UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 30, 1998
MOOG INC.
______________________________________________________________________
(Exact name of registrant as specified in its charter)
New York 1-5129 16-0757636
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
East Aurora, New York 14052
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 652-2000
NONE
______________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Condensed Combined Financial
Information and Exhibits.
The following financial statements and pro forma condensed
combined financial information are filed as a part of this
report.
(a) Financial Statements of Raytheon Aircraft
Montek Company
(i) Audited Financial Statements for the
years ended December 31, 1997 and 1996
(ii) Unaudited Financial Statements for the
nine months ended September 30, 1998 and
1997
(b) Pro Forma Condensed Combined Financial
Statements of Moog Inc., Raytheon Aircraft
Montek Company, Hydrolux SARL, Moog-Hydrolux
Hydraulic Systems, Inc. and Microset Srl.
(i) Pro Forma Condensed Combined Statement
of Earnings for the year ended
September 26, 1998
(ii) Pro Forma Condensed Combined Balance
Sheet as of September 26, 1998
(iii) Notes to Pro Forma Condensed Combined
Financial Statements.
(c) Exhibits
(23) Consent of PricewaterhouseCoopers LLP
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Raytheon Company:
In our opinion, the accompanying balance sheets and the related
statements of income, parent company investment and cash flows present
fairly, in all material respects, the financial position of Raytheon
Aircraft Montek Company (the "Company") at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of
the two years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
November 6, 1998
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
BALANCE SHEETS
December 31, 1997 and 1996
(in thousands)
ASSETS 1997 1996
Current assets:
Cash $ 14 $ 23
Accounts receivable, net 6,647 9,600
Inventory, net 19,034 17,672
Prepaid expenses and other
current assets 4 20
Receivables from affiliates 1,013 447
Notes receivable 181 -
Deferred tax assets - 1,283
________ ________
Total current assets 26,893 29,045
________ ________
Property, plant and equipment, net 25,105 25,096
Intangible assets, net 61,318 63,010
Long-term receivables 110 921
________ ________
Total assets $113,426 $118,072
======== ========
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
Bank overdraft 1,179 805
Accounts payable 2,314 1,642
Accrued salaries and wages 832 1,053
Accrued expenses 4,773 5,600
________ ________
Total current liabilities 9,098 9,100
________ ________
Long-term tax liabilities 418 -
Commitments and contingencies
(see footnotes 7 and 12)
Parent company investment 103,910 108,972
________ ________
$113,426 $118,072
======== ========
The accompanying notes are an integral part of the financial
statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
STATEMENTS OF INCOME (LOSS)
for the years ended December 31, 1997 and 1996
(in thousands)
1997 1996
Net external sales $79,384 $57,613
Net sales to affiliates 1,063 1,047
________ ________
Total revenue 80,447 58,660
________ ________
Cost of external sales 51,659 41,916
Cost of affiliated sales 2,084 2,477
________ ________
Gross profit 26,704 14,267
________ ________
Research and development 5,402 4,289
Selling, general and administrative 7,792 10,749
________ ________
Operating profit (loss) 13,510 (771)
________ ________
Other expense (income) (13) 340
Intercompany interest 3,870 1,779
________ ________
Income (loss) before taxes 9,653 (2,890)
________ ________
Provision (benefit) for
income taxes 4,090 (588)
________ ________
Net income (loss) $ 5,563 $(2,302)
======== ========
The accompanying notes are an integral part of the financial
statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
STATEMENTS OF PARENT COMPANY INVESTMENT
for the years ended December 31, 1997 and 1996
(in thousands)
1997 1996
Parent company investment, beginning
of year $108,972 $ 96,932
________ ________
Net income (loss) 5,563 (2,302)
Net transfers (to)/from parent (10,625) 14,342
________ ________
Parent company investment, end of year $103,910 $108,972
======== ========
The accompanying notes are an integral part of the financial
statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997 and 1996
(in thousands)
1997 1996
Cash flows from operating activities:
Net income (loss) $ 5,563 $ (2,302)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,782 3,611
Loss on disposal of property,
plant and equipment 39 285
Provision for bad debts (53) 450
Net provision for long term contracts (2,024) 7,975
Deferred income taxes 1,701 (741)
Changes in assets and liabilities:
Accounts receivable 3,006 (1,714)
Inventory 662 (10,251)
Prepaid expenses and other
current assets 16 265
Receivables from affiliates (566) (304)
Notes receivable (181) -
Deferred receivable 811 829
Bank overdraft 374 (1,109)
Accounts payable 672 (151)
Accrued expenses (1,048) (3,828)
________ _________
Net cash provided by
operating activities 12,754 (6,985)
________ _________
Investing activities:
Additions to property, plant and
equipment (2,138) (7,866)
_________ __________
Net cash (used in)
investing activities (2,138) (7,866)
_________ __________
Financing activities:
Transfers (to) from parent (10,625) 14,342
_________ __________
Net cash (used in)
financing activities (10,625) 14,342
_________ __________
Decrease in cash (9) (509)
Cash at beginning of year 23 532
_________ __________
Cash at end of year $ 14 $ 23
========= ==========
The accompanying notes are an integral part of the financial
statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(dollars in thousands)
1. Background and Basis of Presentation:
Raytheon Aircraft Montek Company (the "Company"), a wholly-owned
subsidiary of Raytheon Company ("Raytheon"), is an international
developer and producer of aircraft control systems in the world's
commercial, military, and business aircraft aerospace markets as
well as several industrial markets. Montek has five business
lines: Aircraft Flight Controls, Missile Control Systems,
Servovalves (Atchley Controls), Solenoids (SR Solenoids) and
actuation systems for petroleum exploration industry (Seismic
Source).
