Form 10-Q

10-Q 1 form10q.htm FORM 10-Q Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended April 1, 2006

OR

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ______________ to ______________

Commission File Number: 1-5129

MOOG INC.

(Exact name of registrant as specified in its charter)


New York State	16-0757636
(State or other jurisdiction of	(I.R.S. employer identification no.)
incorporation or organization)

East Aurora, New York	14052-0018
(Address of principal executive offices)	(Zip code)

Telephone number including area code: (716) 652-2000
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X Accelerated filer __ Non-accelerated filer __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes__ No X

The number of shares outstanding of each class of common stock as of May 5, 2006 were:

Class A Common Stock, $1.00 par value

37,465,142 shares

Class B Common Stock, $1.00 par value

4,249,216 shares

MOOG INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Consolidated Condensed Balance Sheets

April 1, 2006 and September 24, 2005

Consolidated Condensed Statements of Earnings

Three and Six Months Ended April 1, 2006 and

March 26, 2005

Consolidated Condensed Statements of Cash Flows

Six Months Ended April 1, 2006 and March 26, 2005

Notes to Consolidated Condensed Financial

Statements

6-15

Item 2.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

16-27

Item 3. Quantitative and Qualitative Disclosures about

Market Risk

Item 4.

Controls and Procedures

PART II.

OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and

Use of Proceeds

Item 4.

Submission of Matters to a Vote of Security Holders

Item 6.

Exhibits

SIGNATURES

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

MOOG INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(dollars in thousands)

April 1,

September 24,

2006

2005

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

42,235

$

33,750

Receivables

321,412

296,986

Inventories

243,458

215,425

Other current assets

59,308

53,897

TOTAL CURRENT ASSETS

666,413

600,058

PROPERTY, PLANT AND EQUIPMENT, net of accumulated

depreciation of $300,720 and $293,245, respectively

279,413

262,841

GOODWILL

381,955

378,205

INTANGIBLE ASSETS, net

33,652

24,786

OTHER ASSETS

35,975

37,437

TOTAL ASSETS

$

1,397,408

$

1,303,327

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Notes payable

$

884

$

885

Current installments of long-term debt

16,792

17,035

Accounts payable

81,946

70,180

Customer advances

37,516

43,877

Accrued pension and retirement obligations

46,801

18,635

Contract loss reserves

14,019

14,121

Other accrued liabilities

133,127

122,619

TOTAL CURRENT LIABILITIES

331,085

287,352

LONG-TERM DEBT, excluding current installments

Senior debt

82,424

130,853

Senior subordinated notes

200,115

200,124

LONG-TERM PENSION AND RETIREMENT OBLIGATIONS

94,206

125,503

DEFERRED INCOME TAXES

38,718

36,304

OTHER LONG-TERM LIABILITIES

2,677

2,154

TOTAL LIABILITIES

749,225

782,290

SHAREHOLDERS' EQUITY

Common stock

48,605

45,730

Other shareholders' equity

599,578

475,307

TOTAL SHAREHOLDERS' EQUITY

648,183

521,037

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,397,408

$

1,303,327

See accompanying Notes to Consolidated Condensed Financial Statements.


MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(dollars in thousands except per share data)








		Three Months Ended				Six Months Ended
		April 1,		March 26,		April 1,		March 26,
		2006		2005		2006		2005

Net sales		$	322,109	$	255,237	$	632,280	$	504,540
Cost of sales			218,211		174,344		427,785		348,227
Gross profit			103,898		80,893		204,495		156,313

Research and development			15,980		10,133		29,587		19,142
Selling, general and administrative			51,382		43,819		104,942		84,738
Interest			4,877		3,170		10,497		5,879
Other			311		10		638		(34)


Earnings before income taxes			31,348		23,761		58,831		46,588

Income taxes			9,886		7,991		20,572		15,843

Net earnings		$	21,462	$	15,770	$	38,259	$	30,745

Net earnings per share
	Basic	$	.54	$	.41	$	.97	$	.80
	Diluted	$	.53	$	.40	$	.96	$	.78

Average common shares outstanding
	Basic		40,014,206		38,607,521		39,314,682		38,597,874
	Diluted		40,723,532		39,528,401		40,005,871		39,486,535




See accompanying Notes to Consolidated Condensed Financial Statements.

MOOG INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)

Six Months Ended

April 1,

March 26,

2006

2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings

38,259

30,745

Adjustments to reconcile net earnings

to net cash provided by operating activities:

Depreciation and amortization

22,017

17,602

Stock compensation expense

2,487

Other

(36,590)

5,882

NET CASH PROVIDED BY OPERATING ACTIVITIES

26,173

54,229

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of businesses, net of acquired cash

(24,190)

(4,613)

Purchase of property, plant and equipment

(37,154)

(14,756)

Other

4,133

283

NET CASH USED BY INVESTING ACTIVITIES

(57,211)

(19,086)

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from (repayments of) notes payble

(72)

Net repayments of revolving lines of credit

(40,400)

(159,300)

Proceeds from long-term debt

455

268

Payments on long-term debt

(8,063)

(9,715)

Proceeds from sale of senior subordinated notes, net of issuance costs

147,164

Proceeds from issuance of Class A Common Stock, net of issuance costs

84,588

Excess tax benefits from share-based payment arrangements

1,246

Other

1,612

365

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

39,456

(21,290)

Effect of exchange rate changes on cash

1,765

INCREASE IN CASH AND CASH EQUIVALENTS

8,485

15,618

Cash and cash equivalents at beginning of period

33,750

56,701

CASH AND CASH EQUIVALENTS AT END OF PERIOD

42,235

72,319

CASH PAID FOR:

Interest

10,425

5,333

Income taxes

9,823

7,105

See accompanying Notes to Consolidated Condensed Financial Statements.

MOOG INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED APRIL 1, 2006

(Unaudited)

(dollars in thousands, except per share data)

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for fair presentation of results for the interim period have been included. The results of operations for the three and six months ended April 1, 2006 are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended September 24, 2005. All references to years in these financial statements are to fiscal years.

The Company's fiscal year ends on the last Saturday in September. The Company's financial statements will include 53 weeks in 2006 and 52 weeks in 2005. The Company's financial statements include 13 weeks for the three months ended April 1, 2006 and March 26, 2005, and 27 weeks for the six months ended April 1, 2006 compared to 26 weeks for the six months ended March 26, 2005. While management believes this has a financial impact on the reported results for the first six months of 2006 that may affect the comparability of the financial statements presented, the impact has not been determined.

Acquisitions

All of the Company's 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.

On November 23, 2005, the Company acquired Flo-Tork Inc. The adjusted purchase price was $24,855 which was financed with credit facility borrowings. Flo-Tork is a leading designer and manufacturer of hydraulic and pneumatic rotary actuators and specialized cylinders for niche military and industrial applications. This acquisition not only expands the Company's reach within Industrial Controls, but also provides new opportunities for naval applications within Space and Defense Controls.

On August 11, 2005, the Company acquired FCS Control Systems for $46,670, financed primarily with existing cash in one of the Company's European subsidiaries. FCS Control Systems is a business that produces high-fidelity electromechanical and electrohydraulic flight and vehicle simulation equipment and structural test systems for aerospace and automotive applications. This acquisition expands the Company's market for simulators in Europe and enhances the Company's line of control loading actuation systems within Industrial Controls.

