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 25, 1999
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 _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not 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. _________
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 8, 1999 was approximately $177 million.
The number of shares of Common Stock outstanding as of the close
of business on December 8, 1999 was:
Class A: 7,335,602; Class B: 1,580,813.
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 25, 1999 (the "1999
Annual Report")
(2) Specific sections of the January 2000 Proxy Statement
to Shareholders (the "2000 Proxy")
<PAGE>
_________________________________________________________________
MOOG INC.
FORM 10-K INDEX
_________________________________________________________________
PART I PAGE
Item 1 - Business 22-23
Item 2 - Properties 23
Item 3 - Legal Proceedings 23
Item 4 - Submission of Matters to a 23
Vote of Security Holders
PART II
Item 5 - Market for the Registrant's 23
Common Equity and Related
Stockholder Matters
Item 6 - Selected Financial Data 23-24
Item 7 - Management's Discussion and 25
Analysis of Financial Condition
and Results of Operations
Item 7A- Quantitative and Qualitative 30
Disclosures About Market Risk
Item 8 - Financial Statements and 31
Supplementary Data
Item 9 - Changes in and Disagreements with 44
Accountants on Accounting and
Financial Disclosure
PART III
Item 10- Directors and Executive Officers 44-45
of the Registrant
Item 11 - Executive Compensation 46
Item 12 - Security Ownership 46
of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and 46
Related Transactions
PART IV
Item 14 - Exhibits, Financial Statement 46-48
Schedules, and Reports
on Form 8-K
<PAGE>
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
the industries in which the Company operates, successful
integration of acquired businesses, 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 1999 Annual Report, specific pages of which are referred to
in parentheses.
DESCRIPTION OF THE COMPANY'S BUSINESS. (See pages 2 through 20.)
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 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 three operating groups.
However, the Company is the only precision motion control
specialist which competes globally in all markets and all drive
technologies.
Many of its competitors have greater financial and other
resources than the Company. In Aircraft Controls, the Company's
principal competitors include Parker Hannifin Corporation,
Curtiss-Wright Corp., HR Textron, a subsidiary of Textron, Inc.
("HR Textron") and Teijin Seiki Limited. In Satellite and Launch
Vehicle Controls, the Company's principal competitors are
Honeywell and HR Textron. In Industrial Controls, competitors
include Robert Bosch AG, Mannesmann Rexroth AG, Barber-Colman
Company, Siemens AG and Indramat GmbH.
Competition in each operating group is based upon design
capability, product performance and life, service, price and
delivery time. In certain cases 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 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, on
page 26.
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 35.
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 24.
EMPLOYEES. The information required herein is incorporated
by reference to Item 6, Selected Financial Data, on page 24.
SEGMENT FINANCIAL INFORMATION. The information required
herein is incorporated by reference to Note 10 of Item 8 on pages
42 and 43.
CUSTOMERS. The information required herein is incorporated
by reference to pages 2 through 20, 25 and 42. In aggregate, the
Company markets its products to a wide variety of customers. The
Boeing Company represented approximately 20% of consolidated
sales in 1999, including sales to the Boeing Commercial Airplane
Group representing 12% of fiscal 1999 sales. Sales to U.S.
Government prime- or sub-contractors, including military sales to
Boeing, represented approximately 30% of sales. Sales to these
customers are made principally from Aircraft Controls, and
Satellite and Launch Vehicle Controls. The concentration of
customers varies between operating groups. In Aircraft Controls,
as well as Satellite and Launch Vehicle Controls, a few customers
provide the majority of revenues, while in Industrial Controls
revenues are spread over a more diverse customer base.
INTERNATIONAL OPERATIONS. Operations outside the United
States are conducted through various foreign companies in which
the Company's ownership interest ranges from majority to complete
control. The Company's international operations are located
predominantly in Europe and the Asian-Pacific region. (See pages
2 through 20, 43 and 47.) 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 page 43.
ITEM 2. PROPERTIES.
The Company occupies approximately 2.0 million square feet
of space (1.3 million owned, 602,000 through operating leases and
54,000 through a capital lease) in the United States and
countries throughout the world, distributed as follows:
Square Feet
___________
Aircraft Controls 965,000
Satellite and Launch Vehicle Controls 291,000
Industrial Controls 622,000
Corporate Headquarters 146,000
_________
Total 2,024,000
Aircraft Controls' principal manufacturing and assembly
facilities are located in East Aurora, New York, Torrance,
California, Salt Lake City, Utah and the Philippines.
Approximately 285,000 square feet were obtained in connection
with the acquisition of Raytheon Aircraft Montek Company in
November 1998.
Satellite and Launch Vehicle Controls' primary manufacturing
and assembly facility is located in East Aurora, New York.
Industrial Controls' principal manufacturing facilities are
located in East Aurora, New York, Germany, Luxembourg and Japan.
The Company's headquarters are located in East Aurora, New
York.
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. Operating leases expire at varying times from December
1999 through November 2013. 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 or 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 37 of
Item 8. Other information required herein is incorporated by
reference to pages 24, 48 and 50.
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 1995 - 1999. For a
more detailed discussion of 1997 through 1999 refer to
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 25 through 30 and Notes to
Consolidated Financial Statements on pages 35 through 43.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
(dollars in thousands except per share data)
<CAPTION>
FISCAL YEARS 1999(1) 1998(2) 1997(3) 1996 1995
_______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
RESULTS FROM OPERATIONS
Net sales $ 630,034 $ 536,612 $ 455,929 $ 407,237 $ 374,284
Earnings before
extraordinary loss $ 24,431 $ 19,268 $ 13,606 $ 11,219 $ 7,761
Net earnings $ 24,431 $ 19,268 $ 13,606 $ 10,709 $ 7,761
Per share
Earnings before
extraordinary loss
Basic $ 2.74 $ 2.33 $ 1.95 $ 1.51 $ 1.00
Diluted $ 2.70 $ 2.26 $ 1.88 $ 1.47 $ .99
Net earnings
Basic $ 2.74 $ 2.33 $ 1.95 $ 1.44 $ 1.00
Diluted $ 2.70 $ 2.26 $ 1.88 $ 1.40 $ .99
________________________________________________________________________________________________
FINANCIAL POSITION
Total assets $ 798,476 $ 559,325 $ 490,563 $ 449,558 $ 424,957
Working capital 224,967 226,190 187,521 187,971 166,985
Indebtedness - senior 256,110 85,614 118,245 91,262 170,361
- senior subordinated 120,000 120,000 120,000 120,000 19,400
Shareholders' equity 211,770 191,008 114,191 104,743 108,636
Shareholders' equity per
common share outstanding 23.77 21.38 16.18 15.01 14.06
________________________________________________________________________________________________
SUPPLEMENTAL FINANCIAL DATA
Capital expenditures $ 26,439 $ 22,688 $ 13,713 $ 10,885 $ 10,232
Depreciation and
amortization 30,602 22,665 21,267 19,632 19,675
R&D - Company funded 33,306 27,487 17,798 17,303 15,783
- customer funded 14,367 15,440 14,071 24,411 21,603
Backlog 336,857 314,253 280,364 243,310 237,941
________________________________________________________________________________________________
ADDITIONAL DATA
Number of employees 4,699 4,073 3,657 3,229 3,003
Number of shareholders
- Class A 1,520 1,610 1,722 1,904 2,114
- Class B 713 751 810 898 966
________________________________________________________________________________________________
RATIOS
Net return on sales 3.9% 3.6% 3.0% 2.6% 2.1%
Return on shareholders'
equity 12.1% 12.6% 12.4% 10.0% 7.4%
Current ratio 2.24 2.87 2.75 2.89 2.76
Debt to shareholders'
equity 1.78 1.08 2.09 2.02 1.75
Long-term senior debt
to capitalization(4) 40.9% 20.4% 30.3% 25.6% 55.5%
Long-term debt to
capitalization(4) 62.3% 51.1% 66.0% 65.3% 61.8%
__________________________________________________________________________________________
(1) Includes the effects of the fiscal 1999 acquisitions of Montek and the Acquired Industrial
Businesses and the related financing. See Notes 2 and 6 to the Consolidated Financial
Statements.
(2) Includes the effects of the Class A common stock offering completed in February 1998. See Note
9 to the Consolidated Financial Statements.
(3) Includes the effects of the October 1996 acquisition of the industrial hydraulic servocontrols
business of International Motion Control Inc.
(4) 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
Moog Inc. is a leading worldwide designer and manufacturer
of a broad range of high performance precision motion and fluid
control products and systems for aerospace and industrial
markets. The Company is organized into three operating groups.
Aircraft Controls designs and produces technologically
advanced flight and engine controls for manufacturers of
commercial and military aircraft. Moog has supplied high
performance servoactuators to move flight control surfaces on
almost every U.S. military aircraft since the 1950's. The Company
recently began initial production on the F/A-18E/F Super Hornet,
the V-22 Osprey and Japanese F-2, as well as delivery of flight
and engine control actuation for the Joint Strike Fighter concept
demonstrator aircraft. The Company supplies controls to Boeing
for its 7-series commercial airplanes as well as to Airbus,
Raytheon, Lockheed Martin and Bombardier, among others.
Satellite and Launch Vehicle Controls designs and
manufactures motion, fluid and propellant controls and systems to
control the flight, positioning or thrust of satellites, solar
panels and antennae, launch vehicles and tactical and strategic
missiles. Customers for the Company's products include Alliant,
Lockheed Martin, DaimlerChrysler, Raytheon and Boeing.
Significant programs include the Titan IV and Delta family of
launch vehicles, National Missile Defense and numerous satellite
programs.
Industrial Controls manufactures hydraulic and electric
controls used in a wide variety of industrial applications
requiring the precise control of position, velocity and force.
Moog believes it is the world's market leader in industrial
servovalves. Applications for hydraulic controls include plastic
injection and blow molding machines, steam and gas turbines,
steel rolling mills and fatigue testing machines. In the field of
power generation, Moog is the leading servovalve supplier to GE
and its licensees and to Siemens Westinghouse. Applications for
electric controls range from the motion simulators on MCA-
Universal's Spiderman theme park attraction and electric drive
systems for gun and turret positioning and ammunition-loading on
military ground vehicles to controls for plastic injection and
blow molding machines.
On October 30, 1998, the Company acquired a 75% shareholding
of Hydrolux SARL, a Luxembourg manufacturer and designer 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. After
the transaction, Paul Wurth SARL owns the remaining 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, supplies flight controls to the Boeing Commercial
Airplane Group and manufacturers of regional and business jets.
Montek also produces steering controls for tactical missiles and
servovalves for both industrial and aerospace applications.
On December 3, 1998, the Company acquired a 66-2/3%
shareholding in Microset Srl, an Italian manufacturer and
designer of electronic controls for industrial machinery for $3.5
million in cash.
Hydrolux SARL, Moog-Hydrolux and Microset Srl are referred
to as the Acquired Industrial Businesses.
Effective with the first quarter of 1999, the Company
adopted 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 by management for evaluating segment
performance and deciding how to allocate resources to segments.
The Company's reportable segments under SFAS No. 131 are Aircraft
Controls, Satellite and Launch Vehicle Controls and Industrial
Controls. The determination of the Company's reportable segments
was based on an analysis of the organizational structure of the
Company and its products, as well as markets served. Prior
periods' information has been presented to conform to the new
presentation of segment information.
1999 COMPARED WITH 1998
CONSOLIDATED. Sales for 1999 were $630 million, up 17% from
$537 million in 1998. The current year acquisition of Montek
accounted for the majority of the increase. In the ten months
since the acquisition, Montek had $78 million in sales, the
majority of which were controls for aircraft. Sales in 1999 also
included incremental sales of the Acquired Industrial Businesses
totaling $24 million. Excluding the impact of acquisitions, sales
decreased by $13 million due to the winding down of the B-2
bomber and F-15 fighter aircraft programs along with declines in
deliveries to Boeing, due to their reduced production rates.
Cost of sales in 1999 was 68.6% of sales compared with 69.7%
of sales in 1998. The improvement is due to a favorable product
mix of sales in 1999 resulting from a greater share of aircraft
flight control aftermarket sales along with a greater proportion
of work on higher margin launch vehicle and tactical missile
programs. This improvement was offset by higher cost of sales as
a percentage of sales (1.4 percentage points) associated with the
Acquired Industrial Businesses and the satellite controls
business.
Research and development expenses increased by $6 million in
1999 to $33 million, or 5.3% of sales. Approximately half of the
dollar increase was associated with the development of next
generation flight controls. The current year acquisitions and
efforts in Industrial Controls related to developing the next
generation direct drive valve and turbine products accounted
equally for the remainder of the increase.
Selling, general and administrative (SG&A) expenses were
$100 million in 1999 compared to $85 million in 1998 while as a
percentage of sales, SG&A remained at 15.9% of net sales. The
1999 acquisitions accounted for over 70% of the absolute dollar
increase.
Interest expense increased $8 million in 1999 to $28 million
due to significantly higher average outstanding borrowings
resulting from the indebtedness incurred to finance the first
quarter acquisitions.
The Company's effective tax rate for 1999 was 33.5% compared
to 35.5% a year ago. The current year tax rate reflects higher
foreign tax credit benefits resulting from distributions from the
Company's German subsidiary.
For 1999, net earnings increased 27% to $24.4 million
compared with $19.3 million in 1998. Basic EPS increased to $2.74
in 1999 compared to $2.33 in 1998, while diluted EPS increased to
$2.70 in 1999 compared to $2.26 last year.
<TABLE>
<CAPTION>
___________________________________________________________________________
MOOG INC.
Results of Operations
___________________________________________________________________________
Fiscal Years Ended
___________________________________________________________________________
September 25, September 26, September 27,
(dollars in millions) 1999 1998 1997
___________________________________________________________________________
<S> <C> <C> <C>
SALES
Aircraft Controls $ 302 $ 254 $ 226
Satellite and Launch
Vehicle Controls 110 94 66
Industrial Controls 218 189 164
_________ _________ _________
Total sales $ 630 $ 537 $ 456
========= ========= =========
OPERATING PROFIT AND MARGINS
Aircraft Controls $ 37 $ 29 $ 31
12.2% 11.4% 14.0%
Satellites and Launch
Vehicle Controls 13 10 9
11.7% 10.4% 13.8%
Industrial Controls 23 20 11
10.8% 10.8% 6.5%
_________ _________ _________
Total operating
profit $ 73 $ 59 $ 51
========= ========= =========
BACKLOG
Aircraft Controls $ 192 $ 179 $ 174
Satellite and Launch
Vehicle Controls 85 77 55
Industrial Controls 60 58 51
_________ _________ _________
Total backlog $ 337 $ 314 $ 280
========= ========= =========
</TABLE>
AIRCRAFT CONTROLS. Sales in Aircraft Controls increased 19%
to $302 million in 1999 as compared to $254 million in 1998. The
acquisition of Montek provided significant growth to Aircraft
Controls sales and contributed to operating margin improvement
during 1999. For the ten months since the acquisition, Montek
contributed $63 million to Aircraft Controls sales. Approximately
80% of Montek's aircraft controls' book of business relates to
controls for commercial airplane applications, primarily the
Boeing 7-series airplanes. Also contributing to the overall sales
improvement was an increase of $20 million in aftermarket sales
from the Company's pre-acquisition businesses, primarily related
to controls for military applications. These increases were
offset by anticipated declines in sales on the B-2 bomber and F-
15 fighter aircraft programs, as they near completion, and pre-
acquisition Boeing OEM business. The Company recently began
initial production on the F/A-18E/F Super Hornet and the V-22
Osprey, which over the long-term, will help offset the completion
of the F-15 and B-2 programs. Although the Company's total Boeing
OEM business increased in 1999 due to the Montek acquisition,
reduced production rates of the 747 and 777 slowed deliveries of
pre-acquisition products to Boeing.
Operating margins for Aircraft Controls were 12.2% in 1999
compared to 11.4% in 1998. The main reason for the margin
improvement is the acquisition of Montek, which has higher
margins than the Company's pre-acquisition operations. The higher
margins reflect Montek's book of business containing a greater
percentage of aftermarket sales, which typically carry higher
margins than sales to OEMs. For the ten months since its
acquisition, 38% of Montek's sales related to spares, parts and
repair services. Including the acquisition, Aircraft Controls
aftermarket sales represented 33% of total sales in 1999 compared
to 21% in 1998. This improvement was tempered by $3 million of
increased research and development costs associated with the
development of next generation flight controls.
Backlog for Aircraft Controls was $192 million at September
25, 1999 compared to $179 million at September 26, 1998. The
increase is due to the acquisition of Montek, offset by lower
pre-acquisition business resulting from production rate declines
at Boeing and certain military programs winding down. Backlog
consists of that portion of open orders for which sales are
expected to be recognized over the next twelve months.
SATELLITE AND LAUNCH VEHICLE CONTROLS. Sales in Satellite
and Launch Vehicle Controls were $110 million in 1999, up 18%
from $94 million in 1998. Sales of controls for tactical missiles
increased $12 million in the current year with 88% of that
increase resulting from the acquisition of Montek for controls
on the Hellfire, TOW and Popeye tactical missile programs. On the
strength of the Titan IV, Delta family of launch vehicles and the
National Missile Defense system, sales of launch vehicle steering
controls increased $11 million. These increases were offset by
lower sales of satellite controls due to a general softness in
the satellite market.
Operating margins for Satellite and Launch Vehicle Controls
were 11.7% in 1999 compared to 10.4% in 1998. Operating margins
for launch vehicle and tactical missile products improved 50% as
the mix in 1999 favored more mature production programs and
significant expenditures were made in 1998 on launch vehicle
development programs. These favorable developments were mostly
offset by lower sales and margins that deteriorated in satellite
controls, which represents 20% of the group's sales.
Backlog for Satellite and Launch Vehicle Controls was $85
million at September 25, 1999 compared to $77 million at
September 26, 1998. The increase relates to controls for tactical
missiles resulting from the acquisition of Montek.
