PART I [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Q1 FY23 financial statements show 5% net sales growth to $760.1 million, stable net earnings, increased assets to $3.66 billion, and operating cash flow significantly declined to $8.1 million [Consolidated Condensed Statements of Earnings](index=4&type=section&id=Consolidated%20Condensed%20Statements%20of%20Earnings) Net sales for Q1 FY23 increased 5.0% to $760.1 million, with gross profit rising to $203.7 million, while net earnings remained flat at $46.0 million due to higher interest expenses and the absence of a prior-year large business sale gain Consolidated Earnings Summary (Q1 FY23 vs Q1 FY22) | Financial Metric | Three Months Ended Dec 31, 2022 (in thousands) | Three Months Ended Jan 1, 2022 (in thousands) | | :--- | :--- | :--- | | Net sales | $760,103 | $724,086 | | Gross profit | $203,686 | $192,880 | | Earnings before income taxes | $60,301 | $61,423 | | Net earnings | $46,016 | $46,265 | | Diluted EPS ($) | $1.44 | $1.44 | - A **$9.5 million** gain on building sales was recorded, contrasting with a **$16.1 million** gain on business sales in the prior-year quarter[10](index=10&type=chunk) [Consolidated Condensed Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the quarter was $99.9 million, a significant increase from $43.9 million in the prior-year period, primarily driven by a $50.7 million positive foreign currency translation adjustment, contrasting with a $6.6 million loss in the same quarter last year Comprehensive Income Summary (Q1 FY23 vs Q1 FY22) | Metric (in thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Jan 1, 2022 | | :--- | :--- | :--- | | Net earnings | $46,016 | $46,265 | | Foreign currency translation adjustment | $50,735 | $(6,560) | | **Comprehensive income** | **$99,869** | **$43,930** | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) As of December 31, 2022, total assets stood at $3.66 billion, up from $3.43 billion at October 1, 2022, driven by higher receivables (up $76 million) and inventories (up $60 million), while total liabilities increased to $2.13 billion from $2.00 billion, mainly due to a rise in long-term debt and contract advances Balance Sheet Summary | Metric (in thousands) | December 31, 2022 | October 1, 2022 | | :--- | :--- | :--- | | Total current assets | $1,933,183 | $1,758,310 | | Total assets | $3,658,045 | $3,431,841 | | Total current liabilities | $885,666 | $838,436 | | Long-term debt | $916,058 | $836,872 | | Total liabilities | $2,132,864 | $1,995,028 | | Total shareholders' equity | $1,525,181 | $1,436,813 | [Consolidated Condensed Statements of Cash Flows](index=9&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Net cash from operating activities was $8.1 million, a sharp decline from $157.2 million in the prior-year quarter, primarily due to increased cash usage for receivables and inventories, while investing activities used $25.3 million, and financing activities provided $59.4 million, driven by net borrowings on credit facilities Cash Flow Summary (Q1 FY23 vs Q1 FY22) | Cash Flow Activity (in thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Jan 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,083 | $157,185 | | Net cash provided (used) by investing activities | $(25,293) | $277 | | Net cash provided (used) by financing activities | $59,396 | $(151,585) | | **Increase in cash, cash equivalents and restricted cash** | **$46,678** | **$5,812** | [Notes to Consolidated Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) Key notes detail the company's revenue recognition policies, recent acquisitions and divestitures, debt structure, and segment performance, with revenue recognized over time for 63% of sales, total debt increased, and sales growth across all three segments, notably in Industrial Systems' operating profit - As of December 31, 2022, the company had remaining performance obligations of **$5.2 billion**, with **44%** expected to be recognized as sales over the next twelve months[45](index=45&type=chunk) - The company sold a sonar business, a security business, and its NAVAIDS business in fiscal 2022, impacting year-over-year comparisons[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - On October 27, 2022, the company amended its U.S. revolving credit facility, extending maturity to October 27, 2027, and increasing capacity to **$1.1 billion**[75](index=75&type=chunk) - On February 2, 2023, the company declared a quarterly dividend of **$0.27 per share**, an increase from the prior rate[103](index=103&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 5% Q1 sales growth to increases across all segments, despite negative foreign currency impacts and divestitures, with gross margin improving slightly, Industrial Systems' operating profit more than doubling, and the company forecasting 5% sales growth for FY23 to $3.175 billion and diluted EPS of $5.89, while maintaining strong liquidity despite lower operating cash flow [Consolidated Results of Operations](index=33&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net sales for Q1 2023 increased 5% to $760 million, driven by growth in all segments, with gross margin at 26.8%, interest expense up 65%, net earnings flat at $46 million, diluted EPS unchanged at $1.44, and the twelve-month backlog growing 8% to $2.34 billion Q1 FY23 vs Q1 FY22 Performance | Metric | Q1 2023 | Q1 2022 | % Variance | | :--- | :--- | :--- | :--- | | Net sales (M) | $760 | $724 | 5% | | Gross margin | 26.8% | 26.6% | - | | Interest expense (M) | $13 | $8 | 65% | | Net earnings (M) | $46 | $46 | (1%) | | Diluted EPS ($) | $1.44 | $1.44 | 0% | | Twelve-month backlog (M) | $2,343 | $2,167 | 8% | - Excluding a **$17 million** negative impact from foreign currency and a **$12 million** impact from divestitures, sales growth was **9%**[121](index=121&type=chunk) [Segment Results of Operations](index=34&type=section&id=Segment%20Results%20of%20Operations) In Q1 2023, Aircraft Controls sales grew 2% to $310 million, Space and Defense Controls sales rose 5% to $218 million, and Industrial Systems sales increased 9% to $232 million, with operating profit falling in Aircraft Controls and Space and Defense, but surging 114% in Industrial Systems due to a building sale and higher volumes Q1 FY23 Segment Performance | Segment | Net Sales (Q1'23, M) | YoY Sales Change | Operating Profit (Q1'23, M) | YoY Profit Change | | :--- | :--- | :--- | :--- | :--- | | Aircraft Controls | $310 | +2% | $30 | -29% | | Space and Defense Controls | $218 | +5% | $20 | -5% | | Industrial Systems | $232 | +9% | $37 | +114% | - Aircraft Controls' operating margin was **9.6%**, but adjusted margin was higher than the prior year's **8.5%** when excluding a **$16 million** gain from the NAVAIDS divestiture in Q1 2022[130](index=130&type=chunk) - Industrial Systems' operating margin was **15.8%**, but adjusted margin was **12.3%** after excluding a **$10 million** gain on building sales and **$1 million** in restructuring charges[137](index=137&type=chunk) [Consolidated Segment Outlook](index=37&type=section&id=Consolidated%20Segment%20Outlook) For fiscal year 2023, the company projects total net sales of $3.175 billion, a 5% increase, with operating profit expected to rise 26% to $356 million, operating margin expanding to 11.2%, and full-year diluted EPS forecasted at $5.89, with Industrial Systems anticipating the largest percentage increase in operating profit Fiscal Year 2023 Outlook | Metric | 2023 Outlook (M) | 2022 Actual (M) | % Variance | | :--- | :--- | :--- | :--- | | Net Sales | $3,175 | $3,036 | 5% | | Operating Profit | $356 | $283 | 26% | | Operating Margin | 11.2% | 9.3% | - | | Diluted EPS ($) | $5.89 | $4.83 | - | - The company expects adjusted diluted EPS to range between **$5.50** and **$5.90**, with a midpoint of **$5.70**[139](index=139&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains robust with **$709 million** of unused borrowing capacity as of December 31, 2022, despite operating cash flow significantly decreasing to **$8 million** in Q1 2023 from **$157 million** in the prior year, mainly due to a **$90 million** prior-year receivables program benefit and **$52 million** greater inventory investment, with full-year 2023 cash from operations expected at **$250 million** and capital expenditures at **$150 million** - Operating cash flow decreased by **$149 million** YoY, primarily due to a prior-year benefit from the Receivables Purchase Agreement (RPA) program and increased inventory investment due to supply chain constraints[143](index=143&type=chunk)[144](index=144&type=chunk) - The company is in compliance with all debt covenants, with a leverage ratio that allows for an additional **$659 million** in net debt[160](index=160&type=chunk) - The Board has authorized a share repurchase program with approximately **2.2 million shares** remaining for repurchase[164](index=164&type=chunk) [Economic Conditions and Market Trends](index=41&type=section&id=Economic%20Conditions%20and%20Market%20Trends) The company operates in varying market conditions, with the defense market stable and potentially increasing due to global tensions, the commercial aircraft market recovering but facing prolonged international travel pressure, and industrial markets experiencing demand but constrained by supply chain issues, all demanding technologically advanced products - Defense market (part of the **70%** of sales from aerospace & defense) is stable and could see increased spending due to global tensions[170](index=170&type=chunk)[174](index=174&type=chunk) - The commercial aircraft market recovery is heavily dependent on the return of global international air traffic, which is expected to face prolonged pressure[175](index=175&type=chunk) - Industrial markets (**30%** of 2022 sales) are experiencing recovering demand but are constrained by supply chain issues[171](index=171&type=chunk)[179](index=179&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that there have been no material changes in its market risk information from what was disclosed in its Annual Report on Form 10-K for the fiscal year ended October 1, 2022 - There have been no material changes in the company's market risk disclosures during the current year[193](index=193&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2022, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the quarter[195](index=195&type=chunk) - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[195](index=195&type=chunk) PART II OTHER INFORMATION [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended October 1, 2022 - There have been no material changes in the company's risk factors during the current year[196](index=196&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended December 31, 2022, the company purchased a total of **152,691 shares** of its common stock at an average price of **$79.90 per share**, including **71,849 shares** under its publicly announced repurchase program, with approximately **2.2 million shares** remaining authorized for repurchase Share Repurchase Summary (Q1 FY23) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | Oct 2 - Oct 29, 2022 | 81,981 | $75.03 | 71,849 | | Oct 30 - Dec 3, 2022 | 67,698 | $85.41 | 0 | | Dec 4 - Dec 31, 2022 | 3,012 | $88.32 | 0 | | **Total** | **152,691** | **$79.90** | **71,849** | - At the end of the quarter, **2,198,081 shares** may yet be purchased under the company's publicly announced share repurchase program[198](index=198&type=chunk)[199](index=199&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a form of the Restricted Stock Unit Award, certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and Interactive Data Files (XBRL)

