avatar Moog Inc. Manufacturing
  • Location: New York 
  • Founded:
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    14 Moog ANNUAL R E PO RT 2 0 1 4 W H E N P E R F O R M A N C E ® R E A L L Y M A T T E R S


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    TA BLE O F CO NTE NTS Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chairman’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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Investor Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Form 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 FINA NCIA L PE R F O R MA NC E DILUTED EARNINGS PER SHARE RECENT FINANCIAL PERFORMANCE (In dollars) (Dollars and shares in millions, except per share data) $ 4.00 $ 3.52 2014 2013 $ 3.50 $ 3.33 $ 2.95 NET SALES $ 2,648 $ 2,610 $ 3.00 $ 2.75 $ 2.63 $ 2.50 $ 2.34 $ 2.36 NET EARNINGS $ 158 $ 120 $ 1.97 $ 1.98 $ 2.00 $ 1.64 DILUTED $ 1.45 $ 1.50 EARNINGS $ 3.52 $ 2.63 PER SHARE $ 1.00 EQUITY MARKET $ 2,841 $ 2,644 CAPITALIZATION* $ 0.50 AVERAGE $ 0.00 SHARES 45.0 45.8 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OUTSTANDING FISCAL YEAR 10 Year Compound Annual Growth Rate = 9% * Measured as of fiscal year end moog 1


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    CHAI R MA N’ S LE TTE R To Our Shareholders, Employees and Friends, Every day, 11,000+ Moog employees dedicate their time and energy to delivering outstanding products to our customers . This report is a testimony to their dedication in supporting the most demanding applications around the globe . We hope you find it informative . 2014 was a strong year for our Company . Earnings were up and cash flow was very strong . Total company sales were relatively flat with 2013 . We saw significant sales growth in our commercial aircraft market and a slight increase in our industrial businesses . Our space business was comparable with 2013 while our defense business portfolio was down slightly as the budget impacts of sequestration continued to play out . Our medical pumps business experienced a reduction in sales as we sought to divest this segment . Almost 80% of our products go into three main markets – defense, commercial aircraft and industrial . We also have three smaller markets, each less than 10% of our sales – energy, space and medical . In our defense markets, budget constraints have curbed spending on many platforms since the wind down of U .S . activities in Iraq and Afghanistan . We have seen single digit reductions in our overall defense revenues for the past couple of years and we are anticipating a similar trend in 2015 . We have responded by increasing our focus on foreign military opportunities and strengthening our partnerships with U .S . military depots to provide additional services on existing platforms . In addition, our content on the F-35 platform, the only major fighter program in the western world, bodes well for our longer-term defense outlook . Historically, spending on defense goes through a cycle every decade or so . The relatively slow pace of change in this market has allowed us to adjust our production capacity in line with our customer’s needs while ensuring we maintain the capability to respond to a future upswing in demand . Our customers in the commercial aircraft business continue to produce record numbers of airplanes . They are also introducing new, more fuel efficient models . Moog has a dominant position in flight controls on many of these new models, in particular the 787 at Boeing, the A350 at Airbus and the next generation E-Jets at Embraer . Our commercial aircraft OEM sales have more than doubled over the last five years and are positioned to continue growing over the coming five years . Our commercial aftermarket represents only about one-fifth of our total commercial book of business today, but over the coming years, as the fleet of new airplanes grows, our aftermarket revenue will also grow significantly . Looking out to the next decade, we expect the aftermarket to be about one-third of total commercial aircraft sales . In our industrial markets, our sales have largely followed the general trend in GDP growth in the major economies around the world . The strengthening economy in the U .S . has helped buoy sales into the general industrial automation arena in our domestic market . Europe, and Germany in particular, have been struggling to eke out any growth in 2014, and our sales of automation components to European machine builders have shown a similar trend . Finally, in Asia, the slowdown in the Chinese growth rate has resulted in sales of our industrial products about even with 2013 . Taken all together, our industrial market sales for 2014 were up modestly over 2013 . Sales of our products into the energy markets had a good year in 2014 . Sales into the offshore exploration market hit another record in 2014, after a record year in 2013 . In wind energy, we introduced a new technology which helped drive increased sales, with particular success in Latin America . In the space market, sales were level with 2013 in both the launch vehicle and the satellite component markets . Our Medical Devices segment had an eventful 2014 . This was the year we had planned to sell this segment . Back in 2013, we concluded that this segment was not core and believed it could perform better under alternative ownership . Over the first half of 2014, we conducted an extensive sale process . Unfortunately, we failed to find a qualified buyer and learned through the process that this segment consists of multiple product lines with differing appeal to potential buyers . We stopped the sale process in March 2014 and spent the remainder of the year restructuring the business to better position it to restart the sale process in 2015 . There are a couple of additional items of note as we wrap up 2014 . 2014 was a year of restructuring and portfolio adjustments . As the year came to a close, and we looked at our 2015 forecast, a weakening outlook in both the defense and space markets compelled us to restructure our Aircraft and Space & Defense segments . We also continued to refine our portfolio of product lines during the year in our Industrial segment . 2 moog


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    2014 was the year we increased shareholder value in the form of a share repurchase program . It was a year of slow organic growth, very strong cash flow and a quiet acquisition environment . We continue to look for adjacent acquisition opportunities which meet our strategic and financial goals . With patience, we believe the right opportunities will come along and our strong financial position will allow us to move quickly . In the meantime, as we continue to generate strong cash flow, we have determined that the best avenue to create shareholder value is to maintain a prudent financial structure and return the excess capital to shareholders . Between March and the end of September 2014, we repurchased 4 million shares, representing 9% of the total shares outstanding . With 2014 behind us, we are looking forward to another good year in 2015 . We are forecasting full year sales next year of $2 .66 billion, up 1% over 2014 . We are projecting increases in margins and earnings per share, as well as another year of strong free cash flow . Commercial aircraft OEM sales will continue to grow nicely next year; however, Aircraft segment sales in total will be marginally lower on weaker military and commercial aftermarket sales . We are forecasting small increases in sales in our Space & Defense, Industrial and Components segments . We think sales in our Medical Devices segment will be flat with 2014 . As always, there are both opportunities and risks associated with our 2015 outlook . On the opportunities side, we could see a pickup in our global industrial markets and our commercial aircraft aftermarket may be stronger than we are forecasting . On the risks side, defense spending remains a concern and meeting our production cost targets on our new commercial aircraft programs will continue to be a major area of focus . The recent drop in the price of crude oil could also negatively impact our off-shore energy business . As always, we try to provide an outlook which balances these pluses and minuses . As we look to the future, our focus remains unchanged . Our financial goals are growth, margin improvement and strong cash generation . We will continue to invest in R&D to drive long-term organic growth while looking for adjacent acquisitions to increase our market share or broaden our scope of supply with our existing customers . We will continuously review our portfolio of product lines to ensure we are following a strategy which maximizes long-term value creation and enhances margin performance . We will promote lean techniques to deliver superior value to our customers, while increasing our cash flow and improving our returns on capital . Finally, we will consider all capital allocation decisions in the light of long-term shareholder returns . Despite some continued market headwinds, 2014 was a good year for our Company . We did not deviate from our fundamental strategy . We strive to be the world leader in high-performance control systems . We have three major initiatives in support of this strategy – Lean, Innovation and Talent Development . • Lean is about today . It is about continuously improving our processes to deliver value to our customers . It is about everybody, everyday seeking to get better and better . We are on a journey to make Lean a way of life throughout our Company . • Innovation is about tomorrow . It is about bringing new technologies and new business models to market that change the basis of competition and capture the next generation of applications . It is the life blood of our Company . • Talent Development is about our people . It is about ensuring that everybody has the opportunity to be the very best they can be . It is engrained in the culture of our Company – a culture of mutual trust and confidence . In 2015, we will continue to invest our energies and talents in serving our customers and advancing our three major initiatives . We hope to come back to you next year to report on another successful year for our Company . Respectfully submitted, moog 3


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    OFFI CERS A ND D I R E C TO R S Left to Right: Pat Roche, Jay Hennig, Harald Seiffer, Sash Eranki, Warren Johnson, John Scannell, Don Fishback, Gary Szakmary, Larry Ball, Sean Gartland, Dick Aubrecht JOHN R. SCANNELL BRIAN J. LIPKE WARREN C. JOHNSON LAWRENCE J. BALL Chairman of the Board Director President President Chief Executive Officer Chairman and CEO Aircraft Controls Components Gibraltar Industries RICHARD A. AUBRECHT SASIDHAR ERANKI TIMOTHY P. BALKIN Vice Chairman of the Board ROBERT H. MASKREY Vice President Treasurer VP – Strategy and Technology Director Deputy General Manager Assistant Secretary Director Retired Executive VP, COO Aircraft Controls Moog Inc . JENNIFER WALTER WILLIAM G. GISEL, JR. JAY K. HENNIG Controller Director DONALD R. FISHBACK President* Principal Accounting Officer President and CEO Vice President Space and Defense Rich Products Corp . Chief Financial Officer ROBERT J. OLIVIERI SEAN GARTLAND Secretary PETER J. GUNDERMANN GARY A. SZAKMARY President Partner Director Vice President Industrial Systems Hodgson Russ, LLP President and CEO Chief Human Resources Officer Astronics Corp . HARALD E. SEIFFER PATRICK J. ROCHE Vice President KRAIG H. KAYSER Vice President General Manager, Europe Director Global Systems and Services President and CEO Seneca Foods Corp . *Effective November 7, 2014 Jay K. Hennig resigned from the Company. 4 moog