INDUSTRIAL CONTROLS. Sales in Industrial Controls increased
15% to $218 million in 1999 from $189 million in 1998. The
Acquired Industrial Businesses accounted for $24 million with
Hydrolux Sarl and Moog-Hydrolux adding $21 million in sales of
hydraulic controls and Microset contributing $3 million in sales
of electric controls. Montek, which produces industrial
servovalves, accounted for the remainder of the Industrial
Controls' sales increase.
Operating margins for Industrial Controls were 10.8% in 1999
and 1998. An increase in margins of 2.5 percentage points in the
Company's pre-acquisition businesses is attributable to favorable
product mix resulting from higher sales of electric controls for
military ground vehicles and industrial hydraulic controls in
Europe. This increase was offset by losses incurred by the
Acquired Industrial Businesses reflecting lower than anticipated
sales due to a downturn in the injection molding machinery
market.
Backlog for Industrial Controls was $60 million at September
25, 1999 compared to $58 million at September 26, 1998. Decreases
in orders for controls for military ground vehicles and
entertainment simulators offset backlog associated with the
Acquired Industrial Businesses and Montek.
1998 COMPARED WITH 1997
CONSOLIDATED. Net sales for 1998 increased 18% to $537
million as compared to $456 million in 1997. Sales in Aircraft
Controls increased $28 million reflecting higher sales of
controls for the Boeing 7-series airplanes, regional and business
jets, the F-15 fighter aircraft and military programs entering
initial production. Within Satellite and Launch Vehicle Controls,
the February 1998 Schaeffer acquisition, which contributed
approximately $14 million in sales, and increased launch vehicle
activity resulted in a $28 million increase in sales. Sales in
Industrial Controls increased $25 million led by higher volumes
of controls for turbines, electric controls for military ground
vehicles and entertainment simulators.
Cost of sales in 1998 was 69.7% of sales compared with 69.2%
in 1997. Approximately $2 million was incurred in Satellite and
Launch Vehicle Controls associated with certain manufacturing
issues including a defect on a propulsion system isolation valve
and unfavorable cost experience on a fixed-price development
contract for the Atlas Centaur launch vehicle program. In
addition, margins declined due to an unfavorable product mix
towards lower margin development and production programs related
to commercial airplane applications.
Research and development expenditures increased by $10
million in 1998 to $28 million, or 5.1% of net sales, primarily
due to $7 million of additional effort related to the development
of next generation flight controls within Aircraft Controls and,
to a lesser extent, activity in Satellite and Launch Vehicle
Controls related to various satellite constellations.
Selling, general and administrative expenses were $85
million, or 15.9% of net sales, in 1998, compared to $82 million,
or 17.9%, 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 related bid and proposal work
in 1997 within Aircraft Controls, which was recorded in SG&A.
Interest expense decreased by $3 million to $20 million in
1998, as compared to 1997. The decline is due to lower average
borrowings outstanding resulting from the use of proceeds from
the equity offering completed in February 1998.
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 being generated in countries
with lower tax rates.
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 in 1997.
AIRCRAFT CONTROLS. Sales for Aircraft Controls increased
12% to $254 million in 1998 compared to $226 million in 1997.
Initial production of controls for the V-22 Osprey and F/A-18E/F
military programs added $14 million to 1998 sales while increased
production rates on the Boeing 7-series airplanes improved 1998
sales by $9 million. The majority of the remaining increase was
due to increased volume for secondary and leading edge actuation
on the F-2 and F-15 fighter aircraft.
Operating margins for Aircraft Controls in 1998 were 11.4%
compared to 14.0% in 1997. The decrease is the result of $7
million in increased research and development expenses incurred
in 1998 related to the development of next generation flight
controls.
Backlog for Aircraft Controls at September 26, 1998 was $179
million compared to $174 million at September 27, 1997.
SATELLITE AND LAUNCH VEHICLE CONTROLS. Sales for Satellite
and Launch Vehicle Controls increased 42% to $94 million in 1998
from $66 million in 1997. The increase was due to increased
launch vehicle activity, which added $15 million in sales, the
acquisition of Schaeffer, which contributed $14 million in
incremental revenues, and $9 million of 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 and the slowdown in the Asian-Pacific economies. Launch
vehicle activity during 1998 was strong particularly on the Atlas
Centaur, Kistler commercial launch vehicle and Titan IV programs.
Operating margins for Satellite and Launch Vehicle Controls
were 10.4% in 1998 compared to 13.8% in 1997. Approximately half
of the decrease was associated with certain manufacturing issues
including a defect on a propulsion system isolation valve and
unfavorable cost experience on a fixed-price development contract
for the Atlas Centaur launch vehicle. The remaining decrease is
primarily due to increased research and development activities
related to various satellite constellations.
Backlog for Satellite and Launch Vehicle Controls was $77
million at September 26, 1998 compared with $55 million at
September 27, 1997. The increase is due primarily to launch
vehicles, in particular the Titan IV program, and the Schaeffer
acquisition, which added approximately $10 million.
Industrial Controls. Sales for Industrial Controls increased 15%
to $189 million in 1998 compared to $164 million in 1997 despite
lower average currency values, particularly in Germany and the
Asian-Pacific. Sales in 1998, at constant dollars, increased 20%,
or $33 million. In the United States, sales of controls for
hydraulic applications increased $10 million on growth in
controls for turbines, flight training simulators and material
testing equipment. Higher volumes for entertainment simulators
and controls for carpet tufting equipment and military ground
vehicles helped increase sales of controls for electric
applications by $7 million. Internationally, sales growth of $16
million was primarily in Germany. Approximately $11 million of
the increase was due to higher volume in controls for hydraulic
applications, principally turbine and plastics controls, and $5
million related to increased volume of electric controls for
military ground vehicles.
Operating margins for Industrial Controls were 10.8% in 1998
compared to 6.5% in 1997. The increase was due primarily to
higher sales allowing for better absorption of fixed costs. In
addition, approximately $2 million of write-offs and transition
costs were incurred in 1997 to allow the Company to compete more
effectively in markets for electric controls.
Backlog for Industrial Controls at September 26, 1998 was
$58 million compared to $51 million at September 27, 1997. The
increase from a year ago is attributable to growth in orders for
electric controls for military ground vehicles and controls for
hydraulic applications in Europe.
FINANCIAL CONDITION AND LIQUIDITY
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 million Corporate Revolving
and Term Loan Agreement (Credit Facility) with a banking group.
The Credit Facility provides a $265 million 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
Credit Facility is for a five year period with quarterly
principal payments on the term loan of $3.75 million, which
commenced 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. The
Credit Facility was used primarily to acquire Montek and to
refinance approximately $72 million of existing revolving credit
facilities with the remaining balance available for future
working capital requirements.
Cash on hand at September 25, 1999 was $10 million. Cash
provided by operating activities was $43 million in 1999 compared
to $23 million a year ago. The increase in cash from operations
is due primarily to improved earnings as adjusted for non-cash
charges and lower growth in working capital, specifically with
respect to receivables and inventories. The Company expects cash
from operations in 2000 to be comparable with 1999.
Long-term debt increased $150 million to $349 million at
September 25, 1999. The percentage of long-term debt to
capitalization increased to 62.3% from 51.1% at September 26,
1998. These increases are a direct result of financing the first
quarter acquisitions. At September 25, 1999, the Company had $106
million of unused borrowing capacity under short and long-term
lines of credit, including $92 million from the Credit Facility.
Net property, plant and equipment increased $50 million to
$189 million at September 25, 1999 from $13 million at September
26, 1998. The current year acquisitions added approximately $43
million to net property, plant and equipment. Capital
expenditures in 1999 were $26 million compared with depreciation
and amortization of $31 million. Capital expenditures in 1998
were $23 million compared to depreciation and amortization of $23
million. Capital expenditures in 2000 are expected to be
approximately $24 million.
The Company believes its cash on hand, cash flows from
operations and available borrowings under short and long-term
lines of credit, will continue to be sufficient to meet its
operating needs.
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 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 main business
system, which encompasses manufacturing, engineering and
accounting and is used by approximately 80% of the Company, has
been reviewed and tested and is considered to be Year 2000
compliant. However certain auxiliary business applications
required changes to ensure Year 2000 compliance, the most
significant of which involved the Company's Human Resource
Information System which was put in place and was operational on
October 1, 1999 and cost approximately $1 million. The costs
associated with remediating the remaining auxiliary business
applications were not material.
The Company also evaluated and tested 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
were made, many were previously scheduled and the timing was not
materially impacted by the Year 2000 issue. The Year 2000 costs
associated with these systems were not 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. The
Company also sent letters to its critical vendors who provide
materials, supplies and components inquiring about their Year
2000 efforts.
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
required upgrading or replacement, which has been completed. The
cost of upgrading or replacement was not material.
The Company has completed remedial activity as it relates to
the systems deemed critical. Activities related to less critical
operations, which will continue until the end of 1999, include
the installation of compliant releases of desktop, voice mail,
data entry software and monitoring the progress of any critical
suppliers who are still working to complete their Year 2000
plans. The cost associated with these activities is not expected
to be material.
The Company has contingency plans that address specific
critical operations that are not expected, or likely, to
experience problems. The contingency plans include the use of
backup systems as well as manual processes to ensure continuity
of business operations.
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 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 and others. The Company believes the
greatest potential risk from the Year 2000 issue relates to
suppliers or customers whose systems may not be Year 2000
compliant and who may not be able to accept shipment of the
Company's products until they correct their Year 2000 problems.
OUTLOOK
Sales in 2000 are expected to increase modestly in each of
the Company's three operating groups. Aircraft Controls should
continue to see increases in production rates on the F/A-18E/F
while a full year of Montek and new commercial aircraft business
awarded by Boeing will offset the decline in the commercial
aircraft production rate at Boeing that began in 1999. Satellite
and Launch Vehicle Controls sales are expected to grow on
increased revenues from the National Missile Defense program and
involvement on the Space Station. Sales of Industrial Controls
are expected to grow on the continuing strength of turbine
controls and metal-forming and a recovery in sales of servovalves
to the plastics industry. In addition, Industrial Controls should
benefit from new product introductions and partnering
arrangements with some well-established suppliers of motion
control devices.
Operating margins are expected to improve as the Company
continues the process of improving the cost structures related to
the businesses acquired in 1999 as well as satellite control
products. The Company is also focusing on its other operations to
ensure their cost structures are appropriate in relation to
expected sales while allowing for continued margin improvement.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company, in the normal course of business, has exposures
to interest rate risks from its long-term debt obligations and
foreign exchange rate risk with respect to its foreign operations
and from 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.
In connection with the Montek acquisition and refinancing of
the Company's U.S. credit facilities, the Company's borrowings
under variable interest rate facilities have increased by $164
million to $238 million at September 25, 1999. The Credit
Facility under which the borrowings are outstanding has an
interest rate of LIBOR plus 200 basis points. In order to provide
for interest rate protection, the Company has entered into
interest rate swap agreements for $80 million, effectively
converting this amount into fixed rate debt at 7.05%. If LIBOR
were to change by 10%, the impact on consolidated interest
expense from the Company's floating rate debt would be
approximately $1 million annually.
The majority of the Company's sales, expenses and cash flows
are transacted in U.S. dollars. The Company does have some market
risk exposure with respect to changes in foreign currency
exchange rates primarily as it relates to the value of the U.S.
dollar versus the British Pound, the Japanese Yen and the Euro.
If foreign exchange rates were to collectively weaken against the
U.S. dollar by 10%, net earnings would be reduced by
approximately $1 million related to currency exchange rate
translation exposures and $.5 million related to pressures on
operating margins for products sourced in non-U.S. countries.
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 periodically uses forward
contracts to reduce fluctuations in the value of foreign currency
investments in, and long-term advances to, subsidiaries. At
September 25, 1999 there were no contracts outstanding.
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 2001. 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, the reason for holding it.
The Company is in the process of evaluating the impact this
standard will have on its financial statements.
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
___________________________________________________________________________
MOOG INC.
Consolidated Statements of Earnings
___________________________________________________________________________
Fiscal Years Ended
_____________________________________________________
September 25, September 26, September 27,
1999 1998 1997
(dollars in thousands
except per share data)
___________________________________________________________________________
<S> <C> <C> <C>
NET SALES $ 630,034 $ 536,612 $ 455,929
OTHER INCOME 1,597 1,447 1,565
___________ ___________ ___________
631,631 538,059 457,494
___________ ___________ ___________
COSTS AND EXPENSES
Cost of sales 432,033 374,000 315,380
Research and development 33,306 27,487 17,798
Selling, general and
administrative 100,023 85,374 81,413
Interest 28,188 20,148 22,675
Other expenses 1,353 1,177 649
___________ ___________ ___________
594,903 508,186 437,915
___________ ___________ ___________
EARNINGS BEFORE
INCOME TAXES 36,728 29,873 19,579
INCOME TAXES (Note 7) 12,297 10,605 5,973
___________ ___________ ___________
NET EARNINGS $ 24,431 $ 19,268 $ 13,606
=========== =========== ===========
NET EARNINGS PER SHARE (Note 1)
Basic $ 2.74 $ 2.33 $ 1.95
Diluted $ 2.70 $ 2.26 $ 1.88
___________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
___________________________________________________________________________
MOOG INC.
Consolidated Balance Sheets
___________________________________________________________________________
As of As of
(dollars in thousands except September 25, September 26,
per share data) 1999 1998
___________________________________________________________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,780 $ 11,625
Receivables (Note 3) 212,279 182,228
Inventories (Note 4) 152,246 121,784
Deferred income taxes (Note 7) 29,097 22,289
Prepaid expenses and
other current assets 3,413 9,151
_________ __________
TOTAL CURRENT ASSETS 406,815 347,077
PROPERTY, PLANT AND EQUIPMENT
(Notes 5 and 6) 188,918 139,444
GOODWILL, net of accumulated
amortization of $15,328 in 1999,
and $10,117 in 1998 (Note 2) 184,368 60,025
OTHER ASSETS 18,375 12,779
_________ __________
TOTAL ASSETS $ 798,476 $ 559,325
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 6) $ 5,831 $ 410
Current installments of
long-term debt (Note 6) 20,787 5,505
Accounts payable 36,373 25,648
Accrued salaries, wages and
commissions 39,167 36,338
Contract loss reserves 24,741 10,448
Accrued interest 10,587 8,050
Federal, state and foreign
income taxes 9,181 6,838
Other accrued liabilities 27,347 17,746
Customer advances 7,834 9,904
_________ __________
TOTAL CURRENT LIABILITIES 181,848 120,887
LONG-TERM DEBT, excluding current
installments (Note 6)
Senior debt 229,492 79,699
Senior subordinated notes 120,000 120,000
OTHER LONG-TERM LIABILITIES
(Notes 7 and 8) 55,366 47,731
_________ __________
TOTAL LIABILITIES 586,706 368,317
_________ __________
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (see page 34 and Note 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 8,427,311 shares in 1999 and
8,427,141 shares in 1998. 8,427 8,427
Class B- Authorized 10,000,000 shares.
Convertible to Class A on a one
for one basis. Issued 2,461,812
shares in 1999 and 2,461,982
shares in 1998. 2,462 2,462
Additional paid-in capital 102,778 102,306
Retained earnings 132,104 107,681
Treasury shares (32,589) (30,511)
Accumulated other comprehensive
income (loss) (1,512) 614
Loan to Savings and Stock Ownership Plan - (71)
__________ _________
TOTAL SHAREHOLDERS' EQUITY 211,770 191,008
__________ _________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 798,476 $ 559,325
___________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
__________________________________________________________________________________________
MOOG INC.
Consolidated Statements of Cash Flows
__________________________________________________________________________________________
Fiscal Years Ended
___________________________________________________________
September 25, September 26, September 27,
(dollars in thousands) 1999 1998 1997
_________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 24,431 $ 19,268 $ 13,606
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 30,602 22,665 21,267
Provisions for losses 8,466 10,974 9,763
Deferred income taxes 2,110 (3,200) (2,094)
Other (71) 146 755
Change in assets and liabilities
providing (using) cash, excluding
the effects of acquisitions:
Receivables (736) (19,590) (10,084)
Inventories (12,156) (20,124) (4,479)
Other assets (2,478) (320) (1,652)
Accounts payable and accrued
liabilities (5,531) 12,403 2,745
Other liabilities 63 524 3,810
Customer advances (2,023) 615 (1,607)
__________ __________ __________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 42,677 23,361 32,030
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions and investments,
net of cash acquired (Note 2) (171,710) (20,983) (49,180)
Acquisition of minority interest
(Note 2) (2,133) -- --
Purchase of property, plant and
equipment (25,866) (22,527) (12,982)
Proceeds from sale of assets
(Note 5) 3,379 328 393
Payments received, net of advances,
on loan to Savings and Stock
Ownership Plan 71 923 (493)
_________ _________ ________
NET CASH USED IN INVESTING
ACTIVITIES (196,259) (42,259) (62,262)
_________ _________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (219) (477) (1,913)
Proceeds from revolving lines
of credit 258,700 126,151 97,000
Payments on revolving lines
of credit (166,000) (128,417) (71,000)
Proceeds from issuance of
long-term debt 77,219 4,736 18,684
Payments on long-term debt (15,329) (33,843) (14,825)
Net proceeds from the sale of
common stock (Note 9) -- 56,658 --
Purchase of outstanding shares
for treasury (2,815) (2,145) (428)
Proceeds from sale of treasury stock 503 2,295 1,123
Other (8) (1,289) (836)
_________ _________ ________
NET CASH PROVIDED BY FINANCING
ACTIVITIES 152,051 23,669 27,805
_________ _________ ________
Effect of exchange rate changes on
cash and cash equivalents (314) 54 (412)
_________ _________ ________
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,845) 4,825 (2,839)
Cash and cash equivalents at
beginning of year 11,625 6,800 9,639
_________ _________ ________
Cash and cash equivalents at
end of year $ 9,780 $ 11,625 $ 6,800
__________________________________________________________________________________________
See Note 11 for Supplemental Cash Flow Information.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOOG INC.
