MOOG INC. - Annual Report: 2009 (Form 10-K)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended October 3, 2009

o		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

(Exact Name of Registrant as Specified in its Charter)

New York		16-0757636
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
East Aurora, New York		14052-0018
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (716) 652-2000

Securities registered pursuant to Section 12(b) of the Act:

	Title of Each Class		Name of Each Exchange on Which Registered
	Class A Common Stock, $1.00 Par Value		New York Stock Exchange
	Class B Common Stock, $1.00 Par Value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:            None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o     No þ

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 þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o     No þ

The aggregate market value of the common stock outstanding and held by non-affiliates (as defined in Rule 405 under the Securities Act of 1933) of the registrant, based upon the closing sale price of the common stock on the New York Stock Exchange on March 27, 2009, the last business day of the registrant’s most recently completed second quarter, was approximately $860 million.

The number of shares of common stock outstanding as of the close of business on November 24, 2009 was:
Class A 41,213,817; Class B 4,131,392.

Portions of the 2009 Proxy Statement to Shareholders (“2009 Proxy”) are incorporated by reference into Part III of this Form 10-K.

FORM 10-K INDEX

PART I						PAGE
		Item 1		Business			32-35
		Item 1A		Risk Factors			36-40
		Item 1B		Unresolved Staff Comments			40
		Item 2		Properties			41
		Item 3		Legal Proceedings			41
		Item 4		Submission of Matters to a Vote of Security Holders			41
PART II
		Item 5		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			42-43
		Item 6		Selected Financial Data			44
		Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			45-62
		Item 7A		Quantitative and Qualitative Disclosures About Market Risk			62
		Item 8		Financial Statements and Supplementary Data			63-99
		Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			100
		Item 9A		Controls and Procedures			100
		Item 9B		Other Information			100
PART III
		Item 10		Directors, Executive Officers and Corporate Governance			100
		Item 11		Executive Compensation			100
		Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			100
		Item 13		Certain Relationships and Related Transactions and Director Independence			100
		Item 14		Principal Accountant Fees and Services			100
PART IV
		Item 15		Exhibits and Financial Statement Schedules			101-108
EX-23
EX-31.1
EX-31.2
EX-32.1

Disclosure Regarding Forward-Looking Statements

Information included or incorporated by reference herein 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,” “approximate,” “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 results described in the forward-looking statements. Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and are set forth below:

	•		fluctuations in general business cycles for commercial aircraft, military aircraft, space and defense products, industrial capital goods and medical devices;
	•		our dependence on government contracts that may not be fully funded or may be terminated;
	•		our dependence on certain major customers, such as The Boeing Company and Lockheed Martin, for a significant percentage of our sales;
	•		delays by our customers in the timing of introducing new products, which may affect our earnings and cash flow;
	•		the possibility that the demand for our products may be reduced if we are unable to adapt to technological change;
	•		intense competition, which may require us to lower prices or offer more favorable terms of sale;
	•		our indebtedness, which could limit our operational and financial flexibility;
	•		the possibility that new product and research and development efforts may not be successful, which could reduce our sales and profits;

	•		increased cash funding requirements for pension plans, which could occur in future years based on assumptions used for our defined benefit pension plans, including returns on plan assets and discount rates;
	•		a write-off of all or part of our goodwill or intangible assets, which could adversely affect our operating results and net worth and cause us to violate covenants in our bank agreements;
	•		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;
	•		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;
	•		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;
	•		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 acquired businesses for which we are not indemnified;
	•		our dependence on our management team and key personnel;
	•		the possibility of a catastrophic loss of one or more of our manufacturing facilities;
	•		the possibility that future terror attacks, war or other civil disturbances could negatively impact our business;
	•		that our operations in foreign countries could expose us to political risks and adverse changes in local, legal, tax and regulatory schemes;
	•		the possibility that government regulation could limit our ability to sell our products outside the United States;
	•		product quality or patient safety issues with respect to our medical devices business that could lead to product recalls, withdrawal from certain markets, delays in the introduction of new products, sanctions, litigation, declining sales or actions of regulatory bodies and government authorities;
	•		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;
	•		changes in medical reimbursement rates of insurers to medical service providers, which could affect sales of our medical products;
	•		the possibility that litigation results may be unfavorable to us;
	•		our ability to adequately enforce our intellectual property rights and the possibility that third parties will assert intellectual property rights that prevent or restrict our ability to manufacture, sell, distribute or use our products or technology;
	•		foreign currency fluctuations in those countries in which we do business and other risks associated with international operations;
	•		the cost of compliance with environmental laws;
	•		the risk of losses resulting from maintaining significant amounts of cash and cash equivalents at financial institutions that are in excess of amounts insured by governments;
	•		the inability to modify, to refinance or to utilize amounts presently available to us under our credit facilities given uncertainties in the credit markets;
	•		our ability to meet the restrictive covenants under our credit facilities since a breach of any of these covenants could result in a default under our credit agreements; and
	•		our customers’ inability to continue operations or to pay us due to adverse economic conditions or their inability to access available credit.

PART I

The Registrant, Moog Inc., a New York corporation formed in 1951, is referred to in this Annual Report on Form 10-K as “Moog” or in the nominative “we” or the possessive “our.”

Unless otherwise noted or the context otherwise requires, all references to years in this report are to fiscal years.

Item 1.      Business

Description of the Business. Moog is a worldwide designer, manufacturer and integrator of high performance precision motion and fluid controls and systems for a broad range of applications in aerospace and defense, industrial and medical markets. We have five operating segments: Aircraft Controls, Space and Defense Controls, Industrial Systems, Components and Medical Devices.

Additional information describing the business and comparative segment revenues, operating profits and related financial information for 2009, 2008 and 2007 are provided in Note 17 of Item 8, Financial Statements and Supplementary Data of this report.

Distribution. Our sales and marketing organization consists of individuals possessing highly specialized technical expertise. This expertise is required in order to effectively evaluate a customer’s precision control requirements and to facilitate communication between the customer and our engineering staff. Our sales staff is the primary contact with customers. Manufacturers’ representatives are used to cover certain domestic aerospace markets. Distributors are used selectively to cover certain industrial and medical markets.

Industry and Competitive Conditions. We experience considerable competition in our aerospace and defense, industrial and medical markets. We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness of delivery, effectiveness of the distribution organization and quality of support after the sale. We believe we compete effectively on all of these bases. Principal competitors in our five operating segments include:

	•		Aircraft Controls: Parker Hannifin, Nabtesco, GE, Goodrich, Liebherr, Curtiss-Wright, and Hamilton Sundstrand.
	•		Space and Defense Controls: Honeywell, Parker Hannifin, Vacco, Valvetech, Marotta, Sabca, Curtiss-Wright, ESW, Aerojet, Valcor, Aeroflex, Hamilton Sundstrand, Limitorque, Sargeant Industries, RVision, Directed Perception, ATA Engineering, Barry Controls, RUAG, Woodward, Sierra-Nevada, Videotec, Pelco and Lord Corp.
	•		Industrial Systems: Bosch Rexroth, Danaher, Baumueller, Siemens and Hydraudyne.
	•		Components: Danaher, Allied Motion, Ametek, MPC, Axsys, Schleifring, Airflyte, Smiths, Kearfott and Electro-Miniatures.
	•		Medical Devices: B. Braun, Carefusion, Smiths Medical, Hospira, Alcon, Baxter International, CME, I-Flow, Kendall (Covidien) and Ross (Abbott).

Government Contracts. All U.S. Government contracts are subject to termination by the Government. In 2009, sales under U.S. government contracts represented 38% of total sales primarily within Aircraft Controls, Space and Defense Controls and Components.

Backlog. Substantially all backlog will be realized as sales in the next twelve months. See the discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

Raw Materials. Materials, supplies and components are purchased from numerous suppliers. We believe the loss of any one supplier, although potentially disruptive in the short-term, would not materially affect our operations in the long-term.

Working Capital. See the discussion on operating cycle in Note 1 of Item 8, Financial Statements and Supplementary Data of this report.

Seasonality. Our business is generally not seasonal.

Patents. We maintain a patent portfolio of issued or pending patents and patent applications worldwide that generally includes the U.S., Europe, China, Japan and India. The portfolio includes patents that relate to electrohydraulic, electromechanical, electronics, hydraulics, components and methods of operation and manufacture as related to motion control and actuation systems. The portfolio also includes patents for recently acquired products related to wind turbines, robotics, surveillance/security, vibration control and medical devices. We do not consider any one or more of these patents or patent applications to be material in relation to our business as a whole. The patent portfolio related to certain medical devices is significant to our position in this market due to the competitive nature of the business environment.

Research Activities. Research and development activity has been, and continues to be, significant for us. Research and development decreased to $100 million in 2009 from $110 million in 2008 and $103 million in 2007.

Employees. On October 3, 2009, we employed 10,005 full-time employees.

Customers. Our principal customers are Original Equipment Manufacturers, or OEMs, and end users for whom we provide aftermarket support. Aerospace and defense OEM customers collectively represented approximately 48% of 2009 sales. The majority of these sales are to a small number of large companies. Due to the long-term nature of many of the programs, many of our relationships with aerospace and defense OEM customers are based on long-term agreements. Our OEM sales of industrial controls and medical devices, which represented approximately 35% of 2009 sales, are to a wide range of global customers and are normally based on lead times of 90 days or less. We also provide aftermarket support, consisting of spare and replacement parts and repair and overhaul services, for all of our product applications. Our major aftermarket customers are the U.S. Government and commercial airlines. In 2009, aftermarket sales accounted for 17% of total sales.

Customers in our five operating segments include:

	•		Aircraft Controls: Boeing, Lockheed Martin, Airbus, BAE, Bombardier, Gulfstream, Hawker Beechcraft, Honeywell, Northrop Grumman and the U.S. Government.
	•		Space and Defense Controls: Alliant Techsystems, Lockheed Martin, Astrium, Raytheon, General Dynamics, United Technologies-Pratt & Whitney Rocketdyne, Aerojet and Boeing.
	•		Industrial Systems: FlightSafety, Huskey, Cooper, CAE, Arburg, Metso and Schlumberger.
	•		Components: Respironics, Raytheon, Lockheed Martin, Honeywell, Philips Medical and the U.S. Government.
	•		Medical Devices: B. Braun, Danone and DJO Inc.

International Operations. Our operations outside the United States are conducted through wholly-owned foreign subsidiaries and are located predominantly in Europe and the Asian-Pacific region. See Note 17 of Item 8, Financial statements and Supplementary Data of this report for information regarding sales by geographic area and Exhibit 21 of Item 15, Exhibits and Financial Statement Schedules of this report for a list of subsidiaries. Our international operations are subject to the usual risks inherent in international trade, including currency fluctuations, local government contracting regulations, local governmental restrictions on foreign investment and repatriation of profits, exchange controls, regulation of the import and distribution of foreign goods, as well as changing economic and social conditions in countries in which our operations are conducted.