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    OU R TE CH NO LO G Y For over 60 years, Moog engineers have been designing and manufacturing the most advanced motion control products for applications where precise control of velocity, force, acceleration and fluid flow are critical . Customers select our products when performance really matters . 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 . Our products reflect the culture that our employees embrace – a culture where the opportunity to solve a really challenging control problem is always welcomed . AIRCRAFT FLY-BY-WIRE SERVOACTUATOR ROCKET ENGINE Pilot commands are sent to the flight control computer and The Moog DST-12 is the highest performing bi-propellant subsequently to electronic controllers mounted near or on engine in its thrust class . In a typical application, 12 of these the actuators that position the flight control surfaces on an engines are arranged on a 5-7 ton telecommunication satellite aircraft’s wings and tail . The actuator shown is one of three to provide a nominal force of 5-pounds per thruster to nudge redundant linear actuators that control the rudder surface on the satellite into its proper attitude and maintain the satellite’s the Boeing 787 Dreamliner . These move the rudder to the left position in orbit . In 2013, four of these engines were also used and right in response to commands from the flight computer . to put NASA’s Lunar Atmosphere and Dust Environment Key attributes include onboard electronics for loop closure Explorer (LADEE) into orbit around the Moon . Over 200 engines and a 5000 psi hydraulic operating pressure . have been delivered with a 100% on-orbit success rate . SLIP RING SIMULATION TABLE Slip rings allow the transfer of power and data through a Moog simulation tables are used to simulate acceleration rotating interface . The Ethernet design shown meets the and displacement outputs . Integrated control hardware and challenge of matching impedance, while controlling crosstalk software provide a flexible, high-performance solution in and managing data losses . Over 10,000 slip ring solutions hydraulic or electric options . The systems incorporate fatigue are available with combinations of data and power in multiple rated hydrostatic servoactuators that can deliver more than mechanical configurations . Applications include blade 14 g of vertical acceleration to payloads beyond 1,500 lbs . de-icing, packaging, machining centers, robotics, marine and Typical tests performed include vehicle component R&D, medical equipment . vehicle ride and comfort, driving simulation and functional testing for turrets and antennas . moog 5


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    A I RCR A F T C O NTR O LS We supply integrated systems and critical control products to airframers and aftermarket customers for military, commercial and business aircraft. For 2014, revenues from development, production and aftermarket support of our aircraft products were $1 .1 billion . Commercial aircraft sales were 18% higher than 2013, while military sales were down 4% . On the commercial side, we provide flight controls for Boeing’s commercial aircraft lineup and saw a 25% increase in Boeing OEM sales . Production rates on the 787 Dreamliner continue to increase with deliveries of the 787-9 commencing during the year . Our products on the 787 control all of the primary and secondary flight surfaces, horizontal stabilizer, leading edge slats and trailing edge flaps . To date, 60 customers from around the world have ordered more than 1,000 Dreamliners . Airbus’ A350 wide body is in the early stages of production and was recently awarded its flight certification . Our content includes the primary flight control actuation and trailing edge flap actuation . The aircraft will enter service by the end of 2014 and will be flown by more than 39 customers . Moog’s Total Support program provides airlines with a comprehensive range of aftermarket services for the A350 and 787, including maintenance support and 24/7 inventory access at Moog’s worldwide stocking locations . Embraer’s E-Jet regional jet program recently completed a preliminary design review for the E190-E2 aircraft . Moog is providing the primary flight control system, including flight control computers and software, flight control actuators and related control electronics . This is the first of three models for the E2 family with the first flight scheduled for 2016 and entry into service in 2018 . In the business jet market, we provide the flight control computers, primary and secondary flight control actuators, high lift system and cockpit controls for Gulfstream’s G280® super mid-size aircraft and the high lift system on the G650® ultra-long range aircraft . On future Gulfstream models, the G500® and G600®, we’ll provide the flap drive system, including flap actuation, control electronics and software and the pilot directional control system, including rudder pedals, sensors and linkages . Our largest military flight control program is the F-35 Joint Strike Fighter, with all three variants currently in low rate production . International partner countries for the program include Australia, Canada, Denmark, Italy, the Netherlands, Norway, Turkey and the United Kingdom . To date, 115 aircraft have been delivered . Future deliveries are slotted for the U .S . and partner countries and foreign military sales to Israel, Japan and the Republic of Korea . The KC-46 tanker, in development at Boeing, is based on the 767 aircraft platform with a modernized fly-by-wire refueling boom . Moog’s actuation system extends, retracts and guides the boom . First flight is expected in 2015 with deliveries starting in 2017 . We continue to support the U .S . Air Force C-5M Super Galaxy modernization program, our largest aircraft aftermarket program . We are replacing all of the Leading Edge Slat System (32 actuators per aircraft) and all of the ground and flight spoilers (18 actuators per aircraft) . Lockheed Martin has delivered 23 upgraded aircraft to the U .S . Air Force with 29 more deliveries scheduled through 2018 . We also provide significant aftermarket support for the F-15, F-18, V-22 Osprey and Black Hawk and Seahawk® (H-60/S-70) helicopters . For 2015, our revenue forecast for the Aircraft Controls segment is $1 .1 billion with commercial aircraft sales of $563 million and military aircraft sales of $538 million . 6 moog


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    AIRBUS A350 XWB – The Airbus A350 XWB is the world’s newest widebody airliner. In 2014, five A350 XWB test aircraft completed more than 2,600 flight hours as part of the aircraft’s certification program. Both the European Aviation Safety Agency (EASA) and the U.S. Federal Aviation Administration (FAA) recently granted Type Certification for the A350-900 aircraft. With a 25% reduction in fuel-burn and seating capacity for 276 to 369 passengers, the aircraft shares common type rating with the A330, furthering the Airbus concept of flight operation commonality between its fly-by-wire aircraft families. Moog supplies all of the A350 primary flight control actuation as well as all of the trailing edge flap actuation. Courtesy of Airbus S.A.S./H. Goussé moog 7


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    A I RCR A F T C O NTR O LS PRODUCTS Commercial Airplanes: COMPETITIVE ADVANTAGES • Integrated primary and secondary flight • Boeing 737, 747, 767, 777, 787 • Flight control system design and control systems • Airbus A320, A330, A350, A380 integration • Flight control computers and software • COMAC C919 • Complete actuation system integration • Actuator control electronics • Embraer E-Jets E2 capability • Flight control actuators using hydraulic, • Bombardier Q400 • Unparalleled experience in design of mechanical, electromechanical and Business Jets: primary and secondary flight control electrohydrostatic technologies systems, both in the U .S . and overseas • Bombardier Challenger 300, 604, 605 • Stabilizer trim controls and multi-axis feel and Global Express, Cessna Citation X, • State-of-the-art technology in flight and trim systems Gulfstream G280, G350, G400, G450, controls, engine controls, navigation and G500, G550, G600, G650 guidance, and active vibration controls • Wingfold, bladefold and weapons bay actuation systems Military and Commercial Helicopters: • World-class manufacturing facilities staffed with a skilled, experienced and • Active vibration control systems • H-60/S-70, H-53, EH-101, S-76, S-92, team-based workforce • Engine thrust vector control actuation V-22, AH-64, A109, A129, AB139, AW159, AW609, Future Lynx, 525 • Focused, highly-responsive global systems aftermarket support organization • Flight control servovalves Military Engine Controls: • Engine control actuators and servovalves • F-404, F-414, F-110, F-119, F-135, EJ200, AE2100, T406, RTM322, T700 COMPETITORS • Aircraft braking and steering selector manifolds and servovalves Commercial Engine Controls: • Parker Hannifin, UTC (Goodrich, Hamilton • CF-6, GE90, V2500, RB211 and Trent, Sundstrand), Liebherr, Nabtesco, • MEMS-based inertial sensors and inertial Honeywell APUs, PW 901 Woodward, Curtiss-Wright measurement units • Ground-based navigation aids Customer Support: • All current production programs above MAJOR PROGRAMS plus legacy programs including A-7, A-10, A300, A340, AH-64, AMX, B-1B, Military Aircraft: B-2, B-52, BAE-146, C-5, C-130, C-141, • F-35, F-15, F/A-18E/F, EA-18G, F-16, CH-46, CH-47, CH-53, DC-8, DC-9, KC-46, A400M, Korea T-50, C-27J, DC-10, E-2C, EA-6B, F-2, F-4, F-100, C-295, CN-235, Eurofighter-Typhoon, F/A-18C/D, F/A-22, Hawk, KC-10, JAS 39, India LCA, Japan XC-2, XP-1, KC-135, MD-11, MD-80, MD-90, P-3, Hawk AJT, M346 T-45, Tornado, U-2, VC-10, 757 Unmanned Aerial Systems: • X-47B UCAS-D, Mantis, Hunter, Heron, Searcher Business Jets Military Aircraft OEM $ 48 M $ 349 M Commercial Aircraft Aftermarket $ 130 M Military Aircraft Commercial Aftermarket Aircraft OEM $ 223 M $ 368 M FY 2014 SALES – $1,118 M 8 moog