On July 26, 2005, the Company acquired the Power and Data Technologies Group of the Kaydon Corporation and financed the acquisition with credit facility borrowings. In the first quarter of 2006, the Company received $665 in cash from the seller representing a working capital adjustment, resulting in an adjusted purchase price of $72,086. This business manufactures electric and fiber-optic slip rings for industrial products, underwater applications and for European military applications. This acquisition will help the Company reach new markets and will complement the Company's existing line of products within Components.

The Company's purchase price allocations for Flo-Tork, FCS Control Systems and the Power and Data Technologies Group of the Kaydon Corporation are based on preliminary estimates of fair values of assets acquired and liabilities assumed. These estimates are subject to the finalization of the purchase price allocations.

In the second quarter of 2005, the Company acquired an industrial systems engineering business and a commercial aircraft repair business for $4,637.

Stock-Based Compensation

The Company has stock option plans that authorize the issuance of options for shares of Class A Common Stock to directors, officers and key employees. Stock option grants are designed to reward long-term contributions to the Company and provide incentives for recipients to remain with the Company. 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 issued as of April 1, 2006 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.

During the first quarter of 2006, the Company adopted SFAS 123(R), "Share-Based Payment," applying the modified prospective method. This Statement requires all equity-based payments to employees, including grants of employee stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under the modified prospective method, the Company is required to record equity-based compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards outstanding as of the date of adoption. The Company uses a straight-line method of attributing the value of stock-based compensation expense, subject to minimum levels of expense, based on vesting.

Stock compensation expense recognized 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 granted to outside directors vest one year from the date of grant, options granted to officers vest on various schedules and options granted to key employees are graded vested over a five-year period from the date of grant.

The fair value of stock options granted was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair value of the options was $11.22 for options granted during the six months ended April 1, 2006 and was $9.57 for options granted during the six months ended March 26, 2005. The following table provides the range of assumptions used to value stock options granted during the six months ended April 1, 2006 and March 26, 2005.


	Six Months Ended
	April 1,	March 26,
	2006	2005

Expected volatility	27% - 35%	36%
Risk-free rate	4.4% - 4.5%	3.3% - 4.4%
Expected dividends	0%	0%
Expected term (in years)	3-10 years	3-10 years

To determine expected volatility, the Company uses historical volatility based on weekly closing prices of its Class A Common Stock over periods that correlate with the expected terms of the options 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 options granted. Expected dividends are based on the Company's history and expectation of dividend payouts. The expected term of stock options is based on vesting schedules, expected exercise patterns and contractual terms.

The table below reflects net earnings and net earnings per share for the three and six months ended April 1, 2006 compared with the pro forma information for the three and six months ended March 26, 2005 as follows:


	Three Months Ended				Six Months Ended
		April 1,		March 26,		April 1,		March 26,
		2006		2005		2006		2005

Net earnings, as reported for the prior period (1)		N/A	$	15,770		N/A	$	30,745

Stock compensation expense	$	475		518	$	2,487		867
Tax benefit		(50)		(54)		(614)		(80)

Stock compensation expense, net of tax (2)		425		464		1,873		787

Net earnings, including the effect of stock
compensation expense (3)	$	21,462	$	15,306	$	38,259	$	29,958

Net earnings per share:
Basic, as reported for the prior period (1)		N/A	$	0.41		N/A	$	0.80
Basic, including the effect of stock compensation
expense (3)	$	0.54	$	0.40	$	0.97	$	0.78

Diluted, as reported for the prior period (1)		N/A	$	0.40		N/A	$	0.78
Diluted, including the effect of stock
compensation expense (3)	$	0.53	$	0.39	$	0.96	$	0.76

(1)	Net earnings and earnings per share prior to 2006 did not include stock compensation expense for stock options.

(2)	Stock compensation expense prior to 2006 is calculated based on the pro forma application of SFAS No. 123.

(3)	Net earnings and earnings per share prior to 2006 represents pro forma information based on SFAS 123.

Stock compensation expense is included in selling, general and administrative expense. The following table summarizes information about stock options outstanding and exercisable at April 1, 2006.


	Outstanding		Exercisable
		Weighted		Weighted
Exercise		Average		Average
Price		Exercise		Exercise
Range	Options	Price	Options	Price
$ 7.07 - 10.04	592,233	$ 8.53	430,834	$ 8.61
12.53 - 15.24	433,361	13.16	218,859	13.77
19.74 - 23.88	219,372	20.15	34,558	20.44
26.65 - 28.94	699,988	28.29	73,760	28.03
	1,944,954	$ 17.98	758,011	$ 12.53

Shares under options are as follows:


			Weighted
		Weighted	Average
	Class A	Average	Remaining	Aggregate
1998 Plan	Stock Options	Exercise Price	Contractual Life	Intrinsic Value
Outstanding at September 24, 2005	1,303,921	$ 11.56
Exercised in 2006	(139,955)	11.38
Outstanding at April 1, 2006	1,163,966	$ 11.59	5.3	$ 27,816
Exercisable at April 1, 2006	680,065	$ 10.77	4.5	$ 16,808
			Weighted
		Weighted	Average
	Class A	Average	Remaining	Aggregate
2003 Plan	Stock Options	Exercise Price	Contractual Life	Intrinsic Value
Outstanding at September 24, 2005	585,222	$ 26.85
Granted in 2006	236,266	28.94
Exercised in 2006	(40,500)	25.42
Outstanding at April 1, 2006	780,988	$ 27.51	8.9	$ 6,234
Exercisable at April 1, 2006	77,946	$ 27.81	8.6	$ 599

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company's closing stock price of Class A Common Stock of $35.49 as of April 1, 2006, which would have been received by the option holders had all option holders exercised their options as of that date.

Inventories


		April 1,		September 24,
		2006		2005
Raw materials and purchased parts	$	89,276	$	75,859
Work in process		114,814		101,487
Finished goods		39,368		38,079
	$	243,458	$	215,425

Goodwill and Intangible Assets


The changes in the carrying amount of goodwill for the six months ended April 1, 2006 are as follows:

				Space
	Aircraft		& Defense			Industrial
	Controls			Controls			Controls		Components		Total
Balance as of September 24, 2005	$	103,749		$	45,664		$	82,496	$	146,296	$	378,205
Current year acquisition		-			5,805			3,869		-		9,674
Adjustment to prior year acquisitions		28			-			(45)		(5,641)		(5,658)
Foreign currency translation		4			-			(70)		(200)		(266)
Balance as of April 1, 2006	$	103,781		$	51,469		$	86,250	$	140,455	$	381,955

All acquired intangible assets other than goodwill are being amortized. The weighted-average amortization period is nine years for customer-related, technology-related and marketing-related intangible assets and ten years for artistic-related intangible assets. In total, these intangible assets have a weighted-average life of nine years. Customer-related intangible assets primarily consist of customer relationships. Technology-related intangible assets primarily consist of intellectual property, patents and engineering drawings. Marketing-related intangible assets primarily consist of non-compete agreements. Amortization of acquired intangible assets was $1,900 and $3,327 for the three and six months ended April 1, 2006 and was $502 and $977 for the three and six months ended March 26, 2005, respectively. Based on acquired intangible assets recorded at April 1, 2006, amortization is expected to be $6,655 in 2006, $4,167 in 2007, $3,565 in 2008, $3,429 in 2009 and $3,369 in 2010. The gross carrying amount and accumulated amortization for major categories of acquired intangible assets are as follows:


		April 1, 2006				September 24, 2005
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Customer-related	$	24,597	$	(4,957)	$	16,106	$	(2,641)
Technology-related		9,677		(1,621)		6,445		(993)
Marketing-related		6,889		(5,208)		6,381		(4,842)
Artistic-related		25		(11)		25		(10)
	$	41,188	$	(11,797)	$	28,957	$	(8,486)

Product Warranties

In the ordinary course of business, the Company warrants its products against defects in design, materials and workmanship typically over periods ranging from twelve to thirty-six months. On a quarterly basis, the Company determines warranty reserves needed by assessing exposures by product line based on experience and current facts and circumstances. Activity in the warranty accrual is summarized below:


	Three Months Ended					Six Months Ended
	April 1, 2006		March 26, 2005		April 1, 2006		March 26, 2005
	April 1, 2006		March 26, 2005		April 1, 2006		March 26, 2005

Warranty accrual at beginning of period	$	4,625	$	4,725	$	4,733	$	4,233
Additions from acquisition		-		110		-		110
Warranties issued during period		2,110		1,234		3,327		2,693
Reductions for settling warranties		(1,406)		(1,194)		(2,690)		(2,369)
Foreign currency translation		35		(98)		(6)		110
Warranty accrual at end of period	$	5,364	$	4,777	$	5,364	$	4,777

Derivative Financial Instruments

The Company uses derivative financial instruments to manage the risk associated with changes in interest rates that affect the amount of future interest payments. Interest rate swaps with a notional amount of $55,000 matured in the second quarter of 2006. At April 1, 2006, the Company had outstanding interest rate swaps with a $35,000 notional amount, effectively converting that amount of variable-rate debt to fixed-rate debt. The $35,000 notional amount matures in the first quarter of 2007. Based on the applicable margin at April 1, 2006, the interest rate swaps effectively convert the amount of variable-rate debt to fixed-rate debt at 3.8% through its maturity, at which time the interest will revert back to variable rates based on LIBOR plus the applicable margin. Activity in Accumulated Other Comprehensive Loss (AOCL) related to derivatives held by the Company during the first six months of 2006 is summarized below:


	Before-Tax Amount		Income Tax		After-Tax Amount
	Before-Tax Amount		Income Tax		After-Tax Amount
Accumulated gain at September 24, 2005	$	1,119	$	(431)	$	688
Net increase in fair value of derivatives		151		(58)		93
Net reclassification from AOCL into earnings		(665)		256		(409)
Accumulated gain at April 1, 2006	$	605		(233)		372

To the extent that the interest rate swaps are not perfectly effective in offsetting the change in the value of the interest payments being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was not material in the first six months of 2006 or 2005. At April 1, 2006, the fair value of interest rate swaps was $706, which is included in other current assets. At September 24, 2005, the fair value of interest rate swaps was $1,262, which is included in other current assets and other noncurrent assets.

The Company has foreign currency exposure on intercompany loans 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 the foreign currency exposure, the Company has foreign currency forwards with a notional amount of $27,499. The foreign currency forwards are recorded in the balance sheet at fair value and resulting gains or losses are recorded in the statement of earnings, generally offsetting the gains or losses from the adjustments on the intercompany loans. At April 1, 2006, the fair value of the foreign currency forwards was a $570 liability, most of which was included in current liabilities.

Employee Benefit Plans


Net periodic benefit costs for U.S. pension plans consist of:

			Three Months Ended										Six Months Ended
			April 1,					March 26,				April 1,			March 26,
			2006					2005				2006			2005
Service cost			$			4,050		$		3,310		$	8,000		$	6,705
Interest cost						4,688				4,360			9,375			8,825
Expected return on plan assets						(5,525)				(5,075)			(10,850)			(10,100)
Amortization of prior service cost						272				272			545			545
Amortization of actuarial loss						2,143				1,075			4,285			2,375
Pension expense for defined benefit plans						5,628				3,942			11,355			8,350
Pension expense for defined
contribution plans						280				191			539			349
Total pension expense for U.S. plans			$			5,908		$		4,133		$	11,894		$	8,699

Net periodic benefit costs for non-U.S. pension plans consist of:

		Three Months Ended									Six Months Ended
		April 1,					March 26,				April 1,				March 26,
		2006					2005				2006				2005
Service cost		$			894		$		632		$			1,767	$		1,237
Interest cost					1,016				942					2,003			1,868
Expected return on plan assets					(561)				(423)					(1,117)			(839)
Amortization of prior service credit					(10)				(6)					(19)			(12)
Amortization of actuarial loss					278				172					553			341
Pension expense for defined benefit plans					1,617				1,317					3,187			2,595
Pension expense for defined
contribution plans					339				306					556			574
Total pension expense for non-U.S. plans		$			1,956		$		1,623		$			3,743	$		3,169

Net periodic benefit costs for the postretirement health care benefit plan consist of:

	Three Months Ended										Six Months Ended
	April 1,						March 26,				April 1,				March 26,
	2006						2005				2006				2005
Service cost	$			87			$		64		$			175	$		120
Interest cost				240					257					480			510
Amortization of transition obligation				97					97					195			195
Amortization of prior service cost				73					72					145			145
Amortization of actuarial loss				95					82					190			155
Net periodic postretirement benefit cost	$			592			$		572		$			1,185	$		1,125

During the six months ended April 1, 2006, the Company made contributions to its defined benefit pension plans of $15,000 to the U.S. plan and $1,133 to the non-U.S. plans. The Company presently anticipates contributing an additional $18,000 to the U.S. plan and $2,000 to the non-U.S. plans to fund its pension plans in 2006 for a total of approximately $36,000.

Shareholders' Equity

The changes in shareholders' equity for the six months ended April 1, 2006 are summarized as follows:


		Number of Shares
		Class A	Class B
		Common	Common
	Amount	Stock	Stock

COMMON STOCK
Beginning of period	$ 45,730	37,727,348	8,002,365
Sale of Class A Common Stock	2,875	2,875,000	-
Conversion of Class B to Class A	-	15,500	(15,500)
End of period	48,605	40,617,848	7,986,865

ADDITIONAL PAID-IN CAPITAL
Beginning of period	187,025
Sale of Class A Common Stock, net of
issuance costs	81,713
Stock compensation expense	2,487
Issuance of Treasury shares at more than cost	1,660
Adjustment to market - SECT, and other	3,920
End of period	276,805

RETAINED EARNINGS
Beginning of period	387,781
Net earnings	38,259
End of period	426,040

TREASURY STOCK
Beginning of period	(42,916)	(3,320,768)	(3,305,971)
Treasury stock issued	962	180,455	-
Treasury stock purchased	(1,596)	(50,617)	-
End of period	(43,550)	(3,190,930)	(3,305,971)

STOCK EMPLOYEE COMPENSATION TRUST (SECT)
Beginning of period	(12,952)		(446,628)
Purchase of SECT Stock	(600)		(18,400)
Sale of SECT stock to SSOP Plan	1,186		40,850
Adjustment to market - SECT	(2,586)		-
End of period	(14,952)		(424,178)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning of period	(43,631)
Foreign currency translation adjustment	(818)
Decrease in accumulated gain on derivatives	(316)
End of period	(44,765)

TOTAL SHAREHOLDERS' EQUITY	$ 648,183	37,426,918	4,256,716

10.