On October 20, 1998, Raytheon entered into a purchase and sale
agreement for the sale of the Company to Moog Inc. (the "Buyer").
These financial statements present the Company's results of
operations and its financial condition as it operated as a
subsidiary of Raytheon from July 1, 1996 through December 31,
1997 and as a division of E-Systems, Inc. (a wholly-owned
subsidiary of Raytheon) from April 28, 1995 through June 30,
1996, including certain adjustments necessary for a fair
presentation of the business. The financial statements presented
may not be indicative of the results that would have been
achieved had the Company operated as a non-affiliated entity.
2. Summary of Significant Accounting Policies:
Use of Estimates
The preparation of these 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 assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Estimates include reserves for contract losses,
warranties and uncollectible accounts receivable. Actual results
could differ from those estimates.
Inventories
Work-in-process inventories primarily relate to long-term
contracts and are stated at actual production cost which includes
direct manufacturing and engineering costs and applicable
overhead reduced by amounts identified with revenues recognized
on units delivered or with progress completed. Such inventories
are further reduced by contract loss reserves which are
established when a current contract estimate indicates a loss.
Raw material inventories are stated at the lower of cost (first-
in, first out) or market.
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the
respective assets. Depreciation provisions are based on the
following estimated useful lives: buildings and improvements 25
to 39 years and furniture, fixtures, and equipment 3 to 16 years.
Leasehold improvements are depreciated over the lesser of the
remaining life of the lease or the estimated useful life of the
improvement. Expenditures for renewals and betterments are
capitalized while maintenance and repairs are charged to
operations in the period incurred. When assets are retired or
otherwise disposed, the assets and related allowances for
depreciation are eliminated from the accounts and any resulting
gain or loss is reflected in income.
Goodwill
Goodwill represents an allocation of the excess of Raytheon's
acquisition costs over the fair value of the net assets of the E-
Systems, Inc. business acquired in April, 1995. It is being
amortized using the straight-line method over its estimated
useful life of 40 years. The Company evaluates the recoverability
of goodwill based on undiscounted future cash flows. No
impairments of goodwill have been recorded as a result of these
evaluations.
Revenue Recognition
Sales primarily relate to long-term contracts and are recognized
as deliveries are made. A small percentage of sales are
recognized when development contract milestones are reached.
Expected profits or losses on long-term contracts are based on
management estimates of total costs at completion. These
estimates are reviewed and revised periodically throughout the
lives of the contracts, and adjustments resulting from such
revisions are recorded in the periods in which the revisions are
made. Losses on contracts are recorded in full as they are
identified. Provision is made for estimated warranties that
range from one to five years at the time of sale.
Research and Development
Independent research and development expenditures are expensed as
incurred.
Income Taxes
Historically, the Company's operations have been included in the
consolidated income tax returns filed by Raytheon. Income tax
expense in the Company's statement of operations is calculated on
a separate tax return basis as if the Company had operated as a
stand alone entity. The provision for income taxes is calculated
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred income taxes using the liability method.
<PAGE>
Accounting for Stock - Based Compensation
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations in accounting for its plans. Accordingly, no
compensation expense has been recognized for its stock-based
plans. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" and has provided pro
forma disclosures of net income as if the fair value-based method
prescribed by SFAS 123 had been applied in measuring compensation
expense.
Fair Value of Financial Instruments
The fair values of financial instruments, including accounts
receivable, other current assets, accounts payable and accrued
expenses, approximate their respective book values.
Concentration of Credit Risk
In the normal course of business, the Company provides credit
terms to its customers, including contracts involving the U.S.
Government, which do not require collateral or other security.
Accordingly, the Company performs ongoing credit evaluations of
its non-U.S. Government customers and maintains allowances for
possible losses. Two customers individually accounted for more
than 10 percent of trade and long-term accounts receivable; one
customer for 12.3 percent and 14.8 percent at December 31, 1997
and 1996, respectively, and the other for 16.9 percent and 12.9
percent at December 31, 1997 and 1996, respectively. Two
customers individually accounted for more than 10 percent of net
sales; one customer for 37.5 percent and 29.6 percent for the
years ended December 31, 1997 and 1996, respectively, and the
other for 11.2 percent for the year ended December 31, 1997.
Because the Company is engaged in supplying defense-related
equipment to the U.S. Government, it is subject to certain
business risks specific to that industry. Sales to the U.S.
