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 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to ______________ to _____________
Commission file number 1-5129
MOOG INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-0757636
_______________________________ ____________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
East Aurora, New York 14052-0018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:(716) 652-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
_____________________________________ _________________________
Class A Common Stock, $1.00 Par Value American Stock Exchange
Class B Common Stock, $1.00 Par Value American Stock Exchange
_____________________________________ _________________________
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will be contained, to
the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
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
November 10, 1997 was approximately $188.4 million.
The number of shares of Common Stock outstanding as of the close
of business on November 10, 1997 was: Class A: 5,469,715; Class
B: 1,589,086.
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 27, 1997 (the "1997
Annual Report")
(2) Specific sections of the January 1998 Proxy Statement
to Shareholders (the "1998 Proxy")
_________________________________________________________________
MOOG INC.
FORM 10-K INDEX
_________________________________________________________________
PART I PAGE
Item 1 - Business 18-19
Item 2 - Properties 19
Item 3 - Legal Proceedings 19
Item 4 - Submission of Matters to a 19
Vote of Security Holders
PART II
Item 5 - Market for the Registrant's 19
Common Equity and Related
Stockholder Matters
Item 6 - Selected Financial Data 19-20
Item 7 - Management's Discussion and 21-26
Analysis of Financial Condition
and Results of Operations
Item 8 - Financial Statements and 27-39
Supplementary Data
Item 9 - Changes in and Disagreements with 40
Accountants on Accounting and
Financial Disclosure
PART III
Item 10 - Directors and Executive Officers 40
of the Registrant
Item 11 - Executive Compensation 41
Item 12 - Security Ownership 41
of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and 41
Related Transactions
PART IV
Item 14 - Exhibits, Financial Statement 41-43
Schedules, and Reports
on Form 8-K
Cautionary Statement
Information included or incorporated by reference which are not
historical facts are forward looking statements. Such forward
looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward looking statements involve a number of risks
and uncertainties, including but not limited to, contracting with
various governments, changes in economic conditions, demand for
the Company's products, pricing pressures, intense competition in
the industries in which the Company operates, the need for the
Company to keep pace with technological developments and timely
response to changes in customer needs, and other factors
identified in the Company's Securities and Exchange Commission
filings.
Part I
The Registrant, Moog Inc., a New York corporation formed in 1951,
is referred to in this Annual Report on Form 10-K as "Moog," "the
Company" or in the nominative "we" or the possessive "our."
ITEM 1. Business.
Certain information required herein is contained in part in the
1997 Annual Report, specific pages of which are referred to in
parentheses.
Description of the Company's Business. (See pages 2 through 16.)
Distribution. Moog's sales and marketing organization is
comprised of individuals possessing highly specialized technical
expertise. Such expertise is required in order to effectively
evaluate the customer's precision control requirements and to
facilitate communication between the customer's engineering staff
and the Moog engineering staff. Manufacturers' representatives
are used to cover certain aerospace and selected industrial
markets.
Industry and Competitive Conditions. The Company experiences
considerable competition in each of its five major product lines.
However, the Company is the only precision motion control
specialist which competes globally in all markets and all drive
technologies.
Many of its competitors have greater financial and other
resources than the Company. In Aircraft Controls, the Company's
principal competitors include Parker Hannifin Corporation,
Curtiss-Wright Corp., HR Textron, a subsidiary of Textron, Inc.
("HR Textron"), Teijin Seiki Limited and E-Systems Inc., a
Raytheon company, ("E-Systems"). In Satellites and Launch
Vehicles, the Company's principal competitors are AlliedSignal
Inc. and HR Textron. For the Industrial Hydraulics product line,
competitors are Robert Bosch AG, Mannesmann Rexroth AG and E-
Systems. Competitors in the Industrial Electrics product line
include Barber-Colman Company, Siemens AG, Indramat GmbH, Pacific
Scientific Company and Yaskawa Electric Corp.
Competition in each of the product lines is based upon design
capability, product performance and life, service, price and
delivery time. In certain product lines technological
considerations predominate over price considerations, while in
others price considerations are paramount. The Company believes
it competes effectively on all of these bases.
Backlog. Substantially all backlog will be realized as sales in
the next twelve months. The information required herein is
incorporated by reference to Item 6, Selected Financial Data, on
page 20.
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 31.
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 dependent upon such protection.
The Company's patents and patent applications, including U.S.,
Canadian, European and Japanese patents, relate to
electrohydraulic, electropneumatic and electromechanical
actuation mechanisms and control valves, electronic control
component systems and interface devices.
Research Activities. Research and product development activity
has been and continues to be significant to the Company. The
information required herein is incorporated by reference to Item
6, Selected Financial Data, on page 20.
Employees. The information required herein is incorporated by
reference to Item 6, Selected Financial Data, on page 20.
Segment Financial Information. The information required herein is
incorporated by reference to Notes 10 and 11 of Item 8 on page
37.
Customers. The information required herein is incorporated by
reference to pages 2 through 16 and 37. In aggregate, the Company
markets its products to a wide variety of customers. The Boeing
Corporation (including Boeing Helicopters, McDonnell Douglas and
the former Space and Defense business of Rockwell) represented
approximately 19% of fiscal 1997 sales, with sales to U.S.
government prime- or sub-contractors, including military sales to
Boeing, representing approximately 30% of sales. The
concentration of customers varies within product lines. In the
Commercial and Military Aircraft product lines as well as
Satellites and Launch Vehicles, a few customers provide the
majority of revenues, while in the Industrial Hydraulics and
Industrial Electrics product lines revenues are spread over a
wide customer base.
International Operations. Moog's International Controls segment
is an aggregate of operations located predominantly in Europe and
the Asian-Pacific region. (See pages 2 through 16, 37 and 42.)
The Company's international operations are subject to the usual
risks inherent in international trade, including currency
fluctuations, local governmental foreign investment restrictions,
exchange controls, regulation of the import and distribution of
foreign goods, as well as changing economic and social conditions
in countries in which such operations are conducted.
Environmental Matters. See pages 26 and 38.
ITEM 2. Properties.
Corporate headquarters are located in East Aurora, New York.
Principal manufacturing facilities for the Domestic Controls
segment are located in East Aurora, New York and Torrance,
California. These facilities consist of 755,525 square feet which
are owned, and 53,992 square feet which are under capital lease
and financed primarily by industrial revenue bonds which allow
the Company to purchase the facilities at nominal prices upon
expiration. The Domestic Controls segment leases 187,190 square
feet in East Aurora and 6,155 square feet in Torrance under
operating leases. Outside of the U.S., the Domestic Controls
segment owns manufacturing centers in the Philippines and India
consisting of 63,777 square feet and 31,299 square feet,
respectively.
The International Controls segment maintains major manufacturing
facilities in Germany, England and Japan. Of the major European
facilities, 4,500 square feet are owned and 219,235 square feet
are leased under operating lease agreements. The Japanese
facility, consisting of 67,911 square feet, is owned. A specialty
manufacturing operation with 27,750 square feet which is owned is
located in Ireland. In various other major markets, including
Italy, France, Spain, Sweden, Finland, Denmark, Brazil,
Australia, South Korea, Hong Kong and Singapore, the Company has
sales and applications engineering offices. Of these facilities,
30,027 square feet are owned and 74,977 square feet are leased
under operating leases. Operating leases of the International
facilities expire at varying times from December 1997 through
June 2013.
The Company believes that its properties have been adequately
maintained and are in generally good condition. The Company
currently has plans to add approximately 94,500 square feet and
30,000 square feet of manufacturing capacity between its East
Aurora, New York and Baguio City, Philippines locations,
respectively. After completion of such expansion the Company
believes that its existing facilities will provide sufficient
production capacity for its needs in the foreseeable future. Upon
the expiration of its current leases, the Company believes that
it will be able to either secure renewal terms or enter into
leases for alternative locations at market terms.
ITEM 3. Legal Proceedings.
From time to time, the Company is named as a defendant in legal
actions arising in the normal course of business. The Company is
not a party to any pending legal proceedings the resolution of
which management believes will have a material adverse effect on
the Company's results of operations or financial condition and
liquidity or to any pending legal proceedings other than
ordinary, routine litigation incidental to its business.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend restrictions are detailed in Note 6 on page 33 of Item
8. Other information required herein is incorporated by reference
to pages 20, 43 and 45.
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 1993 - 1997. For a
more detailed discussion of 1995 through 1997 refer to
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 21 through 26 and Notes to
Consolidated Financial Statements on pages 31 through 39.
ITEM 6. Selected Financial Data.
(dollars in thousands except per share data)
Fiscal Years 1997(1), (2) 1996 1995 1994(3), (4) 1993
__________________________________________________________________________________________
RESULTS FROM OPERATIONS
Net Sales $ 455,929 $ 407,237 $ 374,284 $ 307,370 $ 293,680
Earnings before extraordinary
item and cumulative effect of
change in accounting for
income taxes $ 13,606 $ 11,219 $ 7,761 $ 1,618 $ 5,118
Net Earnings $ 13,606 $ 10,709 $ 7,761 $ 2,123 $ 4,761
Per share
Earnings before extraordinary
item and cumulative effect of
change in accounting for
income taxes $ 1.88 $ 1.47 $ 1.00 $ .21 $ .66
Net earnings $ 1.88 $ 1.40 $ 1.00 $ .27 $ .62
Average common and common
equivalent shares outstanding 7,224,612 7,639,312 7,721,927 7,714,444 7,713,465
__________________________________________________________________________________________
FINANCIAL POSITION
Total Assets $ 490,563 $ 449,558 $ 424,957 $ 424,456 $ 318,130
Working Capital 187,521 187,971 166,985 150,850 123,533
Indebtedness - senior 118,245 91,262 170,361 183,376 115,515
- senior
subordinated 120,000 120,000 19,400 20,800 22,082
Shareholders' equity 114,191 104,743 108,636 102,184 92,561
Shareholders' equity per common
share outstanding 16.18 15.01 14.06 13.25 12.00
__________________________________________________________________________________________
SUPPLEMENTAL FINANCIAL DATA
Capital expenditures $ 13,713 $ 10,885 $ 10,232 $ 8,893 $ 10,216
Depreciation and amortization 21,267 19,632 19,675 15,700 15,621
R&D - Company funded 17,798 17,303 15,783 18,668 16,128
- customer funded 14,071 24,411 21,603 25,332 30,986
Backlog - Domestic 236,409 205,516 195,908 181,405 149,035
- International 43,955 37,794 42,033 35,856 32,046
__________________________________________________________________________________________
ADDITIONAL DATA
Number of employees 3,657 3,229 3,003 3,140 2,824
Number of shareholders - Class A 1,722 1,904 2,114 2,424 2,665
- Class B 810 898 966 1,088 1,201
__________________________________________________________________________________________
RATIOS
Net return on sales 3.0% 2.6% 2.1% .7% 1.6%
Return on shareholders' equity 12.4% 10.0% 7.4% 2.2% 5.0%
Current ratio 2.75 2.89 2.76 2.46 2.33
Debt to shareholders' equity 2.09 2.02 1.75 2.00 1.49
Long-term senior debt to
capitalization(5) 30.3% 25.6% 55.5% 56.8% 40.8%
Long-term debt to capitalization(5) 66.0% 65.3% 61.8% 63.7% 51.7%
__________________________________________________________________________________________
(1) Effective in fiscal 1997, the Company changed its fiscal year-end to the last Saturday in September
(September 27, 1997 for fiscal 1997). The impact on the current year results of operations was
not material.
(2) Includes the effects of the October 1996 acquisition of the industrial hydraulic servocontrols
business of International Motion Control Inc. See Note 2 to the Consolidated Financial Statements.
(3) Includes the effects of the June 1994 acquisition of the hydraulic and mechanical actuation product
lines of AlliedSignal Inc.
(4) Includes the effect of pre-tax restructuring charges of $4.7 million.
(5) Capitalization is equal to total long-term debt, excluding current maturities, and shareholders'
equity.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company is a leading worldwide designer and manufacturer of a
broad range of high performance, precision motion and fluid
control products and systems for aerospace and industrial
markets. Moog's servoactuation systems are critical to the
flight control of commercial and military aircraft, positioning
satellites, controlling the thrust of space launch vehicles,
steering tactical and strategic missiles, and a wide variety of
hydraulic and electric industrial applications requiring the
precise control of position, velocity and force.
The Company has two segments, Domestic Controls and International
Controls. Domestic Controls primarily focuses on North American
markets, with the majority of its sales in aerospace-related
product lines. International Controls is focused on markets in
Europe and the Asian-Pacific, with the majority of sales in
industrial product lines.
The Company has five principal product lines. Aerospace Controls
includes Commercial Aircraft, Satellites and Launch Vehicles and
Military Aircraft. Industrial Controls includes Industrial
Hydraulics and Industrial Electrics controls. The Commercial
Aircraft product line provides servovalves and flight controls
for Boeing, Airbus and regional jet aircraft. The Satellites and
Launch Vehicles product line includes satellite positioning
controls and steering controls for launch vehicles, strategic
missiles and tactical missiles. The Military Aircraft product
line provides primary and secondary flight controls and engine
controls for advanced fighters, helicopters and bomber aircraft.
Industrial Hydraulics controls principally consist of servovalves
used in various applications including plastic injection and blow
molding, steam and gas turbines, steel rolling mills and fatigue
testing machines. The Industrial Electrics product line includes
motion simulators, controls for gun and turret positioning on
military ground vehicles and electric drives. In each product
line, significant revenues are generated through Aftermarket
sales, including spares and repairs.
The Company considers strategic acquisitions to enhance market
share or improve engineering and manufacturing capability. On
October 26, 1996, the Company acquired the assets of and assumed
certain liabilities related to the industrial hydraulic
servocontrols business (the U.S. Industrial Hydraulics Business)
of International Motion Control Inc., an unrelated third party,
for $48.6 million. The U.S. Industrial Hydraulics Business, which
operated under the name Moog Controls Inc., was spun off by the
Company in February 1988. The acquisition was principally
financed with proceeds from the Company's U.S. Revolving Credit
and Term Loan Facility (the Bank Credit Facility).
Sales
Aerospace and Industrial Controls sales were 64% and 36% of 1997
sales, respectively. In Aerospace Controls, the Company's sales
are dependent on commercial aircraft demand, procurement and
spending levels on various military programs and the demand for
satellites serving the telecommunications and direct broadcasting
industries. In Industrial Controls, the Company is subject to
changes in capital goods spending cycles in regional markets. The
Company's sales in each product category are subject to different
short and long-term cycles; however, the impact of cyclicality in
sales is mitigated by the diversity of the product lines and the
Company's broad global distribution capabilities.
Sales of Aerospace Controls are typically pursuant to long-term
contracts for which the Company uses the percentage of completion
(cost-to-cost) method of accounting. Under this method, revenues
are recognized as costs are incurred. Estimates of the cost to
complete the contracts are performed on a regular basis. On
contracts for which the estimated factory cost is higher than the
contract's value, a charge to earnings is made, and a loss
reserve created. The Company believes that adequate reserves have
been established.
International Controls sales were approximately 29% of
consolidated 1997 sales. Results of operations can be affected in
U.S. dollar terms by the fluctuation in foreign exchange rates.
Exposure to currency movements can be mitigated by the number of
countries in which the Company operates. Although the Company
does not hedge the operating results of its international
operations, it selectively hedges certain balance sheet
exposures.
Spare parts and repairs are aggressively marketed directly to the
Company's Aerospace and Industrial Controls customers. Sales of
spare parts and repairs are generally more profitable and less
volatile than OEM sales. Aftermarket sales were approximately
19% of 1997 and 1996 sales.
Over the past five years, government sales, as a percentage of
total sales, has declined as the Company has increased its focus
on the development and acquisition of Commercial Aircraft and
Industrial Controls product lines. In 1993, government sales were
57% of consolidated net sales compared to 39% in 1997. The mix of
commercial and government sales is not expected to materially
shift in the near future.
Cost of Sales
The principal elements of cost of sales are direct labor, raw
materials and manufacturing overhead. The Company has a highly
skilled workforce and an infrastructure of engineering and
related support costs. The business requires significant
investments in capital equipment, buildings and related support
costs. Cost of sales can be significantly affected by changes in
both volume and product mix. Accordingly, short-term changes in
volume can have a significant effect on gross margins.
Selling, General and Administrative Expenses
The Company's selling, general and administrative expenses are
generally higher in Industrial Controls compared to Aerospace
Controls. Typically, Industrial Controls has higher gross profit
margins, while requiring higher sales and support efforts.
Accordingly, shifts in the sales mix to or from Industrial
Controls will generally affect total selling, general and
administrative expenses as a percentage of sales. For Aerospace
Controls, selling, general and administrative expenses are also
affected by the extent of bid and proposal work on long-term
programs.
Research and Development
Research and development expenses can vary depending on whether
the engineering staff is engaged in customer-funded design and
development activities or Company-funded design and development
activities. Annual Company-funded research and development
expenses have averaged $17.1 million over the past five years.
Sales related to customer-funded design and development have
averaged $23.3 million, or 6.3% of sales, from 1993 to 1997. The
decline in customer-funded design and development costs in 1997
reflects the transition of certain long-term military programs
from the development phase to production.
Income Taxes
The Company's effective tax rate reflects differing tax rates of
the various countries in which it conducts its business.
Variations in where the Company earns income can have an impact
on the effective tax rate.
Fiscal Year
Effective in fiscal 1997, the Company changed its fiscal year-end
from September 30 to the last Saturday in September (September
27, 1997 for fiscal 1997). The impact on 1997 results of
operations was not material.
MOOG Inc.
