ITEM 1. Business.
Certain information required herein is contained in part in the 1995 Annual Report, specific pages of which are referred to in parentheses. Description of the Company's Business. (See pages 2 through 16.)
Distribution. Moog primarily uses its own sales and engineering personnel in the sale of its products. In selective markets, independent manufacturers' representatives are retained.
Industry and Competitive Conditions. Moog experiences considerable competition in its Domestic Controls segment, principally in the areas of product performance, delivery and price. These competitors are associated with parent companies larger than the Company as measured by total assets and sales. These include the Hydraulics Research and Manufacturing Division of Textron Inc., Abex NWL Division of Power Control Technologies Inc., the Parker Bertea Aerospace Group of Parker Hannifin Corporation, E-Systems Corporation owned by Raytheon Company and Vickers, a Division of Trinova Corporation.
The International Controls segment experiences similar competition from numerous domestic and foreign corporations, particularly Mannesmann Rexroth, a Mannesmann AG company, and Robert Bosch AG.
Backlog. Substantially all backlog will be recorded as sales in the next twelve months. The information required herein is incorporated by reference to Item 6, Selected Financial Data, on page 21 .
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.
Seasonality. Moog's business is generally not seasonal.
Patents. Moog has a number of 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, pneumatic and mechanical 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 21.
Employees. The information required herein is incorporated by reference to Item 6, Selected Financial Data, on page 21.
Segment Financial Information. The information required herein is incorporated by reference to Note 14 of Item 8. See page 37.
Customers. The information required herein is incorporated by reference to pages 2 through 16 and 37. Moog's military activities in aerospace, through its Domestic Controls segment, are subject to changes in national defense policy, Department of Defense (DoD) procurement practice, and contract termination. In commercial aerospace, principally commercial aviation, Moog's activities are subject to changes in the delivery schedules of the major commercial aircraft manufacturers.
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 43.) 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.
Working Capital. Working capital includes items which will not be realized within one year, reflecting the procurement and production cycle associated with long term contracts. Long-term contract receivables include substantial amounts not yet billed under progress payment terms of contracts, and which provide that certain holdback amounts cannot be billed until shipment of completed units. Inventories reflect the extended production and procurement cycle on most Moog products. Contract loss reserves represent expenditures to be incurred over development and production periods extending beyond one year.
Environmental Matters. See pages 25 and 38.
ITEM 2.
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 756,000 square feet which are owned, and 54,000 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 140,000 square feet in East Aurora and 7,200 square feet in Torrance under operating leases. With respect to the Company's facilities, third parties have leased 91,000 square feet of owned space through December 1996 and 67,000 square feet of leased space through August 1997. Outside of the U.S., the Domestic Controls segment owns manufacturing centers in the Philippines and India. The Philippines facility consists of 64,000 square feet and the India facility consists of 23,000 square feet.
The International Controls segment maintains major manufacturing facilities in Germany, England and Japan. Of the major European facilities, 4,000 square feet are owned and 200,000 square feet are leased under operating lease agreements. The Japanese facility, consisting of 68,000 square feet, is owned. A specialty manufacturing operation with 26,000 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, 30,000 square feet are owned and 48,000 square feet are leased under operating leases. Operating leases of the International facilities expire at varying times from December 1995 through June 2013.
The capacity of Moog's manufacturing facilities is considered adequate for current and future production requirements.
ITEM 3.
ITEM 3. Legal Proceedings.
Legal proceedings presently pending by or against Moog or its subsidiaries are not expected to have a material adverse effect on the financial condition or results of operations of Moog and its subsidiaries taken as a whole.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
ITEM 5.
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
Dividend restrictions are detailed in Note 7 on page 32 of Item 8, Financial Statements and Supplementary Data.
Other information required herein is incorporated by reference to pages 21 and 44.
ITEM 6.
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 1991 - 1995. For a more detailed discussion of 1993 through 1995 refer to Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 22 through 25 and Notes to Consolidated Financial Statements on pages 30 through 39.
ITEM 6. Selected Financial Data. (dollars in thousands except per share data)
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations - 1995 Compared with 1994
Earnings per share in 1995 were $1.00 compared with $.27 in 1994. Net earnings in 1995 were $7.8 million on sales of $374 million, compared with net earnings of $2.1 million on sales of $307 million in 1994. Net earnings in 1995 were favorably affected by the strong recovery of capital goods markets in Europe. Also in 1995, incremental net earnings from the hydraulic and mechanical actuation product lines of AlliedSignal Inc. acquired in June 1994 (the Product Lines), served to partially offset declining revenues and profits on various mature defense programs. Conversely, 1994 earnings were adversely affected by pre-tax inventory obsolescence and restructuring charges of $4.7 million. The inventory obsolescence charge of $2.6 million was taken in response to the decline in repair activities and spare parts requirements on certain military programs. Of the pre-tax restructuring charge, $1.8 million related to workforce reductions in the Company's operations in the U.S., England, Germany and Denmark, while $.3 million related to lease termination costs. The 1994 restructuring actions were taken in response to defense spending reductions and, at the time, weak capital goods markets in Europe. The workforce reductions and related cost savings, in conjunction with the recovery of European capital goods markets and, to a lesser extent, the Product Line acquisition, provided the basis for the improved earnings performance in 1995.
Operating profit for the Domestic Controls segment was $25.2 million in 1995, representing 9.6% of segment sales, compared with $20.4 million, or 9.2% of segment sales in 1994. Excluding the pre-tax Domestic inventory obsolescence and restructuring charges of $3.4 million in 1994, Domestic Segment 1994 operating profit would have been $23.8 million, or 10.7% of segment sales. In absolute terms, the increase in operating profit is due to the Product Line acquisition along with the aforementioned cost reduction measures. These benefits were, however, in part offset by declining revenue on both the B-2 program and the Missiles product line, along with now complete one-time transition service costs paid to AlliedSignal Inc. related to various overhead functions.
Operating profit for the International Controls segment in 1995 was $8.5 million, or 6.8% of segment sales compared with $1.1 million or 1.1% of segment sales in 1994. International Controls segment operating profit for 1994 includes $1.3 million in inventory obsolescence and restructuring charges. Excluding these 1994 charges, operating profit would have been $2.4 million or 2.4% of segment sales. The improvement in capital goods markets in Europe, along with the aforementioned cost reduction measures, led to a dramatic turnaround in European operating profit. Within the Pacific Group, operating profit is down from a year ago, primarily due to costs of penetrating new Asian markets.
Net sales in 1995 of $374 million were 21.8% higher than 1994 sales of $307 million. For the Domestic Controls segment net sales increased 19.1% in 1995 to $254 million compared to $213 million in 1994. The increase is attributable to the Product Lines acquisition, in part offset by lower revenue on the B-2 program and the Missiles product line. International Controls segment net sales increased 27.9% in 1995 to $120 million from $94.1 million in the prior year. The increase reflects the improvement in
European capital goods markets, and to a much lesser extent, the increase in value of certain foreign currencies relative to the U.S. dollar. Excluding the effect of changing currency values, International Controls segment net sales increased 18%.
Worldwide commercial sales were $193 million in 1995, or 51% of sales, with government sales being $181 million or 49% of sales. In 1994, commercial sales were $133 million, or 43% of sales. Going back to 1991, commercial sales were only 39% of sales. The shift of the sales mix to commercial sales reflects the focus the Company has placed on development and acquisition of commercial product lines.
The increase in consolidated net sales in 1995, exclusive of the Product Lines acquisition, relates primarily to unit volume. There were both minor price increases and decreases in most European markets, while in Japan, the Company experienced overall declines in pricing due to worldwide competitive pressures.
Other Income was $2.2 million in 1995 compared to $2.5 million in 1994. Other income generally includes rents, royalties and interest. The decline is principally due to lower interest income.
Cost of sales increased to 70.8% of net sales in 1995 compared with 69.5% in 1994. The International Controls segment cost of sales percentages have declined as a result of increased sales and related improvements in facility utilization, along with the cost reduction efforts made over the previous three years. The International Controls segment improvement was more than offset, however, by increasing cost of sales percentages for the Domestic Controls segment. The Domestic Controls segment increase is principally due to the costs associated with the transition services and a change in product mix which reflects a greater percentage of lower margin production and development contracts sales in 1995 compared to 1994.
Research and Development expenses were $15.8 million, or 4.2% of net sales in 1995 compared to $18.7 million, or 6.1% of net sales in 1994. The decline is attributable to significant expenditures in 1994 on brushless motor development for entertainment motion platforms, radio controls, engine thrust vectoring controls, and helicopter vibration controls. Further, more engineering resources are currently being utilized on production related activity.
