UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-5129
MOOG INC.
(Exact name of registrant as specified in its charter)
New York State 16-0757636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
East Aurora, New York 14052-0018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 652-2000
No Change
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
Class Outstanding at May 10, 1996
Class A Common Stock, $1.00 par value 5,355,281 Shares
Class B Common Stock, $1.00 par value 1,597,775 Shares
<PAGE>
MOOG INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION 3-20
Consolidated Condensed Balance Sheets
March 31, 1996 and September 30, 1995 4
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1996 and 1995 5
Consolidated Condensed Statements of Income
Six Months Ended March 31, 1996 and 1995 6
Consolidated Condensed Statements of Cash Flows
Six Months Ended March 31, 1996 and 1995 7
Notes to Consolidated Condensed Financial
Statements 8-11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-20
PART II. OTHER INFORMATION 21-25
SIGNATURES 26
<PAGE>
PART I: FINANCIAL INFORMATION
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
Unaudited Audited
As of As of
March 31, September 30,
ASSETS 1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 9,749 $ 7,576
Receivables, net 149,664 148,915
Inventories (note 5) 97,423 86,176
Deferred income taxes 17,396 16,816
Prepaid expenses and other
current assets 2,271 2,275
________ ________
TOTAL CURRENT ASSETS 276,503 261,758
PROPERTY, PLANT AND EQUIPMENT, net 135,335 139,131
INTANGIBLE ASSETS, net 18,748 16,310
OTHER ASSETS 7,817 7,758
________ ________
TOTAL ASSETS $438,403 $424,957
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,919 $ 6,606
Current installments of long-term
debt and convertible subordinated
debentures (note 3) 11,211 7,080
Accounts payable 25,048 25,781
Accrued salaries, wages and
commissions 22,986 21,065
Contract loss reserves 10,990 12,872
Other accrued liabilities 17,691 11,433
Customer advances 10,396 9,936
________ ________
TOTAL CURRENT LIABILITIES 103,241 94,773
LONG-TERM DEBT, less current
installments (note 3) 161,583 158,075
LONG-TERM PENSION OBLIGATION 24,761 23,794
OTHER LONG-TERM LIABILITIES 132 430
DEFERRED INCOME TAXES 19,605 19,674
CONVERTIBLE SUBORDINATED DEBENTURES,
less current installments (note 3) 16,600 18,000
MINORITY INTEREST IN SUBSIDIARY COMPANY 1,506 1,575
________ ________
TOTAL LIABILITIES 327,428 316,321
________ ________
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY (note 8)
Preferred stock 100 100
Common stock 9,134 9,134
Other shareholders' equity 101,741 99,402
________ ________
TOTAL SHAREHOLDERS' EQUITY 110,975 108,636
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $438,403 $424,957
======== ========
See accompanying notes to Consolidated Condensed Financial
Statements.
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Unaudited
Three Months Ended
March 31
1996 1995
NET SALES $ 106,822 $ 91,372
OTHER INCOME 838 351
_________ __________
107,660 91,723
_________ __________
COSTS AND EXPENSES
Cost of sales 74,498 63,213
Research and development expenses 4,680 4,139
Selling, general and administrative
expenses 19,629 17,547
Interest expense 4,344 4,312
Foreign exchange gain (108) (77)
Other expenses 186 118
__________ __________
103,229 89,252
__________ __________
EARNINGS BEFORE INCOME TAXES 4,431 2,471
INCOME TAXES 1,387 508
__________ __________
NET EARNINGS $ 3,044 $ 1,963
========== ==========
EARNINGS PER COMMON SHARE $ .40 $ .25
========== ==========
AVERAGE COMMON SHARES OUTSTANDING $7,673,405 $7,720,052
========== ==========
See accompanying notes to Consolidated Condensed Financial
Statements.
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Unaudited
Six Months Ended
March 31
1996 1995
NET SALES $ 200,055 $ 178,289
OTHER INCOME 1,356 920
__________ __________
201,411 179,209
__________ __________
COSTS AND EXPENSES
Cost of sales 139,205 125,106
Research and development expenses 8,685 8,292
Selling, general and administrative
expenses 37,443 33,057
Interest expense 8,301 8,699
Foreign exchange gain (152) (67)
Other expenses 272 176
__________ __________
193,754 175,263
__________ __________
EARNINGS BEFORE INCOME TAXES 7,657 3,946
INCOME TAXES 2,263 799
__________ __________
NET EARNINGS $ 5,394 $ 3,147
========== ==========
EARNINGS PER COMMON SHARE $ .70 $ .41
========== ==========
AVERAGE COMMON SHARES OUTSTANDING 7,700,456 7,719,735
========== ==========
See accompanying notes to Consolidated Condensed Financial
Statements.
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
Six Months Ended
March 31
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
Net earnings $ 5,394 $ 3,147
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 9,913 9,834
Provisions for losses 2,595 951
Deferred income taxes (348) 1,323
Other 99 (17)
Changes in assets and liabilities
providing (using) cash:
Receivables (2,669) (9,119)
Inventories (13,231) (4,312)
Prepaid expenses and other assets (638) 2,071
Accounts payable and accrued expenses 5,334 (1,664)
Other liabilities 1,370 543
Accrued income taxes 489 689
Customer advances 464 (2,429)
__________ __________
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,772 1,017
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Ultra servovalve product line,
net of cash acquired (note 6) (5,012) -
Purchase of property, plant and equipment (4,775) (3,549)
Proceeds from sale of assets 82 219
Other 132 153
__________ __________
NET CASH USED BY INVESTING ACTIVITIES (9,573) (3,177)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in notes payable (1,956) (2,894)
Net proceeds from revolving lines of credit 7,475 5,000
Proceeds from issuance of long-term debt 3,194 4,610
Payments on long-term debt (2,590) (4,342)
Redemption of convertible subordinated
debentures (1,400) (1,400)
Dividends paid (5) (5)
Common stock repurchase (1,600) -
Proceeds from issuance of treasury stock 30 14
__________ __________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,148 983
__________ __________
Effect of exchange rate changes on cash (174) 153
__________ __________
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,173 (1,024)
Cash and cash equivalents at
beginning of period 7,576 7,561
__________ __________
Cash and cash equivalents at end
of period $ 9,749 $ 6,537
========== ==========
See accompanying notes to Consolidated Condensed Financial Statements.