Results of Operations
_________________________________________________________________
Fiscal Years Ended
_________________________________________________________________
September 27, September 30, September 30,
(dollars in thousands) 1997 1996 1995
_________________________________________________________________
DOMESTIC CONTROLS
Net sales
Aerospace $ 265,835 $ 249,594 $ 232,525
Industrial 59,031 26,981 21,401
_____________ _____________ _____________
324,866 276,575 253,926
Intersegment sales 13,792 11,912 10,446
_____________ _____________ _____________
Total sales $ 338,658 $ 288,487 $ 264,372
============= ============= =============
Operating profit $ 43,288 $ 32,744 $ 25,242
Backlog 236,409 205,516 195,908
INTERNATIONAL CONTROLS
Net sales
Aerospace $ 25,978 $ 19,382 $ 19,086
Industrial 105,085 111,280 101,272
_____________ _____________ _____________
131,063 130,662 120,358
Intersegment sales 7,887 14,983 4,728
_____________ _____________ _____________
Total sales $ 138,950 $ 145,645 $ 125,086
============= ============= =============
Operating profit $ 7,977 $ 11,796 $ 8,464
Backlog 43,955 37,794 42,033
CONSOLIDATED
Net sales
Aerospace $ 291,813 $ 268,976 $ 251,611
Industrial 164,116 138,261 122,673
_____________ _____________ _____________
$ 455,929 $ 407,237 $ 374,284
============= ============= =============
Operating profit $ 51,369 $ 43,339 $ 33,487
Net earnings 13,606 10,709 7,761
Backlog 280,364 243,310 237,941
_________________________________________________________________
1997 Compared with 1996
Consolidated
Net sales for 1997 were $455.9 million compared with $407.2
million in 1996. The sales improvement is due to increases of
$25.9 million in Industrial Controls and $22.8 million in
Aerospace Controls. The increase in Industrial Controls resulted
primarily from the acquisition of the U.S. Industrial Hydraulics
Business, which added approximately $28 million in revenues
during 1997, and to a lesser extent, increased demand for
entertainment simulators. Industrial Controls sales increases in
Europe and the Asian-Pacific were more than offset by exchange
rate fluctuations, particularly in Germany and Japan. The effect
on Industrial Controls sales of the decline in the value of the
applicable foreign currencies relative to the U.S. dollar was
approximately 8% in 1997 compared to 1996, or approximately $9
million. The sales improvement in Aerospace Controls resulted
primarily from increased volume in the Commercial Aircraft
product line and, to a lesser extent, the Satellites and Launch
Vehicles product line, tempered by expected declines in Military
Aircraft.
Cost of sales for 1997 was 69.2% of net sales, which is
comparable to 1996. Increased volume and product mix in
Aerospace Controls had a favorable effect of approximately $3
million on consolidated cost of sales. The improved Aerospace
Controls gross margin was offset by unfavorable product mix and
adverse changes in foreign currencies in Industrial Controls, in
particular Germany, and, to a lesser extent, costs incurred to
improve the longer-term margins of Industrial Electrics.
Selling, general and administrative expenses were $81.4 million,
or 17.9% of net sales, in 1997, compared to $75.7 million, or
18.6% of net sales, in 1996. The decrease as a percentage of
sales is principally due to growth in sales.
Interest expense increased by $4.6 million to $22.7 million in
1997, as compared to 1996, due primarily to additional
indebtedness incurred for the October 1996 acquisition of the
U.S. Industrial Hydraulics Business.
The 1997 tax rate of 30.5% primarily reflects benefits resulting
from the distribution of earnings from the German subsidiary and
tax incentives associated with U.S. export sales.
Other income decreased by $.8 million to $1.6 million in 1997 as
1996 included $.5 million of license fees received on a foreign
military program.
Other expense in 1997 includes $.4 million of the Company's share
of costs associated with the start-up phase of a joint venture
that manufactures and markets manifolds for OEM machinery, as
well as losses associated with disposals of assets.
Results in 1996 include a $.5 million extraordinary loss, net of
income tax benefit, on the early repayment of debt.
As a result of the previously mentioned factors, net earnings for
1997 increased to $13.6 million, or $1.88 per share, compared
with $10.7 million, or $1.40 per share in 1996.
Domestic Controls
Domestic Controls net sales increased by 17.5% to $324.9 million
in 1997 compared to $276.5 million in 1996. Sales of Industrial
Controls increased by $32.1 million primarily due to the October
1996 acquisition of the U.S. Industrial Hydraulics Business. In
addition, increased sales of entertainment motion simulators of
approximately $6 million contributed to the higher sales of
Industrial Controls. Sales of Aerospace Controls increased by
$16.2 million in 1997 due to growing Commercial Aircraft and
Satellites and Launch Vehicles demand. Sales of flight controls
for Commercial Aircraft to Boeing increased approximately 47%
from a year ago. The demand for cellular phones, pagers and
direct-to-home television has resulted in increased sales of
controls for communication-related Satellites and Launch
Vehicles. These increases were in part offset by expected sales
declines of approximately $12 million in the Military Aircraft
product line as certain programs, particularly the F/A-18 Super
Hornet and V-22 Osprey, were transitioning from the development
phase to low rate initial production.
Operating profit for the Domestic Controls segment was up 32.2%
to $43.3 million for 1997, or 12.8% of segment sales. This
compares with $32.7 million, or 11.4% of segment sales a year
ago. Approximately half of the increase was attributable to
higher Aerospace Controls sales, in addition to a more favorable
product mix in Commercial and Military Aircraft controls.
Industrial Controls accounted for the remainder of the Domestic
Controls operating profit increase primarily due to the
acquisition of the U.S. Industrial Hydraulics Business.
Backlog for the Domestic Controls segment was $236.4 million at
September 27, 1997 compared with $205.5 million at September 30,
1996. The increase from a year ago is due to low rate initial
production orders received on the F/A-18 Super Hornet, V-22
Osprey and Standard Missile 2 programs, growth in orders for
entertainment simulators and the acquisition of the U.S.
Industrial Hydraulics Business. Backlog consists of that portion
of open orders for which sales are expected to be recognized over
the next twelve months.
International Controls
International Controls net sales for 1997 of $131.1 million were
flat as compared to 1996 net sales of $130.7 million despite
lower average currency values. Excluding the changes in currency
values, 1997 sales increased approximately 8%. Sales of
Aerospace Controls, excluding the foreign exchange impact,
increased approximately $7 million in 1997 particularly on the
strength of Military Aircraft controls in the United Kingdom and,
to a lesser extent, missile controls in Italy. Sales of
Industrial Controls increased approximately $4 million in 1997,
excluding the foreign exchange impact, primarily due to improved
sales in the Company's Industrial Electrics product line. Sales
of Industrial Hydraulics controls marginally declined in Europe
and were offset by sales gains in Japan.
Operating profit for the International Controls segment decreased
32.4% to $8.0 million, or 5.7% of segment sales, compared to
$11.8 million, or 8.1% of segment sales, in 1996, primarily
related to Industrial Controls. Margins in Europe were affected
by the movement of certain currencies in countries where the
Company's products are manufactured relative to currencies in
countries where the products are sold. Margins in the Industrial
Electrics product line were affected by approximately $1.5
million of costs incurred throughout the year to better position
plastic systems controls for the long-term. The remainder of the
decline was attributable to a shift in Industrial Controls
product lines to lower margin electric controls, along with a
shift within the Industrial Hydraulics product line away from
higher margin mechanical feedback valves.
Backlog at September 27, 1997 for the International Controls
segment was $44.0 million compared to $37.8 million at September
30, 1996. The increase was attributable to growth in orders for
electric drives for military ground vehicles in Germany and
Industrial Hydraulics in Japan, partially offset by approximately
$4 million attributable to weaker currencies.
1996 Compared with 1995
Consolidated
Net sales for 1996 were $407.2 million versus $374.3 million in
1995. The increase was due to an increase of $17.4 million in
sales of controls for Aerospace applications and an increase of
$15.6 million in Industrial Controls. The increased Aerospace
Controls sales were attributable to increased volume in controls
for Commercial and Military Aircraft and Satellites and Launch
Vehicles, while Industrial Controls increased as a result of
improved sales of Industrial Hydraulics controls throughout
Europe.
Cost of sales for 1996 was 69.2% of net sales compared to 70.8%
of net sales in 1995. Approximately half of the decrease as a
percentage of sales was due to transition costs incurred in 1995
related to the acquisition of certain actuation product lines of
AlliedSignal Inc. in June 1994 and the remainder was due to
increased sales in the higher margin Industrial Hydraulics and
Satellites and Launch Vehicles product lines.
Research and development expenses increased to $17.3 million in
1996 from $15.8 million in 1995 due to the development of
advanced actuation technology and active vibration development
efforts in the U.S. related to Commercial and Military Aircraft
controls.
Selling, general and administrative expenses in 1996 were $75.7
million, or 18.6% of net sales, compared to $68.5 million, or
18.3% of net sales, in 1995. Approximately half of the increase
as a percentage of sales resulted from compensation costs
associated with stock appreciation rights, with the remainder due
to temporarily high legal expenses and amortization of debt
issuance costs.
Interest expense was $18.1 million for 1996, compared with $17.5
million for 1995. A recapitalization initiated by the Company in
May 1996 enhanced the Company's long-term capital base and
provided additional senior debt capacity to fund growth, while
increasing the Company's average interest rate. Although the
recapitalization resulted in higher interest expense for the
third and fourth quarters of 1996, interest expense declined to
4.5% of sales in 1996 from 4.7% in 1995.
The effective tax rate for 1996 was 30.1%. The effective tax
rate was affected by the utilization of net operating loss
carryforwards at the German subsidiary. In 1996, the Company
continued to reduce its valuation allowance for deferred tax
assets principally related to the improving financial position of
its German subsidiary.
Results in 1996 include a $.5 million extraordinary loss, net of
income tax benefit, on the early repayment of debt.
As a result of the factors mentioned above, net earnings for
1996 increased to $10.7 million, or $1.40 per share, compared
with $7.8 million, or $1.00 per share, in 1995.
Domestic Controls
Domestic Controls net sales in 1996 were $276.5 million, up 8.9%
above net sales of $253.9 million in 1995. Sales of Aerospace
Controls accounted for most of the increase.
Operating profit for the Domestic Controls segment was $32.7
million for 1996, or 11.4% of segment sales. This compares to
$25.2 million, or 9.5% of segment sales, in 1995. Aerospace
Controls accounted for substantially all of the increase as a
result of increased sales, along with the absence in 1996 of
transition costs associated with the acquisition of certain
actuation product lines from AlliedSignal Inc. in 1994.
International Controls
International Controls net sales in 1996 were $130.7 million
versus $120.4 million in 1995. International Controls net sales
growth relates principally to increased volumes due to stronger
demand for Industrial Hydraulics throughout Europe and, to a
lesser degree, the December 1995 acquisition of the industrial
servovalve product line of Ultra Hydraulics Limited. The
movement of certain foreign currencies relative to the U.S.
dollar in 1996 versus 1995 did not have a significant impact on
sales.
International Controls operating profit was $11.8 million for
1996, or 8.1% of segment sales, compared to $8.5 million, or 6.8%
of segment sales in 1995. The increase is a result of higher
segment sales due to improved European capital goods market
conditions.
Financial Condition and Liquidity
Cash provided by operating activities was $32.0 million in 1997
compared to $15.2 million in 1996 and 1995. The increase in 1997
resulted from lower working capital requirements, and to a lesser
extent, improved earnings as adjusted for non-cash expenses and
charges.
Long-term senior debt increased by $24.2 million to $101.6
million at September 27, 1997 from September 30, 1996 primarily
due to the acquisition of the U.S. Industrial Hydraulics
Business, which was principally financed with proceeds from the
Bank Credit Facility, offset by cash provided by operations. The
percentage of long-term debt to capitalization at September 27,
1997 was 66.0% compared to 65.3% at September 30, 1996.
At September 27, 1997, the Company had $87.7 million of unused
borrowing capacity available under short and long-term lines of
credit, including $68.0 million from the Bank Credit Facility.
During 1997, the Company obtained a $15 million credit facility
for its international subsidiaries. Approximately $5.7 million
was available on this facility at September 27, 1997.
Working capital at September 27, 1997 was $187.5 million compared
to $188.0 million at September 30, 1996. The current ratio was
2.75 at September 27, 1997, compared to 2.89 at September 30,
1996.
Current assets increased by $7.1 million to $294.7 million at
September 27, 1997. The increase was due to the acquisition of
the U.S. Industrial Hydraulics Business which added
approximately $12 million of current assets, primarily
receivables and inventories. In addition, receivables and
inventories increased in the International Controls segment as a
result of increased business. These increases were partially
offset by foreign currency fluctuations which resulted in a
decrease in current assets of approximately $8 million.
Current liabilities increased by $7.6 million to $107.2 million
at September 27, 1997. The increase was due to greater working
capital demands related to higher sales and approximately $4
million from the acquisition of the U.S. Industrial Hydraulics
Business. These increases were partially offset by changes in
foreign currency translation values resulting in a reduction in
current liabilities of approximately $3 million.
Net property, plant and equipment increased $.7 million to $132.1
million at September 27, 1997. Capital expenditures for 1997
were $13.7 million compared with depreciation and amortization of
$21.3 million. Capital expenditures in 1996 were $10.9 million
compared with depreciation and amortization of $19.6 million.
The acquisition of the U.S. Industrial Hydraulics Business added
approximately $7 million of property, plant and equipment, while
unfavorable movements in foreign currency translation values
resulted in a decrease of approximately $2 million. During 1997,
the Company entered into operating leases for equipment which
otherwise would have had a purchase cost of $6.9 million. Capital
expenditures for 1998 are expected to be below depreciation and
amortization levels. Capital expenditures in 1998 are expected
to include the cost of approximately 124,500 square feet of
facilities expansion for the Domestic Aerospace Controls
operations and a low cost manufacturing operation in the
Philippines.
Goodwill increased by $33.6 million to $49.6 million at September
27, 1997, primarily as a result of the October 1996 acquisition
of the U.S. Industrial Hydraulics Business, offset by current
year amortization of $2.9 million. The goodwill resulting from
this acquisition is being amortized over 30 years.
Recently Issued Accounting Pronouncements
Effective October 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and SFAS No. 123 "Accounting for Stock-Based
Compensation." As permitted by SFAS No. 123, the Company has
elected to continue measuring its compensation expense using the
principles of Accounting Principles Board Opinion No. 25. The
adoption of these standards had no effect on the Company's
consolidated financial position or results of operations.
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128, "Earnings per Share" which will be adopted
by the Company during the first quarter of 1998. At that time,
the Company will change the method currently used to compute
earnings per share (EPS) and restate all prior periods, as
required. Under the new requirements for calculating basic EPS,
the dilutive effect of stock options will be excluded. When
adopted, basic EPS required under SFAS No. 128 will be reported
for 1997, 1996 and 1995 as $1.95, $1.44 and $1.00, respectively,
and diluted EPS will be $1.88, $1.40 and $1.00, respectively.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." The standard must be adopted by fiscal
1999. SFAS No. 130 does not change any accounting measurements,
but requires presentation of comprehensive income and a
reconciliation thereof to net income. The principal differences
between comprehensive and net income are certain adjustments made
directly to shareholders' equity, such as foreign currency
translation adjustments.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
requires financial information to be reported on the basis that
is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The standard
must be adopted by fiscal 1999. The Company is currently
evaluating the disclosures required under this new standard.
Other
Foreign exchange instruments are used to hedge the Company's
equity in, and long-term advances to, various international
subsidiaries. In addition, the Company periodically utilizes
foreign currency forward contracts to hedge known foreign
currency cash flows. Interest rate swaps are used to manage
exposure to increases in interest rates on a floating-rate credit
facility. The Company does not hold or issue financial
instruments for trading purposes.
At September 27, 1997, the Company believes that adequate
reserves have been established for all currently pending
environmental issues, and does not expect environmental matters
and the utilization of existing reserves, if any, to have a
material effect on the financial condition and liquidity or
results of operations of the Company.
Sales to Boeing represented approximately 19% of the Company's
1997 net sales, and approximately 10% of the Company's sales were
to Boeing for Commercial Aircraft only. Boeing recently
announced plans, and the related costs, to rectify difficulties
it is experiencing with commercial aircraft production
inefficiencies and resulting late deliveries of its 7 series
airplanes. Boeing's announced plans to rectify these matters
include, among other things, the temporary shutdown of certain
lines of production to allow it to concentrate on catching up on
deliveries of certain of its 7 series aircraft. As Moog is
current on all of its scheduled deliveries to Boeing, the Company
does not foresee that any temporary shutdown will have any
materially adverse impact on its results of operations at this
time or in the near future. However, there can be no assurance
that, at some future date, Boeing will not modify its existing
orders with the Company in order to allow other vendors to catch
up on deliveries.
Recent months have seen an unusually rapid devaluation of certain
Asian-Pacific currencies including those in countries where the
Company has operations. Similarly, certain financial markets
have experienced valuation adjustments. The Company's sales in
the Asian-Pacific, excluding Japan, were $9.0 million in 1997, or
2.0% of consolidated sales. Including Japan, sales were $31.5
million or 6.9% of sales. At this time, the Company is unaware
of any major shifts in incoming orders that would produce
materially adverse effects on the Company's results of operations
in the near term.
The Company is currently evaluating the potential impact of the
computer systems and software products situation commonly
referred to as the "Year 2000 Issue." The Year 2000 Issue, which
affects most corporations, concerns the inability of information
systems, primarily computer software programs, to properly
recognize and process date-sensitive information relating to the
year 2000 and beyond. The Company utilizes a significant number
of computer software programs and operating systems across its
entire organization, including applications used in
manufacturing, product development, financial business systems
and various administrative functions. To the extent the
Company's software applications contain source code that is
unable to appropriately interpret the upcoming calendar year
"2000," some level of modification, or even possibly replacement
of such applications may be necessary. The Company is currently
in the process of completing the identification of applications
that may require modification or replacement. The Company does
not currently anticipate that it will incur material expenditures
to complete any such modification or replacement as the Company
believes that a majority of its systems are Year 2000 compliant,
although there can be no assurance in this regard. The Company's
issues relate not only to its own systems being Year 2000
compliant, but also those systems of its suppliers and customers.
A failure of suppliers or customers to address the Year 2000
Issue could have a material adverse effect on the Company.
Outlook
The Company believes its Aerospace Controls product lines are
well positioned. The Commercial Airplane market upswing, the
demand for Satellites and Launch Vehicles, and Military Aircraft
modernization programs are expected to provide revenue growth.
The Industrial Hydraulics product line was significantly
enhanced with the acquisition of the U.S. Industrial Hydraulics
Business in October 1996. Further synergies are expected in 1998
as the integration with the European and the Asian-Pacific
subsidiaries continues. Sales growth in Industrial Electrics is
anticipated principally due to military ground vehicle controls
and entertainment simulators.
ITEM 8. Financial Statements and Supplementary Data.
_________________________________________________________________
MOOG INC.
Consolidated Statements of Earnings
_________________________________________________________________
Fiscal Years Ended
__________________________________________
(dollars in thousands September 27, September 30, September 30,
except per share data) 1997 1996 1995
_________________________________________________________________
NET SALES $ 455,929 $ 407,237 $ 374,284
OTHER INCOME 1,565 2,380 2,166
___________ ____________ ____________
457,494 409,617 376,450
COSTS AND EXPENSES
Cost of sales 315,380 281,710 265,033
Research and development 17,798 17,303 15,783
Selling, general and
administrative 81,413 75,707 68,457
Interest 22,675 18,124 17,492
Other expenses 649 723 895
___________ ____________ ____________
437,915 393,567 367,660
___________ ____________ ____________
EARNINGS BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEM 19,579 16,050 8,790
INCOME TAXES (note 7) 5,973 4,831 1,029
___________ ____________ ____________
EARNINGS BEFORE
EXTRAORDINARY ITEM 13,606 11,219 7,761
EXTRAORDINARY ITEM, LOSS
FROM EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME
TAX BENEFIT OF $300
(note 6) -- (510) --
___________ ____________ ____________
NET EARNINGS $ 13,606 $ 10,709 $ 7,761
=========== ============ ============
NET EARNINGS PER COMMON
AND COMMON EQUIVALENT
SHARE:
Before extraordinary
item $ 1.88 $ 1.47 $ 1.00
Extraordinary item -- (.07) --
___________ ____________ ____________
Net earnings $ 1.88 $ 1.40 $ 1.00
=========== ============ ============
AVERAGE COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING 7,224,612 7,639,312 7,721,927
_________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
MOOG INC.