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    MH-60S Seahawk® Courtesy of U.S. Navy, MC Spec. 3rd Class Eric Coffer Boeing 787-9 Courtesy of Max Niesson, AirTeam Dutch F-35C Joint Strike Fighter and F/A-18F Super Hornet Courtesy of U.S. Navy and Lockheed Martin/Matt Short MV-22B Osprey Gulfstream G600® Courtesy of U.S. Navy, MC Spec. Seaman Jonathan Nelson Courtesy of Gulfstream moog 9


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    SPA CE A ND D E F E NSE C O NTR O LS We have a systems level understanding of our customers’ applications and a commitment to provide unmatched mission critical solutions for land, sea, air and space platforms. Revenues in the Space and Defense segment were $395 million in 2014 . Space market sales were $220 million and Defense sales were $175 million . During the second half of the year, we incurred $5 million in restructuring costs in the segment . We’ve expanded our global presence in the space access and exploration markets and have evolved into a higher-tier systems supplier, often providing hardware, integration and launch support for satellites and the launch vehicles that carry them into orbit . During the year we provided hardware and support for 24 launch vehicles and over 45 spacecraft . Our largest development programs include the Space Launch System (SLS) and the Boeing Soft Capture System for the CST-100 . The SLS is designed to be flexible for crew or cargo missions and will back up NASA’s commercial and international partner transportation services to the International Space Station . We also provided hardware and services for the launch of six ORBCOMM Generation 2 (OG2) satellites . The six spacecraft included a complete Moog propulsion system and relied on a modular satellite dispenser built on multiple Moog EELV secondary payload adapters, or ESPA rings . The entire payload “stack” was protected from launch vehicle vibrations and shock using a Moog SoftRide vibration isolation system . In addition, Moog provided the dispenser electrical harness and performed the integration of the dispenser/spacecraft assembly at SpaceX’s payload processing facility at Cape Canaveral, Florida . Within the defense market, our proven electromechanical actuation systems control turret aiming and stabilization on land, air and sea platforms . The U .S . Marine Corps LAV-25 and European CV90 vehicles feature Moog systems and the U .S . Air Force AC-130J gunship is fitted with a precision strike package which includes Moog actuation for its 30mm and 105mm weapons . We’ve also expanded our turret drive system capabilities to include the U .S . Navy MK46 weapon system, a naval turret that uses a 30mm high velocity cannon for shipboard self-defense . Utilizing Moog actuation, the gun can be operated locally or from a remote console on the Landing Platform Dock (LPD-17 class) or from the mission control center on the Littoral Combat Ship (LCS-1 class) . In 2014, we were awarded a contract to supply more than one thousand actuators for the next 10 Virginia-class nuclear submarines . Moog’s Orrville, Ohio facility has installed its technology on every U .S . nuclear submarine starting with the George Washington class in 1958 and has been supporting the Virginia class program since 1998 . The safety of the crew and the success of every mission depends on Moog’s quiet actuation technology . We also delivered more than 11,000 missile fin steering controls for the HELLFIRE®, TOW and other U .S . missile programs in 2014 . Moog, in conjunction with its defense-industry partners, recently demonstrated the firing of a HELLFIRE® missile from a ground vehicle using our weapon Stores Management System (SMS) . The SMS is a newly designed weapon controller that provides the interface for targeting sensors, operator stations and command-and-control systems . Our surveillance portfolio includes rugged cameras and precision positioning systems and web-based remotely operated systems for commercial and military use . In 2014, the U .S . Department of State installed Moog imaging systems in overseas facilities to detect terrorist and security threats in low-light and night-time conditions . We faced many challenges in this segment in 2014 and have engaged in a range of activities, including restructuring, to reduce segment overhead and improve sales . For 2015, the Space and Defense revenue forecast is $403 million . 10 moog


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    CREW SPACE TRANSPORTATION SYSTEM, CST-100 AND INTERNATIONAL SPACE STATION – Boeing was selected to develop the Crew Space Transportation System, the CST-100, as part of NASA’s Commercial Crew Program. It is designed to transport up to seven passengers or a mix of crew and cargo to the International Space Station (ISS) and can be re-used up to 10 times. The first unmanned flight is scheduled for early 2017 with the first crew flying to the International Space Station in mid-2017. Moog is currently providing propulsion system valves, avionics and the actuation control system to enable soft capture of the spacecraft while autonomously docking at the ISS. Courtesy of Boeing moog 11


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    SPA CE A ND D E F E NSE C O NTR O LS PRODUCTS MAJOR PROGRAMS COMPETITIVE ADVANTAGES • Thrust vector control actuation systems, Spacecraft and Payload Applications: • Multi-tier provider capable of components, avionics, propulsion controls and • LS-1300, Eurostar, Spacebus, AEHF, systems and prime level integration structures for missiles and launch vehicles Boeing 702, LM A2100, NASA Mars • Fluid and motion control heritage • Liquid rocket engines, tanks, chemical Curiosity, DS-1000/2000, MAVEN, • World-class, high volume manufacturing and electric propulsion systems, EAGLE, GEOStar-2, James Webb Space for missile fin controls subsystems and components for Telescopes, GPS III, Galileo, ORBCOMM • High reliability electronics design with spacecraft and launch vehicles Second Generation, NICER, SkySat, assembly and test facilities • Solar array drives, antenna pointing SmallGeo mechanisms, reaction wheels and sun Launch Vehicle and Strategic Missile sensors for spacecraft Controls: COMPETITORS • Spacecraft avionics and software, • Trident D-5, GMD, Minuteman III, Spacecraft Controls: occultation science payloads, GPS Antares®, Atlas V, Delta IV, Ariane 5, • Propulsion – Airbus, IHI Aerospace, Vacco, receivers and communications Vega, H-IIA, Minotaur, Falcon 9, NASA’s ValveTech transceivers Space Launch System and Orion, • Motion Controls – Aeroflex, RUAG, Sierra • Vibration suppression for aerospace, CST-100 Commercial Crew Vehicle Nevada Corp . defense and commercial applications Missile Steering Controls: • Vibration Control – ATA Engineering, • Fin actuation systems, divert and attitude • HELLFIRE®, TOW, Tomahawk, EKV, MALD® Honeywell, Lord Corp . control components for missiles and Defense Controls: Spacecraft Avionics: interceptors • LAV-25, CV90 family, FLW 100/200 RWS, • BAE, SEAKR, Southwest Research Institute • Weapon Stores Management Systems AC-130 Stinger II, Littoral Combat Ship, (SMS) for use on air, land and sea Missile and Launch Vehicle Steering and G/ATOR Radar platforms for the deployment of missiles, Propulsion Controls: Naval Systems: guns and rockets • General Dynamics - OTS, Honeywell, • Virginia-class submarines, USS Gerald R . Parker Hannifin, SABCA, UTC Aerospace • EM actuators, motor controllers, and slip Ford aircraft carrier Systems, Vacco, Valcor, Woodward rings for turreted weapon systems, ammunition handling and expeditionary Sensor and Surveillance Systems: Defense Control Systems: radar deployment • Military, industrial, commercial, • Curtiss-Wright, ESW, Woodward • EM and EH actuation products for naval transportation and process control Naval Systems: ships, submarines and autonomous applications • Curtiss-Wright (Exlar), Flowserve Limitorque, underwater vehicles Honeywell, Sargent Aerospace & Defense • High definition, network, visible and Surveillance/Security: thermal cameras, pan and tilt positioners, rugged tripods and surveillance systems • Chess Dynamics, Cohu, Pelco by Schneider Electric, RVision, Videotec Space $ 220 M Defense $ 175 M FY 2014 SALES – $395 M 12 moog


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    Littoral Combat Ship USS Freedom (LCS-1), MK46 Weapon System – Surface Warfare Package Courtesy of U.S. Navy, MC Spec, 1st Class James R. Evans Moog EXO™ HD Camera Series Space Launch System (SLS) Courtesy of NASA/MSFC HELLFIRE® Missile Fin Steering Controls ORBCOMM OG2 Satellites on Moog ESPA Rings Courtesy of U.S. Navy, AO 3rd Class Rosana Cruz Martinez Courtesy of Sierra Nevada Corporation moog 13


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    INDUSTR I A L SY S TE MS Our customers are partners and we take a collaborative approach to solving their most difficult motion control problems with electric, hydraulic and hybrid solutions. Industrial Systems sales in 2014 were $591 million, with industrial automation sales accounting for $307 million, energy sales of $158 million and simulation and test sales of $126 million . In 25 countries worldwide, we deliver superior value in applications where performance, reliability and durability are critical . Our major industrial markets, including motion controls for plastics machines, metal forming equipment and steel mills, experienced stronger demand during the year . Moog hydraulic, electric and hybrid systems are used in the most demanding applications and extremely harsh environments . An in-depth understanding of the capabilities of each technology for specific application requirements allows us to collaborate with customers to deliver the best solution for their specific needs . Since 1982, Moog engineers have worked closely with Formula 1™ race teams to help them design and produce the most technologically advanced racing cars in the world . For 2014, dramatic rule changes were introduced to promote and showcase the efficiencies of hybrid technology . During the 2014 season, a typical F1 racing car utilized up to eight Moog electro- hydraulic valves as well as servo hydraulic actuators, pressure limiting valves and power assisted steering valves . In 2014, our wind turbine pitch control sales stabilized, led by strong sales in Brazil . We have more than 35,000 onshore and offshore wind turbine pitch control installations and the market is an important one for our future growth . Our introduction of a new AC system has been well received as the system offers improved performance in a market where reliability and uptime are critical . In the oil and gas industry, design engineers use our servovalves for flow and pressure control with hydraulic motors on topside oil rigs . To meet the rugged requirements for oil and gas drilling, engineers are designing servovalves with onboard microprocessing . These valves combine rugged construction with fieldbus technology to offer machine builders advanced functionality, system diagnostics and simplified maintenance . Our hydraulic and electric simulation solutions enable product test labs to perform research and development testing for prototypes and products . In the auto test market, Chang’an Mazda is using our turn-key tire coupled simulation system for performance and durability testing in Mazda’s first Chinese R&D center . Thule Group recently installed a second Moog hydraulic simulation table at its test lab in Sweden . Thule’s products include vehicle racks for bikes, luggage, skis and surfboards . The test system, in use 24 hours a day, simulates road and terrain conditions as part of their product development and qualification process . Our electric motion bases, installed on flight simulators, were the first to attain Level D Flight Certification by the U .S . Federal Aviation Authority (FAA) . The Level D rating is based on the evaluation of a simulator’s realism in relation to flying an aircraft . Installations include airline and private training centers and we expect to benefit from increased pilot training requirements, new commercial aircraft deliveries and planned fleet replacements . Industrial Systems revenues for 2015 are forecasted at $600 million . Our experience in designing, manufacturing and supporting customers in our specialty markets is our greatest asset . As our customers continue to challenge us with their difficult motion control problems, we’ll support them with offerings that are innovative, reliable and supportable . 14 moog