Environmental Matters. See the discussion in Note 18 of Item 8, Financial Statements and Supplementary Data of this report.

Website Access to Information. Our internet address is www.moog.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports, available on the investor information portion of our website. The reports are free of charge and are available as soon as reasonably practicable after they are filed with the Securities and Exchange Commission. We have posted our Corporate Governance guidelines, Board committee charters and code of ethics to the investor information portion of our website. This information is available in print to any shareholder upon request. All requests for these documents should be made to Moog’s Manager of Investor Relations by calling 716-687-4225.

Executive Officers of the Registrant. Other than John B. Drenning, the principal occupations of our officers for the past five years have been their employment with us. John B. Drenning’s principal occupation is partner in the law firm of Hodgson Russ LLP.

On February 11, 2008, Jennifer Walter was named Controller and Principal Accounting Officer. Previously, she was Director of Financial Planning and Analysis.

On November 28, 2007, Donald R. Fishback was named Vice President of Finance. Previously, he was Controller and Principal Accounting Officer.

On November 28, 2007, John R. Scannell was named Vice President and Chief Financial Officer. Previously, he was Vice President and Director of Contracts and Pricing, a position he held since 2006. Prior to that, he was the Program Director for the Boeing 787.

On January 10, 2006, Sasidhar Eranki was named Vice President and continues as Deputy General Manager of the Aircraft Group and Director of Engineering.

On January 14, 2005, Harald E. Seiffer was named Vice President and continues as Business Development Manager for Moog Europe. Previously he was General Manager of Moog GmbH.

Executive Officers		Age				Year First Elected Officer
Robert T. Brady
Chairman of the Board; President; Chief Executive Officer;
Director; Member, Executive Committee			68				1967
Richard A. Aubrecht
Vice Chairman of the Board; Vice President - Strategy and Technology;
Director; Member, Executive Committee			65				1980
Joe C. Green
Executive Vice President; Chief Administrative Officer;
Director; Member, Executive Committee			68				1973
Stephen A. Huckvale
Vice President			60				1990
Martin J. Berardi
Vice President			53				2000
Warren C. Johnson
Vice President			50				2000
Jay K. Hennig
Vice President			49				2002
Lawrence J. Ball
Vice President			55				2004
Harald E. Seiffer
Vice President			50				2005
Sasidhar Eranki
Vice President			55				2006
John R. Scannell
Vice President and Chief Financial Officer			46				2006
Donald R. Fishback
Vice President - Finance			53				1985
Jennifer Walter
Controller; Principal Accounting Officer			38				2008
Timothy P. Balkin
Treasurer; Assistant Secretary			50				2000
John B. Drenning
Secretary			72				1989

Item 1A.      Risk Factors

The markets we serve are cyclical and sensitive to domestic and foreign economic conditions and events, which may cause our operating results to fluctuate. The markets we serve are sensitive to fluctuations in general business cycles and domestic and foreign economic conditions and events. For example, demand for our industrial systems products is dependent upon several factors, including capital investment, product innovations, economic growth, cost-reduction efforts and technology upgrades. In addition, the commercial airline industry is highly cyclical and sensitive to fuel price increases, labor disputes and economic conditions. These factors could result in a reduction in the amount of air travel. A reduction in air travel could reduce orders for new aircraft for which we supply flight controls and for spare parts and services and reduce our sales. A reduction in air travel may also result in our commercial airline customers being unable to pay our invoices on a timely basis or at all.

We depend heavily on government contracts that may not be fully funded or may be terminated, and the failure to receive funding or the termination of one or more of these contracts could reduce our sales and increase our costs. Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of our business. In 2009, sales under U.S. Government contracts represented 38% of our total sales, primarily within Aircraft Controls, Space and Defense Controls and Components. Sales to foreign governments represented 6% of our total sales. We expect that the percentage of our revenues from government contracts will continue to be substantial in the future. Government programs can be structured into a series of individual contracts. The funding of these programs is generally subject to annual congressional appropriations, and congressional priorities are subject to change. In addition, government expenditures for defense programs may decline or these defense programs may be terminated. A decline in government expenditures may result in a reduction in the volume of contracts awarded to us. We have resources applied to specific government contracts and if any of those contracts were terminated, we may incur substantial costs redeploying those resources.

If our subcontractors or suppliers fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially and adversely impacted. Many of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we must provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract or our hiring of personnel of a subcontractor. Failure by our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations as the prime contractor. Subcontractor performance deficiencies could result in a customer terminating our contract for default. A default termination could expose us to liability and substantially impair our ability to compete for future contracts and orders. In addition, a delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our customers’ needs and may have an adverse effect upon our profitability.

We make estimates in accounting for long-term contracts, and changes in these estimates may have significant impacts on our earnings. We have long-term contracts with some of our customers. These contracts are predominantly within Aircraft Controls and Space and Defense Controls. Revenue representing 33% of 2009 sales was accounted for using the percentage of completion, cost-to-cost method of accounting. Under this method, we recognize revenue 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. A significant change in an estimate on one or more contracts could have a material effect on our results of operations. For contracts with anticipated losses at completion, we establish a provision for the entire amount of the estimated remaining loss and charge it against income in the period in which the loss becomes known. 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.

We enter into fixed-price contracts, which could subject us to losses if we have cost overruns. In 2009, fixed-price contracts represented 78% of our sales that were accounted for using the percentage of completion, cost-to-cost method of accounting. On fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price. Depending on the fixed price negotiated, these contracts may provide us with an opportunity to achieve higher profits based on the relationship between our total contract costs and the contract’s fixed price. However, we bear the risk that increased or unexpected costs may reduce our profit or cause us to incur a loss on the contract, which could reduce our net sales and net earnings. Loss reserves are most commonly associated with fixed-price contracts that involve the design and development of new and unique controls or control systems to meet the customer’s specifications.

Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment. Like all government contractors, we are subject to risks associated with this contracting. These risks include the potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to be, subjected to audits and investigations by U.S. and foreign government agencies and authorities. The failure to comply with the terms of our government contracts could harm our business reputation. It could also result in our progress payments being withheld or our suspension or debarment from future government contracts.

If we are unable to adapt to technological change, demand for our products may be reduced. The technologies related to our products have undergone, and in the future may undergo, significant changes. To succeed in the future, we will need to continue to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. Historically, our technology has been developed through customer-funded and internally funded research and development and through business acquisitions. In addition, our competitors may develop technologies and products that are more effective than those we develop or that render our technology and products obsolete or uncompetitive. Furthermore, our products could become unmarketable if new industry standards emerge. We may have to modify our products significantly in the future to remain competitive, and new products we introduce may not be accepted by our customers.

Our new product and research and development efforts may not be successful, which would result in a reduction in our sales and earnings. In the past, we have incurred, and we expect to continue to incur, expenses associated with research and development activities and the introduction of new products. For instance, we are currently incurring substantial development costs in connection with our work on the Airbus A350 XWB and Boeing 787. We may experience difficulties that could delay or prevent the successful development of new products or product enhancements, and new products or product enhancements may not be accepted by our customers. In addition, the research and development expenses we incur may exceed our cost estimates, and new products we develop may not generate sales sufficient to offset our costs. If any of these events occur, our sales and profits could be adversely affected.

The loss of Lockheed Martin or Boeing as a customer or a significant reduction in sales to either company could reduce our sales and earnings. Sales to Lockheed Martin were 9% of our 2009 sales. We provide Boeing with controls for both military and commercial applications, which, in total, were 8% of our 2009 sales. Sales to Boeing’s commercial airplane group were 3% of 2009 sales. These commercial sales are generally made under a long-term supply agreement through 2021 for the Boeing 787 and 2012 for other commercial airplanes. The loss of Lockheed Martin or Boeing as a customer or a significant reduction in sales to either company could significantly reduce our sales and earnings.

We operate in highly competitive markets with competitors who may have greater resources than we possess, which could reduce our sales and operating margins. Many of our products are sold in highly competitive markets. Some of our competitors, especially in our industrial and medical markets, are larger and more diversified and have greater financial, marketing, production and research and development resources. As a result, they may be better able to withstand the effects of periodic economic downturns. Our sales and operating margins will be negatively impacted if our competitors:

	•		develop products that are superior to our products,
	•		develop products of comparable quality and performance that are more competitively priced than our products,
	•		develop methods of more efficiently and effectively providing products and services, or
	•		adapt more quickly than we do to new technologies or evolving customer requirements.

We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness of delivery, effectiveness of the distribution organization and quality of support after the sale. Maintaining and improving our competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and our distribution networks. If we do not maintain sufficient resources to make these investments or are not successful in maintaining our competitive position, our operations and financial performance will suffer.

Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could affect our earnings, equity and pension funding requirements. Pension obligations and the related costs are determined using actual results and actuarial valuations that involve several assumptions. Our funding requirements are also based on these assumptions. The most critical assumptions are the discount rate, the long-term expected return on assets and mortality. Other assumptions include salary increases and retirement age. Some of these assumptions, such as the discount rate and return on pension assets, are largely outside of our control. Changes in these assumptions could affect our earnings, equity and funding requirements.

We are subject to financing and interest rate exposure risks that could adversely affect our business and operating results. Changes in the availability, terms and cost of capital, increases in interest rates or a reduction in credit rating or outlook could cause our cost of doing business to increase, limit our ability to pursue acquisition opportunities and place us at a competitive disadvantage. At October 3, 2009, 57% of our debt was at fixed interest rates with the remaining 43% subject to variable interest rates. The current contraction in credit markets could impact our ability to finance our operations.

We are subject to the risk of loss resulting from financial institutions or customers defaulting on their obligations to us. We maintain significant amounts of cash and cash equivalents at financial institutions that are in excess of amounts insured by governments. The failure of these institutions could cause a loss of our cash balances or the ability to access them when needed. The inability of our customers to pay us due to adverse economic conditions or their inability to access available credit could have an adverse effect on our financial condition and liquidity.

Our international operations pose currency and other risks that may adversely impact sales and earnings. We have significant manufacturing and sales operations in foreign countries. In addition, our domestic operations have sales to foreign customers. Our financial results may be adversely affected by fluctuations in foreign currencies and by the translation of the financial statements of our foreign subsidiaries from local currencies into U.S. dollars. The translation of our sales in foreign currencies, primarily the euro, British pound and Japanese yen, to the U.S. dollar had a $49 million negative impact on sales for 2009 using average exchange rates for 2009 compared to average exchange rates for 2008 and a $49 million positive impact on sales for 2008 using average exchange rates for 2008 compared to average exchange rates for 2007.