Consolidated Statements of Shareholders' Equity
__________________________________________________________________________________________
Fiscal Years Ended
_____________________________________________________
(dollars in thousands September 25, September 26, September 27,
except per share data) 1999 1998 1997
_________________________________________________________________________________________
<S> <C> <C> <C>
PREFERRED STOCK $ 100 $ 100 $ 100
__________ __________ __________
COMMON STOCK
Beginning of year 10,889 9,134 9,134
Sale of common stock (Note 9) -- 1,755 --
__________ __________ __________
End of year 10,889 10,889 9,134
ADDITIONAL PAID-IN CAPITAL
Beginning of year 102,306 47,519 47,611
Sale of common stock,
net of issuance costs (Note 9) -- 54,903 --
Issuance of treasury shares at
less than cost (234) (306) (141)
Tax benefits related to stock
option plan 706 190 49
__________ __________ __________
End of year 102,778 102,306 47,519
__________ __________ __________
RETAINED EARNINGS
Beginning of year 107,681 88,422 74,825
Net earnings 24,431 19,268 13,606
Preferred dividends ($.09 per
share in 1999, 1998 and 1997) (8) (9) (9)
__________ __________ __________
End of year 132,104 107,681 88,422
__________ __________ __________
TREASURY SHARES, AT COST*
Beginning of year (30,511) (30,967) (31,803)
Shares issued related to options
(1999 - 53,000 Class A shares;
1998 - 99,750 Class A shares
and 85,000 Class B shares;
1997 - 50,150 Class A shares
and 44,912 Class B shares) 636 2,451 1,264
Shares purchased (1999 - 14,858
Class A shares and 65,115
Class B shares; 1998 - 57,343
Class A shares and 8,817 Class B
shares; 1997 - 17,321 Class A
shares and 410 Class B shares)(2,815) (2,145) (428)
Shares sold to Savings and Stock
Ownership Plan (SSOP) (1999 -
2,857 Class B shares; 1998 -
3,300 Class A shares) 101 150 --
__________ __________ __________
End of year (32,589) (30,511) (30,967)
__________ __________ __________
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)**
Beginning of year 614 977 5,377
Adjustment from foreign
currency translation (2,126) (363) (4,400)
__________ __________ __________
End of year (1,512) 614 977
__________ __________ __________
LOAN TO SSOP
Beginning of year (71) (994) (501)
Payments received on loan to SSOP,
net of advances 71 923 (493)
__________ __________ __________
End of year -- (71) (994)
__________ __________ __________
TOTAL SHAREHOLDERS' EQUITY $ 211,770 $ 191,008 $ 114,191
__________ __________ __________
COMPREHENSIVE INCOME
Net earnings $ 24,431 $ 19,268 $ 13,606
Adjustment from foreign
currency translation (2,126) (363) (4,400)
__________ __________ __________
Total comprehensive income $ 22,305 $ 18,905 $ 9,206
__________________________________________________________________________________________
* Class A Common Stock in treasury: 1,101,418 shares as of September 25, 1999;
1,140,514 shares as of September 26, 1998; 1,186,221 shares as of September 27, 1997.
Class B Common Stock in treasury: 878,176 shares as of September 25, 1999; 815,918
shares as of September 26, 1998; 892,101 shares as of September 27, 1997.
Preferred Stock in treasury: 16,229 shares as of September 25, 1999 (Note 9), and
5,117 shares as of September 26, 1998 and September 27, 1997.
** End of year balance consists solely of cumulative foreign currency translation.
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 foreign wholly-
owned and majority-owned 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 (Note 13).
REVENUE RECOGNITION: Revenues are recognized as units are
delivered except for those under long-term contracts. The
percentage of completion (cost-to-cost) method of accounting is
followed for long-term contracts, which comprise approximately
half of the Company's sales. 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.
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 under 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 40 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 periodically 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, liabilities, or firm commitments are
recognized immediately in the statement of earnings. The interest
differential to be paid or received on interest rate swaps is
recognized in the consolidated statement of earnings, as
incurred, as a component of interest expense. 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.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging
Activities," which must be adopted by fiscal 2001. 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, 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: Basic and diluted weighted-average
shares outstanding are as follows:
_________________________________________________________________
1999 1998 1997
_________________________________________________________________
Basic weighted-average
shares outstanding 8,927,369 8,281,974 6,979,011
Stock options 112,572 220,382 245,601
Convertible preferred
stock 7,516 8,146 8,585
_________ _________ _________
Diluted weighted-average
shares outstanding 9,047,457 8,510,502 7,233,197
_________________________________________________________________
Preferred stock dividends are deducted from net earnings to
calculate income available to common stockholders for basic
earnings per share.
STOCK-BASED COMPENSATION: The Company measures compensation
cost for stock options as the excess, if any, of the quoted
market price of the Company's stock at the measurement date over
the exercise price.
NOTE 2 - ACQUISITIONS
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 dates of acquisition. Purchase
price allocations are considered preliminary until all relevant
information has been obtained. This process generally occurs over
a period of time, but not longer than a year from the acquisition
date.
On October 30, 1998, the Company acquired a 75% shareholding
of Hydrolux SARL, a Luxembourg manufacturer and designer 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. After
the transaction, 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. The
acquisition resulted in intangible assets of approximately
$3,300, which are being amortized over 20 years.
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, supplies flight controls to the Boeing Commercial
Airplane Group and manufacturers of regional and business jets.
Montek also produces steering controls for tactical missiles and
servovalves for both industrial and aerospace applications. The
acquisition resulted in intangible assets of approximately
$122,000, the majority of which are being amortized over 40
years. In addition to the customary business assets and
liabilities, contract loss reserves of $21,800 related to
development contracts on certain business jet programs were
recorded, the majority of which will be utilized by the end of
fiscal 2000. The Company established a $3,800 reserve for
severance and other related costs associated with expected
involuntary termination of employees. The Company finalized a
formal plan for integrating the operations of Montek and informed
the impacted employees. The plan provides for the termination of
178 employees from various functional areas of Montek and is
expected to be completed by May 2001. At September 25, 1999, the
balance of the reserve was reduced to $2,870 as a result of
payments made.
On December 3, 1998, the Company acquired a 66-2/3%
shareholding in Microset Srl, an Italian manufacturer and
designer of electronic controls for industrial machinery for
$3,500 in cash. The acquisition resulted in intangible assets of
approximately $3,000, which are being amortized over 30 years.
Hydrolux SARL, Moog-Hydrolux and Microset Srl are referred
to as the Acquired Industrial Businesses.
The following summary, prepared on a proforma basis,
combines the consolidated results of operations of the Company,
Montek and the Acquired Industrial Businesses as if the
acquisitions took place on September 28, 1997. The unaudited
proforma results include the impact of certain adjustments,
including amortization of intangibles and increased interest
expense on acquisition debt, and related income tax effects.
_________________________________________________________________
(Unaudited) September 25, 1999 September 26, 1998
_________________________________________________________________
Net sales $ 647,762 $ 650,914
Net earnings 24,028 20,055
Basic earnings per share $ 2.69 $ 2.42
Diluted earnings per share $ 2.66 $ 2.36
_________________________________________________________________
The unaudited proforma results are not necessarily
indicative of what actually would have occurred if the
acquisitions had been in effect for the periods presented. In
addition, they are not intended to be a projection of future
results.
In fiscal 1999, the Company purchased the remaining 10%
minority interest of Moog Japan Ltd. for $2,133. The impact of
this acquisition on the Company's results of operations and
financial condition is not significant.
On February 3, 1998, the Company acquired the net assets of
Schaeffer Magnetics, Inc. (Schaeffer). Schaeffer manufactures
motion control devices and systems for solar panels and antennas
to the space industry. The purchase price was $21,700.
NOTE 3 - RECEIVABLES
Receivables consist of:
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Long-term contracts:
Amounts billed $ 41,274 $ 48,216
Unbilled recoverable costs
and profits 102,311 77,661
Claims on terminated
contracts 391 391
__________ __________
Total long-term contract
receivables 143,976 126,268
Trade 67,069 57,599
Refundable income taxes 237 17
Other 3,414 1,244
__________ __________
Total receivables 214,696 185,128
Less allowance for
doubtful accounts (2,417) (2,900)
_________________________________________________________________
Receivables $ 212,279 $ 182,228
_________________________________________________________________
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 25, 1999 September 26, 1998
_________________________________________________________________
Raw materials and
purchased parts $ 40,684 $ 37,404
Work in process 87,925 64,385
Finished goods 23,637 19,995
_________________________________________________________________
Inventories $ 152,246 $ 121,784
_________________________________________________________________
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Land $ 10,127 $ 6,936
Buildings and improvements 119,515 94,915
Machinery and equipment 275,640 234,519
__________ __________
Property, plant and equipment,
at cost 405,282 336,370
Less accumulated depreciation
and amortization (216,364) (196,926)
_________________________________________________________________
Property, plant and
equipment $ 188,918 $ 139,444
_________________________________________________________________
In fiscal 1999, the Company sold land and building totaling
$2,600 that was acquired as part of the acquisition of Schaeffer
in 1998. There was no gain or loss on the sale.
Assets under leases that have been accounted for as capital
leases and included in property, plant and equipment are
summarized as follows:
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Capital leases, at cost $ 6,577 $ 6,121
Less accumulated
amortization (3,445) (2,787)
_________________________________________________________________
Net assets under capital
leases $ 3,132 $ 3,334
_________________________________________________________________
NOTE 6 - INDEBTEDNESS
Long-term debt consists of the following:
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Credit Facility
- revolving credit $ 170,000 $ -
- term loan 67,500 -
Revolving credit facilities - 74,000
International and other U.S.
term loan agreements 10,784 8,985
Obligations under capital
leases 1,995 2,219
__________ __________
Senior debt 250,279 85,204
10% senior subordinated notes 120,000 120,000
__________ __________
Total long-term debt 370,279 205,204
Less current installments (20,787) (5,505)
_________________________________________________________________
Long-term debt $ 349,492 $ 199,699
_________________________________________________________________
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 a $265,000 revolving facility and a
$75,000 term loan with interest starting at LIBOR plus 200 basis
points, with the spread adjusted based on leverage. At September
25, 1999, interest on the Credit Facility was LIBOR plus 200
basis points. In order to provide for interest rate protection,
the Company has entered into interest rate swap agreements
totaling $80,000, effectively converting this amount to fixed
debt at 7.05%. The Credit Facility expires in November 2003 and
requires quarterly principal payments on the term loan of $3,750,
which commenced in March 1999.
The Credit Facility is secured by substantially all of the
Company's U.S. assets. The loan agreement contains various
covenants which, among others, specify minimum interest and fixed
charge coverage, limit capital expenditures, specify minimum net
worth, limit leverage and restrict payment of cash dividends on
common stock. The Credit Facility was used primarily to acquire
Montek and to refinance approximately $72,000 of existing
revolving credit facilities.
International and other U.S. term loan agreements of $10,784
at September 25, 1999 consist principally of financing provided
by various banks to certain foreign subsidiaries. These term
loans are being repaid through 2004 and carry interest rates
ranging from 1.0% to 8.75%.
The 10% Senior Subordinated Notes (the Notes) are due on May
1, 2006. The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after May 1, 2001
initially at 105% of their principal amount, plus accrued
interest, declining ratably to 100% of their principal amount,
plus accrued interest, on or after May 1, 2003. The 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.
Maturities of long-term debt are $20,787 in 2000, $19,138 in
2001, $16,770 in 2002, $15,657 in 2003, $177,927 in 2004, and
$120,000 thereafter.
At September 25, 1999, the Company had pledged assets with a
net book value of $397,713 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 $92,300 available on the Credit Facility,
provided credit availability of $105,888 at September 25, 1999.
Commitment fees are charged on some of these arrangements based
on a percentage of the unused amounts available and are not
material.
At September 25, 1999, the Company had $5,831 of notes
payable to banks at an average rate of 3.9%. During 1999, an
average of $6,086 in notes payable were outstanding at an average
interest rate of 4.9%.
See Note 13 for fair values of indebtedness and interest
rate swaps.
NOTE 7 - INCOME TAXES
The reconciliation of the provision for income taxes to the
amount computed by applying the U.S. federal statutory tax rate
to earnings before income taxes is as follows:
_________________________________________________________________
1999 1998 1997
_________________________________________________________________
Earnings before income taxes:
Domestic $ 22,184 $ 22,009 $ 16,310
Foreign 14,588 8,746 3,165
Eliminations (44) (882) 104
_________________________________________________________________
Total $ 36,728 $ 29,873 $ 19,579
_________________________________________________________________
Computed expected tax expense $ 12,855 $ 10,456 $ 6,657
Increase (decrease) in income taxes
resulting from:
Foreign tax rates 297 338 571
Nontaxable export sales (943) (800) (664)
State taxes net of federal benefit 403 501 302
Foreign tax credits (646) (145) (1,244)
Change in beginning of the year
valuation allowance 128 179 (77)
Other 203 76 428
_________________________________________________________________
Income taxes $ 12,297 $ 10,605 $ 5,973
_________________________________________________________________
Effective income tax rate 33.5% 35.5% 30.5%
_________________________________________________________________
At September 25, 1999, certain foreign subsidiaries had net
operating loss carryforwards totaling $12,852. 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 foreign subsidiaries' undistributed
earnings ($41,869 at September 25, 1999) 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 are as follows:
_________________________________________________________________
1999 1998 1997
Current:
Federal $ 4,518 $ 8,809 $ 6,543
Foreign 5,487 3,897 949
State 182 1,099 575
_______ _______ _______
Total current 10,187 13,805 8,067
_______ _______ _______
Deferred:
Federal 2,471 (2,374) (1,621)
Foreign (715) (498) (354)
State 354 (328) (119)
_______ _______ _______
Total deferred 2,110 (3,200) (2,094)
_________________________________________________________________
Total income taxes $12,297 $10,605 $ 5,973
_________________________________________________________________
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 25, 1999 September 26, 1998
_________________________________________________________________
Deferred tax assets:
Contract loss reserves not
currently deductible $ 10,043 $ 4,828
Tax benefit carryforwards 5,258 628
Accrued vacation 7,398 6,109
Deferred compensation 2,081 1,566
Pension 4,905 3,907
Accrued expenses not
currently deductible 5,027 4,034
Inventory 4,182 4,596
Other 34 638
_________ _________
Total gross deferred tax
assets 38,928 26,306
Less: Valuation reserve (603) (474)
_________ _________
Net deferred tax assets $ 38,325 $ 25,832
_________ _________
Deferred tax liabilities:
Differences in bases and
depreciation of property,
plant and equipment $ 29,909 $ 21,993
Other 79 128
_________ _________
Total gross deferred tax
liabilities $ 29,988 $ 22,121
_________________________________________________________________
Net deferred tax assets $ 8,337 $ 3,711
_________________________________________________________________
<PAGE>
NOTE 8 - EMPLOYEE BENEFIT PLANS
In 1999 the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits,"
which revises employers' required disclosures. It does not change
the measurement or recognition of employee benefit plans. Prior
year information has been presented to conform to the current
year disclosures.
The Company maintains a number of defined benefit plans
covering substantially all employees. The changes in projected
benefit obligations and plan assets and the funded status of the
U.S. and non-U.S. defined benefit plans for 1999 and 1998 are as
follows:
<PAGE>
<TABLE>
<CAPTION>
__________________________________________________________________________________________
U.S. Plans Non-U.S. Plans
_________________________________________________________________
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
__________________________________________________________________________________________
<S> <C> <C> <C> <C>
Change in projected
benefit obligation:
Projected benefit obligation
at beginning of year $ 160,440 $ 125,981 $ 35,030 $ 29,549
Service cost 6,441 4,647 1,674 1,569
Interest cost 11,052 9,971 2,149 1,912
Contributions by plan
participants - - 28 33
Actuarial losses (gains) (8,140) 18,035 (376) 2,021
Foreign currency exchange impact - - (1,283) 984
Benefits paid from plan assets (5,722) (5,242) (568) (655)
Benefits paid by Company (82) (104) (429) (383)
Plan amendments - 7,152 - -
__________________________________________________________________________________________
Projected benefit obligation at
end of year $ 163,989 $ 160,440 $ 36,225 $ 35,030
__________________________________________________________________________________________
Change in plan assets:
Fair value of assets at
beginning of year $ 140,022 $ 139,743 $ 13,133 $ 11,106
Actual return on plan assets 27,905 3,825 2,171 1,412
Employer contributions 1,649 1,696 863 718
Contributions by plan
participants - - 198 174
Benefits paid (5,722) (5,242) (568) (655)
Foreign currency exchange
impact - - (220) 378
__________________________________________________________________________________________
Fair value of assets at
end of year $ 163,854 $ 140,022 $ 15,577 $ 13,133
__________________________________________________________________________________________
Funded status: $ (135) $ (20,418) $ (20,648)$ (21,897)
Unrecognized net actuarial
losses (gains) (18,989) 5,443 (376) 183
Unrecognized prior service
cost 7,017 7,811 141 114
Unrecognized net (asset)
liability from SFAS No. 87
adoption date, amortized
over 15 years (810) (1,116) 759 1,020
__________________________________________________________________________________________
Accrued pension liability $ (12,917) $ (8,280) $ (20,124) $ (20,580)
__________________________________________________________________________________________
Amounts recognized in the
balance sheet consist of:
Prepaid benefit cost $ -- $ -- $ 975 $ 187
Accrued pension liability (13,195) (8,988) (21,099) (20,767)
Intangible asset 278 708 -- --
Net amount recognized $ (12,917) $ (8,280) $ (20,124) $ (20,580)
__________________________________________________________________________________________
The following table provides aggregate information for pension plans with accumulated benefit
obligations in excess of plan assets:
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Projected benefit obligation $ 39,711 $ 193,086
Accumulated benefit obligation 33,921 173,685
Fair value of plan assets 12,505 150,293
________________________________________________________________
</TABLE>
<PAGE>
Fiscal 1999 plan assets consist primarily of publicly traded
stocks, bonds, mutual funds, and $12,075 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 respective
countries. The principal actuarial assumptions weighted for all
defined benefit plans are:
_________________________________________________________________
U.S. Plans Non-U.S. Plans
__________________________________________
1999 1998 1999 1998
_________________________________________________________________
Discount rate 7.5% 7.0% 5.9% 6.4%
Return on assets 9.5% 9.5% 6.0% 6.5%
Rate of compensation
increase 3.6% 3.6% 3.5% 4.0%
_________________________________________________________________
In addition, the Company maintains various defined
contribution plans. Pension expense for all plans for 1999, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
___________________________________________________________________________
U.S. Plans Non-U.S. Plans
______________________________________________________
1999 1998 1997 1999 1998 1997
___________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 6,441 $ 4,647 $ 3,630 $ 1,674 $ 1,569 $ 1,463
Interest cost on
projected benefit
obligation 11,052 9,971 9,059 2,149 1,912 1,782
Expected return on
plan assets (11,855) (10,098) (8,824) (991) (783) (679)
Amortization of prior
service cost 794 575 34 7 -- --
Amortization of
transition (asset)
obligation (305) (305) (305) 168 174 184
Recognized actuarial
(gain) or loss 242 1 172 10 (142) (147)
_______ _______ _______ ______ _____ ______
Pension expense for
defined benefit
plans 6,369 4,791 3,766 3,017 2,730 2,603
Pension expense for
defined contribution
plans 510 228 245 870 865 628
___________________________________________________________________________
Total pension
expense $ 6,879 $ 5,019 $ 4,011 $ 3,887 $ 3,595 $ 3,231
___________________________________________________________________________
</TABLE>
Employee and management profit share plans provide for the
discretionary payment of profit share based on net earnings as a
percentage of net sales multiplied by the employees' wages, as
defined. Profit share expense was $5,334, $8,990 and $4,518 in
1999, 1998, and 1997, respectively. At management's discretion,
the amounts paid to employees and management were 50%, 100% and
75% of the formula for 1999, 1998 and 1997, respectively.
