avatar Moog Inc. Manufacturing
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    2012 | Annual Report moog


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    Front Cover Photo Credits F-35B Lightning II Joint Strike Fighter Courtesy of Lockheed Martin BepiColombo Courtesy of European Space Agency Oil and Gas Exploration Courtesy of Shutterstock / Iurii MV-22 Osprey Courtesy of U.S. Marine Corps / Cpl. Michael Petersheim Moog PainSmart IOD Ambulatory Infusion Pump


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    TABLE OF CONTENTS Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CEO’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Our Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Aircraft Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Space and Defense Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Industrial Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Form 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Investor Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover FINANCIAL PERFORMANCE DILUTED EARNINGS PER SHARE RECENT FINANCIAL PERFORMANCE (In dollars) (Dollars and shares in millions, except per share data) $ 3.50 $ 3.33 $ 3.25 2012 2011 $ 2.95 $ 3.00 $ 2.75 $ 2.75 NET SALES $2,470 $2,331 $ 2.50 $ 2.34 $ 2.36 $ 2.25 $ 1.97 $ 1.98 $ 2.00 NET EARNINGS $152 $136 $ 1.64 $ 1.75 $ 1.45 $ 1.50 DILUTED EARNINGS $ 1.22 $3.33 $2.95 $ 1.25 $ 1.11 PER SHARE $ 1.00 $ 0.75 EQUITY MARKET $1,716 $1,476 CAPITALIZATION* $ 0.50 $ 0.25 $ 0.00 AVERAGE SHARES 45.7 46.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 OUTSTANDING FISCAL YEAR 10 Year Compound Annual Growth Rate = 12% * Measured as of fiscal year end 1


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    CEO’S LETTER To Our Shareholders, Employees and Friends, Our annual report is a testimony to the dedication and ingenuity of 11,000 Moog employees around the world. This is the report on their investment of time and talents in 2012. It describes the markets and applications we serve and the customers who make our business a success. We hope you find it interesting and informative. 2012 was a very good year for our company. It was our third year of growth in sales and earnings following the great recession of 2009. In 2012, sales were up 6%, net earnings were up 12% and earnings per share were up 13%. Over the last three years, sales have increased 34% and earnings per share are up 68%. We have delivered this improvement despite the downward pressures on military spending and the tepid industrial recovery around the world. We believe our diversity across markets and geographies, as well as our excellent position on the most important military and commercial airplane programs, has been the key to this strong performance. We think these factors will continue to benefit us in 2013. Our Aircraft Group had a very strong 2012 with sales up 13% to $964 million. We saw our military aircraft business increase 9% while our commercial aircraft business had an even stronger performance with sales up 21% for the year. In our Space and Defense Group, 2012 sales increased 1% to $359 million. The space business was up as we integrated two new acquisitions. On the other hand, the defense and security businesses were lower as some large programs wound down. 2012 sales in our Industrial Group were 1% higher. Our test and simulation business was up nicely. Our energy business was mixed with wind down and non-renewables up. Our industrial automation business was slightly lower than last year. Sales in our Components Group increased 6% to $374 million in 2012. Our Components Group is like a mini-version of our company – with sales in all of our major markets. Component sales into aerospace and defense markets were flat with 2011 while sales into industrial markets were way up. 2012 sales in our Medical Group were $140 million, similar to 2011. Both pump and set sales were flat while handpieces were down slightly from 2011. Overall 2012 was a much better year for this segment as we consolidated the benefits we achieved from a restructuring in 2011. From an outsider’s perspective, 2012 was another great year for the company – but perhaps it doesn’t stand out as particularly unusual. Sales and earnings grew nicely and we continued our strategy of bolt-on acquisitions to augment our position in our target markets. From an insider’s perspective, however, it was perhaps the most eventful year in a generation. In December 2011, after 23 years as CEO, Bob Brady passed the reins to the next generation. As we worked through this transition, the broad strategy in 2012 was simple – “steady as she goes.” Continue with the proven strategy of the past and deliver on the forecast we had provided the Street. Looking back on 2012, we are happy to report that is what we have achieved. Our thanks goes to all our employees around the world who delivered this great performance. When there is a leadership transition, people often wonder what might be different from the past. When asked this question, we explain the four important elements for our business going forward. Customers: Our customers are the reason we have a company. Our efforts should be dedicated to meeting and exceeding their needs. Our focus is to provide products and services which create superior value for them and their customers. This is why we exist. Culture: Our culture is based on trust and integrity at all levels. We collaborate, take individual responsibility, look for solutions and try harder at everything we do. Respect comes with competence, not title, and we are ready and willing to change as circumstances dictate. This is who we are. Innovation: We are an innovative technology company, built on a foundation of great engineering. New products and processes are the lifeblood of our organization. They are the key to our long-term success. We look for innovation in every aspect of our business. It is part of everybody’s role. This is what we do. Performance: Our shareholders have entrusted us with their money, and their investment in Moog should be rewarded with solid financial performance. We strive to deliver strong and consistent growth in sales and earnings, which should translate over time into share price appreciation. This is the result of our efforts. 2


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    After we explain our priorities, people often respond with – “but isn’t that what we were always doing” – and the answer, of course, is yes. We have been a successful company over many years by focusing on these four elements, and we will continue to succeed with that formula in the future. Our priorities have not changed. The other topic of interest is the strategy of the company – is there any change in our direction? Here again, we already have a proven model for success. We plan to build on this model as we move forward. Our broad strategy is simple – to be a world leader in high-performance control systems. We will maintain our excellence in components and continue to broaden our portfolio to offer higher level systems to our customers. We will look for bolt-on acquisitions that support this strategy. We will share our technology across a diverse range of markets. With this strategy, we believe we will continue our record of strong and consistent growth in sales and earnings. To folks outside our company, it is sometimes difficult to understand how all our products and markets fit together into a cohesive strategy. As you read through this annual report, you may be struck by the range of applications we serve. We operate in markets from satellites in space to oil exploration undersea. Our products help airplanes fly, steel mills run and medical patients recover. How does it all fit together? The common thread is simple – Moog products are used in applications “when performance really matters.” Our products are designed to work the first time, every time. They may not always be the least expensive but, in the end, we believe they are the best value. They are used in applications where the cost of failure is high – where our customers cannot afford to use second best. Our use of the word “performance” has a broad range of meanings. • Performance means dynamic response – such as moving the flight surface on a supersonic jet fighter. • Performance means precision – such as positioning the wafer in a semiconductor manufacturing line. • Performance means high power – such as controlling the motion of a shovel on a giant excavator. • Performance means reliability – such as delivering a life-sustaining drug to a patient. • Performance means durability – such as working in harsh environments in the off-shore oil industry. • Performance means dependability – such as operating for the first time millions of miles from home to help land the NASA Curiosity Rover on the surface of Mars. In all these cases, Moog products, quite simply, deliver on the promise of working the first time, every time. This common thread links all our markets and applications together. Complementing this approach, we share a common technology base of mechanics, electronics and control systems across all our products. And, of course, we are bound together internally by our culture of trust and collaboration. As we now look to 2013, we are forecasting increases in both sales and earnings per share. We think the outlook for the global industrial markets is somewhat uncertain and therefore have predicted a range of sales and an associated range of earnings. At the high end of the range, sales would increase 8% and earnings per share would be up 11%. At the low end of the range, sales would be 6% higher and earnings per share would be 5% higher. We believe our commercial aerospace business will grow as the new Boeing 787 and Airbus A350 airplanes ramp up production. We are optimistic that our military businesses will remain steady because of our position on the next generation of platforms, particularly the F-35. We are hopeful that the looming “fiscal cliff” in the U.S. will be avoided and that the planned cuts to defense spending, under sequestration, will not come to pass. We think that the industrial business may be a challenge, given the European financial crisis and the slowing growth in China. Our space business should be up as we integrate the acquisitions that we completed in 2012. Finally, our medical business should continue its progress on the road to increasing sales and improving margins. In summary, 2013 has some challenges on the horizon but also some opportunities. In times like these, our diversity across markets and geographies serves us well. We hope to come back to you next year to report on another successful year of increased sales and earnings. Respectfully submitted, 3


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    OFFICERS AND DIRECTORS JOHN R. SCANNELL JOE C. GREEN RAYMOND W. BOUSHIE Chief Executive Officer Executive Vice President Director Director Chief Administrative Officer Retired President and CEO Director Crane Aerospace ROBERT T. BRADY Executive Chairman RICHARD A. AUBRECHT WILLIAM G. GISEL, JR. Vice Chairman of the Board Director VP – Strategy and Technology President and CEO DONALD R. FISHBACK Director Rich Products Corp. Vice President Chief Financial Officer GARY A. SZAKMARY PETER J. GUNDERMANN Vice President Director WARREN C. JOHNSON Chief Human Resources Officer President and CEO President Astronics Corp. Aircraft Controls Group PATRICK J. ROCHE JAY K. HENNIG Vice President KRAIG H. KAYSER Global Systems and Services Director President President and CEO Space and Defense Group Seneca Foods Corp. SASIDHAR ERANKI Vice President SEAN GARTLAND Deputy General Manager BRIAN J. LIPKE President Aircraft Controls Group Director Industrial Group Chairman and CEO Gibraltar Industries LAWRENCE J. BALL HARALD E. SEIFFER Vice President President Components Group General Manager, Europe ROBERT H. MASKREY Director Retired Executive VP, COO MARTIN J. BERARDI TIMOTHY P. BALKIN Moog Inc. Treasurer President Assistant Secretary Medical Devices Group ALBERT F. MYERS Director JENNIFER WALTER Retired VP Strategy and Technology Controller Northrop Grumman Principal Accounting Officer JOHN B. DRENNING Secretary Partner Hodgson Russ, LLP Left to Right: Dick Aubrecht, Joe Green, John Scannell, Don Fishback, Left to Right: Harald Seiffer, Marty Berardi, Sash Eranki, Larry Ball, Bob Brady, Warren Johnson, Gary Szakmary Jay Hennig, Pat Roche, Sean Gartland 4


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    OUR TECHNOLOGY ➊ ➌ ➋ ➍ ➎ ➏ ➐ ➑ ➒ ➊ Flight Control Computers and Software ➋ Aileron Servoactuators ➌ Leading Edge Slat Actuation ➍ Trailing Edge Flap Actuation ➎ Flaperon Servoactuators ➏ Motor Drive Controller ➐ Rudder Servoactuators ➑ Elevator Servoactuators ➒ Horizontal Stabilizer Trim Actuator Over the last 60 years, our engineers have developed the capability to design and manufacture the most advanced motion control products for aerospace, defense, industrial and medical applications – applications where precise control of velocity, force, acceleration and fluid flow are critical. Our motion control portfolio has expanded to include all forms of actuation technology, sophisticated control electronics and system software. The motion control products that our investors find most familiar are used for flight control actuation. Our aircraft rendering displays the interconnectivity of the key products in a flight control system including cockpit controls, flight control computers, electronic controllers and the actuators that control the wing and tail surfaces. Control commands begin with the pilot interface – the stick or the yoke. Pilot commands are sent through the flight control computer to the corresponding electronic controllers mounted near or directly on the actuators that position a flight control surface. The actuator technology can be a mix of electrohydraulic, electromechanical, rotary-mechanical or electrohydrostatic. Our strategy is to supply highly customized motion control solutions that are robust, reliable and supportable. We do this across a broad range of applications – from undersea to space – where performance really matters. With this strategy, we’ve grown from being a high technology components supplier to become a leading integrator of precision motion control systems. Our products reflect the culture that our people embrace – a culture where the opportunity to solve a really challenging control problem is always welcomed. 5


