Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
____________________________________________________________________________________________
Note 1 - Summary of Significant Accounting Policies
Consolidation:
The consolidated financial statements include the accounts of Moog Inc. and all of our U.S. and foreign subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year:
Our fiscal year ends on the Saturday that is closest to September 30. The consolidated financial statements include 52 weeks for the years ended
September 29, 2012
,
October 1, 2011
and
October 2, 2010
.
Operating Cycle:
Consistent with industry practice, aerospace and defense related inventories, unbilled recoverable costs and profits on long-term contract receivables, customer advances and contract loss reserves include amounts relating to contracts having long production and procurement cycles, portions of which are not expected to be realized or settled within one year.
Foreign Currency Translation:
Assets and liabilities of subsidiaries that prepare financial statements in currencies other than the U.S. dollar are translated using rates of exchange as of the balance sheet date and the statements of earnings are translated at the average rates of exchange for each reporting period.
Use of Estimates:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
Revenue Recognition:
We recognize revenue using either the percentage of completion method for contracts or as units are delivered or services are performed.
Percentage of completion method for contracts
: Revenue representing
32%
of 2012 sales was accounted for using the percentage of completion, cost-to-cost method of accounting. This method of revenue recognition is predominantly used within the Aircraft Controls and Space and Defense Controls segments due to the contractual nature of the business activities, with the exception of their respective aftermarket activities. The contractual arrangements are either firm fixed-price or cost-plus contracts and are primarily 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.
Revenue on contracts using the percentage of completion, cost-to-cost method of accounting is recognized 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, revenue and costs are recognized 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, revenue and costs are recognized 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, as determined in accordance with the Federal Acquisition Regulations and the related Cost Accounting Standards for applicable U.S. Government contracts, and are included in cost of sales when incurred. The nature of these costs includes development engineering costs and product manufacturing costs including 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 for 2012, 2011 or 2010.
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.
As units are delivered or services are performed
: In 2012,
68%
of our sales were recognized as units were delivered or as service obligations were satisfied. Revenue is recognized when the risks and rewards of ownership and title to the product are transferred to the customer. When engineering or similar services are performed, revenue is recognized upon completion of the obligation including any delivery of engineering drawings or technical data. This method of revenue recognition is predominantly used within the Industrial Systems, Components and Medical Devices segments, as well as with aftermarket activity. Profits are recorded as costs are relieved from inventory and charged to cost of sales and as revenue is recognized. Inventory costs include all product manufacturing costs such as direct material, direct labor, other direct costs and indirect overhead cost allocations.
Shipping and Handling Costs:
Shipping and handling costs are included in cost of sales.
Research and Development:
Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation.
Bid and Proposal Costs:
Bid and proposal costs are expensed as incurred and classified as selling, general and administrative expenses.
Equity-Based Compensation:
Equity-based compensation expense is included in selling, general and administrative expenses.
Earnings Per Share:
Basic and diluted weighted-average shares outstanding are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Basic weighted-average shares outstanding
|
|
45,246,960
|
|
|
45,501,806
|
|
|
45,363,738
|
|
Dilutive effect of equity-based awards
|
|
471,364
|
|
|
545,616
|
|
|
345,282
|
|
Diluted weighted-average shares outstanding
|
|
45,718,324
|
|
|
46,047,422
|
|
|
45,709,020
|
|
Cash and Cash Equivalents:
All highly liquid investments with an original maturity of three months or less are considered cash equivalents.
Allowance for Doubtful Accounts:
The allowance for doubtful accounts is based on our assessment of the collectibility of customer accounts. The allowance is determined by considering factors such as historical experience, credit quality, age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay.
Inventories:
Inventories are stated at the lower-of-cost-or-market with cost determined on the first-in, first-out (FIFO) method of valuation.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Plant and equipment are depreciated principally using the straight-line method over the estimated useful lives of the assets, generally
40
years for buildings,
15
years for building improvements,
12
years for furniture and fixtures,
10
years for machinery and equipment,
8
years for tooling and test equipment and
3
to
4
years for computer hardware. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful life of the asset, whichever is shorter.
Goodwill:
We test goodwill for impairment at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that indicate that the fair value of a reporting unit is likely to be below its carrying amount.
We may elect to perform a qualitative assessment that considers economic, industry and company-specific factors for all or selected reporting units. 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 test. We may also elect to perform a quantitative test instead of a qualitative test for any or all of our reporting units.
Quantitative testing 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 weighted-average cost of capital. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and any loss must be measured. To determine the amount of 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.
There were
no
impairment charges recorded in 2012, 2011 or 2010.
Acquired Intangible Assets:
Acquired identifiable intangible assets are recorded at cost and are amortized over their estimated useful lives.
Impairment of Long-Lived Assets:
Long-lived assets, including acquired identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. We use undiscounted cash flows to determine whether impairment exists and measure any impairment loss using discounted cash flows. There were
no
impairment charges recorded in 2012, 2011 or 2010.
Product Warranties:
In the ordinary course of business, we warrant our products against defect in design, materials and workmanship typically over periods ranging from
twelve
to
sixty
months. We determine warranty reserves needed by product line based on historical experience and current facts and circumstances. Activity in the warranty accrual is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Warranty accrual at beginning of year
|
|
$
|
19,247
|
|
|
$
|
14,856
|
|
|
$
|
14,675
|
|
Additions from acquisitions
|
|
233
|
|
|
120
|
|
|
213
|
|
Warranties issued during current year
|
|
9,842
|
|
|
11,426
|
|
|
6,729
|
|
Adjustments to pre-existing warranties
|
|
(460
|
)
|
|
713
|
|
|
186
|
|
Reductions for settling warranties
|
|
(10,016
|
)
|
|
(7,865
|
)
|
|
(6,831
|
)
|
Foreign currency translation
|
|
13
|
|
|
(3
|
)
|
|
(116
|
)
|
Warranty accrual at end of year
|
|
$
|
18,859
|
|
|
$
|
19,247
|
|
|
$
|
14,856
|
|
Financial Instruments:
Our financial instruments consist primarily of cash and cash equivalents, receivables, notes payable, accounts payable, long-term debt, interest rate swaps and foreign currency forwards. The carrying values for our financial instruments approximate fair value with the exception at times of long-term debt. See Note 7, Indebtedness, for fair value of long-term debt. We do not hold or issue financial instruments for trading purposes.
We carry derivative instruments on the balance sheet at fair value, determined by reference to quoted market prices. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. Our use of derivative instruments is generally limited to cash flow hedges of certain interest rate risks and minimizing foreign currency exposure on foreign currency transactions, which are typically designated in hedging relationships, and intercompany balances, which are not designated as hedging instruments. Cash flows resulting from forward contracts are accounted for as hedges of identifiable transactions or events and classified in the same category as the cash flows from the items being hedged.
Recent Accounting Pronouncements:
In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820) - Improving Disclosures About Fair Value Measurements.” This amendment requires separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. The disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. We adopted this standard in the first quarter of 2012. Other than requiring additional disclosures, the adoption of this guidance did not have a material impact on our consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-28, “Intangibles - Goodwill and Other (ASC Topic 350) - When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” This amendment modifies the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts, and it requires performing Step 2 if qualitative factors indicate that it is more likely than not that an impairment exists. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Any goodwill impairment resulting from the initial adoption of the amendments should be recorded as a cumulative effect adjustment to beginning retained earnings. Any goodwill impairments occurring after the initial adoption of the amendments should be included in earnings. We adopted this standard in the first quarter of 2012. The adoption of this guidance did not have a material impact on our financial statements.
In December 2010, the FASB issued ASU No. 2010-29, “Business Combinations (ASC Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations.” This amendment expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This amendment is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. We adopted this standard in the first quarter of 2012. Other than requiring additional disclosures, the adoption of this amendment did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” The amendments provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The amendments also change certain fair value measurement principles and enhance the disclosure requirements, particularly for Level 3 fair value measurements. The amendments are effective during interim and annual periods beginning after December 15, 2011 and should be applied prospectively. Early adoption is not permitted. We adopted this standard during the second quarter of 2012. Other than requiring additional disclosures, the adoption of this amendment did not have a material impact on our consolidated financial statements.
In July 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” The amendment eliminates the option to present other comprehensive income and its components in the statement of stockholders' equity. The amendment requires all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment, which must be applied retrospectively, is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. We adopted this standard during the second quarter of 2012. Other than requiring a change in the format of our financial statement presentation, the adoption of this amendment did not have a material impact on our consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments of 2011-05.” The amendment allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the guidance in place prior to the issuance of ASU No. 2011-05. While the Board is considering the operational concerns about presentation requirements for reclassification adjustments, it stated that the deferral did not affect the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The amendment, which must be applied retrospectively, is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. We adopted this standard during the second quarter of 2012. The adoption of this amendment did not have a material impact on our consolidated financial statements.
Note 2 - Acquisitions
All of our acquisitions are accounted for under the purchase method and, accordingly, the operating results for the acquired companies are included in the consolidated statements of earnings from the respective dates of acquisition. Under purchase accounting, we record assets and liabilities at fair value and such amounts are reflected in the respective captions on the balance sheet. All of the following acquisitions, with the exception of the 2011 military aftermarket business, resulted in goodwill being recorded as a result of the respective purchase price allocations.
In 2012, we completed
four
business combinations.
Two
of these business combinations were in our Components segment. We acquired Protokraft, LLC, based in Tennessee, for
$12,500
in cash plus contingent consideration with an initial fair value of
$4,809
. Protokraft designs and manufacturers opto-electronic transceivers, ethernet switches and media converters packaged into rugged, environmentally-sealed connectors. We also acquired Tritech International Limited, based in the UK, for
$32,921
, net of cash acquired. Tritech is a leading designer and manufacturer of high performance acoustic sensors, sonars, video cameras and mechanical tooling equipment. We also completed
two
business combinations in our Space and Defense Controls segment. We acquired Bradford Engineering, based in the Netherlands, for
$13,173
, net of cash acquired. Bradford is a developer and manufacturer of satellite equipment including attitude control, propulsion and thermal control subsystems. We also acquired In-Space Propulsion for
$45,495
, net of cash acquired. In-Space Propulsion has locations in New York, California, Ireland and the United Kingdom and is a developer and manufacturer of liquid propulsion systems and components for satellites and missile defense systems.
In 2011, we completed
three
business combinations within
two
of our segments. We completed
two
business combinations within our Aircraft Controls segment, both of which are located in the U.S. We acquired Crossbow Technology Inc., based in California, for
$31,999
, net of cash acquired. Crossbow designs and manufactures acceleration sensors that are integrated into inertial navigation and guidance systems used in a variety of aerospace, defense and transportation applications. We also acquired a business that complements our military aftermarket business for
$2,373
in cash. We completed
one
business combination within our Components segment by acquiring Animatics Corporation, based in California. The purchase price, net of cash acquired, was
$24,045
, which included
466,541
shares of Moog Class A common stock valued at
$18,739
and
$1,837
of debt assumed. Animatics supplies integrated servos, linear actuators and control electronics that are used in a variety of industrial, medical and defense applications.
