__________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 1-5129
MOOG INC.
(Exact name of registrant as specified in its charter)
New York State 16-0757636
__________________________________________________________________________
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
East Aurora, New York 14052-0018
__________________________________________________________________________
(Address of principal executive offices) (Zip code)
Telephone number including area code: (716) 652-2000
__________________________________________________________________________
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
The number of shares outstanding of each class of common stock as of May 8,
1998 were:
Class A Common Stock, $1.00 par value 7,274,917 shares
Class B Common Stock, $1.00 par value 1,630,086 shares
__________________________________________________________________________
<PAGE>
MOOG INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION 3-13
Item 1. Consolidated Condensed Balance Sheets
March 31, 1998 and September 27, 1997 3
Consolidated Condensed Statements of Earnings
Three and Six Months Ended March 31, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows
Six Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 14
SIGNATURES 15
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
Unaudited Audited
As of As of
March 31, September 27,
1998 1997
_________ _____________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,050 $ 6,800
Receivables 184,039 160,054
Inventories (note 2) 109,471 103,866
Deferred income taxes 20,675 18,935
Prepaid expenses and other current
assets 6,283 5,052
__________ __________
TOTAL CURRENT ASSETS 326,518 294,707
PROPERTY, PLANT AND EQUIPMENT, net 139,385 132,109
GOODWILL, net (note 3) 60,795 49,626
OTHER ASSETS 13,483 14,121
__________ __________
TOTAL ASSETS $ 540,181 $ 490,563
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,960 $ 1,323
Current installments of
long-term debt 11,270 15,345
Accounts payable 27,266 23,860
Accrued salaries, wages and
commissions 30,329 28,747
Contract loss reserves 8,646 8,170
Accrued interest 8,151 7,253
Federal, state and foreign
income taxes 7,532 5,419
Other accrued liabilities 14,315 10,439
Customer advances 12,117 6,630
__________ __________
TOTAL CURRENT LIABILITIES 121,586 107,186
LONG-TERM DEBT, excluding current
installments
Senior debt 72,286 101,577
Senior subordinated notes 120,000 120,000
OTHER LONG-TERM LIABILITIES 47,375 47,609
__________ __________
TOTAL LIABILITIES 361,247 376,372
__________ __________
<PAGE>
SHAREHOLDERS' EQUITY (notes 4 and 5)
Preferred stock 100 100
Common stock 10,889 9,134
Other shareholders' equity 167,945 104,957
__________ __________
TOTAL SHAREHOLDERS' EQUITY 178,934 114,191
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 540,181 $ 490,563
========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(dollars in thousands except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
NET SALES $ 134,511 $ 109,805 $ 260,629 $ 213,655
OTHER INCOME 309 387 661 906
__________ __________ __________ __________
134,820 110,192 261,290 214,561
__________ __________ __________ __________
COSTS AND EXPENSES
Cost of sales 93,987 74,802 183,097 145,601
Research and
development 6,602 4,364 11,728 8,565
Selling, general and
administrative 21,477 20,362 41,395 39,881
Interest 5,241 5,816 11,152 11,173
Other expenses 344 333 738 600
__________ __________ __________ __________
127,651 105,677 248,110 205,820
__________ __________ __________ __________
EARNINGS BEFORE
INCOME TAXES 7,169 4,515 13,180 8,741
INCOME TAXES 2,511 1,256 4,615 2,523
__________ __________ __________ __________
NET EARNINGS $ 4,658 $ 3,259 $ 8,565 $ 6,218
========== ========== ========== ==========
NET EARNINGS PER
SHARE (note 6)
Basic $ .57 $ .47 $ 1.12 $ .89
========== ========== ========== ==========
Diluted $ .55 $ .45 $ 1.08 $ .86
========== ========== ========== ==========
AVERAGE COMMON
SHARES OUTSTANDING
(note 6)
Basic 8,226,538 6,973,644 7,648,005 6,970,161
========== ========== ========== ==========
Diluted 8,468,491 7,234,975 7,899,593 7,224,574
========== ========== ========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Six Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 8,565 $ 6,218
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 10,816 10,660
Other (13,022) (5,428)
______ ______
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,359 11,450
______ ______
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of
cash acquired (note 3) (20,983) (48,589)
Purchase of property, plant and equipment (11,344) (6,391)
Other 1,026 343
______ ______
NET CASH USED BY INVESTING ACTIVITIES (31,301) (54,637)
______ ______
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from notes payable 2,737 (1,834)
Net (repayments of) proceeds from
revolving lines of credit (27,000) 31,000
Proceeds from long-term debt 3,325 18,035
Payments on long-term debt (12,010) (6,360)
Proceeds from the sale of common
stock (note 4) 56,935 -
Other 457 (519)
______ ______
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,444 40,322
______ ______
Effect of exchange rate changes on cash (252) 193
______ ______
DECREASE IN CASH AND CASH EQUIVALENTS (750) (2,672)
Cash and cash equivalents at beginning of period 6,800 9,639
______ ______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,050 $ 6,967
====== ======
CASH PAID FOR:
Interest $ 9,813 $ 9,142
Income taxes 4,301 2,436
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Leases capitalized, net of leases terminated $ 116 $ 196
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31, 1998
(Unaudited)
(dollars in thousands)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared by management and in the opinion of management contain all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly the financial position of Moog Inc. as of March 31, 1998,
the results of its operations for the three and six months ended March 31,
1998 and 1997 and its cash flows for each of the six month periods ended
March 31, 1998 and 1997. The results of operations for the three and six
month periods ended March 31, 1998 and 1997 are not necessarily indicative
of the results expected for the full year.
2. Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method of valuation. Inventories are comprised of the
following:
March 31, September 27,
1998 1997
Raw materials and purchased parts $ 32,004 $ 28,933
Work in process 60,469 64,502
Finished goods 16,998 10,431
________ ________
$109,471 $103,866
======== ========
3. Acquisition
On February 3, 1998, the Company acquired the net assets of Schaeffer
Magnetics, Inc. (Schaeffer), a leading supplier to the space industry of
motion control devices and systems with annual revenues of approximately
$20,000. The purchase price was $21,700. The acquisition has been
accounted for under the purchase method, and accordingly, the operating
results of Schaeffer have been included in the Consolidated Condensed
Statement of Earnings since the date of acquisition. Goodwill resulting
from this acquisition is approximately $12 million, which will be amortized
over 30 years.
4. Stock Offering
On January 29, 1998, the Company completed an offering of Class A shares at
$34.375 per share. The offering consisted of 1,700,000 previously unissued
shares sold by the Company and 300,000 existing shares sold by the Moog
Inc. Employees' Retirement Plan (Moog Retirement Plan). In addition, on
February 5, 1998, an additional 55,000 previously unissued Class A shares
were sold pursuant to an over-allotment option exercised by the
underwriters of the offering.
The net proceeds to the Company from the offering of $56.9 million were
used to repay amounts outstanding under the Company's U.S. Revolving Credit
and Term Loan Facility and will be used for smaller strategic acquisitions.
The Company did not receive any proceeds from the sale of shares by the
Moog Retirement Plan.
<PAGE>
5. Shareholders' Equity
The changes in shareholders' equity for the six months ended March 31, 1998
are summarized
as follows:
Number of Shares
Class A Class B
Preferred Common Common
Amount Shares Stock Stock
PREFERRED STOCK
Beginning and end of period $ 100 100,000
COMMON STOCK
Beginning of period 9,134 6,635,936 2,498,187
Sale of common stock 1,755 1,755,000 -
Conversion of Class B to
Class A - 26,100 (26,100)
________ _________ _________
End of period 10,889 8,417,036 2,472,087
________ _________ _________
ADDITIONAL PAID-IN CAPITAL
Beginning of period 47,519
Sale of common stock, net of
issuance costs 55,180
Issuance of Treasury shares at
less than cost (79)
________
End of period 102,620
________
RETAINED EARNINGS
Beginning of period 88,422
Net earnings 8,565
Preferred stock dividends (5)
________
End of period 96,982
________
TREASURY STOCK
Beginning of period (30,967) (5,114) (1,186,221) (892,101)
Treasury stock issued 992 - 40,850 34,000
Treasury stock purchased (53) - (1,500) -
________ ________ _________ _________
End of period (30,028) (5,114) (1,146,871) (858,101)
________ ________ _________ _________
EQUITY ADJUSTMENTS
Beginning of period 977
Foreign currency translation (2,394)
________
End of period (1,417)
________
LOAN TO SAVINGS AND STOCK
OWNERSHIP PLAN (SSOP)
Beginning of period (994)
Net change in loan to SSOP 782
________
End of period (212)
________
TOTAL SHAREHOLDERS' ________ ________ _________ _________
EQUITY $178,934 94,886 7,270,165 1,613,986
======== ======== ========= =========
<PAGE>
6. Earnings Per Share
During the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS
No. 128 replaces primary EPS with basic EPS and fully diluted EPS with
diluted EPS. Basic EPS is computed by dividing reported earnings by
weighted average shares outstanding. Diluted EPS is computed the same way
as fully diluted EPS except that the calculation now uses the average share
price for the reporting period to compute dilution from options under the
treasury stock method. The Company has restated its earnings per share for
prior periods.
