May 28, 1996
Filing Desk
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form S-4
Moog Inc.
Ladies and Gentlemen:
Enclosed for filing on behalf of Moog Inc. (the
"Company") please find Form S-4, registering 10% Series B Senior
Subordinated Notes due 2006 (the "New Notes") of the Company to
be exchanged for outstanding 10% Senior Subordinated Notes due
2006 (the "Old Notes").
The Old Notes were privately placed pursuant to Rule
144A, Regulation S and Regulation D, and pursuant to a certain
Registration Rights Agreement, either the exchange offer
contemplated by the Form S-4 must be consummated or a shelf
registration allowing resale of the Old Notes must be declared
effective prior to November 12, 1996 or the interest rate on the
Old Notes will increase to 10.5% permanently.
Contemporaneously with this filing, a copy of the
Form S-4 has been submitted to the American Stock Exchange.
Questions regarding this filing should be directed to
the undersigned at (716) 847-7020.
Very truly yours,
PHILLIPS, LYTLE, HITCHCOCK, BLAINE & HUBER
By /s/Paul N. Edwards
Paul N. Edwards, Esq.
Enclosures
cc: The American Stock Exchange
Robert R. Banta, Executive Vice President,
Moog Inc.
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 28, 1996
REGISTRATION STATEMENT NO. 333-_____
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
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.)
ROBERT T. BRADY
Chairman of the Board,
President and Chief Executive Officer
EAST AURORA, NEW YORK 14052-0018
(716) 652-2000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
____________________
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
____________________
WITH A COPY TO:
JOHN B. DRENNING, ESQ.
PHILLIPS, LYTLE, HITCHCOCK,
BLAINE & HUBER
3400 Marine Midland Center
Buffalo, New York 14203
____________________
Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If the only securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or reinvestment plans, check the following box. [ ]
____________________
<PAGE>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum Amount of
Shares to be Amount to be Offering Price Aggregate Registra-
Registered Registered Per Note (1) Offering Price (1) tion Fee
__________________________________________________________________________
10% Series B $120,000,000 100% of the $120,000,000 $41,379.31
Senior Sub- face amount
ordinated
Notes due 2006
_____________________
(1) Estimated solely for purposes of calculating the registration fee.
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
ITEM NO. CAPTION LOCATION IN PROSPECTUS
Item 1 Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus.................. Facing Page of Regis-
tration Statement;
Cross-Reference Sheet;
Outside Front and
Inside Front Cover Page
of Prospectus
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside
Back Cover Pages of
Prospectus
Item 3 Risk Factors, Ratio of Earnings to
Fixed Charges, and Other
Information........................ Summary; Risk Factors;
Business
Item 4 Terms of the Transaction............ The Exchange Offer;
Description of New
Notes; Certain Federal
Tax Considerations
Item 5 Pro Forma Financial Information..... Summary Historical and
Pro Forma Consolidated
Financial Information;
Capitalization
Item 6 Material Contracts With the Company
Being Acquired...................... Not Applicable
Item 7 Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........... Plan of Distribution
Item 8 Interests of Named Experts and
Counsel............................. Legal Matters
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... Not Applicable
Item 10 Information with Respect to S-3
Registrants......................... Incorporation of Certain
Documents by Reference
Item 11 Incorporation of Certain Information
by Reference........................ Incorporation of Certain
Documents by Reference
Item 12 Information With Respect to S-2 or
S-3 Registrants..................... Not Applicable
Item 13 Incorporation of Certain Information
by Reference........................ Not Applicable
Item 14 Information With Respect to Registrants
Other than S-3 or S-2 Registrants... Not Applicable
Item 15 Information With Respect to S-3
Companies........................... Not Applicable
<PAGE>
Item 16 Information With Respect to S-2 or
S-3 Companies....................... Not Applicable
Item 17 Information With Respect to Companies
Other than S-2 or S-3 Companies..... Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited.. Not Applicable
Item 19 Information if Proxies, Consents or
Authorizations are Not to be
Solicited, or in an Exchange Offer.. Incorporation of Certain
Documents by Reference;
Summary; The Exchange
Offer; Description of
the New Notes; Certain
Federal Tax
Considerations
<PAGE>
[MOOG LOGO] OFFER TO EXCHANGE
ALL OUTSTANDING 10% SENIOR
SUBORDINATED NOTES DUE 2006
($120,000,000 AGGREGATE PRINCIPAL
AMOUNT OUTSTANDING)
FOR
10% SENIOR SUBORDINATED
NOTES DUE 2006 OF
MOOG INC.
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1996, UNLESS EXTENDED
____________________
Moog Inc., a New York corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 10% Series B Senior Subordinated
Notes due 2006, (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 10% Senior Subordinated Notes
due May 1, 2006 (the "Old Notes") of the Company of which
$120 million aggregate principal amount is outstanding. The New
Notes and the Old Notes are collectively referred to herein as
the "Notes."
The Company will accept for exchange any and all Old Notes
that are validly tendered and not withdrawn on or prior to
5:00 p.m., New York City time, on the date the Exchange Offer
expires, which will be , 1996, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the business day prior to the Expiration Date, unless
previously accepted for payment. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to
certain conditions which may be waived by the Company and to the
terms and provisions of the Registration Rights Agreement (as
defined herein). See "The Exchange Offer." Old Notes may be
tendered only in denominations of $1,000 and integral multiples
thereof. The Company has agreed to pay the expenses of the
Exchange Offer.
The New Notes will be obligations of the Company entitled to
the benefits of the Indenture (as defined herein) relating to the
Old Notes. The form and terms of the New Notes are identical in
all material respects to the form and terms of the Old Notes
except that the New Notes have been registered under the
Securities Act and following the completion of the Exchange
<PAGE>
Offer, the Notes generally will not be entitled to a contingent
increase in the interest rate otherwise provided under certain
circumstances. See "The Exchange Offer."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
____________________
The date of this Prospectus is _____________ , 1996.
<PAGE>
The New Notes bear interest from May 10, 1996. Holders of
Old Notes whose Old Notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect
of interest on the Old Notes accrued from May 10, 1996 to the
date of the issuance of the New Notes. Interest on the New Notes
is payable semi-annually on May 1 and November 1 of each year,
commencing November 1, 1996, accruing from May 10, 1996 at a rate
of 10% per annum.
The New Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after May 1, 2001 at the
redemption prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In addition,
upon the occurrence of a Change of Control (as defined), each
holder of the New Notes has the option to require the Company to
make an offer to repurchase such holder's Notes at a redemption
price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption.
The New Notes are unsecured senior subordinated obligations
of the Company and are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined) of the
Company, including indebtedness under its Bank Credit Facility
(as defined). In addition, the New Notes are effectively
subordinated to the obligations of the Company's subsidiaries.
As of March 31, 1996, after giving pro forma effect to the
Recapitalization, the aggregate outstanding amount of Senior
Indebtedness of the Company would have been approximately
$91.3 million and the aggregate outstanding amount of
indebtedness of the Company's subsidiaries would have been
approximately $22.6 million.
Old Notes initially purchased by qualified institutional
buyers, as defined pursuant to Rule 144A under the Securities Act
("Qualified Institutional Buyers"), were initially represented by
a single, global Note in registered form ("Rule 144A Global
Note"), registered in the name of a nominee of The Depository
Trust Company ("DTC"), as depository. Old Notes initially sold
in offshore transactions in reliance on Regulation S under the
Securities Act were initially represented by a single global Note
in registered form ("Regulation S Global Note" and together with
the Rule 144A Global Note, the "Restricted Global Notes"),
registered in the name of a nominee of DTC for the accounts of
Euroclear and Cedel. The New Notes exchanged for Old Notes
represented by the Restricted Global Notes will each be
represented by a single, global New Note in registered form
("Global New Notes"), registered in the name of an appropriate
nominee of DTC, unless the beneficial holders thereof request
otherwise. The Global New Notes will be exchangeable for New
Notes in registered form, in denominations of $1,000 and integral
multiples thereof. See "Description of the New
Notes--Book-Entry Delivery and Form."
Based on no-action letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third
parties, the Company believes the New Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered
<PAGE>
for resale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old
Notes directly from the Company to resell pursuant to Rule 144A
or any other available exemption under the Securities Act or
(ii) a person that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the
Securities Act provided that the holder is acquiring the New
Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any
person to participate, in the distribution of the New Notes.
Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met. In
the event that the Company's belief is inaccurate, holders of New
Notes who transfer New Notes in violation of the prospectus
delivery provisions of the Securities Act and without an
exemption from registration thereunder may incur liability under
the Securities Act. The Company does not assume or indemnify
holders against such liability.
Each broker-dealer that receives New Notes in exchange for
Old Notes held for its own account, as a result of market-making
or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealer
in connection with resales of New Notes received in exchange for
Old Notes. The Company has agreed that, for a period of 90 days
after the Expiration Date, it will make this Prospectus and any
amendment or supplement to this Prospectus available to any such
broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Company believes that no registered holder of the Old
Notes is an affiliate (as such term is defined in Rule 405 under
the Securities Act) of the Company. Proceeds from the offering
of the Old Notes (the "Offering") were used by Moog to finance a
recapitalization (the "Recapitalization"). See "The
Recapitalization." The Company will not receive any proceeds
from the Exchange Offer, and no underwriter is being utilized in
connection with the Exchange Offer.
After completion of the Exchange Offer, Old Notes which have
not been exchanged for New Notes will remain outstanding. See
"Risk Factors--Consequences of Failure to Exchange."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE
COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES
IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE
SKY LAWS OF SUCH JURISDICTION.
Prior to the Exchange Offer, there has been no public market
for the Old Notes or New Notes. If a market for the New Notes
<PAGE>
should develop, the New Notes could trade at a discount from
their principal amount. The Company does not presently intend to
list the New Notes on any stock exchange or trading market other
than PORTAL, for which the Notes are eligible. There can be no
assurance that an active public market for the New Notes will
develop.
The Company has been advised by Morgan Stanley & Co.
Incorporated, the placement agent of the Old Notes (the
"Placement Agent"), that, following completion of the Exchange
Offer, it intends to make a market in the New Notes; however, it
is under no obligation to do so and any market-making activities
with respect to the New Notes may be discontinued at any time.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this
Prospectus the following documents or information filed with the
Commission:
(a) Items 10, 11 and 13 of the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1995 (the "Form
10-K"); and
(b) all documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as
amended (the "Exchange Act"), on or after the date of this
Prospectus and prior to the termination of the offering made
hereby.
Any statement contained herein or in any documents
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for the purpose of
this Prospectus to the extent that a subsequent statement
contained herein or in any subsequently filed document which also
is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM
WILLIAM P. BURKE, TREASURER OF THE COMPANY AT THE COMPANY'S
PRINCIPAL EXECUTIVE OFFICES LOCATED AT SENECA STREET AND JAMISON
ROAD, EAST AURORA, NEW YORK 14052-0018, TELEPHONE NUMBER
(716) 652-2000. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY 5 DAYS PRIOR TO
EXPIRATION DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act, and in accordance therewith files periodic
reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information may
be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street,
<PAGE>
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, Northwestern
Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus constitutes a part of a registration
statement (the "Registration Statement") filed by the Company
with the Commission under the Securities Act. As permitted by
the rules and regulations of the Commission, this Prospectus does
not contain all of the information contained in the Registration
Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the
Company and the securities offered hereby. Statements contained
herein concerning the provisions of any documents filed as an
exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance
reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference.
The Indenture (as defined) provides that the Company will
furnish copies of the periodic reports required to be filed with
the Commission under the Exchange Act to the holders of the
Notes. If the Company is not subject to the periodic reporting
and informational requirements of the Exchange Act, it will, to
the extent such filings are accepted by the Commission, and
whether or not the Company has a class of securities registered
under the Exchange Act, file with the Commission, and provide the
Trustee and the holders of the Notes within 15 days after such
filings with, annual reports containing the information required
to be contained in Form 10-K promulgated under the Exchange Act,
quarterly reports containing the information required to be
contained in Form 10-Q promulgated under the Exchange Act and
from time to time such other information as is required to be
contained in Form 8-K promulgated under the Exchange Act. If
filing such reports with the Commission is not accepted by the
Commission or prohibited by the Exchange Act, the Company will
also provide copies of such reports, at its cost, to prospective
purchasers of the Notes promptly upon written request.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information
and the Consolidated Financial Statements of the Company,
including the related notes, appearing elsewhere in this
prospectus. As used in this prospectus, "Moog" and the "Company"
refer to Moog Inc., a New York corporation, and its subsidiaries.
Market data and certain industry forecasts used throughout
this prospectus were obtained from internal surveys, market
research, publicly available information and industry
publications. Industry publications generally state that the
information contained therein has been obtained from sources
believed to be reliable, but that the accuracy and completeness
of such information is not guaranteed. Similarly, internal
surveys, industry forecasts and market research, while believed
to be reliable, have not been independently verified, and the
Company makes no representation as to the accuracy of such
information.
THE COMPANY
The Company, founded in 1951, is a leading worldwide
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 to the flight control of commercial and
military aircraft, in controlling the thrust of space launch
vehicles, steering tactical and strategic missiles, positioning
satellites, and in a wide variety of electric and hydraulic
industrial applications that require the precise control of
position, velocity and force. Moog is the recognized worldwide
technological leader in the precision controls market.
In recent years the Company has expanded its product lines
through design and product innovations and through the
acquisition (the "Acquisition") in 1994 of certain servoactuation
product lines of AlliedSignal Inc. ("AlliedSignal"). In the
fiscal year ended September 30, 1995, Moog's sales and EBITDA (as
defined herein) were $374.3 million and $46.0 million,
respectively. In fiscal 1995, 51% of the Company's sales were to
commercial aerospace and industrial customers and 49% were to
government and military customers.
Products, Customers and Markets
The Company traces its origins to a single product, the
electrohydraulic servovalve. Capable of controlling high pressure
hydraulic fluid, the servovalve responds to electrical command
signals which, when received, initiate a desired mechanical
movement. From this single component, the Company's product lines
and technological base have grown to include a broad range of
electrohydraulic, electromechanical, electropneumatic and
electric drive servoactuation systems and components. While the
original applications for servovalves and servoactuation systems
were in the aerospace industry, the Company and a wide variety of
<PAGE>
industrial machinery manufacturers throughout the world quickly
recognized the benefits of using the Moog servovalve as a key
component in automation.
The Company believes that it is the recognized technology
leader and is the market leader in terms of sales in four of its
five principal product lines: commercial aircraft, military
aircraft, space and missiles and industrial hydraulic controls.
Described below are the Company's principal product lines and
markets.
Commercial Aircraft. In the market for commercial aircraft
controls ("Commercial Aircraft"), Moog supplies technologically
advanced primary and secondary flight controls and engine
controls to the major prime aircraft and engine manufacturers.
Moog provides flight controls to The Boeing Corporation
("Boeing") for use on its 747, 757, 767 and 777 aircraft pursuant
to exclusive contracts which contain pre-determined prices. The
Boeing 747, 757 and 767 contracts run through 2002, while the
Boeing 777 contract runs through 2006. Moog is also a supplier of
servovalves on all Airbus Industries ("Airbus") models as well as
flight control actuators on the A330 and A340. In addition, the
Company supplies a wide range of servovalves or servoactuators
for the McDonnell Douglas Corporation ("McDonnell Douglas") MD-
11, the Boeing 737, the Gulfstream Aerospace Corporation
("Gulfstream") II, III and IV, and other business and regional
aircraft. Sales in the Commercial Aircraft market represented
approximately 20% of Moog's fiscal 1995 sales.
Military Aircraft. In the market for military aircraft
controls ("Military Aircraft"), Moog supplies products similar to
those supplied to the Commercial Aircraft market, with additional
emphasis on technological performance, weight minimization and
combat survivability. Major programs on which Moog is represented
include the F-14, F-15, F-16, F/A-18 C/D, F/A-18 E/F, B-2 and
Taiwanese IDF. In addition, Moog is the principal source of "fly-
by-wire" flight controls for helicopters, and has incorporated
these advanced systems into the newly developed V-22 Osprey
tiltrotor aircraft as well as the Army's Comanche helicopter.
Military Aircraft accounted for approximately 35% of Moog's
fiscal 1995 sales. As used in this prospectus, Military Aircraft
and Commercial Aircraft are referred to together as "Aircraft
Controls."
Space and Missiles. Moog manufactures motion, fluid and
propellant controls and systems which are used to control the
flight and positioning of satellites, launch vehicles, the Space
Shuttle and missiles. The Company believes it has the leading
market share in satellite propulsion and strategic missile and
launch vehicle thrust vector control ("TVC") systems, and is the
technological leader in electric propulsion, gel propellant
controls, thrusters and valves. Approximately 12% of Moog's
fiscal 1995 sales were in the market for space and missiles
controls ("Space and Missiles"). As used in this prospectus,
Space and Missiles and Aircraft Controls are referred to together
as "Aerospace."
<PAGE>
Industrial Hydraulics. The Company serves the market for
industrial hydraulic controls ("Industrial Hydraulics") primarily
through the manufacture of over 15,000 custom designed variations
of precision heavy-duty industrial servovalves. Moog believes it
is the recognized world leader in terms of breadth of product
offering, technology and market share for industrial servovalves.
The Company estimates that customers for this product line
include over 1,500 manufacturers of automated industrial
machinery in which Moog servovalves are the key elements
providing interfaces between the customer's control electronics
and motion producing hydraulic systems. Sample applications
include plastic injection and blow molding machines, industrial
steam and gas turbines, steel rolling mills, sawmill equipment,
metal forming presses, mobile and marine equipment and fatigue
testing machines. Moog's strength in this market is derived from
its engineering expertise and proven capability in solving
complex motion control problems. Moog's sales in the Industrial
Hydraulics market accounted for approximately 20% of its fiscal
1995 sales.
Industrial Electrics. Moog's primary products in the market
for industrial electric controls ("Industrial Electrics") are
high performance, custom designed brushless DC motors, motor
controllers and microprocessor based machine controls. The
customers for these products are high performance machinery
manufacturers throughout the world who require control systems
and electric drives that improve the speed, accuracy, quality and
reliability of their machinery. Applications for the Company's
products include plastic injection and blow molding machines,
material handling robots, rug manufacturing, packaging equipment,
and other specialty machines. The Company's electric control
technology has recently been adapted for gun turret controls on
military ground vehicles and forms the basis for Moog's complete
line of electrically driven motion platforms used in the small
but rapidly growing entertainment simulation market.
Approximately 13% of Moog's fiscal 1995 sales were in the
Industrial Electrics market. Industrial Electrics and Industrial
Hydraulics are referred to together in this prospectus as
"Industrial Controls."
Business Strategy
The Company's objective is to enhance its present global
leadership positions in Aerospace and Industrial Controls. Key
elements of the Company's principal business strategy include:
Enhance Market Leadership. The Company focuses on high-end
precision control markets. In product areas representing
approximately 87% of its fiscal 1995 sales, the Company believes
it is the technological leader and the market leader in terms of
sales. In Aircraft Controls, Moog is the recognized world leader
in technologically advanced control systems and components that
are custom designed to perform to exacting specifications. The
Company also believes that it is the largest supplier of flight
controls and servovalves to the worldwide Aerospace market. Due
to Moog's proven ability to meet or exceed the original equipment
manufacturers' ("OEMs") technological specifications, the Company
<PAGE>
is a sole source supplier of certain flight controls for both the
B-2 and V-22, as well as Boeing's 747, 757, 767 and 777 aircraft.
In industrial servovalves, the Company estimates it currently has
a 35% share of the worldwide market. Moog continually improves
its line of servovalves and servoactuators to provide its
customers with the optimal solution in terms of performance,
price and quality.
Continually Broaden Product Lines and Applications. The
Company's growth is principally attributable to its strategy of
continually broadening its technology, products and product
applications. Moog's capabilities extend to the design and
production of electrohydraulic, electromechanical and
electropneumatic systems and components. In addition, as a result
of the Acquisition, the Company now offers one of the broadest
Aircraft Controls product lines in the industry. In Industrial
Controls, the Company provides increasingly intelligent digital
controls as part of its electric drive systems and as a
complement to its hydraulic controls. The Company believes that
its diverse product applications and integrated approach to
product development and testing provide it with competitive
advantages over rival suppliers.
Maintain Stability and Diversity of Customer Relationships.
Over the last decade, the Company has never been replaced as the
supplier of a commercial or miliary flight control system for
which it was the original supplier to the OEM. Moog's success in
obtaining and retaining long-term OEM contracts is directly
attributable to the Company's practice of working closely with
its customers from the design phase, through production and
aftermarket support. In addition, the Company markets its
products to a broad range of commercial, industrial and
government customers. For example, Moog's industrial customer
base consists of more than a thousand machinery manufacturers
throughout the world, in plastics, packaging, fatigue testing
equipment, steel and metals production, wood processing and
general manufacturing. The Company's sales diversity in both
geography and product applications can mitigate the effects of
specific regional or capital goods spending cycles.
Provide Superior Aftermarket Service. The Company
aggressively markets spares, parts and repair services directly
to its Aerospace and Industrial Controls customers
("Aftermarket"), through its extensive network of international
subsidiaries. Aftermarket sales are generally more profitable and
less volatile than other sales. For fiscal 1995, the Company's
Aftermarket sales represented approximately 14% of sales, which
the Company estimates to be approximately double its fiscal 1992
Aftermarket sales, reflecting increases in the Company's
installed base and its focus on Aftermarket sales opportunities
resulting from the Acquisition.
Growth Opportunities
The Company believes that its established strategy, the
product lines acquired in the Acquisition, and anticipated growth
in its Aerospace and Industrial Controls markets provide it with
a platform to increase sales and profitability.
<PAGE>
Growing Commercial Aircraft Market. According to recent
widely published reports, Boeing has forecasted that commercial
passenger miles are expected to grow at 5.1% per annum over the
next 20 years, with the market doubling from 1994 to 2000.
According to such reports, as a result of this expected increase
in demand, combined with the need to replace aircraft which are
aging, uneconomical to operate or do not meet stringent noise
control regulations, the airlines are expected to purchase
approximately 16,000 new aircraft during the next 20 years. With
approximately 20% of the Company's fiscal 1995 sales derived from
the Commercial Aircraft market, and with its established position
as a preferred supplier on growing programs at Boeing and other
aerospace OEMs, the Company is well-positioned to capitalize on
this expected growth.
Growing Demand for Industrial Controls. Industrial Controls
represented approximately 33% of the Company's fiscal 1995 sales,
the substantial majority of which were in international markets.
The Company has only recently targeted the U.S. market, and
expects to make significant inroads in this market by utilizing
its existing design, marketing, engineering and service
capabilities in conjunction with its low-cost overseas
manufacturing facilities. The Company anticipates long-term
growth in the Industrial Controls markets based upon expected
increases in demand in Asian markets and the trend toward greater
automation worldwide.
Expanding Aftermarket Opportunities. The Company derived
approximately 14% of its fiscal 1995 sales directly from
Aftermarket business. As its installed product base continues to
increase, the Company expects Aftermarket sales to increase both
in absolute terms and as a percentage of total sales. The Company
is the principal provider of Aftermarket support for its
installed base of products and systems because of the rigid
specifications and high technological content of the Company's
products and its rapid customer response time.
Increasing Numbers of New Satellites. The Company expects
new satellite launches to increase due to the growing demand for
communications-related satellites. Moog's wide range of zero-
defect products, quality reputation, technical depth, customer
support and leading market share position it to capitalize on
this growth.
Continuing Technological Innovation. New product
introductions have been and will continue to be an important part
of the Company's growth. Company-funded research and development
has averaged $17.1 million annually for the past five years, and
the Company estimates that customer-funded design and development
averaged $26.4 million over the same period. The Company is also
working on a wide range of technologies and new applications for
various customers. These efforts will enable the Company to
enhance its position as a leading edge technology company.
<PAGE>
THE RECAPITALIZATION
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
$18.0 million on April 26, 1996, principal of $17.9 million
was redeemed with $.1 million of principal converted into
6,204 shares of Class A Common Stock.
(3) The completion on May 14, 1996 of the Offering of Old
Notes, the proceeds of which were approximately
$116.3 million, net of discounts, commissions and expenses
of the Offering. 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 $12.9 million, or $18 per share;
(b) Prepay in its entirety the principal balance of
$16.4 million on the Company's 10-1/4% Senior Secured
Note due 2001 (the "10-1/4% Note");
(c) Repay approximately $86.5 million of its revolving
borrowings under the Bank Credit Facility, which
includes $17.9 million borrowed for the Debenture
Redemption; and
(d) Pay prepayment and amendment fees of $.5 million
incurred in connection with the Recapitalization.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to
$120 million aggregate principal amount of Old Notes for an equal
aggregate principal amount of New Notes. The New Notes are
obligations of the Company entitled to the benefits of the
Indenture relating to the Old Notes. The form and terms of the
New Notes are the same as the form and terms of the Old Notes
except that the New Notes have been registered under the
Securities Act, and following the completion of the Exchange
<PAGE>
Offer, the Notes generally will not be entitled to a contingent
increase in the interest rate otherwise provided under certain
circumstances.
The Exchange Offer........ $1,000 principal amount of New
Notes will be issued in exchange
for each $1,000 principal amount of
Old Notes validly tendered pursuant
to the Exchange Offer. As of the
date hereof, $120 million in
aggregate principal amount of Old
Notes are outstanding. The Company
will issue the New Notes to
tendering holders of Old Notes on
or promptly after the Expiration
Date.
Resale of the New Notes... Based on interpretations by the
staff of the Commission set forth
in no-action letters issued to
third parties, the Company believes
that New Notes issued pursuant to
the Exchange Offer in exchange for
Old Notes may be offered for
resale, resold and otherwise
transferred by any holder thereof
(other than (i) a broker-dealer who
purchased such Old Notes directly
from the Company for resale
pursuant to Rule 144A or any other
available exemption under the
Securities Act or (ii) a person
that is an "affiliate" of the
Company within the meaning of
Rule 405 under the Securities Act)
without compliance with the
registration and prospectus
delivery provisions of the
Securities Act provided that the
holder is acquiring the New Notes
in its ordinary course of business
and is not participating, and has
no arrangement or understanding
with any person to participate, in
the distribution of the New Notes.
In the event that the Company's
belief is inaccurate, holders of
New Notes who transfer New Notes in
violation of the prospectus
delivery provisions of the
Securities Act and without an
exemption from registration
thereunder may incur liability
under the Securities Act. The
Company does not assume or
indemnify holders against such
liability.
<PAGE>
Each broker-dealer that receives
New Notes in exchange for Old Notes
held for its own account, as a
result of market-making activities
or other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of such New Notes. The
Letter of Transmittal states that
by so acknowledging and by
delivering a prospectus, such
broker-dealer will not be deemed to
admit that it is an "underwriter"
within the meaning of the
Securities Act. This Prospectus,
as it may be amended or
supplemented from time to time, may
be used by such broker-dealer in
connection with resales of New
Notes received in exchange for Old
Notes. The Company has agreed
that, for a period of 90 days after
the date of this Prospectus, it
will make this Prospectus and any
amendment or supplement to this
Prospectus available to any such
broker-dealer for use in connection
with any such resales. See "Plan
of Distribution." The Company
believes that no registered holder
of the Old Notes is an affiliate
(as such term is defined in
Rule 405 of the Securities Act) of
the Company.
This Exchange Offer is not being
made to, nor will the Company
accept surrenders for exchange
from, holders of Old Notes in any
jurisdiction in which this Exchange
Offer or the acceptance thereof
would not be in compliance with the
securities or blue sky laws of such
jurisdiction.
Expiration of Exchange
Offer................... 5:00 p.m., New York City time, on
__________, 1996, unless the
Exchange Offer is extended, in
which case the term "Expiration
Date" means the latest date and
time to which the Exchange Offer is
extended. See "The Exchange
Offer--Expiration Date; Extensions;
Amendments."
<PAGE>
Accrued Interest on the
New Notes and the
Old Notes............... The New Notes bear interest from
May 10, 1996. Holders of Old Notes
whose Old Notes are accepted for
exchange will be deemed to have
waived the right to receive any
payment in respect of interest on
such Old Notes accrued from May 10,
1996 to the date of the issuance of
the New Notes. Consequently,
holders who exchange their Old
Notes for New Notes will receive
the same interest payment on
November 1, 1996 (the first
interest payment date with respect
to the Old Notes and the New Notes)
that they would have received had
they not accepted the Exchange
Offer. See "The Exchange Offer--
Interest on the New Notes."
Termination of the Exchange
Offer................... The Company may terminate the
Exchange Offer if it determines
that its ability to proceed with
the Exchange Offer could be
impaired due, for example, to any
pending or threatened legal or
governmental action, any new law,
statute, rule or regulation or any
interpretation of the staff of the
Commission. There can be no
assurance that any such condition
will not occur. Holders of Old
Notes will have certain rights
against the Company under the
Registration Rights Agreement
should the Company fail to
consummate the Exchange Offer. See
"The Exchange Offer--General" and
"--Termination."
Procedures for Tendering Old
Notes................... Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter
of Transmittal, or a facsimile
thereof, in accordance with the
instructions contained herein and
therein, and mail or otherwise
deliver such Letter of Transmittal,
or such facsimile, together with
any other required documentation,
to Fleet National Bank, as Exchange
Agent, at the address set forth
<PAGE>
herein and therein. See "The
Exchange Offer--Procedures for
Tendering."
By executing the Letter of
Transmittal, each holder will
represent to the Company that,
among other things, (i) the New
Notes acquired pursuant to the
Exchange Offer are being obtained
in the ordinary course of business
of the person receiving such New
Notes, whether or not such person
is the holder, (ii) neither the
holder nor any such other person
has an arrangement or understanding
with any person to participate in
the distribution of such New Notes
and (iii) neither the holder nor
any such other person is an
"affiliate," as defined in Rule 405
under the Securities Act, of the
Company.
Special Procedures for
Beneficial Holders...... Any beneficial holder whose Old
Notes are registered in the name of
a broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender in the
Exchange Offer should contact such
registered holder promptly and
instruct such registered holder to
tender on its behalf. If such
beneficial holder wishes to tender
on his own behalf, such beneficial
holder must, prior to completing
and executing the Letter of
Transmittal and delivering its Old
Notes, either make appropriate
arrangements to register ownership
of the Old Notes in such holder's
name or obtain a properly completed
bond power from the registered
holder. The transfer of record
ownership may take considerable
time. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery
Procedures.............. Holders of Old Notes who wish to
tender their Old Notes and whose
Old Notes are not immediately
available or who cannot deliver
their Old Notes (or who cannot
complete the procedure for book-
entry transfer on a timely basis)
<PAGE>
and a properly completed Letter of
Transmittal or any other documents
required by the Letter of
Transmittal to the Exchange Agent
prior to the Expiration Date may
tender their Old Notes according to
the guaranteed delivery procedures
set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights......... Tenders of Old Notes may be
withdrawn at any time prior to
5:00 p.m., New York City time, on
the business day prior to the
Expiration Date, unless previously
accepted for exchange. See "The
Exchange Offer--Withdrawal of
Tenders."
Acceptance of Old Notes and
Delivery of New Notes... Subject to certain conditions (as
summarized above in "Termination of
the Exchange Offer" and described
more fully under "The Exchange
Offer--Termination"), the Company
will accept for exchange any and
all Old Notes which are properly
tendered in the Exchange Offer and
not validly withdrawn prior to
5:00 p.m., New York City time, on
the Expiration Date. The New Notes
issued pursuant to the Exchange
Offer will be delivered promptly
following the Expiration Date. See
"The Exchange Offer--General."
Certain Tax
Considerations.......... The exchange pursuant to the
Exchange Offer should not be a
taxable event for federal income
tax purposes. See "Certain Federal
Tax Considerations."
Exchange Agent............ Fleet National Bank, the Trustee
under the Indenture, is serving as
exchange agent (the "Exchange
Agent") in connection with the
Exchange Offer. The address of the
Exchange Agent is: Fleet National
Bank, 777 Main Street, Hartford,
Connecticut 06115, Attention:
Corporate Trust Department. For
information with respect to the
Exchange Offer, the telephone
number for the Exchange Agent is
(860) 986-1271 and the facsimile
number for the Exchange Agent is
(860) 986-7908.
<PAGE>
Use of Proceeds........... There will be no cash proceeds
payable to the Company from the
issuance of the New Notes pursuant
to the Exchange Offer. The
proceeds to the Company from the
sale of the Old Notes were
approximately $116.3 million, net
of discounts, commissions and
estimated expenses of the Offering.
Such proceeds were used to finance
the Recapitalization. See "The
Recapitalization."
SUMMARY DESCRIPTION OF THE NEW NOTES
Notes Offered............. $120 million principal amount of
10% Series B Senior Subordinated
Notes due 2006.
Maturity Date............. May 1, 2006
Interest Payment Dates..... May 1 and November 1 of each year,
commencing November 1, 1996.
Optional Redemption....... The Notes are redeemable at the
option of the Company, in whole or
in part, on or after May 1, 2001,
at the redemption prices set forth
herein, together with accrued and
unpaid interest to the date of
redemption.
Mandatory Redemption...... None.
Change of Control......... Upon the occurrence of a Change of
Control, each holder of the Notes
shall have the option to require
the Company to repurchase such
holder's Notes at a redemption
price equal to 101% of the
principal amount thereof, plus
accrued interest to the date of
redemption, pursuant to a Change of
Control Offer to be made by the
Company. See "Description of the
New Notes--Certain Definitions" for
the definition of a Change of
Control.
Ranking................... The Notes are unsecured senior
subordinated obligations of the
Company and are subordinated to all
existing and future Senior
Indebtedness of the Company,
including indebtedness under the
Bank Credit Facility. As of
March 31, 1996, after giving pro
<PAGE>
forma effect to the
Recapitalization, the aggregate
outstanding principal amount of
Senior Indebtedness of the Company
would have been approximately
$91.3 million. In addition, the
Notes are effectively subordinated
to the obligations of the Company's
subsidiaries. As of March 31,
1996, after giving pro forma effect
to the Recapitalization, the
Company's subsidiaries would have
had approximately $22.6 million of
indebtedness outstanding. Subject
to certain limitations, the Company
and its Restricted Subsidiaries may
incur additional indebtedness in
the future. See "Risk
Factors--Leverage" and "--Ranking
of the Notes."
Certain Covenants......... The Indenture contains certain
covenants, including, without
limitation, covenants with respect
to the following matters:
(i) limitation on indebtedness;
(ii) limitation on other senior
subordinated indebtedness;
(iii) limitation on restricted
payments; (iv) limitation on
issuance of restricted subsidiary
stock and indebtedness;
(v) limitation on transactions with
affiliates; (vi) limitation on
liens securing pari passu or
subordinated indebtedness;
(vii) limitation on disposition of
proceeds from asset sales;
(viii) limitation on dividends and
other payment restrictions
affecting restricted subsidiaries;
and (ix) restrictions on mergers
and certain transfers of assets.
See "Description of the New Notes--
Certain Covenants."
