FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to ______________ to _____________
Commission file number 1-5129
MOOG INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-0757636
_______________________________ ____________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
East Aurora, New York 14052-0018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:(716) 652-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
_____________________________________ _________________________
Class A Common Stock, $1.00 Par Value American Stock Exchange
Class B Common Stock, $1.00 Par Value American Stock Exchange
_____________________________________ _________________________
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will be contained, to
the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
<PAGE>
The aggregate market value of the Common Stock outstanding and
held by non-affiliates (as defined in Rule 405 under the
Securities Act of 1933) of the registrant, based upon the closing
sale price of the Common Stock on the American Stock Exchange on
December 10, 1998 was approximately $223.6 million.
The number of shares of Common Stock outstanding as of the close
of business on December 10, 1998 was: Class A: 7,295,808;
Class B: 1,635,339.
The Documents listed below have been incorporated by reference
into this Annual Report on Form 10-K:
(1) Specific sections of the Annual Report to Shareholders
for the fiscal year ended September 26, 1998 (the "1998
Annual Report")
(2) Specific sections of the January 1999 Proxy Statement
to Shareholders (the "1999 Proxy")
<PAGE>
_________________________________________________________________
MOOG INC.
FORM 10-K INDEX
_________________________________________________________________
PART I PAGE
Item 1 - Business 18-19
Item 2 - Properties 19
Item 3 - Legal Proceedings 19
Item 4 - Submission of Matters to a 19
Vote of Security Holders
PART II
Item 5 - Market for the Registrant's 19
Common Equity and Related
Stockholder Matters
Item 6 - Selected Financial Data 19-20
Item 7 - Management's Discussion and 21
Analysis of Financial Condition
and Results of Operations
Item 7A- Quantitative and Qualitative 27
Disclosures About Market Risk
Item 8 - Financial Statements and 28
Supplementary Data
Item 9 - Changes in and Disagreements with 41
Accountants on Accounting and
Financial Disclosure
PART III
Item 10- Directors and Executive Officers 41-42
of the Registrant
Item 11 - Executive Compensation 43
Item 12 - Security Ownership 43
of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and 43
Related Transactions
PART IV
Item 14 - Exhibits, Financial Statement 43-45
Schedules, and Reports
on Form 8-K
Cautionary Statement
Information included or incorporated by reference which are not
historical facts are forward looking statements. Such forward
looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward looking statements involve a number of risks
and uncertainties, including but not limited to, contracting with
various governments, changes in economic conditions, demand for
the Company's products, pricing pressures, intense competition in
<PAGE>
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.
Part I
The Registrant, Moog Inc., a New York corporation formed in 1951,
is referred to in this Annual Report on Form 10-K as "Moog," "the
Company" or in the nominative "we" or the possessive "our."
ITEM 1. Business.
Certain information required herein is contained in part in the
1998 Annual Report, specific pages of which are referred to in
parentheses.
Description of the Company's Business. (See pages 2 through 16.)
Distribution. Moog's sales and marketing organization is
comprised of individuals possessing highly specialized technical
expertise. Such expertise is required in order to effectively
evaluate the customer's precision control requirements and to
facilitate communication between the customer's and Moog's
engineering staff. Manufacturers' representatives are used to
cover certain aerospace and selected industrial markets.
Industry and Competitive Conditions. The Company experiences
considerable competition in each of its five major product lines.
However, the Company is the only precision motion control
specialist which competes globally in all markets and all drive
technologies.
Many of its competitors have greater financial and other
resources than the Company. In Commercial and Military Aircraft,
the Company's principal competitors include Parker Hannifin
Corporation, Curtiss-Wright Corp., HR Textron, a subsidiary of
Textron, Inc. ("HR Textron") and Teijin Seiki Limited. In
Satellites and Launch Vehicles, the Company's principal
competitors are AlliedSignal Inc. and HR Textron. In the
Industrial Hydraulics product line, competitors are Robert Bosch
AG and Mannesmann Rexroth AG. Competitors in the Industrial
Electronics and Electric Drives product line include Barber-
Colman Company, Siemens AG, Indramat GmbH, Pacific Scientific
Company and Yaskawa Electric Corp.Competition in each of the
product lines is based upon design capability, product
performance and life, service, price and delivery time. In
certain product lines technological considerations predominate
over price considerations, while in others price considerations
are paramount. The Company believes it competes effectively on
all of these bases.
Backlog. Substantially all backlog will be realized as sales in
the next twelve months. The information required herein is
incorporated by reference to Item 6, Selected Financial Data, on
page 20.
<PAGE>
Raw Materials. Materials, supplies and components are purchased
from numerous suppliers. The loss of any one supplier would not
materially affect the Company's operations.
Working Capital. The information required herein is incorporated
by reference to the discussion on inventories in Note 1 of Item 8
on page 32.
Seasonality. Moog's business is generally not seasonal.
Patents. Moog has numerous patents and has filed applications
for others. While the aggregate protection afforded by these is
of value, the Company does not consider the successful conduct of
any material part of its business to be dependent upon such
protection. The Company's patents and patent applications,
including U.S., Canadian, European and Japanese patents, relate
to electrohydraulic, electropneumatic and electromechanical
actuation mechanisms and control valves, electronic control
component systems and interface devices.
Research Activities. Research and product development activity
has been and continues to be significant to the Company. The
information required herein is incorporated by reference to
Item 6, Selected Financial Data, on page 20.
Employees. The information required herein is incorporated by
reference to Item 6, Selected Financial Data, on page 20.
Segment Financial Information. The information required herein
is incorporated by reference to Notes 10 and 11 of Item 8 on
pages 39 and 40.
Customers. The information required herein is incorporated by
reference to pages 2 through 16, 39 and 40. In aggregate, the
Company markets its products to a wide variety of customers. The
Boeing Company represented approximately 20% of fiscal 1998
sales, with sales to U.S. Government prime- or sub-contractors,
including military sales to Boeing, representing approximately
31% of sales. The concentration of customers varies within
product lines. In the Commercial and Military Aircraft product
lines as well as Satellites and Launch Vehicles, a few customers
provide the majority of revenues, while in the Industrial
Hydraulics and Industrial Electronics and Electric Drives product
lines revenues are spread over a wide customer base.
International Operations. Moog's International Controls segment
is an aggregate of operations located predominantly in Europe and
the Asian-Pacific region. (See pages 2 through 16, 40 and 44.)
The Company's international operations are subject to the usual
risks inherent in international trade, including currency
fluctuations, local governmental foreign investment restrictions,
exchange controls, regulation of the import and distribution of
foreign goods, as well as changing economic and social conditions
in countries in which such operations are conducted.
Environmental Matters. See pages 27 and 40.
<PAGE>
ITEM 2. Properties.
Corporate headquarters are located in East Aurora, New York.
Principal manufacturing facilities for the Domestic Controls
segment are located in East Aurora, New York, Torrance,
California and Chatham, California. These facilities consist of
833,697 square feet which are owned and 53,992 square feet which
are under capital lease and financed primarily by industrial
revenue bonds, which allow the Company to purchase the facilities
at nominal prices upon expiration. The Domestic Controls segment
leases 197,990 square feet in East Aurora and 6,155 square feet
in Torrance under operating leases. Outside of the U.S., the
Domestic Controls segment owns manufacturing centers in the
Philippines and India consisting of 87,777 square feet and 31,299
square feet, respectively.
The International Controls segment maintains major manufacturing
facilities in Germany, England and Japan. Of the major European
facilities, 4,500 square feet are owned and 203,265 square feet
are leased under operating lease agreements. The Japanese
facility, consisting of 67,911 square feet, is owned. A specialty
manufacturing operation with 31,750 square feet (27,750 square
feet of which are owned) is located in Ireland. In various other
major markets, including Italy, France, Spain, Sweden, Finland,
Denmark, Brazil, Australia, South Korea, Hong Kong, China and
Singapore, the Company has sales and applications engineering
offices. Of these facilities, 30,027 square feet are owned and
52,656 square feet are leased under operating leases. Operating
leases of the International facilities expire at varying times
from December 1999 through June 2013.
The Company believes that its properties have been adequately
maintained and are generally in good condition. The Company
believes that its existing facilities will provide sufficient
production capacity for its needs in the foreseeable future. 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.
ITEM 3. 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 proceedings which management
believes will result in a material adverse effect on the
Company's financial condition, liquidity or results of operations
or to any pending legal proceedings other than ordinary, routine
litigation related to its business.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
Part II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend restrictions are detailed in Note 6 on page 34 of
Item 8. Other information required herein is incorporated by
reference to pages 20, 45 and 47.
ITEM 6. Selected Financial Data - Notes and Discussion.
Refer to the table on the following page for the Selected
Financial Data for the five year fiscal period 1994 - 1998. For a
more detailed discussion of 1996 through 1998 refer to
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 21 through 27 and Notes to
Consolidated Financial Statements on pages 32 through 40.
<PAGE>
ITEM 6. Selected Financial Data.
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Fiscal Years 1998(1) 1997(2) 1996 1995 1993(3), (4)
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
RESULTS FROM OPERATIONS
Net Sales $ 536,612 $ 455,929 $ 407,237 $ 374,284 $ 307,370
Earnings before extraordinary
loss and cumulative effect of
change in accounting for
income taxes $ 19,268 $ 13,606 $ 11,219 $ 7,761 $ 1,618
Net Earnings $ 19,268 $ 13,606 $ 10,709 $ 7,761 $ 2,123
Per share (5)
Earnings before extraordinary
loss and cumulative effect of
change in accounting for
income taxes
Basic $ 2.33 $ 1.95 $ 1.51 $ 1.00 $ .21
Diluted $ 2.26 $ 1.88 $ 1.47 $ .99 $ .21
Net earnings
Basic $ 2.33 $ 1.95 $ 1.44 $ 1.00 $ .27
Diluted $ 2.26 $ 1.88 $ 1.40 $ .99 $ .27
______________________________________________________________________________________________________
FINANCIAL POSITION
Total Assets $ 559,325 $ 490,563 $ 449,558 $ 424,957 $ 424,456
Working Capital 226,190 187,521 187,971 166,985 150,850
Indebtedness - senior 85,614 118,245 91,262 170,361 183,376
- senior
subordinated 120,000 120,000 120,000 19,400 20,800
Shareholders' equity 191,008 114,191 104,743 108,636 102,184
Shareholders' equity per common
share outstanding 21.38 16.18 15.01 14.06 13.25
______________________________________________________________________________________________________
<PAGE>
SUPPLEMENTAL FINANCIAL DATA
Capital expenditures $ 22,688 $ 13,713 $ 10,885 $ 10,232 $ 8,893
Depreciation and amortization 22,665 21,267 19,632 19,675 15,700
R&D - Company funded 27,487 17,798 17,303 15,783 18,668
- customer funded 15,440 14,071 24,411 21,603 25,332
Backlog 314,253 280,364 243,310 237,941 217,261
______________________________________________________________________________________________________
ADDITIONAL DATA
Number of employees 4,073 3,657 3,229 3,003 3,140
Number of shareholders - Class A 1,610 1,722 1,904 2,114 2,424
- Class B 751 810 898 966 1,088
______________________________________________________________________________________________________
RATIOS
Net return on sales 3.6% 3.0% 2.6% 2.1% .7%
Return on shareholders' equity 12.6% 12.4% 10.0% 7.4% 2.2%
Current ratio 2.87 2.75 2.89 2.76 2.46
Debt to shareholders' equity 1.08 2.09 2.02 1.75 2.00
Long-term senior debt to
capitalization(6) 20.4% 30.3% 25.6% 55.5% 56.8%
Long-term debt to capitalization(6) 51.1% 66.0% 65.3% 61.8% 63.7%
______________________________________________________________________________________________________
(1) Includes the effects of the Class A common stock offering completed in February 1998. See Note 9
to the Consolidated Financial Statements.
(2) Includes the effects of the October 1996 acquisition of the industrial hydraulic servocontrols
business of International Motion Control Inc. See Note 2 to the Consolidated Financial
Statements.
(3) Includes the effects of the June 1994 acquisition of the hydraulic and mechanical actuation
product lines of AlliedSignal Inc.
(4) Includes the effect of pre-tax restructuring charges of $4,700.
(5) In fiscal 1998, the Company adopted SFAS No. 128 "Earnings per Share". All prior periods
presented have been restated. See Note 1 to the Consolidated Financial Statements.
(6) Capitalization is equal to total long-term debt, excluding current maturities, and shareholders'
equity.
</TABLE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Overview
The Company is a leading worldwide designer and manufacturer of a
broad range of high performance, precision motion control
products for aerospace and industrial markets. Moog's
servoactuation systems are critical in 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 electric applications requiring the precise control
of position, velocity and force.
The business consists of five principal product lines. The
Commercial Aircraft product line provides servovalves and flight
controls for Boeing, Airbus and regional jet aircraft. The
Satellites and Launch Vehicles product line includes satellite
positioning controls and steering controls for launch vehicles,
strategic missiles and tactical missiles. The Military Aircraft
product line provides primary and secondary flight controls and
engine controls for advanced fighters, helicopters and bomber
aircraft. Industrial Hydraulics controls principally consist of
servovalves used in various applications including plastic
injection and blow molding, steam and gas turbines, steel rolling
mills and fatigue testing machines. Industrial Electronics and
Electric Drives includes motion simulators, controls for gun and
turret positioning on military ground vehicles, plastics machine
controls and electric drives. Commercial Aircraft, Military
Aircraft and Satellites and Launch Vehicles are collectively
referred to as Aerospace Controls. Industrial Hydraulics and
Industrial Electronics and Electric Drives are collectively
referred to as Industrial Controls.
The operating results of the Company are reported using two
segments: Domestic Controls and International Controls. Domestic
Controls focuses primarily 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 its sales in industrial
product lines. The Company is currently reviewing the
requirements of Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures 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 the first quarter of fiscal
1999.
In early February 1998, the Company completed an offering of
Class A shares at a price of $34.375 per share. The offering
consisted of 1,755,000 previously unissued shares and 300,000
existing shares sold by the Moog Inc. Employees' Retirement Plan
(Moog Retirement Plan). The net proceeds to the Company from the
offering of $56.7 million were used to repay amounts outstanding
<PAGE>
under the U.S. Revolving Credit and Term Loan Facility (Bank
Credit Facility). The Company did not receive any proceeds from
the sale of shares by the Moog Retirement Plan.
In February 1998, the Company purchased the net assets of
Schaeffer Magnetics, Inc. (Schaeffer). Schaeffer, with annual
revenues of approximately $20 million, is a leading supplier to
the space industry of motion control devices and systems for
solar panels and antennas. The cash purchase price was $21.7
million.
On October 30, 1998, the Company acquired a 75% shareholding of
Hydrolux SARL, a Luxembourg designer and manufacturer of
hydraulic power control systems for industrial machinery with
sales of approximately $20 million, from Paul Wurth SARL. As a
result of the transaction, the Company owns 75% of Moog-Hydrolux
Hydraulic Systems, Inc. (Moog-Hydrolux), a joint venture the
Company formed in fiscal 1996 with Hydrolux SARL to serve the
North American market. The Company previously owned 50% of Moog-
Hydrolux. Moog-Hydrolux has sales of $7 million. Paul Wurth SARL
owns a 25% minority interest in Hydrolux SARL and Moog-Hydrolux.
The purchase price was $8.2 million in cash, plus the assumption
of $6.4 million of debt.
On November 30, 1998, the Company completed the acquisition from
Raytheon Aircraft Company of all the outstanding common stock of
Raytheon Aircraft Montek Company (Montek) for approximately $160
million in cash. Montek, located in Salt Lake City, Utah, is a
supplier of flight controls to the Boeing Commercial Airplane
Group and to manufacturers of regional aircraft and business jets
including the Raytheon Aircraft Company. Montek also produces
steering controls for tactical missiles and servovalves for both
industrial and aerospace applications. For its fiscal year ended
December 31, 1997, Montek had sales of $79.4 million and an
operating profit of $13.5 million. See the Financial Condition
and Liquidity section for a description of the related financing.
On December 3, 1998, the Company acquired a 66-2/3% shareholding
in Microset Srl, an Italian designer and manufacturer of
electronic controls for industrial machinery with sales of
approximately $4 million. The cash purchase price was $3.5
million.
<PAGE>
MOOG Inc.
Results of Operations
_________________________________________________________________
Fiscal Years Ended
_________________________________________________________________
September 26, September 27, September 30,
(dollars in thousands) 1998 1997 1996
_________________________________________________________________
DOMESTIC CONTROLS
Net sales
Aerospace $ 319,272 $ 265,835 $ 249,594
Industrial 75,378 59,031 26,981
_____________ _____________ _____________
394,650 324,866 276,575
Intersegment sales 19,236 13,792 11,912
_____________ _____________ _____________
Total sales $ 413,886 $ 338,658 $ 288,487
============= ============= =============
Operating profit $ 47,161 $ 43,288 $ 32,744
Backlog 253,095 236,409 205,516
INTERNATIONAL CONTROLS
Net sales
Aerospace $ 28,276 $ 25,978 $ 19,382
Industrial 113,686 105,085 111,280
_____________ _____________ _____________
141,962 131,063 130,662
Intersegment sales 11,049 7,887 14,983
_____________ _____________ _____________
Total sales $ 153,011 $ 138,950 $ 145,645
============= ============= =============
Operating profit $ 12,722 $ 7,977 $ 11,796
Backlog 61,158 43,955 37,794
CONSOLIDATED
Net sales
Aerospace $ 347,548 $ 291,813 $ 268,976
Industrial 189,064 164,116 138,261
_____________ _____________ _____________
$ 536,612 $ 455,929 $ 407,237
============= ============= =============
Operating profit $ 59,034 $ 51,369 $ 43,339
Net earnings 19,268 13,606 10,709
Backlog 314,253 280,364 243,310
_________________________________________________________________
<PAGE>
1998 Compared with 1997
Consolidated. Net sales for 1998 increased 18% to $536.6 million
as compared to $455.9 million in 1997. Sales of Aerospace
Controls increased $55.7 million reflecting volume increases in
each of the aerospace-related product lines. Within the
Satellites and Launch Vehicles product line, the February 1998
Schaeffer acquisition, which contributed approximately $14
million in sales, and increased launch vehicle activity resulted
in a 42% increase in sales. Sales of Commercial Aircraft controls
increased 16% due to increased revenues associated with Boeing 7
series hardware, regional and business jets, increased activity
in the engine controls business and higher aftermarket sales.
Military Aircraft controls sales improved by 10% due to increased
volume on the F-15 fighter aircraft and programs that are
entering initial production. Sales in Industrial Controls
increased $24.9 million. Industrial Hydraulics controls sales
increased 14% on higher volumes of controls for turbines, flight
training simulators and material test equipment. Sales in
Industrial Electronics and Electric Drives improved 18% due to
increased volumes of entertainment simulators and electric
controls for military ground vehicles.
Cost of sales in 1998 was 69.7% of net sales compared with 69.2%
in 1997. The increase as a percentage of sales is attributable to
lower Aerospace Controls gross margins. Approximately half of
the increase was incurred in the Satellites and Launch Vehicles
product line associated with a manufacturing defect on certain
propulsion system isolation valves and unfavorable cost
experience on a fixed-price development contract for the Atlas
Centaur launch vehicle program. In addition, Commercial Aircraft
margins declined due to an unfavorable product mix towards lower
margin development and production programs.
Research and development expenditures increased by $9.7 million
in 1998 to $27.5 million, or 5.1% of net sales, primarily due to
approximately $7 million of additional efforts related to the
development of next generation flight controls for aircraft and,
to a lesser extent, activity in the Satellites and Launch
Vehicles product line related to various satellite
constellations.
Selling, general and administrative expenses (SG&A) were $85.4
million, or 15.9% of net sales, in 1998, compared to $81.4
million, or 17.9% of net sales, in 1997. The decrease as a
percentage of sales was primarily due to growth in sales, in
addition to a shift of costs (approximately $2 million) to
production and research and development activities in 1998 from
Commercial Aircraft related bid and proposal work in 1997, which
was recorded in SG&A.