The purchase price allocations for the 2011 acquisitions are complete. Allocations for the 2012 acquisitions are subject to subsequent adjustment as we obtain additional information for our estimates during the respective measurement periods.
Note 3 - Receivables
Receivables consist of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Accounts receivable
|
|
$
|
338,000
|
|
|
$
|
338,381
|
|
Long-term contract receivables:
|
|
|
|
|
Amounts billed
|
|
114,482
|
|
|
94,420
|
|
Unbilled recoverable costs and accrued profits
|
|
286,887
|
|
|
216,667
|
|
Total long-term contract receivables
|
|
401,369
|
|
|
311,087
|
|
Other
|
|
10,936
|
|
|
11,055
|
|
Total receivables
|
|
750,305
|
|
|
660,523
|
|
Less allowance for doubtful accounts
|
|
(5,754
|
)
|
|
(4,718
|
)
|
Receivables
|
|
$
|
744,551
|
|
|
$
|
655,805
|
|
On March 5, 2012, we entered into a trade receivables securitization facility (the Securitization Program). Under the Securitization Program, we securitize certain trade receivables in transactions that are accounted for as secured borrowings. We maintain a subordinated interest in a portion of the pool of trade receivables that are securitized. The retained interest, which is included in receivables in the balance sheet, is recorded at fair value, which approximates the total amount of the designated pool of accounts receivable. See Note 7, Indebtedness, for additional disclosures related to the Securitization Program.
Long-term contract receivables are primarily associated with prime contractors and subcontractors in connection with U.S. Government contracts, commercial aircraft and satellite manufacturers. Amounts billed under long-term contracts to the U.S. Government were
$7,413
at
September 29, 2012
and
$12,237
at
October 1, 2011
. Unbilled recoverable costs and accrued profits under long-term contracts to be billed to the U.S. Government were
$4,223
at
September 29, 2012
and
$6,861
at
October 1, 2011
. Unbilled recoverable costs and accrued profits principally represent revenues recognized on contracts that were not billable on the balance sheet date. These amounts will be billed in accordance with contract terms, generally as certain milestones are reached or upon shipment. Approximately three-quarters of unbilled amounts are expected to be collected within one year. In situations where billings exceed revenues recognized, the excess is included in customer advances.
There are
no
material amounts of claims or unapproved change orders included in the balance sheet. Balances billed but not paid by customers under retainage provisions are not material.
Concentrations of credit risk on receivables are limited to those from significant customers who are believed to be financially sound. Receivables from Boeing were
$139,287
at
September 29, 2012
and
$117,072
at October 1, 2011. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral.
Note 4 - Inventories
Inventories, net of reserves, consist of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Raw materials and purchased parts
|
|
$
|
188,643
|
|
|
$
|
197,347
|
|
Work in progress
|
|
283,122
|
|
|
235,428
|
|
Finished goods
|
|
66,497
|
|
|
69,598
|
|
Inventories
|
|
$
|
538,262
|
|
|
$
|
502,373
|
|
Note 5 - Property, Plant and Equipment
Property, plant and equipment consists of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Land
|
|
$
|
27,154
|
|
|
$
|
27,286
|
|
Buildings and improvements
|
|
386,101
|
|
|
341,716
|
|
Machinery and equipment
|
|
693,780
|
|
|
648,021
|
|
Property, plant and equipment, at cost
|
|
1,107,035
|
|
|
1,017,023
|
|
Less accumulated depreciation and amortization
|
|
(560,856
|
)
|
|
(513,151
|
)
|
Property, plant and equipment
|
|
$
|
546,179
|
|
|
$
|
503,872
|
|
Note 6 - Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft
Controls
|
Space
and
Defense
Controls
|
Industrial
Systems
|
Components
|
Medical
Devices
|
Total
|
Balance at October 3, 2009
|
$
|
180,694
|
|
$
|
106,802
|
|
$
|
124,155
|
|
$
|
159,359
|
|
$
|
127,449
|
|
$
|
698,459
|
|
Acquisitions
|
4,917
|
|
14,201
|
|
577
|
|
—
|
|
—
|
|
19,695
|
|
Adjustments to prior year acquisitions
|
(11,903
|
)
|
—
|
|
—
|
|
—
|
|
(82
|
)
|
(11,985
|
)
|
Foreign currency translation
|
(201
|
)
|
620
|
|
(2,612
|
)
|
1,537
|
|
(697
|
)
|
(1,353
|
)
|
Balance at October 2, 2010
|
173,507
|
|
121,623
|
|
122,120
|
|
160,896
|
|
126,670
|
|
704,816
|
|
Acquisitions
|
22,464
|
|
—
|
|
—
|
|
12,404
|
|
—
|
|
34,868
|
|
Adjustments to prior year acquisitions
|
(903
|
)
|
22
|
|
84
|
|
—
|
|
(138
|
)
|
(935
|
)
|
Foreign currency translation
|
(1,016
|
)
|
(229
|
)
|
(1,370
|
)
|
(769
|
)
|
(344
|
)
|
(3,728
|
)
|
Balance at October 1, 2011
|
194,052
|
|
121,416
|
|
120,834
|
|
172,531
|
|
126,188
|
|
735,021
|
|
Acquisitions
|
—
|
|
9,696
|
|
—
|
|
19,987
|
|
—
|
|
29,683
|
|
Adjustments to prior year acquisitions
|
(3,865
|
)
|
—
|
|
—
|
|
(147
|
)
|
—
|
|
(4,012
|
)
|
Foreign currency translation
|
2,199
|
|
(397
|
)
|
(1,259
|
)
|
2,093
|
|
(474
|
)
|
2,162
|
|
Balance at September 29, 2012
|
$
|
192,386
|
|
$
|
130,715
|
|
$
|
119,575
|
|
$
|
194,464
|
|
$
|
125,714
|
|
$
|
762,854
|
|
The components of acquired intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 29, 2012
|
October 1, 2011
|
|
Weighted-
Average
Life (Years)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Customer-related
|
10
|
$
|
179,383
|
|
$
|
(80,953
|
)
|
$
|
159,861
|
|
$
|
(64,420
|
)
|
Program-related
|
18
|
79,631
|
|
(13,976
|
)
|
64,887
|
|
(9,163
|
)
|
Technology-related
|
9
|
67,969
|
|
(35,676
|
)
|
61,276
|
|
(28,876
|
)
|
Marketing-related
|
9
|
29,327
|
|
(16,145
|
)
|
23,669
|
|
(13,828
|
)
|
Contract-related
|
3
|
3,354
|
|
(3,354
|
)
|
3,238
|
|
(2,156
|
)
|
Artistic-related
|
10
|
25
|
|
(25
|
)
|
25
|
|
(25
|
)
|
Acquired intangible assets
|
12
|
$
|
359,689
|
|
$
|
(150,129
|
)
|
$
|
312,956
|
|
$
|
(118,468
|
)
|
Customer-related intangible assets primarily consist of customer relationships. Program-related intangibles assets consist of long-term programs represented by current contracts and probable follow on work. Technology-related intangible assets primarily consist of technology, patents, intellectual property and software. Marketing-related intangible assets primarily consist of trademarks, trade names and non-compete agreements. Contract-related intangible assets consist of favorable operating lease terms. We have
$5,113
of identifiable assets with indefinite lives in marketing-related intangibles at
September 29, 2012
.
Amortization of acquired intangible assets was
$31,235
in 2012,
$28,948
in 2011 and
$28,280
in 2010. Based on acquired intangible assets recorded at
September 29, 2012
, amortization is estimated to be
$29,510
in 2013,
$26,344
in 2014,
$23,301
in 2015,
$21,800
in 2016 and
$18,452
in 2017.
Note 7 - Indebtedness
Short-term borrowings consist of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29, 2012
|
|
October 1,
2011
|
Securitization program
|
|
$
|
81,800
|
|
|
$
|
—
|
|
Lines of credit
|
|
8,974
|
|
|
8,426
|
|
Other short-term debt
|
|
—
|
|
|
857
|
|
Short-term borrowings
|
|
$
|
90,774
|
|
|
$
|
9,283
|
|
On March 5, 2012, we entered into a securitization program which matures on
March 4, 2013
and which effectively increases our borrowing capacity by up to
$100,000
. Under the securitization program, we sell certain trade receivables and related rights to an affiliate, which in turn sells an undivided variable percentage ownership interest in the trade receivables to a financial institution, while maintaining a subordinated interest in a portion of the pool of trade receivables. The securitization program can be extended by agreement of the parties for successive
364
-day terms. Interest for the securitization program is
0.9%
at
September 29, 2012
and is based on prevailing market rates for short-term commercial paper plus an applicable margin. A commitment fee is also charged based on a percentage of the unused amounts available and is not material. The agreement governing the securitization program contains restrictions and covenants which include limitations on the making of certain restricted payments, creation of certain liens, and certain corporate acts such as mergers, consolidations and sale of substantially all assets. We are in compliance with all covenants.
In addition to the securitization program we maintain short-term credit facilities with banks throughout the world that are principally demand lines subject to revision by the banks. Interest on outstanding lines of credit is
1.9%
at
September 29, 2012
.
Long-term debt consists of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
U.S. revolving credit facility
|
|
$
|
292,026
|
|
|
$
|
332,874
|
|
Term loans
|
|
3,216
|
|
|
4,115
|
|
Obligations under capital leases
|
|
27
|
|
|
579
|
|
Senior debt
|
|
295,269
|
|
|
337,568
|
|
6¼% senior subordinated notes
|
|
187,004
|
|
|
187,021
|
|
7¼% senior subordinated notes
|
|
191,575
|
|
|
191,575
|
|
Total long-term debt
|
|
673,848
|
|
|
716,164
|
|
Less current installments
|
|
(3,186
|
)
|
|
(1,407
|
)
|
Long-term debt
|
|
$
|
670,662
|
|
|
$
|
714,757
|
|
Our U.S. revolving credit facility consists of a
$900,000
revolver, which matures on
March 18, 2016
. The credit facility is secured by substantially all of our U.S. assets. The loan agreement contains various covenants which, among others, specify interest coverage and maximum leverage and capital expenditures. We are in compliance with all covenants. Interest on the majority of the outstanding credit facility borrowings is
1.9%
and is based on LIBOR plus the applicable margin, which was
150
basis points at
September 29, 2012
. Interest on the remaining outstanding credit facility borrowings is
3.8%
and is based on prime plus the applicable margin, which was
75
basis points at
September 29, 2012
.
Term loans at
September 29, 2012
consist of loans being repaid
through 2014
that carry interest rates of
5.6%
.
Our 6¼% senior subordinated notes are due
January 15, 2015
, with interest paid semiannually on
January 15
and
July 15
of each year. Our 7¼% senior subordinated notes are due
June 15, 2018
, with interest paid semiannually on
June 15
and
December 15
of each year. Both the 6¼% and 7¼% senior subordinated notes are unsecured, general obligations, subordinated in right of payment to all existing and future senior indebtedness and contain normal incurrence-based covenants.
Maturities of long-term debt are
$3,186
in 2013,
$57
in 2014, $
187,004
in 2015,
$292,026
in 2016,
$0
in 2017 and
$191,575
thereafter.