Stock Employee Compensation Trust

The Stock Employee Compensation Trust (SECT) assists in administering and provides funding for employee stock plans and benefit programs, including the Moog Inc. Savings and Stock Ownership Plan (SSOP). The shares in the SECT are not considered outstanding for purposes of calculating earnings per share. However, in accordance with the Trust agreement, the SECT trustee votes all shares held by the SECT on all matters submitted to shareholders.

11.

Earnings per Share

Basic and diluted weighted-average shares outstanding are as follows:


	Three Months Ended				Six Months Ended
	April 1,		March 26,		April 1,		March 26,
	2006		2005		2006		2005

Weighted-average shares outstanding-Basic		40,014,206		38,607,521		39,314,682		38,597,874
Dilutive effect of stock options		709,326		920,880		691,189		888,661
Weighted-average shares outstanding-Diluted		40,723,532		39,528,401		40,005,871		39,486,535

On February 21, 2006, the Company completed the offering and sale of 2,875,000 shares of Class A Common Stock at a price of $31 per share. The Company used the net proceeds of $85 million to pay down outstanding credit facility borrowings, some of which were reborrowed in April 2006 to finance the Curlin Medical acquisition.

12.

Comprehensive Income


The components of comprehensive income are as follows:

		Three Months Ended				Six Months Ended
		April 1,		March 26,		April 1,		March 26,
		2006		2005		2006		2005

Net earnings		$	21,462	$	15,770	$	38,259	$	30,745
Other comprehensive income (loss):
	Foreign currency translation adjustments		2,853		(6,201)		(818)		7,985
	Increase (decrease) in accumulated
	gain on derivatives, net of tax		(117)		301		(316)		617
Comprehensive income		$	24,198	$	9,870	$	37,125	$	39,347

The components of accumulated other comprehensive loss are as follows:

				April 1,		September 24,
				2006		2005
Cumulative foreign currency translation adjustments				$	10,216	$	11,034
Minimum pension liability adjustment					(55,353)		(55,353)
Accumulated gain on derivatives					372		688
Accumulated other comprehensive loss				$	(44,765)	$	(43,631)

13.

Segment Information

Below are sales and operating profit by segment for the three and six months ended April 1, 2006 and March 26, 2005 and a reconciliation of segment operating profit to earnings before income taxes. Operating profit is net sales less cost of sales and other operating expenses excluding stock 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 or manpower.


		Three Months Ended				Six Months Ended
		April 1,		March 26,		April 1,		March 26,
		2006		2005		2006		2005
Net Sales

Aircraft Controls		$	127,610	$	109,003	$	254,715	$	215,183
Space and Defense Controls			38,918		30,901		76,020		64,083
Industrial Controls			96,678		78,761		186,820		153,631
Components			58,903		36,572		114,725		71,643
	Net sales	$	322,109	$	255,237	$	632,280	$	504,540

Operating Profit and Margins

Aircraft Controls		$	16,334	$	15,043	$	32,274	$	30,156
			12.8%		13.8%		12.7%		14.0%
Space and Defense Controls			4,695		3,402		6,463		6,657
			12.1%		11.0%		8.5%		10.4%
Industrial Controls			11,685		7,281		23,235		12,756
			12.1%		9.2%		12.4%		8.3%
Components			8,323		5,032		18,470		9,682
			14.1%		13.8%		16.1%		13.5%
	Total operating profit		41,037		30,758		80,442		59,251
			12.7%		12.1%		12.7%		11.7%

Deductions from Operating Profit

	Interest expense		4,877		3,170		10,497		5,879
	Stock compensation expense		475		-		2,487		-
	Corporate expenses and other		4,337		3,827		8,627		6,784

Earnings before Income Taxes		$	31,348	$	23,761	$	58,831	$	46,588

14.

Subsequent Event

On April 7, 2006, the Company acquired Curlin Medical and affiliated companies for $75,000, financed with $63,000 of credit facility borrowings and a $12,000 53-week unsecured note. Curlin Medical is a manufacturer of infusion pumps that provide controlled delivery of therapeutic drugs to patients. This acquisition will be included in Industrial Controls and expands the Company's participation in the medical market business.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Form 10-K for the fiscal year ended September 24, 2005 and its quarterly reports on Form 10-Q for the quarter ended December 31, 2005. All references to years in this Management's Discussion and Analysis of Financial Condition and Results of Operations are to fiscal years.

OVERVIEW

We are a leading worldwide designer and manufacturer of high performance, precision motion and fluid controls and control systems for a broad range of applications in aerospace, defense and industrial markets. Our products and systems include military and commercial aircraft flight controls, satellite positioning controls, controls for steering tactical and strategic missiles, thrust vector controls for space launch vehicles and controls for positioning gun barrels and automatic ammunition loading for military combat vehicles. Our products are also used in a wide variety of industrial applications, including injection molding machines for the plastics markets, metal forming, power generating turbines, simulators used to train pilots and certain medical applications. We operate under four segments, Aircraft Controls, Space and Defense Controls, Industrial Controls and Components. Our principal manufacturing facilities are located in the United States, including facilities in New York, California, Utah, Virginia, North Carolina and Pennsylvania, and in Germany, Italy, England, Japan, the Philippines, Ireland and India.

Revenue under long-term contracts, representing approximately one-third of our sales, is recognized using the percentage of completion, cost-to-cost method of accounting. This method of revenue recognition is associated with the Aircraft Controls and Space and Defense Controls segments due to the long-term contractual nature of the business activities, with the exception of their respective aftermarket activities. The remainder of our sales are recognized when the risks and rewards of ownership and title to the product are transferred to the customer, principally as units are delivered or as service obligations are satisfied. This method of revenue recognition is associated with the Industrial Controls and Components segments, as well as with aftermarket activity.

We intend to increase our revenue base and improve our profitability and cash flows from operations by building on our market leadership positions and by strengthening our niche market positions in the principal markets that we serve. We also expect to maintain a balanced, diversified portfolio in terms of markets served, product applications, customer base and geographic presence. Our strategy to achieve our objectives includes maintaining our technological excellence by building upon our systems integration capabilities while solving our customers' most demanding technical problems, growing our profitable aftermarket business, entering and developing new markets by using our broad expertise as a designer and supplier of precision controls, taking advantage of our global engineering, selling and manufacturing capabilities, striving for continuing cost improvements and capitalizing on strategic acquisition opportunities.

Challenges facing us include improving shareholder value through increased profitability while experiencing pricing pressures from customers, strong competition and increases in costs, including health care costs. We address these challenges by focusing on strategic revenue growth and by continuing to improve operating efficiencies through various process and manufacturing initiatives and using low cost manufacturing facilities without compromising quality.

Acquisitions

On April 7, 2006, we acquired Curlin Medical and affiliated companies for $75 million, financed with $63 million of credit facility borrowings and a $12 million 53-week unsecured note. Curlin Medical is a manufacturer of infusion pumps that provide controlled delivery of therapeutic drugs to patients. This acquisition will be included in Industrial Controls and expands our participation in the medical market business. Upon acquisition, annual sales for this business were approximately $35 million.

On November 23, 2005, we acquired Flo-Tork. The adjusted purchase price was $25 million, which was financed with credit facility borrowings. Flo-Tork is a leading designer and manufacturer of hydraulic and pneumatic rotary actuators and specialized cylinders for niche military and industrial applications. This acquisition not only expands our reach within Industrial Controls, but also provides new opportunities for naval applications within Space and Defense Controls. Upon acquisition, annual sales for this business were approximately $10 million.