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    AIRCRAFT CONTROLS We supply integrated systems and critical control products to airframers and aftermarket customers for military, commercial and business aircraft. Revenues from development, production and aftermarket support of our aircraft products accounted for $964 million in 2012 sales, including $576 million for military products and $388 million for commercial products. Highlights for the year included new airplane deliveries and certifications, a new facility opening and record aftermarket sales for both the military and commercial businesses. On the commercial side, Boeing continued to deliver their newest passenger airplane, the 787. First deliveries from Seattle were made to United, LAN, Japan, Qatar and Ethiopian Airlines. Boeing’s second 787 production facility in Charleston, South Carolina delivered its first aircraft to Air India. Our content on the 787 includes more than 500 discrete parts that control all of the primary and secondary flight surfaces, horizontal stabilizer, high lift actuation system, leading edge slats and trailing edge flaps. As airlines take delivery of their 787 aircraft, we also supply them with initial provisioning spares and maintenance. During the year, we opened a new 212,000 square foot facility in the U.K. The Wolverhampton location boasts modern flight control development, fabrication, processing and assembly and test facilities for primary and secondary flight control actuation for commercial and military programs. Commercial programs include the high lift actuation systems for the Boeing 777 and 787, and the Airbus A330 and A380 aircraft. Airbus’ A350 primary flight control system and trailing edge flap actuation system is currently our largest commercial development program. In the business jet market, we provide the control computers, primary and secondary flight controls, high lift system and cockpit controls for Israel Aerospace Industries (IAI) and Gulfstream’s newest business aircraft, the G280®. The G280, which offers the longest range and fastest speed in its super mid-size class, was certified by the FAA for airworthiness in September. Moog is providing the high lift system for Gulfstream’s G650® ultra-long range aircraft which also received FAA certification during the year. In 2002, we were selected by Lockheed Martin to design the F-35 Joint Strike Fighter flight controls. The program is now in low rate production after more than 10 years of development. To date, more than 45 F-35 aircraft are currently in various phases of flight testing with the U.S. Air Force, Marine Corps and Navy. In July, the first F-35 international fighter was delivered to the United Kingdom’s Royal Air Force. A year ago, Boeing awarded Moog the refueling boom actuation system on the KC-46 tanker aircraft for the U.S. Air Force. The new tanker will feature a modernized fly-by-wire refueling boom. We are providing the design, integration and qualification for the complete actuation system used to extend, retract and guide the boom. Moog’s system gives the tanker advanced refueling capabilities, allowing it to refuel any fixed-wing receiver aircraft in the fleet. The KC-46 is based on Boeing’s 767, a 30-year old platform that also features Moog autopilot actuators. Both the commercial and military aftermarket businesses had record sales in 2012. More than 70 military and commercial aircraft models are flying with Moog hardware. We provide the global support, spares, repairs and hardware exchanges to keep them flying—sometimes beyond their intended design life. For older platforms, we also offer fleet modernization with hardware upgrades and life extension programs. In 2013, our guidance for the Aircraft Controls segment sales will be over $1 billion for the first time in company history with military aircraft sales of $590 million and commercial aircraft sales of $437 million. 6


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    F-35C LIGHTNING II JOINT STRIKE FIGHTER – The F-35C is distinct from the F-35A and F-35B variants with its larger wing surfaces and reinforced landing gear. It is designed to withstand carrier catapult take-offs and deck landings. During the year, JSF program milestones included first night flights (F-35A and F-35C), first refueling at night (F-35A), first flights for external weapons (F-35A, F-35B, F-35C), first in-flight refueling mission with external weapons, and the first weapon release (F-35B). The F-35B also completed its first vertical landing on the flight deck of the USS Wasp (LHD-1). Moog is supplying the primary flight control system, leading edge flap system and wingfold actuation system. Moog is also supplying the main engine lift actuation system for the F-35B, the short takeoff/vertical landing (STOVL) variant. Courtesy of U.S. Navy and Lockheed Martin / Andy Wolfe 7


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    AIRCRAFT CONTROLS Military Aircraft – Commercial Aircraft – Business Jets – Aftermarket PRODUCTS Unmanned Aerial Systems: COMPETITIVE ADVANTAGES • Integrated primary and secondary flight • X-47B UCAS-D, Mantis, Hunter, Heron, • Flight control system design and integration control systems Searcher • Complete actuation system integration • Flight control computers and software Large Commercial Airplanes: capability • Actuator control electronics • Boeing 737, 747, 767, 777, 787 • Unparalleled experience in design of • Flight control actuators using hydraulic, • Airbus A320, A330, A350, A380 primary and secondary flight control mechanical, electromechanical and • COMAC C919 systems, both in the U.S. and overseas electrohydrostatic technologies Regional Aircraft: • State-of-the-art technology in flight • Stabilizer trim controls and multi-axis feel • DHC-8-400 controls, engine controls, navigation and and trim systems guidance, and active vibration controls Business Jets: • Wingfold, bladefold and weapons bay • World-class manufacturing facilities staffed • Bombardier Challenger 300, 604, 605 actuation systems with a skilled, experienced and team-based and Global Express, Cessna Citation X, workforce • Active vibration control systems Gulfstream G280, G350, G400, G450, G550, G650, Hawker 4000, Premier I • Focused, highly-responsive global • Engine thrust vector control actuation aftermarket support organization systems Military and Commercial Helicopters: • Flight control servovalves • H-60/S-70, H-53, EH-101, S-76, S-92, • Engine control actuators and servovalves V-22, AH-64, A109, A129, AB139, COMPETITORS • Aircraft braking and steering selector AW159, AW609, Future Lynx • Parker Hannifin, UTC (Goodrich, Hamilton manifolds and servovalves Military Engine Controls: Sundstrand), Liebherr, Nabtesco, Woodward • F-404, F-414, F-110, F-119, F-135, Governor, Curtiss-Wright • MEMS-based inertial sensors and inertial measurement units EJ200, AE2100, T406, RTM322, T700 • Ground-based navigation aids Commercial Engine Controls: • CF-6, GE90, V2500, RB211 and Trent, MAJOR PROGRAMS Honeywell APUs, PW 901 Customer Support: Military Aircraft: • All current production programs above plus • F-35, F-15, F/A-18E/F, EA-18G, F-16, legacy programs including A-7, A-10, A300, F/A-22, KC-46, A400M, Korea T-50, C-27J, A340, AH-64, AMX, B-1B, B-2, B-52, C-295, CN-235, Eurofighter-Typhoon, BAE-146, C-5, C-130, C-141, CH-46, JAS 39, India LCA, Japan XC-2, XP-1, CH-47, CH-53, DC-8, DC-9, DC-10, E-2C, Hawk AJT, M346 EA-6B, F-2, F-4, F-100, F/A-18C/D, Hawk, KC-10, KC-135, MD-11, MD-80, MD-90, P-3, T-45, Tornado, U-2, VC-10, 757 1 5 4 1 Military Aircraft OEM $ 362M 3 2 Military Aircraft Aftermarket 214M 2 3 Commercial Aircraft OEM 227M 4 Commercial Aircraft Aftermarket 117M 5 Business Jets 44M _______________________________________ 2012 TOTAL $ 964M 8


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    Boeing 787 Primary and Secondary Flight Controls Courtesy of Claudio Luna Gulfstream G280 A350 XWB Courtesy of Gulfstream Aerospace Corporation Courtesy of Airbus / Fixion MH-60S Seahawk AW159 Lynx Wildcat Courtesy of U.S. Navy / MC Spec. 2nd Class Julia A. Casper Courtesy of AgustaWestland F-15 Japan F/A-18F Super Hornet Courtesy of Esa Kaihlanen Courtesy of U.S. Navy / MC Spec. 3rd Class Benjamin Crossley 9


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    SPACE AND DEFENSE CONTROLS In our target markets, we have a systems level understanding of our customer’s applications allowing us to design and manufacture reliable hardware and provide focused customer support. Commitment to mission success, risk mitigation and project management are part of our heritage. Revenues in the Space and Defense segment accounted for $359 million of 2012 sales. The expertise of our engineering staff allows us to meet customer specifications for system design, production and integration in a wide array of markets. During the year, we completed two acquisitions, celebrated the successful landing of the Mars Science Laboratory’s Curiosity Rover and introduced a new line of camera systems. Moog space products position commercial and military satellite antennas, control propellant flow to rocket engines, provide vibration isolation and steer launch and space vehicles. In the first quarter, we purchased Bradford Engineering B.V., a European developer and manufacturer of satellite equipment including satellite attitude and orbit control systems, propulsion and thermal subsystems and components. Bradford adds to Moog’s existing European spacecraft components business and gives us an established manufacturing base for space components in Europe. In July, we completed the acquisition of American Pacific Corporation’s In-Space Propulsion (ISP) business. Moog ISP is a developer and manufacturer of liquid propulsion systems, engines and components for satellites and missile defense systems. The acquisition provides us with additional capabilities in spacecraft controls and expands upon our propulsion systems capabilities. It also increases our European presence and better serves our customers with a complete portfolio of satellite controls. We produced servoactuators that moved the rocket motor nozzles to steer the Apollo Saturn rocket into space in the 60’s and supported the Space Shuttle program for over 30 years and 132 missions. More recently, it was a thrill to witness our products at work during Curiosity’s smooth landing on Mars. Twenty-six Moog propulsion valves were used for the NASA Curiosity mission—ten on the cruise stage and sixteen on the descent phase. Our solenoid thruster valves helped steer the mission in its cruise phase to Mars while our fill and drain valves were used to help load the hydrazine propellant safely onto the spacecraft prior to launch. For the final phase of the mission, we produced cavitating venturi valves which controlled the engines during Curiosity’s descent onto Mars. These valves were specifically developed to provide throttle-able thrust to the engines so that Curiosity would be safely lowered onto the surface of Mars. In the defense market, our electromechanical actuation systems and upgrade solutions operate turrets, aiming and stabilization systems on more than 30 armored ground vehicles worldwide; including the United States Stryker MGS, LAV-25 and the European CV90. For the first time, one of our turret actuation systems has been specifically designed for airborne use. Moog engineers developed and successfully fielded a dual-axis turret drive system for the door-mounted 30 mm cannon on the AC-130W Stinger II. The AC-130W is a modified C-130H Hercules airframe configured for Special Operations use as a flying gunship. The first Moog product, sold in 1951, was a servovalve developed for tactical missile control systems. In 2012, we delivered more than 20,000 missile fin steering and motion controls for the HELLFIRE® and TOW missile programs – a record year for the product line. Products in our surveillance portfolio include rugged cameras and precision positioning systems and web-based remotely operated systems for commercial and military use. Our Videolarm subsidiary specializes in designing camera housings with wireless and vandal-resistant camera systems for security and surveillance applications. In September, Moog Videolarm’s EXO™ Series High Definition camera line was introduced. These models were specifically designed for harsh environments and include explosion proof and impact resistant models to withstand extreme temperature ranges, power surges and ammunition. We continue to build on our reputation as the premier precision motion and flow control solutions provider for the space, defense and security industries. For 2013, our Space and Defense segment sales forecast is $413 million. This includes space sales of $213 million, with full-year contributions from the Bradford and ISP acquisitions. Defense sales are forecast at $144 million and security sales are forecast at $56 million. 10


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    ADVANCED EXTREMELY HIGH FREQUENCY (AEHF) SATELLITE – The AEHF program includes a series of military communications satellites providing highly secure, survivable and jam-resistant communications for U.S. national security. One AEHF satellite has greater total capacity than the five-satellite constellation it’s replacing. Two AEHF satellites built by Lockheed Martin are on orbit and a third is scheduled for launch in 2013. Moog provides critical components and feed systems for chemical and electric propulsion in addition to pointing mechanisms on each AEHF satellite. Courtesy of Lockheed Martin 11


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    SPACE AND DEFENSE CONTROLS Satellite Controls – Launch Vehicles – Vibration Control – Missile Steering – Defense Controls – Naval Systems – Surveillance PRODUCTS MAJOR PROGRAMS COMPETITIVE ADVANTAGES • Thrust vector control actuation systems, Satellite Structures and Propulsion and • Multi-tier provider capable of components, avionics, propulsion controls and structures Motion Controls: systems and/or prime level integration for missiles and launch vehicles • LS-1300, Eurostar, Spacebus, AEHF, Boeing • Unmatched fluid and motion control heritage for • Liquid rocket engines, tanks, chemical and 702, LM A2100, NASA Mars Curiosity, launch vehicles, spacecraft, combat vehicles, electric propulsion systems, subsystems DS-1000/2000, Prisma, Meteosat Third submarines, missiles and surveillance and components for satellites and launch Generation, BepiColombo, Star 2, James • Global network of sales, technical and vehicles Webb Space Telescopes, GPS III, Galileo, manufacturing resources • Solar array drives, antenna pointing ORS and H-II Transfer Vehicle • A flexible and responsive workforce willing mechanisms and electronics for satellites Launch Vehicle and Strategic Missile to adapt our processes to support evolving • Reaction wheels, pressure transducers Motion, Vibration and Propulsion Controls: customer requirements and sun sensors for satellites • Trident D-5, Minuteman III Service Life • Focus on world-class project management • Vibration suppression for aerospace, Extension, Atlas V, Delta II/IV, Ariane 5, • Highly flexible, cost effective, cellular defense and commercial applications Vega, Antares®, H-IIA, Space Shuttle, GMD, manufacturing for families of products Pegasus, Minotaur, Falcon 1e, NASA’s • Fin actuation systems, divert and attitude • High reliability electronics design with Space Launch System and Multi-Purpose control thruster valves for missiles and assembly and test facilities Crew Vehicle interceptors Missile Steering Controls: • Compact/Lightweight Stores Management • HELLFIRE®, TOW, EKV, MALD® COMPETITORS System and ISR -Targeting Pod for use on light attack fixed and rotary wing aerial Defense Controls: Satellite Controls: platforms • Stryker Mobile Gun System, LAV-25 and • Propulsion Controls: Aerojet, Snecma, • Guidance, navigation and control units for CV90 family, FLW 100/200 remote mount Vacco, ValveTech unmanned vehicles weapon system, AC-130W Stinger II/ • Motion Controls: Aeroflex, CDA InterCorp, • Electromechanical actuators, controllers MC-130W Dragon Spear, G/ATOR radar, RUAG, Rockwell Collins, Sierra Nevada and slip rings for armored vehicle turrets, Mine Resistant Ambush Protected (MRAP) Missile and Launch Vehicle Steering ammunition handling and radar systems military vehicle and Propulsion Controls: • Data and power management for military Naval Systems: • Honeywell, Marotta, Hamilton Sunstrand, vehicles • Virginia-class submarines, USS Gerald R. SABCA, Vacco, Valcor, Woodward Governor • Electromechanical and electrohydraulic Ford aircraft carrier Vibration Control: actuation products for naval ships, Surveillance/Security: • ATA Engineering, Honeywell, Lord Corp. submarines and underwater vehicles • Precision pointing mechanisms, ruggedized Defense Control Systems: • Ruggedized cameras and surveillance cameras, housings and accessories for • Curtiss-Wright, ESW, Woodward Governor accessories, electromechanical positioners military, critical infrastructure, commercial and systems integration for cameras and installations, transportation and process Naval Systems: sensors control installations • Hamilton Sundstrand, Honeywell, Limitorque, Sargeant Industries Surveillance/Security: • Cohu, Directed Perception, RVision, Vicon, 1 Videotec 7 2 1 Spacecraft Controls $ 79M 6 2 Launch Vehicles and NASA 77M 3 Vibration Control 17M 3 5 4 Tactile Missile Solutions 68M 5 Defense Controls 50M 4 6 Naval Systems 15M 7 Surveillance/Security 53M _______________________________________ 2012 TOTAL $ 359M 12


