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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 March 31, 2004
     
   

OR
   

    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 __

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes X   No __

The number of shares outstanding of each class of common stock as of May 7, 2004 were:

Class A Common Stock, $1.00 par value                 22,886,409 shares
Class B Common Stock, $1.00 par value                 3,138,626 shares

 

 

 

 

MOOG INC.
QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I.

 

FINANCIAL INFORMATION

Page

 

 

 

 

 

Item 1.

Consolidated Condensed Balance Sheets

March 31, 2004 and September 27, 2003

3

 

 

 

 

 

 

Consolidated Condensed Statements of Earnings

Three and Six Months Ended March 31, 2004 and 2003

4

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows

Six Months Ended March 31, 2004 and 2003

5

 

 

 

 

 

 

Notes to Consolidated Condensed Financial

Statements

6-15

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of

Financial Condition and Results of Operations

16-26

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about

Market Risk

26

 

 

 

 

 

Item 4.

Controls and Procedures

27

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 
  Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities		 28
       
  Item 4. Submission of Matters to a Vote of Security Holders 29
       

 

Item 6.

Exhibits and Reports on Form 8-K

30

 

 

 

 

SIGNATURES

 

31

2

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
March 31, September 27,
2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 34,708 $ 77,491
Receivables 259,339 262,094
Inventories 191,617 170,578
Other current assets   46,506   42,036
TOTAL CURRENT ASSETS 532,170 552,199
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $296,144 and $277,624, respectively 248,562 208,169
GOODWILL, net 290,122 194,937
INTANGIBLE ASSETS, net 16,672 10,949
OTHER ASSETS   26,098   25,326
TOTAL ASSETS $ 1,113,624 $ 991,580
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 885 $ 10,140
Current installments of long-term debt 18,777 15,607
Accounts payable 52,405 47,159
Accrued liabilities 106,478 98,952
Contract loss reserves 14,679 16,147
Customer advances   29,316   23,418
TOTAL CURRENT LIABILITIES 222,540 211,423
LONG-TERM SENIOR DEBT, excluding current installments 304,192 230,913
LONG-TERM PENSION AND RETIREMENT OBLIGATIONS 89,078 91,324
DEFERRED INCOME TAXES 35,282 31,953
OTHER LONG-TERM LIABILITIES   2,730   1,819
TOTAL LIABILITIES   653,822   567,432
SHAREHOLDERS' EQUITY
Preferred stock - 100
Common stock 30,490 30,488
Other shareholders' equity   429,312   393,560
TOTAL SHAREHOLDERS' EQUITY   459,802   424,148
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,113,624 $ 991,580
See accompanying Notes to Consolidated Condensed Financial Statements.

3

MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(dollars in thousands except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
  2004   2003   2004   2003
Net sales $ 234,069 $ 190,048 $ 460,054 $ 369,731
Cost of sales   160,209   132,675   319,697   256,179
Gross profit 73,860 57,373 140,357 113,552
Research and development 7,498 7,871 14,266 15,297
Selling, general and administrative 42,702 30,323 80,433 59,880
Interest 2,834 5,409 6,019 10,783
Other   413   (241)   888   (198)
Earnings before income taxes 20,413 14,011 38,751 27,790
Income taxes   6,328   3,707   12,010   7,708
Net earnings $ 14,085 $ 10,304 $ 26,741 $ 20,082
Net earnings per share
Basic $ .54 $ .45 $ 1.03 $ .88
Diluted $ .53 $ .45 $ 1.01 $ .87
Average common shares outstanding
Basic   25,985,428   22,767,554   25,929,617   22,750,151
Diluted   26,545,213   23,099,393   26,479,345   23,056,881
See accompanying Notes to Consolidated Condensed Financial Statements.

4

MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)

Six Months Ended
March 31,
 

2004

  

2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 26,741 $ 20,082
Adjustments to reconcile net earnings
to net cash provided by operating activities:
   Depreciation and amortization 17,934 14,153
   Other   22,150   (19)
NET CASH PROVIDED BY OPERATING ACTIVITIES  66,825   34,216
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (152,019) -
Purchase of property, plant and equipment (13,496) (15,080)
Other   49   70
NET CASH USED BY INVESTING ACTIVITIES   (165,466)   (15,010)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (10,086) (959)
Net proceeds from (repayments of) revolving lines of credit 72,000 (43,000)
Proceeds from long-term debt 22,572 35,221
Payments on long-term debt (30,977) (6,365)
Other   848   645
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES  54,357   (14,458)
Effect of exchange rate changes on cash   1,501   299
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (42,783) 5,047
Cash and cash equivalents at beginning of period   77,491   15,952
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34,708 $ 20,999
CASH PAID FOR:
Interest $ 4,783 $ 11,379
Income taxes 1,499 3,053
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Assets acquired under capital leases $ 3,978 $ 426
See accompanying Notes to Consolidated Condensed Financial Statements.

5

MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 2004

(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 March 31, 2004 and September 27, 2003 and the results of its operations for the three and six months ended March 31, 2004 and 2003 and its cash flows for the six months ended March 31, 2004 and 2003. The results of operations for the three and six months ended March 31, 2004 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 27, 2003. All references to years in these financial statements are to fiscal years.

2.    Recent Accounting Pronouncements

As of December 31, 2003, the Company adopted FASB Interpretation No. 46 R, "Consolidation of Variable Interest Entities," revised in December 2003. The Company is the primary beneficiary of two variable interest entities and has accordingly consolidated these entities beginning December 31, 2003. The Company leases land and buildings from these variable interest entities that own the land and buildings and have the related debt. In the initial consolidation as of December 31, 2003, the Company recorded land and buildings, net of depreciation, of $13,526 and long-term debt, including current installments, of $9,279, reduced other assets by $4,252 and recorded other net liabilities of $32. The cumulative effect of this accounting change is a $37 pretax loss and is included in other expense as the amount is immaterial.

In December 2003, the FASB issued SFAS No. 132 R (revised), "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement requires revisions to employers' disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition provisions of SFAS No. 87 or SFAS No. 106. The interim period disclosure requirements were applied in the Company's second quarter of 2004 and the annual disclosure requirements will be effective for 2004.

3.     Acquisition

On September 30, 2003, the beginning of the Company's 2004 fiscal year, the Company acquired the net assets of the Poly-Scientific division of Litton Systems, Inc., a subsidiary of Northrop Grumman Corporation. Operating results for this acquisition have been included in the consolidated financial statements since that date. The acquired business is a manufacturer of motion control and data transmission devices. Its principal products are electrical and fiber optic slip rings, brushless D.C. motors and electromechanical actuators. The acquisition complements the Company's business in the design and manufacture of components and subsystems used in high-performance motion control systems in addition to extending product applications into the medical market.

On the acquisition date, the Company paid $158,000 in cash for the net assets. In the second quarter, the Company received a net amount of $5,981 from the seller representing a purchase price adjustment in accordance with the asset purchase agreement, resulting in an adjusted purchase price of $152,019.

6

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition. This preliminary purchase price allocation will be finalized during fiscal 2004 after the Company completes its review of current assets.  The Company does not