SEC Form 10-Q filed by Moog Inc.
$MOG.A
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 December 28, 2024
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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
(716 ) 652-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of each class of common stock as of January 17, 2025 was:
Class A common stock, 28,350,335 shares
Class B common stock, 3,244,769 shares
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PAGE | ||||||||||||||||||||
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Earnings
(Unaudited)
| Three Months Ended | ||||||||||||||
| (dollars in thousands, except share and per share data) | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net sales | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||
| Gross profit | ||||||||||||||
| Research and development | ||||||||||||||
| Selling, general and administrative | ||||||||||||||
| Interest | ||||||||||||||
| Restructuring | ||||||||||||||
| Other | ||||||||||||||
| Earnings before income taxes | ||||||||||||||
| Income taxes | ||||||||||||||
| Net earnings | $ | $ | ||||||||||||
| Net earnings per share | ||||||||||||||
| Basic | $ | $ | ||||||||||||
| Diluted | $ | $ | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||
| Basic | ||||||||||||||
| Diluted | ||||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
4
Consolidated Condensed Statements of Comprehensive Income
(Unaudited)
| Three Months Ended | ||||||||||||||
| (dollars in thousands) | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net earnings | $ | $ | ||||||||||||
| Other comprehensive income (loss) ("OCI"), net of tax: | ||||||||||||||
| Foreign currency translation adjustment | ( | |||||||||||||
| Retirement liability adjustment | ||||||||||||||
| Change in accumulated loss on derivatives | ||||||||||||||
| Other comprehensive income (loss), net of tax | ( | |||||||||||||
| Comprehensive income | $ | $ | ||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
5
Consolidated Condensed Balance Sheets
(Unaudited)
| (dollars in thousands) | December 28, 2024 | September 28, 2024 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Receivables, net | ||||||||||||||
| Unbilled receivables | ||||||||||||||
| Inventories, net | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property, plant and equipment, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued compensation | ||||||||||||||
| Contract advances and progress billings | ||||||||||||||
| Accrued liabilities and other | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt, excluding current installments | ||||||||||||||
| Long-term pension and retirement obligations | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Shareholders’ equity | ||||||||||||||
| Common stock - Class A | ||||||||||||||
| Common stock - Class B | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Retained earnings | ||||||||||||||
| Treasury shares | ( | ( | ||||||||||||
| Stock Employee Compensation Trust | ( | ( | ||||||||||||
| Supplemental Retirement Plan Trust | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total shareholders’ equity | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
6
Consolidated Condensed Statements of Shareholders' Equity
(Unaudited)
| Three Months Ended | ||||||||||||||
| (dollars in thousands) | December 28, 2024 | December 30, 2023 | ||||||||||||
| COMMON STOCK | ||||||||||||||
| Beginning and end of period | $ | $ | ||||||||||||
| ADDITIONAL PAID-IN CAPITAL | ||||||||||||||
| Beginning of period | ||||||||||||||
| Issuance of treasury shares | ||||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Adjustment to market - SECT and SERP | ( | |||||||||||||
| End of period | ||||||||||||||
| RETAINED EARNINGS | ||||||||||||||
| Beginning of period | ||||||||||||||
| Net earnings | ||||||||||||||
Dividends (1) | ( | ( | ||||||||||||
| End of period | ||||||||||||||
| TREASURY SHARES AT COST | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Class A and B shares issued related to compensation | ||||||||||||||
| Class A and B shares purchased | ( | ( | ||||||||||||
| End of period | ( | ( | ||||||||||||
| STOCK EMPLOYEE COMPENSATION TRUST ("SECT") | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Issuance of shares | ||||||||||||||
| Purchase of shares | ( | ( | ||||||||||||
| Adjustment to market | ( | |||||||||||||
| End of period | ( | ( | ||||||||||||
| SUPPLEMENTAL RETIREMENT PLAN ("SERP") TRUST | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Adjustment to market | ( | |||||||||||||
| End of period | ( | ( | ||||||||||||
| ACCUMULATED OTHER COMPREHENSIVE LOSS | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Other comprehensive income (loss) | ( | |||||||||||||
| End of period | ( | ( | ||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | $ | $ | ||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
(1) Cash dividends were $0.28 and $0.27 per share for the three months ended December 28, 2024 and December 30, 2023, respectively.