Government may be affected by changes in procurement policies,
budget considerations, changing concepts of national defense,
political developments abroad and other factors. As a result of
the Balanced Budget and Emergency Deficit Reduction Control Act,
the federal deficit and changing world order conditions,
Department of Defense (DOD) budgets have been subject to
increasing pressure resulting in an uncertainty as to the future
effects of DOD budget cuts.
Parent Company Investment
The Parent Company Investment amount includes Raytheon's
investment in the Company and intercompany debt. At December 31,
1997 and 1996, the Company had long term funded balances from
Raytheon of $55,302 and $59,622, respectively. Interest expense
related to Raytheon's long-term financing is included in the
statements of income. Interest expense associated with
Raytheon's general corporate debt has not been allocated to the
Company's financial statements.
<PAGE>
The Company participates in several benefit plans of Raytheon
(see Note 12). Certain of Raytheon's costs have been allocated
to the Company, primarily related to central services, taxes,
legal expenses and risk management. Management believes these
allocations are reasonable. Raytheon provides certain
supplemental services to the Company related primarily to tax,
general legal, audit and human resources which are not deemed to
be material and have been excluded from these financial
statements.
All cash receipts and disbursements and intercompany charges
related to the Company's operations are charged or credited to
Parent Company Investment.
3. Accounts Receivable, Net:
Accounts receivable, net, consist of the following:
December 31,
1997 1996
Accounts receivable $ 7,080 $10,086
Allowance for doubtful accounts (433) (486)
________ ________
$ 6,647 $ 9,600
======== ========
Accounts receivable principally relate to long-term contracts.
Amounts billed under retainage provisions of contracts are not
significant, and amounts not collectible within one year are
disclosed separately as long-term receivables.
4. Inventories, Net:
Inventories, net, are comprised of the following:
December 31,
1997 1996
Work-in-process $21,531 $23,724
Loss contract reserves (1,817) (3,669)
Progress billings (912) (2,586)
Raw materials 232 203
________ ________
Total $19,034 $17,672
======== ========
<PAGE>
5. Property, Plant and Equipment, Net:
Property, plant and equipment, net, are comprised of the
following:
December 31,
1997 1996
Land $ 1,290 $ 1,290
Buildings and improvements 22,033 21,689
Furniture, fixtures, and equipment 15,029 14,990
Construction-in-process 1,818 414
________ ________
40,170 38,383
________ ________
Less accumulated depreciation
and amortization (15,065) (13,287)
________ ________
Property, plant and equipment, net $25,105 $25,096
======== ========
Depreciation expense totaled $2,090 and $1,925 for the years
ended December 31, 1997 and 1996.
6. Intangible Assets, Net:
Intangible assets, net, is comprised of the following:
December 31,
1997 1996
Goodwill $65,607 $65,607
Other 331 331
Accumulated amortization (4,620) (2,928)
________ ________
$61,318 $63,010
======== ========
7. Lease Commitments and Obligations:
The Company leased its office and manufacturing facility for a
portion of 1996 and purchased this facility on August 22, 1996.
The Company also leases certain computer and manufacturing
equipment under operating leases.
The following summarizes future minimum lease payments required
under operating leases:
1998 $176
1999 124
2000 177
2001 -
2002 -
Thereafter -
____
$477
====
<PAGE>
Total rent expense incurred by the Company under non-cancelable
operating leases for the years ended December 31, 1997 and 1996
was $67 and $369, respectively.
8. Federal Income Taxes:
The Company's financial statements reflect a charge for federal
and state income taxes based on income as if the Company had been
subject to income tax on a separate return basis. The charge was
computed in accordance with SFAS No. 109 and the charge is based
on the current tax rates.
December 31,
1997 1996
Current income tax expense (benefit):
Federal $ 1,190 $ (684)
State 185 (106)
________ ________
1,375 (790)
________ ________
Deferred income tax expense (benefit):
Federal 2,351 175
State 364 27
________ ________
Net provision (benefit) $ 4,090 $ (588)
======== ========
The provision for income taxes for 1997 and 1996 differs from the
U.S. statutory rate due to the following:
December 31,
1997 1996
Tax at statutory rate $ 3,282 $ (982)
Non deductible goodwill amortization 574 574
FSC benefit (140) (140)
State income tax net of federal
tax benefit 374 (40)
________ ________
Net provision (benefit) $ 4,090 $ (588)
======== ========
Current income tax expense amounts are included as a transfer to
Raytheon in the parent company investment account. The effect of
temporary differences which give rise to deferred income tax
balances are as follows:
December 31,
1997 1996
Current deferred tax assets:
Non deductible reserves $ 1,019 $ 2,531
Noncurrent deferred tax liabilities:
Depreciation (1,437) (1,248)
________ ________
Net deferred tax (liability) asset $ (418) $ 1,283
======== ========
<PAGE>
9. Employee Stock Plans:
As a wholly-owned subsidiary of Raytheon, the Company has no
separate employee stock option plan, however certain employees of
the Company participate in Raytheon's stock option plans
specifically the 1995 Stock Option Plan which provides for the
grant of both incentive and nonqualified options at an exercise
price which is 100% of the fair market value on the date of
grant. The plans provide that all stock options may be exercised
in their entirety 12 months after the date of grant. Incentive
stock options terminate 10 years from the date of grant and
become exercisable to a maximum of $100,000 per year.
