Annual Meeting Remarks 1/11/06

01 / 11 / 2006

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In the Aircraft business, we’re looking for a 6% sales increase overall in fiscal ’06. The increase will all come on the commercial side. During 2001 and 2002, our military aircraft business grew by over $100 million or 68%. For the last two years, it has been growing at 5 or 6% a year and it will plateau for a while beginning in ’06. On the other hand, we’re looking at 17% growth in the commercial airplane business based on increased deliveries to Boeing, to Airbus, to Raytheon and Bombardier, and a modest increase in the aftermarket.

Our Space and Defense business, which grew 11% in fiscal ‘05, should be up by about 8% in ’06, but over half of the increase will come as a result of the acquisition of Flo-Tork. We do have a number of programs and product lines that are growing in our Space and Defense business, but the flurry of activity that occurred in the military satellite business which increased our satellite and launcher business from $44 million in ’04 to $56 million in ’05 is not predicted to continue in ’06.

In fiscal ’05, sales in our Industrial segment were up about 10% before we factor in the impact of the acquisition of FCS. About two-thirds of the sales increase was real growth and the rest was currency impact. Most major product lines saw increased sales in ‘05. Plastics, our largest product line, was up only 4%, but turbine controls and heavy industry were up 22 and 23%, respectively, and we had a 40% increase in our motion simulator business in ’05.

In ’06, we’re forecasting an Industrial sales increase of about 20%, which does not include any currency effect. We’re looking for an improvement in plastic sales, but we think that power generating turbine controls and heavy industry will settle down. The test equipment and the simulator business will be way up as a result of the FCS acquisition. FCS will add $36 million and our fiscal ’06 forecast for Industrial centers now around $379 million.

In fiscal ’05, the Components Group had a wonderful sales year. Sales were up 21% to $156 million including $7 million from the Kaydon acquisition. The most dramatic growth occurred in the Space and Defense product line where sales increased from $14 million to $23 million. Medical equipment sales increased by 38% to over $36 million driven by production rate increases at Phillips Medical and Respironics.

For the Components Group in ’06, we’re forecasting a 28% increase over ’05 to a new total of $200 million. The increase is principally the result of the acquisition of the Kaydon Power and Data Transmission Group. We’re forecasting the acquisition at $41 million, up from $7 million in ’05. Other than that, we’re forecasting relatively modest increases in the rest of the Components Group product line.

So, when you put it all together, the commercial airplane business and the industrial controls business will be up nicely in ’06. Space and Defense, Industrial, and the Components Group all see a nice sales increase as a result of some fortuitous acquisitions.

In total we are now forecasting fiscal ’06 sales in the range of $1.186 billion to $1.206 billion with a midpoint at $1.196 billion. Using the midpoint of the fiscal ’06 range, our sales increase over fiscal ’05 will be $145 million. About $75 million of that increase occurs in the acquired companies. However, even excluding the acquisitions, we’re forecasting $70 million worth of increased sales or 7% organic growth.

We’re forecasting net earnings in the range of $71 million to $74.3 million. The midpoint at $72.6 would be 6.1% of sales and will provide $1.83 per share, an increase of 12% over the $1.64 we reported in fiscal ’05. I should point out, though, that the $1.83 in EPS for fiscal ’06 would be achieved after expensing stock options. This is the first time we’ve had to expense options, and the impact is about five cents per share. If and when we restate fiscal ’05 to include pro forma option expense then on that basis the $1.83 EPS estimate for ’06 would be a 14% increase over ’05, and that would be the appropriate comparison.

If we achieve $1.83 per share in ’06, it will be the twelfth consecutive year of growth in earnings per share and everyone in the Moog organization can be extremely proud of that record.

Given the Company’s financial performance over that history and in the recent past and the prospects for a 14% increase in earnings per share in the current year, it’s probably appropriate for me to comment on the movement or the recent lack of movement in the price of our stock. Over the last four years on a split-adjusted basis, the price of our stock has tripled. In recognition of this fact, we were recently listed by Forbes Magazine as one of the 400 best performing companies in America. Over the last few months, however, our stock seems to be cycling in a narrow band between $28 and $30. Some years ago during a similar period when our stock seemed to be settled in the same range for a number of months, one of our investors suggested that it was “seasoning”. So, perhaps our stock is currently seasoning at $29 or $30. And, it is the case that over the last four years when the stock has gone from $10 a share to close to $30, it has not always moved in a straight line. There have been extended periods where the stock, on a split adjusted basis, seasoned at around $10, and then a long period at around $15, and then a year in the low to mid twenties, and, now, we seem to be seasoning at around $30. Given the Company’s prospects for the future, we are, of course, hopeful that there will be a time, in the not too distant future, where we’ll be seasoning at $40 and then $50 and beyond, all the result of a lot of very good work by a lot of great Moog people who are able to take advantage of a very broad spectrum of market opportunities. Thank you very much.

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