A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth and cause us to violate covenants in our bank credit facility. Goodwill and other intangible assets are a substantial portion of our assets. At October 3, 2009, goodwill was $698 million and other intangible assets were $220 million of our total assets of $2.6 billion. Our goodwill and other intangible assets may increase in the future since our strategy includes growing through acquisitions. We may have to write off all or part of our goodwill or other intangible assets if their value becomes impaired. Although this write-off would be a non-cash charge, it could reduce our earnings and net worth significantly. A write-off of goodwill or other intangible assets could also cause us to violate covenants in our bank credit facility that require a minimum level of net worth. This could result in our inability to borrow under our bank credit facility or obligation to refinance or renegotiate the terms of our bank indebtedness.

Our sales and earnings growth may be reduced if we cannot implement our acquisition strategy. Acquisitions are a key part of our growth strategy. Our historical growth has depended, and our future growth is likely to depend, in large part, on our ability to successfully implement our acquisition strategy, and the successful integration of acquired businesses into our existing operations. We intend to continue to seek additional acquisition opportunities in accordance with our acquisition strategy, both to expand into new markets and to enhance our position in existing markets throughout the world. If we are unable to successfully identify suitable candidates, successfully acquired and integrate acquired businesses into our existing operations our sales and earnings growth would be reduced.

We may incur losses and liabilities as a result of our acquisition strategy. Growth by acquisition involves risks that could adversely affect our financial condition and operating results, including:

	•		diversion of management time and attention from our core business,
	•		the potential exposure to unanticipated liabilities,
	•		the potential that expected benefits or synergies are not realized and that operating costs increase,
	•		the risks associated with incurring additional acquisition indebtedness, including that additional indebtedness could limit our cash flow availability for operations and our flexibility,
	•		difficulties in integrating the operations and personnel of acquired companies, and
	•		the potential loss of key employees, suppliers or customers of acquired businesses.

In addition, any acquisition, once successfully integrated, could negatively impact our financial performance if it does not perform as planned, does not increase earnings, or does not prove otherwise to be beneficial to us.

Our future growth and continued success is dependent on our key personnel. Our future success depends to a significant degree upon the continued contributions of our management team and technical personnel. The loss of members of our management team could have a material adverse effect on our business. In addition, competition for qualified technical personnel in our industries is intense, and we believe that our future growth and success will depend on our ability to attract, train and retain such personnel.

Future terror attacks, war, or other civil disturbances could negatively impact our business. Terror attacks, war or other disturbances could lead to economic instability and decreases in demand for commercial products, which could negatively impact our business, financial condition and results of operations. Terrorist attacks worldwide have caused instability from time to time in global financial markets and the aviation industry. In 2009, 13% of our net sales was related to commercial aircraft. The long-term effects of terrorist attacks on us are unknown. These attacks and the U.S. Government’s continued efforts against terrorist organizations may lead to additional armed hostilities or to further acts of terrorism and civil disturbance in the United States or elsewhere, which may further contribute to economic instability.

Our operations in foreign countries expose us to political risks and adverse changes in local legal, tax and regulatory schemes. In 2009, 40% of our consolidated revenue was from customers outside of the United States. We expect international operations and export sales to continue to contribute to our earnings for the foreseeable future. Both the sales from international operations and export sales are subject in varying degrees to risks inherent in doing business outside of the United States. Such risks include, without limitation, the following:

	•		the possibility of unfavorable circumstances arising from host country laws or regulations,
	•		partial or total expropriation,
	•		potential negative consequences from changes to significant taxation policies, laws or regulations,
	•		changes in tariff and trade barriers and import or export licensing requirements, and
	•		political or economic instability, insurrection, civil disturbance or war.

Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business. In 2009, 12% of our sales was subject to compliance with the United States Export Administration regulations. Our failure to obtain the requisite licenses, meet registration standards or comply with other government export regulations would hinder our ability to generate revenues from the sale of our products outside the United States. Compliance with these government regulations may also subject us to additional fees and operating costs. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. In order to sell our products in European Union countries, we must satisfy certain technical requirements. If we are unable to comply with those requirements with respect to a significant quantity of our products, our sales in Europe would be restricted. Doing business internationally also subjects us to numerous U.S. and foreign laws and regulations, including, without limitation, regulations relating to import-export control, technology transfer restrictions, foreign corrupt practices and anti-boycott provisions. Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in administrative, civil or criminal liabilities and could, in the extreme case, result in suspension or debarment from government contracts or suspension of our export privileges, which would have a material adverse effect on us.

Our facilities could be damaged by catastrophes which could reduce our production capacity and result in a loss of customers. We conduct our operations in facilities located throughout the world. Any of these facilities could be damaged by fire, floods, earthquakes, power loss, telecommunication and information systems failure or similar events. Our facilities in California, Japan and the Philippines are particularly susceptible to earthquakes. These facilities accounted for 15% of our manufacturing, assembly and test capacity in 2009. Although we carry property insurance, including earthquake insurance and business interruption insurance, our inability to meet customers’ schedules as a result of a catastrophe may result in a loss of customers or significant additional costs such as penalty claims under customer contracts.

The failure of our products may damage our reputation, necessitate a product recall or result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages. Defects in the design and manufacture of our products may necessitate a product recall. We include complex system design and components in our products that could contain errors or defects, particularly when we incorporate new technology into our products. If any of our products are defective, we could be required to redesign or recall those products or pay substantial damages or warranty claims. Such an event could result in significant expenses, disrupt sales and affect our reputation and that of our products. We are also exposed to product liability claims. Many of our products are used in applications where their failure or misuse could result in significant property loss and serious personal injury or death. We carry product liability insurance consistent with industry norms. However, these insurance coverages may not be sufficient to fully cover the payment of any potential claim. A product recall or a product liability claim not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs. Our operations and facilities are subject to numerous stringent environmental laws and regulations. Although we believe that we are in material compliance with these laws and regulations, future changes in these laws, regulations, or interpretations of them, or changes in the nature of our operations may require us to make significant capital expenditures to ensure compliance. We have been and are currently involved in environmental remediation activities, the cost of which may become significant depending on the discovery of additional environmental exposures at sites that we currently own or operate and at sites that we formerly owned or operated, or at sites to which we have sent hazardous substances or wastes for treatment, recycling or disposal.

Item 1B.		Unresolved Staff Comments.

None

Item 2.		Properties.

On October 3, 2009, we occupied 4,802,000 square feet of space in the United States and countries throughout the world, distributed as follows:

		Square Feet
		Owned				Leased				Total
Aircraft Controls			1,132,000				615,000				1,747,000
Space and Defense Controls			432,000				165,000				597,000
Industrial Systems			692,000				552,000				1,244,000
Components			673,000				87,000				760,000
Medical Devices			244,000				190,000				434,000
Corporate Headquarters			-				20,000				20,000
Total			3,173,000				1,629,000				4,802,000

Aircraft Controls has principal manufacturing facilities located in New York, Utah, California, England and the Philippines. Space and Defense Controls has principal manufacturing facilities located in New York, California, Ohio, Illinois, Georgia and Germany. Industrial Systems has principal manufacturing facilities located in New York, Germany, Italy, Japan, China, The Netherlands, Luxembourg, Ireland, England and India. Components has principal manufacturing facilities located in Virginia, North Carolina, Pennsylvania, Canada and England. Medical Devices has principal manufacturing facilities in Utah, California, New York and Lithuania. Our corporate headquarters is located in East Aurora, New York.

We believe that our properties have been adequately maintained and are generally in good condition. Operating leases for properties expire at various times from 2010 through 2034. Upon the expiration of our current leases, we believe that we will be able to either secure renewal terms or enter into leases for alternative locations at market terms.

Item 3.		Legal Proceedings.

From time to time, we are named as a defendant in legal actions. We are not a party to any pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations.

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

None.

PART II

Item 5.		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our two classes of common shares, Class A common stock and Class B common stock, are traded on the New York Stock Exchange (NYSE) under the ticker symbols MOG.A and MOG.B. The following chart sets forth, for the periods indicated, the high and low sales prices of the Class A common stock and Class B common stock on the NYSE.

Quarterly Stock Prices
		Class A								Class B
Fiscal Year Ended		High				Low				High				Low
October 3, 2009
1st Quarter		$	43.36			$	24.00			$	44.86			$	23.91
2nd Quarter			39.58				17.90				38.58				18.39
3rd Quarter			28.57				21.50				28.39				22.98
4th Quarter			33.17				22.93				32.59				22.98
September 27, 2008
1st Quarter		$	49.19			$	41.18			$	49.03			$	41.77
2nd Quarter			48.24				38.79				48.00				39.18
3rd Quarter			46.37				37.46				46.16				37.80
4th Quarter			56.47				35.30				49.75				36.00

The number of shareholders of record of Class A common stock and Class B common stock was 1,071 and 478, respectively, as of November 20, 2009.

We did not pay cash dividends on our Class A common stock or Class B common stock in 2008 or 2009 and have no plans to do so in the foreseeable future.

The following table summarizes our purchases of our common stock for the quarter ended October 3, 2009.

Issuer Purchases of Equity Securities
														(d) Maximum
										(c) Total number				Number (or Approx.
										of Shares				Dollar Value) of
		(a) Total								Purchased as				Shares that May Yet
		Number				(b) Average				Part of Publicly				Be Purchased
		of Shares				Price Paid				Announced Plans				Under Plans
Period		Purchased (1) (2)				Per Share				or Programs (3)				or Programs (3)
June 29 - July 31, 2009			11,253			$	26.00				-				766,400
August 1 - 31, 2009			-				-				-				766,400
September 1 - October 3, 2009			35,789				30.83				-				766,400
Total			47,042			$	29.68				-				766,400

(1)		Purchases in July consist of shares from the Moog Inc. Retirement Savings Plan. Purchases in September include 10,789 shares from the Moog Inc. Retirement Savings Plan at $31.19 per share.
(2)		Purchases in September include 25,000 shares of Class B common stock from a member of the Moog family at $30.68 per share.
(3)		In October 2008, the Board of Directors authorized a share repurchase program. The program permits the purchase of up to 1,000,000 Class A or Class B common shares in open market or privately negotiated transactions at the discretion of management. The transactions will be made in accordance with rules and regulations of the U.S. Securities and Exchange Commission and other rules that govern such purchases. The approximate dollar value of the maximum number of shares that may yet be purchased as determined by the Class A stock price on the last day of the quarter is $22 million.

The following graph and table show the performance of the Company’s Class A common stock compared to the NYSE Composite-Total Return Index and the S&P Aerospace and Defense Index for a $100 investment made on September 30, 2004, including the reinvestment of any dividends.

		9/04				9/05				9/06				9/07				9/08				9/09
Moog Inc. Class A Common Stock		$	100.00			$	121.98			$	143.22			$	181.57			$	177.19			$	121.90
NYSE Composite - Total Return Index			100.00				118.75				134.71				163.09				125.40				118.55
S&P Aerospace & Defense Index			100.00				115.95				140.53				186.76				139.28				132.43

Item 6.

Selected Financial Data.