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. Shares are allocated and compensation expense is
recognized as the employer share match is earned. At September
25, 1999, the SSOP owned 289,660 Class A shares and 499,623 Class
B shares.
The Company provides postretirement health care benefits to
certain retirees. The change in the accumulated benefit
obligation and the funded status of the plan for 1999 and 1998
are shown below. There are no plan assets. The transition
obligation is being recognized over 20 years.
_________________________________________________________________
September 25, 1999 September 26, 1998
_________________________________________________________________
Change in Accumulated
Postretirement Benefit
Obligation (APBO)
APBO at beginning of year $ 10,154 $ 9,416
Service cost 183 152
Interest cost 710 699
Plan participants' contributions 221 174
Benefits paid (1,358) (1,311)
Acquisitions 521 41
Actuarial losses 231 983
_________________________________________________________________
APBO at end of year $ 10,662 $ 10,154
_________________________________________________________________
Funded status $ (10,662) $(10,154)
Unrecognized transition
obligation 5,521 5,915
Unrecognized prior service cost 172 192
Unrecognized losses 1,931 1,764
_________________________________________________________________
Accrued postretirement benefit
liability $ (3,038) $ (2,283)
_________________________________________________________________
The cost of the postretirement benefit plan is as follows:
_________________________________________________________________
1999 1998 1997
_________________________________________________________________
Service cost $ 183 $ 152 $ 150
Interest cost 710 699 658
Amortization of transitional
obligation 396 394 395
Amortization of prior service cost 19 19 19
Recognized actuarial loss 62 -- --
_________________________________________________________________
Net periodic postretirement benefit
cost $1,370 $1,264 $1,222
_________________________________________________________________
The assumed discount rate used in the accounting for the
plan was 7.5% in 1999 and 7.0% in 1998.
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 25, 1999.
NOTE 9 - SHAREHOLDERS' EQUITY
Class A and Class B Common Stock share equally 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 number) with Class B
shareholders entitled to elect the balance of the directors. 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 170 in 1999, 36,205 in 1998
and 6,691 in 1997.
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.
In August 1998, the Board of Directors authorized the
repurchase of up to 200,000 common shares. As of September 25,
1999, 100,047 shares had been repurchased at market prices under
this program at a cost of $3,321.
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
83,771 outstanding shares at September 25, 1999, and is
convertible into Class A Common shares (.08585 shares of Class A
Common Stock per share of Series B Preferred Stock). In fiscal
1999, 11,112 Series B Preferred shares were converted to 954
Class A common shares. 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 (1998 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. All options issued as
of September 25, 1999 were incentive options. 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. Options become
exercisable over a six year period.
Had compensation expense for stock options been determined
based on the fair value of the options at the grant date,
proforma net earnings, basic earnings per share and diluted
earnings per share would have been $23,753, $2.66 and $2.63,
respectively, for 1999 and $18,904, $2.28 and $2.22,
respectively, for 1998. The weighted-average fair value of
options granted during 1999 and 1998 was $14.02 and $16.61 per
option, respectively. Fair value was estimated at the date of
grant using the Black Scholes option-pricing model and the
following weighted-average assumptions: risk-free interest rate
of 5.1% and 5.7% for 1999 and 1998, respectively, expected
volatility of 33%, expected life of 7.5 years and expected
dividend yield of 0%.
The 1983 Non-Statutory Stock Option Plan granted options on
Class B shares to directors, officers, and key employees. The
1983 Incentive Stock Option Plan (1983 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. At September 25,
1999, 118,500 options were outstanding under the 1983 Plan.
Class A shares reserved for issuance at September 25, 1999
are as follows:
_________________________________________________________________
Shares
_________________________________________________________________
Conversion of Class B to Class A shares 1,583,636
1983 Plan 118,500
1998 Plan 600,000
Conversion of Series B Preferred Stock to Class A
shares 7,191
_________________________________________________________________
2,309,327
_________________________________________________________________
Shares under option are as follows:
_________________________________________________________________
Class B Weighted Class A Weighted
Stock Average Stock Average
Option Exercise Option Exercise
Plan Price Plans Price
_________________________________________________________________
Outstanding 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 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
September 26, 1998 -- $ -- 327,000 $ 19.79
Granted in fiscal 1999 -- $ -- 65,500 $ 29.44
Cancelled or expired in
fiscal 1999 -- $ -- (5,000) $33.875
Exercised in fiscal 1999 -- $ -- (53,000) $ 7.46
_________________________________________________________________
Outstanding at Sept. 25, 1999 -- $ -- 334,500 $ 23.43
_________________________________________________________________
The weighted-average remaining lives of the Class A options
as of September 25, 1999 are as follows: 1983 Plan - 2.0 years;
1998 Plan - 8.7 years.
As of September 25, 1999 prices of options outstanding under
the 1983 Plan ranged from $5.625 to $8.00, with a weighted-
average exercise price of $6.83. The price of the options
outstanding under the 1998 Plan ranged from $29.125 to $33.875,
with a weighted-average exercise price of $32.53.
Options to purchase 85,000 Class B shares were exercisable
at September 27, 1997 at a weighted-average exercise price of
$14.75. Options to purchase 118,500, 171,500 and 271,650 Class A
shares under the 1983 Plan were exercisable at September 25,
1999, September 26, 1998 and September 27, 1997, respectively, at
a weighted-average exercise price of $6.83, $7.03 and $8.15
respectively. Options to purchase 44,020 Class A shares under the
1998 Plan were exercisable at September 25, 1999 at a weighted-
average price of $33.875.
NOTE 10 - SEGMENTS
In fiscal 1999, the Company adopted the provisions of 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 by management for evaluating segment
performance and deciding how to allocate resources to segments.
The Company's reportable segments under SFAS No. 131 are Aircraft
Controls, Satellite and Launch Vehicle Controls and Industrial
Controls. The determination of the Company's reportable segments
was based on an analysis of the organizational structure of the
Company and its products, as well as markets served.
Aircraft Controls designs and produces technologically
advanced flight and engine controls to manufacturers of
commercial and military aircraft. Moog supplies controls on
numerous military and commercial aircraft including the F/A-18E/F
Super Hornet, the V-22 Osprey, the Joint Strike Fighter concept
demonstrator aircraft and Boeing 7-Series airplanes, among
others.
Satellite and Launch Vehicle Controls designs and
manufactures motion, fluid and propellant controls and systems to
control the flight, positioning or thrust of satellites, solar
panels and antennae, launch vehicles, and tactical and strategic
missiles.
Industrial Controls manufactures hydraulic and electric
controls which are used in a wide variety of industrial
applications requiring the precise control of position, velocity
and force. Applications include plastic injection and blow
molding machines, steam and gas turbines, steel rolling mills,
fatigue testing machines, and gun and turret positioning and
ammunition-loading on military ground vehicles.
Below is segment information for the years ended 1999, 1998
and 1997 and reconciliations to consolidated amounts. Prior year
information has been presented to conform to the new presentation
of segment information.
_________________________________________________________________
1999 1998 1997
_________________________________________________________________
Sales:
Aircraft Controls $ 302,108 $ 254,086 $ 225,997
Satellite and Launch Vehicle
Controls 109,987 93,459 65,816
Industrial Controls 217,939 189,067 164,116
_________________________________________________________________
Total sales $ 630,034 $ 536,612 $ 455,929
_________________________________________________________________
Operating profit and margins:
Aircraft Controls $ 36,960 $ 28,899 $ 31,643
12.2% 11.4% 14.0%
Satellite and Launch
Vehicle Controls 12,833 9,755 9,077
11.7% 10.4% 13.8%
Industrial Controls 23,595 20,380 10,649
10.8% 10.8% 6.5%
_________ _________ _________
Total operating profit 73,388 59,034 51,369
Deductions from operating profit:
Interest expense 28,188 20,148 22,675
Currency loss (gain) 280 360 (186)
Corporate and other expenses,
net 8,192 8,653 9,301
_________________________________________________________________
Earnings before income tax $ 36,728 $ 29,873 $ 19,579
_________________________________________________________________
Depreciation and amortization expense:
Aircraft Controls $ 16,185 $ 10,989 $ 11,542
Satellite and Launch
Vehicle Controls 3,555 2,790 1,797
Industrial Controls 8,639 6,946 6,519
_________ _________ _________
28,379 20,725 19,858
Corporate 2,223 1,940 1,409
_________________________________________________________________
Total depreciation and
amortization $ 30,602 $ 22,665 $ 21,267
_________________________________________________________________
Identifiable assets:
Aircraft Controls $ 429,914 $ 234,075 $ 218,823
Satellite and Launch
Vehicle Controls 119,108 111,463 76,970
Industrial Controls 220,621 189,653 170,898
_________ _________ _________
769,643 535,191 466,691
Corporate 28,833 24,134 23,872
_________________________________________________________________
Total assets $ 798,476 $ 559,325 $ 490,563
_________________________________________________________________
Capital expenditures:
Aircraft Controls $ 9,722 $ 11,315 $ 4,348
Satellite and Launch
Vehicle Controls 6,195 1,400 3,023
Industrial Controls 8,241 8,520 4,576
_________ _________ ________
24,158 21,235 11,947
Corporate 2,281 1,453 1,766
_________________________________________________________________
Total capital expenditures $ 26,439 $ 22,688 $ 13,713
_________________________________________________________________
Operating profit is total sales less cost of sales and other
operating expenses. The deductions from operating profit are
directly identifiable to the respective segment or allocated on
the basis of sales or manpower.
Sales to the Boeing Company were $123,254, $108,640 and
$85,033 in 1999, 1998 and 1997, respectively, including sales to
the Boeing Commercial Airplane Group of $72,768, $56,780 and
$47,372 in 1999, 1998 and 1997, respectively. Sales to U.S.
Government prime- or sub-contractors, including military sales to
Boeing, were $187,795, $163,680 and $134,659 in 1999, 1998 and
1997, respectively. Sales to the Boeing Company and to U.S.
Government prime- or sub-contractors are made principally from
the Aircraft Controls and Satellite and Launch Vehicle Controls
segments.
Sales and property, plant and equipment by geographic area
are as follows:
_________________________________________________________________
1999 1998 1997
_________________________________________________________________
Sales:
United States $ 372,346 $ 319,695 $ 254,579
Germany 46,467 39,400 38,952
Japan 38,046 42,902 35,425
Other 173,175 134,615 126,973
_________________________________________________________________
Total sales $ 630,034 $ 536,612 $ 455,929
_________________________________________________________________
Property, plant and equipment:
United States $ 144,583 $ 103,942 $ 100,614
Philippines 15,013 12,004 8,255
Japan 11,152 8,913 9,503
Other 18,170 14,585 13,737
_________________________________________________________________
Total property, plant and
equipment $ 188,918 $ 139,444 $ 132,109
_________________________________________________________________
Sales by geographic region are based on where the customer
is located.
<TABLE>
NOTE 11- SUPPLEMENTAL CASH FLOW INFORMATION
<CAPTION>
___________________________________________________________________________
1999 1998 1997
___________________________________________________________________________
<S> <C> <C> <C>
Cash paid for:
Interest $ 25,332 $ 18,842 $ 20,452
Income taxes 12,014 12,058 5,646
Non-cash investing and financing activities:
Leases capitalized, net of terminations $ 573 $ 161 $ 731
Acquisitions of businesses:
Fair value of assets acquired $226,381 $ 30,050 $ 51,915
Net cash paid 171,710 20,983 49,180
________ ________ ________
Liabilities assumed $ 54,671 $ 9,067 $ 2,735
___________________________________________________________________________
</TABLE>
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 its share of the estimated
cost for all currently pending environmental administrative or
legal proceedings and does not expect that these environmental
matters will have a material adverse 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 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 $11,494 in 1999, $8,810 in 1998, and $7,762 in
1997. Future minimum rental payments required under noncancelable
operating leases are $11,404 in 2000, $9,745 in 2001, $8,891 in
2002, $7,729 in 2003, $6,315 in 2004 and $14,646 thereafter.
The Company has $2,861 in open letters of credit at
September 25, 1999. Purchase commitments outstanding at September
25, 1999 are $7,629 for machinery and equipment.
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial
instruments as of September 25, 1999 and September 26, 1998 are
as follows:
<TABLE>
<CAPTION>
___________________________________________________________________________
1999 1998
Carrying Fair Carrying Fair
Asset/(Liability) Amount Value Amount Value
___________________________________________________________________________
<S> <C> <C> <C> <C>
Cash and cash equivalents (Note 1) $ 9,780 $ 9,780 $ 11,625 $ 11,625
Interest rate swaps (Note 6) 34 1,171 (73) (146)
Notes payable (Note 6) (5,831) (5,831) (410) (410)
Long-term debt (Note 6) (370,279)(372,416) (205,204) (206,404)
___________________________________________________________________________
</TABLE>
The fair value of interest rate swaps (used for hedging
purposes) is the estimated amount that the Company would receive
or pay to terminate the swap agreements at the end of the year,
taking into account current interest rates.
The fair value of long-term debt was estimated based on
quoted market prices.
<PAGE>
<TABLE>
____________________________________________________________________________________________________________
NOTE 14 - QUARTERLY DATA - UNAUDITED
Net Sales and Earnings
____________________________________________________________________________________________________________
<CAPTION>
Year Ended Year Ended
September 25, 1999 September 26, 1998
___________________________________________ ___________________________________________________
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 $148,444 $161,909 $160,528 $159,153 $630,034 $126,118 $134,511 $134,839 $141,144 $536,612
Gross profit 45,771 51,278 50,895 50,057 198,001 37,008 40,524 40,838 44,242 162,612
Net earnings 5,627 5,994 6,322 6,488 24,431 3,907 4,658 5,273 5,430 19,268
Per share data:
Basic $ .63 $ .67 $ .71 $ .73 $ 2.74 $ .55 $ .57 $ .59 $ .61 $ 2.33
Diluted $ .62 $ .66 $ .70 $ .72 $ 2.70 $ .53 $ .55 $ .58 $ .60 $ 2.26
____________________________________________________________________________________________________________
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 25, 1999.
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 25, 1999. 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 year ended September 27, 1997 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 6% and 8% as of
September 25, 1999 and September 26, 1998, respectively, and
total net sales constituting 11%, 12% and 19% of the related
consolidated totals for the years ended September 25, 1999,
September 26, 1998, and September 27, 1997, 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 25, 1999
and September 26, 1998 and the results of their operations and
their cash flows for each of the years in the three-year period
ended September 25, 1999, 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 4, 1999 KPMG LLP
_________________________________________________________________
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 2000 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.
On October 1, 1999, Robert H. Maskrey was named Executive
Vice President and Chief Operating Officer. Previously he was a
Vice President of the Company.
___________________________________________________________________________
Executive Officers and Positions Held Age Year First
Elected Officer
___________________________________________________________________________
Robert T. Brady
Chairman of the Board;
President; Chief Executive Officer;
Director; Member, Executive Committee 58 1967
Richard A. Aubrecht
Vice Chairman of the Board;
Vice President - Strategy and Technology;
Director; Member, Executive Committee 55 1980
Joe C. Green
Executive Vice President;
Chief Administrative Officer;
Director; Member, Executive Committee 58 1973
Robert H. Maskrey
Executive Vice President;
Chief Operating Officer
Director; Member, Executive Committee 58 1985
Robert R. Banta
Executive Vice President;
Chief Financial Officer; Assistant Secretary;
Director; Member, Executive Committee 57 1983
Philip H. Hubbell
Vice President - Contracts and Pricing 60 1988
Stephen A. Huckvale
Vice President 50 1990
Richard C. Sherrill
Vice President 61 1991
William P. Burke
Treasurer 64 1985
John B. Drenning
Secretary 62 1989
Donald R. Fishback
Controller 43 1985
___________________________________________________________________________
ITEM 11. EXECUTIVE COMPENSATION.
The information required herein is incorporated by reference
to "Compensation Committee Report," "Compensation Committee
Interlocks and Insider Participation," "Summary Compensation
Table," "Option Grants in Last Fiscal Year," "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values,"
"Employees' Retirement Plan," "Supplemental Retirement Plan,"
"Employment Termination Benefits Agreements" and "Compensation of
Directors" in the 2000 Proxy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required herein is incorporated by reference
to the 2000 Proxy.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required herein is incorporated by reference
to the 2000 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 25, 1999.