Financial Performance - Net sales for the three months ended July 2, 2022, were $772,911 thousand, an increase of 9.2% compared to $707,352 thousand for the same period in 2021[11] - Gross profit for the three months ended July 2, 2022, was $211,743 thousand, representing a gross margin of 27.4%, up from $190,602 thousand in the prior year[11] - Net earnings for the three months ended July 2, 2022, were $50,409 thousand, a 39.5% increase from $36,122 thousand in the prior year[11] - Basic net earnings per share increased to $1.58 for the three months ended July 2, 2022, compared to $1.12 for the same period in 2021[11] - Operating profit for the three months ended July 2, 2022, was $79.3 million, compared to $64.9 million for the same period in 2021, reflecting an increase of about 22.1%[103] - The company’s total operating profit for the nine months ended July 2, 2022, was $216.9 million, compared to $208.2 million for the same period in 2021, showing a growth of about 4.0%[103] Assets and Liabilities - Total assets as of July 2, 2022, were $3,439,056 thousand, slightly up from $3,433,169 thousand as of October 2, 2021[17] - Total liabilities decreased to $2,007,631 thousand as of July 2, 2022, from $2,033,025 thousand as of October 2, 2021[17] - Shareholders' equity increased to $1,431,425 thousand as of July 2, 2022, compared to $1,400,144 thousand as of October 2, 2021[17] Cash Flow and Investments - Net cash provided by operating activities for the nine months ended July 2, 2022, was $184,264,000, down from $230,580,000 in the prior year, indicating a decrease of about 20%[24] - The company reported a net cash used by investing activities of $85,267,000 for the nine months ended July 2, 2022, compared to $162,558,000 in the prior year, reflecting a reduction of about 47.5%[24] - Cash, cash equivalents, and restricted cash at the end of the period were $95,864,000, compared to $91,658,000 at the end of the same period in 2021, showing an increase of approximately 4.8%[24] Research and Development - Research and development expenses decreased to $25,890 thousand for the three months ended July 2, 2022, down 21.8% from $33,095 thousand in the same period of 2021[11] - Research and development expenses decreased by 22% to $26 million in the third quarter of 2022 compared to $33 million in the same quarter of 2021[130] Foreign Currency and Market Impact - The company reported a foreign currency translation adjustment loss of $43,954 thousand for the three months ended July 2, 2022[14] - The company experienced a $15 million decrease in sales due to weaker foreign currencies, primarily the Euro and British Pound, relative to the U.S. Dollar[128] - The company experienced a decrease in sales of $24 million due to the weakening of foreign currencies against the U.S. dollar during the first nine months of 2022[194] Acquisitions and Growth - The company acquired TEAM Accessories Limited for a purchase price of $14,890, enhancing its Aircraft Controls segment[49] - The company acquired TEAM Accessories Limited for a purchase price of $15 million on February 21, 2022, enhancing its Aircraft Controls segment[120] - The company plans to continue exploring strategic acquisitions and return capital to shareholders to enhance long-term value[118] Backlog and Future Sales - The twelve-month backlog increased to $2.2 billion as of July 2, 2022, a 10% increase from $2.0 billion a year earlier[134] - The company expects total net sales for 2022 to reach $3,035 million, an increase of 6% from $2,852 million in 2021[153] - Aircraft Controls anticipates an increase in sales driven by recoveries in commercial OEM and aftermarket programs, despite a decline in military sales[154] - Space and Defense Controls expects sales growth in both defense and space markets, primarily from the RIwP program and integrated space vehicles business[155] - Industrial Systems forecasts a modest sales increase in 2022, particularly in the simulation and test market, but expects a decrease in operating margin due to ongoing portfolio shaping activities[156] Operational Risks and Legal Proceedings - The company faced operational risks due to potential interruptions in information systems and issues with product manufacturing processes[199] - The company is involved in various legal proceedings that could have unfavorable outcomes impacting financial results[201] Tax and Pension Expenses - The effective tax rate for the three months ended July 2, 2022, was 15.7%, lower than the U.S. federal statutory tax rate of 21% due to beneficial provisions related to the U.S. research and development tax credit[95] - The company reported a pension expense of $12,552 million for U.S. defined contribution plans for the three months ended July 2, 2022, compared to $11,195 million for the same period in 2021[94] Impairments and Restructuring - The company recorded impairment charges on long-lived assets in the Aircraft Controls segment due to a slower than expected recovery in the commercial aircraft business[29] - The company recorded impairment charges on inventory totaling $1,907 for the nine months ended July 2, 2022, associated with Russian actions in Ukraine[62] - The restructuring charge for 2022 included non-cash charges of $1,500 million for inventory write-downs and $7,423 million for severance related to businesses no longer pursued[93]

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Net sales rose 5% to **$1.49 billion**, but net earnings fell 13% to **$75.4 million** due to significant asset impairment and restructuring charges Consolidated Earnings Summary (Six Months Ended) | Metric | Six Months Ended April 2, 2022 | Six Months Ended April 3, 2021 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $1,494.9M | $1,420.4M | +5.2% | | **Gross Profit** | $405.9M | $389.6M | +4.2% | | **Asset Impairment** | $15.2M | $0 | N/A | | **Restructuring** | $7.8M | $0 | N/A | | **Net Earnings** | $75.4M | $86.5M | -12.9% | | **Diluted EPS** | $2.34 | $2.68 | -12.7% | Consolidated Balance Sheet Summary | Metric | April 2, 2022 | October 2, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $1,712.8M | $1,718.8M | | **Total Assets** | $3,441.5M | $3,433.2M | | **Total Current Liabilities** | $842.4M | $869.4M | | **Total Liabilities** | $2,010.8M | $2,033.0M | | **Total Shareholders' Equity** | $1,430.6M | $1,400.1M | Consolidated Cash Flow Summary (Six Months Ended) | Metric | Six Months Ended April 2, 2022 | Six Months Ended April 3, 2021 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $180.2M | $137.4M | | **Net Cash used by Investing Activities** | ($48.1M) | ($133.7M) | | **Net Cash (used) provided by Financing Activities** | ($109.7M) | $1.4M | - In 2022, the company recorded **impairment charges** on long-lived assets in the **Aircraft Controls segment** due to a slower-than-expected recovery of the commercial aircraft business. Additional impairment charges on receivables and inventories were recorded due to **Russian actions in Ukraine**[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased 5% to **$1.495 billion**, but diluted EPS fell 13% to **$2.34** due to Q2 asset impairments and restructuring - In Q2 2022, the company incurred **$15 million** of asset impairments and **$8 million** of restructuring expenses, primarily in Aircraft Controls, due to business resizing and portfolio shaping. An additional **$2 million** in charges were recognized related to Russian actions in Ukraine. These charges impacted diluted EPS by **$0.59**[131](index=131&type=chunk) - The twelve-month backlog increased by **21%** to **$2.3 billion** as of April 2, 2022, compared to **$1.9 billion** a year prior, with increases across all segments[128](index=128&type=chunk)[132](index=132&type=chunk) - The company divested its NAVAIDS business in Q1 2022, resulting in a **$16 million** gain and proceeds of **$39 million**. It also acquired TEAM Accessories Limited for **$15 million** in Q2 2022 to bolster its MRO capabilities in the Aircraft Controls segment[120](index=120&type=chunk)[122](index=122&type=chunk) - The fiscal 2022 outlook projects net sales of approximately **$3.035 billion**, a **6%** increase from 2021. The diluted EPS is forecasted to be between **$5.04** and **$5.44**. Adjusted EPS, excluding the NAVAIDS gain and other charges, is expected to be between **$5.30** and **$5.70**[149](index=149&type=chunk) [Aircraft Controls Segment Analysis](index=35&type=section&id=Aircraft%20Controls%20Segment%20Analysis) Aircraft Controls sales grew 4% to **$615 million**, driven by commercial aircraft, despite a military sales decline; operating profit rose 9% to **$54 million** Aircraft Controls Performance (Six Months Ended) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $615M | $591M | +4% | | Military Aircraft Sales | $378M | $407M | -7% | | Commercial Aircraft Sales | $237M | $184M | +29% | | **Operating Profit** | $54M | $50M | +9% | | **Operating Margin** | 8.8% | 8.4% | +40 bps | - The segment's operating margin was impacted by a **$16 million** gain from the NAVAIDS business sale, offset by **$15 million** of impairment and **$4 million** of restructuring expenses in Q2. Adjusted operating margin for H1 2022 was **9.3%**[138](index=138&type=chunk) [Space and Defense Controls Segment Analysis](index=36&type=section&id=Space%20and%20Defense%20Controls%20Segment%20Analysis) Space and Defense Controls sales increased 9% to **$431 million**, but operating profit fell 9% to **$45 million** due to restructuring and labor inefficiencies Space and Defense Controls Performance (Six Months Ended) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $431M | $394M | +9% | | **Operating Profit** | $45M | $50M | -9% | | **Operating Margin** | 10.5% | 12.6% | -210 bps | - Defense market sales increased by **$28 million** in H1 2022, primarily driven by a **$30 million** sales increase in the RIwP program[141](index=141&type=chunk) - Operating margin was negatively impacted by **$2 million** in Q2 restructuring charges and continued direct labor inefficiencies related to COVID-19[142](index=142&type=chunk) [Industrial Systems Segment Analysis](index=37&type=section&id=Industrial%20Systems%20Segment%20Analysis) Industrial Systems sales grew 3% to **$449 million**, but operating profit decreased 13% to **$38 million** due to impairment and restructuring charges Industrial Systems Performance (Six Months Ended) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $449M | $435M | +3% | | **Operating Profit** | $38M | $44M | -13% | | **Operating Margin** | 8.4% | 10.1% | -170 bps | - Sales growth was driven by simulation and test (**+$12M**) and energy (**+$7M**) markets, while medical market sales decreased by **$11M**. Weaker foreign currencies reduced sales by **$8M**[144](index=144&type=chunk)[146](index=146&type=chunk) - Operating margin was negatively affected by a **$2 million** impairment charge related to Russia, **$2 million** in restructuring charges, and disruptions from facility consolidations in Europe and the US[147](index=147&type=chunk) [Financial Condition and Liquidity](index=39&type=section&id=Financial%20Condition%20and%20Liquidity) Net cash from operating activities increased to **$180 million**, boosted by a new receivables purchase agreement, with **$785 million** unused borrowing capacity - Net cash from operating activities increased by **$43 million** YoY, primarily due to a **$100 million** benefit from a new receivables purchase agreement (RPA)[153](index=153&type=chunk)[155](index=155&type=chunk) - The company entered into a new Receivables Purchase Agreement (RPA) on November 4, 2021, allowing it to sell up to **$100 million** in receivables. As of April 2, 2022, the full **$100 million** was sold and derecognized from the balance sheet[168](index=168&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) - As of April 2, 2022, the company had **$785 million** of unused borrowing capacity, including **$756 million** from its U.S. revolving credit facility. Net debt to capitalization decreased to **33%** from **36%** at the end of fiscal 2021[173](index=173&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes occurred in the company's market risk disclosures compared to the prior fiscal year's Annual Report on Form 10-K - There have been no material changes in the company's market risk disclosures during the current year[202](index=202&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the quarter[204](index=204&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the most recent fiscal quarter[204](index=204&type=chunk) PART II OTHER INFORMATION [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred in the company's risk factors compared to the prior fiscal year's Annual Report on Form 10-K - There have been no material changes in the company's risk factors during the current year[205](index=205&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **223,893** shares at an average price of **$80.16** per share, with **2,517,925** shares remaining authorized Share Repurchases (Quarter Ended April 2, 2022) | Metric | Value | | :--- | :--- | | **Total Shares Purchased** | 223,893 | | **Average Price Paid Per Share** | $80.16 | | **Shares Purchased Under Public Plan** | 55,274 | | **Shares Remaining for Repurchase** | 2,517,925 | [Exhibits](index=47&type=section&id=Item%206.%20Exhibits) The report includes filed exhibits such as CEO and CFO certifications and Interactive Data Files (XBRL) - Exhibits filed with the report include CEO and CFO certifications (**31.1, 31.2, 32.1**) and XBRL data files (**101, 104**)[210](index=210&type=chunk)

Table of Contents For the quarterly period ended January 1, 2022 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ☐ 1934 For the transition period from _________ to _________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (716) 652-2000 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of ...