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    HELLFIRE ® Missile Fin Steering Controls, Predator MQ-1 Aircraft Slip Rings Courtesy of U.S. Air Force / Lt. Col. Leslie Pratt LAV-25 AC-130W Stinger II / MC-130W Dragon Spear 105 mm Turret Drive System Courtesy of U.S. Marine Corps / Lance Cpl. D. J. Wu Courtesy of U.S. Air Force / Airman 1st Class Ericka Engblom Atlas V Evolved Expendable Launch Vehicle and NASA Mars Science Laboratory Courtesy of U.S. Air Force / George Roberts Moog Videolarm EXO ® HD Cameras NASA Mars Rover Curiosity Virginia-Class Submarine Mississippi, SSN 782 Courtesy of NASA / JPL-Caltech Courtesy of U.S. Navy and General Dynamics Electric Boat 13


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    INDUSTRIAL SYSTEMS Our customers are partners and we take a collaborative approach to solving their most difficult motion control problems with electric, hydraulic and hybrid solutions. In more than 26 countries worldwide, Moog technical teams provide high-performance systems and leading-edge solutions. Industrial sales in 2012 were $634 million, with industrial automation accounting for $302 million, sales of energy products at $195 million and simulation and test product sales at $137 million. The year featured global technology demonstrations, new product and software designs and enhancements of application-specific motion control solutions. Moog hydraulic, electric and hybrid systems are recognized as world class, high-performance and suitable for the most demanding applications. Technology neutral means we design and implement both hydraulic and electric motion control products and solutions for our customers while working with both OEMs and end users. We have developed an in-depth understanding of the capabilities of each technology for specific application requirements and this allows us to collaborate with our customers to deliver the best motion control solution for their specific needs. At automotive testing expositions held in China, India and Germany, Moog engineers demonstrated our test products and systems for automobile manufacturers and suppliers. Moog’s expertise and collaborative culture result in versatile testing solutions for components, materials and vehicles. Hydraulic and electric simulation tables, or multi-axis shaker tables, maximize R&D testing for a variety of products. Our driving simulator technology is based on electric motion systems that enable automotive manufacturers to test current and future vehicle designs and assess vehicle dynamics with expert drivers. We’ve also introduced a realistic training simulator for dental students. The Moog Simodont® Dental Trainer is a virtual reality training simulator that helps dental students bridge the gap between training on plastic teeth and treating real patients. Interest in this product has grown since it was introduced a year ago, with several dental schools looking to add training by simulator to their curriculums. Universities in Europe, Asia Pacific and the Americas have shown interest in the system. In June, we introduced the Maximum Dynamic Brushless Servo Motor Series (MD Series). This line of motors allows machine builders and end users in die casting, plastics and metal forming industries to increase machine performance through improved cycle times. The motors are flexible and can be integrated into existing machines to reduce redesign costs. Sumitomo Demag recently selected Moog servovalves for its new El-Exis SP machine. The machine has a considerable market share in the production of closures and thin-walled packaging products in all regions of the world. Dynamic and precise operation on an injection molding machine results in higher quality for molded parts. Moog’s D680 proportional valves improve the precision and consistency of the process. Engineers in Moog’s wind turbine product line introduced a Remote Terminal Software monitoring product. For wind turbine operations in remote areas or offshore, remote monitoring and failure diagnosis results in efficient and cost effective planning for on-site service work. This software is a value-added tool for wind farm operators and is part of the pitch control system package delivered by Moog. We are forecasting Industrial Systems sales for 2013 around a midpoint of $649 million, with a range of ± $25 million. The forecast assumes we’ll see higher industrial automation and simulation and test sales with some weakness in sales in Europe and softer wind turbine sales in China. As our customers continue to challenge us with their difficult motion control problems, we’ll support them with high-performance products that are innovative and reliable. 14


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    CAE FLIGHT SIMULATION – CAE is a global leader in modelling, simulation and training for civil aviation and defense. CAE offers civil aviation and military training services in more than 45 locations worldwide and trains approximately 100,000 crew members annually. CAE simulators are designed to provide a high-fidelity environment that enhances safety and the operational effectiveness of air crews. Its new Boeing 787 aircraft simulator includes a realistic flight deck with seating, flight controls and immersive, real-world visuals. Moog provides the actuators, controls and motion software that make up the CAE True™ electric motion system. Courtesy of CAE 15


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    INDUSTRIAL SYSTEMS Industrial Automation – Energy – Simulation and Test SOLUTIONS Turnkey Systems: Simulation and Test: Motion control products and systems • Multi-axis simulation tables and suspension, • Flight simulation: Six-degrees-of-freedom incorporating a wide variety of world-class kinetics and compliance, and other test systems motion bases, control loading systems and electric and hydraulic components for automotive testing control cabinets for realistic pilot training Products: • Driving simulators to aid R&D engineers in • Automotive testing systems: Turnkey automotive development and train drivers systems and products for structural and • Broad portfolio of electric servo motors performance testing and electric actuators used in applications Aftermarket: ranging from light industrial automation to • Moog Global Support™ offers world-class • Aerospace testing: Turnkey systems and large machinery repair and maintenance services and products for iron bird, structural and flexible programs for upgrades, preventative component testing • Controllers, servo drives and software for a broad range of motion control applications maintenance and annual/multi-year contracts • Medical simulation: Dental trainer for realistic training of students • Hydraulic servovalves, ranging from miniature valves for Formula 1™ race cars to large MAJOR SECTORS valves for industrial applications and valves Industrial Automation: COMPETITIVE ADVANTAGES with embedded intelligence • Ability to improve our customer’s machine • Plastic injection and blow molding machines: • A wide range of high-performance servo performance with high-performance motion Hydraulic and electric products for improved pumps for high-end industrial applications control solutions and world-class products speed, performance and energy efficiency Systems: • Significant domain expertise in our • Steel mills: Servovalves, servoactuators and • Hydraulic and electric solutions specifically customers’ machines, industry applications servocontrollers for improved dimensional designed and tailored to perform with and design challenges accuracy and surface finish of mill output precision control in harsh environments and • Global organization focused on collaborating • Metal forming machinery and presses: demanding applications with customers to meet their requirements Products to improve performance and • Electric hexapod motion systems for flight productivity in a wide range of machines • Rich experience and strong capabilities in the simulation and automotive test systems design and application of products and system Energy: • Control loading and G-seat solutions for flight solutions for use in challenging environments • Wind turbines: Pitch systems, rotor monitoring training simulators • Worldwide aftermarket support and services and blade sensing systems and products, • Integrated hydraulic manifold systems provided by Moog employees offering efficient operation, increased safety incorporating servovalves, pumps, and extended life of the turbine manifolds, sensors and power units • Gas and steam turbines: Solutions for COMPETITORS • Electric pitch control and load sensing systems precise control and greater safety of fuel Servovalves: for wind turbines metering and guide vane positioning • Bosch Rexroth, Parker Hannifin • Oil and gas exploration and production: Electric servodrives, servomotors, Solutions for downhole drilling, topside and servoactuation: subsea equipment, offering high reliability for harsh environments • Danaher, Baumueller, Siemens, Exlar Simulation and Test Systems: • Hydraudyne, MTS Systems Corp. Wind Energy: • SSB, Suzhou ReEnergy 1 3 1 Industrial Automation $ 302M 2 2 Energy 195M 3 Simulation and Test 137M _______________________________________ 2012 TOTAL $ 634M 16


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    El-Exis SP Injection Molding Machine, Servovalves Courtesy of Sumitomo Demag Simodont ® Dental Trainer Courtesy of ACTA Dental University, Amsterdam Oil and Gas Exploration and Production Wind Energy Turbine Controls Courtesy of Mark Hall Courtesy of Shutterstock / Majeczka Steel Mills Motorsports Courtesy of Shutterstock / Jordache Courtesy of iStockphoto / M. Evans 17


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    COMPONENTS Our business is focused on solving difficult engineering problems for motion control, air moving, electronics and fiber optic applications. The Components Group specializes in solving motion and power and data transmission challenges in the world’s harshest environments with high-performance slip rings, fiber optics, motors, actuators and air moving products. Revenues for 2012 were $374 million for products sold into markets also supported by Moog’s other business segments. Our slip rings rapidly transmit power and data across rotating interfaces. This product line has more than 10,000 designs used in rotating electromechanical systems. We transfer power and data for de-icing, flight control and blade position on the V-22 Osprey rotorcraft and Apache, Black Hawk, Seahawk and Jayhawk helicopters. Moog slip rings are also installed on tank turrets, commander stations, infrared sights, underwater vehicles and closed circuit television systems. During the year, we completed two strategic acquisitions. Early in the year, we purchased Protokraft LLC, a U.S.-based manufacturer of switches and media converters that are packaged into rugged and environmentally sealed connectors. Moog Protokraft’s products are used in radar signal processors, cockpit displays, navigation and weather monitoring systems — all mission critical. The acquisition adds new technologies to complement our existing product lines and it enhances our existing customer base. In August, we purchased Tritech International Limited, based in Aberdeenshire, Scotland. Tritech is known for designing and manufacturing high-performance acoustic sensors, sonars and video cameras used on remotely operated vehicles (ROVs) and deployed in a variety of undersea oil and gas, renewable energy, defense and survey projects. Deep water oil drilling operations require rugged equipment and maximum performance and uptime. Our Canadian operation designs and manufactures custom and vessel specific Floating Production, Storage and Off-Loading (FPSO) swivels used in buoys, turret moorings and offshore loading towers for offshore operators worldwide. In 2012, Moog designs were incorporated on swivels, tower yokes and well containment projects. These heavily customized systems incorporate electric slip rings, hydraulic utility swivels and fiber optic rotary joints. Our motor technology engineers solve thermal, airflow, acoustic and efficiency problems for the telecommunications, electronic storage and medical markets. Each year, we ship thousands of brushless DC motors to manufacturers of sleep disorder breathing systems and lightweight portable oxygen therapy concentrators. Moog Animatics supplies servomotors and linear actuators to a variety of industrial and specialty machine manufacturers. Their flagship product, the SmartMotor™, is designed into applications for factory automation, winding and spooling, CNC routing, robotics and weapons stabilization systems. In 2013, we have forecasted sales of $413 million, with higher sales in the marine markets, in part due to the acquisition of Tritech. As we add strategic acquisitions, we continue to expand our product offerings in each market we serve and grow our customer base worldwide. 18


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    SIEMENS SOMATOM DEFINITION FLASH CT – Siemens’ latest high-end scanner was designed to make CT exams healthier for patients. Its core innovation – the Flash Spiral – provides split-second scanning and a lower radiation dose. SOMATOM Definition Flash protects the most dose-sensitive body regions from direct X-ray exposure by switching the X-ray tube off for a certain range of projections. Moog produces a large diameter slip ring to transmit image data across the rotating surfaces of the Somatom Flash CT. Courtesy of Siemens Healthcare 19