Total Company sponsored and customer sponsored research and development expenses were $37.4 million in 1995 compared to $44.0 million in 1994. Customer sponsored R&D was $21.6 million in 1995 compared with $25.3 million in 1994. Customer sponsored R&D reflects the Company's involvement in a number of development programs including the B-2, the Taiwanese Indigenous Defense Fighter (IDF) and various military ground vehicle programs in Europe.
Selling, General and Administrative Expenses in 1995 were $68.5 million, or 18.3% of sales, compared to $58.3 million, or 19.0% of sales in 1994. In absolute terms, the increase is primarily due to a full year of costs for the Product Lines. Further, $2.6 million of the increase reflects the higher average value of foreign currencies relative to the U.S. dollar. The decline as a percentage of sales reflects the benefits of additional sales from the Product Lines and increasing sales in the International Controls segment.
Interest Expense increased in 1995 to $17.5 million or 4.7% of net sales compared to $11.4 million or 3.7% of net sales in 1994. The increase in interest expense is due to the additional debt associated with the acquisition of the Product Lines.
Foreign Currency Exchange Loss (Gain) was a loss of $.1 million in 1995 compared with a gain of $.5 million in 1994. The 1994 gain primarily related to a short-term loan denominated in Deutsche Marks between the parent company and the German subsidiary during which time the Deutsche Mark appreciated.
Income Tax Expense at an effective rate of 11.7% for 1995 compares with a 1994 effective rate of 46.8%. The effective tax rate for 1995 reflects the relatively strong earnings at the Company's German operation, which benefits from its net operating loss carryforward position. Conversely, the higher effective tax rate for 1994 resulted from losses at the German subsidiary which provided limited tax benefits.
In the fourth quarter of 1995 and 1994, the Company reduced its valuation allowance for deferred tax assets to reflect the improved German operating results. See Note 9 of Item 8
ITEM 8. Financial Statements and Supplementary Data.
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. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to conform the prior years financial statements with the 1995 presentation.
Cash and Cash Equivalents: All highly liquid investments with an original maturity of three months or less are considered cash equivalents.
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 using 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: Foreign subsidiary assets and liabilities are translated using rates of exchange as of the balance sheet date and the statements of income are translated at the average rates of exchange for the year. Gains and losses resulting from translation and hedging of net investments in, or long term advances to, foreign subsidiaries are accumulated in the equity section as "Equity Adjustments." Gains and losses resulting from foreign currency transactions are included in income.
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. Debt issuance costs are amortized over the term of the related debt agreements.
Intangibles associated with acquisitions are amortized over their estimated useful lives, generally 7 to 12 years. The Company annually reviews acquisition related intangibles for impairment. The method used to determine whether such intangibles have been impaired is generally based upon forecasted undiscounted cash flows.
Income Taxes: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," in 1994. The Company separately reported the cumulative effect of the adoption of SFAS No. 109 in the Consolidated Statements of Income.
Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for future tax consequences
Note 1 - (continued)
attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Under the previously used asset and liability method of SFAS No. 96, deferred tax assets and liabilities were recognized for all events that had been recognized in the financial statements, with generally no consideration of any future events in calculating deferred taxes.
Note 2 - Acquisition
On June 17, 1994, the Company acquired the hydraulic and mechanical actuation product lines (the Product Lines) of AlliedSignal Inc., located in Torrance, California. The Product Lines include mechanical drive systems for leading edge flaps and hydraulic servoactuators for primary and secondary flight controls used on a wide variety of commercial and military aircraft. The purchase price for the Product Lines, including payment for specified transition services, was $68,800 based upon finalization of the net assets transferred. The acquisition has been accounted for under the purchase method, and accordingly, the operating results for the Product Lines have been included in the Consolidated Statements of Income since the date of acquisition. The cost of the acquisition was allocated on the basis of the estimated fair value of assets acquired and the liabilities assumed.
The acquisition was financed with proceeds from a Revolving Credit and Term Loan Agreement with a banking group (Note 7). The acquisition resulted in Product Line intangible assets, as adjusted for the final purchase price allocation, of $14,565, which are being amortized over a 12 year period.
The following summary, prepared on a pro-forma basis, combines the unaudited consolidated results of operations as if the Product Lines had been acquired at the beginning of the periods presented. The pro-forma consolidated results include the impact of certain adjustments, including amortization of intangibles, increased interest expense on acquisition debt, and related income tax effects.
(Unaudited) 1994 1993
Net sales $ 375,545 $ 394,130 Net earnings before extraordinary item and cumulative effect of change in accounting principle 6,916 7,461 Net earnings 7,421 7,104 Earnings per share $ .96 $ .92
The pro-forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for the periods presented.
Note 3 - Receivables
Receivables consist of:
September 30 1995 1994
Long term contracts: Amounts billed $ 38,542 $ 35,168 Unbilled recoverable costs and profits 61,400 63,151 Unbilled costs and profits subject to negotiation 116 571 __________ __________ Total long-term contract receivables 100,058 98,890 Trade 45,582 40,679 Refundable income taxes 3,331 5,504 Other 1,323 617 __________ __________ Total receivables 150,294 145,690 Less allowance for doubtful accounts (1,379) (1,493) __________ __________ Receivables, net $ 148,915 $ 144,197
The long term contract amounts are primarily associated with prime U.S. Government contractors and the major commercial aircraft manufacturers. These amounts include retainage in accordance with the terms of the contracts. Unbilled costs and profits subject to negotiation represent claims on terminated contracts. 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.
Note 4 - Inventories
Inventories consist of the following:
September 30 1995 1994
Raw materials and purchased parts $ 23,028 $ 19,356 Work in process 52,839 48,517 Finished goods 10,309 10,769 _________ _________ $ 86,176 $ 78,642
In 1994, the Company incurred a pre-tax charge of $2,574 to write off obsolete Domestic Controls segment inventory. The special charge reflected a decline in repair activities and spare parts requirements on various government programs.
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
September 30 1995 1994
Land $ 7,864 $ 7,870 Buildings and improvements 89,323 87,124 Machinery and equipment 212,026 207,769 ________ ________ Property, plant and equipment, at cost 309,213 302,763 Less accumulated depreciation and amortization (170,082) (156,291) ________ ________ Property, plant and equipment, net $139,131 $146,472
Note 6 - Notes Payable
The Company maintains short term lines of credit with various banks throughout the world. The short term credit lines are principally demand lines and subject to revision by the banks. At September 30, 1995, $6,606 of notes payable to banks at an average rate of 7.4% were outstanding under these lines of credit. During 1995, an average of $8,355 in notes payable were outstanding at an average interest rate of 8.1%. These short term lines of credit, along with $39,701 available on the amended long term U.S. revolving credit agreement detailed in Note 7, provide credit availability amounting to $56,900. Commitment fees are charged on some of these arrangements based on a percentage of the unused amounts available.
Note 7 - Long Term Debt and Subordinated Debentures
Long-Term Debt consist of the following:
September 30 1995 1994
U.S. revolving credit agreement $ 95,299 $ 70,000 U.S. term loan agreements 30,000 67,000 10-1/4% Note 18,350 20,000 International and other U.S. term loan agreements 16,452 13,359 Obligations under capital leases 3,654 3,448 ________ ________ 163,755 173,807 Less current installments: Long-term debt 4,859 12,978 Capital lease obligations 821 823 ________ ________ Long term debt excluding current installments $158,075 $160,006
Subordinated Debentures consist of the following:
September 30 1995 1994
Subordinated debentures 19,400 20,800 Less current installment 1,400 1,400 Subordinated debentures excluding current ________ ________ installment 18,000 19,400
Note 7 - (continued)
The U.S. Revolving Credit and Term Loan Agreement (Agreement) was amended in November 1995, increasing the facility to $165,000,which consists of a $135,000 revolving credit facility and a $30,000 term loan. The original facility, entered into in June 1994 to finance the acquisition of the Product Lines and to refinance existing debt, was a $151,750 total facility consisting of an $84,750 revolving credit facility and a $67,000 term loan. The amended revolving credit facility is for a five year period which expires in October 2000. The amended term loan is for six years through July 2001, with quarterly principal payments of $1,500 commencing October 1, 1996. As a result of this amendment $ 6,930 otherwise due in 1996 was converted to long term and has been classified as such on the September 30, 1995 Consolidated Balance Sheet.
