank, Limited
The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
Barnett Bank of Pinellas County
National Bank of Canada
<PAGE>
<TABLE> EXHIBIT 11.1
<CAPTION>
COMPUTATION OF PER SHARE EARNINGS - PRIMARY
Years Ended September 30,
1996 1995 1994
____ ____ ____
<S> <C> <C> <C>
Weighted-average common shares outstanding 7,412,485 7,721,927 7,714,444
Net effect of dilutive stock options 226,827 0 0
_________ _________ _________
Weighted-average common and common
equivalent shares outstanding(A) 7,639,312 7,721,927 7,714,444
========= ========= =========
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes $ 11,219 $ 7,761 $ 1,618
Less: Preferred stock dividends (9) (9) (9)
_________ _________ _________
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes attributable
to common shareholders (B) 11,210 7,752 1,609
Extraordinary item (C) (510) 0 0
Cumulative effect of change in accounting
for income taxes (D) 0 0 505
_________ _________ _________
Net earnings attributable to common
shareholders (E) $ 10,700 $ 7,752 $ 2,114
========= ========= =========
Per share:
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes (B)/(A) $ 1.47 $ 1.00 $ 0.21
Extraordinary item (C)/(A) (0.07) 0.00 0.00
Cumulative effect of change in accounting
for income taxes (D)/(A) 0.00 0.00 0.06
_________ _________ _________
Net earnings (E)/(A) $ 1.40 $ 1.00 $ 0.27
========= ========= =========
</TABLE>
<PAGE>
<TABLE> EXHIBIT 11.2
<CAPTION>
COMPUTATION OF PER SHARE EARNINGS - FULLY DILUTED
Years Ended September 30,
1996 1995 1994
____ ____ ____
<S> <C> <C> <C>
Weighted-average common shares outstanding 7,412,485 7,721,927 7,714,444
Net effect of dilutive stock options 244,040 93,352 39,105
Assumed conversion of Preferred Stock 8,585 8,585 8,585
Assumed conversion of Convertible Subordinate
Debentures 0 863,305 923,214
_________ _________ _________
Weighted-average common and common
equivalent shares outstanding (A) 7,665,110 8,687,169 8,685,348
========= ========= =========
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes $ 11,219 $ 7,761 $ 1,618
Add: conversion of Convertible Subordinated
Debentures 0 1,682 1,239
--------- --------- ---------
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes attributable
to common shareholders (B) 11,219 9,443 2,857
Extraordinary item (C) (510) 0 0
Cumulative effect of change in accounting
for income taxes (D) 0 0 505
_________ _________ _________
Net earnings attributable to common
shareholders (E) $ 10,709 $ 9,443 $ 3,362
========= ========= =========
Per share:
Net earnings before extraordinary item
and cumulative effect of change in
accounting for income taxes (B)/(A) $ 1.46 $ 1.00* $ 0.21*
Extraordinary item (C)/(A) (0.06) 0.00 0.00
Cumulative effect of change in
accounting for income taxes (D)/(A) 0.00 0.00 0.06*
_________ _________ _________
Net earnings (E)/(A) $ 1.40 $ 1.00* $ 0.27*
========= ========= =========
* Antidilutive
</TABLE>
<PAGE>
Exhibit 13
Contents
Financial Highlights 1
Letter to Shareholders 2
Moog at a Glance 4
Market Segment Facts
Military Aircraft 6
Commercial Aircraft 8
Space and Missiles 10
Industrial Hydraulics 12
Industrial Electrics 14
Moog-Hydrolux 16
Form 10K 17
Investor Information 42
International Subsidiaries
located on inside back cover.