The number of shares and earnings used in the Company's basic and diluted
earnings per share computations are as follows:
Three Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
EARNINGS
Earnings available to
common stockholders -
Basic $ 4,656 $ 3,257 $ 8,560 $ 6,213
Add: Preferred stock
dividends 2 2 5 5
_________ __________ _________ _________
Earnings available to
common stockholders -
Diluted $ 4,658 $ 3,259 $ 8,565 $ 6,218
======== ========= ======== ========
SHARES
Weighted-average shares
outstanding - Basic 8,226,538 6,973,644 7,648,005 6,970,161
Stock options 233,807 252,746 243,442 245,828
Convertible preferred
stock 8,146 8,585 8,146 8,585
_________ __________ _________ _________
Shares outstanding -
Diluted 8,468,491 7,234,975 7,899,593 7,224,574
========= ========== ========= =========
BASIC EPS $ .57 $ .47 $ 1.12 $ .89
========= ========== ========= =========
DILUTED EPS $ .55 $ .45 $ 1.08 $ .86
========= ========== ========= =========
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Moog Inc. 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 markets.
Moog's servoactuation systems are critical to the flight control of
commercial and military aircraft, positioning satellites, controlling the
thrust of space launch vehicles, steering tactical and strategic missiles,
and a wide variety of industrial hydraulic and electronic applications that
require the precise control of position, velocity and force. The
business consists of five principal product lines. Commercial Aircraft,
Military Aircraft and Satellites and Launch Vehicles are collectively
referred to as Aerospace Controls. Industrial Hydraulics and Electronics
and Drives are collectively referred to as Industrial Controls.
At the present time, the operating results of the Company are reported
using two segments: Domestic Controls and International Controls. Domestic
Controls primarily focuses on North American markets, with the majority of
its sales in aerospace-related product lines. International Controls is
focused on markets in Europe and the Asian-Pacific, with the majority of
sales in industrial product lines. The Company is currently reviewing the
requirements of Statement of Financial Accounting Standard (SFAS) No. 131,
"Disclosure about Segments of an Enterprise and Related Information," which
requires financial information to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company will adopt this new standard and revise
its segment reporting, if necessary, in fiscal 1999.
Overview
During the current quarter, the Company completed two transactions which
helped improve its financial condition and build on its strategy of
broadening product lines.
On January 29, 1998, the Company completed an offering of Class A shares at
a price of $34.375 per share. The offering consisted of 1,700,0000
previously unissued shares and 300,000 existing shares sold by the Moog
Inc. Employees' Retirement Plan (Moog Retirement Plan). In addition, on
February 5, 1998, an additional 55,000 previously unissued Class A shares
were sold pursuant to an over-allotment option exercised by the
underwriters of the offering. The net proceeds to the Company from the
offering of $56.9 million were used to repay amounts outstanding under our
U.S. Revolving Credit and Term Loan Facility (Bank Credit Facility) and
will be used for smaller strategic acquisitions. The Company did not
receive any proceeds from the sale of shares by the Moog Retirement Plan.
On February 3, 1998, the Company purchased the net assets of Schaeffer
Magnetics, Inc. (Schaeffer), a leading supplier to the space industry of
motion control devices and systems with annual revenues of approximately
$20 million. The purchase price was $21.7 million.
<PAGE>
Results of Operations
Consolidated
Sales in the current quarter were $134.5 million, reflecting an increase of
23% from last year's sales of $109.8 million. We continue to benefit from
growth in the commercial airplane market, increased launch vehicle
activity, and initial production on large military aircraft and missile
programs, which together led to a 27% increase in sales of Aerospace
Controls. Increased production of entertainment simulators, electric
controls for military vehicles, material test equipment, flight simulators
and power generation controls helped increase Industrial Controls sales by
15%, despite a 5% reduction caused by unfavorable exchange rate
fluctuations, particularly in Germany and Japan. Sales year-to-date were
$260.6 million, an increase of 22% from last year's sales of $213.7
million. Sales of Aerospace Controls grew 27% as a result of the factors
mentioned above. Industrial Controls sales increased 14% despite a 5%
reduction due to currency fluctuations.