7
Consolidated Condensed Statements of Shareholders’ Equity, Shares
(Unaudited)
| Three Months Ended | ||||||||||||||
| (share data) | December 28, 2024 | December 30, 2023 | ||||||||||||
| COMMON STOCK - CLASS A | ||||||||||||||
| Beginning of period | ||||||||||||||
| Conversion of Class B to Class A | ||||||||||||||
| End of period | ||||||||||||||
| COMMON STOCK - CLASS B | ||||||||||||||
| Beginning of period | ||||||||||||||
| Conversion of Class B to Class A | ( | ( | ||||||||||||
| End of period | ||||||||||||||
| TREASURY SHARES - CLASS A COMMON STOCK | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Class A shares issued related to compensation | ||||||||||||||
| Class A shares purchased | ( | ( | ||||||||||||
| End of period | ( | ( | ||||||||||||
| TREASURY SHARES - CLASS B COMMON STOCK | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Class B shares issued related to compensation | ||||||||||||||
| Class B shares purchased | ( | ( | ||||||||||||
| End of period | ( | ( | ||||||||||||
| SECT - CLASS A COMMON STOCK | ||||||||||||||
| Beginning and end of period | ( | ( | ||||||||||||
| SECT - CLASS B COMMON STOCK | ||||||||||||||
| Beginning of period | ( | ( | ||||||||||||
| Issuance of shares | ||||||||||||||
| Purchase of shares | ( | ( | ||||||||||||
| End of period | ( | ( | ||||||||||||
| SERP - CLASS B COMMON STOCK | ||||||||||||||
| Beginning and end of period | ( | ( | ||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
8
Consolidated Condensed Statements of Cash Flows
(Unaudited)
| Three Months Ended | ||||||||||||||
| (dollars in thousands) | December 28, 2024 | December 30, 2023 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||
| Net earnings | $ | $ | ||||||||||||
| Adjustments to reconcile net earnings to net cash provided (used) by operating activities: | ||||||||||||||
| Depreciation | ||||||||||||||
| Amortization | ||||||||||||||
| Deferred income taxes | ( | ( | ||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Other | ( | |||||||||||||
| Changes in assets and liabilities providing (using) cash: | ||||||||||||||
| Receivables | ( | |||||||||||||
| Unbilled receivables | ( | ( | ||||||||||||
| Inventories | ( | ( | ||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Contract advances and progress billings | ( | |||||||||||||
| Accrued expenses | ( | ( | ||||||||||||
| Accrued income taxes | ( | |||||||||||||
| Net pension and post retirement liabilities | ||||||||||||||
| Other assets and liabilities | ( | ( | ||||||||||||
| Net cash provided (used) by operating activities | ( | |||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||
| Acquisitions of businesses, net of cash acquired | ( | |||||||||||||
| Purchase of property, plant and equipment | ( | ( | ||||||||||||
| Net proceeds from businesses sold | ||||||||||||||
| Other investing transactions | ( | |||||||||||||
| Net cash provided (used) by investing activities | ( | ( | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from revolving lines of credit | ||||||||||||||
| Payments on revolving lines of credit | ( | ( | ||||||||||||
| Payments on finance lease obligations | ( | ( | ||||||||||||
| Payment of dividends | ( | ( | ||||||||||||
| Proceeds from sale of treasury stock | ||||||||||||||
| Purchase of outstanding shares for treasury | ( | ( | ||||||||||||
| Proceeds from sale of stock held by SECT | ||||||||||||||
| Purchase of stock held by SECT | ( | ( | ||||||||||||
| Other financing transactions | ( | |||||||||||||
| Net cash provided (used) by financing activities | ||||||||||||||
| Effect of exchange rate changes on cash | ( | |||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period (1) | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||||||||
| Treasury shares issued as compensation | $ | $ | ||||||||||||
| Assets acquired through lease financing | ||||||||||||||
| See accompanying Notes to Consolidated Condensed Financial Statements. | ||||||||||||||
(1) Beginning of period cash balance at September 29, 2024 includes cash related to assets held for sale of $2,720 .
9
Notes to Consolidated Condensed Financial Statements
Three Months Ended December 28, 2024
(Unaudited)
(dollars in thousands, except per share data)
Note 1 - Basis of Presentation
Recent Accounting Pronouncements Adopted
There have been no new accounting pronouncements adopted for the three months ended December 28, 2024.
