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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 December 25, 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 January 28, 2005 were:
Class A Common Stock, $1.00 par value     22,915,228 shares
Class B Common Stock, $1.00 par value       2,820,152 shares

MOOG INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I.

 

FINANCIAL INFORMATION

Page

 

 

 

 

 

Item 1.

Consolidated Condensed Balance Sheets

December 25, 2004 and September 25, 2004

3

 

 

 

 

 

 

Consolidated Condensed Statements of Earnings

Three Months Ended December 25, 2004 and December 31, 2003

4

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows

Three Months Ended December 25, 2004 and December 31, 2003

5

 

 

 

 

 

 

Notes to Consolidated Condensed Financial

Statements

6-14

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of

Financial Condition and Results of Operations

15-24

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about

Market Risk

25

 

 

 

 

 

Item 4.

Controls and Procedures

25

 

 

 

 

PART II.

 

OTHER INFORMATION

 
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26

 

 

 

 

 

Item 6.

Exhibits

27

 

 

 

 

SIGNATURES

 

28

2

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
December 25, September 25,
2004 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 73,670 $ 56,701
Receivables 256,661 261,776
Inventories 196,623 189,649
Other current assets   45,357   40,963
TOTAL CURRENT ASSETS 572,311 549,089
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $305,524 and $298,387, respectively 253,428 246,743
GOODWILL 290,094 288,563
INTANGIBLE ASSETS, net 14,139 14,471
OTHER ASSETS   30,081   26,062
TOTAL ASSETS $ 1,160,053 $ 1,124,928
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 885 $ 923
Current installments of long-term debt 18,926 18,700
Accounts payable 61,143 54,200
Accrued liabilities 108,780 108,134
Contract loss reserves 15,139 14,311
Customer advances   39,737   31,016
TOTAL CURRENT LIABILITIES 244,610 227,284
LONG-TERM SENIOR DEBT, excluding current installments 271,455 291,666
LONG-TERM PENSION AND RETIREMENT OBLIGATIONS 104,380 97,901
DEFERRED INCOME TAXES 34,914 34,198
OTHER LONG-TERM LIABILITIES   2,217   2,223
TOTAL LIABILITIES   657,576   653,272
SHAREHOLDERS' EQUITY
Common stock 30,491 30,491
Other shareholders' equity   471,986   441,165
TOTAL SHAREHOLDERS' EQUITY   502,477   471,656
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,160,053 $ 1,124,928
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
December 25, December 31,
 2004  2003
Net sales $ 249,303 $ 225,985
Cost of sales   173,883   159,488
Gross profit 75,420 66,497
Research and development 9,009 6,768
Selling, general and administrative 40,919 37,731
Interest 2,709 3,185
Other   (44)   475
Earnings before income taxes 22,827 18,338
Income taxes   7,852   5,682
Net earnings $ 14,975 $

12,656

Net earnings per share
Basic $ .58 $ .49
Diluted $ .57 $ .48
Average common shares outstanding
Basic   25,725,484   25,873,806
Diluted   26,296,445   26,413,476
See accompanying Notes to Consolidated Condensed Financial Statements.

4

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

Three Months Ended
December 25, December 31,
  2004   2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 14,975 $ 12,656
Adjustments to reconcile net earnings to net cash provided by operating activities:
        Depreciation and amortization 8,726 9,002
        Other   19,283   422
NET CASH PROVIDED BY OPERATING ACTIVITIES   42,984   22,080
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business - (158,000)
Purchase of property, plant and equipment (8,994) (7,435)
Other   13   6
NET CASH USED BY INVESTING ACTIVITIES   (8,981)   (165,429)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments of notes payable (95) (8,569)
Net (repayments of) proceeds from revolving lines of credit (17,000) 75,000
Proceeds from long-term debt 132 21,018
Payments on long-term debt (4,140) (4,334)
Other   750   677
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES   (20,353)   83,792
Effect of exchange rate changes on cash   3,319   1,237
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,969 (58,320)
Cash and cash equivalents at beginning of period   56,701   77,491
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 73,670 $ 19,171
CASH PAID FOR:
Interest $ 3,071 $ 3,025
Income taxes 3,701 3,341
NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of business:
Fair value of assets acquired $ - $ 168,219
Cash paid before purchase price adjustment   -   (158,000)
         Liabilities assumed $ - $ 10,219
Assets acquired under capital leases $ - $ 3,805
See accompanying Notes to Consolidated Condensed Financial Statements.

5

MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 25, 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 December 25, 2004 and September 25, 2004 and the results of its operations for the three months ended December 25, 2004 and December 31, 2003 and its cash flows for the three months ended December 25, 2004 and December 31, 2003. The results of operations for the three months ended December 25, 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 25, 2004. All references to years in these financial statements are to fiscal years.

2.    Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 R (revised 2004), "Share-Based Payment," which is a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation." This statement will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. This statement covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans, and replaces FASB SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in APB No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Statement 123(R) is effective for public companies (excluding small business issuers) at the beginning of the first interim or annual report period beginning after June 15, 2005. Upon adoption, prior periods may be, but are not required to be, restated. The Company is evaluating the effect that this statement will have on its results of operations and financial conditions.

In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4." The amendments made by this statement clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The provisions of this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 2004. The Company believes the adoption of this standard will not have a material impact on its results of operations or financial position.

In October 2004, President Bush signed the American Job Creation Act of 2004, which contains provisions related to the distribution of the earnings of foreign subsidiaries. Although preliminary guidance has been issued by the IRS, the Company is still evaluating the effect that this new tax legislation will have on its results of operations and financial condition. Therefore, while the impact of the provisions could be significant, the Company is not able at this time to determine the impact, if any, of future repatriations.

6

3.     Stock-Based Compensation

The Company accounts for stock options under the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25. The exercise price equals the market price of the underlying common shares on the date of grant and, therefore, no compensation expense is recognized. The following table illustrates the effect on net earnings and earnings per share as if the fair value method had been applied to all outstanding awards in each period.

Three Months Ended

December 25,

December 31,

2004

2003
Net earnings, as reported

$

14,975

$

12,656

Less stock based employee compensation
expense determined under fair value
method

(323)

(196)
Net earnings, pro forma $

14,652

$

12,460

Earnings per share:
Basic, as reported $

.58

 $

.49
Basic, pro forma

$

.57

 $

.48
Diluted, as reported

$

.57

 $

.48
Diluted, pro forma $

.56

 $

.47

 

4.     Inventories

Inventories consist of:

December 25,

September 25,

2004

2004
Raw materials and purchased parts $

64,214

$

62,903

Work in process

94,688

92,034

Finished goods