Annual Meeting Remarks 1/10/07

01 / 10 / 2007

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In our presentation, this morning, I'm going to make a few remarks about the extraordinary results achieved in fiscal '06. Then we'll have a presentation by representatives of each of our segments. They're not going to tell you everything that's going on, but they'll describe one interesting and important product line. Then, I'll come back and review the guidance we've provided for fiscal '07 and, finally, I'll spend a few minutes on a subject that's getting an increasing amount of attention inside our Company, but which we rarely talk about outside the Company and that's what we refer to as our Company culture.

Fiscal '06. What a year it was! The numbers were all great. Sales were up 24%. Earnings up 26%. Earnings per share, as reported, up 20%. As you know, we started expensing stock options in '06. If we adjusted '05 for option expense, the increase in earnings per share would have been 23%. For a Company of our size to generate 20+% increases in sales and earnings is a remarkable performance. Our folks took advantage of relatively strong conditions in all of our major markets. The across the board growth in sales, the excellent performance of our recent acquisitions and the improved margins particularly in the Industrial and Components segments generated the 26% increase in earnings in spite of a $25 million increase in R&D Expense. R&D was up to 5.3% of sales.

There have been times in our history when the Company has done well and our market cap. has not responded. That was not the case in '06. Our market value increased by about $400 million. Our total firm value at year-end was $1.854 billion. You may remember that at last year's Annual Meeting, I was musing that our stock price seemed to be seasoning somewhere between 28 and 30. Well, apparently it seasoned sufficiently and we're happy that, at the moment, it's 25% higher.

So, that's the overall corporate picture for '06, now let me turn to some segment highlights.

During fiscal '06, Aircraft Group sales were up $76 million to a total of $527 million. In addition to growth in commercial transport sales and the aftermarket, both military and commercial, our revenues on the F-35 development program, at $77 million, were $15 million higher than a year earlier. It was a year in which a lot of work got done, preparing the airplane for its first flight, which occurred in the middle of December.

Let me introduce Mark Trabert. Mark is a Deputy General Manager of the Aircraft Group and Program Director for our F-35 Programs. Mark is a Buffalo boy. He grew up in Kenmore. He has a B.S. and an M.B.A. from Canisius College. He was a Program Manager at Calspan when we met him in 1984. At that time, we had two programs - the B-2 Bomber and the MX Missile, wherein we were very much dependent on subcontractors for big portions of the systems we were delivering. Mark came in to manage those major subcontracts. Shortly thereafter, he became a Program Manager on the B-2, and then our helicopter programs, the Comanche and the V-22. In '92, we asked him to go to California, to take over a company we'd acquired, Esprit Technologies. Three years later, we asked him to pack up that company and bring it back to East Aurora. Mark then became Director of Sales and Marketing in the Aircraft Group. In 2001, after he and his team had succeeded in winning the jobs we have on the Joint Strike Fighter, Mark became the Director of Programs on the F-35, and Deputy General Manager of the Aircraft Group.

Here's Mark.

Thanks Mark.

Our Space and Defense segment had a very good year in '06. Sales were up 15%, an increase of almost $20 million, to a total of $148 million. Sales increased in controls for Satellites and for Tactical Missiles. The big increase though was in what we call Defense Controls. This is a product line that we developed, over twenty years ago, to provide electric actuation for positioning guns on tanks and military vehicles. Sales were up to $35 million in '06 and we're looking for a big increase in '07, which will come about partly because of the Future Combat System program, which Mike Baczkowski will describe.

Mike received a Bachelor of Science Degree from Canisius College. He joined Moog in '81 as the Manager of Engineering Services in what was then the Missile Systems Division. Prior to that, Mike spent 14 years at Carleton Controls. Carleton was acquired by Moog in January of '77.

During his Carleton career, Mike was a Designer, a Project Engineer, a Program Manager, and the Operations Manager. Our Missile Systems Division became part of our Space & Defense Group. Over the years, Mike's work experience in Space & Defense has included program management responsibilities for the Maverick, GBU-15, and the Standard Missile-3, all Tactical Missile Control Systems. Currently, as Product Line Manager for Defense Controls, he is responsible for developing precision actuation systems used on armored vehicles around the world.

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