Financial Performance - Net sales for the fiscal year ended October 2, 2021, were $2,851,993, a decrease of 1.1% from $2,884,554 in the previous year[212]. - Gross profit increased to $775,723 for the fiscal year ended October 2, 2021, compared to $743,696 in the prior year, reflecting a gross margin of approximately 27.2%[212]. - Net earnings for the fiscal year ended October 2, 2021, were $157,220, significantly higher than $9,205 in the previous year, resulting in a net earnings per share of $4.90[212]. - Cash provided by operating activities was $293.23 million, compared to $279.18 million in the prior year, reflecting a year-over-year increase of approximately 5.4%[226]. - The company reported a net cash used by financing activities of $86.99 million, a decrease from $142.77 million in the previous year, indicating improved cash management[226]. Backlog and Sales - The twelve-month backlog was $2.1 billion as of October 2, 2021, representing a 24% increase compared to the previous year[16]. - As of October 2, 2021, the total backlog was $4.8 billion, representing confirmed orders expected to be recognized as revenue[65]. - In 2021, sales under U.S. Government contracts represented 44% of total sales, primarily within Aircraft Controls and Space and Defense Controls[63]. - Aerospace and defense OEM customers represented 58% of total sales in 2021, while industrial OEM sales accounted for 31%[44]. - Sales to Boeing and Lockheed Martin each accounted for 12% of total sales in 2021, with Boeing's commercial aircraft orders decreasing due to reduced global air traffic[64]. Research and Development - Research and development expenses were at least $110 million in each of the last three years, accounting for approximately 4% of sales in 2021[20]. - The company has incurred significant research and development expenses to maintain a leadership position in the high-performance, precision controls market[59]. - The company maintains a patent portfolio related to various technologies, including medical devices, which is significant for future revenue opportunities[19]. Employee and Workforce - In 2021, the company hired 1,348 new regular employees globally[27]. - The average voluntary attrition rate over the last four years was just below 5%[36]. - The company has implemented flexible working arrangements, including remote work and hybrid schedules, in response to employee feedback[35]. - The company issued 39,227 Class A shares related to compensation, compared to 31,943 in the previous year, indicating a focus on employee retention[223]. - Equity-based compensation expense rose to $7.46 million from $5.66 million, reflecting increased incentives for employees[226]. Financial Position and Liabilities - Total current assets increased to $1,718,780 as of October 2, 2021, compared to $1,613,487 in the previous year[217]. - Total liabilities rose to $2,033,025 as of October 2, 2021, up from $1,982,748 in the prior year[217]. - Shareholders' equity increased to $1,400,144 as of October 2, 2021, compared to $1,243,083 in the previous year[220]. - The company incurred $77.60 million in acquisitions of businesses, net of cash acquired, indicating a strategic investment in growth[226]. - The company has incurred significant indebtedness, which may limit operational and financial flexibility[72]. Risks and Challenges - The company has experienced lower customer demand and reduced manufacturing activities due to the COVID-19 pandemic, impacting overall financial performance[55]. - The uncertain length of the COVID-19 pandemic may shift the commercial market away from wide-body aircraft, affecting future sales[62]. - The company faces risks related to supply chain disruptions, including shortages of industry-wide parts and increased freight costs[55]. - Future levels of defense spending beyond 2021 are uncertain and subject to congressional debate, which could adversely impact sales and cash flow[63]. - The company relies on government contracts that may not be fully funded or may be terminated, potentially reducing sales and increasing costs[63]. Asset Management - As of October 2, 2021, the company's goodwill was $852 million and other intangible assets were $106 million, representing a significant portion of total assets of $3.4 billion[75]. - The company reported an impairment charge of $1.50 million related to long-lived assets, reflecting challenges in the Space and Defense Controls segment[226]. - The projected benefit obligation for U.S. defined benefit pension plans increased to $704,989 in 2021 from $688,689 in 2020, while the fair value of plan assets rose to $640,513 from $615,872[322]. - The accumulated benefit obligation for all defined benefit pension plans was $832,053 in 2021, down from $868,316 in 2020, with fair values of plan assets totaling $768,279[323]. - The company recorded a one-time settlement charge of $121,324 due to the purchase of a group annuity contract, which reduced the projected benefit obligation by $486,615[320]. Market and Economic Conditions - The company’s international operations are primarily in Europe and the Asia-Pacific region, facing typical risks associated with international trade[45]. - The company is exposed to currency, political, and trade risks due to its operations in foreign countries[78]. - Future catastrophic events, such as natural disasters or terrorist attacks, could negatively impact the company's business and financial condition[83]. - The transition away from LIBOR as an interest rate benchmark may negatively affect the company's debt agreements and financial position[73]. - Changes in discount rates and pension assumptions could adversely affect the company's earnings and increase pension funding requirements[74].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 3, 2021 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ☐ 1934 For the transition period from _________ to _________ Commission file number 1-05129 MOOG Inc. (Exact name of registrant as specified in its charter) New York 16-0757636 (St ...

Table of Contents ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 2021 OR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) 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 1-05129 MOOG Inc. (I.R.S. Employer Identification No.) 400 Jamison Rd East Aurora, New York 140 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 2, 2021 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ☐ 1934 For the transition period from _________ to _________ Commission file number 1-05129 MOOG Inc. (Exact name of registrant as specified in its charter) New York 16-0757636 ...

[PART I](index=5&type=section&id=PART%20I) This section provides an overview of Moog Inc.'s business, risk factors, properties, and legal proceedings [Business Overview](index=5&type=section&id=Item%201.%20Business) Moog Inc. is a global designer, manufacturer, and systems integrator of high-performance precision motion and fluid controls for aerospace, defense, and industrial markets, operating through three segments: Aircraft Controls, Space and Defense Controls, and Industrial Systems - Moog operates in three segments: Aircraft Controls, Space and Defense Controls, and Industrial Systems, providing high-performance precision motion and fluid controls[11](index=11&type=chunk) - Sales under U.S. Government contracts represented **41% of total sales in 2020**, primarily within Aircraft Controls and Space and Defense Controls segments[14](index=14&type=chunk) Key Business Metrics (2020) | Metric | Value | | :----------------------- | :---------- | | Twelve-month backlog | $1.7 billion | | Backlog increase (YoY) | 10% | | R&D expense (2020) | $110 million | | R&D expense as % of sales (2020) | 4% | | Total employees (Oct 3, 2020) | 12,623 | | Average employee tenure | 11 years | - The company maintains a global patent portfolio focusing on motion control and actuation systems, with specific significance in medical devices[19](index=19&type=chunk) - Moog's human capital strategy emphasizes attracting diverse talent, fostering a unique culture, and investing in employee well-being, engagement, and leadership development[20](index=20&type=chunk)[21](index=21&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk)[29](index=29&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) Customer Sales Breakdown (2020) | Customer Type | % of Total Sales | | :---------------------- | :--------------- | | Aerospace & Defense OEM | 56% | | Industrial OEM | 32% | | Aftermarket sales | 12% | [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) Moog Inc. faces a range of significant risks, including those related to the COVID-19 pandemic, intense market competition, and the success of new product development - The COVID-19 pandemic poses risks to operations, supply chain, liquidity, cash flows, and customer orders, though most operations are deemed essential[50](index=50&type=chunk) - Moog operates in highly competitive markets, with some competitors having greater resources, and relies on continuous investment in product quality, reliability, and engineering capabilities[51](index=51&type=chunk) - Dependence on government contracts (**41% of 2020 sales**) and a single major customer, Boeing (**14% of 2020 sales**), creates significant market condition risks, especially with potential reductions in defense spending and commercial aircraft orders[57](index=57&type=chunk)[58](index=58&type=chunk) Backlog and Associated Risks (as of Oct 3, 2020) | Metric | Value | | :---------------- | :---------- | | Total backlog | $2.6 billion | | Risk | No assurance customers will purchase all orders, especially due to government termination rights and COVID-19 impact on commercial aircraft | - Operational risks include information system interruptions, cybersecurity threats, product quality issues, and reliance on subcontractor performance[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - Financial risks include significant impacts from changes in estimates for over-time contracts, potential losses on fixed-price contracts, and limitations imposed by indebtedness and restrictive covenants[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) Goodwill and Intangible Assets (as of Oct 3, 2020) | Asset Type | Value | | :-------------------- | :---------- | | Goodwill | $822 million | | Other intangible assets | $85 million | | Total assets | $3.2 billion | | Risk | Potential write-off if value becomes impaired, affecting operating results and net worth | - Legal and compliance risks include stringent government contract regulations, foreign country operations (political, currency, regulatory risks), and environmental laws[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - General risks encompass the adverse impacts of Brexit, escalating tariffs, catastrophic events, and the challenge of maintaining company culture and retaining employees[78](index=78&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) There are no unresolved staff comments to report [Properties](index=18&type=section&id=Item%202.