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    FULL FLIGHT MOTION SIMULATOR, AIRBUS – As the A350 XWB airplane enters service, airline flight crews prepare by training on a simulator that incorporates exact seating, flight deck, flight controls and a real-world visual system. The A350 full-flight simulator is Airbus’ first all electric motion system simulator at the company’s Toulouse, France training center. To date. thirty-nine customers worldwide have ordered the A350 XWB. Moog’s electric motion bases are designed to provide a high-fidelity environment that enhances safety and the operational effectiveness of air crews by delivering the same or improved performance when compared to a hydraulic system. Moog provides the electric actuators, controls and motion software on the simulator. Courtesy of Airbus S.A.S. / P. Pigeyre moog 15


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    INDUSTR I A L SY S TE MS PRODUCTS MAJOR SECTORS Aftermarket: • Portfolio of electric servo motors and Industrial Automation: • Moog Global Support offers world-class electric actuators for light industrial • Plastic injection and blow molding repair and maintenance services and flexible automation to large machinery applications machines – hydraulic and electric products programs for upgrades, preventative for improved speed, performance and maintenance and annual/multi-year contracts • Controllers, servo drives and software for a broad range of motion control applications energy efficiency • Hydraulic servovalves, ranging from • Steel mills – servovalves, servoactuators COMPETITIVE ADVANTAGES miniature valves for Formula 1™ race cars and servocontrollers for improved • Global organization focused on collaborating to large valves for industrial applications dimensional accuracy and surface finish with customers and valves with embedded intelligence • Metal forming machinery and presses – • Ability to improve customers’ machine • A wide range of high-performance servo products to improve performance and performance with motion control solutions pumps for high-end industrial applications productivity in a wide range of machines and world-class products Energy: • Significant domain expertise in our SYSTEMS • Wind turbines – pitch systems and blade customers’ machines, industry sensing systems offering efficient operation, applications and design challenges • Hydraulic and electric solutions designed increased safety and extended turbine life • Experience in the design and application to perform with precision control in harsh of products and system solutions for use • Gas and steam turbines – solutions for environments and demanding applications in challenging environments precise control and greater safety of fuel • Electric hexapod motion systems for flight metering and guide vane positioning simulation and automotive test systems • Oil and gas exploration and production – COMPETITORS • Control loading and G-seat solutions for solutions for downhole drilling, topside flight training simulators and subsea equipment Servovalves: • Integrated hydraulic manifold systems Simulation and Test: • Bosch Rexroth, Parker Hannifin incorporating servovalves, pumps, Electric servodrives, servomotors, • Flight simulation – six-degrees-of- manifolds, sensors and power units servoactuation: freedom motion bases, control loading • Electric pitch control and load sensing systems and control cabinets for realistic • Danaher, Baumüller, Siemens, Exlar systems for wind turbines pilot training Simulation and Test Systems: • Automotive testing systems – turnkey • Rexroth Hydraudyne, MTS Systems Corp . TURNKEY SYSTEMS systems for performance testing Wind Energy: • Multi-axis simulation tables and • Aerospace testing – turnkey systems for • SSB, RE-energy Electric (Suzhou) Co ., Ltd . suspension, kinetics and compliance, iron bird, structural and component testing systems for automotive testing • Medical simulation – realistic dental and • Driving simulators to aid R&D engineers cataract surgery training simulators in auto development and to train drivers Simulation and Test $ 126 M Energy $ 158 M Industrial Automation $ 307 M FY 2014 SALES – $591 M 16 moog


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    Wind Energy Turbines Courtesy of Pati Photo Steam Turbines Courtesy of Hywit Dimyadi Steel Mill Processing Oil and Gas Exploration and Production Courtesy of Fisherss Courtesy of Henrik Lehnerer Motorsports Hydraulic Simulation Table – Product Testing Courtesy of Tan Kian Khoon Courtesy of Thule AB Sweden moog 17


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    COMP O NE NTS Our business is focused on solving difficult engineering problems for motion control, air moving, electronics and fiber optic applications. Components revenues for 2014 were $425 million . This segment specializes in solving motion and power and data transmission challenges in harsh environments with slip rings, motors, actuators, air moving, fiber optics and sonar products . Slip rings transmit power and broadband data signals across rotating interfaces . We offer more than 10,000 slip ring designs that are used in a variety of rotating electromechanical systems to transfer power and data for de-icing, flight control and helicopter blade position . Moog slip rings are also installed on tank turrets, satellites, CT scanners, underwater vehicles, mooring systems and wind turbines . We are currently supporting a U .S . Department of Defense modernization effort for the Abrams M1A1 tank . This Main Battle Tank system enhancement includes the miniaturization of electronics and enhanced power generation, distribution and management in the tank’s rotating turret . The upgrade requires a newly designed Moog turret slip ring assembly . The U .S . Air Force GPS III satellite program is the next generation global positioning system for military and civilian use . With a lifespan of 15 years, it will deliver three times as much accuracy and enhanced power to provide improved GPS coverage in hard to reach areas . We provide solar array drive assemblies for the satellite . We have designed products for the offshore petroleum, oceanographic, seismic and maritime industries for more than 20 years . Water depth and weather conditions heavily influence equipment specifications for deep water exploration, oil drilling and production . Operators require rugged equipment and maximum performance and uptime . Moog custom and vessel-specific swivels are installed on buoys, turret moorings and loading towers for Floating Production, Storage and Off-Loading (FPSO) vessels . Our swivels are heavily customized and designed with specific requirements for each tanker or FPSO vessel conversion or retrofit . They incorporate electrical, toroidal fluid and optical swivels, and can withstand extreme temperatures, wind, wave height and ship movement . Internal turret moorings can be permanent and weather-safe, or can be disconnected, allowing vessels to leave a field to avoid typhoons, hurricanes and icebergs . External turrets permit vessels to weathervane 360° in moderate to extreme conditions . Our high-performance acoustic sensors, sonar and video cameras are installed on Remotely Operated Vehicles (ROVs) and deployed in a variety of critical undersea applications that require exceptional performance and reliability . Search and rescue, navigation, mapping and excavating operations deploy Moog sonar products and our RAMS™ system is deployed beneath FPSO vessels to provide real-time sonar monitoring for mooring lines and risers . Moog engineers understand the motor specifications for aerospace, industrial and medical applications . Our brushless DC motors are installed on critical systems including the brakes on the Boeing 787 Dreamliner aircraft and the sleep apnea devices and portable oxygen concentrators used by thousands of people around the world . Moog’s Aspen team designs custom permanent magnet brushless DC motors and digital controls for applications where reliability, low noise and custom sizing are required . Our SmartMotors™ and linear actuators are used in factory automation, robotics, CNC cutting, packaging and winding and spooling applications . These can be linked together to create a synchronized machine that requires minimal programming and maintenance . For 2015, our Components segment revenue forecast is $440 million . We continue to look for strategic acquisitions to expand our product offerings and grow our customer base . 18 moog


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    FPSO OSX3 MOORING SYSTEM – The external turret mooring system on the OSX3 provides a safe and reliable means of mooring the FPSO in the Campos Basin, offshore of Brazil. The turret extends from the bow of the vessel using 12 chain legs fastened to the seabed by anchor piles. The turret was designed for a combination of 17 risers and 9 umbilicals. During offloading, the mooring must be capable of withstanding the additional load of a shuttle tanker moored in tandem off of the FPSO’s stern. Moog Focal designed and manufactured a medium voltage electrical swivel, low voltage electrical/optical swivel and associated electronics for the mooring system. Courtesy of Benny Van Bockel moog 19