For a more detailed discussion of 2007 through 2009, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and Item 8, Financial Statements and Supplementary Data of this report.

(dollars in thousands, except per share data)		2009(1)(2)				2008(1)(3)				2007(4)				2006(4)(5)				2005(3)(4)
RESULTS FROM OPERATIONS
Net sales		$	1,848,918			$	1,902,666			$	1,558,099			$	1,306,494			$	1,051,342
Net earnings			85,045				119,068				100,936				81,346				64,792
Net earnings per share
Basic		$	2.00			$	2.79			$	2.38			$	2.01			$	1.68
Diluted		$	1.98			$	2.75			$	2.34			$	1.97			$	1.64
Weighted-average shares outstanding
Basic			42,598,321				42,604,268				42,429,711				40,558,717				38,608,235
Diluted			42,906,495				43,256,888				43,149,481				41,247,689				39,498,834
FINANCIAL POSITION
Total assets		$	2,634,317			$	2,227,247			$	2,006,179			$	1,607,654			$	1,303,327
Working capital			764,137				713,292				616,623				420,495				312,706
Indebtedness - senior			454,456				270,988				417,434				186,451				148,773
Indebtedness - senior subordinated			378,630				400,072				200,089				200,107				200,124
Shareholders’ equity			1,065,033				994,410				877,212				762,856				521,037
Shareholders’ equity per common share outstanding			23.53				23.30				20.63				18.04				13.48
SUPPLEMENTAL FINANCIAL DATA
Capital expenditures		$	81,826			$	91,833			$	96,988			$	83,555			$	41,188
Depreciation and amortization			76,384				63,376				52,093				47,077				36,207
Research and development			100,022				109,599				102,603				68,886				43,561
Twelve-month backlog			1,097,760				861,694				774,548				645,032				539,186
RATIOS
Net return on sales			4.6%				6.3%				6.5%				6.2%				6.2%
Return on shareholders’ equity			8.3%				12.7%				12.3%				12.9%				12.8%
Current ratio			2.71				2.89				2.93				2.37				2.09
Net debt to capitalization (6)			41.4%				37.0%				37.8%				30.1%				37.7%

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

We are a worldwide designer, manufacturer and integrator of high performance precision motion and fluid controls and control systems for a broad range of applications in aerospace and defense, industrial and medical markets. Our aerospace and defense 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, controls for gun aiming, stabilization and automatic ammunition loading for armored combat vehicles, and homeland security products. Our industrial products are used in a wide range of applications, including injection molding machines, pilot training simulators, wind energy, power generation, material and automotive testing, metal forming, heavy industry and oil exploration. Our medical products include infusion therapy pumps, enteral clinical nutrition pumps, slip rings used on CT scanners and motors used in sleep apnea devices. We operate under five segments, Aircraft Controls, Space and Defense Controls, Industrial Systems, Components and Medical Devices. Our principal manufacturing facilities are located in the United States, including facilities in New York, California, Utah, Virginia, North Carolina, Pennsylvania, Ohio, Georgia and Illinois, and in Germany, England, Italy, Japan, the Philippines, Ireland, India and China.

We have long-term contracts with some of our customers. These contracts are predominantly within Aircraft Controls and Space and Defense Controls and represent approximately one-third of our sales. We recognize revenue on these contracts using the percentage of completion, cost-to-cost method of accounting as work progresses toward completion. 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 predominantly used within the Industrial Systems, Components and Medical Devices segments, as well as with aftermarket activity.

We concentrate on providing our customers with products designed and manufactured to the highest quality standards. In achieving a leadership position in the high performance, precision controls market, we have capitalized on our strengths, which include:

	•		superior technical competence and customer intimacy breed market leadership,
	•		customer diversity and broad product portfolio,
	•		well-established international presence serving customers worldwide, and
	•		proven ability to successfully integrate acquisitions.

We intend to increase our revenue base and improve our profitability and cash flows from operations by building on our market leadership positions, by strengthening our niche market positions in the principal markets that we serve and by extending our participation on the platforms we supply by providing more systems solutions. 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,
	•		taking advantage of our global capabilities,
	•		growing our profitable aftermarket business,
	•		capitalizing on strategic acquisitions and opportunities,
	•		entering and developing new markets, and
	•		striving for continuing cost improvements.

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

Acquisitions and Equity Investment

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. The purchase price described for each acquisition below is net of any cash acquired and includes debt issued or assumed.

In 2009, we completed eight business combinations within four of our segments. We completed two acquisitions in our Aircraft Controls segment, both of which are located in the U.K. for a total purchase price of $136 million. These acquisitions complement our flight control actuation business and expand our business in ground-based air navigation systems. We acquired one business in our Space and Defense Controls segment for $45 million that expands our capabilities in the security and surveillance markets. We completed three acquisitions in our Industrial Systems segment, two of which specialize in systems and blade controls of turbines for the wind energy market, for a total of $110 million which includes $28 million for a 40% ownership paid in 2008 for one of the acquired companies. We also completed two acquisitions in our Medical Devices segment for a total purchase price of $36 million. Those acquisitions expand our portfolio to now include syringe style pumps, proprietary medical devices and contract manufacturing of disposables as well as microbiology, toxicology and sterilization services.

In 2008, we completed two acquisitions, one in each of our Space and Defense Controls and Components segments. Space and Defense Controls acquired a business for $15 million that designs and supplies systems for vibration suppression, precision motion control and dynamic testing of structures for the aerospace and defense markets. Components acquired a business that specializes in the design of fiber optic and wireless video and data multiplexers used in commercial and military subsea markets, for oil and gas exploration, terrestrial robots and remote sensing applications for $12 million.

See the discussion in Note 2 of Item 8, Financial Statements and Supplementary Data of this report for further information on our acquisitions.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by our application of accounting policies, which are discussed in Note 1 of Item 8, Financial Statements and Supplementary Data, of this report. The critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.

Revenue Recognition on Long-Term Contracts

Revenue representing 33% of 2009 sales was accounted for using the percentage of completion, cost-to-cost method of accounting. This method of revenue recognition is predominately 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 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.

We recognize revenue on contracts in the current period using the percentage of completion, cost-to-cost method of accounting 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, we recognize revenue and costs 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, we recognize revenue and costs 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 such as 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 in 2009, 2008 and 2007.

Contract Loss Reserves

At October 3, 2009, we had contract loss reserves of $50 million. 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.

In connection with the acquisition of the Wolverhampton flight control business, we established contract loss reserves of $31 million on the opening balance sheet. A portion of these loss reserves relates to early stage development programs such as the Boeing 787, the F-35 Joint Strike Fighter and the Airbus A380. The contract loss reserves related to these programs are expected to diminish as the programs progress. Also, upcoming work for these programs is expected to shift to our low cost manufacturing facility in the Philippines. We anticipate that this shift in work will result in cost benefits that will further reduce the contract loss reserves related to these programs.

Reserves for Inventory Valuation

At October 3, 2009, we had net inventories of $484 million, or 40% of current assets. Reserves for inventory were $73 million, or 15% of gross inventories. Inventories are stated at the lower-of-cost-or-market with cost determined primarily on the first-in, first-out method of valuation.

We record valuation reserves to provide for slow-moving or obsolete inventory by using both a formula-based method that increases the valuation reserve as the inventory ages and, supplementally, a specific identification method. We consider overall inventory levels in relation to firm customer backlog in addition to forecasted demand including aftermarket sales. Changes in these and other factors such as low demand and technological obsolescence could cause us to increase our reserves for inventory valuation, which would negatively impact our gross margin. As we record provisions within cost of sales to increase inventory valuation reserves, we establish a new, lower cost basis for the inventory.

Reviews for Impairment of Goodwill

At October 3, 2009, we had $698 million of goodwill, or 27% of total assets. We test goodwill for impairment at least annually, during our fourth quarter, and whenever events occur or circumstances change that indicate there may be an impairment. These events or circumstances could include a significant adverse change in the business climate, poor indicators of operating performance or the sale or disposition of a significant portion of a reporting unit.

We test goodwill for impairment at the reporting unit level. Certain of our reporting units are our operating segments while others are one level below our operating segments. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components.

Testing goodwill for impairment requires us to determine the amount of goodwill associated with reporting units, estimate fair values of those reporting units and determine their carrying values.

Interim Review

We use the discounted cash flow method to estimate the fair value of each of our reporting units. We believe this method is the most appropriate as it is based on the investment returns of our reporting units and is a generally accepted and common method of business valuation. This method incorporates various assumptions, the most significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate and the discount rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit’s current business, expected developments and operational strategies over a five-year period. In estimating the terminal growth rate, we consider our historical and projected results, as well as the economic environment in which our reporting units operate.

We performed an interim test on goodwill for impairment as of March 28, 2009. In determining whether an interim test on goodwill for impairment was necessary, we considered whether events occurred or circumstances changed that indicated there may be an impairment. Due to the challenging economic environment, certain areas of our business had been impacted and we announced a projected decrease in our 2009 earnings per share from both previous guidance and 2008 results. In addition, our stock price declined significantly, reducing our market capitalization to just below the book value of our equity. We tested each of our reporting units since an important step of our impairment test is to compare the aggregate fair value to our market capitalization and assess any resulting control premium for reasonableness.

We updated each of our assumptions as of our interim testing date. The only material change in assumptions from our testing during the fourth quarter of 2008 was our discount rate, which increased for each of our reporting units. In our testing during the fourth quarter of 2008, the discount rates ranged from 9.2% to 11.5%. In our interim testing during 2009, the discount rates ranged from 12.5% to 15.0%. The increases in the discount rates reflected the economic downturn and a much tighter credit environment, both of which had negatively affected the cost and availability of capital of marketplace participants. Our Industrial Systems Europe, Industrial Systems Pacific and Medical Devices reporting units had the largest increases in their discount rates, also reflecting the risk associated with estimating cash flows in these reporting units. We also updated our projected sales and operating margins, but the impact was not as significant as the change in discount rates. We reduced our projected sales levels in most of our reporting units, most notably in Aircraft Controls and Industrial Systems Europe. In Aircraft Controls, we reduced our projected sales for business jets due to the current economic downturn and on the Boeing 787 Dreamliner program due to announced program delays. We reduced our projected sales levels in Industrial Systems Europe as a result of the economic downturn. In our three Industrial Systems reporting units, we reduced our operating margins to reflect the economic downturn.

Based on the results of our test, we concluded that goodwill was not impaired as of March 28, 2009. The fair value of each of our reporting units exceeded its carrying value by over 10%, with the exception of our Aircraft Controls reporting unit. This reporting unit is one level below our Aircraft Controls segment and excludes the navigational aids business we recently acquired. Its excess of fair value over carrying value was 6%.