Nonqualified stock options expire 10 years from the date of
grant.
The following stock option information relates to options granted
to the employees of the Company under Raytheon's stock option
plans. Shares exercisable at the corresponding weighted average
price at December 31, 1997 and 1996, respectively, were 21,300 at
$46.17 and 9,400 at $39.03. Information for 1997 and 1996
follows:
Weighted
Number of Average Price
Options Per Share
Outstanding at December 31, 1995 14,600 $39.03
Granted 12,400 51.85
Exercised (5,200) 39.03
Canceled (500) 52.56
_______
Outstanding at December 31, 1996 21,300 46.17
_______
Granted 33,600 51.69
Exercised - -
Canceled (900) 51.69
_______
Outstanding at December 31, 1997 54,000 $49.51
======= ======
Raytheon adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123) "Accounting
for Stock Based Compensation," as of December 31, 1997 and 1996
and accordingly, no compensation has been recognized for the
stock option plans. Had compensation cost for the stock options
awarded to the Company been determined based on the fair value at
the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, the Company's pro
forma net income (loss) for the years ended December 31, 1997 and
1996 would have been $5,437 and $(2,374), respectively.
<PAGE>
The weighted-average fair value of each option granted in 1997
and 1996, respectively, was estimated at $9.95 and $10.57 on the
date of grant using the Black-Scholes option pricing model with
the following assumptions: risk free interest rate ranging from
5% to 7.5 %; expected life of 4 years; expected volatility of
15%; expected dividend yield of 6%; and assumed annual forfeiture
rate of 5%.
The effects of applying SFAS No. 123 in this pro forma disclosure
are not indicative of future amounts.
The following table summarizes information about stock options
outstanding at December 31, 1997:
Options Outstanding Options Exercisable
_____________________________ ___________________________________
Weighted
Shares Average Weighted Shares
Exercise Outstanding Contractual Average Exercisable
Price at December 31, Remaining Exercise at December 31, Weighted
Range 1997 Life Price 1997 Average
________ _______________ ___________ ________ _______________ ________
$39.03 9,400 7.5 $39.03 9,400 $39.03
$48.12 to
$51.69 44,600 9.2 $51.73 11,900 $54.02
______ ______
Total 54,000 21,300
====== ======
10. Employee Benefit Plans:
Eligible employees of the Company may participate in two
defined benefit plans sponsored by Raytheon or Raytheon
entities, the E-Systems, Inc. Salaried Retirement Plan and
the E-Systems, Inc. Medical Welfare Benefits Plan.
Employees must be employed at least one year, have at least
1,000 hours of service, and be at least 21 years of age.
These plans cover the majority of employees who have reached
normal retirement age while working for the Company.
Pension and other benefits are generally based on an
employees compensation and years of service and participants
are fully vested upon completion of five years of service.
Retiree health plan costs paid by this plan are provided to
retirees, eligible dependents and beneficiaries while
retiree life insurance covers the retiree only. The total
expense allocated to the Company for these plans was $2,143
and $1,753 for 1997 and 1996, respectively.
The employees of the Company with more than six months of
service participate in a defined benefit plan sponsored by a
Raytheon entity, the E-Systems, Inc. Long-Term Disability
Income Plan. This plan is a contributory welfare plan and
covers active employees who voluntarily elect to contribute
and participate.
Substantially all employees are immediately eligible to
participate in the E-Systems, Inc. Employee Savings Plan,
sponsored by a Raytheon entity. Under the terms of the
Plan, covered employees are allowed to contribute up to 18
<PAGE>
percent of their pay, subject to IRS guidelines. A matching
contribution of 50 percent of the employee's contribution,
up to a maximum of 3 percent of an employee's eligible base
pay is made by the Company. The Company's discretionary
contributions are approximately one and one half percent of
an employee's eligible base pay, subject to IRS guidelines.
Total expense for this plan was $524 and $558 for 1997 and
1996, respectively.
Employee benefit plan charges to the Company are based
primarily on head count and eligible payroll. Management
believes these allocation methods are reasonable.
11. Related Party Transactions:
Included in the accompanying balance sheet are accounts
receivable amounts of $1,013 and $447 as of December 31,
1997 and 1996, respectively, due from other Raytheon
entities.
For the years ended December 31, 1997 and 1996, the Company
transacted sales and purchases with other Raytheon entities
that were related parties. The total amounts of these net
sales and related costs of sales are stated separately in
the accompanying statement of income.
The Company obtained financing for its operations from
Raytheon and at December 31, 1997 and 1996, the Company had
long term funded balances from Raytheon of $55,302 and
$62,987, respectively. Related interest expense of $3,870
and $1,779 for the years ended December 31, 1997 and 1996,
respectively, is recorded on the accompanying statement of
income.