(ii) Consolidated Balance Sheets as of September 25,
1999 and September 26, 1998.
(iii) Consolidated Statements of Cash Flows for
each of the three years ended September 25,
1999.
(iv) Consolidated Statements of Shareholders' Equity
for each of the three years ended September 25,
1999.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Auditors.
2. Index to Financial Statement Schedules.
The following Financial Statement Schedule as of and
for each of the three years ended September 25, 1999, 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.
(iii) Stock Purchase Agreement dated October 20,
1998 between Raytheon Aircraft Company and
Moog Inc., incorporated by reference to
exhibit 2(i) of the Company's report on Form
8-K dated November 30, 1998.
(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) 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.
(iii) 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.
(iv) 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.
(v) Indemnity Agreement, incorporated by
reference to Annex A to 1988 Proxy Statement
dated January 4, 1988.
(vi) 1998 Stock Option Plan, incorporated by
reference to exhibit A to 1998 Proxy
Statement dated January 5, 1998.
(vii) Form of Employment Termination Benefits
Agreement between Moog Inc. and Robert T.
Brady, Richard A. Aubrecht, Joe C. Green,
Robert H. Maskrey, Robert R. Banta, Phillip
H. Hubbell and Richard C. Sherrill, (Filed
herewith)
(viii) Supplemental Retirement Plan, as amended and
restated, effective October 1, 1978 - amended
August 30, 1983; May 19, 1987; August 30,
1988 and November 11, 1999 (Filed herewith)
(13) 1999 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.)
(21) Subsidiaries of the Company.
Subsidiaries of the Company are listed below:
(i) Hydrolux Sarl, Incorporated in Luxembourg,
75% owned subsidiary
(ii) Microset S.r.l., Incorporated in Italy, 66
2/3% owned subsidiary
(iii) Moog AG, Incorporated in Switzerland, wholly-
owned subsidiary with branch operation in
Ireland
(iv) Moog Australia Pty. Ltd., Incorporated in
Australia, wholly-owned subsidiary
(v) Moog do Brasil Controles Ltda., Incorporated
in Brazil, wholly-owned subsidiary
(a) Moog de Argentina Srl, Incorporated in
Argentina, wholly-owned subsidiary of
Moog do Brasil Controles Ltda.
(vi) Moog Buhl Automation, a branch office of Moog
Inc. operating under Danish law
(vii) Moog Controls Corporation, Incorporated in
New York, wholly-owned subsidiary with branch
operation in the Republic of the Philippines
(viii) Moog Controls Hong Kong Ltd., Incorporated in
Hong Kong, wholly-owned subsidiary
(ix) Moog Controls (India) Private Ltd.,
Incorporated in India, wholly-owned
subsidiary
(x) Moog Controls Ltd., Incorporated in the
United Kingdom, wholly-owned subsidiary with
a branch operation in India
(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.
(xi) Moog Control System (Shanghai) Co. Ltd.,
Incorporated in People's Republic of China,
wholly-owned subsidiary
(xii) Moog FSC Ltd., Incorporated in the Virgin
Islands, wholly-owned subsidiary
(xiii) 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.
(xiv) Moog-Hydrolux Hydraulic Systems, Inc.,
Incorporated in New York, 75% owned
subsidiary
(xv) Moog IFSC Ltd., Incorporated in the United
Kingdom, wholly-owned subsidiary
(xvi) Moog Industrial Controls Corporation,
Incorporated in New York, wholly-owned
subsidiary
(xvii) Moog Japan Ltd., Incorporated in Japan,
wholly-owned subsidiary
(xviii) Moog Korea Ltd., Incorporated in South Korea,
wholly-owned subsidiary
(xix) Moog Properties, Inc., Incorporated in New
York, wholly-owned subsidiary
(xx) Moog Sarl, Incorporated in France, wholly-
owned subsidiary, 95% owned by Moog Inc; 5%
owned by Moog GmbH
(xxi) Moog Singapore Pte. Ltd., Incorporated in
Singapore, wholly-owned subsidiary
(23) (ii) Consent of KPMG 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 25, 1999.
<PAGE>
<TABLE>
________________________________________________________________________________________________________________________
MOOG INC. Schedule II
Valuation and Qualifying Accounts - Three Years ended September 25, 1999
(dollars in thousands)
<CAPTION>
Additions
Balance at charged to Foreign Balance
beginning costs and Exchange at end
Description of period expenses Deductions Acquisitions Impact of period
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
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 -- 85 12,127
____________________________________________________________________________________
Year ended 1998:
Reserve for contract losses $ 8,170 $ 4,923 $ 2,645 $ 1,212 $ -- $ 11,660
Allowance for doubtful accounts 1,594 1,782 493 -- 17 2,900
Reserve for inventory valuation 12,127 4,269 2,368 -- (68) 13,960
____________________________________________________________________________________
Year ended 1999:
Reserve for contract losses $ 11,660 $ 3,676 $ 15,198 $ 24,603 $ -- $ 24,741
Allowance for doubtful accounts 2,900 876 1,777 -- (55) 1,944
Reserve for inventory valuation 13,960 3,914 4,286 -- (461) 13,127
____________________________________________________________________________________
________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
QUARTERLY STOCK PRICES
Stock Prices
Fiscal Year Class B Class A
Ended High Low High Low
_________________________________________________________________
Sept. 25, 1999
1st Quarter $35 7/16 $33 $39 1/8 $24 5/16
2nd Quarter 37 3/8 35 3/8 37 13/16 28 3/4
3rd Quarter 40 3/4 37 5/16 34 3/8 26 5/8
4th Quarter 41 1/4 40 1/4 35 1/4 28 5/8
_________________________________________________________________
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
_________________________________________________________________
<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 15, 1999
By ROBERT T. BRADY
________________________________
Robert T. Brady
Chairman of the Board,
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
By ROBERT R. BANTA
________________________________
Robert R. Banta
Executive Vice President,
Chief Financial Officer,
and Director
(Principal Financial Officer)
By 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 RICHARD A. AUBRECHT By PETER P. POTH
________________________________ ______________________________
Richard A. Aubrecht Peter P. Poth
Director, December 15, 1999 Director, December 15, 1999
By JAMES L. GRAY By KRAIG H. KAYSER
________________________________ ______________________________
James L. Gray Kraig H. Kayer
Director, December 15, 1999 Director, December 15, 1999
By JOE C. GREEN By JOHN D. HENDRICK
________________________________ ______________________________
Joe C. Green John D. Hendrick
Director, December 15, 1999 Director, December 15, 1999
By ALBERT F. MYERS By ROBERT H. MASKREY
________________________________ ______________________________
Albert F. Myers Robert H. Maskrey
Director, December 15, 1999 Director, December 15, 1999
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 9, 2000 at the Albright-Knox Art Gallery, 1285 Elmwood
Avenue, Buffalo, New York. 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 10(vii)
EMPLOYMENT TERMINATION BENEFITS AGREEMENT
AGREEMENT, made this _____ day of [MONTH], [YEAR], and
effective the [DATE] day of [MONTH], [YEAR], between MOOG INC., a
New York corporation with an office and place of business at
Jamison Road, East Aurora, New York 14052 (the "Company"), and
[NAME], [ADDRESS], [CITY/TOWN], [STATE] [ZIP] ("Executive").
RECITALS:
A. Executive is presently employed by Company; and
B. Company and Executive entered into an Employment
Termination Benefits Agreement as of the [DAY] day of [MONTH],
[YEAR]; and
C. The Board of Directors of Company (the "Board")
recognizes that Executive's contribution to the growth and
success of Company has been substantial; and
D. Board desires to provide for continued employment
of Executive, to supercede and replace the prior Employment
Termination Benefits Agreement, and to establish appropriate
employment arrangements which Board has determined will reinforce
and encourage Executive's continued attention and dedication to
the Company's business and success as a member of the Company's
management, furthering the best interest of the Company and its
Shareholders; and
E. Executive is willing to commit himself to continue
to serve Company on the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the mutual promises
and the respective covenants and agreements of the parties herein
contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I - DEFINITIONS
1.01 Terms Defined. In addition to any words and terms
elsewhere defined herein, the following words and terms shall
have the meanings indicated below unless the context or use
indicates a different meaning:
(a) "CAUSE" shall mean:
Any harmful act or omission that constitutes
a willful and a continuing material failure
by the Executive to perform the material and
essential obligations under this Agreement
(other than as a result of death or total or
partial incapacity due to physical or mental
illness); or
The Executive's conviction of a felony, or
any willful perpetration by the Executive of
a common law fraud upon the Company; or
Any willful misconduct or bad faith omission
by the Executive constituting dishonesty,
fraud or immoral conduct, which is materially
injurious to the financial condition or
business reputation of the Company.
Anything in this definition to the contrary
notwithstanding, the termination of the
Executive's employment by the Company is not
considered to have been for Cause if the
termination resulted from:
Bad judgment or mere negligence on the
part of the Executive; or
An act or omission by the Executive
without intending to gain, directly or
indirectly, a substantial personal
profit to which the Executive was not
legally entitled; or
An act or omission by the Executive that
the Executive believed in good faith to
have been in the interests of the
Company or not opposed to such
interests.
(b) A "CHANGE OF CONTROL" shall mean the transfer
in one or more transactions, extending over a
period of not more than 24 months of Common
Stock of the Company possessing 25% or more
of the total combined voting power of all
Class A and Class B Shares of Common Stock.
A transfer shall be deemed to occur if shares
of Common Stock are either transferred or
made the subject of options, warrants, or
similar rights granting a third party the
opportunity to acquire ownership or voting
control of such Common Stock.
(c) "COMMON STOCK" shall mean the Class A and
Class B $1.00 par value shares of the capital
stock of the Company, as well as all other
securities with voting rights or convertible
into securities with voting rights.
(d) "COMPENSATION" shall mean the base pay plus
profit share and any bonus paid to Executive
in any one fiscal year; provided, however,
that if any profit share was not paid but
would have been payable under the terms of
the Profit Share Plan, Compensation shall
include the amount of such unpaid profit
share calculated in accordance with the terms
of the profit share plan. "AVERAGE ANNUAL
COMPENSATION" shall mean the average of the
Compensation paid to Executive for the three
highest years of the five years preceding
termination. "MONTHLY PAYMENT" shall mean
the average Annual Compensation divided by
12.
(e) "COMPENSATION COMMITTEE" shall mean the
Executive Compensation Committee of Board, as
it is constituted from time to time.
(f) "COMPANY" shall mean MOOG INC., as well as
any successors or assigns of MOOG INC.,
whether by transfer, merger, consolidation,
acquisition of all or substantially all of
the business assets, change in identity, or
otherwise by operation of law and for
purposes of employment of Executive shall
also mean any parent, subsidiary or
affiliated entity to whom Executive's
services may be assigned.
(g) "DISABILITY" shall mean the inability of
Executive to perform a substantial portion of
his duties hereunder for a continuous period
of 6 months or more.
(h) "EFFECTIVE DATE" shall mean the date of this
Agreement.
(i) "INVOLUNTARY TERMINATION OF EMPLOYMENT" shall
mean a severance of the Executive's
employment relationship prior to age 65,
other than for death, Disability, Retirement,
or Cause, by or at the instigation of Company
or by or at the instigation of Executive
where Executive's pay has been diminished or
reduced to a greater extent than any
diminution or reduction of Company's
Executives generally, or where there has been
a Change of Control, Involuntary Termination
of Employment shall also include a
termination of the employment relationship by
Executive (whether before or after age 65),
within two years of the Change of Control, in
those circumstances where the duties,
responsibilities, status, base pay or
perquisites of office and employment have
been diminished or downgraded, or
substantially increased (other than base pay)
without Executive's actual or implied
consent; provided, however, that a general
increase or decrease in base pay which is
approved by a majority of those executives
who are parties to agreements similar to this
Agreement will be considered as having been
consented to for purposes of this Agreement.
(j) "RETIREMENT" shall mean the election of
Executive to retire from active employment
with Company at the end of the month in which
Executive attains 65 years of age or
thereafter. Retirement shall also mean a
similar election by Executive prior to
age 65, where Executive elects to receive
early Retirement benefits under the Moog Inc.
Employees' Retirement Plan or any successor
Company Retirement Plan.
(k) "TERM OF EMPLOYMENT" means the period
commencing on the effective date and expiring
on the earliest to occur of (i) Executive's
death, Disability or Retirement, (ii) the
Voluntary Termination of Employment by
Executive, or (iii) Termination for Cause of
Executive's employment.
(l) "TERMINATION FOR CAUSE" shall mean severance
of the Employment relationship based upon or
brought about by Cause as defined in
paragraph (a) above.
(m) "VOLUNTARY TERMINATION OF EMPLOYMENT" shall
mean a severance of the Employment
relationship by or at the instigation of
Executive, other than a termination occurring
upon a Change of Control as defined in
paragraph (b) above, or upon death,
Disability or Retirement.
(n) "YEAR OF SERVICE" shall have the same meaning
as defined in the Moog Inc. Employees'
Retirement Plan for benefit accrual purposes.
ARTICLE II - EMPLOYMENT, TERM, DUTIES
2.01 Employment. Company hereby hires Executive, and
Executive agrees to serve Company, for a term beginning on the
Effective Date of this Agreement, and ending on the last day of
the Term of this Agreement.
2.02 Term. The term of this Agreement shall begin on
the Effective Date, and shall end as provided in Section 5.01.
Unless benefits under this Agreement are being provided at that
time, this Agreement shall also end upon Executive's attainment
of age 65; provided, however, that upon the request of Executive,
Company in its sole discretion may agree to continue this
Agreement after Executive's attainment of age 65 but, in such
event, this Agreement shall end no later than Executive's
attainment of age 70.
2.03 Capacity. Executive shall serve in such Executive
or Managerial capacity as the Board of Directors or the Chief
Executive Officer of the Company shall determine, and shall have
all of the duties, responsibilities, obligations and privileges
commensurate with such position.
2.04 Duties. Executive agrees to devote his full
business time and energy to the business and affairs of Company
and to utilize his best efforts, skill and abilities to promote
such interest, performing such duties as may be assigned on the
executive level. Company agrees that Executive shall have such
powers and authority as shall reasonably be required to enable
Executive to discharge his duties in an efficient manner.
2.05 Base of Operations. Company agrees that
Executive's base of operations shall be Executive's location as
of the effective date of this Agreement. Although Executive
recognizes that substantial traveling may be required in
connection with employment, Executive shall not be required to
operate from any other area without Executive's prior consent.
ARTICLE III - COMPENSATION AND BENEFITS
3.01 Base Salary and Profit Share. During the Term of
Employment, Company shall pay Executive for all services to be
rendered as set forth herein, a base salary as determined from
time to time by the Compensation Committee, plus a Management
Profit Share Award under the Profit Share Plan. The base salary
shall be payable in periodic installments not less frequently
than on a monthly basis. Any Profit Share Award shall be payable
annually in the month of January.
This Agreement shall not be deemed abrogated or
terminated if Company, in its discretion, shall determine to
modify the base compensation of Executive for any period of time,
and Executive accepts such modification, but nothing herein
contained shall be deemed to obligate Company to make any
increase in base compensation.
3.02 Other Employment Benefits. Executive shall be
entitled to all rights and benefits for which he shall be
eligible under any Retirement, Profit Sharing, Employee Stock
Purchase Plan, Savings and Investment Plan, Business Travel,
Group Life, Disability, Accident or Health Insurance, Vacation,
and other benefit plans which Company provides for its employees
generally, as well as for any Stock Option, Incentive
Compensation, Deferred Compensation, Extended Vacation,
Supplemental Retirement, Club Memberships, Supplemental Medical
and Life Insurance coverages and similar benefit plans which
Company provides for executive personnel having duties and
responsibilities similar to those of Executive.
3.03 Reimbursement of Expenses. Company shall provide
Executive with an automobile or an allowance for automobile use
and shall pay or reimburse Executive for all reasonable traveling
or other expenses incurred or paid by Executive in connection
with the performance of his services under this Agreement upon
presentation of expense statements or vouchers, and such other
supporting information as it may from time to time request.
3.04 Death Benefit. Company agrees that in the event
of the death of Executive during the continuation of the term of
employment hereunder, Executive's base salary shall continue to
be paid to Executive's widow, or to Executive's estate, for a
period of six months following the date of such demise.
ARTICLE IV - NON COMPETITION, CONFIDENTIAL DATA
4.01 Non-Competition. During the term of this
Agreement, and in the event of Involuntary Termination upon a
Change in Control until the last payment of any benefits to
Executive under this Agreement, Executive will not directly or
indirectly enter the employ of, or render any service to any
customer or former customer, or any other person, partnership,
association or corporation engaged in any business engaged in by
Company during the term of this Agreement, and Executive will not
engage in any such business on his own account, nor become
interested in any such business, directly or indirectly as an
individual, partner, shareholder, director, officer, principal,
agent, employee, trustee, consultant, or in any other
relationship or capacity.
4.02 Confidential Information. Executive agrees,
during the term of this Agreement and thereafter, not to use or
make use of nor to divulge to anyone other than authorized
personnel or representatives of Company, any information or
knowledge relating to the business, business methods or
techniques of Company including, without being limited to,
information about accounting procedures, training methods or
techniques, data, processes, research manufacturing formulae,
costing, sales prospects, customers' or suppliers' lists, bidding
formulae, sales, profits or costs, except to the extent that
Executive can establish the same to be generally known to the
public or recognized as standard practice in the business in
which Company is engaged or to the extent Executive is required
to divulge such information or knowledge in connection with any
legal proceeding.
4.03 Patents and Inventions. Executive agrees that any
patents, inventions, improvements, discoveries, formulae or
processes which he may obtain, make or conceive during the period
of employment hereunder, shall be the sole and exclusive property
of Company, and that he will sign and execute any and all
applications, assignments or other instruments necessary or
appropriate to assign, convey or otherwise make available
exclusively to Company all such patents, inventions,
improvements, discoveries, formulae or processes.