Consolidated Balance Sheets
_________________________________________________________________
As of As of
September 27, September 30,
(dollars in thousands) 1997 1996
________________________________________________________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,800 $ 9,639
Receivables (note 3) 160,054 155,972
Inventories (note 4) 103,866 99,318
Deferred income taxes
(note 7) 18,935 19,708
Prepaid expenses and other
current assets 5,052 2,939
____________ _____________
TOTAL CURRENT ASSETS 294,707 287,576
PROPERTY, PLANT AND EQUIPMENT
(notes 5 and 6) 132,109 131,371
GOODWILL, net of accumulated
amortization of $7,528 in
1997, and $4,676 in 1996 49,626 16,024
OTHER ASSETS 14,121 14,587
____________ _____________
TOTAL ASSETS $ 490,563 $ 449,558
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (note 6) $ 1,323 $ 3,420
Current installments of
long-term debt (note 6) 15,345 10,491
Accounts payable 23,860 21,597
Accrued salaries, wages and
commissions 28,747 24,504
Contract loss reserves 8,170 10,966
Accrued interest 7,253 6,160
Federal, state and foreign
income taxes 5,419 4,728
Other accrued liabilities 10,439 9,480
Customer advances 6,630 8,259
____________ _____________
TOTAL CURRENT
LIABILITIES 107,186 99,605
LONG-TERM DEBT, excluding
current installments (note 6)
Senior debt 101,577 77,351
Senior subordinated notes 120,000 120,000
OTHER LONG-TERM LIABILITIES
(notes 7 and 8) 47,609 47,859
____________ _____________
TOTAL LIABILITIES 376,372 344,815
____________ _____________
COMMITMENTS AND CONTINGENCIES
(note 12)
SHAREHOLDERS' EQUITY (see page
30 and notes 8 and 9)
9% Series B Cumulative, Convertible,
Exchangeable Preferred stock -
Par Value $1.00
Authorized 200,000 shares.
Issued 100,000 shares. 100 100
Common Stock - Par Value $1.00
Class A - Authorized 30,000,000
shares. Issued 6,635,936 shares
in 1997 and 6,629,245 shares
in 1996. 6,636 6,629
Class B - Authorized 10,000,000
shares. Convertible to Class A on
a one for one basis. Issued
2,498,187 shares in 1997 and
2,504,878 shares in 1996. 2,498 2,505
Additional paid-in capital 47,519 47,611
Retained earnings 88,422 74,825
Treasury shares (30,967) (31,803)
Equity adjustments 977 5,377
Loan to Savings and Stock
Ownership Plan (994) (501)
____________ _____________
TOTAL SHAREHOLDERS'
EQUITY 114,191 104,743
____________ _____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 490,563 $ 449,558
_________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
MOOG INC.
Consolidated Statements of Cash Flows
Fiscal Years Ended
___________________________________________________
September 27, September 30, September 30,
(dollars in thousands) 1997 1996 1995
__________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 13,606 $ 10,709 $ 7,761
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 21,267 19,632 19,675
Provisions for losses 9,763 6,444 3,761
Deferred income taxes (2,094) (584) 1,565
Extraordinary item, loss from
early extinguishment of debt,
pre-tax -- 810 --
Other 755 485 (84)
Change in assets and liabilities
providing (using) cash:
Receivables (10,084) (13,465) (7,876)
Inventories (4,479) (17,662) (8,627)
Other assets (1,652) (1,486) 952
Accounts payable and
accrued liabilities 2,745 5,604 (3,189)
Other liabilities 3,810 6,354 1,381
Customer advances (1,607) (1,665) (144)
___________ ___________ __________
NET CASH PROVIDED BY OPERATING
ACTIVITIES 32,030 15,176 15,175
___________ ___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions and investments,
including 1995 purchase price
settlement (note 2) (49,180) (6,752) 9,200
Purchase of property, plant
and equipment (12,982) (10,288) (9,974)
Proceeds from sale of assets 393 202 362
Payments received, net of advances,
on loan to Savings and Stock
Ownership Plan (493) 248 349
___________ ___________ __________
NET CASH USED IN INVESTING
ACTIVITIES (62,262) (16,590) (63)
___________ ___________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (1,913) (3,357) (2,738)
Proceeds from revolving lines
of credit 97,000 92,272 --
Payments on revolving lines of credit (71,000) (149,657) (1,000)
Proceeds from issuance of
long-term debt 18,684 125,213 7,610
Payments on long-term debt (14,825) (46,181) (18,884)
Purchase of outstanding shares
for treasury (428) (14,605) --
Proceeds from sale of treasury stock 1,123 545 60
Other (836) (435) (9)
___________ ___________ __________
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 27,805 3,795 (14,961)
___________ ___________ __________
Effect of exchange rate changes on
cash and cash equivalents (412) (318) (136)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,839) 2,063 15
Cash and cash equivalents at
beginning of year 9,639 7,576 7,561
___________ ___________ __________
Cash and cash equivalents
at end of year $ 6,800 $ 9,639 $ 7,576
=========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 20,452 $ 12,856 $ 17,598
Income taxes, net of refunds 5,646 2,739 (3,189)
Non-cash investing and financing
activities:
Adjustment required to adjust
minimum pension liability (note 8) 676 (2,019) 1,083
Leases capitalized, net of leases
terminated 731 597 260
__________________________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements
MOOG INC.
Consolidated Statements of Shareholders' Equity
Fiscal Years Ended
___________________________________________________
(dollars in thousands September 27, September 30, September 30,
except per share data) 1997 1996 1995
__________________________________________________________________________________________
PREFERRED STOCK $ 100 $ 100 $ 100
_____________ _____________ _____________
COMMON STOCK 9,134 9,134 9,134
_____________ _____________ _____________
ADDITIONAL PAID-IN CAPITAL
Beginning of year 47,611 47,709 47,737
Issuance of treasury shares
at less than cost (141) (98) (28)
Tax benefits related to
stock option plan 49 -- --
_____________ _____________ _____________
End of year 47,519 47,611 47,709
_____________ _____________ _____________
RETAINED EARNINGS
Beginning of year 74,825 64,125 56,373
Net earnings 13,606 10,709 7,761
Preferred dividends ($.09 per share
in 1997, 1996 and 1995) (9) (9) (9)
_____________ _____________ _____________
End of year 88,422 74,825 64,125
_____________ _____________ _____________
TREASURY SHARES, AT COST*
Beginning of year (31,803) (17,841) (17,929)
Shares issued related to
options (1997 - 50,150
Class A shares and 44,912
Class B shares; 1996 - 46,800
Class A shares and 500 Class B
shares; 1995 - 6,000 Class A
shares and 1,000 Class B
shares) 1,264 568 87
Shares acquired through
purchase (1997 - 17,321 Class A
shares and 410 Class B shares;
1996 - 721,086 Class A shares,
80,000 Class B shares and
5,117 Series B Preferred shares) (428) (14,605) --
Shares issued related to conversion
of convertible subordinated
debentures (1996 - 6,204 Class A
shares; 1995 - 87 Class A shares) -- 75 1
_____________ _____________ _____________
End of year (30,967) (31,803) (17,841)
_____________ _____________ _____________
EQUITY ADJUSTMENTS**
Beginning of year 5,377 6,158 7,867
Adjustment from foreign currency
translation (4,400) (2,110) (478)
Adjustment from change in pension
liability -- 1,329 (1,231)
_____________ _____________ _____________
End of year 977 5,377 6,158
_____________ _____________ _____________
LOAN TO SAVINGS AND STOCK OWNERSHIP
PLAN (SSOP)
Beginning of year (501) (749) (1,098)
Payments received on loan, net of
advances, to SSOP (493) 248 349
_____________ _____________ _____________
End of year (994) (501) (749)
_____________ _____________ _____________
TOTAL SHAREHOLDERS' EQUITY $114,191 $ 104,743 $108,636
__________________________________________________________________________________________
* Class A Common Stock in treasury: 1,186,221 shares as of September 27, 1997;
1,219,050 shares as of September 30, 1996; 550,968 shares as of September 30, 1995.
Class B Common Stock in treasury: 892,101 shares as of September 27, 1997; 936,603
shares as of September 30, 1996; 857,103 shares as of September 30, 1995. Preferred
Stock in treasury: 5,117 shares as of September 27, 1997 and September 30, 1996.
** End of year balance includes cumulative foreign currency translation, net of
applicable deferred taxes, of 1997 - $977; 1996 - $5,377; 1995 - $7,487; and
cumulative minimum pension liability adjustments of 1997 and 1996 - ($0); 1995 -
($1,329). Included in adjustment from foreign currency translation are net deferred
(gains) losses of $89 in 1997, $(246) in 1996, and $1,138 in 1995 related to hedging
net investments in, and long-term advances to various international subsidiaries.
See accompanying Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
(dollars in thousands except per share data)
Note 1 - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include the
accounts of Moog Inc. and all of its U.S. and International
subsidiaries (the Company). All significant intercompany balances
and transactions have been eliminated in consolidation.
Fiscal Year: Effective in fiscal 1997, the Company changed its
fiscal year-end to the last Saturday in September (September 27,
1997 for fiscal 1997). The impact on the current year results of
operations was not material.
Cash and Cash Equivalents: All highly liquid investments with
an original maturity of three months or less are considered cash
equivalents. Cash and cash equivalents are carried at amounts
which approximate fair value. The Company places its temporary
investments in highly rated financial institutions.
Revenue Recognition: The percentage of completion (cost-to-cost)
method of accounting is followed for long-term contracts. Under
this method, revenues are recognized as the work progresses
toward completion. Contract incentive awards affect earnings when
the amounts can be determined. For contracts with anticipated
losses at completion, the projected loss is accrued. Revenues
other than on long-term contracts are recognized as units are
delivered.
Inventories: Inventories are stated at the lower of cost or
market with cost determined primarily on the first-in, first-out
(FIFO) method of valuation. Consistent with industry practice,
aerospace related inventories include amounts relating to
contracts having long production and procurement cycles, portions
of which are not expected to be realized within one year.
Foreign Currency Translation: Foreign subsidiaries' assets and
liabilities are translated using rates of exchange as of the
balance sheet date and the statements of earnings are translated
at the average rates of exchange for the year.
Depreciation and Amortization: Plant and equipment are
depreciated principally using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements and
assets considered capital leases are amortized on a straight-line
basis over the term of the lease or the estimated useful life of
the asset, whichever is shorter.
Intangibles associated with acquisitions are amortized on a
straight-line basis over periods not to exceed 30 years. The
Company monitors its 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, if any.
Long-Lived Assets: Effective October 1, 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of." The adoption of this standard
had no effect on the Company's consolidated financial position or
results of operations in fiscal 1997.
Financial Instruments: The Company uses derivative financial
instruments for the purpose of hedging currency and interest rate
exposures which exist as part of its ongoing business operations.
In general, instruments used as hedges must be effective at
reducing the risk associated with the exposure being hedged and
must be designated as a hedge at the inception of the contract.
Deferred gains or losses related to any instrument designated but
ultimately ineffective as a hedge of existing assets,
liabilities, or firm commitments are recognized immediately in
the statement of earnings. The Company does not hold or issue
financial instruments for trading purposes. The Company is
exposed to credit loss in the event of nonperformance by the
counter-parties to the instruments. The Company, however, does
not expect nonperformance by the counter-parties.
The Company uses forward contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material
purchases, intercompany product shipments, and intercompany
loans. Foreign currency contracts are marked-to-market with net
amounts due to or from counter-parties recorded in accounts
receivable or payable. For contracts hedging firm commitments,
marked-to-market gains or losses are deferred and recognized as
an adjustment to the basis of the transaction. For all other
contracts, marked-to-market gains or losses are recognized
currently, generally offsetting gains or losses from underlying
hedged transactions. Foreign currency forward contracts
outstanding at fair value on September 27, 1997 and September 30,
1996 were $2,086 and $1,717, respectively. The Company also uses
forward contracts to reduce fluctuations in the value of foreign
currency investments in, and long-term advances to, subsidiaries.
At September 27, 1997 and September 30, 1996, the Company had $0
and $4,484, respectively, of such instruments outstanding at fair
value. These contracts are marked-to-market with gains or losses
recorded in the cumulative translation adjustment component of
shareholders' equity.
The Company uses interest rate swaps to reduce interest rate
volatility with certain debt issues. The interest differential to
be paid or received on the swap is recognized in the statement of
earnings, as incurred, as a component of interest expense.
The cash flows related to derivative financial instruments are
classified in the statement of cash flows in a manner consistent
with those of the transactions being hedged.
Use of Estimates: Management has necessarily made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
Note 2 - Acquisitions
On October 26, 1996, the Company acquired the assets of, and
assumed certain liabilities related to, the industrial hydraulic
servocontrols business (the U.S. Industrial Hydraulics Business)
of International Motion Control Inc., an unrelated third party.
The purchase price was $48,600. The U.S. Industrial Hydraulics
Business, which operated under the name Moog Controls Inc., was
spun off by the Company in February 1988. The acquisition was
principally financed with proceeds from the Company's U.S.
Revolving Credit and Term Loan Facility (the Bank Credit
Facility) and resulted in intangible assets of approximately
$36,500, the majority of which are being amortized over 30 years.
The following summary, prepared on a proforma basis, combines the
consolidated results of operations of the Company and the U.S.
Industrial Hydraulics Business for the year ended September 30,
1996 as if the acquisition took place on October 1, 1995. The
proforma consolidated results include the impact of certain
adjustments, including amortization of intangibles and increased
interest expense on acquisition debt, and related income tax
effects.
_________________________________________________________________
(Unaudited) 1996
_________________________________________________________________
Net Sales $437,099
Earnings before extraordinary item 11,739
Net earnings 11,229
Net earnings per share $1.47
_________________________________________________________________
The proforma results are not necessarily indicative of what
actually would have occurred if the acquisition had been in
effect for the period presented. In addition, they are not
intended to be a projection of future results.
On May 7, 1997, the Company purchased the assets and servovalve
distributor and repair business of Dowty-France for $580. On
May 24, 1996, the Company acquired the propellant valve product
line of Parker Hannifin Corporation for $890. On December 15,
1995, the Company purchased for $5,012 net of cash acquired, the
industrial servovalve product line of Ultra Hydraulics Limited
located in the United Kingdom.
All of the Company's acquisitions are accounted for under the
purchase method, and accordingly, the operating results for the
acquired companies are included in the Consolidated Statements of
Earnings from the date of acquisition.
On May 13, 1996, a joint venture called Moog Hydrolux LLC, in
which the company has a 50% interest, was formed. The Company
accounts for this investment on the equity method.
Note 3 - Receivables
Receivables consist of:
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Long-term contracts:
Amounts billed $ 42,028 $ 37,068
Unbilled recoverable costs and
profits 66,472 71,101
Claims on terminated contracts 558 1,518
________ ________
Total long-term contract
receivables 109,058 109,687
Trade 50,998 45,710
Refundable income taxes 250 183
Other 1,342 1,724
________ ________
Total receivables 161,648 157,304
Less allowance for doubtful
accounts (1,594) (1,332)
_________________________________________________________________
Receivables $ 160,054 $ 155,972
_________________________________________________________________
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 27, 1997 September 30, 1996
_________________________________________________________________
Raw materials and purchased
parts $ 28,933 $ 30,609
Work in process 64,502 55,789
Finished goods 10,431 12,920
_________________________________________________________________
Inventories $ 103,866 $ 99,318
_________________________________________________________________
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Land $ 7,283 $ 7,553
Buildings and improvements 87,727 87,945
Machinery and equipment 222,362 214,880
Property, plant and equipment,
at cost 317,372 310,378
Less accumulated depreciation
and amortization (185,263) (179,007)
_________________________________________________________________
Property, plant and equipment $ 132,109 $ 131,371
_________________________________________________________________
Assets under leases that have been accounted for as capital
leases and included in property, plant and equipment are
summarized as follows:
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Capital leases at cost $ 6,025 $ 6,711
Less accumulated amortization (2,114) (2,721)
_________________________________________________________________
Net assets under capital leases $ 3,911 $ 3,990
_________________________________________________________________
Note 6 - Indebtedness
Long-term debt consists of the following:
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Bank Credit Facility
- revolving credit $ 67,000 $ 41,000
- term loan 24,000 30,000
International and other U.S. term
loan agreements 13,935 13,254
International revolving credit
facility 9,266 -
Obligations under capital leases 2,721 3,588
________ ________
Senior debt 116,922 87,842
10% senior subordinated notes 120,000 120,000
________ ________
Total long-term debt 236,922 207,842
Less current installments (15,345) (10,491)
_________________________________________________________________
Long-term debt $ 221,577 $ 197,351
_________________________________________________________________
The Bank Credit Facility consists of a $135,000 revolving credit
facility and a $24,000 term loan. The revolving credit facility
expires in October 2000. The term loan has four years remaining
through July 2001, with quarterly principal payments of $1,500.
Interest on the Bank Credit Facility is LIBOR plus 1.75%. In
order to provide for interest rate protection, the Company has
entered into interest rate swap agreements for $80,000,
effectively converting this amount to fixed rate debt averaging
8.1%. The swaps expire at various times during 1998.
The Bank Credit Facility contains various covenants which, among
others, specify minimum interest coverage, limit senior debt to a
defined capital base, limit capital expenditures and restrict
payment of cash dividends on common stock. The Bank Credit
Facility is secured by substantially all of the Company's U.S.
assets and the common shares of all Domestic and International
subsidiaries.
International and other U.S. term loan agreements of $13,935 at
September 27, 1997 consist principally of financing provided by
various banks to individual International subsidiaries. These
term loans are being repaid through 2003, and carry interest
rates ranging from .8% to 13.5%.
During fiscal 1997, the Company entered into a credit facility
for its international subsidiaries. The facility allows for
borrowings in different foreign currencies up to $15 million,
carries an interest rate of LIBOR plus .75% and expires on
October 1, 1999.
The 10% Senior Subordinated Notes (the "Notes"), have a single
maturity with the aggregate principal amount due on May 1, 2006.
The Notes are redeemable at the option of the Company, in whole
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 Notes indenture includes certain
covenants limiting, subject to certain exceptions, the incurrence
of additional indebtedness, payment of dividends, redemption of
capital stock, asset sales and certain mergers and
consolidations.