%20Properties.) Moog Inc. occupies 5,549,000 square feet of space globally, with principal manufacturing facilities in the U.S., Europe, and Asia Property Square Footage by Segment (as of Oct 3, 2020) | Segment | Owned (sq ft) | Leased (sq ft) | Total (sq ft) | | :----------------------- | :-------------- | :------------- | :-------------- | | Aircraft Controls | 1,475,000 | 359,000 | 1,834,000 | | Space and Defense Controls | 912,000 | 424,000 | 1,336,000 | | Industrial Systems | 1,709,000 | 650,000 | 2,359,000 | | Corporate Headquarters | 20,000 | — | 20,000 | | **Total** | **4,116,000** | **1,433,000** | **5,549,000** | - Principal manufacturing facilities are located in the U.S., Philippines, United Kingdom, Germany, Czech Republic, Italy, Costa Rica, China, Netherlands, Luxembourg, Japan, Canada, India, and Lithuania[88](index=88&type=chunk) [Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings.) Moog Inc. is involved in various legal proceedings in the normal course of business but does not believe any pending proceedings will have a material adverse effect on its financial condition, results of operations, or cash flows - Management believes no pending legal proceedings will result in a material adverse effect on financial condition, results of operations, or cash flows[85](index=85&type=chunk) [Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to Moog Inc [PART II](index=19&type=section&id=PART%20II) This section covers Moog Inc.'s market for common equity, selected financial data, management's discussion and analysis, and market risk disclosures [Market for Common Equity, Stockholder Matters and Issuer Purchases](index=19&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Moog Inc.'s Class A and Class B common stocks are traded on the NYSE, with the company engaging in share repurchases and illustrating stock performance against relevant indices - Moog Inc. Class A and Class B common stocks are traded on the NYSE under ticker symbols **MOG.A** and **MOG.B**[89](index=89&type=chunk) Issuer Purchases of Equity Securities (Quarter Ended Oct 3, 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plans | Max Shares Yet Be Purchased Under Plans | | :-------------------------------- | :----------------------- | :--------------------------- | :------------------------------------------------- | :-------------------------------------- | | June 28, 2020 - August 1, 2020 | 83,866 | $52.92 | — | 765,320 | | August 2, 2020 - August 29, 2020 | 225,524 | $60.66 | 224,456 | 540,864 | | August 30, 2020 - October 3, 2020 | 380,305 | $61.93 | 374,673 | 166,191 | | **Total** | **689,695** | **$60.42** | **599,129** | **166,191** | Stock Performance ($100 Investment on Sep 30, 2015) | Index | 9/15 | 9/16 | 9/17 | 9/18 | 9/19 | 9/20 | | :----------------------------- | :----- | :----- | :----- | :----- | :----- | :----- | | Moog Inc. - Class A Common Stock | $100.00 | $110.12 | $154.30 | $159.99 | $152.78 | $120.79 | | NYSE Composite - Total Return Index | $100.00 | $112.35 | $131.16 | $144.02 | $146.94 | $147.15 | | S&P Aerospace & Defense Index | $100.00 | $117.87 | $169.18 | $209.29 | $222.91 | $159.87 | [Selected Financial Data](index=21&type=section&id=Item%206.%20Selected%20Financial%20Data.) This section provides a five-year summary of Moog Inc.'s selected financial data, including results from operations, financial position, and supplemental financial data, highlighting key trends and metrics Selected Financial Data (2016-2020) | (dollars in thousands, except per share data) | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------ | :--------- | :--------- | :--------- | :--------- | :--------- | | **RESULTS FROM OPERATIONS** | | | | | | | Net sales | $2,884,554 | $2,904,663 | $2,709,468 | $2,497,524 | $2,411,937 | | Net earnings | $9,205 | $174,548 | $95,240 | $143,157 | $126,745 | | Net earnings per share - Diluted | $0.28 | $4.96 | $2.64 | $3.95 | $3.47 | | Dividends declared per share | $0.75 | $1.00 | $0.50 | $— | $— | | **FINANCIAL POSITION** | | | | | | | Cash and cash equivalents | $84,583 | $89,702 | $125,584 | $368,073 | $325,128 | | Total assets | $3,225,831 | $3,114,237 | $2,964,048 | $3,090,592 | $3,004,974 | | Indebtedness - total | $930,332 | $833,233 | $862,824 | $957,037 | $1,006,393 | | Shareholders' equity | $1,243,083 | $1,322,481 | $1,224,986 | $1,214,304 | $988,411 | | **SUPPLEMENTAL FINANCIAL DATA** | | | | | | | Capital expenditures | $88,284 | $118,422 | $94,517 | $75,798 | $67,208 | | Research and development | $110,865 | $126,453 | $129,838 | $144,157 | $147,336 | | Total backlog | $2,555,129 | $2,232,605 | n/a | n/a | n/a | | Twelve-month backlog | $1,658,344 | $1,502,028 | $1,481,230 | $1,211,797 | $1,224,878 | | **RATIOS** | | | | | | | Net return on sales | 0.3% | 6.0% | 3.5% | 5.7% | 5.3% | | Return on shareholders' equity | 0.7% | 13.4% | 7.7% | 13.4% | 12.6% | | Net debt to capitalization | 40% | 36% | 38% | 33% | 41% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of Moog Inc.'s financial performance, condition, and operational results, focusing on fiscal year 2020 compared to 2019 [Overview](index=22&type=section&id=OVERVIEW) Moog Inc. is a global designer and manufacturer of high-performance precision controls for aerospace, defense, and industrial markets, focusing on strategic growth and shareholder value - Moog Inc. is a worldwide designer, manufacturer, and systems integrator of high-performance precision motion and fluid controls for aerospace and defense and industrial markets[99](index=99&type=chunk) - **65% of 2020 revenue** was recognized over time using the cost-to-cost method, primarily in Aircraft Controls and Space and Defense Controls, for U.S. Government and large commercial contracts[101](index=101&type=chunk) - Long-term strategies include strengthening leadership, innovating through global capabilities and engineering heritage, investing in talent development, and maximizing customer value through lean enterprise principles[106](index=106&type=chunk) - Capital deployment strategies shifted in 2020 to focus on cash preservation and cost management due to COVID-19, while opportunistically resuming investments[107](index=107&type=chunk) - In November 2019, Moog acquired GAT for **$54 million**, integrating it into the Industrial Systems segment; in 2020, a non-core Industrial Systems business was sold for **$2 million**[109](index=109&type=chunk) [Critical Accounting Policies](index=24&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Moog Inc.'s critical accounting policies involve significant estimates and judgments, particularly in revenue recognition, contract reserves, inventory valuation, goodwill impairment, and pension assumptions - Revenue recognition for over-time contracts (**65% of 2020 revenue**) uses the cost-to-cost method, with estimates reviewed and updated quarterly[113](index=113&type=chunk) Contract Reserves (as of Oct 3, 2020) | Reserve Type | Amount | | :-------------------- | :---------- | | Total Contract Reserves | $72 million | | Components | Contract loss reserves, recall reserves, contract-related reserves | | Recognition | Charged against income when loss is probable and estimable | Inventory Valuation (as of Oct 3, 2020) | Metric | Value | | :-------------------- | :---------- | | Net Inventories | $623 million | | % of Current Assets | 39% | | Reserves for Inventory | $153 million | | % of Gross Inventories | 20% | | Valuation Method | Lower of cost or net realizable value (FIFO), formula-based for aging, specific circumstances | - Goodwill (**25% of total assets** at **$822 million in 2020**) is tested for impairment annually or more frequently, using qualitative and quantitative assessments; no impairment charges were recorded in 2020[117](index=117&type=chunk)[121](index=121&type=chunk)[125](index=125&type=chunk) - In 2020, **$38 million** of impairment charges were recorded for property, plant and equipment, right-of-use assets, and intangible assets[128](index=128&type=chunk) - Pension costs and obligations rely on critical assumptions like discount rates (U.S. plan 2020: **3.5% service cost**, **2.9% interest cost**) and expected return on assets (U.S. plan 2020: **4.50%**); a **$121 million** non-cash pension settlement charge was incurred in 2020[129](index=129&type=chunk)[130](index=130&type=chunk)[132](index=132&type=chunk) - Income tax rate determination involves significant judgment, including valuation allowances for deferred tax assets; at October 3, 2020, gross deferred tax assets were **$171 million** with **$15 million** in valuation allowances[134](index=134&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [COVID-19 Impacts on Our Business](index=28&type=section&id=COVID-19%20IMPACTS%20ON%20OUR%20BUSINESS) The COVID-19 pandemic significantly impacted Moog Inc.'s business, leading to short-term actions for financial health and liquidity, with varied market recovery expectations - Moog implemented short-term actions in response to COVID-19, focusing on employee health and safety, meeting customer needs, and securing financial well-being[140](index=140&type=chunk)[141](index=141&type=chunk) - Defense, space, and medical markets are expected to remain strong in fiscal 2021, but industrial markets are not expected to recover, and commercial OEM aircraft production schedules face considerable uncertainty[143](index=143&type=chunk) - The company's immediate financial focus is on cash preservation and cost management, with existing financial arrangements believed to be sufficient for short-term operating needs[141](index=141&type=chunk)[144](index=144&type=chunk) [Consolidated Results of Operations](index=29&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) Moog Inc. experienced a 1% decrease in net sales in 2020, with gross margin decline and a significant 95% decrease in net earnings due to pension settlement and impairment charges Consolidated Financial Performance (2020 vs. 2019) | Metric | 2020 | 2019 | $ Variance (2020 vs 2019) | % Variance (2020 vs 2019) | | :------------------------------------------------- | :--------- | :--------- | :------------------------ | :------------------------ | | Net sales (in millions) | $2,885 | $2,905 | $(20) | (1%) | | Gross margin | 25.8% | 28.1% | - | - | | Research and development expenses (in millions) | $111 | $126 | $(16) | (12%) | | Selling, general and administrative as % of sales | 13.8% | 13.9% | - | - | | Interest expense (in millions) | $39 | $39 | $— | (1%) | | Restructuring expense (in millions) | $11 | $— | $11 | 100% | | Long-lived asset impairment (in millions) | $38 | $— | $38 | 100% | | Pension settlement (in millions) | $121 | $— | $121 | 100% | | Net earnings attributable to Moog (in millions) | $9 | $175 | $(165) | (95%) | | Diluted earnings per share | $0.28 | $4.96 | $(4.68) | (94%) | | Total backlog (in millions) | $2,555 | $2,233 | $323 | 14% | | Twelve-month backlog (in millions) | $1,658 | $1,502 | $156 | 10% | - Net sales decreased by **1%** in 2020 due to COVID-19 impacts on commercial aircraft and industrial automation, partially offset by military, space, and medical growth[147](index=147&type=chunk) - Gross margin decreased in 2020, including **$23 million** in inventory write-downs and negative impacts from facility under-utilization due to lower sales volumes[148](index=148&type=chunk) - Net earnings were significantly impacted by a **$121 million** non-cash pension settlement charge, **$38 million** in long-lived asset impairments, and **$11 million** in restructuring expenses[151](index=151&type=chunk)[152](index=152&type=chunk) - Twelve-month backlog increased by **10%** to **$1.66 billion**, driven by military aircraft programs and medical products, partially offset by timing of space and defense orders[155](index=155&type=chunk) [Segment Results of Operations](index=31&type=section&id=SEGMENT%20RESULTS%20OF%20OPERATIONS) Segment results show varied performance in 2020, with Aircraft Controls declining, Space and Defense Controls growing, and Industrial Systems experiencing mixed results due to market shifts Aircraft Controls Segment Performance (2020 vs. 2019) | Metric | 2020 | 2019 | $ Variance | % Variance | | :---------------------- | :--------- | :--------- | :--------- | :--------- | | Net sales - military aircraft | $721 | $622 | $99 | 16% | | Net sales - commercial aircraft | $485 | $681 | $(196) | (29%) | | Total Net sales | $1,206 | $1,303 | $(97) | (7%) | | Operating profit | $35 | $123 | $(88) | (72%) | | Operating margin | 2.9% | 9.4% | - | - | - Aircraft Controls' commercial OEM and aftermarket programs declined by **$169 million** and **$27 million** respectively due to COVID-19, while military OEM and aftermarket sales increased by **$55 million** and **$44 million**[159](index=159&type=chunk) - Aircraft Controls' operating margin decreased due to sales decline, **$57 million** in COVID-19 related impairments and restructuring, and negative adjustments to development contracts[160](index=160&type=chunk) Space and Defense Controls Segment Performance (2020 vs. 2019) | Metric | 2020 | 2019 | $ Variance | % Variance | | :---------------- | :--------- | :--------- | :--------- | :--------- | | Net sales | $770 | $683 | $87 | 13% | | Operating profit | $102 | $89 | $13 | 14% | | Operating margin | 13.2% | 13.0% | - | - | - Space and Defense Controls' sales increased by **$75 million** in the space market (driven by launch vehicle programs and satellite controls) and **$11 million** in the defense market, partially offset by a **$15 million** decline in security sales[163](index=163&type=chunk) Industrial Systems Segment Performance (2020 vs. 2019) | Metric | 2020 | 2019 | $ Variance | % Variance | | :---------------- | :--------- | :--------- | :--------- | :--------- | | Net sales | $909 | $918 | $(10) | (1%) | | Operating profit | $80 | $109 | $(29) | (27%) | | Operating margin | 8.8% | 11.9% | - | - | - Industrial Systems' sales declined by **$42 million** in industrial automation and **$20 million** in simulation and test, but were partially offset by a **$46 million** increase in medical product sales and **$34 million** from the GAT acquisition[167](index=167&type=chunk) - Industrial Systems' operating margin decreased due to sales declines, **$14 million** in COVID-19 related impairments and restructuring, a less favorable sales mix, and factory inefficiencies[168](index=168&type=chunk) [Financial Condition and Liquidity](index=34&type=section&id=FINANCIAL%20CONDITION%20AND%20LIQUIDITY) Moog Inc.'s liquidity is supported by available borrowing capacity and cash flow from operations, with increased operating cash flow and significant share repurchases in 2020 Cash Flow Summary (2020 vs. 2019) | Cash Flow Type (in millions) | 2020 | 2019 | $ Variance | % Variance | | :--------------------------- | :--------- | :--------- | :--------- | :--------- | | Operating activities | $279 | $181 | $98 | 54% | | Investing activities | $(146) | $(116) | $(30) | 26% | | Financing activities | $(143) | $(99) | $(44) | 45% | - Net cash provided by operating activities increased by **$98 million** in 2020, driven by **$191 million** more cash from receivables and **$80 million** from customer advances[172](index=172&type=chunk) - Net cash used by investing activities included **$54 million** for the GAT acquisition and **$88 million** for capital expenditures, with capital spend actively managed due to COVID-19[173](index=173&type=chunk) - Net cash used by financing activities included **$215 million** for share repurchases, **$95 million** of net payments on long-term debt, and **$25 million** in cash dividends[174](index=174&type=chunk) [Capital Structure and Resources](index=35&type=section&id=CAPITAL%20STRUCTURE%20AND%20RESOURCES) Moog Inc. maintains a robust capital structure with bank credit facilities and access to debt and equity markets, including new senior notes and a trade receivables securitization facility Credit Facilities and Debt (as of Oct 3, 2020) | Facility | Capacity | Outstanding Balance | Interest Rate | Maturity | | :-------------------------------- | :--------- | :------------------ | :------------ | :--------- | | U.S. revolving credit facility | $1.1 billion | $362 million | 2.25% (LIBOR + 1.5%) | Oct 15, 2024 | | SECT revolving credit facility | $35 million | $6 million | 2.28% (LIBOR + 2.13%) | July 26, 2022 | | Senior notes 4.25% | $500 million | $500 million | 4.60% effective | Dec 15, 2027 | | Securitization Program | $130 million | $69 million | 1.02% (30-day LIBOR + margin) | Oct 29, 2021 | - Moog redeemed **$300 million** of **5.25% senior notes** in January 2020, incurring a **$4 million** call premium[183](index=183&type=chunk) - Unused borrowing capacity was **$738 million** at October 3, 2020, with a leverage ratio covenant limiting it to **$552 million**[185](index=185&type=chunk) Capitalization and Shareholder Returns (2020 vs. 2019) | Metric | 2020 | 2019 | Change | | :-------------------------- | :--- | :--- | :----- | | Net debt to capitalization | 40% | 36% | +4% | | Dividends declared per share | $0.25 | $0.25 | No change | | Shares repurchased (2020) | 2.88 million | - | - | | Value of shares repurchased (2020) | $215.78 million | - | - | [Off Balance Sheet Arrangements](index=36&type=section&id=Off%20Balance%20Sheet%20Arrangements) Moog Inc. does not have any material off-balance sheet arrangements that are reasonably likely to have a material future effect on its financial condition, results of operations, or cash flows - No material off-balance sheet arrangements exist that are likely to have a material future effect on financial condition, results of operations, or cash flows[191](index=191&type=chunk) [Contractual Obligations and Commercial Commitments](index=36&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) Moog Inc.'s significant contractual obligations totaled $1,768 million at October 3, 2020, primarily comprising long-term debt, interest, lease liabilities, and purchase obligations Contractual Obligations (as of Oct 3, 2020) | Obligation Type | Total (in millions) | 2021 (in millions) | 2022-2023 (in millions) | 2024-2025 (in millions) | After 2025 (in millions) | | :-------------------------- | :------------------ | :----------------- | :---------------------- | :---------------------- | :--------------------- | | Long-term debt | $939 | $— | $76 | $362 | $500 | | Interest on long-term debt | $153 | $21 | $43 | $42 | $47 | | Right-of-use lease liabilities | $117 | $20 | $33 | $20 | $43 | | Purchase obligations | $560 | $421 | $113 | $8 | $18 | | **Total contractual obligations** | **$1,768** | **$463** | **$265** | **$433** | **$607** | Other Commercial Commitments (as of Oct 3, 2020) | Commitment Type | Total (in millions) | 2021 (in millions) | 2022-2023 (in millions) | 2024-2025 (in millions) | After 2025 (in millions) | | :-------------------------- | :------------------ | :----------------- | :---------------------- | :---------------------- | :--------------------- | | Standby letters of credit | $41 | $17 | $24 | $— | $— | - Pension obligations are excluded from the table, with anticipated contributions of **$14 million** in 2021 (**$5 million** for a non-qualified U.S. plan)[194](index=194&type=chunk) [Economic Conditions and Market Trends](index=37&type=section&id=ECONOMIC%20CONDITIONS%20AND%20MARKET%20TRENDS) Moog Inc.'s markets are experiencing varying pressures from the COVID-19 pandemic, with stable defense and space, challenged commercial aircraft, impacted industrial, and normalizing medical sectors - Defense and space businesses (approx. **half of 2020 sales**) are stable, driven by program funding, with modest supply chain and production risks[198](index=198&type=chunk) - Commercial aircraft market (less than **20% of 2020 sales**) faces significant pressures due to drastic reductions in air travel, delayed new aircraft purchases, and lower jet fuel prices[198](index=198&type=chunk)[203](index=203&type=chunk) - Industrial markets (automation, simulation, energy – less than **25% of 2020 sales**) face productivity and demand challenges from macroeconomic slowdowns and reduced capital investments[199](index=199&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Medical market (approx. **10% of 2020 sales**) experienced a surge in demand for COVID-19 related equipment (ventilators, pumps) but is expected to return to normal growth rates as this demand subsides[199](index=199&type=chunk)[210](index=210&type=chunk) - Foreign currency movements, particularly the Euro, British pound, and Japanese yen, impact sales, with about **one-fifth of 2020 sales** denominated in foreign currencies; weakening foreign currency rates decreased 2020 sales by **$4 million**[211](index=211&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Moog Inc. is exposed to interest rate risk on its variable-rate debt and foreign exchange rate risk from international operations; the company uses derivative instruments, such as foreign currency contracts, to manage these risks - Moog is exposed to interest rate risk from long-term debt and foreign exchange rate risk from foreign operations, managed through derivative instruments[214](index=214&type=chunk) Interest Rate Risk Sensitivity (2020) | Metric | Value | | :------------------------------------ | :---------- | | Variable interest rate borrowings (Oct 3, 2020) | $437 million | | Average variable borrowings (2020, adjusted for swaps) | $502 million | | Impact of 1% interest rate increase on 2020 interest expense | +$5 million | | Outstanding interest rate swaps (Oct 3, 2020) | None | Foreign Currency Risk Sensitivity (as of Oct 3, 2020) | Metric | Value | | :------------------------------------------------- | :---------- | | Notional amount of foreign currency contracts | $162 million | | Net fair value of U.S. dollar foreign currency contracts | $3 million net asset | | Impact of 10% USD increase on foreign currency contracts fair value | -$12 million | | Impact of 10% USD decrease on foreign currency contracts fair value | +$15 million | | Impact of 10% FX rate change on 2020 net earnings | +/-$5 million | [Financial Statements and Supplementary Data](index=40&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents Moog Inc.'s audited consolidated financial statements, including statements of earnings, comprehensive income, balance sheets, shareholders' equity, and cash flows, along with detailed notes and the independent auditor's report [Consolidated Statements of Earnings](index=40&type=section&id=Consolidated%20Statements%20of%20Earnings) The Consolidated Statements of Earnings show a significant decline in net earnings for Moog Inc. in 2020, primarily due to a pension settlement charge, long-lived asset impairment, and inventory write-downs Consolidated Statements of Earnings (Fiscal Years Ended) | (dollars in thousands, except share and per share data) | October 3, 2020 | September 28, 2019 | September 29, 2018 | | :----------------------------------------------------- | :-------------- | :----------------- | :----------------- | | Net sales | $2,884,554 | $2,904,663 | $2,709,468 | | Cost of sales | $2,118,150 | $2,088,831 | $1,923,179 | | Inventory write-down | $22,708 | $— | $12,198 | | Gross profit | $743,696 | $815,832 | $774,091 | | Research and development | $110,865 | $126,453 | $129,838 | | Selling, general and administrative | $397,947 | $404,653 | $388,434 | | Interest | $38,897 | $39,269 | $36,238 | | Long-lived asset impairment | $37,839 | $— | $— | | Restructuring | $10,700 | $— | $28,794 | | Pension settlement | $121,324 | $— | $— | | Other | $20,707 | $18,505 | $8,608 | | Earnings before income taxes | $5,417 | $226,952 | $182,179 | | Income taxes (benefit) | $(3,788) | $52,404 | $86,818 | | Net earnings attributable to