FY 2010

Fourth Quarter and Year End Conference Call, Fiscal Year 2010

November 4, 2010

Before we begin, we call your attention to the fact that we may make forward-looking statements during the course of this conference call.  These forward-looking statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors that could cause actual performance to differ materially from such statements.  A description of these risks, uncertainties and other factors is contained in our news release of November  4, 2010, our most recent Form 8K filed on November 4, 2010 and in certain of our other public filings with the SEC.

We've provided some financial schedules to help our listeners better follow along with the prepared comments.  For those of you who do not already have the document, a copy of today's financial presentation is available on our investor relations home page and webcast page at www.moog.com.  

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Introduction

Good Morning.  Thanks for joining us.  This morning we’ll report the results of our fourth quarter of fiscal 2010.  We’ll review the 2010 year end results and we’ll update our guidance for 2011, the year we’ve just begun.

Fiscal 2010, Total Year

As I said at the end of last quarter, our recession is over.  I don’t mean that the entire global recession is over, or even that the recession is over in the 
U.S. What I do mean is that our Company has adjusted to the current market conditions and the recession has not been impeding our growth this year and won’t be an obstacle to growth in 2011.

Fiscal 2010 is now complete.  It was a very good year.  Sales of $2.1 billion were up 14%.  Net earnings of $108.1 million were up 27%.  We have a few more shares outstanding this year than we did last and so our earnings per share of $2.36 are up 19%.  

We continued our heavy investment in R&D.  We spent $102.6 million in 2010.  This is a slight increase, $2.6 million over last year, but R&D has begun to decline as a percentage of sales; this year 4.9% versus 5.4% last year.  SG&A expenses at $313.4 million were also down as a percentage of sales.  We did incur a restructuring expense during the year of $5.1 million, down from $15.1 million from last year.  Interest expense at $38.7 million was a little bit less than last year.  This year’s other expense is primarily foreign exchange and last year we had earnings on our investment in LTi REEnergy.  Pre-tax earnings were up 35%.  Our tax rate of 27.7% was considerably higher than last year, but nevertheless, as I said a minute ago, net earnings were up 27%.

Q4 Results & 2011 Guidance

In terms of net earnings we came out where we expected in the fourth quarter.  Sales at $572 million were slightly higher than we expected, and up 13% from last year.  Our gross margin at 28.7% was up from last year’s 27.3%.  R&D at $27.4 million was down ever so slightly from last year in dollar terms and also as a percentage of sales.  SG&A at $79.9 million was 14% of sales, also down from last year’s percentage.  Interest at $9.4 million was down $1.4 million from last year.  Net earnings of $32.3 million were more than double last year.  On a per share basis this quarter at $.71, was double last year in spite of an increase of 6% in our share count.  

Fiscal 2011 Guidance
We are reaffirming, this morning, our guidance for fiscal 2011.  There have been some small shifts in the mix of sales, but in total we still expect to come in at $2.241 billion.  We’re projecting net earnings of $124.2 million or $2.70 a share.  If we achieve that it will be a 14.4% increase on top of this year’s 19% increase.

Now I’ll go to the segments.  

Aircraft Group Q4 2010

Total aircraft sales in the quarter of $201.6 million were up 14% from a year ago.  This was a $24.8 million increase and our recent acquisition of Wolverhampton provided sales of $22.2 million of that increase.  In this quarter we saw increases in both military and commercial aircraft.  

Military aircraft sales of $119.2 million were up 7% from a year ago.  Sales from Wolverhampton of $9.1 million provided the growth.  Higher sales on the V-22 tilt rotor, on the Blackhawk helicopter and in the military aftermarket offset reduced sales on F-35.  We had a net $5.3 million decrease on F-35.  The production revenues increased by $5.2 million, including $2.6 million from Wolverhampton, but the development program, which is winding down, generated revenues of $6.2 million in the quarter, down $10.5 million from a year ago.  Our other military production programs were up about 10%. 

On the commercial side, sales in the quarter were way up.  Sales of $73.7 million were up 32% from a year ago.  Of the $17.9 million increase, $13.1 million came from Wolverhampton.  Including those sales, our revenues to Boeing of $28.2 million were up 62% in the quarter and Airbus sales of $8.9 million were up 77%.  Even our business jet product line generated a sales increase of 18% to a total of $7.1 million.  The commercial aftermarket at $23.2 million was up 6% from a year ago, but it was up 18% from the most recent quarter.  Hopefully that upward trend will continue.  

Our Navigation Aids business was actually down in the quarter by about
$1.1 million.  In last year’s fourth quarter we were completing a large US Air Force TACAN contract and we also sold $1.7 million in transponder equipment which did not repeat this year.

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