The Company has paid product liability premiums to a
Raytheon entity of $397 for the year ended December 31,
1997, the amount of which is included in the accompanying
income statement. Also included in the income statement are
certain immaterial transactions, including labor for
Raytheon related projects recorded at cost, between the
Company and various Raytheon entities.
On December 17, 1997, Raytheon, HE Holdings, Inc., a wholly-
owned subsidiary of Hughes Electronics Corporation (Hughes),
and General Motors Corporation (GM) who is the parent of
Hughes, entered into various agreements pursuant to which
the defense business of Hughes (the Defense Business) was
spun off to holders of GM's Class H common stock, followed
immediately by the tax-free merger of the Defense Business
with Raytheon. As a result of this transaction, the Defense
Business became a related party to Montek. The amount of
revenue related to the Defense Business recognized during
the period from December 17, 1997 through December 31, 1997,
and therefore included in the accompanying income statement,
is immaterial.
<PAGE>
12. Commitments and Contingencies:
The Company is responsible for post-remediation monitoring
costs related to prior storage tank remediation performed.
The Company has included the present value of future post-
remediation costs as an accrued liability in the
accompanying balance sheet at December 31, 1997 and 1996 in
accordance with application of the American Institute of
Certified Public Accountants Statement of Position 96-1,
"Environmental Remediation Liabilities."
13. Subsequent Events:
Effective January 1, 1998, the Company transferred the
related net assets including an allocation of goodwill of
the Navigation Landing Systems (NLS) product line to another
Raytheon entity. The total assets and parent company
investment transferred were both approximately $11,000. The
net loss for the NLS business at December 31, 1997 was
approximately $2,900.
On October 20, 1998, Raytheon entered into a stock purchase
and sale agreement for the sale of the Company to Moog Inc.
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
RAYTHEON AIRCRAFT MONTEK COMPANY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
BALANCE SHEET
(Unaudited)
(dollars in thousands)
September 30,
1998
_____________
ASSETS
CURRENT ASSETS
Cash $ 364
Accounts receivable, net 8,222
Inventories, net 20,961
Prepaid expenses and other current assets 25
Receivables from affiliates 1,587
Notes Receivable 131
__________
TOTAL CURRENT ASSETS 31,290
PROPERTY, PLANT AND EQUIPMENT, net 25,614
INTANGIBLE ASSETS, net 50,312
LONG-TERM RECEIVABLES 729
__________
TOTAL ASSETS $ 107,945
==========
LIABILITIES AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES
Bank overdraft $ 560
Accounts payable 3,640
Accrued salaries and wages 1,037
Accrued expenses 6,545
__________
TOTAL CURRENT LIABILITIES 11,782
LONG-TERM LIABILITIES 3,541
PARENT COMPANY INVESTMENT 92,622
__________
$ 107,945
==========
See Notes to Financial Statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands)
Nine Months Ended
September 30,
1998 1997
_______ _______
Net sales $63,247 $58,462
Cost of sales 45,538 40,265
_______ _______
Gross profit 17,709 18,197
Research and development 4,816 3,313
Selling, general and administrative 6,441 5,526
_______ _______
Operating Profit 6,452 9,358
Other income (21) (10)
Intercompany interest 1,452 2,922
_______ _______
Income before taxes 5,021 6,446
Provision for income taxes 1,908 2,731
_______ _______
Net income $ 3,113 $ 3,715
======= =======
See Notes to Financial Statements.
<PAGE>
RAYTHEON AIRCRAFT MONTEK COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Nine Months Ended
September 30,
1998 1997
_________ _________
Cash flows from operating activities:
Net income $ 3,113 $ 3,715
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,470 2,853
Deferred income taxes 3,123 3,328
Net provision for long-term contracts 2,606 (1,897)
Changes in assets and liabilities:
Accounts receivable (2,331) (3,149)
Inventory (4,533) 2,870
Prepaid expenses and other current assets (21) 14
Receivables from affiliates (574) 347
Notes receivable 50 0
Deferred receivable (619) 712
Bank overdraft (619) (185)
Accounts payable 1,326 1,286
Accrued expenses 1,977 (2,784)
_________ _________
Net cash provided by operating activities 5,968 7,110
_________ _________
Investing Activities:
Additions to property, plant and equipment (2,438) (883)
_________ _________
Net cash used in investing activities (2,438) (883)
_________ _________
Financing activities:
Transfers to parent (3,180) (5,825)
_________ _________
Net cash used in financing activities (3,180) (5,825)
_________ _________
Increase in cash 350 402
Cash at beginning of period 14 23
_________ _________
Cash at end of period $ 364 $ 425
========= =========
See Notes to Financial Statements.
<PAGE>
Raytheon Aircraft Montek Company
Notes to Financial Statements
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
(dollars in thousands)
1. Background and Basis of Presentation
Raytheon Aircraft Montek Company (the "Company"), a wholly-owned
subsidiary of Raytheon Company (Raytheon), is an international
developer and producer of aircraft control systems in the world's
commercial, military, and business aircraft aerospace markets as
well as several industrial markets.