4.04 Enforcement. Executive agrees that in the event
of a breach or threatened breach by Executive of any provision of
this Article, Company may institute legal proceedings to compel
Employee compliance hereunder, including injunctive relief and
any other remedy provided in law or equity. If the scope of any
restriction contained in this Agreement is too broad to permit
enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by
law, and Executive hereby consents and agrees that such scope may
be judicially modified accordingly in any proceeding brought to
enforce such restriction.
In the event of such judicial modification, Company
may, if it determines in its sole judgment that such action is
contrary to the best interests of Company, within ten days after
notification of such modification, terminate all obligations of
Company under this Agreement by giving Executive not less than
15 days notice of such termination.
ARTICLE V - TERMINATION
5.01 Termination of Employment. Executive's employment
by Company shall terminate on the earliest to occur of
(a) Executive's death, Disability or Retirement, (b) Voluntary
Termination of Employment by Executive, or (c) Termination for
Cause of Executive's employment. In any such event this
Agreement shall also terminate other than for the provisions of
Articles IV, VI and VII and Section 3.04, which shall survive
such Termination.
The existence of Disability, as defined herein, shall
be determined in the sole judgment of the Compensation Committee,
and effective upon delivery to Executive of written notice that
such determination has been made, Executive's employment shall be
terminated and Executive shall be removed from all positions, as
an Officer or Director, with Company.
5.02 Effect of Involuntary Termination. This Agreement
shall survive an Involuntary Termination of Employment.
5.03 Executive Obligations Upon Termination. Executive
agrees that upon termination of services under this Agreement,
for any cause whatsoever, he will deliver to Company all
documents, drawings, papers, computer tapes or discs, notes,
memoranda, handbooks, manuals, and all other tangible material on
which information is stored or recorded, and all copies thereof
which Executive has in his control or possession in any way
related to the business of Company, its customers, suppliers or
affiliates.
ARTICLE VI - BENEFITS UPON TERMINATION
6.01 Death, Disability, Retirement. In the event of
termination upon death, Executive's surviving spouse or estate
shall be entitled to the benefit provided in Section 3.04, life
insurance benefits, the limited right (to the extent permitted by
the terms of the applicable stock option plan or the grant
thereunder) to exercise any outstanding options owned within the
one year period after the date of death but not later than the
expiration date(s) of such stock options or if such exercise is
not permitted an amount equal to the bargain element of such
options shall be paid, any death benefits which may be provided
under any Company Retirement Plan or Supplemental Retirement
Plan, the limited right to receive a payment in cash for any
unutilized vacation benefits accrued for Executive, as well as
any other benefits provided generally by Company to its
executives upon death.
Termination of the employment relationship by virtue of
Retirement of Executive shall entitle Executive to all retirement
benefits provided generally by Company to its Executives upon
retirement including benefits under any Company Retirement Plan
or Supplemental Retirement Plan, insurance benefits provided upon
Retirement, the limited right (to the extent permitted by the
terms of the applicable stock option plan or the grant
thereunder) to exercise any stock options previously granted to
Executive within the one year period after the date of Retirement
but not later than the expiration date(s) of such stock options
or if such exercise is not permitted an amount equal to the
bargain element of such options shall be paid, and the limited
right to receive a payment in cash for any unutilized vacation
benefits accrued for Executive.
In the event that employment is terminated by virtue of
Disability as determined under Section 5.01, Executive shall be
entitled to all basic and long term Disability benefits which may
be provided generally under Plans made available by Company to
its executives, including any rights which may be available upon
disability under any Company Retirement Plan or Supplemental
Retirement Plan, as well as the limited right (to the extent
permitted by the terms of the applicable stock option plan or the
grant thereunder) to exercise any stock options previously
granted to Executive within the one year period after becoming
disabled but not later than the expiration date(s) of such stock
options or if such exercise is not permitted an amount equal to
the bargain element of such options shall be paid, and the
limited right to receive a payment in cash for any unutilized
vacation benefits accrued for Executive.
6.02 Termination For Cause. Upon termination of
Executive's employment for Cause, Executive shall be entitled to
his base salary up to the date of such termination, as well as
any vested benefits under any Company Retirement Plan or
Supplemental Retirement Plan. Under such termination, Executive
shall not be entitled to participate in any Profit Share Award or
Incentive Compensation payable after the date of termination, but
will be eligible to receive a payment in cash for any unutilized
vacation benefits accrued for Executive. Unless otherwise
provided by law, Executive shall not have the right or privilege
of exercising any stock options held by Executive and issued
under any stock option plan of the Company.
6.03 Voluntary Termination of Employment. In the event
of Executive's Voluntary Termination of Employment with Company,
Executive shall be entitled to his employment benefits up to the
date of termination, including any vested benefits under any
Company Retirement Plan or Supplemental Retirement Plan, but
unless any Profit Share Award or Incentive Compensation is
payable prior to such termination, Executive shall not receive
any such payment. Executive shall receive a payment in cash for
any unutilized vacation benefits accrued for Executive.
Executive shall have the limited right (to the extent permitted
by the terms of the applicable stock option plan or the grant
thereunder) to exercise any stock options previously granted to
Executive within three months after the date of such Voluntary
Termination of Employment but not later than the expiration
date(s) of such stock options or if such exercise is not
permitted an amount equal to the bargain element of such options
shall be paid. Notwithstanding the foregoing, if Executive dies
within three months from the date of the Voluntary Termination of
Employment, his stock options (to the extent permitted by the
terms of the applicable stock option plan or the grant
thereunder) may be exercised within the one year period after the
date of such Voluntary Termination of Employment but not later
than the expiration date(s) of such stock options or if such
exercise is not permitted an amount equal to the bargain element
of such options shall be paid.
6.04 Involuntary Termination of Employment. In the
event of the Involuntary Termination of Employment of Executive,
Executive shall be entitled to any vested benefits under any
Company Retirement Plan or Supplemental Retirement Plan,
Executive shall be entitled to continue at Company's expense for
one year Club Memberships held by Executive for which
reimbursement was provided by Company, Executive, for a period of
one year, will continue to be provided with an automobile, or
reimbursement of automobile expense, Executive shall be entitled
to receive full Profit Share and Incentive Compensation for
credited service and Company performance up to the date of
termination. Executive shall have the right (to the extent
permitted by the terms of the applicable stock option plan or the
grant thereunder) to exercise any stock options held by Executive
at the date of termination within the one year period after the
date of such Involuntary Termination of Employment but not later
than the expiration date(s) of such stock options or if such
exercise is not permitted an amount equal to the bargain element
of such options shall be paid. Executive shall also receive for
one year after Termination the same Health, Life and Disability
Insurance coverages, for which he was eligible during employment.
Executive shall also receive a payment in cash for any unutilized
vacation benefits accrued for Executive. In addition, Executive
shall be provided with Company paid professional Out-Placement
Service to assist Executive in securing other employment.
Notwithstanding the foregoing, if the Executive dies within three
months from the date of the Involuntary Termination of
Employment, his stock options (to the extent permitted by the
terms of the applicable stock option plan or the grant
thereunder) may be exercised within the one year period after the
date of such Involuntary Termination of Employment but not later
than the expiration date(s) of such stock options or if such
exercise is not permitted an amount equal to the bargain element
of such options shall be paid.
6.05 Continuation of Compensation. In addition to the
benefits of Section 6.04, upon Involuntary Termination of
Employment Executive shall continue to receive Monthly Payments
for that number of months set forth in the table below, based
upon the Years of Service of Executive with Company.
MONTHS OF
YEARS OF SERVICE COMPENSATION CONTINUATION
More Less
Than Than
0 - 10 years 12 months
10 - 11 years 13 months
11 - 12 years 14 months
12 - 13 years 15 months
13 - 14 years 16 months
14 - 15 years 17 months
15 - 16 years 18 months
16 - 17 years 19 months
17 - 18 years 20 months
18 - 19 years 21 months
19 - 20 years 22 months
20 - 21 years 24 months
21 - 22 years 25 months
22 - 23 years 26 months
23 - 24 years 27 months
24 - 25 years 28 months
25 - 26 years 30 months
26 - 27 years 31 months
27 - 28 years 32 months
28 - 29 years 33 months
29 - 30 years 34 months
more than 30 years 36 months
6.06 Involuntary Termination - Change of Control. In
the event that an Involuntary Termination of Employment of
Executive occurs by virtue of a Change of Control, Executive
shall receive all of the benefits set out in Section 6.04 above.
Executive shall receive Monthly Payments for the number of months
indicated in the table below.
MONTHS OF
YEARS OF SERVICE COMPENSATION CONTINUATION
More Less
Than Than
0 - 3 years 12 months
3 - 10 years 24 months
10 - 15 years 27 months
15 - 20 years 30 months
more than 20 years 36 months
ARTICLE VII - MISCELLANEOUS
7.01 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
received, if personally delivered, electronically transmitted, or
mailed, first class postage prepaid, addressed to Company at
Jamison Road and Seneca Street, East Aurora, New York 14052 (with
a copy to Phillips, Lytle, Hitchcock, Blaine & Huber LLP,
attention John B. Drenning, Esq., 3400 HSBC Center, Buffalo, New
York 14203), or to Executive at the address on the first page, or
such other address as may be designated by notice in accordance
with the provisions of this Section.
7.02 Arbitration. All disputes, differences and
controversies arising under or in connection with this Agreement,
including but not limited to its interpretation, construction,
performance or application, shall be settled and finally
determined by arbitration in the City of Buffalo, New York, under
the then existing rules of the American Arbitration Association.
7.03 Entire Agreement. This instrument contains the
entire agreement of the parties with respect to its subject
matter, and supersedes and replaces any prior agreement or
understanding, and no amendment, modification or waiver of any
provision hereof shall be valid unless it be in writing and
signed by Company and Executive.
7.04 Non-Waiver. The waiver of, or failure to take
action with regard to, any breach of any term or condition of
this Agreement shall not be deemed to constitute a continuing
waiver or a waiver of any other breach of the same or any other
term or condition.
7.05 Paragraph and Other Headings. The section and
other headings contained in this Agreement are for reference
purposes only and shall not affect in any way, the meaning or
interpretation of this Agreement.
7.06 Gender and Number. The masculine gender used
herein shall be deemed to include the feminine and neuter
genders, and vice versa, and the singular or plural, shall be
deemed to include the plural or singular, as the case may be,
when required by the context, and the word "person" shall include
corporation, firm, partnership or other form of association.
7.07 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any of which shall be
deemed an original, and all of which together shall constitute
one and the same instrument, notwithstanding that all of the
parties are not signatory to the original or the same
counterpart.
7.08 Persons Bound - Non-Assignment. This Agreement
and all of the provisions hereof shall be binding upon the
parties hereto, their legal representatives, heirs, distributees,
successors and assigns. Except as expressly stated herein,
nothing in this Agreement is intended to confer upon any other
person any rights or remedies under or by reason of this
Agreement. Neither this Agreement nor any rights hereunder shall
be assignable by Executive.
7.09 Guarantee of Company. If Executive's services are
assigned to any parent, subsidiary or affiliate of Company,
Company shall remain liable as a guarantor of the obligations
hereunder.
7.10 Inconsistent Provisions. If any provision of this
Agreement is inconsistent with any provision or any Plan or
Resolution (including the Severance Pay Resolution) providing
benefits substantially similar to those provided by this
Agreement or any other document required or executed pursuant to
this Agreement, the provisions of this Agreement shall be
controlling.
7.11 Severability. If any provision of this Agreement
or the application thereof to any person or circumstances is held
invalid, the remainder of this Agreement and the application of
such provision to the other person and circumstances shall not be
affected thereby and each term and condition of the Agreement
shall be valid and enforced to the fullest extent permitted by
law.
7.12 Choice of Law. This Agreement shall be construed
as to both validity and performance and enforced in accordance
with and governed by the laws of the State of New York, without
giving effect to the choice of law principles of those laws.
7.13 No Conflicting Agreement. Executive represents
and warrants to Company that he is not a party to, or bound by,
any agreement, understanding or plan which would interfere with
or prevent performance under this Agreement. Company similarly
represents and warrants to Executive.
7.14 Attorney's Fees. In the event that any dispute or
difference arising under or in connection with this Agreement
results in arbitration or litigation, Company shall reimburse
Executive for all reasonable Attorney's Fees and expenses if
Executive prevails in such proceeding.
7.15 Authorization. Company represents to Executive
that this Agreement has been duly approved by its Board of
Directors and execution by an appropriate officer duly
authorized.
IN WITNESS WHEREOF, the undersigned parties hereto have
duly executed this Agreement as of the day and year first above
written.
MOOG INC.
WITNESS:
__________________________ By __________________________
[NAME]
[TITLE]
WITNESS:
______________________________ ______________________________
[NAME], Executive
<PAGE>
Exhibit 10(viii)
MOOG INC. SUPPLEMENTAL RETIREMENT PLAN
[ADOPTED: AUGUST 22, 1978; AMENDED: AUGUST 30, 1983, MAY 19,
1987,
AUGUST 30, 1988, DECEMBER 12, 1996 AND NOVEMBER 11, 1999]
ARTICLE I
Purpose, Definitions, Administration, Amendment
The Moog Inc. Supplemental Retirement Plan is an
unfunded plan, not intended to qualify under the Internal Revenue
Code, maintained for the purpose of providing additional
retirement benefits for a select group of management or highly
compensated employees of Moog Inc., and participation in the Moog
Inc. Supplemental Retirement Plan is limited consistent with such
purpose. Benefits under the Moog Inc. Supplemental Retirement
Plan are intended to supplement benefits provided under the Moog
Inc. Employees' Retirement Plan and benefits received from Social
Security.
The following words and phrases as used herein have the
following meanings:
"Cause" means: any harmful act or omission that
constitutes a willful and a continuing material failure
by the Executive to perform the material and essential
obligations under his Employment Termination Benefits
Agreement (other than as a result of death or total or
partial incapacity due to physical or mental illness);
or the Executive's conviction of a felony, or any
willful perpetration by the Executive of a common law
fraud upon the Company; or any willful misconduct or
bad faith omission by the Executive constituting
dishonesty, fraud or immoral conduct, which is
materially injurious to the financial condition or
business reputation of the Company. Anything in this
definition to the contrary notwithstanding, the
termination of the Executive's employment by the
Company is not considered to have been for Cause if the
termination resulted from: bad judgment or mere
negligence on the part of the Executive; or an act or
omission by the Executive without intending to gain,
directly or indirectly, a substantial personal profit
to which the Executive was not legally entitled; or an
act or omission by the Executive that the Executive
believed in good faith to have been in the interests of
the Company or not opposed to such interests.
"Change of Control" means the transfer in one or
more transactions, extending over a period of not more
than 24 months of Common Stock of the Company
possessing 25% or more of the total combined voting
power of all Class A and Class B Shares of Common
Stock. A transfer shall be deemed to occur if shares
of Common Stock are either transferred or made the
subject of options, warrants, or similar rights
granting a third party the opportunity to acquire
ownership or voting control of such Common Stock.
"Common Stock" means the Class A and Class B $1.00
par value shares of the capital stock of the Company,
as well as all other securities with voting rights or
convertible into securities with voting rights.
"Code" means the Internal Revenue Code of 1986, as
amended and as it may be amended.
"Company" means Moog Inc., as well as any
successors or assigns of Moog Inc., whether by
transfer, merger, consolidation, acquisition of all or
substantially all of the business assets, change in
identity, or otherwise by operation of law and for
purposes of employment of an Executive shall also mean
any parent, subsidiary or affiliated entity to whom
Executive's services may be assigned.
"Compensation Committee" means the Executive
Compensation Committee of the Board of Directors of the
Company (the "Board"), as it is constituted from time
to time.
"Disability" means the inability of Executive to
perform a substantial portion of his duties for a
continuous period of 6 months or more.
"Employment Termination Benefits Agreement" means
the written agreement between the Company and the
Executive providing the terms and conditions of the
Executive's employment as a member of the Company's
management.
"Executive" means an employee of the Company who
participates in the Moog Inc. Employees' Retirement
Plan, who is an officer of the Company and who is a
party to an Employment Termination Benefits Agreement.
"Involuntary Termination of Employment" means a
severance of the Participant's employment relationship
prior to age 65, other than for death, Disability,
Retirement, or Cause, by or at the instigation of
Company or by or at the instigation of Participant
where Participant's pay has been diminished or reduced
to a greater extent than any diminution or reduction of
Company's Executives generally, or where there has been
a Change of Control, Involuntary Termination of
Employment shall also include a termination of the
employment relationship by Participant (whether before
or after age 65), within two years of the Change of
Control, in those circumstances where the duties,
responsibilities, status, base pay or perquisites of
office and employment have been diminished or
downgraded, or substantially increased (other than base
pay) without Participant's actual or implied consent;
provided, however, that a general increase or decrease
in base pay which is approved by a majority of those
Participants who are parties to Employment Termination
Benefits Agreements will be considered as having been
consented to for purposes of this Plan.
"Moog Inc. Employees' Retirement Plan" means the
Moog Inc. Employees' Retirement Plan, as amended and
restated effective as of January 1, 1989, as amended
and as it may be amended, or any successor Company
Retirement Plan, as in effect as of the date that a
benefit is calculated under the Plan.
"Participant" means an Executive who is a
Participant in the Plan pursuant to Article II. The
word "Participant" includes a person who has ceased to
actively participate in the Plan but who has not
received payment of all of his Plan benefits.
"Plan" means the Moog Inc. Supplemental Retirement
Plan, as set forth herein and as it may be amended.
"Retirement" means the election of Executive to
retire from active employment with Company at the end
of the month in which Executive attains 65 years of age
or thereafter. Retirement shall also mean a similar
election by Executive prior to age 65, where Executive
elects to receive early Retirement benefits under the
Moog Inc. Employees' Retirement Plan.