Interest expense decreased by $2.5 million to $20.1 million in
1998, as compared to 1997. The decline is due to lower average
borrowings outstanding under the Bank Credit Facility primarily
resulting from the use of proceeds from the equity offering
completed in February 1998.
<PAGE>
The effective tax rate for 1998 was 35.5% compared with 30.5% in
1997. The 1997 tax rate was unusually low due to substantial
foreign tax credit benefits resulting from the distribution of
earnings from the Company's German subsidiary, and a higher share
of 1997 earnings generated in countries with lower tax rates.
During the first quarter of 1998, the Company adopted SFAS No.
128, "Earnings per Share." SFAS No. 128 replaces primary earnings
per share (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 1998, net earnings increased 42% to $19.3 million compared
with $13.6 million in 1997. Basic EPS increased to $2.33 in 1998
compared to $1.95 in 1997, while diluted EPS increased to $2.26
in 1998 compared with $1.88 last year.
Domestic Controls. Domestic Controls net sales increased 21% to
$394.7 million in 1998 compared to $324.9 million in 1997.
Aerospace Controls accounted for over 75% of the increase. Sales
in the Satellites and Launch Vehicles product line increased
$27.0 million, or 45%, due to increased launch vehicle activity
which added approximately $15 million in sales, the acquisition
of Schaeffer which contributed approximately $14 million in
incremental revenues and increased sales of controls for tactical
missiles. These increases helped offset a sales decline in
satellite propulsion hardware related to reduced incoming order
activity associated with customers' high inventory levels, the
slowdown in the Asian-Pacific economies and delays in contract
awards on new large constellation programs. Launch vehicle
activity during the year was strong particularly on the Centaur,
Kistler commercial launch vehicle, Atlas and Titan IV programs.
Sales of Commercial Aircraft controls increased $14.6 million
primarily as a result of approximately $9 million in higher sales
of Boeing 7 series hardware. Also contributing to the improvement
was an increase in the shipment levels associated with regional
and business jets, particularly the Canadair, Gulfstream and
Cessna programs. The Military Aircraft controls sales increase of
$11.8 million is attributable to initial production on the V-22
and F/A-18 E/F programs and increased activity on the F-15 and
F-2 fighter aircraft. Industrial Controls sales increased $16.3
million. Industrial Hydraulics increased $9.7 million on growth
in controls for turbines, flight training simulators and material
testing equipment. Industrial Electronics and Electric Drives
increased $6.6 million due to higher volumes of entertainment
simulators and controls for carpet tufting equipment and military
ground vehicles.
Operating profit for the Domestic Controls segment in 1998 was
11.4% of segment sales, compared to 12.8% of segment sales in
1997. The decrease is due to lower operating margins in Aerospace
Controls, largely due to increased research and development costs
associated with additional efforts related to the development of
<PAGE>
next generation flight controls for aircraft and, to a lesser
extent, activity related to various satellite constellations.
Backlog for the Domestic Controls segment was $253.1 million at
September 26, 1998 compared with $236.4 million at September 27,
1997. The increase from a year ago is due primarily to launch
vehicles, in particular the Titan IV program, and the Schaeffer
acquisition, which added approximately $10 million. Backlog
consists of that portion of open orders for which sales are
expected to be recognized over the next twelve months.
International Controls. International Controls net sales
increased 8% to $142.0 million in 1998 compared to $131.1 million
in 1997 despite lower average currency values, particularly in
Germany and the Asian-Pacific. Sales in 1998, at constant
dollars, increased approximately 15% with sales of Industrial
Controls increasing $16.7 million, primarily in Europe. The
Industrial Hydraulics increase of $11.6 million was due to
increased volume for turbine and plastics controls, while
Industrial Electronics and Electric Drives increased $5.1 million
on increased volumes of controls for military ground vehicles.
Operating profit for the International Controls segment in 1998
was 8.3% of segment sales, compared to 5.7% of segment sales in
1997. The increase is due primarily to higher sales allowing for
better absorption of fixed costs. In addition, approximately $1.5
million of write-offs and transition costs were incurred in 1997
to better position the Industrial Electronics and Electric Drives
product line to compete more effectively.
Backlog at September 26, 1998 for the International Controls
segment was $61.2 million as compared to $44.0 million at
September 27, 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.
1997 Compared with 1996
Consolidated. Net sales for 1997 were $455.9 million compared
with $407.2 million in 1996. The sales improvement was due to an
increase of $25.9 million in Industrial Controls resulting
primarily from the acquisition of the U.S. Industrial Hydraulics
Business (See Note 2 in Item 8.), which added approximately $28
million in revenues during 1997, and to a lesser extent,
increased demand for entertainment simulators. Industrial
Controls sales increases in Europe and the Asian-Pacific were
more than offset by exchange rate fluctuations. The effect on
Industrial Controls sales of declines in the value of the
applicable foreign currencies relative to the U.S. dollar was
approximately 8% in 1997 compared to 1996, or approximately $9
million. The sales improvement of Aerospace Controls of $22.8
million resulted primarily from increased volume in the
Commercial Aircraft product line and, to a lesser extent, the
Satellites and Launch Vehicles product line, tempered by expected
declines in Military Aircraft.
Cost of sales for 1997 was 69.2% of net sales, which is
comparable to 1996. Increased volume and product mix in Aerospace
Controls had a favorable effect of approximately $3 million on
<PAGE>
consolidated cost of sales. The improved Aerospace Controls gross
margin was offset by unfavorable product mix and adverse changes
in foreign currencies in Industrial Controls and, to a lesser
extent, costs incurred to improve the longer-term margins of
Industrial Electronics and Electric Drives.
Selling, general and administrative expenses were $81.4 million,
or 17.9% of net sales, in 1997, compared to $75.7 million, or
18.6 % of net sales, in 1996. The decrease as a percentage of
sales was principally due to the growth in sales.
Interest expense increased by $4.6 million to $22.7 million in
1997, as compared to 1996, due primarily to additional
indebtedness incurred for the acquisition of the U.S. Industrial
Hydraulics Business.
The 1997 tax rate of 30.5% primarily reflected benefits resulting
from the distribution of earnings from the German subsidiary and
tax incentives associated with U.S. export sales.
Other income decreased by $.8 million to $1.6 million in 1997, as
1996 included $.5 million of license fees received on a foreign
military program.
Other expenses in 1997 included $.4 million of the Company's
share of costs associated with the start-up phase of Moog-
Hydrolux as well as losses associated with disposals.
Results in 1996 included a $.5 million extraordinary loss, net of
income tax benefit, on the early repayment of debt.
For 1997, net earnings increased 27% to $13.6 million compared to
$10.7 million in 1996. Basic EPS increased to $1.95 in 1997
compared to $1.44 in 1996, while diluted EPS increased to $1.88
in 1997 compared to $1.40 in 1996.
Domestic Controls. Domestic Controls net sales increased by 17%
to $324.9 million in 1997 compared to $276.5 million in 1996.
Sales of Industrial Controls increased by $32.1 million primarily
due to the acquisition of the U.S. Industrial Hydraulics Business
and, to a lesser extent, $6 million in higher sales of
entertainment simulators. Sales of Aerospace Controls increased
by $16.2 million in 1997 due to growing Commercial Aircraft and
Satellites and Launch Vehicles demand. These increases were in
part offset by expected sales declines of approximately $12
million in the Military Aircraft product line as certain
programs, particularly the F/A-18 E/F and V-22, were
transitioning from the development phase to low rate initial
production.
Operating profit for the Domestic Controls segment was up 32.2%
to $43.3 million for 1997, or 12.8% of segment sales. This
compares with $32.7 million, or 11.4% of segment sales a year
ago. Approximately half of the increase was attributable to
higher Aerospace Controls sales in addition to a more favorable
product mix in Commercial and Military Aircraft controls.
Industrial Controls accounted for the remainder of the Domestic
Controls operating profit increase primarily due to the
acquisition of the U.S. Industrial Hydraulics Business.
<PAGE>
Backlog for the Domestic Controls segment increased by $30.9
million to $236.4 million at September 27, 1997 due to low rate
initial production orders received on the F/A-18 E/F, V-22 and
Standard Missile 2 programs, growth in orders for entertainment
simulators and the acquisition of the U.S. Industrial Hydraulics
Business.
International Controls. International Controls net sales for 1997
of $131.1 million were flat as compared to 1996 net sales of
$130.7 million despite lower average currency values. Sales in
1997, at constant currency, increased approximately 8%. Sales of
Aerospace Controls, at constant currency, increased approximately
$7 million in 1997 particularly on the strength of Military
Aircraft controls in the United Kingdom and, to a lesser extent,
missile controls in Italy. Sales of Industrial Controls increased
approximately $4 million in 1997, at constant currency, primarily
due to improved sales in the Company's Industrial Electronics and
Electric Drives product line. Sales of Industrial Hydraulics
controls marginally declined in Europe and were offset by sales
gains in Japan.
Operating profit for the International Controls segment decreased
32.4% to $8.0 million, or 5.7% of segment sales, compared to
$11.8 million, or 8.1% of segment sales, in 1996, primarily
related to Industrial Controls. Margins in Europe were affected
by the movements of certain currencies in countries where the
Company's products are manufactured relative to currencies in
countries where the products are sold. Margins in the Industrial
Electronics and Electric Drives product line were affected by
approximately $1.5 million of costs incurred throughout the year
to better position plastic systems controls for the long-term.
The remainder of the decline was attributable to a shift in
Industrial Controls product lines to lower margin electric
controls, along with a shift within the Industrial Hydraulics
product line away from higher margin mechanical feedback valves.
Backlog at September 27, 1997 for the International Controls
segment was $44.0 million compared to $37.8 million at September
30, 1996. The increase was attributable to growth in orders for
electric drives for military ground vehicles in Germany and
Industrial Hydraulics in Japan, partially offset by approximately
$4 million attributable to weaker currencies.
Financial Condition and Liquidity
Cash provided by operating activities was $23.4 million in 1998
compared to $32.0 million in 1997. Improved earnings as adjusted
for non-cash charges were offset by increased receivables and
inventories related to the current year sales growth.
Long-term senior debt decreased by $21.9 million to $79.7 million
at September 26, 1998 primarily due to the use of proceeds from
the current year equity offering to pay down existing
indebtedness, offset by the Schaeffer acquisition. On April 1,
1998, the Company used $21 million available under the revolving
portion of the Bank Credit Facility to pay off the term loan
<PAGE>
outstanding under the same facility. In addition, the interest
rate on the revolving portion was lowered to LIBOR plus 90 basis
points from LIBOR plus 175 basis points. The percentage of long-
term debt to capitalization at September 26, 1998 was 51.1%
compared to 66.0% at September 27, 1997. The decrease is due to
the aforementioned reduction in senior debt and the $56.7 million
of proceeds from the equity offering.
At September 26, 1998, the Company had $100.8 million of unused
borrowing capacity available under the short and long-term lines
of credit, including $86.0 million from the Bank Credit Facility.
In connection with the previously mentioned acquisition of
Montek, the Company refinanced its U.S. credit facilities.
Effective November 30, 1998, the Company entered into a $340
million Corporate Revolving and Term Loan Agreement (1999 Credit
Facility) with a banking group. The 1999 Credit Facility provides
for $265 million in a revolving facility and a $75 million term
loan with interest starting at LIBOR plus 200 basis points, with
the spread adjusted based on leverage. The facility is for a five
year period with quarterly principal payments on the term loan of
$3.75 million commencing in March 1999. The 1999 Credit Facility
is secured by substantially all of the Company's U.S. assets. The
loan agreement includes customary covenants for a transaction of
this nature. The 1999 Credit Facility was used principally to
acquire Montek for approximately $160 million and to refinance
approximately $72 million of existing revolving credit facilities
(including the Bank Credit Facility), with the remaining balance
available for future working capital requirements.
Working capital at September 26, 1998 was $226.2 million compared
to $187.5 million at September 27, 1997. The current ratio was
2.87 at September 26, 1998 compared to 2.75 at September 27,
1997. Current assets increased by $52.4 million in 1998. The
increase is due primarily to increased receivable and inventory
levels necessary to support the sales growth experienced in 1998.
In addition, the Schaeffer acquisition added approximately $10
million of current assets, including $2.6 million of land and
building that were sold subsequent to September 26, 1998. Current
liabilities increased by $13.7 million due primarily to increases
in benefit accruals, $3.5 million related to the acquisition of
Schaeffer, $3.3 million in customer advances and a $1.8 million
increase in accounts payable.
Net property, plant and equipment increased $7.3 million to
$139.4 million at September 26, 1998. Capital expenditures of
$22.7 million in 1998 compared with depreciation and amortization
of $22.7 million. Capital expenditures in 1997 were $13.7 million
compared with depreciation and amortization of $21.3 million. The
increase in capital expenditures related primarily to facilities
expansion for the Domestic Aerospace Controls operations and the
low cost manufacturing operation in the Philippines. The
acquisition of Schaeffer added approximately $3.9 million to net
property, plant and equipment. Capital expenditures in 1999 are
expected to be approximately $22.5 million.
<PAGE>
The Company believes its cash flow from operations, together with
access to external capital resources, will continue to be
sufficient to meet its operating needs.
Other
Year 2000. As the end of the century nears, there is widespread
concern around the world that many existing computer programs
that use only the last two digits to refer to a year will not
properly recognize a year that begins with the digits "20"
instead of "19." If not corrected, the concern is that many
computer applications might fail, creating erroneous results or
cause unanticipated system failures, among other problems.
In fiscal 1996 the Company initiated activities, including
designating a Year 2000 project team to be responsible for
specific information technology (IT) environments, to ensure its
Year 2000 readiness. In addition, communications were made to all
non-IT functional areas to initiate a process of review and
remediation of Year 2000 issues in those areas. The Company has
substantially completed the phase of identifying IT and non-IT
systems that are not Year 2000 compliant and is in the process of
upgrading or replacing those systems. It is anticipated that all
Year 2000 efforts, including testing, will be completed by the
end of 1999.
The Company's principal business system is used by the majority
of the Domestic operations and certain international
subsidiaries, which in total represent approximately 70% of the
Company's sales. This business system, which encompasses
manufacturing, engineering and accounting, has been reviewed and
tested and is considered to be Year 2000 compliant. However,
certain auxiliary business applications must be changed and
activity is in process to have these replaced with compliant
packages or changed, tested and compliant by the end of 1999. The
most significant of these applications is the Company's Human
Resource Information System for the Domestic operations. The
Company has purchased a new system which is scheduled to be in
place by mid-1999 and cost approximately $1 million, the majority
of which will be capitalized. The costs associated with the other
auxiliary business applications are not expected to be material.
The business systems for the remainder of the Company have been
evaluated and are being tested. Certain applications will require
replacement, the cost of which should not exceed $.5 million.
The Company is in the process of testing product systems (i.e.,
CAD/CAM systems), personal computing, data entry, and
communication hardware and software and systems associated with
facilities management. Although certain upgrades or replacements
are being made, many were previously scheduled and the timing has
not been materially impacted by the Year 2000 issue. The Year
2000 costs associated with these systems are not expected to be
material. The Company uses large computerized numerical control
(CNC) machines which are critical to the manufacturing process.
Confirmation of Year 2000 compliance with respect to these
machines has been obtained from the Company's vendors.
<PAGE>
Only a small portion of the Company's products contain embedded
processors or depend upon date logic. With respect to those that
do, the Company identified certain software that must be upgraded
or replaced, primarily within its Industrial Controls product
lines. The cost of upgrading or replacement is not expected to be
material.
The Company purchases materials, supplies and components from
numerous suppliers. The loss of any one supplier would not
materially affect the Company's operations. Nevertheless the
Company is continually assessing the level of Year 2000 readiness
of its key suppliers and service providers. To do this, the
Company has sent letters to its critical vendors inquiring about
their Year 2000 efforts and is evaluating responses.
In fiscal 1998, the Company's sales to U.S. Government prime- or
sub-contractors represented approximately 31% of consolidated
sales. The Company believes that the U.S. Government, including
the Department of Defense, is undertaking substantial efforts to
address Year 2000 issues. However, there is no assurance as to
the Department of Defense's readiness and the potential impact of
the Department of Defense's non-readiness is unknown at this
time.
The Company believes that it is taking the necessary steps to
ensure the Year 2000 issue will not pose significant operational
problems for the Company. However, if all Year 2000 issues are
not properly identified, or assessment, remediation and testing
do not occur on a timely basis, there can be no assurance that
the Year 2000 issue will not materially impact the Company's
results of operations or adversely affect relationships with
customers, vendors or others. The Company believes the greatest
potential risk from the Year 2000 issue relates to major
suppliers or customers whose systems may not be Year 2000
compliant and who may not be able to meet delivery requirements
for important raw materials, equipment or utilities, or who may
not be able to accept shipment of the Company's products until
they correct their Year 2000 problems.
The Company has taken a proactive approach toward identifying and
remediating Year 2000 problems both internally and with outside
business partners in order to minimize the need for contingency
plans. While the Company does not have formalized contingency
plans, as the evaluation of internal and external factors
continues, the Company will assess which areas of the business
require contingency plans and have those plans in place by the
end of 1999.
Market Risk Sensitive Instruments. The Company, in the normal
course of business, has exposures to interest rate risks from its
long-term debt obligations and to foreign exchange rate risk with
respect to its foreign operations and foreign currency
transactions. To minimize these risks, the Company periodically
enters into interest rate swaps and forward contracts. The
Company does not hold or issue financial instruments for trading
purposes.
<PAGE>
The Company's long-term revolving credit facilities have variable
interest rates based on LIBOR. At September 26, 1998, $74.0
million was outstanding under these facilities. If LIBOR were to
change by 10%, the impact on consolidated interest expense would
be approximately $.5 million annually. In order to provide for
interest rate protection with respect to the variable rate
revolving credit facilities, the Company has entered into an
interest rate swap agreement for $20 million, effectively
converting this amount to fixed rate debt at 6.45%. A 10% change
in LIBOR would not have a material impact on the fair value of
the interest rate swap or the Company's results of operations or
cash flows. At September 26, 1998 the carrying value of the
Company's long-term debt was $205.2 million compared to an
estimated fair value of $206.4 million. A 10% increase in
treasury security yields would result in a projected fair value
at September 26, 1998 of $196.5 million.
The majority of the Company's sales, expenses and cash flows are
transacted in U.S. dollars. In addition, the geographic diversity
of the Company's international operations generally provides a
natural hedge against foreign exchange movements. The Company
periodically uses forward contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material
purchases, intercompany product shipments and intercompany loans.
The Company also uses forward contracts to reduce fluctuations in
the value of foreign currency investments in, and long-term
advances to, subsidiaries. At September 26, 1998 there was one
contract outstanding with a fair value of less than $.1 million.
A 10% change in foreign exchange rates would not have a material
impact on the fair value of the forward contract or the Company's
results of operations or cash flows related to that contract.
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which must be adopted by fiscal 2000. Under this
standard, companies are required to carry all derivatives in the
balance sheet at fair value. The accounting for changes in the
fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part
of a hedging relationship and, if so, on the reason for holding
it. The Company is in the process of evaluating the impact this
standard will have on its financial statements.
Euro Conversion. On January 1, 1999, eleven of the fifteen
member countries of the European Union are scheduled to adopt the
Euro as their common legal currency and to establish fixed
conversion rates between their existing sovereign currencies and
the Euro. The Company initiated an internal review of the
potential effects on the Company of the Euro conversion. Although
existing business systems will have to be programmed to
accommodate the Euro, the cost is not expected to be material.
Other factors such as competitive implications of increased price
transparency, currency exchange rate risk and derivative
exposures, continuity of material contracts and potential tax
consequences are not expected to have a material impact on the
Company's financial condition, liquidity or results of
operations.