Registration Rights....... In connection with the sale of the
Old Notes, the Company agreed in
the Registration Rights Agreement
to use its best efforts to cause
the registration statement (the
"Registration Statement") of which
this Prospectus is a part to become
effective with respect to a
registered offer to exchange the
Old Notes (the "Exchange Offer")
<PAGE>
for the New Notes and to consummate
the Exchange Offer by November 10,
1996.
In the event that the Company
determines that the Exchange Offer
may not be consummated, if the
Exchange Offer is not consummated
by November 10, 1996, or if counsel
to the Placement Agent under
certain circumstances opines that
the Placement Agent cannot resell
the Notes without so registering,
the Company will use its best
efforts to file a shelf
registration statement with respect
to the resale of the Old Notes (the
"Shelf Registration Statement"),
and to keep the Shelf Registration
Statement effective until May 14,
1999 or such shorter period as may
be necessary for the resale of all
Old Notes pursuant thereto.
In the event that the Exchange
Offer is not consummated or a Shelf
Registration Statement with respect
to resales of the Old Notes is not
declared effective by November 10,
1996, the interest rate borne by
the Old Notes shall be permanently
increased to 10-1/2%. See "The
Exchange Offer."
For further information regarding the Notes, see "Description of
the New Notes."
RISK FACTORS
Prospective investors should consider carefully certain
matters relating to an investment in the Notes. See "Risk
Factors."
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical and pro
forma consolidated financial and operating information of the
Company for the periods indicated. The historical financial
information for each of the three years ended September 30, 1995,
except data presented under the caption "Key Operating Data", has
been derived from the Company's audited consolidated financial
statements. The historical financial information for each of the
six month periods ended March 31, 1995 and 1996 (except data
presented under the caption "Key Operating Data") and the Balance
Sheet Data as of March 31, 1996, have been derived from the
unaudited consolidated condensed financial statements of the
Company. See "Selected Consolidated Financial and Operating
Data." The pro forma financial information for the fiscal year
ended September 30, 1995 and for the six months ended March 31,
1996 and the As Adjusted Balance Sheet Data as of March 31, 1996
are based upon the historical consolidated financial information,
as adjusted, to reflect the consummation of all the transactions
completed as a result of the Recapitalization. See "The
Recapitalization."
<PAGE>
<TABLE>
<CAPTION> Years Ended September 30, Six Months Ended March 31,
1995 1996
1993 1994 1995 Pro Forma(1) 1995 1996 Pro Forma(1)
(unaudited)
(in thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income:
Net sales(2) $293,680 $307,370 $374,284 $374,284 $178,289 $200,055 $200,055
Other income 2,663 2,489 2,166 2,166 920 1,356 1,356
________ ________ ________ ________ ________ ________ ________
296,343 309,859 376,450 376,450 179,209 201,411 201,411
________ ________ ________ ________ ________ ________ ________
Costs and expenses:
Cost of sales 206,985 213,530 265,033 265,033 125,106 139,205 138,951
Research and
development
expenses 16,128 18,668 15,783 15,783 8,292 8,685 8,685
Selling, general and
administrative
expenses 52,723 58,324 68,457 68,735 33,057 37,443 37,582
Interest expense 10,974 11,402 17,492 20,386 8,699 8,301 9,974
Foreign currency
exchange loss
(gain) 60 (451) 143 143 (67) (152) (152)
Other expenses 853 665 752 752 176 272 272
Inventory obsolescence
charge(3) -- 2,574 -- -- -- -- --
Restructuring
charge(3) -- 2,107 -- -- -- -- --
________ ________ ________ ________ ________ ________ ________
287,723 306,819 367,660 370,832 175,263 193,754 195,312
________ ________ ________ ________ ________ ________ ________
Earnings before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle 8,620 3,040 8,790 5,618 3,946 7,657 6,099
Income taxes 3,502 1,422 1,029 (145) 799 2,263 1,687
________ ________ ________ ________ ________ ________ ________
<PAGE>
Earnings before
extraordinary item and
cumulative effect of
change in accounting
principle 5,118 1,618 7,761 5,763 3,147 5,394 4,412
Extraordinary item, loss
from early
extinguishment of debt,
net of income
taxes(4) (357) -- -- -- -- -- --
Cumulative effect of
change in accounting
principle(5) -- 505 -- -- -- -- --
Net earnings $4,761 $2,123 $7,761 $5,763 $3,147 $5,394 $4,412
======== ======== ======== ======== ======== ======== ========
Net earnings per share $ .62 $ .27 $ 1.00 $ .82 $ .41 $ .70 $ .63
======== ======== ======== ======== ======== ======== ========
Key Operating Data:
EBITDA(6) $35,215 $34,823 $45,957 $45,957 $22,479 $25,871 $26,125
EBITDA as a percentage
of net sales 12.0% 11.3% 12.3% 12.3% 12.6% 12.9% 13.1%
Ratio of total debt to
EBITDA(7) 3.9x 5.9x 4.1x 4.5x -- -- --
Ratio of EBITDA to
total interest
expense 3.2x 3.1x 2.6x 2.3x 2.6x 3.1x 2.6x
Capital expenditures $10,216 $8,893 $10,232 $10,232 $3,725 $5,372 $5,372
Depreciation &
amortization 15,621 15,700 19,675 19,953 9,834 9,913 10,052
Backlog(8) 181,081 217,261 237,941 237,941 216,966 247,260 247,260
Ratio of earnings to
fixed charges(9) 1.6x 1.2x 1.4x 1.2x 1.4x 1.8x 1.5x
</TABLE>
<PAGE>
As of March 31, 1996
Actual As Adjusted(10)
(unaudited)
Balance Sheet Data:
Working capital $173,262 $177,771
Property, plant and equipment, net 135,335 135,335
Total assets 438,403 441,843
Total debt 194,313 211,309
Total shareholders' equity 110,975 97,728
__________________
(1) The pro forma adjustments are based upon currently
available information and certain assumptions that
management believes to be reasonable. Pro forma amounts
show the effect on the Statements of Income and Key
Operating Data assuming that $120,000 of Notes had been
sold on October 1, 1994 (for September 30, 1995 pro
forma) and October 1, 1995 (for the March 31, 1996 pro
forma) and that net proceeds of $116,250 were used to
repurchase 714,600 shares of the Company's Class A
Common Stock ($12,863 for both periods), prepay the
balances outstanding on the 10-1/4% Note ($20,000 and
$18,350, respectively), redeem the 9-7/8% Convertible
Debentures ($20,658 and $19,258, respectively), and pay
prepayment fees on the 10-1/4% Note and an amendment
fee on the Bank Credit Facility ($770 and $557,
respectively), with the remainder used to repay
outstanding revolving borrowings under the Bank Credit
Facility ($61,959 and $65,222, respectively). For
purposes of these pro forma adjustments, it is assumed
that $142 of the outstanding 9-7/8% Convertible
Debentures were converted into 6,204 shares of Class A
Common Stock prior to the consummation of the Debenture
Redemption. The amounts of borrowing repayments in
these pro forma adjustments differ from the estimated
amounts set forth under "The Recapitalization" and in
the March 31, 1996 As Adjusted Balance Sheet Data due
to the different time periods involved.
The net increases in selling, general and
administrative expense for the pro forma periods ended
September 30, 1995 and March 31, 1996, respectively,
reflect a pretax increase in expense ($375 and $187,
respectively) for the incremental amortization of
$3,750 of discounts, commissions and estimated expenses
associated with the sale of the Notes over their 10
year life and a reduction in expense ($97 and $48,
respectively) for the lower amortization expense due to
the write-off of deferred debt issue costs associated
with the 10-1/4% Note and the 9-7/8% Convertible
Debentures. The deferred debt issue costs related to
the 10-1/4% Note and the 9-7/8% Convertible Debentures,
together with the prepayment fee associated with the
10-1/4% Note, will be charged to earnings in the fiscal
year the respective debt repayments occur; such charges
have not been reflected in the Pro Forma Statements of
Income.
<PAGE>
The increases in interest expense for the pro forma
periods ended September 30, 1995 and March 31, 1996
reflect the estimated interest expense associated with
the Notes, partly offset by reduced interest expense on
debt repayments.
The reduction in cost of sales of $254 for the pro
forma six-month period ended March 31, 1996 reflects
the reduction in profit share expense due to the pro
forma increases discussed above for the same pro forma
period. Profit share did not effect the pro forma
period ended September 30, 1995.
The pro forma adjustments for income taxes have been
determined using an estimated domestic effective tax
rate of 37.0%.
Fully diluted earnings per share for the pro forma six-
month period ended March 31, 1996 would be $0.61.
The pro forma financial information does not purport to
represent the Company's results of operations if the
Recapitalization had in fact been consummated on either
October 1, 1994 or October 1, 1995.
(2) Net sales in fiscal 1994 and 1995 include $22,400 and
$95,000, respectively, related to the Acquisition.
(3) Restructuring and inventory obsolescence charges in
1994 relate to costs associated with workforce
reductions and facility consolidations resulting from
U.S. defense spending reductions and weak European
capital goods markets.
(4) The extraordinary item in fiscal 1993 represents the
cost, net of income taxes, of extinguishing 12-7/8%
notes in the amount of $10,200.
(5) The cumulative effect of change in accounting principle
in fiscal 1994 relates to the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." In fiscal 1994, the
Company also adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions," with the cumulative effect of such adoption
being amortized over 20 years.
(6) EBITDA represents earnings before deducting interest
expense, extraordinary items, the impact of the
cumulative change in accounting principle, income tax
expense, restructuring and inventory obsolescence
charges in fiscal 1994, and depreciation and
amortization expense. EBITDA is presented herein to
facilitate a supplemental analysis of Moog's financial
condition and is not intended to represent results of
operations or cash flows in accordance with generally
accepted accounting principles ("GAAP").
<PAGE>
(7) Ratio of total debt to EBITDA is not presented for the
six month periods as it is not meaningful.
(8) Backlog consists of that portion of open orders for
which sales are expected to be recognized over the next
twelve months.
(9) For purposes of computing the ratio of earnings to
fixed charges, earnings consist of earnings before
extraordinary item and cumulative effect of change in
accounting principle, income taxes and fixed charges.
Fixed charges consist of interest expense, capitalized
interest, implicit interest expense associated with
operating leases, and amortization expense. Absent the
restructuring and inventory obsolescence charges, the
ratio of earnings to fixed charges in fiscal 1994 would
have been 1.6.
(10) The pro forma adjustments are based on currently
available information and certain assumptions that
management believes to be reasonable. The As Adjusted
Balance Sheet Data as of March 31, 1996 reflects the
sale of $120,000 in Notes as if it had occurred at that
date, and the application of the net proceeds therefrom
to repurchase 714,600 shares of the Company's Class A
Common Stock ($12,863), prepay the balance outstanding
on the 10-1/4% Note ($17,100), redeem the 9-7/8%
Convertible Debentures ($17,858), and pay prepayment
and amendment fees ($525), with the remainder ($67,904)
used to reduce the outstanding balance on the Bank
Credit Facility. The as adjusted 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.
<PAGE>
RISK FACTORS
Prospective purchasers should consider carefully the
following factors, as well as the other information contained in
this prospectus, in evaluating an investment in the Notes.
Leverage
At March 31, 1996, after giving effect to the
Recapitalization, the Company would have had approximately $211.3
million of total indebtedness, and the percentage of total long
term debt to total capitalization on a consolidated basis would
have been approximately 67%. The degree to which the Company is
leveraged could have important consequences to holders of the
Notes, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital,
capital expenditures, acquisitions or other purposes may be
impaired, (ii) the Company's flexibility in planning for or
reacting to changes in market conditions may be limited, and
(iii) the Company may be more vulnerable in the event of a
downturn in its business. The Company expects that its cash flow
from operations will be sufficient to cover its expenses,
including fixed charges. However, the Company's ability to
satisfy its obligations will be dependent upon the future
performance of the Company, which will be subject to prevailing
economic conditions and to financial, business and other factors,
including factors beyond the control of the Company.
As of March 31, 1996, the Company had $194.3 million in
aggregate borrowings outstanding under its various credit
facilities, and unused credit facilities of $52.2 million. All
revolving borrowings under the Bank Credit Facility mature on
October 1, 2000 and all term borrowings under the Bank Credit
Facility will be repaid in quarterly installments ending on
July 1, 2001. There can be no assurance that the Company will be
able to either replace or refinance the Bank Credit Facility at
maturity. Furthermore, because the Bank Credit Facility provides
for interest at floating rates, the Company's financial
performance may be adversely affected by fluctuations in interest
rates.
Restrictions Imposed by the Bank Credit Facility and the
Indenture
The Bank Credit Facility contains, and the Indenture will
contain, certain restrictive covenants, including, among others,
covenants limiting the Company's and certain of its subsidiaries'
ability to incur additional indebtedness, pay dividends, make
certain investments, consummate certain asset sales, enter into
transactions with affiliates, incur liens, create restrictions on
the ability of certain subsidiaries to pay dividends or make
certain payments to the Company, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of
the Company. Although the covenants are subject to various
exceptions which are designed to allow the Company to operate
without undue restraint, there can be no assurance that such
<PAGE>
covenants will not adversely affect its ability to finance future
operations or capital needs or engage in other business
activities which may be in the interest of the Company. In
addition, the Company is required under the Bank Credit Facility
to maintain specified financial ratios. See "Description of Bank
Credit Facility." The ability of the Company to comply with such
provisions may be affected by events beyond the Company's
control. A breach of any of these covenants or the inability of
the Company to comply with the required financial ratios could
result in a default under the Bank Credit Facility, which would
entitle the lenders to accelerate the maturity of the Bank Credit
Facility, and could result in cross-defaults permitting the
acceleration of other Senior Indebtedness or other indebtedness
under other agreements. Such an event would adversely affect the
Company's ability to make payments on the Notes.
Ranking of the Notes
The Notes will be unsecured, general obligations of the
Company, subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, including indebtedness
under the Bank Credit Facility. Amounts outstanding under the
Bank Credit Facility are secured by (i) a first priority security
interest in the Company's and its domestic subsidiaries' assets,
and (ii) a pledge of stock of all the Company's domestic and
foreign subsidiaries. At March 31, 1996, on a pro forma basis
after giving effect to the Recapitalization, the Company
(excluding its subsidiaries) would have had approximately
$188.7 million of Indebtedness outstanding, of which $68.7
million would have been Senior Indebtedness. In addition, at
March 31, 1996, on a pro forma basis after giving effect to the
Recapitalization, the Company (including its subsidiaries) would
have had approximately $121.0 million of unused capacity under
its various credit facilities. In the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the
Company would be available to pay obligations on the Notes only
after all Senior Indebtedness of the Company has been repaid in
full. Consequently, sufficient assets may not exist to pay
amounts due on the Notes. In addition, the subordination
provisions of the Indenture provide that no cash payments may be
made with respect to the Notes during the continuance of a
payment default under any Senior Indebtedness of the Company.
Furthermore, if certain nonpayment defaults exist with respect to
certain Senior Indebtedness, the holders of such Senior
Indebtedness would be able to prevent payments on the Notes for
certain periods of time. See "Description of the Notes --
Ranking."
In addition, the Notes will be effectively subordinated to
all liabilities of the Company's subsidiaries, including trade
payables. At March 31, 1996, on a pro forma basis after giving
effect to the Recapitalization, the Company's subsidiaries would
have had $64.4 million of liabilities, including $22.6 million of
Indebtedness. The right of the Company to receive assets of any
of its subsidiaries upon liquidation or reorganization of such
subsidiary will be subordinated to the claims of that
<PAGE>
subsidiary's creditors (including trade creditors), except to the
extent the Company itself is recognized as a creditor of such
subsidiary. See "Description of the Notes -- Ranking."
Competition
The fluid and motion control systems business is highly
competitive, and is characterized by changing technologies.
Competition in each product line is based primarily upon design
capability, product performance and life, service, price and
delivery time. In certain product lines, technological
considerations predominate over price considerations, and in
others price considerations are paramount. While the Company
believes that it competes effectively on all these bases, there
can be no assurance that the Company will be able to maintain its
technological leadership in its Aerospace and Industrial
Hydraulics product lines, or that it will be able to continue to
compete effectively on the basis of price.
The Company competes with various large national and
international companies, some of which are substantially larger
than the Company and have greater financial and other resources.
There can be no assurance that any of such competitors will not
increase the resources devoted to the development and marketing,
including discounting, of products competitive with those of the
Company. See "Business -- Competition."
In 1988, the Company's founder exchanged his stock in the
Company for its domestic industrial business, named Moog
Controls, Inc. ("MCI"), which was recently transferred to an
unrelated company currently controlled by International Motion
Controls ("IMC"). Competition between Moog and MCI is rapidly
intensifying, and may have adverse effects on Moog's Industrial
Controls business. See "Business -- Legal Proceedings."
Dependence on Defense Industry and Risks of Government
Contracting
For the fiscal year ended September 30, 1995, approximately
49% of the Company's sales were derived from government
contracts. For the foreseeable future, the Company expects that
the percentage of its revenues attributable to such contracts
will continue to be substantial. U.S. government expenditures for
defense products may or may not decline after fiscal 1995. Any
such reductions may or may not have an effect on the Company's
programs; however, in the event expenditures for products of the
type manufactured by the Company are reduced and not offset by
greater foreign sales or other new programs or products, there
will be a reduction in the volume of contracts or subcontracts
awarded to the Company. Unless offset, such reductions could
adversely affect the Company's earnings.
In addition to its dependence on government contracts, the
Company, like all government contractors, is subject to risks
associated with such contracting, which include the potential for
substantial civil and criminal fines and penalties for, among
other matters, failure to follow procurement integrity and
<PAGE>
bidding rules, employing improper billing practices or otherwise
failing to follow cost accounting standards, receiving or paying
kickbacks or filing false claims. As a result of its government
contracting business, the Company has been, and is expected to
be, subjected to audits and investigations by government
agencies. In addition to potential damage to the Company's
business reputation, the failure to comply with the terms of one
or more of its government contracts could also result in the
Company's progress payments being withheld or in the Company's
suspension or debarment from future government contracts for a
significant period of time. The fines and penalties which could
result from noncompliance with appropriate standards and
regulations, or the Company's suspension or debarment, could have
a material adverse effect on the Company's business. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."
Exposure to Foreign Currency Fluctuations; International
Operations
The Company has significant manufacturing and sales
operations in foreign countries. The production costs, profit
margins and competitive position of the Company can be affected
by the strength of the currencies in countries where it
manufactures or purchases goods relative to the strength of the
currencies in countries where its products are sold. The
Company's results of operations and financial position may be
adversely affected by fluctuations in foreign currencies and by
translations of the financial statements of the Company's foreign
subsidiaries from local currencies into U.S. dollars. Further,
international operations are generally subject to various risks
that are not present in domestic operations, including
restrictions on dividends and the tax impact of the repatriation
of funds. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Cyclical Industries; Dependence on Key Customers
The Company's customers manufacture aircraft, missiles,
space products and heavy industrial equipment. These industries
are sensitive to fluctuations in government procurement
requirements and general business cycles, and the Company's
supply agreements with the various OEMs only require their
purchase of products from the Company on an as-ordered basis.
Sales to prime contractors supplying U.S. and foreign governments
are dependent on the funding of programs in which the Company
participates. With the end of the Cold War, the Company
experienced declines in sales in a variety of these programs. In
Commercial Aircraft, the Company is dependent on the production
cycle of the major commercial aircraft OEMs. The commercial
aircraft industry experienced a downturn in the early 1990's,
affecting the Company's profitability. Currently, the commercial
aircraft industry is beginning to enjoy improved business
conditions. Demand for the Company's industrial products is
dependent upon spending for capital goods. The Company's
Industrial Controls product lines experienced a downturn as a
result of the capital goods recession in Europe during the early
<PAGE>
1990's. This portion of the Company's operations is currently
enjoying improved performance as a result of the recent
strengthening of the capital goods market in Europe. There can be
no assurance, however, that government funding for the programs
on which the Company participates will not be reduced or
eliminated, or that commercial aircraft OEMs or manufacturers of
industrial equipment will maintain or increase their expenditures
on the Company's products.
In aggregate, the Company markets its products to a wide
variety of customers. Boeing (including Bell-Boeing, a joint
venture between Textron, Inc. and Boeing Helicopters, a division
of Boeing ("Boeing Helicopters")) and the U.S. government
(including U.S. government prime contractors) are Moog's largest
customers and represented approximately 12.4% and 36.4%,
respectively, of fiscal 1995 sales. The loss of Boeing or the
U.S. government (including U.S. government prime contractors) as
customers would have a material adverse effect upon the Company.
Catastrophic Loss; Philippine Facility
The Company has facilities in southern California and the
Philippines, geographic areas which are particularly susceptible
to earthquakes. In addition, the Company's Philippines facility
is subject to various risks associated with operations in that
country, including risks of property damage or personal injuries
from civil or political unrest, and risks of the expropriation of
private property. Although the Company carries property insurance
consistent with industry standards, it generally does not carry
political risk insurance. In addition, due to prohibitive cost,
the Company carries limited earthquake insurance for its southern
California facility. Thus, there can be no assurance that any
losses suffered as a result of these risks will be covered, or if
covered by such insurance, that such insurance will be sufficient
to fully recompense the Company.
Product Liability
The products manufactured by the Company are used in
applications where their failure could result in significant
property loss, serious personal injury and death. The Company
carries aircraft and non-aircraft product liability insurance
consistent with industry norms, and in the last ten years the
Company has had no product liability claims which were not
covered by insurance. However, there can be no assurance that
such insurance will be sufficient to fully cover the payment of
any potential claim.
Lack of Public Market for the Notes
The Notes are a new issue of securities for which there is
currently no trading market. If the Notes are traded after their
initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the
market for similar securities and other factors, including
general economic conditions and the financial condition and
performance of, and prospects for, the Company. The Placement
<PAGE>
Agent has advised the Company that it currently intends to make a
market in the Notes. However, the Placement Agent is not
obligated to do so, and any market-making activity with respect
to the Notes may be discontinued at any time without notice.
Although the Company is obligated to consummate the Exchange
Offer or to register resales of the Old Notes by November 10,
1996, there can be no assurance that an active trading market for
the Notes will develop or be sustained. The Company does not
presently intend to apply for listing of the New Notes on any
stock exchange or trading market other than the Private
Offerings, Resale and Trading through Automatic Linkages (PORTAL)
market, for which the Notes are eligible.
Consequences of Failure to Exchange
Untendered Old Notes that are not exchanged for New Notes
pursuant to the Exchange Offer will remain restricted securities.
Old Notes will continue to be subject to the following
restrictions on transfer: (i) Old Notes may be resold only if
registered pursuant to the Securities Act or if an exemption from
registration is available thereunder, (ii) Old Notes shall bear a
legend restricting transfer in the absence of registration or an
exemption therefrom and (iii) a holder of Old Notes who desires
to sell or otherwise dispose of all or any part of its Old Notes
under an exemption from registration under the Securities Act, if
requested by the Company, must deliver to the Company an opinion
of independent counsel experienced in Securities Act matters,
reasonably satisfactory in form and substance to the Company,
that such exemption is available.
THE RECAPITALIZATION
The Company implemented the Recapitalization to improve its
operating and financial flexibility. The principal elements of
the Recapitalization were the Bank Credit Facility Amendments,
the Offering, the Debenture Redemption, the Note Prepayment and
the Stock Repurchase, all as described below.
Sources and Uses of Funds
The following table sets forth the sources and uses of funds
in connection with the Recapitalization.
Amount Amount
(in millions) (in millions)
Sources of Funds: Uses of Funds:
Bank Credit Facility $18.0 Debenture Redemption(1) $17.9
Proceeds of Offering 120.0 Note Prepayment(1) 16.4
Stock Repurchase 12.9
Repayment of Bank Credit
Facility 86.5
Transaction fees
and estimated expenses(2) 4.3
______ ______
Total $138.0 Total $138.0
====== ======
<PAGE>
___________________
(1) Does not include accrued interest.
(2) Includes (i) discounts, commissions and expenses of
approximately $3.8 million in connection with the Offering,
and (ii) prepayment and amendment fees of approximately
$.5 million.
The Bank Credit Facility Amendments
On March 22, 1996 and May 13, 1996, the Company and the
lenders (the "Banks") under the Bank Credit Facility entered into
the Bank Credit Facility Amendments pursuant to which the Banks
consented to the Recapitalization, and the parties agreed to
amend certain financial covenants in the Credit Agreement. See
"Description of Bank Credit Facility." As part of the
Recapitalization, the Company (i) used $17.9 million in funds
available under the Bank Credit Facility to consummate the
Debenture Redemption on April 26, 1996, and (ii) used the
remaining net proceeds of the Offering (after the Note
Prepayment, Stock Repurchase and payment of transaction fees and
expenses) to repay a substantial portion of the Company's
outstanding revolving borrowings under the Bank Credit Facility.
As of March 31, 1996, the Company's revolving borrowings
under the Bank Credit Facility totalled $102.0 million. Amounts
outstanding accrued interest at a weighted average rate of 7.75%
per annum as of March 31, 1996 (including approximately 35 basis
points for interest rate swap costs).
The Debenture Redemption
On April 26, 1996, the Company redeemed all of its
outstanding 9-7/8% Convertible Debentures, at a redemption price
equal to 100% of the principal amount thereof ($18.0 million at
April 15, 1996) plus accrued interest to the redemption date. The
Company used funds available under the Bank Credit Facility to
consummate the Debenture Redemption. The 9-7/8% Convertible
Debentures were convertible into shares of Class A Common Stock
at any time on or prior to April 26, 1996 at a price per share
equal to $22.88. Prior to consummation of the Debenture
Redemption, approximately $.1 million principal amount of 9-7/8%
Convertible Debentures were converted into 6,204 shares of
Class A Common Stock.
The Offering
The proceeds to the Company (net of discounts, commissions
and estimated expenses) from the sale of the Old Notes were
$116.3 million. The net proceeds of the Offering were used to
retire or refinance certain indebtedness of the Company,
including making the Note Prepayment, and to consummate the Stock
Repurchase.
<PAGE>
The Note Prepayment
The Company completed the Note Prepayment concurrently with
the closing of the Offering, paying principal of $16.4 million
and a prepayment fee of $.4 million, plus accrued interest.
The Stock Repurchase
In connection with the consummation of the Offering, the
Company purchased 714,600 shares of Class A Common Stock held
from Seneca for $18 per share, or an aggregate purchase price of
$12.9 million. Arthur S. Wolcott, the Chairman, director and
major shareholder of Seneca, is a director of Moog, and Robert T.
Brady, Chairman of the Board, President and Chief Executive
Officer of the Company, is a director of Seneca. See "Management"
and "Security Ownership of Certain Beneficial Owners and
Management."
THE EXCHANGE OFFER
General
In connection with the sale of the Old Notes, the purchasers
thereof became entitled to the benefits of certain registration
rights. Pursuant to the Registration Rights Agreement, the
Company agreed to use its best efforts to cause the Registration
Statement of which this Prospectus is a part to become effective
with respect to the Exchange Offer for the New Notes and to
consummate the Exchange Offer by November 10, 1996.
In the event that the Company determines that the Exchange
Offer may not be consummated, if the Exchange Offer is not
consummated by November 10, 1996, or if counsel to the Placement
Agent under certain circumstances opines that the Placement Agent
cannot resell the Notes without so registering, the Company will
use its best efforts to file the Shelf Registration Statement and
keep it effective until May 14, 1999 or such shorter period as
may be necessary to allow for the resale of all Old Notes.
In the event that the Exchange Offer is not consummated or a
Shelf Registration Statement with respect to resales of the Old
Notes is not declared effective by November 10, 1996, the
interest rate borne by the Old Notes shall be permanently
increased to 10-1/2%.
The New Notes have terms identical in all material respects
to the terms of the Old Notes except that the New Notes have been
registered under the Securities Act and following the completion
of the Exchange Offer, the Notes generally will not be entitled
to a contingent increase in the interest rate otherwise provided
under certain circumstances.
In the event the Exchange Offer is consummated, the Company
will not be required to file a Shelf Registration Statement
relating to the registration of any outstanding Old Notes other
than those held by persons not eligible to participate in the
Exchange Offer, and the interest rate on such Old Notes will
<PAGE>
remain at its initial level of 10%. The Exchange Offer shall be
deemed to have been consummated upon the earlier to occur of
(i) the Company having exchanged New Notes for all outstanding
Old Notes (other than Old Notes held by persons not eligible to
participate in the Exchange Offer) pursuant to the Exchange Offer
and (ii) the Company having exchanged, pursuant to the Exchange
Offer, New Notes for all Old Notes that have been tendered and
not withdrawn on the Expiration Date. Upon consummation, holders
of Old Notes seeking liquidity in their investment (except under
certain circumstances, Participating Broker Dealers, as defined
in the Registration Rights Agreement, and the Placement Agent)
would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act. See
"Risk Factors--Consequences of Failure to Exchange."
Upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal,
the Company will accept all Old Notes properly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders
may tender some or all of their Old Notes pursuant to the
Exchange Offer in denominations of $1,000 and integral multiples
thereof.
Based on no-action letters issued by the staff of the
Commission to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred
by any holder thereof (other than (i) a broker-dealer who
purchased such Old Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery
requirements of the Securities Act provided that the holder is
acquiring the New Notes in its ordinary course of business and is
not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes.
Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met.
Each broker-dealer that receives New Notes in exchange for
Old Notes held for its own account, as a result of market-making
or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealer
in connection with resales of New Notes received in exchange for
Old Notes. The Company has agreed that, for a period of 90 days
after the Expiration Date, it will make this Prospectus and any
amendment or supplement to this Prospectus available to any such
<PAGE>
broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
As of the date of this Prospectus, $120 million aggregate
principal amount of the Old Notes is outstanding. In connection
with the issuance of the Old Notes, the Company arranged for the
Old Notes initially purchased by Qualified Institutional Buyers
to be issued and transferable in book entry form through the
facilities of DTC, acting as depositary. The New Notes are also
issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of
Transmittal, is being sent to all registered holders as of
___________, 1996 (the "Record Date").
The Company shall be deemed to have accepted validly
tendered Old Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent. See "--Exchange
Agent." The Exchange Agent will act as agent for the tendering
holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange
because of an invalid tender or the occurrence of certain other
events set forth herein, certificates for any such unaccepted Old
Notes will be returned, without expenses, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject
to the instructions in the Letter of Transmittal, transfer taxes
with respect to the exchange of Old Notes pursuant to the
Exchange Offer. The Company will pay all reasonable charges and
expenses, other than certain applicable taxes and any counsel
fees incurred by the Placement Agent, in connection with the
Exchange Offer. See "--Fees and Expenses."
Expiration Dates; Extensions; Amendments
The term "Expiration Date" shall mean _____________, 1996
unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the
latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will
notify the Exchange Agent of any extension by oral or written
notice and will mail to the record holders of Old Notes an
announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--
Termination" shall have occurred and shall not have been waived
<PAGE>
by the Company (if permitted to be waived by the Company), by
giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous
to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof. If the
Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly
disclose such amendment in a manner reasonably calculated to
inform the holders of the Old Notes of such amendment.
Without limiting the manner to which the Company may choose
to make public announcements of any delay in acceptance,
extension, termination or amendment of the Exchange Offer, the
Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones New Service.
Interest on the New Notes
The New Notes will bear interest from May 10, 1996, payable
semiannually on May 1 and November 1 of each year commencing on
November 1, 1996, at the rate of 10% per annum. Holders of Old
Notes accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old
Notes accrued from May 10, 1996 until the date of the issuance of
the New Notes. Consequently holders who exchange their Old Notes
for New Notes will receive the same interest payment on
November 1, 1996 (the first interest payment date with respect to
the Old Notes and the New Notes) that they would have received
had they not accepted the Exchange Offer.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter
of Transmittal, and mail or otherwise deliver such Letter of
Transmittal or such facsimile, together with the Old Notes
(unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date.
Any financial institution that is a participant in DTC's
Book-Entry Transfer Facility system may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC's procedure
for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or
confirmed by the Exchange Agent at its addresses set forth herein
under "--Exchange Agent" prior to 5:00 p.m., New York City time,
<PAGE>
on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an
agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent
at its address set forth herein. Holders may also request that
their respective brokers, dealers, commercial banks, trust
companies or nominees effect such tender for such holders.
The method of delivery of Old Notes and the Letters of
Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holders. Instead of
delivery by mail, it is recommended that holders use an overnight
or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery. NO LETTER OF TRANSMITTAL
OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Only a holder of Old Notes may tender such Old Notes in the
Exchange Offer. The term "holder" with respect to the Exchange
Offer means any person in whose name Old Notes are registered on
the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any
person whose Old Notes are held of record by DTC who desires to
deliver such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the
name of his broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact such
registered holder promptly and instruct such registered holder to
tender on his behalf. If such beneficial holder wishes to tender
on his own behalf, such beneficial holder must, prior to
completing and executing the Letter of Transmittal and delivering
his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a
properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by a member
firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial
bank or trust company having an office of correspondent in the
United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution") unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other
than the registered holder of any Old Notes listed therein, such
<PAGE>
Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on
behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the Old
Notes.
If the Letter of Transmittal or any Old Notes or bond powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Company, evidence
satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of the
tendered Old Notes will be determined by the Company in its sole
discretion, which determination will be final and binding. The
Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the absolute
right to waive any irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to
tenders of Old Notes nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned
without cost by the Exchange Agent to the tendering holder of
such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration
Date.
In addition, the Company reserves the right in its sole
discretion to (a) purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date, or, as set
forth under "Termination," to terminate the Exchange Offer and
(b) to the extent permitted by applicable law, purchase Old Notes
in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
By tendering, each holder of Old Notes will represent to the
Company that, among other things, the New Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course
of business of the person receiving such New Notes, whether or
not such person is the holder, that neither the Holder nor any
other person has an arrangement or understanding with any person
<PAGE>
to participate in the distribution of the New Notes and that
neither the holder nor any such other person has an arrangement
or understanding with any person to participate in the
distribution of the New Notes and that neither the holder nor any
such other person is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available, or (ii) who cannot deliver
their Old Notes, the Letter of Transmittal, or any other required
documents to the Exchange Agent prior to the Expiration Date, or
if such Holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if;
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and
address of the holder of the Old Notes, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together
with the certificate(s) representing the Old Notes to be tendered
in proper form for transfer and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of
Transmittal (or facsimile thereof), together with the
certificate(s) representing all tendered Old Notes in proper form
for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the business day prior to the Expiration Date, unless
previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein
prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange
thereof by the Company. Any such notice of withdrawal must
(i) specify the name of the person having deposited the Old Notes
to be withdrawn (the "Depositor"), (ii) identify the Old Notes to
be withdrawn (including the certificate number or numbers and
<PAGE>
principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied
by documents of transfer sufficient to permit the Trustee with
respect to the Old Notes to register the transfer of such Old
notes into the name of the Depositor withdrawing the tender and
(iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including
time of receipt) for such withdrawal notices will be determined
by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Old
Notes so withdrawn are validly rendered. Any Old Notes which
have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes
may be rendered by following one of the procedures described
above under"--Procedures for Tendering" at any time prior to the
Expiration Date.