<PAGE>
<TABLE>
Financial
Highlights
<CAPTION>
Years Ended September 30 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales $407,237 $374,284 $307,370 $293,680 $307,004
Net Earnings (Loss) 10,709 7,761 2,123 4,761 (6,773)
Net Earnings (Loss) Per Share $1.40 $1.00 $.27 $.62 ($.88)
Total Assets $449,558 $424,957 $424,456 $318,130 $335,986
Indebtedness - senior 91,262 170,361 183,376 115,515 121,721
- subordinated 120,000 19,400 20,800 22,082 22,264
Shareholders' Equity 104,743 108,636 102,184 92,561 97,374
Capital Expenditures 10,885 10,232 8,893 10,216 15,295
Depreciation and Amortization 19,632 19,675 15,700 15,621 17,767
Backlog 243,310 237,941 217,261 181,081 212,100
(dollars in thousands except per share data)
</TABLE>
<PAGE>
To our Shareholders, Employees and Friends,
The Numbers Keep Getting Better
Fiscal '96 sales were up, earnings were up and our
stock price was up.
More precisely, sales were up 9%, net earnings were up
38%, and our stock closed on 30 September '96, up over 60% from a
year earlier. We made a lot of progress in '96. We believe that
our sharp focus on high performance motion controls for aircraft,
satellites and industrial automation will sustain this positive
momentum.
Commercial Airplane Revenues Are Up
Revenue growth in the aircraft business is all in
commercial airplanes. We've signed six-year contracts with Boeing
to supply flight controls for the 747, 757 and 767. We're under
contract for the 777 through 2006. Production rates are up on
all
of these airplanes. Our deliveries to Boeing were up 15% in '96
and will increase 50% in '97.
Military Revenues Are Stable
Production continues on the F-15, F/A-18C/D and the
B-2. In '96, we completed development of the leading edge and
wingfold actuators for the F/A-18E/F, and the flight control
actuators for the Navy's V-22 tiltrotor, the Army's RAH-66
helicopter and the Indian Light Combat Aircraft. Over the next
few years all of these aircraft will enter production.
The Satellite Business Soars
Our satellite business really took off in '96. All the
major satellite manufacturers are using our thrusters and
isolation valves and they're building more satellites. More
satellites mean more launches. We provide steering controls and
propellant controls for the launch vehicles. Adding to our range
of technology for the satellite business is the Parker Hannifin
propellant valve product line we acquired this year.
Two Strategic Acquisitions in Industrial Controls
Early in the year, we acquired the servovalve product
line of Ultra Hydraulics Ltd. in the UK. This product line had
its origins in a Moog license granted to Dowty in the late '50's.
The Ultra acquisition added about $4 million to '96 revenues.
Just after the end of the year, we acquired Moog Controls Inc., a
company with revenues of about $30 million. This company was
created in 1988 when we exchanged our U.S. industrial servovalve
division with Bill Moog for his stock. Bill subsequently sold
Moog Controls Inc. to an unrelated third party from whom we made
this acquisition.
<PAGE>
Also in '96, we entered into a 50/50 joint venture with
a Luxembourg-based manufacturer of hydraulic controls named
Hydrolux. The joint venture company, Moog-Hydrolux, makes
integrated hydraulic manifolds for North American manufacturers
of injection molding machines, hydraulic presses and die casting
machines.
A Strengthened Balance Sheet
In mid-year, we took our story to the financial markets
and sold $120 million of ten year, 10% bonds. Our objective was
to extend maturities on the revolver financing we used to acquire
the actuation product line from AlliedSignal in 1994. We also
called some convertible debentures and bought back a big block of
our stock at $18 per share. At the time we sold the bonds, we
weren't planning to acquire Moog Controls because its owner
hadn't offered it for sale. However, having completed the bond
financing, we were able to move quickly in completing this very
strategic move.
'97 Looks Good
We're approaching fiscal '97 with the expectation that
we'll have a third year of increased sales and earnings. Sales
will be up in most of our product lines and the acquisition of
Moog Controls will add another 20% to our industrial revenues.
We expect that our '97 revenues will be close to $450
million and will be distributed as follows:
[Graph inserted which shows the distribution of '97 revenues as
follows:
Industrial Automation - 38.5%
Aircraft Controls - 48.0%
Space & Missiles - 13.5%]
Increased production of commercial aircraft and
commercial satellites, and the acquisitions we've made in
industrial automation, will shift our balance of revenues more
toward the commercial/industrial sector.