<PAGE>
MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands except share data)
Unaudited
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements fairly present
the financial position of Moog Inc. as of March 31, 1996 and
the results of its operations and cash flows for the three
and six months ended March 31, 1996 and 1995. The results
of operations for the six month period ended March 31, 1996
are not necessarily indicative of the results expected for
the full year. Certain reclassifications have been made to
conform the 1995 financial statements with the current year
presentation.
2. On May 14, 1996, the Company completed a recapitalization
(the "Recapitalization") which is expected to increase its
operating and financial flexibility. The principal elements
of the Recapitalization were:
(1) The amendment on May 13, 1996 and March 22, 1996 of the
Company's secured U.S. revolving credit and term loan
facility (the "Bank Credit Facility") pursuant to which the
lenders thereunder consented to consummation of the
Recapitalization and the parties agreed to amend certain
financial covenants.
(2) The redemption (the "Debenture Redemption") on
April 26, 1996 of the Company's 9-7/8% Convertible
Subordinated Debentures due 2006 (the "9-7/8% Convertible
Debentures") 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.
(3) 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 approximately
$116,250 million net of discounts, commissions and estimated
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. The Company used
such net proceeds to:
(a) Repurchase 714,600 shares of its Class A Common
Stock, representing 11.8% of the outstanding shares of
Class A Common Stock (9.3% of total Common Stock
outstanding), from Seneca Foods Corporation for a
purchase price of $12,863, or $18 per share;
(b) Prepay in its entirety the principal balance of
$16,400 on the Company's 10-1/4% Senior Secured Note
due 2001 (the "10-1/4% Note");
<PAGE>
(c) Repay approximately $86,481 of its revolving
borrowings under the Bank Credit Facility, which
includes $17,858 borrowed for the Debenture Redemption;
and
(d) Pay prepayment and amendment fees of $506 incurred
in connection with the Recapitalization.
The Offering was made under Rule 144A and Regulation S of
the Securities Act of 1933. Accordingly, the Notes have not
been registered under the Securities Act of 1933 and may not
be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
The Company has entered into an agreement to exchange the
Notes for new notes that will be registered under the
Securities Act of 1933. The exchange will be made only by
means of a prospectus.
3. The following proforma income statement amounts show the
effect for the six month period ended March 31, 1996
assuming that the Notes had been sold on October 1, 1995 and
that net proceeds of $116,250 were used to repurchase
714,600 shares of the Company's Class A Common Stock for
$12,863, prepay the balance then outstanding of $18,350 on
the 10-1/4% Note, redeem $19,258 of the 9-7/8% Convertible
Debentures, pay prepayment and amendment fees of $557 on the
10-1/4% Note and the Bank Credit Facility, with the
remainder used to repay outstanding revolving borrowings
under the Bank Credit Facility of $65,222. The proforma
adjustments assume $142 in principal of the 9-7/8%
Convertible Debentures was converted into 6,204 shares of
Class A Common Stock. The reduction in net earnings for the
proforma period reflects the net increase in interest and
amortization expenses associated with Recapitalization. The
prepayment fee and the write off of deferred debt issue
costs associated with the 10-1/4% Note (see note 4) have not
been reflected in the proforma income statement amounts.
The proforma financial information does not purport to
represent the Company's results of operations if the
Recapitalization had in fact been consummated on October 1,
1995.
Six Months Ended
March 31, 1996
Actual Proforma
Net sales $ 200,055 $ 200,055
Earnings before income taxes 7,657 6,110
Earnings after income taxes 5,394 4,419
Earnings per share $ .70 $ .63
Average shares outstanding 7,700,465 6,992,069
The proforma summary balance sheet information is provided
assuming the transaction had taken place on March 31, 1996. The
proforma balance sheet information reflects the sale of $120,000
in Notes and the application of the estimated net proceeds of
<PAGE>
$116,250 therefrom to repurchase 714,600 shares of the Company's
Class A Common Stock for $12,863, prepay the balance outstanding
on the 10-1/4% Note of $17,100, redeem $17,858 of the 9-7/8%
Convertible Debentures, pay prepayment and amendment fees of
$525, with the remainder of $67,904 used to reduce the
outstanding balance on the Bank Credit Facility. The proforma
amounts also reflect the reduction in shareholders' equity that
would result from the after-tax write-off of deferred debt issue
costs ($246), and prepayment fees ($280) associated with the Note
Prepayment (see note 4).
March 31, 1996
Actual Proforma
Total Assets $ 438,403 $ 441,843
========== ==========
Other liabilities $ 113,115 $ 132,825
Senior debt 176,313 91,290
9-7/8% Convertible Debentures 18,000 -
Senior subordinated debt - 120,000
Shareholders' equity 110,975 97,728
========== ==========
Total Liabilities and
Shareholders' Equity $ 438,403 $ 441,843
========== ==========
4. In connection with the May 1996 prepayment in its entirety
of the 10-1/4% Note, the Company incurred a prepayment fee
and wrote off the related deferred debt issue costs. The
estimated after-tax charge of $510 will be reported in the
third quarter of fiscal 1996 as an extraordinary item.