"Spouse" means a surviving spouse receiving
benefits, if any, payable under the Moog Inc.
Employees' Retirement Plan because of the death of a
Participant, and includes a spouse receiving either
pre-retirement surviving spouse benefits or survivor's
benefits because of the form of payment elected by the
Participant under the Moog Inc. Employees' Retirement
Plan.
"Supplemental Benefit" means the income, if any,
payable to a Participant or Beneficiary pursuant to
Article III of the Plan.
"Year of Service" has the same meaning as defined
in the Moog Inc. Employees' Retirement Plan for benefit
accrual purposes.
The Plan shall be operated under the direction of the
Compensation Committee, which shall have all authority and powers
necessary to administer the Plan and construe the Plan terms,
make factual determinations, resolve any ambiguities or
inconsistencies, determine eligibility for participation or
benefits, and decide all questions arising in the Plan
administration, interpretation or application; provided, however,
that all such actions or decisions made after a Change of Control
shall be subject to a de novo standard of judicial review.
While the Company expects to continue the Plan
indefinitely, it reserves the right to amend the Plan at any time
and from time to time or to discontinue the Plan at any time, by
action of its Board. No amendment or discontinuance of the Plan
shall impair or adversely affect any benefits accrued under the
Plan as of the date of such action, except with the consent of
the Participant or Spouse entitled to receive such benefits. In
the event of an amendment of the Plan affecting benefits, or
discontinuance of the Plan, the interest of each Participant
shall be determined as if each Participant retired as of the date
of such amendment or discontinuance; provided, however, that in
the event of such an amendment or discontinuance after a Change
of Control, the Plan shall continue and benefits shall continue
to accrue under the Plan, based on the terms of the Plan as of
the date preceding such action, for all individuals who are
Participants or Spouses on such date.
ARTICLE II
Eligibility
Each Executive shall be a Participant eligible for
Supplemental Benefits pursuant to Article III of the Plan,
provided the Executive has at least ten continuous Years of
Service with the Company and (except as provided in Article VIII)
elects Retirement; provided, however, that at the time of
Retirement, the Participant must have attained (1) age 65 or
later or (2) age 60 or later with a combined total of age and
Years of Service with the Company at least equal to 90; provided,
further, that Supplemental Benefits shall be payable to an
Executive who receives benefits under the Moog Inc. Employees'
Retirement Plan because of Disability, without regard to such
Participant's eligibility for early or normal Retirement benefits
under this Plan. Supplemental Benefits shall be payable to a
Spouse who receives pre-retirement surviving spouse benefits
under the Moog Inc. Employees' Retirement Plan because the
Executive died before commencing benefit payments under the Moog
Inc. Employees' Retirement Plan.
Eligibility for the benefits of this Plan is limited to
Executives of the Company and does not extend to officers or
executives of any affiliate or subsidiary.
ARTICLE III
Benefits
For an Executive with twenty-five or more Years of
Service with the Company, the Supplemental Benefit payable to the
Executive under this Plan (determined based on the payment form
elected under the Moog Inc. Employees' Retirement Plan) shall
equal the excess, if any, of "(a)" over "(b)" + "(c)" where
"(a)" is sixty-five percent of the average of the highest
consecutive three-year base salary paid to such Executive prior
to retirement, "(b)" is the benefit that would be paid to such
Executive under the Moog Inc. Employees' Retirement Plan at
age 65, and "(c)" is the primary Social Security benefit of such
Executive at age 65. For an Executive with 10-24 Years of
Service, "(a)" will be determined according to the following
schedule:
Years of Service (a) Total Combined Benefit Target
24 64%
23 63%
22 62%
21 61%
20 60%
19 59%
18 58%
17 57%
16 56%
15 55%
14 54%
13 53%
12 52%
11 51%
10 50%
Early payment of Supplemental Benefits under this Plan
shall be made to an Executive who elects earlier Retirement under
the Moog Inc. Employees' Retirement Plan; provided, however, that
no early payment shall be made unless the Executive's Retirement
is at age 60 or later with a combined total of age and Years of
Service with the Company at least equal to 90; provided, further,
that the Supplemental Benefits payable under this Plan shall be
reduced by the early payment actuarial discount established under
the Moog Inc. Employees' Retirement Plan for the commencement of
benefits before age 65. Notwithstanding the foregoing,
Supplemental Benefits shall be payable to an Executive who
receives benefits under the Moog Inc. Employees' Retirement Plan
because of Disability, without regard to such Participant's
eligibility for early or normal Retirement benefits under this
Plan.
In the event of commencement of Supplemental Benefits
prior to attainment of age 62, the Supplemental Benefit payable
under this Plan shall include a Social Security "bridge" payment
equal to the amount of the Social Security benefit at age 62,
until such time as the Executive attains age 62.
In the event of commencement of Supplemental Benefits
between age 62 and age 65, the Social Security benefit amount to
be used in determining the Supplemental Benefit payable under
this Plan shall be the Social Security benefit amount payable on
the actual date of Retirement.
A Spouse shall receive a payment of Supplemental
Benefits determined by applying the above benefit formula if, and
to the extent that, the Spouse receives pre-retirement surviving
spouse benefits under the Moog Inc. Employees' Retirement Plan
because the Executive died before commencing benefit payments
under the Moog Inc. Employees' Retirement Plan; provided,
however, that if the Executive had not attained age 65 when he
died, the Supplemental Benefits shall be determined as if the
Executive attained age 65 on the day before his death.
Supplemental Benefits under this Plan, to which a
Spouse is entitled pursuant to the preceding paragraph, shall be
paid to a Spouse who receives pre-retirement surviving spouse
benefits from the Moog Inc. Employees' Retirement Plan before the
Participant would have attained age 65; provided, however, that
the Supplemental Benefits payable under this Plan shall be
reduced by the early payment actuarial discount established under
the Moog Inc. Employees' Retirement Plan for the commencement of
benefits before age 65.
ARTICLE IV
Time and Form of Benefit Payment
Any benefit under this Plan shall be paid to the
Participant, or his Spouse, at the same time and in the same form
and manner as benefit payments are made to, or on behalf of, the
Participant or Spouse under the Moog Inc. Employees' Retirement
Plan, except as otherwise provided in Article III.
ARTICLE V
Funding
This Plan shall be maintained as an unfunded Plan which
is not intended to meet the qualification requirements of
Section 401 of the Code. All benefits under this Plan shall be
payable solely from the general assets of the Company and a
Participant or Spouse shall have only the rights of a general
unsecured creditor of the Company. No benefits under this Plan
shall be payable from the trust fund maintained under or in
accordance with the provisions of the Moog Inc. Employees'
Retirement Plan. The Company, however, has established a grantor
trust, to which the Company makes contributions from time to time
in accordance with the terms of the Trust Agreement.
ARTICLE VI
Effective Date
The Effective Date of this Plan shall be October 1,
1978. The Effective Date of the amendment and restatement of
this Plan shall be November 11, 1999, and the amended and
restated terms of the Plan shall apply to only Participants
employed by the Company on or after the Effective Date of the
amendment and restatement.
ARTICLE VII
Agreement Not to Compete
Payment of benefits under this Plan is contingent upon
the Participant's agreement not to directly or indirectly engage
in or compete with the business of the Company, either as owner,
partner or employee for a period of the later to occur of the
expiration of three years after Retirement or the attainment of
65 years of age. In the event a Participant shall compete with
the business of the Company, payment of benefits under this Plan
shall be suspended so long as such Participant engages in
activity deemed to be in competition with the business of the
Company. Notwithstanding the foregoing, this Article VII shall
not apply to a Participant after the Participant's Involuntary
Termination of Employment by virtue of a Change of Control.
ARTICLE VIII
Benefits Upon Certain Terminations or Change of Control
The provisions of this Article VIII shall apply only
where there has been an Involuntary Termination of Employment or
a Change of Control.
Upon an Involuntary Termination of Employment, other
than by virtue of a Change of Control, a Participant who would be
eligible to receive benefits under this Plan if he was then
age 65 or more, shall be vested in his benefits under this Plan
upon such Involuntary Termination of Employment and, upon
attainment of age 65, shall receive such benefits determined as
follows: the benefit payable at age 65 shall be determined under
Article III using the average of the highest consecutive
three-year base salary paid prior to such Involuntary Termination
of Employment, instead of such average for the base salary paid
prior to Retirement, subject to further adjustment by reducing
the combined benefit target of Article III by one percent for
each year of the Participant's age under 65 at the time of such
Involuntary Termination of Employment. For example, a
Participant age 45 at the time of such Involuntary Termination of
Employment, with 15 Years of Service to the Company, upon
attaining age 65, would have a combined benefit target of
44 percent (55 percent - (55 percent x 20 percent) = 44 percent)
instead of the combined benefit target of 55 percent that would
be payable if the Participant were then 65 years of age with
15 Years of Service.
Upon a Change of Control, a Participant who would be
eligible to receive benefits under this Plan if he was then
age 65 or more, shall be vested in his benefits under this Plan
upon such Change of Control and, upon attainment of age 65, shall
receive such benefits determined as follows: the benefit payable
at age 65 shall be determined under Article III using the greater
of the average of the highest consecutive three-year base salary
paid prior to such Change of Control or such average for the base
salary paid prior to Retirement.
ARTICLE IX
Miscellaneous
Social Security: Any increases in Social Security
benefits payable to a Participant after Retirement shall not be
considered in determining any benefits payable under this Plan.
Nonassignability: No benefit under this Plan shall be
assigned or alienated, or be subjected by attachment or otherwise
to the claims of creditors of any Participant or Spouse.
Nonguarantee of Employment: This Plan shall not be
construed as giving any Participant the right to be retained in
the employment of the Company.
Death Benefits: Except as provided in Article III
(with respect to the payment of benefits under this Plan to a
Spouse because pre-retirement surviving spouse benefits are
payable under the Moog Inc. Employees' Retirement Plan) or
Article IV (with respect to the payment of benefits under this
Plan to a Spouse because of the form and manner of benefit
payments elected by the Participant under the Moog Inc.
Employees' Retirement Plan), there shall be no death benefit
payable under this Plan.
Deferred Retirement: In the event that a Participant
elects a deferred Retirement date after age 65, the amount of
benefit payable under this Plan at Retirement shall not be
adjusted other than as provided by the benefit formulas in
Article III.
Attorney's Fees: In the event that any dispute or
difference arising under or in connection with this Plan results
in arbitration or litigation, Company shall reimburse Executive
for all reasonable Attorney's Fees and expenses if Executive
prevails in such proceeding.
<PAGE>
Exhibit 13
MOOG
1999 Annual Report
The Power of Perfect Motion
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.
Content:
Financial Highlights 1
Letter to Shareholders 2
Moog Technology 4
Military Aircraft and
Commercial Aircraft 6
Satellites & Launchers 10
Industrial Automation 14
eMoog.com 18
Board of Directors 20
Form 10K 21
Investor Information 50
Financial Highlights
(dollars in thousands except
per share data)
Net Sales
1999 $630,034
1998 $536,612
1997 $455,929
1996 $407,237
1995 $374,284
Net Earnings
1999 $24,431
1998 $19,268
1997 $13,606
1996 $10,709
1995 $7,761
Net Earnings Per Share
1999 $2.70
1998 $2.26
1997 $1.88
1996 $1.40
1995 $.99
Total Assets
1999 $798,476
1998 $559,325
1997 $490,563
1996 $449,558
1995 $424,957
Indebtedness - Senior
1999 $256,110
1998 $85,614
1997 $118,245
1996 $91,262
1995 $170,361
- Subordinated
1999 $120,000
1998 $120,000
1997 $120,000
1996 $120,000
1995 $19,400
Shareholders' Equity
1999 $211,770
1998 $191,008
1997 $114,191
1996 $104,743
1995 $108,636
Capital Expenditures
1999 $26,439
1998 $22,688
1997 $13,713
1996 $10,885
1995 $10,232
Depreciation and Amortization
1999 $30,602
1998 $22,665
1997 $21,267
1996 $19,632
1995 $19,675
Backlog
1999 $336,857
1998 $314,253
1997 $280,364
1996 $243,310
1995 $237,941
Graphs inserted which show consolidated sales, operating profit
and net earnings in millions of dollars as follows:
FY1999 FY1998 FY1997
Sales 630 537 456
Operating profit 73 59 51
Net earnings 24 19 14
<PAGE>
Chairman's Letter
Fiscal Year 1999
Shareholders, Employees and Friends:
Fiscal '99 was the fifth straight year of double-digit earnings
growth for Moog. Net earnings and earnings per share increased
24% and 19%, respectively, on a 17% sales increase.
Our results were all the more remarkable when contrasted with
disappointments experienced by some of our aerospace industry
customers and peers. Aviation Week, in its Market Focus column,
described our performance as being "in sharp contrast" to other
aerospace subcontractors. Our '99 experience differed for several
reasons. Let's focus on four.
First of all, we take our highly refined technical specialties to
a variety of diverse markets. Our success depends on conditions
in defense, commercial aerospace, and many industrial sectors in
the U.S. and overseas. This year, weakness in the production of
commercial airplanes, telecommunication satellites and injection
molding machines was offset by strength in satellite launch
vehicles, missile defense systems and turbine controls. Overseas,
our results in Europe were much improved and our turnaround in
Asia was amazing.
Secondly, in early '99, we closed on three acquisitions: Hydrolux
Sarl, Microset srl and the Montek division of Raytheon Aircraft.
Montek had a larger impact on fiscal '99 than anything else. The
additional revenues provided a big increase in our Aircraft group
despite the production of fewer airplanes at Boeing and the end
of deliveries on the F-15 and the B-2.
Thirdly, we have a carefully maintained discipline for providing
visibility at all management levels on cost and contract
performance. We don't like surprises. We know from experience
that when a problem exists, the facts are known at some level in
the organization. Our process illuminates a problem as soon as it
occurs so that all our Company's resources can be brought to
bear.
Lastly, and most importantly, our '99 results were achieved
because we have an extraordinary organization of people who are
experienced and dedicated, and willing to make personal
sacrifices to get the job done and, in '99, they did. Let's
review some of the highlights.
Early in '99, we signed three very important multi-year contracts
with Boeing. The biggest was an agreement that covers deliveries
of all our commercial airplane products through 2008. It
establishes pricing for the existing portfolio of products,
including those that came with Montek, and it includes new
business as well - the trailing edge transmissions on the 777 and
the leading edge actuators for the 767. This new business will
largely offset the slightly lower production rates for Boeing's
7-series aircraft in fiscal 2000.Taken altogether, this contract
could approach $700 million. The next contract covered 170
shipsets of flight controls for the V-22 Osprey, delivered over
six years. It will exceed $200 million. Lastly, our future in the
helicopter business was stabilized by a $15 million contract for
delivery of flight controls for six shipsets of pre-production
RAH-66 Comanches.
We'll go a long way to win a new job in the military aircraft
business. In '99, we won the maneuvering leading edge on the
Korean KTX-2 Trainer. The initial contract is worth $6.7 million,
but it'll be worth $30 million if all 99 aircraft are built.
Buying Montek stimulated a new emphasis for us on regional
aircraft and business jets. The acquisition brought us spoiler
actuators on the Raytheon Premier and an entire suite of flight
control actuation on Raytheon's Hawker Horizon. A few months
after the acquisition, we won all the flight control actuation on
Bombardier's Continental. We're hopeful that these new
relationships with Raytheon and Bombardier will develop as a
strong complement to our positions at Boeing and Lockheed.
Overall, our Aircraft revenues increased by 19% in '99, and we
maintained margins in spite of heavy research and development in
the Joint Strike Fighter. Aftermarket continued to build,
amounting to nearly 35% of Aircraft segment revenues. Sales in
our Satellite and Launch Vehicle segment were up 18% in fiscal
'99, fueled by increases in steering controls for launch
vehicles, particularly Titan IV and Delta IV. In addition, we
were awarded contracts to develop steering controls for the
National Missile Defense Launch Vehicle and flight controls for
the Space Station Crew Return Vehicle. Although Montek's revenues
are mostly aircraft-related, they include some tactical missile
programs like Hellfire, TOW, and AGM-142.
Within the same segment, satellite sales for propulsion controls,
solar array drives, and antenna pointing mechanisms were a
disappointment in fiscal '99. Commercial failures of Iridium(tm)
and ICO slowed the development of further LEO constellations,
perhaps indefinitely. Nevertheless, in fiscal 2000 we're looking
for an upturn in satellite revenues because of a new award on the
Lockheed Martin A2100 bus and a long term supply agreement with
DASA in Europe.
Overall, our Industrial business grew 15% in '99. Much of the
growth came from the Hydrolux and Microset acquisitions. Beyond
that, we saw impressive and sustainable growth in power
generating turbine controls. Sales to customers building plastics
forming machines, including Husky, were slower than we hoped but
are expected to improve in 2000. Also in '99, we delivered 22
mobile motion simulators for MCA-Universal's Spiderman attraction
at their Islands of Adventure Theme Park. These are remarkable
machines choreographed to Universal's extraordinary visual
effects. They provide theme park customers with experiences
described by enthusiasts as "unforgettable".
We look forward to the next century with optimism and confidence.
Consolidation in aerospace and in many industrial sectors has
strengthened our market position. Our acquisitions have broadened
what we offer to many key customers and are part of the reason
that, since '96, our revenues have increased by 50%.In terms of
operational performance, market position, and the achievement of
financial targets, we're delighted with the progress to date.
The one major disappointment in our overall picture is the price
of our A stock. In January of '98, having just reported fiscal
'97 results of $1.88 per share, we issued 1.8 million new shares
at $34 3/8. In this report, we're describing results that are a
43% improvement over '97, and, if we were enjoying a similar P/E
ratio, we'd see a stock price of close to $50 per share.
There may be several factors responsible for our P/E compression,
but we think there are three major ones. We believe that
disappointing results by some industry leaders in aerospace have
pushed our sector out of favor. We're hopeful that, with the help
of Aviation Week and a number of highly regarded industry
analysts, Moog will be recognized as an exception.