Cost of sales for the current quarter was 69.9% of sales as compared to
68.1% last year. On a six month basis, costs of sales was 70.3% in the
current year versus 68.1% last year. Cost of sales increased as a
percentage of sales for a variety of reasons, each of which was
individually small. The mix of business in the current quarter consisted
of more lower gross margin Aerospace Controls sales and, within Aerospace
Controls, a mix which contained a larger share of lower margin development
and production programs. The higher margin aftermarket business
represented a lower share of sales reflecting increased sales to original
equipment manufacturers. Finally, gross margins were down slightly in the
International Controls segment, in part reflecting changes in currency
values and lower industrial margins conservatively reported by the Asian-
Pacific companies taking into account potential asset-related exposures
associated with the recent devaluation of certain Asian-Pacific currencies.
Year-to-date, the increase reflects the above mentioned items as well as
favorable cost experience in the first quarter of fiscal 1997 on various
Military Aircraft programs.
Research and development expenditures increased by $2.2 million in the
current quarter to $6.6 million, or 4.9% of net sales, and by $3.2 million
year-to-date to $11.7 million, or 4.5% of net sales, primarily due to
additional engineering efforts within the Military Aircraft product line
related to the development of next generation flight controls.
Selling, general and administrative (SG&A) expenses were $21.5 million, or
16.0% of net sales, in the second quarter of fiscal 1998, compared to $20.4
million, or 18.5% of net sales, in fiscal 1997. Year-to-date SG&A expenses
were $41.4 million, or 15.9% of net sales, compared to $39.9 million, or
18.7% of net sales, in the same period last year. The decrease as a
percentage of sales in both periods was primarily due to growth in sales,
in addition to a shift of costs to production and research and development
activities in fiscal 1998 from bid and proposal work in fiscal 1997.
Interest expense decreased by $.6 million to $5.2 million in the current
quarter due to lower average borrowings outstanding under the Bank Credit
Facility, resulting primarily from the use of proceeds from the equity
offering in January.
<PAGE>
The effective tax rate in fiscal 1998 was 35% compared to 27.8% in the
second quarter of fiscal 1997 and 28.9% for the first half of last year.
The prior year tax rates reflect higher foreign tax credit benefits
resulting from distributions of earnings from our German subsidiary.
During the first quarter of fiscal 1998, the Company adopted SFAS No. 128
"Earnings per Share." SFAS No. 128 replaces primary EPS with basic EPS and
fully diluted EPS with diluted EPS. Basic EPS is computed by dividing
reported earnings by weighted average shares outstanding. Diluted EPS is
computed the same way as fully diluted EPS except the calculation now uses
the average share price for the reporting period to compute dilution from
options under the treasury stock method. The Company has restated its
earnings per share for prior periods.
For the second quarter of fiscal 1998, net earnings increased 43% to $4.7
million compared with $3.3 million last year. Basic earnings per share
increased to $.57 in the current quarter compared to $.47 in the same
period last year, while diluted earnings per share was $.55 compared to
$.45 in fiscal 1997. For the first half of fiscal 1998, net earnings
increased 38% to $8.6 million compared with $6.2 million last year. Basic
earnings per share increased to $1.12 in fiscal 1998 compared to $.89 in
the same period last year, while diluted earnings per share was $1.08 in
fiscal 1998 compared to $.86 in fiscal 1997.