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    COMP O NE NTS PRODUCTS • Secondary flight controls, primary flight Medical: controls for UAVs and target drones – • Sleep disorder devices, ventilators and Motion Technology: EM servo and utility actuators portable oxygen concentrators – motors • Slip ring assemblies – electromechanical • Aircraft servos and instruments – motors, and blowers devices that allow the transfer of power LED and analog instruments and broadband data signals from a • Medical imaging – slip rings and fiber optic stationary to a rotating structure • Communication networking – Ethernet rotary joints switches, media converters • Medical and laboratory centrifuges – • Brush and brushless DC torque and servomotors Space Controls: motors and slip rings • Fractional horsepower brush and • Solar array drive assemblies – slip rings, brushless DC motors and drives motors, resolvers COMPETITIVE ADVANTAGES • Linear servomotors Defense Controls: • Market leader in slip rings and fractional • Position sensors • Armored vehicle and pedestal turrets – horsepower brushless DC motors slip rings, resolvers, motors and air • Servo and utility actuators • Market leader in marine marketplace for moving • SmartMotors™ rotary power and data transfer • Radar – servo and utility actuators, slip • Fluid rotary unions • Multi-component and system level engineering rings, motors, resolvers and integrated knowledge and applications support • Solenoids EM solutions • Integration of components into sub-systems • Air moving systems Industrial: providing higher value, higher level solutions • Aircraft displays and avionic instruments • Video security and surveillance • Alternators equipment – slip rings • Robotics and material handling – motors COMPETITORS Fiber Optics and Communications: and slip rings Slip Rings: • Fiber optic rotary joints, fiber optic multiplexers, transmitters and receivers • Telecommunications and computer • Schleifring, Aeroflex Motion Control, equipment cooling – air moving solutions Stemmann • Fiber optic modems, Ethernet switches, media converters, optical tranceivers Energy / Marine : Commercial Motors: • Subsea acoustic sensors and sonars • Wind Turbines – slip rings • Danaher Motion, Allied Motion, Ametek • Remotely Operated Vehicles (ROV) – Military Motors: slip rings, fiber optic rotary joints, • Danaher Motion, Woodward MPC, General MAJOR SECTORS multiplexers and media converters Dynamics GIT Military and Commercial Aircraft: • Subsea imaging – acoustic sensors, Actuators: • Electro-optic / infrared sensors and sonars and video cameras gimbaled systems – motors, air movers, • Whippany Actuation Systems, Woodward • Floating Production, Storage and MPC, Kearfott slip rings, resolvers, RVDTs, integrated Offloading (FPSO) – explosion-proof slip assemblies, Ethernet switches Air Moving: rings, monitoring • EBM-PAPST, Ametek Military Aircraft Commercial Aircraft $ 91 M $ 32 M Medical $ 67 M Space and Defense $ 56 M Energy/Marine $ 85 M Industrial $ 94 M FY 2014 SALES – $425 M 20 moog


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    F-35 Joint Srike Fighter, Electro-Optical Targeting System (EOTS) Courtesy of Lockheed Martin M1A1 Abrams Tank Courtesy of U.S. Marine Corps, Staff Sgt. Brian A. Lautenslager U.S. Air Force GPS III Satellite Courtesy of Lockheed Martin Packaging Equipment MQ-9 Reaper, Multi-Spectral Targeting System (MTS-B) Courtesy of A.J. Cotton Photography Courtesy of Air National Guard, Sr. Airman Michael Quiboloy moog 21


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    MED I C A L D E V I C E S Our medical products are designed to simplify procedures, increase patient safety and enhance patient and caregiver outcomes. Our Medical Devices segment supports intravenous (IV) therapy and enteral nutrition delivery with a suite of pumps and components as well as products sold to OEM manufacturers . Medical sales in 2014 were $120 million . A year ago, we determined that the medical pump business is not core to our other businesses long-term . We’re continuing our process of seeking a suitable buyer, and we’ve broadened our process to consider options for each of the product lines, as appropriate . Moog Curlin infusion therapy pumps offer IV, intra-arterial, subcutaneous or epidural flow of fluids and precise medicine delivery . beeLINE® disposable pumps offer continuous infusion for chemotherapy, pain management or antibiotic applications . Our Aitecs syringe pumps are used in anesthesia and general ward applications, mostly in Eastern European countries . 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 . These pumps are used by infant, pediatric and adult tube-fed patients and are designed for ease of use and mobility . Moog medical products are marketed by our regional distribution network for IV and enteral pumps sold in the U .S . and Canada, allowing us to work closely with key accounts and capture new business . For 2015, our Medical Devices revenue forecast is $120 million . Administration Sensors and Sets Handpieces $ 41 M $ 23 M Pumps $ 38 M Other Products $ 18 M FY 2014 SALES – $120 M 22 moog


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    Infinity® Orange™ Enteral Pump Courtesy of Martin Valigursky Zevex Enteral Pumps Curlin® PainSmart Infusion Pumps beeLINE® Disposable Pumps Aitecs Syringe Pump PRODUCTS SALES CHANNELS • Extremely versatile for all areas in hospitals with enhanced safety and ease of use from • Electronic ambulatory and acute care • Moog Medical direct: infusion pumps, neonates to adult patients infusion pumps administration sets, enteral feeding products, sensors and surgical handpieces • Full range of products from low end/cost • Enteral feeding pumps for acute care, effective to high-end, including single and long-term care and ambulatory care for • Major global clinical nutrition companies: double syringe pumps, PCA, pumps, stand specialized clinical nutrition international distribution of enteral products alone and stackable pumps • Syringe infusion pumps and safety software • Distributors and dealers worldwide • Moog manufactures many of the critical that reduce drug administration errors component technologies that go into • Sensors used in infusion pump systems for COMPETITIVE ADVANTAGES infusion therapy pumping devices bubble detection and air-in-line sensing • We are specialized in our markets, • Surgical handpieces used primarily in concentrating on pumps and their respective COMPETITORS cataract surgery administration sets, creating a market • B. Braun, CareFusion, Smiths Medical, • Sterilization and comprehensive lab services solution focus Hospira, Baxter International, Covidien moog 23


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    FINA NC I A L H I G H LI G H TS STOCK PRICE COMPARISON SALES (Dollars in millions) (Moog Class A and Class B Stock) $3,000 $ 2,648 $ 2,610 $ 2,470 MOOG A/B HIGH LOW $2,500 $ 2,331 $ 2,114 $ 1,903 1ST A $ 69.97 $ 56.07 $ 2,000 $ 1,849 QUARTER B $ 69.80 $ 56.67 $ 1,558 2 ND A $ 69.45 $ 57.11 $ 1,500 $ 1,306 QUARTER B $ 69.44 $ 57.61 $1,051 $ 939 $ 1,000 3 RD A $ 75.00 $ 60.00 QUARTER B $ 74.65 $ 61.10 $ 500 4 TH A $ 74.20 $ 65.42 QUARTER B $ 73.83 $ 65.98 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Bloomberg FISCAL YEAR REVENUE BY SEGMENT NET EARNINGS (Dollars in millions) Space and Industrial $160 $ 158 Defense Systems $ 152 Controls 22% $ 136 15% $140 Components Aircraft 16% $ 119 $ 120 $120 Controls $ 108 42% Medical $ 101 Devices $ 100 5% $ 85 $ 81 $ 80 $ 65 $ 57 $ 60 $ 40 REVENUE BY MARKET $ 20 Industrial Commercial 22% Aircraft $0 22% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FISCAL YEAR Energy Defense 9% 32% Space 8% DILUTED EARNINGS PER SHARE Medical (In dollars) 7% $ 3.75 $ 3.52 $ 3.50 $ 3.33 $ 3.25 $ 2.95 $ 3.00 $ 2.75 $ 2.63 GEOGRAPHIC DISTRIBUTION $ 2.75 $ 2.50 $ 2.34 $ 2.36 International $ 2.25 41% $ 1.97 $ 1.98 $ 2.00 $ 1.64 United $ 1.75 States $ 1.45 59% $ 1.50 $ 1.25 $ 1.00 $ 0.75 $ 0.50 $ 0.25 $ 0.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Moog’s military and government funded revenue is 37% and commercial revenue is 63% FISCAL YEAR 24 moog