5. Inventories are stated at the lower of cost or market using
the first-in, first-out (FIFO) method of valuation.
Inventories are comprised of the following:
March 31 September 30
1996 1995
Raw materials and purchased parts $28,489 $23,028
Work in process 56,568 52,839
Finished goods 12,366 10,309
_______ _______
$97,423 $86,176
======= =======
6. On December 15, 1995 the Company purchased, for $5,012 net
of cash acquired, the servovalve product line assets of
Ultra Hydraulics Limited ("Ultra"). This product line
traces its history back to a license granted by Moog in the
1950's. Over the past thirty years, the Ultra product line
has benefitted from numerous refinements to the original
Moog designs and has developed a valuable customer network.
Ultra, located in the United Kingdom, had worldwide sales of
just under $5,000 in its latest fiscal year.
<PAGE>
7. In addition to the cash flow information provided in the
Consolidated Condensed Statements of Cash Flows, the
following supplemental cash flow data is provided:
Six Months Ended
March 31
1996 1995
Cash paid (received) during the
period for:
Interest $5,940 $7,925
Income taxes 1,608 (3,385)
Non cash investing and financing
activities:
Leases capitalized, net of
leases terminated 597 176
<PAGE>
8. The changes in shareholders' equity for the six months ended
March 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares
Class A Class B
Preferred Common Common
Amount Shares Stock Stock
<S> <C> <C> <C> <C>
PREFERRED STOCK
Beginning and end of period $ 100 100,000
COMMON STOCK
Beginning and end of period 9,134 6,599,306 2,534,817
ADDITIONAL PAID-IN CAPITAL
Beginning of period 47,709
Issuance of treasury shares at
less than cost (5)
_______
End of period 47,704
RETAINED EARNINGS
Beginning of period 64,125
Net earnings 5,394
Preferred stock dividends (5)
_______
End of period 69,514
TREASURY STOCK
Beginning of period (17,841) (550,968) (857,103)
Treasury stock issued 35 2,900 -
Treasury stock acquired (1,600) - (80,000)
________ _________ _________
End of period (19,406) (548,068) (937,103)
EQUITY ADJUSTMENTS
Beginning of period 6,158
Foreign currency translation (1,612)
________
End of period 4,546
LOAN TO SAVINGS AND STOCK
OWNERSHIP PLAN (SSOP)
Beginning of period (749)
Payments received on loan
to SSOP 132
________
End of period (617)
TOTAL SHAREHOLDERS' EQUITY $110,975 100,000 6,051,238 1,597,714
======== ======= ========= =========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company, founded in 1951, is a leading global designer and
manufacturer of a broad range of high performance motion and
fluid control products and systems for aerospace and industrial
applications. Moog's servoactuation systems are critical to the
flight control of commercial and military aircraft, controlling
the thrust of space launch vehicles, steering tactical and
strategic missiles, satellite positioning, and in a wide variety
of electric and hydraulic industrial applications that require
the precise control of position, velocity and force. Moog
believes it is the recognized worldwide technological leader in
the market of precision controls.
The Company has two industry segments, Domestic Controls and
International Controls, both of which include five major product
lines. These product lines are Commercial Aircraft, Military
Aircraft, Space & Missiles (together "Aerospace Controls") and
Industrial Electronic Controls and Industrial Hydraulic Controls
(together "Industrial Controls"). Domestic Controls designs and
manufactures products primarily for North American markets, while
International Controls designs and manufactures products
primarily for markets in Europe and the Far East. The
substantial majority of Domestic Controls segment sales relate to
Aerospace Controls, with a relatively small portion of sales
related to Industrial Controls. Conversely, International
Controls segment sales relate principally to Industrial Controls,
with a relatively small portion of sales related to Aerospace
Controls.
From time to time, the Company considers select acquisitions to
achieve its strategies of broadening product lines, enhancing
market share and improving manufacturing and engineering
capabilities. In 1994, for example, Moog acquired certain
hydraulic and mechanical actuation product lines of AlliedSignal
Inc. ("AlliedSignal") located in Torrance, California (the
"Acquisition"). Mechanical actuation products acquired include
drive systems for the leading edge flaps on the F/A-18 C/D, F/A-
18 E/F, V-22 Osprey and Boeing 777, and hydraulic actuation
products acquired include the primary flight controls for the
Boeing 747 and 757 and the Airbus A330 and A340. The Acquisition
strengthened Moog's position in the actuation market and improved
utilization of existing manufacturing facilities and overhead
structure. The Acquisition added revenues of approximately $95.0
million in fiscal 1995. The final purchase price, excluding $5.0
million for specified transition services, was $63.8 million.
The transition services which ended in June 1995 principally
related to computer services, engineering, and manufacturing
support.
On December 15, 1995, the Company purchased, for $5.0 million net
of cash acquired, the servovalve product line of Ultra Hydraulics
Limited ("Ultra"). This product line traces its history back to
a license granted by Moog in the 1950's. Over the past thirty
<PAGE>
years, the Ultra product line has benefitted from numerous
refinements to the original Moog designs and has developed a
valuable customer network. Ultra, located in the United Kingdom,
had worldwide sales of just under $5.0 million in its latest
fiscal year.