Interest on the Agreement is LIBOR plus 1.75%. In order to provide for interest rate protection, the Company has entered into interest rate swap agreements for $100,000, effectively converting this amount to fixed rate debt averaging 8.0%. The swaps expire at various times from June 1996 through July of 1998.
The 10-1/4% Note has quarterly principal payments of $550 through October 1, 1995, increasing to $700 on January 1, 1996 and $750 on January 1, 1997, with a final payment due in July 2001.
Both the Agreement and the Note contain various covenants which, among others, specify minimum interest and payment coverage, maintenance of tangible net worth, required working capital and current ratio levels, and limit liabilities in relation to tangible net worth. The Agreement prohibits payment of cash dividends on common stock. The Agreement and the Note are secured by substantially all of the Company's U.S. assets and the common shares of all Domestic and International subsidiaries. The Agreement and the Note will convert to unsecured arrangements when the Company has three consecutive quarters whereby the ratio of consolidated liabilities to tangible net worth is less than 200%.
International and other U.S. term loan agreements of $16,452 at September 30, 1995 consist principally of financing provided by various banks to individual International subsidiaries. These term loans are being repaid through 2004, and carry interest rates ranging from 2.6% to 14.3% in 1995 and 2.875% to 16.1% in 1994.
Convertible subordinated debentures at 9-7/8% are subordinated in right of payment to all senior indebtedness, as defined, and are convertible, subject to prior redemption, into shares of Class A Common Stock at $22.88 per share at any time up to and including the maturity date of January 15, 2006. At September 30, 1995, the debentures are convertible into 847,902 shares of Class A Common Stock (Note 13). The debentures are redeemable at the option of the Company, at any time, in whole or in part, at 100% of their principal amount. The quoted market price of the debentures at September 30, 1995 and 1994, was 102 and 100, respectively.
Maturities of long-term debt and subordinated debentures for the next five years are $7,080 in 1996, $13,600 in 1997, $18,322 in 1998, $12,663 in 1999, $107,578 in 2000, and $23,912 thereafter.
In the first quarter of 1993, the Company extinguished $10,186 of 12-7/8% Domestic long-term debt prior to its scheduled maturity in order to take advantage of a decline in U.S. interest rates. Funds from existing
credit facilities were used to accomplish the extinguishment. The cost of the extinguishment was $357, net of $119 in income tax benefits, and was recorded as an extraordinary charge in the Consolidated Statement of Income.
At September 30, 1995, the Company has pledged assets with a net book value of $265,425 as security for long-term debt.
Note 8 - Leases
The Company leases certain facilities and equipment under various lease arrangements. Such arrangements generally include fair market value renewal and/or purchase options. Some of the capital leases (primarily land and buildings) allow for the Company to purchase the asset at a nominal price upon expiration. Substantially all leases provide that the Company pay applicable taxes, maintenance, insurance, and certain other operating expenses. Amortization of assets recorded as capital leases is included with depreciation and amortization of plant and equipment. Assets under leases that have been accounted for as capital leases and included in property, plant and equipment are summarized as follows:
September 30 1995 1994
Capital leases at cost $ 6,945 $ 6,861 Less accumulated amortization (2,841) (2,534) ________ ________ Net assets under capital leases $ 4,104 $ 4,327
Rent expense under operating leases amounted to $6,957 in 1995, $7,049 in 1994 and $6,366 in 1993. Future minimum rental payments required under noncancelable operating leases are $5,680 in 1996, $4,536 in 1997, $3,697 in 1998, $2,982 in 1999, $2,372 in 2000, and $10,832 thereafter.
The Company subleases various facilities to third parties. Gross rental income from such activities was $1,535 in 1995, $1,247 in 1994, $780 in 1993. Future minimum rental income under noncancelable operating leases is $1,135 in 1996, $610 in 1997, $170 in 1998.
Interest expense includes $217 in 1995, $261 in 1994 and $715 in 1993 attributable to obligations under capital leases.
Note 9 - Income Taxes
The Company adopted SFAS No. 109 "Accounting for Income Taxes" in 1994. SFAS No. 109 supersedes SFAS No. 96 "Accounting For Income Taxes." The impact of adopting SFAS No. 109 on the Consolidated Statement of Income was to increase 1994 earnings by $505, which was recorded as a cumulative effect of change in accounting principle.
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, extraordinary item and cumulative effect of change in accounting principle is as follows:
Note 9 - (continued)
1995 1994 1993 Earnings before income taxes, extraordinary item and cumulative effect of change in accounting principle: Domestic $ 6,042 $ 6,054 $ 10,376 Foreign 2,967 (3,440) (1,741) Eliminations (219) 426 (15) _____________________________ Total $ 8,790 $ 3,040 $ 8,620
Computed expected tax expense $ 2,988 $ 1,034 $ 2,931 Increase (decrease) in income taxes resulting from: Foreign tax rates 356 (419) 402 Deferred tax rate differential - - (1,092) Nontaxable FSC earnings (280) (350) (325) State taxes net of federal benefit 226 79 168 Change in beginning of the year valuation allowance (765) (420) - Utilization of net operating losses (2,136) - - Limitation on benefits from foreign net operating losses 192 1,054 1,498 Other 448 444 (80) _____________________________ Income taxes $ 1,029 $ 1,422 $ 3,502 =============================
Effective income tax rate 11.7% 46.8% 40.6%
At September 30, 1995, certain International subsidiaries had net operating loss carryforwards totalling $4,254. These loss carryforwards do not expire and can be used to reduce current taxes otherwise due on future earnings of those subsidiaries.
Accumulated undistributed earnings of International subsidiaries intended to be permanently reinvested are $19,021 at September 30, 1995. If such earnings were remitted to the Company, income taxes, based on the applicable current rates, would be payable after reductions for any foreign taxes previously paid on such earnings and subject to applicable limitations.
The components of income taxes excluding the extraordinary item and cumulative effect of change in accounting principle are as follows:
1995 1994 1993 Current: Federal $ (828) $ (3,255) $ 1,320 Foreign 292 (249) 2,180 State - - 213 _____________________________ Total current (536) (3,504) 3,713 _____________________________
Note 9 - (continued)
Deferred: Federal $ 2,466 5,440 305 Foreign (1,243) (634) (558) State 342 120 42 _____________________________ Total deferred 1,565 4,926 (211) _____________________________ Total income taxes $ 1,029 $ 1,422 $ 3,502
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 this assessment. 1995 1994 Deferred tax assets: Contract loss reserves not currently deductible $ 5,890 $ 5,575 Net operating loss carryforwards 2,578 3,730 Accrued vacation 4,440 3,621 Deferred compensation 4,099 3,212 Accrued expenses not currently deductible 2,392 2,698 Inventory 3,031 2,436 Other 62 845 ________ ________ Total gross deferred tax assets 22,492 22,117 Less: Valuation reserve (3,366) (5,223) ________ ________ Net deferred tax assets 19,126 16,894 ________ ________ Deferred tax liabilities: Differences in bases and depreciation of property, plant and equipment 20,720 13,591 Intangible assets - 2,832 Prepaid pension 552 884 Other 712 866 ________ ________ Total gross deferred tax liabilities 21,984 18,173 ________ ________ Net deferred tax liabilities $ 2,858 $ 1,279
Net deferred taxes are presented in the accompanying Consolidated Balance Sheets as follows: 1995 1994
Noncurrent deferred tax liabilities $ 19,674 $ 16,671 Current deferred tax assets 16,816 15,392 ________ ________ Net deferred tax liabilities $ 2,858 $ 1,279
In 1993, deferred taxes resulted from differences in the tax and financial accounting for depreciation, restructuring charges, and estimated losses on contracts and inventories.
Note 10 - Restructuring Charges
In 1994, the Company provided $2,107 in pre-tax restructuring charges, with $890 related to the Domestic Controls segment and $1,217 related to the International Controls segment. The restructuring actions were taken in response to U.S. defense spending reductions and the persistently weak capital goods markets in Europe. The restructuring charge included $1,757 of severance benefit costs relating to work force reductions totalling 140 employees in the Company's operations in the United States, England, Germany and Denmark. The Company has completed the work force reductions by September 30, 1995. The total severance related charges were paid in their entirety by September 30, 1995. A charge of $350 was also recorded and paid for the termination of a long term operating lease in September 1994.
Note 11 - Employee Benefit Plans
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. The profit share plan was suspended for 1995. Profit share expense was $459 in 1994 and $1,119 in 1993.