Termination
Notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange, or exchange
New Notes for, any Old Notes not therefore accepted for exchange,
and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Old Notes if it determines that its
ability to proceed with the Exchange Offer could be impaired due,
for example, to any pending or threatened legal or governmental
action, any new law, statute, rule or regulation or any
interpretation of the staff of the Commission. There can be no
assurance that any such condition will not occur.
If the Company determines that it may terminate the Exchange
Offer, as set forth above, the Company may (i) refuse to accept
any Old Notes and return any Old Notes that have been tendered to
the holders thereof, (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the Expiration of the Exchange
Offer, subject to the rights of such holders of tendered Old
Notes to withdraw their tendered Old Notes, or (iii) waive such
termination event with respect to the Exchange Offer and accept
all properly tendered Old Notes that have not been withdrawn. If
such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to
this Prospectus that will be distributed to each registered
holder of Old Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon
the significance of the waiver and the manner of disclosure to
the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
<PAGE>
Exchange Agent
Fleet National Bank, the Trustee under the Indenture, has
been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requires for additional
copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Mail or Hand Delivery:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Department
Facsimile Transmission: (860) 986-7908
Confirm by Telephone: (860) 986-1271
Fees and expenses
The expenses of soliciting tenders pursuant to the Exchange
Offer will be borne by the Company. The principal solicitation
for tenders pursuant to the Exchange Offer is being made by mail.
Additional solicitations may be made by officers and regular
employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers
or other persons soliciting acceptances of the Exchange Offer.
The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse the Exchange
Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage house and other
custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the
beneficial owners of the Old Notes and in handling or forwarding
tenders for exchange.
The expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and
Trustee and accounting and legal fees, will be paid by the
Company.
The Company will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of,
any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of
any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the
tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated
short-term debt and capitalization of the Company as of March 31,
1996 and as adjusted to reflect the Recapitalization as if it had
occurred on such date. The following table should be read in
conjunction with the Consolidated Financial Statements of the
Company and notes thereto included elsewhere herein.
March 31, 1996
As
Actual Adjusted(1)
(in thousands)
Short-term debt:
Notes payable $4,919 $4,919
Current installments of long-term debt
and convertible subordinated debentures 11,211 7,011
_______ _______
Total short-term debt $16,130 $11,930
======= =======
Long-term debt, excluding current
installments:
Bank Credit Facility:
Revolving credit facility $102,000 $34,096
Term loan facility 27,000 27,000
10-1/4% Note 14,300 --
International and other U.S. term
loan agreements 14,023 14,023
Obligations under capital leases 4,260 4,260
9-7/8% Convertible Subordinated
Debentures 16,600 --
Senior Subordinated Notes Due 2006 -- 120,000
_______ _______
Total long-term debt 178,183 199,379
_______ _______
Shareholders' equity:
9% Series B Cumulative, Convertible,
Exchangeable Preferred Stock,
$1.00 par value; 200,000 shares
authorized; 100,000 shares issued
and outstanding(2) 100 100
Class A Common Stock, $1.00 par value;
30,000,000 shares authorized;
6,599,306 shares issued(3) 6,599 6,599
Class B Common Stock, $1.00 par value;
10,000,000 shares authorized;
2,534,817 shares issued(4) 2,535 2,535
Additional paid-in capital 47,704 47,704
Retained earnings 67,933 67,407
Treasury shares -- at cost (17,825) (30,546)
Equity adjustments 4,546 4,546
Loan to Savings and Stock Ownership Plan (617) (617)
_______ _______
Total shareholders' equity 110,975 97,728
_______ _______
Total capitalization $289,158 $297,107
======= =======
<PAGE>
_________________
(1) See Note 10 to "Summary -- Summary Historical and Pro Forma
Consolidated Financial Information" regarding adjustments.
(2) The Company is authorized to issue up to 9,800,000
additional shares of preferred stock.
(3) Does not include (i) 311,200 shares of Class A Common Stock
reserved for issuance upon exercise of outstanding stock
options at exercise prices ranging from $5.625 to $10.50 per
share and 130,412 shares of Class B Common Stock reserved
for issuance upon exercise of outstanding stock options at
exercise prices ranging from $11.00 to $17.25 per share,
(ii) 8,585 shares of Class A Common Stock reserved for
issuance upon conversion of outstanding shares of Series B
Preferred Stock, and (iii) 2,534,817 shares of Class A
Common Stock reserved for issuance upon conversion of
outstanding shares of Class B Common Stock.
(4) Shares of Class B Common Stock are convertible into shares
of Class A Common Stock on a one-for-one basis.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated
financial and operating data of the Company for the periods
indicated. The selected consolidated financial data as of and for
each of the five years ended September 30, 1995, except data
presented under the caption "Key Operating Data," has been
derived from the Company's audited consolidated financial
statements. The selected consolidated financial data for each of
the six month periods ended March 31, 1995 and 1996 (except for
data presented under the caption "Key Operating Data") and the
Balance Sheet Data as of March 31, 1996, have been derived from
unaudited consolidated condensed financial statements of the
Company which, in the opinion of management, include all
adjustments (consisting only of normal recurring items) necessary
for a fair and consistent presentation of such data. The results
for the six months ended March 31, 1996 are not necessarily
indicative of results to be expected for the full fiscal year.
The selected consolidated financial data as of September 30, 1994
and 1995, and for each of the years ended September 30, 1993,
1994 and 1995, should be read in conjunction with the
consolidated financial statements of the Company and notes
thereto, which refer to accounting changes made in fiscal 1994,
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this
prospectus.
<PAGE>
<TABLE>
<CAPTION> Six Months
Years Ended September 30, Ended March 31,
1991 1992 1993 1994 1995 1995 1996
(unaudited)
(in thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income:
Net sales(1) $321,283 $307,004 $293,680 $307,370 $374,284 $178,289 $200,055
Other income 5,385 3,532 2,663 2,489 2,166 920 1,356
________ ________ ________ ________ ________ ________ ________
Total revenues 326,668 310,536 296,343 309,859 376,450 179,209 201,411
________ ________ ________ ________ ________ ________ ________
Costs and expenses:
Cost of sales 230,692 216,373 206,985 213,530 265,033 125,106 139,205
Research and development
expenses 16,946 17,927 16,128 18,668 15,783 8,292 8,685
Selling, general and
administrative expenses 49,882 53,619 52,723 58,324 68,457 33,057 37,443
Interest expense 15,213 13,346 10,974 11,402 17,492 8,699 8,301
Foreign currency exchange loss
(gain) 284 834 60 (451) 143 (67) (152)
Other expenses 1,442 887 853 665 752 176 272
Inventory obsolescence
charge(2) -- -- -- 2,574 -- -- --
Restructuring charges(2) -- 13,834 -- 2,107 -- -- --
________ ________ ________ ________ ________ ________ ________
314,459 316,820 287,723 306,819 367,660 175,263 193,754
________ ________ ________ ________ ________ ________ ________
Earnings (loss) before income
taxes, extraordinary item and
cumulative effect of change in
accounting principle 12,209 (6,284) 8,620 3,040 8,790 3,946 7,657
Income taxes 4,578 489 3,502 1,422 1,029 799 2,263
________ ________ ________ ________ ________ ________ ________
Earnings (loss) before
extraordinary item and cumulative
effect of change in accounting
principle 7,631 (6,773) 5,118 1,618 7,761 3,147 5,394
<PAGE>
Extraordinary item, loss from early
extinguishment of debt, net of
income taxes(3) -- -- (357) -- -- -- --
Cumulative effect of change in
accounting principle(4) -- -- -- 505 -- -- --
________ ________ ________ ________ ________ ________ ________
Net earnings (loss) $7,631 $(6,773) $4,761 $2,123 $7,761 $3,147 $5,394
======== ======== ======== ======== ======== ======== ========
Per Share Data(3):
Earnings (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle $.97 $(.88) $.66 $.21 $1.00 $.41 $.70
Extraordinary item, loss from early
extinguishment of debt, net of
income taxes(4) -- -- (.04) -- -- -- --
Cumulative effect of change in
accounting principle(5) -- -- -- .06 -- -- --
________ ________ ________ ________ ________ ________ ________
Net earnings (loss) $.97 $(.88) $.62 $.27 $1.00 $.41 $.70
======== ======== ======== ======== ======== ======== ========
Key Operating Data:
EBITDA(6) $45,338 $38,663 $35,215 $34,823 $45,957 $22,479 $25,871
EBITDA as a percentage of net
sales 14.1% 12.6% 12.0% 11.3% 12.3% 12.6% 12.9%
Ratio of total debt to
EBITDA(7) 3.2x 3.7x 3.9x 5.9x 4.1x -- --
Ratio of EBITDA to total
interest expense 3.0x 2.9x 3.2x 3.1x 2.6x 2.6x 3.1x
Capital expenditures $18,467 $15,295 $10,216 $8,893 $10,232 $3,725 $5,372
Depreciation & amortization 17,916 17,767 15,621 15,700 19,675 9,834 9,913
Backlog(8) 231,000 212,100 181,081 217,261 237,941 216,966 247,260
Ratio of earnings to fixed
charges(9) 1.7x .6x 1.6x 1.2x 1.4x 1.4x 1.8x
<PAGE>
As of September 30, As of
March
1991 1992 1993 1994 1995 31,
----- ----- ----- ----- ----- 1996
(unaudited)
(in thousands)
Balance Sheet Data:
Working capital $107,363 $114,694 $123,533 $150,850 $166,985 $173,262
Property, plant and
equipment, net 109,717 109,640 95,855 146,472 139,131 135,335
Total assets 334,938 335,986 318,130 424,456 424,957 438,403
Total debt 145,575 143,985 137,597 204,176 189,761 194,313
Total shareholders' equity 100,438 97,374 92,561 102,184 108,636 110,975
</TABLE>
<PAGE>
___________________
(1) Net sales in fiscal 1994 and 1995 include $22,400 and
$95,000, respectively, related to the Acquisition.
(2) Restructuring charges in fiscal 1992 and 1994 and the
inventory obsolescence charge in fiscal 1994 relate to costs
associated with workforce reductions and facility consolidations
resulting from U.S. defense spending reductions and weak European
capital goods markets.
(3) No cash dividends have been declared on the Company's common
shares for the periods presented.
(4) The extraordinary item in fiscal 1993 represents the cost,
net of income taxes, of extinguishing 12-7/8% notes in the amount
of $10,200.
(5) The cumulative effect of change in accounting principle in
fiscal 1994 relates to the adoption of SFAS No. 109 "Accounting
For Income Taxes." In fiscal 1994 the Company also adopted SFAS
No. 106 "Employers' Accounting For Postretirement Benefits Other
Than Pensions," with the cumulative effect of such adoption being
amortized over 20 years.
(6) EBITDA represents earnings before deducting interest
expense, extraordinary items, the impact of the cumulative change
in accounting principle, income tax expense, restructuring and
inventory obsolescence charges in fiscal 1992 and 1994, and
depreciation and amortization expense. EBITDA is presented herein
to facilitate a supplemental analysis of Moog's financial
condition and is not intended to represent results of operations
or cash flows in accordance with GAAP.
(7) Ratio of total debt to EBITDA is not presented for the six
month periods as it is not meaningful.
(8) Backlog consists of that portion of open orders for which
sales are expected to be recognized over the next twelve months.
(9) For purposes of computing the ratio of earnings to fixed
charges, earnings consist of earnings before extraordinary item
and cumulative effect of change in accounting principle, income
taxes and fixed charges. Fixed charges consist of interest
expense, capitalized interest, implicit interest expense
associated with operating leases, and amortization expense.
Earnings were insufficient to cover fixed charges by $6,284 in
fiscal 1992. Absent the restructuring and inventory obsolescence
charges, the ratio of earnings to fixed charges in fiscal 1992
and 1994 would have been 1.5 and 1.6, respectively.
<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
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 years, the Ultra product line has benefited from
numerous refinements to the original Moog designs, and has
<PAGE>
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
control 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 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
efforts. 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.
Results of Operations
The following table sets forth, for the periods indicated,
the percentage relationship to net sales of certain items
included in the Company's statements of income:
<TABLE>
<CAPTION> Six Months
Ended
Year Ended September 30, March 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Other income .9 .8 .6 .5 .7
Cost of sales 70.5 69.5 70.8 70.2 69.6
Research and
development expenses 5.5 6.1 4.2 4.6 4.4
Selling, general and
administrative
expenses 18.0 19.0 18.3 18.5 18.7
Interest expense 3.7 3.7 4.7 4.9 4.1
Foreign currency exchange
loss (gain) -- (.2) -- -- --
Other expenses .3 .2 .2 .1 .1
Inventory obsolescence
charge -- .8 -- -- --
Restructuring charge -- .7 -- -- --
_____ _____ _____ _____ _____
Earnings before income
taxes, extraordinary
item and cumulative
effect of change in
accounting principle 2.9 1.0 2.4 2.2 3.8
Income taxes 1.2 .5 .3 .4 1.1
Extraordinary item .1 -- -- -- --
Cumulative effect of
change in accounting
principle -- (.2) -- -- --
_____ _____ _____ _____ _____
Net earnings 1.6% .7% 2.1% 1.8% 2.7%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
The Company's five primary product lines, Commercial
Aircraft, Military Aircraft, Space and Missiles, Industrial
Electrics and Industrial Hydraulics, are organized into two
industry segments, Domestic Controls and International Controls.
Domestic Controls
Six Months
Ended
Year Ended September 30, March 31,
1993 1994 1995 1995 1996
(in thousands)
Net sales $189,365 $213,250 $253,926 $123,184 $135,161
Intersegment sales 10,140 7,804 10,446 5,148 6,998
_______ _______ _______ _______ _______
Total sales 199,505 221,054 264,372 128,332 142,159
======= ======= ======= ======= =======
Operating profit 21,726 20,373 25,242 12,152 15,608
Net earnings 7,604 4,394 4,030 1,865 3,232
Backlog 149,035 181,405 195,908 169,207 202,049
International Controls
Six Months
Ended
Year Ended September 30, March 31,
1993 1994 1995 1995 1996
(in thousands)
Net sales $104,315 $94,120 $120,358 $55,105 $64,894
Intersegment sales 4,231 5,634 4,728 2,302 8,664
_______ ______ _______ ______ ______
Total sales 108,546 99,754 125,086 57,407 73,558
======= ====== ======= ====== ======
Operating profit 5,097 1,135 8,464 3,779 5,775
Net earnings (loss)(2,842) (2,366) 3,918 1,426 2,713
Backlog 32,046 35,856 42,033 47,759 45,211
Consolidated
Six Months
Ended
Year Ended September 30, March 31,
1993 1994 1995 1995 1996
(in thousands)
Net sales $293,680 $307,370 $374,284 $178,289 $200,055
Operating profit 26,823 21,508 33,706 15,931 21,383
Net earnings 4,761 2,123 7,761 3,147 5,394
Backlog 181,081 217,261 237,941 216,966 247,260
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 $.41 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 Acquisition and unit
<PAGE>
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%. 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.
Worldwide commercial sales were $192.5 million in fiscal
1995, or 51% of net sales, with government sales totaling $181.8
million or 49% of net sales. In fiscal 1994, commercial sales
were $133.1 million, or 43% of net sales.
Other income was $2.2 million in 1995 compared to $2.5
million in 1994. The decline was principally due to lower
interest income.
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. In the Domestic Controls segment, cost
of sales was $203.7 million, or 77.0% of segment sales in fiscal
1995 compared with $161.9 million, or 73.3% of segment sales in
fiscal 1994, while the International Controls segment's cost of
sales was $77.9 million, or 62.2% of segment sales, in fiscal
1995 compared with $65.4 million, or 65.6% of segment sales, in
fiscal 1994. The Domestic Controls segment increase was
principally due to transition costs associated with the
Acquisition and a change in product mix which reflected a greater
percentage of lower margin production and development contracts
sales in fiscal 1995 compared to fiscal 1994. The International
Controls segment cost of sales percentage declined as a result of
increased sales volumes and related improvements in facility
utilization, along with the cost reduction efforts made over the
previous three years. The International Controls segment
improvement was more than offset, however, by increasing cost of
sales percentages for the Domestic Controls segment.
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. Customer-funded
design and development costs, as estimated by the Company, were
$21.6 million in fiscal 1995 compared with $25.3 million in
fiscal 1994. The Company estimates that total Company-funded
research and development and customer-funded design and
development expenses were $37.4 million in fiscal 1995 compared
to $44.0 million in fiscal 1994.
<PAGE>
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
related to the 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 Acquisition and increased
sales in the International Controls segment.
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. Fiscal 1994 operating profit included pre-tax Domestic
Controls inventory obsolescence and restructuring charges of $3.4
million, as discussed above. Excluding these charges, Domestic
Controls segment 1994 operating profit would have been $23.8
million, or 10.7% of segment sales. The increase in operating
profit was due to the Acquisition along with the aforementioned
cost reduction measures. These benefits were in part offset by
declining revenue on the B-2 program and certain missile
programs, as well as one-time transition service costs resulting
from the Acquisition. 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. International Controls segment operating
profit for fiscal 1994 included $1.2 million of restructuring
charges and inventory obsolescence charges of $.1 million.
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 the aforementioned 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 Acquisition.
Foreign currency exchange was a loss 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 loan
denominated in Deutsch Marks between Moog and its German
subsidiary during which time the Deutsch Mark appreciated.
Income tax expense at an effective rate of 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.
<PAGE>
As a result of the factors discussed above, net earnings in
fiscal 1995 were $7.8 million on net sales of $374.3 million,
compared with net earnings in fiscal 1994 of $2.1 million on net
sales of $307.4 million.
Results of Operations -- Fiscal 1994 Compared to Fiscal 1993
Net sales increased 4.7% to $307.4 million in fiscal 1994
compared with $293.7 million in fiscal 1993. Net sales for the
Domestic Controls segment in fiscal 1994 increased 12.6% to
$213.3 million compared with $189.4 million in fiscal 1993, due
primarily to the Acquisition which contributed net sales of $22.4
million. Within the Domestic Controls segment, sales of missiles
controls continued to decline as a result of the effects of
reduced U.S. defense spending, accompanied by sales declines in
engine controls. These decreases were offset in fiscal 1994 by
increased sales on the B-2 program and stronger sales in the
Commercial Aircraft product line.
Net sales for the International Controls segment in fiscal
1994 declined 9.8% to $94.1 million compared with $104.3 million
in fiscal 1993. The decline was principally attributable to lower
sales in the European aerospace market, in conjunction with lower
industrial sales in England and France due to the then weak
European capital goods markets, partially offset by minor price
increases, principally within Europe.
Other income was $2.5 million in fiscal 1994 compared with
$2.7 million in fiscal 1993.
Cost of sales was $213.5 million, or 69.5% of net sales, in
fiscal 1994 compared with $207.0 million, or 70.5% of net sales,
in fiscal 1993. Cost of sales as a percent of segment sales for
the Domestic Controls segment was 73.3%, or $161.9 million, in
fiscal 1994 compared with 72.9%, or $145.4 million, in fiscal
1993. The increase in Domestic Controls cost of sales as a
percent of sales resulted primarily from reduced sales of higher
margin missile products, which included favorable cost experience
in fiscal 1993 on various long-term development contracts. Cost
of sales as a percent of sales for the International Controls
segment improved to 65.6% of segment sales, or $65.4 million, in
fiscal 1994 compared with 67.0%, or $72.8 million, in fiscal
1993, primarily due to cost reduction actions initiated in fiscal
1992 and continued through fiscal 1994.
Research and development expenses were $18.7 million, or
6.1% of net sales, in fiscal 1994 compared with $16.1 million, or
5.5% of net sales, in fiscal 1993. The fiscal 1994 increase was
the result of a shift toward Company-funded research and
development projects from customer-funded design and development
projects, primarily efforts on entertainment simulators,
brushless motors, radio controls, development of engine TVC
systems, and helicopter vibration controls. The Company estimates
that customer-funded design and development costs were $25.3
million in fiscal 1994 compared with $31.0 million in fiscal 1993
and total Company-funded research and development and customer-
funded design and development expenses were $44.0 million in
fiscal 1994 compared with $47.1 million in fiscal 1993.
<PAGE>
Selling, general and administrative expenses were $58.3
million, or 19.0% of net sales, in fiscal 1994 compared with
$52.7 million, or 18.0% of net sales, in fiscal 1993. The
increased costs in fiscal 1994 in absolute terms was primarily
due to the Acquisition. As a percentage of net sales, the
increase in fiscal 1994 related primarily to increased staffing
costs in Japan, Hong Kong and Singapore in order to pursue sales
opportunities in the Pacific Rim.
Operating profit for the Domestic Controls segment in fiscal
1994 was $20.4 million, or 9.2% of segment sales, compared with
$21.7 million, or 10.8% of segment sales, in fiscal 1993.
Excluding pretax Domestic inventory obsolescence and
restructuring charges of $3.4 million in fiscal 1994, Domestic
Controls segment operating profit would have been $23.8 million,
or 10.7% of segment sales, in fiscal 1994. The increase in
Domestic Controls segment operating profit excluding the
obsolescence and restructuring charges resulted primarily from
the Acquisition, partly offset by decreased missile sales.
Operating profit for the International Controls segment in fiscal
1994 was $1.1 million, or 1.1% of segment sales, compared with
$5.1 million, or 4.7% of segment sales, in fiscal 1993. Included
in fiscal 1994 operating profit for the International Controls
segment were restructuring charges of $1.2 million and inventory
obsolescence charges of $.1 million discussed above. Excluding
these charges, operating profit for the International Controls
segment would have been $2.4 million, or 2.4% of segment sales,
in fiscal 1994. The change in operating profit from fiscal 1993
to fiscal 1994 for the International Controls segment resulted
primarily from a decrease in profits at the Company's English
subsidiary on a variety of Industrial Controls products, and a
decline in operating profit from the Pacific subsidiaries due to
a slow Japanese economy and strong shipments in fiscal 1993 on
Aerospace programs in Korea.
Interest expense was $11.4 million, or 3.7% of net sales, in
fiscal 1994 compared with $11.0 million, or 3.7% of net sales, in
fiscal 1993. The increase in 1994 primarily reflected the
increase in debt related to the Acquisition.
Foreign currency exchange gain was $.5 million in fiscal
1994 compared with a loss of $.1 million in fiscal 1993. The
foreign currency gain in fiscal 1994 primarily related to a
short-term loan denominated in Deutsch Marks between Moog and its
German subsidiary during which time the Deutsch Mark
strengthened.
Income tax expense accrued in fiscal 1994 at an effective
tax rate of 46.8% resulting primarily from losses incurred at the
German subsidiary against which the amount of tax benefits were
limited. The effective tax rate for fiscal 1993 of 40.6%
comprised an effective rate on Domestic Controls earnings of
20.8% offset by a tax expense of $1.4 million for the
International Controls segment on a pre-tax loss of $1.4 million.
The lower effective Domestic Controls tax rate in fiscal 1993
resulted primarily from a $1.1 million benefit received in fiscal
1993 from the utilization of prior year foreign tax credit
<PAGE>
carryforwards. The unusual fiscal 1993 tax situation for the
International Controls segment resulted from paying taxes at
certain subsidiaries primarily in the Pacific Rim where taxable
earnings were generated, offset by pretax losses in Europe that
generated virtually no benefit.
As a result of the above factors, net earnings in fiscal
1994 were $2.1 million, or .7% of net sales, compared with $4.8
million, or 1.6% of net sales, in fiscal 1993. Net earnings in
fiscal 1994 included the positive cumulative effect of $.5
million related to the adoption of SFAS No. 109, "Accounting for
Income Taxes". Net earnings in 1993 included a $.4 million net
after-tax extraordinary charge related to prepayment costs on the
early retirement of $10.2 million of 12-7/8% debt.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in the first quarter
of fiscal 1994. SFAS No. 106 costs were $1.1 million in fiscal
1994, including the amortization of the initial transition
obligation of $7.9 million over 20 years. The fiscal 1994 cost
was $.4 million greater than the annual cost of postretirement
benefits other than pensions in fiscal 1993 of $.7 million,
determined on a "pay as you go" basis.
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.
(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 $18.0 million on April 26,
1996, principal of $17.9 million was redeemed with
$.1 million of principal converted into 6,204 Class A Common
shares.
(3) The completion on May 14, 1996 of the $120.0 million
Offering of 10% Senior Subordinated Notes due 2006, the
proceeds of which were approximately $116.3 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:
<PAGE>
(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 $12.9 million, or $18 per share;
(b) Prepay in its entirety the principal balance of
$16.4 million on the Company's 10-1/4% Note;
(c) Repay approximately $86.5 million of its revolving
borrowings under the Bank Credit Facility, which
includes $17.9 million borrowed for the Debenture
Redemption; and
(d) Pay prepayment and amendment fees of $.5 million
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 $64.1 million would have been
borrowings under the Bank Credit Facility. The Company believes
it will be able to reduce interest costs through lower interest
rates on the outstanding borrowings under the Bank Credit
Facility during the third quarter of fiscal 1996.
Scheduled periodic principal payments of long-term debt for
the next five years are presented below compared with the revised
principal payments of long-term debt after giving effect to the
Recapitalization.
($ 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
<PAGE>
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.
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.
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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. Consolidated backlog increased to $237.9
million at September 30, 1995 compared with $217.2 million at
September 30, 1994. Backlog for the Domestic Controls segment
increased to $195.9 million at September 30, 1995 compared with
$181.4 million a year earlier. Within the Domestic Controls
segment, this increase was primarily due to the Acquisition.
International Controls segment backlog was $42.0 million at
September 30, 1995 compared with $35.9 million a year earlier,
with the increase principally reflecting the recovery of capital
goods markets in Europe. Approximately $1.7 million of this
increase resulted from the strengthening of foreign currencies,
principally the Deutsch Mark, relative to the U.S. dollar from
fiscal 1994 to 1995.
BUSINESS
The Company, founded in 1951, is a leading worldwide
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 to the flight control of commercial and
military aircraft, in controlling the thrust of space launch
vehicles, steering tactical and strategic missiles, positioning
satellites, 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 precision controls market.
In the fiscal year ended September 30, 1995, Moog's sales
and EBITDA were $374.3 million and $46.0 million, respectively.
In fiscal 1995, 51% of the Company's sales were to commercial
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aerospace and Industrial Controls customers and 49% were to
government and military customers.
The Company is a New York corporation with its principal
office in East Aurora, New York, and its telephone number is
(716) 652-2000.
Technology
Moog designs and manufactures high performance precision
controls called servovalves and servoactuators. Servovalves and
servoactuators control the position, velocity or force of moving
objects with accuracy which can be measured in millionths of an
inch.
Servovalves regulate the flow of fluid. They convert the
electronic signal from a computer into a precisely metered amount
of liquid, such as hydraulic fluid flowing into a piston/cylinder
assembly known as an actuator. The actuator then creates
movement. When a servovalve is mounted on an actuator, the device
is known as a servoactuator. Servovalves are also used to meter
the flow of fuel into jet engines
Moog's core products provide precision motion control. The
precision in a motion control system is created through the use
of a closed loop system or what is technically referred to as a
servocontrol system. A servocontrol system is a group of
electronic and/or mechanical elements that generate a desired
output by comparing the achieved output with the commanded input
and then using the difference between the input and the output as
the actuating signal.
For example, an electrohydraulic servocontrol system
consists of the six elements indicated in the diagram above:
(1) control electronics which may be a computer, microprocessor
or guidance system and which creates a command input signal;
(2) a servoamplifier which provides a low power electrical
actuating signal which is the difference between the command
input signal and the feedback signal generated by the feedback
transducer (6); (3) a servovalve which responds to this low power
electrical signal and controls the high power flow of hydraulic
fluid to (5), an actuation element such as a piston and cylinder
or a hydraulic motor which positions the device being controlled;
and (4) a power supply, generally an electric motor and pump,
which provides a flow of hydraulic fluid under high pressure. The
feedback transducer (6) measures the output of the system and
converts this measurement into a proportional signal which is
sent to the servoamplifier. The Company is engaged primarily in
the design, manufacture and sale of servovalves and actuators,
although all the elements of a servosystem are incorporated in
the Company's diverse product lines.
The Company's portfolio of products has resulted from a
strategy of using its core competency in electrohydraulic
servocontrol elements as a platform from which to pursue a wide
range of applications on a global basis. Demands are varied, from
applications requiring micro designs that operate at extremely
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high speeds, to applications requiring high power levels to
control large loads over long distances. Providing the
appropriate solution to each customer's particular design problem
adds to the Company's technology base and allows for further
expansion of the product portfolio. Moog typically customizes its
products to provide customers with optimal solutions.
Applications
Moog provides motion controls in three core technologies;
1) Electrohydraulic, 2) Electromechanical, and
3) Electropneumatic, and fluid controls in Electrohydraulic
technologies. Electrohydraulic technologies are used in Moog's
standard servovalves, servoactuators and integrated actuation and
power systems. Electromechanical technologies include brushless
DC servomotors, DC motor controllers, servoactuators and
servosystems. Electropneumatic technologies include solenoid-
controlled servoactuators and control actuation systems. Another
market opportunity for Moog is the development of digital control
for increased performance and functionality. Moog uses digital
controls as part of its electric drive systems and as a
complement to its hydraulic controls.
There are two broad applications for the Company's technologies,
more fully described below.
Aerospace Applications. In an aircraft, servoactuators are
part of the flight controls that position the moveable control
surfaces on a plane's wing, tail section and engine. The onboard
flight computer sends the control signal from the pilot to the
servoactuators, which in turn control the movement of the flight
control surfaces of the aircraft and regulate the thrust of the
aircraft's engines. With respect to flight controls, servovalves
and servoactuators regulate the movement and position of the
leading edge flaps, spoilers, ailerons, elevators and rudders on
military and commercial aircraft. Servovalves in jet aircraft
engines meter the fuel flow and inlet air to the engines. Similar
systems are used to move the fins on a short-range missile or
steer the engine thrust on a large missile.
Industrial Controls Applications. Servovalves and
servoactuators are also used in a wide variety of industrial
machinery. For example, they can direct the large forces and
tremendous amounts of power and pressure in steel rolling mills
or provide extremely precise motion control, such as in robotics.
Product Lines
Moog's five product lines are formed around its core,
technologically advanced business -- the manufacture of
servovalves and servoactuators. Outlined below is a description
of the five product lines.
Commercial Aircraft
The Company supplies the Commercial Aircraft market with one
of the aerospace industry's broadest lines of flight control
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products, including servovalves and actuators for the autopilot,
leading edges, trailing edges, spoilers and rudders. The Company
supplies all of the major OEMs, and also derives a substantial
portion of its revenues directly from the domestic and
international airlines in the form of sales of spare parts and
repairs. Aftermarket sales to airlines are conducted through the
Company's direct sales force. The Commercial Aircraft product
line represented approximately 20% of fiscal 1995 sales.
The Company believes that there are significant growth
opportunities for its Commercial Aircraft product line over the
next several years. To position itself for this anticipated
growth in Commercial Aircraft production, the Company acquired
certain of AlliedSignal's hydraulic and mechanical actuation
product lines in June of 1994. Mechanical actuators acquired
include drive systems on the Boeing 777, while hydraulic
actuators 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 Commercial Aircraft market
and improved utilization of existing manufacturing facilities and
overhead structure. As a result of the Acquisition, the Company
now supplies more flight control components to Boeing than any
other supplier.
According to recent widely published reports, Boeing
announced that it would raise its total monthly production of the
737, 747 and 757 from the previous scheduled 22-1/2 to a total of
27 airplanes by mid-1997. In addition, Boeing announced that its
backlog had increased from $60.6 billion in 1994, to $66.5
billion at the end of 1995. This increased demand, coupled with
the need to replace aircraft which are aging, uneconomical, or do
not meet stringent noise control regulations, indicates
tremendous potential for near term market growth.
While Commercial Aircraft sales to Boeing accounted for 7.0%
of fiscal 1995 sales, the Company also supplies flight actuation
and control products to a number of other manufacturers of
commercial aircraft. The Company's exclusive supply contracts
with Boeing include pre-determined prices through 2002, except
for the Boeing 777 contract, which expires in 2006.
Major Commercial Aircraft programs include the following:
Boeing 747. On the 747, Moog had been supplying nine
autopilot servoactuators prior to its acquisition of
AlliedSignal's product lines. With the Acquisition, Moog gained
the additional contracts for the four aileron power control units
and twelve spoiler actuators on the 747. All of Boeing's 747's
carry Moog products. The 747 aircraft line accounts for a large
and growing portion of Moog's sale of parts and replacements to
the airline industry because of the over 1,000 747s in service as
of January 1996. Boeing recently announced that, starting with
the second quarter of 1997, it expects to increase the monthly
production rate of 747's from 3-1/2 per month to 4 per month.
Boeing 757. The second largest commercial aircraft program
for Moog is the 757, and includes elevator and rudder power
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control units, spoilers, and servovalves. There were
approximately 700 757's in service as of January 1996. Boeing
recently announced that, starting with the second quarter of
1997, it expects to increase the monthly production rate of 757's
from 3 per month to 4 per month.
Boeing 767. Once Moog's biggest commercial aircraft
contract, the 767 production rate has slowed from a peak of 5 per
month in 1993 to 4 per month expected in 1996. Moog currently
supplies nine autopilot actuators and all of the servovalves on
the 767. There were approximately 600 767's in service as of
January 1996.
Boeing 777. Moog provides all of the servovalves, flight
spoilers and the leading edge rotary actuation system for the
777. The 777 is Boeing's newest plane, seating 328, with a range
of approximately 8,000 miles. Industry observers believe this
plane will be one of Boeing's largest revenue sources for the
foreseeable future.
Airbus and McDonnell Douglas. Moog supplies aileron
actuators for the Airbus A330 and A340 as well as servovalves on
all of the Airbus models. The Company also supplies flight
control servovalves and anti-skid brake valves to McDonnell
Douglas.
Cessna, Canadair, Gulfstream and Lear. Moog supplies
primary flight control actuators for Cessna Aircraft Co.'s
("Cessna") new Citation X. These are Cessna's first electronic
input flight control actuators. The Acquisition also extended
Moog's general aviation sales to Canadair ("Canadair") and Lear
Jet Inc., both divisions of Bombardier Inc., and Gulfstream.
Engine Controls. The Company also designs and manufactures
fuel metering and air inlet controls for jet engines used on
numerous commercial aircraft. All models of commercial aircraft
currently produced by Boeing and Airbus contain engines on which
the Company's controls are used.
Military Aircraft
Moog provides flight controls for most of the advanced
military aircraft and helicopters in the world today. On military
aircraft, these controls include servoactuators for ailerons,
elevons, rudders, leading edge flaps, servovalves for engines and
pitch and roll control assemblies on fixed wing aircraft. On
helicopters, flight controls include swashplate, flaperon,
elevator, main rotor, tail rotor, bladefold, and vibration-
control servoactuation systems. The military hardware is similar
to that of commercial aircraft except that certain of Moog's
military products are designed for mission survivability. These
products also incorporate triple redundancy, effectively allowing
the aircraft to lose two of its systems and still continue to fly
and survive on the remaining system. The Military Aircraft
product line represented approximately 35% of Moog's fiscal 1995
sales.