At
September 29, 2012
, we had pledged assets with a net book value of
$1,453,831
as security for long-term debt.
Our only financial instrument for which the carrying value at times differs from its fair value is long-term debt. At
September 29, 2012
, the fair value of long-term debt was
$686,741
compared to its carrying value of
$673,848
. The fair value of long-term debt was estimated based on quoted market prices.
At
September 29, 2012
, we had
$607,928
of unused short and long-term borrowing capacity, including
$594,443
from the U.S. credit facility. Commitment fees are charged on some of these arrangements and on the U.S. credit facility based on a percentage of the unused amounts available and are not material.
Note 8 - Derivative Financial Instruments
We principally use derivative financial instruments to manage foreign exchange risk related to foreign operations and foreign currency transactions and interest rate risk associated with long-term debt . We enter into derivative financial instruments with a number of major financial institutions to minimize counterparty credit risk.
Derivatives designated as hedging instruments
We use foreign currency forward contracts as cash flow hedges to effectively fix the exchange rates on future payments. To mitigate exposure in movements between various currencies, primarily the Philippine peso, we had outstanding foreign currency forwards with notional amounts of
$26,626
at
September 29, 2012
. These contracts mature at various times through the
second quarter of 2014
.
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. The interest rate swaps are designated as hedges of the amount of future cash flows related to interest payments on variable-rate debt that, in combination with the interest payments on the debt, convert a portion of the variable-rate debt to fixed-rate debt. There were
no
outstanding interest rate swaps at
September 29, 2012
.
These foreign currency forwards and interest rate swaps are recorded in the consolidated balance sheet at fair value and the related gains or losses are deferred in shareholders’ equity as a component of Accumulated Other Comprehensive Income (Loss) (AOCI). These deferred gains and losses are reclassified into expense during the periods in which the related payments or receipts affect earnings. However, to the extent the interest rate swaps and foreign currency forwards are not perfectly effective in offsetting the change in the value of the payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was not material in 2012, 2011 or 2010.
Activity in Accumulated Other Comprehensive Income (Loss) (AOCI) related to these derivatives is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Balance at beginning of period
|
|
$
|
(165
|
)
|
|
$
|
144
|
|
Net deferral in AOCI of derivatives:
|
|
|
|
|
Net increase (decrease) in fair value of derivatives
|
|
783
|
|
|
(122
|
)
|
Tax effect
|
|
(318
|
)
|
|
34
|
|
|
|
465
|
|
|
(88
|
)
|
Net reclassification from AOCI into earnings:
|
|
|
|
|
Reclassification from AOCI into earnings
|
|
(161
|
)
|
|
(346
|
)
|
Tax effect
|
|
81
|
|
|
125
|
|
|
|
(80
|
)
|
|
(221
|
)
|
Balance at end of period
|
|
$
|
220
|
|
|
$
|
(165
|
)
|
Activity and classification of derivatives are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Statement of earnings
classification
|
|
Net deferral in AOCI of derivatives -
effective portion
|
|
|
|
2012
|
|
2011
|
Foreign currency forwards
|
Cost of sales
|
|
$
|
783
|
|
|
$
|
(39
|
)
|
Interest rate swaps
|
Interest expense
|
|
—
|
|
|
(83
|
)
|
Net gain (loss)
|
|
|
$
|
783
|
|
|
$
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of earnings
classification
|
|
Net reclassification from AOCI into
earnings - effective portion
|
|
|
|
2012
|
|
2011
|
Foreign currency forwards
|
Cost of sales
|
|
$
|
228
|
|
|
$
|
769
|
|
Interest rate swaps
|
Interest expense
|
|
(67
|
)
|
|
(423
|
)
|
Net gain
|
|
|
$
|
161
|
|
|
$
|
346
|
|
Derivatives not designated as hedging instruments
We also have foreign currency exposure on intercompany balances that are denominated in a foreign currency and are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in the statements of earnings. To minimize foreign currency exposure, we have foreign currency forwards with notional amounts of
$193,325
at
September 29, 2012
. The foreign currency forwards are recorded in the balance sheet at fair value and resulting gains or losses are recorded in the statements of earnings. We recorded net losses of
$4,192
in 2012 and
$3,994
in 2011 on the foreign currency forwards. These losses are included in other expense and generally offset the gains from the foreign currency adjustments on the intercompany balances that are also included in other income or expense.
Summary of derivatives
The fair value and classification of derivatives is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
Foreign currency forwards
|
Other current assets
|
|
$
|
467
|
|
|
$
|
25
|
|
Foreign currency forwards
|
Other assets
|
|
32
|
|
|
—
|
|
|
Total assets
|
|
$
|
499
|
|
|
$
|
25
|
|
Foreign currency forwards
|
Other accrued liabilities
|
|
$
|
41
|
|
|
$
|
143
|
|
Foreign currency forwards
|
Other long-term liabilities
|
|
40
|
|
|
81
|
|
Interest rate swaps
|
Other accrued liabilities
|
|
—
|
|
|
102
|
|
|
Total liabilities
|
|
$
|
81
|
|
|
$
|
326
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency forwards
|
Other current assets
|
|
$
|
1,456
|
|
|
$
|
1,524
|
|
|
Total assets
|
|
$
|
1,456
|
|
|
$
|
1,524
|
|
Foreign currency forwards
|
Other accrued liabilities
|
|
$
|
2,549
|
|
|
$
|
2,640
|
|
|
Total liabilities
|
|
$
|
2,549
|
|
|
$
|
2,640
|
|
Note 9 - Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. The definition of the fair value hierarchy is as follows:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.
Level 3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.
The following table presents the fair values and classification of our financial assets and liabilities measured on a recurring basis as of
September 29, 2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Foreign currency forwards
|
Other current assets
|
$
|
—
|
|
|
$
|
1,923
|
|
|
$
|
—
|
|
|
$
|
1,923
|
|
Foreign currency forwards
|
Other assets
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
1,955
|
|
|
$
|
—
|
|
|
$
|
1,955
|
|
Foreign currency forwards
|
Other accrued liabilities
|
$
|
—
|
|
|
$
|
2,590
|
|
|
$
|
—
|
|
|
$
|
2,590
|
|
Foreign currency forwards
|
Other long-term liabilities
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
Acquisition contingent consideration
|
Other accrued liabilities
|
—
|
|
|
—
|
|
|
5,211
|
|
|
5,211
|
|
Acquisition contingent consideration
|
Other long-term liabilities
|
—
|
|
|
—
|
|
|
1,211
|
|
|
1,211
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
2,630
|
|
|
$
|
6,422
|
|
|
$
|
9,052
|
|
The changes in financial liabilities classified as Level 3 within the fair value hierarchy are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
Balance at beginning of year
|
|
$
|
1,990
|
|
|
$
|
3,112
|
|
Additions from acquisitions
|
|
4,809
|
|
|
—
|
|
Increase in discounted future cash flows recorded as interest expense
|
|
287
|
|
|
483
|
|
Decrease in earn out provisions recorded as other income
|
|
(645
|
)
|
|
(1,585
|
)
|
Settlements paid in cash
|
|
(19
|
)
|
|
(20
|
)
|
Balance at end of year
|
|
$
|
6,422
|
|
|
$
|
1,990
|
|
Note 10 - Restructuring
In 2009, we initiated restructuring plans to better align our cost structure with lower sales activity associated with the global recession. The restructuring actions taken are complete and have resulted in workforce reductions, primarily in the U.S., the Philippines and Europe.
Restructuring expense by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Aircraft Controls
|
|
$
|
—
|
|
|
$
|
(182
|
)
|
|
$
|
2,423
|
|
Space and Defense Controls
|
|
—
|
|
|
38
|
|
|
1,106
|
|
Industrial Systems
|
|
—
|
|
|
518
|
|
|
717
|
|
Components
|
|
—
|
|
|
38
|
|
|
512
|
|
Medical Devices
|
|
—
|
|
|
339
|
|
|
367
|
|
Total
|
|
$
|
—
|
|
|
$
|
751
|
|
|
$
|
5,125
|
|
Restructuring activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
Balance at beginning of period
|
|
$
|
283
|
|
|
$
|
3,389
|
|
Charged to expense
|
|
—
|
|
|
751
|
|
Cash payments
|
|
(184
|
)
|
|
(3,860
|
)
|
Foreign currency translation
|
|
7
|
|
|
3
|
|
Balance at end of period
|
|
$
|
106
|
|
|
$
|
283
|
|
Note 11 - Employee Benefit Plans
We maintain multiple employee benefit plans, covering employees at certain locations.
Our qualified U.S. defined benefit pension plan is not open to new entrants. New employees are not eligible to participate in the pension plan. Instead, we make contributions for those employees to an employee-directed investment fund in the Moog Inc. Retirement Savings Plan (RSP). The Company’s contributions are based on a percentage of the employee’s eligible compensation and age. These contributions are in addition to the employer match on voluntary employee contributions.
The RSP includes an Employee Stock Ownership Plan. As one of the investment alternatives, participants in the RSP can acquire our stock at market value. We match
25%
of the first
2%
of eligible compensation contributed to any investment selection. Shares are allocated and compensation expense is recognized as the employer share match is earned. At
September 29, 2012
, the participants in the RSP owned
735,643
Class A shares and
1,954,685
Class B shares.