[Graph inserted which shows the distribution of '97 revenues as
follows:
Government/Military - 37%
Commercial/Industrial - 63%]
We began our expansion into international markets over
30 years ago. Today, we have companies in 17 countries and about
a third of our revenues come from outside the United States:
[Graph inserted which shows the distribution of '97 revenues as
follows:
U.S. - 70%
International - 30%]
<PAGE>
Our Strategy for the Future
We're accustomed to market leadership in terms of
market share and product performance. We'll work to enhance this
position where we have it and develop it where we don't. We'll
maintain a tight focus on our core technologies and extend
applications into closely related product areas. We'll continue
to emphasize an active collaboration with our customers, to
support them with our global reach and to provide world-class
aftermarket service and support.
This strategic framework has guided our recent
acquisitions. These acquisitions, combined with healthier market
conditions and the team effort of all the Moog people around the
globe, have resulted in progress on all fronts. We're happy with
our '96 results. We believe that '96 was the second year in what
will become a consistent pattern of growth in sales, earnings and
the value of our stock.
The fun has just begun.
Robert T. Brady
Chairman, CEO
Pictured below, from left to right:
Bob Maskrey, Aircraft Controls
Bob Banta, Chief Financial Officer
Phil Hubbell, Contracts & Pricing
Dick Aubrecht, Vice-Chairman
Bob Brady, Chairman, CEO
Joe Green, Chief Administrative Officer
Steve Huckvale, Industrial Controls
Bing Sherrill, Systems Group
<PAGE>
Moog at a Glance
Everyone appreciates the tremendous pace of advancement
in computers and computer software. Just as the PC has
revolutionized information technology, computers have also
revolutionized controls in aircraft, satellites and industrial
machinery. This phenomenon places Moog in an enviable position.
Our principal product lines are servoactuators that take the
information generated by computers and then make something
happen. The inputs to our products are the tiny electrical
signals emanating from the control computers. Advancements in
computer technology enhance the capabilities of our products and
their relevance in today's industrial society. The illustration
at right describes the operating parts of a servoactuator system.
There are hundreds of design variations, but they share the
fundamental characteristics shown.
Military Aircraft: Flight Controls and Engine Controls
Moog has supplied high performance servoactuation to
move flight control surfaces on military aircraft since the
1950's. Our selection as the designer of flight control
actuation for the B-2 confirmed our Company's position as the
technology leader for military aircraft. Over the next few years
we'll be starting production on a number of new programs; the
F/A-18E/F Super Hornet, the V-22 Osprey, the RAH-66 Comanche, the
Japanese F-2 and the Indian Light Combat Aircraft. During '96,
we were selected as the principal supplier of flight control
actuation for both the Boeing and Lockheed Joint Strike Fighter
(JSF) demonstrators.
We believe that we supply about 40% of the flight
control actuation in the military aircraft markets open to
American companies.
Commercial Aircraft
We supply flight control and autopilot actuators for
the 747, 757, 767, and 777. We have more of these applications
than any other actuator supplier on Boeing's fleet and our share
is about thirty percent of the dollar content of Boeing's flight
control actuation. We also make all the servovalves for the
Boeing aircraft and for all the Airbus aircraft, as well. In
addition, we supply flight control actuators for the ailerons on
the A330/A340.
Space and Missiles
The space and missiles business has become the
satellite, launch vehicle and anti-missile business. The big
story is the growth in the number of satellites driven by the
demand for cellular phones, pagers and direct-to-home TV. We
have a very high market share in satellite propulsion controls
and steering controls for launch vehicles.
<PAGE>
Anti-missile defense initiatives in the Congress have
triggered the production start of Standard Missile 2 Block 4 and
the potential of a Theater High Altitude Air Defense System
(THAADS).