The Company has a Savings and Stock Ownership Plan (SSOP) which includes an Employee Stock Ownership Plan (ESOP). 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 matching Class B shares was funded by a Company loan. The loan is repaid with Company contributions. Interest on the loan is computed at the Company's U.S. Revolving Credit and Term Loan borrowing rate. Shares are allocated and compensation expense is recognized as the employer share match is earned. Compensation expense was $446 in 1995, $180 in 1994 and $161 in 1993. Class B shares allocated to ESOP participants for 1995, 1994 and 1993 were 23,397, 12,236 and 10,891, respectively. At September 30, 1995, 502,382 Class B Common Shares were owned by the SSOP participants, including the Company match, representing 30% of the issued and outstanding Class B shares. An additional 50,779 Class B shares related to the Company match remain to be allocated to participants. The SSOP began purchasing shares of Class A Common Stock in 1995 in addition to the Class B Common Stock. At September 30, 1995, a total of 63,947 Class A Common Shares were owned by the SSOP participants, representing 1% of Class A Common Shares issued and outstanding. All SSOP shares, both allocated and those remaining to be allocated, are considered outstanding for calculating earnings per share.
In 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Under SFAS No. 106, the cost of postretirement benefits other than pensions must be recognized as employees perform services to earn the benefits, instead of when benefits are paid, as had been the practice in 1993 and prior years. Postretirement health care benefits for U.S. employees are the only costs that need to be accrued by the Company in accordance with SFAS No. 106. Substantially all of the Company's U.S. employees hired prior to March 1, 1989 will become eligible for benefits when they reach normal retirement age while working for the Company. Further, changes in the Company's health care plans have limited the amount of retiree health care benefits to employees who retire after October 1, 1989.
Note 11 - (continued)
The 1995 SFAS No. 106 cost of $1,011 included $119 for service cost, $599 for interest cost and $394 for amortization of the October 1, 1993 transition obligation over a twenty year period and ($101) for the amortization of actuarial gains and losses. The 1994 cost of $1,075 was comprised of $103 for service cost, $577 for interest cost and $395 for the amortization of the transition obligation. The health care costs for retirees expensed in 1993 was $741, based on expensing claims as paid.
The discount rate assumed at September 30, 1995 was 7.75% compared with the 9.0% rate used to determine the September 30, 1994 obligation. In June 1994, the Company's SFAS No. 106 obligation increased by $569 due to the acquisition of the Product Lines (Note 2). For pre October 1, 1989 retiree's, the health care cost trend rates assumed are 2.5% per year for qualified employees who are presently under 65 years of age, and 11.0% in 1996, 10.0% in 1997 and 2.5% for 1998 and all subsequent years for Plan participants who are currently older than 65 years of age. Premiums for post October 1, 1989 retiree's are frozen and no trend schedule is applied. The effect of a one percentage point increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation as of September 30, 1995 by approximately 3.8%, and increase the aggregate of the service and interest cost components of net annual postretirement benefit cost by approximately 3.3%.
A reconciliation of the funded status of the plan with the accrued liability at September 30, 1995 is shown below. There were no Plan Assets at September 30, 1995 or 1994.
September 30 1995 1994
Accumulated Postretirement Benefit Obligation (APBO) - Inactives $ (5,307) $ (4,414) - Actives fully eligible (367) (342) - Actives not fully eligible (2,724) (2,167) _________ _________ Total APBO (Funded Status) (8,398) (6,923) Unrecognized Transition Obligation 7,098 7,493 Unrecognized Gains (158) (1,498) _________ _________ Accrued Postretirement Benefit Cost $ (1,458) $ (928)
The Company maintains defined benefit and defined contribution plans covering substantially all employees. With the exception of certain International subsidiaries, the Company funds defined benefit pension costs accrued, including amortization of prior service costs, over a 15-year period. Plan Assets where applicable, consist primarily of government obligations and publicly traded stocks, bonds and mutual funds. At September 30, 1995 and 1994, the minimum pension liability adjustments were $2,072 and $989, respectively. This liability is offset by an intangible asset of $743 in 1995 and $891 in 1994 and a reduction of shareholders' equity of $1,329 in 1995, and $98 in 1994. The 1995 and 1994 minimum pension liability adjustment reflects the change in the discount rate for measuring U.S. plan obligations. At September 30, 1995, the discount rate for the U.S. was decreased to 7.75% from 9.0% at September 30, 1994. The comparable discount rate at September 30, 1993 was 7.5%.
Note 11 - (continued)
The tables below set forth the funded status of the domestic and foreign defined benefit plans at September 30, 1995, 1994, and pension expense in 1995, 1994 and 1993 for all plans. Principal actuarial assumptions weighted for all plans are: 1995 1994
Discount rate 7.4% 8.7% Return on assets 8.2% 8.9% Rate of compensation increase 3.6% 3.3%
Note 11 - (continued)
Note 11 - (continued)
Pension Expense for 1995, 1994 and 1993:
1995 1994 1993 Service cost - benefits earned during the year $ 4,523 $ 4,217 $ 3,940 Interest cost on projected benefit obligation 9,019 8,472 7,836 Actual return on Plan assets (16,939) (3,017) (11,246) Net amortization, deferral and other 9,038 (3,005) 4,889 ________ ________ ________ Pension expense for defined benefit plans 5,641 6,667 5,419 Pension expense for other plans 317 383 265 ________ ________ ________ Total Pension Expense $ 5,958 $ 7,050 $ 5,684 ________ ________ ________
Note 12 - Stock Option Plans
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. 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, 1992: 145,020 343,400 Granted in 1993 - ($5.625 per share) - 57,000 Cancelled in 1993 (5,304) (11,100) _______ _______ Outstanding at September 30, 1993: 139,716 389,300 Cancelled or expired in 1994 (6,304) (3,800) Exercised in 1994 - (5,500) _______ _______ Outstanding at September 30, 1994: 133,412 380,000 Cancelled or expired in 1995 (500) (3,400) Exercised in 1995 (1,000) (6,000) _______ _______ Outstanding and exercisable at September 30, 1995: Class A ($5.625 to $10.50 per share) 370,600 Class B ($11.00 to $17.25 per share) 131,912
Note 13 - Capital Stock
Class A and Class B Common Stock share equally in the earnings of the Company, and are identical in most respects except (i) Class A has limited voting rights, 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, (ii) Class A shareholders are entitled 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, (iii) 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, and (iv) 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 317 shares in 1994, and 373 shares in 1993. Convertible subordinated debentures were also converted into 87 Class A shares in 1995.
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 and outstanding shares, and are convertible into Class A Common Shares. 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.
Of the Class B common stock, 131,912 shares are reserved for issuance under the 1983 Non-Statutory Stock Option Plan (note 12). Class A shares reserved for issuance at September 30, 1995 are as follows:
Shares
Conversion of Class B to Class A shares 2,666,829 Conversion of 9-7/8% convertible subordinated debentures (note 7) 847,902 1983 Incentive Stock Option Plan (note 12) 370,600 Conversion of Series B Preferred Stock to Class A shares 8,585 _________ 3,893,916
Note 14 - Industry Segments
The Company's two industry segments, Domestic Controls and International Controls, manufacture and market precision control systems and components primarily for North America and for industrialized economies in Europe and the Far East, respectively.
Note 14 - (continued)
1995 1994 1993 Domestic Controls Net Sales: Government $ 163,714 $ 157,928 $ 147,532 Commercial 90,212 55,322 41,833 Intersegment sales 10,446 7,804 12,488 _________ _________ _________ Total sales $ 264,372 $ 221,054 $ 201,853 ========= ========= =========
Operating profit (O.P.) $ 25,242 $ 20,373 $ 21,726 Inventory obsolescence and restructuring charges included in O.P. - 3,390 - Net earnings 4,030 4,394 7,604 Identifiable assets 282,323 290,644 186,147 Capital expenditures 5,633 5,263 6,093 Depreciation expense 10,363 7,725 7,389
International Controls Net Sales: Government $ 18,064 $ 16,385 $ 19,240 Commercial 102,294 77,735 85,075 Intersegment sales 4,728 5,634 4,231 _________ _________ _________ Total sales $ 125,086 $ 99,754 $ 108,546 ========= ========= ========= Operating profit (O.P.) $ 8,464 $ 1,135 $ 5,097 Inventory obsolescence and restructuring charges included in O.P. - 1,291 - Net earnings (loss) 3,918 (2,366) (2,842) Identifiable assets 120,499 100,261 100,902 Capital expenditures 3,977 3,019 2,888 Depreciation expense 5,337 5,129 5,996
Consolidated operations Net Sales $ 374,284 $ 307,370 $ 293,680 Operating profit (O.P.) 33,706 21,508 26,823 Inventory obsolescence and restructuring charges included in O.P. - 4,681 - Deductions from operating profit: Interest expense 17,492 11,402 10,974 Currency loss (gain) 143 (451) 60 Corporate and other expenses 7,354 7,613 7,170 Eliminations (73) (96) (1) _________ _________ _________ Total deductions 24,916 18,468 18,203 Earnings before income taxes, extraordinary item and cumulative effect of change in accounting principle 8,790 3,040 8,620 Income taxes 1,029 1,422 3,502 _________ _________ _________
Note 14 - (continued)
Earnings before extraordinary item and cumulative effect of change in accounting principle 7,761 1,618 5,118 Extraordinary item - - (357) Cumulative effect of change in accounting principle - 505 - _________ _________ _________ Net earnings $ 7,761 $ 2,123 $ 4,761 ========= ========= ========= Total identifiable segment assets $ 402,822 $ 390,905 $ 287,049 Corporate assets 39,864 50,179 42,085 Eliminations (17,729) (16,628) (11,004) _________ _________ _________ Total assets $ 424,957 $ 424,456 $ 318,130
Intersegment sales, which are transacted at appropriate arms length transfer prices, have been eliminated in net sales. Operating profit is total revenue less cost of sales and identifiable 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 earnings.