Segment Operating Review
(dollars in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
DOMESTIC CONTROLS
Net sales:
Aerospace $ 80,478 $ 62,275 $156,847 $122,609
Industrial 19,964 14,575 36,618 26,724
________ ________ ________ ________
100,442 76,850 193,465 149,333
Intersegment sales 4,663 3,132 9,162 5,388
________ ________ ________ ________
Total sales $105,105 $ 79,982 $202,627 $154,721
======== ======== ======== ========
Operating profit $ 12,391 $ 9,905 $ 24,513 $ 19,037
Backlog 258,533 231,561 258,533 231,561
INTERNATIONAL CONTROLS
Net sales:
Aerospace $ 6,963 $ 6,437 $ 13,912 $ 12,102
Industrial 27,106 26,518 53,252 52,220
________ ________ ________ ________
34,069 32,955 67,164 64,322
Intersegment sales 2,089 1,787 4,482 3,604
________ ________ ________ ________
Total sales $ 36,158 $ 34,742 $ 71,646 $ 67,926
======== ======== ======== ========
Operating profit $ 2,389 $ 2,382 $ 4,417 $ 4,593
Backlog 52,466 40,814 52,466 40,814
<PAGE>
CONSOLIDATED
Net sales:
Aerospace $ 87,441 $ 68,712 $170,759 $134,711
Industrial 47,070 41,093 89,870 78,944
________ ________ ________ ________
$134,511 $109,805 $260,629 $213,655
======== ======== ======== ========
Operating profit $ 14,780 $ 12,287 $ 28,930 $ 23,630
Backlog 310,999 272,375 310,999 272,375
Domestic Controls
Domestic Controls net sales increased by $23.6 million to $100.4 million in
the current quarter compared to $76.8 million in the same period of the
prior year. The 31% improvement reflects increases of $18.2 million in
Aerospace Controls and $5.4 million in Industrial Controls. Increased
volumes across each of its product lines contributed to the improvement in
Aerospace Controls. Improved sales in the Satellites and Launch Vehicles
product line of approximately $7 million resulted primarily from increased
demand for controls for launch vehicles, primarily on Centaur, the Kistler
commercial launch vehicle and the Titan IV program, and the Standard
Missile 2 anti-missile defense system. In addition, the Schaeffer
acquisition added $3 million in sales during the quarter. Sales of
Military Aircraft controls increased approximately $7 million due primarily
to initial production on the F/A-18 E/F and V-22 Osprey programs and work
on the B-2 program which is nearing completion. Commercial Aircraft sales
increased by approximately $4 million primarily as a result of shipments to
Boeing. OEM sales to Boeing increased 33% in the second quarter of fiscal
1998. The improvement in Industrial Controls relates primarily to increased
demand for entertainment simulators, electric controls for military
vehicles, material test equipment, flight simulators and power generation.
Year-to-date, sales for the Domestic Controls segment increased 30%.
Aerospace Controls increased $34.2 million spread evenly across the three
product lines that comprise Aerospace Controls. Industrial Controls sales
year-to-date sales increased $9.9 million. Year-to-date increases are
attributable to the same factors mentioned above.
Operating income in the current quarter for the Domestic Controls segment
increased by $2.5 million to $12.4 million (11.8% of segment sales) from
$9.9 million (12.4% of segment sales) last year. Industrial Controls
accounted for two-thirds of the absolute dollar increase reflecting the
sales improvement described above and higher margins resulting from the
continued integration of the U.S. Industrial Hydraulics Business.
Aerospace Controls operating profit increased by approximately $1 million
while operating margins declined modestly due to a shift in sales mix to
lower margin development and production programs and higher research and
development expenditures associated with next generation flight controls
and efforts related to low earth orbit satellite constellations. Year-to-
date, operating income increased 29% in dollar terms while margins remained
at approximately 12%. The increase in dollar terms resulted primarily from
increased sales.
Backlog consists of that portion of open orders for which sales are
expected to be recognized over the next twelve months. Backlog at
March 31, 1998 for the Domestic Controls segment was $258.5 million
compared with $236.4 million at September 27, 1997 and $231.6 million at
March 31, 1997. The increase from a year ago is due to the current quarter
<PAGE>
acquisition of Schaeffer and growth in orders related to the Standard
Missile 2 anti-missile defense system, the Titan IV launch vehicle and
entertainment simulators.
International Controls
Sales in our International Controls segment increased approximately 3% in
the second quarter of fiscal 1998 to $34.1 million as compared to last year
despite lower average currency values. Excluding the changes in currency
values, fiscal 1998 second quarter sales increased approximately 11%. Sales
of Industrial Controls increased approximately $2.9 million in the current
quarter, excluding the foreign exchange impact, primarily on the strength
in sales of Industrial Hydraulics and electric controls for military
vehicles in Germany. Sales of Aerospace Controls increased approximately
$.7 million, excluding foreign exchange, due to higher sales in Europe of
controls for engines and tactical missiles. Year-to date, sales for the
International Controls segment increased approximately 4% to $67.2 million
versus $64.3 million in fiscal 1997. Excluding the changes in currency
values, fiscal 1998 year-to-date sales increased approximately 12%,
primarily on the strength of Industrial Hydraulics and electric controls in
Germany and engine controls in the United Kingdom.