Industrial Hydraulics
Since 1959, when Moog introduced the first industrial
servovalve, we have led the way in product technology. By any
measure, we are the world's market leader in industrial
servovalves. The acquisitions of the Ultra and Moog Controls
servo lines enhance our worldwide market position. The Moog
Controls acquisition also brings back to Moog two actuation
product lines with good growth potential: long stroke actuators
for motion platforms and turbine control actuators for industrial
gas turbines.
Industrial Electronics and Electric Drives
The growth areas in the drives business have been the
specialties. We recently booked a $28 million order from Wegmann
for electric drives used on the automatic ammunition loader for a
German howitzer. Also during '96, we established a production
line for six-degree-of-freedom, six-passenger simulators used in
the entertainment and training markets. Both of these product
lines have a big future.
<PAGE>
Military Aircraft
32% of '96 sales, 27% of '97 forecast
FY97 Forecast Sales = $120 million
[Graph inserted which shows the distribution of '97 revenues by
project as follows:
B-2 - 11.5%
F-15 - 19.2%
F-16 - 3.4%
F-18 - 9.6%
V-22 - 6.8%
Engines - 4.4%
Aftermarket - 23.5%
Other - 21.6%]
Products
- Primary and secondary flight control actuation for fighters,
bombers, helicopters
- Engine control servovalves and servoactuators
- Active vibration control systems
- Flight data recording systems
Wingfold and weapons bay systems
Major Programs & Applications
Primary Flight Controls:
- B-2, V-22, RAH-66, Taiwanese IDF, Indian LCA, JSF
Demonstrators
Secondary and Leading Edge Actuation:
- F/A-18, F-15, F-16, Blackhawk, Japanese F-2, Taiwanese IDF,
Czech L-159, JSF Demonstrators
Flight Data Recording Systems:
- C-130J
Active Vibration Controls:
- EH-101, S-92
Engine Control Servovalves and Servoactuators:
- F-404, F-414, F-110, F-119, EJ200, AE2100, T406, RTM322
Competitive Advantages
- Extensive U.S. and international experience in design of
flight-critical fly-by-wire flight controls
- Product innovation in engine control servovalves and active
vibration control
- World-class manufacturing capability focused on flight
safety and quality
- Innovative engineering capabilities
- Skilled, experienced and dedicated workforce
Competitors
- Parker Hannifin, Curtiss-Wright, HR Textron
<PAGE>
Market Developments
- F/A-18C/D, E/F are funded for production
- V-22 Osprey approved for limited production, 523 aircraft
are planned, program could accelerate
- RAH-66 Comanche in flight testing, 6 development helicopters
planned for 2001, production in 2004
- Japanese F-2 will start production in '97
- Additional B-2's are still a possibility
- Both JSF demos will use Moog actuators
- Demand for next generation engine controls
Strategies & Initiatives
- Develop next generation technology in flight control, engine
control, vibration suppression
- Partner with prime contractor R&D Centers
- Pursue opportunities in international markets
- Develop depot capability for overhauls
<PAGE>
Commercial Aircraft
20% of '96 sales, 21% of '97 forecast
FY97 Forecast Sales = $96 million
[Graph inserted which shows the distribution of '97 revenues by
project as follows:
747 - 18.8%
757 - 7.8%
767 - 6.8%
777 - 11.6%
Engines - 6.3%
Airbus - 15.2%
Aftermarket - 21.1%
Other - 12.4%]
Products
- Primary and secondary flight control actuation
- Flight control servovalves
- Digital engine control servovalves
Major Programs & Applications
Primary Flight Controls and Spoilers:
- 747, 757, 777, A330/A340, Citation X
Autopilot Actuators:
- 747, 767
Leading Edge Rotary Actuators:
- 777
Flight Control Servovalves:
- All Boeing, all Airbus, IPTN-250
Trailing Edge Flap System:
- Gulfstream IV, Challenger
Digital Engine Control Servovalves:
- CF-6, GE90, V2500, Rolls Royce RB211 and Trent, AlliedSignal
APU's
Competitive Advantages
- Extensive experience in design and production of
flight-critical control surface actuators
- Product innovation in engine control servovalves
- World-class manufacturing capability focused on flight
safety and quality
- Focused, highly responsive aftermarket support organization
- Skilled, experienced and dedicated workforce
Competitors
- Parker Hannifin, Teijin Seiki, Curtiss-Wright, Lucas,
Liebherr
<PAGE>
Market Developments