<PAGE>
As a result of the Acquisition, the Company broadened this
product line to include mechanical and hydraulic actuation
systems on the F-16, F/A-18 C/D, F/A-18E/F and V-22 Osprey.
Moog's military sales to the U.S. prime government
contractors and to foreign governments are generally based on
long-term, fixed price contracts. Moog, as a subcontractor, has
never experienced collection issues with the original
manufacturer of equipment destined for the U.S. government.
Generally, Moog's sales of flight controls to foreign governments
are guaranteed by the U.S. government under foreign military
sales legislation or supported by customer advances and letters
of credit.
Major military aircraft programs to which Moog contributes
include:
V-22 Osprey Tiltrotor. The V-22 Osprey tiltrotor aircraft
is being built by Bell-Boeing. The V-22 is a hybrid between a
helicopter and a fixed wing aircraft. Moog has received
significant customer funding for this program in fiscal years
1995 and 1996. Low rate initial production is scheduled to start
in 1997, with the first delivery of production aircraft scheduled
for 1999. Moog products on the V-22 include six swashplate, six
bladefold, eight flaperon and three elevator actuators. The U.S.
government currently plans to procure 523 V-22 aircraft for use
by the Marines, Navy and Special Forces.
F/A-18 Hornet. Moog provides a variety of flight controls
for this aircraft, which is the U.S. Navy's primary carrier-based
fighter/attack aircraft. The C/D version, of which over 1,200
have been produced, is the only U.S. fighter aircraft currently
being built in production quantities. The E/F version, which is
30% larger than the C/D version, is currently in development and
will enter production in 1997. Production is planned to be at the
rate of approximately 48 aircraft per year by 2002.
F-15 Eagle. Moog provides the pitch and roll control
assembly for this aircraft. Orders from the U.S. Air Force, Saudi
Arabia, Israel and the United Arab Emirates are expected to keep
production at current levels through the rest of the decade. Moog
also has a significant replacement parts business for this
program, as 1,455 aircraft have been produced.
F-16 Falcon. Moog provides the power drive unit for the
leading edge flaps and associated components on the F-16.
Production on the F-16 is primarily for foreign military sales.
Moog also provides the leading edge flap actuation system for the
Japanese FSX, an F-16 derivative. This project is scheduled to
enter its production phase during 1997. There have been 2,876
F-16s produced utilizing Moog products, and the spares and
repairs business from this program is steady and substantial.
Production at an average rate of 68 aircraft per year is expected
through 1999.
<PAGE>
Taiwanese Indigenous Defense Fighter. The IDF is Taiwan's
version of the F-16 Falcon light attack aircraft. This 126-
aircraft program peaked in fiscal 1994, and is a program for
which Moog supplies all the primary flight control actuators. The
IDF program illustrates Moog's ability to provide complete flight
control systems and service for not only domestic aircraft, but
foreign aircraft as well.
Indian Light Combat Aircraft. Moog is developing the flight
control actuation system for the Indian government's new Light
Combat Aircraft. Moog is also working on the aircraft's nosewheel
steering system and brake module. The Company began delivery of
the hardware on this program in 1995. Full scale aircraft
production is expected to begin after the year 2000.
B-2 "Stealth" Bomber. Moog designed and produces the flight
control actuation system for this aircraft. The Company believes
that the B-2 possesses the most technically challenging flight
control system ever developed. The B-2 program has solidified
Moog's position as the technological leader in the fly-by-wire
market. The Company has recently received a contract to replace
the flight control actuation systems for the first four
production aircraft. This, along with spares and repairs, will
provide significant revenues through 1999.
Blackhawk Helicopter. The Blackhawk, built by Sikorsky, is
the U.S. military's major combat and troop transport helicopter.
Moog supplies the secondary flight controls and an accumulator
which is used to start the helicopter's auxiliary power unit. In
addition to the U.S. government, sales of the Blackhawk and the
Navy's equivalent, the Seahawk, are made to the governments of
Turkey, Japan, South Korea, Australia, China and Saudi Arabia.
RAH-66 Comanche Reconnaissance Attack Helicopter. Moog
holds contracts on the main rotor and tail rotor actuators for
the Comanche light attack helicopter. The Comanche is a highly
maneuverable and stealthy aircraft with a radar cross-section of
1/600th of the Apache attack helicopter. The first flight of the
Comanche prototype, still in the pre-production phase, was
completed in January of 1996. Although production funding is
uncertain, the Company is receiving customer funding for design
and development of the primary flight controls for this
helicopter.
Engine Controls. The Company also produces fuel metering
and air inlet controls for jet engines used on numerous advanced
military aircraft. The military engine controls business is
represented on the F-14, F-15, F-16, F/A-18 C/D, F/A-18 E/F,
F-22, B-2 and the IDF.
Space and Missiles
The Company manufactures motion, fluid and propellant
controls and systems which are used to control the flight and
positioning of satellites, launch vehicles and missiles. The
Company has the leading market share in satellite propulsion and
strategic missile and launch vehicle TVC systems, and is the
<PAGE>
technological leader in electric propulsion, gel propellant
controls, thrusters and valves. The Space and Missiles product
line accounted for approximately 12% of fiscal 1995 sales.
Moog's space and missile systems products can be separated
into two broad categories. First, the Company manufactures valves
and regulators which control fluid and propellant flows on
satellites, launch vehicles and tactical missiles. The second
category consists of products which control the trajectory of
strategic missiles, tactical missiles and launch vehicles. These
products include hydraulic actuators, electromechanical actuators
and TVC systems.
The Company's strengths in the space and missile systems
markets include its broad product offering, quality reputation
and customer support programs. The Company's major space and
missiles programs and applications are described below.
Satellite Propulsion. Moog's Space and Missiles product
line is centered around its satellite propulsion business, which
enjoys a broad, established line of custom designed and standard
controls products. While the Company manufactures a relatively
small number of satellite components, it supplies them for almost
every make of satellite that is produced in the world. Major
customers include General Motors Corporation-Hughes Electronics
("GM-Hughes"), Lockheed Martin Corporation ("Lockheed Martin")
and Loral Corporation ("Loral"). Moog's typical satellite shipset
of 10-12 valves provides an estimated $200,000 per satellite in
sales, exclusive of launch vehicle sales. Two examples of new
satellite propulsion programs are:
- Motorola Iridium Satellite System. Moog supplies
propellant isolation valves on Motorola's Iridium Satellite
System, which is scheduled to enter production in late 1996.
Over the next ten years, an estimated 110 of these low Earth
orbit communications satellites are expected to be launched.
- Xenon Propellant Management Assembly. Xenon-ion thrusters
are expected to replace conventional chemical rockets used
to control satellite orbits. Xenon-ion propulsion systems
use solar-powered electronics to accelerate Xenon ions to
very high velocities to create rocket thrust. Xenon-ion
propulsion systems are expected to create savings of $9
million to $12 million per commercial satellite launch. Moog
has become the technological leader in supplying the
complete propellent storage and Xenon gas control system.
The first commercial launch of this system is scheduled for
mid-1997.
Space Station. Another significant space program for Moog
is the International Space Station Alpha, for which Moog is
developing a highly specialized fluid quick disconnect to be used
in the electric power and thermal control systems, as well as a
bolt motor assembly for connecting key structural portions of the
Space Station.
<PAGE>
Space Shuttle. Moog supplies actuators for the Space
Shuttle's flight controls, main engine TVC and solid rocket
booster TVC. Space Shuttle launches now occur at a rate of
approximately seven per year. The solid rocket booster actuators
are recoverable after every launch and are returned to Moog for
refurbishment. A new Space Shuttle development program for Moog
is the hydrazine flow control system for use in the auxiliary
power unit in the Space Shuttle's solid rocket boosters. The new
hydrazine flow control system is scheduled to begin production in
mid-1996.
SAFER Space Life Jacket. SAFER is an acronym for Simplified
Aid for Extra Vehicular Rescue. NASA developed the SAFER self-
propelled space life jacket for astronauts to wear while working
outside the Space Shuttle. Moog supplies the 24 cold gas mini-
thrusters on the jacket that each provide less than one pound of
thrust. If an astronaut breaks loose from a tether, Moog's mini-
thrusters enable the astronaut to instantly halt and stabilize an
uncontrolled tumble with computer-controlled thrust pulses. Then,
with a joy stick that controls these thrusters, the astronaut can
maneuver at will.
Launch Vehicles. Sales from Moog's launch vehicle programs
are expected to remain relatively constant in the near term.
Because of government budget constraints, satellites will be
launched with the vehicles currently in production. The Company's
sole source position on the Titan family of launch vehicles and
on the Ariane 5 assure its participation. Three examples of
launch vehicle programs are:
- Titan IV Launch Vehicle. The Titan IV is the largest
unmanned launch vehicle in existence. Moog produces the TVC
system for Titan IV's rocket boosters as well as TVC
actuators for all stages of the core vehicle.
- Ariane V Launch Vehicle. Moog is working on two programs
that accommodate the new upper stage engine on the Ariane V.
One program is a propellant valve assembly that controls
fuel flow. The other program is an electromechanical TVC
actuator.
- Trident Submarine-Launched Missile. Moog is the sole
source provider of TVC actuation for all three stages of the
Trident submarine-launched missile. Trident is the only
strategic missile currently in production for the U.S.
Department of Defense ("DoD").
Tactical Missiles. Moog continues to produce valves for the
Patriot program. The Company's only recent European tactical
missile program was to supply valves for the Italian Aspide,
which is a derivative of the Sparrow missile.
Theater High Altitude Area Defense. THAAD is an anti-
missile defense system designed for the interception of incoming
missiles in the upper atmosphere. The program was mandated by the
Missile Defense Act passed by Congress in 1991. Moog is the sole
source supplier of bipropellant thrusters for the attitude
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control system on this program. The Company also produces a
pressure control module used to position THAAD's infrared seeker.
Industrial Hydraulics
This product line consists of over 15,000 variations of
servovalves and servoactuators used in industrial automation to
apply substantial force in a precise and measured fashion,
usually resulting in linear movement. The Company's Industrial
Hydraulics products are used in a wide range of applications,
including fatigue testing systems, plastic blow molding machines,
position controls for sawmill equipment, fuel metering and
override controls for gas and steam turbines, and controls for
clamp and injection operations in plastic injection molding
machines. The Company's Industrial Hydraulics product line
represented approximately 20% of fiscal 1995 sales.
During fiscal 1995, the Company estimates that it sold
approximately 30,000 industrial servovalves to over 1,500
customers throughout the world. Currently, almost all of this
business is in markets outside the U.S. Industrial Hydraulics
products are traditionally used with heavy equipment which
requires periodic servicing and maintenance. The Company has
capitalized upon this requirement by building a substantial
Aftermarket business. The Company believes that it currently
services over 80% of its installed base of Industrial Hydraulics
servovalves. The Company's strong market share in both OEM sales
and Aftermarket support is enhanced by an extensive worldwide
subsidiary network with which Moog can provide exceptional
service and support to its customers.
The Company expects this product line to experience strong
sales and earnings growth. The Company's restructurings and
manufacturing consolidations in prior years have resulted in
substantial cost reductions. The emergence of European capital
goods markets from a prolonged recession late in calendar 1994
resulted in improved fiscal 1995 sales. Future sales growth is
expected based upon trends toward increasing automation,
expanding Asian markets, and the Company's recent targeting of
the U.S. market.
In December 1995, the Company acquired Ultra's servovalve
product line. 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 and extensive customer network. In its latest fiscal
year, the Ultra industrial servovalve product line reported
worldwide sales of just under $5.0 million.
Industrial Electrics
This product line includes electric drives for assembly
robots, brush making machines, material handling robots, total
machine controls for plastic injection and blow molding machines,
carpet tufting machines, postal sorting machines, gun/turret
controls for military vehicles, and 4- and 6-degree of freedom
<PAGE>
motion platforms for the entertainment industry. Moog's
Industrial Electrics products are generally used in applications
requiring less force than applications using hydraulic systems.
The Industrial Electrics product line represented approximately
13% of fiscal 1995 sales.
From a cost perspective, the Company rationalized its
production capabilities in 1995 to reduce overhead and take
advantage of its low cost Irish facility. At the same time,
increasing demand for plastics, electric drives and motion
simulators is resulting in increased sales. The combination of
the cost reductions and improving market conditions is expected
to result in considerably improved financial results. In
addition, as the Company's installed base of Industrial Electrics
products grows and matures, it anticipates future sales growth
from the sale of spare parts and repairs.
The primary applications for these products are described
below:
Plastics Market. Electric controls supplied by Moog for
injection and blow molding machines manage servovalve functions
and the sequence and temperatures of machine operation, with
servovalves providing for closed loop control.
Entertainment Simulators. Moog has developed a family of
electrically actuated motion bases for the entertainment
business. Moog has delivered 27 simulator shipsets since fiscal
1994, and has established the performance standard for
electrically actuated motion platforms.
Military Vehicles. Moog supplies the Industrial Electric
products used in the azimuth and elevation controls for gun
systems on military vehicles. These systems are designed to
handle the large inertia involved in aiming a gun mounted on a
vehicle traveling at high speed through rough, open terrain. One
key advantage of electric controllers is the elimination of the
hydraulic supply, thereby reducing fire hazard.
Electric Drives. This area includes brushless DC motors,
servoactuators and digital motor controllers. These products are
used in a wide variety of applications, including assembly and
material handling robots, carpet tufting and postal sorting
machines.
Business Strategy
The Company's objective is to enhance its present global
leadership positions in the Aerospace and Industrial Controls
markets. Key elements of the Company's principal business
strategies include:
Enhance Market Leadership. The Company focuses on high-end
precision control markets. In product areas representing
approximately 87% of its fiscal 1995 sales, the Company believes
it is the technological leader and the market leader in terms of
sales. In Aircraft Controls, Moog is the recognized world leader
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in technologically advanced control systems and components that
are custom designed to perform to exacting specifications. The
Company also believes that it is the largest supplier of flight
controls and servovalves to the worldwide Aerospace market. Due
to Moog's proven ability to meet or exceed the OEM's
technological specifications, the Company is a sole source
supplier of certain flight controls for both the B-2 and V-22, as
well as Boeing's 747, 757, 767 and 777 aircraft. In industrial
servovalves, the Company estimates it currently has a 35% share
of the worldwide market. Moog continually improves its line of
servovalves and servoactuators to provide its customers with the
optimal solution in terms of performance, price and quality.
Continually Broaden Product Lines and Applications. The
Company's growth is principally attributable to its strategy of
continually broadening its technology, products and product
applications. Moog's capabilities extend to the design and
production of electrohydraulic, electromechanical and
electropneumatic systems and components. In addition, as a result
of the Acquisition, the Company now offers one of the broadest
controls product lines in the industry. In Industrial Controls,
the Company provides increasingly intelligent digital controls as
part of its electric drive systems and as a complement to its
hydraulic controls. The Company believes that its diverse product
applications and integrated approach to product development and
testing provide it with competitive advantages over rival
suppliers.
Maintain Stability and Diversity of Customer Relationships.
Over the last decade, the Company has never been replaced as the
supplier of commercial or military flight control systems for
which the Company was the original supplier to the OEM. Moog's
success in obtaining and retaining long-term OEM contracts is
directly attributable to the Company's practice of working
closely with its customers from the design phase, through
production and Aftermarket support. In addition, the Company
markets its products to a broad range of commercial, industrial
and government customers. For example, Moog's industrial customer
base consists of more than a thousand machinery manufacturers
throughout the world, in plastics, packaging, fatigue testing
equipment, steel and metals production, wood processing and
general manufacturing. The Company's sales diversity in both
geography and applications can mitigate the effects of specific
regional or capital goods spending cycles.
Provide Superior Aftermarket Service. The Company
aggressively markets spares, parts and repair services directly
to its Aerospace and Industrial Controls customers through its
extensive network of international subsidiaries. Aftermarket
sales are generally more profitable and less volatile than OEM
sales. For fiscal 1995, the Company's Aftermarket sales
represented approximately 14% of sales, which the Company
estimates to be approximately double its fiscal 1992 Aftermarket
sales, reflecting increases in the Company's installed base and
its focus on Aftermarket sales opportunities resulting from the
Acquisition.
<PAGE>
Customers
Moog's customers can be categorized into three principal
groups. The first group includes customers for Aerospace
hardware, including producers of military aircraft, commercial
aircraft, jet engines, strategic and tactical missiles, launch
vehicles and satellites. While the majority of Moog's Aerospace
sales are to U.S. government prime contractors and U.S.
commercial aircraft manufacturers, there are also significant
sales generated in foreign markets. Moog is currently involved in
numerous U.S. governmental defense programs with various prime
contractors such as McDonnell Douglas, Boeing Helicopters,
Northrop Grumman Corporation, Rockwell International Corporation,
Lockheed Martin, Loral, Sikorsky, a United Technologies
Corporation company, Mitsubishi Heavy Industries, Ltd., Bofors
AB, GM-Hughes and General Electric Company. Customers also
include foreign governments purchasing products originally
developed for the DoD. Examples of this include the sale of
F-15's to Israel and Saudi Arabia, Patriot missiles to Taiwan and
Korea, and helicopters to various U.S. allies. In commercial
aerospace, the three principal commercial aircraft manufacturers,
Boeing, McDonnell Douglas and Airbus, are major customers. Moog
has recently developed relationships with manufacturers of
regional aircraft and business jets, including Canadair,
Gulfstream and Cessna. Moog is also involved in commercial
satellite propulsion and launch vehicles, where it sells to
companies such as GM-Hughes, Loral, Lockheed Martin and British
Aerospace PLC.
Moog's second customer grouping includes industrial
manufacturers of capital goods machinery and robotics used for
blow molding, injection molding, power generation, materials
handling, steel rolling mills, wood processing, mining, flight
simulation, fatigue testing and assorted other sophisticated
automated production equipment and mobile applications. The
Company's customers include worldwide manufacturers such as
Robert Bosch GmbH ("Bosch"), Battenfeld Maschinerfabriken GmbH,
European Gas Turbines and Sega Enterprises Ltd. This customer
segment is expected to experience a fairly strong rate of growth
in Asian markets due to the rapidly developing economies in that
part of the world. In Europe, growth is anticipated based upon
the trend to greater automation. In the U.S., Moog has a market
presence in industrial electric controls, with plastics forming
and the electric drive markets expected to provide the impetus
for electric controls growth. The Company is also targeting the
U.S. industrial hydraulics markets.
The third major customer group is comprised of Aftermarket
customers who require spares to be provisioned and repairs to
hardware in service. This group includes the U.S. and foreign
governments in military related products and airlines throughout
the world in commercial aircraft products. For military hardware,
this includes the DoD and foreign governments which need spares
and repairs for and to existing aircraft, launch vehicles, or
missiles. Similarly, industrial end-users and commercial airlines
require a steady supply of spares and repairs to service their
<PAGE>
existing machinery and aircraft. In fiscal 1995, total
Aftermarket sales were approximately $52.0 million.
In aggregate, the Company markets its products to a wide
variety of customers. Boeing (including Bell-Boeing) and the U.S.
government (including U.S. government prime contractors) are
Moog's largest customers and represented approximately 12.4% and
36.4%, respectively, of fiscal 1995 sales. The concentration of
customers varies within product lines. In the Commercial and
Military Aircraft product lines as well as Space and Missiles,
the Company has fewer customers, while in the Industrial
Hydraulics and Industrial Electrics product lines the Company has
many customers with no one customer being material. In the
Commercial Aircraft market, Boeing is Moog's largest customer,
representing approximately 7.0% of fiscal 1995 sales. In the
Military Aircraft market, the largest customer is McDonnell
Douglas (7.8% of fiscal 1995 sales) and in the Space and Missiles
market, Lockheed Martin is the largest customer (3.0% of fiscal
1995 sales). The largest customer in the Industrial Controls
markets represented no more than 1.2% of fiscal 1995 sales.
Competition
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
("Parker Hannifin"), 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 and HR Textron. For the Industrial Hydraulics
product line, competitors are Bosch, IMC, Mannesmann Rexroth GmbH
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 these bases. See "Risk Factors --
Competition."
Manufacturing
Moog's manufacturing facilities are equipped to manufacture
custom engineered products designed for specific customer
applications. The facilities and manufacturing equipment are
state of the art. They include CAD/CAM, CNC machining, internally
designed and manufactured test equipment, and Class 10,000 and
Class 100,000 environmental facilities.
<PAGE>
The manufacturing process for specific custom engineered
applications demands technical expertise and precision of the
highest degree. First, design engineering expands the preliminary
designs completed during the proposal process. After any
necessary modifications, prototypes of the design are
manufactured for developmental testing. As part of this process,
Moog conducts an internal review which ensures that the design
will meet the specific customer application and can be
manufactured in a cost-effective manner. Moog emphasizes
concurrent engineering, whereby design engineering and production
engineering coordinate early in the process to optimize product
design from a manufacturing standpoint. The product then goes
into limited production for customer testing, after which the
product is a qualified design. At this stage the product moves
into full production.
Production of the final product is a three-step process:
fabrication, assembly and testing. In the fabrication process,
skilled machinists using proprietary manufacturing processes
directed by Moog's methods engineering staff produce a
substantial volume of components satisfying submicron tolerances.
Assembly of the components by technicians is followed by testing
of the product to ensure that it meets Company and customer
specifications. In general, each technician involved in both the
assembly and testing functions has a two-year degree in a
technical field and is supported by Moog's product engineering
staff, which prepares assembly worksheets and test procedures.
Sales and Marketing
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. Moog's marketing staff is the primary
contact with key customers. Manufacturers' representatives are
used to cover certain domestic aerospace market areas, primarily
on the west coast. As of September 30, 1995, the Company had
approximately 226 individuals in its sales and marketing
organization. Approximately 40% of these individuals are located
in the U.S. and 60% are located in international markets.
Moog's success in both the Aerospace and Industrial Controls
markets can be attributed to its innovative engineering
solutions, the continual stream of new product applications, the
Company's reputation for reliability and customer support, and
the development of strong contacts with customers which allow for
early identification of opportunities. Further, Moog's strong
technical marketing force located in key markets throughout the
world has facilitated the adaptation of technology developed in
one geographic market to other geographic markets for different
applications.
<PAGE>
Employees
Moog currently employs approximately 3,050 individuals
worldwide. Of that total, approximately 1,920 are in the U.S.,
560 are in Europe, 170 are in the Pacific Rim and 400 are in low
cost manufacturing centers in the Philippines, Ireland and India.
A portion of the Company's employees in Germany are represented
by a works council, and a portion of the employees at the
recently acquired Ultra are represented by a union.
Moog's engineering staff is one of the Company's competitive
strengths, and its production work force is composed of highly
skilled machinists, assemblers and technicians. The Company
believes its relationship with its employees is excellent. Moog
has been listed in all publications of the book "The 100 Best
Companies to Work for in America," and enjoys an unusually low
employee turnover rate.
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. See also "-- Environmental Matters."
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 MCI. In 1994, Mr. Moog transferred his interest in and
control of MCI to an unrelated company currently controlled by
IMC. 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 the
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.
<PAGE>
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 particular duration or
geographic scope, but did prohibit its assignment or sublicense.
In late 1995, Moog Italiana S.r.1., 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.1., 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. See also "Risk
Factors -- Competition."
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
plaintiffs' 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.
Patents, Trademarks and Trade Names
Moog has numerous patents and has filed applications for
others. While the 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 include both U.S. and
<PAGE>
international patents, relating to electrohydraulic,
electropneumatic and electromechanical actuation mechanisms and
control valves, electronic control component systems and
interface devices. The Company has trademark and trade name
protection in major markets throughout the world.
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 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
<PAGE>
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 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.
Properties
The Company maintains its corporate headquarters in East
Aurora, New York and conducts its principal manufacturing and
distribution operations at the following facilities:
Sq. Owned
Location Utilization Footage or Leased
East Aurora, NY Headquarters &
Manufacturing 555,515 Owned
East Aurora, NY Headquarters &
Manufacturing 234,914 Leased(1)(2)
Torrance, CA Manufacturing 200,010 Owned
Torrance, CA Sales 800 Leased
Torrance, CA Storage 5,355 Leased
Baguio City, Philippines Manufacturing 63,777 Owned
Boblingen, Germany Manufacturing 121,520 Leased
Malnate, Italy Sales 15,480 Owned
Tewkesbury, England Manufacturing 4,500 Owned
Tewkesbury, England Manufacturing 78,000 Leased
Askim, Sweden Sales 4,515 Leased
Espoo, Finland Sales 1,400 Leased
Rungis, France Sales 18,601 Leased
Shatin, Hong Kong Sales 7,276 Leased
Hiratsuka, Japan Manufacturing 67,911 Owned
Sao Paulo, Brazil Sales 12,912 Leased
Mulgrave, Australia Sales 7,500 Owned
Mulgrave, Australia Sales 1,000 Leased
Ringaskiddy, Ireland Manufacturing 26,000 Owned
Kyunggi-do, Korea Sales 7,047 Owned
Birkerod, Denmark Manufacturing 30,100 Leased
Bangalore, India Manufacturing 22,901 Owned
Science Park, Singapore Sales 2,091 Leased
________________
(1) Includes 94,724 square feet under capital lease
arrangements.
<PAGE>
(2) Includes 132,290 square feet owned and under capital lease
arrangements sub-leased to third parties, and 26,364 square
feet under an operating lease sub-leased to a third party.
The Company believes that its properties have been
adequately maintained, are in generally good condition and are
suitable for the Company's business as presently conducted. The
Company also believes that its existing facilities provide
sufficient production capacity for present and foreseeable future
needs. Upon the expiration of its current leases, the Company
believes that it will be able to either secure renewal terms or
enter into leases for alternative locations at market terms.
MANAGEMENT
The following table sets forth, as of March 31, 1996, the
names and ages of the Company's executive officers, together with
their business experience during the last five years and offices
currently held with the Company.
Name Age Position
Robert T. Brady 55 Chairman of the Board; President; Chief
Executive Officer; Director; Member,
Executive
Committee
Robert R. Banta 54 Executive Vice President; Chief
Financial
Officer; Director; Assistant Secretary;
Member, Executive Committee
Richard A. Aubrecht 51 Vice Chairman of the Board; Vice
President --
Strategy and Technology; Director;
Member,
Executive Committee
Joe C. Green 55 Executive Vice President; Chief
Administrative
Officer; Director; Member, Executive
Committee
Kenneth D. Garnjost 69 Vice President -- Engineering
Philip H. Hubbell 56 Vice President -- Contracts and Pricing
Stephen A. Huckvale 46 Vice President -- International
Robert H. Maskrey 54 Vice President
Richard C. Sherrill 57 Vice President
William P. Burke 60 Treasurer
John B. Drenning 58 Secretary
Donald R. Fishback 40 Controller
Mr. Robert T. Brady has been with the Company for 30 years.
In 1976, Mr. Brady became Vice President and General Manager of
the Aerospace Division, and subsequently President of the
Aerospace Group in 1981. In 1988, Mr. Brady was elected President
and CEO, and in 1996, he was elected as Chairman of the Board.
Prior to joining the Company in 1966, Mr. Brady served as an
<PAGE>
officer in the U.S. Navy. Mr. Brady received his B.S. in
Mechanical Engineering from M.I.T. and his M.B.A. from the
Harvard Business School.
Mr. Robert R. Banta began his career at the Company in 1983
as Vice President of Finance, and was named to his present
position in 1988. Prior to joining the Company, Mr. Banta was
Executive Vice President of Corporate Banking for M&T Bank.
Mr. Banta received his B.S. from Rutgers University and holds an
M.B.A. from the Wharton School of Finance.
Dr. Richard A. Aubrecht began his career at the Company in
1969. Dr. Aubrecht worked in various engineering and
manufacturing capacities, including two years at the Company's
German subsidiary, before leaving the Company in 1976 to work for
American Hospital Supply. In 1979, he rejoined the Company as
Administrative Vice President and Secretary. In 1988,
Dr. Aubrecht became Chairman of the Board, and subsequently was
elected Vice Chairman of the Board and Vice President of Strategy
and Technology. Dr. Aubrecht studied at the Sibley School of
Mechanical Engineering at Cornell University from 1962 to 1969
where he earned B.S., M.S. and Ph.D. Degrees.
Mr. Joe C. Green began his career at the Company in 1966. In
1973, Mr. Green was named Vice President -- Human Resources, and
was subsequently elected to his current position in 1988. Before
joining the Company, Mr. Green worked for the General Motors
Institute and served as a Captain in the U.S. Army. Mr. Green
received his B.S. from Alfred University in 1962 and completed
graduate study in Industrial Psychology at Heidelberg University
in Germany.
Mr. Kenneth D. Garnjost began his career at the Company in
1954 as Chief Systems Engineer. He has held several positions
during his career, including Technical Assistant to the
President, Chief Engineer and Director of Engineering. He was
appointed Vice President -- Engineering in 1961. Prior to joining
the Company, he was on the staff of the M.I.T. Instrumentation
Laboratory. Mr. Garnjost received his B.S. in Mechanical
Engineering from M.I.T.
Mr. Philip H. Hubbell began his career at the Company in
1965 as Controller of the Hydra-Point Division. In 1968, he
became Controller of the Aerospace/Industrial Groups. In 1978,
Mr. Hubbell was made a Group Vice President, and was appointed
Vice President -- Contracts and Pricing in 1988. Mr. Hubbell
received his B.A. from Duke University.
Dr. Stephen A. Huckvale, Vice President-International, began
his career with the Company in 1980 as Moog Controls Ltd.'s
Engineering Manager. In 1986, Dr. Huckvale became General Manager
of the Pacific Group, and Vice President in 1990. In 1995,
Dr. Huckvale became Vice President -- Moog International. Prior
to joining the Company, Dr. Huckvale worked for Plesy Hydraulics
and the Atkins Research and Development Center. Dr. Huckvale
received his Doctorate in Mechanical Engineering from the
University of Bath in England.
<PAGE>
Mr. Robert H. Maskrey has been with the Company since 1964.
He served in a variety of engineering capacities through 1976.
From 1976 until 1981, Mr. Maskrey was Chief Engineer for the
Electronics & Systems Division. In 1981, Mr. Maskrey joined the
Aircraft Controls Division, of which he became General Manager
and concurrently a Vice President of the Company in 1985. In
1989, Mr. Maskrey became General Manager for the Aircraft
Controls Group. Mr. Maskrey received his M.S. in Mechanical
Engineering from M.I.T.
Mr. Richard C. Sherrill began his career at the Company in
1974 as Materials Manager for the Industrial Controls Group, and
became Manufacturing Manager for the Industrial Division in 1976.
In 1977, he became Operations Manager for the Aerospace Division,
and in 1985, General Manager of the Space Products Division. In
1989, Mr. Sherrill became General Manager for the Systems Group
and, in 1991, a Vice President of the Company. Mr. Sherrill
received his undergraduate degree in Industrial Administration
from Yale University, and his M.B.A. from the Harvard Business
School.
Mr. William P. Burke joined the Company in 1985. Prior to
becoming Treasurer at the Company, Mr. Burke was an
Administrative Vice President of M&T Bank. Mr. Burke received his
B.S. in Civil Engineering and his M.B.A. from Cornell University.
Mr. John B. Drenning became Moog's Secretary in 1988. He
received his law degree from Cornell University and is currently
a Partner in the Buffalo, New York, law firm of Phillips, Lytle,
Hitchcock, Blaine & Huber.
Mr. Donald R. Fishback began his career with the Company in
1981. After working as an Internal Auditor and as a Divisional
Financial Manager, Mr. Fishback became Controller in 1985. Prior
to joining the Company, Mr. Fishback worked for Deloitte, Haskins
and Sells. He is a C.P.A. and holds a B.A. in Business from
Westminster College and an M.B.A. from the State University of
New York at Buffalo.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to
the beneficial ownership of Common Stock as of May 23, 1996 by
(i) each person known to the Company to beneficially own more
than 5% of either class of the Company's outstanding Common
Stock, (ii) each of the Company's directors and certain executive
officers, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned.
<PAGE>
Class A Class B
Common Stock Common Stock(1)
Amount and Amount and
nature of nature of
Name and address of beneficial Percent beneficial Percent
beneficial owner ownership of Class ownership of Class
Moog Family Agreement as to
Voting(2) 177,151 3.3 270,943 17.0
c/o Moog Inc.
Jamison Rd.
East Aurora, NY 14052
David L. Babson & Co., Inc 365,000 6.8 -- --
One Memorial Drive
Cambridge, MA 02142
Moog Inc. Retirement Plan
Trust(3) 304,155 5.7 296,603 18.6
c/o Moog Inc.
Jamison Rd.
East Aurora, NY 14052
Moog Inc. Savings and Stock
Ownership Plan Trust(4) 86,574 1.6 502,258 31.4
c/o Moog Inc.
Jamison Rd.
East Aurora, NY 14052
U.S. Bancorp 606,000 11.3 -- --
111 S.W. Fifth Street
Portland, OR 97208
Pioneering Management
Corporation 480,800 9.0 -- --
60 State Street
Boston, MA 02109
Gabelli Funds, Inc.(5) 516,700 9.6 -- --
One Corporate Center
Rye, New York 10580-1434
Richard A. Aubrecht(6) 41,863 * 24,435 1.5
Robert R. Banta 29,000 * 17,000 1.1
Robert T. Brady(7) 53,636 1.0 29,792 1.8
Joe C. Green 40,632 * 19,810 1.2
John D. Hendrick -- -- 1,000 *
Robert H. Maskrey 41,242 * 20,257 1.3
Kenneth J. McIlraith 6,000 * 8,304 *
Peter P. Poth(8) 500 * 3,804 *
Arthur S. Wolcott(9) 26,085 * 17,184 1.1
All directors and executive
officers as a group (16
persons)(10) 351,123 6.2 181,396 10.5
_______________
* Does not exceed one percent of the class.
(1) Class B shares are convertible into Class A shares on a
share-for-share basis.
(2) Does not include options to acquire 40,500 Class A
shares and 17,000 Class B shares. See "--Moog Family
<PAGE>
Agreement as to Voting" for an explanation as to how
the shares shown in the table as beneficially owned are
voted.
(3) Shares held are voted by the Trustee, Manufacturers and
Traders Trust Company, Buffalo, New York, as directed
by the Moog Inc. Retirement Plan Committee.
(4) Of the shares shown as beneficially owned in the table,
approximately 41,700 unallocated Class B shares held
are voted by the Trustee, Marine Midland Bank, Buffalo,
New York, as directed by the Investment Committee under
the Company's Savings and Stock Ownership Plan. An
additional 460,558 Class B shares and 86,574 Class A
shares allocated to individual participants under the
Plan are voted by the Trustee as directed by such
participants to whom such shares are allocated. Any
allocated shares as to which voting instructions are
not received are voted by the Trustee as directed by
the Investment Committee. As of September 30, 1995,
17,016 of the allocated Class B shares and 1,099 of the
allocated Class A shares belong to officers and are
included in the share totals for all directors and
executive officers as a group.
(5) Information provided is derived from Amendment No. 3 to
a Schedule 13D filed May 1, 1996 with the Securities
and Exchange Commission.