On August 11, 2005, we acquired FCS Control Systems for $47 million, financed primarily with existing cash in one of our European subsidiaries. FCS Control Systems is a business that produces high-fidelity electromechanical and electrohydraulic flight and vehicle simulation equipment and structural test systems for aerospace and automotive applications. This acquisition expands our market for simulators in Europe and enhances our line of control loading actuation systems within Industrial Controls. Upon acquisition, annual sales for this business were approximately $30 million.

On July 26, 2005, we acquired the Power and Data Technologies Group of the Kaydon Corporation. The adjusted purchase price was $72 million, which was financed with credit facility borrowings. This business manufactures electric and fiber-optic slip rings for industrial products, underwater applications and for European military applications. This acquisition will help us reach new markets and will complement our existing line of products within Components. Upon acquisition, annual sales for this business were approximately $40 million.

Issuance of Class A Common Stock

On February 21, 2006, we completed the offering and sale of 2,875,000 shares of Class A Common Stock at a price of $31 per share. We used the net proceeds of $85 million to pay down outstanding credit facility borrowings, some of which were reborrowed in April 2006 to finance the Curlin Medical acquisition.

RECENT ACCOUNTING PRONOUNCEMENTS

During the first quarter of 2006, we adopted SFAS 123(R), "Share-Based Payment," applying the modified prospective method. This Statement requires all equity-based payments to employees, including grants of employee stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under the modified prospective method, we are required to record equity-based compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards outstanding as of the date of adoption. We use a straight-line method of attributing the value of stock-based compensation expense, subject to minimum levels of expense based on vesting. Stock compensation expense was $0.5 million in the second quarter and $2.5 million in first half of 2006. No stock compensation expense was recognized prior to 2006.

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK


		Three Months Ended				Six Months Ended
(dollars in millions)		April 1,		March 26,		April 1,		March 26,
		2006		2005		2006		2005
Net sales		$	322.1	$	255.2	$	632.3	$	504.5
Gross margin			32.3%		31.7%		32.3%		31.0%
Research and development expenses		$	16.0	$	10.1	$	29.6	$	19.1
Selling, general and administrative
	expenses as a percentage of sales		16.0%		17.2%		16.6%		16.8%
Interest expense		$	4.9	$	3.2	$	10.5	$	5.9
Effective tax rate			31.5%		33.6%		35.0%		34.0%
Net earnings		$	21.5	$	15.8	$	38.3	$	30.7

Our fiscal year ends on the last Saturday in September. Our financial statements will include 53 weeks in fiscal year 2006 and 52 weeks in fiscal year 2005. Our financial statements include 13 weeks for the three months ended April 1, 2006 and March 26, 2005, and 27 weeks for the six months ended April 1, 2006 compared to 26 weeks for the six months ended March 26, 2005. While we believe this has a financial impact on our reported results for the first six months of 2006 that may affect the comparability of the financial statements presented, the impact cannot be determined.

Net sales increased $67 million, or 26%, in the second quarter of 2006 and $128 million, or 25%, in the first half of 2006 over the comparable periods one year ago. Our recent acquisitions have contributed to this growth, providing $26 million of sales in the second quarter and $52 million in the first half of 2006. Sales increased in each of our segments, even without considering the contribution from the acquisitions.

Our gross margins improved in the second quarter and first half of 2006 compared to the same periods last year, due largely to our higher sales volume across all of our segments. Our gross margin can also be influenced by additions to contract loss reserves. While our additions to contract loss reserves were at a similar level in the second quarters of 2006 and 2005, the additions to contract loss reserves were $9 million in the first six months of 2006 compared to $8 million in the same period last year.

Research and development expenses increased in the second quarter and first half of 2006. The higher level of research and development reflects the steady increase in our efforts over the past year and a half on Boeing's next generation commercial aircraft, the 787 Dreamliner.

Selling, general and administrative expenses as a percentage of sales were lower in the second quarter of 2006, reflecting sales levels that continue to increase without corresponding increases in our cost structure. We expect that our recent growth will result in increases in selling, general and administrative expense in future quarters. Selling, general and administrative expenses as a percentage of sales were fairly consistent in the first six months of 2006 and 2005, due to second quarter improvements being offset by certain first quarter charges in 2006. In the first quarter, we terminated an agreement with a long-standing sales representative and recognized a $2 million charge associated with the settlement. In addition, we adopted SFAS No. 123(R) as of the beginning of the first quarter and accordingly began expensing stock options. Our first quarter expense related to stock options was $2 million, which included incremental expense for retirements and all of the expense associated with the stock option grant in the first quarter for those eligible for retirement. Second quarter expense for stock options was $0.5 million, the level we expect to continue for the remaining quarters in 2006.

Interest expense was higher in the second quarter of 2006 compared to the second quarter of 2005, primarily related to higher levels of debt associated with our acquisitions of the Power and Data Technologies Group of the Kaydon Corporation and Flo-Tork. Interest expense was also higher in the first half of 2006 compared to the first half of 2005. Just over half of the increase was attributable to higher debt levels associated with our acquisitions. In addition, interest rates were higher in the first half of 2006 as a result of the issuance of 6¼% senior subordinated notes in 2005.

Our effective tax rate was lower in the second quarter of 2006 due primarily to European restructuring changes. Our effective tax rate was higher in the first half of 2006, resulting from a $2 million first quarter write-off of a tax asset at our U.K. subsidiary related to an adverse European tax court ruling for an unrelated taxpayer. This charge was mostly offset by benefits associated with the European restructuring in the first half of this year.

Net earnings increased 36% and diluted earnings per share increased 33% in the second quarter of 2006 compared to the second quarter of 2005. In the first six months of 2006, net earnings increased 24% and diluted earnings per share increased 23%. Average common shares outstanding increased during 2006 primarily as a result of the sale of 2,875,000 shares of Class A Common Stock on February 21, 2006.

2006 Outlook - We expect net sales in 2006 to increase by a range of 20% to 22% to between $1.262 billion and $1.282 billion. Sales are expected to increase by an amount between $72 million and $92 million in Industrial Controls, $73 million in Components, $46 million in Aircraft Controls and $20 million in Space and Defense Controls. Incremental sales from acquisitions account for approximately two-thirds of the increase in Industrial Controls, over half of the increase in Components and one quarter of the increase in Space and Defense Controls. We expect operating margins to increase to 12.8% in 2006 from 11.7% in 2005. In 2006, operating margins are expected to increase in Industrial Controls, Components and Space and Defense Controls and decrease in Aircraft Controls. We expect diluted earnings per share to increase by a range of 16% to 21% to between $1.91 and $1.99 despite being negatively impacted by approximately $0.07 per share for recording compensation expense for stock options beginning in 2006 in accordance with SFAS No. 123(R).

SEGMENT RESULTS OF OPERATIONS AND OUTLOOK

Operating profit, as presented below, is net sales less cost of sales and other operating expenses excluding stock 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. Operating profit is reconciled to earnings before income taxes in Note 13 of the Notes to Consolidated Condensed Financial Statements included in this report.