The accompanying unaudited financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial position of Raytheon Aircraft
Montek Company as of September 30, 1998 and the results of
operations and its cash flows for the nine months ended September
30, 1998 and 1997 as it operated as a subsidiary of Raytheon. The
results of operations for the nine months ended September 30, 1998
and 1997 are not necessarily indicative of the results expected
for the full year.
2. Inventories
Work-in-process inventories primarily relate to long-term
contracts and are stated at actual production cost which includes
direct manufacturing and engineering costs and applicable overhead
reduced by amounts identified with revenues recognized on units
delivered or with progress completed. Such inventories are
further reduced by contract loss reserves which are established
when a current contract estimate indicates a loss. Raw material
inventories are stated at the lower of cost (first-in, first-out)
or market.
Inventories at September 30, 1998 consist of the following:
Work-in-process $ 24,914
Loss contract reserves (1,550)
Progress billings (2,689)
Raw materials 286
________
Total inventories $ 20,961
________
3. Subsequent Event
The sale of all of the outstanding stock of Raytheon Aircraft
Montek Company to Moog Inc. for approximately $160,000 was
completed on November 30, 1998.
4. Non-cash Activities
Effective January 1, 1998, the Company transferred the related net
assets including an allocation of goodwill of the Navigation
Landing Systems product line to another Raytheon entity. The
total assets and parent company investment transferred were both
approximately $11,000.
<PAGE>
Moog Inc.
Pro Forma Condensed Combined Financial Statements
(dollars in thousands)
Introduction
On November 30, 1998, Moog Inc. (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. In connection with the
acquisition of Montek, 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 (Credit Facility)
with a banking group. The 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 Credit Facility is for a five year period with
quarterly principal payments on the term loan of $3,750 commencing in
March 1999. The 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, including maintaining
various financial ratios.
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 from Paul Wurth SARL.
As part of the transaction, the Company increased its ownership to
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. Paul Wurth SARL owns the remaining 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 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 for $3,500 in cash. Hydrolux SARL, Moog-Hydrolux
and Microset Srl are referred to as the Industrial Businesses. The
Industrial Businesses are not considered significant either
individually or in the aggregate. The acquisitions of the Industrial
Businesses were not related to the acquisition of Montek.
The following unaudited pro forma condensed combined financial
statements give effect to the acquisitions of Montek and the
Industrial Businesses by the Company assuming the transactions took
place as of September 28, 1997 for the condensed combined statements
of earnings and as of September 26, 1998 for the condensed combined
balance sheet. The pro forma adjustments are described in the
accompanying notes to the pro forma condensed combined financial
statements and should be read in conjunction with such pro forma
condensed combined financial statements. Such pro forma condensed
combined financial statements should be read in conjunction with the
<PAGE>
Company's consolidated financial statements and notes set forth in the
Report on Form 10-K for the year ended September 26, 1998. The pro
forma condensed combined financial statements have been prepared based
on preliminary purchase price allocations for each acquisition, which
are subject to finalization. The pro forma condensed combined
financial statements are not necessarily indicative of the actual
results that would have occurred had the transactions been consummated
on September 28, 1997 or September 26, 1998 or of the future results
of operations which will be obtained by the Company as a result of the
acquisitions.
<PAGE>
<TABLE>
Moog Inc.
Pro Forma Condensed Combined Statements of Earnings (Unaudited)
Year Ended September 26, 1998
(dollars in thousands except per share data)
<CAPTION>
Industrial
Montek Businesses
Pro Forma Pro Forma Industrial Pro Forma Pro Forma
Moog Inc. Montek Adjustments Combined Businesses Adjustments Combined
_________ ______ ___________ _________ __________ ___________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES $ 536,612 $ 85,232 $ (304) (1) $ 621,540 $ 33,356 $ (4,000) (1) $ 650,896
OTHER INCOME 1,447 25 1,472 0 1,472
__________ __________ _________ __________ __________ __________ ___________
538,059 85,257 (304) 623,012 33,356 (4,000) 652,368
__________ __________ _________ __________ __________ __________ ___________
COST AND EXPENSES
Cost of sales 374,000 58,522 4,408 (2) 433,969 24,907 (4,000) (1) 455,007
(1,432) (3) 131 (2)
(470) (4)
(309) (1)
(750) (5)
Research and development 27,487 6,906 (150) (1) 31,171 1,116 (400) (3) 31,887
(3,072) (6)
Selling, general and
administrative 85,374 8,707 151 (7) 92,338 6,387 98,725
(944) (8)
(700) (9)
(250) (5)
Interest 20,148 2,400 (2,400) (10) 33,529 665 949 (4) 35,143
13,381 (11)
Other Expenses 1,177 1,177 (70) (203) (5) 904
__________ __________ _________ __________ __________ __________ ___________
508,186 76,535 7,463 592,184 33,005 (3,523) 621,666
__________ __________ _________ __________ __________ __________ ___________
EARNINGS BEFORE INCOME
TAXES & EXTRAORDINARY
ITEM 29,873 8,722 (7,767) 30,828 351 (477) 30,702
<PAGE>
INCOME TAXES 10,605 3,314 (2,952) (12) 10,967 316 (325) (6) 10,958
__________ __________ _________ __________ __________ __________ ___________
EARNINGS BEFORE
EXTRAORDINARY
ITEM $ 19,268 $ 5,408 $ (4,815) $ 19,861 $ 35 $ (152) $ 19,744
========== ========== ========= ========== ========= ========== ===========
EARNINGS PER SHARE BEFORE
EXTRAORDINARY ITEM
Basic $ 2.33 $ 2.40 $ 2.38
Fully Diluted $ 2.26 $ 2.33 $ 2.32
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Moog Inc.