The changes in projected benefit obligations and plan assets and the funded status of the U.S. and non-U.S. defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
Projected benefit obligation at prior year measurement date
|
$
|
635,798
|
|
|
$
|
556,010
|
|
|
$
|
131,914
|
|
|
$
|
141,022
|
|
Service cost
|
23,347
|
|
|
22,566
|
|
|
4,046
|
|
|
4,804
|
|
Interest cost
|
29,786
|
|
|
28,683
|
|
|
5,864
|
|
|
6,260
|
|
Contributions by plan participants
|
—
|
|
|
—
|
|
|
900
|
|
|
873
|
|
Actuarial losses (gains)
|
108,095
|
|
|
45,358
|
|
|
16,557
|
|
|
(14,825
|
)
|
Foreign currency exchange impact
|
—
|
|
|
—
|
|
|
(1,995
|
)
|
|
(1,601
|
)
|
Benefits paid from plan assets
|
(15,926
|
)
|
|
(15,777
|
)
|
|
(1,430
|
)
|
|
(2,020
|
)
|
Benefits paid by Moog
|
(1,123
|
)
|
|
(905
|
)
|
|
(2,700
|
)
|
|
(2,530
|
)
|
Other
|
—
|
|
|
(137
|
)
|
|
(67
|
)
|
|
(69
|
)
|
Projected benefit obligation at measurement date
|
$
|
779,977
|
|
|
$
|
635,798
|
|
|
$
|
153,089
|
|
|
$
|
131,914
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
Fair value of assets at prior year measurement date
|
$
|
389,286
|
|
|
$
|
369,090
|
|
|
$
|
68,991
|
|
|
$
|
72,419
|
|
Actual return on plan assets
|
68,074
|
|
|
(23,987
|
)
|
|
11,086
|
|
|
(6,950
|
)
|
Employer contributions
|
1,115
|
|
|
61,004
|
|
|
6,842
|
|
|
7,356
|
|
Contributions by plan participants
|
—
|
|
|
—
|
|
|
900
|
|
|
873
|
|
Benefits paid
|
(17,049
|
)
|
|
(16,682
|
)
|
|
(4,130
|
)
|
|
(4,550
|
)
|
Foreign currency exchange impact
|
—
|
|
|
—
|
|
|
422
|
|
|
(88
|
)
|
Other
|
—
|
|
|
(139
|
)
|
|
(67
|
)
|
|
(69
|
)
|
Fair value of assets at measurement date
|
$
|
441,426
|
|
|
$
|
389,286
|
|
|
$
|
84,044
|
|
|
$
|
68,991
|
|
Funded status and amount recognized in assets and liabilities
|
$
|
(338,551
|
)
|
|
$
|
(246,512
|
)
|
|
$
|
(69,045
|
)
|
|
$
|
(62,923
|
)
|
Amount recognized in assets and liabilities:
|
|
|
|
|
|
|
|
Other assets - non-current
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
372
|
|
Accrued and long-term pension liabilities
|
(338,551
|
)
|
|
(246,512
|
)
|
|
(69,045
|
)
|
|
(63,295
|
)
|
Amount recognized in assets and liabilities
|
$
|
(338,551
|
)
|
|
$
|
(246,512
|
)
|
|
$
|
(69,045
|
)
|
|
$
|
(62,923
|
)
|
Amount recognized in accumulated other comprehensive loss, before taxes:
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
$
|
42
|
|
|
$
|
52
|
|
|
$
|
(305
|
)
|
|
$
|
(380
|
)
|
Actuarial losses
|
415,524
|
|
|
350,556
|
|
|
29,775
|
|
|
21,547
|
|
Amount recognized in accumulated other comprehensive loss, before taxes
|
$
|
415,566
|
|
|
$
|
350,608
|
|
|
$
|
29,470
|
|
|
$
|
21,167
|
|
Our stock included in U.S. plan assets consisted of
149,022
shares of Class A common stock and
1,001,034
shares of Class B common stock. Our funding policy is to contribute at least the amount required by law in the respective countries.
The total accumulated benefit obligation as of the measurement date for all defined benefit pension plans was
$832,303
in 2012 and
$692,601
in 2011. At the measurement date in 2012, our plans had fair values of plan assets totaling
$525,471
. At the measurement date in 2012,
three
of our plans had fair values of plan assets totaling
$37,798
, which exceeded their accumulated benefit obligations of
$33,438
. At the measurement date in 2011,
two
of our plans had fair values of plan assets totaling
$17,856
, which exceeded their accumulated benefit obligations of
$13,746
. The following table provides aggregate information for the other pension plans, which have projected benefit obligations or accumulated benefit obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Projected benefit obligation
|
|
$
|
892,005
|
|
|
$
|
748,495
|
|
Accumulated benefit obligation
|
|
798,865
|
|
|
678,855
|
|
Fair value of plan assets
|
|
487,673
|
|
|
440,422
|
|
Weighted-average assumptions used to determine benefit obligations as of the measurement dates and weighted-average assumptions used to determine net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Assumptions for net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
4.7
|
%
|
|
5.2
|
%
|
|
6.0
|
%
|
|
4.7
|
%
|
|
4.6
|
%
|
|
5.8
|
%
|
Return on assets
|
8.9
|
%
|
|
8.9
|
%
|
|
8.9
|
%
|
|
5.5
|
%
|
|
5.1
|
%
|
|
6.0
|
%
|
Rate of compensation increase
|
3.8
|
%
|
|
3.8
|
%
|
|
4.1
|
%
|
|
3.0
|
%
|
|
3.1
|
%
|
|
3.3
|
%
|
Assumptions for benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
3.7
|
%
|
|
4.7
|
%
|
|
5.2
|
%
|
|
3.9
|
%
|
|
4.7
|
%
|
|
4.6
|
%
|
Rate of compensation increase
|
4.1
|
%
|
|
3.8
|
%
|
|
3.8
|
%
|
|
2.9
|
%
|
|
3.0
|
%
|
|
2.6
|
%
|
Pension plan investment policies and strategies are developed on a plan specific basis, which varies by country. At
September 29, 2012
, the U.S. plans represented
84%
of consolidated pension assets, while the non-U.S. plans represented
16%
of consolidated pension assets, the largest concentration being in the U.K. (
6%
). The overall objective for the long-term expected return on both domestic and international plan assets is to earn a rate of return over time to meet anticipated benefit payments in accordance with plan provisions. The long-term investment objective of both the domestic and international retirement plans is to maintain the economic value of plan assets and future contributions by producing positive rates of investment return after subtracting inflation, benefit payments and expenses. Each of the plan’s strategic asset allocations is based on this long-term perspective and short-term fluctuations are viewed with appropriate perspective.
The U.S. qualified defined benefit plan’s assets are invested for long-term investment results. To accommodate the long-term investment horizon while providing appropriate liquidity, the plan maintains a liquid cash reserve of one-month to three-months of benefit distributions. Its assets are broadly diversified to help alleviate the risk of adverse returns in any one security or investment class. The international plans’ assets are invested in both low-risk and high-risk investments in order to achieve the long-term investment strategy objective. Investment risks for both domestic and international plans are considered within the context of the entire plan, rather than on a security-by-security basis.
The U.S. qualified defined benefit plan and certain international plans have investment committees that are responsible for formulating investment policies, developing manager guidelines and objectives and approving and managing qualified advisors and investment managers. The guidelines established for each of the plans define permitted investments within each asset class and apply certain restrictions such as limits on concentrated holdings in order to meet overall investment objectives.
Pension obligations and the related costs are determined using actuarial valuations that involve several assumptions. The return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. In determining the return on assets assumption, we consider the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and to provide adequate liquidity to meet immediate and future benefit payment requirements.
In determining our U.S. pension expense for 2012, we assumed an average rate of return on U.S. pension assets of approximately
8.9%
measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average of
80%
in equity securities and
20%
in fixed income securities. In determining our non-U.S. pension expense for 2012, we assumed an average rate of return on non-U.S. pension assets of approximately
5.5%
measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average asset allocation of
40%
in equity securities and
60%
in fixed income securities.
The weighted average asset allocations by asset category for the pension plans as of
September 29, 2012
and October 1, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Target
|
|
2012
Actual
|
|
2011
Actual
|
|
Target
|
|
2012
Actual
|
|
2011
Actual
|
Asset category:
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
50%-85%
|
|
82
|
%
|
|
74
|
%
|
|
40%-60%
|
|
39
|
%
|
|
43
|
%
|
Debt
|
15%-30%
|
|
15
|
%
|
|
14
|
%
|
|
40%-60%
|
|
60
|
%
|
|
55
|
%
|
Real estate and other
|
0%-20%
|
|
3
|
%
|
|
12
|
%
|
|
0%-10%
|
|
1
|
%
|
|
2
|
%
|
The following tables present the consolidated plan assets using the fair value hierarchy, which is described in Note 9 - Fair Value, as of
September 29, 2012
and
October 1, 2011
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans, September 29, 2012
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Shares of registered investment companies:
|
|
|
|
|
|
|
|
International equity
|
$
|
72,763
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,763
|
|
Large growth stocks
|
87,062
|
|
|
—
|
|
|
—
|
|
|
87,062
|
|
Emerging markets
|
18,566
|
|
|
—
|
|
|
—
|
|
|
18,566
|
|
Common stock:
|
|
|
|
|
|
|
—
|
|
International equity
|
28,774
|
|
|
—
|
|
|
—
|
|
|
28,774
|
|
Large value stocks
|
17,454
|
|
|
—
|
|
|
—
|
|
|
17,454
|
|
Large core stocks
|
18,409
|
|
|
—
|
|
|
—
|
|
|
18,409
|
|
Large growth stocks
|
19,411
|
|
|
—
|
|
|
—
|
|
|
19,411
|
|
Other
|
16,950
|
|
|
—
|
|
|
—
|
|
|
16,950
|
|
Fixed income funds:
|
|
|
|
|
|
|
|
Intermediate-term core fixed income
|
67,046
|
|
|
—
|
|
|
—
|
|
|
67,046
|
|
Employer securities
|
43,893
|
|
|
—
|
|
|
—
|
|
|
43,893
|
|
Interest in common collective trust
|
—
|
|
|
29,105
|
|
|
—
|
|
|
29,105
|
|
Money market funds
|
—
|
|
|
6,630
|
|
|
—
|
|
|
6,630
|
|
Cash and cash equivalents
|
1,759
|
|
|
—
|
|
|
—
|
|
|
1,759
|
|
Limited partnerships
|
—
|
|
|
—
|
|
|
13,604
|
|
|
13,604
|
|
Fair value
|
$
|
392,087
|
|
|
$
|
35,735
|
|
|
$
|
13,604
|
|
|
$
|
441,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans, September 29, 2012
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Shares of registered investment companies
|
$
|
—
|
|
|
$
|
30,700
|
|
|
$
|
—
|
|
|
$
|
30,700
|
|
Domestic equity
|
3,161
|
|
|
142
|
|
|
—
|
|
|
3,303
|
|
International equity
|
9,866
|
|
|
—
|
|
|
—
|
|
|
9,866
|
|
Fixed income funds
|
2,157
|
|
|
16,765
|
|
|
—
|
|
|
18,922
|
|
Cash and cash equivalents
|
748
|
|
|
—
|
|
|
—
|
|
|
748
|
|
Insurance contracts and other
|
—
|
|
|
653
|
|
|
19,852
|
|
|
20,505
|
|
Fair value
|
$
|
15,932
|
|
|
$
|
48,260
|
|
|
$
|
19,852
|
|
|
$
|
84,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans, October 1, 2011
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Shares of registered investment companies:
|
|
|
|
|
|
|
|
Large growth stocks
|
$
|
60,550
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60,550
|
|
International equity
|
44,827
|
|
|
—
|
|
|
—
|
|
|
44,827
|
|
Emerging markets
|
16,195
|
|
|
—
|
|
|
—
|
|
|
16,195
|
|
Common stock:
|
|
|
|
|
|
|
|
International equity