- Production rates on 747, 757, 767 and 777 are all increasing
- A330/A340 deliveries projected to increase
- Boeing plans launch of 747 derivatives
Strategies & Initiatives
- Align strategies with customer objectives
- Pursue aggressive cost reduction to meet market pricing
demands
- Transfer technology developed in military applications to
commercial aircraft
- Develop next generation technology for engine controls
<PAGE>
Space & Missiles
14% of '96 sales, 14% of '97 forecast
FY97 Forecast Sales = $61 million
[Graph inserted which shows the distribution of '97 revenues by
project as follows:
Satellites - 31%
Strategic Missiles - 11.2%
Tactical Missiles - 24.0%
Launch Vehicles - 21.8%
Vehicles - 12.0%]
Products
- Steering controls for launch vehicles, strategic missiles,
and space shuttle
- Thrusters, isolation valves and propulsion system valves for
satellites and launch vehicles
- Electric propulsion feed systems for satellite
attitude control
- Thermal control valves
Major Programs & Applications
Satellite Propulsion:
- HS-601, A2100, FS1300, Eurostar 3000
Launch Vehicle Steering Controls:
- Titan IV, Atlas, Centaur, Delta, Ariane IV, Ariane V, Space
Shuttle
Tactical Missile Steering Controls:
- Standard Missile 2 BLK IV, VLASROC, THAADS, Patriot,
Aspide, Sea Dart, Penguin, Aster 15
Space Station Components:
- Fluid quick disconnects, segment attachment drives
Electric Propulsion:
- Loral propellant management assembly
- New Millennium Deep Space One Xenon feed system
- Artemis Xenon solenoid valves
Competitive Advantages
- Extensive experience in design and manufacture of launch
vehicle steering controls
- Unparalleled experience in design and manufacture of
thrusters and valves for space applications
- Leading edge technology in electric propulsion
- World class manufacturing capabilities
- Skilled, experienced and dedicated workforce
Competitors
- AlliedSignal, HR Textron
<PAGE>
Market Developments
- Our customers, Hughes, Lockheed Martin, and Loral, dominate
U.S. satellite production
- Traditional launch vehicles, Titan, Atlas, Delta, Space
Shuttle, continue as workhorses
- Standard Missile 2 BLK IV will be used by the Navy for
missile defense
- Theater High Altitude Area Defense (THAADS) is funded and
progressing
Strategies & Initiatives
- Increase capacity and reduce lead time to support
accelerated demand
- Develop leading edge technology for satellite
and launch vehicle propulsion systems
- Develop leading edge technologies for launch vehicle
steering controls
- Support satellite and launch vehicle manufacturers on a
worldwide basis
<PAGE>
Industrial Hydraulics
22% of '96 sales, 27% of '97 forecast
FY97 Forecast Sales = $120 million
[Graph inserted which shows the distribution of '97 revenues by
geographic region:
U.S. - 34%
U.K. - 8%
Germany - 19%
Japan - 15%
Pacific Rim - 7%
Scandinavia - 5%
France - 4%
Italy - 6%
Other - 2%]
Products
- Servovalves and proportional valves
- Mechanical and electrical feedback
- Nozzle-flapper, servojet, direct drive
- Low friction, long stroke actuators for flight simulators
- Servo-controlled valve assemblies for gas turbines
Major Applications
- Electrical feedback servovalves for control of clamp and
injection operations on plastic injection molding equipment
- Mechanical feedback and direct drive valves for parison
control in plastic blow molding machines
- Fuel metering, steam bypass, and override control
servovalves for gas and steam turbines
- Hydraulic position control actuators and servovalves for
fatigue testing systems
- Direct drive and electrical feedback valves to provide
precise positioning in saw mills
- Servoactuators for heavy industry, steel mills
- Electrical and mechanical feedback servovalves for gauge
coil box, side guide and camcoiler control of steel and
aluminum processing equipment
- Control loading and motion platform actuators for full
flight simulators
Competitive Advantages
- Leading edge technology for 36 years
- Unmatched, worldwide application engineering to optimize
custom solutions
- Worldwide engineering, manufacturing, support and service
facilities
- Skilled, experienced and dedicated workforce
Competitors
- Bosch, Rexroth, Atchley
<PAGE>
Market Developments
- Steady demand in the U.S., Europe and Pacific
- Consistent pressure to reduce lead time
- Acquired servovalve product line from Ultra Hydraulics Ltd.