Recent Accounting Pronouncements Not Yet Adopted
| Standard | Description | Financial Statement Effect or Other Significant Matters | ||||||||||||
ASU no. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures | This standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The provisions of the standard are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment requires retrospective application to all prior periods presented in the financial statements. | We are currently reviewing the guidance and evaluating the impact on our financial statements and related disclosures. | ||||||||||||
| Planned date of adoption: FY 2025 | ||||||||||||||
ASU no. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures | This standard expands annual income tax disclosures to require specific categories in the rate reconciliation table to be disclosed using both percentages and reporting currency amounts and requires additional information for reconciling items that meet a quantitative threshold. Additionally, the amendment requires disclosure of income taxes paid by jurisdiction. The provisions of the standard are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. | We are currently reviewing the guidance and evaluating the impact on our financial statements and related disclosures. | ||||||||||||
| Planned date of adoption: FY 2026 | ||||||||||||||
ASU no. 2024-03 Income Statement -Reporting Comprehensive Income-Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses | This standard requires disclosure of specified information about certain cost and expenses at each interim and annual reporting period. This includes disclosure of the amounts of purchases of inventory, employee compensation, depreciation and intangible asset for each relevant expense caption on the income statement, as well as the total amount of selling expenses. Additionally, the amendments require disclosing a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated. The provisions of the standard are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. | We are currently reviewing the guidance and evaluating the impact on our financial statements and related disclosures. | ||||||||||||
| Planned date of adoption: FY 2028 | ||||||||||||||
10
Out of Period Adjustment
During the three months ended December 28, 2024, the Company recorded an out of period adjustment to correct an error identified by management related to its warranty expense in Commercial Aircraft. The adjustment resulted in an increase to cost of sales and a decrease to unbilled receivables of $7,540 . The Company has evaluated the impacts of this error, both quantitatively and qualitatively, and has concluded the error was not material to any prior interim or annual period. The correction is not expected to be material to the fiscal year ending September 27, 2025.
Note 2 - Revenue from Contracts with Customers
We recognize revenue from contracts with customers using the five-step model prescribed in ASC 606. The first step is identifying the contract. The identification of a contract with a customer requires an assessment of each party’s rights and obligations regarding the products or services to be transferred, including an evaluation of termination clauses and presently enforceable rights and obligations. Each party’s rights and obligations and the associated terms and conditions are typically determined in purchase orders. For sales that are governed by master supply agreements under which provisions define specific program requirements, purchase orders are issued under these agreements to reflect presently enforceable rights and obligations for the units of products and services being purchased.
Contracts are sometimes modified to account for changes in contract specifications and requirements. When this occurs, we assess the modification as prescribed in ASC 606 and determine whether the existing contract needs to be modified (and revenue cumulatively caught up), whether the existing contract needs to be terminated and a new contract needs to be created, or whether the existing contract remains and a new contract needs to be created. This is determined based on the rights and obligations within the modification as well as the associated transaction price.
The next step is identifying the performance obligations. A performance obligation is a promise to transfer goods or services to a customer that is distinct in the context of the contract, as defined by ASC 606. We identify a performance obligation for each promise in a contract to transfer a distinct good or service to the customer. As part of our assessment, we consider all goods and/or services promised in the contract, regardless of whether they are explicitly stated or implied by customary business practices. The products and services in our contracts are typically not distinct from one another due to their complexity and reliance on each other or, in many cases, we provide a significant integration service. Accordingly, many of our contracts are accounted for as one performance obligation. In limited cases, our contracts have more than one distinct performance obligation, which occurs when we perform activities that are not highly complex or interrelated or involve different product life cycles. Warranties are provided on certain contracts, but do not typically provide for services beyond standard assurances and are therefore not distinct performance obligations under ASC 606.
The third step is determining the transaction price, which represents the amount of consideration we expect to be entitled to receive from a customer in exchange for providing the goods or services. There are times when this consideration is variable, for example a volume discount, and must be estimated. Sales, use, value-added, and excise taxes are excluded from the transaction price, where applicable.
The fourth step is allocating the transaction price. The transaction price must be allocated to the performance obligations identified in the contract based on relative stand-alone selling prices when available, or an estimate for each distinct good or service in the contract when standalone prices are not available. Our contracts with customers generally require payment under normal commercial terms after delivery. Payment terms are typically within 30 to 60 days of delivery. The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment.
The final step is the recognition of revenue. We recognize revenue as the performance obligations are satisfied. ASC 606 provides guidance to help determine if we are satisfying the performance obligation at a point in time or over time. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative use of the product or service. In essence, we recognize revenue when, or as control of, the promised goods or services transfer to the customer.