<PAGE>
Environmental. At September 26, 1998 the Company believes that
adequate reserves have been established for all currently pending
environmental issues, and does not expect environmental matters
to have a material adverse effect on the financial condition,
liquidity or results of operations of the Company.
Outlook
The outlook for 1999 is for continued growth in both sales and
net earnings. The increase in sales will be primarily due to the
aforementioned acquisitions, while the earnings improvement will
be driven mainly by improved operating efficiencies in the
existing core business and, to a lesser extent, the 1999
acquisitions.
Excluding the 1999 acquisitions, sales in the Military and
Commercial Aircraft product lines appear to have temporarily
peaked as sales declines on mature military programs nearing
completion have not yet been offset by programs entering initial
production and due to a recent rescheduling of deliveries to
Boeing, reflecting softness in the Asian-Pacific commercial
airplane market. However, increases in satellite controls,
primarily due to the Schaeffer acquisition and projected growth
on satellite constellations, and launch vehicles due to work on
the Titan IV program, should provide modest growth in Aerospace
Controls in the near term. Sales and operating profit growth in
Industrial Controls is expected to continue on the strength of
sales of electric drives for military ground vehicles in Europe,
power generation controls, and due to the strong U.S. and
European industrial economies. Sales from the Company's Asian-
Pacific operations, excluding Japan, account for less than 2% of
total sales (5% including Japan) and, as a result, economic
difficulties, as they affect those operations, are not expected
to have a material impact on the Company's financial condition,
liquidity or results of operations.
ITEM 7A. Quantitative and Qualitative Disclosures About Market
Risk.
The information required herein is incorporated by reference to
the information appearing under the caption "Market Risk
Sensitive Instruments" in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, on
page 26.
<PAGE>
ITEM 8. Financial Statements and Supplementary Data.
_________________________________________________________________
MOOG INC.
Consolidated Statements of Earnings
_________________________________________________________________
Fiscal Years Ended
__________________________________________
(dollars in thousands September 26, September 27, September 30,
except per share data) 1998 1997 1996
_________________________________________________________________
NET SALES $ 536,612 $ 455,929 $ 407,237
OTHER INCOME 1,447 1,565 2,380
___________ ____________ ____________
538,059 457,494 409,617
___________ ____________ ____________
COSTS AND EXPENSES
Cost of sales 374,000 315,380 281,710
Research and development 27,487 17,798 17,303
Selling, general and
administrative 85,374 81,413 75,707
Interest 20,148 22,675 18,124
Other expenses 1,177 649 723
___________ ____________ ____________
508,186 437,915 393,567
___________ ____________ ____________
EARNINGS BEFORE INCOME
TAXES AND EXTRAORDINARY
LOSS 29,873 19,579 16,050
INCOME TAXES (Note 7) 10,605 5,973 4,831
___________ ____________ ____________
EARNINGS BEFORE
EXTRAORDINARY LOSS 19,268 13,606 11,219
EXTRAORDINARY LOSS FROM
EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME
TAX BENEFIT OF $300 (Note 6) -- -- (510)
___________ ____________ ____________
NET EARNINGS $ 19,268 $ 13,606 $ 10,709
=========== ============ ============
NET EARNINGS PER
SHARE (Note 1):
Basic
Before extraordinary
loss $ 2.33 $ 1.95 $ 1.51
Extraordinary loss -- -- (0.07)
___________ ____________ ____________
Net earnings $ 2.33 $ 1.95 $ 1.44
=========== ============ ============
Diluted
Before extraordinary
loss $ 2.26 $ 1.88 $ 1.47
Extraordinary loss -- -- (0.07)
___________ ____________ ____________
Net earnings $ 2.26 $ 1.88 $ 1.40
_________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
MOOG INC.
Consolidated Balance Sheets
_________________________________________________________________
As of As of
September 26, September 27,
(dollars in thousands 1998 1997
except per share data)
________________________________________________________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,625 $ 6,800
Receivables (Note 3) 182,228 160,054
Inventories (Note 4) 121,784 103,866
Deferred income taxes
(Note 7) 22,289 18,935
Prepaid expenses and other
current assets 9,151 5,052
____________ _____________
TOTAL CURRENT ASSETS 347,077 294,707
PROPERTY, PLANT AND EQUIPMENT
(Notes 5 and 6) 139,444 132,109
GOODWILL, net of accumulated
amortization of $10,117 in
1998, and $7,528 in 1997 60,025 49,626
OTHER ASSETS 12,779 14,121
____________ _____________
TOTAL ASSETS $ 559,325 $ 490,563
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 6) $ 410 $ 1,323
Current installments of
long-term debt (Note 6) 5,505 15,345
Accounts payable 25,648 23,860
Accrued salaries, wages and
commissions 36,338 28,747
Contract loss reserves 10,448 8,170
Accrued interest 8,050 7,253
Federal, state and foreign
income taxes 6,838 5,419
Other accrued liabilities 17,746 10,439
Customer advances 9,904 6,630
____________ _____________
TOTAL CURRENT
LIABILITIES 120,887 107,186
LONG-TERM DEBT, excluding
current installments (Note 6)
Senior debt 79,699 101,577
Senior subordinated notes 120,000 120,000
<PAGE>
OTHER LONG-TERM LIABILITIES
(Notes 7 and 8) 47,731 47,609
____________ _____________
TOTAL LIABILITIES 368,317 376,372
____________ _____________
COMMITMENTS AND CONTINGENCIES
(Note 12)
SHAREHOLDERS' EQUITY (see page
31 and Notes 8 and 9)
9% Series B Cumulative, Convertible,
Exchangeable Preferred stock -
Par Value $1.00
Authorized 200,000 shares.
Issued 100,000 shares. 100 100
Common Stock - Par Value $1.00
Class A - Authorized 30,000,000
shares. Issued 8,427,141 shares
in 1998 and 6,635,936 shares
in 1997. 8,427 6,636
Class B - Authorized 10,000,000
shares. Convertible to Class A on
a one for one basis. Issued
2,461,982 shares in 1998 and
2,498,187 shares in 1997. 2,462 2,498
Additional paid-in capital 102,306 47,519
Retained earnings 107,681 88,422
Treasury shares (30,511) (30,967)
Equity adjustments 614 977
Loan to Savings and Stock
Ownership Plan (71) (994)
____________ _____________
TOTAL SHAREHOLDERS'
EQUITY 191,008 114,191
____________ _____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 559,325 $ 490,563
_________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
MOOG INC.
Consolidated Statements of Cash Flows
<CAPTION>
Fiscal Years Ended
___________________________________________________
September 26, September 27, September 30,
(dollars in thousands) 1998 1997 1996
__________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 19,268 $ 13,606 $ 10,709
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 22,665 21,267 19,632
Provisions for losses 10,974 9,763 6,444
Deferred income taxes (3,200) (2,094) (584)
Extraordinary loss from
early extinguishment of debt,
pre-tax -- -- 810
Other 146 755 485
Change in assets and liabilities
providing (using) cash:
Receivables (19,590) (10,084) (13,465)
Inventories (20,124) (4,479) (17,662)
Other assets (320) (1,652) (1,486)
Accounts payable and
accrued liabilities 12,403 2,745 5,604
Other liabilities 524 3,810 6,354
Customer advances 615 (1,607) (1,665)
___________ ___________ __________
NET CASH PROVIDED BY OPERATING
ACTIVITIES 23,361 32,030 15,176
___________ ___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions and investments,
net of cash acquired (Note 2) (20,983) (49,180) (6,752)
Purchase of property, plant
and equipment (22,527) (12,982) (10,288)
<PAGE>
Proceeds from sale of assets 328 393 202
Payments received, net of advances,
on loan to Savings and Stock
Ownership Plan 923 (493) 248
___________ ___________ __________
NET CASH USED IN INVESTING
ACTIVITIES (42,259) (62,262) (16,590)
___________ ___________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (477) (1,913) (3,357)
Proceeds from revolving lines
of credit 126,151 97,000 92,272
Payments on revolving lines of credit (128,417) (71,000) (149,657)
Proceeds from issuance of
long-term debt 4,736 18,684 125,213
Payments on long-term debt (33,843) (14,825) (46,181)
Net proceeds from the sale of
common stock (Note 9) 56,658 -- --
Purchase of outstanding shares
for treasury (2,145) (428) (14,605)
Proceeds from sale of treasury stock 2,295 1,123 545
Other (1,289) (836) (435)
___________ ___________ __________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 23,669 27,805 3,795
___________ ___________ __________
Effect of exchange rate changes on
cash and cash equivalents 54 (412) (318)
___________ ___________ __________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,825 (2,839) 2,063
Cash and cash equivalents at
beginning of year 6,800 9,639 7,576
___________ ___________ __________
Cash and cash equivalents
at end of year $ 11,625 $ 6,800 $ 9,639
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 18,842 $ 20,452 $ 12,856
Income taxes, net of refunds 12,058 5,646 2,739
<PAGE>
Non-cash investing and financing
activities:
Adjustment to minimum
pension liability (Note 8) (21) 676 (2,019)
Leases capitalized, net of leases
terminated 161 731 597
__________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> MOOG INC.
Consolidated Statements of Shareholders' Equity
<CAPTION>
Fiscal Years Ended
___________________________________________________
(dollars in thousands September 26, September 27, September 30,
except per share data) 1998 1997 1996
__________________________________________________________________________________________
<S> <C> <C> <C>
PREFERRED STOCK $ 100 $ 100 $ 100
_____________ _____________ _____________
COMMON STOCK
Beginning of year 9,134 9,134 9,134
Sale of common stock (Note 9) 1,755 -- --
_____________ _____________ _____________
End of year 10,889 9,134 9,134
_____________ _____________ _____________
ADDITIONAL PAID-IN CAPITAL
Beginning of year 47,519 47,611 47,709
Sale of common stock, net of
issuance costs (Note 9) 54,903 -- --
Issuance of treasury shares at
less than cost (306) (141) (98)
Tax benefits related to stock
option plan 190 49 --
_____________ _____________ _____________
End of year 102,306 47,519 47,611
_____________ _____________ _____________
RETAINED EARNINGS
Beginning of year 88,422 74,825 64,125
Net earnings 19,268 13,606 10,709
Preferred dividends ($.09 per share
in 1998, 1997 and 1996) (9) (9) (9)
_____________ _____________ _____________
End of year 107,681 88,422 74,825
_____________ _____________ _____________
TREASURY SHARES, AT COST*
Beginning of year (30,967) (31,803) (17,841)
Shares issued related to
options (1998 - 99,750 Class A
shares and 85,000 Class B shares;
<PAGE>
1997 - 50,150 Class A shares and
44,912 Class B shares; 1996 - 46,800
Class A shares and 500 Class B
shares) 2,451 1,264 568
Shares acquired through
purchase (1998 - 57,343 Class A
shares and 8,817 Class B shares;
1997 - 17,321 Class A
shares and 410 Class B shares;
1996 - 721,086 Class A shares,
80,000 Class B shares and
5,117 Series B Preferred shares) (2,145) (428) (14,605)
Shares sold to Savings and Stock
Ownership Plan (SSOP) (1998 -
3,300 Class A shares) 150 -- --
Shares issued related to conversion
of convertible subordinated
debentures (1996 - 6,204 Class A
shares) -- -- 75
_____________ _____________ _____________
End of year (30,511) (30,967) (31,803)
_____________ _____________ _____________
EQUITY ADJUSTMENTS**
Beginning of year 977 5,377 6,158
Adjustment from foreign currency
translation (363) (4,400) (2,110)
Adjustment from change in pension
liability -- -- 1,329
_____________ _____________ _____________
End of year 614 977 5,377
_____________ _____________ _____________
LOAN TO SSOP
Beginning of year (994) (501) (749)
Payments received on loan, net of
advances, to SSOP 923 (493) 248
_____________ _____________ _____________
End of year (71) (994) (501)
_____________ _____________ _____________
TOTAL SHAREHOLDERS' EQUITY $191,008 $ 114,191 $104,743
__________________________________________________________________________________________
* Class A Common Stock in treasury: 1,140,514 shares as of September 26, 1998; 1,186,221
shares as of September 27, 1997; 1,219,050 shares as of September 30, 1996.
Class B Common Stock in treasury: 815,918 shares as of September 26, 1998; 892,101 shares
as of September 27, 1997; 936,603 shares as of September 30, 1996.
Preferred Stock in treasury: 5,117 shares as of September 26, 1998, September 27, 1997 and
September 30, 1996.
** End of year balance consists solely of cumulative foreign currency translation, net of
applicable deferred taxes.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Notes To Consolidated Financial Statements
(dollars in thousands except per share data)
Note 1 - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include the
accounts of Moog Inc. and all of its U.S. and International
subsidiaries (the Company). All significant intercompany balances
and transactions have been eliminated in consolidation.
Cash and Cash Equivalents: All highly liquid investments with an
original maturity of three months or less are considered cash
equivalents. Cash and cash equivalents are carried at amounts
which represent fair value. The Company places its temporary
investments with highly rated financial institutions.
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 with cost determined primarily on 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 Translation: Foreign subsidiaries' assets and
liabilities are translated using rates of exchange as of the
balance sheet date and the statements of earnings are translated
at the average rates of exchange for the year.
Depreciation and Amortization: Plant and equipment are
depreciated principally using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements and
assets considered capital leases are amortized on a straight-line
basis over the term of the lease or the estimated useful life of
the asset, whichever is shorter.
Intangibles associated with acquisitions are amortized on a
straight-line basis over periods not to exceed 30 years. The
Company monitors its long-lived assets, including intangibles,
for evidence of impairment. In the event that such evidence
exists, the Company uses forecasted discounted cash flow analysis
to determine the amount of impairment.
Financial Instruments: The Company uses derivative financial
instruments for the purpose of hedging currency and interest rate
exposures which exist as part of its ongoing business operations.
In general, instruments used as hedges must be effective at
reducing the risk associated with the exposure being hedged and
must be designated as a hedge at the inception of the contract.
Deferred gains or losses related to any instrument designated but
ultimately ineffective as a hedge of existing assets,
<PAGE>
liabilities, or firm commitments are recognized immediately in
the statement of earnings. The Company does not hold or issue
financial instruments for trading purposes. The Company is
exposed to credit loss in the event of nonperformance by the
counter-parties to the instruments. The Company, however, does
not expect nonperformance by the counter-parties.
The Company uses forward contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material
purchases, intercompany product shipments, and intercompany
loans. Foreign currency contracts are marked-to-market with net
amounts due to or from counter-parties recorded in accounts
receivable or payable. For contracts hedging firm commitments,
marked-to-market gains or losses are deferred and recognized as
an adjustment to the basis of the transaction. For all other
contracts, marked-to-market gains or losses are recognized
currently, generally offsetting gains or losses from underlying
hedged transactions. Foreign currency forward contracts
outstanding at fair value on September 26, 1998 and September 27,
1997 were $82 and $2,086, respectively. Forward contracts used to
reduce fluctuations in the value of foreign currency investments
in, and long-term advances to, subsidiaries are marked-to-market
with gains or losses recorded in the cumulative translation
adjustment component of shareholders' equity.
The Company uses interest rate swaps to reduce interest rate
volatility with certain debt issues. The interest differential to
be paid or received on the swap is recognized in the statement of
earnings, as incurred, as a component of interest expense.
The cash flows related to derivative financial instruments are
classified in the statement of cash flows in a manner consistent
with those of the transactions being hedged.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging
Activities," which must be adopted by fiscal 2000. Under this
standard, companies are required to carry all derivative
instruments in the balance sheet at fair value. The accounting
for changes in the fair value (i.e., gains or losses) of a
derivative instrument depends on whether it has been designated
and qualifies as part of a hedging relationship and, if so, on
the reason for holding it. The Company is in the process of
evaluating the impact this standard will have on its financial
statements.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those
estimates and assumptions.
Earnings Per Share: In fiscal 1998, the Company adopted SFAS No.
128, "Earnings per Share." SFAS No. 128 replaces primary earnings
per share (EPS) with basic EPS and fully diluted EPS with diluted
<PAGE>
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.
The number of shares and earnings in the Company's basic and
diluted earnings per share computations are as follows:
__________________________________________________________________________
Earnings
Before Weighted
Extraordinary Average Earnings
Loss Shares Per Share
__________________________________________________________________________
1998
Earnings before extraordinary loss $ 19,268
Less preferred stock dividends (9)
___________
Basic EPS 19,259 8,281,974 $ 2.33
=======
Stock options -- 220,382
Convertible preferred stock 9 8,146
___________ _________
Diluted EPS $ 19,268 8,510,502 $ 2.26
=========== ========= =======
1997
Earnings before extraordinary loss $ 13,606
Less preferred stock dividends (9)
___________
Basic EPS 13,597 6,979,011 $ 1.95
=======
Stock options __ 245,601
Convertible preferred stock 9 8,585
___________ _________
Diluted EPS $ 13,606 7,233,197 $ 1.88
=========== ========= ======
1996
Earnings before extraordinary loss $ 11,219
Less preferred stock dividends (9)
___________
Basic EPS 11,210 7,412,485 $ 1.51
======
Stock options __ 226,827
Convertible preferred stock 9 8,585
___________ _________
Diluted EPS $ 11,219 7,647,897 $ 1.47
__________________________________________________________________________
<PAGE>
Note 2 - Acquisitions
On February 3, 1998, the Company acquired the net assets of
Schaeffer Magnetics, Inc. (Schaeffer). Schaeffer, with annual
revenues of approximately $20,000, is a leading supplier to the
space industry of motion control devices and systems for solar
panels and antennas. The purchase price was $21,700. Intangible
assets resulting from this acquisition are approximately $13,600,
the majority of which are being amortized over 30 years. Proforma
results of operations have not been presented because the effect
of this acquisition was not significant.
On October 26, 1996, the Company acquired the assets of, and
assumed certain liabilities related to, the industrial hydraulic
servocontrols business (the U.S. Industrial Hydraulics Business)
of International Motion Control Inc., an unrelated third party.
The cash purchase price was $48,600. The U.S. Industrial
Hydraulics Business, which operated under the name Moog Controls
Inc., was spun off by the Company in February 1988. The
acquisition resulted in intangible assets of approximately
$36,500, the majority of which are being amortized over 30 years.
On October 30, 1998, the Company acquired a 75% shareholding of
Hydrolux SARL, a Luxembourg designer and manufacturer of
hydraulic power control systems for industrial machinery with
sales of approximately $20,000, from Paul Wurth SARL. As part of
the transaction, the Company owns 75% of Moog-Hydrolux Hydraulic
Systems, Inc. (Moog-Hydrolux), a joint venture the Company formed
in fiscal 1996 with Hydrolux SARL to serve the North American
market. The Company previously owned 50% of Moog-Hydrolux. Moog-
Hydrolux has sales of $7,000. Paul Wurth SARL owns a 25% minority
interest in Hydrolux SARL and Moog-Hydrolux. The purchase price
was $8,200 in cash, plus the assumption of $6,400 of debt.
On November 30, 1998, the Company completed the acquisition from
Raytheon Aircraft Company of all the outstanding common stock of
Raytheon Aircraft Montek Company (Montek) for approximately
$160,000 in cash. Montek, located in Salt Lake City, Utah, is a
supplier of flight controls to the Boeing Commercial Airplane
Group and to manufacturers of regional aircraft and business jets
including the Raytheon Aircraft Company. Montek also produces
steering controls for tactical missiles and servovalves for both
industrial and aerospace applications. For its fiscal year ended
December 31, 1997, Montek had sales of $79,400 and an operating
profit of $13,500.
On December 3, 1998, the Company acquired a 66-2/3% shareholding
in Microset Srl, an Italian designer and manufacturer of
electronic controls for industrial machinery with sales of
approximately $4,000. The cash purchase price was $3,500.
All of the Company's acquisitions are accounted for under the
purchase method, and accordingly, the operating results for the
acquired companies are included in the Consolidated Statements of
Earnings from the date of acquisition.