(U.K.) in December, '95
- Acquired Moog Controls Inc., a manufacturer of servovalves,
simulator actuators and turbine controls in October, '96
Strategies & Initiatives
- Continue development of leading edge technology
- Pursue forward integration of products in key end markets
- Consolidate production in global manufacturing centers
- Focus factories and processes to shorten lead times
<PAGE>
Industrial Electrics & Electric Drives
12% of '96 sales, 11% of '97 forecast
FY97 Forecast Sales = $53 million
[Graph inserted which shows the distribution of '97 revenues by
project as follows:
Electric Drives - 40%
Military Vehicles - 14%
Plastics - 14%
Motion Simulator - 14%
Other - 18%]
Products
- Brushless D.C. servomotors and digital motor controllers
- Electronic controls for injection and blow molding machines
- Electronic controls for specialized automated machinery
- Electromechanical servoactuators
- Ruggedized high-torque drives for military vehicles
Major Applications
- Electric drives for assembly robots, brush making machines,
material handling robots, postal sorting machines
- Full performance total machine control for injection molding
and blow molding
- Custom tailored controls for Tuftco carpet tufting and
scrolling machine
- Four and six degree-of-freedom motion platforms with
capacities between 2,000 and 13,000 pounds
- Electric azimuth and elevation gun control,
ammunition-handling, and radar platform control for military
vehicles.
(Electrically actuated gun controls are categorized
industrial because of the similarity to other industrial
products.)
Competitive Advantages
- Highest power density of available brushless D.C.
servodrives
- Full range of capability in total machine control for
injection molding and blow molding
- Customized machine control solutions
- High reliability in electrically actuated motion platforms
- Demonstrated experience in electric gun controls for
military vehicles
- Skilled, experienced and dedicated workforce
Competitors
- Indramat, Pacific Scientific, Barber Coleman, Siemens,
Gefran, Control Techniques
<PAGE>
Market Developments
- Demand stabilizes for electric drives and plastics machine
controls
- Moog electric simulators lead the field in both
entertainment and training
- Wegmann howitzer production starts
- Military vehicle technology is applied to high-speed trains
Strategies & Initiatives
- Refine product design and reduce costs to improve
profitability in electric drives
- Broaden worldwide distribution of plastics machine controls
- Broaden product range in electric motion simulators
- Re-package electric gun controls to maintain technology
advantage
<PAGE>
Moog is a worldwide manufacturer of precision control
components and systems. Moog's actuation products control
high-performance aircraft, satellites and space vehicles, launch
vehicles, missiles and automated industrial machinery.
Electrohydraulic Servocontrol Actuation
This cutaway of an actuator shows the piston which
moves inside the cylinder in response to the pressure and flow
control of the servovalve. A piston extends and retracts,
providing the motion or force commanded by the computer.
McDonnell Douglas X-36
Moog supplies twenty custom actuators on McDonnell
Douglas' experimental aircraft, demonstrating Moog's Rapid
Prototyping capability.
Boeing 777
Moog is the largest supplier of flight control
actuators and servovalves for Boeing's commercial aircraft.