Moog | $9,205 | $174,548 | $95,240 | | Net earnings per share - Diluted | $0.28 | $4.96 | $2.64 | | Dividends declared per share | $0.75 | $1.00 | $0.50 | [Consolidated Statements of Comprehensive Income (Loss)](index=41&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The Consolidated Statements of Comprehensive Income (Loss) show a significant increase in comprehensive income in 2020, primarily driven by a large retirement liability adjustment and a foreign currency translation gain Consolidated Statements of Comprehensive Income (Loss) (Fiscal Years Ended) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | September 29, 2018 | | :------------------------------------------------- | :-------------- | :----------------- | :----------------- | | Net earnings attributable to Moog and noncontrolling interest | $9,205 | $174,548 | $95,361 | | Other comprehensive income (loss), net of tax: | | | | | Foreign currency translation adjustment | $26,405 | $(29,984) | $(16,279) | | Retirement liability adjustment | $102,081 | $(12,806) | $28,024 | | Change in accumulated income (loss) on derivatives | $1,538 | $105 | $(121) | | Other comprehensive income (loss), net of tax | $130,024 | $(42,685) | $11,624 | | Comprehensive income (loss) attributable to Moog | $139,229 | $131,863 | $59,817 | [Consolidated Balance Sheets](index=42&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show an increase in total assets for Moog Inc. in 2020, driven by higher property, plant and equipment, goodwill, and intangible assets, with a slight decrease in shareholders' equity Consolidated Balance Sheets (as of) | (dollars in thousands, except per share data) | October 3, 2020 | September 28, 2019 | | :------------------------------------------ | :-------------- | :----------------- | | **ASSETS** | | | | Cash and cash equivalents | $84,583 | $89,702 | | Receivables, net | $855,535 | $954,355 | | Inventories, net | $623,043 | $534,974 | | Total current assets | $1,613,487 | $1,628,973 | | Property, plant and equipment, net | $600,498 | $586,767 | | Operating lease right-of-use assets | $68,393 | $— | | Goodwill | $821,856 | $784,240 | | Intangible assets, net | $85,046 | $79,646 | | Total assets | $3,225,831 | $3,114,237 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Current installments of long-term debt | $350 | $249 | | Accounts payable | $176,868 | $257,677 | | Contract advances | $203,338 | $137,242 | | Total current liabilities | $710,554 | $727,658 | | Long-term debt, excluding current installments | $929,982 | $832,984 | | Long-term pension and retirement obligations | $183,366 | $160,034 | | Total liabilities | $1,982,748 | $1,791,756 | | Total shareholders' equity | $1,243,083 | $1,322,481 | [Consolidated Statements of Shareholders' Equity](index=43&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) The Consolidated Statements of Shareholders' Equity show a decrease in total shareholders' equity in 2020, primarily driven by significant treasury share repurchases and a reduction in retained earnings Consolidated Statements of Shareholders' Equity (Fiscal Years Ended) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | September 29, 2018 | | :------------------------------------------------- | :-------------- | :----------------- | :----------------- | | Common stock - Beginning and end of year | $51,280 | $51,280 | $51,280 | | Additional paid-in capital - End of year | $472,645 | $510,546 | $502,257 | | Retained earnings - End of year | $2,112,734 | $2,128,739 | $1,974,125 | | Treasury shares - End of year | $(990,783) | $(769,569) | $(738,494) | | Stock Employee Compensation Trust - End of year | $(64,242) | $(111,492) | $(118,449) | | Supplemental Retirement Plan Trust - End of year | $(53,098) | $(71,546) | $(72,941) | | Accumulated other comprehensive loss - End of year | $(285,453) | $(415,477) | $(372,792) | | **Total Moog Shareholders' Equity** | **$1,243,083** | **$1,322,481** | **$1,224,986** | Common Stock Shares Outstanding (Fiscal Years Ended) | (share data) | October 3, 2020 | September 28, 2019 | September 29, 2018 | | :-------------------------------- | :-------------- | :----------------- | :----------------- | | Common Stock - Class A (End of year) | 43,799,229 | 43,794,935 | 43,784,489 | | Common Stock - Class B (End of year) | 7,480,484 | 7,484,778 | 7,495,224 | | Treasury Shares - Class A (End of year) | (13,959,998) | (11,101,512) | (10,872,575) | | Treasury Shares - Class B (End of year) | (3,344,877) | (3,345,489) | (3,323,996) | [Consolidated Statements of Cash Flows](index=45&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show a significant increase in net cash provided by operating activities in 2020, with increased cash usage in investing and financing activities Consolidated Statements of Cash Flows (Fiscal Years Ended) | (dollars in thousands) | October 3, 2020 | 2019 | 2018 | | :------------------------------------------------- | :-------------- | :----- | :----- | | Net cash provided by operating activities | $279,177 | $181,423 | $102,407 | | Net cash used by investing activities | $(146,193) | $(115,720) | $(141,642) | | Net cash used by financing activities | $(142,766) | $(98,681) | $(221,569) | | Decrease in cash, cash equivalents and restricted cash | $(7,476) | $(35,158) | $(259,263) | | Cash, cash equivalents and restricted cash at end of year | $85,072 | $92,548 | $127,706 | | Interest paid | $38,420 | $38,864 | $36,689 | | Income taxes paid, net of refunds | $59,053 | $36,474 | $34,214 | [Note 1 - Summary of Significant Accounting Policies](index=47&type=section&id=Note%201%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines Moog Inc.'s key accounting policies, including consolidation, revenue recognition, use of estimates, and the adoption of new accounting standards for leases and pension asset valuation - Moog Inc. adopted ASC 842 (Leases) in Q1 2020 using the modified retrospective method, recognizing initial ROU assets of **$75,521 thousand** and lease liabilities of **$79,187 thousand**[268](index=268&type=chunk) - The company changed its method of accounting for the market-related value of fixed income assets within its qualified U.S. defined benefit plan, now using fair value for approximately **80% of plan assets**, effective Q1 2020[271](index=271&type=chunk) Impact of Change in Accounting Principle on Net Earnings (2020) | Metric | As Reported (With Change) | Impact of Change | Without Change | | :------------------------------------------------- | :------------------------ | :--------------- | :------------- | | Net earnings attributable to Moog (in thousands) | $9,205 | $(8,788) | $417 | | Net earnings per share - Diluted | $0.28 | $(0.27) | $0.01 | - No goodwill impairment charges were recorded in 2020, 2019, or 2018[257](index=257&type=chunk) - In 2020, **$37,839 thousand** of impairment charges were recorded on long-lived assets, primarily in Aircraft Controls and Industrial Systems, due to COVID-19 impacts[260](index=260&type=chunk) [Note 2 - Revenue from Contracts with Customers](index=53&type=section&id=Note%202%20-%20Revenue%20from%20Contracts%20with%20Customers) Moog Inc. recognizes revenue using a five-step model, with 65% of 2020 revenue recognized over time, and details contract assets, liabilities, and backlog - **65% of 2020 revenue** was recognized over time using the cost-to-cost method, primarily for U.S. Government contracts and repair/overhaul arrangements[290](index=290&type=chunk) - **35% of 2020 revenue** was recognized at a point in time, mainly in Industrial Systems, when control transfers to the customer[295](index=295&type=chunk) Contract Assets and Liabilities (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :--------------------- | :-------------- | :----------------- | | Unbilled receivables | $493,734 | $468,824 | | Contract advances | $203,338 | $137,242 | | Net contract assets | $290,396 | $331,582 | Remaining Performance Obligations (Backlog) (as of Oct 3, 2020) | Metric | Value | | :------------------------------------------------- | :---------- | | Total backlog | $2,555,129 | | Expected to be recognized as sales within next 12 months | ~65% | - Contract reserves totaled **$72,412 thousand** as of October 3, 2020, for anticipated losses, recalls, and other contract-related issues[294](index=294&type=chunk) [Note 3 - Acquisitions and Divestitures](index=55&type=section&id=Note%203%20-%20Acquisitions%20and%20Divestitures) In November 2019, Moog Inc. acquired GAT for $54,265 thousand, integrating it into the Industrial Systems segment, and divested a non-core business in 2020 - Acquired GAT (Gesellschaft für Antriebstechnik mbH and GAT Inc.) on November 28, 2019, for **$54,265 thousand**, included in Industrial Systems segment[301](index=301&type=chunk) - Sold a non-core business of Industrial Systems segment for **$1,775 thousand** in Q1 2020, recording a minimal gain[302](index=302&type=chunk) [Note 4 - Receivables](index=56&type=section&id=Note%204%20-%20Receivables) Receivables primarily consist of accounts receivable and unbilled receivables, totaling $855,535 thousand at October 3, 2020, with a significant portion from major customers Receivables Composition (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :--------------------- | :-------------- | :----------------- | | Accounts receivable | $363,089 | $477,154 | | Unbilled receivables | $493,734 | $468,824 | | Other | $5,025 | $13,779 | | Less allowance for doubtful accounts | $(6,313) | $(5,402) | | **Receivables, net** | **$855,535** | **$954,355** | - Receivables from Boeing were **$249,424 thousand** at October 3, 2020, and **$245,892 thousand** at September 28, 2019[306](index=306&type=chunk) - Unbilled recoverable costs and accrued profits under over-time contracts to the U.S. Government were **$34,223 thousand** at October 3, 2020[304](index=304&type=chunk) [Note 5 - Inventories](index=56&type=section&id=Note%205%20-%20Inventories) Moog Inc.'s net inventories totaled $623,043 thousand at October 3, 2020, primarily comprising raw materials, purchased parts, and work in progress; this figure includes $16,319 thousand in non-cash inventory reserves related to the COVID-19 pandemic Inventories, Net of Reserves (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :--------------------- | :-------------- | :----------------- | | Raw materials and purchased parts | $235,906 | $189,875 | | Work in progress | $327,990 | $276,538 | | Finished goods | $59,147 | $68,561 | | **Inventories, net** | **$623,043** | **$534,974** | - Net inventory includes **$16,319 thousand** in non-cash inventory reserves as of October 3, 2020, due to the impact of the COVID-19 pandemic[308](index=308&type=chunk) [Note 6 - Property, Plant and Equipment](index=57&type=section&id=Note%206%20-%20Property,%20Plant%20and%20Equipment) Moog Inc.'s net property, plant and equipment amounted to $600,498 thousand at October 3, 2020; in 2020, the company recorded $25,419 thousand in impairment charges for owned and finance lease ROU assets, primarily due to the economic impacts of the COVID-19 pandemic Property, Plant and Equipment (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :-------------------------------- | :-------------- | :----------------- | | Land | $37,463 | $33,111 | | Buildings and improvements | $476,659 | $469,867 | | Machinery and equipment | $782,194 | $775,378 | | Computer equipment and software | $158,683 | $137,221 | | Property, plant and equipment, at cost | $1,454,999 | $1,415,577 | | Less accumulated depreciation and amortization | $(854,501) | $(828,810) | | **Property, plant and