Aircraft Controls


	Three Months Ended				Six Months Ended
(dollars in millions)	April 1,		March 26,		April 1,		March 26,
	2006		2005		2006		2005
Net sales - military aircraft	$	80.3	$	71.4	$	160.1	$	143.5
Net sales - commercial aircraft		47.3		37.6		94.6		71.7
	$	127.6	$	109.0	$	254.7	$	215.2
Operating profit	$	16.3	$	15.0	$	32.3	$	30.2
Operating margin		12.8%		13.8%		12.7%		14.0%
Backlog	$	278.3	$	237.8	$	278.3	$	237.8

Net sales in Aircraft Controls increased 17% in the second quarter and 18% in the first half of 2006, driven by increases in both military and commercial aircraft. Within military aircraft, sales increased $7 million in the second quarter and $13 million in the first half of 2006 on the F-35 Joint Strike Fighter, reflecting our higher activity level on this program. Sales were also strong for military aftermarket, which increased by $5 million in the second quarter and $9 million in the first half of 2006. Within commercial aircraft, aftermarket sales increased $6 million in the second quarter and $13 million in the first half of 2006. Boeing OEM sales increased $2 million in the second quarter and $5 million in the first six months of 2006.

Our operating margin for Aircraft Controls decreased in the second quarter of 2006. In the second quarter, we had $4 million more of research and development expenses associated with our efforts on the Boeing 787 Dreamliner and a $1 million write off associated with aftermarket tracking software that we were not able to place into service. These factors were partially offset by a $4 million gain upon completion of negotiations with Boeing and the U.S. Army for the Comanche termination that was completed in the second quarter of 2006. Our operating margin was also lower for the first six months of 2006. Research and development expenses associated with the Boeing 787 were $7 million higher in the first six months of 2006 compared to the same period one year ago. We also had $2 million more of additions to contract loss reserves, most notably on development programs. The operating margin for the first six months was also impacted by the second quarter aftermarket tracking software write off, the Comanche termination gain and increased sales volume.

Twelve-month backlog for Aircraft Controls increased from March 26, 2005 to April 1, 2006 related to increased orders for military helicopter programs including the Blackhawk and V-22 Osprey. In addition, backlog increased on the F-35 Joint Strike Fighter program.

2006 Outlook for Aircraft Controls - We expect net sales in Aircraft Controls in 2006 to increase 10% to $497 million, with most of the increase being generated within commercial aircraft. The expected increase in commercial aircraft sales relates to the continuation of strong aftermarket sales, continuing growth in Boeing OEM sales and the ramp up of our business jet production activity. Within military aircraft, we expect sales increases on the F-35 Joint Strike Fighter and in the aftermarket, primarily related to test equipment to be sold to Korea for the F-15. However, we expect decreases on fighter aircraft programs such as the Indian Light Combat Aircraft, the F-15 Eagle and the F-16 Falcon to partially offset this increase. We expect our operating margin to be 13.2% in 2006, a decline from 14.1% in 2005, largely as a result of higher research and development expense on the Boeing 787 program.

Space and Defense Controls


	Three Months Ended				Six Months Ended
(dollars in millions)	April 1,		March 26,		April 1,		March 26,
	2006		2005		2006		2005
Net sales	$	38.9	$	30.9	$	76.0	$	64.1
Operating profit	$	4.7	$	3.4	$	6.5	$	6.7
Operating margin		12.1%		11.0%		8.5%		10.4%
Backlog	$	116.2	$	97.1	$	116.2	$	97.1

Net sales in Space and Defense Controls increased 26% in the second quarter and 19% in the first half of 2006. Sales of controls for tactical missiles increased $5 million in the second quarter, reflecting a new order for Maverick missile systems, resumed deliveries on the VT-1 missile program and the restart of production on the TOW missile program. In addition, sales increased by $2 million for defense controls and $2 million related to the Flo-Tork acquisition in the second quarter. In the first half of 2006, sales increased $7 million for controls on tactical missiles, $2 million related to the Flo-Tork acquisition, $2 million for defense controls and $2 million for controls on strategic missiles, largely related to increasing refurbishment work on components for the Minuteman missile program.

Our operating margin for Space and Defense Controls was strong in the second quarter of 2006 and benefited from higher sales volume. Our operating margin was lower in the first half of 2006 due to the $2 million first quarter charge associated with the termination of a sales representative agreement.

Twelve-month backlog for Space and Defense Controls increased from March 26, 2005 to April 1, 2006 reflecting increased orders on defense controls. In addition, backlog increased due to orders for naval systems resulting from the Flo-Tork acquisition.

2006 Outlook for Space and Defense Controls - We expect sales in Space and Defense Controls to increase 15% to $148 million in 2006, including the contribution to sales for naval applications through our acquisition of Flo-Tork. Sales of defense controls are expected to increase in 2006, driven by work on the Stryker and LAV-25 military vehicles. Additional sales increases are expected on tactical missile programs as a result of a recent order for Maverick fin controls and the resumption of production on the TOW missile, and also on the Minuteman refurbishment program. We expect our operating margin in 2006 to be 9.2%, compared to 8.6% in 2005, reflecting improvement related to increased volume, partially offset by the first quarter negative impact from the termination of the sales representative agreement.

Industrial Controls


	Three Months Ended				Six Months Ended
(dollars in millions)	April 1,		March 26,		April 1,		March 26,
	2006		2005		2006		2005
Net sales	$	96.7	$	78.8	$	186.8	$	153.6
Operating profit	$	11.7	$	7.3	$	23.2	$	12.8
Operating margin		12.1%		9.2%		12.4%		8.3%
Backlog	$	113.4	$	84.4	$	113.4	$	84.4

Net sales in Industrial Controls increased 23% in the second quarter and 22% in the first six months of 2006. The acquisitions of FCS Control Systems and Flo-Tork accounted for 55% of the sales increase in the second quarter and 65% of the sales increase in the first six months of 2006. The remainder of the increases primarily resulted from strength in the heavy industry, simulation and power generation markets. In the second quarter, sales increased $2 million in each of these markets. In the first six months, sales increased $5 million in power generation, $3 million in heavy industry and $3 million in simulators. Most of our sales in power generation are in Asia and the growth is being driven by the development of power generating plants in China. The heavy industry market, for which we manufacture controls for steel mills, is currently strong due to high demand in China. Sales for simulators increased as a result of our work on Flight School XXI for the U.S. Army. Weaker foreign currencies compared to the U.S. dollar, primarily the euro and yen, had negative impacts on sales of $5 million in the second quarter and $9 million in the first six months of 2006, partially offsetting the increases we otherwise achieved.

Our operating margin for Industrial Controls was strong in the second quarter and first half of 2006. The increase in the margin resulted from higher volume and a more favorable product mix, particularly in the Americas and the Asian-Pacific region.

The higher level of twelve-month backlog for Industrial Controls at April 1, 2006 compared to March 26, 2005 primarily relates to the acquisition of FCS Control Systems.

2006 Outlook for Industrial Controls - We expect our net sales in Industrial Controls to increase between 23% and 29% to within a range of $387 million to $407 million in 2006. Sales related to the late 2005 acquisition of FCS Control Systems are expected to increase to $38 million in 2006 from $5 million in 2005. Curlin and Flo-Tork are expected to contribute $16 million and $6 million, respectively, to 2006 Industrial Controls sales. We also expect continued organic sales growth. We expect our operating margin in Industrial Controls to improve to 12.3% in 2006 from 8.6% in 2005 largely as a result of higher volume.