Lockheed Martin Atlas Centaur
Moog's propellant valves and actuators provide control
for launch vehicles worldwide. The Centaur upper stage of the
Atlas launch vehicle utilizes Moog actuators to gimbal the rocket
engine nozzle. Moog valves control fuel and oxidizer flow to
the engines.
Stationary Gas Turbine
Power generating equipment is a major global market for
Moog's industrial servovalves and actuation packages.
Wegmann PzH2000
Moog provides twelve compact brushless electric motors
and controllers for the automatic ammunition loader on this
Wegmann howitzer.
Space Systems/Loral Apstar-IIR Satellite
Geosynchronous satellites provide communication
services to customers worldwide. Moog provides propulsion system
components to every major satellite manufacturer in the world.
<PAGE>
The Moog-Hydrolux Joint Venture
The Moog-Hydrolux joint venture combines the marketing
and manufacturing strengths of Moog in North America with the
specific application experience of Hydrolux Sarl. Hydrolux is a
subsidiary of Paul Wurth S.A., a 125 year-old Luxembourg-based
construction manager and equipment manufacturer for industrial
plants, particularly steel mills. For thirteen years, Hydrolux
has been designing and manufacturing hydraulic systems and
components for injection molding machines and hydraulic presses.
Moog Inc. Headquarters East Aurora, New York, USA
Moog Australia Pty., Ltd.
Mulgrave, Australia
Moog Buhl Automation
Copenhagen, Denmark
Moog Controls Corporation
Baguio City, Philippines
Moog Controls Hong Kong Ltd.
Hong Kong
Moog Controls (India) Pvt. Ltd.
Bangalore, India
Moog Controls Ltd.
Tewkesbury, England
Moog do Brasil Controles Ltda.
Sio Paulo, Brazil
Moog OY
Espoo, Finland
Moog Sarl
Rungis, France
Moog GmbH
Bublingen, Germany
Moog Ltd.
Ringaskiddy, Ireland
Moog Italiana S.r.l.
Malnate, Italy
Moog Japan Ltd.
Hiratsuka, Japan
Moog Korea Ltd.
Kwangju-Kun, Korea
<PAGE>
Moog Singapore Pte. Ltd.
Singapore
Moog Sarl Sucursal En Espaua
Orio, Spain
Moog Norden A.B.
Askim, Sweden
Moog-Hydrolux Hydraulic Systems LLC
East Aurora, New York, USA
<PAGE>
Investor Information
Reports
In addition to our Annual Report and 10-K, shareholders
receive copies of our three quarterly earnings releases.
Additional information about the Company may be obtained by
writing:
Shareholder Relations
Moog Inc.
East Aurora, New York 14052-0018
PHONE - 716/652-2000
FAX - 716/687-4457
E-MAIL [email protected]
Electronic Information About Moog
In Moog's annual report, we try to convey key information
about our fiscal year results. In addition to this primary
information, we have a site on the world wide web. Please visit
this location using the URL address of:
http://www.moog.com
Annual Meeting
Moog Inc.'s Annual Meeting of Shareholders will be held
February 12, 1997 at 9:15 a.m. at the Albright-Knox Art Gallery,
1285 Elmwood Avenue, Buffalo, New York. Proxy cards should be
dated, signed and returned promptly to ensure that all shares are
represented at the meeting and voted in accordance with
shareholder instructions.
Stock Exchange
Moog Inc.'s two classes of common shares are traded on the
American Stock Exchange under the ticker symbols MOG/A and MOG/B.
The 10% Senior Subordinated Notes are traded on the Private
Offerings, Resales and Trading through Automated Linkages
(PORTAL) Market.
Financial Mailing List
Shareholders who hold Moog stock in the names of their
brokers or bank nominees but wish to receive information directly
from the Company should contact Shareholder Relations at Moog
Inc.