|
29,886
|
|
|
—
|
|
|
—
|
|
|
29,886
|
|
Large value stocks
|
18,202
|
|
|
—
|
|
|
—
|
|
|
18,202
|
|
Large core stocks
|
15,897
|
|
|
—
|
|
|
—
|
|
|
15,897
|
|
Large growth stocks
|
15,835
|
|
|
—
|
|
|
—
|
|
|
15,835
|
|
Other
|
9,947
|
|
|
—
|
|
|
—
|
|
|
9,947
|
|
Fixed income funds:
|
|
|
|
|
|
|
|
Intermediate-term core fixed income
|
56,345
|
|
|
—
|
|
|
—
|
|
|
56,345
|
|
Employer securities
|
37,995
|
|
|
—
|
|
|
—
|
|
|
37,995
|
|
Interest in common collective trust
|
—
|
|
|
27,446
|
|
|
—
|
|
|
27,446
|
|
Money market funds
|
—
|
|
|
45,971
|
|
|
—
|
|
|
45,971
|
|
Cash and cash equivalents
|
1,557
|
|
|
—
|
|
|
—
|
|
|
1,557
|
|
Limited partnerships
|
—
|
|
|
—
|
|
|
8,633
|
|
|
8,633
|
|
Fair value
|
$
|
307,236
|
|
|
$
|
73,417
|
|
|
$
|
8,633
|
|
|
$
|
389,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans, October 1, 2011
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Shares of registered investment companies
|
$
|
—
|
|
|
$
|
27,929
|
|
|
$
|
—
|
|
|
$
|
27,929
|
|
Domestic equity
|
2,728
|
|
|
222
|
|
|
—
|
|
|
2,950
|
|
International equity
|
7,705
|
|
|
—
|
|
|
—
|
|
|
7,705
|
|
Fixed income funds
|
1,567
|
|
|
12,210
|
|
|
—
|
|
|
13,777
|
|
Cash and cash equivalents
|
4,762
|
|
|
—
|
|
|
—
|
|
|
4,762
|
|
Insurance contracts and other
|
—
|
|
|
490
|
|
|
11,378
|
|
|
11,868
|
|
Fair value
|
$
|
16,762
|
|
|
$
|
40,851
|
|
|
$
|
11,378
|
|
|
$
|
68,991
|
|
The following is a roll forward of the consolidated plan assets classified as Level 3 within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
Balance at October 2, 2010
|
|
$
|
5,900
|
|
|
$
|
16,210
|
|
|
$
|
22,110
|
|
Return on assets
|
|
(507
|
)
|
|
(6,197
|
)
|
|
(6,704
|
)
|
Purchases from contributions to Plans
|
|
6,054
|
|
|
1,873
|
|
|
7,927
|
|
Proceeds from sales of investments
|
|
(2,814
|
)
|
|
—
|
|
|
(2,814
|
)
|
Settlements paid in cash
|
|
—
|
|
|
(79
|
)
|
|
(79
|
)
|
Foreign currency translation
|
|
—
|
|
|
(429
|
)
|
|
(429
|
)
|
Balance at October 1, 2011
|
|
8,633
|
|
|
11,378
|
|
|
20,011
|
|
Return on assets
|
|
3,026
|
|
|
3,769
|
|
|
6,795
|
|
Purchases from contributions to Plans
|
|
5,344
|
|
|
5,420
|
|
|
10,764
|
|
Proceeds from sales of investments
|
|
(3,399
|
)
|
|
—
|
|
|
(3,399
|
)
|
Settlements paid in cash
|
|
—
|
|
|
(160
|
)
|
|
(160
|
)
|
Foreign currency translation
|
|
—
|
|
|
(555
|
)
|
|
(555
|
)
|
Balance at September 29, 2012
|
|
$
|
13,604
|
|
|
$
|
19,852
|
|
|
$
|
33,456
|
|
The valuation methodologies used for pension plan assets measured at fair value have not changed in the past two years. Cash and cash equivalents consist of direct cash holdings and institutional short-term investment vehicles. Direct cash holdings are valued at cost, which approximates fair value. Institutional short-term investment vehicles are valued daily. Investments in U.S. treasury obligations are valued by a pricing service based upon closing market prices at year end. Shares of registered investment companies are valued at net asset value of shares held by the plan at year end. Common stocks traded on national exchanges are valued at the last reported sales price. Investments denominated in foreign currencies are translated into U.S. dollars using the last reported exchange rate. Fixed income funds, which primarily consist of corporate and government bonds, are valued using methods, such as dealer quotes, available trade information, spreads, bids and offers provided by a pricing vendor. Investments in limited partnerships are valued based on the net asset value of our share in the fair value of the investments at year end. Common collective trust funds consist of pools of investments used by institutional investors to obtain exposure to equity and fixed income markets. Common collective trust funds held by us invest primarily in investment grade, U.S. denominated fixed income securities. The common collective trusts have no unfunded commitments at
September 29, 2012
, and there are no significant restrictions on redemptions. Shares held in common collective trust funds are reported at the net unit value of units held by the trust at year end. The unit value is determined by the total value of fund assets divided by the total number of units of the fund owned. Investments in insurance contracts are valued at contract value, which is the fair value of the underlying investment of the insurance company. Securities or other assets for which market quotations are not readily available or for which market quotations do not represent the value at the time of pricing (including certain illiquid securities) are fair valued in accordance with procedures established under the supervision and responsibility of the Custodian of that investment.
Such procedures may include the use of independent pricing services or affiliated advisor pricing, which use prices based upon yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, operating data and general market conditions.
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Pension expense for all plans, including costs for various defined contribution plans, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
Service cost
|
$
|
23,347
|
|
|
$
|
22,566
|
|
|
$
|
18,718
|
|
|
$
|
4,046
|
|
|
$
|
4,804
|
|
|
$
|
3,139
|
|
Interest cost
|
29,786
|
|
|
28,683
|
|
|
27,067
|
|
|
5,864
|
|
|
6,260
|
|
|
5,868
|
|
Expected return on plan assets
|
(41,970
|
)
|
|
(39,089
|
)
|
|
(35,344
|
)
|
|
(3,832
|
)
|
|
(3,900
|
)
|
|
(3,605
|
)
|
Amortization of prior service cost (credit)
|
9
|
|
|
9
|
|
|
203
|
|
|
(62
|
)
|
|
(60
|
)
|
|
(54
|
)
|
Amortization of actuarial loss
|
17,024
|
|
|
11,292
|
|
|
4,949
|
|
|
875
|
|
|
1,546
|
|
|
521
|
|
Settlement loss
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
275
|
|
|
91
|
|
Pension expense for defined benefit plans
|
28,196
|
|
|
23,477
|
|
|
15,593
|
|
|
6,891
|
|
|
8,925
|
|
|
5,960
|
|
Pension expense for defined contribution plans
|
9,114
|
|
|
7,674
|
|
|
6,571
|
|
|
5,105
|
|
|
4,765
|
|
|
6,053
|
|
Total pension expense
|
$
|
37,310
|
|
|
$
|
31,151
|
|
|
$
|
22,164
|
|
|
$
|
11,996
|
|
|
$
|
13,690
|
|
|
$
|
12,013
|
|
The estimated net prior service (credit) and net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for pension plans in 2013 are (
$55
) and
$29,348
, respectively.
Benefits expected to be paid to the participants of the plans are:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
2013
|
|
$
|
20,200
|
|
|
$
|
4,198
|
|
2014
|
|
23,170
|
|
|
4,503
|
|
2015
|
|
24,846
|
|
|
5,818
|
|
2016
|
|
26,856
|
|
|
5,942
|
|
2017
|
|
29,585
|
|
|
6,321
|
|
Five years thereafter
|
|
191,882
|
|
|
37,194
|
|
We presently anticipate contributing approximately
$31,500
to the U.S. plans and
$7,300
to the non-U.S. plans in 2013.
We provide postretirement health care benefits to certain domestic retirees, who were hired prior to October 1, 1989. There are no plan assets. The transition obligation is being expensed over
20
years through
2013
. The changes in the accumulated benefit obligation of this unfunded plan for 2012 and 2011 are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Change in Accumulated Postretirement Benefit Obligation (APBO):
|
|
|
|
|
APBO at prior year measurement date
|
|
$
|
18,025
|
|
|
$
|
23,860
|
|
Service cost
|
|
330
|
|
|
491
|
|
Interest cost
|
|
785
|
|
|
1,103
|
|
Contributions by plan participants
|
|
1,510
|
|
|
1,453
|
|
Benefits paid
|
|
(2,634
|
)
|
|
(2,460
|
)
|
Actuarial gains
|
|
(656
|
)
|
|
(6,521
|
)
|
Retiree drug subsidy receipts
|
|
96
|
|
|
99
|
|
APBO at measurement date
|
|
$
|
17,456
|
|
|
$
|
18,025
|
|
Funded status
|
|
$
|
(17,456
|
)
|
|
$
|
(18,025
|
)
|
Accrued postretirement benefit liability
|
|
$
|
17,456
|
|
|
$
|
18,025
|
|
Amount recognized in accumulated other comprehensive loss, before taxes:
|
|
|
|
|
Transition obligation
|
|
$
|
361
|
|
|
$
|
756
|
|
Actuarial (gains) losses
|
|
(604
|
)
|
|
52
|
|
Amount recognized in accumulated other comprehensive loss, before taxes
|
|
$
|
(243
|
)
|
|
$
|
808
|
|
The cost of the postretirement benefit plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Service cost
|
|
$
|
330
|
|
|
$
|
491
|
|
|
$
|
571
|
|
Interest cost
|
|
785
|
|
|
1,103
|
|
|
1,345
|
|
Amortization of transition obligation
|
|
394
|
|
|
394
|
|
|
394
|
|
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
215
|
|
Amortization of actuarial loss
|
|
—
|
|
|
579
|
|
|
842
|
|
Net periodic postretirement benefit cost
|
|
$
|
1,509
|
|
|
$
|
2,567
|
|
|
$
|
3,367
|
|
The estimated transition obligation and actuarial gain that will be amortized from accumulated other comprehensive loss into net periodic postretirement benefit cost in 2013 are
$361
and
$0
, respectively.
As of the measurement date, the assumed discount rate used in the accounting for the postretirement benefit obligation was
3.3%
in 2012,
4.5%
in 2011
and
4.8%
in 2010. As of the measurement date, the assumed discount rate used in the accounting for the net periodic postretirement benefit cost was
4.5%
in
2012,
4.8%
in 2011 and
5.5%
in 2010.
For measurement purposes, a
7.6%
,
6.8%
and
8.1%
annual per capita rate of increase of medical and drug costs before age 65, medical costs after age 65 and drug costs after age 65, respectively, were assumed for 2012, all gradually decreasing to
4.5%
for
2028
and years thereafter. A one percentage point increase in this rate would increase our accumulated postretirement benefit obligation as of the measurement date in 2012 by
$696
, while a one
percentage point decrease in this rate would decrease our accumulated postretirement benefit obligation by
$642
. A one percentage point increase or decrease in this rate would not have a material effect on the total service cost and interest cost components of the net periodic postretirement benefit cost.
Activity in AOCI related to U.S. pension plans, non-U.S. pension plans and post-retirement health care benefit plans is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
September 29, 2012
|
|
October 1,
2011
|
Balance at beginning of period
|
|
$
|
(234,128
|
)
|
|
$
|
(182,336
|
)
|
Net deferral in AOCI of actuarial loss:
|
|
|
|
|
Net actuarial loss during period
|
|
(90,463
|
)
|
|
(97,899
|
)
|
Tax effect
|
|
32,990
|
|
|
37,290
|
|
|
|
(57,473
|
)
|
|
(60,609
|
)
|
Net reclassification from AOCI into earnings:
|
|
|
|
|
Reclassification from AOCI into earnings
|
|
17,969
|
|
|
13,875
|
|
Tax effect
|
|
(6,792
|
)
|
|
(5,058
|
)
|
|
|
11,177
|
|
|
8,817
|
|
Balance at end of period
|
|
$
|
(280,424
|
)
|
|
$
|
(234,128
|
)
|
Employee and management profit sharing reflects a discretionary payment based on our financial performance. Profit share expense was
$25,100
,
$30,025
and
$21,100
in 2012, 2011 and 2010, respectively.