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    COMPONENTS Military Aircraft – Commercial Aircraft – Space Controls – Defense Controls – Industrial – Wind Energy – Medical – Marine PRODUCTS MAJOR SECTORS • Motors and slip rings for robotics and Military/Aerospace: material handling Motion Technology: • Brush and brushless DC motors for electro- • Slip rings for blade pitch control in wind • Slip ring assemblies: electromechanical optic / infrared sensors and gimbaled turbines devices that allow the transfer of power and data signals from a stationary to a rotating systems, missile seeker and fin control • Air moving products for cooling structure actuation systems, aircraft servos and telecommunications and computer equipment instruments, space applications, radar and • Pressure compensated slip rings and fiber • Brush and brushless DC torque and launcher pedestals optic rotary joints for subsea applications servomotors • Electromechanical servo and utility actuators • Explosion-proof slip ring assemblies for • High-performance fractional horsepower for secondary flight controls, primary flight hazardous environments brush and brushless DC motors and drives controls for UAVs and target drones, Forward- • Mux/Demux electronics for the marine • Linear servomotors Looking Infrared (FLIR) and radar applications market • Resolver, synchro and RVDT position sensors • Slip ring assemblies for armored vehicle • Acoustic sensors, sonars and video • Electromechanical servo and utility actuators – and naval pedestal turrets, FLIR and cameras for subsea applications rotary and linear gimbaled systems, missile de-roll, radar, • Fluid rotary unions rotorcraft de-ice, space mechanisms, aircraft instrument applications and antenna COMPETITIVE ADVANTAGES • Solenoids and launcher pedestals • Market leader in slip rings and fractional • Integrated electromechanical mechanisms • Air moving products for air-to-air heat horsepower brushless DC motors • Air moving systems exchangers and military vehicles • Strong engineering and manufacturing • Aircraft displays and avionic instruments • Integrated mechanisms for missile defense, capability with a reputation for highly • Alternators radar, FLIR and space applications reliable, technically differentiated products • Subsea navigation and control systems • Solenoids for airborne armament equipment • Multi-component and system level engineering • SmartMotor™ integrated servo systems and and aircraft applications knowledge and applications support linear actuatorss • Fiber optic modems and multiplexers for • Extensive material science and analytical Fiber Optics: tactical communication and data transmission capability • Fiber optic rotary joints, fiber optic Commercial/Industrial: • Market leader in marine marketplace for multiplexers, transmitters and receivers • Brushless DC motors and blowers for sleep rotary power and data transfer • Fiber optic modems, switches, media disorder medical devices, critical care non- • Ability to integrate components into converters and tactical connectors and invasive ventilators and portable oxygen sub-systems providing higher value, higher cable assemblies concentrators level solutions • Large diameter slip rings for medical imaging and luggage scanning COMPETITORS • Motors for medical and laboratory centrifuges Slip Rings: • Slip rings for video security and surveillance • Stemmann, Schleifring, Airflyte equipment Commercial Motors: • Danaher Motion, Allied Motion, Ametek Military Motors: 1 • Danaher Motion, Woodward MPC, Axsys Actuators: • Smiths, MPC, Kearfott 2 6 3 1 Military Aircraft $ 99M 5 2 Commercial Aircraft 26M 3 Space and Defense 62M 4 Industrial 71M 4 5 Medical 63M 6 Marine 53M _______________________________________ 2012 TOTAL $ 374M 20


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    F-35 Joint Strike Fighter, Electro Optical Targeting System (EOTS) Courtesy of Lockheed Martin MV-22 Osprey Bradley A3 Courtesy of U.S. Navy / Chief MC Specialist Jeremy L. Wood Courtesy of BAE Systems Animatics, Multi-Axis Controls for Winding and Spooling Pharmaceutical Processing Automation Courtesy of Shutterstock / Evgeny Korshenkov Courtesy of iStockphoto / Matt Harris FPSO Vessel Swivels Moog Tritech Super SeaKing ROV Sonars Courtesy of Leo Francini / Alamy Courtesy of Saab-Seaeye 21


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    MEDICAL DEVICES Our medical products are designed to simplify procedures, increase patient safety and enhance patient and caregiver outcomes. In our Medical Devices segment, we support intravenous (IV) therapy and enteral nutrition delivery with a suite of pumps, fluid delivery systems and components. In 2012, our pumps, disposables and associated products accounted for $140 million in sales, which included $41 million in pump sales, $52 million in administration set sales and $47 million in sensors, handpieces and private label products sold to OEM medical companies. Our ambulatory and stationary feeding pumps, sold under the Zevex label, deliver nutrition for direct gastrointestinal feeding. Products include the EnteraLite® Infinity® and Infinity® Orange™ feeding pumps. The Infinity Orange pump combines a highly accurate small volume feeding design with safety features that ease programming and ensure continuous and safe operation. It is the only pump on the market designed specifically for infants. EnteraLite Infinity pumps are used by pediatric and adult tube-fed patients. The small pump size provides patients with added freedom and mobility. Moog Curlin infusion therapy pumps offer intravenous, intra-arterial, subcutaneous or epidural flow of fluids and medications. Our advanced monitoring software provides data for management of precise medication delivery, offering safe, optimal performance and medication flow. Each pump in our product line has a specific administration set, and more than 15 million administration sets were shipped during the year from our production facility in Costa Rica. Chemotherapy, pain management, antibiotic applications and regional anesthesia are administered using beeLINE® single patient disposable pumps. Our AITECS syringe pumps are used in anesthesia and general ward applications, mostly in Eastern European countries. Sensor products are used in a variety of medical devices to protect patients from air bubble infusion, ensuring accurate fluid delivery and monitoring. Moog’s engineers work with multiple OEM device manufacturers to design precision sensors. Ethox International produces disposable medical devices which are used in operating room, anesthesia, emergency and infection control applications. Contract manufacturing capabilities cover the product life cycle from design, development and prototyping to fully validated production processes and products. Toxicology, microbiology and sterilization services are also available. During the past few years, our pump businesses experienced a shift in the regulatory environment in the U.S. which resulted in more stringent government regulations. As a result, we have refined some of our manufacturing processes and we continue to improve our internal operations and quality systems. A year ago, we restructured the business and changed our strategy to focus on profitability and modest sales growth for the short term. An initiative is underway to improve our sales channels and add to our regional distribution network for IV, enteral and associated products sold in the U.S. and Canada. Under this new structure, we have added direct sales representatives and regional distributors to help us capture new business in acute care facilities and better manage key customer accounts, upgrade programs and new product opportunities. For 2013, our forecast is $146 million, including $47 million in pump sales, $50 million in sales of administrative sets and $49 million in other products. 22


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    MOOG CURLIN® INFUSION THERAPY PUMPS – Unmatched dependability and ease-of-use describe our Curlin® infusion therapy pumps. Our products are designed to simplify procedures, increase patient safety and enhance patient and caregiver outcomes. Moog Medical’s internal sales and distribution network sells the Curlin family of pump products, administration sets and accessories in the United States and Canada. 23


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    MEDICAL DEVICES IV Pumps – Enteral Feeding Pumps – Syringe Pumps – Single Use Pumps – Administration Sets – Sensors – Surgical Handpieces MAJOR APPLICATIONS • Disposable blood pressure cuffs and • Moog manufactures many of the critical accessories sized for infants to obese adults component technologies that go into • Post-operative pain management (PCA and • Full-service contract manufacturing of infusion therapy pumping devices PCEA) disposable medical devices • Ethox increases key capabilities in • Regional anesthesia • Sterilization and comprehensive lab services development and distribution including • Neonatal and critical care biocompatibility analysis, microbiology • Intensive Care expertise, manufacturing and in-house SALES CHANNELS sterilization • Oncology • Total Parenteral Nutrition (TPN) • Infusion pumps, Protocol Library Safety • Ultrasonic technology expertise allows us to System™ software, administration sets and develop sensors and surgical tools in a fast • Enteral feeding (ECN) accessories: Moog Medical direct and flexible manner • Cataract Removal • International distribution of enteral products: • Full range of products from low end/cost • Ultrasonic sensing technology Major global clinical nutrition companies effective to high-end, including single and • Domestic distribution of enteral feeding double syringe pumps, PCA, pumps, stand PRODUCTS AND SERVICES products, sensors and surgical handpieces, alone and stackable pumps single patient/single use pumps and syringe • Electronic ambulatory and acute care devices for anesthesia, cardiovascular, COMPETITORS infusion pumps and safety software orthopedic, general care, neonatal and • Enteral feeding pumps for acute care, pediatric critical care, intensive care, Infusion Devices: long-term care and ambulatory care for general and plastic surgery applications: • B. Braun, CareFusion, Smiths Medical, specialized clinical nutrition Moog Medical direct Hospira, Baxter International, CME, Covidien • Administration sets specifically designed • Distributors and dealers worldwide Single Patient Pumps: and patented for our infusion and enteral feeding pumps • I-Flow • Syringe infusion pumps and safety software COMPETITIVE ADVANTAGES Syringe Pumps: that reduce drug administration errors • Niche market focus and strong position in • CareFusion, Smiths Medical • Single patient infusion pumps for post-op homecare Enteral Feeding Pumps: and regional pain management • We are specialized in our markets, concentrating on pumps and their • Covidien, Ross (Abbott) • Sensors used in infusion pump systems for bubble detection and air-in-line sensing respective administration sets, creating a Phacoemulsification: market solution focus • Alcon • Surgical handpieces used primarily in cataract surgery for lens removal • Extremely versatile for all areas in hospitals Sensors: with enhanced safety and ease of use from • Disposable pressure infuser bags used for • Etalon, Introtek neonates to adult patients quick, easy, low-cost infusion 1 4 2 1 Pumps $ 41M 3 2 Administration Sets 52M 3 Sensors and Handpieces 20M 4 Other 27M _______________________________________ 2012 TOTAL $ 140M 24


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    Infinity ® Orange™ Enteral Pump Courtesy of Martin Valigursky Aitecs 2016 Syringe Pump EnteraLite® Infinity® Pump Handpieces for Eye Surgery Microbiology, Toxicology and Sterilization Services Courtesy of Shutterstock / Mehmetcan Courtesy of Shutterstock / Alexander Raths 25


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    FINANCIAL HIGHLIGHTS STOCK PRICE COMPARISON SALES (dollars in millions) $ 2,470 (Moog Class A and Class B Stock) $ 2,500 $ 2,331 $ 2,114 MOOG A/B HIGH LOW $ 1,903 $ 2,000 $ 1,849 A $ 44.72 $ 30.47 $ 1,558 1ST QUARTER $ 1,500 B $ 44.62 $ 31.00 $ 1,306 A $ 44.53 $ 40.31 2ND QUARTER $ 939 $1,051 B $ 45.00 $40.60 $ 1,000 $ 719 $ 755 A $43.75 $ 36.48 3RD QUARTER B $ 43.43 $ 36.60 $ 500 A $ 41.76 $ 34.77 4TH QUARTER B $ 41.30 $ 34.67 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Bloomberg FISCAL YEAR REVENUE BY SEGMENT NET EARNINGS (dollars in millions) $160 $ 152 1 $ 136 $140 5 $ 119 1 Aircraft Controls 39% $120 $ 108 4 2 Space and Defense $ 101 2 Controls 14% $ 100 $ 85 3 Industrial Systems 26% $ 81 3 $ 80 4 Components 15% $ 65 $ 57 5 Medical Devices 6% $ 60 $ 43 $ 38 $ 40 REVENUE BY MARKET $ 20 1 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 FISCAL YEAR 6 1 Defense 33% 2 Industrial 23% 5 2 DILUTED EARNINGS PER SHARE 3 Commercial Aircraft 17% (in dollars) 4 4 Energy 10% 3 $ 3.50 5 Space 9% $ 3.33 $ 3.25 6 Medical 8% $ 2.95 $ 3.00 $ 2.75 $ 2.75 GEOGRAPHIC DISTRIBUTION $ 2.50 $ 2.34 $ 2.36 $ 2.25 $ 1.97 $ 1.98 $ 2.00 1 $ 1.64 $ 1.75 $ 1.45 $ 1.50 $ 1.22 $ 1.25 $ 1.11 $ 1.00 $ 0.75 2 $ 0.50 1 United States 55% $ 0.25 2 International 45% $ 0.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Moog’s military and government funded revenue is 39% and commercial revenue is 61% FISCAL YEAR 26