Included in net sales for Domestic Controls is $136,261 in 1995, $118,807 in 1994, and $125,369 in 1993, in sales to the U.S. government or to prime U.S. government contractors. Net sales in 1994 and 1993 included $38,752 and $37,200 respectively, for the B-2 Advanced Technology Bomber with the Northrup Corporation.
Note 15 - Geographic Areas and Export Sales
United Europe Pacific & Corporate & Consol- States Other Eliminations idated Identifiable Assets:
1995 $282,323 $ 79,910 $ 40,589 $ 22,135 $424,957 1994 290,644 66,086 34,175 33,551 424,456 1993 186,147 67,128 33,774 31,081 318,130
Sales to Unaffiliated Customers:
1995 $253,926 $ 90,076 $ 30,282 $374,284 1994 213,250 67,568 26,552 307,370 1993 189,365 78,776 25,539 293,680
Inter-area Sales to Affiliates:
1995 $ 10,446 $ 4,062 $ 666 $ 15,174 1994 7,804 4,738 896 13,438 1993 12,488 2,864 1,367 16,719
Note 15 - (continued)
Export Sales:
1995 $ 54,364 $ 25,370 $ 1,610 $ 81,344 1994 41,698 18,575 1,867 62,140 1993 25,623 31,954 3,103 60,680
Net Earnings (Loss):
1995 $ 4,030 $ 4,082 $ (164) $ (187) $ 7,761 1994 4,394 (3,583) 1,217 95 2,123 1993 7,604 (4,233) 1,391 (1) 4,761
Sales between geographic areas are generally transacted and accounted for at comparable arms length pricing. 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 16 - Commitments and Contingencies
The Company, over the past five years, has been named as a potentially responsible party (PRP) with respect to three Superfund sites. The clean up actions with regard to the three Superfund sites has been completed, and the Company's share of the related financial accommodations was not significant. No further actions have been initiated by Federal or State regulators. In addition, the Company was notified in August 1993 by a PRP group at a site related to one of the Superfund sites referenced above that it will seek contribution from the Company to the extent the PRP group is responsible for remediation costs. The Company is also in the process of voluntarily remediating an area identified in 1994 at a Company-owned facility leased to a third party.
At September 30, 1995, the Company believes that adequate reserves have been established for environmental issues, and does not expect these environmental matters will have a material effect on the financial position of the Company in excess of amounts previously reserved.
Legal proceedings pending by or against the Company and it's subsidiaries are not expected to have a material effect on the financial condition or results of operations of the Company and its subsidiaries taken as a whole.
In the ordinary course of business, subsidiaries of the Company have discounted promissory notes received in settlement of trade receivables at banks. The aggregate proceeds from discounted notes were $8,091 in 1995, $14,809 in 1994, $13,663 in 1993. Under the recourse provisions of such transactions, the subsidiaries are contingently liable for $661 at September 30, 1995.
The Company has $5,894 in open letters of credit at September 30, 1995, which principally relate to cash advances received on a contract.
Note 17 - Financial Instruments and Credit Concentration
The Company uses a variety of financial instruments, including foreign exchange instruments, letters of credit and interest rate swaps to reduce financial risk. 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.
Foreign exchange instruments are used to hedge the Company's equity in, and long term advances to, various International subsidiaries. At September 30, 1995 and September 30, 1994, the Company had $6,107 and $9,935, respectively, of such instruments outstanding at fair value. Gains and losses on these hedges of equity and long term advances are included in shareholders' equity. Foreign currency forward contracts are periodically utilized to hedge known foreign currency cash flows. Gains and losses on such contracts are netted against the gain or loss on the underlying amounts receivable or payable. Foreign currency forward contracts outstanding at fair value on September 30, 1995 were $2,020.
The Company has three interest rate swap agreements which convert a notional amount of $100,000 in variable rate long term debt to 8.0% fixed rate debt. The agreements expire at various times from June 1996 through June 1998. The differential interest paid or received is accrued as interest rates change and is recognized over the life of the agreements.
Cash and cash equivalents and notes payable are carried at amounts which approximate fair value at September 30, 1995 because of their short maturity. The fair value of long-term debt was estimated based on a discounted cash flow analysis using current rates offered to the Company for debt with the same remaining maturities. At September 30, 1995, the carrying value and estimated fair value of long-term debt was $183,155 and $188,763, respectively.
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary investments with highly rated financial institutions for maturities of generally three months or less. Concentrations of credit risk with respect to trade receivables are limited due to the significant amount of business with prime U.S. Government contractors or large commercial aerospace companies, and to the number of customers and their dispersion over a large geographic area.
Note 18 - Quarterly Data - Unaudited
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 1995. 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 1995. 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 financial statements or schedule of certain wholly-owned consolidated subsidiaries, which statements reflect total assets constituting 13% as of September 30, 1995 and 1994, and total net sales constituting 17%, 18% and 22% of the related consolidated totals for the years ended September 30, 1995, 1994 and 1993, 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 such consolidated subsidiaries, 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 30, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 1995, 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.
As discussed in Notes 1 and 9 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1994 to adopt the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As discussed in Note 11, the Company has also adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1994.
KPMG PEAT MARWICK LLP Buffalo, New York November 22, 1995
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
ITEM 10.
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 1996 Proxy.
Executive Officers of the Registrant.
The names and ages of all executive officers of Moog are set forth on the following page.
Other than John B. Drenning, the principal occupations of the following officers for the past five years have been their employment with the Company. Mr. Drenning's principal occupation is partner in the law firm of Phillips, Lytle, Hitchcock, Blaine & Huber.
Executive Officers and Positions Held Age Year First Elected Officer
Robert T. Brady President; Chief Executive Officer; Director; Member, Executive Committee 54 1967
Richard A. Aubrecht Chairman of the Board; Director; Member, Executive Committee 51 1980
Joe C. Green Executive Vice President; Chief Administrative Officer; Director; Member, Executive Committee 54 1973
Robert R. Banta Executive Vice President; Chief Financial Officer; Director; Assistant Secretary; Member, Executive Committee 53 1983
Kenneth D. Garnjost Vice President - Engineering 69 1961
Philip H. Hubbell Vice President - Contracts and Pricing 56 1988
Stephen A. Huckvale Vice President - International 46 1990
Robert H. Maskrey Vice President 54 1985
Richard C. Sherrill Vice President 57 1991
Kenneth G. Smith Vice President 59 1990
William P. Burke Treasurer 60 1985
John B. Drenning Secretary 58 1989
Donald R. Fishback Controller 39 1985
ITEM 11.
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 1996 Proxy.
ITEM 12.
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 1996 Proxy.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions.
The information required herein is incorporated by reference to "Transactions With Moog Controls Inc." in the 1996 Proxy.
PART IV.
ITEM 14.
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 Income for the years ended September 30, 1995, 1994, and 1993. (ii) Consolidated Balance Sheets as of September 30, 1995 and 1994. (iii) Consolidated Statements of Cash Flows for the years ended September 30, 1995, 1994, and 1993. (iv) Consolidated Statements of Shareholders' Equity for the years ended September 30, 1995, 1994, and 1993. (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 the years ended September 30, 1995, 1994, and 1993, 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) 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.
(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) Instruments defining the rights of security holders. Instruments defining the rights of holders of long-term debt of the Company and its subsidiaries are not being filed since the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any such instruments to the Securities and Exchange Commission upon request.