In May 1996, the Company prepaid in its entirety the principal
balance on its 10.25% Senior Secured Note resulting in an
extraordinary pre-tax charge of $810. The charge consisted of
prepayment and amendment fees and the write-off of related debt
issuance costs.
Maturities of long-term debt are $15,345 in 1998, $18,002 in
1999, $8,526 in 2000, $73,794 in 2001, $886 in 2002, and $120,369
thereafter.
The fair value of long-term debt was estimated based on quoted
market prices and discounted cash flow analysis using current
rates offered to the Company for debt with the same remaining
maturities. At September 27, 1997, the estimated fair value of
long-term debt was $245,471.
At September 27, 1997, the Company has pledged assets with a net
book value of $288,531 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 $68,000 available on the Bank Credit Facility and $5,734 on
the international revolving credit facility, provided credit
availability of $87,709 at September 27, 1997. Commitment fees
are charged on some of these arrangements based on a percentage
of the unused amounts available.
At September 27, 1997, the International Controls segment had
$1,323 of notes payable to banks at an average rate of 13.7%.
During 1997, an average of $1,948 in notes payable were
outstanding at an average interest rate of 11.6%. Notes payable
are carried at amounts which approximate fair value.
Note 7 - Income Taxes
The reconciliation of the provision for income taxes with the
amount computed by applying the U.S. federal statutory tax rate
of 34% to earnings before income taxes and extraordinary item is
as follows:
_________________________________________________________________
1997 1996 1995
_________________________________________________________________
Earnings before income taxes and
extraordinary item:
Domestic $ 16,310 $ 10,979 $ 6,042
Foreign 3,165 6,272 2,967
Eliminations 104 (1,201) (219)
_________________________________________________________________
Total $ 19,579 $ 16,050 $ 8,790
_________________________________________________________________
Computed expected tax expense $ 6,657 $ 5,457 $ 2,988
Increase (decrease) in income
taxes resulting from:
Foreign tax rates 571 1,102 356
Nontaxable export sales (664) (76) (280)
State taxes net of federal benefit 302 141 226
Foreign tax credits (1,244) - -
Change in beginning of the year
valuation allowance (77) (2,541) (2,709)
Other 428 748 448
_________________________________________________________________
Income taxes $ 5,973 $ 4,831 $ 1,029
_________________________________________________________________
Effective income tax rate 30.5% 30.1% 11.7%
_________________________________________________________________
At September 27, 1997, certain International subsidiaries had net
operating loss carryforwards totalling $1,219. These loss
carryforwards do not expire and can be used to reduce current
taxes otherwise due on future earnings of those subsidiaries.
No provision has been made for U.S. federal or foreign taxes on
that portion of certain International subsidiaries' undistributed
earnings ($28,474 at September 27, 1997) considered to be
permanently reinvested. It is not practicable to determine the
amount of tax that would be payable if these amounts were
repatriated to the Company.
The components of income taxes excluding the extraordinary item
are as follows:
_________________________________________________________________
1997 1996 1995
_________________________________________________________________
Current:
Federal $ 6,543 $ 2,817 $ (828)
Foreign 949 2,518 292
State 575 80 -
________ ________ _______
Total current 8,067 5,415 (536)
________ ________ _______
Deferred:
Federal (1,621) 1,220 2,466
Foreign (354) (1,937) (1,243)
State (119) 133 342
________ ________ ______
Total deferred (2,094) (584) 1,565
_________________________________________________________________
Total income taxes $ 5,973 $ 4,831 $ 1,029
_________________________________________________________________
The tax effects of temporary differences that generated deferred
tax assets and liabilities are detailed in the following table.
Realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers projected future taxable income and tax planning
strategies in making its assessment of the recoverability of
deferred tax assets.
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Deferred tax assets:
Contract loss reserves not
currently deductible $ 4,137 $ 4,739
Tax benefit carryforwards 647 2,044
Accrued vacation 5,173 5,025
Deferred compensation 5,069 4,156
Accrued expenses not currently
deductible 3,508 2,463
Inventory 3,884 3,633
Other 427 505
________ ________
Total gross deferred tax
assets 22,845 22,565
Less: Valuation reserve (295) (456)
________ ________
Net deferred tax assets 22,550 22,109
________ ________
Deferred tax liabilities:
Differences in bases and
depreciation of property,
plant and equipment 21,720 21,314
Prepaid pension - 207
Other 1,135 996
________ ________
Total gross deferred tax
liabilities 22,855 22,517
_________________________________________________________________
Net deferred tax liabilities $ 305 $ 408
_________________________________________________________________
Note 8 - Employee Benefit Plans
The Company maintains a number of defined benefit pension plans. The funded status of these plans is as follows:
__________________________________________________________________________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________ ___________________________________________________
U.S. Employee Other U.S. Employee Other
Plan with Other Plans Plans with Plan with Other Plans Plans with
Assets in with Assets Accumulated Assets in with Assets Accumulated
Excess of in Excess Benefits in Excess of in Excess of Benefits in
Accumulated of Accumulated Excess of Accumulated Accumulated Excess of
Benefits Benefits Assets Benefits Benefits Assets
_________________________________________________________________________________________________________________________________
Accumulated benefit obligation
- Vested $ 109,686 $ 9,034 $ 15,274 $ 100,232 $ 7,071 $ 14,883
- Nonvested 914 - 4,177 670 - 3,545
_________ _________ _________ _________ _________ _________
- Total $ 110,600 $ 9,034 $ 19,451 $ 100,902 $ 7,071 $ 18,428
_________ _________ _________ _________ _________ _________
Projected benefit obligation (PBO) $ 121,300 $ 9,972 $ 24,258 $ 112,357 $ 7,377 $ 23,553
Plan assets at fair value 139,743 9,769 1,337 112,119 8,377 1,447
_________ _________ _________ _________ _________ _________
Plan assets in excess of
(or less than) PBO 18,443 (203) (22,921) (238) 1,000 (22,106)
Unrecognized cumulative experience
loss (gain) (19,074) 822 (1,346) 1,426 (482) (2,446)
Unrecognized net (asset) liability
from SFAS no. 87 adoption date,
amortized over 15 years (1,735) - 1,470 (2,104) - 1,909
Unrecognized prior service cost 31 - 1,071 35 - 273
Adjustment required to recognize
minimum liability - - (729) - - (53)
_________________________________________________________________________________________________________________________________
Accrued pension (liability) asset $ (2,335) $ 619 $ (22,455) $ (881) $ (518) $(22,423)
_________________________________________________________________________________________________________________________________
Fiscal 1997 plan assets, shown above, consist primarily of
publicly traded stocks, bonds, mutual funds and $21,667 in
Company stock, based on quoted market prices. The Company's
funding policy is to contribute at least the amount required by
law in the various jurisdictions in which the plans are
domiciled. The principal actuarial assumptions weighted for all
defined benefit plans are:
________________________________________________________________
1997 1996
________________________________________________________________
Discount rate 7.3% 7.6%
Return on assets 8.5% 8.6%
Rate of compensation increase 3.7% 3.8%
_________________________________________________________________
In addition, the Company maintains various defined contribution
plans. These defined contribution plans, along with the defined
benefit plans, cover substantially all employees. Pension expense
for all plans for 1997, 1996 and 1995 is as follows:
_________________________________________________________________
1997 1996 1995
_________________________________________________________________
Service cost - benefits
earned during the year $ 5,093 $ 4,635 $ 4,523
Interest cost on projected
benefit obligation 10,841 9,827 9,019
Actual return on plan assets (30,843) (17,231) (16,939)
Net amortization, deferral and
other 21,278 9,816 9,038
________ _______ _______
Pension expense for defined
benefit plans 6,369 7,047 5,641
Pension expense for other plans 873 574 763
________________________________________________________________
Total pension expense $ 7,242 $ 7,621 $ 6,404
________________________________________________________________
Employee and management profit share plans provide for the
computation of profit share based on net earnings as a percent of
net sales multiplied by base wages, as defined. Profit share
expense was $4,518 in 1997 and $2,602 in 1996. The profit share
plan was suspended for 1995.
The Company has a Savings and Stock Ownership Plan (SSOP) which
includes an Employee Stock Ownership Plan. As one of the
investment alternatives, participants in the SSOP can acquire
Company stock at market value, with the Company providing a 25%
share match. The SSOP purchase of the initial shares was funded
by a Company loan. The loan is repaid with Company contributions.
Interest on the loan is computed at the Bank Credit Facility
borrowing rate. The Company makes temporary advances to the SSOP
for purchases of additional shares. Shares are allocated and
compensation expense is recognized as the employer share match is
earned. At September 27, 1997, the SSOP owned (allocated and
unallocated) 147,991 Class A shares and 514,311 Class B shares.
The Company provides postretirement health care benefits to
certain retirees. Expenses under this plan were $1,222, $1,158
and $1,011 in 1997, 1996 and 1995, respectively. A reconciliation
of the funded status of the plan with the accrued liability is
shown below. There are no plan assets.
_________________________________________________________________
September 27, 1997 September 30, 1996
_________________________________________________________________
Accumulated postretirement benefit
obligation (APBO)
- Inactives $ (5,420) $ (5,147)
- Actives fully eligible (767) (395)
- Actives not fully eligible (3,229) (2,800)
________ ________
Total APBO (funded status) (9,416) (8,342)
Unrecognized transition obligation 6,310 6,704
Unrecognized prior service cost 211 -
Unrecognized gains (losses) 780 (343)
_________________________________________________________________
Accrued postretirement benefit
liability $ (2,115) $ (1,981)
_________________________________________________________________
Discount rate 7.8% 8.0%
_________________________________________________________________
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 27, 1997.
Note 9 - Shareholders' Equity
Class A and Class B Common Stock equally share in the earnings of
the Company, and are identical with certain exceptions. Class A
shares have limited voting rights, with each share of Class A
being entitled to one-tenth of a vote on most matters, and each
share of Class B being entitled to one vote. Class A shareholders
are entitled, subject to certain limitations, to elect at least
25% of the Board of Directors (rounded up to the nearest whole
number) with Class B shareholders entitled to elect the balance
of the directors. Cash dividends may be paid on Class A without
paying a cash dividend on Class B, and no cash dividend may be
paid on Class B unless at least an equal cash dividend is paid on
Class A. Class B shares are convertible at any time into Class A
on a one-for-one basis at the option of the shareholder. The
number of common shares issued reflects conversion of Class B to
Class A of 6,691 and 30,039 shares in 1997 and 1996,
respectively.
The Company is authorized to issue up to 10,000,000 shares of
preferred stock. Series B Preferred Stock is 9% Cumulative,
Convertible, Exchangeable Preferred Stock with a $1.00 par value.
Series B Preferred Stock consists of 100,000 issued shares and
94,883 outstanding shares at September 27, 1997, and is
convertible into Class A Common shares (.08585 shares of Class A
Common Stock per share of Series B Preferred Stock). The Series B
Preferred Stock is owned by nine principal 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.
The Company adopted SFAS No. 123 "Accounting for Stock-Based
Compensation," effective October 1, 1996. This statement
encourages companies to adopt a fair value based method of
accounting for compensation costs of employee stock compensation
plans. As permitted by SFAS No. 123, the Company will continue to
apply its current accounting policy using the intrinsic value
method of accounting prescribed by Accounting Principles Board
Opinion No. 25 with respect to measuring stock-based
compensation. The adoption of SFAS No. 123, therefore, had no
effect on the Company's consolidated financial position or
results of operations for fiscal 1997. Proforma footnote
disclosures of net earnings and earnings per share, as if the
fair value based method of accounting had been applied, have not
been presented as awards have not been granted subsequent to
fiscal 1995.
Of the Class B Common Stock, 85,000 shares are reserved for
issuance under the 1983 Non-Statutory Stock Option Plan. Class A
shares reserved for issuance at September 27, 1997 are as
follows:
_________________________________________________________________
Shares
_________________________________________________________________
Conversion of Class B to Class A shares 1,691,086
1983 Incentive Stock Option Plan 271,650
Conversion of Series B Preferred Stock to Class A
shares 8,146
_________________________________________________________________
1,970,882
_________________________________________________________________
The 1983 Non-Statutory Stock Option Plan granted options on
Class B shares to directors, officers, and key employees. Stock
appreciation rights were granted in tandem with the options and
are exercisable only to the extent the options are exercised.
Compensation expense related to the stock appreciation rights was
$1,302, $1,043 and $73 in fiscal 1997, 1996 and 1995,
respectively. The 1983 Incentive Stock Option Plan granted
options on Class A shares to officers and key employees. The
Plans terminated on December 31, 1992 and outstanding options
expire no later than ten years after the date of grant.
Options were granted at prices not less than market value on the
date of the grant. Shares under option are as follows:
___________________________________________________________________________
Non-Statutory Incentive
Plan Plan
(Class B) (Class A)
___________________________________________________________________________
Outstanding at September 30, 1994: 133,412 380,000
Cancelled or expired in fiscal 1995 (500) (3,400)
Exercised in fiscal 1995 (1,000) (6,000)
_______ _______
Outstanding at September 30, 1995: 131,912 370,600
Cancelled or expired in fiscal 1996 (1,500) (1,200)
Exercised in fiscal 1996 (500) (46,800)
Outstanding at September 30, 1996
(weighted-average exercise price:
Class B - $14.28, Class A - $8.36) 129,912 322,600
Cancelled or expired in fiscal 1997
(weighted-average exercise price:
Class A - $10.50) - (800)
Exercised in fiscal 1997
(weighted-average exercise price:
Class B - $14.44, Class A - $9.46) (44,912) (50,150)
_______ _______
Outstanding and exercisable at
September 27, 1997: (weighted-
average exercise price: Class B - $14.75,
Class A - $8.15) 85,000 271,650
___________________________________________________________________________
The weighted-average remaining contractual life of the Class B
and Class A options as of September 27, 1997 is .9 and 2.6 years,
respectively.
All options outstanding at September 27, 1997, are exercisable at
prices ranging as follows: Class B - $14.75 per share; Class A -
$5.625 to $10.50 per share.
Note 10 - Segment Information
The Company is organized into two segments: The Domestic Controls
segment, which is larger based on sales and assets, and
International Controls. Domestic Controls primarily serves North
American markets with a substantial majority of its sales within
the aerospace industry. International Controls serves markets in
Europe and the Asian-Pacific with the majority of its sales
related to industrial applications.
___________________________________________________________________________
1997 1996 1995
___________________________________________________________________________
Domestic Controls
Net sales:
Aerospace $ 265,835 $ 249,594 $ 232,525
Industrial 59,031 26,981 21,401
_________ _________ _________
324,866 276,575 253,926
Intersegment sales 13,792 11,912 10,446
_________ _________ _________
Total sales $ 338,658 $ 288,487 $ 264,372
_________ _________ _________
Operating profit $ 43,288 $ 32,744 $ 25,242
Net earnings 10,960 5,863 4,030
Identifiable assets 351,944 297,445 282,323
Capital expenditures 8,322 4,973 5,633
Depreciation and amortization
expense 10,975 10,103 10,363
___________________________________________________________________________
International Controls
Net sales:
Aerospace $ 25,978 $ 19,382 $ 19,086
Industrial 105,085 111,280 101,272
_________ _________ _________
131,063 130,662 120,358
Intersegment sales 7,887 14,983 4,728
_________ _________ _________
Total sales $ 138,950 $ 145,645 $ 125,086
_________ _________ _________
Operating profit $ 7,977 $ 11,796 $ 8,464
Net earnings 2,570 5,691 3,918
Identifiable assets 121,456 126,732 120,499
Capital expenditures 3,910 4,468 3,977
Depreciation and amortization
expense 4,312 4,913 5,337
___________________________________________________________________________
Consolidated operations
Net sales $ 455,929 $ 407,237 $ 374,284
_________ _________ _________
Operating profit (O.P.), net
of intercompany eliminations $ 51,369 $ 43,339 $ 33,487
Deductions from O.P.:
Interest expense 22,675 18,124 17,492
Currency (gain) loss (186) (88) 143
Other expenses, net 9,301 9,253 7,062
_________ _________ _________
Earnings before income taxes
and extraordinary item $ 19,579 $ 16,050 $ 8,790
_________ _________ _________
Total identifiable assets $ 473,400 $ 424,177 $ 402,822
Corporate assets 32,938 45,976 39,864
Eliminations (15,775) (20,595) (17,729)
_________ _________ _________
Total consolidated assets $ 490,563 $ 449,558 $ 424,957
___________________________________________________________________________
Intersegment sales, which are transacted and accounted for at
factory cost plus applicable general and administrative expenses
and profit, have been eliminated in net sales.
Operating profit is total revenue less cost of sales and other
operating expenses. The deductions from operating profit have
been charged to the respective segments by being directly
identified with the segments or allocated on the basis of assets
or sales.
Included in net sales for Domestic Controls is $85,033 in 1997 of
sales to the Boeing Corporation (including Boeing Helicopters,
McDonnell Douglas and the former Space and Defense business of
Rockwell) and $134,659 in 1997, $153,865 in 1996 and $136,261 in
1995, in sales to U.S. government prime- or sub-contractors,
including military sales to Boeing.
In June 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 131, "Dislosure about Segments of an Enterprise
and Related Information," which requires financial information to
be reported on the basis that is used internally for evaluating
segment performance and deciding how to allocate resources to
segments. The standard must be adopted by fiscal 1999. The
Company is currently evaluating the disclosures required under
this new standard.
Note 11 - Geographic Areas and Export Sales
___________________________________________________________________________
United Europe Pacific & Corporate & Consol-
States Other Eliminations idated
Identifiable Assets:
1997 $351,944 $ 87,606 $ 33,850 $ 17,163 $490,563
1996 297,445 92,206 34,526 25,381 449,558
1995 282,323 79,910 40,589 22,135 424,957
Sales to Unaffiliated Customers:
1997 $324,866 $ 99,609 $ 31,454 $455,929
1996 276,575 101,093 29,569 407,237
1995 253,926 90,076 30,282 374,284
Inter-area Sales to Affiliates:
1997 $ 13,792 $ 5,662 $ 2,225 $ 21,679
1996 11,912 13,529 1,454 26,895
1995 10,446 4,062 666 15,174
Export Sales:
1997 $ 71,348 $ 25,277 $ 2,578 $ 99,203
1996 57,350 27,023 2,220 86,593
1995 54,364 25,370 1,610 81,344
Net Earnings (Loss):
1997 $ 10,960 $ 1,185 $ 1,385 $ 76 $ 13,606
1996 5,863 5,005 686 (845) 10,709
1995 4,030 4,082 (164) (187) 7,761
___________________________________________________________________________
Export sales from the United States are primarily to areas other
than Europe. Export sales from Europe and all other geographic
areas are principally to countries within their geographic area.