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    FINANCIAL REVIEW (dollars in millions, except per share data) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 SEGMENT SALES: AIRCRAFT CONTROLS $ 964 $ 850 $ 757 $ 663 $ 673 $ 587 $ 527 $ 452 $ 412 $ 404 $ 359 SPACE AND DEFENSE CONTROLS $ 359 $ 356 $ 325 $ 275 $ 253 $ 185 $ 148 $ 128 $ 116 $ 114 $ 131 INDUSTRIAL SYSTEMS $ 634 $ 629 $ 546 $ 455 $ 532 $ 436 $ 381 $ 315 $ 282 $ 237 $ 229 COMPONENTS $ 374 $ 353 $ 360 $ 346 $ 341 $ 283 $ 238 $ 156 $ 130 — — MEDICAL DEVICES $ 140 $ 142 $ 127 $ 111 $ 103 $ 68 $ 13 — — — — NET SALES $ 2,470 $ 2,331 $ 2,114 $ 1,849 $ 1,903 $ 1,558 $ 1,306 $ 1,051 $ 939 $ 755 $ 719 EARNINGS BEFORE TAXES $ 209 $ 184 $ 149 $ 111 $ 168 $ 144 $ 120 $ 95 $ 83 $ 58 $ 53 NET EARNINGS $ 152 $ 136 $ 108 $ 85 $ 119 $ 101 $ 81 $ 65 $ 57 $ 43 $ 38 NET RETURN ON SALES 6.2% 5.8% 5.1% 4.6% 6.3% 6.5% 6.2% 6.2% 6.1% 5.7% 5.2% EARNINGS PER SHARE: BASIC $ 3.37 $ 2.99 $ 2.38 $ 2.00 $ 2.79 $ 2.38 $ 2.01 $ 1.68 $ 1.48 $ 1.24 $ 1.13 DILUTED $ 3.33 $ 2.95 $ 2.36 $ 1.98 $ 2.75 $ 2.34 $ 1.97 $ 1.64 $ 1.45 $ 1.22 $ 1.11 DILUTED WEIGHTED-AVERAGE 45.7 46.0 45.7 42.9 43.3 43.1 41.2 39.5 39.6 34.9 33.8 SHARES OUTSTANDING (in millions) RESEARCH AND DEVELOPMENT $ 116 $ 106 $ 103 $ 100 $ 110 $ 103 $ 69 $ 44 $ 30 $ 30 $ 33 CAPITAL EXPENDITURES $ 107 $ 84 $ 66 $ 82 $ 92 $ 97 $ 84 $ 41 $ 34 $ 28 $ 27 DEPRECIATION AND AMORTIZATION $ 101 $ 96 $ 91 $ 76 $ 63 $ 52 $ 47 $ 36 $ 36 $ 30 $ 26 AT YEAR END: TOTAL ASSETS $ 3,106 $ 2,843 $ 2,712 $ 2,634 $ 2,227 $ 2,006 $ 1,608 $ 1,303 $ 1,125 $ 992 $ 886 WORKING CAPITAL $ 885 $ 834 $ 813 $ 764 $ 713 $ 617 $ 420 $ 313 $ 322 $ 341 $ 276 INDEBTEDNESS $ 765 $ 725 $ 765 $ 833 $ 671 $ 618 $ 387 $ 349 $ 311 $ 257 $ 316 SHAREHOLDERS’ EQUITY $ 1,305 $ 1,192 $ 1,121 $ 1,065 $ 994 $ 877 $ 763 $ 521 $ 472 $ 424 $ 300 RETURN ON SHAREHOLDERS’ 12.1% 11.4% 9.8% 8.3% 12.7% 12.3% 12.9% 12.8% 12.6% 12.5% 13.3% EQUITY SHAREHOLDERS’ EQUITY PER $ 28.80 $ 26.38 $ 24.70 $ 23.53 $ 23.30 $ 20.63 $ 18.04 $ 13.48 $ 12.23 $ 10.93 $ 8.80 COMMON SHARE OUTSTANDING BACKLOG (12 month) $ 1,279 $ 1,325 $ 1,181 $ 1,098 $ 862 $ 775 $ 645 $ 539 $ 450 $ 368 $ 365 NUMBER OF FULL-TIME 10,976 10,320 10,117 10,005 8,844 8,364 7,273 6,662 5,781 4,744 4,817 EMPLOYEES Please Note: Amounts may not equal the total due to rounding. 27


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    moog When Performance Really Matters 28


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    UNITED฀STATES฀SECURITIES฀AND฀EXCHANGE฀COMMISSION Washington,฀D.C.฀20549 FORM฀10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 29, 2012 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 Inc. (Exact Name of Registrant as Specified in its Charter) New฀York 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) Registrant’s Telephone Number, Including Area Code: (716)฀652-2000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Class A Common Stock, $1.00 Par Value New York Stock Exchange Class B Common Stock, $1.00 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 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 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 29 29599 10K Annual Report.pdf 1 11/28/12 12:04 PM


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    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the common stock outstanding and held by non-affiliates (as defined in Rule 405 under the Securities Act of 1933) of the registrant, based upon the closing sale price of the common stock on the New York Stock Exchange on March 31, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1,717 million. The number of shares of common stock outstanding as of the close of business on November 16, 2012 was: Class A 41,359,594; Class B 3,991,786. Portions of the 2012 Proxy Statement to Shareholders (“2012 Proxy”) are incorporated by reference into Part III of this Form 10-K. 30 29599 10K Annual Report.pdf 2 11/28/12 12:04 PM


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    Inc. FORM 10-K INDEX PART฀I Item฀1 Business 33-36 Item฀1A Risk Factors 37-41 Item฀1B Unresolved Staff Comments 41 Item฀2 Properties 42 Item฀3 Legal Proceedings 42 Item฀4 Mine Safety Disclosures 42 PART฀II Item฀5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43-44 Item฀6 Selected Financial Data 45 Item฀7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 46-62 Item฀7A Quantitative and Qualitative Disclosures About Market Risk 63 Item฀8 Financial Statements and Supplementary Data 64-102 Item฀9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 103 Item฀9A Controls and Procedures 103 Item฀9B Other Information 103 PART฀III Item฀10 Directors, Executive Officers and Corporate Governance 104 Item฀11 Executive Compensation 104 Item฀12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 104 Item฀13 Certain Relationships and Related Transactions, and Director Independence 104 Item฀14 Principal Accountant Fees and Services 104 PART฀IV Item฀15 Exhibits and Financial Statement Schedules 104-110 31 29599 10K Annual Report.pdf 3 11/28/12 12:04 PM


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    Disclosure฀Regarding฀Forward-Looking฀Statements Information included or incorporated by reference in this report that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. We disclaim any obligation to update the forward-looking statements made in this report. 32 29599 10K Annual Report.pdf 4 11/28/12 12:04 PM


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    PART฀I The Registrant, Moog Inc., a New York corporation formed in 1951, is referred to in this report as “Moog” or in the nominative “we” or the possessive “our.” Unless otherwise noted or the context otherwise requires, all references to years in this report are to fiscal years. Item฀1.฀ Business. Description฀of฀the฀Business. Moog is a worldwide designer, manufacturer and integrator of high performance precision motion and fluid controls and systems for a broad range of applications in aerospace and defense and industrial markets. We have five operating segments: Aircraft Controls, Space and Defense Controls, Industrial Systems, Components and Medical Devices. Additional information describing the business and comparative segment revenues, operating profits and related financial information for 2012, 2011 and 2010 are provided in Note 17 of Item 8, Financial Statements and Supplementary Data of this report. Distribution. Our sales and marketing organization consists of individuals possessing highly specialized technical expertise. This expertise is required in order to effectively evaluate a customer’s precision control requirements and to facilitate communication between the customer and our engineering staff. Our sales staff is the primary contact with customers. Manufacturers’ representatives are used to cover certain domestic aerospace markets. Distributors are used selectively to cover certain industrial and medical markets. Industry฀and฀Competitive฀Conditions. We experience considerable competition in our aerospace and defense and industrial markets. We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness of delivery, effectiveness of the distribution organization and quality of support after the sale. We believe we compete effectively on all of these bases. Competitors in our five operating segments include: • Aircraft Controls: Parker Hannifin, UTC (Goodrich, Hamilton Sundstrand), Liebherr, Nabtesco, Woodward Governor and Curtiss-Wright. • Space and Defense Controls: Honeywell, Parker Hannifin, Vacco, Valvetech, Marotta, SABCA, ESW, Aerojet, Snecma, Valcor, Aeroflex, UTC (Hamilton Sundstrand), Limitorque, Sargeant Industries, RVision, Directed Perception, ATA Engineering, CDA InterCorp, RUAG, Rockwell Collins, Woodward Governor, Sierra-Nevada, Vicon, Videotec and Lord Corp. • Industrial Systems: Bosch Rexroth, Danaher, Baumueller, Siemens, SSB, Parker Hannifin, Suzhou ReEnergy, MTS Systems Corp., Exlar and Hydraudyne. • Components: Danaher, Allied Motion, Ametek, Woodward MPC, Axsys, Schleifring, Airflyte, Smiths, Kearfott and Stemmann. • Medical Devices: B. Braun, CareFusion, Smiths Medical, Hospira, Alcon, Baxter International, CME, I-Flow, Covidien, Etalon, Introtek and Ross (Abbott). Government฀Contracts. All U.S. Government contracts are subject to termination by the Government. In 2012, sales under U.S. Government contracts represented 30% of total sales and were primarily within Aircraft Controls, Space and Defense Controls and Components. Backlog. Substantially all backlog will be realized as sales in the next twelve months. See the discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report. Raw฀Materials. Materials, supplies and components are purchased from numerous suppliers. We believe the loss of any one supplier, although potentially disruptive in the short-term, would not materially affect our operations in the long-term. Working฀Capital. See the discussion on operating cycle in Note 1 of Item 8, Financial Statements and Supplementary Data of this report. Seasonality. Our business is generally not seasonal; however, certain markets, such as wind energy, do experience seasonal variations in sales levels. 33 29599 10K Annual Report.pdf 5 11/28/12 12:04 PM


  • Page 36

    Patents. We maintain a patent portfolio of issued or pending patents and patent applications worldwide that generally includes the U.S., Europe, China, Japan and India. The portfolio includes patents that relate to electrohydraulic, electromechanical, electronics, hydraulics, components and methods of operation and manufacture as related to motion control and actuation systems. The portfolio also includes patents related to wind turbines, robotics, surveillance/security, vibration control and medical devices. We do not consider any one or more of these patents or patent applications to be material in relation to our business as a whole. The patent portfolio related to certain medical devices is significant to our position in this market as several of these products work exclusively together, and provide us future revenue opportunities. Research฀Activities. Research and development activity has been, and continues to be, significant for us. Research and development expense was at least $100 million in each of the last three years. Employees. On September 29, 2012, we employed 10,976 full-time employees. Customers. Our principal customers are Original Equipment Manufacturers, or OEMs, and end users for whom we provide aftermarket support. Aerospace and defense OEM customers collectively represented approximately 44% of 2012 sales. The majority of these sales are to a small number of large companies. Due to the long-term nature of many of the programs, many of our relationships with aerospace and defense OEM customers are based on long- term agreements. Our industrial OEM sales, which represented approximately 38% of 2012 sales, are to a wide range of global customers and are normally based on lead times of 90 days or less. We also provide aftermarket support, consisting of spare and replacement parts and repair and overhaul services, for all of our products. Our major aftermarket customers are the U.S. Government and commercial airlines. In 2012, aftermarket sales accounted for 18% of total sales. Customers in our five operating segments include: • Aircraft Controls: Boeing, Lockheed Martin, Airbus, BAE, Bombardier, Gulfstream, Honeywell, Northrop Grumman and the U.S. Government. • Space and Defense Controls: Lockheed Martin, Raytheon, Orbital Sciences, BAE, United Technologies-Pratt & Whitney Rocketdyne, Alliant Techsystems, General Dynamics and Thales Alenia. • Industrial Systems: RePower AG, United Power (GUP), FlightSafety, CAE, Arburg, Metso and Schlumberger. • Components: Respironics, Raytheon, Lockheed Martin, Philips Medical and the U.S. Government. • Medical Devices: Danone and Abbott. International฀Operations. Our operations outside the United States are conducted through wholly-owned foreign subsidiaries and are located predominantly in Europe and the Asia-Pacific region. See Note 17 of Item 8, Financial Statements and Supplementary Data of this report for information regarding sales by geographic area and Exhibit 21 of Item 15, Exhibits and Financial Statement Schedules of this report for a list of subsidiaries. Our international operations are subject to the usual risks inherent in international trade, including currency fluctuations, local government contracting regulations, local governmental restrictions on foreign investment and repatriation of profits, exchange controls, regulation of the import and distribution of foreign goods, as well as changing economic and social conditions in countries in which our operations are conducted. Environmental฀Matters. See the discussion in Note 18 of Item 8, Financial Statements and Supplementary Data of this report. Website฀Access฀to฀Information. Our internet address is www.moog.com. We make our annual reports on Form quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports, available on the investor information portion of our website. The reports are free of charge and are available as soon as reasonably practicable after they are filed with the Securities and Exchange Commission. We have posted our Corporate Governance guidelines, Board committee charters and code of ethics to the investor information portion of our website. This information is available in print to any shareholder upon request. All requests for these documents should be made to Moog’s Manager of Investor Relations by calling 716-687-4225. 34 29599 10K Annual Report.pdf 6 11/28/12 12:04 PM