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    FINA NC I A L R E V I E W (Dollars in millions, except per share data) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 SEGMENT SALES: AIRCRAFT CONTROLS $ 1,118 $ 1,060 $ 964 $ 850 $ 757 $ 663 $ 673 $ 587 $ 527 $ 452 $ 412 SPACE AND DEFENSE CONTROLS $ 395 $ 396 $ 359 $ 356 $ 325 $ 275 $ 253 $ 185 $ 148 $ 128 $ 116 INDUSTRIAL SYSTEMS $ 591 $ 592 $ 634 $ 629 $ 546 $ 455 $ 532 $ 436 $ 381 $ 315 $ 282 COMPONENTS $ 425 $ 415 $ 374 $ 353 $ 360 $ 346 $ 341 $ 283 $ 238 $ 156 $ 130 MEDICAL DEVICES $ 120 $ 147 $ 140 $ 142 $ 127 $ 111 $ 103 $ 68 $ 13 — — NET SALES $ 2,648 $ 2,610 $ 2,470 $ 2,331 $ 2,114 $ 1,849 $ 1,903 $ 1,558 $ 1,306 $ 1,051 $ 939 EARNINGS BEFORE TAXES $ 219 $ 165 $ 209 $ 184 $ 149 $ 111 $ 168 $ 144 $ 120 $ 95 $ 83 NET EARNINGS $ 158 $ 120 $ 152 $ 136 $ 108 $ 85 $ 119 $ 101 $ 81 $ 65 $ 57 NET RETURN ON SALES 6.0% 4.6% 6.2% 5.8% 5.1% 4.6% 6.3% 6.5% 6.2% 6.2% 6.1% EARNINGS PER SHARE: BASIC $ 3.57 $ 2.66 $ 3.37 $ 2.99 $ 2.38 $ 2.00 $ 2.79 $ 2.38 $ 2.01 $ 1.68 $ 1.48 DILUTED $ 3.52 $ 2.63 $ 3.33 $ 2.95 $ 2.36 $ 1.98 $ 2.75 $ 2.34 $ 1.97 $ 1.64 $ 1.45 DILUTED WEIGHTED-AVERAGE 45.0 45.8 45.7 46.0 45.7 42.9 43.3 43.1 41.2 39.5 39.6 SHARES OUTSTANDING (in millions) RESEARCH AND DEVELOPMENT $ 139 $ 135 $ 116 $ 106 $ 103 $ 100 $ 110 $ 103 $ 69 $ 44 $ 30 CAPITAL EXPENDITURES $ 79 $ 93 $ 107 $ 84 $ 66 $ 82 $ 92 $ 97 $ 84 $ 41 $ 34 DEPRECIATION AND AMORTIZATION $ 109 $ 108 $ 101 $ 96 $ 91 $ 76 $ 63 $ 52 $ 47 $ 36 $ 36 AT YEAR END: TOTAL ASSETS $ 3,208 $ 3,237 $ 3,106 $ 2,843 $ 2,712 $ 2,634 $ 2,227 $ 2,006 $ 1,608 $ 1,303 $ 1,125 WORKING CAPITAL $ 941 $ 924 $ 885 $ 834 $ 813 $ 764 $ 713 $ 617 $ 420 $ 313 $ 322 INDEBTEDNESS $ 874 $ 709 $ 765 $ 725 $ 765 $ 833 $ 671 $ 618 $ 387 $ 349 $ 311 SHAREHOLDERS’ EQUITY $ 1,347 $ 1,536 $ 1,305 $ 1,192 $ 1,121 $ 1,065 $ 994 $ 877 $ 763 $ 521 $ 472 RETURN ON SHAREHOLDERS’ 10.4% 8.6% 12.1% 11.4% 9.8% 8.3% 12.7% 12.3% 12.9% 12.8% 12.6% EQUITY SHAREHOLDERS’ EQUITY PER $ 32.51 $ 33.86 $ 28.80 $ 26.38 $ 24.70 $ 23.53 $ 23.30 $ 20.63 $ 18.04 $ 13.48 $ 12.23 COMMON SHARE OUTSTANDING BACKLOG (12 month) $ 1,340 $ 1,296 $ 1,279 $ 1,325 $ 1,181 $ 1,098 $ 862 $ 775 $ 645 $ 539 $ 450 NUMBER OF FULL-TIME 11,031 11,152 10,976 10,320 10,117 10,005 8,844 8,364 7,273 6,662 5,781 EMPLOYEES Please Note: Amounts may not equal the total due to rounding. moog 25


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    I NVESTO R I NF O R MATI O N REPORTS Shareholders receive a copy of our annual report and Form 10-K . All other public reports are available on our website or by contacting us via email, telephone or letter at: Investor Relations Moog Inc. East Aurora, New York 14052-0018 Phone: 716-687-4225 Email: investorrelations@moog.com ELECTRONIC INFORMATION ABOUT MOOG In our annual report, we convey key information about our financial results . In addition, we have a website for investors . The site includes SEC filings, archived conference call remarks, answers to frequently asked questions, corporate governance information, press releases and links to our transfer agent . Please visit our website at: http://www .moog .com . Information contained on our website is not incorporated into this annual report or our other SEC filings . ANNUAL MEETING Our Annual Meeting of Shareholders will be held on January 7, 2015 at the Albright-Knox Art Gallery, 1285 Elmwood Avenue, Buffalo, New York . Proxy cards can be voted by internet, telephone or letter . STOCK EXCHANGE Our two classes of common shares are traded on the New York Stock Exchange under the ticker symbols MOG .A and MOG .B . FINANCIAL MAILING LIST Shareholders who hold Moog stock in the names of their brokers or bank nominees but wish to receive press releases by e-mail should contact Investor Relations at Moog . TRANSFER AGENT AND REGISTRAR Wells Fargo Shareowner Services is the stock transfer agent and registrar maintaining shareholder accounting records . If assistance is needed, it is possible for shareholders to view all facets of their accounts online at: www .shareowneronline .com . The agent will respond to questions on change of ownership, lost stock certificates and consolidation of accounts . Please direct inquiries to: Wells Fargo Shareowner Services or Wells Fargo Shareowner Services PO Box 64874 1110 Centre Pointe Curve, Suite 101 St. Paul, MN 55164-0874 Mendota Heights, MN 55120 Toll Free: 1-800-468-9716 AFFIRMATIVE ACTION PROGRAM In recognition of our role as a contributing corporate citizen, we have adopted all programs and procedures in our Affirmative Action Program as a matter of Corporate policy . Independent Auditors Ernst & Young LLP 26 moog


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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 27, 2014 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 1-05129 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. 1


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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 28, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $2,561 million. The number of shares of common stock outstanding as of the close of business on November 5, 2014 was: Class A 37,074,391 Class B 3,577,679. Portions of the 2014 Proxy Statement to Shareholders (“2014 Proxy”) are incorporated by reference into Part III of this Form 10-K. 2


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    Inc. FORM 10-K INDEX PART I Item 1 Business 5-8 Item 1A Risk Factors 9-13 Item 1B Unresolved Staff Comments 14 Item 2 Properties 14 Item 3 Legal Proceedings 14 Item 4 Mine Safety Disclosures 14 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 15-17 Item 6 Selected Financial Data 18 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 19-39 Item 7A Quantitative and Qualitative Disclosures About Market Risk 40 Item 8 Financial Statements and Supplementary Data 41-80 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 81 Item 9A Controls and Procedures 81 Item 9B Other Information 81 PART III Item 10 Directors, Executive Officers and Corporate Governance 82 Item 11 Executive Compensation 82 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 82 Item 13 Certain Relationships and Related Transactions, and Director Independence 82 Item 14 Principal Accountant Fees and Services 82 PART IV Item 15 Exhibits and Financial Statement Schedules 82-87 3


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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. 4


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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 2014, 2013 and 2012 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, reliability, 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 Aerospace Systems (Goodrich, Hamilton Sundstrand), Liebherr Group, Nabtesco, Woodward and Curtiss-Wright. Space and Defense Controls: Honeywell, Parker Hannifin, Vacco, ValveTech, Marotta, SABCA, Valcor, Aeroflex, UTC Aerospace Systems, Flowserve Limitorque, Sargent Aerospace and Defense, RUAG, Woodward, Sierra-Nevada Corp., Videotec, Lord Corp., SEAKR Engineering, Southwest Research Institute, Curtiss-Wright, Cohu, Pelco, IHI Aerospace, ATA Engineering, BAE, General Dynamics - OTS, ESW, Woodward, RVision and Chess Dynamics. Industrial Systems: Bosch Rexroth, Danaher, Baumuller, Siemens, Parker Hannifin, REenergy Electric (Suzhou), MTS Systems Corp., Exlar and Rexroth Hydradyne. Components: Danaher, Allied Motion Technologies, Ametek, Woodward MPC, Schleifring, Aeroflex Motion Control, Kearfott, Stemmann, General Dynamics - GIT, Whippany Actuation Systems and EBM - PAPST. Medical Devices: B. Braun Medical, CareFusion, Smiths Medical, Hospira, Baxter International, CME Medical and Covidien. Government Contracts. All U.S. Government contracts are subject to termination by the U.S. Government. In 2014, sales under U.S. Government contracts represented 29% of total sales and were primarily within our Aircraft Controls, Space and Defense Controls and Components segments. 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 products and systems, such as those in the energy market of our Industrial Systems segment, do experience seasonal variations in sales levels. 5


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    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 and represented over 5% of sales in 2014. Employees. On September 27, 2014, we employed 11,031 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 49% of 2014 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 35% of 2014 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 2014, aftermarket sales accounted for 16% of total sales. Significant customers in our five operating segments include: Aircraft Controls: Boeing, Lockheed Martin, Airbus, Japan Aerospace, BAE Systems, Bombardier, Gulfstream, Honeywell, Northrop Grumman, Bell Helicopter, Embraer and the U.S. Government. Space and Defense Controls: Boeing, Lockheed Martin, Aerojet Rocketdyne, Raytheon, United Launch Alliance, Orbital Sciences, General Dynamics, Airbus Defence & Space and ATK. Industrial Systems: Senvion, CAE, FlightSafety International, Schlumberger, Alstom, Husky Energy, Arburg, Shuler and Danieli. Components: Philips Medical, MacArtney, Lockheed Martin, Raytheon and the U.S. Government. Medical Devices: Nestle, Danone Nutricia, B. Braun Medical and Abbott Laboratories. 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 relations 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 relations 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. 6


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    Other than Robert J. Oliveri and the changes noted below, the principal occupations of our officers for the past five years have been their employment with us in the same positions they currently hold. Robert J. Oliveri'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, 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. On December 2, 2010, Sean Gartland was named Vice President. Previously, he was General Manager of the International Group, Pacific operation. 7