(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
(11) Statement re: Computation of per share earnings.
(13) 1995 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 Ohio, 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. (a) Moog SNC, Incorporated in France, wholly-owned subsidiary of Moog Sarl (xvi) Moog Singapore Pte. Ltd., Incorporated in Singapore, wholly-owned subsidiary (xvii) Moog Torrance Inc., Incorporated in Delaware, wholly-owned subsidiary
(23) Consent of KPMG Peat Marwick LLP; Consents and Audit Reports of Coopers & Lybrand LLP
(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).
Quarterly Stock Prices Stock Prices Fiscal Year Class B Class A Ended High Low High Low
Sept. 30, 1995 1st Quarter $15-1/8 $12 $ 9-1/2 $ 7-1/2 2nd Quarter 14-7/8 11-5/8 9-5/8 8-5/8 3rd Quarter 15 12-1/4 13 9-1/2 4th Quarter 15-1/2 14-3/8 14-3/8 12-1/4
Sept. 30, 1994 1st Quarter $11 $ 9-3/8 $ 9-1/2 $ 7-1/2 2nd Quarter 13 9-3/8 9-3/8 7 3rd Quarter 12-3/4 11-1/2 9 7-5/8 4th Quarter 14 12-3/8 9-5/8 7-1/2
Stock Listing
Moog Inc.'s two classes of common shares (symbols MOGA and MOGB) and convertible subordinated debentures are listed on the American Stock Exchange.
EXHIBIT 13-ANNUAL REPORT TO SHAREHOLDERS
Contents
Financial Highlights 1 Letter to Shareholders 2 Moog at a Glance 4
Market Segment Facts
Military Aircraft 6 Commercial Aircraft 8 Space and Missiles 10 Industrial Hydraulics 12 Industrial Electrics 14
Form 10K 17 Investor Information 46
Financial Highlights
The Start of a New Era
Fiscal '95 was the beginning of a new era for our company. A lot of hard work on many different fronts finally paid off. Sales increased by 22%. Earnings gained 266%. We made $1.00 per share for the first time since '87. Our strong cash flow allowed us to bring our worldwide debt down by $14 million. In view of these improving financials, the same lenders that financed last year's big acquisition have modified our loan agreement. They've increased our credit availability, relaxed their restrictive covenants and lowered our interest rate. We regard this as a real vote of confidence.
The Acquisition Is A Perfect Fit
We closed on our acquisition of the AlliedSignal actuation product line shortly before the end of fiscal '94. Our job this year was integration. We transformed the factory we acquired in Torrance (Los Angeles) into a facility specialized in the design and manufacture of rotary actuation systems for military and commercial aircraft flight controls. This factory has a big job on each of two new airplanes. The Navy has just rolled out the F/A-18E/F, the successor to the F/A-18C/D, the only fighter that the U.S. government buys in production quantities. The E/F is a bigger, better airplane and deliveries will start in '99. Our Torrance factory builds the rotary actuation for the maneuvering leading edge and for the wingfold on both of these planes, making the F/A -18 our largest military aircraft program.
In June of '95, Boeing's handsome new 777 entered international service. It also has a leading edge actuation system built by Moog Torrance. This system is one of a number of Moog products on the 777. The flight spoiler actuators and primary flight control servovalves are the production responsibility of our commercial aircraft team in East Aurora. In the acquisition, it was always our plan to concentrate production responsibility for hydraulic actuators in East Aurora, and the transfer was one of the major tasks in '95. Responsibility for Boeing's 747 aileron and spoiler actuators, 757 elevator, rudder and spoiler actuators and Airbus' A330/340 aileron actuators has been combined now with our other commercial airplane production. The arrangement we envisioned when we made the acquisition is now a reality.
The integration of the AlliedSignal product line allowed our U. S. operations to grow by 19% and to earn $4.0 million in fiscal '95 in spite of the costs of transition. The newly acquired product lines generated revenue of almost $95 million, about $15 million more than anticipated. The higher revenues were the result of the scale of activity on development contracts for the F/A-18E/F and the swashplate actuators for the production version of the V-22 Osprey. Swashplate actuators adjust the pitch of the aircraft's huge propellers when it's operating in its helicopter mode. They are big actuators and extremely complex. These two development contracts turned out to be bigger than we expected and all the work had to be done in '95. This made our '95 military aircraft sales higher than they would have been otherwise, and, in comparison, '96 sales will be slightly lower.
We'll be supplying the swashplate actuators as well as flaperon and elevator actuators and mechanical bladefold mechanisms for the V-22, which is planned to go into service in 1998. In production, our sales for each aircraft will be well in excess of $500,000. The Marines are planning,
ultimately, to buy 523 and the manufacturer, a Bell-Boeing team, has hopes of additional U. S. Army and foreign military orders that could extend the production to 1,500 aircraft.
Europe Came Roaring Back
Shortly after fiscal '95 began, our European industrial business began a spectacular recovery after 30 months of recession. While the recession was underway, we consolidated European production of industrial servovalves in our factory in Germany. The explosion in order intake overwhelmed that production capacity. At a time when all our customers were determined to shorten supplier lead-times, we found ourselves extending deliveries. We brought on additional capacity in the U. S. and in the Philippines to meet this demand.
The upswing was not confined to servovalves. Sales of electric drives were up over 50% in Europe, just as they were in the U.S. The increased order activity was broadly based. The principal applications continue to be robotics, material handling, packaging and printing. We have a new application this year to provide motors for use on mail sorting equipment which Bell and Howell will supply to the German and Dutch postal systems.
The only real disappointment in our international business was the slow pace of orders in the Pacific Rim for our injection molding controls. Our revenues there fell far short of our expectations. We've seen some improvement lately and are expecting a recovery in fiscal '96.
International sales were up 35% in Europe and 14% in Asia/Pacific. This increased volume, in combination with our reorganized operations, generated much improved profitability, particularly because of our tax loss carryforward in Germany. Our international segment had net profits of $3.8 million, almost half of our total earnings.
Commercial and Industrial
Sales Are Now More Than Half
Our Company has a proud history of providing advanced technology to defense agencies in the U.S. and around the world. Not too many years ago, government-funded revenues were close to two-thirds of our business. In fiscal '95, for the first time in our history, commercial and industrial revenues were more than half of our business (51%), and this occurred in spite of the surge in military aircraft development work. We expect this trend to continue. Almost all of our expected growth in fiscal '96 will be in the commercial aircraft and industrial product lines. Even in the space business, which used to be a primarily government-funded activity, future growth will come on commercial satellites and satellite launch vehicles.
Fiscal '96 Looks Like a Good Year Too
With a little luck, we'll be a $400 million company in fiscal '96. Growth in our commercial aircraft business is expected to offset a slight decline in military aircraft sales. We're anticipating some growth in the satellite business. Our strong growth prospects, though, are in our combined industrial businesses for which we're forecasting growth of nearly 20%. Increased earnings in '96 and our strong cash flow will allow further reduction in debt as well as the consideration of additional strategic acquisitions.
We'll get a small boost in '96 from our acquisition in December of the servovalve product line from Ultra Hydraulics Ltd. The Ultra servovalve traces its history back to a Moog license extended to the Dowty Group in the late '50's. We expect it will add nearly $5.0 million in revenues.
The fiscal '95 results demonstrate that our people can deal with the challenges of an evolving global marketplace. We've made a lot of adjustments that have worked. We're confident that the pattern of improvement begun in '95 was just the beginning of a new era of growth and prosperity.
Robert T. Brady, President, CEO
Richard A. Aubrecht, Chairman of the Board
Moog at a Glance
For forty-four years, our Company has applied leading-edge technology to solve motion control problems in whatever industries required our kind of precision performance. As a result, we offer a broad array of products to an equally broad spectrum of customers. These products can generally be grouped into five categories: aerospace products can be differentiated by market - military aircraft, commercial aircraft and space. The industrial product lines can be distinguished by the technology - hydraulics versus electronics/electrics. Here's a synopsis of our product evolution.
Moog was founded in 1951 on the development of the electrohydraulic servovalve, a device that controls lots of hydraulic horsepower in response to a tiny electrical command signal. Originally, servovalves were used to control aerodynamic fins on small missiles and to gimbal rocket motor nozzles on big missiles. They were sold to missile builders skilled in guidance systems and designers of aircraft flight controls. These customers persuaded Moog to begin building the piston and cylinder assemblies, called actuators, which deliver the motion.