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    Executive฀Officers฀of฀the฀Registrant. Other than John B. Drenning, the principal occupations of our officers for the past five years have been their employment with us. John B. Drenning’s principal occupation is partner in the law firm of Hodgson Russ LLP. On September 1, 2012, Patrick J. Roche was named Vice President. Previously, he was a Group Vice President and General Manager of the Moog Ireland operation. On December 1, 2011, John R. Scannell was named Chief Executive Officer. Previously, he was President and Chief Operating Officer. Prior to that, he was Vice President and Chief Financial Officer. On December 1, 2011, Robert T. Brady was named Executive Chairman. Previously, he was Chief Executive Officer. On December 1, 2011, Gary Szakmary was named Vice President. Previously, he was a Corporate Group Vice President. On December 2, 2010, Donald R. Fishback was named Vice President and Chief Financial Officer. Previously, he was Vice President of Finance. Prior to that, he was Controller and Principal Accounting Officer. On December 2, 2010, Sean Gartland was named Vice President. Previously, he was General Manager of the International Group, Pacific operation. On February 11, 2008, Jennifer Walter was named Controller and Principal Accounting Officer. Previously, she was Director of Financial Planning and Analysis. 35 29599 10K Annual Report.pdf 7 11/28/12 12:04 PM


  • Page 38

    Year฀First฀Elected฀ Executive฀Officers Age Officer John R. Scannell Chief Executive Officer 49 2006 Robert T. Brady Executive Chairman of the Board Director; Member, Executive Committee 71 1967 Joe C. Green Executive Vice President; Chief Administrative Officer; Director; Member, Executive Committee 71 1973 Richard A. Aubrecht Vice Chairman of the Board; Vice President - Strategy and Technology; Director; Member, Executive Committee 68 1980 Donald R. Fishback Vice President; Chief Financial Officer 56 1985 Martin J. Berardi Vice President 56 2000 Warren C. Johnson Vice President 53 2000 Jay K. Hennig Vice President 52 2002 Lawrence J. Ball Vice President 58 2004 Harald E. Seiffer Vice President 53 2005 Sasidhar Eranki Vice President 58 2006 Sean Gartland Vice President 49 2010 Gary A. Szakmary Vice President 61 2011 Patrick J. Roche Vice President 49 2012 Jennifer Walter Controller; Principal Accounting Officer 41 2008 Timothy P. Balkin Treasurer; Assistant Secretary 53 2000 John B. Drenning Secretary 75 1989 36 29599 10K Annual Report.pdf 8 11/28/12 12:04 PM


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    Item฀1A.฀ ฀฀Risk฀Factors. The฀markets฀we฀serve฀are฀cyclical฀and฀sensitive฀to฀domestic฀and฀foreign฀economic฀conditions฀and฀events,฀ which฀may฀cause฀our฀operating฀results฀to฀fluctuate. The markets we serve are sensitive to fluctuations in general business cycles as well as domestic and foreign economic conditions and events. For example, our defense programs are largely contingent on U.S. Department of Defense funding. Our space programs rely on the same governmental funding as well as commercial investment into exploration activities. Demand for our industrial systems products is dependent upon several factors, including capital investment, product innovations, economic growth, cost-reduction efforts and technology upgrades. In addition, the commercial airline industry is cyclical and sensitive to fuel price increases, labor disputes and economic conditions. These factors could result in a reduction in the amount of air travel, which could reduce service and maintenance orders for flight controls and spare parts, thereby reducing our commercial market sales. Changes in medical reimbursement rates of insurers to medical service providers could impact our sale of medical products. We฀operate฀in฀highly฀competitive฀markets฀with฀competitors฀who฀may฀have฀greater฀resources฀than฀we฀ possess. Many of our products are sold in highly competitive markets. Some of our competitors, especially in our industrial and medical markets, are larger, more diversified and have greater financial, marketing, production and research and development resources. As a result, they may be better able to withstand the effects of periodic economic downturns. Our sales and operating margins will be negatively impacted if our competitors: • develop products that are superior to our products, • develop products of comparable quality and performance that are more competitively priced than our products, • develop methods of more efficiently and effectively providing products and services, or • adapt more quickly than we do to new technologies or evolving customer requirements. We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness of delivery, effectiveness of the distribution organization and quality of support after the sale. Maintaining and improving our competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and our distribution networks. If we do not maintain sufficient resources to make these investments or are not successful in maintaining our competitive position, our operations and financial performance will suffer. We฀depend฀heavily฀on฀government฀contracts฀that฀may฀not฀be฀fully฀funded฀or฀may฀be฀terminated,฀and฀the฀ failure฀to฀receive฀funding฀or฀the฀termination฀of฀one฀or฀more฀of฀these฀contracts฀could฀reduce฀our฀sales฀and฀ increase฀our฀costs. Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of our business. In 2012, sales under U.S. Government contracts represented 30% of our total sales, primarily within Aircraft Controls, Space and Defense Controls and Components. Sales to foreign governments represented 9% of our total sales. Government programs can be structured into a series of individual contracts and funding under those contracts is generally subject to annual congressional appropriations which are subject to change. Also outlined in the 2011 Budget Control Act, starting in calendar year 2013, are additional reductions to defense spending (or Sequestration) of approximately $500 billion over the next decade. These uniform cuts could have ramifications for the aerospace and defense market. As currently written in the Budget Control Act, sequestration could materially adversely impact our sales, operating profit and our cash flow. We have resources applied to specific government contracts and if any of those contracts are rescheduled or terminated, we may incur substantial costs redeploying those resources. We฀make฀estimates฀in฀accounting฀for฀long-term฀contracts,฀and฀changes฀in฀these฀estimates฀may฀have฀ significant฀impacts฀on฀our฀earnings. We have long-term contracts with some of our customers. These contracts are predominantly within Aircraft Controls and Space and Defense Controls. Revenue representing 32% of 2012 sales was accounted for using the percentage of completion, cost-to-cost method of accounting. Under this method, we recognize revenue as work progresses toward completion as determined by the ratio of cumulative costs incurred to date to estimated total contract costs at completion, multiplied by the total estimated contract revenue, less cumulative revenue recognized in prior periods. 37 29599 10K Annual Report.pdf 9 11/28/12 12:04 PM


  • Page 40

    Changes in these required estimates could have a material effect on sales and profits. Any adjustments are recognized in the period in which the change becomes known using the cumulative catch-up method of accounting. For contracts with anticipated losses at completion, we establish a provision for the entire amount of the estimated remaining loss and charge it against income in the period in which the loss becomes known. Amounts representing performance incentives, penalties, contract claims or change orders are considered in estimating revenues, costs and profits when they can be reliably estimated and realization is considered probable. We฀enter฀into฀fixed-price฀contracts,฀which฀could฀subject฀us฀to฀losses฀if฀we฀have฀cost฀overruns. In 2012, fixed- price contracts represented 87% of our sales that were accounted for using the percentage of completion, cost-to-cost method of accounting. On fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price. Depending on the fixed price negotiated, these contracts may provide us with an opportunity to achieve higher profits based on the relationship between our total contract costs and the contract's fixed price. However, we bear the risk that increased or unexpected costs may reduce our profit or cause us to incur a loss on the contract, which could reduce our net earnings. Loss reserves are most commonly associated with fixed-price contracts that involve the design and development of new and unique controls or control systems to meet the customer's specifications. If฀our฀subcontractors฀or฀suppliers฀fail฀to฀perform฀their฀contractual฀obligations,฀our฀prime฀contract฀ performance฀and฀our฀ability฀to฀obtain฀future฀business฀could฀be฀materially฀and฀adversely฀impacted. Many of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we must provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract or our hiring of personnel of a subcontractor. Failure by our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations as the prime contractor. Subcontractor performance deficiencies could result in a customer terminating our contract for default. A default termination could expose us to liability and substantially impair our ability to compete for future contracts and orders. In addition, a delay or failure in our ability to obtain components and equipment parts from our suppliers may adversely affect our ability to perform our obligations to our customers. Contracting฀on฀government฀programs฀is฀subject฀to฀significant฀regulation,฀including฀rules฀related฀to฀bidding,฀ billing฀and฀accounting฀kickbacks฀and฀false฀claims,฀and฀any฀non-compliance฀could฀subject฀us฀to฀fines฀and฀ penalties฀or฀possible฀debarment. Like all government contractors, we are subject to risks associated with this contracting. These risks include the potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to be, subjected to audits and investigations by U.S. and foreign government agencies and authorities. The failure to comply with the terms of our government contracts could harm our business reputation. It could also result in our progress payments being withheld or our suspension or debarment from future government contracts. The฀loss฀of฀Boeing฀as฀a฀customer฀or฀a฀significant฀reduction฀in฀sales฀to฀Boeing฀could฀adversely฀impact฀our฀ operating฀results. We provide Boeing with controls for both military and commercial applications, which, in total, were 11% of our 2012 sales. Sales to Boeing's commercial airplane group are generally made under a long-term supply agreement through 2021 for the Boeing 787 and through 2013 for other commercial airplanes. The loss of Boeing as a customer or a significant reduction in sales to Boeing could reduce our sales and earnings. 38 29599 10K Annual Report.pdf 10 11/28/12 12:04 PM


  • Page 41

    Our฀new฀product฀research฀and฀development฀efforts฀may฀not฀be฀successful฀which฀could฀reduce฀our฀sales฀and฀ earnings. Technologies related to our products have undergone, and in the future may undergo, significant changes. We have incurred, and we expect to continue to incur, expenses associated with research and development activities and the introduction of new products in order to succeed in the future. Our technology has been developed through customer-funded and internally funded research and development and through business acquisitions. If we fail to predict customers' preferences or fail to provide viable technological solutions, we may experience difficulties that could delay or prevent the acceptance of new products or product enhancements. The research and development expenses we incur may exceed our cost estimates and new products we develop may not generate sales sufficient to offset our costs. Additionally, our competitors may develop technologies and products that have more competitive advantages than ours and render our technology obsolete or uncompetitive. Our฀inability฀to฀adequately฀enforce฀and฀protect฀our฀intellectual฀property฀or฀defend฀against฀assertions฀of฀ infringement฀could฀prevent฀or฀restrict฀our฀ability฀to฀compete. We rely on patents, trademarks and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage. Our inability to defend against the unauthorized use of these rights and assets could have an adverse effect on our results of operations and financial condition. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement. This litigation could result in significant costs and divert our management's focus away from operations. Our฀business฀operations฀may฀be฀adversely฀affected฀by฀information฀systems฀interruptions฀or฀intrusion.฀We are dependent on various information technologies throughout our company to administer, store and support multiple business activities. Disruptions or cybersecurity attacks, such as unauthorized access, malicious software and other violations may lead to exposure of proprietary and confidential information as well as potential data corruption. Any intrusion may cause operational stoppages, diminished competitive advantages through reputational damages and increased operational costs. Our฀indebtedness฀and฀restrictive฀covenants฀under฀our฀credit฀facilities฀could฀limit฀our฀operational฀and฀ financial฀flexibility.฀We have incurred significant indebtedness, and may in the future incur additional debt for acquisitions, operations, research and development and capital expenditures. Our ability to make interest and scheduled principal payments and meet restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, increases in interest rates or a reduction in credit rating or outlook. These changes could cause our cost of doing business to increase and limit our ability to pursue acquisition opportunities, react to market conditions and meet operational and capital needs, which would place us at a competitive disadvantage. Significant฀changes฀in฀discount฀rates,฀rates฀of฀return฀on฀pension฀assets,฀mortality฀tables฀and฀other฀factors฀ could฀adversely฀affect฀our฀earnings฀and฀equity฀and฀increase฀our฀pension฀funding฀requirements. Pension obligations and the related costs are determined using actual results and actuarial valuations that involve several assumptions. The most critical assumptions are the discount rate, the long-term expected return on assets and mortality. Other assumptions include salary increases and retirement age. Some of these assumptions, such as the discount rate and return on pension assets, are reflective of economic conditions and largely out of our control. Positive or negative changes in these assumptions could adversely affect our earnings, equity and funding requirements. A฀write-off฀of฀all฀or฀part฀of฀our฀goodwill฀or฀other฀intangible฀assets฀could฀adversely฀affect฀our฀operating฀results฀ and฀net฀worth. Goodwill and other intangible assets are a substantial portion of our assets. At September 29, 2012, goodwill was $763 million and other intangible assets were $212 million of our total assets of $3.1 billion. Our goodwill and other intangible assets may increase in the future since our strategy includes growing through acquisitions. We may have to write off all or part of our goodwill or other intangible assets if their value becomes impaired. Although this write-off would be a non-cash charge, it could reduce our earnings and net worth significantly. Among other adverse impacts, this could result in our inability to refinance or renegotiate the terms of our bank indebtedness. 39 29599 10K Annual Report.pdf 11 11/28/12 12:04 PM