Annual Reviews

We performed our annual test during the fourth quarter of 2009. We used a 4% terminal growth rate, which is below the historical growth rate of our reporting units. We then discounted our projected cash flows. For our test during the fourth quarter of 2009, we used discount rates that ranged from 12.0% to 14.5% for our various reporting units. These discount rates reflect management’s assumptions of marketplace participants’ cost of capital and risk assumptions, both specific to the reporting unit and overall in the economy. We evaluate the reasonableness of the resulting fair values of our reporting units by comparing the aggregate fair value to our market capitalization and assessing the reasonableness of any resulting premium. The determination of these amounts is subjective and requires significant estimates. Changes in these estimates and assumptions could materially affect the results of our reviews for impairment of goodwill.

The most significant change in assumptions from our prior year annual impairment test was our discount rate, which increased for each of our reporting units. In our testing during the fourth quarter of 2008, the discount rates ranged from 9.2% to 11.5%. The increases in our discount rates reflected the economic downturn and a much tighter credit environment, both of which had negatively affected the cost and availability of capital of marketplace participants. Our Industrial Systems Europe, Industrial Systems Pacific and Medical Devices reporting units had the largest increases in their discount rates. These increases also reflect the risk associated with estimating cash flows including for recently acquired businesses such as the wind energy acquisitions in our Industrial Systems Europe and Industrial Systems Pacific reporting units. We also updated our projected sales and operating margins, but the impact was not as significant as the change in discount rates. We reduced our projected sales levels in most of our reporting units, most notably in Aircraft Controls and Industrial Systems Europe. In Aircraft Controls, we reduced our projected sales for business jets due to the current economic downturn and on the Boeing 787 Dreamliner program due to announced program delays. We reduced our projected sales levels in Industrial Systems Europe as a result of the economic downturn. In our three Industrial Systems reporting units, we reduced our operating margins to reflect the economic downturn.

Based on these tests, the fair value of each reporting unit exceeded its carrying amount in 2009, 2008 and 2007. Therefore, goodwill was not impaired as of our annual testing dates. In our annual review of goodwill for impairment in the fourth quarter of 2009, the fair value of each reporting unit exceeded its carrying value by over 10% except for our Aircraft Controls reporting unit where the fair value exceeded its carrying value by 8%.

While any individual assumption could reasonably differ from those that we used, we believe the overall fair values of our reporting units are reasonable as the values are derived from a mix of reasonable assumptions. However, had we used discount rates that were 100 basis points higher than those we assumed or terminal growth rates that were 100 basis points lower than those we assumed the fair value of each reporting unit would have exceeded its carrying value by over 10% except for the Aircraft Controls, Industrial Systems Americas and Medical Devices reporting units. In Aircraft Controls, the fair value would not have exceeded its carrying value, requiring us to measure the amount of goodwill impairment. Had we used discount rates that were 100 basis points higher than those we assumed for Industrial Systems Americas and Medical Devices, the fair value would not have exceeded its carrying value, requiring us to measure the amount of goodwill impairment. Had we used terminal growth rates that were 100 basis points lower than those we assumed for Industrial Systems Americas and Medical Devices, the fair value would have exceeded its carrying value and there would be no goodwill impairment.

Purchase Price Allocations for Business Combinations

During 2009, we completed eight business combinations. Under purchase accounting, we recorded assets and liabilities at fair value as of the acquisition dates. We identified and ascribed value to programs, customer relationships, patents and technology, trade names, backlog and contracts and estimated the useful lives over which these intangible assets would be amortized. Valuations of these assets were performed largely using discounted cash flow models. These valuations support the conclusion that intangible assets other than goodwill had a value of $158 million. The resulting goodwill was $135 million, reflecting the strong cash flows of the acquired operations.

Ascribing value to intangible assets requires estimates used in projecting relevant future cash flows, in addition to estimating useful lives of such assets. Using different assumptions could have a material effect on our current and future amortization expense.

Pension Assumptions

We maintain various defined benefit pension plans covering employees at certain locations. Pension expense for all defined benefit plans for 2009 was $15 million. Pension obligations and the related costs are determined using actuarial valuations that involve several assumptions. The most critical assumptions are the discount rate and the long-term expected return on assets. Other assumptions include salary increases, retirement age and mortality.

The discount rate is used to state expected future cash flows at present value. Using a higher discount rate decreases the present value of pension obligations and reduces pension expense. We used using the Mercer Pension Discount Yield Curve to determine the discount rate for our U.S. plans. In determining expense for 2009 for our U.S. plans, we used a 7.3% discount rate, compared to 6.2% for 2008. We will use a 6.0% discount rate to determine our expense in 2010 for these U.S. plans. This 130 basis point decrease in the discount rate will increase our pension expense by $7 million in 2010.

The return on assets assumption reflects the average rate of earnings 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 our current and target asset allocations. 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 expense for 2009 for our largest plan, we used an 8.9% return on assets assumption, the same we used in 2008. A 50 basis point decrease in the return on assets assumption would increase our annual pension expense by $2 million.

Deferred Tax Asset Valuation Allowances

At October 3, 2009, we had gross deferred tax assets of $184 million and a deferred tax asset valuation allowance of $9 million. The deferred tax assets principally relate to benefit accruals, inventory obsolescence and contract loss reserves. The deferred tax assets include $10 million related to tax benefit carryforwards in Luxembourg and Germany for which a $9 million deferred tax asset valuation allowance is recorded.

We record a valuation allowance to reduce deferred tax assets to the amount of future tax benefit that we believe is more likely than not to be realized. We consider recent earnings projections, allowable tax carryforward periods, tax planning strategies and historical earnings performance to determine the amount of the valuation allowance. Changes in these factors could cause us to adjust our valuation allowance, which would impact our income tax expense when we determine that these factors have changed.

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK

(dollars in millions)		2009				2008				2007
Net sales		$	1,849			$	1,903			$	1,558
Gross margin			29.1%				32.0%				34.0%
Research and development expenses		$	100			$	110			$	103
Selling, general and administrative expenses as a percentage of sales			15.2%				15.5%				16.2%
Restructuring expense		$	15			$	-			$	-
Interest expense		$	39			$	38			$	30
Effective tax rate			23.1%				29.1%				29.8%
Net earnings		$	85			$	119			$	101

Our fiscal year ends on the Saturday that is closest to September 30. The consolidated financial statements include 53 weeks for the year ended October 3, 2009 and 52 weeks for the years ended September 27, 2008 and September 29, 2007. While management believes this affects the comparability of financial results presented, the impact has not been determined.

Net sales decreased $54 million, or 3%, in 2009. During 2009, our sales were negatively impacted by the global recession, most significantly in our Industrial Systems segment and sales that are denominated in foreign currencies that generally weakened against the U.S. dollar. Partially offsetting those decreases were $122 million of incremental sales from 2009 acquisitions.

In 2008, sales increased $345 million, or 22%, from the prior year. Sales increased in each of our segments and acquisitions accounted for approximately one-third of the growth in 2008.

Our gross margin declined in 2009 compared to 2008 primarily as a result of lower sales and adverse product mix. A lower proportion of our sales came from industrial controls, which generally carry a higher gross margin than many of our other products. Our gross margin declined in 2008 compared to 2007. Approximately one-third of the decline was a result of increased charges to our contract loss reserves, most of which relate to aircraft development contracts. We also had a less favorable product mix in 2008, particularly within Aircraft Controls and Space and Defense Controls.

Research and development expenses were lower in 2009 compared to 2008. The lower levels were primarily within Industrial Systems in response to slowing sales demand and Aircraft Controls. The reduced expenses for Aircraft Controls were due to the Boeing 787 program that have been partially offset by increases for the A350 program. During 2008, the increase was evenly split between aircraft initiatives and acquisitions. Within Aircraft Controls, work on the Airbus A350 increased by $10 million and other aircraft projects increased by $6 million. These increases were offset by a $13 million decline on the Boeing 787 Dreamliner.

Selling, general and administrative expenses as a percentage of sales were lower in 2009 compared to 2008. The percentage decrease was primarily a result of the impact of the acquisition of wind energy businesses, which have lower selling, general and administrative expenses as a percentage of sales than most of our other product lines. During 2008, selling, general and administrative expenses as a percentage of sales decreased. The decrease resulted from higher bid and proposal and sales support costs on the A350 and other aircraft projects in 2007.

In 2009, we initiated restructuring plans to better align our cost base with the lower level of sales and operating margins associated with the global economic recession. The restructuring actions taken have or will result in workforce reductions, primarily in the U.S., the Philippines and Europe. During 2009, we incurred $15 million of severance costs, of which $10 million is in Industrial Systems and $5 million is in Aircraft Controls. We expect that payment of these restructuring costs will be completed by the end of 2010.

Interest expense in 2009 was comparable to 2008 as a result of higher debt levels in 2009 offset by lower average interest rates. The increase in 2008 was a result of higher debt levels, with slightly more than half associated with our acquisitions and the remainder coming from working capital and capital expenditure requirements.

The lower effective tax rate for 2009 compared to 2008 is due to one time factors, which include our decision to repatriate approximately $31 million of cash back to the U.S. from our Japanese subsidiary, resulting in a $5 million foreign tax credit, which reduced our U.S. tax provision. In addition, for most of 2009, we had the benefit of the effect of our equity earnings in LTi REEnergy which were recognized in operating profit on an after-tax basis. The effective tax rate for 2008 was slightly lower than 2007 mainly as a result of lower state tax rates and a greater portion of our income coming from foreign operations with lower tax rates.

In 2009, net earnings decreased 29% and diluted earnings per share decreased 28% compared to 2008 as a result of the decline in sales and the $15 million charge for restructuring activities. In 2008, both net earnings and diluted earnings per share increased 18%.

2010 Outlook - We expect sales in 2010 to increase by 15% to approximately $2.12 billion with increases in each of our segments. Sales are expected to increase $118 million in Industrial Systems, $73 million in Aircraft Controls, $43 million in Space and Defense Controls, $19 million in Components and $18 million in Medical Devices over 2009. We expect operating margins to be approximately 9.5% in 2010 compared to 9.3% in 2009. We expect operating margins to increase in Medical Devices, Industrial Systems and Aircraft Controls and decrease in Space and Defense Controls and Components. Further restructuring costs are estimated to be $6 million in 2010 related to anticipated staff reductions in our Aircraft Controls and international industrial operations associated with initiatives started in 2009. We expect net earnings to increase to $103 million and diluted earnings per share to increase by 14% to $2.25. Given the uncertainty in the global economy, these forecasted earnings amounts are centered within a range of plus or minus $.10 per share.

SEGMENT RESULTS OF OPERATIONS AND OUTLOOK

Operating profit, as presented below, 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. Operating profit is reconciled to earnings before income taxes in Note17 of Item 8, Financial Statements and Supplementary Data of this report.