(6) Nancy Moog Aubrecht, wife of Richard A. Aubrecht, is
the beneficial owner of 29,569 Class A shares and
39,658 Class B shares, which are not included.
(7) Not included are 200 Class A shares owned by the spouse
of Robert T. Brady and 1,000 Class A shares and 3,600
Class B shares owned by such spouse as custodian for
their children.
(8) Mr. Poth was Vice Chairman of Delaware North Companies,
Incorporated from November 1991 until he retired in
December 1992, and was its President from February 1,
1989 to October 31, 1991. From July 1983 to December
1987, he was Executive Vice President --
Administration, and from December 1, 1987 to February
1, 1989, he was a business consultant for that company.
(9) Does not include (i) 55,900 Class B shares held by the
Seneca Foods Corporation, (ii) 99,900 Class A shares,
20,300 and Class B shares held by the Seneca Foods
Corporation Employees' Pension Benefit Plan Trust,
(iii) 41,521 Class A shares and options to acquire
45,000 Class A shares, or 26,172 Class B shares and
options to acquire 20,804 Class B shares, beneficially
owned by the directors and executive officers of
Seneca, (iv) 89,700 Class A shares beneficially owned
by the Seneca Foods Foundation, of which Mr. Wolcott is
<PAGE>
Chairman and a director, or (v) 50 Class A shares held
by Mr. Wolcott's spouse.
(10) Includes 298,700 Class A shares and 130,412 Class B
shares subject to currently exercisable options.
Officers and directors of the Company have entered into
an agreement among themselves and with the Company's
Savings and Stock Ownership Plan (the "SSOP"), the
Employees' Retirement Plan and the Company, which
provides that prior to selling Class B shares obtained
through exercise of a nonstatutory option, the
remaining officers and directors, the SSOP, the
Employees' Retirement Plan and the Company have a right
of first refusal to purchase the shares being sold.
Does not include (i) shares held by spouses, or as
custodian or trustee for minors, as to which beneficial
interest has been disclaimed, (ii) shares held under
the Moog Family Agreement as to Voting described
herein, or (iii) shares of Series B Preferred Stock
owned by certain officers of the Company. Each share
of Series B Preferred Stock, which has one vote per
share on matters as to which the class is entitled to
vote, is convertible into .086 Class A share. Under an
agreement dated October 15, 1988, and amended July 20,
1992, the seven holders of the Series B Preferred Stock
appointed as proxies Vice Presidents Richard C.
Sherrill and Robert H. Maskrey, who will vote all
shares of such stock as determined by a majority of
such shares.
Moog Family Agreement As to Voting
The Moog Family Agreement as to Voting is an agreement among
the children, adult grandchildren, son-in-law and daughter-in-law
of the late Jane B. Moog (collectively, the "Family Members").
Albert K. Hill, former counsel to the Company, is also a party.
The agreement relates to all shares of Class A and Class B Common
Stock, presently 177,151 Class A shares and 270,943 Class B
shares, owned of record or beneficially by the Family Members.
Pursuant to the agreement, each Family Member granted an
irrevocable proxy to a committee, which is to cause all such
shares to be voted on any matter as determined by any four of the
committee members. Richard A. Aubrecht, Constance Moog Silliman,
Jeanne M. Moog, Douglas B. Moog, Susan L. Moog and Albert K. Hill
currently constitute this committee. Each committee member may
appoint a successor from among the Family Members.
The agreement restricts the removal of shares from its
provisions, the transfer of shares, and the conversion of Class B
to Class A shares, and continues in effect until December 31,
2015 unless certain specified contingencies occur prior that
date.
DESCRIPTION OF BANK CREDIT FACILITY
The following summary of certain terms of the Bank Credit
Facility does not purport to be complete and is subject to the
<PAGE>
detailed provisions of, and is qualified in its entirety by
reference to, the Credit Agreement, a copy of which has been
filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 filed with the Securities
and Exchange Commission.
The Bank Credit Facility is a $165.0 million facility,
comprised of (i) a $135.0 million revolving credit facility and
(ii) a $30.0 million term loan. The term loan is for a six year
period, with quarterly payments commencing in October 1996. The
revolving credit facility is for a five year period ending
October 1, 2000. Interest accrues on borrowings outstanding under
the Bank Credit Facility at the Company's option at either
(i) the agent bank's prime lending rate plus a margin (up to
0.50%) that varies depending on the consolidated liabilities to
net worth ratio of the Company, or (ii) LIBOR plus a margin that
varies from 1.75% to 1.00% depending on the consolidated
liabilities to net worth ratio of the Company. As of April 8,
1996, the interest rate on borrowings under the Bank Credit
Facility was LIBOR plus 1.75%. To provide protection against
interest rate increases, the Company entered into $100 million of
interest rate swap arrangements, effectively converting $100
million outstanding under the Bank Credit Facility into fixed
rate debt over two years at approximately 8.0%.
The Bank Credit Facility is secured by (i) a first priority
security interest in the Company's and its domestic subsidiaries'
assets and (ii) a pledge of stock of all the Company's domestic
and foreign subsidiaries. The Bank Credit Facility contains
customary covenants including, among others, restrictions on the
incurrence of debt, encumbrances on or sales of assets,
transactions with affiliates, dividends, mergers and acquisitions
and annual limits on capital expenditures. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition and Liquidity."
Financial covenants include the maintenance of (i) a
consolidated liabilities to net worth ratio not exceeding 420%
for any fiscal quarter ending and on or before June 30, 1997,
375% for any fiscal quarter ending after June 30, 1997 and on or
before June 30, 1998, and 325% for any fiscal quarter ending
thereafter, (ii) a minimum EBITDA, as defined in the Credit
Agreement, equal to (A) 250% of the required interest payments on
all indebtedness of the Company and its subsidiaries for the
fiscal year ending September 30, 1996, and (B) 275% for each
fiscal year thereafter, and (iii) the sum of (A) EBITDA for each
fiscal year plus (B) the difference between the revolving loan
maximum principal amount and the total outstanding revolving
loans as of the last day of such fiscal year plus (C) the amount
of cash or cash equivalents as of such day, so that such sum is
at least 200% of the sum of (W) required principal and interest
payments on all indebtedness during such fiscal year (other than
principal payments of revolving loans) plus (X) income taxes paid
during such fiscal year plus (Y) all capital expenditures during
such fiscal year plus (Z) certain distributions made during such
fiscal year (the "EBITDA Covenant"). The Bank Credit Facility
provides that certain changes in control of the Company or any of
its subsidiaries constitute events of default.
<PAGE>
DESCRIPTION OF THE NEW NOTES
The Old Notes were, and the New Notes will be, issued under
an Indenture, dated as of May 10, 1996 (the "Indenture"), between
the Company, as issuer, and Fleet National Bank, as Trustee (the
"Trustee"). The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by reference to the
Trust Indenture Act of 1939, as amended. Whenever particular
defined terms of the Indenture not otherwise defined herein are
referred to, such defined terms are incorporated herein by
reference. For definitions of certain capitalized terms used in
the following summary, see "-- Certain Definitions."
General
The New Notes are unsecured senior subordinated obligations
of the Company, limited to $120 million aggregate principal
amount, and will mature on May 1, 2006. Each New Note will
initially bear interest at 10% per annum from May 10, 1996 or
from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semiannually (to Holders of
record at the close of business on April 15 or October 15
immediately preceding the Interest Payment Date) on May 1 and
November 1 of each year, commencing November 1, 1996. See "--
Registration Rights" for a description of the circumstances under
which the interest rate on the Old Notes may be permanently
increased by 0.5% per annum.
Principal of, premium, if any, and interest on the Notes
will be payable, and the Notes may be exchanged or transferred,
at the office or agency of the Company in the Borough of
Manhattan, the City of New York (which initially will be the
corporate trust office of the Trustee); provided that, at the
option of the Company, payment of interest may be made by check
mailed to the address of the Holders as such address appears in
the Security Register.
The Notes are issuable only in fully registered form,
without coupons, in denominations of $1,000 of principal amount
and any integral multiple thereof. See "-- Book-Entry; Delivery
and Form." No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other
similar governmental charge payable in connection therewith.
Old Notes that remain outstanding after the consummation of
the Exchange Offer and New Notes issued in connection with the
Exchange Offer will be treated as a single class of securities
under the Indenture.
Optional Redemption
The Notes are redeemable, at the Company's option, in whole
or in part, at any time or from time to time, on or after May 1,
<PAGE>
2001 and prior to maturity, upon not less than 30 nor more than
60 days' prior notice mailed by first class mail to each Holder's
last address as it appears in the Security Register, at the
following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to
the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment
Date), if redeemed during the 12-month period commencing May 1 of
the years set forth below:
Redemption
Year Price
2001 105.000%
2002 102.500
2003 and thereafter 100.000
In the case of any partial redemption, selection of the
Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes
are not listed on a national securities exchange, on a pro rata
basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that
no Note of $1,000 in principal amount or less shall be redeemed
in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the
original Note.
Sinking Fund
There are no sinking fund payments for the Notes.
Registration Rights
The Company has agreed with the Placement Agent, for the
benefit of the Holders, that the Company will use its best
efforts, at its cost, to file and cause to become effective a
registration statement with respect to a registered offer (the
"Exchange Offer") to exchange the Notes for an issue of senior
subordinated notes of the Company (the "Exchange Notes") with
terms identical to the Notes (except that the Exchange Notes will
not bear legends restricting the transfer thereof). Upon such
registration statement being declared effective, the Company
shall offer the Exchange Notes in return for surrender of the
Notes. Such offer shall remain open for not less than 20 business
days after the date notice of the Exchange Offer is mailed to
Holders. For each Note surrendered to the Company under the
Exchange Offer, the Holder will receive an Exchange Note of equal
principal amount. Interest on each Exchange Note shall accrue
from the last Interest Payment Date on which interest was paid on
the Notes so surrendered or, if no interest has been paid on such
Notes, from the Closing Date. In the event that applicable
<PAGE>
interpretations of the staff of the Securities and Exchange
Commission (the "Commission") do not permit the Company to effect
the Exchange Offer, or under certain other circumstances, the
Company shall, at its cost, use its best efforts to cause to
become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to resales of the Notes and
to keep such registration statement effective until three years
after the Closing Date. The Company shall, in the event of such a
shelf registration, provide to each Holder copies of the
prospectus, notify each Holder when the Shelf Registration
Statement for the Notes has become effective and take certain
other actions as are required to permit resales of the Notes. A
Holder that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a
holder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated, or
a Shelf Registration Statement is not declared effective, on or
prior to the date that is six months after the Closing Date,
then, from and after the date that is six months after the
Closing Date, the annual interest rate borne by the Notes shall
be permanently increased by 0.5% per annum over the rate shown on
the cover page of this prospectus.
If the Company effects the Exchange Offer, the Company will
be entitled to close the Exchange Offer 20 business days after
the commencement thereof, provided that it has accepted all Notes
theretofore validly surrendered in accordance with the terms of
the Exchange Offer. Notes not tendered in the Exchange Offer
shall bear interest at the rate set forth on the cover page of
this prospectus and be subject to all of the terms and conditions
specified in the Indenture and to the transfer restrictions
described in each such Note.
This summary of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the
provisions of the Registration Rights Agreement, a copy of which
is available from the Company upon request.
Ranking
The Notes will be unsecured, general obligations of the
Company, subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, pari passu in right of
payment with any future senior subordinated indebtedness of the
Company and senior in right of payment to any existing or future
subordinated indebtedness of the Company. In addition, all
existing and future liabilities (including Trade Payables) of the
Company's subsidiaries will be effectively senior to the Notes.
After giving pro forma effect to the Recapitalization and the
application of the proceeds thereof, as of March 31, 1996, the
<PAGE>
Company (excluding its Subsidiaries as defined herein) would have
had approximately $188.7 million of Indebtedness outstanding,
$68.7 million of which would have been Senior Indebtedness and
the Company's Subsidiaries would have had approximately $64.4
million of liabilities, including $22.6 million of Indebtedness
all of which would have been effectively senior to the Notes. See
"Risk Factors -- Leverage," "-- Ranking of the Notes," and
"Capitalization." Notwithstanding the foregoing, payment from the
money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below will not be
contractually subordinated in right of payment to any Senior
Indebtedness or subject to the restrictions described herein.
Upon any payment or distribution of assets or securities of
the Company, of any kind or character, whether in cash, property
or securities, in connection with any dissolution or winding up
or total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings or other marshalling of assets
for the benefit of creditors, all amounts due or to become due
upon all Senior Indebtedness (including any interest accruing
subsequent to an event of bankruptcy, whether or not such
interest is an allowed claim enforceable against the debtor under
the United States Bankruptcy Code) shall first be paid in full,
in cash or cash equivalents, before the Holders or the Trustee on
their behalf shall be entitled to receive any payment by the
Company on account of Senior Subordinated Obligations, or any
payment to acquire any of the Notes for cash, property or
securities, or any distribution with respect to the Notes of any
cash, property or securities. Before any payment may be made by,
or on behalf of, the Company on any Senior Subordinated
Obligations in connection with any such dissolution, winding up,
liquidation or reorganization, any payment or distribution of
assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or
the Trustee on their behalf would be entitled, but for the
subordination provisions of the Indenture, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or
distribution or by the Holders or the Trustee if received by them
or it, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their
representatives or to any trustee or trustees under any indenture
pursuant to which any such Senior Indebtedness may have been
issued, as their respective interests appear, to the extent
necessary to pay all such Senior Indebtedness in full, in cash or
cash equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such
Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company
of Senior Subordinated Obligations, whether pursuant to the terms
of the Notes or upon acceleration or otherwise, shall be made if,
at the time of such payment, there exists a default in the
payment of all or any portion of the obligations on any Senior
Indebtedness, and such default shall not have been cured or
<PAGE>
waived or the benefits of this sentence waived by or on behalf of
the holders of such Senior Indebtedness. In addition, during the
continuance of any other event of default with respect to (i) the
Credit Agreement pursuant to which the maturity of the Company's
Indebtedness thereunder may be accelerated and (a) upon receipt
by the Trustee of written notice from the Agent or (b) if such
event of default under the Credit Agreement results from the
acceleration of the Notes or a Change of Control, from and after
the date of such acceleration, no payment of Senior Subordinated
Obligations may be made by or on behalf of the Company upon or in
respect of the Notes for a period (a "Payment Blockage Period")
commencing on the earlier of the date of receipt of such notice
or the date of such acceleration and ending 179 days thereafter
(unless such Payment Blockage Period shall be terminated by
written notice to the Trustee from the Agent or by repayment in
full in cash or cash equivalents of such Senior Indebtedness or
such event of default has been cured or waived) or (ii) any other
Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, upon receipt by the Trustee of
written notice from the trustee or other representative for the
holders of such other Designated Senior Indebtedness (or the
holders of at least a majority in principal amount of such other
Designated Senior Indebtedness then outstanding), no payment of
Senior Subordinated Obligations may be made by or on behalf of
the Company upon or in respect of the Notes for a Payment
Blockage Period commencing on the date of receipt of such notice
and ending 119 days thereafter (unless, in each case, such
Payment Blockage Period shall be terminated by written notice to
the Trustee from such trustee of, or other representatives for,
such holders or by repayment in full in cash or cash equivalents
of such Designated Senior Indebtedness or such event of default
has been cured or waived). Notwithstanding anything in the
Indenture to the contrary, there must be 180 consecutive days in
any 360-day period in which no Payment Blockage Period is in
effect. No event of default that existed or was continuing (it
being acknowledged that any subsequent event or condition that
would give rise to an event of default pursuant to any provision
under which an event of default previously existed or was
continuing shall constitute a new event of default for this
purpose) on the date of commencement of any Payment Blockage
Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or shall be
made, the basis for the commencement of a second Payment Blockage
Period by the representative for, or the holders of, such
Designated Senior Indebtedness, whether or not within a period of
360 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive
days.
By reason of the subordination provisions described above,
in the event of bankruptcy, liquidation, insolvency or similar
events, creditors of the Company who are not holders of Senior
Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Holders of the
Notes.
<PAGE>
To the extent any payment of Senior Indebtedness (whether by
or on behalf of the Company, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid
to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such
payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent
the obligation to repay any Senior Indebtedness is declared to be
fraudulent, invalid, or otherwise set aside under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise
set aside (and all other amounts that would come due with respect
thereto had such obligation not been affected) shall be deemed to
be reinstated and outstanding as Senior Indebtedness for all
purposes hereof as if such declaration, invalidity or setting
aside had not occurred.
Certain Definitions
Set forth below is a summary of certain of the defined terms
used in the covenants and other provisions of the Indenture.
Reference is made to the Indenture for the full definition of all
terms as well as any other capitalized term used herein for which
no definition is provided.
"Adjusted Consolidated Net Income" means, for any period,
the aggregate net income (or loss) of the Company and its
Restricted Subsidiaries for such period determined in conformity
with GAAP; provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person
(other than the Company or any of its Restricted Subsidiaries)
has an ownership interest and the net income of any Unrestricted
Subsidiary, except, in each case, to the extent of the amount of
dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below (and
in such case, except to the extent includable pursuant to clause
(i) above), the net income (or loss) of any Person accrued prior
to the date it becomes a Restricted Subsidiary or is merged into
or consolidated with the Company or any of its Restricted
Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary
of such net income is not at the time permitted by the operation
of the terms of its charter or any agreement, instrument,
<PAGE>
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales;
(v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant
described below, any amount paid or accrued as dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned
by Persons other than the Company and any of its Restricted
Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses.
"Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. For
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means the agent or agents, as the case may be, for
the lenders from time to time party to the Credit Agreement.
"Asset Acquisition" means (i) an investment by the Company
or any of its Restricted Subsidiaries in any other Person
pursuant to which such Person shall become a Restricted
Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary
to the businesses of the Company and its Restricted Subsidiaries
on the date of such investment or (ii) an acquisition by the
Company or any of its Restricted Subsidiaries of the property and
assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the
property and assets acquired are related, ancillary or
complementary to the businesses of the Company and its Restricted
Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by
the Company or any of its Restricted Subsidiaries (other than to
the Company or another Restricted Subsidiary) of (i) all or
substantially all of the Capital Stock of any Restricted
Subsidiary of the Company or (ii) all or substantially all of the
assets that constitute a division or line of business of the
Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback
transaction) in one transaction or a series of related
transactions by the Company or any of its Restricted Subsidiaries
to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the
<PAGE>
property and assets of an operating unit or business of the
Company or any of its Restricted Subsidiaries or (iii) any other
property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the
Company or such Restricted Subsidiary and, in each case, that is
not governed by the provisions of the Indenture applicable to
mergers, consolidations and sales of assets of the Company;
provided that "Asset Sale" shall not include sales or other
dispositions of inventory, receivables and other current assets.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such
date of determination to the dates of each successive scheduled
principal payment of such debt security and (b) the amount of
such principal payment by (ii) the sum of all such principal
payments.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) in equity of
such Person, whether now outstanding or issued after the Closing
Date, including, without limitation, all Common Stock and
Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which
the discounted present value of the rental obligations of such
Person as lessee, in conformity with GAAP, is required to be
capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the
rental obligations under such lease.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act), other than the Existing Stockholders, becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock representing more than 35% of the
total voting power of the total Voting Stock of the Company on a
fully diluted basis, and such ownership is greater than the total
voting power of the Voting Stock of the Company held by the
Existing Stockholders and their Affiliates; or (ii) individuals
who on the Closing Date constitute the Board of Directors
(together with any new directors whose election by the Board of
Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were
members of the Board of Directors on the Closing Date or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of
the Board of Directors then in office.
"Closing Date" means the date on which the Notes are
originally issued under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income,
<PAGE>
(ii) Consolidated Interest Expense, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income,
(iii) income taxes, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary
and non-recurring gains or losses or sales of assets),
(iv) depreciation expense, to the extent such amount was deducted
in calculating Adjusted Consolidated Net Income, (v) amortization
expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, and (vi) all other non-cash
items reducing Adjusted Consolidated Net Income (other than items
that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less all non-
cash items increasing Adjusted Consolidated Net Income, all as
determined on a consolidated basis for the Company and its
Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal
to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the
quotient of (1) the number of shares of outstanding Common Stock
of such Restricted Subsidiary not owned on the last day of such
period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding Common
Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated Interest Expense" means, for any period
(without duplication), the aggregate amount of interest in
respect of Indebtedness (including amortization of original issue
discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions,
discounts and other fees and charges owed with respect to letters
of credit, bankers' acceptance financings and other financings;
the net costs associated with Interest Rate Agreements; interest
in respect of Indebtedness that is Guaranteed or secured by the
Company or any of its Restricted Subsidiaries; interest in
respect of Indebtedness consisting of the Company's obligations
under the Supplemental Plan which, for any period, shall be
computed at a rate per annum equal to the weighted average of the
rates of interest borne by all other Indebtedness of the Company
and its Restricted Subsidiaries for such period); and the
interest component of capitalized lease obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its
Restricted Subsidiaries during such period; excluding, however,
(i) any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof), (ii) any
amount of such interest expense of any Restricted Subsidiary that
is not a Wholly Owned Restricted Subsidiary if the Adjusted
Consolidated Net Income of such Restricted Subsidiary is excluded
<PAGE>
in the calculation of Consolidated EBITDA pursuant to the proviso
at the end of the definition thereof (but only in the same
proportion as the Adjusted Consolidated Net Income of such
Restricted Subsidiary is excluded from the calculation of
Consolidated EBITDA pursuant to the proviso at the end of the
definition thereof) and (iii) any premiums, fees and expenses
(and any amortization thereof) payable in connection with the
Recapitalization, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of
determination, stockholders' equity as set forth on the most
recently available quarterly or annual consolidated balance sheet
of the Company and its Restricted Subsidiaries (which shall be as
of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Redeemable Stock
or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount
of any promissory notes receivable from the sale of the Capital
Stock of the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with GAAP (excluding the
effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Credit Agreement" means the credit agreement dated June 15,
1994, as amended as of November 14, 1995 and March 22, 1996,
among the Company, the lenders named therein, and Marine Midland
Bank, as Agent, together with all other agreements, instruments
and documents executed or delivered pursuant thereto or in
connection therewith, as such credit agreement, other agreements,
instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time by one
or more other agreements, instruments and documents entered into
with such Persons and/or other Persons; provided, that a
particular agreement (together with its related agreements,
instruments and documents) shall constitute all or a portion of
the Bank Credit Agreement under the Indenture only if a notice to
that effect is delivered by the Company to the Trustee.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) Indebtedness and
all other monetary obligations (including expenses, fees and
other money obligations) under the Credit Agreement and (ii) any
other Indebtedness constituting Senior Indebtedness that, at any
date of determination, has an aggregate principal amount
outstanding of at least $25 million and is specifically
designated by the Company in the instrument creating or
evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Existing Stockholders" means (i) the Persons from time to
time parties to the Moog Family Agreement as to Voting dated
<PAGE>
September 1982, as amended February 26, 1988, (ii) the Moog Inc.
Retirement Plan Trust and (iii) the Moog Inc. Savings and Stock
Ownership Plan Trust.
"Fair Market Value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller
under no compulsion to sell and an informed and willing buyer
under no compulsion to buy, as determined in good faith by
(i) senior management of the Company if the aggregate amount of
the transaction with respect to which Fair Market Value is being
determined does not exceed $10.0 million in value or (ii) the
Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution, if the aggregate amount of the
transaction with respect to which Fair Market Value is being
determined exceeds $10.0 million in value.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Closing Date,
including, without limitation, those set forth in the opinions
and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as approved by a
significant segment of the accounting profession. All ratios and
computations contained or referred to in the Indenture shall be
computed in conformity with GAAP applied on a consistent basis,
except that calculations made for purposes of determining
compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect
to (i) the amortization of any expenses incurred in connection
with the offering of the Notes and (ii) except as otherwise
provided, the amortization of any amounts required or permitted
by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or
by agreements to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for
or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an
"Incurrence" of Indebtedness by reason of a Person becoming a
<PAGE>
Restricted Subsidiary of the Company; provided that neither the
accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including
reimbursement obligations with respect thereto) other than with
respect to the Company and its Restricted Subsidiaries letters of
credit issued in the ordinary course of business and not
exceeding $8 million outstanding at any time, (iv) all
obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is
due more than six months after the date of placing such property
in service or taking delivery and title thereto or the completion
of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the Fair Market Value of such asset at such
date of determination and (B) the amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person,
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate
Agreements, and (ix) with respect to the Company, all obligations
pursuant to the Supplemental Plan. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability
upon the occurrence of the contingency giving rise to the
obligation, provided (A) that the amount outstanding at any time
of any Indebtedness issued with original issue discount is the
face amount of such Indebtedness and (B) that Indebtedness shall
not include any liability for federal, state, local or other
taxes.
"Interest Coverage Ratio" means, on any Transaction Date,
the ratio of (i) the aggregate amount of Consolidated EBITDA for
the then most recent four fiscal quarters prior to such
Transaction Date for which reports have been filed with the
Commission pursuant to the "Commission Reports and Reports to
Holders" covenant (the "Four Quarter Period") to (ii) the
aggregate Consolidated Interest Expense during such Four Quarter
Period. In making the foregoing calculation, (A) pro forma effect
shall be given to any Indebtedness Incurred or repaid during the
period (the "Reference Period") commencing on the first day of
the Four Quarter Period and ending on the Transaction Date (other
than Indebtedness Incurred or repaid under a revolving credit or
similar arrangement to the extent of the commitment thereunder
(or under any predecessor revolving credit or similar
arrangement) in effect on the last day of such Four Quarter
Period adjusted, however, to give pro forma effect to
<PAGE>
(x) repayments resulting from the reduction in such commitment or
Indebtedness Incurred in excess of such commitment, in each case
after the end of such Four Quarter Period and on or before the
Transaction Date, and (y) Indebtedness projected, in the
reasonable judgment of the senior management of the Company, to
remain outstanding for a period in excess of 12 months from the
date of the Incurrence thereof), in each case as if such
Indebtedness had been Incurred or repaid the first day of such
Reference Period; (B) Consolidated Interest Expense attributable
to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating
interest rate shall be computed as if the rate in effect on the
Transaction Date (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months or, if shorter, at
least equal to the remaining term of such Indebtedness) had been
the applicable rate for the entire Reference Period; (C) pro
forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur
during such Reference Period as if they had occurred and such
proceeds had been applied on the first day of such Reference
Period; and (D) pro forma effect shall be given to asset
dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition)
that have been made by any Person that has become a Restricted
Subsidiary or has been merged with or into the Company or any
Restricted Subsidiary during such Reference Period and that would
have constituted Asset Dispositions or Asset Acquisitions had
such transactions occurred when such Person was a Restricted
Subsidiary as if such asset dispositions or asset acquisitions
were Asset Dispositions or Asset Acquisitions that occurred on
the first day of such Reference Period; provided that to the
extent that clause (C) or (D) of this sentence requires that pro
forma effect be given to an asset acquisition or asset
disposition, such pro forma calculation shall be based upon the
four full fiscal quarters immediately preceding the Transaction
Date of the Person, or division or line of business of the
Person, that is acquired or disposed for which financial
information is available ; and provided further that to the
extent that clause (C) or (D) of this sentence requires that pro
forma effect be given to an asset acquisition, such pro forma
calculation shall exclude any expense (net of any expense
increase) which, in the good faith estimate of management, will
(in accordance with GAAP and the rules, regulations and
guidelines of the Commission) be eliminated as a result of such
acquisition.
"Investment" in any person means any direct or indirect
advance, loan or other extension of credit (including, without
limitation, by way of Guarantee or similar arrangement; but
excluding advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any
<PAGE>
purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person
and shall include (i) the designation of a Restricted Subsidiary
as an Unrestricted Subsidiary and (ii) the Fair Market Value of
the Capital Stock (or any other Investment) held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on
Restricted Payments" covenant described below, (i) "Investment"
shall include the Fair Market Value of the assets (net of
liabilities (other than liabilities to the Company or any of its
Restricted Subsidiaries)) of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the Fair Market Value of the assets
(net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention
agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller or any
agreement to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, (a) with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Company or any
Restricted Subsidiary) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net
of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes
(whether or not such taxes will actually be paid or are payable)
as a result of such Asset Sale without regard to the consolidated
results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of
such Asset Sale that either (A) is secured by a Lien on the
property or assets sold or (B) is required to be paid as a result
of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated
<PAGE>
with such Asset Sale, all as determined in conformity with GAAP
and (b) with respect to any issuance or sale of Capital Stock,
the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Company or any
Restricted Subsidiary of the Company) and proceeds from the
conversion of other property received when converted to cash or
cash equivalents, net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions
and brokerage, consultant and other fees incurred in connection
with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Offer to Purchase" means an offer to purchase Notes by the
Company from the Holders commenced by mailing a notice to the
Trustee and each Holder stating: (i) the covenant pursuant to
which the offer is being made and that all Notes validly tendered
will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Payment Date"); (iii) that
any Note not tendered will continue to accrue interest pursuant
to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest
on and after the Payment Date; (v) that Holders electing to have
a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of
the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day
immediately preceding the Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives,
not later than the close of business on the third Business Day
immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes
purchased; and (vii) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. On the
Payment Date, the Company shall (i) accept for payment on a pro
rata basis Notes or portions thereof tendered pursuant to an
Offer to Purchase; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered,
to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions
thereof accepted for payment by the Company. The Paying Agent
shall promptly mail to the Holders of Notes so accepted for
payment an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Note
<PAGE>
equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral
multiples thereof. The Company will publicly announce the results
of an Offer to Purchase as soon as practicable after the Payment
Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in the
Company or a Restricted Subsidiary or a Person which will, upon
the making of such Investment, become a Restricted Subsidiary or
be merged or consolidated with or into or transfer or convey all
or substantially all its assets to, the Company or a Restricted
Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such
Investment; (ii) a Temporary Cash Investment; (iii) payroll,
travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in
accordance with GAAP; (iv) loans or advances to employees made in
the ordinary course of business in accordance with past practice
of the Company or its Restricted Subsidiaries and that do not in
the aggregate exceed $2 million at any time outstanding; and
(v) stock, obligations or securities received in satisfaction of
judgments or in settlements.
"Redeemable Stock" means any class or series of Capital
Stock of any Person that by its terms or otherwise is
(i) required to be redeemed prior to the Stated Maturity of the
Notes, (ii) redeemable at the option of the holder of such class
or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated
Maturity of the Notes; provided that any Capital Stock that would
not constitute Redeemable Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of
the Notes shall not constitute Redeemable Stock if the "asset
sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in the "Limitation on
Asset Sales" and "Repurchase of Notes Upon a Change of Control"
covenants described below and such Capital Stock specifically
provides that such Person will not repurchase or redeem any such
stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and "Repurchase of
Notes Upon a Change of Control" covenants described below.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
<PAGE>
"Senior Indebtedness" means the following obligations of the
Company, whether outstanding on the Closing Date or thereafter
Incurred: (i) all Indebtedness and all other monetary obligations
(including, without limitation, expenses, fees, claims,
indemnifications, reimbursements, liabilities and other monetary
obligations) of the Company under the Credit Agreement ,
(ii) Indebtedness of the Company pursuant to the Supplemental
Plan, and (iii) all other Indebtedness of the Company (other than
the Notes), including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such
Indebtedness is issued is pari passu with, or subordinated in
right of payment to, the Notes; provided that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the
Company that, when Incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code, was
without recourse to the Company, (b) any Indebtedness of the
Company to any of its Subsidiaries or to a joint venture in which
the Company has an interest, (c) any Indebtedness of the Company
not permitted by the Indenture, (d) any repurchase, redemption or
other obligation in respect of Redeemable Stock, (e) any
Indebtedness of the Company to any employee, officer or director
of the Company or any of its Subsidiaries, (f) any liability for
federal, state, local or other taxes owed or owing by the
Company, (g) any Trade Payables of the Company or (h) any
Indebtedness of the Company described in clause (ii) of this
definition to the extent such Indebtedness exceeds $10 million.
Senior Indebtedness will also include interest accruing
subsequent to events of bankruptcy of the Company and its
Subsidiaries at the rate provided for in the document governing
such Senior Indebtedness, whether or not such interest is an
allowed claim enforceable against the debtor in a bankruptcy case
under federal bankruptcy law or similar laws relating to
insolvency.
"Senior Subordinated Obligations" means any principal of,
premium, if any, or interest on the Notes payable pursuant to the
terms of the Notes or upon acceleration, including any amounts
received upon the exercise of rights of rescission or other
rights of action (including claims for damages) or otherwise, to
the extent relating to the purchase price of the Notes or amounts
corresponding to such principal, premium, if any, or interest on
the Notes.
"S&P" means Standard and Poor's Ratings Group and its
successors.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed
date on which the final installment of principal of such debt
security is due and payable and (ii) with respect to any
scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed
date on which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more
<PAGE>
than 50% of the voting power of the outstanding Voting Stock is
owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person.
"Supplemental Plan" means, collectively, the Moog Inc.
Supplemental Retirement Plan and the Moog Inc. Supplemental
Retirement Plan Trust, in each case, as in effect on the Closing
Date or as may be amended from time to time with the approval of
a majority of the disinterested members of the Board of
Directors.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any
agency thereof or obligations fully and unconditionally
guaranteed by the United States of America or any agency thereof,
(ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof, Taiwan or any foreign country recognized by the
United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50
million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing
not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized
and in existence under the laws of the United States of America,
any state thereof, Taiwan or any foreign country recognized by
the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P, and
(v) securities with maturities of two years or less from the date
of acquisition issued or fully and unconditionally guaranteed by
any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by S&P or Moody's.
"Trade Payables" means, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation
to trade creditors created, assumed or Guaranteed by such Person
or any of its Subsidiaries arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted
Subsidiaries, the date such Indebtedness is to be Incurred and,
with respect to any Restricted Payment, the date such Restricted
Payment is to be made.
<PAGE>
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner
provided below; and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or
holds any Lien on any property of, the Company or any Restricted
Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being
so designated shall be deemed an "Incurrence" of such
Indebtedness by the Company or such Restricted Subsidiary (or
both, if applicable) at the time of such designation; (B) either
(I) the Subsidiary to be so designated has total assets of $1,000
or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the "Limitation
on Restricted Payments" covenant described below and (C) if
applicable, the Incurrence of Indebtedness referred to in clause
(A) of this proviso would be permitted under the "Limitation on
Indebtedness" covenant described below. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described below and (y) no Default or
Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote
for the election of directors, managers or other voting members
of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of
such Subsidiary (other than any director's qualifying shares or
Investments by foreign nationals mandated by applicable law) by
such Person or one or more Wholly Owned Subsidiaries of such
Person.
Covenants
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness (other than
the Notes and Indebtedness existing on the Closing Date);
provided that the Company and any Restricted Subsidiary (to the
extent permitted under the "Limitation on the Issuance of Capital
Stock and Indebtedness of Restricted Subsidiaries" covenant
below) may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application
<PAGE>
of the proceeds therefrom, the Interest Coverage Ratio would be
greater than (x) for the period beginning on the Closing Date and
ending on the fourth anniversary thereof, 2.0:1 and
(y) thereafter 2.25:1.