Components


	Three Months Ended				Six Months Ended
(dollars in millions)	April 1,		March 26,		April 1,		March 26,
	2006		2005		2006		2005
Net sales	$	58.9	$	36.6	$	114.7	$	71.6
Operating profit	$	8.3	$	5.0	$	18.5	$	9.7
Operating margin		14.1%		13.8%		16.1%		13.5%
Backlog	$	109.5	$	62.4	$	109.5	$	62.4

Net sales in Components increased 61% in the second quarter and 60% in the first half of 2006. Nearly two-thirds of these increases resulted from the acquisition of the Power and Data Technology Group of the Kaydon Corporation. The remainder of the increases primarily related to medical equipment components, such as motors used in sleep apnea machines and slips rings and fiber optic rotary joints used in CT scan equipment, and defense controls, including slip rings used in the turret of the Bradley Fighting Vehicle.

Our operating margin for Components for the second quarter of 2006 showed a modest improvement over the same period one year ago. However, for the first six months of 2006, our operating margin for Components was much stronger than the first six months of 2005, resulting from higher volume and a more favorable product mix.

The higher level of twelve-month backlog for Components at April 1, 2006 as compared to March 26, 2005 primarily relates to the acquisition of the Power and Data Technologies Group of the Kaydon Corporation. In addition, backlog increased due to increased orders in military aircraft and space and defense programs.

2006 Outlook for Components - We expect net sales in Components to increase 47% to $229 million in 2006. Over half of the increase is expected to be generated by incremental sales associated with the acquisition of the Power and Data Technologies Group of the Kaydon Corporation. In addition, sales are expected to increase for medical equipment components and for foreign military sales of fiber-optic modems. We expect our operating margin to increase to 15.1% in 2006 from 13.5% in 2005 largely as a result of higher volume and a favorable product mix.

FINANCIAL CONDITION AND LIQUIDITY


		Six Months Ended
(dollars in millions)		April 1,		March 26,
		2006		2005
Net cash provided (used) by:
Operating activities	$	26.2	$	54.2
Investing activities		(57.2)		(19.1)
Financing activities		39.5		(21.3)

Cash flow from operations and available borrowing capacity provide us with resources needed to run our operations, continually invest in our business and take advantage of acquisition opportunities as they may arise.

Operating Activities

Net cash provided by operating activities decreased in the first six months of 2006 from the first six months of 2005. The majority of the decrease relates to higher working capital requirements, related primarily to receivables and inventories, associated with our increasing sales. The decrease was partially offset by higher earnings adjusted for non-cash charges. In addition, in the first six months of 2005, we received significant cash advances from customers.

Investing Activities

Net cash used by investing activities in the first six months of 2006 consisted of the $25 million purchase price for the Flo-Tork acquisition and working capital adjustments and $37 million of capital expenditures. The higher level of capital expenditures in the first six months of 2006 resulted from building expansions in the Philippines, England and Luxembourg and the procurement of capital tooling and test equipment for the Boeing 787 program. Capital expenditures are expected to be approximately $65 million in 2006.

Financing Activities

Net cash provided by financing activities in the first six months of 2006 is primarily related to the net proceeds of $85 million received from the issuance of Class A common stock in the second quarter of 2006, partially offset by paydowns on our revolving credit facility.

Off Balance Sheet Arrangements

We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.

Contractual Obligations and Commercial Commitments

Our contractual obligations and commercial commitments have not changed materially from the disclosures in our 2005 Form 10-K.

CAPITAL STRUCTURE AND RESOURCES

We maintain bank credit facilities to fund our short and long-term capital requirements, including for acquisitions. From time to time, we also sell equity and debt securities to fund acquisitions or take advantage of favorable market conditions.

Our largest credit facility is the U.S. facility that consists of a $75 million term loan and a $315 million revolver that had outstanding balances of $30 million and $59 million, respectively, at April 1, 2006. Interest on outstanding credit facility borrowings is based on LIBOR plus the applicable margin, which is currently 150 basis points. The credit facility expires on March 31, 2008 and requires quarterly principal payments on the term loan of $3.75 million. The credit facility is secured by substantially all of our U.S. assets.

The U.S. credit facility contains various covenants. The covenant for minimum consolidated net worth, defined as the sum of capital stock and additional paid-in capital plus retained earnings, adjusts over the term of the facility and was $275 million at April 1, 2006. The covenant for minimum interest coverage ratio, defined as the ratio of adjusted EBITDA to total interest expense for the most recent four quarters, is 3.0. The covenant for minimum fixed charge coverage ratio, defined as the ratio of (i) adjusted EBITDA minus capital expenditures to (ii) the sum of interest expense, income tax expense and regularly scheduled principal payments on debt, all for the most recent four quarters, is 1.2. The covenant for the maximum leverage ratio, defined as the ratio of total debt (including letters of credit) less cash to adjusted EBITDA for the most recent four quarters, is 3.5. The covenant for maximum capital expenditures is $50 million in any one fiscal year. Adjusted EBITDA is defined in the agreement as (i) the sum of net income, interest expense, income tax expense, depreciation expense, amortization expense, stock compensation expense and other non-cash items reducing net income minus (ii) other non-cash items increasing net income. At April 1, 2006, we were in compliance with all covenants.

We are required to obtain the consent of lenders of the U.S. credit facility before raising additional debt financing. In recent years, we have demonstrated our ability to secure consents and modifications to access debt and capital markets. In addition, we have shown strong, consistent financial performance. We believe that we will be able to obtain additional debt or equity financing as needed.

At April 1, 2006, we had $285 million of unused borrowing capacity, including $248 million from the U.S. credit facility after considering standby letters of credit.

Our ratio of total debt to capitalization was 32% at April 1, 2006 and 36% at March 26, 2005 due to the equity offering from which the proceeds were used to pay down debt, partially offset by higher levels of debt associated with acquisitions.

We believe that our cash on hand, cash flows from operations and available borrowings under short and long-term lines of credit will continue to be sufficient to meet our operating needs.

ECONOMIC CONDITIONS AND MARKET TRENDS

Military Aerospace and Defense

Approximately 45% of our 2005 sales related to global military defense or government-funded programs. Most of these sales were within Aircraft Controls and Space and Defense Controls.

The military aircraft market is dependent on military spending for development and production programs. Military spending is expected to remain strong in the near term. Production programs are typically long-term in nature, offering greater predictability as to capacity needs and future revenues. We maintain positions on numerous high priority programs, including the F-35 Joint Strike Fighter, F/A-18E/F Super Hornet and V-22 Osprey. These and other government programs can be reduced, delayed or terminated. The large installed base of our products leads to attractive aftermarket sales and service opportunities. Aftermarket revenues are expected to continue to grow, due to military retrofit programs and increased flight hours resulting from increased military activity.

The military and government space market is primarily dependent on the authorized levels of funding for satellite communications needs. We believe that long-term government spending on military satellites will continue to trend upwards as the military's need for improved intelligence gathering increases.

The tactical missile, missile defense and defense controls markets are dependent on many of the same market conditions as military aircraft, including overall military spending and program funding levels.

Industrial

Approximately one-third of our 2005 sales were generated in industrial markets. The industrial markets we serve are influenced by several factors, including capital investment, product innovation, economic growth, cost-reduction efforts and technology upgrades. However, due to the high degree of sophistication of our products and the niche markets we serve, we believe we may be less susceptible to overall macro-economic industrial trends. Opportunities for growth include demand in China to support their economic growth particularly in power generation and steel manufacturing markets, steel manufacturers that are seeking to reduce energy costs, advancements in medical technology and automotive manufacturers that are upgrading their metal forming, injection molding and material test capabilities.