<PAGE>
Note 3 - Receivables
Receivables consist of:
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Long-Term contracts:
Amounts billed $ 48,216 $ 42,028
Unbilled recoverable
costs and profits 77,661 66,472
Claims on terminated
contracts 391 558
_______ ________
Total long-term contract
receivables 126,268 109,058
Trade 57,599 50,998
Refundable income taxes 17 250
Other 1,244 1,342
_______ _______
Total receivables 185,128 161,648
Less allowance for doubtful
accounts (2,900) (1,594)
________________________________________________________________
Receivables $182,228 $160,054
________________________________________________________________
The long-term contract amounts are primarily associated with U.S.
Government prime- and sub-contractors and major commercial
aircraft manufacturers. 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.
Concentrations of credit risk with respect to trade receivables
are mitigated due to the significant amount of business with
large commercial aerospace companies or U.S. Government prime-
and sub-contractors and to the number of customers and their
dispersion over a large geographic region.
Note 4 - Inventories
Inventories consist of the following:
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Raw materials and
purchased parts $ 37,404 $ 28,933
Work in process 64,385 64,502
Finished goods 19,995 10,431
_________________________________________________________________
Inventories $121,784 $103,866
_________________________________________________________________
<PAGE>
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Land $ 6,936 $ 7,283
Buildings and improvements 94,915 87,727
Machinery and equipment 234,519 222,362
________ ________
Property, plant and
equipment, at cost 336,370 317,372
Less accumulated depreciation
and amortization (196,926) (185,263)
________________________________________________________________
Property, plant and
equipment $139,444 $132,109
________________________________________________________________
Assets under leases that have been accounted for as capital
leases and included in property, plant and equipment are
summarized as follows:
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Capital leases at cost $ 6,121 $ 6,025
Less accumulated amortization (2,787) (2,114)
_________________________________________________________________
Net assets under capital
leases $ 3,334 $ 3,911
_________________________________________________________________
Note 6 - Indebtedness
Long-term debt consists of the following:
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Bank Credit Facility
- revolving credit $ 49,000 $ 67,000
- term loan - 24,000
Revolving credit facility 25,000 9,266
International and other U.S.
term loan agreements 8,985 13,935
Obligations under
capital leases 2,219 2,721
_________ ________
Senior debt 85,204 116,922
10% senior subordinated notes 120,000 120,000
_________ ________
<PAGE>
Total long-term debt 205,204 236,922
Less current installments (5,505) (15,345)
_________ ________
Long-term debt $199,699 $221,577
_________________________________________________________________
The Bank Credit Facility consists of a $135,000 revolving credit
facility which expires in October 2000. On April 1, 1998 the
Company used $21,000 available under the revolving credit
facility to pay off the remaining balance on the term loan.
Interest on the Bank Credit Facility is LIBOR plus 90 basis
points (LIBOR plus 175 basis points at September 27, 1997). In
order to provide for interest rate protection, the Company has
entered into an interest rate swap agreement for $20,000,
effectively converting this amount to fixed rate debt at 6.45%.
The Bank Credit Facility contains various covenants which, among
others, specify minimum interest coverage, limit senior debt to a
defined capital base, limit capital expenditures and restrict
payment of cash dividends on common stock. The Bank Credit
Facility is secured by substantially all of the Company's U.S.
assets.
The Company has an unsecured revolving credit facility for up to
$25 million which carries an interest rate of LIBOR plus 50 basis
points and expires on October 1, 2001. The facility has covenants
similar to the Bank Credit Facility.
In connection with the acquisition of Montek (see Note 2), the
Company refinanced its U.S. credit facilities. Effective November
30, 1998, the Company entered into a $340,000 Corporate Revolving
and Term Loan Agreement (1999 Credit Facility) with a banking
group. The 1999 Credit Facility provides for $265,000 in a
revolving facility and a $75,000 term loan with interest starting
at LIBOR plus 200 basis points, with the spread adjusted based on
leverage. The facility is for a five year period with quarterly
principal payments on the term loan of $3,750 commencing in March
1999. The 1999 Credit Facility is secured by substantially all of
the Company's U.S. assets. The loan agreement includes customary
covenants for a transaction of this nature. The 1999 Credit
Facility was used principally to acquire Montek for approximately
$160,000 and to refinance approximately $72,000 of existing
revolving credit facilities with the remaining balance available
for future working capital requirements.
International and other U.S. term loan agreements of $8,985 at
September 26, 1998 consist principally of financing provided by
various banks to certain International subsidiaries. These term
loans are being repaid through 2003, and carry interest rates
ranging from .8% to 9.5%.
The 10% Senior Subordinated Notes (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
<PAGE>
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 Notes are unsecured, general
obligations of the Company subordinated in right of payment to
all existing and future senior indebtedness. The indenture
includes certain covenants limiting, subject to certain
exceptions, the incurrence of additional indebtedness, payment of
dividends, redemption of capital stock, asset sales and certain
mergers and consolidations.
In May 1996, the Company prepaid in its entirety the principal
balance on its 10.25% Senior Secured Note resulting in an
extraordinary pre-tax charge of $810. The charge consisted of
prepayment and amendment fees and the write-off of related debt
issuance costs.
Maturities of long-term debt, excluding the Bank Credit Facility
and the revolving credit facility, are $5,505 in 1999, $3,224 in
2000, $1,320 in 2001, $575 in 2002, $509 in 2003, and $120,071
thereafter.
The fair value of long-term debt was estimated based on quoted
market prices and discounted cash flow analysis using current
rates offered to the Company for debt with the same remaining
maturities. At September 26, 1998, the estimated fair value of
long-term debt was $206,404.
At September 26, 1998, the Company had pledged assets with a net
book value of $316,256 as security for long-term debt.
The Company has both short-term lines of credit and long-term
credit facilities with various banks throughout the world. The
short-term credit lines are principally demand lines and subject
to revision by the banks. These short-term lines of credit, along
with $86,000 available on the Bank Credit Facility, provided
credit availability of $100,768 at September 26, 1998. Commitment
fees are charged on some of these arrangements based on a
percentage of the unused amounts available.
At September 26, 1998, the International Controls segment had
$410 of notes payable to banks at an average rate of 7.1%. During
1998, an average of $1,517 in notes payable were outstanding at
an average interest rate of 8.2%. Notes payable are carried at
amounts which represent fair value.
Note 7 - Income Taxes
The reconciliation of the provision for income taxes with the
amount computed by applying the U.S. federal statutory tax rate
to earnings before income taxes and extraordinary loss is as
follows:
<PAGE>
_________________________________________________________________
1998 1997 1996
_________________________________________________________________
Earnings before income taxes
and extraordinary loss:
Domestic $ 22,009 $ 16,310 $ 10,979
Foreign 8,746 3,165 6,272
Eliminations (882) 104 (1,201)
________________________________________________________________
Total $ 29,873 $ 19,579 $ 16,050
________________________________________________________________
Computed expected tax expense $ 10,456 $ 6,657 $ 5,457
Increase (decrease) in income
taxes resulting from:
Foreign tax rates 338 571 1,102
Nontaxable export sales (800) (664) (76)
State taxes net of federal
benefit 501 302 141
Foreign tax credits (145) (1,244) -
Change in beginning of the
year valuation allowance 179 (77) (2,541)
Other 76 428 748
_________________________________________________________________
Income taxes $ 10,605 $ 5,973 $ 4,831
_________________________________________________________________
Effective income tax rate 35.5% 30.5% 30.1%
_________________________________________________________________
At September 26, 1998, certain International subsidiaries had net
operating loss carryforwards totalling $1,891. These loss
carryforwards do not expire and can be used to reduce current
taxes otherwise due on future earnings of those subsidiaries.
No provision has been made for U.S. federal or foreign taxes on
that portion of certain International subsidiaries' undistributed
earnings ($34,016 at September 26, 1998) considered to be
permanently reinvested. It is not practicable to determine the
amount of tax that would be payable if these amounts were
repatriated to the Company.
The components of income taxes excluding the extraordinary loss
are as follows:
_________________________________________________________________
1998 1997 1996
_________________________________________________________________
Current:
Federal $ 8,809 $ 6,543 $ 2,817
Foreign 3,897 949 2,518
State 1,099 575 80
________ ________ ________
Total current 13,805 8,067 5,415
________ ________ ________
<PAGE>
Defered:
Federal (2,374) (1,621) 1,220
Foreign (498) (354) (1,937)
State (328) (119) 133
________ _______ ________
Total deferred (3,200) (2,094) (584)
________________________________________________________________
Total income taxes $ 10,605 $ 5,973 $ 4,831
________________________________________________________________
The tax effects of temporary differences that generated deferred
tax assets and liabilities are detailed in the following table.
Realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers projected future taxable income and tax planning
strategies in making its assessment of the recoverability of
deferred tax assets.
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Deferred tax assets:
Contract loss reserves
not currently
deductible $ 4,828 $ 4,137
Tax benefit carryforwards 628 647
Accrued vacation 6,109 5,173
Deferred compensation 4,572 5,069
Accrued expenses not
currently deductible 4,935 3,508
Inventory 4,596 3,884
Other 638 427
________ _______
Total gross deferred
tax assets 26,306 22,845
Less: Valuation reserve (474) (295)
________ _______
Net deferred tax assets 25,832 22,550
________ _______
Deferred tax liabilities:
Differences in bases and
depreciation of property,
plant and equipment 21,993 21,720
Other 128 1,135
________ _______
Total gross deferred
tax liabilities 22,121 22,855
________________________________________________________________
Net deferred tax assets
(liabilities) $ 3,711 $ (305)
________________________________________________________________
During 1998, the Internal Revenue Service (IRS) completed an
examination of the Company's Federal corporate income tax returns
for the years ended September 30, 1993 through September 30,
1995. The IRS has proposed certain adjustments which would
simultaneously give rise to tax benefits available in the years
examined as well as subsequent tax years. No penalties have been
<PAGE>
asserted. The Company believes that its positions are correct and
supportable and has filed a petition with the Appeals Office of
the IRS challenging the adjustments. The Company believes that
ultimate resolution of this matter will not have any material
adverse effect on the financial condition, liquidity or results
of operations of the Company.
<PAGE>
<TABLE>
Note 8 - Employee Benefit Plans
The Company maintains a number of defined benefit pension plans. The funded status of these plans
is as follows:
<CAPTION>
___________________________________________________________________________________________________
September 26, 1998 September 27, 1997
___________________________________ ___________________________________
U.S. Employee Other Other U.S. Employee Other Other
Plan with Plans with Plans with Plan with Plans with Plans with
Accumulated Assets in Accumulated Assets in Assets in Accumulated
Benefits in Excess of Benefits in Excess of Excess of Benefits in
Excess of Accumulated Excess of Accumulated Accumulated Excess of
Assets Benefits Assets Benefits Benefits Assets
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Accumulated benefit
obligation - Vested $ 141,135 $ 2,384 $ 26,948 $ 109,686 $ 9,034 $ 15,274
- Nonvested 851 - 4,751 914 - 4,177
_________ _________ _________ _________ ________ _________
- Total $ 141,986 $ 2,384 $ 31,699 $ 110,600 $ 9,034 $ 19,451
_________ _________ _________ _________ ________ _________
Projected benefit
obligation (PBO) $ 155,304 $ 2,384 $ 37,782 $ 121,300 $ 9,972 $ 24,258
Plan assets at fair value 140,022 2,862 10,271 139,743 9,769 1,337
_________ _________ _________ _________ ________ _________
Plan assets in excess of
(or less than) PBO (15,282) 478 (27,511) 18,443 (203) (22,921)
Unrecognized cumulative
experience loss (gain) 4,571 - 1,055 (19,074) 822 (1,346)
Unrecognized net (asset)
liability from SFAS No. 87
adoption date, amortized
over 15 years (1,367) - 1,271 (1,735) - 1,470
Unrecognized prior
service cost 7,211 - 714 31 - 1,071
Adjustment required to
recognize minimum liability - - (708) - - (729)
____________________________________________________________________________________________________
Accrued pension (liability)
asset $ (4,867) $ 478 $ (25,179) $ (2,335) $ 619 $ (22,455)
____________________________________________________________________________________________________
</TABLE>
<PAGE>
The U.S. Employee Plan was amended effective January 1, 1998 to
update the year used to calculate past service benefits. The
amendment resulted in an increase of $7,027 in the September 26,
1998 projected benefit obligation. Effective with the August 31,
1998 measurement date, the discount rate for the U.S. Employee
Plan was reduced to 7.0% from 7.75%. The change in discount rate
resulted in an increase of $14,644 in the September 26, 1998
projected benefit obligation.
Fiscal 1998 plan assets consist primarily of publicly traded
stocks, bonds, mutual funds and $9,868 in Company stock, based on
quoted market prices. The Company's funding policy is to
contribute at least the amount required by law in the various
jurisdictions in which the plans are domiciled. The principal
actuarial assumptions weighted for all defined benefit plans
are:
_________________________________________________________________
1998 1997
_________________________________________________________________
Discount rate 6.9% 7.3%
Return on assets 9.0% 8.5%
Rate of compensation increase 3.7% 3.7%
_________________________________________________________________
In addition, the Company maintains various defined contribution
plans. These defined contribution plans, along with the defined
benefit plans, cover substantially all employees. Pension expense
for all plans for 1998, 1997 and 1996 is as follows:
_________________________________________________________________
1998 1997 1996
_________________________________________________________________
Service cost - benefits
earned during the year $ 6,216 $ 5,093 $ 4,635
Interest cost on projected
benefit obligation 11,883 10,841 9,827
Actual return on plan assets (4,235) (30,843) (17,231)
Net amortization, deferral
and other (6,343) 21,278 9,816
________ _______ _______
Pension expense for defined
benefit plans 7,521 6,369 7,047
Pension expense for other plans 1,093 873 574
_________________________________________________________________
Total pension expense $ 8,614 $ 7,242 $ 7,621
_________________________________________________________________
Employee and management profit share plans provide for the
computation of profit share based on net earnings as a percentage
of net sales multiplied by base wages, as defined. Profit share
expense was $8,990, $4,518 and $2,602 in 1998, 1997 and 1996,
respectively.
<PAGE>
The Company has a Savings and Stock Ownership Plan (SSOP) which
includes an Employee Stock Ownership Plan. As one of the
investment alternatives, participants in the SSOP can acquire
Company stock at market value, with the Company providing a 25%
share match. The SSOP purchase of the initial shares was funded
by a Company loan. The loan is repaid with Company contributions.
Interest on the loan is computed at the Bank Credit Facility
borrowing rate. Shares are allocated and compensation expense is
recognized as the employer share match is earned. At September
26, 1998, the SSOP owned (allocated and unallocated) 173,149
Class A shares and 507,806 Class B shares.
The Company provides postretirement health care benefits to
certain retirees. Expenses under this plan were $1,264, $1,222,
and $1,158 in 1998, 1997 and 1996, respectively. A reconciliation
of the funded status of the plan with the accrued liability is
shown below. There are no plan assets. The transition obligation
is being recognized over 20 years.
_________________________________________________________________
September 26, 1998 September 27, 1997
_________________________________________________________________
Accumulated post-
retirement benefit
obligation (APBO)
- Inactives $ (5,645) $ (5,420)
- Actives fully eligible (975) (767)
- Actives not fully
eligible (3,534) (3,229)
_________ _________
Total APBO (funded status) (10,154) (9,416)
Unrecognized transition
obligation 5,915 6,310
Unrecognized prior service
cost 233 211
Unrecognized gains (losses) 1,764 780
_________________________________________________________________
Accrued postretirement
benefit liability $ (2,242) $ (2,115)
_________________________________________________________________
Discount rate 7.0% 7.8%
_________________________________________________________________
The effect of a one percentage point increase in the health care
cost trend rate, currently assumed at 2.5%, would not have a
significant impact on the accumulated postretirement benefit
obligation as of September 26, 1998.
Note 9 - Shareholders' Equity
Class A and Class B Common Stock equally share in the earnings of
the Company, and are identical with certain exceptions. Class A
shares have limited voting rights, with 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. Class A shareholders
are entitled, subject to certain limitations, to elect at least
25% of the Board of Directors (rounded up to the nearest whole
<PAGE>
number) with Class B shareholders entitled to elect the balance
of the directors. 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. 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 36,205 in 1998, 6,691 in 1997 and 30,039 in 1996.
In early February 1998, the Company completed an offering of
Class A shares at $34.375 per share. The offering consisted of
1,755,000 previously unissued shares sold by the Company and
300,000 existing shares sold by the Moog Inc. Employees'
Retirement Plan (Moog Retirement Plan). The net proceeds to the
Company from the offering of $56,658 were used to repay amounts
outstanding under the Bank Credit Facility. The Company did not
receive any proceeds from the sale of shares by the Moog
Retirement Plan.
In August 1998, the Board of Directors authorized the repurchase
of up to 200,000 common shares. As of September 26, 1998, 34,800
shares had been repurchased under this program.
The Company is authorized to issue up to 10,000,000 shares of
preferred stock. Series B Preferred Stock is 9% Cumulative,
Convertible, Exchangeable Preferred Stock with a $1.00 par value.
Series B Preferred Stock consists of 100,000 issued shares and
94,883 outstanding shares at September 26, 1998, and is
convertible into Class A Common shares (.08585 shares of Class A
Common Stock per share of Series B Preferred Stock). The Series B
Preferred Stock is owned primarily by officers of the Company.
With respect to any matters on which the Series B Preferred Stock
is entitled to vote, all shares will be voted in a manner
determined by a majority of such shares. The Series B Preferred
Stock is entitled to vote as a class on certain takeover
transactions. 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.
In February 1998 the shareholders of the Company approved the
1998 Stock Option Plan authorizing the issuance of options for
600,000 shares of Class A stock to directors, officers and key
employees. Under the terms of the plan, options may be either
incentive or non-qualified. The exercise price, determined by a
committee of Board of Directors, may not be less than the fair
market value of the Class A stock on the grant date. The options
have a term of ten years.
In February 1998, the Stock Option Committee of the Board of
Directors granted 153,000 incentive stock options to officers and
key employees and 2,500 non-qualified options to non-employee
<PAGE>
directors. The options were issued at the fair market value on
the date of grant, or $33.875, and become exercisable over a five
year period.
The Company's accounting for stock-based plans is in accordance
with Accounting Principles Board Opinion No. 25. Accordingly, no
compensation expense has been recognized for the options granted
in fiscal 1998. Had compensation expense for the Company's stock-
based plans been accounted for using the fair value method
prescribed by SFAS No. 123, "Accounting for Stock-Based
Compensation," proforma net earnings, basic earnings per share
and diluted earnings per share for 1998 would have been $18,904,
$2.28 and $2.22, respectively. The fair value of options granted
during fiscal 1998 was $16.61 per option on the date of grant.
Fair value was calculated using the Black Scholes option-pricing
model with the following assumptions: expected volatility - 33%,
expected dividend yield - 0%, risk-free interest rate of 5.7% and
an expected life of 7.5 years.
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.
Compensation (income) expense related to the stock appreciation
rights was $(129), $1,302 and $1,043 in fiscal 1998, 1997 and
1996, respectively. 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.