Aircraft Controls

(dollars in millions)		2009				2008				2007
Net sales - military aircraft		$	417			$	395			$	320
Net sales - commercial aircraft			214				271				261
Net sales - navigational aids			33				7				6
		$	664			$	673			$	587
Operating profit		$	52			$	55			$	61
Operating margin			7.9%				8.2%				10.4%
Backlog		$	508			$	372			$	322

Net sales in Aircraft Controls decreased 1% in 2009. There was a shift from commercial aircraft to military aircraft sales. Military aircraft sales increased $22 million. Military aftermarket sales increased $13 million, while sales increased $7 million on the Indian Light Combat Aircraft and $4 million on the V-22 Osprey production program. Commercial aircraft sales decreased $57 million from 2008, mainly due to $25 million in lower sales to Boeing, a $24 million decrease in sales on business jets and a $7 million decline in aftermarket sales. Navigational aids sales increased $26 million in 2009 primarily as a result of $15 million of incremental sales from the Fernau acquisition.

Net sales in Aircraft Controls increased 15% in 2008 due to strong military aircraft sales. Military sales were led by a $37 million increase on the F-35 Joint Strike Fighter program. Military aftermarket sales increased $20 million and sales on the V-22 Osprey production program increased $12 million. Commercial aircraft sales increased 4%, as a $19 million sales increase in business jets was offset by a $6 million decline in sales to Boeing on the 7-series, including the 787 program, and a $6 million decline in aftermarket sales.

Our operating margin for Aircraft Controls decreased in 2009 and 2008. The decrease in 2009 was a result of $7 million of higher additions to contract loss reserves, $5 million of restructuring charges incurred in 2009 and $4 million of inventory and other charges on certain business jet programs. Partially offsetting those higher costs were better margins as sales shifted from commercial aircraft to military aircraft and lower research and development spending. The operating margin decline in 2008 was largely due to a greater proportion of sales from the cost-plus F-35 program. We also established a loss reserve of $7 million on our Boeing business related to delays in Boeing’s production schedule and increased costs of certain purchased critical components.

Twelve-month backlog for Aircraft Controls increased during 2009. This increase related to strong military orders and backlog from the 2009 fourth quarter acquisition of the General Electric Aviation Systems flight control actuation business in Wolverhampton, U.K. (Wolverhampton flight controls), and the Fernau acquisition. Partially offsetting those increases was a decline in commercial orders. The increase in backlog at September 27, 2008 from September 29, 2007 related to strong commercial orders.

2010 Outlook for Aircraft Controls - We expect sales in Aircraft Controls in 2010 to be $736 million, an 11% increase over 2009 as a result of the incremental sales from the Wolverhampton flight controls and Fernau acquisitions. Commercial aircraft sales are expected to increase 21% to $259 million, principally related to the Wolverhampton flight controls acquisition, partially offset by a decline in sales on business jets. Military aircraft sales are expected to increase 3% to $427 million as a result of an additional $44 million from the Wolverhampton flight controls acquisition and an $11 million increase on the V-22 production program, offset by a $43 million reduction on the F-35 program as it shifts from cost-plus development to fixed-price production. Navigational aids are expected to increase to $50 million due in large part to the effect of owning Fernau for a full year. We expect our operating margin to be 8.3% in 2010, a slight improvement from 7.9% in 2009.

Space and Defense Controls

(dollars in millions)		2009				2008				2007
Net sales		$	275			$	253			$	185
Operating profit		$	40			$	29			$	24
Operating margin			14.6%				11.6%				13.1%
Backlog		$	202			$	153			$	142

Net sales in Space and Defense Controls increased 8% in 2009 compared to 2008 due to the CSA Engineering and Videolarm acquisitions, which contributed $21 million in incremental sales. Sales of controls for military and commercial satellites increased $6 million and sales of launch vehicles also increased $6 million. Sales of tactical missiles, primarily Hellfire and TOW, increased $5 million. Offsetting those increases was a decrease in sales of defense controls of $10 million as a result of a decline on the Driver’s Vision Enhancer (DVE) program. Sales for the Constellation program also decreased $6 million as NASA delayed contract awards for the program, which slowed down commitments for the design of the Orion Crew Vehicle.

Net sales in Space and Defense Controls increased 37% in 2008 due primarily from the acquisition of QuickSet, which contributed $53 million of incremental sales. The Constellation Program, which we began working on in 2007, generated $24 million of sales in 2008. The third quarter of 2008 acquisition of CSA also contributed $6 million of the increase.

Our operating margin for Space and Defense Controls increased in 2009 as a result of the impact of higher sales volume in 2009 and a $4 million loss reserve recorded in 2008 for thruster valves used on satellites. Our operating margin for Space and Defense Controls decreased in 2008 due to additions to contract loss reserves, partially offset by strong margins on the DVE program.

Twelve-month backlog for Space and Defense Controls increased to $202 million at October 3, 2009 as a result of increased orders for satellite programs, launch vehicles and tactical missiles. Backlog at September 27, 2008 increased from September 29, 2007 primarily as a result of the backlog associated with the CSA acquisition.

2010 Outlook for Space and Defense Controls - We expect sales in Space and Defense Controls to increase $43 million, or 16%, to $317 million in 2010. We expect increases on the Constellation Program, homeland security, tactical missiles and launch vehicles. We expect sales to decrease in defense controls and satellites. We expect our operating margin in 2010 to decrease to 11.3% from 14.6% in 2009, primarily as a result of a larger portion of sales coming from lower margin cost-plus contracts.

Industrial Systems

(dollars in millions)		2009				2008				2007
Net sales		$	455			$	532			$	436
Operating profit		$	31			$	73			$	57
Operating margin			6.8%				13.8%				13.2%
Backlog		$	196			$	161			$	150

Net sales in Industrial Systems decreased 15% in 2009. The global recession significantly impacted our industrial business in most of the major markets we serve. In addition, weaker foreign currencies, in particular the euro, compared to the U.S. dollar had a negative impact on sales, representing over one-quarter of the sales decrease. Sales were lower in all of our major markets except for wind energy and power generation. Sales for plastic making machinery decreased $40 million. Sales of controls for metal forming and presses decreased $25 million. Sales for motion simulators decreased $15 million. Sales of controls for steel mills decreased $13 million. Offsetting those sales declines were increases of $69 million in the wind energy business from the LTi REEnergy and Insensys acquisitions and $4 million in power generation.

Net sales increased 22% in 2008. Stronger foreign currencies, in particular the euro, compared to the U.S. dollar, represented 38% of the sales increase. Sales were up in nearly all our major markets. Sales increases in the motion simulator business were a result of strong deliveries to CAE and Flight Safety. The metal forming market grew due to strong demand in Europe. Sales growth in heavy industry came mainly from China and Europe. Sales in power generation were a result of strong demand in Asia.

Our operating margin for Industrial Systems declined in 2009 due to lower sales volume and $10 million of restructuring charges. Our operating margin for Industrial Systems improved in 2008 due to higher sales volume and operating efficiencies.

The higher level of twelve-month backlog for Industrial Systems at October 3, 2009 compared to September 27, 2008 relates to the LTi REEnergy and Insensys acquisitions, partially offset by lower demand due to the global economic recession.

2010 Outlook for Industrial Systems - We expect sales in Industrial Systems to increase $118 million, or 26%, to $573 million in 2010. We expect a $151 million sales increase in wind energy to $220 million as a result of a full year of sales for the LTi REEnergy and Insensys acquisitions. Partially offsetting that increase are sales declines in the rest of our major markets, with the exception of test equipment, as a result of the continuation of the slowing global demand we experienced in 2009. We expect our operating margin to increase to 7.4% in 2010, from 6.8% in 2009. The increase in our operating margin reflects higher sales volume and lower anticipated restructuring expenses, partially offset by no longer having the benefit of the equity earnings of LTi REEnergy.

Components

(dollars in millions)		2009				2008				2007
Net sales		$	346			$	341			$	283
Operating profit		$	56			$	61			$	45
Operating margin			16.1%				17.8%				15.7%
Backlog		$	183			$	167			$	149

Net sales in Components increased 1% in 2009 despite a $10 million negative impact on sales related to weaker foreign currencies in 2009 compared to 2008. Aircraft sales increased $18 million, primarily on the Guardian and Multi-Spectral Targeting System programs. Sales of space and defense controls increased $14 million for components supplied on the Abrams Tank, the Stryker Mobile Gun System, space vehicles and ground-based radar systems. Marine sales decreased $4 million as this market is closely impacted by activity in offshore drilling and oil prices. Medical sales decreased $7 million, largely in sales to Respironics for sleep apnea equipment. Industrial sales decreased $16 million, largely a result of reduced demand from the recession for industrial automation equipment and slip rings for closed circuit TV surveillance.

Net sales in Components increased 20% in 2008 with growth in every major market. Acquisitions also contributed to the sales increase. Marine sales increased 27% as the high price of oil drove demand. Aircraft sales increased 24% due largely to work on the Guardian program and Multi-Spectral Targeting System. Sales of space and defense controls increased 22% due to strong orders for defense controls. Industrial sales increased 17%, largely a result of the Thermal Control Products and Techtron acquisitions.

Our operating margin for Components declined in 2009 as a result of a sales mix shift away from higher margin industrial and marine products. The operating margin for 2008 improved primarily as a result of higher sales volume.

The higher level of twelve-month backlog at October 3, 2009 compared to September 27, 2008 and September 29, 2007 primarily relates to increased orders for defense controls and military aircraft programs.

2010 Outlook for Components - We expect sales in Components to increase $19 million, or 6%, to $365 million in 2010. We expect sales increases in aircraft, which is primarily driven by the Guardian program, and from the industrial market. We expect our sales into the medical market to remain flat and sales to decrease within the marine market as the price of oil remains relatively low and also in the space and defense market. We expect our operating margin in 2010 to decrease to 15.3% based on the sales mix that we are currently forecasting.

Medical Devices

(dollars in millions)		2009				2008				2007
Net sales		$	111			$	103			$	68
Operating (loss) profit		$	(7	)		$	9			$	7
Operating margin			(6.7%	)			8.8%				10.2%
Backlog		$	11			$	8			$	12

Net sales in Medical Devices increased 7% in 2009. The acquisitions of Aitecs and Ethox contributed $21 million of incremental sales. Sales of administration sets also increased $4 million, or 11%. Offsetting those sales increases was a decrease of $10 million in sales of pumps and a $9 million decrease in sales of sensors and handpieces, largely a result of reduced spending associated with the recession.

Net sales in Medical Devices increased in 2008. The acquisition of ZEVEX in 2007 expanded this segment. The increase in 2008 reflected a full year of sales for ZEVEX, partially offset by decreased sales of intravenous and disposable pumps.

Our operating margin for Medical Devices declined in 2009 as a result of the lower sales volume excluding the impact of acquisitions, a shift in product mix, warranty costs for a voluntary software modification and first year purchase accounting adjustments for the Aitecs and Ethox acquisitions. The decline in our operating margin for 2008 was attributable to both the product mix and sales volume of certain products. In 2008, we had lower sales of higher margin intravenous pumps.