Note 12 - Income Taxes
The reconciliation of the provision for income taxes to the amount computed by applying the U.S. federal statutory tax rate to earnings before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Earnings before income taxes:
|
|
|
|
|
|
|
Domestic
|
|
$
|
120,158
|
|
|
$
|
89,409
|
|
|
$
|
82,654
|
|
Foreign
|
|
86,506
|
|
|
96,801
|
|
|
66,955
|
|
Eliminations
|
|
2,177
|
|
|
(2,425
|
)
|
|
(173
|
)
|
Total
|
|
$
|
208,841
|
|
|
$
|
183,785
|
|
|
$
|
149,436
|
|
Computed expected tax expense
|
|
$
|
73,094
|
|
|
$
|
64,325
|
|
|
$
|
52,303
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
Foreign and R&D tax credits
|
|
(1,029
|
)
|
|
(7,578
|
)
|
|
(3,185
|
)
|
Foreign tax rates
|
|
(11,126
|
)
|
|
(6,704
|
)
|
|
(9,711
|
)
|
Export and manufacturing incentives
|
|
(2,275
|
)
|
|
(1,680
|
)
|
|
(840
|
)
|
State taxes, net of federal benefit
|
|
3,346
|
|
|
2,396
|
|
|
2,274
|
|
Change in valuation allowance for deferred taxes
|
|
(4,030
|
)
|
|
(3,100
|
)
|
|
634
|
|
Change in enacted tax rates
|
|
(1,303
|
)
|
|
(277
|
)
|
|
—
|
|
Other
|
|
(298
|
)
|
|
382
|
|
|
(133
|
)
|
Income taxes
|
|
$
|
56,379
|
|
|
$
|
47,764
|
|
|
$
|
41,342
|
|
Effective income tax rate
|
|
27.0
|
%
|
|
26.0
|
%
|
|
27.7
|
%
|
At
September 29, 2012
, various subsidiaries had tax benefit carryforwards totaling
$37,285
. These tax benefit carryforwards generally do not expire and can be used to reduce current taxes otherwise due on future earnings of those subsidiaries. The change in the valuation allowance relates to tax benefit carryforwards reflecting recent and projected financial performance, tax planning strategies and statutory tax carryforward periods.
No provision has been made for U.S. federal or foreign taxes on that portion of certain foreign subsidiaries’ undistributed earnings (
$598,280
at
September 29, 2012
) considered to be permanently reinvested. It is not practicable to determine the amount of tax that would be payable if these amounts were repatriated to the U.S.
The components of income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
34,361
|
|
|
$
|
14,307
|
|
|
$
|
10,642
|
|
Foreign
|
|
20,646
|
|
|
27,746
|
|
|
17,362
|
|
State
|
|
5,485
|
|
|
2,788
|
|
|
2,024
|
|
Total current
|
|
60,492
|
|
|
44,841
|
|
|
30,028
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
|
1,239
|
|
|
7,449
|
|
|
12,744
|
|
Foreign
|
|
(5,014
|
)
|
|
(5,424
|
)
|
|
(2,905
|
)
|
State
|
|
(338
|
)
|
|
898
|
|
|
1,475
|
|
Total deferred
|
|
(4,113
|
)
|
|
2,923
|
|
|
11,314
|
|
Income taxes
|
|
$
|
56,379
|
|
|
$
|
47,764
|
|
|
$
|
41,342
|
|
Realization of deferred tax assets is dependent, in part, upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making its assessment of the recoverability of deferred tax assets.
The tax effects of temporary differences that generated deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Deferred tax assets:
|
|
|
|
|
Benefit accruals
|
|
$
|
219,396
|
|
|
$
|
188,473
|
|
Inventory reserves
|
|
30,953
|
|
|
29,449
|
|
Tax benefit carryforwards
|
|
14,928
|
|
|
11,789
|
|
Contract loss reserves not currently deductible
|
|
12,124
|
|
|
14,231
|
|
Other accrued expenses
|
|
14,563
|
|
|
13,303
|
|
Total gross deferred tax assets
|
|
291,964
|
|
|
257,245
|
|
Less valuation allowance
|
|
(1,746
|
)
|
|
(4,106
|
)
|
Total net deferred tax assets
|
|
290,218
|
|
|
253,139
|
|
Deferred tax liabilities:
|
|
|
|
|
Differences in bases and depreciation of property, plant and equipment
|
|
172,253
|
|
|
166,039
|
|
Pension
|
|
49,293
|
|
|
50,061
|
|
Foreign currency
|
|
1,963
|
|
|
1,492
|
|
Other
|
|
415
|
|
|
—
|
|
Total gross deferred tax liabilities
|
|
223,924
|
|
|
217,592
|
|
Net deferred tax assets
|
|
$
|
66,294
|
|
|
$
|
35,547
|
|
Net deferred tax assets and liabilities are included in the balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Current assets
|
|
$
|
87,780
|
|
|
$
|
82,513
|
|
Other assets
|
|
16,280
|
|
|
10,826
|
|
Other accrued liabilities
|
|
(1,311
|
)
|
|
(1,063
|
)
|
Long-term liabilities
|
|
(36,455
|
)
|
|
(56,729
|
)
|
Net deferred tax assets
|
|
$
|
66,294
|
|
|
$
|
35,547
|
|
We have unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 29,
2012
|
|
October 1,
2011
|
Balance at beginning of year
|
|
$
|
6,696
|
|
|
$
|
9,836
|
|
Decreases as a result of tax positions for prior years
|
|
(151
|
)
|
|
(41
|
)
|
Increases as a result of tax positions for current year
|
|
—
|
|
|
160
|
|
Reductions as a result of lapse of statute of limitations
|
|
(2,622
|
)
|
|
(1,527
|
)
|
Settlement of tax positions
|
|
—
|
|
|
(1,732
|
)
|
Balance at end of year
|
|
$
|
3,923
|
|
|
$
|
6,696
|
|
We are subject to income taxes in the U.S. and in various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009. The statute of limitations in several jurisdictions will expire in the next twelve months and we have unrecognized tax benefits of
$2,173
, which would be recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.
We record interest and penalties related to unrecognized tax benefits in income tax expense. We had accrued interest and penalties of
$1,473
and
$1,634
at
September 29, 2012
and
October 1, 2011
, respectively. We expensed interest of
$368
and
$585
for 2012 and 2011, respectively.
Note 13 - Shareholders’ Equity
Class A and Class B common stock share equally in our earnings and are identical with certain exceptions. Other than on matters relating to the election of directors or as required by law where the holders of Class A and Class B shares vote as separate classes, Class A shares have limited voting rights, with each share of Class A being entitled to
one-tenth
of a vote on most matters, and each share of Class B being entitled to
one
vote. Class A shareholders are entitled, subject to certain limitations, to elect at least
25%
of the Board of Directors (rounded up to the nearest whole number) with Class B shareholders entitled to elect the balance of the directors. No cash dividend may be paid on Class B shares unless at least an equal cash dividend is paid on Class A shares. Class B shares are convertible at any time into Class A shares on a one-for-one basis at the option of the shareholder. The number of common shares issued reflects conversion of Class B to Class A of
40,549
in 2012,
49,158
in 2011 and
14,044
in 2010.
Class A shares reserved for issuance at
September 29, 2012
are as follows:
|
|
|
|
|
Shares
|
Conversion of Class B to Class A shares
|
7,704,589
|
|
2008 Stock Appreciation Rights Plan
|
1,928,956
|
|
2003 Stock Option Plan
|
1,131,852
|
|
1998 Stock Option Plan
|
157,861
|
|
Class A shares reserved for issuance
|
10,923,258
|
|
We are authorized to issue up to
10,000,000
shares of preferred stock. The Board of Directors may authorize, without further shareholder action, the issuance of additional preferred stock which ranks senior to both classes of our common stock with respect to the payment of dividends and the distribution of assets on liquidation. The preferred stock, when issued, would have such designations relative to voting and conversion rights, preferences, privileges and limitations as determined by the Board of Directors.
Note 14 - Equity-Based Compensation
We have equity-based compensation plans that authorize the issuance of equity-based awards for shares of Class A common stock to directors, officers and key employees. Equity-based compensation grants are designed to reward long-term contributions to Moog and provide incentives for recipients to remain with Moog.
Equity-based compensation expense is based on share-based payment awards that are ultimately expected to vest. Vesting requirements vary for directors, officers and key employees. In general, options and stock appreciation rights (SARs) granted to outside directors vest
one year
from the date of grant, options granted to officers vest on various schedules, options granted to key employees vest in equal annual increments over a period of
five years
from the date of grant and SARs granted to officers and key employees vest in equal annual installments over a period of
three years
from the date of grant.
The fair value of equity-based awards granted was estimated on the date of grant using the Black-Scholes option-pricing model. The following table provides the range of assumptions used to value equity-based awards and the weighted-average fair value of the awards granted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Expected volatility
|
|
40% - 42%
|
|
|
39% - 49%
|
|
|
37% - 46%
|
|
Risk-free rate
|
|
.5% - 1.4%
|
|
|
.8% - 2.0%
|
|
|
1.1% - 2.8%
|
|
Expected dividends
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Expected term
|
|
3-7 years
|
|
|
3-7 years
|
|
|
3-7 years
|
|
Weighted-average fair value of SARs granted
|
|
$
|
16.92
|
|
|
$
|
15.25
|
|
|
$
|
10.92
|
|
To determine expected volatility, we generally use historical volatility based on weekly closing prices of our Class A common stock over periods that correlate with the expected terms of the awards granted. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the appropriate term of the awards granted. Expected dividends are based on our history and expectation of dividend payouts. The expected term of equity-based awards is based on vesting schedules, expected exercise patterns and contractual terms.
The 2008 Stock Appreciation Rights Plan (2008 Plan) authorizes the issuance of
2,000,000
SARs, which represent the right to receive shares of Class A common stock. The exercise price of the SARs, determined by a committee of the Board of Directors, may not be less than the fair market value of the Class A common stock on the grant date. The number of shares received upon exercise of a SAR is equal in value to the difference between the fair market value of the Class A common stock on the exercise date and the exercise price of the SAR. The term of a SAR may not exceed
ten
years from the grant date.
The 2003 Stock Option Plan (2003 Plan) authorizes the issuance of options for
1,350,000
shares of Class A common stock. The 1998 Stock Option Plan (1998 Plan) authorizes the issuance of options for
2,025,000
shares of Class A common stock. Under the terms of the plans, options may be either incentive or non-qualified. Options outstanding as of
September 29, 2012
consisted of both incentive options and non-qualified options. The exercise price, determined by a committee of the Board of Directors, may not be less than the fair market value of the Class A common stock on the grant date. Options become exercisable over periods not exceeding
ten
years.