Notwithstanding the foregoing, the Company and any
Restricted Subsidiary (to the extent permitted under the
"Limitation on the Issuance of Capital Stock and Indebtedness of
Restricted Subsidiaries" covenant below) may Incur each and all
of the following: (i) Indebtedness outstanding at any time under
the Credit Agreement in an aggregate principal amount not to
exceed $165 million, less any amount of Indebtedness permanently
repaid as provided under the "Limitation on Asset Sales" covenant
described below; (ii) Indebtedness (A) to the Company evidenced
by an unsubordinated promissory note or (B) to any of its
Restricted Subsidiaries; provided that any event which results in
any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or another Restricted Subsidiary) shall be
deemed, in each case, to constitute an Incurrence of such
Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clauses (i),
(ii), (iv), (vi) or (vii) of this paragraph, and any refinancings
thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, fees and expenses);
provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu
with, or subordinated in right of payment to, the Notes shall
only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced
is pari passu with the Notes, such new Indebtedness, by its terms
or by the terms of any agreement or instrument pursuant to which
such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining
Notes, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or
remains outstanding, is expressly made subordinate in right of
payment to the Notes at least to the extent that the Indebtedness
to be refinanced is subordinated to the Notes and (C) such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life
of such new Indebtedness is at least equal to the remaining
Average Life of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any
Restricted Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements designed solely
to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates or foreign currency exchange
rates; provided that such agreements do not increase the
<PAGE>
Indebtedness of the obligor outstanding at any time other than as
a result of fluctuations in foreign currency exchange rates or
interest rates or by reason of fees, indemnities and compensation
payable thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of
the Company (other than Guarantees of Indebtedness Incurred by
any Person acquiring all or any portion of such business, assets
or Restricted Subsidiary of the Company for the purpose of
financing such acquisition), in a principal amount not to exceed
the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition;
(v) Indebtedness of the Company, to the extent the net proceeds
thereof are promptly used to purchase Notes tendered in an Offer
to Purchase made as a result of a Change of Control;
(vi) Indebtedness of the Company, to the extent the net proceeds
thereof are promptly deposited to defease the Notes as described
below under "Defeasance"; (vii) Guarantees of the Notes ;
(viii) Indebtedness outstanding at any time in an aggregate
principal amount not to exceed $20.0 million; and
(ix) Indebtedness outstanding at any time pursuant to the
Supplemental Plan in an aggregate amount not to exceed $10
million. The Indenture will provide that the Company shall not
Incur Indebtedness pursuant to the Supplemental Plan in an amount
that exceeds $10.0 million.
(b) For purposes of determining any particular amount of
Indebtedness under this "Limitation on Indebtedness" covenant,
(1) Indebtedness Incurred under the Credit Agreement on or prior
to the Closing Date shall be treated as Incurred pursuant to
clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant, and (2) Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount
shall not be included. For purposes of determining compliance
with this "Limitation on Indebtedness" covenant, in the event
that an item of Indebtedness meets the criteria of more than one
of the types of Indebtedness described in the above clauses
(other than Indebtedness referred to in clause (1) of the
preceding sentence), the Company, in its sole discretion, shall
classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such
clauses.
Limitation on Senior Subordinated Indebtedness
The Company will not Incur any Indebtedness that is
expressly made subordinate in right of payment to any Senior
Indebtedness of the Company unless such Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to
which such Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the Notes
pursuant to provisions substantially similar to those contained
<PAGE>
in the "Subordination" provisions of the Indenture; provided that
the foregoing limitation shall not apply to distinctions between
categories of Senior Indebtedness of the Company that exist by
reason of any Liens or Guarantees arising or created in respect
of some but not all of such Senior Indebtedness.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on its Capital Stock (other
than dividends or distributions payable solely in shares of its
Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock
(other than Redeemable Stock)) held by Persons other than the
Company or any of its Wholly Owned Restricted Subsidiaries,
(ii) purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of the Company or a Restricted Subsidiary
(including options, warrants or other rights to acquire such
shares of Capital Stock) held by Persons other than the Company
or any of its Wholly Owned Restricted Subsidiaries, (iii) make
any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition
or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes or (iv) make any
Investment, other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i)
through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted
Payment: (A) a Default or Event of Default shall have occurred
and be continuing, (B) the Company could not Incur at least $1.00
of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be
determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding
income resulting from transfers of assets by the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter
beginning immediately following the Closing Date and ending on
the last day of the last fiscal quarter preceding the Transaction
Date for which reports have been filed pursuant to the
"Commission Reports and Reports to Holders" covenant plus (2) the
aggregate Net Cash Proceeds received by the Company after the
Closing Date from the issuance and sale permitted by the
Indenture of its Capital Stock (other than Redeemable Stock) to a
Person who is not a Subsidiary of the Company or from the
issuance to a Person who is not a Subsidiary of the Company of
any options, warrants or other rights to acquire Capital Stock of
the Company (in each case, exclusive of any Redeemable Stock or
any options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to
<PAGE>
the Stated Maturity of the Notes) plus (3) an amount equal to the
net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale
of any such Investment (except, in each case, to the extent any
such payment or proceeds are included in the calculation of
Adjusted Consolidated Net Income), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investments"), not to
exceed, in each case, the amount of Investments previously made
by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary plus (4) $3 million.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph; (ii) the redemption,
repurchase, defeasance or other acquisition or retirement for
value of Indebtedness that is subordinated in right of payment to
the Notes including premium, if any, and accrued and unpaid
interest with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (iii) of the second paragraph of part
(a) of the "Limitation on Indebtedness" covenant; (iii) the
repurchase, redemption or other acquisition of Capital Stock of
the Company (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a
substantially concurrent offering of, shares of Capital Stock
(other than Redeemable Stock) of the Company; (iv) the making of
any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the
Company which is subordinated in right of payment to the Notes in
exchange for, or out of the proceeds of, a substantially
concurrent offering of, shares of the Capital Stock of the
Company (other than Redeemable Stock); (v) payments or
distributions, to dissenting stockholders pursuant to applicable
law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the
Indenture applicable to mergers, consolidations and transfers of
all or substantially all of the property and assets of the
Company; (vi) the repurchase of shares, or options to purchase
shares, of Capital Stock of the Company from employees, former
employees, directors or former directors of the Company or any of
its Subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the
terms of agreements (including employment agreements) or plans
(or amendments thereto) approved by the Board of Directors under
which such persons purchase or sell or are granted the option to
purchase or sell, shares of such stock; provided, however, that
the aggregate amount of such repurchases shall not exceed
(A) $500,000 in any calendar year or (B) $3 million in the
aggregate; (vii) any repurchase by the Company or any Restricted
Subsidiary of the Capital Stock of Moog Japan Ltd. from any
Person other than the Company or a Subsidiary; provided, however,
that the aggregate amount expended by the Company and its
Restricted Subsidiaries under this clause (vii) shall not exceed
<PAGE>
$3 million; (viii) the repurchase by the Company of 714,600
shares of Class A Common Stock of the Company from Seneca Foods
Corporation at a purchase price of $18 per share pursuant to the
Stock Purchase Agreement dated March 26, 1996 between the Company
and Seneca Foods Corporation; (ix) the declaration and payment
(strictly in accordance with the provisions of Article Third of
the Company's Certificate of Incorporation as in effect on the
Closing Date) of regular periodic dividends on the Company's
outstanding 9% Series B Cumulative Convertible Exchangeable
Preferred Stock; (x) the Investment by the Company or a
Restricted Subsidiary in a joint venture with a U.S. subsidiary
of a European manufacturer of hydraulics systems and components,
which Investment is currently expected not to exceed $2.0
million; or (xi) Investments by the Company and its Restricted
Subsidiaries in an aggregate amount not to exceed $10.0 million.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payments referred to in
clauses (ii), (vii), (viii), (x) and (xi) thereof and an exchange
of Capital Stock for Capital Stock referred to in clause (iii)
thereof or an exchange of Capital Stock for Indebtedness referred
to in clause (iv) thereof), and the Net Cash Proceeds from any
issuance of Capital Stock referred to in clauses (iii) and (iv),
shall be included in calculating whether the conditions of clause
(C) of the first paragraph of this "Limitation of Restricted
Payments" covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption,
repurchase or other acquisition of the Notes, or Indebtedness
that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant
only to the extent such proceeds are not used for such
redemption, repurchase or other acquisition of Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any
kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable
law on any Capital Stock of such Restricted Subsidiary owned by
the Company or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property
or assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances
or restrictions: (i) existing on the Closing Date in the Credit
Agreement, the Indenture or any other agreements in effect on the
Closing Date, and any extensions, refinancings, renewals or
replacements of such agreements; provided that the encumbrances
and restrictions in any such extensions, refinancings, renewals
or replacements are no less favorable in any material respect to
<PAGE>
the Holders than those encumbrances or restrictions that are then
in effect and that are being extended, refinanced, renewed or
replaced; (ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or
restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or
assets of such Person so acquired; (iv) in the case of clause
(iv) of the first paragraph of this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries"
covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or
assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness,
and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or any
Restricted Subsidiary; (v) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary or (vi) contained in agreements governing
the acquisition and/or financing of facilities and improvements
thereto by Moog GmbH. Nothing contained in this "Limitation on
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from restricting the sale or other
disposition of property or assets of the Company of any of its
Restricted Subsidiaries that secure Indebtedness of the Company
or any of its Restricted Subsidiaries.
Limitation on the Issuance of Capital Stock and Indebtedness of
Restricted Subsidiaries
The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell,
any shares of Capital Stock of a Restricted Subsidiary (including
options, warrants or other rights to purchase shares of such
Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary; or (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock
of foreign Restricted Subsidiaries, to the extent required by
applicable law.
The Company will not permit any Restricted Subsidiary
directly or indirectly, to Incur any Indebtedness except
(i) Indebtedness existing on the Closing Date; (ii) Indebtedness
in an amount not to exceed $3 million, the proceeds of which are
used by the Company or any of its Restricted Subsidiaries to
repurchase the Capital Stock of Moog Japan Ltd. held by any
Person other than the Company or any Subsidiary;
<PAGE>
(iii) Indebtedness expressly permitted under clause (ii), (iii)
or (iv) of the second paragraph of subsection (a) of the
"Limitation on Indebtedness" covenant; and (iv) Indebtedness (in
addition to other amounts described in this paragraph)
outstanding at any time in an aggregate principal amount not to
exceed (A) $15 million for the period beginning on the Closing
Date and ending on the third anniversary thereof, and (B) $25
million thereafter. The limitations set forth in this paragraph
are in addition to those set forth in the "Limitation on
Indebtedness" covenant described above.
Limitation on Transactions with Stockholders and Affiliates
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with any holder (or any Affiliate of
such holder) of 5% or more of any class of Capital Stock of the
Company or any Restricted Subsidiary or with any Affiliate of the
Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such
transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement
providing therefor, in a comparable arm's-length transaction with
a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply
to (i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or, (B) for which
the Company or a Restricted Subsidiary delivers to the Trustee a
written opinion of a nationally recognized investment banking
firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any
transaction solely between the Company and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and
customary regular fees to directors of the Company who are not
employees of the Company; or (iv) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the
first paragraph of this "Limitation on Transactions with
Stockholders and Affiliates" covenant and not covered by clause
(ii) or (iii) of this paragraph must be approved or determined to
be fair in the manner provided for (1) in clause (i) (A) or (B)
above if the aggregate amount of such transaction exceeds $1
million in value or (2) in clause (i)(B) above if the aggregate
amount of such transaction exceeds $5 million in value.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted
Subsidiary is at least equal to the Fair Market Value of the
assets sold or disposed of and (ii) at least 85% of the
<PAGE>
consideration received consists of cash or Temporary Cash
Investments. In the event and to the extent that the Net Cash
Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after
the Closing Date in any period of 12 consecutive months exceed
$10 million, then the Company shall or shall cause the relevant
Restricted Subsidiary to (i) within twelve months after the date
Net Cash Proceeds so received exceed $10 million (A) apply (to
the extent required) an amount equal to such excess Net Cash
Proceeds to permanently repay Senior Indebtedness of the Company
or Indebtedness of any Restricted Subsidiary, in each case owing
to a Person other than the Company or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date
of such agreement), in property or assets (other than current
assets) of a nature or type or that are used in a business (or in
a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type
of the property and assets of, or the business of, the Company
and its Restricted Subsidiaries existing on the date of such
investment and (ii) apply (no later than the end of the 12-month
period referred to in clause (i)) such excess Net Cash Proceeds
(to the extent not applied pursuant to clause (i)) as provided in
the following paragraph of this "Limitation on Asset Sales"
covenant. The amount of such excess Net Cash Proceeds required to
be applied (or to be committed to be applied) during such 12-
month period as set forth in clause (i) of the preceding sentence
and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to
Purchase pursuant to this "Limitation on Asset Sales" covenant
totals at least $5 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an
Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds
on such date, at a purchase price equal to 100% of the principal
amount of the Notes, plus, in each case, accrued interest (if
any) to the date of purchase.
Repurchase of Notes upon a Change of Control
The Company must commence, within 30 days of the occurrence
of a Change of Control, and consummate an Offer to Purchase for
all Notes then outstanding, at a purchase price equal to 101% of
the principal amount thereof, plus accrued interest (if any) to
the date of purchase.
There can be no assurance that the Company will have
sufficient funds available at the time of any Change of Control
to make any debt payment (including repurchases of Notes)
required by the foregoing covenant (as well as may be contained
in other securities of the Company which might be outstanding at
the time). The above covenant requiring the Company to repurchase
the Notes will, unless appropriate consents are obtained, require
<PAGE>
the Company to repay all indebtedness then outstanding which by
its terms would prohibit such Note repurchase, either prior to or
concurrently with such Note repurchase.
Commission Reports and Reports to Holders
Whether or not the Company is required to file reports with
the Commission, for so long as any Notes are outstanding, the
Company shall file with the Commission all such reports and other
information as it would be required to file with the Commission
by Sections 13(a) or 15(d) under the Securities Exchange Act of
1934, as amended, if it were subject thereto. See "Available
Information." The Company shall supply the Trustee and each
Holder or shall supply to the Trustee for forwarding to each such
Holder, without cost to such Holder, copies of such reports and
other information.
Events of Default
The following events will be defined as "Events of Default"
in the Indenture: (a) default in the payment of principal of (or
premium, if any, on) any Note when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise,
whether or not such payment is prohibited by the subordination
provisions described above under "Ranking"; (b) default in the
payment of interest on any Note when the same becomes due and
payable, and such default continues for a period of 30 days,
whether or not such payment is prohibited by the subordination
provisions described above under "Ranking"; (c) default in the
performance or breach of the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to
make or consummate an Offer to Purchase in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change
of Control" covenant, whether or not such Offer to Purchase is
prohibited by the subordination provisions described above under
"Ranking"; (d) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the
Indenture or under the Notes (other than a default specified in
clause (a), (b) or (c) above) and such default or breach
continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (e) there occurs with respect to
any issue or issues of Indebtedness of the Company or any
Restricted Subsidiary having an outstanding principal amount of
$5 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment at the final (but not any
interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment
default; (f) any final judgment or order (not covered by
insurance) for the payment of money in excess of $5 million in
<PAGE>
the aggregate for all such final judgments or orders against all
such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the
Company or any Restricted Subsidiary and shall not be paid or
discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the
aggregate amount of all such final judgments or orders
outstanding and not paid or discharged against all such Persons
to exceed $5 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (g) a court having
jurisdiction in the premises enters a decree or order for
(A) relief in respect of the Company or any Restricted Subsidiary
in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any
Restricted Subsidiary or for all or substantially all of the
property and assets of the Company or any Restricted Subsidiary
or (C) the winding up or liquidation of the affairs of the
Company or any Restricted Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or (h) the Company or any Restricted
Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
the Company or any Restricted Subsidiary or for all or
substantially all of the property and assets of the Company or
any Restricted Subsidiary or (C) effects any general assignment
for the benefit of creditors.
If an Event of Default (other than an Event of Default
specified in clause (g) or (h) above that occurs with respect to
the Company) occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes, then outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the
event of a declaration of acceleration because an Event of
Default set forth in clause (e) above has occurred and is
continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default
triggering such Event of Default pursuant to clause (e) shall be
remedied or cured by the Company or the relevant Restricted
Subsidiary or waived by the holders of the relevant Indebtedness
within 30 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (g) or (h)
above occurs with respect to the Company, the principal of,
premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and
<PAGE>
payable without any declaration or other act on the part of the
Trustee or any Holder. The Holders of at least a majority in
principal amount of the outstanding Notes by written notice to
the Company and to the Trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than
the nonpayment of the principal of, premium, if any, and interest
on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of
defaults, see "-- Modification and Waiver."
The Holders of at least a majority in aggregate principal
amount of the outstanding Notes may direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the
Trustee. However, the Trustee may refuse to follow any direction
that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in
good faith may be unduly prejudicial to the rights of Holders of
Notes not joining in the giving of such direction and may take
any other action it deems proper that is not inconsistent with
any such direction received from Holders of Notes. A Holder may
not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the Holder gives the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in
aggregate principal amount of outstanding Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or
Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does
not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day
period, the Holders of a majority in aggregate principal amount
of the outstanding Notes do not give the Trustee a direction that
is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment
of the principal of, premium, if any, or interest on, such Note
or to bring suit for the enforcement of any such payment, on or
after the due date expressed in the Notes, which right shall not
be impaired or affected without the consent of the Holder.
The Indenture will require certain officers of the Company
to certify each year, on or before a date not more than 15 days
after the date on which its Annual Report on Form 10-K (or
successor report) for the immediately preceding fiscal year is
required to be filed with the Commission that a review has been
conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries'
performance under the Indenture and that the Company has
fulfilled all obligations thereunder, or, if there has been a
default in the fulfillment of any such obligation, specifying
each such default and the nature and status thereof. The Company
will also be obligated to notify the Trustee of any default or
defaults in the performance of any covenants or agreements under
the Indenture.
<PAGE>
Consolidation, Merger and Sale of Assets
The Company will not consolidate with, merge with or into,
or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially as an entirety in one transaction or a series of
related transactions) to, any Person or permit any Person to
merge with or into the Company unless: (i) the Company shall be
the continuing Person, or the Person (if other than the Company)
formed by such consolidation or into which the Company is merged
or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing
under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee,
all of the obligations of the Company on all of the Notes and
under the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred
and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis the Company or any Person
becoming the successor obligor of the Notes shall have a
Consolidated Tangible Net Worth equal to or greater than the
Consolidated Tangible Net Worth of the Company immediately prior
to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person
becoming the successor obligor of the Notes, as the case may be,
could Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv)) and Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all
conditions precedent provided for herein relating to such
transaction have been complied with; provided, however, that
clauses (iii) and (iv) above do not apply if, in the good faith
determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of
incorporation of the Company; and provided further that any such
transaction shall not have as one of its purposes the evasion of
the foregoing limitations.
Defeasance
Defeasance and Discharge. The Indenture will provide that
the Company will be deemed to have paid and will be discharged
from any and all obligations in respect of the Notes on the 123rd
day after the deposit referred to below, and the provisions of
the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to
register the transfer or exchange of the Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and
to hold monies for payment in trust) if, among other things,
(A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with
<PAGE>
their terms will provide money in an amount sufficient to pay the
principal of, premium, if any, and accrued interest on the Notes
on the Stated Maturity of such payments in accordance with the
terms of the Indenture and the Notes, (B) the Company has
delivered to the Trustee (i) either (x) an Opinion of Counsel to
the effect that Holders will not recognize income, gain or loss
for federal income tax purposes as a result of the Company's
exercise of its option under this "Defeasance" provision and will
be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred, which
Opinion of Counsel must be based upon (and accompanied by a copy
of) a ruling of the Internal Revenue Service to the same effect
unless there has been a change in applicable federal income tax
law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from
the Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel and (ii) an Opinion of Counsel
to the effect that the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and after the passage
of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law, (C) immediately after giving effect to such deposit on a pro
forma basis, no Event of Default, or event that after the giving
of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing on the date of
such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound, (D) the Company is not prohibited from
making payments in respect of the Notes by the provisions
described under "Ranking" above and (E) if at such time the Notes
are listed on a national securities exchange, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that
the Notes will not be delisted as a result of such deposit,
defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of
Default. The Indenture further will provide that the provisions
of the Indenture will no longer be in effect with respect to
clauses (iii) and (iv) under "Consolidation, Merger and Sale of
Assets" and all the covenants described herein under "Covenants,"
clause (c) under "Events of Default" with respect to such clauses
(iii) and (iv) under "Consolidation, Merger and Sale of Assets,"
clause (d) with respect to such covenants and clauses (e) and (f)
under "Events of Default" shall be deemed not to be Events of
Default, and the provisions described herein under "Ranking" with
respect to the assets held by the Trustee referred to below shall
not apply, upon, among other things, the deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations
that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such
<PAGE>
payments in accordance with the terms of the Indenture and the
Notes, the satisfaction of the provisions described in clauses
(B)(ii), (C), (D) and (E) of the preceding paragraph and the
delivery by the Company to the Trustee of an Opinion of Counsel
to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as
a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on
the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not
occurred.
Defeasance and Certain Other Events of Default. In the
event the Company exercises its option to omit compliance with
certain covenants and provisions of the Indenture with respect to
the Notes as described in the immediately preceding paragraph and
the Notes are declared due and payable because of the occurrence
of an Event of Default that remains applicable, the amount of
money and/or U.S. Government Obligations on deposit with the
Trustee will be sufficient to pay amounts due on the Notes at the
time of their Stated Maturity but may not be sufficient to pay
amounts due on the Notes at the time of the acceleration
resulting from such Event of Default. However, the Company will
remain liable for such payments.
Modification and Waiver
Modifications and amendments of the Indenture may be made by
the Company and the Trustee with the consent of the Holders of
not less than a majority in aggregate principal amount of the
outstanding Notes; provided, however, that no such modification
or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, (ii) reduce the
principal amount of, or premium, if any, or interest on, any
Note, (iii) change the place or currency of payment of principal
of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or
after the Redemption Date) of any Note, (v) reduce the above-
stated percentage of outstanding Notes the consent of whose
Holders is necessary to modify or amend the Indenture,
(vi) modify the subordination provisions in a manner adverse to
the Holders, (vii) waive a default in the payment of principal
of, premium, if any, or interest on the Notes or (viii) reduce
the percentage or aggregate principal amount of outstanding Notes
the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver
of certain defaults.
No Personal Liability of Incorporators, Stockholders, Officers,
Directors, or Employees
The Indenture provides that no recourse for the payment of
the principal of, premium, if any, or interest on any of the
Notes or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant
<PAGE>
or agreement of the Company in the Indenture, or in any of the
Notes or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, stockholder,
officer, director, employee or controlling person of the Company
or of any successor Person thereof. Each Holder, by accepting the
Notes, waives and releases all such liability.
Concerning the Trustee
The Indenture provides that, except during the continuance
of a Default, the Trustee will not be liable, except for the
performance of such duties as are specifically set forth in such
Indenture. If an Event of Default has occurred and is continuing,
the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of
1939, as amended, incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect
of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however,
that if it acquires any conflicting interest, it must eliminate
such conflict or resign.
Book-Entry; Delivery and Form
The certificates representing the New Notes will be issued
in fully registered form without interest coupons. Old Notes sold
in offshore transactions in reliance on Regulation Old S under
the Securities Act were initially represented by a single
permanent global Note in definitive, fully registered form
without interest coupons ("Regulation S Global Note") and were
deposited with the Trustee as custodian for, and registered in
the name of, a nominee of DTC for the accounts of Euroclear and
Cedel. Notes sold in reliance on Rule 144A were initially
represented by a single permanent global Note in definitive,
fully registered form without interest coupons ("Rule 144A Global
Note" with the Regulation S Global Note, the "Restricted Global
Notes") and were deposited with the relevant Trustee as custodian
for, and registered in the name of, a nominee of DTC.
Each Restricted Global Note is subject to certain
restrictions on transfer set forth therein. Except in the
limited circumstances described below under "Certificated Notes,"
owners of beneficial interests in a Restricted Global Note will
not be entitled to receive physical delivery of Certificated
Notes (as defined below).
Old Notes originally purchased by or transferred to
Institutional Accredited Investors who are not qualified
institutional buyers ("Non-Global Purchasers") were in registered
form without interest coupons ("Certificated Notes"). Upon the
transfer of Certificated Notes initially issued to a Non-Global
<PAGE>
Purchaser to a qualified institutional buyer, such Certificated
Notes will, unless the Restricted Global Note has previously been
exchanged in whole for Certificated Notes, be exchanged for an
interest in such Restricted Global Note.
Ownership of beneficial interests in a Global Note will be
limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of
beneficial interests in a Global Note will be shown on, and the
transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to
interests of persons other than participants). Qualified
institutional buyers may hold their interests in a Restricted
Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are
participants in such system.
Investors may hold their interests in a Regulation S Global
Note directly through Cedel or Euroclear, if they are
participants in such systems, or indirectly through organizations
that are participants in such system. Upon the commencement of
the Exchange Offer, but not earlier, investors may also hold such
interests through organizations other than Cedel or Euroclear
that are participants in the DTC system. Cedel and Euroclear will
hold interests in the Regulation S Global Note on behalf of their
participants through DTC.
So long as DTC, or its nominee, is the registered owner or
holder of a Global Note, DTC or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes
represented by such Global Note for all purposes under the
Indenture and the Notes. No beneficial owner of an interest in a
Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those
provided for under the Indenture and, if applicable, those of
Euroclear and Cedel.
Payments of the principal of, and interest on, a Global Note
will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee nor
any Paying Agent will have any responsibility or liability for
any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for
maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of
any payment of principal or interest in respect of a Global Note,
will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the
principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with
<PAGE>
securities held for the accounts of customers registered in the
names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in
the ordinary way in accordance with DTC rules and will be settled
in same-day funds. Transfers between participants in Euroclear
and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
The Company expects that DTC will take any action permitted
to be taken by a holder of Notes (including the presentation of
Notes for exchange as described below) only at the direction of
one or more participants to whose account the DTC interests in a
Global Note is credited and only in respect of such portion of
the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC
will exchange the applicable Global Note for Certificated Notes,
which it will distribute to its participants and which, in the
case of Old Notes, may be legended as required pursuant to
applicable exemptions from registration."
The Company understands that: DTC is a limited purpose trust
company organized under the laws of the State of New York, a
"banking organization" within the meaning of New York Banking
Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code
and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and
settlement of securities transactions between participants
through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement
of certificates and certain other organizations. Indirect access
to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC, Euroclear and Cedel are expected to follow the
foregoing procedures in order to facilitate transfers of
interests in a Global Note among participants of DTC, Euroclear
and Cedel, they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued
at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel or
their respective participants or indirect participants of their
respective obligations under the rules and procedures governing
their operations.
Certificated Notes
If DTC is at any time unwilling or unable to continue as a
depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, the Company will issue
<PAGE>
Certificated Notes, which, in the case of Old Notes, may be
legended as required by applicable exemptions from registration,
in substitution for the Global Notes.
CERTAIN FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the principal
United States federal income tax consequences of the purchase,
ownership and disposition of the Notes to initial purchasers
thereof who are United States Holders (as defined below) and the
principal United States federal income and estate tax
consequences of the ownership of the Notes to initial purchasers
who are Foreign Holders (as defined below). This discussion is
based on currently existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing, temporary and
proposed Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are
subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax
consequences to subsequent purchasers of Notes, and is limited to
purchasers who hold the Notes as capital assets, within the
meaning of section 1221 of the Code. This discussion also does
not address the tax consequences to Foreign Holders that are
subject to United States federal income tax on a net basis on
income realized with respect to a Note because such income is
effectively connected with the conduct of a U.S. trade or
business. Such Foreign Holders are generally taxed in a similar
manner to United States Holders; however, certain special rules
apply. Moreover, this discussion is for general information only,
and does not address all of the tax consequences that may be
relevant to particular initial purchasers in light of their
personal circumstances, or to certain types of initial purchasers
(such as certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities or persons who have
hedged the risk of owning a Note).
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE
APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN
APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF.
United States Federal Income Taxation of United States Holders
As used herein, the term "United States Holder" means a holder of
a Note that is, for United States federal income tax purposes,
(a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in
or under the laws of the United States or any political
subdivision thereof or (c) an estate or trust the income of which
is subject to United States federal income taxation regardless of
source.
<PAGE>
Payment of Interest on Notes
Interest paid or payable on a Note will be taxable to a
United States Holder as ordinary interest income, generally at
the time it is received or accrued, in accordance with such
holder's regular method of accounting for United States federal
income tax purposes.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange, redemption, retirement at maturity
or other disposition of a Note, a United States Holder will
generally recognize taxable gain or loss equal to the difference
between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such
cash or property is attributable to accrued but unpaid interest,
which will be taxable as ordinary income) and such United States
Holder's adjusted tax basis in the Note. A United States Holder's
adjusted tax basis in a Note generally will equal the cost of the
Note to such United States Holder, less any principal payments
received by such United States Holder.
Gain or loss recognized on the disposition of a Note
generally will be capital gain or loss and will be long-term
capital gain or loss if, at the time of such disposition, the
United States Holder's holding period for the Note is more than
one year.
The exchange of a Note by a United States Holder for an
Exchange Note should not constitute a taxable exchange. Under
certain proposed Treasury regulations issued in December 1992
relating to modifications and exchanges of debt instruments, any
increase or decrease in the interest rate of the Notes resulting
from an Exchange Offer not being consummated, or a Shelf
Registration Statement not being declared effective, on or prior
to the date that is six months after the Closing Date would not
be treated as a taxable exchange, as such change in interest rate
would occur pursuant to the original terms of the Notes.
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements
may apply to certain payments of principal, premium, if any, and
interest on a Note, and to proceeds of the sale or redemption of
an obligation before maturity. The Company, its agent, a broker,
the Trustee or any paying agent, as the case may be, will be
required to withhold from any payment that is subject to backup
withholding a tax equal to 31% of such payment if a United States
Holder fails to furnish his taxpayer identification number
(social security or employer identification number), certify that
such number is correct, certify that such holder is not subject
to backup withholding, or otherwise comply with the applicable
requirements of the backup withholding rules. Certain United
States Holders, including all corporations, are not subject to
backup withholding and reporting requirements. Any amounts
withheld under the backup withholding rules from a payment to a
<PAGE>
United States Holder will be allowed as a credit against such
United States Holder's United States federal income tax and may
entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service ("IRS").
United States Federal Income Taxation of Foreign Holders
As used herein, the term "Foreign Holder" means a holder of
a Note that is, for United States federal income tax purposes,
(i) a nonresident alien individual, (ii) a foreign corporation,
(iii) a nonresident alien fiduciary of a foreign estate or trust
or (iv) a foreign partnership one or more of the members of which
is, for United States federal income tax purposes, a nonresident
alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
Payment of Interest on Notes
In general, payments of interest received by a Foreign
Holder will not be subject to a United States federal withholding
tax, provided that (a)(i) the Foreign Holder does not actually or
constructively own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, (ii) the
Foreign Holder is not a controlled foreign corporation that is
related to the Company actually or constructively through stock
ownership (iii) the Foreign Holder is not a bank receiving
interest described in Section 881(c)(3)(A) of the Code, and
(iv) either (x) the beneficial owner of the Note, under penalties
of perjury, provides the Company or its agent with such
beneficial owner's name and address and certifies on IRS Form W-8
(or a suitable substitute form) that it is not a United States
Holder or (y) a securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial
institution") holds the Note and provides a statement to the
Company or its agent under penalties of perjury in which it
certifies that such an IRS Form W-8 (or a suitable substitute)
has been received by it from the beneficial owner of the Notes or
qualifying intermediary and furnishes the Company or its agent a
copy thereof or (b) the Foreign Holder is entitled to the
benefits of an income tax treaty under which interest on the
Notes is exempt from United States withholding tax and the
Foreign Holder of such Foreign Holder's agent provides a properly
executed IRS Form 1001 claiming the exemption. Payments of
interest not exempt from United States federal withholding tax as
described above will be subject to such withholding tax at the
rate of 30% (subject to reduction under an applicable income tax
treaty).
Sale, Exchange or Retirement of the Notes
A Foreign Holder generally will not be subject to United
States federal income tax (and generally no tax will be withheld)
with respect to gain realized on the sale, exchange, redemption,
retirement at maturity or other disposition of Notes, unless the
<PAGE>
Foreign Holder is an individual who is present in the United
States for a period or periods aggregating 183 or more days in
the taxable year of the disposition and, generally, either has a
"tax home" or an "office or other fixed place of business" in the
United States.
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements do
not apply to payments of interest made by the Company or a paying
agent to Foreign Holders if the certification described above
under "United States Taxation of Foreign Holders -- Payment of
Interest on Notes" is received, provided that the payor does not
have actual knowledge that the holder is a United States Holder.
If any payments of principal and interest are made to the
beneficial owner of a Note by or through the foreign office of a
foreign custodian, foreign nominee or other foreign agent of such
beneficial owner, or if the foreign office of a foreign "broker"
(as defined in applicable Treasury regulations) pays the proceeds
of the sale of a Note or a coupon to the seller thereof, backup
withholding and information reporting will not apply. Information
reporting requirements (but not backup withholding) will apply,
however, to a payment by a foreign office of a broker that is a
United States person, that derives 50% or more of its gross
income for certain periods from the conduct of a trade or
business in the United States, or that is a "controlled foreign
corporation" (generally, a foreign corporation controlled by
certain United States shareholders) with respect to the United
States, unless the broker has documentary evidence in its records
that the holder is a Foreign Holder and certain other conditions
are met, or the holder otherwise establishes an exemption.
Payment by a United States office of a broker is subject to both
backup withholding at a rate of 31% and information reporting
unless the holder certifies under penalties of perjury that it is
a Foreign Holder, or otherwise establishes an exemption.
The foregoing description of the procedures for withholding
tax on interest payments, and associated backup withholding and
information reporting rules, are currently being reviewed by the
IRS and are expected to be the subject of new proposed
regulations. The expected proposed regulations may propose
changes to the treatment of Foreign Holders described above.
Federal Estate Taxes
Subject to applicable estate tax treaty provisions, Notes
held at the time of death (or theretofore transferred subject to
certain retained rights or powers) by an individual who at the
time of death is a Foreign Holder will not be included in such
Foreign Holder's gross estate for United States federal estate
tax purposes provided that the individual does not actually or
constructively own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote or hold
the Notes in connection with a U.S. trade or business.
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
New Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resales.
The Company will not receive any proceeds from any sale of
New Notes by broker-dealers. New Notes received by broker-
dealers for their own account pursuant to the Exchange Offer may
be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the
writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of
resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such New Notes
may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and
any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer
are being passed upon for the Company by Phillips, Lytle,
Hitchcock, Blaine & Huber, Buffalo, New York. John B. Drenning,
Secretary of the Company, is a partner in Phillips, Lytle,
Hitchcock, Blaine & Huber and a shareholder of the Company.
