MOOG INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 1-5129

MOOG Inc.
(Exact name of registrant as specified in its charter)

New York State	16-0757636
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

East Aurora, New York	14052-0018
(Address of principal executive offices)	(Zip code)

Telephone number including area code: (716) 652-2000

_________________________________________________________________________________________
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

The number of shares outstanding of each class of common stock as of August 1, 2002 were:

Class A Common Stock, $1.00 par value	12,983,573 shares
Class B Common Stock, $1.00 par value	2,106,106 shares

MOOG INC.
QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

			Page

PART I.		FINANCIAL INFORMATION

	Item 1.	Consolidated Condensed Balance Sheets June 30, 2002 and September 29, 2001	3

		Consolidated Condensed Statements of Earnings Three and Nine Months Ended June 30, 2002 and 2001	4

		Consolidated Condensed Statements of Cash Flows Nine Months Ended June 30, 2002 and 2001	5

		Notes to Consolidated Condensed Financial Statements	6-12

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13-20

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

PART II.		OTHER INFORMATION

	Item 6.	Exhibits and Reports on Form 8-K	21

SIGNATURES			22

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

MOOG INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(dollars in thousands)

As of
June 30, 2002

As of
September 29,
2001

ASSETS

CURRENT ASSETS

Cash and cash equivalents

16,026

14,273

Receivables, billed and unbilled

240,061

236,229

Inventories

164,862

158,798

Other current assets

36,362

34,215

TOTAL CURRENT ASSETS

457,311

443,515

PROPERTY, PLANT AND EQUIPMENT, net

201,495

198,707

GOODWILL, net

194,952

183,468

INTANGIBLE ASSETS, net

10,400

9,472

OTHER ASSETS

23,546

21,379

TOTAL ASSETS

887,704
=========

856,541
========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Notes payable

18,352

13,236

Current installments of long-term debt

17,523

16,463

Accounts payable

37,951

45,516

Accrued liabilities

88,395

87,927

Contract loss reserves

14,457

16,663

Customer advances

9,853

6,331

TOTAL CURRENT LIABILITIES

186,531

186,136

LONG-TERM DEBT, excluding current installments

Senior debt

181,476

223,630

Senior subordinated notes

120,000

120,000

OTHER LONG-TERM LIABILITIES

91,111

90,947

TOTAL LIABILITIES

579,118

620,713

SHAREHOLDERS' EQUITY

Preferred stock

100

100

Common stock

18,313

16,333

Other shareholders' equity

290,173

219,395

TOTAL SHAREHOLDERS' EQUITY

308,586

235,828

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

887,704
==========

856,541
========

See accompanying Notes to Consolidated Condensed Financial Statements.

MOOG INC.

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(Unaudited)

(dollars in thousands except per share data)

Three Months Ended

Nine Months Ended

June 30,

2002

2001

2002

2001

Net sales

177,335

179,252

533,118

519,505

Cost of sales

118,956

125,309

361,649

365,776

Gross profit

58,379

53,943

171,469

153,729

Research and development

8,716

7,236

24,730

18,470

Selling, general and administrative

29,976

28,246

88,406

80,321

Interest

6,306

8,146

19,980

24,300

Other expense (income), net

582

169

(181)

Earnings before income taxes

12,799

10,304

38,184

30,819

Income taxes

2,968

3,145

10,838

10,325

Net earnings

9,831
==========

7,159
========

27,346
========

20,494
=========

Net earnings per share

Basic

.65
==========

.55
========

1.86
========

1.56
=========

Diluted

.64
==========

.54
========

1.83
========

1.55
=========

Average common shares outstanding

Basic

15,085,836
==========

13,083,341
========

14,708,368
=========

13,099,041
=========

Diluted

15,380,518
==========

13,264,919
========

14,920,440
=========

13,249,208
=========

See accompanying Notes to Consolidated Condensed Financial Statements.

MOOG INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)

Nine Months Ended,

June 30,

2002

2001

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings

27,346

20,494

Adjustments to reconcile net earnings
to net cash provided by operating activities:

Depreciation and amortization

18,867

23,542

Other

(13,032)

(12,808)

NET CASH PROVIDED BY OPERATING ACTIVITIES

33,181

31,228

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of businesses, net of cash acquired

(7,096)

(27,085)

Acquisition of minority interest

(1,354)

Purchase of property, plant and equipment

(18,721)

(19,361)

Other

(729)

(8)

NET CASH USED BY INVESTING ACTIVITIES

(26,546)

(47,808)

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from (repayments of) notes payable

(1,782)

959

Net repayments of revolving lines of credit

(31,000)

(8,000)

Proceeds from long-term debt

3,516

38,957

Payments on long-term debt

(14,466)

(19,088)

Net proceeds from sale of Class A Common Stock

38,814

Other

(9)

(1,669)

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

(4,927)

11,159

Effect of exchange rate changes on cash

(558)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

1,753

(5,979)

Cash and cash equivalents at beginning of period

14,273

13,827

CASH AND CASH EQUIVALENTS AT END OF PERIOD

16,026
=======

7,848
========

CASH PAID FOR:

Interest

25,065

27,926

Income taxes

14,951

8,947

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of businesses:

Fair value of assets acquired other than cash

22,742

42,467

Cash paid, net of cash acquired

7,096

27,085

Liabilities assumed

15,646
========

15,382
========

See accompanying Notes to Consolidated Condensed Financial Statements.

MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2002

(Unaudited)
(dollars in thousands, except per share data)

1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared by management in accordance with generally accepted accounting principles and in the opinion of management contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of Moog Inc. as of June 30, 2002 and September 29, 2001 and the results of its operations for the three and nine months ended June 30, 2002 and 2001 and its cash flows for the nine months ended June 30, 2002 and 2001. The results of operations for the three and nine months ended June 30, 2002 are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended September 29, 2001.

2. Inventories

Inventories consist of the following:

		June 30,		September 29,
		2002		2001
Raw materials and purchased parts	$	52,207	$	53,254
Work in process		83,518		78,793
Finished goods		29,137		26,751
	$	164,862	$	158,798

3. Stock Offering and Stock Split

On November 20, 2001, the Company completed an offering of Class A common stock at $21.00 per share. The offering included 1,980,000 previously unissued shares sold by the Company. The net proceeds to the Company of $38,814 were used to repay outstanding debt.

On September 21, 2001, the Company distributed Class A and Class B Common Stock in a three-for-two stock split, effected in the form of a 50% stock distribution, to shareholders of record as of September 7, 2001.

4. Earnings per Share

Basic and diluted weighted-average shares outstanding are as follows:

	Three Months Ended		Nine Months Ended
	June 30,		June 30,
	2002	2001	2002	2001
Weighted-average shares outstanding-Basic	15,085,836	13,083,341	14,708,368	13,099,041
Dilutive effect of:
Stock options	283,894	170,790	201,284	139,379
Convertible preferred stock	10,788	10,788	10,788	10,788
Weighted-average shares outstanding-Diluted	15,380,518 ========	13,264,919 ========	14,920,440 ========	13,249,208 ========

Preferred stock dividends are deducted from net earnings to calculate income available to common stockholders for basic earnings per share.

5. Shareholders' Equity

The changes in shareholders' equity for the nine months ended June 30, 2002 are summarized as follows:

		Number of Shares
			Class A	Class B
		Preferred	Common	Common
	Amount	Shares	Stock	Stock
PREFERRED STOCK
Beginning and end of period	$ 100	100,000

COMMON STOCK
Beginning of period	16,333		12,640,707	3,692,343
Sale of Class A Common Stock	1,980		1,980,000	-
Conversion of Class B to Class A	-		52,150	(52,150)
End of period	18,313		14,672,857	3,640,193

ADDITIONAL PAID-IN CAPITAL
Beginning of period	97,430
Sale of Class A Common Stock,
net of issuance costs	36,834
Issuance of Treasury shares at
more than cost	303
End of period	134,567

RETAINED EARNINGS
Beginning of period	185,428
Net earnings	27,346
Preferred stock dividends	(6)
End of period	212,768

TREASURY STOCK
Beginning of period	(39,827)	(16,229)	(1,737,279)	(1,519,922)
Treasury stock issued	227	-	57,000	-
Treasury stock purchased	(533)	-	(9,905)	(11,500)
End of period	(40,133)	(16,229)	(1,690,184)	(1,531,422)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning of period	(23,636)
Foreign currency translation adjustment	5,064
Reduction in accumulated loss
on derivatives	1,543
End of period	(17,029)

TOTAL SHAREHOLDERS' EQUITY	$ 308,586 ========	83,771 ========	12,982,673 ========	2,108,771 ========

6. Derivative Financial Instruments

The Company principally uses derivative financial instruments to manage the risk associated with changes in interest rates which affect the amount of future interest payments. The Company uses, to a much lesser extent, derivative financial instruments to reduce fluctuations in foreign currency cash flows related to third party raw material purchases, intercompany product purchases and intercompany loans.

Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. The interest rate swaps provide for the Company to pay an amount equal to a specified fixed rate of interest times a notional principal amount and to receive in return an amount equal to a variable rate of interest based on LIBOR times the same notional amount. Cash amounts are settled on a net basis; the notional amounts are not exchanged. No other cash payments are made unless the contract is terminated prior to its maturity, in which case the contract would likely be settled for an amount equal to its fair value. The Company enters into interest rate swaps with a number of major financial institutions to minimize counterparty credit risk.

The interest rate swaps qualify and are designated as hedges of the amount of future cash flows related to interest payments on variable-rate debt that, in combination with the interest payments on the debt, convert a portion of the variable-rate debt to fixed-rate debt. Therefore, the interest rate swaps are recorded in the consolidated balance sheet at fair value and the related gains or losses are deferred in shareholders' equit