International Controls second quarter operating margin was 6.6% of segment
sales compared to 6.9% in the prior year, while year-to-date the operating
margin in fiscal 1998 was 6.2% compared to 6.8% a year ago. Increased sales
in both periods was offset by lower industrial margins conservatively
reported by the Asian-Pacific companies taking into account potential
asset-related exposures associated with the recent devaluation of certain
Asian-Pacific currencies.
Backlog at March 31, 1998 for our International Controls segment was $52.5
million, compared with $44.0 million at September 27, 1997 and $40.8
million at March 31, 1997. The increase from a year ago is attributable
to growth in orders for electric drives for military ground vehicles and
Industrial Hydraulics in Europe.
Financial Condition and Liquidity
Cash provided by operating activities was $6.4 million in the first half of
fiscal 1998 compared to $11.5 million in the same period a year ago. The
decrease is due primarily to higher receivables within Aerospace Controls
associated with long-term contracts.
Long-term senior debt at March 31, 1998 was $72.3 million compared to
$101.6 million at September 27, 1997. The percentage of long-term debt to
capitalization decreased to 51.8% at March 31, 1998 from 66.0% at
September 27, 1997. The decrease in senior debt is due to the use of
proceeds from our equity offering during the quarter to paydown amounts
outstanding under the Bank Credit Facility, net of amounts used to acquire
Schaeffer.
At March 31, 1998, the Company had $113.7 million of unused borrowing
capacity available under short and long-term lines of credit, including
$100.0 million from the Bank Credit Facility. On April 1, 1998, the
Company used $21 million available under the revolving portion of the Bank
Credit Facility to payoff the term loan outstanding under the same
facility, after which there was $92.7 million in borrowing capacity.
<PAGE>
Working capital at March 31, 1998 was $204.9 million compared with $187.5
million at September 27, 1997. The current ratio was 2.69 and 2.75 at
March 31, 1998 and September 27, 1997, respectively. Current assets
increased by $31.8 million. Receivables increased $24 million primarily
due to significant cost input on long-term Aerospace Controls contracts,
which are accounted for under long-term percentage-of-completion accounting
and, to a lesser extent, $5 million related to the current quarter
acquisition of Schaeffer. Inventories increased by $5.6 million primarily
due to the impact of increased production activity in response to customer
demands. Current liabilities increased $14.4 million as a result of
increased customer advances, higher accounts payable resulting from
increased throughput and the timing of payments of accrued liabilities.
Net property, plant and equipment at March 31, 1998 was $139.4 million as
compared to $132.1 million at September 27, 1997. Capital expenditures for
the first half of fiscal 1998 were $11.5 million compared with depreciation
and amortization of $10.8 million. Capital expenditures for the same
period last year were $6.6 million compared with depreciation and
amortization of $10.7 million. The acquisition of Schaeffer added
approximately $6 million of property, plant and equipment. Capital
expenditures for fiscal 1998 should approximate depreciation and
amortization levels.
Goodwill increased to $60.8 million at March 31, 1998 from $49.6 million at
September 27, 1997. The increase is due to the acquisition of Schaeffer
during the quarter, which resulted in goodwill of approximately $12
million.
Cautionary Statement
Forward looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Statements under
the "Outlook" heading are considered forward looking statements that relate
to future operating periods and are subject to important risks and
uncertainties that could cause actual results to differ materially. These
risks and uncertainties include, but are not limited to, contracting with
various governments, changes in economic conditions, demand for the
Company's products, pricing pressures, intense competition in the
industries in which the Company operates, the need for the Company to keep
pace with technological developments and timely response to changes in
customer needs, and other factors identified in the Company's Securities
and Exchange Commission filings including the Company's most recent Annual
Report on Form 10-K for the fiscal year ended September 27, 1997 and its
Quarterly Report on Form 10-Q for the quarter ended December 31, 1997.
Outlook
The Company expects to see continued strong revenues in its Aerospace
Controls product lines for the remainder of fiscal 1998 as the Commercial
Aircraft outlook remains positive, launch vehicle activity increases and
Military Aircraft modernization programs continue with initial production.