Pro Forma Condensed Combined Balance Sheet
September 26, 1998
(dollars in thousands)
<CAPTION>
Industrial
Montek Businesses
Pro Forma Pro Forma Industrial Pro Forma Pro Forma
Moog Inc. Montek Adjustments Combined Businesses Adjustments Combined
_________ ______ ___________ _________ __________ ___________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash
equivalents $ 11,625 $ 364 $ $ 11,989 $ 1,117 $ $ 13,106
Receivables, net 182,228 9,940 9,000 (13) 201,168 10,643 (4,754) (7) 207,057
Inventories 121,784 22,511 (9,000)(13) 135,295 13,612 (1,000) (8) 147,907
Deferred income taxes 22,289 8,000 (14) 30,289 30,289
Prepaid expenses and
other current assets 9,151 25 9,176 104 9,280
__________ __________ _________ __________ __________ ___________ __________
TOTAL CURRENT ASSETS 347,077 32,840 8,000 387,917 25,476 (5,754) 407,639
PROPERTY, PLANT AND
EQUIPMENT, NET 139,444 25,614 11,745 (15) 176,803 3,664 180,467
INTANGIBLES 60,025 50,312 (50,312) (15) 188,955 3,941 (9) 192,896
900 (15)
128,030 (16)
OTHER ASSETS 12,779 729 3,643 (17) 17,151 3,919 (333) (10) 20,737
__________ __________ _________ __________ __________ ___________ __________
TOTAL ASSETS $ 559,325 $ 109,495 $ 102,006 $ 770,826 $ 33,059 $ (2,146) $ 801,739
========== ========== ========= ========== ========== =========== ==========
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Moog Inc.
Pro Forma Condensed Combined Balance Sheet (Unaudited)
September 26, 1998
(dollars in thousands)
<CAPTION>
Industrial
Montek Businesses
Pro Forma Pro Forma Industrial Pro Forma Pro Forma
Moog Inc. Montek Adjustments Combined Businesses Adjustments Combined
_________ ______ ___________ _________ __________ ___________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 410 $ - $ $ 410 $ 5,756 $ $ 6,166
Current installments
of long-term debt 5,505 - 15,000 (17) 20,505 578 21,083
Accounts payable 25,648 4,200 29,848 7,547 (4,754) (7) 32,641
Accrued salaries, wages
and commissions 36,338 1,037 1,400 (15) 38,775 170 38,945
Contract loss reserves 10,448 1,550 17,950 (15) 29,948 29,948
Accrued interest 8,050 8,050 3 8,053
Accrued income taxes 6,838 6,838 6,838
Other accrued
liabilities 17,746 6,545 3,635 (15) 27,926 817 167 (8) 28,910
Customer advances 9,904 - 9,904 9,904
__________ ________ ________ ___________ __________ _________ ____________
TOTAL CURRENT
LIABILITIES 120,887 13,332 37,985 172,204 14,871 (4,587) 182,488
LONG-TERM DEBT,
excluding current
installments
Senior debt 79,699 148,643 (17) 228,342 4,362 12,790 (11) 245,494
Senior subordinated
notes 120,000 120,000 120,000
OTHER LONG-TERM
LIABILITIES 47,731 3,541 8,000 (14) 59,272 3,477 (12) 62,749
__________ ________ ________ ___________ __________ _________ ____________
<PAGE>
TOTAL LIABILITIES 368,317 16,873 194,628 579,818 19,233 11,680 610,731
__________ ________ ________ ___________ __________ _________ ____________
SHAREHOLDERS' EQUITY 191,008 92,622 (92,622) (15) 191,008 13,826 (13,826) (8) 191,008
__________ ________ ________ ___________ __________ _________ ____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 559,325 $109,495 $102,006 $ 770,826 $ 33,059 $ (2,146) $ 801,739
========== ======== ======== =========== ========== ========= ============
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE>
Moog Inc.
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
(dollars in thousands)
Montek Pro Forma Adjustments
The following pro forma adjustments have been made to reflect the
acquisition of Montek as of September 28, 1997 for the Pro Forma Condensed
Combined Statement of Earnings and as of September 26, 1998 for the Pro
Forma Condensed Combined Balance Sheet.
(1) To eliminate the results of a product line Of Montek that was not
acquired as part of the transaction.
(2) To reflect the increase in depreciation and amortization expense
due to (a) the amortization of goodwill on a straight-line basis
over 40 years, (b) the amortization of other intangibles and (c)
the increase in depreciation resulting from step-up of property,
plant and equipment.
(3) To remove goodwill expense related to a previous acquisition of
Montek.