Commercial Aircraft

Approximately 15% of our 2005 sales were on commercial aircraft programs. The commercial OEM aircraft market has historically exhibited cyclical swings and sensitivity to economic conditions, while the aftermarket, which is driven by usage of the existing aircraft fleet, has proven to be more stable. Higher aircraft utilization rates result in the need for increased maintenance and spare parts and enhance aftermarket sales. Boeing and Airbus are both increasing production levels for new planes related to air traffic growth and further production increases are projected. We have contract coverage through 2012 with Boeing for the existing 7-series aircraft and are also developing flight control actuation systems for Boeing's 787 Dreamliner, its next generation commercial aircraft. In the business jet market, our flight controls on a couple of newer jets are entering their initial production phases.

Foreign Currencies

We are affected by the movement of foreign currencies compared to the U.S. dollar, particularly in Industrial Controls. Less than one-third of our 2005 sales was denominated in foreign currencies including the euro, British pound and Japanese yen. During 2005, these foreign currencies strengthened against the U.S. dollar and the translation of the results of our foreign subsidiaries into U.S. dollars contributed $12 million to the sales increase over 2004. However, during the first half of 2006, the U.S. dollar strengthened against these currencies and the translation of the results of our foreign subsidiaries into U.S. dollars reduced sales by $12 million compared to the same period a year ago.

CRITICAL ACCOUNTING POLICIES

There have been no changes in critical accounting policies in the current year from those disclosed in our 2005 Form 10-K.

Cautionary Statement

Information included herein or incorporated by reference that does not consist of historical facts, including statements accompanied by or containing words such as "may," "will," "should," "believes," "expects," "expected," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume" and "assume," are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. These important factors, risks and uncertainties include (i) fluctuations in general business cycles for commercial aircraft, military aircraft, space and defense products and industrial capital goods, (ii) our dependence on government contracts that may not be fully funded or may be terminated, (iii) our dependence on certain major customers, such as The Boeing Company and Lockheed Martin, for a significant percentage of our sales, (iv) the possibility that the demand for our products may be reduced if we are unable to adapt to technological change, (v) intense competition which may require us to lower prices or offer more favorable terms of sale, (vi) our significant indebtedness which could limit our operational and financial flexibility, (vii) the possibility that new product and research and development efforts may not be successful which could reduce our sales and profits, (viii) higher pension costs and increased cash funding requirements, which could occur in future years if future actual plan results differ from assumptions used for our defined benefit pension plans, including returns on plan assets and discount rates, (ix) a write-off of all or part of our goodwill, which could adversely affect our operating results and net worth and cause us to violate covenants in our bank agreements, (x) the potential for substantial fines and penalties or suspension or debarment from future contracts in the event we do not comply with regulations relating to defense industry contracting, (xi) the potential for cost overruns on development jobs and fixed price contracts and the risk that actual results may differ from estimates used in contract accounting, (xii) the possibility that our subcontractors may fail to perform their contractual obligations, which may adversely affect our contract performance and our ability to obtain future business, (xiii) our ability to successfully identify and consummate acquisitions, and integrate the acquired businesses and the risks associated with acquisitions, including that the acquired businesses do not perform in accordance with our expectations, and that we assume unknown liabilities in connection with the acquired businesses for which are not indemnified, (xiv) our dependence on our management team and key personnel, (xv) the possibility of a catastrophic loss of one or more of our manufacturing facilities, (xvi) the possibility that future terror attacks, war or other civil disturbances could negatively impact our business, (xvii) our operations in foreign countries could expose us to political risks and adverse changes in local, legal, tax and regulatory schemes, (xviii) the possibility that government regulation could limit our ability to sell our products outside the United States, (xix) the impact of product liability claims related to our products used in applications where failure can result in significant property damage, injury or death and in damage to our reputation, (xx) the possibility that litigation may result unfavorably to us, (xxi) foreign currency fluctuations in those countries in which we do business and other risks associated with international operations and (xxii) the cost of compliance with environmental laws. The factors identified above are not exhaustive. New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. We disclaim any obligation to update the forward-looking statements made in this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Refer to the Company's Annual Report on Form 10-K for the year ended September 24, 2005 for a complete discussion of the Company's market risk. There have been no material changes in the current year regarding this market risk information.

Item 4. Controls and Procedures

(a)

Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of Company management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective as of the end of the period covered by this report, to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is made known to them on a timely basis, and that these disclosure controls and procedures are effective to ensure such information is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

(b) Changes in Internal Control over Financial Reporting. There have been no changes in the Company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II. OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(c)

The following table summarizes the Company's purchases of its common stock for the quarter ended April 1, 2006.

ISSUER PURCHASES OF EQUITY SECURITIES

of Shares

(d) Maximum Number

(a) Total

Purchased as

(or Approximate Dollar

Number

(b) Average Part of Publicly

Value) of Shares that May

of Shares

Price

Announced Plans

Yet Be Purchased Under

Period

Purchased(1)(2) Paid Per Share or Programs(2) the Plans or Programs(2)

January 1-31, 2006

3,700

$31.61

N/A

February 1-28, 2006

27,188

33.24

N/A

March 1, 2006-

April 1, 2006

N/A

Total

30,888

$33.04

N/A

(1)

The issuer's purchases during January represent the purchase of shares from the Moog Inc. Savings and Stock Ownership Plan.

(2)

In connection with the exercise and vesting of stock options, the Company from time to time accepts delivery of shares to pay the exercise price of employee stock options. The Company does not otherwise have any plan or program to purchase its common stock. During the period, the Company accepted the delivery of 27,188 shares in February at $33.24 per share in connection with the exercise of stock options.

Item 4. Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Shareholders was held on January 11, 2006. The following matters were submitted to a vote of security holders at the Annual Meeting.

The nominees to the Board of Directors were elected based on the following shares voted:

Nominee

For

Authority Withheld

Class A

James L. Gray

30,234,907

1,631,490

Class B

Richard A. Aubrecht

4,476,939

63,200

John D. Hendrick

4,474,412

65,727

Brian J. Lipke

4,430,157

109,982

The term of the following directors continued after the Annual Meeting: Kraig H. Kayser, Robert H. Maskrey and Albert F. Myers (Class B directors through 2007); Robert R. Banta (Class A director through 2007); Joe C. Green and Raymond W. Boushie (Class B directors through 2008); Robert T. Brady (Class A director through 2008); Richard A. Aubrecht, John D. Hendrick and Brian J. Lipke (Class B directors through 2009); and James L. Gray (Class A director through 2009).

The appointment of Ernst & Young LLP as auditors was approved based on the following shares voted:

Class A*: For, 3,162,076; Against, 22,638; Abstain, 1,926.

Class B: For, 4,504,828; Against, 24,294; Abstain, 11,017.

* Each share of Class A Common Stock is entitled to a one-tenth vote per share on this proposal.

Item 6.

Exhibits

(a)

Exhibits

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Moog Inc.

__________________________

(Registrant)

Date:

May 11, 2006

By /s/Robert T. Brady

Robert T. Brady

Chairman

Chief Executive Officer

(Principal Executive Officer)

Date:

May 11, 2006

By /s/Robert R. Banta

Robert R. Banta

Executive Vice President

Chief Financial Officer

(Principal Financial Officer)

Date:

May 11, 2006

By /s/Donald R. Fishback

Donald R. Fishback

Controller

(Principal Accounting Officer)

Exhibit Index

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.