The acquisition of Schaeffer will add to fiscal 1998 revenues in the
satellites market. Sales and operating income growth in Industrial
Controls is expected to continue on the strength of electric controls for
military ground vehicles, entertainment simulators and power generation,
and due to further global integration benefits of the fiscal 1997
acquisition of the U.S. Industrial Hydraulics Business. The Company
<PAGE>
continues to believe that the financial difficulties being experienced in
the Asian-Pacific region will not have a material impact on the Company's
results of operations or financial condition due to the Company's
geographic and product line diversity.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Company's Annual Meeting of Shareholders was held
on February 11, 1998.
b. At the Annual Meeting, the nominees to the Board of
Directors were elected based upon the following
results:
Nominee For Against
Class B
Kraig H. Kayser 1,489,592 6,572
Robert H. Maskrey 1,489,997 6,167
Albert F. Myers 1,490,615 5,549
Class A
Robert R. Banta 5,005,124 31,663
c. KPMG Peat Marwick was ratified to continue as auditors
based upon the following votes: Class A: For,
5,024,642; Against, 3,933; Abstain, 8,212;
Class B: For, 1,490,233; Against, 1,915; Abstain,
4,016.
d. The Moog Inc. 1998 Stock Option Plan was approved based
upon the following votes: Class A: For, 4,392,487;
Against, 134,788; Abstain, 23,391;
Class B: For, 1,357,437; Against, 32,935; Abstain,
18,024.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 27 - Financial data schedule.
b. Reports on Form 8-K.
Reports on Form 8-K dated January 26, 1998, February 3,
1998, and February 11, 1998 were filed reporting
pursuant to items 5 and 7.
Additionally, a report on Form 8-K dated February 5,
1998 was filed reporting pursuant to item 5.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Moog Inc.
(Registrant)
Date: May 13, 1998 By/S/Robert R. Banta
Robert R. Banta
Executive Vice President
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1998 By/S/Donald R. Fishback
Donald R. Fishback
Controller
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,050
<SECURITIES> 0
<RECEIVABLES> 184,039
<ALLOWANCES> 0
<INVENTORY> 109,471
<CURRENT-ASSETS> 326,518
<PP&E> 139,385
<DEPRECIATION> 0
<TOTAL-ASSETS> 540,181
<CURRENT-LIABILITIES> 121,586
<BONDS> 192,286
0
100
<COMMON> 113,509
<OTHER-SE> 65,325
<TOTAL-LIABILITY-AND-EQUITY> 540,181
<SALES> 260,629
<TOTAL-REVENUES> 261,290
<CGS> 183,097
<TOTAL-COSTS> 183,097
<OTHER-EXPENSES> 12,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,152
<INCOME-PRETAX> 13,180
<INCOME-TAX> 4,615
<INCOME-CONTINUING> 8,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,565
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,967
<SECURITIES> 0
<RECEIVABLES> 151,094
<ALLOWANCES> 0
<INVENTORY> 104,420
<CURRENT-ASSETS> 284,369
<PP&E> 134,290
<DEPRECIATION> 0
<TOTAL-ASSETS> 484,634
<CURRENT-LIABILITIES> 93,144
<BONDS> 236,915
0
100
<COMMON> 56,735
<OTHER-SE> 51,054
<TOTAL-LIABILITY-AND-EQUITY> 484,634
<SALES> 213,655
<TOTAL-REVENUES> 214,561
<CGS> 145,601
<TOTAL-COSTS> 145,601
<OTHER-EXPENSES> 9,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,173
<INCOME-PRETAX> 8,741
<INCOME-TAX> 2,523
<INCOME-CONTINUING> 6,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,218
<EPS-PRIMARY> .89
<EPS-DILUTED> .86
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,743
<SECURITIES> 0
<RECEIVABLES> 152,684
<ALLOWANCES> 0
<INVENTORY> 107,176
<CURRENT-ASSETS> 299,988
<PP&E> 137,563
<DEPRECIATION> 0
<TOTAL-ASSETS> 505,083
<CURRENT-LIABILITIES> 99,027
<BONDS> 249,927
0
100
<COMMON> 56,736
<OTHER-SE> 51,519
<TOTAL-LIABILITY-AND-EQUITY> 505,083
<SALES> 103,850
<TOTAL-REVENUES> 104,369
<CGS> 70,799
<TOTAL-COSTS> 70,799
<OTHER-EXPENSES> 4,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,357
<INCOME-PRETAX> 4,226
<INCOME-TAX> 1,267
<INCOME-CONTINUING> 2,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,959
<EPS-PRIMARY> .42
<EPS-DILUTED> .41
</TABLE>