Note 12- Commitments and Contingencies
The Company is, in the normal course of its business, engaged in
administrative proceedings with governmental agencies and legal
proceedings with governmental agencies and other third parties,
including litigation under Superfund laws, regarding
environmental matters. The Company believes that adequate
reserves have been established for all currently pending
environmental administrative or legal proceedings, and does not
expect that these environmental matters, and the utilization of
existing reserves, if any, will have a material effect on the
financial condition and 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 or legal proceedings the resolution of
which management believes will have a material adverse effect on
the Company's results of operations or financial condition and
liquidity, or to any pending legal proceedings other than
ordinary, routine litigation incidental 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 $7,762 in 1997, $7,191 in 1996 and $6,957 in
1995. Future minimum rental payments required under noncancelable
operating leases are $7,359 in 1998, $6,169 in 1999, $4,751 in
2000, $3,292 in 2001, $3,035 in 2002 and $9,281 thereafter.
The Company subleases various facilities to third parties. Gross
rental income from such activities was $351 in 1997, $1,291 in
1996 and $1,535 in 1995. Future minimum rental income under
noncancelable operating leases is $234 in 1998, $225 in 1999 and
$188 in 2000.
Note 13 - Per Share Data
Primary earnings per common and common equivalent share have been
calculated after deducting dividend entitlements on preferred
stock and using the weighted average number of shares of common
stock and dilutive stock options outstanding.
In February 1997, the FASB issued SFAS No. 128, "Earning per
Share," which will be adopted by the Company during the first
quarter of fiscal 1998. At that time, the Company will change the
method currently used to compute earnings per share (EPS) and
restate all prior periods, as required. Under the new
requirements for calculating basic EPS, the dilutive effect of
stock options will be excluded. When adopted, basic EPS required
under SFAS No. 128 will be reported for fiscal 1997, 1996 and
1995 as $1.95, $1.44 and $1.00, respectively, and the diluted EPS
will be $1.88, $1.40 and $1.00, respectively.
Note 14 Quarterly Data - Unaudited
Net Sales and Earnings
(dollars in thousands except per share data)
________________________________________________________________________________________________________________________
Year Ended Year Ended
September 27, 1997 September 30, 1996
_____________________________________________ _____________________________________________
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
________________________________________________________________________________________________________________________
Net sales $103,850 $109,805 $120,064 $122,210 $455,929 $ 93,233 $106,822 $103,107 $104,075 $407,237
Gross profit 33,051 35,003 36,023 36,472 140,549 28,526 32,324 32,573 32,104 125,527
Earnings before
income taxes and
extraordinary item 4,226 4,515 5,017 5,821 19,579 3,226 4,431 4,299 4,094 16,050
Earnings before
extraordinary item 2,959 3,259 3,561 3,827 13,606 2,350 3,044 3,022 2,803 11,219
Extraordinary item - - - - - - - (510) - (510)
________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Net earnings $ 2,959 $ 3,259 $ 3,561 $ 3,827 $ 13,606 $ 2,350 $ 3,044 $ 2,512 $ 2,803 $ 10,709
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Net earnings per common
and common equivalent
share before extra-
ordinary item $ .41 $ .45 $ .49 $ .53 $ 1.88 $ .30 $ .40 $ .40 $ .39 $ 1.47
Extraordinary item - - - - - - - (.07) - (.07)
________ ________ ________ ________ ________ ________ ________ ________ ________ ________
Net earnings $ .41 $ .45 $ .49 $ .53 $ 1.88 $ .30 $ .40 $ .33 $ .39 $ 1.40
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Note: The 1996 quarterly Earnings Per Share do not add to the total due to rounding.
________________________________________________________________________________________________________________________
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 1997. 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 1997. 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 Controls Limited and Moog GmbH,
wholly owned consolidated subsidiaries of the Company, which
statements reflect total assets constituting 13% and 15% as of
September 27, 1997 and September 30, 1996, respectively, and
total net sales constituting 19%, 20% and 21% of the related
consolidated totals for the years ended September 27, 1997,
September 30, 1996 and 1995, respectively. Those statements and
schedule 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 Controls Limited and Moog GmbH, 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 27, 1997 and
September 30, 1996, and the results of their operations and their
cash flows for each of the years in the three-year period ended
September 27, 1997, 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 materials respects, the information set forth
therein.
Buffalo, New York
November 10, 1997
KPMG Peat Marwick 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 1998 Proxy.
Executive Officers of the Registrant.
The names and ages of all executive officers of Moog are set
forth below.
Other than John B. Drenning, the principal occupations of the
following officers for the past five years have been their
employment with the Company. Mr. Drenning's principal occupation
is partner in the law firm of Phillips, Lytle, Hitchcock,
Blaine & Huber.
___________________________________________________________________________
Executive Officers and Positions Held Age Year First
Elected Officer
___________________________________________________________________________
Robert T. Brady
Chairman of the Board;
President; Chief Executive Officer;
Director; Member, Executive Committee 56 1967
Richard A. Aubrecht
Vice Chairman of the Board;
Vice President - Strategy and Technology;
Director; Member, Executive Committee 53 1980
Joe C. Green
Executive Vice President;
Chief Administrative Officer;
Director; Member, Executive Committee 56 1973
Robert R. Banta
Executive Vice President;
Chief Financial Officer; Assistant Secretary;
Director; Member, Executive Committee 55 1983
Philip H. Hubbell
Vice President - Contracts and Pricing 58 1988
Stephen A. Huckvale
Vice President 48 1990
Robert H. Maskrey
Vice President 56 1985
Richard C. Sherrill
Vice President 59 1991
William P. Burke
Treasurer 62 1985
John B. Drenning
Secretary 60 1989
Donald R. Fishback
Controller 41 1985
___________________________________________________________________________
ITEM 11. Executive Compensation.
The information required herein is incorporated by reference to
"Compensation Committee Report," "Stock Price Performance Graph,"
"Summary Compensation Table," "Fiscal Year-End Option/SAR
Values," "Employees' Retirement Plan," "Supplemental Retirement
Plan," "Employment Termination Benefits Agreements" and
"Compensation of Directors" in the 1998 Proxy.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required herein is incorporated by reference to
"Certain Beneficial Owners" and "Election of Directors" in the
1998 Proxy.
ITEM 13. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference to
the 1998 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 27, 1997.
(ii) Consolidated Balance Sheets as of September 27, 1997
and September 30, 1996.
(iii) Consolidated Statements of Cash Flows for each of the
three years ended September 27, 1997.
(iv) Consolidated Statements of Shareholders' Equity for
each of the three years ended September 27, 1997.
(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 27, 1997, is
included in this Annual Report on Form 10-K:
II. Valuation and Qualifying Accounts.
Schedules other than that listed above are omitted because
the conditions requiring their filing do not exist, or
because the required information is provided in the
Consolidated Financial Statements, including the notes
thereto.
3. Exhibits
The exhibits required to be filed as part of this Annual
Report on Form 10-K have been included as follows:
(2)(i) Stock Purchase Agreement between Moog Inc., Moog
Torrance Inc. and AlliedSignal Inc., incorporated by
reference to exhibit 2.1 of the Company's report on
Form 8-K dated June 15, 1994.
(ii) Asset Purchase Agreement dated as of September 22,
1996 between Moog Inc., Moog Controls Inc.,
International Motion Control Inc., Enidine Holdings,
L.P. and Enidine Holding Inc., incorporated by
reference to exhibit 2.1 of the Company's report on
Form 8-K dated October 28, 1996.
(3) Restated Certificate of Incorporation and By-laws of
the Company, incorporated by reference to exhibit (3)
of the Company's Annual Report on Form 10-K for its
fiscal year ended September 30, 1989.
(4) Form of Indenture between Moog Inc. and Fleet National
Bank, as Trustee, dated May 10, 1996 relating to the
10% Senior Subordinated Notes due 2006, incorporated by
reference to exhibit (iv) to Form 8-K dated May 10,
1996.
(9)(i) Agreement as to Voting, effective October 15, 1988,
incorporated by reference to exhibit (i) of
October 15, 1988 Report on Form 8-K dated
November 30, 1988.
(ii) Agreement as to Voting, effective November 30, 1983,
incorporated by reference to exhibit (i) of
November 1983 Report on Form 8-K dated December 9,
1983.
(10) Material contracts.
(i) Management Profit Sharing Plan, incorporated by
reference to exhibit 10(i) of the Company's Annual
Report on Form 10-K for the fiscal year ended
September 30, 1991.
(ii) Supplemental Retirement Plan dated October 1980, as
amended, incorporated by reference to exhibit (iv) of
November 1983 Report on Form 8-K, dated December 9,
1983, as amended, and reported in August 30, 1988
Report on Form 8-K, dated October 3, 1988, and
amended on October 20, 1988, incorporated by
reference thereto.
(iii) Deferred Compensation Plan for Directors and
Officers, incorporated by reference to exhibit (i) of
November 1985 Report on Form 8-K, dated December 3,
1985.
(iv) Incentive Stock Option Plan, incorporated by
reference to exhibit 4(b) of the Registration
Statement on Form S-8, File No. 33-36721, filed with
the Securities and Exchange Commission on
September 7, 1990.
(v) Non-Statutory Stock Option Plan, as amended,
incorporated by reference to exhibits 10(v) and
10(vi) of the Company's Annual Report on Form 10-K
for its fiscal year ended September 30, 1989.
(vi) Savings and Stock Ownership Plan, incorporated by
reference to exhibit 4(b) of the Company's Annual
Report on Form 10-K for its fiscal year ended
September 30, 1989.
(vii) Executive Termination Benefits Agreement incorporated
by reference to January 29, 1988 Report on Form 8-K
dated February 4, 1988.
(viii) Indemnity Agreement, incorporated by reference to
Annex A to 1988 Proxy Statement dated January 4,
1988.
(ix) Revolving Credit and Term Loan Agreement dated
June 15, 1994, incorporated by reference to Exhibit
10(ix) to the Company's Report on Form 10-K for its
fiscal year ended September 30, 1994.
(x) Amendment No. 2 to the Bank Credit Facility,
incorporated by reference to Exhibit (ii) to the
Company's Report on Form 8-K dated March 13, 1996.
(xi) Amendment No. 3 to the Bank Credit Facility,
incorporated by reference to Exhibit (v) to the
Company's Report on Form 8-K dated May 10, 1996.
(xii) Amendment No. 4 to the Bank Credit Facility, dated
June 18, 1996, incorporated by reference to exhibit
10 (xii) of the Company's Annual Report on Form 10-K
for its fiscal year ended September 30, 1996.
(xiii) Amendment No. 5 to the Bank Credit Facility, dated
October 26, 1996. (Filed herewith)
(xiv) Amendment No. 6 to the Bank Credit Facility, dated
April 9, 1997. (Filed herewith)
(11) Statement re: Computation of per share earnings. (Filed
herewith)
(13) 1997 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) Moog AG, Incorporated in Switzerland, wholly-owned
subsidiary with branch operation in Ireland
(ii) Moog Australia Pty. Ltd., Incorporated in Australia,
wholly-owned subsidiary
(iii) Moog do Brasil Controles Ltda., Incorporated in
Brazil, wholly-owned subsidiary
(iv) Moog Buhl Automation, a branch office of Moog Inc.
operating under Danish law
(v) Moog Controls Corporation, Incorporated in New York,
wholly-owned subsidiary with branch operation in the
Republic of the Philippines
(vi) Moog Controls Hong Kong Ltd., Incorporated in Hong
Kong, wholly-owned subsidiary
(vii) Moog Controls (India) Private Ltd., Incorporated in
India, wholly-owned subsidiary
(viii) Moog Controls Ltd., Incorporated in the United
Kingdom, wholly-owned subsidiary
(a) Moog Norden A.B., Incorporated in Sweden,
wholly-owned subsidiary of Moog Controls Ltd.
(b) Moog OY, Incorporated in Finland, wholly-owned
subsidiary of Moog Controls Ltd.
(ix) Moog FSC Ltd., Incorporated in the Virgin Islands,
wholly-owned subsidiary
(x) Moog GmbH, Incorporated in Germany, wholly-owned
subsidiary
(a) Moog Italiana S.r.l., Incorporated in Italy,
wholly-owned subsidiary, 90% owned by Moog GmbH;
10% owned by Moog Inc.
(xi) Moog Industrial Controls Corporation, Incorporated in
New York, wholly-owned subsidiary
(xii) Moog Japan Ltd., Incorporated in Japan, 90% owned
subsidiary
(xiii) Moog Korea Ltd., Incorporated in South Korea,
wholly-owned subsidiary
(xiv) Moog Properties, Inc., Incorporated in New York,
wholly-owned subsidiary
(xv) Moog Sarl, Incorporated in France, wholly-owned
subsidiary, 95% owned by Moog Inc; 5% owned by Moog
GmbH.
(xvi) Moog Singapore Pte. Ltd., Incorporated in Singapore,
wholly-owned subsidiary
(23)(ii) Consent of KPMG Peat Marwick LLP; Consents and Audit
Reports of Coopers & Lybrand and Coopers &
Lybrand 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
(i) The Company filed a report on Form 8-K dated
October 28, 1996 reporting pursuant to items 2 and 7.
(ii) The Company filed a report on Form 8-K dated
September 17, 1997 reporting pursuant to item 8.
Schedule II
MOOG INC.
Valuation and Qualifying Accounts - Three Years ended September 27, 1997
(dollars in thousands)
Additions
Balance at charged to Acquisitions/ Balance
beginning costs and Exchange at end
Description of period expenses Deductions rate changes 1/ of period
____________________________________________________________________________________________________
Year ended 1995:
Reserve for contract losses $14,964 $ 986 $ 7,369 $ 4,291 $12,872
Allowance for doubtful
accounts 1,493 352 501 35 1,379
Reserve for inventory
valuation 3,486 2,423 1,209 2,892 7,592
______________________________________________________________________
Year ended 1996:
Reserve for contract losses $12,872 $ 1,965 $ 3,871 $ - $10,966
Allowance for doubtful
accounts 1,379 462 479 (30) 1,332
Reserve for inventory
valuation 7,592 4,017 2,237 (37) 9,335
______________________________________________________________________
Year ended 1997:
Reserve for contract losses $10,966 $ 3,898 $ 6,694 $ - $ 8,170
Allowance for doubtful
accounts 1,332 882 527 (93) 1,594
Reserve for inventory
valuation 9,335 4,983 2,076 612 12,854
______________________________________________________________________
Note:
1/ Represents the impact of changes in currency exchange rates during the year and, in 1995,
reserves for contract losses related to the acquisition of the hydraulic and mechanical actuation
product lines of AlliedSignal Inc.
Quarterly Stock Prices
Stock Prices
Fiscal Year Class B Class A
Ended High Low High Low
_______________________________________________________________
Sept. 27, 1997
1st Quarter $25 3/4 $21 5/8 $26 $17 1/8
2nd Quarter 25 3/8 24 7/8 25 1/4 22 1/2
3rd Quarter 31 3/8 23 1/8 31 7/8 21
4th Quarter 39 3/4 28 3/8 40 1/4 28
______________________________________________________________
Sept. 30, 1996
1st Quarter $18 $14 7/8 $17 1/2 $12 7/8
2nd Quarter 19 1/2 17 7/8 20 16 3/4
3rd Quarter 24 5/8 18 5/8 24 1/2 18 1/8
4th Quarter 24 5/8 21 1/4 24 3/4 19
______________________________________________________________
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: November 21, 1997
By /s/ ROBERT T. BRADY
Robert T. Brady
Chairman of the Board,
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
By /s/ ROBERT R. BANTA
Robert R. Banta
Executive Vice President,
Chief Financial Officer,
and Director
(Principal Financial Officer)
By /s/ DONALD R. FISHBACK
Donald R. Fishback
Controller (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and on the dates indicated.
By/s/ RICHARD A. AUBRECHT By/s/PETER P. POTH
Richard A. Aubrecht Peter P. Poth
Director, November 21, 1997 Director, November 21, 1997
By/s/ JOE C. GREEN By/s/ARTHUR S. WOLCOTT
Joe C. Green Arthur S. Wolcott
Director, November 21, 1997 Director, November 21, 1997
By/s/ KENNETH J. McILRAITH By/s/ JOHN D. HENDRICK
Kenneth J. McIlraith John D. Hendrick
Director, November 21, 1997 Director, November 21, 1997
By/s/ ALBERT F. MYERS
Albert F. Myers
Director, November 21, 1997
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 sjohnson.inc@moog.com
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 11, 1998. 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.
Exhibit 10(xiii)
CONSENT AND FIFTH AMENDMENT TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 26th day of October,
1996 among the banks identified in Exhibit A attached to and made
a part of this Agreement (collectively the "Banks" and
individually a "Bank"), Marine Midland Bank, a New York banking
corporation having its chief executive office at One Marine
Midland Center, Buffalo, New York 14203, ("Marine"), as agent for
the Banks, and Moog Inc., a New York business corporation having
its chief executive office at Jamison Road and Seneca Street,
East Aurora, New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, a First Amendment to Revolving and
Term Loan Agreement dated as of November 14, 1995, a Consent and
Second Amendment to Revolving and Term Loan Agreement dated as of
March 22, 1996, a Consent and Third Amendment to Revolving and
Term Loan Agreement dated as of May 13, 1996 and a Fourth
Amendment to Revolving and Term Loan Agreement dated as of June
18, 1996 (as so amended, the "Loan Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement; and
WHEREAS, the Banks and Marine as agent for the Banks
now desire to give their consent under the Loan Agreement to the
taking of certain actions by the Borrower;
NOW, THEREFORE, effective on the date described in
Section 5(a) of this Agreement, the Banks, Marine as agent for
the Banks and the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENTS.
a. Section 6(d) of the Loan Agreement shall be
amended to read in its entirety as follows:
d. Senior Debt to Net Capital Base Ratio.