Class A shares reserved for issuance at September 26, 1998
are as follows:
_________________________________________________________________
Shares
_________________________________________________________________
Conversion of Class B to Class A shares 1,646,064
1983 Incentive Stock Option Plan 171,500
1998 Stock Option Plan 600,000
Conversion of Series B Preferred Stock to
Class A shares 8,146
_________________________________________________________________
2,425,710
_________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Shares under option are as follows:
__________________________________________________________________________________________
Class B Weighted Class A Weighted
Stock Average Stock Average
Option Exercise Option Exercise
Plan Price Plans Price
__________________________________________________________________________________________
<S> <C> <C> <C> <C>
Outstanding and exercisable
at September 30, 1995 131,912 $ 14.67 370,600 $ 8.38
Cancelled or expired in
fiscal 1996 (1,500) $ 17.00 (1,200) $ 10.50
Exercised in fiscal 1996 (500) $ 13.75 (46,800) $ 8.47
_______ _______
Outstanding and exercisable at
September 30, 1996 129,912 $ 14.28 322,600 $ 8.36
Cancelled or expired in
fiscal 1997 - $ - (800) $ 10.50
Exercised in fiscal 1997 (44,912) $ 14.44 (50,150) $ 9.46
_______ _______
Outstanding and exercisable at
September 27, 1997 85,000 $ 14.75 271,650 $ 8.15
Granted in fiscal 1998 - $ - 155,500 $33.875
Cancelled or expired in
fiscal 1998 - $ - (400) $ 10.50
Exercised in fiscal 1998 (85,000) $ 14.75 (99,750) $ 10.08
_________________________________________________________________________________________
Outstanding at Sept. 26, 1998 - $ - 327,000 $ 19.79
_________________________________________________________________________________________
Exercisable at Sept. 26, 1998 - $ - 171,500 $ 7.03
_________________________________________________________________________________________
</TABLE>
<PAGE>
The weighted average remaining lives of the Class A options as of
September 26, 1998 are as follows: 1983 Incentive Stock Option
Plan - 2.6 years; 1998 Stock Option Plan - 9.3 years.
As of September 26, 1998 prices of options outstanding under the
1983 Incentive Stock Option Plan ranged from $5.625 to $8.00,
with a weighted-average exercise price of $7.03. The price of the
options granted under the 1998 Stock Option Plan is $33.875.
Note 10 - Segment Information
The Company is organized into two segments: the Domestic Controls
segment, which is larger based on sales and assets, and
International Controls. Domestic Controls primarily serves North
American markets with a substantial majority of its sales within
the aerospace industry. International Controls serves markets in
Europe and the Asian-Pacific with the majority of its sales
related to industrial applications.
Included in net sales for Domestic Controls is $108,640 and
$85,033 in 1998 and 1997, respectively, of sales to The Boeing
Company and $163,680 in 1998, $134,659 in 1997 and $153,865 in
1996, in sales to U.S. Government prime- or sub-contractors,
including military sales to Boeing.
_________________________________________________________________
1998 1997 1996
_________________________________________________________________
Domestic Controls
Net sales:
Aerospace $319,272 $265,835 $249,594
Industrial 75,378 59,031 26,981
________ ________ ________
394,650 324,866 276,575
Intersegment sales 19,236 13,792 11,912
________ ________ ________
Total sales $413,886 $338,658 $288,487
======== ======== ========
Operating profit $ 47,161 $ 43,288 $ 32,744
Net earnings 14,720 10,960 5,863
Identifiable assets 408,429 351,944 297,445
Capital expenditures 15,574 8,322 4,973
Depreciation and
amortization expense 16,378 10,975 10,103
_________________________________________________________________
_________________________________________________________________
1998 1997 1996
_________________________________________________________________
International Controls
Net sales:
Aerospace $ 28,276 $ 25,978 $ 19,382
Industrial 113,686 105,085 111,280
________ ________ ________
141,962 131,063 130,662
<PAGE>
Intersegment sales 11,049 7,887 14,983
________ ________ ________
Total sales $153,011 $138,950 $145,645
======== ======== ========
Operating profit $ 12,722 $ 7,977 $ 11,796
Net earnings 5,178 2,570 5,691
Identifiable assets 135,060 121,456 126,732
Capital expenditures 5,661 3,910 4,468
Depreciation and
amortization expense 4,522 4,312 4,913
_________________________________________________________________
Consolidated operations
Net sales $536,612 $455,929 $407,237
======== ======== ========
Operating profit (O.P.),
net of intercompany
eliminations $ 59,034 $ 51,369 $ 43,339
Deductions from O.P.:
Interest expense 20,148 22,675 18,124
Currency (gain) loss 360 (186) (88)
Other expenses, net 8,653 9,301 9,253
________ ________ ________
Earnings before income
taxes and extra-
ordinary item $ 29,873 $ 19,579 $ 16,050
======== ======== ========
Total identifiable assets $543,489 $473,400 $424,177
Corporate assets 18,458 23,672 39,635
Eliminations (2,622) (6,509) (14,254)
________ ________ ________
Total consolidated assets $559,325 $490,563 $449,558
_________________________________________________________________
Intersegment sales, which are transacted and accounted for at
factory cost plus applicable general and administrative expenses
and profit, have been eliminated in net sales.
Operating profit is total revenue less cost of sales and other
operating expenses. The deductions from operating profit have
been charged to the respective segments by being directly
identified with the segments or allocated on the basis of assets
or sales.
In June 1997, the FASB issued 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 the first quarter of fiscal 1999.
<PAGE>
Note 11 - Geographic Areas and Export Sales
______________________________________________________________________
United Pacific & Corporate & Consol-
States Europe Other Eliminations idated
______________________________________________________________________
Identifiable Assets:
1998 $ 408,429 $ 105,919 $ 29,141 $ 15,836 $ 559,325
1997 351,944 87,606 33,850 17,163 490,563
1996 297,445 92,206 34,526 25,381 449,558
Sales to Unaffiliated Customers:
1998 $ 394,650 $ 114,929 $ 27,033 $ 536,612
1997 324,866 99,609 31,454 455,929
1996 276,575 101,093 29,569 407,237
Inter-area Sales to Affiliates:
1998 $ 19,236 $ 9,933 $ 1,116 $ 30,285
1997 13,792 5,662 2,225 21,679
1996 11,912 13,529 1,454 26,895
Export Sales:
1998 $ 73,257 $ 36,626 $ 1,841 $ 111,724
1997 71,348 25,277 2,578 99,203
1996 57,350 27,023 2,220 86,593
Net Earnings (Loss):
1998 $ 14,720 $ 5,362 $ (184) $ (630) $ 19,268
1997 10,960 1,185 1,385 76 13,606
1996 5,863 5,005 686 (845) 10,709
__________________________________________________________________________
Export sales from the United States are primarily to areas other
than Europe. Export sales from Europe and all other geographic
areas are principally to countries within their geographic area.
Note 12 - Commitments and Contingencies
The Company is engaged in administrative proceedings with
governmental agencies and legal proceedings with governmental
agencies and other third parties in the normal course of its
business, including litigation under Superfund laws, regarding
environmental matters. The Company believes that adequate
reserves have been established for all currently pending
environmental administrative or legal proceedings, and does not
expect that these environmental matters will have a material
effect on the financial condition, liquidity or results of
operations of the Company.
From time to time, the Company is named as a defendant in legal
actions arising in the normal course of business. The Company is
<PAGE>
not a party to any pending legal proceedings which management
believes will result in a material adverse effect on the
Company's financial condition, liquidity or results of
operations, or to any pending legal proceedings other than
ordinary, routine litigation related to its business.
The Company leases certain facilities and equipment under
operating lease arrangements. These arrangements may include fair
market renewal or purchase options. Rent expense under operating
leases amounted to $8,810 in 1998, $7,762 in 1997, and $7,191 in
1996. Future minimum rental payments required under noncancelable
operating leases are $9,472 in 1999, $7,956 in 2000, $6,286 in
2001, $5,676 in 2002, $4,837 in 2003, and $16,177 thereafter.
The Company subleases various facilities to third parties. Gross
rental income from such activities was $229 in 1998, $351 in 1997
and $1,291 in 1996. Future minimum rental income under
noncancelable operating subleases is $229 in 1999 and $188 in
2000.
<PAGE>
<TABLE>
Note 13 Quarterly Data - Unaudited
Net Sales and Earnings
(dollars in thousands except per share data)
<CAPTION>
__________________________________________________________________________________________________________________________________
Year Ended Year Ended
September 26, 1998 September 27, 1997
_________________________________________________ ______________________________________________________
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 126,118 $ 134,511 $ 134,839 $ 141,144 $ 536,612 $ 103,850 $ 109,805 $ 120,064 $ 122,210 $ 455,929
Gross profit 37,008 40,524 40,838 44,242 162,612 33,051 35,003 36,023 36,472 140,549
Net earnings 3,907 4,658 5,273 5,430 19,268 2,959 3,259 3,561 3,827 13,606
Per share data:
Basic $ .55 $ .57 $ .59 $ .61 $ 2.33 $ .42 $ .47 $ .51 $ .55 $ 1.95
Diluted $ .53 $ .55 $ .58 $ .60 $ 2.26 $ .41 $ .45 $ .49 $ .53 $ 1.88
_________________________________________________________________________________________________________________________________
Note: The 1998 quarterly basic earnings per share do not add to the total due to rounding.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors of Moog Inc.:
We have audited the consolidated financial statements of Moog Inc. and
subsidiaries listed in Item 14(a)(1) of the annual report on Form 10-K for
the fiscal year ended September 26, 1998. In connection with our audits of
the consolidated financial statements, we also have audited the financial
statement schedule listed in Item 14(a)(2) of the annual report on
Form 10-K for the fiscal year ended September 26, 1998. These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits. We did not audit the consolidated
financial statements or schedule of Moog GmbH, and for the years ended
September 27, 1997 and September 30, 1996, the consolidated financial
statements or schedule of Moog Controls Limited, wholly owned consolidated
subsidiaries of the Company. The financial statements of Moog GmbH and Moog
Controls Limited which we have not audited reflect total assets
constituting 8% and 13% as of September 26, 1998 and September 27, 1997,
respectively, and total net sales constituting 12%, 19% and 20% of the
related consolidated totals for the years ended September 26, 1998,
September 27, 1997, and September 30, 1996, respectively. Those statements
and schedules were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Moog GmbH and Moog Controls Limited for the applicable fiscal
years, 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 26, 1998 and September 27, 1997 and the results of their
operations and their cash flows for each of the years in the three-year
period ended September 26, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
Buffalo, New York
November 9, 1998, except as to KPMG Peat Marwick LLP
Notes 2 and 6 which are as of
December 3, 1998
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III
ITEM 10. Directors and Executive Officers of the Registrant.
The information required herein with respect to directors of the
Company is incorporated by reference to "Election of Directors"
in the 1999 Proxy.
Executive Officers of the Registrant.
The names and ages of all executive officers of Moog are set
forth on the following page.
Other than John B. Drenning, the principal occupations of the
following officers for the past five years have been their
employment with the Company. Mr. Drenning's principal occupation
is partner in the law firm of Phillips, Lytle, Hitchcock,
Blaine & Huber.
_________________________________________________________________
Executive Officers and Year First
Positions Held Age Elected Officer
_________________________________________________________________
Robert T. Brady
Chairman of the Board;
President; Chief Executive Officer;
Director; Member, Executive Committee 57 1967
Richard A. Aubrecht
Vice Chairman of the Board;
Vice President-Strategy and Technology;
Director; Member, Executive Committee 54 1980
Joe C. Green
Executive Vice President;
Chief Administrative Officer;
Director; Member, Executive Committee 57 1973
Robert R. Banta
Executive Vice President;
Chief Financial Officer;
Assistant Secretary; Director;
Member, Executive Committee 56 1983
Robert H. Maskrey
Vice President; Director 57 1985
Philip H. Hubbell
Vice President-Contracts and Pricing 59 1988
Stephen A. Huckvale
Vice President 49 1990
<PAGE>
Richard C. Sherrill
Vice President 60 1991
William P. Burke
Treasurer 63 1985
John B. Drenning
Secretary 61 1989
Donald R. Fishback
Controller 42 1985
_________________________________________________________________
ITEM 11. Executive Compensation.
The information required herein is incorporated by reference to
"Compensation Committee Report," "Stock Price Performance Graph,"
"Summary Compensation Table," "Fiscal Year-End Option/SAR
Values," "Employees' Retirement Plan," "Supplemental Retirement
Plan," "Employment Termination Benefits Agreements" and
"Compensation of Directors" in the 1999 Proxy.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required herein is incorporated by reference to
the 1999 Proxy.
ITEM 13. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference to
the 1999 Proxy.
Part IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) Documents filed as part of this report:
1. Index to Financial Statements.
The following financial statements are included:
(i) Consolidated Statements of Earnings for each of the
three years ended September 26, 1998.
(ii) Consolidated Balance Sheets as of September 26, 1998
and September 27, 1997.
(iii) Consolidated Statements of Cash Flows for each of the
three years ended September 26, 1998.
(iv) Consolidated Statements of Shareholders' Equity for
each of the three years ended September 26, 1998.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Auditors.
<PAGE>
2. Index to Financial Statement Schedules.
The following Financial Statement Schedule as of and for
each of the three years ended September 26, 1998, is
included in this Annual Report on Form 10-K:
II. Valuation and Qualifying Accounts.
Schedules other than that listed above are omitted because
the conditions requiring their filing do not exist, or
because the required information is provided in the
Consolidated Financial Statements, including the notes
thereto.
3. Exhibits
The exhibits required to be filed as part of this Annual
Report on Form 10-K have been included as follows:
(2) (i) 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) Asset Purchase Agreement dated as of September 22, 1996
between Moog Inc., Moog Controls Inc., International
Motion Control Inc., Enidine Holdings, L.P. and Enidine
Holding Inc., incorporated by reference to exhibit 2.1
of the Company's report on Form 8-K dated October 28,
1996.
(3) Restated Certificate of Incorporation and By-laws of the
Company, incorporated by reference to exhibit (3) of
the Company's Annual Report on Form 10-K for its fiscal
year ended September 30, 1989.
(4) Form of Indenture between Moog Inc. and Fleet National Bank,
as Trustee, dated May 10, 1996 relating to the 10%
Senior Subordinated Notes due 2006, incorporated by
reference to exhibit (iv) to Form 8-K dated May 10,
1996.
(9) (i) Agreement as to Voting, effective October 15, 1988,
incorporated by reference to exhibit (i) of October 15,
1988 Report on Form 8-K dated November 30, 1988.
(ii) Agreement as to Voting, effective November 30, 1983,
incorporated by reference to exhibit (i) of November
1983 Report on Form 8-K dated December 9, 1983.
(10) Material contracts.
(i) Management Profit Sharing Plan, incorporated by
reference to exhibit 10(i) of the Company's Annual
Report on Form 10-K for the fiscal year ended September
30, 1991.
(ii) Supplemental Retirement Plan dated October 1980, as
amended, incorporated by reference to exhibit (iv) of
November 1983 Report on Form 8-K, dated December 9,
<PAGE>
1983, as amended, and reported in August 30, 1988
Report on Form 8-K, dated October 3, 1988, and amended
on October 20, 1988, incorporated by reference thereto.
(iii) Deferred Compensation Plan for Directors and Officers,
incorporated by reference to exhibit (i) of November
1985 Report on Form 8-K, dated December 3, 1985.
(iv) Incentive Stock Option Plan, incorporated by reference
to exhibit 4(b) of the Registration Statement on Form
S-8, File No. 33-36721, filed with the Securities and
Exchange Commission on September 7, 1990.
(v) 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.
(vi) Executive Termination Benefits Agreement incorporated
by reference to January 29, 1988 Report on Form 8-K
dated February 4, 1988.
(vii) Indemnity Agreement, incorporated by reference to Annex
A to 1988 Proxy Statement dated January 4, 1988.
(viii) 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.
(ix) 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.
(x) 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.
(xi) Amendment No. 4 to the Bank Credit Facility, dated June
18, 1996, incorporated by reference to exhibit 10 (xii)
of the Company's Annual Report on Form 10-K for its
fiscal year ended September 30, 1996.
(xii) Amendment No. 5 to the Bank Credit Facility, dated
October 26, 1996. , incorporated by reference to
exhibit 10(xiii) of the Company's Annual Report on Form
10-K for its fiscal year ended September 27, 1997.
(xiii) Amendment No. 6 to the Bank Credit Facility, dated
April 9, 1997, incorporated by reference to exhibit
10(xiv) of the Company's Annual Report on Form 10-K for
its fiscal year ended September 27, 1997.
(xiv) Amendment No. 7 to the Bank Credit Facility, dated
January 9, 1998. (Filed herewith).
(xv) Amendment No. 8 to the Bank Credit Facility, dated
April 1, 1998. (Filed herewith).
(xvi) 1998 Stock Option Plan, incorporated by reference to
exhibit A to 1998 Proxy Statement dated January 5,
1998.
(13) 1998 Annual Report to Shareholders. (Except for those
portions which are expressly incorporated by reference to
the Annual Report on Form 10-K, this exhibit is furnished
for the information of the Securities and Exchange
Commission and is not deemed to be filed as part of this
Annual Report on Form 10-K.)
<PAGE>
(21) Subsidiaries of the Company.
Subsidiaries of the Company are listed below:
(i) Moog AG, Incorporated in Switzerland, wholly-owned
subsidiary with branch operation in Ireland
(ii) Moog Australia Pty. Ltd., Incorporated in Australia,
wholly-owned subsidiary
(iii) Moog do Brasil Controles Ltda., Incorporated in Brazil,
wholly-owned subsidiary
(iv) Moog Buhl Automation, a branch office of Moog Inc.
operating under Danish law
(v) Moog Controls Corporation, Incorporated in New York,
wholly-owned subsidiary with branch operation in the
Republic of the Philippines
(vi) Moog Controls Hong Kong Ltd., Incorporated in Hong
Kong, wholly-owned subsidiary
(vii) Moog Controls (India) Private Ltd., Incorporated in
India, wholly-owned subsidiary
(viii) Moog Controls Ltd., Incorporated in the United Kingdom,
wholly-owned subsidiary
(a) Moog Norden A.B., Incorporated in Sweden, wholly-
owned subsidiary of Moog Controls Ltd.
(b) Moog OY, Incorporated in Finland, wholly-owned
subsidiary of Moog Controls Ltd.
(ix) Moog FSC Ltd., Incorporated in the Virgin Islands,
wholly-owned subsidiary
(x) Moog GmbH, Incorporated in Germany, wholly-owned
subsidiary
(a) Moog Italiana S.r.l., Incorporated in Italy,
wholly-owned subsidiary, 90% owned by Moog GmbH;
10% owned by Moog Inc.
(xi) Moog Industrial Controls Corporation, Incorporated in
New York, wholly-owned subsidiary
(xii) Moog Japan Ltd., Incorporated in Japan, 90% owned
subsidiary
(xiii) Moog Korea Ltd., Incorporated in South Korea, wholly-
owned subsidiary
(xiv) Moog Properties, Inc., Incorporated in New York,
wholly-owned subsidiary
(xv) Moog Sarl, Incorporated in France, wholly-owned
subsidiary, 95% owned by Moog Inc; 5% owned by Moog
GmbH.
(xvi) Moog Singapore Pte. Ltd., Incorporated in Singapore,
wholly-owned subsidiary
(xvii) Moog Control System (Shanghai) Co. Ltd., Incorporated
in People's Republic of China, wholly-owned subsidiary
(xviii) Moog IFSC Ltd., Incorporated in the United Kingdom,
wholly-owned subsidiary
(23)(ii) Consent of KPMG Peat Marwick LLP; Consent and Audit
Report of PricewaterhouseCoopers GmbH. (Filed herewith)
(27) Financial Data Schedule. (Filed herewith)
(99) Additional Exhibits.
Information, Financial Statements and Exhibits required by
Form 11-K for the Moog Inc. Savings and Stock Ownership Plan
(to be filed by amendment).
(b) Reports on Form 8-K
No reports on Form 8-K have been filed in the three month
period ended September 26, 1998.
<PAGE>
<TABLE> Schedule II
MOOG INC.