Options and SARs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1998 Stock Option Plan
|
|
Stock Options/SARs
|
|
Weighted-
Average
Exercise Price
|
|
Weighted-
Average
Remaining Contractual Life
|
|
Aggregate
Intrinsic Value
|
Outstanding at October 3, 2009
|
|
539,244
|
|
|
$
|
12.27
|
|
|
|
|
|
Exercised in 2010
|
|
(89,760
|
)
|
|
7.69
|
|
|
|
|
|
Outstanding at October 2, 2010
|
|
449,484
|
|
|
13.19
|
|
|
|
|
|
Exercised in 2011
|
|
(143,323
|
)
|
|
11.84
|
|
|
|
|
|
Outstanding at October 1, 2011
|
|
306,161
|
|
|
13.81
|
|
|
|
|
|
Exercised in 2012
|
|
(148,300
|
)
|
|
12.07
|
|
|
|
|
|
Outstanding at September 29, 2012
|
|
157,861
|
|
|
$
|
15.45
|
|
|
0.6 years
|
|
$
|
3,539
|
|
Exercisable at September 29, 2012
|
|
147,362
|
|
|
$
|
15.14
|
|
|
0.5 years
|
|
$
|
3,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 Stock Option Plan
|
|
|
|
|
|
|
|
|
Outstanding at October 3, 2009
|
|
1,149,392
|
|
|
$
|
32.82
|
|
|
|
|
|
Exercised in 2010
|
|
(12,065
|
)
|
|
23.75
|
|
|
|
|
|
Forfeited in 2010
|
|
(1,538
|
)
|
|
42.45
|
|
|
|
|
|
Outstanding at October 2, 2010
|
|
1,135,789
|
|
|
32.90
|
|
|
|
|
|
Exercised in 2011
|
|
(10,065
|
)
|
|
24.31
|
|
|
|
|
|
Outstanding at October 1, 2011
|
|
1,125,724
|
|
|
32.98
|
|
|
|
|
|
Exercised in 2012
|
|
(19,852
|
)
|
|
$
|
28.17
|
|
|
|
|
|
Expired in 2012
|
|
(1,538
|
)
|
|
42.45
|
|
|
|
|
Outstanding at September 29, 2012
|
|
1,104,334
|
|
|
$
|
33.05
|
|
|
3.2 years
|
|
$
|
6,528
|
|
Exercisable at September 29, 2012
|
|
853,071
|
|
|
$
|
33.93
|
|
|
3.3 years
|
|
$
|
4,501
|
|
|
|
|
|
|
|
|
|
|
Total Stock Option Plans
|
|
|
|
|
|
|
|
|
Outstanding at September 29, 2012
|
|
1,262,195
|
|
|
$
|
30.85
|
|
|
|
|
|
Exercisable at September 29, 2012
|
|
1,000,433
|
|
|
$
|
31.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Stock Appreciation Rights Plan
|
|
|
|
|
|
|
|
|
Outstanding at October 3, 2009
|
|
488,500
|
|
|
$
|
36.89
|
|
|
|
|
|
Granted in 2010
|
|
288,375
|
|
|
26.66
|
|
|
|
|
|
Forfeited in 2010
|
|
(13,666
|
)
|
|
38.12
|
|
|
|
|
|
Outstanding at October 2, 2010
|
|
763,209
|
|
|
33.00
|
|
|
|
|
|
Granted in 2011
|
|
385,000
|
|
|
36.86
|
|
|
|
|
|
Exercised in 2011
|
|
(14,501
|
)
|
|
32.79
|
|
|
|
|
|
Forfeited in 2011
|
|
(17,000
|
)
|
|
37.74
|
|
|
|
|
|
Outstanding at October 1, 2011
|
|
1,116,708
|
|
|
34.26
|
|
|
|
|
|
Granted in 2012
|
|
408,000
|
|
|
41.82
|
|
|
|
|
|
Exercised in 2012
|
|
(56,543
|
)
|
|
32.62
|
|
|
|
|
|
Outstanding at September 29, 2012
|
|
1,468,165
|
|
|
$
|
36.43
|
|
|
7.5 years
|
|
$
|
4,221
|
|
Exercisable at September 29, 2012
|
|
730,539
|
|
|
$
|
34.39
|
|
|
6.3 years
|
|
$
|
3,031
|
|
The aggregate intrinsic value in the preceding tables represent the total pre-tax intrinsic value, based on our closing price of Class A common stock of
$37.87
as of
September 29, 2012
. That value would have been effectively received by the option and SAR holders had all option and SAR holders exercised their options and SARs as of that date.
The intrinsic value of awards exercised and fair value of awards vested are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
1998 Stock Option Plan
|
|
|
|
|
|
|
Intrinsic value of options exercised
|
|
$
|
4,254
|
|
|
$
|
4,186
|
|
|
$
|
1,821
|
|
Total fair value of options vested
|
|
$
|
27
|
|
|
$
|
791
|
|
|
$
|
186
|
|
2003 Stock Option Plan
|
|
|
|
|
|
|
Intrinsic value of options exercised
|
|
$
|
227
|
|
|
$
|
156
|
|
|
$
|
88
|
|
Total fair value of options vested
|
|
$
|
376
|
|
|
$
|
4,758
|
|
|
$
|
2,975
|
|
2008 Stock Appreciation Rights Plan
|
|
|
|
|
|
|
Intrinsic value of SARs exercised
|
|
$
|
437
|
|
|
$
|
108
|
|
|
$
|
—
|
|
Total fair value of SARs vested
|
|
$
|
4,563
|
|
|
$
|
3,438
|
|
|
$
|
2,473
|
|
As of
September 29, 2012
, total unvested compensation expense associated with stock options amounted to
$925
and will be recognized over a weighted-average period of
three
years, and total unvested compensation expense associated with SARs amounted to
$3,509
and will be recognized over a weighted-average period of
two
years.
Note 15 - Stock Employee Compensation Trust
We have a Stock Employee Compensation Trust (SECT) to assist in administering and to provide funding for employee stock plans and benefit programs, including the RSP. The shares in the SECT are not considered outstanding for purposes of calculating earnings per share. However, in accordance with the trust agreement governing the SECT, the SECT trustee votes all shares held by the SECT on all matters submitted to shareholders.
Note 16 - Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss), net of tax, consists of:
|
|
|
|
|
|
|
|
|
|
|
|
September 29, 2012
|
|
October 1,
2011
|
Accumulated foreign currency translation
|
|
$
|
33,493
|
|
|
$
|
33,349
|
|
Accumulated retirement liability
|
|
(280,424
|
)
|
|
(234,128
|
)
|
Accumulated gain (loss) on derivatives
|
|
220
|
|
|
(165
|
)
|
Accumulated other comprehensive loss
|
|
$
|
(246,711
|
)
|
|
$
|
(200,944
|
)
|
Note 17 - Segments
Aircraft Controls.
We design, manufacture and integrate primary and secondary flight controls for military and commercial aircraft and provide aftermarket support. Our systems are used in large commercial transports, supersonic fighters, multi-role military aircraft, business jets and rotorcraft. We also supply ground-based navigation aids. We are well positioned on both development and production programs. Typically, development programs require concentrated periods of research and development by our engineering teams and involve design, development, testing and integration. We are currently working on several large development programs including the F-35 Joint Strike Fighter, Boeing 787 Dreamliner, COMAC C919, Airbus A350XWB, several business jet programs and a new military air refueling tanker KC-46. The F-35 flight test phase has expanded covering three variants and initial production is increasing with aircraft being delivered to international partners. The 787 program began design and development in 2004 and has transitioned into initial production. Development activity on 787 derivative aircraft will continue through 2013. The Airbus A350XWB is in development with entry into service planned for 2014. Production programs are generally long-term manufacturing efforts that extend for as long as the aircraft builder receives new orders. Our large military production programs include the F/A-18E/F Super Hornet, the V-22 Osprey tiltrotor, the Black Hawk/Seahawk helicopter and the F-35. Our large commercial production programs include the full line of Boeing 7-series aircraft, Airbus A330 and a variety of business jets. Aftermarket sales, which represented
34%
of 2012 sales for this segment, consist of the maintenance, repair, overhaul and parts supply for both military and commercial aircraft. Further, we sell to both military and commercial customers spares inventory that they store throughout the world in order to minimize down time.
Space and Defense Controls.
Space and Defense Controls provides controls for satellites and space vehicles, launch vehicles, armored combat vehicles, tactical and strategic missiles, security and surveillance and other defense applications. For commercial and military satellites, we design, manufacture and integrate propulsion systems and components (attitude control and orbit insertion) and actuation systems and components for deploying solar panels and antennae pointing. The Atlas, Delta and Ariane launch vehicle programs use our steering and propulsion controls. We are also developing products for NASA’s new Space Launch System. We design and build steering and propulsion controls for tactical and strategic missile programs, including Hellfire, TOW and Trident. We supply valves and steering controls on the U.S. National Missile Defense Agency's Ballistic Missile Defense initiative. We design and manufacture systems for gun aiming, stabilization, turrets, automatic ammunition loading and driver vision enhancement on armored combat vehicles for a variety of international and U.S. customers. We design, build and integrate stores management systems for light attack aerial reconnaissance platforms. We also design and build high power, quiet controls for naval surface ship and submarine applications.
Industrial Systems.
Industrial Systems serves a global customer base across a variety of markets. For wind energy, we design and manufacture electric pitch controls and blade monitoring systems for wind turbines. We supply electromechanical motion simulation bases for the flight simulation and training markets. For the plastics making machinery market, we design, manufacture and integrate systems for all axes of injection and blow molding machines using leading edge technology, both hydraulic and electric. In the power generation market, we design, manufacture and integrate complete control assemblies for fuel, steam and variable geometry control applications. For the test markets, we supply controls for automotive, structural and fatigue testing. Metal forming markets use our systems to provide precise control of position, velocity, force, pressure, acceleration and other critical parameters. Heavy industry uses our high precision electrical and hydraulic servovalves for steel and aluminum mill equipment. Other markets include oil exploration, material handling, auto racing, carpet tufting, paper and lumber mills.
Components.
The Components segment serves many of the same markets as our other segments. The Components segment’s three largest product categories are slip rings, fiber optic rotary joints and motors. Slip rings and fiber optic rotary joints use sliding contacts and optical technology to allow unimpeded rotation while delivering power and data through a rotating interface. They come in a range of sizes that allow them to be used in many applications, including diagnostic imaging CT scan medical equipment featuring high-speed data communications, de-icing and data transfer for rotorcraft, forward-looking infrared camera installations, radar pedestals, satellites, missiles, wind turbines, surveillance cameras and remotely operated vehicles and floating platforms for offshore oil exploration. Our motors are used in an equally broad range of markets, many of which are the same as for slip rings. Components designs and manufactures a series of fractional horsepower brushless motors that provide extremely low acoustic noise and reliable long life operation, with the largest market being sleep apnea equipment. Industrial markets use our motors for material handling and electric pumps. Military applications use our motors for gimbals, missiles and radar pedestals. Components’ other product lines include electromechanical actuators for military, aerospace and commercial applications, fiber optic modems that provide electrical-to-optical conversion of communication and data signals, avionic instrumentation, optical switches and resolvers.
Medical Devices.