Maintain at the end of each fiscal quarter of the
Borrower the Senior Debt to Net Capital Base Ratio so
that it does not exceed the following applicable
percentage: (i) for any fiscal quarter ending on or
before September 30, 1998, 102% and (ii) for any such
fiscal quarter ending thereafter, 80%;
b. Subsection (i) of Section 6(e) of the Loan
Agreement shall be amended in its entirety to read as follows:
(i) EBITDA of the Borrower (A) for the fiscal year of
the Borrower ending on September 30, 1995 less the
aggregate amount of all capital expenditures of the
Borrower and all Subsidiaries for such fiscal year so
that it is not less than 200% of the required interest
payments on all Indebtedness of the Borrower and all
Subsidiaries for such fiscal year, (B) for the fiscal
years of the Borrower ending on September 30, 1996 and
September 30, 1997 so that it is not less than 250% of
the required interest payments on all Indebtedness of
the Borrower and all Subsidiaries for each such fiscal
year and (C) for each fiscal year of the Borrower
ending thereafter so that it is not less than 275% of
the required interest payments on all Indebtedness of
the Borrower and all Subsidiaries for such fiscal year
and
c. Section 6(t) of the Loan Agreement shall be
amended to read in its entirety as follows:
t. Interest Rate Protection. Execute and
deliver or cause to be executed and delivered
agreements, in form and substance satisfactory to the
Agent, with financial institutions satisfactory to the
Required Banks providing, when aggregated with similar
protections previously delivered, interest rate
protections with respect to (i) at least $60,000,000
for a period of at least two years and deliver evidence
satisfactory to the Agent of the existence thereof no
later than July 15, 1994 and (ii) at least $60,000,000
at all times during the period from October 15, 1996
through September 30, 1999, in such time increments as
the Borrower may select, and deliver evidence
satisfactory to the Agent of the existence thereof
within fifteen days of entering into each such
agreement; and
d. Subsection (iii) of Section 7(i) of the Loan
Agreement shall be amended to read in its entirety as follows:
(iii) acquire all or substantially all of the assets or
stock of any other Person, or assets constituting all
or substantially all of a division or product line of
any other Person, other than pursuant to a Permitted
Acquisition,
e. Section 7(j-1) of the Loan Agreement shall be
amended to read in its entirety as follows:
j-1. Capital Expenditures. Make (whether by means
of any purchase or other acquisition of any asset, by
means of any capital lease or otherwise) capital
expenditures, other than for any permitted Acquisition,
exceeding in the aggregate for the Borrower and all
Subsidiaries during any fiscal year of the Borrower the
following applicable amount: (i) during the fiscal year
of the Borrower ending on September 30, 1996,
$14,000,000 and (ii) during any fiscal year of the
Borrower ending thereafter, $15,000,000;
f. Section 12 (rr-1) of the Loan Agreement shall be
amended to read in its entirety as follows:
rr-1. Permitted Acquisition. "Permitted
Acquisition" means (i) the Permitted Special
Acquisition or (ii) any other acquisition by the
Borrower or any Subsidiary of all or substantially all
of the assets or stock of any other Person, or assets
constituting all or substantially all of a division or
product line of any other Person, so long as (A)
neither immediately prior to contracting for such other
acquisition shall there exist, nor as a direct or
indirect result of the consummation of any such other
acquisition shall there occur, any Event of Default or
Default, (B) the aggregate consideration paid (whether
by means of transfer of assets, assumption of
liabilities or otherwise) by the Borrower and all
Subsidiaries in connection with all such other
acquisitions during the term of this Agreement does not
exceed $2,000,000 and (C) with respect to any assets or
stock of any Person acquired directly or indirectly
pursuant to any such other acquisition, all collateral
requirements of the Required Banks are satisfied.
g. Section 12(tt) shall be amended to read in its
entirety as follows:
tt. Permitted Indebtedness. "Permitted
Indebtedness" means any Indebtedness (including any
related to any Contingent Obligation) of the Borrower
or of any Subsidiary (i) to any Lending Entity pursuant
to this Agreement, (ii) constituting unsecured normal
trade debt incurred upon customary terms in the
ordinary course of its business, (iii) resulting from
the endorsement in the ordinary course of its business
of any check or other negotiable instrument for
deposition or collection, (iv) to the extent incurred
to pay, or to defer the payment of, the purchase price
of any equipment used in the ordinary course of its
business, (v) consisting of Indebtedness only of any
Foreign Subsidiary, (vi) to any Sharing Creditor to the
extent described in clause (ii) of Section 12(fff) of
this Agreement, (vii) Indebtedness of the Borrower, in
an amount not to exceed $15,000,000, pursuant to that
certain Credit Facility for Eurocredits dated September
18, 1996 between the Borrower and Landesgirokasse
offentliche Bank und Landessparkasse or (viii)
identified as "Permitted Indebtedness" in Exhibit A
attached to and made a part of this Agreement.
3. CONSENTS. Section 5(a) of the Loan Agreement
provides that "[t]he proceeds of each subsequent Revolving Loan
will be used only for working capital and other cash needs
arising in the ordinary course of business (not including any
corporate or other acquisition other than pursuant to a Permitted
Acquisition". Section 7(b) of the Loan Agreement provides that
"the Borrower shall not, without the prior written consent of the
Required Banks . . . assume or have any Indebtedness . . .
(ii) pursuant to any Contingent Obligation, except . . . for
Permitted Indebtedness". Section 7(d) of the Loan Agreement
provides that "the Borrower shall not, without the prior written
consent of the Required Banks . . . cause or permit . . . any of
its Assets to be subject to any Lien, except for Permitted
Liens". Section 7(i) of the Loan Agreement, as amended by this
Agreement, provides that "the Borrower shall not, without the
prior written consent of the Required Banks . . . (iii) acquire
all or substantially all of the assets . . . of any other Person
. . . other that pursuant to a Permitted Acquisition". In
addition, Section 7(j-1) of the Loan Agreement, as amended by
this Agreement, provides that "the Borrower shall not, without
the prior written consent of the Required Banks . . .
[m]ake . . . capital expenditures exceeding . . . during any
fiscal year of the Borrower . . . $15,000,000". The Borrower has
requested the Required Banks to consent, and by this Agreement
the Required Banks consent, to (i) the acquisition by the
Borrower of (A) the assets and business of Moog Controls Inc.
("MCI") and certain assets of IMC Controls GmbH pursuant to the
terms of that certain Asset Purchase Agreement dated as of
September 22, 1996 by and between the Borrower, MCI,
International Motion Control Inc., Enidine Holding L.P. and
Enidine Holding, Inc. (the "Asset Purchase Agreement") for a
purchase price of $48,600,000 (the "MCI Assets") and (B) the real
property and improvements commonly known as 7 Sterling Drive,
Orchard Park, New York pursuant to the terms of that certain Real
Estate Purchase Agreement dated as of September 22, 1996 by and
between the Borrower and MCI (as amended by that certain letter
agreement dated as of September 22, 1996 by and between Borrower
and MCI) (the "Real Estate Purchase Agreement") for a purchase
price of $5,850,000 (the "MCI Real Property") (the acquisition of
the MCI Assets and the MCI Real Property is collectively referred
to herein as the "MCI Acquisition"), (ii) the use by the Borrower
of proceeds of any subsequent Revolving Loan to pay for the
purchase of the MCI Assets and (iii) either (A) the use by the
Borrower of the proceeds of any subsequent Revolving Loan to pay
for the purchase of the MCI Real Property or (B) the assumption
by the Borrower of Indebtedness of MCI, the principal amount of
which does not exceed $5,850,000, governed by those certain
financing arrangements of MCI described in that certain Lease
Agreement dated as of January 1, 1996 between the Erie County
Industrial Development Agency and MCI in connection with the
purchase of the MCI Real Property and the Borrower's permitting
the existing liens and encumbrances on the MCI Real Property
created by such financing arrangements to remain.
4. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the following:
a. No Default. (i) There not existing at the time
such Loan is to be made any Event of Default or Default and (ii)
such Bank not believing in good faith that any Event of Default
or Default so exists;
b. Representations and Warranties. (i) Each
representation and warranty made in the Loan Agreement, as
amended by this Agreement, being true and correct as of all times
during the period beginning on the effective date of this
Agreement and ending at the time such Loan is to be made and as
of the time such Loan is to be made, except to the extent updated
in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity
before the time such Loan is to be made, (ii) each other
representation and warranty made to any Lending Entity by or on
behalf of the Borrower or any Subsidiary before the time such
Loan is to be made being true and correct as of the date thereof,
except to the extent updated in a certificate executed by a
Designated Officer and a Designated Financial Officer and
received by each Lending Entity before the time such Loan is to
be made, (iii) each financial statement provided to any Lending
Entity by or on behalf of the Borrower or any Subsidiary before
the time such Loan is to be made having fairly represented the
financial information that it purports to reflect as of the date
thereof and (iv) such Bank not believing in good faith that (A)
any such representation or warranty, except to the extent so
updated, was or is other than true and correct as of any time or
date of determination of the truth and correctness thereof or (B)
any such financial statement did not so fairly represent such
information as of the date thereof;
c. Proceedings. Such Bank being satisfied as to each
corporate or other proceeding of the Borrower and any Subsidiary
in connection with any transaction contemplated by the Loan
Agreement, as amended by this Agreement; and
d. Receipt by Banks. The receipt by each Bank at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to each Lending Entity:
(i) If such Loan is the first Revolving Loan after the
effective date of this Agreement, a certificate executed by a
Designated Officer and a Designated Financial Officer updating
each representation and warranty previously made in or pursuant
to the Loan Agreement and stating that (A) there did not occur or
exist at any time during the period beginning on the date of the
Loan Agreement and ending at the time such Loan is to be made and
there does not exist at the time such Loan is to be made any
Event of Default or Default and (B) each representation and
warranty made in the Loan Agreement, as amended by this
Agreement, was true and correct as of all times during the period
beginning on the date of the Loan Agreement and ending at the
time such Loan is to be made and is true and correct as of the
time such Loan is to be made, except to the extent updated in a
certificate executed by a Designated Officer and a Designated
Financial Officer and received by each Lending Entity before the
time such Loan is to be made;
(ii) If such Loan is the first Revolving Loan after the
date of this Agreement, evidence of the taking and the
continuation in full force and effect, at the time such Revolving
Loan is to be made, of each corporate or other action of the
Borrower or any other Person necessary to authorize the obtaining
of all Loans by the Borrower and the execution, delivery and
performance of each Loan Document and the imposition or creation
of each security interest, mortgage and other lien and
encumbrance imposed or created pursuant to any Loan Document;
(iii) If such Loan is the first Revolving Loan after the
date of this Agreement, evidence of the closing of the MCI
Acquisition in accordance with the terms of the Asset Purchase
Agreement and the Real Estate Purchase Agreement including the
expiration of the related waiting period therefor under Hart-
Scott-Rodino and any other applicable Law and the receipt of any
necessary governmental and other third party approvals and
consents, together with copies of each other document related to
the MCI Acquisition;
(iv) If such Loan is the first Revolving Loan after the
date of this Agreement, confirmation that the MCI Assets and the
MCI Real Property are being acquired free and clear of all liens
and encumbrances except the extent to which, if any, the MCI Real
Property remains subject to existing liens and encumbrances as a
result of the assumption of Indebtedness described in clause
(iii) of the last sentence of Section 3 of this Agreement;
(v) If such Loan is the first Revolving Loan after the
date of this Agreement, Collateral Assignments, appropriately
completed and duly executed by the Borrower, with respect to the
patents and licensed technology acquired by the Borrower pursuant
to the MCI Acquisition;
(vi) If such Loan is the first Revolving Loan after the
date of this Agreement, a Negative Pledge Agreement, together
with an Environmental Indemnity Agreement, each appropriately
completed and duly executed by the Borrower with respect to the
MCI Real Property;
(vii) If such Loan is the first Revolving Loan after the
date of this Agreement, evidence (A) that no asset subject to any
Lien pursuant to any Loan Document is at the time such Loan is to
be made subject to any other Lien, except for Permitted Liens,
and (B) of the making of each recording and filing, and of the
taking of each other action, deemed necessary or desirable by the
Agent at the sole option of the Agent to perfect or otherwise
protect any such Lien;
(viii) If such Loan is the first Revolving Loan after the
date of this Agreement, evidence that each requirement contained
in any Loan Document with respect to insurance is being met at
the time such Loan is to be made;
(ix) If such Loan is the first Revolving Loan after the
date of this Agreement, an opinion of Phillips, Lytle, Hitchcock,
Blaine & Huber, counsel to the Borrower;
(x) If such Loan is the first Revolving Loan after the
date of this Agreement, such financial, business and other
information regarding the Borrower, MCI and each such Person's
Subsidiaries and Affiliates as any of the Lender Entities shall
have reasonably requested;
(xi) If such Loan is the first Revolving Loan after the
effective date of this Agreement, payment on the effective date
of this Agreement of a modification fee to the Agent, for the
ratable benefit of each Bank, equal to such Bank's Pro Rata share
of $100,000;
(xii) Each additional agreement, instrument and other
writing, including, but not limited to, (A) each agreement,
instrument and other writing intended to be filed or recorded
with any Governmental Authority to perfect or otherwise preserve
or protect the priority of any Lien created or imposed pursuant
to any Loan Document and (B) if such Loan is not the first
Revolving Loan after the effective date of this Agreement, each
item referred to in any of clauses (i) through (xiii) of this
Section 4d, referred to in any of clauses (i) through (xviii) of
Section 4(d) of the Loan Agreement, required by any Loan Document
or reasonably deemed necessary or desirable by the Required
Banks; and
(xiii) Payment of all costs and expenses payable pursuant
to the first sentence of Section 9(a) of the Loan Agreement at or
before the time such Loan is to be made.
5. GENERAL.
a. Term. This Agreement shall become effective upon
its execution by the Borrower, the Agent and the Required Banks.
The term of this Agreement shall be the same as the term of the
Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement contained in this Agreement
shall survive the making of each Loan and the execution and
delivery of each Loan Document and shall continue in full force
and effect during the term of this Agreement, except to the
extent modified in accordance with the terms of this Agreement.
Each such representation, warranty, covenant and agreement shall
be presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any rending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination.
d. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to
principles of conflict of laws.
e. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by this
Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to this Agreement shall be
deemed to be references to the Loan Agreement as amended by this
Agreement.
IN WITNESS WHEREOF, each Lending Entity and the
Borrower have caused this Agreement to be duly executed on the
date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By /s/Hugh C. McLean
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By /s/Timothy Geiger
Title
FLEET BANK
By /s/John J. Larry VP
Title
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, SUCCESSOR BY MERGER TO
THE MITSUBISHI BANK, LIMITED
By /s/Paul Malecki
attorney-in-fact
THE SUMITOMO BANK, LIMITED
By /s/William N. Paty
Vice President and Manager Title
By /s/James Drum
Vice President, NY Office Title
BARNETT BANK OF PINELLAS COUNTY
By /s/Michael S. Crowe
Senior VP Title
NATIONAL BANK OF CANADA
By /s/Robert G. Uhrig
Vice President and Manager Title
By /s/Michael S. Woodward
Vice President Title
MARINE MIDLAND BANK, AS AGENT
By /s/Hugh C. McLean
Hugh C. McLean, Vice President
MOOG INC.
By /s/Robert R. Banta
Robert R. Banta, Executive Vice
President
ACKNOWLEDGEMENTS
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On this 22 day of October in the year 1996, before me
personally came Hugh C. McLean, known to me, who, being by me
duly sworn, did depose and say that he resides at 170 Highland
Avenue, Buffalo, New York; that he is a Vice President of Marine
Midland Bank, the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of
the board of directors of said corporation.
/s/Beth A. Flynn
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 22 day of October in the year 1996, before me
personally came Timothy Geiger, to me known, who, being by me
duly sworn, did depose and say that he resides at 1145 D. Youngs
Rd., Williamsville, NY 14221; that he is Vice President of
Manufacturers and Traders Trust Company, the corporation
described in and which executed the foregoing instrument; and
that he signed his name thereto by order of the Board of
Directors of said corporation.
______________________________
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 24th day of October in the year 1996, before me
personally came John J. Larry, to me known, who, being by me duly
sworn, did depose and say that he resides at 302 Colonial Dr.,
Grand Island, NY, that he is Vice President of Fleet Bank, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Karen Ertman
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 24th day of October in the year 1996, before me
personally came Joseph P. Devoe, to me known, who, being by me
duly sworn, did depose and say that he resides at Hartsdale, NY,
that he is the attorney-in-fact of The Bank of Tokyo-Mitsubishi,
Ltd., New York Branch, successor by merger to The Mitsubishi
Bank, Limited, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto
pursuant to duly granted authority.
/s/Nancy Mallm Morton
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 23 day of October in the year 1996, before me
personally came William N. Paty, to me known, who, being by me
duly sworn, did depose and say that he resides at 136 Allison
Road, Katovah, NY; that he is Vice President & Manager of The
Sumitomo Bank, Limited, the corporation described in and which
executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of said corporation.
/s/Marie K. Capone
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 23 day of October in the year 1996, before me
personally came James Drum, to me known, who, being by me duly
sworn, did depose and say that he resides at 108 Charles St., N.
Massapequa, NY 11758; that he is Vice President of The Sumitomo
Bank, Limited, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Mary K. Capone
Notary Public
STATE OF FLORIDA )
) SS.:
COUNTY OF PINELLAS )
On this 23rd day of October in the year 1996, before me
personally came Michael S. Crowe, to me known, who, being by me
duly sworn, did depose and say that he resides at 200 Central
Avenue, Suite 1800, St. Petersburg, Florida 33701; that he is
the Senior Vice President of Barnett Bank of Pinellas County, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Susanna J. Macdonald
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 22nd day of October in the year 1996, before me
personally came Robert G. Uhrig, to me known, who, being by me
duly sworn, did depose and say that he resides at Orchard Park,
New York; that he is the Vice President of National Bank of
Canada, the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Lori A. Potter
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 22nd day of October in the year 1996, before me
personally came Michael S. Woodard, to me known, who, being by me
duly sworn, did depose and say that he resides at Lancaster, New
York; that he is Vice President of National Bank of Canada, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Lori A. Potter
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 22 day of October in the year 1996, before me
personally came Hugh C. McLean,to me known, who, being by me duly
sworn, did depose and say that he resides at 170 Highland Avenue,
Buffalo, New York; that he is Vice President of Marine Midland
Bank, as Agent, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Beth A. Flynn
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 22nd day of October in the year 1996, before me
personally came Robert R. Banta, to me known, who, being by me
duly sworn, did depose and say that he resides at 158
Willardshire Road, East Aurora, New York; that he is Executive
Vice President of Moog Inc., the corporation described in and
which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said
corporation.