Sales. Commercial aerospace and Industrial Controls sales
accounted for slightly more than half of fiscal 1995 sales, with
the balance to either the U.S. government or various foreign
governments for military and space hardware on programs that
normally extend over many years. Over the past five years, the
percentage of government sales has declined as the Company has
increased its focus on the development and acquisition of
Commercial Aircraft and Industrial Controls product lines. In
fiscal 1991, government sales were 61% and commercial sales were
39%, respectively, of sales, compared to 49% and 51% in fiscal
1995, respectively. Moog expects the percentage of commercial
sales to continue to increase based upon expected growth in
Commercial Aircraft and Industrial Controls. The Company's sales
are dependent upon its ability to provide highly technical
controls solutions at a competitive price. Although price is a
major consideration, it is often secondary to technical
considerations.
In Commercial Aircraft, the Company's sales follow the production
cycle of the major original equipment manufacturers. In
Industrial Controls, the Company is subject to the normal swings
in capital goods spending in regional markets. Sales of Military
Aircraft and Space and Missiles products are subject to changes
in government procurement levels on programs in which the
Company participates. While the Company's sales in each of its
product lines is subject to cyclicality, the impact of
cyclicality can be mitigated by the diversity of these product
lines and their broad geographic distribution.
Sales to U.S. government prime contractors are typically pursuant
to long-term contracts for which the Company uses the percentage
of completion (cost to cost) method of accounting. Under this
method, revenues are recognized as costs are incurred. Estimates
of the cost to complete the contract are performed on a regular
basis. On contracts for which the estimated factory cost is
higher than the contract's value, a charge to earnings is made
and a loss reserve provided. The Company shares risks of
cancellation as a participant in these 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.
Approximately 32% of fiscal 1995 sales were to international
markets. The Company's consolidated U.S. dollar sales and
results of operations can be affected by the fluctuation in
foreign exchange rates. The Company believes exposure to
movements in a particular currency can be mitigated by the number
of countries in which it operates. Although the Company does not
hedge sales or operating results of its international operations,
it selectively hedges certain balance sheet exposures.
<PAGE>
The Company aggressively markets spare parts and repairs directly
to its Aerospace and Industrial Controls customers. Sales of
spare parts and repairs are more profitable than OEM sales and
generally less volatile. For fiscal 1995, the Company's
aftermarket sales represented approximately 14% of sales, which
the Company estimates to be approximately twice fiscal 1992
aftermarket sales, reflecting increases in the Company's
installed base and focus on aftermarket sales opportunities
resulting from the Acquisition.
Cost of Sales. The principal elements of cost of sales are
direct labor, raw materials and manufacturing overhead. The
business requires significant investments in capital equipment,
buildings and related support costs. Cost of sales can be
significantly 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 Controls business and the production
cycle of major industrial capital goods manufacturers. In
Aerospace Controls, new contracts or contract terminations/
cutbacks are generally known in advance, while in industrial
markets, the Company generally "lags" into a capital spending
slowdown.
Since 1991 the Company has significantly reduced its worldwide
manufacturing cost base. Excluding the Acquisition, the Company
reduced its U.S. workforce by 28%, or 605 people, from fiscal
1991 through 1995, while closing and terminating the lease for
its engine controls facility in Florida and sub-leasing two
facilities in East Aurora, New York. In Europe, the Company
reduced headcount by 23%, or 173 people, from fiscal 1991 through
1994, and consolidated industrial manufacturing in Germany and
aerospace production in England. Manufacturing capabilities in
France and Italy were eliminated. These restructuring actions
resulted in total charges of $13.8 million in 1992 and $2.1
million in 1994. In conjunction with these efforts, the Company
increased utilization of low cost manufacturing centers in the
Philippines, Ireland and India. In fiscal 1994, the Company
recorded an inventory obsolescence charge of $2.6 million,
representing the write-off of obsolete Domestic Controls
inventory, reflecting the decline in repair activities and spare
parts requirements on certain government programs. The Company
expects to continue to increase the use of its international low
cost manufacturing facilities in the future.
Selling, General and Administrative Expenses. The Company's
selling, general and administrative expenses are generally higher
in Industrial Controls compared to Aerospace Controls markets.
Typically, the majority of industrial products have higher gross
profit margins, but also require higher sales and support effort.
Accordingly, shifts in the sales mix to or from Industrial
Controls will generally affect total selling, general and
administrative expenses as a percentage of sales. Selling,
general and administrative expenses are also affected by the
amount of bid and proposal work on government contracts and
commission sales.
<PAGE>
Research and Development. While the Company's overall level of
engineering resources has been relatively constant, its research
and development expenses will vary depending on whether its
engineering staff is engaged in customer-funded design and
development, sales support, production support or Company-funded
research and development activities.
Income Taxes. Income taxes consist of the consolidation of the
tax attributes in each country in which the Company has an
established presence. In recent years, the effective tax rate
has been affected by significant net operating losses and
utilization of net operating loss carryforwards primarily at the
Company's German operation. These net operating loss
carryforwards are expected to be substantially utilized by the
end of fiscal 1996.