Valuation and Qualifying Accounts - Three Years ended September 26, 1998
(dollars in thousands)
<CAPTION>
Additions
Balance at charged to Acquisitions/ Balance
beginning costs and Exchange at end
Description of period expenses Deductions rate changes 1/ of period
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended 1996:
Reserve for contract losses $12,872 $ 1,965 $ 3,871 $ - $10,966
Allowance for doubtful
accounts 1,379 462 479 (30) 1,332
Reserve for inventory
valuation 7,592 4,017 2,237 (37) 9,335
______________________________________________________________________
Year ended 1997:
Reserve for contract losses $10,966 $ 3,898 $ 6,694 $ - $ 8,170
Allowance for doubtful
accounts 1,332 882 527 (93) 1,594
Reserve for inventory
valuation 9,335 4,983 2,276 812 12,854
______________________________________________________________________
Year ended 1998:
Reserve for contract losses $ 8,170 $ 4,923 $ 2,645 $ - $10,448
Allowance for doubtful
accounts 1,594 1,782 493 17 2,900
Reserve for inventory
valuation 12,854 4,269 2,368 (68) 14,687
______________________________________________________________________
Note:
1/ Represents the impact of changes in currency exchange rates during the year.
</TABLE>
<PAGE>
Quarterly Stock Prices
Stock Prices
Fiscal Year Class B Class A
Ended High Low High Low
_______________________________________________________________
Sept. 26, 1998
1st Quarter $40 $32 3/4 $39 7/8 $32 1/4
2nd Quarter 42 1/4 34 42 1/2 33 1/8
3rd Quarter 45 1/4 36 3/4 47 1/8 32 3/4
4th Quarter 39 3/4 32 1/2 39 15/16 28 1/8
______________________________________________________________
Sept. 27, 1997
1st Quarter $25 3/4 $21 5/8 $26 $17 1/8
2nd Quarter 25 3/8 24 7/8 25 1/4 22 1/2
3rd Quarter 31 3/8 23 1/8 31 7/8 21
4th Quarter 39 3/4 28 3/8 40 28
______________________________________________________________
<PAGE>
Signatures
Pursuant to the requirements of Section 13, or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Moog Inc.
(Registrant)
Date: December 11, 1998
By /s/ ROBERT T. BRADY
Robert T. Brady
Chairman of the Board,
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
By /s/ ROBERT R. BANTA
Robert R. Banta
Executive Vice President,
Chief Financial Officer,
and Director
(Principal Financial Officer)
By /s/ DONALD R. FISHBACK
Donald R. Fishback
Controller (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and on the dates indicated.
By/s/ RICHARD A. AUBRECHT By/s/PETER P. POTH
Richard A. Aubrecht Peter P. Poth
Director, December 11, 1998 Director, December 11, 1998
By/s/ JOE C. GREEN By/s/KRAIG H. KAYSER
Joe C. Green Kraig H. Kayser
Director, December 11, 1998 Director, December 11, 1998
By/s/ KENNETH J. McILRAITH By/s/ JOHN D. HENDRICK
Kenneth J. McIlraith John D. Hendrick
Director, December 11, 1998 Director, December 11, 1998
By/s/ ALBERT F. MYERS By/s/ROBERT H. MASKREY
Albert F. Myers Robert H. Maskrey
Director, December 11, 1998 Director, December 11, 1998
<PAGE>
Exhibit 10(xiv)
CONSENT AND SEVENTH AMENDMENT
TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 9th day of January,
1998 among the banks identified in Exhibit A attached to and made
a part of this Agreement (collectively the "Banks" and
individually a "Bank"), Marine Midland Bank, a New York banking
corporation having its chief executive office at One Marine
Midland Center, Buffalo, New York 14203, ("Marine"), as agent for
the Banks, and Moog Inc., a New York business corporation having
its chief executive office at Jamison Road and Seneca Street,
East Aurora, New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, a First Amendment to Revolving and
Term Loan Agreement dated as of November 14, 1995, a Consent and
Second Amendment to Revolving and Term Loan Agreement dated as of
March 22, 1996, a Consent and Third Amendment to Revolving and
Term Loan Agreement dated as of May 13, 1996, a Fourth Amendment
to Revolving and Term Loan Agreement dated as of June 18, 1996, a
Consent and Fifth Amendment to Revolving and Term Loan Agreement
dated as of October 26, 1996 and a Sixth Amendment to Revolving
and Term Loan Agreement dated as of April 9, 1997 (as so amended,
the "Loan Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement; and
WHEREAS, the Banks and Marine as agent for the Banks
now desire to give their consent under the Loan Agreement to the
taking of certain actions by the Borrower;
NOW, THEREFORE, effective on the date described in
Section 5(a) of this Agreement, the Banks, Marine as agent for
the Banks and the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENTS.
(a) The last sentence of Section 2e of the Loan
Agreement shall be amended by adding immediately before the
period the language ", except for any such repayment made with
Net Proceeds attributable to the prospective offering of
2,000,000 shares of the Class A common stock of the Borrower, as
more particularly described in the registration statement (Form
S-3) filed by the Borrower with the Securities and Exchange
Commission on November 24, 1997".
<PAGE>
(b) The first sentence of Section 3d of the Loan
Agreement shall be amended by adding immediately before the
period the language ", except for any such remaining Net Proceeds
attributable to the prospective offering of 2,000,000 shares of
the Class A common stock of the Borrower, as more particularly
described in the registration statement (Form S-3) filed by the
Borrower with the Securities and Exchange Commission on
November 24, 1997".
(c) Section 7j-1 of the Loan Agreement shall be
amended to read in its entirety as follows:
j-1. Capital Expenditures. Make capital
expenditures, other than for any Permitted
Acquisition, exceeding in the aggregate for the
Borrower and all Subsidiaries during any fiscal
year of the Borrower the following applicable
amount: (i) during the fiscal year of the Borrower
ending on September 30, 1997, $18,000,000,
(ii) during the fiscal year of the Borrower ending
on September 30, 1998, $22,000,000 and
(iii) during any fiscal year of the Borrower
ending thereafter, $15,000,000;
3. CONSENT. The second sentence of Section 5a of the
Loan Agreement provides in relevant part that "[t]he proceeds of
each subsequent Revolving Loan will be used only for working
capital and other cash needs arising in the ordinary course of
business (not including any corporate or other acquisition other
than pursuant to a Permitted Acquisition by the Borrower or any
Domestic Subsidiary) . . . ." The Borrower has requested the
Required Banks to consent, and by this Agreement the Required
Banks consent, to the use by the Borrower of proceeds of any such
subsequent Revolving Loan to pay for all or any portion of
(a) the $20,500,000 purchase price of the assets to be acquired
by the Borrower pursuant to the terms of an Asset Purchase
Agreement, dated as of December 16, 1997, between the Borrower
and Schaeffer Magnetics, Inc. ("SMI") and Ernest Schaeffer (the
"SMI Asset Purchase Agreement") and (b) the $1,200,000 purchase
price of the leased premises to be acquired by the Borrower
pursuant to the terms of the real estate agreement referred to in
the SMI Asset Purchase Agreement (the "Real Estate Agreement")
(the acquisition by the Borrower pursuant to the SMI Asset
Purchase Agreement and the Real Estate Agreement being
hereinafter referred to as the "SMI Acquisition"). The Required
Banks have otherwise consented to the SMI Acquisition pursuant to
a letter, dated December 11, 1997, a copy of which is attached as
Exhibit B to this Agreement.
4. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the following:
a. No Default. (i) There not existing at the time
such Loan is to be made any Event of Default or Default and
(ii) such Bank not believing in good faith that any Event of
Default or Default so exists;
<PAGE>
b. Representations and warranties. (i) Each
representation and warranty made in the Loan Agreement, as
amended by this Agreement, being true and correct as of all times
during the period beginning on the effective date of this
Agreement and ending at the time such Loan is to be made and as
of the time such Loan is to be made, except to the extent updated
in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity
before the time such Loan is to be made, (ii) each other
representation and warranty made to any Lending Entity by or on
behalf of the Borrower or any Subsidiary before the time such
Loan is to be made being true and correct as of the date thereof,
except to the extent updated in a certificate executed by a
Designated Officer and a Designated Financial Officer and
received by each Lending Entity before the time such Loan is to
be made, (iii) each financial statement provided to any Lending
Entity by or on behalf of the Borrower or any Subsidiary before
the time such Loan is to be made having fairly represented the
financial information that it purports to reflect as of the date
thereof and (iv) such Bank not believing in good faith that
(A) any such representation or warranty, except to the extent so
updated, was or is other than true and correct as of any time or
date of determination of the truth and correctness thereof or
(B) any such financial statement did not so fairly represent such
information as of the date thereof;
c. Proceedings. Such Bank being satisfied as to each
corporate or other proceeding of the Borrower and any Subsidiary
in connection with any transaction contemplated by the Loan
Agreement, as amended by this Agreement; and
d. Receipt by Agent. The receipt by the Agent at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to each Lending Entity:
(i) If such Loan is (A) a Revolving Loan the
proceeds of which will be used to pay for all or any portion of
the purchase price of the SMI Acquisition or (B) if no such
Revolving Loan is so used, the first Revolving Loan after the
closing of the SMI Acquisition (a Revolving Loan described in (A)
or (B) being the "Designated Revolving Loan"), a certificate
executed by a Designated Officer and a Designated Financial
Officer updating each representation and warranty previously made
in or pursuant to the Loan Agreement and stating that (A) there
did not occur or exist at any time during the period beginning on
the date of the Loan Agreement and ending at the time such Loan
is to be made and there does not exist at the time such Loan is
to be made any Event of Default or Default and (B) each
representation and warranty made in the Loan Agreement, as
amended by this Agreement, was true and correct as of all times
during the period beginning on the date of the Loan Agreement and
ending at the time such Loan is to be made and is true and
correct as of the time such Loan is to be made, except to the
extent updated in a certificate executed by a Designated Officer
and a Designated Financial Officer and received by each Lending
Entity before the time such Loan is to be made;
<PAGE>
(ii) if such Loan is the Designated Revolving
Loan, evidence of the taking and the continuation in full force
and effect, at the time such Loan is to be made, of each
corporate or other action of the Borrower or any other Person
necessary to authorize the obtaining of all Loans by the Borrower
and the execution, delivery and performance of each Loan Document
and the imposition or creation of each security interest,
mortgage and other lien and encumbrance imposed or created
pursuant to any
Loan Document;
(iii) If such Loan is the Designated Revolving Loan,
evidence of the closing of the SMI Acquisition in accordance with
the terms of the SMI Asset Purchase Agreement and the Real Estate
Agreement including the expiration of the related waiting period
therefor under Hart-Scott-Rodino and any other applicable Law and
the receipt of any necessary governmental and other third party
approvals and consents, together with copies of each other
document related to the SMI Acquisition;
(iv) If such Loan is the Designated Revolving
Loan, confirmation that the Subject Assets (as defined in the SMI
Asset Purchase Agreement) and the Leased Premises (as defined in
the SMI Asset Purchase Agreement) are being acquired free and
clear of all liens and encumbrances (except, in the case of the
Leased Premises, as otherwise specifically permitted under the
Real Estate Agreement);
(v) If such Loan is the Designated Revolving
Loan, Collateral Assignments, appropriately completed and duly
executed by the Borrower, with respect to the patents, other
intellectual property and licensed technology acquired by the
Borrower pursuant to the SMI Acquisition;
(vi) If such Loan is the Designated Revolving
Loan, a Negative Pledge Agreement, together with an Environmental
Indemnity Agreement, each appropriately completed and duly
executed by the Borrower with respect to the real property
acquired by the Borrower pursuant to the SMI Acquisition;
(vii) If such Loan is the Designated Revolving
Loan, evidence (A) that no asset subject to any Lien pursuant to
any Loan Document is at the time such Loan is to be made subject
to any other Lien, except for Permitted Liens, and (B) of the
making of each recording and filing, and of the taking of each
other action, deemed necessary or desirable by the Agent at the
sole option of the Agent to perfect or otherwise protect any such
Lien;
(viii) If such Loan is the Designated Revolving
Loan, evidence that each requirement contained in any Loan
Document with respect to insurance is being met at the time such
Loan is to be made;
(ix) If such Loan is the Designated Revolving
Loan, an opinion of Phillips, Lytle, Hitchcock, Blaine &
Huber, LLP, counsel to the Borrower;
<PAGE>
(x) If such Loan is the Designated Revolving
Loan, such financial, business and other information regarding
the Borrower, SMI and each such Person's Subsidiaries and
Affiliates as any of the Lender Entities shall have reasonably
requested;
(xi) Each additional agreement, instrument and
other writing, including, but not limited to, (A) each agreement,
instrument and other writing intended to be filed or recorded
with any Governmental Authority to perfect or otherwise preserve
or protect the priority of any Lien created or imposed pursuant
to any Loan Document and (B) if such Loan is not the Designated
Revolving Loan, each item referred to in any of clauses (i)
through (x) of this Section 4(d), referred to in any of clauses
(i) through (xviii) of Section 4d of the Loan Agreement, required
by any Loan Document or reasonably deemed necessary or desirable
by the Required Banks; and
(xii) Payment of all costs and expenses payable
pursuant to the first sentence of Section 9a of the Loan
Agreement at or before the time such Loan is to be made.
5. GENERAL.
a. Term. This Agreement shall become effective upon
its execution by the Borrower, the Agent and the Required Banks.
The term of this Agreement shall be the same as the term of the
Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation, warran-
ty, covenant and agreement contained in this Agreement shall
survive the making of each Loan and the execution and delivery of
each Loan Document and shall continue in full force and effect
during the term of this Agreement, except to the extent modified
in accordance with the terms of this Agreement. Each such
representation, warranty, covenant and agreement shall be
presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination.
<PAGE>
d. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to princi-
ples of conflict of laws.
e. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by this
Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to "this Agreement" or words of
similar effect shall be deemed to be references to the Loan
Agreement as amended by this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each Lending Entity and the
Borrower have caused this Agreement to be duly executed as of the
date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By_________________________________
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By_________________________________
Timothy Geiger, Vice President
FLEET BANK
By_________________________________
Thomas Giles, Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, successor by merger to
The Mitsubishi Bank, Limited
By________________________________
Brian Dossie attorney-in-fact
THE SUMITOMO BANK, LIMITED
By________________________________
James Drum, Vice President
By________________________________
William Paty, Vice President
BARNETT BANK N.A., PINELLAS, successor
in interest to Barnett Bank of Pinellas
County
By_________________________________
Michael S. Crowe, Senior Vice
President
<PAGE>
NATIONAL BANK OF CANADA
By_________________________________
Robert Uhrig, Vice President
By_________________________________
Michael Woodard, Vice President
MARINE MIDLAND BANK, AS AGENT
By________________________________
Hugh C. McLean, Vice President
MOOG INC.
By________________________________
William Burke, Treasurer
<PAGE>
Exhibit 10(xv)
CONSENT AND EIGHTH AMENDMENT
TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 1st day of April, 1998
among the banks identified in Exhibit A attached to and made a
part of this Agreement (collectively the "Banks" and individually
a "Bank"), Marine Midland Bank, a New York banking corporation
having its chief executive office at One Marine Midland Center,
Buffalo, New York 14203, ("Marine"), as agent for the Banks, and
Moog Inc., a New York business corporation having its chief
executive office at Jamison Road and Seneca Street, East Aurora,
New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, as amended by a First Amendment to
Revolving and Term Loan Agreement dated as of November 14, 1995,
a Consent and Second Amendment to Revolving and Term Loan
Agreement dated as of March 22, 1996, a Consent and Third
Amendment to Revolving and Term Loan Agreement dated as of
May 13, 1996, a Fourth Amendment to Revolving and Term Loan
Agreement dated as of June 18, 1996, a Consent and Fifth
Amendment to Revolving and Term Loan Agreement dated as of
October 26, 1996, a Sixth Amendment to Revolving and Term Loan
Agreement dated as of April 9, 1997 and a Consent and Seventh
Amendment to Revolving and Term Loan Agreement dated as of
January 9, 1998 (as so amended, the "Loan Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement; and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to give their consent under the Loan
Agreement to the taking of certain actions by the Borrower and
certain Banks;
NOW, THEREFORE, effective as provided in Section 5 (a)
of this Agreement, the Banks, Marine as agent for the Banks and
the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENTS.
(a) The reference to "3/8%" in Section 2j of the Loan
Agreement is amended to read ".15%".
(b) Section 7j-1 of the Loan Agreement is amended by
adding immediately after the words "Permitted Acquisition" the
language "and the purchase by Moog GmbH of a portion of its
<PAGE>
Plant 1 with proceeds of a deposit in the amount of approximately
DEM 2,850,000 held by its landlord pursuant to its lease
thereof".
(c) Section 12gg of the Loan Agreement is amended in
its entirety to read as follows:
gg. LIBOR Rate Margin. "LIBOR Rate Margin" means .90%.
(d) Section 12ss of the Loan Agreement is amended by
replacing the word "and" preceding the reference to "(iv)" with a
comma and by adding immediately before the period the following
language:
and (v) purchases from time to time by the Borrower of
the Borrower's Class A or Class B common shares, to be
held by the Borrower as treasury shares for future
sales, at the then prevailing market price of such
shares, to the Borrower's Savings and Stock Ownership
Plan so long as no more than 75,000 of such treasury
shares that have been so purchased are so held at any
one time
(e) Clause (viii) of Section 12tt of the Loan
Agreement is renumbered as clause (ix), and clause (vii) of such
Section 12tt is amended in its entirety, and a new clause (viii)
is added to such Section 12tt, to read as follows:
(vii) in an amount not to exceed $25,000,000,
pursuant to a certain credit facility extended or to be
extended to the Borrower by Landesgirokasse Offentliche
Bank und Landessparkasse pursuant to a certain Credit
Facility for Eurocredits, dated September 18, 1996, as
amended by an amendment dated November 27, 1997 and by
any further amendment that does not increase the
maximum amount of such credit facility to more than
$25,000,000 or otherwise result in any Default,
(viii) any guaranty or indemnification obligations of
the Borrower pursuant to a Treasury Administration
Services Agreement, dated or to be dated March 18,
1998, among the Borrower, Moog IFSC Limited and The
Chase Manhattan Bank (Ireland) PLC in connection with
the International Financial Services Center referred to
in subclause (J) of Section 12uu of this Agreement, as
such Treasury Administration Services Agreement may
hereafter be amended by any amendment that does not
increase such guaranty or indemnification obligations
or otherwise result in any Default or
(f) The words "any Investment" are added at the
beginning of subclause (H) of clause (i) of Section 12uu of the
Loan Agreement, subclause (I) of such clause (i) is relettered as
subclause (K) and new subclauses (I) and (J) are added to such
clause (i) to read as follows:
<PAGE>
(I) an Investment by the Borrower of not more than
$900,000 in connection with the formation and
capitalization of Moog Controls Systems (Shanghai) Co.
Ltd., a Foreign Subsidiary that shall operate a repair
facility in Shanghai, China, and (J) an Investment by
the Borrower of not more than $10,000,000 in connection
with the formation and capitalization of Moog IFSC
Limited, a Foreign Subsidiary that shall operate as an
International Financial Services Center in Dublin
Docks, Ireland under a treasury administration services
agreement with The Chase Manhattan Bank (Ireland) PLC
for the purpose of providing various financial services
to the Borrower and European Foreign Subsidiaries
(g) Section 12xx of the Loan Agreement is amended in
its entirety to read as follows:
xx. Prime Rate Margin. "Prime Rate Margin" means
.00%.
(h) Notwithstanding anything in the Loan Agreement to
the contrary, any certificate required pursuant to the Loan
Agreement to be executed by both a Designated Officer and a
Designated Financial Officer may be executed by either a
Designated Officer or a Designated Financial Officer.
(i) Upon the execution and delivery of this Agreement
by the Required Banks, this Agreement shall constitute the
agreement of the Required Banks to the amendments referred to in
subsections (b), (d), (e), (f) and (h) of this Section 2. Upon
the execution and delivery of this Agreement by the Banks, this
Agreement shall constitute the agreement of the Banks to the
amendments referred to in subsections (a), (c) and (g) of this
Section 2.