/s/Linda A. Zazynski
Notary Public
EXHIBIT A
Banks that are a Party to
this Agreement
Marine Midland Bank
Manufacturers and Trades Trust Company
Fleet Bank
The Sumitomo Bank, Limited
The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
Barnett Bank of Pinellas County
National Bank of Canada
Exhibit 10(xiv)
SIXTH AMENDMENT TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 9th day of April, 1997
among the banks identified in Exhibit A attached to and made a
part of this Agreement (collectively the "Banks" and individually
a "Bank"), Marine Midland Bank, a New York banking corporation
having its chief executive office at One Marine Midland Center,
Buffalo, New York 14203, ("Marine"), as agent for the Banks, and
Moog Inc., a New York business corporation having its chief
executive office at Jamison Road and Seneca Street, East Aurora,
New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, a First Amendment to Revolving and
Term Loan Agreement dated as of November 14, 1995, a Consent and
Second Amendment to Revolving and Term Loan Agreement dated as of
March 22, 1996, a Consent and Third Amendment to Revolving and
Term Loan Agreement dated as of May 13, 1996, a Fourth Amendment
to Revolving and Term Loan Agreement dated as of June 18, 1996
and a Consent and Fifth Amendment to Revolving and Term Loan
Agreement Dated as of October 26, 1996 (as so amended, the "Loan
Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement; and
NOW, THEREFORE, effective on the date described in
Section 4(a) of this Agreement, the Banks, Marine as agent for
the Banks and the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENT. Section 7(j-1) of the Loan
Agreement shall be amended to read in its entirety as follows:
j-1. Capital Expenditures. Make capital
expenditures, other than for any Permitted Acquisition,
exceeding in the aggregate for the Borrower and all
Subsidiaries during any fiscal year of the Borrower the
following applicable amount: (i) during the fiscal year
of the Borrower ending on September 30, 1996,
$14,000,000, (ii) during the fiscal year of the
Borrower ending on September 30, 1997, $18,000,000 and
(iii) during any fiscal year of the Borrower ending
thereafter, $15,000,000;
3. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the receipt by each Bank at or before
the time such Loan is to be made of the following, in form and
substance satisfactory to each Lending Entity:
a. If such Loan is the first Revolving Loan after the
effective date of this Agreement, a certificate executed by a
Designated Officer and a Designated Financial Officer updating
each representation and warranty previously made in or pursuant
to the Loan Agreement and stating that (i) there did not occur or
exist at any time during the period beginning on the date of the
Loan Agreement and ending at the time such Loan is to be made and
there does not exist at the time such Loan is to be made any
Event of Default or Default and (ii) each representation and
warranty made in the Loan Agreement, as amended by this
Agreement, was true and correct as of all times during the period
beginning on the date of the Loan Agreement and ending at the
time such Loan is to be made and is true and correct as of the
time such Loan is to be made, except to the extent updated in a
certificate executed by a Designated Officer and a Designated
Financial Officer and received by each Lending Entity before the
time such Loan is to be made; and
b. Payment of all costs and expenses payable pursuant
to the first sentence of Section 9(a) of the Loan Agreement at or
before the time such Loan is to be made.
4. GENERAL.
a. Term. This Agreement shall become effective
upon its execution by the Borrower, the Agent and the Required
Banks. The term of this Agreement shall be the same as the term
of the Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement contained in this Agreement
shall survive the making of each Loan and the execution and
delivery of each Loan Document and shall continue in full force
and effect during the term of this Agreement, except to the
extent modified in accordance with the terms of this Agreement.
Each such representation, warranty, covenant and agreement shall
be presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination.
d. Governing Law. This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to
principles of conflict of laws.
e. Invalidity. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by
this Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to "this Agreement" or words of
similar effect shall be deemed to be references to the Loan
Agreement as amended by this Agreement.
IN WITNESS WHEREOF, each Lending Entity and the
Borrower have caused this Agreement to be duly executed on the
date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By /s/Hugh C. McLean
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By /s/Timothy Geiger
Vice President Title
FLEET BANK
By /s/John J. Larry
Vice President Title
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, SUCCESSOR BY MERGER TO
THE MITSUBISHI BANK, LIMITED
By /s/Paul Malecki
attorney-in-fact
THE SUMITOMO BANK, LIMITED
By /s/William N. Paty
Vice President and Manager Title
By /s/James Drum
Vice President Title
BARNETT BANK OF PINELLAS COUNTY
By /s/Michael S. Crowe
Senior Vice President Title
NATIONAL BANK OF CANADA
By /s/Robert G. Uhrig
Vice President and Manager Title
By /s/Michael S. Woodward
Vice President Title
MARINE MIDLAND BANK, AS AGENT
By /s/Hugh C. McLean
Hugh C. McLean, Vice President
MOOG INC.
By /s/Robert R. Banta
Robert R. Banta, Executive Vice
President
ACKNOWLEDGEMENTS
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 11 day of April in the year 1997, before me
personally came Hugh C. McLean, known to me, who, being by me
duly sworn, did depose and say that he resides at 170 Highland
Avenue, Buffalo, New York; that he is a Vice President of Marine
Midland Bank, the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of
the board of directors of said corporation.
/s/Beth A. Flynn
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 11th day of April in the year 1997, before me
personally came Timothy Geiger, to me known, who, being by me
duly sworn, did depose and say that he resides at 1145 D. Youngs
Rd., Williamsville, NY 14221; that he is Vice President of
Manufacturers and Traders Trust Company, the corporation
described in and which executed the foregoing instrument; and
that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/Barbara V. Rackley
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 15th day of April in the year 1997, before me
personally came John J. Larry, to me known, who, being by me duly
sworn, did depose and say that he resides at 302 Colonial Dr.,
Grand Island, NY, that he is Vice President of Fleet Bank, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Patricia A. Brennan
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 2nd day of May in the year 1997, before me
personally came Paul Malecki, to me known, who, being by me duly
sworn, did depose and say that he resides at 211 ____________
Road, _________________, NJ 08853; that he is the attorney-in-
fact of The Bank of Tokyo-Mitsubishi, Ltd., New York Branch,
successor by merger to The Mitsubishi Bank, Limited, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto pursuant to duly
granted authority.
/s/Nancy Mallm Morton
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 1st day of May in the year 1997, before me
personally came William N. Paty, to me known, who, being by me
duly sworn, did depose and say that he resides at 136 Allison
Road, Katonah, NY; that he is Vice President & Manager of The
Sumitomo Bank, Limited, the corporation described in and which
executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of said corporation.
/s/Anastasia Alexopoulos
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 1st day of May in the year 1997, before me
personally came James Drum, to me known, who, being by me duly
sworn, did depose and say that he resides at 108 Charles St., N.
Massapequa, NY 11758; that he is Vice President of The Sumitomo
Bank, Limited, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Anastasia Alexopoulos
Notary Public
STATE OF FLORIDA )
) SS.:
COUNTY OF PINELLAS )
On this 14th day of April in the year 1997, before me
personally came Michael S. Crowe, to me known, who, being by me
duly sworn, did depose and say that he resides at 200 Central
Avenue, Suite 1800, St. Petersburg, Florida 33701; that he is
the Senior Vice President of Barnett Bank of Pinellas County, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Susanna Macdonald
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 15th day of April in the year 1997, before me
personally came Robert G. Uhrig, to me known, who, being by me
duly sworn, did depose and say that he resides at Orchard Park,
New York; that he is the Vice President & Manager of National
Bank of Canada, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Sharon A. Benitez
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 15th day of April in the year 1997, before me
personally came Michael S. Woodard, to me known, who, being by me
duly sworn, did depose and say that he resides at Lancaster, New
York; that he is V.P.-Marketing of National Bank of Canada, the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Sharon A. Benitez
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 11th day of April in the year 1997, before me
personally came Hugh C. McLean,to me known, who, being by me duly
sworn, did depose and say that he resides at 170 Highland Avenue,
Buffalo, New York; that he is Vice President of Marine Midland
Bank, as Agent, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/Beth A. Flynn
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF ERIE )
On this 14th day of April in the year 1997, before me
personally came Robert R. Banta, to me known, who, being by me
duly sworn, did depose and say that he resides at 158
Willardshire Road, East Aurora, New York; that he is Executive
Vice President of Moog Inc., the corporation described in and
which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said
corporation.
/s/Linda A. Zazynski
Notary Public
EXHIBIT A
Banks that are a Party to
this Agreement
Marine Midland Bank
Manufacturers and Trades Trust Company
Fleet Bank
The Sumitomo Bank, Limited
The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
Barnett Bank of Pinellas County
National Bank of Canada
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS - PRIMARY
Years Ended
------------------------------------------
September 27, September 30, September 30,
1997 1996 1995
------------- ------------- -------------
Weighted-average common
shares outstanding 6,979,011 7,412,485 7,721,927
Net effect of dilutive
stock options 245,601 226,827 0
------------- ------------- ------------
Weight-average common and
common equivalent shares
outstanding (A) 7,224,612 7,639,312 7,721,927
============= ============= ============
Net earnings before extra-
ordinary item and cumulative
effect of change in
accounting for income taxes $ 13,606 $ 11,219 $ 7,761
Less: Preferred stock dividends (9) (9) (9)
------------- ------------- ------------
Net earnings before extra-
ordinary item and cumulative
effect of change in accounting
for income taxes attributable
to common shareholders (B) 13,597 11,210 7,752
Extraordinary item (C) 0 (510) 0
Cumulative effect of change in
accounting for income taxes (D) 0 0 0
------------- ------------- -----------
Net earnings attributable
to common shareholders (E) $ 13, 597 $ 10,700 $ 7,752
============= ============= ===========
Per share:
Net earnings before extra-
ordinary item and cumulative
effect of change in
accounting for income
taxes (B)/(A) $ 1.88 $ 1.47 $ 1.00
Extraordinary item (C)/(A) 0.00 (0.07) 0.00
Cumulative effect of change
in accounting for income
taxes (D)/(A) 0.00 0.00 0.00
------------- ------------- -----------
Net earnings (E)/(A) $ 1.88 $ 1.40 $ 1.00
============= ============= ===========
EXHIBIT 11.2
COMPUTATION OF PER SHARE EARNINGS - FULLY DILUTED
Years Ended
------------------------------------------
September 27, September 30, September 30,
1997 1996 1995
------------- ------------- -------------
Weighted-average common
shares outstanding 6,979,011 7,412,485 7,721,927
Net effect of dilutive
stock options 261,237 244,040 93,352
Assumed conversion of
Preferred Stock 8,146 8,585 8,585
Assumed conversion of
Convertible Subordinate
Debentures 0 863,305
------------- ------------- ------------
Weighted-average common and
common equivalent shares
outstanding (A) 7,248,394 7,665,110 8,687,169
============= ============= ============
Net earnings before extra-
ordinary item and cumulative
effect of change in
accounting for income taxes $ 13,606 $ 11,219 $ 7,761
Add: conversion of Convertible
Subordinated Debentures 0 0 1,682
------------- ------------- ------------
Net earnings before extra-
ordinary item and cumulative
effect of change in accounting
for income taxes attributable
to common shareholders (B) 13,606 11,219 9,443
Extraordinary item (C) 0 (510) 0
Cumulative effect of change in
accounting for income taxes (D) 0 0 0
------------- ------------- -----------
Net earnings attributable
to common shareholders (E) $ 13,606 $ 10,709 $ 9,443
============= ============= ===========
Per share:
Net earnings before extra-
ordinary item and cumulative
effect of change in
accounting for income
taxes (B)/(A) $ 1.88 $ 1.46 $ 1.00*
Extraordinary item (C)/(A) 0.00 (0.06) 0.00
Cumulative effect of change
in accounting for income
taxes (D)/(A) 0.00 0.00 0.00
------------- ------------- -----------
Net earnings (E)/(A) $ 1.88 $ 1.40 $ 1.00*
============= ============= ===========
*Antidilutive
Exhibit 13
Content
Financial Highlights 1
Letter to Shareholders 2
Moog at a Glance 4
Market Segment Facts
Military Aircraft 6
Commercial Aircraft 8
Satellites & Launch Vehicles 10
Industrial Hydraulics 12
Industrial Electronics & Electric Drives 14
16
Form 10K 17
Investor Information 42
Directors and Officers,
and International Subsidiaries
located on inside back cover.
Financial Highlights
Fiscal Years 1997 1996 1995 1994 1993
Net Sales $455,929 $407,237 $374,284 $307,370 $293,680
Net Earnings 13,606 10,709 7,761 2,123 4,761
Net Earnings Per Share $1.88 $1.40 $1.00 $.27 $.62
Total Assets $490,563 $449,558 $424,957 $424,456 $318,130
Indebtedness - Senior 118,245 91,262 170,361 183,376 115,515
- Subordinated 120,000 120,000 19,400 20,800 22,082
Shareholders' Equity 114,191 104,743 108,636 102,184 92,561
Capital Expenditures 13,713 10,885 10,232 8,893 10,216
Depreciation and Amortization 21,267 19,632 19,675 15,700 15,621
Backlog 280,364 243,310 237,941 217,261 181,081
(dollars in thousands except per share data)
To Our Shareholders, Employees and Friends:
A Record Year
Fiscal '97 was a very good year. On a per share basis, earnings
were up 34% on a 12% sales increase. This is the third
consecutive year in which earnings per share growth has exceeded
30%. The reshaping of our company, begun in the early '90's, has
finally paid off for our shareholders. During '97 our stock price
increased by 78%. Our market capitalization was $158 million
coming into the year and $282 million at the end.
Over our 46 year history, we've cultivated a variety of different
markets for high performance motion controls. This
diversification worked well for us in '97. Lively activity across
a broad base of applications provided consistent earnings
performance quarter-by-quarter. Each quarter's results in Fiscal
'97 were an increase over the year previous and a record for the
Company. In addition to sales and earnings growth, our businesses
have provided a strong cash flow throughout the year. Early in
the year, we borrowed $49 million to acquire the principal assets
of Moog Controls Inc. By year-end, we'd paid nearly half that
money back.
Aircraft: Surging Commercial, Stable Military
The big news in the aircraft business in '97 was the dramatic
increase in production of commercial airplane flight controls.
Our sales to Boeing grew by 47%. Revenue increased on every one
of the Boeing airplanes, but the big increase was on the 747.
Every member of the Moog team should "get a medal" for
maintaining "on schedule deliveries" throughout this remarkable
acceleration in production rates. It was a major achievement. The
entire airplane industry is stretching to keep pace with this new
level of activity. Once achieved, we believe it will be sustained
for a long time. Production levels in military aircraft were
fairly stable, although we had a big year on the F-15 program,
all a result of foreign military sales. The F/A-18E/F and the
V-22 are transitioning from development into production. In the
years to come, these two programs will be the long-awaited
stimulus for growth in military aircraft revenues. Controls for
commercial and military aircraft, which make up half our
revenues, grew by about 7% in '97.
Acquisition Adds To Industrial Growth
About a third of our business is industrial controls, both
hydraulic and electric. In '97, the growth in our industrial
sector came about mostly because of our timely acquisition of the
assets of Moog Controls Inc., the U.S. manufacturer of industrial
servovalves and servoactuators. The addition of this strong U.S.
product line and the realization of improved operating
efficiencies had an immediately accretive effect on our earnings.
Also during the year, we began production of some important new
products including entertainment simulators for MCA-Universal and
industrial electric drives used on the PzH2000 German howitzer.
Rapid Growth in Space, Resurgence in Missiles
Our Satellites and Launch Vehicles (previously Space and
Missiles) product line is currently 14% of revenues and is the
fastest growing. The global demand for commercial satellites
provides increasing revenues for our electric propulsion feed
systems, thrusters, and actuation systems. We believe that we are
in the very early days in the build-up of large space-based
commercial communication systems. All of the major satellite
buses built by Hughes, Lockheed and Loral use our products and we
participate on most of the major satellite launch vehicles
including Titan, Centaur and Ariane V. In addition, the Iridium
constellation uses our isolation valves. The tactical missile
business is also growing again because the U. S. Congress is
making serious preparations to defend against missile attacks.
Standard Missile 2, on which we supply a fin control package, has
been adopted as an anti-missile defense system.
Research and Development
Enhances Market Leadership
Our strategy in most of our markets is to be the market leader
both in terms of product performance as well as market share. To
maintain this position, we pay special attention to both in-house
and customer-funded R&D. In '97, much of our development activity
in the Aircraft Group was directed to the flight controls for the
Joint Strike Fighter concept demonstrators. On the commercial
side, the early part of the year was spent supporting the Boeing
program to re-wing the 747. When Boeing decided not to pursue the
new aircraft, our technical team continued to design and produce
a state-of-the-art, fly-by-wire primary flight control actuator
demonstrating to Boeing our breakthrough improvement in
development cycle time through the effective use of concurrent
engineering.
The Satellite Market Goes Electric
Product development in satellite controls was principally focused
on electric propulsion. We designed and built xenon feed systems
and components for three different customers. Our first electric
propulsion feed system will be launched in early '98. In launch
vehicles, all of our emphasis is on electromechanical actuation
for thrust vector control and for upper stage fuel control.
Satellite launch vehicles are well on the way to using
all-electric actuation and we're a leading contributor to this
transition.
Industrial R & D Focuses on Specialties
In the industrial area, our product development emphasis has
been on controls for industrial gas turbines, on design of the
custom-tailored simulator for MCA-Universal, as well as on a
broader range of standard simulators, and in electric actuation
for tilting high-speed trains.
We Love Long Term Agreements
Our contracts with Boeing Commercial are six years in duration.
In '97, we signed multi-year contracts with AlliedSignal for APU
servoactuators, Hughes Electronics for satellite attitude
controls, the Standard Missile Company for fin control actuators
and MTS for servovalves. These long term commitments set the
stage for a genuine technical and commercial collaboration. In
that kind of framework, we can provide our best in terms of
product performance, service and value for our customers.
Bill's Culture Lives On
Fiscal '97 marked the passing of our founder, Bill Moog. Although
Bill retired from our Company over nine years ago, it seemed
natural for the Moog community to get together and reminisce
about the good old days with Bill. For many of us, it was
striking how distinct an imprint Bill left on the Company he
founded. Since the earliest days, the culture Bill fashioned has
placed the highest priority on the delivery of a technically
superior product, built to the highest standards of quality and
reliability. It occurred to us on the day of Bill's memorial that
our tribute did not have to be summed up in graceful words spoken
on one afternoon. Our tribute continues every day as products
built to his high standards, products that carry his name, are
delivered to customers all around the world.
'98 Looks Great
Bill gave our Company its start. Over the years, a great many
people have built Moog into what it is today. In '97, we had our
best year ever. We're looking forward to an even better year in
'98.
Robert T. Brady
Chairman, CEO
Pictured below,
from left to right:
Bob Maskrey,
Aircraft Controls
Bob Banta,
Chief Financial Officer
Phil Hubbell,
Contracts & Pricing
Dick Aubrecht,
Vice-Chairman
Bob Brady,
Chairman, CEO
Joe Green,
Chief Administrative Officer
Steve Huckvale,
International Controls Group
Bing Sherrill,
Systems Group
Moog at a Glance
Everyone appreciates the tremendous pace of advancement in
computers and computer software. Just as the PC has
revolutionized information technology, computers have also
revolutionized controls in aircraft, satellites and industrial
machinery. This phenomenon places Moog in an enviable position.
Our principal product lines are servoactuators that take the
information generated by computers and then make something
happen. The inputs to our products are the tiny electrical
signals emanating from the control computers. Advancements in
computer technology enhance the capabilities of our products and
their relevance in today's industrial society. The illustration
at right describes the operating parts of a servoactuator system.
There are hundreds of design variations, but they share the
fundamental characteristics shown.
The following diagram shows the elements of a servocontrol system
in which the power to move the output is provided by pressurized
hydraulic fluid. The concepts are similar for systems in which
the power is directly provided by an electric motor.