<PAGE>
Results of Operations
DOMESTIC CONTROLS
Three Months Ended Six Months Ended
3/31/96 3/31/95 3/31/96 3/31/95
Net sales $71,572 $60,656 $135,161 $123,184
Intersegment sales 3,595 2,928 6,998 5,148
_______ _______ ________ ________
Total sales $75,167 $63,584 $142,159 $128,332
======= ======= ======== ========
Operating profit $ 8,097 $ 5,826 $ 15,608 $ 12,152
Net earnings $ 1,617 $ 805 $ 3,232 $ 1,865
Backlog $202,049 $169,207
INTERNATIONAL CONTROLS
Three Months Ended Six Months Ended
3/31/96 3/31/95 3/31/96 3/31/95
Net sales $35,250 $30,716 $ 64,894 $ 55,105
Intersegment sales 4,541 1,170 8,664 2,302
_______ _______ ________ ________
Total sales $39,791 $31,886 $ 73,558 $ 57,407
======= ======= ======== ========
Operating profit $ 3,184 $ 2,778 $ 5,775 $ 3,779
Net earnings $ 1,678 $ 1,215 $ 2,713 $ 1,426
Backlog $ 45,211 $ 47,759
CONSOLIDATED
Three Months Ended Six Months Ended
3/31/96 3/31/95 3/31/96 3/31/95
Net sales $106,822 $91,372 $200,055 $178,289
Operating profit 11,281 8,604 21,383 15,931
Deductions from operating profit:
Interest expense 4,344 4,312 8,301 8,699
Currency exchange gain (108) (77) (152) (67)
Other expenses-net 2,274 1,823 4,731 3,189
Eliminations 340 75 846 164
________ _______ ________ _______
Total deductions 6,850 6,133 13,726 11,985
________ _______ ________ _______
Earnings before income taxes 4,431 2,471 7,657 3,946
Income taxes 1,387 508 2,263 799
________ _______ ________ _______
Net earnings $ 3,044 $ 1,963 $ 5,394 $ 3,147
======== ======= ======== ========
Backlog $247,260 $216,966
======== ========
Operating profit for each segment consists of total revenue less cost of
sales and segment specific operating expenses. In calculating net earnings
for each segment, deductions from operating profit have been charged to the
respective segments by being directly identified with a segment or
allocated on the basis of sales.
<PAGE>
Fiscal 1996 Second Quarter Compared with
Fiscal 1995 Second Quarter
Net sales for the second quarter of fiscal 1996 were $107
million, an increase of 16.9% over last fiscal year's second
quarter. Net sales for the Domestic Controls segment were $71.6
million, 18.0% above net sales of $60.7 million a year ago. The
Domestic Controls segment sales increase is attributable to
increased sales of mechanical controls in both the Commercial and
Military Aircraft product lines, higher satellite and space
propulsion controls within the Space and Missiles product line,
and growth in electric drives sales in the Industrial Electronic
Controls product line. For the International Controls segment,
net sales increased 14.8% to $35.3 million in the fiscal 1996
second quarter compared with $30.7 million a year ago. The
International Controls segment sales growth relates principally
to stronger demand for Industrial Hydraulic Controls throughout
Europe and, to a lesser degree, the December 1995 acquisition of
the Ultra servovalve product line.
Other income was $.8 million in the second quarter of fiscal 1996
compared to $.4 million a year ago. The increase relates to
license fees on a foreign military program.
Cost of sales for the second quarter of fiscal 1996 was $74.5
million, or 69.7% of net sales, compared to $63.2 million, or
69.2% of net sales in the prior fiscal year. The increase as a
percentage of sales is primarily due to lower Industrial
Hydraulic Controls product line margins due to a less favorable
product mix as well as some pricing pressures.
Research and development expense was $4.7 million, 4.4% of net
sales, for the second quarter of fiscal 1996, compared with $4.1
million or 4.5% of net sales in the second quarter of fiscal
1995. The increase in absolute terms relates to research in the
U.S. on advanced actuation systems related to Military and
Commercial Aircraft and in Germany on various hydraulic and
electronic products.
Selling, general and administrative expenses were $19.6 million
or 18.4% of sales, in the second quarter of fiscal 1996, compared
to $17.5 million or 19.2% of sales the same period a year ago.
In absolute terms, the increase is attributable to higher sales
levels, the Ultra acquisition, costs associated with stock
appreciation rights on the non-qualified stock option plan, and
consulting costs incurred by the German subsidiary related to
enhancing manufacturing activities.
Operating profit for the Domestic Controls segment was $8.1
million in the second quarter of fiscal 1996, or 10.8% of segment
sales. This compares with $5.8 million, or 9.2% of segment sales
a year ago. The increase is attributable to the previously
discussed 18.0% increase in net sales. For the International
Controls segment, operating profit in the second quarter of
fiscal 1996 was $3.2 million, or 8.0% of segment sales, compared
to $2.8 million, or 8.7% of segment sales a year ago. The
increase in absolute terms is a result of the increase in net
<PAGE>
sales, while the decline as a percentage of segment sales relates
principally to a less favorable product mix and some pricing
pressures.
Interest expense was $4.3 million in both the second quarter of
fiscal 1996 and the second quarter of fiscal 1995. As a
percentage of sales, interest expense declined to 4.1% of sales
in the current quarter from 4.7% a year ago.
Income taxes are based upon an effective rate for the second
quarter of fiscal 1996 of 31.3% compared to 20.6% for the second
quarter of fiscal 1995. The effective tax rates reflect the
utilization of net operating loss carryforwards available to the
German subsidiary. The lower tax rate in fiscal 1995 reflected
the fact that a larger proportion of fiscal 1995 second quarter
earnings before taxes were generated by the German subsidiary
relative to fiscal 1996.
As a result of the factors discussed above, net earnings for the
second quarter of fiscal 1996 increased to $3.0 million, or $.40
per share, compared with $2.0 million, or $.25 per share, a year
ago.