Unlike our other segments, twelve-month backlog for Medical Devices is not substantial relative to sales reflecting the shorter order-to-shipment cycle for this line of business.

2010 Outlook for Medical Devices - We expect sales in Medical Devices to increase $18 million, or 16%, to $129 million in 2010. We expect sales increases in our major product lines as a result of a broader product offering and strengthening of our sales and distribution organization. In addition, we anticipate $8 million of incremental sales from a full year of owning Aitecs and Ethox. We expect our operating margin to be 4.7% as a result of the increased sales, cost reduction efforts and a more favorable product mix.

FINANCIAL CONDITION AND LIQUIDITY

(dollars in millions)		2009				2008				2007
Net cash provided (used) by:
Operating activities		$	118			$	108			$	25
Investing activities			(325	)			(149	)			(231	)
Financing activities			201				42				227

Our available borrowing capacity and our cash flow from operations provide us with the financial resources needed to run our operations, reinvest in our business and make strategic acquisitions.

Operating activities

Net cash provided by operating activities increased $10 million in 2009 despite lower earnings. This increase relates primarily to slowing growth in working capital requirements, especially in receivables. Partially offsetting these increases were larger uses of cash for various items such as higher pension contributions. The majority of the increase in 2008 resulted from increased earnings, slower growth in working capital requirements, lower pension contributions and higher non-cash charges. Depreciation and amortization was $76 million in 2009, $63 million in 2008 and $52 million in 2007. Provisions for losses were $43 million in 2009, $37 million in 2008 and $21 million in 2007.

Investing activities

Net cash used by investing activities of $325 million in 2009 includes $261 million for the completion of eight acquisitions. Net cash used by investing activities also included $82 million for capital expenditures. These amounts were partially offset by the redemption of $20 million of supplemental retirement plan investments that were used to purchase $21 million par value of our 6.25% and 7.25% senior subordinated notes. Net cash used by investing activities of $149 million in 2008 consisted principally of $92 million for capital expenditures, the $28 million investment in 40% of LTi REEnergy and $22 million for the acquisitions of PRIZM and CSA. Net cash used by investing activities of $231 million in 2007 consisted principally of $136 million used for five acquisitions and $97 million for capital expenditures. Our major cash outlays for acquisitions included $82 million for the March 2007 acquisition of ZEVEX and $41 million for the September 2007 acquisition of QuickSet.

Over the past few years, our capital expenditures have been at fairly high levels compared to our previous historical averages. We have invested in major program initiatives and facility expansions. We expect our 2010 capital expenditures to approximate $75 million.

Financing activities

Net cash provided by financing activities in 2009 is primarily related to borrowings on our U.S. credit facility to fund most of the acquisitions and net proceeds of $75 million received from the sale of 2,675,000 shares of Class A common stock at $29.50 per share. These amounts were partially offset by the redemption of $21 million par value of our senior subordinated notes, pay downs of $17 million on notes payable and $7 million used for our share repurchase program. The decrease in cash provided by financing activities in 2008 is a result of the use of our U.S. revolving credit facility to fund acquisitions in 2007 and the growth in our working capital in 2007. Net cash provided by financing activities in 2007 of $227 million principally relates to increased borrowings under our U.S. revolving credit facility for acquisitions and increased investments in working capital requirements to fund our sales growth.

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 our U.S. credit facility, which matures on March 14, 2013. It consists of a $750 million revolver and had an outstanding balance of $422 million at October 3, 2009. Interest on outstanding credit facility borrowings is based on LIBOR plus the applicable margin, which was 225 basis points at October 3, 2009. 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 net worth, defined as total shareholders’ equity adjusted to maintain the amounts of accumulated other comprehensive loss at the level in existence as of September 30, 2006, is $600 million. The covenant for minimum interest coverage ratio, defined as the ratio of EBITDA to interest expense for the most recent four quarters, is 3.0. The covenant for the maximum leverage ratio, defined as the ratio of net debt, including letters of credit, to EBITDA for the most recent four quarters, is 4.0. The covenant for maximum senior leverage ratio, defined as the ratio of net senior debt to consolidated EBITDA for the most recent four quarters is 2.75. The covenant for maximum capital expenditures is $100 million annually. We are in compliance with all covenants. EBITDA is defined in the loan agreement as (i) the sum of net income, interest expense, income taxes, depreciation expense, amortization expense, other non-cash items reducing consolidated net income and non-cash equity-based compensation expenses minus (ii) other non-cash items increasing consolidated net income. The definition of EBITDA allows for the exclusion of up to $17 million of restructuring charges to be incurred in calendar year 2009.

We are required to obtain the consent of lenders of the U.S. credit facility before raising significant additional debt financing. In recent years, we have demonstrated our ability to secure consents to access debt markets. We have also been successful in accessing equity markets, as demonstrated most recently by our October 2, 2009 sale of 2,675,000 shares of Class A common stock at $29.50 per share. We believe that we will be able to obtain additional debt or equity financing as needed.

At October 3, 2009, we had $353 million of unused borrowing capacity, including $315 million from the U.S. credit facility after considering standby letters of credit. Our ability to utilize the unused borrowing capacity is limited by the maximum leverage ratio covenant, which would restrict borrowings to an additional $277 million as of October 3, 2009.

Net debt to capitalization was 41% at October 3, 2009 and 37% at September 27, 2008. The increase in net debt to capitalization is primarily due to amounts borrowed to fund acquisitions, partially offset by the proceeds from the sale of Class A common stock.

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.

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 significant contractual obligations and commercial commitments at October 3, 2009 are as follows:

(dollars in millions)		Payments due by period
										2011-				2013-				After
Contractual Obligations		Total				2010				2012				2014				2014
Long-term debt		$	816			$	2			$	9			$	426			$	379
Interest on long-term debt			184				26				52				51				55
Operating leases			90				20				32				19				19
Purchase obligations			516				335				52				128				1
Total contractual obligations		$	1,606			$	383			$	145			$	624			$	454

In addition to the obligations in the table above, we have $11 million recorded for unrecognized tax benefits in current liabilities, which includes $1 million of related accrued interest. We are unable to determine if and when any of those amounts will be settled, nor can we estimate any potential changes to the unrecognized tax benefits.

Interest on long-term debt consists of payments on fixed-rate debt, primarily senior subordinated notes.

Total contractual obligations exclude pension obligations. In 2010, we anticipate making contributions of $29 million to defined benefit pension plans.

(dollars in millions)		Commitments expiring by period
										2011-				2013-				After
Other Commercial Commitments		Total				2010				2012				2014				2014
Standby letters of credit		$	13			$	11			$	2			$	-			$	-

ECONOMIC CONDITIONS AND MARKET TRENDS

We operate within the aerospace and defense, industrial and medical markets. Our aerospace and defense markets are affected by market conditions and program funding levels, while our industrial markets are influenced by general capital investment trends. Our medical markets are influenced by economic conditions, population demographics, medical advances and patient demand. A common factor throughout our markets is the continuing demand for technologically advanced products.

Aerospace and Defense

Approximately 62% of our 2009 sales were generated in aerospace and defense markets. The military aircraft market is dependent on military spending for development and production programs. Production programs are typically long-term in nature, offering 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. 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 a number of scheduled military retrofit programs and increased flight hours resulting from increased military commitments.

The commercial OEM market has historically exhibited cyclical swings and sensitivity to economic conditions. The aftermarket is driven by usage of the existing aircraft fleet, the age of the installed fleet and is currently being impacted by fleet re-sizing programs for passenger and cargo aircraft. Changes in aircraft utilization rates affect the need for maintenance and spare parts and impact aftermarket sales. Boeing and Airbus have historically adjusted production in line with air traffic volume.

The military and government space market is primarily dependent on the authorized levels of funding for satellite communications. Government spending on military satellites has risen in recent years as the military’s need for improved intelligence gathering has increased. The commercial space market is comprised of large satellite customers, traditionally telecommunications companies. Trends for this market, as well as for commercial launch vehicles, follow the telecommunications companies’ need for increased capacity and the satellite replacement lifecycle of 7-10 years. Our position on NASA’s Constellation Program for the exploration of the Moon and possibly Mars holds the potential to be a long-run production program.

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. Our homeland security product line is dependent on government funding at federal and local levels, as well as private sector demand.

Industrial

Approximately 29% of our 2009 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. We are experiencing challenges from current global economic conditions. These challenges include reacting to slowing demand for industrial automation equipment, steel and automotive manufacturing and delayed orders as customers manage inventory levels. Despite the general slowdown in demand from the global recession, we continue to see strong demand in the growing wind energy market.

Medical

Approximately 9% of our 2009 sales were generated in medical markets. The medical markets we serve are influenced by economic conditions, hospital and outpatient clinic spending on equipment, population demographics, medical advances, patient demands and the need for precision control components and systems. Advances in medical technology and medical treatments have had the effect of extending the average life span, in turn resulting in greater need for medical services. These same technology and treatment advances also drive increased demand from the general population as a means to improve quality of life. Greater access to medical insurance, whether through government funded health care plans or private insurance, also increases the demand for medical services.

Foreign Currencies

We are affected by the movement of foreign currencies compared to the U.S. dollar, particularly in Industrial Systems. About one-quarter of our 2009 sales were denominated in foreign currencies including the euro, British pound and Japanese yen. During 2009, these foreign currencies weakened against the U.S. dollar and the translation of the results of our foreign subsidiaries into U.S. dollars decreased sales by $49 million compared to the same period one year ago. During 2008, these foreign currencies strengthened against the U.S. dollar and the translation of the results of our foreign subsidiaries into U.S. dollars increased sales by $49 million compared to 2007.

Pension

The assumptions for our 2009 net periodic pension costs and funding requirements were determined as of August 31, 2008. Changes in the fair market value of our pension assets between August 31, 2008 and the end of 2009 will impact our expense over a five-year period beginning in 2010.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of the Consolidated Financial Statements at Item 8 of this report.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk.

In the normal course of business, we have exposures to interest rate risk from our long-term debt and foreign exchange rate risk related to our foreign operations and foreign currency transactions. To manage these risks, we may enter into derivative instruments such as interest rate swaps and foreign currency forward contracts. We do not hold or issue financial instruments for trading purposes. In 2009, our derivative instruments consisted of interest rate swaps designated as cash flow hedges and foreign currency forwards.

At October 3, 2009, we had $355 million of borrowings subject to variable interest rates. During 2009, our average borrowings subject to variable interest rates were $281 million and, therefore, if interest rates had been one percentage point higher during 2009, our interest expense would have been $3 million higher. At October 3, 2009, we had a $75 million notional amount of outstanding interest rate swaps, of which $60 million matures in the first quarter of 2010 and $15 million in the second quarter of 2010. Based on the applicable margin, the interest rate swaps effectively convert this amount of variable-rate debt to fixed-rate debt at 6.4% through their maturities in 2010, at which time the interest will revert back to a variable rate based on LIBOR.