Secondly, we share the fate of many well-performing small cap
companies, ignored for the time being by some of the major
investment funds. We believe the time will come when the market
will look more favorably on small caps.
Finally, we have not yet been swept up in the dot com euphoria.
The world is just learning of the capabilities of our web site -
www.moog.com. Page 18 of this report describes our e-commerce
capabilities. When users discover that they can specify and
select servovalves and electric actuators on our web site, we'll
probably have to change our name to eMoog.com, and then the sky
will be the limit.
Respectfully submitted,
R. T. Brady
<PAGE>
Moog Technology
Everyone appreciates the breathtaking advancement in computers
and 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 products 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: 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.
This cutaway of an actuator shows the piston which moves inside
the cylinder in response to the pressure and flow control of the
servovalve. The piston extends and retracts, providing the motion
or force commanded by the computer.
Military and Commercial Aircraft
Moog is the dominant supplier of primary and secondary flight
control actuation on U.S. military aircraft. In recent years, our
market share has been increasing due to our positions on the V-22
and the F-18, and our potential on the Joint Strike Fighter. In
commercial airplanes, our position is similarly dominant at
Boeing, and we have recently stepped up our pursuit of regional
and business jets at Bombardier and business jets at Raytheon. In
the U.S., our revenues will continue to grow because of our
increasing market share and our strength in aftermarket revenues.
Military Aircraft: 22% of '99 sales/FY'00 Forecast Sales: $144
million
Commercial Aircraft: 26% of '99 sales/FY'00 Forecast Sales: $165
million
Military and Commercial Aircraft
Products
- - Primary and secondary flight control actuation using hydraulic,
mechanical and electrohydrostatic technologies
- - Flight control servovalves
- - Engine control servovalves and servoactuators
- - Stabilizer trim controls and elevator feel systems
- - --Active vibration control systems
- - --Wingfold and weapons bay actuation systems
Major Programs
Military Aircraft:
- - F/A-18E/F, V-22, F-16, Japanese F-2, Korean KTX-2, Joint Strike
Fighter, C-27J, C-295, Tornado, Eurofighter-Typhoon
Large Commercial Airplanes:
- - Boeing 737, 747, 757, 767,777, Airbus A330, A340
Regional Aircraft:
- - DHC-8-400
Business Jets:
- - Citation X, Premier 1, Hawker Horizon, Gulfstream IV,
Continental, Challenger 601
Military and Commercial Helicopters:
- - Blackhawk, Seahawk, RAH-66, EH-101, S-92
Military Engine Controls:
- - F-404, F-414, F-110, F-119,EJ200, AE2100, T406,RTM322
Commercial Engine Controls:
- - CF-6, GE90, V2500, RB211 and Trent, Honeywell APU's, PW 901
Competitive Advantages
- - Unparalleled experience in design of primary and secondary
flight control actuation, both in the U.S. and overseas
- - Complete actuation system integration capability
- - State-of-the-art technology in flight controls, engine controls
and active vibration
- - World-class manufacturing facilities staffed with
skilled,experienced and dedicated work force
- - Focused, highly-responsive aftermarket support organization
Competitors
Electrohydraulic Actuation:
- - Parker Hannifin, Teijin Seiki, Dowty
Mechanical Actuation:
- - Curtiss-Wright, Dowty
Strategies & Initiatives
- - Maintain leading-edge technology in flight control, engine
control and active vibration controls
- - Align business plans with customer objectives
- - Partner with prime contractor R&D centers
- - Continue emphasis on reduced development cycle for new products
- - Continue pursuit of process improvement and cost reduction
- - Maintain the world's most responsive aftermarket support
services
Market Developments
- - The F/A-18E/F and the V-22 continue to ramp up in production
- - Boeing production rate stabilizes at sustainable level
- - Awarded new work on Boeing's 767 and 777
- - Regional aircraft and business jets become the near-term growth
opportunity
- - Awarded primary and secondary flight controls on the Bombardier
Continental business jet
- - Success on both Joint Strike Fighter Concept Demonstrator
programs insures long-term position
Graphs inserted which show Aircraft sales and operating profit in
millions of dollars as follows:
FY1999 FY1998 FY1997
Sales 302 254 226
Operating profit 37 29 31
Satellites and Launch Vehicles
17% of '99 sales/FY'00 Forecast Sales: $111 million
Sales grew 18% in the Satellites and Launch Vehicles business in
fiscal '99.
Fueling the increase was a surge in revenues for launch vehicles
and missiles, which more than offset the general slowdown in
satellite construction. During the year, we won positions
on National Missile Defense and the Space Station Crew Return
Vehicle as well as additional applications on the Lockheed Martin
A2100 satellite bus. In addition, Moog's divert and attitude
control valves played a critical role in the successful
intercepts by both the THAAD and EKV missiles.
These successes and opportunities, coupled with a relatively
stable ongoing business, support our optimism for fiscal 2000.
Satellites and Launch Vehicles
Products
- - Thrust vectoring controls for engines on launch and space
vehicles
- - Fin controls for missiles
- - Thruster valves, isolation valves, regulators and integrated
manifolds for satellite propulsion control
- - Electric propulsion propellant management systems for
satellites
- - Solar array drives and antenna pointing mechanisms
Major Programs
Satellite Propulsion:
- - HS-601, HS-702, A2100,FS1300, Eurostar, Spacebus,IridiumTM,
GlobalStar
Launch and Space Vehicle Steering and Propulsion Controls:
- - Titan IV, Atlas Centaur, Ariane, Trident II, Space Shuttle,
Delta IV, Pegasus, Taurus, National Missile Defense, Space
Station X38 Crew Return Vehicle, Hyper X Space Plane
Missile Steering Controls:
- - SM2-IV, VLASROC, Maverick, Patriot, Aspide, Sea Dart, Penguin,
Aster 15 and 30, Apache, Storm Shadow, Arbizon, MQM 170-B, C-22
Drone, KEPD 350, Hellfire, Longbow, THAAD, EKV, AGM-142, TOW
Space Station Components:
- - Fluid quick disconnects, truss assembly actuators,fluid
transfer couplings
Electric Propulsion:
- - Propellant Management Assembly for Loral
- - NASA Deep Space One Xenon Feed System
- - Hughes XIPS Regulator
- - Xenon resistojet and cathode development
Satellite Motion Control:
- - IridiumTM solar array drives
- - Japanese Experimental Module Intersatellite Communications
System
- - ILAS and GLI instruments on ADEOS 2
Competitive Advantages
- - Unparalleled experience in design and manufacture of launch
vehicle steering controls and satellite propulsion controls
- - Leading edge technology in electric propulsion
- - The most extensive experience in actuation for deploying
satellite solar arrays and antennas
- - World-class manufacturing facilities staffed with
skilled,experienced and dedicated work force
Competitors
Launch Vehicle and Missile Steering Controls:
- - Honeywell, HR Textron, Parker, Lucas
Satellite Propulsion Controls:
- - Vacco, Wright Components
Launch Vehicle Propulsion Controls:
- - Marotta, Ketema
Satellite Motion Control:
- - Tecstar, Honeywell, MPC
Market Developments
- - National Missile Defense has become a high priority for DoD
- - The EELV competition between Delta IV and Atlas V begins - Moog
is baselined on both teams
- - Prospects for LEO satellite constellations fade and GEO
satellite construction stabilizes
- - We've signed a long term supply agreement with DASA in spite of
export license issues
Strategies & Initiatives
- - Continue the advance of electromechanical capability for launch
vehicles and missiles
- - Increase use of automated test stands to reduce costs
- - Continue implementation of next-generation cleanliness
equipment and techniques
- - Move from components to sub-systems in GEO satellite
construction
- - Support satellite and launch vehicle manufacturers on a
worldwide basis
Graphs inserted which show Satellites and Launch sales and
operating profit in millions of dollars as follows:
FY1999 FY1998 FY1997
Sales 110 94 66
Operating profit 13 10 9
Industrial Automation
Moog began manufacturing industrial products 40 years ago.In
1959, we introduced our first industrial servovalve which has
become the world's standard for high-performance hydraulic
actuation. Over the years, we migrated upstream to produce the
electronic controls for servo systems, and then expanded our base
to include electric drives and electromechanical systems. Today,
we provide both standard and customized servovalves and electric
drives as components, as well as integrated hydraulic and
electromechanical sub-systems. Many of our customers are global
market leaders in particular product specialties and many are
increasing their global market share, continuing to grow in spite
of fluctuations in market conditions for capital goods.
Industrial Hydraulics: 24% of '99 sales/FY'00 Forecast Sales:
$163 million
Electronics and Drives: 11% of '99 sales/FY'00 Forecast Sales:
$77 million
Industrial Hydraulics, Electronics and Drives
Products
Hydraulics:
- - Every type of servovalve and proportional valve
- - Actuation packages - high performance and conventional
cylinders
- - Customized, integrated manifold packages
Electromechanical:
- - --Brushless servomotors and programmable servodrives
- - --Electromechanical servoactuator packages(linear and rotary)
- - --Electronic controls for specialized automated machinery
- - --Electrically actuated motion simulators and platforms
Major Applications
Hydraulics:
- - Electrical feedback servovalves for control of clamp and
injection operations on plastic injection molding equipment
- - Mechanical feedback and direct drive valves for parison
control, and electrical feedback valves for motion control in
plastic blow molding machines and for control of rolls in paper
machinery
- - Fuel metering and vane actuation controls for gas turbines
- - --Steam bypass and override controls for steam turbines
- - --Hydraulic actuators and servovalves for fatigue testing
systems
- - --Electrical and mechanical feedback servovalves for coil box,
gauge control, mold oscillator, side guide and down coiler
control of steel and aluminum mill equipment
- - --Control loading and motion platform actuators for flight
training and entertainment simulators
- - --Vane and nozzle positioning of water turbines
- - --Formula 1 race car control systems
- - --Six-degree-of-freedom entertainment motion platforms with
2,000 to 9,000 pounds of capacity
Major Applications
Electromechanical:
- - Electric drives for assembly robots, metal forming machines,
material handling robots and packaging machines
- - Custom controls for Tuftco carpet tufting machines
- - Full performance total machine controllers for injection
molding and blow molding machines
- - --Electric gun positioning,ammunition-handling, and radar
platform actuation for military vehicles
- - --Tilting controls for high-speed trains
- - --Four- and six-degree-of-freedom motion platforms with
capacities between 2,000 and 13,000 pounds for the entertainment
and vehicle training markets
- - --Special entertainment platforms for theme parks
- - --Electric actuation for control of injection and blow molding
machines
- - --Vane positioning in gas turbines
- - --Adaptive control for automatic profiling in injection molding
Competitive Advantages
- - Leading edge technology in industrial automation
- - Worldwide application engineering to optimize custom solutions
- - Focus on product reliability supported by worldwide service
facilities
- - World-class manufacturing facilities staffed with skilled,
experienced and dedicated work force
Competitors
Servovalves:
- - Bosch, Rexroth
Electric Drives:
- - Indramat, Pacific Scientific, Custom Servo Motors, Kollmorgen
Electronic Controls:
- - Siemens, Barber Colman, Gefran
Electric Simulators:
- - Fokker, Hydrodyne
Strategies & Initiatives
- - Continue development of leading edge technology
- - Pursue forward integration of products in selected market
applications
- - Consolidate production in global manufacturing centers
- - Focus factories and processes to shorten lead times
- - Expand global capabilities for support and service
Market Developments
- - European sales stabilize and Asia recovers faster than
anticipated
- - Turbine controls provide fastest revenue growth
- - Growth in plastics machine market slows and shift begins from
hydraulic to electromechanical controls
- - Train tilting for high speed trains goes electric
- - MCA-Universal and Disney begin shift to electric actuation
Graphs inserted which show Industrial sales and operating profit
in millions of dollars as follows:
FY1999 FY1998 FY1997
Sales 218 189 164
Operating profit 23 20 11
eMoog.com
eMoog.com
With all the attention paid these days to e-commerce and the
internet, it seems timely to describe our current state in
information management. We've organized the summary in three
sections: Enterprise Resource Planning, CAD/CAM, and Net
Communications.
ERP: ENTERPRISE RESOURCE PLANNING
Ten years ago, before ERP was a term of art, Moog set out to
develop an information infrastructure that would tie together our
20 worldwide locations. It would integrate sales, engineering,
manufacturing, quality assurance, cost management and finance. It
had to satisfy public accounting standards for SEC reporting and
government accounting standards for long term government
contracting.
A multi-function team analyzed the Company's needs, researched
the available software, and selected a basic package provided by
Western Data Systems. The original installation and modification
of the WDS package took two years. Since then, the Moog Business
System has been installed in our acquired companies and in the
largest of our overseas facilities. Our objective of integrating
our Company on one set of systems is close to complete. We now
have in place the information infrastructure that many companies
are just now spending millions to emulate.
CAD/CAM
While we've been perfecting the ability of Moog's Business System
to schedule, monitor, and report activities within the Company,
another computer-based evolution has come of age. We began
Computer-Aided Design (CAD) over 20 years ago. In 1988, we began
our second-generation implementation. We committed our Company to
Unigraphics and began integrating the CAD portion with
Computer-Aided Manufacturing (CAM) in a serious way. The
objective has finally been achieved wherein a design engineering
team, including the designer, manufacturing engineer, quality
engineer, and assembly and test specialist, and sometimes the
cell machinist who will make the part, can huddle around CAD
stations and jointly design a mechanical part. The design will be
downloaded directly to an NC machine and chips will be cut
without ever committing the design to paper. The evolution of
this process is as much cultural as technological. The result is
that the cycle time to design and develop flight control
actuators for the Joint Strike Fighter was reduced by over 50%.
WORLD WIDE WEB
Since we think of ourselves as an engineering-based manufacturing
company that solves difficult motion control problems in direct
contact with customers, it wasn't clear how much benefit we would
gain when we first published - www.moog.com. However, our web
site has grown from a simple collection of financial materials
such that we now offer on-line modeling of servovalves and
electric actuators. A number of our standard products can be
selected for purchase anywhere in the world simply by entering
our web site. So, we're joining the e-commerce generation hoping
that some of the dot-com glamour spills over onto our P/E and our
stock price.
THE EXTRANET
Where are we headed? The next step will be an interactive site
where Moog's engineers will work directly with customers,
exchanging technical details about our products and our
manufacturing processes. Customers will access databases that
will replace cartons of printed data that are often delivered
with our products. Maintenance manuals will be updated on this
site, making the most recent information instantly available.
E-commerce has come to Moog in the same fashion that it's coming
to General Motors and Ford and all of the much-publicized
internet retailers. The potential for improved efficiency in the
interaction between suppliers and customers has only begun to be
tapped. The advances achieved in recent years and available in
the very near future are nothing short of unbelievable. It's an
exciting time.
Directors and Officers
Robert T. Brady
Chairman of the Board
Chief Executive Officer
President
Richard A. Aubrecht
Vice Chairman of the Board
Vice President
Strategy and Technology
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 et al
Donald R. Fishback
Controller
Principal Accounting Officer
James L. Gray
Director
Retired Executive
Joe C. Green
Executive Vice President
Chief Administrative Officer
Director
John D. Hendrick
Director
President,
Okuma America Corporation
Philip H. Hubbell
Vice President
Contracts and Pricing
Stephen A. Huckvale
Vice President
International Group
Kraig H. Kayser
Director
President and CEO
Seneca Foods Corporation
Robert H. Maskrey
Executive Vice President
Chief Operating Officer
Director
Albert F. Myers
Director
Vice President and Treasurer
Northrop Grumman
Peter P. Poth
Director
Retired Executive
Richard C. Sherrill
Vice President
Systems Group
Worldwide Locations
Moog Inc.
Headquarters
East Aurora, New York, USA
Moog Aircraft Group
Salt Lake 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 Argentina
Buenos Aires, Argentina
Moog Australia Pty. Ltd.
Mulgrave, Australia
Moog do Brasil
Controles Ltda.
Sao 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 S.A.R.L.
Rungis, France
Moog GmbH
Boblingen, Germany
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 s.r.l.
Brescia, Italy
Moog Italiana s.r.l.
Malnate, Italy
Moog Japan Ltd.
Hiratsuka, Japan
Moog Hydrolux S.a.r.l.
Luxembourg
Moog Controls
Corporation
Baguio City, Philippines
Moog Korea Ltd.
Kwangju-kun, South Korea
Moog Singapore Pte. Ltd.
Singapore
Moog Sarl
Sucursal En Espana
Orio, Spain
Moog Norden A.B.
Askim, Sweden
<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. 33-20069, 33-36721, 33-36722, 33-33958,
33-62968, 33-57131, 333-73439 and 333-85657) on Form S-8 of Moog
Inc. of our report dated November 4, 1999 relating to the
consolidated balance sheets of Moog Inc. and subsidiaries as of
September 25, 1999 and September 26, 1998, and the related
consolidated statements of earnings, shareholders' equity, and
cash flows and the related schedule for each of the years in the
three-year period ended September 25, 1999, which report appears
in the September 25, 1999 annual report on Form 10-K of Moog Inc.
KPMG LLP
Buffalo, New York
December 21, 1999
<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, 1999 on our audits of the consolidated
financial statements of MOOG GmbH (a wholly-owned subsidiary of
MOOG Inc.) and subsidiary as of September 30, 1999 and 1998 and
for the years then ended, which report is included in this Annual
Report on Form 10-K of Moog Inc.
Stuttgart Germany
December 17, 1999
PricewaterhouseCoopers
<PAGE>
[PricewaterhouseCoopers Letterhead]
12 November 1999
MOOG Inc.
East Aurora, New York 14052-0018
United States of America
Independent Auditors' Report
The Board of Directors
MOOG Inc.
We have audited the consolidated balance sheets of MOOG GmbH (a
wholly-owned subsidiary of MOOG Inc.) and subsidiary as of
September 30, 1999 and 1998, and the related consolidated
statements of earnings and retained earnings and cash flows for
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 the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of MOOG GmbH and subsidiary as of September 30, 1999
and 1998 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 a 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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