Fiscal 1996 Second Quarter Year-to-Date Compared with
Fiscal 1995 Second Quarter Year-to-Date
Net sales for the first six months of fiscal 1996 were $200
million, an increase of 12.2% over last fiscal year's second
quarter. Net sales for the Domestic Controls segment were $135
million, 9.7% above net sales of $123 million a year ago. The
Domestic Controls segment sales increase is attributable to
increased sales in both the Commercial and Military Aircraft
product lines, higher satellite and space propulsion controls
within the Space and Missiles product line, and growth in
electric drives sales in the Industrial Electronic Controls
product line. For the International Controls segment, net sales
increased 17.8% to $64.9 million in the first six months of
fiscal 1996 compared with $55.1 million a year ago. The
International Controls segment sales growth relates principally
to stronger demand for Industrial Hydraulic Controls throughout
Europe and, to a lesser degree, the December 1995 acquisition of
the servovalve product line of Ultra Hydraulics Ltd.
Other income was $1.4 million in the first six months of fiscal
1996 compared to $.9 million a year ago. The increase relates to
license fees on a foreign military program.
Cost of sales for the first six months of fiscal 1996 was $139
million, or 69.6% of net sales, compared to $125 million, or
70.2% 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 Acquisition, in part offset by lower
margins in the Industrial Hydraulic Controls product line for the
International Controls segment as a result of a less favorable
product mix and some pricing pressures in both European and Asian
markets.
<PAGE>
Research and development expense was $8.7 million or 4.3% of net
sales, for the first six months of fiscal 1996, compared with
$8.3 million or 4.7% of net sales in the same period of fiscal
1995. The increase relates to additional engineering effort in
the U.S. on advanced actuation systems related to Military and
Commercial Aircraft and in Germany on various hydraulic and
electronic products during the second quarter of fiscal 1996.
Selling, general and administrative expenses were $37.4 million
or 18.7% of sales, in the first six months of fiscal 1996,
compared to $33.1 million or 18.5% of sales in the same period a
year ago. The increase is attributable to higher sales levels,
the Ultra acquisition, stock appreciation rights expense, and
consulting costs incurred by the German subsidiary related to
enhancing manufacturing activities.
Operating profit for the Domestic Controls segment was $15.6
million for the first six months of fiscal 1996, or 11.0% of
segment sales. This compares with $12.2 million, or 9.5% of
segment sales a year ago. The increase is attributable to the
previously discussed 9.7% increase in net sales, and the absence
in fiscal 1996 of transition costs associated with the
Acquisition. For the International Controls segment, operating
profit for the first six months of fiscal 1996 was $5.8 million,
or 7.9% of segment sales, compared to $3.8 million, or 6.6% of
segment sales a year ago. The increase in absolute terms is a
result of the increase in net sales due to improved capital goods
market conditions.
Interest expense was $8.3 million for the first six months of
fiscal 1996, compared with $8.7 million for the same fiscal 1995
period. In absolute terms, the decrease is due to lower average
debt levels. As a percentage of sales, interest expense declined
to 4.1% of sales in the current quarter from 4.9% a year ago.
Income taxes are based upon an effective rate for the first six
months of fiscal 1996 of 29.6%, compared to 20.2% for the same
fiscal 1995 period. The effective tax rates reflect the
utilization of net operating loss carryforwards available to the
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.
As a result of the factors discussed above, net earnings for the
first six months of fiscal 1996 increased to $5.4 million, or
$.70 per share compared with $3.1 million, or $.40 per share, a
year ago.
Financial Condition and Liquidity
On May 14, 1996, the Company completed the Recapitalization which
is expected to increase its operating and financial flexibility.
The principal elements of the Recapitalization were:
(1) The amendment on May 13, 1996 and March 22, 1996 of the
Company's Bank Credit Facility pursuant to which the lenders
thereunder consented to consummation of the Recapitalization
and the parties agreed to amend certain financial covenants.
<PAGE>
(2) The Debenture Redemption on April 26, 1996 of the
Company's 9-7/8% Convertible Debentures 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.
(3) The completion on May 14, 1996 of the $120,000 Offering
of 10% Senior Subordinated Notes due 2006, the proceeds of
which were approximately $116,250 million net of discounts,
commissions and estimated 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. The Company used such net proceeds to:
(a) Repurchase 714,600 shares of its Class A Common
Stock, representing 11.8% of the outstanding shares of
Class A Common Stock (9.3% of total Common Stock
outstanding), from Seneca Foods Corporation for a
purchase price of $12,863, or $18 per share;
(b) Prepay in its entirety the principal balance of
$16,400 on the Company's 10-1/4% Note;
(c) Repay approximately $86,481 of its revolving
borrowings under the Bank Credit Facility, which
includes $17,858 borrowed for the Debenture Redemption;
and
(d) Pay prepayment and amendment fees of $506 incurred
in connection with the Recapitalization.
As of March 31, 1996, the Company (excluding its subsidiaries)
had $171.7 million of total debt of which $153.7 million was
senior debt. As of March 31, 1996, on a proforma basis after
giving effect to the Recapitalization, the Company (excluding its
subsidiaries) would have had $188.9 million of total debt
outstanding, of which $68.9 million would have been senior debt.
Of the $68.9 million of proforma senior debt as of March 31,
1996, approximately $64.1 million would have been borrowings
under the Bank Credit Facility. The Company believes it will be
able to reduce interest costs through lower interest rates on the
outstanding borrowings under the Bank Credit Facility during the
third quarter of fiscal 1996.
<PAGE>
Scheduled periodic principal payments of long-term debt for the
next five years are presented below compared with the revised
principal payments of long-term debt after giving effect to the
Recapitalization.