3. CONSENTS.
(a) Section 7h of the Loan Agreement prohibits the
Borrower, without the prior written consent of the Required
Banks, from declaring, paying or making "any Distribution, except
for Permitted Distributions". Pursuant to Section 12p of the
Loan Agreement, a Distribution includes, with respect to any
corporation, "any payment on account of any purchase, redemption,
retirement or other acquisition of any of its stock". The
Borrower has informed the Banks that, in connection with its
recent equity offering, it purchased approximately 1,500 of its
Class A common shares under the safe harbor provisions of Rule
lOb-18 of the Securities and Exchange Act of 1934, and has
requested the Required Banks to consent to this purchase. Upon
the execution and delivery of this Agreement by the Required
Banks, the Required Banks shall be deemed to have consented to
such purchase prior to the consummation thereof.
(b) Clause (vi) of Section 7i of the Loan Agreement
prohibits the Borrower, without the prior written consent of the
<PAGE>
Required Banks, from having any "Subsidiary that is not a
Subsidiary on the date of [the Loan Agreement] other than a
Subsidiary that becomes such as a result of a Permitted
Acquisition". Upon the execution and delivery of this Agreement
by the Required Banks, this Agreement shall constitute their
consent to the Borrower's formation of the two new Foreign
Subsidiaries referred to in Section 2(f) of this Agreement. The
Borrower has requested that the Required Banks not require the
Borrower to pledge its stock or other ownership interests in such
two new Foreign Subsidiaries, as contemplated pursuant to clauses
(v) and (xxvii) of Section 4d of the Loan Agreement. Upon the
execution and delivery of this Agreement by the Required Banks,
this Agreement shall evidence their agreement not to require such
pledge.
(c) Section 11h of the Loan Agreement provides in
relevant part that "no Bank shall assign or otherwise transfer
... any indebtedness, liability or obligation of the Borrower to
such Bank pursuant to [the Loan Agreement] ... without ... the
prior written consent of the Required Banks and ... of the
Borrower". The Sumitomo Bank, Limited has expressed its desire
to assign to Marine the entire $12,273,000 of its maximum
commitment to make Revolving Loans under the Loan Agreement,
together with all of its associated interest under the Loan
Agreement and all other applicable Loan Documents. Barnett Bank
N.A., Pinellas has expressed its desire to assign to (i) Marine
$3,454,000 of its maximum commitment to make Revolving Loans
under the Loan Agreement and (ii) The Chase Manhattan Bank
("Chase") the remaining $8,000,000 of such maximum commitment, in
each case together with all of its associated interest under the
Loan Agreement and all other applicable Loan Documents. Upon the
execution and delivery of this Agreement by the Required Banks
and the Borrower, this Agreement shall constitute their consent
to the foregoing assignments, provided that (i) in the case of
each such assignment to Marine, there shall be executed and
delivered to the Agent assignment documents substantially in the
form of Exhibit B attached to and made a part of this Agreement,
together with the Replacement Revolving Loan Note referred to in
clause (iv) of Section 4d of this Agreement, and (ii) in the case
of such assignment to Chase, there shall be executed and
delivered to the Agent assignment and assumption documents
substantially in the form of Exhibit C attached to and made a
part of this Agreement, together with the Replacement Revolving
Loan Note referred to in clause (v) of Section 4d of this
Agreement. Thereupon, that part of Exhibit A to the Loan
Agreement describing the maximum commitment of each Bank to make
Revolving Loans under the Loan Agreement shall automatically be
replaced by Exhibit D attached to and made a part of this
Agreement.
4. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the following:
<PAGE>
a. No Default. (i) There not existing at the time
such Loan is to be made any Event of Default or Default and
(ii) such Bank not believing in good faith that any Event of
Default or Default so exists;
b. Representations and Warranties. (i) Each
representation and warranty made in the Loan Agreement, as
amended by this Agreement, being true and correct as of all times
during the period beginning on the effective date of this
Agreement and ending at the time such Loan is to be made and as
of the time such Loan is to be made, except to the extent updated
in a certificate executed by a Designated Officer or a Designated
Financial Officer and received by each Lending Entity before the
time such Loan is to be made, (ii) each other representation and
warranty made to any Lending Entity by or on behalf of the
Borrower or any Subsidiary before the time such Loan is to be
made being true and correct as of the date thereof, except to the
extent updated in a certificate executed by a Designated Officer
or a Designated Financial Officer and received by each Lending
Entity before the time such Loan is to be made, (iii) each
financial statement provided to any Lending Entity by or on
behalf of the Borrower or any Subsidiary before the time such
Loan is to be made having fairly represented the financial
information that it purports to reflect as of the date thereof
and (iv) such Bank not believing in good faith that (A) any such
representation or warranty, except to the extent so updated, was
or is other than true and correct as of any time or date of
determination of the truth and correctness thereof or (B) any
such financial statement did not so fairly represent such
information as of the date thereof;
c. Proceedings. Such Bank being satisfied as to each
corporate or other proceeding of the Borrower and any Subsidiary
in connection with any transaction contemplated by the Loan
Agreement, as amended by this Agreement; and
d. Receipt by Agent. The receipt by the Agent at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to each Lending Entity:
(i) A certificate executed by a Designated Officer or
a Designated Financial Officer updating each representation and
warranty previously made in or pursuant to the Loan Agreement and
stating that (A) there did not occur or exist at any time during
the period beginning on the date of the Loan Agreement and ending
at the time such Loan is to be made and there does not exist at
the time such Loan is to be made any Event of Default or Default
and (B) each representation and warranty made in the Loan
Agreement, as amended by this Agreement, was true and correct as
of all times during the period beginning on the date of the Loan
Agreement and ending at the time such Loan is to be made and is
true and correct as of the time such Loan is to be made, except
to the extent updated in a certificate executed by a Designated
Officer or a Designated Financial Officer and received by each
Lending Entity before the time such Loan is to be made;
<PAGE>
(ii) Evidence of the taking and the continuation in
full force and effect, at the time such Loan is to be made, of
each corporate or other action of the Borrower or any other
Person necessary to authorize the obtaining of all Loans by the
Borrower and the execution, delivery and performance of each Loan
Document and the imposition or creation of each security
interest, mortgage and other lien and encumbrance imposed or
created pursuant to any Loan Document;
(iii) Evidence (A) that no asset subject to any Lien
pursuant to any Loan Document is at the time such Loan is to be
made subject to any other Lien, except for Permitted Liens, and
(B) of the making of each recording and filing, and of the taking
of each other action, deemed necessary or desirable by the Agent
at the sole option of the Agent to perfect or otherwise protect
any such Lien;
(iv) A Replacement Revolving Loan Note in favor of
Marine for the maximum principal amount of $61,545,000,
appropriately completed and duly executed by the Borrower;
(v) A Replacement Revolving Loan Note in favor of
Chase for the maximum principal amount of $8,000,000,
appropriately completed and duly executed by the Borrower;
(vi) An opinion of Phillips, Lytle, Hitchcock, Blaine &
Huber, LLP, counsel to the Borrower;
(vii) Each additional agreement, instrument and other
writing, including, but not limited to, (A) each agreement,
instrument and other writing intended to be filed or recorded
with any Governmental Authority to perfect or otherwise preserve
or protect the priority of any Lien created or imposed pursuant
to any Loan Document and (B) each item referred to in any of
clauses (i) through (xviii) of Section 4d of the Loan Agreement,
required by any Loan Document or reasonably deemed necessary or
desirable by the Required Banks; and
(viii) Payment of all costs and expenses payable pursuant
to the first sentence of Section 9a of the Loan Agreement at or
before the time such Loan is to be made.
5 GENERAL.
a. Term. This Agreement shall become effective as to
the amendments and consents described above upon its execution by
the Borrower, the Agent and the Banks or the Required Banks, as
provided above. The term of this Agreement shall be the same as
the term of the Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation, warran-
ty, covenant and agreement contained in this Agreement shall
survive the making of each Loan and the execution and delivery of
each Loan Document and shall continue in full force and effect
during the term of this Agreement, except to the extent modified
<PAGE>
in accordance with the terms of this Agreement. Each such
representation, warranty, covenant and agreement shall be
presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks (except as otherwise
provided in the Loan Agreement) and specifically referring to
each provision of this Agreement being modified or to such
termination.
d. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to princi-
ples of conflict of laws.
e. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by this
Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to "this Agreement" or words of
similar effect shall be deemed to be references to the Loan
Agreement as amended by this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each Lending Entity signing below
and the Borrower have caused this Agreement to be duly executed
as of the date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By_________________________________
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By_________________________________
Timothy Geiger, Vice President
FLEET BANK
By_________________________________
Thomas Giles, Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, successor by merger to
The Mitsubishi Bank, Limited
By________________________________
Brian Dossie attorney-in-fact
THE SUMITOMO BANK, LIMITED
By________________________________
Brian Smith, Senior Vice President
BARNETT BANK N.A., PINELLAS, successor
in interest to Barnett Bank of
Pinellas County
By_________________________________
Michael S. Crowe, Senior Vice President
NATIONAL BANK OF CANADA
By_________________________________
Robert Uhrig, Vice President
<PAGE>
By_________________________________
Mark Nigro, Vice President
MARINE MIDLAND BANK, AS AGENT
By________________________________
Hugh C. McLean, Vice President
MOOG INC.
By________________________________
William Burke, Treasurer
<PAGE>
Exhibit 13
Moog is a worldwide manufacturer of precision control components
and systems. Moog's high performance actuation products control
military and commercial aircraft, satellites and space vehicles,
launch vehicles, missiles and automated industrial machinery.
Worldwide Locations:
Moog Inc.
Headquarters
East Aurora, New York, USA
Moog Aircraft Group
Montek Operations
Salt Lake City, Utah, USA
Moog Aircraft Group
Torrance Operations
Torrance, California, USA
Moog Systems Group
Schaeffer Magnetics Division
Chatsworth, California, USA
Moog-Hydrolux Hydraulic Systems Inc.
East Aurora, New York, USA
Moog Australia
Pty., Ltd.
Mulgrave, Australia
Moog do Brasil
Controles Ltda.
Sio Paulo, Brazil
Moog Control System (Shanghai) Co., Ltd.
Shanghai, People's Republic of China
Moog Buhl Automation
Copenhagen, Denmark
Moog Controls Ltd.
Tewkesbury,
England
Moog OY
Espoo, Finland
Moog Sarl
Rungis,
France
Moog GmbH
Boblingen, Germany
<PAGE>
Moog Controls
Hong Kong Ltd.
Hong Kong
Moog Controls
(India) Pvt. Ltd.
Bangalore, India
Moog International Financial
Services Center Ltd.
Dublin, Ireland
Moog Ltd.
Ringaskiddy,
Ireland
Moog Microset Srl
Brescia,
Italy
Moog Italiana Srl
Malnate,
Italy
Moog Japan Ltd.
Hiratsuka,
Japan
Moog Hydrolux Sarl
Luxembourg City,
Luxembourg
Moog Controls Corporation
Baguio City,
Philippines
Moog Korea Ltd.
Seoul,
South Korea
Moog Singapore Pte. Ltd.
Singapore
Moog Sarl
Sucursal En Espana
Orio, Spain
Moog Norden A.B.
Askim, Sweden
Directors and Officers:
Robert T. Brady
Chairman of the Board
Chief Executive Officer
President
<PAGE>
Richard A. Aubrecht
Vice Chairman of the Board
Vice President
Robert R. Banta
Executive Vice President
Chief Financial Officer
Director
William P. Burke
Treasurer
Warren B. Cutting
Director Emeritus
John B. Drenning
Secretary Partner,
Phillips Lytle
Joe C. Green
Executive Vice President
Chief Administrative Officer
Director
John D. Hendrick
Director
President,
Okuma America Corporation
Philip H. Hubbell
Vice President
Stephen A. Huckvale
Vice President
Kraig H. Kayser
Director
President & CEO,
Seneca Foods Corporation
Robert H. Maskrey
Vice President
Director
Kenneth J. McIlraith
Director
Retired Executive
Albert F. Myers
Director
Vice President & Treasurer,
Northrop Grumman
Peter P. Poth
Director
Retired Executive
Richard C. Sherrill
Vice President
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Fiscal Year 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Sales $536,612 $455,929 $407,237 $374,284 $307,370
Net Earnings 19,268 13,606 10,709 7,761 2,123
Net Earnings Per Share $2.26 $1.88 $1.40 $.99 $.27
Total Assets $559,325 $490,563 $449,558 $424,957 $424,456
Indebtedness-Senior 85,614 118,245 91,262 170,361 183,376
-Subordinated 120,000 120,000 120,000 19,400 20,800
Shareholders' Equity 191,008 114,191 104,743 108,636 102,184
Capital Expenditures 22,688 13,713 10,885 10,232 8,893
Depreciation and
Amortization 22,665 21,267 19,632 19,675 15,700
Backlog 314,253 280,364 243,310 237,941 217,261
(dollars in thousands except per share data)
</TABLE>
<PAGE>
Content
Financial Highlights 1
Letter to Shareholders 2
The Moog Technology 4
Military Aircraft 6
Commercial Aircraft 8
Satellites & Launchers 10
Industrial Hydraulics 12
Electronics & Drives 14
Acquisitions 16
Form 10K 17
Investor Information 47
Directors, Officers, and International Subsidiaries
located on inside back cover.
<PAGE>
To our Shareholders, Employees and Friends:
Fiscal '98 was a wonderful year for Moog. Our numbers were
strong, we introduced a variety of new products and we made four
acquisitions.
Sales increased $81 million, or 18%, sending Moog's revenues well
past the half-billion dollar mark for the first time in the
company's history. Growth across every one of Moog's product
lines contributed $67 million of the increase and our Schaeffer
acquisition provided the rest.
Net earnings were up 42% to $19.3 million. On a per share basis,
earnings were up 20% after an 18% increase in average shares
outstanding.
Diversity in products and markets worked well for us again this
year. Strong sales growth in our aerospace markets generated a
solid profit performance, but much of our earnings growth was the
result of improving profitability in our industrial product
lines. The acquisitions of Ultra Hydraulics in '96 and Moog
Controls in '97, along with a lot of hard work in product
rationalization, culminated in a big improvement in industrial
margins. Continuing cost reductions and an emphasis on specialty
products produced much improved profitability in our electronics
and drives business as well.
Beyond the financials, there were a number of other notable
events and achievements that occurred over the course of the
year. They were, as they say, too numerous to mention but the
following are some of the highlights.
We began production deliveries on the F/A-18E/F Super Hornet, the
V-22 Osprey and the Japanese F-2 Fighter, all of which will be
important revenue-producing programs for the future. Technology
development for the Joint Strike Fighter became the focus for
research and development in the Aircraft Group and the program
achieved major milestones very quickly.
We completed a particularly challenging development program for
electromechanical thrust vector controls to be used on the
Centaur stage of the Atlas launch vehicle. At the end of the
year, we won a number of jobs on the Delta family of launch
vehicles. During '98, the Iridium satellite constellation was
launched, and we continued our make-ready effort for Skybridge
and Teledesic, the satellite constellations of the future.
In the industrial arena, we gained a significant market share in
the field of power generation, and we became the leading
servovalve supplier to GE and its licensees and to Siemens
Westinghouse. In Orlando, Universal Studios began trial runs on
the electric simulators we delivered for their state of-the-art
Spiderman attraction.
These are but a few of the recent happenings that will shape our
company's business in the years to come.
<PAGE>
Supplementing what our folks achieved in our existing business,
'98 was an active year on the acquisition front. The stage was
set in January when we completed a secondary offering of 1.8
million new shares at $34 3/8. We announced the offering in late
'97 when the market seemed particularly receptive for our kind of
issue. This was before Boeing had announced the impact of their
production problems and before the depth of the Asian financial
crisis was apparent. By mid-January, when the offering came to
market, a lot of uncertainty had developed around both of those
issues; but, with the help of Morgan Stanley Dean Witter and SG
Cowen & Co., we completed the offering and our share price moved
up smartly. In July, the market peaked. Since then, we've
shared the experience of many smallcap stocks. We're selling for
twelve times Wall Street's estimate for the current year. We're
hopeful that a continuation of our consistent financial
performance will ultimately be rewarded with a price to earnings
ratio that approaches our percentage increase in earnings per
share.
Market conditions aside, the equity issue strengthened our
financial foundation so that we could take advantage of the
acquisition opportunities that were to come. At the time of the
offering, we were working on one acquisition, Schaeffer
Magnetics, but we are always on the lookout for appropriate
candidates - for companies with products and technology that fit
our emphasis on high performance motion control. We prefer
companies that sell into markets we currently serve, particularly
those that sell to our existing customers. Often, we're able to
find companies with manufacturing processes that match or
complement our own. Last but not least, we look for companies
whose staff will be comfortable with the Moog culture. The timing
of acquisition opportunities is beyond our control. What we can
do is be ready, willing and able. In the past year, we found
Schaeffer and three more - Hydrolux, Microset and Montek. Each of
these acquisitionsis described in more detail on page 16.
Over the years that we've been making acquisitions, we've learned
that there are two distinct phases to the process. The first is
finding the opportunity and making the deal. The second is the
much larger task of assimilation and integration. For the folks
involved on both sides of the transaction, making it a success is
a lot of work. It takes patience, a willingness to make changes
and the determination to find the best combination of all our
capabilities. We salute all the folks who've made our prior
acquisitions so successful.
To all those who are joining us through the recent acquisitions,
we offer a warm welcome. We hope that shortly you'll feel that
you're part of an extended family. You're joining us at a great
time in Moog's history. A few years back we had our problems and
had to make some tough choices. We kept faith with each other and
worked together and '98 is now our fourth year of consistent,
continuous improvement. We're intent on building a great
company - a company that provides the best products for our
<PAGE>
customers, a first class return for our shareholders and a
challenging and rewarding work experience forall of us. Welcome
to the family.
Respectfully submitted,
R.T. Brady
<PAGE>
The Moog Technology
Everyone appreciates the tremendous pace of advancement in
computers and computer software. Just as computers have
revolutionized information technology, they have also
revolutionized controls in aircraft, satellites and industrial
machinery. This phenomenon works in our favor. Our principal
product lines are servoactuators that take the information
generated by computers and then make something happen. The inputs
to our products are tiny electrical signals emanating from
control computers. Advancements in computer technology enhance
the capabilities of our products and their relevance in today's
industrial society. The diagram below describes conceptually the
relationship between the control computer and our servoactuator.
For those interested in a more detailed description we offer the
following:
An electrohydraulic servocontrol system consists of six elements
indicated in the diagram below: control electronics which may be
a computer, microprocessor or guidance system and which create a
command input signal; 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; a servovalve which responds to this low
power electrical signal and controls the high power flow of
hydraulic fluid to an actuation element such as a piston and
cylinder which positions the device being controlled; and a power
supply, generally an electric motor and pump, which provides the
flow of hydraulic fluid under high pressure. The feedback
transducer measures the output of the system and converts this
measurement into a proportional signal which is sent to the
servoamplifier. The concepts are similar in electromechanical
systems wherein an electric drive and ballscrew are used instead
of a servovalve and actuator.
Moog has supplied high performance servoactuation to move flight
control surfaces on military aircraft since the 1950's.
Throughout our history, we've worked on almost every U.S.
military aircraft and many built overseas. This year we began
initial production on the F/A-18E/F Super Hornet, the V-22
Osprey, and the Japanese F-2. We also began delivery of flight
control and engine control actuation for the Joint Strike Fighter
(JSF) demonstrators.