11
Revenue is recognized using either the over time or point in time method. The over-time method of revenue recognition is predominantly used in Space and Defense, Military Aircraft and Commercial Aircraft. We use this method for U.S. Government contracts and repair and overhaul arrangements as we are creating or enhancing assets that the customer controls as the assets are being created or enhanced. In addition, many of our large commercial contracts qualify for over-time accounting as our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed to date. Our over-time contracts are primarily firm fixed price.
Revenue recognized at the point in time control is transferred to the customer is used most frequently in Industrial. We use this method for commercial contracts in which the asset being created has an alternative use. We determine the point in time control transfers to the customer by weighing the five indicators provided by ASC 606 - the entity has a present right to payment; the customer has legal title; the customer has physical possession; the customer has significant risks and rewards of ownership; and the customer has accepted the asset. When control has transferred to the customer, profit is generated as cost of sales is recorded and as revenue is recognized. Inventory costs include all product manufacturing costs such as direct material, direct labor, other direct costs and indirect overhead cost allocations. Shipping and handling costs are considered costs to fulfill a contract and not considered performance obligations. They are included in cost of sales as incurred.
Revenue is recognized over time on contracts using the cost-to-cost method of accounting as work progresses toward completion as determined by the ratio of cumulative costs incurred to date to estimated total contract costs at completion, multiplied by the total estimated contract revenue, less cumulative revenue recognized in prior periods. We believe that cumulative costs incurred to date as a percentage of estimated total contract costs at completion is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Changes in estimates affecting sales, costs and profits are recognized in the period in which the change becomes known using the cumulative catch-up method of accounting, resulting in the cumulative effect of changes reflected in the period. Estimates are reviewed and updated quarterly for substantially all contracts. For the three months ended December 28, 2024 we recognized additional revenue of $8,669 , for adjustments made to performance obligations satisfied (or partially satisfied) in previous periods. For the three months ended December 30, 2023 we recognized lower revenue of $95 , for adjustments made to performance obligations satisfied (or partially satisfied) in previous periods.
Contract costs include only allocable, allowable and reasonable costs which are included in cost of sales when incurred. For applicable U.S. Government contracts, contract costs are determined in accordance with the Federal Acquisition Regulations and the related Cost Accounting Standards. The nature of these costs includes development engineering costs and product manufacturing costs such as direct material, direct labor, other direct costs and indirect overhead costs. Contract profit is recorded as a result of the revenue recognized less costs incurred in any reporting period. Variable consideration and contract modifications, such as performance incentives, penalties, contract claims or change orders are considered in estimating revenues, costs and profits when they can be reliably estimated and realization is considered probable. Revenue recognized on contracts for unresolved claims or unapproved contract change orders was not material for the three months ended December 28, 2024.
As of December 28, 2024, we had contract reserves of $66,646 . For contracts with anticipated losses at completion, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations that are treated as period expenses. Loss reserves are more common on firm fixed-price contracts that involve, to varying degrees, the design and development of new and unique controls or control systems to meet the customers’ specifications. We calculate contract losses at the contract level, versus the performance obligation level. Recall reserves are recorded when additional work is needed on completed products for them to meet contract specifications. Contract-related loss reserves are recorded for the additional work needed on completed and delivered products in order for them to meet contract specifications.
12
Contract Assets and Liabilities
Unbilled receivables (contract assets) primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Unbilled receivables are classified as current assets and in accordance with industry practice, include amounts that may be billed and collected beyond one year due to the long term nature of our contracts.
Contract advances and progress billings (contract liabilities) relate to payments received from customers in advance of the satisfaction of performance obligations for a contract (contract advances) and when billings are in excess of revenue recognized (progress billings). These amounts are recorded as contract liabilities until such obligations are satisfied, either over-time as costs are incurred or at a point when deliveries are made. We do not consider contract advances and progress billings to be significant financing components as the intent of these payments in advance are for reasons other than providing a significant financing benefit and are customary in our industry.
For contracts recognized using the cost-to-cost method, the amount of unbilled receivables or contract advances and progress billings is determined for each contract to determine the contract asset or contract liability position at the end of each reporting period.