($ in millions) Maturities of Long-Term Debt
Fiscal Before After Increase
Year Recapitalization Recapitalization (Decrease)
1996 $ 7.1 $ 6.4 $( .7)
1997 13.6 9.2 (4.4)
1998 18.3 13.9 (4.4)
1999 12.7 8.3 (4.4)
2000 12.3 7.9 (4.4)
Cash provided by operating activities was $8.8 million for the
first six months of fiscal 1996 compared to cash provided of $1.0
million in the same period for fiscal 1995. The principal
factors contributing to the increase in cash provided were higher
net earnings and relatively higher non-cash provisions for
contract losses and inventory obsolescence primarily attributable
to increasing levels and aging of inventories.
As of March 31, 1996, the Company had worldwide unused lines of
credit of $52.2 million, plus cash and cash equivalents of $9.7
million. After giving effect to the Recapitalization, the
Company would have had $121 million of unused capacity under its
various credit facilities. The Company had worldwide unused
lines of credit of $56.9 million and cash and cash equivalents of
$7.6 million at September 30, 1995.
Consolidated assets at March 31, 1996 increased to $438 million
compared with $425 million at September 30, 1995. The increase
was principally due to the acquisition of Ultra in December 1995
and increases in inventory levels to reduce customer lead times.
Capital expenditures for the first six months of fiscal 1996 were
$5.4 million compared with depreciation and amortization of $9.9
million. Capital expenditures in the first six months of fiscal
1995 were $3.7 million compared with $9.8 million of depreciation
and amortization. Capital expenditures in fiscal 1996 are
expected to remain below depreciation and amortization levels.
Debt includes long-term debt and the 9-7/8% Convertible
Debentures. The percentage of debt to capitalization at March 31,
1996 was 61.6% and at September 30, 1995 was 61.8%. After giving
effect to the Recapitalization, the percentage of debt to total
capitalization would be 67.1% at March 31, 1996.
Working capital at March 31, 1996 was $173 million compared with
$167 million at September 30, 1995. The increase in working
capital principally relates to increased inventory levels. The
current ratio was 2.68 at March 31, 1996, compared to 2.76 at
September 30, 1995.
<PAGE>
With respect to the Bank Credit Facility, the Company amended the
facility on November 14, 1995, increasing the total facility to
$165 million, consisting of a $135 million revolving credit
facility and a $30.0 million term loan. The term loan is for a
six year period, with quarterly principal payments commencing in
October 1996. The revolving credit facility is available through
October 2000. The Bank Credit Facility currently provides for
interest at LIBOR plus 1.75%. To provide protection from
interest rate increases, the Company entered into $100 million of
interest rate swap arrangements which began in 1994 and had the
effect of converting $100 million into fixed rate debt over two
years at approximately 8.0%.
The Bank Credit Facility is secured by substantially all of the
Company's domestic assets, including the common shares of all
domestic and foreign subsidiaries. The Bank Credit Facility
includes customary covenants, including interest coverage,
payment coverage, maintenance of tangible net worth to total
liabilities, and limits on capital expenditures and acquisitions.
The Notes, which are unsecured, include customary covenants,
including limitations on indebtedness, restricted payments, and
dividends, among others.
Recent Accounting Pronouncements
The Company is required to adopt SFAS No. 121, "Accounting for
the Impairment of 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 the fiscal 1997
consolidated financial statements.
Backlog
Backlog consists of that portion of open orders for which sales
are expected to be recognized over the next twelve months.
Backlog was $247 million at March 31, 1996 compared with $238
million at September 30, 1995 and $217 million at March 31, 1995.
Backlog for the Domestic Controls segment as $202 million at
March 31, 1996 compared with $196 million at September 30, 1995
and with $169 million at March 31, 1995. The increase in
Domestic Controls backlog from a year ago related to new orders
principally on the B-2 program, strong growth in Space and
Missiles products, along with higher electrical drive order
levels. International Controls segment backlog was $45.2 million
at March 31, 1996 compared with $42.0 million at September 30,
1995 and with $47.8 million at March 31, 1995. The International
Controls backlog decline from a year ago is due entirely to
currency fluctuations.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, the Company is named as a defendant
in legal actions arising in the normal course of
business. The Company is not a party to any pending
legal proceeding the resolution of which management
believes will have a material adverse effect on the
Company's results of operations or financial condition
or, except as discussed herein, to any pending legal
proceedings other than ordinary, routine litigation
incidental to its business.
In early 1988, Moog entered into a transaction (the
"1988 Transaction") with William C. Moog, its then
founder, chairman and largest shareholder, pursuant to
which Mr. Moog exchanged all his common stock in the
Company for sole ownership of Moog's domestic
industrial business and its automotive systems
activities. The newly formed business transferred to
Mr. Moog was called Moog Controls Inc. ("MCI"). In
1994, Mr. Moog transferred his interest in and control
of MCI to an unrelated company currently controlled by
International Motion Controls Inc. The capital stock
of MCI is now held by a partnership in which William C.
Moog is a limited partner. Mr. Moog is the father-in-
law of Richard A. Aubrecht, an officer and director of
the Company.
At the time of the 1988 Transaction, Moog was a
beneficiary of certain agreements with the Power
Authority of the State of New York ("PASNY"), pursuant
to which the Company was entitled to purchase electric
power at advantageous rates. In the course of the 1988
Transaction, an ancillary agreement was entered into
which provided that MCI would be able to take credits
against future rent and services payments to Moog. MCI
never took the credits. Moog regards the ancillary
agreement as having been waived or discharged and of no
further force or effect. In 1995, under its new
ownership, MCI began an action against Moog in New York
State Supreme Court which seeks the economic benefits
of the ancillary agreement. Moog answered the
complaint and has defended the lawsuit, alleging, inter
alia, that MCI, by its inaction over a course of seven
years, waived any rights it may have had under the
ancillary agreement.