  • Page 42

    Our฀sales฀and฀earnings฀growth฀may฀be฀affected฀if฀we฀cannot฀identify,฀acquire฀or฀integrate฀strategic฀ acquisitions. Acquisitions are a key part of our growth strategy. Our historical growth has depended, and our future growth is likely to depend, in part, on our ability to successfully identify, acquire and integrate acquired businesses. We intend to continue to seek additional acquisition opportunities, both to expand into new markets and to enhance our position in existing markets throughout the world. Growth by acquisition involves risk that could adversely affect our financial condition and operating results. In pursuing acquisition opportunities or integrating acquired businesses, management's time and attention may be diverted from our core business. We may not know the potential exposure to unanticipated liabilities. Additionally, the expected benefits or synergies of an acquisition might not be fully realized, integrating operations and personnel may be slowed as well as key employees, suppliers or customers of the acquired business may depart. Our฀operations฀in฀foreign฀countries฀expose฀us฀to฀political฀and฀currency฀risks฀and฀adverse฀changes฀in฀local฀ legal฀and฀regulatory฀environments. We have significant manufacturing and sales operations in foreign countries. In addition, our domestic operations have sales to foreign customers. In 2012, 45% of our net sales was to customers outside of the United States. Our financial results may be adversely affected by fluctuations in foreign currencies and by the translation of the financial statements of our foreign subsidiaries from local currencies into U.S. dollars. We expect international operations and export sales to continue to contribute to our earnings for the foreseeable future. Both the sales from international operations and export sales are subject in varying degrees to risks inherent in doing business outside of the United States. Such risks include the possibility of unfavorable circumstances arising from host country laws or regulations, changes in tariff and trade barriers and import or export licensing requirements, and political or economic reprioritization, insurrection, civil disturbance or war. Unforeseen฀exposure฀to฀additional฀income฀tax฀liabilities฀may฀affect฀our฀operating฀results.฀Our distribution of taxable income is subject to domestic and, as a result of our significant manufacturing and sales presence in foreign countries, foreign tax jurisdictions. Our effective tax rate and earnings may be affected by shifts in our mix of earnings in countries with varying statutory tax rates, changes in reinvested foreign earnings, alterations to tax regulations or interpretations and outcomes of any audits performed on previous tax returns. Government฀regulations฀could฀limit฀our฀ability฀to฀sell฀our฀products฀outside฀the฀United฀States฀and฀otherwise฀ adversely฀affect฀our฀business. In 2012, approximately 12% of our sales were subject to compliance with the United States export regulations. Our failure to obtain, or fully adhere to the limitations contained in, the requisite licenses, meet registration standards or comply with other government export regulations would hinder our ability to generate revenues from the sale of our products outside the United States. Compliance with these government regulations may also subject us to additional fees and operating costs. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. In order to sell our products in European Union countries, we must satisfy certain technical requirements. If we are unable to comply with those requirements with respect to a significant quantity of our products, our sales in Europe would be restricted. Doing business internationally also subjects us to numerous U.S. and foreign laws and regulations, including regulations relating to import-export control, technology transfer restrictions, foreign corrupt practices and anti-boycott provisions. Our failure, or by an authorized agent or representative that is attributable to us, to comply with these laws and regulations could result in administrative, civil or criminal liabilities and could, in the extreme case, result in financial penalties or suspension or debarment from government contracts or suspension of our export privileges, which would have a material adverse effect on us. The฀failure฀or฀misuse฀of฀our฀products฀may฀damage฀our฀reputation,฀necessitate฀a฀product฀recall฀or฀result฀in฀ claims฀against฀us฀that฀exceed฀our฀insurance฀coverage,฀thereby฀requiring฀us฀to฀pay฀significant฀damages. Defects in the design and manufacture of our products may necessitate a product recall. We include complex system designs and components in our products that could contain errors or defects, particularly when we incorporate new technology into our products. If any of our products are defective, we could be required to redesign or recall those products or pay substantial damages or warranty claims and face actions by regulatory bodies and government authorities. Such an event could result in significant expenses, disrupt sales and affect our reputation and that of our products and cause us to withdraw from certain markets. We are also exposed to product liability claims. Many of our products are used in applications where their failure or misuse could result in significant property loss and serious personal injury or death. We carry product liability insurance consistent with industry norms. However, these insurance coverages may not be sufficient to fully cover the payment of any potential claim. A product recall or a product liability claim not covered by insurance could have a material adverse effect on our business, financial condition and results of operations. 40 29599 10K Annual Report.pdf 12 11/28/12 12:04 PM


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    Future฀terror฀attacks,฀war,฀natural฀disasters฀or฀other฀catastrophic฀events฀beyond฀our฀control฀could฀negatively฀ impact฀our฀business.฀Terror attacks, war or other civil disturbances, natural disasters and other catastrophic events could lead to economic instability and decreases in demand for commercial products, which could negatively impact our business, financial condition and results of operations. Terrorist attacks worldwide have caused instability from time to time in global financial markets and the aviation industry. In 2012, 17% of our net sales was in the commercial aircraft market. Our facilities are located throughout the world. They could be subject to damage from fire, flood, earthquake or other natural or man-made disasters. Although we carry third party property insurance covering these and other risks, our inability to meet customers' schedules as a result of a catastrophe may result in a loss of customers or significant additional costs, such as penalty claims under customer contracts. Our฀operations฀are฀subject฀to฀environmental฀laws,฀and฀complying฀with฀those฀laws฀may฀cause฀us฀to฀incur฀ significant฀costs. Our operations and facilities are subject to numerous stringent environmental laws and regulations. Although we believe that we are in material compliance with these laws and regulations, future changes in these laws, regulations, or interpretations of them, or changes in the nature of our operations may require us to make significant capital expenditures to ensure compliance. We have been and are currently involved in environmental remediation activities, the cost of which may become significant depending on the discovery of additional environmental exposures at sites that we currently own or operate and at sites that we formerly owned or operated, or at sites to which we have sent hazardous substances or wastes for treatment, recycling or disposal. We฀are฀involved฀in฀various฀legal฀proceedings,฀the฀outcome฀of฀which฀may฀be฀unfavorable฀to฀us. Our business may be adversely impacted by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. We estimate loss contingencies and establish reserves based on our assessment where liability is deemed probable and reasonably estimable given the facts and circumstances known to us at a particular point in time. Subsequent developments may affect our assessment and estimates of the loss contingencies recorded as liabilities. Item฀1B. Unresolved฀Staff฀Comments. None. 41 29599 10K Annual Report.pdf 13 11/28/12 12:04 PM


  • Page 44

    Item฀2. Properties. On September 29, 2012, we occupied 5,200,000 square feet of space in the United States and countries throughout the world, distributed as follows: Square Feet Owned Leased Total Aircraft Controls 1,387,000 349,000 1,736,000 Space and Defense Controls 519,000 372,000 891,000 Industrial Systems 669,000 653,000 1,322,000 Components 623,000 215,000 838,000 Medical Devices 282,000 111,000 393,000 Corporate Headquarters — 20,000 20,000 Total 3,480,000 1,720,000 5,200,000 Aircraft Controls has principal manufacturing facilities located in the U.S., the Philippines and England. Space and Defense Controls has principal manufacturing facilities located in the U.S., The Netherlands, England, Germany and Ireland. Industrial Systems has principal manufacturing facilities located in Germany, China, the U.S., Italy, India, Japan, Luxembourg, The Netherlands, the Philippines, Ireland and England. Components has principal manufacturing facilities located in the U.S., England and Canada. Medical Devices has principal manufacturing facilities in Costa Rica, the U.S. and Lithuania. Our corporate headquarters is located in East Aurora, New York. We believe that our properties have been adequately maintained and are generally in good condition. Operating leases for properties expire at various times from 2013 through 2034. Upon the expiration of our current leases, we believe that we will be able to either secure renewal terms or enter into leases for alternative locations at market terms. Item฀3. Legal฀Proceedings. From time to time, we are involved in legal proceedings. We are not a party to any pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations. Item฀4. Mine฀Safety฀Disclosures. Not applicable. 42 29599 10K Annual Report.pdf 14 11/28/12 12:04 PM


  • Page 45

    PART฀II Item฀5. Market฀for฀the฀Registrant’s฀Common฀Equity,฀Related฀Stockholder฀Matters฀and฀Issuer Purchases฀of฀Equity฀Securities. Our two classes of common shares, Class A common stock and Class B common stock, are traded on the New York Stock Exchange (NYSE) under the ticker symbols MOG.A and MOG.B. The following chart sets forth, for the periods indicated, the high and low sales prices of the Class A common stock and Class B common stock on the NYSE. Quarterly฀Stock฀Prices Class A Class B Fiscal฀Year฀Ended High Low High Low September฀29,฀2012 1st฀Quarter $ 44.72 $ 30.47 $ 44.62 $ 31.00 2nd฀Quarter 45.53 40.31 45.00 40.60 3rd฀Quarter 43.75 36.48 43.43 36.60 4th฀Quarter 41.76 34.77 41.30 34.67 October 1, 2011 1st Quarter $ 40.67 $ 33.97 $ 40.27 $ 34.26 2nd Quarter 46.38 39.24 46.25 40.42 3rd Quarter 46.46 39.54 46.14 39.29 4th Quarter 45.45 30.45 45.00 31.95 The number of shareholders of record of Class A common stock and Class B common stock was 948 and 421, respectively, as of November 16, 2012. We did not pay cash dividends on our Class A common stock or Class B common stock in 2011 or 2012 and have no plans to do so in the foreseeable future. The following table summarizes our purchases of our common stock for the quarter ended September 29, 2012. Issuer฀Purchases฀of฀Equity฀Securities (d) Maximum Number (or Approx. (c) Total number Dollar Value) of of Shares Shares that (a) Total Purchased as May Number of Part of Publicly Yet Be Shares (b) Average Announced Purchased Purchased Price Paid Plans Under Plans or Period (1)(2)(3) Per Share or Programs (4) Programs (4) July 1 - July 31, 2012 437 $ 35.77 — 1,000,000 August 1 - August 31, 2012 400 37.51 — 1,000,000 September 1 - September 29, 2012 42,080 38.92 — 1,000,000 Total 42,917 $ 38.88 — 1,000,000 (1) Purchases consisted of shares of Class B common stock from the Moog Inc. Retirement Savings Plan (RSP) as follows: July, 437 shares at $35.77 per share, August, 400 shares at $37.51 per share and September, 26,109 shares at $39.18 per share. 43 29599 10K Annual Report.pdf 15 11/28/12 12:04 PM


  • Page 46

    (2) In connection with the exercise of stock options, we accept, from time to time, delivery of shares to pay the exercise price of stock options. During September, we accepted delivery of 14,763 shares at $38.53 per share, in connection with the exercise of stock options. (3) In September, 1,208 shares at $38.12 per share, were returned to treasury for the settlement of the Animatics acquisition. (4) In December 2011, the Board of Directors authorized a share repurchase program. The program permits the purchase of up to 1,000,000 Class A or Class B common shares in open market or privately negotiated transactions at the discretion of management. Performance฀Graph The following graph and tables show the performance of the Company's Class A common stock compared to the NYSE Composite-Total Return Index and the S&P Aerospace & Defense Index for a $100 investment made on September 30, 2007, including reinvestment of any dividends. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Moog Inc., the NYSE Composite Index, and the S&P Aerospace & Defense Index $120 $120 $100 $100 $80 $80 $60 $60 $40 $40 $20 $20 $0 $0 9/07 9/08 9/09 9/10 9/11 9/12 9/07 9/08 9/09 9/10 9/11 9/12 Moog Inc. NYSE Composite S&P Aerospace & Defense Moog Inc. S&P Aerospace & Defense 9/07 9/08 9/09 9/10 9/11 9/12 Moog Inc. - Class A Common Stock $ 100.00 $ 97.59 $ 67.14 $ 80.81 $ 74.24 $ 86.19 NYSE Composite - Total Return Index 100.00 76.89 72.69 78.36 74.79 93.33 S&P Aerospace & Defense Index 100.00 74.58 70.91 80.65 81.33 99.12 44 Revised 29599 10Kpage 44 Report.pdf Annual (16).indd 116 11/30/1212:04 11/28/12 4:35PM PM