Military Aircraft
25% of '98 sales
FY99 Forecast Sales = $136 million
(Pie chart inserted which shows the distribution of 1999 sales by
project as follows:
B-2 - 5%
Engines - 5%
Aftermarket - 29%
F-15 - 11%
F-16 - 2%
<PAGE>
F-18 - 18%
V-22 - 9%
Other - 21%)
Products
- - Primary and secondary flight control actuation for fighters,
bombers and helicopters using hydraulic, mechanical and
electrohydrostatic technologies
- - Engine control servovalves and servoactuators
- - Wingfold and weapons bay actuation systemsn Active vibration
control systems
Major Programs & Applications
Primary Flight Controls:
- - B-2, V-22, RAH-66 Comanche, Taiwanese IDF, Joint Strike Fighter
Secondary and Leading Edge Actuation:
- - F/A-18, F-15, F-16, Blackhawk, Japanese F-2,Taiwanese IDF,
C-5B, Joint Strike Fighter
Active Vibration Controls:
- - EH-101 Helicopter
Engine Control Servovalves and Servoactuators:
- - F-404, F-414, F-110, F-119,EJ200, AE2100, T406, RTM322,thrust
vector controls
Competitive Advantages
- - Extensive U.S. and International experience in design of fly-
by-wire flight controls
- - Complete actuation system integration capability
- - Product innovation for advanced flight controls, engine
controls and active vibration controls
- - World-class manufacturing capability
- - Skilled, experienced and dedicated workforce
Competitors
- - Parker Hannifin, Curtiss-Wright, Dowty
Market Developments
- - F/A-18E/F is funded for production
- - V-22 Osprey approved for low rate production, 458 aircraft are
planned
- - RAH-66 Comanche in flight testing, program restructured to
include 14 aircraft by 2004
- - Japanese F-2 in low rate production
- - Joint Strike Fighter concept demonstrators are in fabrication,
first flight planned for 2000
- - Korean KTX-2 Trainer will be a near term opportunity
Strategies & Initiatives
- - Develop next generation technologies in flight control and
engine control formanned and unmanned vehicles
<PAGE>
- - Partner with prime contractor R & D centers
- - Pursue opportunities in overseas markets
- - Strengthen European manufacturing capabilities
- - Maintain depot capability for responsive support of all Moog
aircraft components
- - Provide highly responsive aftermarket support
Moog supplies many of the flight control and autopilot
servoactuators for Boeing's 737, 747, 757, 767, and 777. We also
manufacture servovalves for all the Boeing and Airbus aircraft.
In addition, we supply flight control actuators for the ailerons
on the Airbus A330/A340. During fiscal '98, our deliveries to
Boeing were still accelerating and our revenues on Boeing
products increased by 17%. In FY99, the addition of the Montek
products will more than offset the impending decline in Boeing
aircraft production rates.
Commercial Aircraft
22% of '98 sales
FY99 Forecast Sales = $158 million
(Pie chart inserted which shows the distribution of 1999 sales by
project as follows:
Engines - 9%
Boeing 747 - 13%
Airbus - 9%
Boeing 767 - 5%
Aftermarket - 29%
Boeing 757 - 9%
Other - 18%
Boeing 777 - 8%)
Products
- - Primary and secondary flight control actuation
- - Flight control servovalves
- - Engine control servovalves and servoactuators
- - Stabilizer trim control systems
- - Elevator feel systems
Major Programs & Applications
Primary and Secondary Flight Controls:
- - 737, 747, 757, 767, 777, A330/A340, Citation X, Premier I,
DHC-8-400, Hawker Horizon
Autopilot Actuators:
- - 737, 747, 757, 767
Flight Control Servovalves:
- - Boeing, Airbus, various business and regional jets
Leading and Trailing Edge Flap Systems:
- - Boeing 777, Gulfstream IV, Challenger, Lear 45/60
Engine Control Servovalves and Servoactuators:
- - CF-6, GE90, V2500, Rolls Royce RB211 and Trent, AlliedSignal
APU's, PW 901
<PAGE>
Active Vibration Controls:
- - S-92, Citation X
Competitive Advantages
- - Extensive experience in design and production of primary and
secondary flight control actuators and components
- - Product innovation for advanced flight controls, engine
controls and active vibration controls
- - Focused, highly responsive aftermarket support organization
- - World-class manufacturing capability
- - Skilled, experienced and dedicated workforce
Competitors
- - Parker Hannifin, Teijin Seiki, Curtiss-Wright, Dowty,
Sundstrand
Market Developments
- - Asian financial crisis begins to impact airplane delivery rates
- - Airline traffic worldwide is projected to grow at a rate of 5%
per year over the next 20 years
Strategies & Initiatives
- - Align business plans with customer objectives
- - Dramatically reduce development cycletime to benefit airframe
design costs
- - Continue pursuit of process improvement and cost reduction
opportunities
- - Find appropriate transfer of military technology to commercial
applications
The satellite and launch vehicle business continues to grow, but
not at the rates expected because the low earth orbit (LEO)
satellite constellations are not starting as quickly as
previously forecasted. On-orbit satellite problems and launch
vehicle failures challenged the industry in '98. Everyone hopes
for better results in '99. The acquisition of Schaeffer Magnetics
and recent wins on the Evolved Expendable Launch Vehicle (EELV)
bode well for Moog's future.
Satellites and Launch Vehicles
18% of '98 sales
FY99 Forecast Sales = $113 million
(Pie chart inserted which shows the distribution of 1999 sales by
project as follows:
Space Vehicles - 6%
Launch Vehicles - 35%
Tactical Missiles - 26%
Satellites - 29%
Strategic Missiles - 4%)
Products
- - Steering and propulsion system controls for launch vehicles,
missiles, and Space Shuttle
<PAGE>
- - Thruster valves, isolation valves, propulsion system valves,
regulators and actuation systems for satellites and launch
vehicles
- - Electric propulsion propellant management systems for satellite
attitude control
- - Electromechanical actuators for satellite motion control
Major Programs & Applications
Satellite Propulsion:
- - HS-601, HS-702, A2100, FS1300, Eurostar, Spacebus, Iridium,
Global Star
Launch Vehicle Steering and Propulsion Controls:
- - Titan IV, Atlas Centaur, Ariane, Space Shuttle, EELV, Delta IV,
Pegasus
Missile Steering Controls:
- - Trident II, SM2-IV, VLASROC, Maverick, Patriot, Aspide, Sea
Dart, Penguin, Aster 15 and 30, Apache, Storm Shadow, Arbizon,
MQM 170-B, C-22 Drone, NMD, KEPD 350, Hellfire, Longbow
Space Station Components:
- - Fluid quick disconnects, truss attachment actuators
Electric Propulsion:
- - Loral Propellant Management Assembly
- - NASA Deep Space One Xenon Feed System
- - Hughes XIPS Regulator
- - Xenon resistojet and cathode development
Satellite Motion Control:
- - Iridium solar array drives
- - Intelsat antenna pointing mechanisms
- - LAS and GLI instruments on ADEOS 2
Competitive Advantages
- - Extensive experience in design and manufacture of launch
vehicle steering controls
- - Unparalleled experience in design and manufacture of propulsion
control devices
- - Leading edge technology in electric propulsion
- - Singular experience in electromechanical actuation for
deploying satellite solar arrays and antennas
- - World-class manufacturing capabilities
- - Skilled, experienced and dedicated workforce
Competitors
- - AlliedSignal, HR Textron, Vacco, EG&G,Tecstar, MPC, Parker,
Lucas
Market Developments
- - Our domestic customers, Hughes, Lockheed Martin and Loral,
dominate U.S. satellite production
- - International customers include Daimler Chrysler Aerospace and
Matra Marconi Space
- - LEO constellations continue to promise large potential
<PAGE>
- - Titan, Atlas, Delta, Space Shuttle still workhorses
- - Delta IV and Atlas III funded under USAF Evolved Expendable
Launch contracts (EELV)
Strategies & Initiatives
- - Increase capacity and reduce lead time to support demand
- - Develop leading edge technology for satellite and launch
vehicle propulsion systems and steering controls
- - Promote Schaeffer satellite products
- - Support satellite and launch vehicle manufacturers on a
worldwide basis
Since 1959, when Moog introduced its first industrial servovalve,
we've led the way in product technology. By any measure, we are
the world's market leader in industrial servovalves. In addition,
we produce customized hydraulic manifold packages and integrated
control actuators for a wide variety of high performance
machinery applications. Most of our customers are global market
leaders in their product specialty and, regardless of overall
market conditions, many continue to grow by increasing their
global market share.
Industrial Hydraulics
24% of '98 sales
FY99 Forecast Sales = $163 million
(Pie chart inserted which shows the distribution of 1999 sales by
geographic region:
Japan - 13%
Scandinavia - 4%
Italy - 8%
U.S. - 36%
Pacific Rim - 4%
U.K. - 9%
France - 4%
Germany - 18%
Other - 4%)
Products
- - Servovalves and proportional valves
- - Electrical and mechanical feedback valves
- - Nozzle-flapper, servojet, jet pipe and direct drive valves
- - Closed loop motion control subsystems
- - Hydrostatic bearing, laminar and conventional actuators
- - Customized integrated valve manifold packages
Major Programs & Applications
- - Electrical feedback servovalves for control of clamp and
injection operations on plastic injection molding equipment
- - Mechanical feedback and direct drive valves for parison control
in plastic blow molding machines and for control of nip load in
paper machinery
- - Fuel metering, steam bypass and override control servovalves
for gas and steam turbines
- - Hydraulic position control actuators and servovalves for
fatigue testing systems
<PAGE>
- - Direct drive and electrical feedback valves for precise
positioning in saw mills
- - Electrical and mechanical feedback servovalves for gauge coil
box, side guide and camcoiler control of steel and aluminum
processing equipment
- - Control loading and motion platform actuators for full flight
simulators
- - Hydraulic control systems for articulating buses and auxiliary
steering systems for rear truck axles
- - Mold oscillators for steel processing equipment
Competitive Advantages
- - Leading edge technology for 39 years
- - Unmatched, worldwide application engineering to optimize custom
solutions
- - Worldwide engineering, manufacturing, support and service
facilities
- - Skilled, experienced and dedicated workforce
Competitors
- - Bosch, Rexroth
Market Developments
- - Adoption of distributed control and device networks
- - One-stop shopping for customers who want pre-tested assemblies
that fit directly onto their machines
- - Global service and support expected and demanded by customers
- - Advanced control algorithmsnow possible using cost effective
electronics and software
Strategies & Initiatives
- - Continue development of leading edge technology
- - Pursue forward integration of products in key markets
- - Consolidate production in global manufacturing centers
- - Focus factories and processes to shorten lead times
- - Expand global locations for support and service
The growth areas in our drives business have been in specialties.
In '98, we developed and began delivery of simulators for MCA-
Universal's Spiderman theme park attraction as well as electric
drives for Wegmann howitzers. We also began producing electric
drives used on the new Marine Corps landing craft, the AAAV, and
the new U.S. Army Crusader howitzer. All of these product lines
have great potential.
Industrial Electronics and Electric Drives
11% of '98 sales
FY99 Forecast Sales = $65 million
(Pie chart inserted which shows the distribution of 1999 sales by
project as follows:
Electric Drives - 29%
Motion Simulators - 12%
Military Vehicles - 21%
Plastics Controls - 11%
Other - 27%)
<PAGE>
Products
- - Brushless servo motors and programmable servo drives
- - Explosion-proof servo motors
- - Electromechanical servoactuators
- - Electronic controls for specialized automated machinery
- - Electronic controls for blow molding and injection molding
- - High-torque drives for military vehicles
- - Electrically actuated motion simulators
- - Radio remote controls for underground mining
Major Programs & Applications
- - Electric drives for assembly robots, metal forming machines,
material handling robots and packaging machines
- - Custom-tailored controls for Tuftco carpet tufting and
scrolling machines
- - Full performance total machine control for injection molding
and blow molding
- - Electric gun positioning, ammunition-handling,and radar
platform control for military vehicles
- - Electric drives for position control of ground antennas for
satellite communication
- - Tilting controls for high speed trains
- - Four- and six-degree-of-freedom motion platforms with
capacities between 2,000 and 13,000 pounds
- - Special entertainment platforms for theme parks
Competitive Advantages
- - Higher peak power density brushless servo motors
- - Full range of capability in total machine control for injection
molding and blow molding
- - Demonstrated experience in electric gun controls for military
vehicles
- - High reliability in electrically actuated motion platforms
Competitors
- - Indramat, Danaher, Barber Colman, Siemens, Gefran, Control
Techniques, Kollmorgen, MPC
Market Developments
- - Advanced control technology now available at reasonable cost to
customer
- - Development starts on AAAV and Crusader electric turret drives
- - Military vehicle technology is applied to high speed trains
- - Moog electric simulators lead the field in both entertainment
and training
Strategies & Initiatives
- - Focus on development of specialized electromechanical actuation
systems
- - Refine product design and reduce costs to improve profitability
in electric drives
- - Broaden worldwide distribution of plastics machine controls
- - Broaden product range in electric motion simulators
Moog has a history of making strongly accretive acquisitions. In
fiscal '98, Moog acquired Schaeffer Magnetics and signed
agreements to acquire the controlling interest in Hydrolux Sarl
<PAGE>
of Luxembourg, the Montek subsidiary of Raytheon and a two-thirds
interest in Microset Srl of Italy. All of the pending purchases
were completed by the first week of December 1998.
(Pie chart inserted which shows the distribution of 1999 sales by
acquired companies by product line as follows:
Military Aircraft - 10%
Commercial Aircraft - 36%
Satellite & Launch Vehicles - 25%
Industrial Hydraulics - 26%
Industrial Electronics and
Electric Drives - 3%)
The following summary describes each of these acquisitions:
Acquisitions
Schaeffer Magnetics
We completed the acquisition of Schaeffer Magnetics, Inc. in
February of '98. Schaeffer was a $20 million per year privately-
held designer and manufacturer of electromechanical actuation
used on satellites and space vehicles. Schaeffer products are
typically used to deploy and position solar arrays and
communication antennas. Lockheed Martin, for instance, uses two
Schaeffer solar array drive actuators on each of the satellites
in the Iridium constellation. Schaeffer was part of Moog for 8
months of fiscal '98, generated $14 million in revenue, and was
accretive to earnings. It was the only acquisition announced in
FY98 which was actually concluded within the fiscal year.
Hydrolux
The next acquisition opportunity came up in Luxembourg. We were
offered the opportunity to purchase 75% of the stock of Hydrolux
Sarl. Hydrolux is a manufacturer of integrated hydraulic
manifold systems used on large, high performance capital
equipment, principally injection molding and die-casting
equipment. In '96, we formed a joint venture in the U.S. with
Hydrolux and, in the year just completed, that joint venture
generated revenues of just over $7 million.
We acquired the controlling interest in both Hydrolux Sarl and
the U.S. joint venture at the end of October. For the remaining
11 months of fiscal '99, we'll be consolidating the revenues of
both of those companies. We expect the sales impact to be about
$28 million and the transaction to be accretive to earnings. In
the longer term, we hope to increase Hydrolux sales by combining
the current Hydrolux technology with our advanced servocontrols
and launching a more aggressive presentation of these
capabilities in Europe and Asia through our network of
international subsidiaries.
<PAGE>
Microset
The smallest of our acquisitions is the purchase of 662-3% of the
shares of Microset Srl, a $4 million Italian manufacturer of
electronic controls. It closed on 3 December 1998. Microset was
founded in 1980 by Mario Bellini, an electronics engineer whohad
been working at IDRA, the oldest Italian manufacturer of die-
casting and injection molding machines. Over the last 18 years,
Microset has moved through the continuing evolution in the design
of control electronics and is currently selling about 1,000
controllers per year for use on a variety of industrial machines.
We became acquainted with Microset when they became a controls
supplier to one of our servovalve customers, Techne, a
manufacturer of injection molding machines. Our intention is to
use the Microset technology to update many of our electronic
controls products, principally for blow molding and injection
molding, and, through better differentiation, improve our
margins.
Montek
The largest of the FY98 acquisition opportunities came about when
Raytheon Aircraft decided to sell its Montek subsidiary, a $90
million a year manufacturer of aircraft flight controls, missile
fin controls and industrial servovalves. Nearly 80% of the
current revenues come from commercial and military aircraft and
associated aftermarket sales. Half of this revenue is generated
by flight controls delivered to Boeing. These products are a
natural extension of the Moog Commercial Aircraft product line.
Also, Montek has invested heavily in the development of flight
control systems supplied for regional aircraft like the
Bombardier DHC-8-400 and for business jets like the Raytheon
Premier 1 and the Hawker Horizon. In addition to these product
areas, Montek has continuing production of missile fin actuation
for the Hellfire and TOW Missiles, and an industrial servovalve
business which will be a complement to our own. Each of the
Montek product lines has an extraordinary strategic fit within
the overall Moog framework. The acquisition was completed on 30
November and we expect revenues for fiscal '99 to exceed $70
million.
<PAGE>
Investor Information
Reports
In addition to our Annual Report and 10-K, shareholders receive
copies of our three quarterly earnings releases. Additional
information about the Company may be obtained by writing:
Shareholder Relations
Moog Inc.
East Aurora, New York 14052-0018
PHONE - 716/652-2000
FAX - 716/687-4457
E-MAIL [email protected]
Electronic Information About Moog
In Moog's annual report, we try to convey key information about
our fiscal year results. In addition to this primary information,
we have a site on the world wide web. Please visit this location
using the URL address of:
http://www.moog.com
Annual Meeting
Moog Inc.'s Annual Meeting of Shareholders will be held February
10, 1999. Proxy cards should be dated, signed and returned
promptly to ensure that all shares are represented at the meeting
and voted in accordance with shareholder instructions.
Stock Exchange
Moog Inc.'s two classes of common shares are traded on the
American Stock Exchange under the ticker symbols MOG/A and MOG/B.
Financial Mailing List
Shareholders who hold Moog stock in the names of their brokers or
bank nominees but wish to receive information directly from the
Company should contact Shareholder Relations at Moog Inc.
Transfer Agent and Registrar
ChaseMellon Shareholder Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800-288-9541
Affirmative Action Program
In recognition of our role as a contributing corporate citizen,
Moog has adopted all programs and procedures in our Affirmative
Action Program as a matter of corporate policy.
<PAGE>
Exhibit 23(ii)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Moog Inc.:
We consent to incorporation by reference in the Registration
Statements (Nos. 33-62968, 33-36721, 33-33958, 33-20069 and 33-
57131) on Form S-8 of Moog Inc. of our report dated November 9,
1998, except as to Notes 2 and 6 which are as of December 3,
1998, relating to the consolidated balance sheets of Moog Inc.
and subsidiaries as of September 26, 1998 and September 27, 1997,
and the related consolidated statements of earnings,
shareholders' equity, and cash flows and a related schedule for
each of the years in the three-year period ended September 26,
1998, which report appears in the September 26, 1998 annual
report on Form 10-K of Moog Inc.
KPMG Peat Marwick LLP
Buffalo, New York
December 18, 1998
<PAGE>
[PricewaterhouseCoopers Letterhead]
MOOG Inc.
East Aurora, New York 14052-0018
U.S.A.
Consent of Independent Auditors'
We consent to the incorporation by reference in the
Registration Statement of Moog Inc. on Form S-8 of our report
dated November 12, 1998 on our audits of the consolidated
financial statements of MOOG GmbH (a wholly-owned subsidiary of
MOOG Inc.) and subsidiary as of September 30, 1998, 1997 and 1996
and for the years then ended, which report is included in this
Annual Report on Form 10-K of Moog Inc.
Stuttgart Germany
December 18, 1998
PricewaterhouseCoopers
<PAGE>
[PricewaterhouseCoopers Letterhead]
12 November 1998
MOOG Inc.
East Aurora, New York 14052-0018
United States of America
Independent Auditors' Report
Board of Directors
MOOG Inc.
We have audited the consolidated balance sheets of MOOG GmbH (a
wholly-owned subsidiary of MOOG Inc.) and subsidiary as of
September 30, 1998, 1997 and 1996, and the related statements of
earnings and retained earnings and cash flows for each of the
years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements 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 principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material aspects, the financial
position of MOOG GmbH and subsidiary as of September 30, 1998,
1997 and 1996 and the results of their operations and cash flows
for the years then ended, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The
supplemental information in the reporting package and the
Hyperion submission are presented for purposes of additional
analysis and are not required part of the basic consolidated
financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
PricewaterhouseCoopers
Stuttgart/Germany
<PAGE>
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