EXPERTS
The consolidated financial statements and schedule of Moog
Inc. as of September 30, 1994 and 1995 and for each of the years
in the three-year period ended September 30, 1995 have been
included herein and in the Registration Statement in reliance on
the reports of KPMG Peat Marwick LLP, independent certified
public accountants, and Coopers & Lybrand, independent public
<PAGE>
accountants, appearing elsewhere herein and in the Registration
Statement, and upon the authority of said firms as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP
covering the September 30, 1994 consolidated financial statements
refers to changes in the method of accounting for income taxes
and postretirement benefits other than pensions.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
No.
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1995 and 1996 (unaudited) F-2
Consolidated Condensed Statements of Income
Six Months Ended March 31, 1995 and 1996 (unaudited) F-3
Consolidated Condensed Balance Sheets
September 30, 1995 and March 31, 1996 (unaudited) F-4
Consolidated Condensed Statements of Cash Flows
Six Months Ended March 31, 1995 and 1996 (unaudited) F-5
Notes to Consolidated Condensed Financial Statements
(unaudited) F-6
Reports of Independent Auditors F-11
Consolidated Statements of Income
Years Ended September 30, 1993, 1994 and 1995 F-17
Consolidated Balance Sheets
September 30, 1994 and 1995 F-18
Consolidated Statements of Cash Flows
Years Ended September 30, 1993, 1994 and 1995 F-20
Consolidated Statements of Shareholders' Equity
Years Ended September 30, 1993, 1994 and 1995 F-22
Notes to Consolidated Financial Statements F-24
F-1
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Unaudited
Three Months Ended
March 31
1995 1996
NET SALES $ 91,372 $ 106,822
OTHER INCOME 351 838
_________ ________
91,723 107,660
_________ ________
COSTS AND EXPENSES
Cost of sales 63,213 74,498
Research and development expenses 4,139 4,680
Selling, general and administrative
expenses 17,547 19,629
Interest expense 4,312 4,344
Foreign exchange gain (77) (108)
Other expenses 118 186
________ ________
89,252 103,229
________ ________
EARNINGS BEFORE INCOME TAXES 2,471 4,431
INCOME TAXES 508 1,387
________ ________
NET EARNINGS $ 1,963 $ 3,044
========= =========
EARNINGS PER COMMON SHARE $ .25 $ .40
========= =========
AVERAGE COMMON SHARES OUTSTANDING 7,720,052 7,673,405
========= =========
See accompanying notes to Consolidated Condensed Financial Statements.
F-2
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Unaudited
Six Months Ended
March 31
1995 1996
NET SALES $ 178,289 $ 200,055
OTHER INCOME 920 1,356
__________ __________
179,209 201,411
__________ __________
COSTS AND EXPENSES
Cost of sales 125,106 139,205
Research and development expenses 8,292 8,685
Selling, general and administrative
expenses 33,057 37,443
Interest expense 8,699 8,301
Foreign exchange gain (67) (152)
Other expenses 176 272
__________ __________
175,263 193,754
__________ __________
EARNINGS BEFORE INCOME TAXES 3,946 7,657
INCOME TAXES 799 2,263
__________ __________
NET EARNINGS $ 3,147 $ 5,394
========== ==========
EARNINGS PER COMMON SHARE $ .41 $ .70
========== ==========
AVERAGE COMMON SHARES OUTSTANDING 7,719,735 7,700,456
========== ==========
See accompanying notes to Consolidated Condensed Financial Statements.
F-3
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
Audited Unaudited
As of As of
September 30, March 31,
1995 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,576 $ 9,749
Receivables, net 148,915 149,664
Inventories (note 5) 86,176 97,423
Deferred income taxes 16,816 17,396
Prepaid expenses and other
current assets 2,275 2,271
________ ________
TOTAL CURRENT ASSETS 261,758 276,503
PROPERTY, PLANT AND EQUIPMENT, net 139,131 135,335
INTANGIBLE ASSETS, net 16,310 18,748
OTHER ASSETS 7,758 7,817
________ ________
TOTAL ASSETS $424,957 $438,403
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 6,606 $ 4,919
Current installments of long-term
debt and convertible subordinated
debentures (note 3) 7,080 11,211
Accounts payable 25,781 25,048
Accrued salaries, wages and
commissions 21,065 22,986
Contract loss reserves 12,872 10,990
Other accrued liabilities 11,433 17,691
Customer advances 9,936 10,396
________ ________
TOTAL CURRENT LIABILITIES 94,773 103,241
LONG-TERM DEBT, less current
installments (note 3) 158,075 161,583
LONG-TERM PENSION OBLIGATION 23,794 24,761
OTHER LONG-TERM LIABILITIES 430 132
DEFERRED INCOME TAXES 19,674 19,605
CONVERTIBLE SUBORDINATED DEBENTURES,
less current installments (note 3) 18,000 16,600
F-4
<PAGE>
Audited Unaudited
As of As of
September 30, March 31,
1995 1996
MINORITY INTEREST IN SUBSIDIARY
COMPANY 1,575 1,506
________ ________
TOTAL LIABILITIES 316,321 327,428
________ ________
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY (note 8)
Preferred stock 100 100
Common stock 9,134 9,134
Other shareholders' equity 99,402 101,741
________ ________
TOTAL SHAREHOLDERS' EQUITY 108,636 110,975
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $424,957 $438,403
======== ========
See accompanying notes to Consolidated Condensed Financial Statements.
F-5
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
Six Months Ended
March 31
1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,147 $ 5,394
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 9,834 9,913
Provisions for losses 951 2,595
Deferred income taxes 1,323 (348)
Other (17) 99
Changes in assets and liabilities
providing (using) cash:
Receivables (9,119) (2,669)
Inventories (4,312) (13,231)
Prepaid expenses and other assets 2,071 (638)
Accounts payable and accrued expenses (1,664) 5,334
Other liabilities 543 1,370
Accrued income taxes 689 489
Customer advances (2,429) 464
________ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,017 8,772
________ ________
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 (3,549) (4,775)
Proceeds from sale of assets 219 82
Other 153 132
________ ________
NET CASH USED BY INVESTING ACTIVITIES (3,177) (9,573)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in notes payable (2,894) (1,956)
Net proceeds from revolving lines of credit 5,000 7,475
Proceeds from issuance of long-term debt 4,610 3,194
Payments on long-term debt (4,342) (2,590)
Redemption of convertible subordinated
debentures (1,400) (1,400)
Dividends paid (5) (5)
Common stock repurchase - (1,600)
Proceeds from issuance of treasury stock 14 30
________ ________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 983 3,148
________ ________
Effect of exchange rate changes on cash 153 (174)
________ ________
F-6
<PAGE>
Six Months Ended
March 31
1995 1996
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,024) 2,173
Cash and cash equivalents at
beginning of period 7,561 7,576
________ ________
Cash and cash equivalents at end
of period $ 6,537 $ 9,749
======== ========
See accompanying notes to Consolidated Condensed Financial Statements.
F-7
<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;
F-8
<PAGE>
(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");
(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
F-9
<PAGE>
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
$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 $ 133,115 $ 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:
September 30 March 31
1995 1996
Raw materials and purchased parts $23,028 $28,489
Work in process 52,839 56,568
Finished goods 10,309 12,366
_______ _______
$86,176 $97,423
======= =======
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
F-10
<PAGE>
1950's. Over the past thirty years, the Ultra product line
has benefited 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.
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
1995 1996
Cash paid (received) during the
period for:
Interest $7,925 $5,940
Income taxes (3,385) 1,608
Non cash investing and financing
activities:
Leases capitalized, net of
leases terminated 176 597
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 - - -
F-11
<PAGE>
Number of Shares
Class A Class B
Preferred Common Common
Amount Shares Stock Stock
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>
F-12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors of Moog Inc.:
We have audited the accompanying consolidated balance sheets
of Moog Inc. and subsidiaries as of September 30, 1994 and 1995,
and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the years in the three-year
period ended September 30, 1995. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the
financial statements of certain wholly-owned consolidated
subsidiaries, which statements reflect total assets constituting
13% as of September 30, 1994 and 1995, and total net sales
constituting 22%, 18% and 17% of the related consolidated totals
for the years ended September 30, 1993, 1994 and 1995,
respectively. Those statements 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, 1994
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, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 9 to the consolidated financial
statements, the Company changed its method of accounting for
income taxes in 1994 to adopt the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." As discussed in Note 11, the Company has also adopted the
provisions of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" in 1994.
KPMG PEAT MARWICK LLP
Buffalo, New York
November 22, 1995
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
MOOG INC.
East Aurora, New York 14052-0018
U. S. A.
November 22, 1995
The Board of Directors
Moog Inc.:
We have audited the consolidated balance sheets of Moog GmbH (a
wholly-owned subsidiary of Moog Inc.) and subsidiary (Moog
Italiana SRL) as of September 30, 1994 and 1995, and the related
consolidated statements of income, shareholder's equity, and cash
flows for each of the years in the three-year period ended
September 30, 1995 (not presented separately herein). These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted 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 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 GmbH and subsidiary as of September 30, 1994 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, 1995, in conformity with accounting principles generally
accepted in the United States.
Our audits were made for the purposes of forming an opinion on
the consolidated financial statements taken as a whole, the
supplemental information in exhibits A through H and Schedule 1
through 22 are presented for purposes of additional analysis and
are not a required part of the basic financial statements (not
presented separately herein). 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 whole.
Coopers & Lybrand GmbH
Wirtschaftsptufungsgesellschaft
F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Moog Inc.
East Aurora
New York
USA
November 22, 1995
Dear Sirs:
We have audited the consolidated balance sheets of Moog Controls
Limited (a wholly-owned subsidiary of Moog Inc.) and subsidiaries
as of September 30, 1994 and 1995, and the related consolidated
statements of income, shareholder's equity, and cash flows for
each of the years in the three-year period ended September 30,
1995 (not presented separately herein). These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on 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
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 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, 1994 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, 1995, 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 Schedules marked by us as "For
identification purposes only" are presented for purposes of
additional analysis and may not be a required part of the basic
financial statements (not presented separately herein). 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 so far
as the information in them relates to the basic consolidated
financial statements taken as whole.
Coopers & Lybrand
Chartered Accountants
Gloucester, UK
F-15
<PAGE>
MOOG INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
Years ended September 30,
1993 1994 1995
NET SALES $293,680 $307,370 $374,284
OTHER INCOME 2,663 2,489 2,166
_______ _______ _______
296,343 309,859 376,450
_______ _______ _______
COSTS AND EXPENSES
Cost of sales 206,985 213,530 265,033
Research and development expenses 16,128 18,668 15,783
Selling, general and administrative
expenses 52,723 58,324 68,457
Interest expense 10,974 11,402 17,492
Foreign currency exchange loss (gain) 60 (451) 143
Other expenses 853 665 752
Inventory obsolescence charge (note 4) -- 2,574 --
Restructuring charges (note 10) -- 2,107 --
_______ _______ _______
287,723 306,819 367,660
_______ _______ _______
EARNINGS BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 8,620 3,040 8,790
INCOME TAXES (note 9) 3,502 1,422 1,029
_______ _______ _______
EARNINGS BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 5,118 1,618 7,761
EXTRAORDINARY ITEM, LOSS FROM EARLY
EXTINGUISHMENT OF DEBT,
NET OF INCOME TAXES OF $119 (note 7) (357) -- --
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (note 9) -- 505 --
_______ _______ _______
NET EARNINGS $ 4,761 $ 2,123 $ 7,761
======= ======= =======
EARNINGS PER COMMON SHARE:
Before extraordinary item and
cumulative effect of change
in accounting principle $.66 $.21 $1.00
Extraordinary item (.04) -- --
Cumulative effect of change in
accounting principle -- .06 --
_______ _______ _______
Earnings per Common Share $.62 $.27 $1.00
========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING 7,713,465 7,714,444 7,721,927
See accompanying Notes to Consolidated Financial Statements.
F-16
<PAGE>
MOOG INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
As of September 30,
1994 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $7,561 $7,576
Receivables, net (note 3) 144,197 148,915
Inventories (note 4) 78,642 86,176
Deferred income taxes 15,392 16,816
Prepaid expenses and other current assets 8,445 2,275
_______ _______
TOTAL CURRENT ASSETS 254,237 261,758
PROPERTY, PLANT AND EQUIPMENT, net
(notes 5, 7, and 8) 146,472 139,131
INTANGIBLE ASSETS, net of accumulated
amortization of $1,520 in 1994,
and $3,213 in 1995 18,154 16,310
OTHER ASSETS 5,593 7,758
_______ _______
TOTAL ASSETS $424,456 $424,957
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (note 6) $9,569 $6,606
Current installments of long-term debt
and convertible subordinated
debentures (note 7) 15,201 7,080
Accounts payable 21,339 25,781
Accrued salaries, wages and commissions 20,641 21,065
Contract loss reserves 14,964 12,872
Other accrued liabilities 11,605 11,433
Customer advances 10,070 9,936
_______ _______
TOTAL CURRENT LIABILITIES 103,389 94,773
LONG-TERM DEBT, excluding current
installments (note 7) 160,006 158,075
LONG-TERM PENSION OBLIGATION (note 11) 20,093 23,794
OTHER LONG TERM LIABILITIES 1,195 430
DEFERRED INCOME TAXES 16,671 19,674
CONVERTIBLE SUBORDINATED DEBENTURES,
excluding current installments
(note 7) 19,400 18,000
MINORITY INTEREST IN SUBSIDIARY COMPANY 1,518 1,575
_______ _______
TOTAL LIABILITIES 322,272 316,321
_______ _______
F-17
<PAGE>
As of September 30,
1994 1995
COMMITMENTS AND CONTINGENCIES (note 16) -- --
SHAREHOLDERS' EQUITY (notes 11, 12, and 13)
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 6,599,206 shares in
1994 and in 1995 6,599 6,599
Class B -- Authorized 10,000,000 shares.
Convertible to Class A on a
one for one basis. Issued 2,534,917
shares in 1994 and in
1995 2,535 2,535
Additional paid-in capital 47,737 47,709
Retained earnings 56,373 64,125
Treasury shares (17,929) (17,841)
Equity adjustments 7,867 6,158
Loan to Savings and Stock Ownership Plan (1,098) (749)
_______ _______
TOTAL SHAREHOLDERS' EQUITY 102,184 108,636
_______ _______
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $424,456 $424,957
======= =======
See accompanying Notes to Consolidated Financial Statements.
F-18
<PAGE>
MOOG INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Years ended September 30,
1993 1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $4,761 $2,123 $7,761
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 15,621 15,700 19,675
Provisions for losses 5,839 5,860 3,761
Deferred income taxes (211) 4,926 1,565
Other 40 418 (84)
Change in assets and liabilities
providing (using) cash:
Receivables (2,906) (10,813) (7,876)
Inventories (969) (1,376) (8,627)
Other assets 1,665 (4,844) 952
Accounts payable and accrued
expenses (12,059) 3,520 (3,454)
Other liabilities 3,094 (4,290) 1,381
Accrued income taxes (353) (1) 265
Customer advances (1,384) (127) (144)
_______ _______ _______
NET CASH PROVIDED BY OPERATING
ACTIVITIES 13,138 11,096 15,175
_______ _______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Product Lines,
including 1995 purchase price settlement
(note 2) -- (78,000) 9,200
Purchase of property, plant and
equipment (9,887) (7,741) (9,974)
Proceeds from sale of assets 9,538 527 362
Payments received on loan to Savings
and Stock Ownership Plan 161 176 349
_______ _______ _______
NET CASH USED IN INVESTING
ACTIVITIES (188) (85,038) (63)
_______ _______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in notes payable (486) (10,635) (2,738)
Proceeds from revolving lines of
credit 31,852 70,000 --
Payments on revolving lines of
credit (21,521) (151) (1,000)
F-19
<PAGE>
Years ended September 30,
1993 1994 1995
Proceeds from issuance of
long-term debt 1,686 69,695 7,610
Payments on long-term debt (15,419) (63,276) (17,484)
Redemption of convertible
subordinated debentures (177) (1,282) (1,400)
Dividends paid (9) (9) (9)
Proceeds from issuance of treasury
stock -- 30 60
_______ _______ _______
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (4,074) 64,372 (14,961)
_______ _______ _______
Effect of exchange rate changes
on cash 466 (317) (136)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 9,342 (9,887) 15
Cash and cash equivalents at
beginning of year 8,106 17,448 7,561
_______ _______ _______
Cash and cash equivalents at
end of year $17,448 $7,561 $7,576
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $10,830 $11,359 $17,598
Income taxes, net of refunds 2,405 367 (3,189)
Non-cash investing and financing
activities:
Equity adjustment from change in
pension liability versus
unrecognized prior service cost
(note 11) (5,523) 5,568 1,231
Adjustment required to recognize
minimum pension liability
(note 11) 5,704 (5,654) 1,083
Leases capitalized net of leases
terminated 401 1,160 260
See accompanying Notes to Consolidated Financial Statements.
F-20
<PAGE>
MOOG INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands except per share data)
Years ended September 30,
1993 1994 1995
PREFERRED STOCK (note 13) $100 $100 $100
_______ _______ _______
COMMON STOCK (note 13) 9,134 9,134 9,134
_______ _______ _______
ADDITIONAL PAID-IN CAPITAL
Beginning of year 47,780 47,780 47,737
Issuance of Treasury Shares at
less than cost -- (43) (28)
_______ _______ _______
End of year 47,780 47,737 47,709
_______ _______ _______
RETAINED EARNINGS
Beginning of year 49,507 54,259 56,373
Net earnings 4,761 2,123 7,761
Preferred dividends ($.09 per
share in 1993, 1994 and
1995) (9) (9) (9)
_______ _______ _______
End of year 54,259 56,373 64,125
_______ _______ _______
TREASURY SHARES, AT COST*
Beginning of year (18,002) (18,002) (17,929)
Shares issued related to options
(1994 -- 5,500 Class A
Shares; 1995 -- 6,000 Class A
Shares and 1,000 Class B
Shares) -- 73 88
_______ _______ _______
End of year (18,002) (17,929) (17,841)
_______ _______ _______
EQUITY ADJUSTMENTS
Beginning of year 10,290 564 7,867
Adjustment from foreign currency
translation, net of
applicable deferred taxes of
$362 in 1993 and $330 in 1994
and 1995** (4,203) 1,735 (478)
Adjustment from change in pension
liability versus
unrecognized prior service cost (5,523) 5,568 (1,231)
_______ _______ _______
End of year 564 7,867 6,158
_______ _______ _______
F-21
<PAGE>
Years ended September 30,
1993 1994 1995
LOAN TO SAVINGS AND STOCK OWNERSHIP
PLAN (SSOP) (note 11)
Beginning of year (1,435) (1,274) (1,098)
Payments received on loan to SSOP 161 176 349
_______ _______ _______
End of year (1,274) (1,098) (749)
_______ _______ _______
TOTAL SHAREHOLDERS' EQUITY $92,561 $102,184 $108,636
======= ======= =======
_______________
* Class A Common Stock in treasury: 562,555 shares as of September
30, 1993; 557,055 shares as of September 30, 1994; 550,968 shares
as of September 30, 1995.
Class B Common Stock in treasury: 858,103 shares as of September
30, 1993 and 1994; 857,103 shares as of September 30, 1995.
** End of year balance includes cumulative foreign currency
translation of 1993 -- $6,230; 1994 -- $7,965; 1995 -- $7,487;
and cumulative minimum pension liability adjustments of 1993 --
($5,666); 1994 -- ($98); 1995 -- ($1,329). Included in adjustment
from foreign currency translation are aggregate deferred losses
of $228 in 1993, $317 in 1994, and $1,138 in 1995 related to
hedging net investments in, and long term advances to, various
international subsidiaries.
See accompanying Notes to Consolidated Financial Statements.
F-22
<PAGE>
MOOG INC.
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 United States
and International subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform the prior
years financial statements with the 1995 presentation.
Cash and Cash Equivalents: All highly liquid investments
with an original maturity of three months or less are considered
cash equivalents.
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 subsidiary 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. Gains and losses resulting from
translation and hedging of net investments in, or long term
advances to, foreign subsidiaries are accumulated in the equity
section as "Equity Adjustments." Gains and losses resulting from
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. Debt issuance costs are
amortized over the term of the related debt agreements.
Intangibles associated with acquisitions are amortized over
their estimated useful lives, generally 7 to 12 years. The
Company annually reviews acquisition related intangibles for
impairment. The method used to determine whether such intangibles
have been impaired is generally based upon forecasted
undiscounted cash flows.
F-23
<PAGE>
Income Taxes: The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," in 1994. The Company separately reported the cumulative
effect of the adoption of SFAS No. 109 in the Consolidated
Statements of Income.
Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for future tax
consequences attributed to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Under the previously used asset and
liability method of SFAS No. 96, deferred tax assets and
liabilities were recognized for all events that had been
recognized in the financial statements, with generally no
consideration of any future events in calculating deferred taxes.
Use of Estimates: Management of the Company has made a
number of estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Note 2 -- Acquisition
On June 17, 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 purchase price for the Product Lines, including
payment for specified transition services, was $68,800 based upon
finalization of the net assets transferred. The acquisition has
been accounted for under the purchase method, and accordingly,
the operating results for the Product Lines have been included in
the Consolidated Statements of Income since the date of
acquisition. The cost of the acquisition was allocated on the
basis of the estimated fair value of assets acquired and the
liabilities assumed.
The acquisition was financed with proceeds from a Revolving
Credit and Term Loan Agreement with a banking group (Note 7). The
acquisition resulted in Product Line intangible assets, as
adjusted for the final purchase price allocation, of $14,565,
which are being amortized over a 12-year period.
The following summary, prepared on a pro forma basis,
combines the unaudited consolidated results of operations as if
the Product Lines had been acquired at the beginning of the
periods presented. The pro forma consolidated results include the
impact of certain adjustments, including amortization of
intangibles, increased interest expense on acquisition debt, and
related income tax effects.
F-24
<PAGE>
1993 1994
(Unaudited)
Net sales $394,130 $375,545
Net earnings before extraordinary
item and cumulative effect of
change in accounting principle 7,461 6,916
Net earnings 7,104 7,421
Earnings per share $.92 $.96
The pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been in
effect for the periods presented.
Note 3 -- Receivables
Receivables consist of:
September 30,
1994 1995
Long term contracts:
Amounts billed $35,168 $38,542
Unbilled recoverable costs and
profits 63,151 61,400
Unbilled costs and profits subject
to negotiation 571 116
_______ _______
Total long-term contract receivables 98,890 100,058
Trade 40,679 45,582
Refundable income taxes 5,504 3,331
Other 617 1,323
_______ _______
Total receivables 145,690 150,294
Less allowance for doubtful accounts (1,493) (1,379)
_______ _______
Receivables, net $144,197 $148,915
======= =======
The long term contract amounts are primarily associated with
prime U.S. Government contractors and the 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.
F-25
<PAGE>
Note 4 -- Inventories
Inventories consist of the following:
September 30,
1994 1995
Raw materials and purchased parts $19,356 $23,028
Work in process 48,517 52,839
Finished goods 10,769 10,309
______ ______
$78,642 $86,176
====== ======
In 1994, the Company incurred a pre-tax charge of $2,574 to
write off obsolete Domestic Controls segment inventory. The
special charge reflected a decline in repair activities and spare
parts requirements on various government programs.
Note 5 -- Property, Plant and Equipment
Property, plant and equipment consists of:
September 30,
1994 1995
Land $7,870 $7,864
Buildings and improvements 87,124 89,323
Machinery and equipment 207,769 212,026
_______ _______
Property, plant and equipment,
at cost 302,763 309,213
Less accumulated depreciation
and amortization (156,291) (170,082)
_______ _______
Property, plant and equipment, net $146,472 $139,131
======= =======
Note 6 -- Notes Payable
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. At September 30, 1995, $6,606 of notes payable to banks at
an average rate of 7.4% were outstanding under these lines of
credit. During 1995, an average of $8,355 in notes payable were
outstanding at an average interest rate of 8.1%. These short term
lines of credit, along with $39,701 available on the amended long
term U.S. revolving credit agreement detailed in Note 7, provide
credit availability amounting to $56,900. Commitment fees are
charged on some of these arrangements based on a percentage of
the unused amounts available.
F-26
<PAGE>
Note 7 -- Long-Term Debt and Subordinated Debentures
Long-Term Debt consist of the following:
September 30,
1994 1995
U.S. Revolving credit agreement $70,000 $95,299
U.S. term loan agreements 67,000 30,000
10 1/4% Note 20,000 18,350
International and other U.S. term
loan agreements 13,359 16,452
Obligations under capital leases 3,448 3,654
_______ _______
173,807 163,755
Less current installments:
Long-term debt 12,978 4,859
Capital lease obligations 823 821
_______ _______
Long term debt excluding current
installments $160,006 $158,075
======= =======
Subordinated Debentures consist of the following:
September 30,
1994 1995
Subordinated debentures $20,800 $19,400
Less current installment 1,400 1,400
______ ______
Subordinated debentures excluding
current installment $19,400 $18,000
====== ======
The U.S. Revolving Credit and Term Loan Agreement
(Agreement) was amended in November 1995, increasing the facility
to $165,000, which consists of a $135,000 revolving credit
facility and a $30,000 term loan. The original facility, entered
into in June 1994 to finance the acquisition of the Product Lines
and to refinance existing debt, was a $151,750 total facility
consisting of an $84,750 revolving credit facility and a $67,000
term loan. The amended revolving credit facility is for a five
year period which expires in October 2000. The amended term loan
is for six years through July 2001, with quarterly principal
payments of $1,500 commencing October 1, 1996. As a result of
this amendment $6,930 otherwise due in 1996 was converted to long
term and has been classified as such on the September 30, 1995
Consolidated Balance Sheet.
Interest on the Agreement is LIBOR plus 1.75%. In order to
provide for interest rate protection, the Company has entered
into interest rate swap agreements for $100,000, effectively
converting this amount to fixed rate debt averaging 8.0%. The
swaps expire at various times from June 1996 through July of
1998.
F-27
<PAGE>
The 10-1/4% Note has quarterly principal payments of $550
through October 1, 1995, increasing to $700 on January 1, 1996
and $750 on January 1, 1997, with a final payment due in July
2001.
Both the Agreement and the Note contain various covenants
which, among others, specify minimum interest and payment
coverage, maintenance of tangible net worth, required working
capital and current ratio levels, and limit liabilities in
relation to tangible net worth. The Agreement prohibits payment
of cash dividends on common stock. The Agreement and the Note are
secured by substantially all of the Company's U.S. assets and the
common shares of all Domestic and International subsidiaries. The
Agreement and the Note will convert to unsecured arrangements
when the Company has three consecutive quarters whereby the ratio
of consolidated liabilities to tangible net worth is less than
200%.
International and other U.S. term loan agreements of $16,452
at September 30, 1995 consist principally of financing provided
by various banks to individual International subsidiaries. These
term loans are being repaid through 2004, and carry interest
rates ranging from 2.875% to 16.1% in 1994 and 2.6% to 14.3% in
1995.
Convertible subordinated debentures at 9-7/8% are
subordinated in right of payment to all senior indebtedness, as
defined, and are convertible, subject to prior redemption, into
shares of Class A Common Stock at $22.88 per share at any time up
to and including the maturity date of January 15, 2006. At
September 30, 1995, the debentures are convertible into 847,902
shares of Class A Common Stock (Note 13). The debentures are
redeemable at the option of the Company, at any time, in whole or
in part, at 100% of their principal amount. The quoted market
price of the debentures at September 30, 1994 and 1995, was 100
and 102, respectively.
Maturities of long-term debt and subordinated debentures for
the next five years are $7,080 in 1996, $13,600 in 1997, $18,322
in 1998, $12,663 in 1999, $12,300 in 2000, and $119,190
thereafter.
In the first quarter of 1993, the Company extinguished
$10,186 of 12-7/8% Domestic long-term debt prior to its scheduled
maturity in order to take advantage of a decline in U.S. interest
rates. Funds from existing credit facilities were used to
accomplish the extinguishment. The cost of the extinguishment was
$357, net of $119 in income tax benefits, and was recorded as an
extraordinary charge in the Consolidated Statement of Income.
At September 30, 1995, the Company has pledged assets with a
net book value of $265,425 as security for long-term debt.
Note 8 -- Leases
The Company leases certain facilities and equipment under
various lease arrangements. Such arrangements generally include
F-28
<PAGE>
fair market value renewal and/or purchase options. Some of the
capital leases (primarily land and buildings) allow for the
Company to purchase the asset at a nominal price upon expiration.
Substantially all leases provide that the Company pay applicable
taxes, maintenance, insurance, and certain other operating
expenses. Amortization of assets recorded as capital leases is
included with depreciation and amortization of plant and
equipment. Assets under leases that have been accounted for as
capital leases and included in property, plant and equipment are
summarized as follows:
September 30,
1994 1995
Capital leases at cost $6,861 $6,945
Less accumulated amortization (2,534) (2,841)
_____ _____
Net assets under capital leases $4,327 $4,104
===== =====
Rent expense under operating leases amounted to $6,366 in
1993, $7,049 in 1994 and $6,957 in 1995. Future minimum rental
payments required under noncancelable operating leases are $5,680
in 1996, $4,536 in 1997, $3,697 in 1998, $2,982 in 1999, $2,372
in 2000, and $10,832 thereafter.
The Company subleases various facilities to third parties.
Gross rental income from such activities was $780 in 1993, $1,247
in 1994 and $1,535 in 1995. Future minimum rental income under
noncancelable operating leases is $1,135 in 1996, $610 in 1997
and $170 in 1998.
Interest expense includes $715 in 1993, $261 in 1994 and
$217 in 1995 attributable to obligations under capital leases.
Note 9 -- Income Taxes
The Company adopted SFAS No. 109 "Accounting for Income
Taxes" in 1994. SFAS No. 109 supersedes SFAS No. 96 "Accounting
For Income Taxes." The impact of adopting SFAS No. 109 on the
Consolidated Statement of Income was to increase 1994 earnings by
$505, which was recorded as a cumulative effect of change in
accounting principle.
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 principle is as
follows:
F-29
<PAGE>
1993 1994 1995
Earnings before income taxes,
extraordinary item and
cumulative effect of change
in accounting principle:
Domestic $10,376 $6,054 $6,042
Foreign (1,741) (3,440) 2,967
Eliminations (15) 426 (219)
______ _____ _____
Total $8,620 $3,040 $8,790
====== ===== =====
Computed expected tax expense $2,931 $1,034 $2,988
Increase (decrease) in income
taxes resulting from:
Foreign tax rates 402 (419) 356
Deferred tax rate differential (1,092) -- --
Nontaxable FSC earnings (325) (350) (280)
State taxes net of federal
benefit 168 79 226
Change in beginning of the
year valuation
allowance -- (420) (765)
Utilization of net operating
losses -- -- (2,136)
Limitation on benefits from
foreign net operating
losses 1,498 1,054 192
Other (80) 444 448
______ _____ _____
Income taxes $3,502 $1,422 $1,029
====== ===== =====
Effective income tax rate 40.6% 46.8% 11.7%
At September 30, 1995, certain International subsidiaries
had net operating loss carryforwards totalling $4,254. These loss
carryforwards do not expire and can be used to reduce current
taxes otherwise due on future earnings of those subsidiaries.
Accumulated undistributed earnings of International
subsidiaries intended to be permanently reinvested are $19,021 at
September 30, 1995. If such earnings were remitted to the
Company, income taxes, based on the applicable current rates,
would be payable after reductions for any foreign taxes
previously paid on such earnings and subject to applicable
limitations.
The components of income taxes excluding the extraordinary
item and cumulative effect of change in accounting principle are
as follows:
F-30
<PAGE>
1993 1994 1995
Current:
Federal $1,320 $(3,255) $(828)
Foreign 2,180 (249) 292
State 213 -- --
_____ _____ _____
Total current 3,713 (3,504) (536)
_____ _____ _____
Deferred:
Federal 305 5,440 2,466
Foreign (558) (634) (1,243)
State 42 120 342
_____ _____ _____
Total deferred (211) 4,926 1,565
_____ _____ _____
Total income taxes $3,502 $1,422 $1,029
===== ===== =====
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 this assessment.
1994 1995
Deferred tax assets:
Contract loss reserves not currently
deductible $5,575 $5,890
Net operating loss carryforwards 3,730 2,578
Accrued vacation 3,621 4,440
Deferred compensation 3,212 4,099
Accrued expenses not currently deductible 2,698 2,392
Inventory 2,436 3,031
Other 845 62
______ ______
Total gross deferred tax assets 22,117 22,492
Less: Valuation reserve (5,223) (3,366)
______ ______
Net deferred tax assets 16,894 19,126
______ ______
Deferred tax liabilities:
Differences in bases and depreciation
of property, plant and
equipment 13,591 20,720
Intangible assets 2,832 --
Prepaid pension 884 552
Other 866 712
______ ______
Total gross deferred tax liabilities 18,173 21,984
______ ______
Net deferred tax liabilities $1,279 $2,858
====== ======
F-31
<PAGE>
Net deferred taxes are presented in the accompanying
Consolidated Balance Sheets as follows:
1994 1995
Noncurrent deferred tax liabilities $16,671 $19,674
Current deferred tax assets 15,392 16,816
______ ______
Net deferred tax liabilities $1,279 $2,858
====== ======
In 1993, deferred taxes resulted from differences in the tax
and financial accounting for depreciation, restructuring charges,
and estimated losses on contracts and inventories.
Note 10 -- Restructuring Charges
In 1994, the Company provided $2,107 in pre-tax
restructuring charges, with $890 related to the Domestic Controls
segment and $1,217 related to the International Controls segment.
The restructuring actions were taken in response to U.S. defense
spending reductions and the persistently weak capital goods
markets in Europe. The restructuring charge included $1,757 of
severance benefit costs relating to work force reductions
totalling 140 employees in the Company's operations in the United
States, England, Germany and Denmark. The Company completed the
work force reductions by September 30, 1995. The total severance
related charges were paid in their entirety by September 30,
1995. A charge of $350 was also recorded and paid for the
termination of a long term operating lease in September 1994.
Note 11 -- Employee Benefit Plans
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 $1,119 in
1993 and $459 in 1994.
The Company has a Savings and Stock Ownership Plan (SSOP)
which includes an Employee Stock Ownership Plan (ESOP). 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 Company's
U.S. Revolving Credit and Term Loan borrowing rate. Shares are
allocated and compensation expense is recognized as the employer
share match is earned. Compensation expense was $161 in 1993,
$180 in 1994 and $446 in 1995. Class B shares allocated to ESOP
participants for 1993, 1994 and 1995 were 10,891, 12,236 and
23,397, respectively. At September 30, 1995, 502,382 Class B
Common Shares were owned by the SSOP participants, including the
Company match, representing 30% of the issued and outstanding
Class B shares. An additional 50,779 Class B shares related to
the Company match remain to be allocated to participants. The
SSOP began purchasing shares of Class A Common Stock in 1995 in
F-32
<PAGE>
addition to the Class B Common Stock. At September 30, 1995, a
total of 63,947 Class A Common Shares were owned by the SSOP
participants, representing 1% of Class A Common Shares issued and
outstanding. All SSOP shares, both allocated and those remaining
to be allocated, are considered outstanding for calculating
earnings per share.