We may also enter into forward contracts to reduce fluctuations in foreign currency cash flows related to third party purchases and sales, intercompany product shipments and intercompany loans and to reduce fluctuations in the value of foreign currency investments in, and long-term advances to, subsidiaries. We have foreign currency forwards with a notional amount of $202 million outstanding at October 3, 2009.

Although the majority of our sales, expenses and cash flows are transacted in U.S. dollars, we have exposure to changes in foreign currency exchange rates such as the euro, British pound and Japanese yen. If average annual foreign exchange rates collectively weakened against the U.S. dollar by 10%, our pre-tax earnings in 2009 would have decreased by $5 million from foreign currency translation, primarily related to the euro and Canadian dollar, offset by $6 million from changes in operating margins for products sourced outside of the U.S.

Item 8.

Financial Statements and Supplementary Data.

Consolidated Statements of Earnings

		Fiscal Years Ended
		October 3,				September 27,				September 29,
(dollars in thousands, except per share data)		2009				2008				2007
NET SALES		$	1,848,918			$	1,902,666			$	1,558,099
COST OF SALES			1,311,618				1,293,452				1,028,852
GROSS PROFIT			537,300				609,214				529,247
Research and development			100,022				109,599				102,603
Selling, general and administrative			281,173				294,936				252,173
Restructuring			15,067				-				-
Interest			39,321				37,739				29,538
Equity in earnings of LTi and other			(8,844	)			(1,095	)			1,182
EARNINGS BEFORE INCOME TAXES			110,561				168,035				143,751
INCOME TAXES			25,516				48,967				42,815
NET EARNINGS		$	85,045			$	119,068			$	100,936
NET EARNINGS PER SHARE
Basic		$	2.00			$	2.79			$	2.38
Diluted		$	1.98			$	2.75			$	2.34
AVERAGE COMMON SHARES OUTSTANDING
Basic			42,598,321				42,604,268				42,429,711
Diluted			42,906,495				43,256,888				43,149,481
See accompanying Notes to Consolidated Financial Statements.

Consolidated Balance Sheets

		October 3,				September 27,
(dollars in thousands, except per share data)		2009				2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	81,493			$	86,814
Receivables			547,571				517,361
Inventories			484,261				408,295
Deferred income taxes			73,673				53,102
Prepaid expenses and other current assets			23,400				24,813
TOTAL CURRENT ASSETS			1,210,398				1,090,385
PROPERTY, PLANT AND EQUIPMENT, net			481,726				428,120
GOODWILL			698,459				560,735
INTANGIBLE ASSETS, net of accumulated amortization of $64,805 in 2009 and $45,060 in 2008			220,311				74,755
OTHER ASSETS			23,423				73,252
TOTAL ASSETS		$	2,634,317			$	2,227,247
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Notes payable		$	16,971			$	7,579
Current installments of long-term debt			1,541				1,487
Accounts payable			125,257				128,723
Accrued salaries, wages and commissions			91,302				107,076
Customer advances			66,811				41,507
Contract loss reserves			50,190				20,536
Other accrued liabilities			94,189				70,185
TOTAL CURRENT LIABILITIES			446,261				377,093
LONG-TERM DEBT, excluding current installments
Senior debt			435,944				261,922
Senior subordinated notes			378,630				400,072
LONG-TERM PENSION AND RETIREMENT OBLIGATIONS			225,747				108,072
DEFERRED INCOME TAXES			76,910				80,754
OTHER LONG-TERM LIABILITIES			5,792				4,924
TOTAL LIABILITIES			1,569,284				1,232,837
COMMITMENTS AND CONTINGENCIES (Note 18)			-				-
SHAREHOLDERS’ EQUITY
Common stock - par value $1.00
Class A - Authorized 100,000,000 shares			43,472				40,794
Issued 43,471,373 and outstanding 41,167,674 shares at October 3, 2009
Issued 40,793,523 and outstanding 38,685,574 shares at September 27, 2008
Class B - Authorized 20,000,000 shares. Convertible to Class A on a one-for-one basis			7,808				7,811
Issued 7,808,340 and outstanding 4,103,817 shares at October 3, 2009
Issued 7,811,190 and outstanding 3,997,799 shares at September 27, 2008
Additional paid-in capital			381,099				311,159
Retained earnings			772,639				688,585
Treasury shares			(47,733	)			(40,607	)
Stock Employee Compensation Trust			(11,426	)			(22,179	)
Accumulated other comprehensive (loss) income			(80,826	)			8,847
TOTAL SHAREHOLDERS’ EQUITY			1,065,033				994,410
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	2,634,317			$	2,227,247
See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Shareholders’ Equity

		Fiscal Years Ended
		October 3,				September 27,				September 29,
(dollars in thousands)		2009				2008				2007
COMMON STOCK
Beginning of year		$	48,605			$	48,605			$	48,605
Sale of Class A Common Stock			2,675				-				-
End of year			51,280				48,605				48,605
ADDITIONAL PAID-IN CAPITAL
Beginning of year			311,159				301,778				292,565
Sale of Class A Common Stock, net of issuance costs			72,042				-				-
Issuance of treasury shares at more than cost			163				3,906				1,086
Equity-based compensation expense			5,682				4,551				3,299
Adjustment to market - SECT, and other			(7,947	)			924				4,828
End of year			381,099				311,159				301,778
RETAINED EARNINGS
Beginning of year			688,585				570,063				469,127
Net earnings			85,045				119,068				100,936
Adjustment for adoption of defined benefit pension plan standard,			(991	)			-				-
net of income taxes of $529
Adjustment for adoption of income tax standard			-				(546	)			-
End of year			772,639				688,585				570,063
TREASURY SHARES AT COST*
Beginning of year			(40,607	)			(39,873	)			(40,354	)
Shares issued related to options (2009 - 48,938 Class A shares; 2008 - 363,784 Class A shares; 2007 - 185,437 Class A shares)			261				1,940				989
Shares purchased (2009 - 244,688 Class A shares 2008 - 59,908 Class A shares; 2007 - 13,019 Class A shares)			(7,387	)			(2,674	)			(508	)
End of year			(47,733	)			(40,607	)			(39,873	)
STOCK EMPLOYEE COMPENSATION TRUST (SECT)**
Beginning of year			(22,179	)			(15,928	)			(14,652	)
Sale of SECT stock to RSP Plan (2009 - 205,028 Class B shares; 2008 - 21,527 Class B shares; 2007 - 70,900 Class B shares)			5,593				942				2,930
Purchase of SECT stock (2009 - 96,160 Class B shares; 2008 - 167,111 Class B shares; 2007 - 14,108 Class B shares)			(2,832	)			(7,530	)			(559	)
Adjustment to market - SECT			7,992				337				(3,647	)
End of year			(11,426	)			(22,179	)			(15,928	)
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Beginning of year			8,847				12,567				7,565
Other comprehensive (loss) income			(89,815	)			(3,720	)			30,890
Adjustment to adopt defined benefit pension plan standard, net of income taxes of $81 in 2009 and $(16,409) in 2007			142				-				(25,888	)
End of year			(80,826	)			8,847				12,567
TOTAL SHAREHOLDERS’ EQUITY		$	1,065,033			$	994,410			$	877,212
COMPREHENSIVE (LOSS) INCOME
Net earnings		$	85,045			$	119,068			$	100,936
Other comprehensive (loss) income:
Foreign currency translation adjustment			(1,073	)			(2,854	)			29,047
Retirement liability adjustment			(89,062	)			(357	)			1,929
Accumulated income (loss) on derivatives adjustment			320				(509	)			(86	)
COMPREHENSIVE (LOSS) INCOME		$	(4,770	)		$	115,348			$	131,826

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

		Fiscal Years Ended
		October 3,				September 27,				September 29,
(dollars in thousands)		2009				2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings		$	85,045			$	119,068			$	100,936
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation			54,762				48,065				40,226
Amortization			21,622				15,311				11,867
Provisions for non-cash losses on contracts, inventories and receivables			43,166				36,563				20,755
Deferred income taxes			13,330				(5,698	)			(545	)
Equity-based compensation expense			5,682				4,551				3,299
Equity in earnings of LTi			(6,717	)			(874	)			-
Other			(5,210	)			2,381				(116	)
Changes in assets and liabilities providing (using) cash, excluding the effects of acquisitions:
Receivables			25,576				(79,302	)			(72,848	)
Inventories			984				(62,439	)			(64,737	)
Other assets			(5,043	)			(3,190	)			(943	)
Accounts payable and accrued liabilities			(79,236	)			16,653				(1,112	)
Other liabilities			(28,675	)			10,122				(12,994	)
Customer advances			(7,394	)			6,681				1,296
NET CASH PROVIDED BY OPERATING ACTIVITIES			117,892				107,892				25,084
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired			(261,193	)			(22,383	)			(136,291	)
Investment in LTi REEnergy Gmbh			-				(28,288	)			-
Purchase of property, plant and equipment			(81,688	)			(91,761	)			(96,960	)
Supplemental retirement plan investment redemption			19,981				-				-
Other			(1,843	)			(6,448	)			2,371
NET CASH USED BY INVESTING ACTIVITIES			(324,743	)			(148,880	)			(230,880	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable			(16,996	)			(709	)			(15,707	)
Proceeds from revolving lines of credit			1,173,249				450,705				666,209
Payments on revolving lines of credit			(1,003,659	)			(599,705	)			(400,209	)
Payments on long-term debt, other than senior subordinated notes			(2,331	)			(1,933	)			(28,690	)
Proceeds from senior subordinated notes, net of issuance costs			-				196,393				-
Payments on senior subordinated notes			(19,981	)			-				-
Proceeds from sale of Class A common stock, net of issuance costs			74,717				-				-
Proceeds from sale of treasury stock			424				5,846				2,075
Purchase of outstanding shares for treasury			(7,387	)			(2,674	)			(508	)
Proceeds from sale of stock held by Stock Employee Compensation Trust			5,593				942				2,930
Purchase of stock held by Stock Employee Compensation Trust			(2,832	)			(7,530	)			(559	)
Excess tax benefits from equity-based payment arrangements			43				1,137				1,147
Other			-				-				(17	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			200,840				42,472				226,671
Effect of exchange rate changes on cash			690				1,474				5,160
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(5,321	)			2,958				26,035
Cash and cash equivalents at beginning of year			86,814				83,856				57,821
Cash and cash equivalents at end of year		$	81,493			$	86,814			$	83,856
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest		$	39,119			$	35,402			$	27,627
Income taxes, net of refunds			24,630				50,555				41,066
Non-cash investing and financing activities:
Unsecured notes issued as partial consideration for acquisitions		$	13,451			$	5,000			$	2,850
Equipment acquired through financing			138				72				28