In 1959, Moog adapted the aerospace servovalve for use in high performance industrial machinery. Applications included various kinds of metal cutting machines, fatigue test machines, injection and blow molding machines and gauge control in steel mills. Many of our early industrial customers were not familiar with the technology that commands servovalves and so Moog also developed electronics for controlling servosystems.
Over the last thirty-five years our industrial hydraulic servovalve product line flourished. But electric servosystems kept getting better and competing more effectively with hydraulics. In the early 1980's the Company resolved to develop state-of-the-art electric drives and to have this technology within our own product line.
Below is a summary of the product lines. In the fact sheets that follow, we describe the character of our business in each of the five categories.
Military Aircraft Controls = 35%
Moog is now one of the world's leading suppliers of fly-by-wire flight controls for military aircraft. In a fly-by-wire system an electrical signal runs from the pilot's control stick to a flight control computer. This signal is modified to conform to the aircraft's pre-programmed "control laws" and then delivered to servoactuators which move the ailerons, elevators and rudder. Moog's extensive experience in this area culminated in Northrop and the Air Force selecting us to design the flight control actuation system for the B-2 bomber. Some aircraft experts consider the B-2 flight control system the "eighth wonder of the world".
Commercial Aircraft Controls = 20%
Moog specialized in military aircraft until 1978 when Boeing selected Moog to design autopilot actuators for the 767. We've had a thriving relationship with Boeing ever since. Moog now supplies autopilot actuators for both the 767 and the 747, flight spoilers for the new 777 and servovalves for all Boeing production aircraft. In the summer of 1994, Moog acquired the AlliedSignal Actuation Systems product line. As a result we supply most of the flight control actuators for the 747 and 757 and the rotary actuation system for the 777 leading edge flap. The Boeing Company is now Moog's No. 1 customer in annual sales.
Space and Missiles = 12%
The first Moog servovalve was applied in the control of aerodynamic fins to steer a tactical missile. The Company moved then to supplying servoactuators for controlling the direction of thrust in rocket motor nozzles. Steering rockets through control of the thrust vector has been used on strategic missiles, the Space Shuttle and the large rockets that launch satellites. Once a satellite is launched into orbit, its position is optimized by the use of attitude control engines. These are small thrust chambers in which fuel and oxidizer are mixed to produce a precisely controlled explosion. The valving that controls the flow of these propellants has become another of Moog's product specialties.
Industrial Hydraulic Servovalves = 20%
Today, hydraulic servovalves are used in all manner of high performance industrial equipment. About 25% of Moog servovalves are used on machinery that forms plastics. Servovalves are used to control the pressure that moves plastic into the mold chamber in an injection molding machine and also provide the clamp pressure on the mold. Servovalves are also used to control the flow of a tube of plastic into a blow molding chamber where it will be formed into a plastic bottle. These are two examples of the hundreds of applications of industrial servovalves in the automated machinery of the '90's.
Industrial Electronics and Electric Drives = 13%
Moog supplies proprietary electronic systems for total machine control of both injection molding and blow molding processes. In addition, the Company designs customized electronic controls for all kinds of high performance industrial machinery. These "front end" control systems may direct electrohydraulic servovalves provided by the Company or they may communicate through a digital data bus to Moog's high performance brushless DC drives. The Company provides electric drives used as subsystems in various robotic applications as well as other sorts of automated machinery and in azimuth and elevation gun control systems for military howitzers. In addition, the Company provides a complete line of electrically actuated entertainment motion simulators and transportation industry training platforms.
Many of our shareholders are interested in the proportions of our business. The charts below illustrate these balances for fiscal '95:
By Product Line:
By Customer:
By Geographical Area:
Military Aircraft - 35% of '95 sales, 32% of '96 forecast
FY95 Actual Sales = $132 million FY96 Forecast Sales = $128 million
Products
- - Primary and secondary flight control actuation for bombers, fighters, helicopters
- - Servovalves used in digital electronic engine controls
- - Active vibration control actuation
- - Structural fatigue measurement systems
Major Programs & Applications
B-2 Flight control actuation system F/A-18 Leading edge flap and wingfold actuation, switching valve, spoiler actuator Pitch and roll control assembly, aileron rudder interconnect Leading edge flap drive Taiwanese IDF All primary flight control actuators Indian LCA All primary flight control actuators Japanese FSX Leading edge flap actuation Tiger IV Armament control unit Canadian Tutor Flight loads data system V-22 Swashplate, flaperon, elevator, bladefold actuator RAH-66 Main rotor, tail rotor actuator, active vibration control actuators Blackhawk Pitch, trim, roll trim actuators EH-101 Active vibration control actuators
Servovalves for engines: Inlet guide vane, afterburner position and fuel control (F/A-18C/D) Fan and compressor geometry, exhaust nozzle control (F/A-18E/F) Main fuel control, exhaust nozzle and afterburner fuel control (F-14D,C/D) Vane and nozzle control (F-22)
Competitive Advantages
- - Extensive international experience in design of flight critical fly-by-wire flight controls
- - Product innovation in engine control servovalves and active vibration control
- - World-class manufacturing capability focused on flight safety and quality
- - Skilled, experienced and dedicated workforce Competitors
- - Curtiss-Wright, HR Textron, Parker Hannifin, Power Control Technologies, Smiths Industries
Market Developments
- - F/A-18C/D, E/F are funded for production
- - B-2 included in '96 defense budget
- - V-22 Osprey approved for limited production, 523 are planned, program could accelerate
- - RAH-66 Comanche rolled out, 6 development helos planned for 2001, production in 2004
- - Japanese FSX planned for 1998
- - Taiwanese IDF production nearing completion
- - Demand for engine controls improving
Strategies & Initiatives
- - Maintain market position through the current production lull
- - Partner with prime contractor R&D Centers
- - Pursue opportunities in international markets (Korean KTX-2)
- - Develop next generation technology in flight control, engine control, vibration suppression
Bell-Boeing V-22 Osprey
Moog's fly-by-wire flight control actuators give the V-22 its unique flying capability.
Commercial Aircraft - 20% of '95 sales, 19% of '96 forecast
FY95 Actual Sales = $73 million FY96 Forecast Sales = $76 million
Products
- - Primary and secondary flight control actuation
- - Flight control servovalves for Boeing and Airbus
- - Servovalves used in digital electronic engine controls
Major Programs & Applications
747 Autopilot, aileron and spoiler actuators 757 Elevator, rudder and spoiler actuators 767 Autopilot actuators 777 Leading edge rotary and spoiler actuators A330/A340 Aileron actuators Boeing All flight control servovalves Airbus All flight control servovalves Citation X All primary flight controls Gulfstream IV Trailing edge flap system Challenger Trailing edge flap system
Servovalves for engines:
GE CF-6 Fuel flow, vane position and blade tip clearance (A330, A310, 747, 767, MD-11) AlliedSignal APU Inlet guide vane actuators, surge control (A310, A320, 737, 757, 767, 777, MD-90) GE90 Burner staging and turbine clearance control (777) Rolls Royce Trent Main fuel metering, turbine overspeed shutoff (A330, 777)
Competitive Advantages
- - Extensive experience in design and production of flight-critical control surface actuators
- - Product innovation in engine control servovalves
- - World-class manufacturing capability focused on flight safety and quality
- - Outstanding and timely aftermarket support
- - Skilled, experienced and dedicated workforce
Competitors
- - Curtiss-Wright, E-Systems, HR Textron, Parker Hannifin, Power Control Technologies, Teijin Seiki
Market Developments
- - Current delivery rates of 747, 757, 767, A330/340 are stable
- - Boeing 777 has entered service and deliveries are increasing
- - 747 production increase expected later in 90's
- - Engine controls market shows signs of recovery
Strategies & Initiatives
- - Align our strategies with customers' objectives
- - Pursue aggressive cost reduction to meet market pricing demand
- - Develop relationships with Canadair, Gulfstream, Cessna, Bombardier and Fokker
- - Transfer technology developed in military applications
- - Develop next generation technology in engine control
Airbus A330
The Airbus A330's fly-by-wire flight controls depend on Moog's eight inboard and outboard aileron actuators for primary roll control.