In 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." Under SFAS No. 106,
the cost of postretirement benefits other than pensions must be
recognized as employees perform services to earn the benefits,
instead of when benefits are paid, as had been the practice in
1993 and prior years. Postretirement health care benefits for
U.S. employees are the only costs that need to be accrued by the
Company in accordance with SFAS No. 106. Substantially all of the
Company's U.S. employees hired prior to March 1, 1989 will become
eligible for benefits when they reach normal retirement age while
working for the Company. Further, changes in the Company's health
care plans have limited the amount of retiree health care
benefits to employees who retire after October 1, 1989.
The 1995 SFAS No. 106 cost of $1,011 included $119 for
service cost, $599 for interest cost and $394 for amortization of
the October 1, 1993 transition obligation over a twenty year
period and ($101) for the amortization of actuarial gains and
losses. The 1994 cost of $1,075 was comprised of $103 for service
cost, $577 for interest cost and $395 for the amortization of the
transition obligation. The health care costs for retirees
expensed in 1993 was $741, based on expensing claims as paid.
The discount rate assumed at September 30, 1994 was 9.0%
compared with the 7.75% rate used to determine the September 30,
1995 obligation. In June 1994, the Company's SFAS No. 106
obligation increased by $569 due to the acquisition of the
Product Lines (Note 2). For pre October 1, 1989 retirees, the
health care cost trend rates assumed are 2.5% per year for
qualified employees who are presently under 65 years of age, and
11.0% in 1996, 10.0% in 1997 and 2.5% for 1998 and all subsequent
years for Plan participants who are currently older than 65 years
of age. Premiums for post October 1, 1989 retirees are frozen and
no trend schedule is applied. The effect of a one percentage
point increase in the assumed health care cost trend rate would
increase the accumulated postretirement benefit obligation as of
September 30, 1995 by approximately 3.8%, and increase the
aggregate of the service and interest cost components of net
annual postretirement benefit cost by approximately 3.3%.
A reconciliation of the funded status of the plan with the
accrued liability at September 30, 1995 is shown below. There
were no Plan Assets at September 30, 1994 or 1995.
F-33
<PAGE>
September 30,
1994 1995
Accumulated Postretirement Benefit
Obligation (APBO)
Inactives $(4,414) $(5,307)
Actives fully eligible (342) (367)
Actives not fully eligible (2,167) (2,724)
______ ______
Total APBO (Funded Status) (6,923) (8,398)
Unrecognized Transition Obligation 7,493 7,098
Unrecognized Gains (1,498) (158)
_______ ______
Accrued Postretirement Benefit Cost $(928) $(1,458)
======= ======
The Company maintains defined benefit and defined
contribution plans covering substantially all employees. With the
exception of certain International subsidiaries, the Company
funds defined benefit pension costs accrued, including
amortization of prior service costs, over a 15-year period. Plan
Assets where applicable, consist primarily of government
obligations and publicly traded stocks, bonds and mutual funds.
At September 30, 1994 and 1995, the minimum pension
liability adjustments were $989 and $2,072, respectively. This
liability is offset by an intangible asset of $891 in 1994 and
$743 in 1995 and a reduction of shareholders' equity of $98 in
1994, and $1,329 in 1995. The 1994 and 1995 minimum pension
liability adjustment reflects the change in the discount rate for
measuring U.S. plan obligations. At September 30, 1994, the
discount rate for the U.S. of 9.0% was decreased to 7.75% at
September 30, 1995. The comparable discount rate at September 30,
1993 was 7.5%.
The tables below set forth the funded status of the domestic
and foreign defined benefit plans at September 30, 1994 and 1995,
and pension expense in 1993, 1994 and 1995 for all plans.
Principal actuarial assumptions weighted for all plans are:
1994 1995
Discount rate 8.7% 7.4%
Return on assets 8.9% 8.2%
Rate of compensation increase 3.3% 3.6%
Funded Status of Defined Benefit Plans at September 30, 1994
and 1995:
F-34
<PAGE>
<TABLE>
<CAPTION> 1994 1995
U.S. Employee Other Plans Other Plans U.S. Employee Other Plans Other Plans
Plan with with Assets with Plan with with Assets with
Assets in in Excess Accumulated Accumulated in Excess Accumulated
Excess of of Benefits in Benefits in of Benefits in
Accumulated Accumulated Excess of Excess of Accumulated Excess of
Benefits Benefits Plan Assets Assets Benefits Plan Assets
<S> <C> <C> <C> <C> <C> <C>
Accumulated benefit
obligation -- Vested $77,075 $3,528 $11,852 $97,791 $3,685 $13,453
-- Nonvested 313 -- 3,361 573 -- 3,599
_______ _______ _______ _______ _______ _______
-- Total $77,388 $3,528 $15,213 $98,364 $3,685 $17,052
======= ======= ======= ======= ======= =======
Projected benefit obli-
gation (PBO) $82,437 $3,675 $20,854 $106,854 $3,838 $22,175
Plan assets at fair
value 84,793 4,068 1,585 97,773 4,741 1,653
_______ _______ _______ ________ _______
Plan assets in excess of
(or less than) PBO 2,356 393 (19,269) (9,081) 903 (20,522)
Unrecognized cumulative
experience loss (gain) 2,741 (615) (738) 12,290 (986) (1,667)
Unrecognized net (asset)
liability from SFAS no. 87
adoption date, amortized
over 15 years (2,840) (3) 2,453 (2,472) (2) 2,155
Unrecognized prior service
cost 43 -- 355 40 -- 303
Adjustment required to
recognize minimum
liability -- -- (989) (1,368) -- (704)
_______ _______ _______ ________ _______ ______
Accrued pension
(liability)
asset $2,300 $(225) $(18,188) $(591) $(85) (20,435)
======= ======= ======= ======== ======= ======
</TABLE>
F-35
<PAGE>
Pension Expense for 1993, 1994 and 1995:
1993 1994 1995
Service cost -- benefits
earned during the year $3,940 $4,217 $4,523
Interest cost on projected
benefit obligation 7,836 8,472 9,019
Actual return on Plan assets (11,246) (3,017) (16,939)
Net amortization, deferral
and other 4,889 (3,005) 9,038
_______ ______ ______
Pension expense for defined
benefit plans 5,419 6,667 5,641
Pension expense for other plans 265 383 317
_______ ______ ______
Total Pension Expense $5,684 $7,050 $5,958
======= ====== ======
Note 12 -- Stock Option Plans
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, 1992: 145,020 343,400
Granted in 1993 -- ($5.625 per share) -- 57,000
Cancelled in 1993 (5,304) (11,100)
_______ _______
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 and exercisable at
September 30, 1995:
Class A ($5.625 to $10.50 per share) -- 370,600
Class B ($11.00 to $17.25 per share) 131,912 --
F-36
<PAGE>
Note 13 -- Capital Stock
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
373 shares in 1993, and 317 shares in 1994. Convertible
subordinated debentures were also converted into 87 Class A
shares in 1995.
The Company is authorized to issue up to 10,000,000 shares
of preferred stock. The 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 and outstanding shares, and are convertible into Class A
Common Shares. The Board of Directors 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, 131,912 shares are reserved for
issuance under the 1983 Non-Statutory Stock Option Plan (note
12). Class A shares reserved for issuance at September 30, 1995
are as follows:
Shares
Conversion of Class B to Class A shares 2,666,829
Conversion of 9-7/8% convertible subordinated
debentures (note 7) 847,902
1983 Incentive Stock Option Plan (note 12) 370,600
Conversion of Series B Preferred Stock to
Class A shares 8,585
_________
3,893,916
=========
Note 14 -- Industry Segments
The Company's two industry segments, Domestic Controls and
International Controls, manufacture and market precision control
systems and components primarily for North America and for
industrialized economies in Europe and the Far East,
respectively.
F-37
<PAGE>
1993 1994 1995
Domestic Controls
Net sales:
Government $147,532 $157,928 $163,714
Commercial 41,833 55,322 90,212
Intersegment sales 10,140 --7,804 10,446
________ ________ ________
Total sales $199,505 $221,054 $264,372
======== ======== ========
Operating profit (O.P.) $21,726 $20,373 $25,242
Inventory obsolescence and
restructuring charges
included in O.P -- 3,390 --
Net earnings 7,604 4,394 4,030
Identifiable assets 186,147 290,644 282,323
Capital expenditures 6,093 5,263 5,633
Depreciation expense 7,389 7,725 10,363
International Controls
Net sales:
Government $19,240 $16,385 $18,064
Commercial 85,075 77,735 102,294
Intersegment sales 4,231 5,634 4,728
________ ________ ________
Total sales $108,546 $99,754 $125,086
======== ======== ========
Operating profit (O.P.) $5,097 $1,135 $8,464
Inventory obsolescence and
restructuring charges
included in O.P -- 1,291 --
Net earnings (loss) (2,842) (2,366) 3,918
Identifiable assets 100,902 100,261 120,499
Capital expenditures 2,888 3,019 3,977
Depreciation expense 5,996 5,129 5,337
Consolidated operations
Net sales $293,680 $307,370 $374,284
Operating profit (O.P.) 26,823 21,508 33,706
Inventory obsolescence and
restructuring charges
included in O.P -- 4,681 --
Deductions from operating profit:
Interest expense 10,974 11,402 17,492
Currency loss (gain) 60 (451) 143
Corporate and other expenses 7,170 7,613 7,354
Eliminations (1) (96) (73)
________ ________ ________
Total deductions 18,203 18,468 24,916
Earnings before income taxes,
extraordinary item
and cumulative effect of
change in accounting
principle 8,620 3,040 8,790
Income taxes 3,502 1,422 1,029
________ ________ ________
F-38
<PAGE>
1993 1994 1995
Earnings before extraordinary
item and cumulative
effect of change in accounting
principle 5,118 1,618 7,761
Extraordinary item (357) -- --
Cumulative effect of change
in accounting principle -- 505 --
________ ________ ________
Net earnings $4,761 $2,123 $7,761
Total identifiable segment
assets $287,049 $390,905 $402,822
Corporate assets 42,085 50,179 39,864
Eliminations (11,004) (16,628) (17,729)
________ ________ ________
Total assets $318,130 $424,456 $424,957
======== ======== ========
Intersegment sales, which are transacted at appropriate arms
length transfer prices, have been eliminated in net sales.
Operating profit is total revenue less cost of sales and
identifiable 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 earnings.
Included in sales for Domestic Controls is $125,369 in 1993,
$118,807 in 1994, and $136,261 in 1995, in sales to the U.S.
government or to prime U.S. government contractors. Net sales in
1993 and 1994 included $37,200 and $38,752 respectively, for the
B-2 Advanced Technology Bomber with the Northrop Corporation.
Note 15 -- Geographic Areas and Export Sales
<TABLE>
<CAPTION> Pacific
United & Corporate &
States Europe Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Identifiable Assets:
1993 $186,147 $67,128 $33,774 $31,081 $318,130
1994 290,644 66,086 34,175 33,551 424,456
1995 282,323 79,910 40,589 22,135 424,957
Sales to Unaffiliated
Customers:
1993 $189,365 $78,776 $25,539 -- $293,680
1994 213,250 67,568 26,552 -- 307,370
1995 253,926 90,076 30,282 -- 374,284
Inter-area Sales to
Affiliates:
1993 $12,488 $2,864 $1,367 -- $16,719
1994 7,804 4,738 896 -- 13,438
1995 10,446 4,062 666 -- 15,174
F-39
<PAGE>
Pacific
United & Corporate &
States Europe Other Eliminations Consolidated
Export Sales:
1993 25,623 $31,954 $3,103 -- $60,680
1994 41,698 18,575 1,867 -- 62,140
1995 54,364 25,370 1,610 -- 81,344
Net Earnings (Loss):
1993 $7,604 $(4,233) $1,391 $(1) $4,761
1994 4,394 (3,583) 1,217 95 2,123
1995 4,030 4,082 (164) (187) 7,761
</TABLE>
Sales between geographic areas are generally transacted and
accounted for at comparable arms length pricing. 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 16 -- 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.
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.
At September 30, 1995, 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 $13,663 in 1993, $14,809 in 1994, $8,091 in 1995.
Under the recourse provisions of such transactions, the
subsidiaries are contingently liable for $661 at September 30,
1995.
The Company has $5,894 in open letters of credit at
September 30, 1995, which principally relate to cash advances
received on a contract.
F-40
<PAGE>
Note 17 -- Financial Instruments and Credit Concentration
The Company uses a variety of financial instruments,
including foreign exchange instruments, letters of credit and
interest rate swaps to reduce financial risk. 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, 1994 and September 30, 1995, the
Company had $9,935 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, 1995
were $2,020.
The Company has three interest rate swap agreements which
convert a notional amount of $100,000 in variable rate long term
debt to 8.0% fixed rate debt. The agreements expire at various
times from June 1996 through June 1998. The differential interest
paid or received is accrued as interest rates change and is
recognized over the life of the agreements.
Cash and cash equivalents and notes payable are carried at
amounts which approximate fair value at September 30, 1995
because of their short maturity. The fair value of long-term debt
was estimated based on a discounted cash flow analysis using
current rates offered to the Company for debt with the same
remaining maturities. At September 30, 1995, the carrying value
and estimated fair value of long-term debt was $183,155 and
$188,763, respectively.
Financial instruments which potentially subject the Company
to concentrations of credit risk consist principally of temporary
cash investments and trade receivables. The Company places its
temporary investments with highly rated financial institutions
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 prime U.S. Government
contractors or large commercial aerospace companies, and to the
number of customers and their dispersion over a large geographic
area.
F-41
<PAGE>
<TABLE>
Note 18 -- Quarterly Data -- Unaudited
Net Sales and Earnings
<CAPTION>
Year Ended September 1994 Year Ended September 1995
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $68,818 $75,127 $73,215 $90,210 $307,370 $86,917 $91,372 $99,450 $96,545 $374,284
Gross Profit 20,537 23,268 23,583 26,452 93,840 24,733 27,869 28,750 27,899 109,251
Earnings (Loss)
before Income
Taxes, and
Cumulative Effect
of Change in
Accounting
Principle 311 (2,138) 2,151 2,716 3,040 1,475 2,471 2,471 2,373 8,790
Earnings (Loss)
before and
Cumulative Effect
of Change in
Accounting
Principle 198 (1,241) 1,212 1,449 1,618 1,184 1,963 2,305 2,309 7,761
Cumulative Effect of
Change in
Accounting
Principle 505 -- -- -- 505 -- -- -- -- --
_______ _______ _______ _______ ________ _______ _______ _______ _______ ________
Net Earnings
(Loss) $703 $(1,241) $1,212 $1,449 $2,123 $1,184 $1,963 $2,305 $2,309 $7,761
======= ======= ======= ======= ======== ======= ======= ======= ======= ========
Net Earnings (Loss)
Per Common Share:
Before Cumulative
Effect of Change
in Accounting
Principle $.03 $(.16) $.16 $.19 $.21 $.15 $.25 $.30 $.30 $1.00
F-42
<PAGE>
Year Ended September 1994 Year Ended September 1995
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
(dollars in thousands except per share data)
Cumulative Effect
of Change in
Accounting
Principle .06 -- -- -- .06 -- -- -- -- --
_______ _______ _______ _______ ________ _______ _______ _______ ________ ________
Net Earnings
(Loss) $.09 $(.16) $.16 $.19 $.27 $.15 $.25 $.30 $.30 $1.00
======= ======= ======= ======= ======== ======= ======= ======= ======== ========
__________
Note: The 1994 quarterly Earnings Per Share do not add to the total due to rounding.
F-43
<PAGE>
$120,000,000
EXCHANGE OFFER
MOOG INC.
[LOGO OF MOOG APPEARS HERE]
10% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
_______________
PROSPECTUS
_______________
, 1996
_________________________________________________________________
_________________________________________________________________
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THIS PROSPECTUS
NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
<PAGE>
TABLE OF CONTENTS
Incorporation of Certain Documents
by Reference
Available Information
Summary
Risk Factors
The Recapitalization
The Exchange Offer
Capitalization
Selected Consolidated Financial and
Operating Data
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Business
Management
Security Ownership of Certain
Beneficial Owners and Management
Description of Bank Credit Facility
Description of the New Notes
Certain Federal Tax Considerations
Plan of Distribution
Legal Matters
Experts
Index to Consolidated Financial
Statements
Annex A - Letter of Transmittal
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Sections 722 through 726 of the New York Business
Corporation Law (the "BCL") grant New York corporations broad
powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with
threatened, pending or completed actions, suits or proceedings to
which they are parties or are threatened to be made parties by
reason of being or having been such directors or officers,
subject to specified conditions and exclusions; give a director
or officer who successfully defends an action the right to be so
indemnified; and permit a corporation to buy directors' and
officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be
entitled under any by-laws, agreement, vote of shareholders or
otherwise.
Section 402(b) of the BCL permits a New York corporation to
include in its certificate of incorporation a provision
eliminating the potential monetary liability of a director to the
corporation or its stockholders for breach of fiduciary duty as a
director, provided that such provision shall not eliminate the
liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for improper
payment of dividends, or (iv) for any transaction from which the
director receives an improper personal benefit. Moog's Restated
Certificate of Incorporation includes the provision permitted by
Section 402(b) of the BCL.
Moog's By-Laws provide that Moog shall indemnify such
directors and officers against expenses, judgments, fines or
amounts paid in settlement in connection with any action, suit or
proceeding, or threat thereof, to the maximum extent permitted by
applicable law.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following Exhibits are filed with this Registration
Statement:
(1) Form of Placement Agreement, incorporated by reference to
Exhibit (i) of the Company's Report on Form 8-K dated
May 10, 1996.
(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.
II-1
<PAGE>
(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) (i) Form of Registration Rights Agreement, incorporated by
reference to Exhibit (iii) of the Company's Report on
Form 8-K dated May 10, 1996.
(ii) Form of Indenture, incorporated by reference to
Exhibit (iv) of the Company's Report on Form 8-K
dated May 10, 1996.
(iii) Letter of Transmittal (included as Annex A to
prospectus).*
Except as listed above, instruments defining the rights of
holders of long-term debt of the Company and its
subsidiaries are not being filed since the total amount of
securities authorized under any such instrument does not
exceed 10 percent of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of any such instruments to the Securities and
Exchange Commission upon request.
(5) Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber as to
the legality of the New Notes.
(9) (i) Agreement as to Voting, effective October 15, 1988,
incorporated by reference to Exhibit (i) of the
Company's 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 the
Company's 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
the Company's Report on Form 8-K dated December 9,
1983, as amended and reported in the Company's Report
on Form 8-K, dated October 3, 1988, and as amended on
October 20, 1988.
(iii) Deferred Compensation Plan for Directors and Officers,
incorporated by reference to Exhibit (i) of the
Company's Report on Form 8-K dated December 3, 1985.
II-2
<PAGE>
(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.
(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 Exhibit 1 of the Company's Report on
Form 8-K dated February 4, 1988.
(viii) Indemnity Agreement, incorporated by reference to
Annex A to the Company's 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.
(11) Statement re computation of per share earnings.
(12) Statement re computation of ratio of earnings to fixed
charges.
(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 Ohio,
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.
II-3
<PAGE>
(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
(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.
(a) Moog SNC, incorporated in France, wholly-owned
subsidiary of Moog SARL.
(xvi) Moog Singapore Pte. Ltd., incorporated in Singapore,
wholly-owned subsidiary.
(23) (i) Consent of KPMG Peat Marwick LLP; consents of Coopers &
Lybrand.
(ii) Consent of Phillips, Lytle, Hitchcock, Blaine & Huber
(included in its opinion filed as Exhibit 5 herewith).
(24) Power of Attorney (included with signature page).
(25) Statement of Eligibility of Trustee.*
(27) Financial Data Schedule.
(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).
_________________________________________________________________
* To be filed by amendment.
_________________________________________________________________
(b) The following Financial Statement Schedule as of and
for the years ended September 30, 1993, 1994, and 1995, is
included in this Registration Statement:
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 hereto.
II-4
<PAGE>
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in
the information set forth in the Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(4) That insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-5
<PAGE>
(5) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration
statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment
all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of
and included in the Registration Statement when it became
effective.
(7) That prior to any public reoffering of the
securities hereunder through use of a prospectus which is a
part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(8) That every prospectus: (i) that is filed pursuant
to paragraph (7) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment
to the registration statement and will not be used until
such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in East Aurora, New York, on the 24th
day of May, 1996.
MOOG INC.
By: Robert R. Banta
Robert R. Banta
Executive Vice President
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert R. Banta
and Richard A. Aubrecht, or each of them, as true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
Signature Title Date
President and
Chief Executive
Officer (Principal
executive officer)
Robert T. Brady and Director May 24, 1996
Robert T. Brady
Executive Vice
President, Chief
Financial Officer
and Asst. Secretary
(Principal financial
Robert R. Banta officer) May 24, 1996
Robert R. Banta
Controller
(Principal
accounting
Donald R. Fishback officer) May 24, 1996
Donald R. Fishback
Richard A. Aubrecht, Ph.D. Director May 24, 1996
Richard A. Aubrecht, Ph.D.
Joe C. Green Director May 24, 1996
Joe C. Green
II-8
<PAGE>
Director May 24, 1996
John D. Hendrick
Director May 24, 1996
Kenneth J. McIlraith
Peter P. Poth Director May 24, 1996
Peter P. Poth
Director May 24, 1996
Arthur S. Wolcott
II-9
<PAGE>
Index to Exhibits
Exhibit
Number Document Description Page
(4) (iii) Letter of Transmittal (included as Annex A
to prospectus).*
(5) Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber
as to the legality of the New Notes.
(11) Statement re computation of per share earnings.
(12) Statement re computation of ratio of earnings to fixed
charges.
(23) (i) Consent of KPMG Peat Marwick LLP; consents
of Coopers & Lybrand.
(ii) Consent of Phillips, Lytle, Hitchcock,
Blaine & Huber (included in its opinion
filed as Exhibit 5 herewith).
(24) Power of Attorney (included with signature page).
(25) Statement of Eligibility of Trustee.*
(27) Financial Data Schedule.
__________________________________________
* To be filed by amendment
__________________________________________
II-10
<PAGE>
</TABLE>
<TABLE>
MOOG INC. Schedule II
Valuation and Qualifying Accounts -
Years ended September 30, 1993, 1994 and 1995
(dollars in thousands)
<CAPTION>
Additions Acquisi-
Balance charged tions/
at to costs Exchange Balance
beginning and Deduc- rate at end
Description of period expenses tions changes(1) of period
____________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended 1993:
Reserve for
contract losses $ 7,261 $ 1,876 $ 3,677 $ (64) $ 5,396
Allowance for
doubtful accounts 1,505 719 215 (145) 1,864
Reserve for
inventory valuation 6,442 1,986 2,963 (393) 5,072
__________________________________________________
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
__________________________________________________
_________________
Note: 1 Represents the impact of changes in currency exchange rates during
the year and, in 1994 and 1995, reserves for contract losses related
to the Acquisition (Note 2).
</TABLE>
<PAGE>
[Phillips, Lytle letterhead)
___________________, 1996
Moog Inc.
Seneca and Jameson Streets
East Aurora, New York 14052-0018
Re: $120,000,000 of 10% Series B Senior Subordinated Notes
due 2006 ("New Notes")
Gentlemen:
We are counsel to Moog Inc. ("Company") in connection with
the issuance by the Company of the New Notes. This opinion is
furnished pursuant to Item 601(b)(5) of Regulation S-K
promulgated under the Securities Act of 1933, as amended
("Securities Act"). All capitalized terms not otherwise defined
herein shall have the meanings attributed in the registration
statement on Form S-4 filed with the Securities Exchange
Commission on May 28, 1996 ("Registration Statement").
In connection with this opinion, we have examined copies of
the following and such other documents as we have deemed
necessary to render the opinions set forth below:
a. Executed copies of the Placement Agreement, the
Registration Rights Agreement, the Indenture, the
Consent and Second Amendment to Revolving and Term Loan
Agreement dated March 22, 1996 and Consent and Third
Amendment to Revolving and Term Loan Agreement dated
May 13, 1996.
b. The Registration Statement relating to the New Notes.
c. Specimen Notes.
d. The Restated Certificate of Incorporation of the
Company.
e. The By-laws of the Company.
f. Certain governmental certificates as to the subsistence
of the Company.
g. Letters dated May 1 and May 13, 1996 from Marine
Midland Bank as Agent under the Bank Credit Agreement
<PAGE>
Moog Inc.
___________, 1996
confirming all conditions subsequent to the
effectiveness of the Amendments to the Bank Credit
Facility have been satisfied.
h. Certain records of the corporate proceedings of the
Company.
i. A certificate of an officer of the Company, dated as of
May 10, 1996, as to certain facts relating to the
Company.
In our examination of the aforesaid certificates, records,
documents and agreements, we have assumed with your consent the
genuineness of all signatures, the legal capacity of all natural
persons, the accuracy, completeness and authenticity of all
documents submitted to us, the conformity with the original
documents of all documents submitted to us as certified,
telecopied, photostatic or reproduced copies, and the
authenticity of all such original documents. We also have
assumed the authenticity, accuracy and completeness of the
foregoing certifications and statements of fact on which we are
relying, and have made no independent investigation thereof.
This opinion is given, and all statements herein are made, in the
context of the foregoing.
We do not express any opinion concerning any law other than
the law of New York and the federal law of the United States.
Based upon the aforesaid examination and assumptions, and
subject to the above qualifications, it is our opinion that the
New Notes have been duly authorized and, when executed,
authenticated, delivered and paid for in accordance with the
terms of the Registration Statement, will be valid and binding
obligations of the Company.
We note that John B. Drenning, a partner in the firm of
Phillips, Lytle, Hitchcock, Blaine & Huber, is the Secretary of
the Company.
This opinion is furnished solely for your benefit and may
not be relied on for any other purpose or furnished to, or relied
on by, any other person, without our prior written consent. We
hereby consent to the inclusion of this opinion as an exhibit to
the Registration Statement, and to the reference to our firm made
in the prospectus which constitutes part of such Registration
Statement, under the heading "Legal Matters." In so doing we do
not thereby admit that we constitute experts as that term is used
in Section 11 of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PROFORMA ACTUAL ACTUAL PROFORMA
Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-95 Mar-95 Mar-96 Mar-96
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIMARY
Average Common ___________________________________________________________________________________________________________
Shares Outstanding
for basic EPS 7,836,780 7,717,791 7,713,465 7,714,444 7,721,927 7,013,531 7,719,735 7,700,456 6,992,069
___________________________________________________________________________________________________________
Net Effect of Dilutive
Stock Options 8,901 0 9,630 39,249 82,129 82,129 47,278 200,359 200,359
Common Shares Outstanding
with Stock Option
Impact 7,845,661 7,717,791 7,723,095 7,749,693 7,604,056 7,095,660 7,767,013 7,900,815 7,192,428
Net Earnings 7,631,000 (6,773,000) 4,761,000 2,123,000 7,761,000 5,763,000 3,147,000 5,394,000 4,412,000
Less: Cumulative Pre-
ferred Stock Dividend (9,000) (9,000) (9,000) (9,000) (9,000) (9,000) (4,500) (4,500) (4,500)
___________________________________________________________________________________________________________
Adjusted Net Earnings 7,622,000 (6,782,000) 4,752,000 2,114,000 7,752,000 5,754,000 3,142,500 5,389,500 4,407,500
___________________________________________________________________________________________________________
PRIMARY EARNINGS ___________________________________________________________________________________________________________
PER SHARE - BASIC 0.97 (0.88) 0.62 0.27 1.00 0.82 0.41 0.70 0.63
___________________________________________________________________________________________________________
PRIMARY EARNINGS
PER SHARE - DILUTED 0.97 (0.88) 0.62 0.27 1.00 0.81 0.41 0.70 0.61
___________________________________________________________________________________________________________
DILUTED PRIMARY EPS
as a % of BASIC EPS 1.00 1.00 1.00 1.00 1.00 1.00 0.90 1.00 1.00
___________________________________________________________________________________________________________
<PAGE>
FULLY DILUTED
Average Common Shares
Outstanding 7,836,780 7,717,791 7,713,465 7,714,444 7,721,927 7,013,531 7,719,735 7,700,456 6,992,069
Net Effect of Dilutive
Stock Options 9,192 0 9,630 39,105 93,352 93,352 58,645 219,860 219,860
Assumed Conversion of
Preferred Stock 8,585 8,585 8,585 8,585 8,585 8,585 8,585 8,585 8,585
Assumed Conversion of
Convertible Subordinate
Debentures 964,038 976,780 966,087 923,214 863,305 0 863,305 786,713 0
Total 8,838,595 8,703,156 8,697,767 8,685,348 8,687,169 7,115,468 8,650,270 8,715,514 7,220,514
___________________________________________________________________________________________________________
Net Earnings 7,631,000 (6,773,000) 4,761,000 2,123,000 7,761,000 5,763,000 3,147,000 5,394,000 4,412,000
Add: Convertible
Subordinate Debentures
Interest Net of
Profit Share and
Federal Income
Tax Effect 1,064,301 2,366,475 1,157,000 1,239,000 1,682,092 0 1,091,102 544,507 0
___________________________________________________________________________________________________________
Adjusted Net Earnings 8,695,301 (4,406,525) 5,918,000 3,362,000 9,443,092 5,763,000 4,238,102 5,938,507 4,412,000
FULLY DILUTED
EARNINGS ___________________________________________________________________________________________________________
PER SHARE 0.98 (0.51) 0.68 0.39 1.09 0.81 0.49 0.68 0.61
___________________________________________________________________________________________________________
FULLY DILUTED as a %
of BASIC EPS 1.01 0.58 1.10 1.41 1.08 1.00 1.20 1.00 1.00
===========================================================================================================
</TABLE>
<PAGE>
Exhibit 12 - Ratio of Earnings to Fixed Charges
000's omitted
<TABLE>
<CAPTION>
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PROFORMA ACTUAL ACTUAL PROFORMA
Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-95 Mar-95 Mar-96 Mar-96
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes,
extraordinary item
and cumulative effect
of change in accounting
principal $12,209 $ (6,284) $ 8,620 $ 3,040 $ 8,790 $ 5,618 $ 3,946 $ 7,657 $ 6,110
=========================================================================================================
Capitalized Interest - - - - - - - - -
Interest Expense 15,213 13,346 10,974 11,402 17,492 20,386 8,699 8,301 9,962
_________________________________________________________________________________________________________
Total Interest
Expense $15,213 $ 13,346 $10,974 $11,402 $17,492 $20,386 $ 8,699 $ 8,301 $ 9,962
=========================================================================================================
Amorization of
deferred debt
issue costs $ (81) $ (85) $ (210) $ (143) $ (429) $ (707) $ (215) $ (475) $ (614)
=========================================================================================================
Rental expense assumed
to be representative of
interest factor $ 2,315 $ 2,112 $ 2,122 $ 2,350 $ 2,319 $ 2,319 $ 1,159 $ 1,159 $ 1,159
=========================================================================================================
Earnings:
Pre-tax earnings $12,209 $ (6,284) $ 8,620 $ 3,040 $ 8,790 $ 5,618 $ 3,946 $ 7,657 $ 6,110
Fixed charge less
capitalized interest 17,609 15,543 13,306 13,895 20,240 23,412 10,073 9,935 11,735
_________________________________________________________________________________________________________
Total earnings
for ratio $29,818 $ 9,259 $21,926 $16,935 $29,030 $29,030 $14,019 $17,592 $17,845
_________________________________________________________________________________________________________
Fixed charges:
Total Interest Expense $15,213 $ 13,346 $10,974 $11,402 $17,492 $20,386 $ 8,699 $ 8,301 $ 9,962
Amortization of Debt
Issue Costs 81 85 210 143 429 707 215 475 614
<PAGE>
Rental Expense
representing interest 2,315 2,112 2,122 2,350 2,319 2,319 1,159 1,159 1,159
Preferred Stock Dividend - - - - - - - - -
_________________________________________________________________________________________________________
Total fixed charges
for ratio $17,609 $ 15,543 $13,306 $13,895 $20,240 $23,412 $10,073 $ 9,935 $11,735
_________________________________________________________________________________________________________
Ratio
Earnings/Fixed charges 1.7 0.6 1.6 1.2 1.4 1.2 1.4 1.8 1.5
Earnings/Fixed charges
(excluding
restructuring) 1.7 1.5 1.6 1.6 1.4 1.2 1.4 1.8 1.5
At September 30, 1992 earnings were inadequate to cover fixed charges by $6,284.
Restructuring add back of $4,681 in 1994 and $13,834 in 1992.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
AND REPORT ON SCHEDULE
The Board of Directors
Moog Inc.:
The audits referred to in our report dated November 22, 1995,
included the related financial statement schedule as of
September 30, 1995 and for each of the years in the three-year
period ended September 30, 1995, included in the registration
statement. The financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedule
based on our audits. In our opinion, based on our audits and,
with respect to the information included for certain wholly-owned
subsidiaries and report of other auditors, the 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.
We consent to the use of our reports included herein and to the
reference to our firm under the heading "Experts" in the
prospectus. Our report covering the September 30, 1994
consolidated financial statements refers to changes in the method
of accounting for income taxes and postretirement benefits other
than pensions.
KPMG Peat Marwick LLP
Buffalo, New York
May 28, 1996
<PAGE>
KPMG Peat Marwick LLP
700 Main Place Tower
BUFFALO
New York 14202
Dear Sirs
Consent of independent auditor
We consent to the inclusion in the Registration Statement of our
report dated 22 November 1995 on our audits of the financial
statements of Moog Controls Limited. We also consent to the
reference to our firm under the caption "Experts".
Cooper & Lybrand
Gloucester
24 May 1996
<PAGE>
MOOG INC.
East Aurora,
New York 14052-0018
U.S.A.
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the inclusion herein of our report dated
November 22, 1995 on our audits of the consolidated financial
statements of Moog GmbH (a wholly-owned subsidiary of Moog Inc.)
and subsidiary as of September 30, 1995 and for each of the years
in the three years period ended September 30, 1995. We also
consent to the reference to our firm under the caption "Experts".
Stuttgart, Germany
May 24, 1996
Coopers & Lybrand GmbH
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 9,749
<SECURITIES> 0
<RECEIVABLES> 149,664
<ALLOWANCES> 0
<INVENTORY> 97,423
<CURRENT-ASSETS> 276,503
<PP&E> 135,335
<DEPRECIATION> 0
<TOTAL-ASSETS> 438,403
<CURRENT-LIABILITIES> 103,241
<BONDS> 0
0
100
<COMMON> 9,134
<OTHER-SE> 101,741
<TOTAL-LIABILITY-AND-EQUITY> 438,403
<SALES> 200,055
<TOTAL-REVENUES> 201,411
<CGS> 139,205
<TOTAL-COSTS> 185,453
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,301
<INCOME-PRETAX> 7,657
<INCOME-TAX> 2,263
<INCOME-CONTINUING> 5,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,394
<EPS-PRIMARY> 70
<EPS-DILUTED> 70
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