equipment, net** | **$600,498** | **$586,767** | - In 2020, **$25,419 thousand** of impairment charges were recorded for owned and finance lease ROU assets due to COVID-19 impacts[310](index=310&type=chunk) [Note 7 - Leases](index=57&type=section&id=Note%207%20-%20Leases) Moog Inc. adopted ASC 842 (Leases) on September 29, 2019, recognizing ROU assets and lease liabilities for its global manufacturing facilities, office space, and equipment; operating lease ROU assets were $68,393 thousand and total operating lease liabilities were $75,871 thousand at October 3, 2020 - Adopted ASC 842: Leases on September 29, 2019, using the modified retrospective method[311](index=311&type=chunk) Lease Expense (Fiscal Year Ended Oct 3, 2020) | Expense Type | Amount (in thousands) | | :-------------------------- | :-------------------- | | Operating lease cost | $27,493 | | Finance lease cost (Amortization) | $1,175 | | Finance lease cost (Interest) | $367 | | **Total finance lease cost** | **$1,542** | Supplemental Balance Sheet Information Related to Leases (as of Oct 3, 2020) | Metric | Operating Leases (in thousands) | Finance Leases (in thousands) | | :-------------------------------- | :------------------------------ | :---------------------------- | | Right-of-use assets | $68,393 | $12,433 (net PP&E) | | Total lease liabilities | $75,871 | $13,591 | | Weighted average remaining lease term | 7.4 years | 12.3 years | | Weighted average discount rate | 4.7% | 4.8% | - Operating lease ROU assets and finance leased costs reflect write-downs of **$3,696 thousand** and **$1,112 thousand**, respectively, due to COVID-19 related impairment charges[319](index=319&type=chunk) [Note 8 - Goodwill and Intangible Assets](index=60&type=section&id=Note%208%20-%20Goodwill%20and%20Intangible%20Assets) Moog Inc.'s goodwill increased to $821,856 thousand at October 3, 2020, primarily due to an acquisition; intangible assets, net, were $85,046 thousand, with a $8,723 thousand write-down in 2020 Goodwill by Segment (as of Oct 3, 2020) | Segment | Balance (in thousands) | | :----------------------- | :--------------------- | | Aircraft Controls | $179,521 | | Space and Defense Controls | $261,726 | | Industrial Systems | $380,609 | | **Total** | **$821,856** | Intangible Assets (as of Oct 3, 2020) | Asset Type | Gross Carrying Amount (in thousands) | Accumulated Amortization (in thousands) | Weighted Average Life (years) | | :----------------- | :--------------------------- | :---------------------------- | :---------------------------- | | Customer-related | $140,048 | $(103,733) | 11 | | Technology-related | $77,060 | $(54,833) | 9 | | Program-related | $38,963 | $(17,340) | 23 | | Marketing-related | $25,581 | $(20,981) | 8 | | Other | $4,134 | $(3,853) | 10 | | **Total** | **$285,786** | **$(200,740)** | **12** | - In 2020, a **$8,723 thousand** write-down of intangible assets was recorded due to COVID-19 related impairment charges[324](index=324&type=chunk) Estimated Future Amortization of Acquired Intangible Assets (in thousands) | Year | Amount | | :--- | :------- | | 2021 | $10,800 | | 2022 | $10,600 | | 2023 | $9,700 | | 2024 | $9,300 | | 2025 | $8,200 | [Note 9 - Indebtedness](index=61&type=section&id=Note%209%20-%20Indebtedness) Moog Inc.'s long-term debt increased to $929,982 thousand at October 3, 2020, primarily due to the issuance of $500 million in 4.25% senior notes in December 2019, used to repay existing debt, and the redemption of $300 million of 5.25% senior notes in January 2020 Long-Term Debt Composition (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :-------------------------------- | :-------------- | :----------------- | | U.S. revolving credit facility | $362,136 | $395,712 | | SECT revolving credit facility | $6,000 | $7,000 | | Senior notes 4.25% | $500,000 | $— | | Senior notes 5.25% | $— | $300,000 | | Securitization program | $69,000 | $130,000 | | Other long-term debt | $1,661 | $— | | Obligations under capital leases | $— | $679 | | **Senior debt** | **$938,797** | **$833,391** | | Less deferred debt issuance cost | $(8,465) | $(158) | | Less current installments | $(350) | $(249) | | **Long-term debt** | **$929,982** | **$832,984** | - Issued **$500 million** aggregate principal amount of **4.25% senior notes** due December 15, 2027, with net proceeds of **$491,769 thousand** used to repay U.S. revolving credit facility indebtedness[327](index=327&type=chunk) - Redeemed **$300 million** aggregate principal amount of **5.25% senior notes** on January 13, 2020, incurring a **$3,939 thousand** call premium[328](index=328&type=chunk) Long-Term Debt Maturities (in thousands) | Year | Amount | | :--- | :------- | | 2021 | $350 | | 2022 | $75,364 | | 2023 | $947 | | 2024 | $— | | 2025 | $362,136 | | Thereafter | $500,000 | - Unused short and long-term borrowing capacity was **$737,692 thousand** at October 3, 2020[331](index=331&type=chunk) [Note 10 - Other Accrued Liabilities](index=62&type=section&id=Note%2010%20-%20Other%20Accrued%20Liabilities) Other accrued liabilities for Moog Inc. totaled $220,488 thousand at October 3, 2020, primarily comprising contract reserves, employee benefits, and warranty accruals Other Accrued Liabilities (as of) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :--------------------- | :-------------- | :----------------- | | Contract reserves | $72,412 | $60,914 | | Employee benefits | $40,734 | $37,040 | | Warranty accrual | $27,707 | $28,061 | | Accrued income taxes | $11,785 | $26,532 | | Other | $67,850 | $36,178 | | **Total** | **$220,488** | **$188,725** | Warranty Accrual Activity (Fiscal Years Ended) | (dollars in thousands) | 2020 | 2019 | 2018 | | :----------------------------- | :----- | :----- | :----- | | Warranty accrual at beginning of period | $28,061 | $25,537 | $25,848 | | Warranties issued during current period | $14,820 | $20,024 | $15,705 | | Reductions for settling warranties | $(14,656) | $(16,083) | $(15,101) | | **Warranty accrual at end of period** | **$27,707** | **$28,061** | **$25,537** | [Note 11 - Derivative Financial Instruments](index=62&type=section&id=Note%2011%20-%20Derivative%20Financial%20Instruments) Moog Inc. uses derivative financial instruments to manage interest rate and foreign exchange risks; while no interest rate swaps were outstanding at October 3, 2020, the company utilized foreign currency contracts as cash flow hedges and for non-hedging purposes to mitigate foreign currency exposure - Moog uses derivative financial instruments to manage interest rate risk (long-term debt) and foreign exchange risk (foreign operations and transactions)[334](index=334&type=chunk) - At October 3, 2020, there were no outstanding interest rate swaps designated as hedging instruments[335](index=335&type=chunk) - Foreign currency contracts with notional amounts of **$38,133 thousand** were outstanding as cash flow hedges at October 3, 2020, maturing through November 2021[336](index=336&type=chunk) - Foreign currency contracts not designated as hedging instruments had notional amounts of **$123,992 thousand** at October 3, 2020, primarily to minimize exposure on intercompany balances[339](index=339&type=chunk) Fair Value and Classification of Derivatives (as of) | (dollars in thousands) | Balance Sheets location | October 3, 2020 | September 28, 2019 | | :-------------------------------- | :---------------------- | :-------------- | :----------------- | | **Derivatives designated as hedging instruments:** | | | | | Foreign currency contracts (assets) | Other current assets | $1,818 | $1,060 | | Foreign currency contracts (assets) | Other assets | $169 | $261 | | Interest rate swaps (assets) | Other current assets | $— | $57 | | Foreign currency contracts (liabilities) | Accrued liabilities and other | $169 | $736 | | Foreign currency contracts (liabilities) | Other long-term liabilities | $— | $152 | | **Derivatives not designated as hedging instruments:** | | | | | Foreign currency contracts (assets) | Other current assets | $1,044 | $93 | | Foreign currency contracts (liabilities) | Accrued liabilities and other | $245 | $359 | [Note 12 - Fair Value](index=64&type=section&id=Note%2012%20-%20Fair%20Value) Moog Inc. classifies its financial instruments into a fair value hierarchy (Level 1, 2, or 3); derivatives are valued using observable market data (Level 2), and nonrecurring fair value measurements for impaired long-lived assets and intangible assets in 2020 used Level 3 inputs - Derivatives are valued using pricing models or discounted cash flow analyses incorporating observable market data (Level 2)[343](index=343&type=chunk) Fair Values of Financial Assets and Liabilities (as of) | (dollars in thousands) | Balance Sheets location | October 3, 2020 | September 28, 2019 | | :-------------------------------- | :---------------------- | :-------------- | :----------------- | | Foreign currency contracts (assets) | Other current assets | $2,862 | $1,153 | | Foreign currency contracts (assets) | Other assets | $169 | $261 | | Interest rate swaps (assets) | Other current assets | $— | $57 | | Foreign currency contracts (liabilities) | Accrued liabilities and other | $414 | $1,095 | | Foreign currency contracts (liabilities) | Other long-term liabilities | $— | $152 | | **Total assets** | | **$3,031** | **$1,471** | | **Total liabilities** | | **$414** | **$1,247** | - Fair value of long-term debt was **$941,054 thousand** at October 3, 2020, compared to a carrying value of **$938,797 thousand**, classified as Level 2[343](index=343&type=chunk) - Impairment losses of **$37,839 thousand** on property, plant and equipment, right-of-use assets, and intangible assets in 2020 were measured using Level 3 fair value inputs[344](index=344&type=chunk) [Note 13 - Restructuring](index=65&type=section&id=Note%2013%20-%20Restructuring) Moog Inc. initiated restructuring actions in 2020 due to the COVID-19 pandemic, resulting in $10,466 thousand for severance, primarily in the Philippines, Europe, and the U.S - In 2020, **$10,466 thousand** was recorded for severance due to restructuring actions related to COVID-19 impacts, primarily in the Philippines, Europe, and the U.S[346](index=346&type=chunk) - The 2018 restructuring charge included **$12,198 thousand** of non-cash inventory reserves, **$12,316 thousand** of non-cash intangible asset impairments, and **$7,969 thousand** for severance[348](index=348&type=chunk) Restructuring Accrual by Segment (as of Oct 3, 2020) | Segment | Balance (in thousands) | | :----------------------- | :--------------------- | | Aircraft Controls | $1,247 | | Space and Defense Controls | $— | | Industrial Systems | $9,095 | | **Total** | **$10,342** | [Note 14 - Employee Benefit Plans](index=66&type=section&id=Note%2014%20-%20Employee%20Benefit%20Plans) Moog Inc. maintains various defined benefit and defined contribution plans; in 2020, a significant event was the $121,324 thousand non-cash pension settlement charge resulting from transferring future benefit obligations for certain U.S. retirees to an insurance company - A **$121,324 thousand** non-cash pension settlement charge was incurred in 2020 due to transferring future benefit obligations for certain U.S. retirees to an insurance company[354](index=354&type=chunk) Defined Benefit Plan Funded Status (as of) | (dollars in thousands) | U.S. Plans (2020) | U.S. Plans (2019) | Non-U.S. Plans (2020) | Non-U.S. Plans (2019) | | :-------------------------------- | :---------------- | :---------------- | :-------------------- | :-------------------- | | Projected benefit obligation | $688,689 | $1,065,937 | $264,419 | $249,575 | | Fair