Also, as part of the 1988 Transaction, Moog and MCI
entered into a Trade Name License Agreement ("TNLA")
pursuant to which MCI was licensed to use the words
"Moog Controls" and "Moog Controls Inc." to identify
itself and its business. The TNLA recognized that Moog
is the exclusive registrant for the trademark and
service mark "Moog." It further recognized that all
use of the word "Moog" by MCI should inure solely to
the benefit of Moog. The TNLA did not express any
<PAGE>
particular duration or geographic scope, but did
prohibit its assignment or sublicense.
In late 1995, Moog Italiana S.r.l., Moog's indirect,
wholly owned subsidiary, sought preliminary relief
against MCI's Italian distributor for MCI's use of the
Moog name in Italy. As a consequence of the action
commenced by Moog Italiana S.r.l., MCI sued Moog in
United States District Court, seeking a declaration of
its rights under the TNLA and preliminary and permanent
injunctions directing Moog to compel its foreign
subsidiaries not to bring actions which would affect
MCI's right to use the Moog name in their respective
jurisdictions. Moog has moved to dismiss the MCI
action for lack of subject matter jurisdiction. On
February 28, 1996, Moog notified MCI that Moog was
terminating the TNLA and granting MCI until August 31,
1996, to use its existing supplies of materials
imprinted with the Moog name. It is anticipated that
MCI will challenge this termination. Motions addressed
to the jurisdiction of the District Court and other
preliminary issues are currently pending before the
court.
During fiscal 1995, the Company sold to MCI products
and services in the amount of $1.8 million and
purchased from MCI products and services in the amount
of $2.1 million. In light of the adversarial
proceedings between Moog and MCI, the level of these
transactions has decreased significantly.
On March 25, 1996, a complaint was filed in the
Superior Court of the State of California for the
County of Los Angeles by certain former employees at
the Aerospace Equipment Division of AlliedSignal
against AlliedSignal, Moog, a named employee of
AlliedSignal and unnamed employees of both companies.
The complaint alleges a number of claims related to age
discrimination in connection with the termination of
the plaintiff's employment by AlliedSignal, and by Moog
after the transfer of such former employees from
AlliedSignal to Moog in connection with the
Acquisition. The complaint seeks general, special and
punitive damages and attorneys' fees in unspecified
amounts and such other relief as the court deems
appropriate. The Company intends to vigorously defend
this action and does not believe that it will have a
material adverse effect upon its financial condition.
Environmental Matters
The Company's operations and properties are subject to
federal, state and local environmental and health and
safety laws and regulations, including those relating
to the handling, generation, emission, discharge,
treatment, storage and disposal of hazardous and non-
hazardous materials and wastes. The Company has a
permit to discharge wastewater from its East Aurora
facility, which in 1994 was revised by the New York
<PAGE>
State Department of Environmental Conservation ("DEC")
to substantially lower its effluent limitations. Over
the past two years, the Company has cooperated with the
DEC by investigating this matter and preparing an
appropriate action plan in response to the permit. In
February 1996, the DEC formally notified the Company
that it believes the Company has exceeded the limits
imposed by the permit. The DEC requested that the
Company enter into an order on consent relative to
alleged non-compliance with respect to the wastewater
discharges, and indicated that if the Company did not
do so, the DEC would initiate an enforcement action.
In March 1996, the Company proposed, in lieu of
entering into a consent order, that certain immediate
action be taken to treat the wastewater discharges and
address this matter. The DEC has not yet responded to
the Company's proposal and the Company currently
expects to implement its proposal after receiving a DEC
response. Whether or not a consent order is entered
into, the Company expects the cost of any required
corrective action to be less than $100,000. There can
be no assurance that the DEC will refrain from
enforcement action, which could include monetary
sanctions, with respect to this matter.
The Company has also recently become aware of an
interpretation of certain state regulations in
California pursuant to which its Torrance facility,
acquired in the Acquisition, should have had a permit
from the California Department of Toxic Substances
Control ("DTSC") for the treatment of hazardous
substances. The Company is working with the DTSC staff
to obtain a variance from this regulation.
The federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA," also commonly
referred to as "Superfund") authorizes the federal and
state governments and private parties to take action
with respect to releases and threatened releases of
hazardous substances and provides a cause of action to
recover the response costs from certain statutorily
responsible parties. The federal government may also
order responsible parties to take remedial action
directly. Liability under CERCLA may be joint and
several among responsible parties. 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 have been completed, and the
Company's share of the related costs 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. In late March 1996, the Company was notified of
a proposed de micromis settlement with respect to waste
<PAGE>
claimed to have been generated by formerly owned
operations. The Company is also in the process of
voluntarily remediating an area identified in 1994 at a
Company-owned facility leased to a third party.
The Company believes that adequate reserves have been
established for environmental issues, and does not
expect that these environmental matters will have a
material effect on the financial position of the
Company in excess of amounts previously reserved.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
None.
b. Reports on Form 8-K.
On March 28, 1996, the Company filed an Item 5
Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Moog Inc.
(Registrant)
Date: May 15, 1996 By S/Robert R. Banta/S
Robert R. Banta
Executive Vice President
Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 1996 By S/Donald R. Fishback/S
Donald R. Fishback
Controller
(Principal Accounting Officer)
<PAGE>
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