This segment operates within four medical devices market areas: infusion therapy, enteral clinical nutrition, sensors and surgical hand pieces. For infusion therapy, our primary products are electronic ambulatory infusion pumps along with the associated administration sets. Applications of these products include hydration, nutrition, patient-controlled analgesia, local anesthesia, chemotherapy and antibiotics. We manufacture and distribute a complete line of portable pumps, stationary pumps and disposable sets that are used in the delivery of enteral nutrition for patients in their own homes, hospitals and long-term care facilities. We manufacture and distribute ultrasonic and optical sensors used to detect air bubbles in infusion pump lines and ensure accurate fluid delivery. Our surgical hand pieces are used to safely fragment and aspirate tissue in common medical procedures such as cataract removal.
Segment information and reconciliations to consolidated amounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Net sales:
|
|
|
|
|
|
|
Aircraft Controls
|
|
$
|
963,421
|
|
|
$
|
850,490
|
|
|
$
|
756,550
|
|
Space and Defense Controls
|
|
358,755
|
|
|
355,762
|
|
|
325,474
|
|
Industrial Systems
|
|
633,713
|
|
|
629,312
|
|
|
545,672
|
|
Components
|
|
374,081
|
|
|
353,142
|
|
|
359,992
|
|
Medical Devices
|
|
139,566
|
|
|
141,974
|
|
|
126,564
|
|
Net sales
|
|
$
|
2,469,536
|
|
|
$
|
2,330,680
|
|
|
$
|
2,114,252
|
|
Operating profit (loss) and margins:
|
|
|
|
|
|
|
Aircraft Controls
|
|
$
|
104,582
|
|
|
$
|
83,776
|
|
|
$
|
76,374
|
|
|
|
10.9
|
%
|
|
9.9
|
%
|
|
10.1
|
%
|
Space and Defense Controls
|
|
42,854
|
|
|
49,245
|
|
|
35,844
|
|
|
|
11.9
|
%
|
|
13.8
|
%
|
|
11.0
|
%
|
Industrial Systems
|
|
63,243
|
|
|
62,805
|
|
|
48,109
|
|
|
|
10.0
|
%
|
|
10.0
|
%
|
|
8.8
|
%
|
Components
|
|
57,303
|
|
|
50,353
|
|
|
60,159
|
|
|
|
15.3
|
%
|
|
14.3
|
%
|
|
16.7
|
%
|
Medical Devices
|
|
5,443
|
|
|
241
|
|
|
(4,044
|
)
|
|
|
3.9
|
%
|
|
0.2
|
%
|
|
(3.2
|
%)
|
Total operating profit
|
|
273,425
|
|
|
246,420
|
|
|
216,442
|
|
|
|
11.1
|
%
|
|
10.6
|
%
|
|
10.2
|
%
|
Deductions from operating profit:
|
|
|
|
|
|
|
Interest expense
|
|
(34,312
|
)
|
|
(35,666
|
)
|
|
(38,742
|
)
|
Equity-based compensation expense
|
|
(6,226
|
)
|
|
(6,952
|
)
|
|
(5,445
|
)
|
Corporate and other expenses, net
|
|
(24,046
|
)
|
|
(20,017
|
)
|
|
(22,819
|
)
|
Earnings before income taxes
|
|
$
|
208,841
|
|
|
$
|
183,785
|
|
|
$
|
149,436
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
Aircraft Controls
|
|
$
|
42,774
|
|
|
$
|
40,945
|
|
|
$
|
37,211
|
|
Space and Defense Controls
|
|
11,996
|
|
|
11,349
|
|
|
10,690
|
|
Industrial Systems
|
|
23,408
|
|
|
23,194
|
|
|
24,461
|
|
Components
|
|
9,123
|
|
|
7,409
|
|
|
6,605
|
|
Medical Devices
|
|
11,101
|
|
|
11,472
|
|
|
10,655
|
|
|
|
98,402
|
|
|
94,369
|
|
|
89,622
|
|
Corporate
|
|
2,414
|
|
|
1,958
|
|
|
1,594
|
|
Total depreciation and amortization
|
|
$
|
100,816
|
|
|
$
|
96,327
|
|
|
$
|
91,216
|
|
Identifiable assets:
|
|
|
|
|
|
|
Aircraft Controls
|
|
1,194,742
|
|
|
$
|
1,110,771
|
|
|
$
|
1,028,213
|
|
Space and Defense Controls
|
|
423,838
|
|
|
342,093
|
|
|
349,987
|
|
Industrial Systems
|
|
760,829
|
|
|
731,193
|
|
|
684,021
|
|
Components
|
|
457,254
|
|
|
384,409
|
|
|
362,417
|
|
Medical Devices
|
|
234,431
|
|
|
243,283
|
|
|
246,606
|
|
|
|
3,071,094
|
|
|
2,811,749
|
|
|
2,671,244
|
|
Corporate
|
|
34,813
|
|
|
31,218
|
|
|
40,890
|
|
Total assets
|
|
$
|
3,105,907
|
|
|
$
|
2,842,967
|
|
|
$
|
2,712,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Capital expenditures:
|
|
|
|
|
|
|
Aircraft Controls
|
|
$
|
67,507
|
|
|
$
|
51,727
|
|
|
$
|
30,449
|
|
Space and Defense Controls
|
|
10,270
|
|
|
11,589
|
|
|
7,315
|
|
Industrial Systems
|
|
16,525
|
|
|
11,702
|
|
|
12,478
|
|
Components
|
|
7,071
|
|
|
4,620
|
|
|
3,961
|
|
Medical Devices
|
|
2,398
|
|
|
2,737
|
|
|
11,746
|
|
|
|
103,771
|
|
|
82,375
|
|
|
65,949
|
|
Corporate
|
|
3,259
|
|
|
1,320
|
|
|
—
|
|
Total capital expenditures
|
|
$
|
107,030
|
|
|
$
|
83,695
|
|
|
$
|
65,949
|
|
Operating profit is net sales less cost of sales and other operating expenses, excluding interest expense, equity-based compensation expense and other corporate expenses. Cost of sales and other operating expenses are directly identifiable to the respective segment or allocated on the basis of sales, manpower or profit.
Sales, based on the customer’s location, and property, plant and equipment by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
Net sales:
|
|
|
|
|
|
|
United States
|
|
$
|
1,363,892
|
|
|
$
|
1,293,058
|
|
|
$
|
1,185,743
|
|
Germany
|
|
210,842
|
|
|
185,840
|
|
|
150,427
|
|
China
|
|
121,338
|
|
|
144,586
|
|
|
157,501
|
|
United Kingdom
|
|
117,336
|
|
|
113,253
|
|
|
115,944
|
|
Japan
|
|
118,484
|
|
|
81,999
|
|
|
96,431
|
|
Other
|
|
537,644
|
|
|
511,944
|
|
|
408,206
|
|
Net sales
|
|
$
|
2,469,536
|
|
|
$
|
2,330,680
|
|
|
$
|
2,114,252
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
United States
|
|
$
|
310,390
|
|
|
$
|
288,647
|
|
|
$
|
274,591
|
|
Philippines
|
|
68,993
|
|
|
70,159
|
|
|
74,720
|
|
United Kingdom
|
|
58,329
|
|
|
35,468
|
|
|
27,866
|
|
Germany
|
|
23,720
|
|
|
24,177
|
|
|
25,899
|
|
Other
|
|
84,747
|
|
|
85,421
|
|
|
83,868
|
|
Property, plant and equipment, net
|
|
$
|
546,179
|
|
|
$
|
503,872
|
|
|
$
|
486,944
|
|
Sales to Boeing were
$263,060
,
$229,825
and
$206,775
, or
11%
,
10%
and
10%
of sales, in 2012, 2011 and 2010, respectively, including sales to Boeing Commercial Airplanes of
$131,318
,
$110,802
and
$91,112
in 2012, 2011 and 2010, respectively. Sales arising from U.S. Government prime or sub-contracts, including military sales to Boeing, were
$737,980
,
$738,429
and
$740,701
in 2012, 2011 and 2010, respectively. Sales to Boeing and the U.S. Government and its prime- or sub-contractors are made primarily from the Aircraft Controls and Space and Defense Controls segments.
Note 18 - Commitments and Contingencies
From time to time, we are involved in legal proceedings. We are not a party to any pending legal proceedings which management believes will result in a material adverse effect on our financial condition or results of operations.
We are engaged in administrative proceedings with governmental agencies and legal proceedings with governmental agencies and other third parties in the normal course of our business, including litigation under Superfund laws, regarding environmental matters. We believe that adequate reserves have been established for our share of the estimated cost for all currently pending environmental administrative or legal proceedings and do not expect that these environmental matters will have a material adverse effect on our financial condition or results of operations.
We lease certain facilities and equipment under operating lease arrangements. These arrangements may include fair market renewal or purchase options. Rent expense under operating leases amounted to
$26,518
in 2012,
$26,544
in 2011 and
$25,061
in 2010. Future minimum rental payments required under non-cancelable operating leases are
$19,681
in 2013,
$16,868
in 2014,
$10,819
in 2015,
$9,150
in 2016,
$7,489
in 2017 and
$13,307
thereafter.
We are contingently liable for
$13,532
of standby letters of credit issued by a bank to third parties on our behalf at
September 29, 2012
. Purchase commitments outstanding at
September 29, 2012
are
$499,264
, including
$21,203
for property, plant and equipment.
Note 19 - Quarterly Data - Unaudited
Net Sales and Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
|
2012
|
Qtr.
|
|
Qtr.
|
|
Qtr.
|
|
Qtr.
|
|
Total
|
Net sales
|
$
|
600,618
|
|
|
$
|
624,970
|
|
|
$
|
611,221
|
|
|
$
|
632,727
|
|
|
$
|
2,469,536
|
|
Gross profit
|
185,135
|
|
|
184,430
|
|
|
183,418
|
|
|
192,321
|
|
|
745,304
|
|
Net earnings
|
36,373
|
|
|
35,421
|
|
|
38,871
|
|
|
41,797
|
|
|
152,462
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.80
|
|
|
$
|
0.78
|
|
|
$
|
0.86
|
|
|
$
|
0.92
|
|
|
$
|
3.37
|
|
Diluted
|
$
|
0.80
|
|
|
$
|
0.77
|
|
|
$
|
0.85
|
|
|
$
|
0.91
|
|
|
$
|
3.33
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
|
2011
|
Qtr.
|
|
Qtr.
|
|
Qtr.
|
|
Qtr.
|
|
Total
|
Net sales
|
$
|
554,434
|
|
|
$
|
574,226
|
|
|
$
|
582,959
|
|
|
$
|
619,061
|
|
|
$
|
2,330,680
|
|
Gross profit
|
164,553
|
|
|
167,248
|
|
|
168,884
|
|
|
178,792
|
|
|
679,477
|
|
Net earnings
|
33,407
|
|
|
30,615
|
|
|
33,838
|
|
|
38,161
|
|
|
136,021
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.74
|
|
|
$
|
0.67
|
|
|
$
|
0.74
|
|
|
$
|
0.84
|
|
|
$
|
2.99
|
|
Diluted
|
$
|
0.73
|
|
|
$
|
0.66
|
|
|
$
|
0.73
|
|
|
$
|
0.83
|
|
|
$
|
2.95
|
|
Note: Quarterly amounts may not add to the total due to rounding.