  • Page 47

    Item฀6. ฀฀฀฀Selected฀Financial฀Data. For a more detailed discussion of 2010 through 2012, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and Item 8, Financial Statements and Supplementary Data of this report. (dollars in thousands, except per share data) 2012(1) 2011(1) 2010(2) 2009(2)(3) 2008(2) RESULTS฀FROM฀OPERATIONS Net sales $ 2,469,536 $ 2,330,680 $ 2,114,252 $ 1,848,918 $ 1,902,666 Net earnings 152,462 136,021 108,094 85,045 119,068 Net earnings per share Basic $ 3.37 $ 2.99 $ 2.38 $ 2.00 $ 2.79 Diluted $ 3.33 $ 2.95 $ 2.36 $ 1.98 $ 2.75 Weighted-average shares outstanding Basic 45,246,960 45,501,806 45,363,738 42,598,321 42,604,268 Diluted 45,718,324 46,047,422 45,709,020 42,906,495 43,256,888 FINANCIAL฀POSITION Total assets $ 3,105,907 $ 2,842,967 $ 2,712,134 $ 2,634,317 $ 2,227,247 Working capital 885,032 834,056 812,805 764,137 713,292 Securitized debt 81,800 — — — — Indebtedness - senior 304,243 346,851 386,103 454,456 270,988 Indebtedness - senior subordinated 378,579 378,596 378,613 378,630 400,072 Shareholders’ equity 1,304,790 1,191,891 1,120,956 1,065,033 994,410 Shareholders’ equity per common share outstanding $ 28.80 $ 26.38 $ 24.70 $ 23.53 $ 23.30 SUPPLEMENTAL฀FINANCIAL฀DATA Capital expenditures $ 107,030 $ 83,695 $ 65,949 $ 81,826 $ 91,833 Depreciation and amortization 100,816 96,327 91,216 76,384 63,376 Research and development 116,403 106,385 102,600 100,022 109,599 Twelve-month backlog 1,279,307 1,324,809 1,181,303 1,097,760 861,694 RATIOS Net return on sales 6.2% 5.8% 5.1% 4.6% 6.3% Return on shareholders’ equity 12.1% 11.4% 9.8% 8.3% 12.7% Current ratio 2.33 2.53 2.70 2.71 2.89 Net debt to capitalization (4) 32.1% 33.9% 36.8% 41.4% 37.0% (1) Includes the effects of acquisitions. See Note 2 of the Consolidated Financial Statements at Item 8, Financial Statements and Supplementary Data of this report. (2) Includes the effects of acquisitions. In 2010, we acquired four businesses, one each in our Aircraft Controls and Industrial Systems segments and two in our Space and Defense Controls segment. In 2009, we acquired eight businesses, two each in our Aircraft Controls and Medical Devices segments, one in our Space and Defense Controls segment and three in our Industrial Systems segment. In 2008, we acquired two businesses, one each in our Space and Defense Controls and Components segments. (3) Includes the sale of Class A common stock on October 2, 2009. (4) Net debt is total debt less cash and cash equivalents. Capitalization is the sum of net debt and shareholders’ equity. 45 29599 10K Annual Report.pdf 17 11/28/12 12:04 PM


  • Page 48

    Item฀7. ฀Management's฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations. OVERVIEW We are a worldwide designer, manufacturer and integrator of high performance precision motion and fluid controls and control systems for a broad range of applications in aerospace and defense and industrial markets. Within the aerospace and defense market, our products and systems include military and commercial aircraft flight controls, thrust vector controls for space launch vehicles, controls for gun aiming, stabilization and automatic ammunition loading for armored combat vehicles, satellite positioning controls and controls for steering tactical and strategic missiles. In the industrial market, our products are used in a wide range of applications including injection molding machines, metal forming, heavy industry, material and automotive testing, pilot training simulators, wind energy, enteral clinical nutrition pumps, infusion therapy pumps, oil exploration, motors used in sleep apnea devices, power generation, surveillance systems and slip rings used on CT scanners. We operate under five segments, Aircraft Controls, Space and Defense Controls, Industrial Systems, Components and Medical Devices. Our principal manufacturing facilities are located in the United States, England, the Philippines, Germany, China, India, Italy, The Netherlands, Japan, Costa Rica, Luxembourg, Ireland and Canada. We have long-term contracts with some of our customers. These contracts are predominantly within Aircraft Controls and Space and Defense Controls and represent 32% of our sales. We recognize revenue on these contracts using the percentage of completion, cost-to-cost method of accounting as work progresses toward completion. The remainder of our sales are recognized when the risks and rewards of ownership and title to the product are transferred to the customer, principally as units are delivered or as service obligations are satisfied. This method of revenue recognition is predominantly used within the Industrial Systems, Components and Medical Devices segments, as well as with aftermarket activity. We concentrate on providing our customers with products designed and manufactured to the highest quality standards. In achieving a leadership position in the high performance, precision controls market, we have capitalized on our strengths, which include: • superior technical competence, • customer diversity and broad product portfolio, and • well-established international presence serving customers worldwide. We intend to increase our revenue base and improve our profitability and cash flows from operations by building on our market leadership positions, by strengthening our niche market positions in the principal markets that we serve and by extending our participation on the platforms we supply by providing more systems solutions. We also expect to maintain a balanced, diversified portfolio in terms of markets served, product applications, customer base and geographic presence. Our strategy to achieve our objectives includes: • maintaining our technological excellence by building upon our systems integration capabilities while solving our customers’ most demanding technical problems, • striving for continuing cost improvements, • taking advantage of our global capabilities, • developing products for new and emerging markets, • growing our profitable aftermarket business, and • capitalizing on strategic acquisitions and opportunities. We face numerous challenges to improve shareholder value. These include, but are not limited to, adjusting to dynamic global economic conditions that are influenced by governmental, industrial and commercial factors, pricing pressures from customers, strong competition, foreign currency fluctuations and increases in employee benefit costs. We address these challenges by focusing on strategic revenue growth and by continuing to improve operating efficiencies through various process and manufacturing initiatives and using low cost manufacturing facilities without compromising quality. 46 29599 10K Annual Report.pdf 18 11/28/12 12:04 PM


  • Page 49

    Acquisitions All of our acquisitions are accounted for under the purchase method and, accordingly, the operating results for the acquired companies are included in the consolidated statements of earnings from the respective dates of acquisition. Under purchase accounting, we record assets and liabilities at fair value and such amounts are reflected in the respective captions on the balance sheet. The purchase price described for each acquisition below is net of any cash acquired and includes debt issued or assumed. In 2012, we completed four business combinations. Two of these business combinations were in our Components segment. We acquired Protokraft, LLC, based in Tennessee, for $13 million plus contingent consideration with an initial fair value of $5 million. Protokraft designs and manufacturers opto-electronic transceivers, ethernet switches and media converters packaged into rugged, environmentally-sealed connectors. We also acquired Tritech International Limited, based in the UK, for $33 million. Tritech is a leading designer and manufacturer of high performance acoustic sensors, sonars, video cameras and mechanical tooling equipment. We also completed two business combinations in our Space and Defense Controls segment. We acquired Bradford Engineering, based in The Netherlands, for $13 million. Bradford is a developer and manufacturer of satellite equipment including attitude control, propulsion and thermal control subsystems. We also acquired In-Space Propulsion for $45 million. In-Space Propulsion has locations in New York, California, Ireland and the United Kingdom and is a developer and manufacturer of liquid propulsion systems and components for satellites and missile defense systems. In 2011, we completed three business combinations within two of our segments. We completed two business combinations within our Aircraft Controls segment, both of which are located in the U.S. We acquired Crossbow Technology Inc., based in California, for $32 million. Crossbow designs and manufacturers acceleration sensors that are integrated into inertial navigation and guidance systems used in a variety of aerospace, defense and transportation applications. We also acquired a business that complements our military aftermarket business for $2 million in cash. We completed one business combination within our Components segment by acquiring Animatics Corporation, based in California. The purchase price was $24 million, which included 466,541 shares of Moog Class A common stock valued at $19 million. Animatics supplies integrated servos, linear actuators and control electronics that are used in a variety of industrial, medical and defense applications. CRITICAL฀ACCOUNTING฀POLICIES Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by our application of accounting policies, which are discussed in Note 1 of Item 8, Financial Statements and Supplementary Data of this report. We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial results. These critical accounting policies have been reviewed with the Audit Committee of our Board of Directors. Revenue฀Recognition฀on฀Long-Term฀Contracts Revenue representing 32% of 2012 sales was accounted for using the percentage of completion, cost-to-cost method of accounting. This method of revenue recognition is predominantly used within the Aircraft Controls and Space and Defense Controls segments due to the contractual nature of the business activities, with the exception of their respective aftermarket activities. The contractual arrangements are either firm fixed-price or cost-plus contracts and are with the U.S. Government or its prime subcontractors, foreign governments or commercial aircraft manufacturers, including Boeing and Airbus. The nature of the contractual arrangements includes customers’ requirements for delivery of hardware as well as funded nonrecurring development work in anticipation of follow-on production orders. We recognize revenue on contracts in the current period using the percentage of completion, cost-to-cost method of accounting as work progresses toward completion as determined by the ratio of cumulative costs incurred to date to estimated total contract costs at completion, multiplied by the total estimated contract revenue, less cumulative revenue recognized in prior periods. Changes in estimates affecting sales, costs and profits are recognized in the period in which the change becomes known using the cumulative catch-up method of accounting, resulting in the cumulative effect of changes reflected in the period. Estimates are reviewed and updated quarterly for substantially all contracts. A significant change in an estimate on one or more contracts could have a material effect on our results of operations. 47 29599 10K Annual Report.pdf 19 11/28/12 12:04 PM


  • Page 50

    Occasionally, it is appropriate to combine or segment contracts. Contracts are combined in those limited circumstances when they are negotiated as a package in the same economic environment with an overall profit margin objective and constitute, in essence, an agreement to do a single project. In such cases, we recognize revenue and costs over the performance period of the combined contracts as if they were one. Contracts are segmented in limited circumstances if the customer had the right to accept separate elements of the contract and the total amount of the proposals on the separate components approximated the amount of the proposal on the entire project. For segmented contracts, we recognize revenue and costs as if they were separate contracts over the performance periods of the individual elements or phases. Contract costs include only allocable, allowable and reasonable costs which are included in cost of sales when incurred. For applicable Government contracts, contract costs are determined in accordance with the Federal Acquisition Regulations and the related Cost Accounting Standards. The nature of these costs includes development engineering costs and product manufacturing costs such as direct material, direct labor, other direct costs and indirect overhead costs. Contract profit is recorded as a result of the revenue recognized less costs incurred in any reporting period. Amounts representing performance incentives, penalties, contract claims or change orders are considered in estimating revenues, costs and profits when they can be reliably estimated and realization is considered probable. Revenue recognized on contracts for unresolved claims or unapproved contract change orders was not material in 2012, 2011 or 2010. Contract฀Loss฀Reserves At September 29, 2012, we had contract loss reserves of $48 million. For contracts with anticipated losses at completion, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations that are treated as period expenses. Loss reserves are more common on firm fixed-price contracts that involve, to varying degrees, the design and development of new and unique controls or control systems to meet the customers’ specifications. Reserves฀for฀Inventory฀Valuation At September 29, 2012, we had net inventories of $538 million, or 35% of current assets. Reserves for inventory were $97 million, or 15% of gross inventories. Inventories are stated at the lower-of-cost-or-market with cost determined primarily on the first-in, first-out method of valuation. We record valuation reserves to provide for slow-moving or obsolete inventory by using both a formula-based method that increases the valuation reserve as the inventory ages and, additionally, a specific identification method. We consider overall inventory levels in relation to firm customer backlog in addition to forecasted demand including aftermarket sales. Changes in these and other factors such as low demand and technological obsolescence could cause us to increase our reserves for inventory valuation, which would negatively impact our gross margin. As we record provisions within cost of sales to increase inventory valuation reserves, we establish a new, lower cost basis for the inventory. Reviews฀for฀Impairment฀of฀Goodwill At September 29, 2012, we had $763 million of goodwill, or 25% of total assets. We test goodwill for impairment for each of our reporting units at least annually, during our fourth quarter, and whenever events occur or circumstances change, such as changes in the business climate, poor indicators of operating performance or the sale or disposition of a significant portion of a reporting unit. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. Certain of our reporting units are our operating segments while others are one level below our operating segments. Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units. Companies are also allowed to bypass the qualitative analysis and perform a quantitative analysis if desired. Economic uncertainties and the length of time from the calculation of a baseline fair value are factors that we would consider in determining whether to perform a quantitative test. 48 29599 10K Annual Report.pdf 20 11/28/12 12:04 PM

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