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    Year First Elected Executive Officers Age Officer John R. Scannell Chairman of the Board; Chief Executive Officer Director; Member, Executive Committee 51 2006 Richard A. Aubrecht Vice Chairman of the Board; Vice President - Strategy and Technology; Director; Member, Executive Committee 70 1980 Donald R. Fishback Vice President; Chief Financial Officer 58 1985 Warren C. Johnson Vice President 55 2000 Jay K. Hennig Vice President 54 2002 Lawrence J. Ball Vice President 60 2004 Harald E. Seiffer Vice President 55 2005 Sasidhar Eranki Vice President 60 2006 Sean Gartland Vice President 51 2010 Gary A. Szakmary Vice President 63 2011 Patrick J. Roche Vice President 51 2012 Jennifer Walter Controller; Principal Accounting Officer 43 2008 Timothy P. Balkin Treasurer; Assistant Secretary 55 2000 Robert J. Olivieri Secretary 64 2014 8


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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 sales. 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 markets 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, reliability, 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 2014, sales under U.S. Government contracts represented 29% of our total sales, primarily within Aircraft Controls, Space and Defense Controls and Components. Sales to foreign governments represented 8% 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. Additionally, the 2011 Budget Control Act reduced the Department of Defense spending (or sequestration) by approximately $500 billion over the next decade. These uniform cuts could have ramifications for the aerospace and defense market. The Bipartisan Budget Act of 2013, passed and signed into law in January 2014, provides some opportunities to lessen the effects of sequestration. This act kept the defense base spending budget flat at approximately $500 billion for Federal Government's 2014 and 2015 fiscal years. This provided over $30 billion in sequester relief over the two fiscal years in exchange for extending the imposition of sequestration to fiscal years 2022 and 2023. However, we expect we will continue to face significant challenges over the next decade as a result of sequestration. Any reduction in future Department of Defense spending levels could 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. 9


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    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 34% of 2014 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. Changes in these required estimates could have a material adverse 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 impacts of scope change negotiations are considered in estimating revenues, costs and profits when they can be reliably estimated and realization is considered probable. Due to the substantial judgments involved with this process, our actual results could differ materially or could be settled unfavorably from our estimates. We enter into fixed-price contracts, which could subject us to losses if we have cost overruns. In 2014, fixed- price contracts represented 91% 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. We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects. As of September 27, 2014, our twelve-month backlog was $1.3 billion, which represents confirmed orders we believe will be recognized as revenue within the next twelve months. There is no assurance that our customers will purchase all the orders represented in our backlog. In particular, the U.S. Government’s ability not to exercise contract options or to modify, curtail or terminate our major programs or contracts makes the calculation of backlog subject to numerous uncertainties. Due to the uncertain nature of our contracts with the U.S. Government, we may never realize revenue from some of the orders that are included in our backlog. If we fail to realize the full amounts included in our backlog, our future revenue and growth prospects may be adversely affected. 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. 10


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    The loss of The Boeing Company as a customer or a significant reduction in sales to The Boeing Company could adversely impact our operating results. We provide The Boeing Company, or Boeing, with controls for both military and commercial applications, which, in total, were 16% of our 2014 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 2019 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. 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, intrusions or new software implementations. 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 intrusions 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. We are initiating a multi-year business information system transformation and standardization project. This endeavor will occupy additional resources, diverting attention from other operational activities, and may cause our information systems to perform unexpectedly. While we expect to invest significant resources throughout the planning and project management process, unanticipated delays could occur. 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. 11


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    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 27, 2014, goodwill was $758 million and other intangible assets were $178 million of our total assets of $3.2 billion. Our goodwill and other intangible assets may increase in the future since our strategy includes growth 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. In the fourth quarter of 2013, we took a $38 million goodwill impairment charge in our Medical Devices segment. Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or if we engage in divesting activities. 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. We may not know the potential exposure to unanticipated liabilities. Additionally, the expected benefits or synergies might not be fully realized, integrating operations and personnel may be slowed and key employees, suppliers or customers of the acquired business may depart. We may also engage in divesting activities if the business operations do not meet our strategic objectives. Divestitures could adversely affect our profitability and, under certain circumstances, require us to record impairment charges or a loss as a result of a transaction. In pursuing acquisition opportunities, integrating acquired businesses, or divesting business operations, management's time and attention may be diverted from our core business, all the while consuming resources and incurring expenses for these activities. 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 2014, 41% of our net sales were 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 2014, 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. 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. From time to time, we may file voluntary disclosure reports with the U.S. Department of State and the Department of Commerce regarding certain violations of U.S. export laws and regulations discovered by us in the course of our business activities, employee training or internal reviews and audits. To date, voluntary disclosures have not resulted in a fine, penalty, or export privilege denial or restriction that has had a material adverse impact on our financial condition or ability to export. Our failure, or failure 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 could have a material adverse effect on us. 12


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    New governmental regulations and customer demands related to conflict minerals may adversely impact our operating results. Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, required the Securities and Exchange Commission to establish new disclosure requirements for publicly-traded companies whose products contain metals derived from conflict minerals originating from the Democratic Republic of Congo (DRC) and its neighboring countries. The implementation of these requirements could result in additional costs associated with complying with the disclosure requirements. As this final rule will likely impact our suppliers, the availability of raw materials used in our operations could be negatively impacted, including an increase in the price of raw materials. In addition, because our global supply chain is complex, we may face commercial challenges if we are unable to sufficiently verify the origins for all metals used in our products through the due diligence procedures that we implement. We will work with our suppliers and customers to exclude, to the extent feasible, from our product supply chain the use of conflict minerals originating from the DRC or adjoining countries. 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, 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. 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, results of operations and cash flows. Terrorist attacks worldwide have caused instability from time to time in global financial markets and the aviation industry. In 2014, 22% of our net sales were 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. 13


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    Item 1B. Unresolved Staff Comments. None. Item 2. Properties. On September 27, 2014, we occupied 5,216,000 square feet of space, distributed by segment as follows: Square Feet Owned Leased Total Aircraft Controls 1,448,000 372,000 1,820,000 Space and Defense Controls 531,000 412,000 943,000 Industrial Systems 744,000 563,000 1,307,000 Components 629,000 233,000 862,000 Medical Devices 137,000 125,000 262,000 Corporate Headquarters 20,000 2,000 22,000 Total 3,509,000 1,707,000 5,216,000 We have principal manufacturing facilities in the United States and countries throughout the world in the following locations: Aircraft Controls - U.S., United Kingdom and Philippines. Space and Defense Controls - U.S., Netherlands, United Kingdom, Germany and Ireland. Industrial Systems - Germany, U.S., Italy, China, Netherlands, Luxembourg, Philippines, India, Japan, Ireland and United Kingdom. Components - U.S., United Kingdom and Canada. Medical Devices - U.S., Costa Rica 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 our properties expire at various times from 2015 through 2036. 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, results of operations or cash flows. Item 4. Mine Safety Disclosures. Not applicable. 14


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    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 27, 2014 1st Quarter $ 69.97 $ 56.07 $ 69.80 $ 56.67 2nd Quarter 69.45 57.11 69.44 57.61 3rd Quarter 75.00 60.00 74.65 61.10 4th Quarter 74.20 65.42 73.83 65.98 September 28, 2013 1st Quarter $ 41.38 $ 33.46 $ 41.00 $ 33.75 2nd Quarter 47.41 40.03 47.50 40.20 3rd Quarter 52.49 42.85 51.87 43.40 4th Quarter 59.81 50.38 59.40 50.69 The number of shareholders of record of Class A common stock and Class B common stock was 853 and 375, respectively, as of November 5, 2014. We did not pay cash dividends on our Class A common stock or Class B common stock in 2013 or 2014 and have no current plans to do so. 15


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    The following table summarizes our purchases of our common stock for the quarter ended September 27, 2014. 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) Per Share or Programs (3) Programs (3) June 29 - July 31, 2014 378,790 $ 69.77 377,497 1,490,569 August 1 - August 31, 2014 684,168 68.67 670,446 5,820,123 September 1 - September 27, 2014 847,114 69.90 822,000 4,998,123 Total 1,910,072 $ 69.43 1,869,943 4,998,123 (1) Reflects purchases by the Moog Inc. Stock Employee Compensation Trust Agreement ("SECT") of shares of Class B common stock from the Moog Inc. Retirement Savings Plan ("RSP") as follows: 1,293 shares at $69.94 per share during July, 13,722 shares at $68.87 per share during August and 23,594 shares at $70.45 per share during September. Purchases by the SECT from members of the Moog family included: 300 shares of Class B common stock at $70.75 per share on September 22, 2014. (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. On September 9, 2014, we accepted delivery of 1,220 shares at $71.77 per share, in connection with the exercise of stock options. (3) In December 2011, the Board of Directors authorized a share repurchase program, which was amended in January 2014. The program permits the purchase of up to 4,000,000 shares of Class A or Class B common stock in open market or privately negotiated transactions at the discretion of management. In August 2014, the Board of Directors authorized an additional repurchase of up to 5,000,000 shares of Class A or Class B common stock under identical terms and conditions. During July, we purchased 376,056 Class A shares at an average price of $69.77 per share and 1,441 Class B shares at an average price of $70.71 per share. In August, we purchased 669,506 Class A shares at an average price of $68.67 per share and 940 Class B shares at an average price of $67.47 per share. In September, we purchased 822,000 Class A shares at an average price of $69.88 per share. 16