Transfer Agent and Registrar
ChaseMellon Shareholder Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800-288-9541
<PAGE>
Affirmative Action Program
In recognition of our role as a contributing corporate
citizen, Moog has adopted all programs and procedures in our
Affirmative Action Program as a matter of corporate policy.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Moog Inc.:
We consent to incorporation by reference in the Registration
Statements (No. 33-62968, 33-36722, 33-36721, 33-33958, 33-20069
and 33-57131) on Form S-8 of Moog Inc. of our report dated
November 18, 1996, relating to the consolidated balance sheets of
Moog Inc. and subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statements of income, shareholders'
equity, and cash flows and related schedule for each of the years
in the three-year period ended September 30, 1996, which report
appears in the September 30, 1996 annual report on Form 10-K of
Moog Inc.
KPMG Peat Marwick LLP
Buffalo, New York
December 24, 1996
<PAGE>
Consent of Independent Accountants
We consent to the incorporation by reference in the prospectus
constituting part of this registration statement on Form S-8 of
Moog Inc. of our report dated November 15, 1996 on our audit of
the consolidated financial statements of Moog Controls Limited (a
wholly owned subsidiary of Moog Inc.) and subsidiaries as of
September 30, 1996 and 1995 and for the years then ended, which
report is included in the Annual Report on Form 10-K of Moog Inc.
for the year ended September 30, 1996.
/s/ Coopers & Lybrand
Gloucester, England
Date 20 December 1996
<PAGE>
[Coopers & Lybrand Letterhead]
December 20, 1996
CRH
MOOG Inc.
East Aurora, New York 14052-0018
United States of America
Letter of Consent of Independent Auditors'
We consent to the incorporation by reference of our
report dated November 15, 1996 on our audit of the consolidated
financial statements of MOOG GmbH, (a wholly-owned subsidiary of
MOOG Inc.) and subsidiary as of September 30, 1996, 1995, 1994
and the related consolidated statements of earnings and retained
earnings and cash flows for each of the years then ended. The
report is included in the Annual Report on Form 10-K of MOOG Inc.
for the year ended September 30, 1996.
Coopers & Lybrand
<PAGE>
[Coopers & Lybrand Letterhead]
15 November 1996
The Board of Directors
Moog Inc.
East Aurora
New York
USA
Dear Sirs
Independent Auditors' Report
We have audited the consolidated balance sheet of Moog Controls
Limited (a wholly-owned subsidiary of Moog inc.) and subsidiaries
as at September 30, 1996 and 1995, and the related consolidated
statement of earnings and retained earnings and cashflows for
each of the three years ended 30 September 1996. These consoli-
dated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion of these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material mis-
statement. An audit includes examining, on a test basis, evi-
dence supporting the amounts and disclosures of the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Moog Controls Limited and subsidiaries as of
September 30, 1996 and 1995, and the results of their operations
and cash flows for each of the three years ended September 1996,
in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The supple-
mental information in Schedules marked by us as "For identifica-
tion purposes only" are presented for purposes of additional
analysis and may not be a required part of the basic financial
statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, is fairly stated in all
material respects as far as the information in them relates to
the basic consolidated financial statements taken as whole.
/s/ Coopers & Lybrand
Chartered Accountants
Gloucester, UK
15 November 1996
<PAGE>
[Coopers & Lybrand Letterhead]
November 15, 1996
CRH
MOOG Inc.
East Aurora, New York 14052-0018
United States of America
Independent Auditors' Report
Board of Directors
MOOG Inc.
We have audited the consolidated balance sheets of MOOG GmbH (a
wholly-owned subsidiary of MOOG Inc.) and subsidiaries as of
September 30, 1996, 1995 and 1994, and the related consolidated
statements of earnings and retained earnings and cash flows for
each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material aspects, the financial
position of MOOG GmbH and subsidiaries as of September 30, 1996,
1995, 1994 and the results of their operations and cash flows for
the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The
supplemental information in Exhibit A through H and Schedules 1
through 27 and Questionnaire 1 and 2 are presented for purposes
of additional analysis and are not required part of the basic
financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
Coopers & Lybrand
Stuttgart/Germany
<PAGE>
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