Space & Missiles - 12% of '95 sales, 12% of '96 forecast
FY95 Actual Sales = $46 million FY96 Forecast Sales = $49 million
Products
- - Thrust vector control actuation (steering controls) for launch vehicles, strategic missiles, and space shuttle
- - Bipropellant and monopropellant thrusters and valves for satellites and launch vehicles
- - Electric propulsion components and systems for satellite attitude control
- - Electrohydraulic, electromechanical and electropneumatic fin controls for tactical missiles
- - Quick disconnects for fluid systems in space vehicles
- - Electric drives for Space Station segment attachment
Major Programs & Applications
Trident (D-5) Thrust vector control (TVC) actuators Titan IV Core vehicle and solid rocket motor upgrade TVC Space Shuttle Main engine and booster TVC, orbiter elevon actuators and rudder speed brake valves Standard Missile 2 BLK IV Electromechanical fin controls Patriot Electrohydraulic servos VLASROC Electropneumatic fin controls
Ariane V Engine TVC and fuel control Space Station Quick disconnects and segment attachment drives THAAD Attitude control thrusters for kill vehicle
Propulsion components for every satellite manufacturer worldwide
Electric propulsion components for next generation geosynchronous communication satellites
Competitive Advantages
- - Extensive experience in design and manufacture of thrust vector control systems
- - Unparalleled experience in creative design and manufacture of thrusters and valves for space applications
- - Leading edge technology in electric propulsion and gel propellant controls
- - World class manufacturing capabilities
- - Skilled, experienced and dedicated workforce
Competitors
- - AlliedSignal, HR Textron, Parker Hannifin
Market Developments
- - Trident is only strategic missile in production
- - Theater High Altitude Area Defense (THAAD) is funded and progressing
- - Standard Missile 2 BLK IV will be used for Navy missile defense
- - Our customers, Hughes and Lockheed Martin, dominate U.S. satellite production
- - Traditional launch vehicles (Titan, Atlas, Delta, Space Shuttle) continue as workhorses
Strategies & Initiatives
- - Develop leading edge technologies for launch vehicle TVC and tactical fin controls
- - Develop leading edge technology for satellite propulsion (electric, gel etc.)
- - Outlast competition in space propulsion
- - Support satellite and launch vehicle manufacturers worldwide
Lockheed Martin Titan IV
Moog's forty year involvement in the Titan family of launch vehicles has evolved from supplying thrust vector control (TVC) actuators on the core vehicle to additionally supplying the complete TVC system on the solid-rocket-motor booster.
Industrial Hydraulics - 20% of '95 sales, 22% of '96 forecast
FY95 Actual Sales = $76 million
FY96 Forecast Sales = $88 million
Products
- - Mechanical feedback, nozzle flapper servovalves
- - Electrical feedback, nozzle flapper servovalves
- - Mechanical feedback, servojet servovalves
- - Electrical feedback, servojet servovalves
- - Electrical feedback, direct drive, industrial servovalves
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 of plastic blow molding machines
Fuel metering, steam bypass, and override control servovalves for gas and steam turbines
Hydraulic position control actuators and servovalves for fatigue testing systems
Carriage control servovalves to provide precise positioning for sawmill equipment
Competitive Advantages
- - Leading edge technology for 36 years
- - Unmatched, worldwide application engineering to optimize custom solutions
- - Worldwide engineering, manufacturing, support and service facilities
- - Skilled, experienced and dedicated workforce
Competitors
- - Bosch, E-Systems, IMC, Rexroth
Market Developments
- - Remarkable increase in demand in Europe
- - Increased competition throughout market
- - Consistent pressure to reduce lead time
Strategies & Initiatives
- - Continue development of leading edge technology
- - Consolidate production in global manufacturing centers
- - Aggressive cost reduction to meet market pricing
- - Develop inventory stocking plan to address lead-time demands
- - Acquired servovalve product line from Ultra Hydraulics Ltd. (U.K.)
Schloemann Siemag Rolling Mill
Modern, highly automated steel mills throughout the world each use over eighty Moog servovalves to control the steel's final form.
Industrial Electronics & Electric Drives - 13% of '95 sales, 15% of '96 forecast
FY95 Actual Sales = $47 million FY96 Forecast Sales = $58 million
Products
- - Brushless D.C. servomotors and digital motor controllers
- - Electronic controls for injection and blow molding machines
- - Electronic controls for specialized automated machinery
- - Radio controls for automatic mining machines
- - Electric and hydraulic azimuth and elevation gun controls for military* vehicles
Major Applications
Electric drives for assembly robots, brush making machines, material handling robots, postal sorting machines
Full performance total machine control for injection molding and blow molding
Custom tailored attachment 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
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
- - Design capability for customized machine control solutions
- - Leading edge digital two-way radio control for automated mining machinery
- - Extensive experience in high reliability electrically actuated motion platforms
- - Demonstrated experience in electric gun controls for military* vehicles
* Electrically actuated gun controls are included in the category of industrial controls because of the similarity to the industrial products.
Competitors
- - Barber Coleman, Indramat, Pacific Scientific, Siemens
Market Developments
- - Resurgence in demand for high performance brushless D.C. drives
- - Rebound in demand for plastics machine controls in Europe, market softening in Pacific
- - Entertainment industry is still taking shape, no supplier dominance yet established
- - Temporary production lull in military* vehicles
Strategies & Initiatives
- - Refine product design and reduce costs to improve profitability in electric drives
- - Improve plastics machine controls and broaden worldwide distribution, increase market share
- - Broaden product range in electric motion simulators
- - Repackage electric gun controls to maintain technology advantage
Bell and Howell Postal Sorting Machine
Moog's brushless motors and controllers provide the high speed control and power for Bell and Howell's latest mail sorting machinery.
Moog Worldwide
Moog Inc. Headquarters East Aurora, New York, USA
Moog Australia Pty., Ltd Mulgrave, Australia
Moog do Brasil Controles Ltda. Sao Paulo, Brazil
Moog Buhl Automation Copenhagen, Denmark
Moog Controls Ltd. Tewkesbury, England
Ultra Servovalves Glocester, England
Moog OY Espoo, Finland
Moog Sarl Rungis, France
Moog GmbH Boblingen, Germany
Moog Controls Hong Kong Ltd. Hong Kong
Moog Controls (India) Pvt. Ltd. Bangalore, India
Moog Ltd. Ringaskiddy, Ireland
Moog Italiana S.r.l. Malnate, Italy
Moog Japan Ltd. Hiratsuka, Japan
Moog Korea Ltd. Kwangju-Kun, Korea
Moog Controls Corporation Baguio City, Philippines
Moog Singapore Pte. Ltd. Singapore
Moog Sarl Sucursal En Espana Orio, Spain
Moog Norden A.B. Askim, Sweden
EXHIBIT 23
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 22, 1995, relating to the consolidated balance sheets of Moog Inc. and subsidiaries as of September 30, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows and related schedule for each of the years in the three-year period ended September 30, 1995, which report appears in the September 30, 1995 annual report on Form 10-K of Moog Inc.
KPMG Peat Marwick LLP
Buffalo, New York December 27, 1995
COOPERS chartered Lennox House telephone (01452 423031) & LYBRAND accountants Beaufort Buildings Spa Road Gloucester GL1 1XD telex 887474 COLYRN G facsimile (01452) 300699
your reference
our reference The Board of Directors MSHB/PR/AMP/CNR1063.95 Moog Inc. East Aurora NEW YORK USA 22 November 1995
Dear Sirs
Independent Auditors' Report
We have audited the consolidated balance sheet of Moog Controls Limited (a wholly-owned subsidiary of Moog Inc.) and subsidiaries as at September 30, 1995 and 1994, and the related consolidated statement of earnings and retained earnings and cashflows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 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, 1995 and 1994, 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 marked by us as "For identification purposes only" are presented for purposes of additional analysis and may not be 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 so far as the information in them relates to the basic consolidated financial statements taken as whole.
COOPERS & LYBRAND
Chartered Accountants Gloucester, UK
COOPERS Telefon (0711) 7843-0 Mitglied von & LYBRAND 70565 Stuttgart telefax (0711) 7843-100 Coopers Postiach 800107 & Lybrand 70501 Stuttgart International
MOOG INC. East Aurora, New York 14052-0018 U.S.A. November 22, 1995 TRI/EGN/MOOGBV3.DOC
Independent Auditors Report
The Board of Directors Moog Inc.:
We have audited the consolidated balance sheet of Moog GmbH (a wholly-owned subsidiary of Moog Inc.) and subsidiary (Moog Italiana SRL) as of September 30, 1995 and 1994, and the related consolidated statements of Earnings and Retained Earnings, changes in shareholder's equity and cash flows for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the 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 GmbH and subsidiary as of September 30, 1995 and 1994, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purposes of forming an opinion on the consolidated financial statements taken as a whole. The supplemental information in exhibits A through H and Schedule 1 through 22 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.
COOPERS & LYBRAND GmbH Wirtschaftsprufungsgesellschaft