(4) To adjust expenses related to employee benefit plans.
(5) To record ongoing cost savings associated with initial work force
reductions at Montek that occurred shortly after the acquisition.
(6) To remove expenses related to a development contract that was
entered into with Raytheon Company concurrent with the signing of
the stock purchase agreement which would have been charged against
a contract loss reserve established in the purchase price
allocation.
(7) To remove amortization of existing debt issuance costs and record
amortization of debt issuance costs associated with the Credit
Facility and acquisition costs.
(8) To remove expense for retention bonuses that would have been
accrued by Montek prior to the acquisition.
(9) Represents a reduction to the amount allocated to Montek by
Raytheon Company for corporate administrative expenses.
(10) Represents the reversal of interest expense recorded by Montek
related to intercompany indebtedness due to Raytheon Company which
was not assumed by the Company.
(11) To record (a) additional interest expense on existing indebtedness
at the Credit Facility's interest rate of LIBOR plus 200 basis
points, (b) interest expense on acquisition indebtedness of
$160,000, debt issuance costs of $3,143 and acquisition costs of
$500, and (c) incremental fees related to the unused portion of
the U.S. revolving credit facility. The interest rate assumed was
<PAGE>
7.66%, which is the average rate that would have been in effect
during the period. A change of 1/8 percent in the interest rate
would result in a change in interest expense and earnings before
extraordinary item of $313 and $194 before and after taxes,
respectively.
(12) Represents the tax effects of the above adjustments at the
marginal tax rate.
(13) Represents the reclassification necessary to conform Montek's
units of delivery accounting for long-term contracts to the cost-
to-cost percentage of completion method of accounting followed by
the Company. The Company does not believe the impact of this
change on earnings would be material.
(14) To set-up a deferred tax asset and liability associated with the
initial difference in value of Montek's net assets between its
financial reporting and tax basis.
(15) To reflect preliminary adjustments to fair market value. (see note
16).
(16) To reflect the excess of acquisition cost over the estimated fair
value of net assets acquired (i.e., goodwill) based on a
preliminary purchase price allocation, which is subject to
finalization, as follows:
Purchase price $160,000
Allocated to:
Historical value of Montek's net assets $42,310
Adjustments to fair value:
Property, plant and equipment 11,745
Other intangibles 900
Employee benefit costs (1,400)
Contract loss reserves (17,950)
Severance and other liabilities (3,635)
Total allocation 31,970
________
Goodwill $128,030
========
Contract loss reserves relate primarily to a development contract
that was entered into with Raytheon Company concurrent with the
signing of the stock purchase agreement.
Severance costs are associated with expected involuntarily
terminated employees at Montek.
(17) To record indebtedness incurred to finance the Montek acquisition
($160,000), acquisition costs ($500) and deferred debt issuance
costs ($3,143).
<PAGE>
Moog Inc.
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
(dollars in thousands)
Industrial Businesses Pro Forma Adjustments
The following pro forma adjustments have been made to reflect the
acquisitions of the Industrial Businesses as of September 28, 1997 for the
Pro Forma Condensed Combined Statement of Earnings and as of September 26,
1998 for the Pro Forma Condensed Combined Balance Sheet.
(1) To eliminate intercompany sales between the Company and the
Industrial Businesses.
(2) To reflect the amortization of goodwill on a straight-line basis
over 30 years.
(3) To record ongoing cost savings associated with the Company's
existing research and development activities related to certain
electronic controls which were curtailed shortly after the
acquisitions of the Industrial Businesses.
(4) To record additional interest expense on acquisition
indebtedness. The interest rate assumed was 7.66% which is the
average rate that would have been in effect during the period. A
change of 1/8 percent in the interest rate would not be material.
(5) To record the minority shareholders' interest in the Industrial
Businesses.
(6) Represents the tax effects of the above adjustments at the
marginal tax rate.
(7) To eliminate intercompany accounts between the Company and the
Industrial Businesses.
(8) To reflect preliminary adjustments to fair market value.
(9) To reflect the excess of acquisition cost over the estimated fair
value of net assets acquired (i.e., goodwill) based on a
preliminary purchase price allocation, which is subject to
finalization.
(10) To remove the Company's 50% investment in Moog-Hydrolux that was
previously accounted for on the equity method prior to the
acquisition.
(11) To record indebtedness incurred to finance the acquisitions of
the Industrial Businesses.
(12) To record the minority shareholders' interest in the Industrial
Businesses.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
MOOG INC.
MOOG INC.
__________________________________
(Registrant)
Date: February 10, 1999 By:/s/Robert R. Banta
Robert R. Banta
Executive Vice President
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Moog Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos. 33-62968, 33-36721, 33-33958 and 33-57131) on Form S-8 of Moog Inc.
of our report dated November 6, 1998 on our audits of the balance sheets
and related statements of income, parent company investment and cash flows
of Raytheon Aircraft Montek Company as of December 31, 1997 and 1996, and
for the years ended December 31, 1997 and 1996, which report is included in
this Current Report on Form 8-K/A of Moog Inc.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 8, 1999
<PAGE>