value of assets | $615,872 | $1,004,163 | $170,765 | $166,242 | | **Funded status** | **$(72,817)** | **$(61,774)** | **$(93,654)** | **$(83,333)** | Weighted-Average Assumptions for Net Periodic Benefit Cost (2020) | Assumption | U.S. Plans | Non-U.S. Plans | | :-------------------------- | :--------- | :------------- | | Service cost discount rate | 3.5% | 1.6% | | Interest cost discount rate | 2.9% | 1.3% | | Return on assets | 4.5% | 2.7% | | Rate of compensation increase | 2.9% | 2.1% | Weighted Average Asset Allocations for Pension Plans (2020) | Asset Category | U.S. Plans (Actual) | Non-U.S. Plans (Actual) | | :------------- | :------------------ | :---------------------- | | Equity | 37% | 24% | | Fixed Income | 63% | 38% | | Other | —% | 38% | Total Expense for Defined Benefit and Contribution Plans (in thousands) | Plan Type | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Defined benefit plans | $156,319 | $39,699 | $29,979 | | Defined contribution plans | $33,663 | $25,118 | $21,389 | [Note 15 - Income Taxes](index=74&type=section&id=Note%2015%20-%20Income%20Taxes) Moog Inc.'s effective income tax rate was (69.9)% in 2020, significantly impacted by tax benefits from increased foreign tax credit utilization and a lower earnings base due to pension settlement and asset impairments Effective Income Tax Rate and Components (2020) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------------- | :----- | :----- | :----- | | Earnings before income taxes (Domestic) | $1,126 | $136,308 | $135,589 | | Earnings before income taxes (Foreign) | $4,291 | $90,644 | $46,590 | | **Total Earnings before income taxes** | **$5,417** | **$226,952** | **$182,179** | | Effective income tax rate | (69.9)% | 23.1% | 47.7% | | Federal statutory income tax rate | 21.0% | 21.0% | 24.5% | - The 2020 effective tax rate was **(69.9)%**, influenced by tax benefits from increased foreign tax credit utilization and a lower earnings base due to pension settlement and asset impairments[386](index=386&type=chunk) Components of Income Taxes (in thousands) | Tax Type | 2020 | 2019 | 2018 | | :----------------- | :----- | :----- | :----- | | Current (Federal) | $14,789 | $23,302 | $19,985 | | Current (Foreign) | $18,997 | $29,460 | $35,515 | | Current (State) | $3,271 | $4,240 | $705 | | Deferred (Federal) | $(35,603) | $(5,666) | $23,229 | | Deferred (Foreign) | $(1,843) | $1,413 | $3,354 | | Deferred (State) | $(3,399) | $(345) | $4,030 | | **Income taxes (benefit)** | **$(3,788)** | **$52,404** | **$86,818** | Deferred Tax Assets and Liabilities (as of Oct 3, 2020) | (dollars in thousands) | October 3, 2020 | September 28, 2019 | | :-------------------------------- | :-------------- | :----------------- | | Total gross deferred tax assets | $170,970 | $174,937 | | Less valuation allowance | $(14,784) | $(13,137) | | Total gross deferred tax liabilities | $177,736 | $182,336 | | **Net deferred tax assets (liabilities)** | **$(21,550)** | **$(20,536)** | - Moog is no longer indefinitely reinvesting unremitted foreign earnings effective December 30, 2017, and has recorded a liability for related withholding taxes[388](index=388&type=chunk) [Note 16 - Earnings per Share and Dividends](index=76&type=section&id=Note%2016%20-%20Earnings%20per%20Share%20and%20Dividends) Moog Inc.'s diluted weighted-average shares outstanding decreased to 33,437,801 in 2020; the company declared and paid cash dividends of $0.75 per share in 2020 Weighted-Average Shares Outstanding (Fiscal Years Ended) | (share data) | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Basic weighted-average shares outstanding | 33,257,684 | 34,854,614 | 35,661,638 | | Dilutive effect of equity-based awards | 180,117 | 324,354 | 390,669 | | **Diluted weighted-average shares outstanding** | **33,437,801** | **35,178,968** | **36,052,307** | - Cash dividends declared and paid were **$0.75 per share** in 2020, compared to **$1.00 in 2019** and **$0.50 in 2018**[396](index=396&type=chunk) [Note 17 - Shareholders' Equity](index=76&type=section&id=Note%2017%20-%20Shareholders'%20Equity) Moog Inc.'s Class A and Class B common stocks have differing voting rights but share equally in earnings, with 2,881,116 shares repurchased for $215,776 thousand in 2020 - Class A and Class B common stock share equally in earnings, with Class A having limited voting rights (**one-tenth of a vote**) and Class B having one vote[397](index=397&type=chunk) Shares Reserved for Issuance (as of Oct 3, 2020) | Purpose | Shares | | :-------------------------------- | :----------- | | Conversion of Class B to Class A shares | 7,480,484 | | Employee Stock Purchase Plan | 1,747,015 | | 2014 Long Term Incentive Plan | 1,806,390 | | 2008 Stock Appreciation Rights Plan | 1,166,555 | | **Total Class A and B shares reserved for issuance** | **12,200,444** | - In 2020, Moog repurchased **2,881,116 Class A and B common shares** for **$215,776 thousand** under its share repurchase program[400](index=400&type=chunk) - As of October 3, 2020, **166,191 shares** remained authorized for future common share repurchases[400](index=400&type=chunk) [Note 18 - Equity-Based Compensation](index=77&type=section&id=Note%2018%20-%20Equity-Based%20Compensation) Moog Inc. offers equity-based compensation through various plans and awards, with total compensation cost before income taxes at $5,661 thousand in 2020 - The Employee Stock Purchase Plan (ESPP) allows employees to purchase common stock at **85% of fair market value**[402](index=402&type=chunk) Total Equity-Based Compensation Cost (before income taxes) | (dollars in thousands) | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Stock appreciation rights | $2,643 | $2,594 | $2,617 | | Performance-based restricted stock units | $221 | $2,048 | $1,650 | | Restricted stock awards | $680 | $480 | $480 | | Employee stock purchase plan | $2,117 | $1,342 | $1,057 | | **Total compensation cost** | **$5,661** | **$6,464** | **$5,804** | Stock Appreciation Rights (SARs) Activity (2020) | Metric | Number of Awards | Weighted Average Exercise Price | | :-------------------------------- | :--------------- | :---------------------------- | | Outstanding at Sep 28, 2019 | 935,156 | $62.60 | | Granted in 2020 | 136,700 | $85.95 | | Exercised in 2020 | (71,557) | $41.77 | | Outstanding at Oct 3, 2020 | 984,270 | $67.07 | | Exercisable at Oct 3, 2020 | 740,288 | $61.63 | | Aggregate Intrinsic Value (Oct 3, 2020) | - | $6,777 | | Total unvested compensation expense (Oct 3, 2020) | - | $2,926 | - Performance-Based Restricted Stock Units (PSUs) granted in 2020 have a three-year performance period, with payouts ranging from **0% to 200%** based on performance targets[412](index=412&type=chunk) [Note 19 - Stock Employee Compensation Trust and Supplemental Retirement Plan Trust](index=79&type=section&id=Note%2019%20-%20Stock%20Employee%20Compensation%20Trust%20and%20Supplemental%20Retirement%20Plan%20Trust) The Stock Employee Compensation Trust (SECT) and Supplemental Retirement Plan (SERP) Trust assist in administering and funding equity-based compensation and benefit programs, holding company shares as investments - The SECT and SERP Trust administer and fund equity-based compensation plans and benefit programs[417](index=417&type=chunk) - Shares held by the SECT and SERP Trust are not considered outstanding for EPS calculations but are voted by the trustees[417](index=417&type=chunk) [Note 20 - Accumulated Other Comprehensive Income (Loss)](index=80&type=section&id=Note%2020%20-%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Moog Inc.'s Accumulated Other Comprehensive Income (Loss) significantly improved in 2020, primarily driven by a large positive retirement liability adjustment and a foreign currency translation gain Changes in AOCIL, Net of Tax, by Component (in thousands) | Component | AOCIL at Sep 29, 2018 | Other comprehensive income (loss) before reclassifications (2019) | Amounts reclassified from AOCIL (2019) | AOCIL at Sep 28, 2019 | Other comprehensive income (loss) before reclassifications (2020) | Amounts reclassified from AOCIL (2020) | AOCIL at Oct 3, 2020 | | :-------------------------------- | :-------------------- | :-------------------------------------------------------- | :----------------------------------- | :-------------------- | :-------------------------------------------------------- | :----------------------------------- | :------------------- | | Accumulated foreign currency translation | $(99,415) | $(26,501) | $(3,483) | $(129,399) | $26,898 | $(493) | $(102,994) | | Accumulated retirement liability | $(272,928) | $(35,606) | $22,800 | $(285,734) | $(13,659) | $115,740 | $(183,653) | | Accumulated gain (loss) on derivatives | $(449) | $41 | $64 | $(344) | $2,245 | $(707) | $1,194 | | **Total AOCIL** | **$(372,792)** | **$(62,066)** | **$19,381** | **$(415,477)** | **$15,484** | **$114,540** | **$(285,453)** | Amounts Reclassified from AOCIL into Earnings (2020) | Reclassification Type | Statements of Earnings location | 2020 (in thousands) | | :-------------------------- | :------------------------------ | :------------------ | | Retirement liability (Prior service cost) | - | $(129) | | Retirement liability (Actuarial losses) | - | $29,652 | | Retirement liability (Curtailment loss) | - | $100 | | Retirement liability (Settlement loss) | - | $122,000 | | **Net reclassification from AOCIL into earnings (Retirement liability)** | **Other** | **$115,740** | | Derivatives (Foreign currency contracts) | Sales | $(48) | | Derivatives (Foreign currency contracts) | Cost of sales | $(874) | | Derivatives (Interest rate swaps) | Interest | $(1) | | **Net reclassification from AOCIL into earnings (Derivatives)** | **-** | **$(707)** | [Note 21 - Segments](index=82&type=section&id=Note%2021%20-%20Segments) Moog Inc. operates in three segments: Aircraft Controls, Space and Defense Controls, and Industrial Systems, each serving distinct markets with varied performance in 2020 - Aircraft Controls designs, manufactures, and integrates flight controls for military and commercial aircraft, with aftermarket sales representing **30% of segment sales in 2020**[423](index=423&type=chunk)[426](index=426&type=chunk) - Space and Defense Controls provides controls for satellites, space vehicles, launch vehicles, armored combat vehicles, and missiles, benefiting from increased government spending[427](index=427&type=chunk)[428](index=428&type=chunk)[429](index=429&type=chunk)[430](index=430&type=chunk) - Industrial Systems offers customized machine performance components and systems across industrial automation, simulation and test, energy, and medical markets[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk) Net Sales by Market Type (in thousands) | Market Type | 2020 | 2019 | 2018 | | :-------------------------- | :--------- | :--------- | :--------- | | Military | $721,024 | $622,126 | $571,886 | | Commercial (Aircraft Controls) | $484,726 | $680,846 | $621,619 | | Space | $294,254 | $218,970 | $214,741 | | Defense (Space & Defense Controls) | $475,860 | $464,498 | $366,136 | | Energy | $127,693 | $120,771 | $163,888 | | Industrial Automation | $405,291 | $447,515 | $430,754 | | Simulation and Test | $102,600 | $122,935 | $127,321 | | Medical | $273,106 | $227,002 | $213,123 | | **Total Net Sales** | **$2,884,554** | **$2,904,663** | **$2,709,468** | Operating Profit by Segment (in tho

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 27, 2020 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 1-05129 MOOG Inc. (Exact name of registrant as specified in its charter) New York 16-0757636 (State ...