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    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, 2009, including reinvestment of any dividends. 9/09 9/10 9/11 9/12 9/13 9/14 Moog Inc. - Class A Common Stock $ 100.00 $ 120.37 $ 110.58 $ 128.37 $ 198.88 $ 231.86 NYSE Composite - Total Return Index 100.00 107.81 102.89 128.40 153.59 174.97 S&P Aerospace & Defense Index 100.00 113.73 114.69 139.79 202.76 239.62 17


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    Item 6. Selected Financial Data. For a more detailed discussion of 2012 through 2014, 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) 2014(1) 2013(2)(3) 2012(4) 2011(4) 2010(4) RESULTS FROM OPERATIONS Net sales $ 2,648,385 $ 2,610,311 $ 2,469,536 $ 2,330,680 $ 2,114,252 Net earnings 158,198 120,497 152,462 136,021 108,094 Net earnings per share Basic $ 3.57 $ 2.66 $ 3.37 $ 2.99 $ 2.38 Diluted $ 3.52 $ 2.63 $ 3.33 $ 2.95 $ 2.36 Weighted-average shares outstanding Basic 44,362,412 45,335,336 45,246,960 45,501,806 45,363,738 Diluted 44,952,437 45,823,720 45,718,324 46,047,422 45,709,020 FINANCIAL POSITION Total assets $ 3,208,452 $ 3,237,095 $ 3,105,907 $ 2,842,967 $ 2,712,134 Working capital 941,260 924,145 885,032 834,056 812,805 Securitized debt 100,000 100,000 81,800 — — Indebtedness - senior 774,036 417,595 304,243 346,851 386,103 Indebtedness - senior subordinated — 191,562 378,579 378,596 378,613 Shareholders’ equity 1,347,415 1,535,765 1,304,790 1,191,891 1,120,956 Shareholders’ equity per common share outstanding $ 32.51 $ 33.86 $ 28.80 $ 26.38 $ 24.70 SUPPLEMENTAL FINANCIAL DATA Capital expenditures $ 78,771 $ 93,174 $ 107,030 $ 83,695 $ 65,949 Depreciation and amortization 109,259 108,073 100,816 96,327 91,216 Research and development 139,462 134,652 116,403 106,385 102,600 Twelve-month backlog (5) 1,339,959 1,296,371 1,279,307 1,324,809 1,181,303 RATIOS Net return on sales 6.0% 4.6% 6.2% 5.8% 5.1% Return on shareholders’ equity 10.4% 8.6% 12.1% 11.4% 9.8% Current ratio 2.30 2.28 2.33 2.53 2.70 Net debt to capitalization (6) 32.3% 26.4% 32.1% 33.9% 36.8% (1) Includes the effects of our share repurchase program. See the Consolidated Statements of Shareholders' Equity and Consolidated Statements of Cash Flow at Item 8, Financial Statements and Supplementary Data of this report. (2) Includes goodwill impairment charge. See Note 6 of the Consolidated Financial Statements at Item 8, Financial Statements and Supplementary Data of this report. (3) Includes the effects of acquisitions. See Note 2 of the Consolidated Financial Statements at Item 8, Financial Statements and Supplementary Data of this report. (4) Includes the effects of acquisitions. In 2012, we acquired four business, two each in our Components and Space and Defense Controls segments. In 2011, we acquired three business, two in our Aircraft Controls segment and one in our Components segment. 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. (5) Twelve-month backlog is defined as confirmed orders we believe will be recognized as revenue within the next twelve months. (6) Net debt is total debt less cash and cash equivalents. Capitalization is the sum of net debt and shareholders’ equity. 18


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    Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW We are a worldwide designer, manufacturer and systems 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: Defense market - primary and secondary flight controls for military aircraft, tactical and strategic missile steering controls and gun aiming controls, stabilization and automatic ammunition loading controls for armored combat vehicles. Commercial aircraft market - primary and secondary flight controls for commercial aircraft. Commercial space market - space satellite positioning controls and thrust vector controls for space launch vehicles. In the industrial market, our products are used in a wide range of applications including: Industrial automation market - injection molding, metal forming, heavy industry, material and automotive testing, pilot training simulators and surveillance systems. Energy market - oil and gas exploration, wind energy and power generation. Medical market - motors used in sleep apnea devices, enteral clinical nutrition and infusion therapy pumps and 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, United Kingdom, Philippines, Germany, Italy, Netherlands, China, Costa Rica, Japan, Luxembourg, India, Canada and Ireland. We have long-term contracts with some of our customers. These contracts are predominantly within Aircraft Controls and Space and Defense Controls and represent 34%, 33% and 32% of our sales in 2014, 2013 and 2012, respectively. 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. Our products are applied in demanding applications, "When Performance Really Matters®." We believe we have achieved a leadership position in the high performance, precision controls market, by capitalizing on our strengths, which include: superior technical competence in delivering mission-critical solutions, an innovative customer-intimacy approach, a diverse base of customers and end markets served by a broad product portfolio, well-established international presence serving customers worldwide, and a proven ability to successfully undertake investments designed to enhance our control systems product franchise and drive continued growth. These strengths afford us the ability to innovate our current solutions into new, complimentary technologies, providing us the opportunity to expand our product scope supply from one market to another. In addition, we will continue to strive for achieving substantial content positions on the platforms on which we currently participate, while strengthening our position in the current niche markets we serve. We also look for innovation in all aspects of our business, employing new technologies to improve productivity and to develop innovative business models. 19


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    These activities will help us achieve our financial objectives of increasing our revenue base and improving our long term profitability and cash flow from operations while continuously focusing on internal cost improvement initiatives. In doing so, we expect to maintain a balanced, diversified portfolio in terms of markets served, product applications, customer base and geographic presence. Our fundamental strategies to achieve our objectives include: maintaining our technological excellence by building upon our systems integration capabilities while solving our customers’ most demanding technical problems in applications "When Performance Really Matters®," utilizing our global capabilities and strong engineering heritage, continuing to grow our profitable aftermarket business, capitalizing on strategic acquisitions and opportunities, maximizing customer value through continuous cost improvements, and investing in talent development to accelerate our leadership capability and employee performance. 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, by continuing to improve operating efficiencies through various process and manufacturing initiatives and using low cost manufacturing facilities without compromising quality. Based on periodic strategy reviews, including the financial outlook of our business, we may also engage in restructuring activities, including reducing overhead, consolidating facilities and exiting some product lines. Financial Highlights Net earnings in 2014 grew 31% to a company record of $158 million compared to 2013. We also generated $287 million in cash flow from operations in 2014. We continued to increase shareholder return by repurchasing 4 million shares of common stock. We lowered our average outstanding shares 2%, going from 46 million in 2013 to 45 million in 2014. Earnings per share grew 34%, driven in part by the absence of last year's goodwill impairment and loss on divestiture, as well as lower interest rates and our share repurchase program. Our strong cash from operations is mainly due to favorable timing on collections of receivables and improved inventory turns. We achieved this level of cash from operations in 2014 despite higher levels of pension contributions. Acquisitions and Divestitures 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 consolidated balance sheets. The purchase price described for each acquisition below is net of any cash acquired, includes debt issued or assumed and the fair value of contingent consideration. We did not complete any acquisitions in 2014. In 2013, we completed two business combinations. One of these business combinations was in our Space and Defense Controls segment. We acquired Broad Reach Engineering for $46 million. Based in Colorado, Broad Reach Engineering is a leading designer and manufacturer of spaceflight electronics and software for aerospace, scientific, commercial and military missions. The company also provides ground testing, launch and on-orbit operations. We also completed one business combination in our Components segment. We acquired Aspen Motion Technologies, located in Radford, Virginia for $34 million. Aspen is a designer and manufacturer of high-performance permanent magnet brushless DC motors, integrated digital controls and motorized impellers. Aspen also specializes in custom motor designs for end product integration in a variety of high-performance industrial applications. In 2013, we completed one divestiture in our Medical Devices segment. We sold our Buffalo, New York operations of Ethox Medical for $5 million. Also in 2013, we began exploring strategic options for our Medical Devices segment, including the possibility of selling the entire segment. 20


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    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 34% of 2014 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. 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 U.S. 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 2014, 2013 or 2012. Contract Loss Reserves At September 27, 2014, we had contract loss reserves of $36 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. 21


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    Reserves for Inventory Valuation At September 27, 2014, we had net inventories of $517 million, or 31% of current assets. Reserves for inventory were $99 million, or 16% 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 27, 2014, we had $758 million of goodwill, or 24% 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 consider in determining whether to perform a quantitative test. When we evaluate the potential for goodwill impairment using a qualitative assessment, we consider factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative two-step impairment test. Quantitative testing first requires a comparison of the fair value of each reporting unit to its carrying value. We use the discounted cash flow method to estimate the fair value of our reporting units. The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, operating margins and cash flows, the terminal growth rate and the discount rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit's current business, expected developments and operational strategies over a five-year period. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and any loss must be measured. In measuring the impairment loss, the implied fair value of goodwill is determined by assigning a fair value to all of the reporting unit's assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination at fair value. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss would be recognized in an amount equal to that excess. Interim Test We performed an interim test on goodwill for impairment for our Medical Devices reporting unit in the first quarter of 2014. We performed a quantitative assessment for this reporting unit, which had $85 million of goodwill as of the date of our test. Based on this test, the fair value of our Medical Devices reporting unit exceeded its carrying value by 1%. Therefore, goodwill was not impaired. The determination of each of our assumptions is subjective and requires significant estimates. Changes in these estimates and assumptions could materially affect the results of our impairment review. 22

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