(Diagram)
An electrohydraulic servocontrol system consists of the six
elements indicated in the diagram above: (1) control electronics
which may be a computer, microprocessor or guidance system which
creates command input signal; (2) a servoamplifier which provides
a low power electrical actuating signal which is the difference
between the command input signal and the feedback signal
generated by the feedback transducer (6); (3) a servovalve which
responds to this low power electrical signal and controls the
high power flow of hydraulic fluid to (5), an actuation element
such as a piston and cylinder or a hydraulic motor which
positions the device being controlled; and (4) a power supply,
generally an electric motor and pump, which provides a flow of
hydraulic fluid under high pressure. The feedback transducer (6)
measures the output of the system and converts this measurement
into a proportional signal which is sent to the servoamplifier.
Military Aircraft
27% of '97 sales
Moog has supplied high performance servoactuation to move flight
control surfaces on military aircraft since the 1950's.
Throughout our history, we've worked on most U.S. military
aircraft and many built overseas. Over the next few years, we'll
be starting production on a number of new programs: the F/A-18E/F
Super Hornet, the V-22 Osprey, the RAH-66 Comanche, the Japanese
F-2 and the Indian Light Combat Aircraft. This year we began
design of flight control and engine control actuation for the
Joint Strike Fighter (JSF) demonstrators.
FY98 Forecast Sales = $125 million
(Pie Chart inserted which shows the distribution of 1998 sales by
project as follows:
B-2 - 9.5%
F-15 - 11.5%
F-16 - 3.0%
F-18 - 14.6%
V-22 - 8.2%
Engines - 5.9%
Aftermarket - 14.8%
Other - 32.5%)
Products
- - Primary and secondary flight control actuation for fighters,
bombers, helicopters
- - Engine control servovalves and servoactuators
- - Active vibration control systems
- - Flight data recording systems
- - Wingfold and weapons bay systems
Major Programs & Applications
Primary Flight Controls:
- - B-2, V-22, RAH-66, Taiwanese IDF, Indian LCA, JSF
Secondary and Leading Edge Actuation:
- - F/A-18, F-15, F-16, Blackhawk, Japanese F-2, Taiwanese IDF,
Czech L-159, JSF
Active Vibration Controls:
- - EH-101, S-92
Engine Control Servovalves and Servoactuators:
- - F-404, F-414, F-110, F-119, EJ200, AE2100, T406, RTM322,
Thrust Vector Controls
Competitive Advantages
- - Extensive U.S. and international experience in design of
fly-by-wire flight controls
- - Product innovation for advanced flight controls, engine
controls and active vibration control
- - World-class manufacturing capability
- - Skilled, experienced and dedicated workforce
Competitors
- - Parker Hannifin, Curtiss-Wright, HR Textron
Market Developments
- - F/A-18C/D, E/F are funded for production
- - V-22 Osprey approved for limited production, 523 aircraft
are planned
- - RAH-66 Comanche in flight testing, 6 development helicopters
planned for 2001
- - Japanese F-2 starts production
- - Indian LCA initial production is funded
- - Koreans launch new trainer
- - JSF concept demonstrators are in design
- - Czech Republic orders 72 L-159 light attack/trainer aircraft
Strategies & Initiatives
- - Develop next generation technology in flight control, engine
control, vibration suppression
- - Partner with prime contractor R&D Centers
- - Pursue opportunities in international markets
- - Strengthen European manufacturing capabilities
- - Develop depot capability for overhauls
Commercial Aircraft
22% of '97 sales
We supply many of the flight control and autopilot actuators for
the 747, 757, 767, and 777. We make servovalves for all the
Boeing aircraft and all the Airbus aircraft. In addition, we
supply flight control actuators for the ailerons on the
A330/A340.
FY98 Forecast Sales = $113 million
(Pie Chart inserted which shows the distribtuion of 1998 sales by
project as follows:
747 - 18.1%
757 - 7.4%
767 - 5.1%
777 - 9.6%
Engines - 12.8%
Airbus - 9.2%
Aftermarket - 25.1%
Other - 12.7%)
Products
- - Primary and secondary flight control actuation
- - Flight control servovalves
- - Digital engine control servovalves
Major Programs & Applications
Primary Flight Controls and Spoilers:
- - 747, 757, 777, A330/A340, Citation X
Autopilot Actuators:
- - 747, 767
Leading Edge Rotary Actuators:
- - 777
Flight Control Servovalves:
- - Boeing, Airbus, IPTN-250, regional jets
Trailing Edge Flap System:
- - Gulfstream IV, Challenger
Digital Engine Control Servovalves:
- - CF-6, GE90, V2500, Rolls Royce RB211 and Trent, AlliedSignal
APU's
Competitive Advantages
- - Extensive experience in design and production of primary and
secondary flight control actuators and components
- - Product innovation for advanced flight controls, engine
controls and active vibration controls
- - World-class manufacturing capability
- - Focused, highly responsive aftermarket support organization
- - Skilled, experienced and dedicated workforce
Competitors
- - Parker Hannifin, Teijin Seiki, Curtiss-Wright, Dowty,
Sundstrand
Market Developments
- - Production rate increases at Boeing and Airbus
- - Airline traffic is projected to grow at a rate of 5% per
year over the next 20 years
- - Trent 500/600 series begins development
Strategies & Initiatives
- - Align business plans with customer objectives
- - Dramatically reduce development cycle time to benefit
airframe design
- - Continue pursuit of cost reduction opportunities
- - Find appropriate transfer of military technology to
commercial applications
Satellites & Launch Vehicles
14% of '97 sales
What was the missile business has become the satellite, launch
vehicle and anti-missile business. The number of satellites
launched to meet the demand for cellular phones, pagers and
direct-to-home TV increases every year.
Anti-missile defense initiatives funded by the Congress have
triggered the production start of Standard Missile-2 Block IV and
the potential of a Theater High Altitude Air Defense System
(THAADS).
FY98 Forecast Sales = $81 million
(Pie Chart inserted which shows the distribution of 1998 sales by
project as follows:
Satellites - 27.0%
Strategic Missiles - 3.7%
Tactical Missiles - 28.9%
Launch Vehicles - 29.0%
Space Vehicles - 11.4%)
Products
- - Steering controls for launch vehicles, strategic missiles,
and space shuttle
- - Thrusters, isolation valves, propulsion system valves and
actuation systems for satellites and launch vehicles
- - Electric propulsion feed systems for satellite attitude
control
- - Thermal control valves
Major Programs & Applications
Satellite Propulsion:
- - HS-601, HS-702, A2100, FS1300, Eurostar 3000
Launch Vehicle Steering Controls:
- - Titan IV, Atlas Centaur, Ariane, Space Shuttle
Tactical Missile Steering Controls:
- - Standard Missile-2 BLK IV, VLASROC, THAADS, Patriot, Aspide,
Sea Dart, Penguin, Aster 15 and 30, Apache, Storm Shadow,
Arbizon, MQM 170-B, C-22 Drone
Space Station Components:
- - Fluid quick disconnects, segment attachment drives
Electric Propulsion:
- - Loral propellant management assembly
- - New Millennium Deep Space One xenon feed system
- - Artemis xenon solenoid valves
- - HS-601 xenon regulator
- - Hughes XIPS
Competitive Advantages
- - Extensive experience in design and manufacture of launch
vehicle steering controls
- - Unparalleled experience in design and manufacture of
propulsion control devices
- - Leading edge technology in electric propulsion
- - World class manufacturing capabilities
- - Skilled, experienced and dedicated workforce
Competitors
- - AlliedSignal, HR Textron, Vacco, Wright
Market Developments
- - Our customers, Hughes, Lockheed Martin, and Loral, dominate
U.S. satellite production
- - Big LEO constellations offer unprecedented production rates.
Over 1100 satellites will be produced in next 10 years.
- - Traditional launch vehicles, Titan, Atlas, Delta, Space
Shuttle, continue as workhorses
- - Standard Missile-2 BLK IV will be used by the Navy for
missile defense
- - Theater High Altitude Area Defense (THAADS) still has a
potential
Strategies & Initiatives
- - Increase capacity and reduce lead time to support
accelerated demand
- - Develop leading edge technology for satellite and launch
vehicle propulsion systems and steering controls
- - Support satellite and launch vehicle manufacturers on a
worldwide basis
Industrial Hydraulics
27% of '97 sales
Since 1959, when Moog introduced the first industrial servovalve,
we have led the way in product technology. By any measure, we are
the world's market leader in industrial servovalves. In addition,
we produce high performance long stroke actuators for motion
platforms and turbine control actuators for industrial gas
turbines.
FY98 Forecast Sales = $120 million
(Pie Chart inserted which shows the distribution of 1998 sales by
geographic region:
U.S. - 36.1%
U.K. - 8.7%
Germany - 18.6%
Japan - 13.8%
Pacific Rim - 6.2%
Scandinavia - 4.1%
France - 4.4%
Italy - 7.0%
Other - 1.1%)
Products
- - Servovalves and proportional valves
- - Electrical and mechanical feedback
- - Direct drive, nozzle-flapper, servojet
- - Low friction, long stroke actuators for flight simulators
- - Servo-controlled valve assemblies for turbines
- - Closed loop motion control subsystems
Major Applications
- - Electrical feedback servovalves for control of clamp and
injection operations on plastic injection molding equipment
- - Mechanical feedback and direct drive valves for parison
control in plastic blow molding machines and for control of
nip load in paper machinery
- - Fuel metering, steam bypass and override control servovalves
for gas and steam turbines
- - Hydraulic position control actuators and servovalves for
fatigue testing systems
- - Direct drive and electrical feedback valves for precise
positioning in saw mills
- - Electrical and mechanical feedback servovalves for gauge
coil box, side guide and camcoiler control of steel and
aluminum processing equipment
- - Control loading and motion platform actuators for full
flight simulators
Competitive Advantages
- - Leading edge technology for 38 years
- - Unmatched, worldwide application engineering to optimize
custom solutions
- - Worldwide engineering, manufacturing, support and service
facilities
- - Skilled, experienced and dedicated workforce
Competitors
- - Bosch, Rexroth
Market Developments
- - Increased global demand, including developing economies
- - Consistent pressure to reduce lead time
Strategies & Initiatives
- - Continue development of leading edge technology
- - Pursue forward integration of products in key end markets
- - Consolidate production in global manufacturing centers
- - Focus factories and processes to shorten lead times
- - Further expansion and focus on global locations for support
and service
Industrial Electronics & Electric Drives
11% of '97 sales
The growth areas in the drives business have been the
specialties. In '97 we began producing entertainment simulators
for MCA-Universal and electric drives used on the automatic
ammunition loader for a German howitzer. Both of these product
lines have the potential for a big commercial future.
FY98 Forecast Sales = $53 million
(Pie Chart inserted which shows the distribution of 1998 sales by
project as follows:
Electric Drives - 35.3%
Military Vehicles - 20.0%
Plastics Controls - 10.4%
Motion Simulators - 17.0%
Other - 17.3%)
Products
- - Brushless D.C. servomotors and digital motor controllers
- - Electronic controls for injection machines
- - Electronic controls for specialized automated machinery
- - Electromechanical servoactuators
- - Ruggedized high-torque drives for military vehicles
Major Applications
- - Electric drives for assembly robots, brush making machines,
material handling robots and packaging machines
- - Full performance total machine control for injection molding
and blow molding
- - Custom-tailored controls for Tuftco carpet tufting and
scrolling machine
- - Four and six-degree-of-freedom motion platforms with
capacities between 2,000 and 13,000 pounds
- - Electric azimuth and elevation gun control,
ammunition-handling, and radar platform control for military
and naval vehicles.
- - Tilting controls for high speed trains
Competitive Advantages
- - Highest power density of available brushless D.C.
servodrives
- - Full range of capability in total machine control for
injection molding and blow molding
- - High reliability in electrically actuated motion platforms
- - Demonstrated experience in electric gun controls for
military vehicles
Competitors
- - Indramat, Pacific Scientific, Barber Colman, Siemens,
Gefran, Control Techniques, Kollmorgen, CAD Gage Textron
Market Developments
- - Moog electric simulators lead the field in both
entertainment and training
- - Wegmann howitzer production starts
- - Spares and warranty contract signed for PzH2000
- - Military vehicle technology is applied to high-speed trains
Strategies & Initiatives
- - Focus on development of specialized electromechanical
actuation systems
- - Refine product design and reduce costs to improve
profitability in electric drives
- - Broaden worldwide distribution of plastics machine controls
- - Broaden product range in electric motion simulators
Worldwide Locations:
Moog Inc.
Headquarters
East Aurora, New York, USA
Moog Australia
Pty., Ltd
Mulgrave, Australia
Moog Buhl Automation
Copenhagen, Denmark
Moog Controls
Corporation
Baguio City, Philippines
Moog Controls
Hong Kong Ltd.
Hong Kong
Moog Controls
(India) Pvt. Ltd.
Bangalore, India
Moog Controls Ltd.
Tewkesbury,
England
Moog do Brasil
Controles Ltda.
Sao Paulo,
Brazil
Moog OY
Espoo, Finland
Moog Sarl
Rungis,
France
Moog GmbH
Boblingen, Germany
Moog Ltd.
Ringaskiddy, Ireland
Moog Italiana S.r.l.
Malnate,
Italy
Moog Japan Ltd.
Hiratsuka, Japan
Moog Korea Ltd.
Kwangju-Kun, Korea
Moog Singapore
Pte. Ltd.
Singapore
Moog Sarl
Sucursal En Espana
Orio, Spain
Moog Norden A.B.
Askim, Sweden
Moog-Hydrolux
Hydraulic Systems LLC
East Aurora, New York, USA
Directors and Officers:
Robert T. Brady
Chairman of the Board
Chief Executive Officer
President
Director
Richard A. Aubrecht
Vice Chairman of the Board
Vice President
Director
Robert R. Banta
Executive Vice President
Chief Financial Officer
Assistant Secretary
Director
William P. Burke
Treasurer
Warren B. Cutting
Director Emeritus
Business Consultant
John B. Drenning
Secretary
Partner, Phillips Lytle
Joe C. Green
Executive Vice President
Chief Administrative Officer
Director
John D. Hendrick
Director
President,
Okuma Machinery Inc.
Philip H. Hubbell
Vice President
Stephen A. Huckvale
Vice President
Robert H. Maskrey
Vice President
Kenneth J. McIlraith
Director
Retired Banking Executive
Albert F. Myers
Director
Treasurer,
Northrop Grumman
Peter P. Poth
Director
Retired Executive
Richard C. Sherrill
Vice President
Arthur S. Wolcott
Director
Chairman,
Seneca Foods Corporation
Exhibit 23(ii)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Moog Inc.:
We consent to incorporation by reference in the Registration
Statements (No. 33-62968, 33-36722, 33-36721, 33-33958, 33-20069
and 33-57131) on Form S-8 of Moog Inc. of our report dated
November 10, 1997, relating to the consolidated balance sheets of
Moog Inc. and subsidiaries as of September 27, 1997 and
September 30, 1996, and the related consolidated statements of
earnings, shareholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended
September 27, 1997, which report appears in the September 27,
1997 annual report on Form 10-K of Moog Inc.
KPMG Peat Marwick LLP
Buffalo, New York
November 21, 1997
[Cooper & Lybrand Letterhead]
Moog Inc.
East Aurora
New York 14052
U.S.A.
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration
Statement of Moog Inc. on Form S-8 of our report dated
14 November 1997 on our audits of the financial statements of
Moog Controls Limited (a wholly owned subsidiary of Moog Inc) as
of September 30, 1997 and 1996 and for the years then ended,
which report is included in the Annual Report on Form 10-K of
Moog Inc.
/s/ Coopers & Lybrand
Gloucester, UK
Date 19 November 1997
[Coopers & Lybrand 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 10, 1997 on our audits of the consolidated
financial statements of MOOG GmbH (a wholly-owned subsidiary of
MOOG Inc.) and subsidiary as of September 30, 1997, 1996 and 1995
and for the years then ended, which report is included in this
Annual Report on Form 10-K of Moog Inc.
Stuttgart Germany
November 19, 1997
Coopers & Lybrand
[Coopers & Lybrand Letterhead]
10 November 1997
MOOG Inc.
East Aurora, New York 14052-0018
United States of America
Independent Auditors' Report
Board of Directors
MOOG Inc.
We have audited the consolidated balance sheets of MOOG GmbH (a
wholly-owned subsidiary of MOOG Inc.) and subsidiary as of
September 30, 1997, 1996 and 1995, and the related consolidated
statements of earnings and retained earnings and cash flows for
each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States. Those standards
require, that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material aspects, the financial
position of MOOG GmbH and subsidiary as of September 30, 1997,
1996, 1995 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 Schedules are presented for purposes of additional
analysis and are not required part of the basic consolidated
financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic
consolidated financial statements as it relates to the required
footnote disclosure and, in our opinion, is fairly stated in all
material respects in relation to the basic consolidated financial
statements taken as a whole.
Coopers & Lybrand
Stuttgart/Germany
[Coopers & Lybrand Letterhead]
14 November 1997
The Board of Directors
Moog Inc.
East Aurora
New York
14052-0018
USA
Dear Sirs
Independent Auditors' Report
We have audited the consolidated balance sheets of Moog Controls
Limited (a wholly-owned subsidiary of Moog Inc.) and subsidiaries
as at September 30, 1997 and 1996 and the related consolidated
statement of earnings and retained earnings and cash flows for
each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion of 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 of the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Moog Controls Limited and subsidiaries as of
September 30, 1997 and 1996, and the results of their operations
and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The
supplemental information in Schedules 1 through 25 are presented
for purposes of additional analysis and are not a required part
of the basic 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 whole.
/s/ Coopers & Lybrand
Chartered Accountants
Gloucester, UK
14 November 1997
Exhibit 27
[ARTICLE] 5
[PERIOD-TYPE] 12 - MOS
[FISCAL-YEAR-END] SEP - 27 - 1997
[PERIOD-END] SEP - 27 - 1997
[CASH] 6,800
[SECURITIES] 0
[RECEIVABLES] 161,648
[ALLOWANCES] (1,594)
[INVENTORY] 103,866
[CURRENT-ASSETS] 294,707
[PP&E] 317,372
[DEPRECIATION] (185,263)
[TOTAL-ASSETS] 490,563
[CURRENT-LIABILITIES] 107,186
[BONDS] 221,577
[COMMON] 56,653
[PREFERRED-MANDATORY] 0
[PREFERRED] 100
[OTHER-SE] 57,438
[TOTAL-LIABILITY-AND-EQUITY] 490,563
[SALES] 455,929
[TOTAL-REVENUES] 457,494
[CGS] 315,380
[TOTAL-COSTS] 315,380
[OTHER-EXPENSES] 18,447
[LOSS-PROVISION] 882
[INTEREST-EXPENSE] 22,675
[INCOME-PRETAX] 19,579
[INCOME-TAX] 5,973
[INCOME-CONTINUING] 13,606
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 13,606
<EPS-PRIMARY 1.88
[EPS-DILUTED] 0