Total contract assets and contract liabilities are as follows:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| Unbilled receivables | $ | $ | ||||||||||||
| Contract advances and progress billings | ||||||||||||||
| Net contract assets | $ | $ | ||||||||||||
The net increase in contract assets reflects the impact of additional unbilled revenues and a decrease in contract advances and progress billings during the period. For the three months ended December 28, 2024, we recognized $98,568 of revenue, that was included in the contract liability balance at the beginning of the year.
Remaining Performance Obligations
As of December 28, 2024, the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) was $5,420,000 . We expect to recognize approximately 46 % of that amount as sales over the next twelve months and the balance thereafter.
Disaggregation of Revenue
See Note 20 - Segments, for disclosures related to disaggregation of revenue.
Note 3 - Acquisitions and Divestitures
Acquisitions
On October 20, 2023, we acquired Data Collection Limited ("DCL") based in Auckland, New Zealand for a purchase price, net of acquired cash, of $5,911 . DCL specializes in manufacturing and operating pavement surveying equipment and providing innovative solutions for measuring and managing pavements. This operation is included in our Military Aircraft segment. The sales and results of operations of DCL are immaterial in 2025 and 2024.
Divestitures
In the fourth quarter of 2024, we recorded losses in Asset impairment and fair value adjustment of $14,897 , related to selling a motors business in the Czech Republic and a hydraulic systems business in Luxembourg that were included in our Industrial segment. As a result, we reclassified $9,360 to other current assets and $5,153 to accrued liabilities as held for sale at September 28, 2024. We completed the sale of these businesses on September 30, 2024, which required the release of the associated cumulative translation adjustment. There has been no significant change to the losses recognized as a result of completing the transactions.
13
Note 4 - Receivables
Receivables consist of:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| Accounts receivable | $ | $ | ||||||||||||
| Other | ||||||||||||||
| Less allowance for credit losses | ( | ( | ||||||||||||
| Receivables, net | $ | $ | ||||||||||||
Moog Receivables LLC (the "Receivables Subsidiary"), a wholly owned bankruptcy remote special purpose subsidiary of Moog Inc. (the "Company"), as seller, the Company, as master servicer, Wells Fargo Bank, N.A., as administrative agent (the "Agent") and certain purchasers (collectively, the "Purchasers") entered into an Amended and Restated Receivables Purchase Agreement (the "RPA"). The RPA matures on December 11, 2026 and is subject to customary termination events related to transactions of this type.
Under the RPA, the Receivables Subsidiary may sell receivables to the Purchasers in amounts up to a $125,000 limit. The receivables will be sold to the Purchasers in consideration for the Purchasers making payments of cash, which is referred to as "capital" for purposes of the RPA, to the Receivables Subsidiary in accordance with the terms of the RPA. The Receivables Subsidiary may sell receivables to the Purchasers so long as certain conditions are satisfied, including that, at any date of determination, the aggregate capital paid to the Receivables Subsidiary does not exceed a "capital coverage amount," equal to an adjusted net receivables pool balance minus a required reserve. Each Purchaser's share of capital accrues yield at a variable rate plus an applicable margin.
The parties intend that the conveyance of receivables to the Agent, for the ratable benefit of the Purchasers will constitute a purchase and sale of receivables and not a pledge for security. The Receivables Subsidiary has guaranteed to each Purchaser and Agent the prompt payment of sold receivables, and to secure the prompt payment and performance of such guaranteed obligations, the Receivables Subsidiary has granted a security interest to the Agent, for the benefit of the Purchasers, in all assets of the Receivables Subsidiary. The assets of the Receivables Subsidiary are not available to pay our creditors or any affiliate thereof. In our capacity as master servicer under the RPA, we are responsible for administering and collecting receivables and have made customary representations, warranties, covenants and indemnities.
The proceeds of the RPA are classified as operating activities in our Consolidated Condensed Statements of Cash Flows. Cash received from collections of sold receivables is used by the Receivables Subsidiary to fund additional purchases of receivables on a revolving basis or to return all or any portion of outstanding capital of the Purchaser. Subsequent collections on the pledged receivables, which have not been sold, will be classified as operating cash flows at the time of collection. Total receivables sold and cash collections under the RPA were both $156,966 for the three months ended December 28, 2024, respectively. The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded.
As of December 28, 2024, the amount sold to the Purchasers was $125,000 , which was derecognized from the Consolidated Condensed Balance Sheets. As collateral against sold receivables, the Receivables Subsidiary maintains a certain level of unsold receivables, which was $625,633 at December 28, 2024.
The allowance for credit losses is based on our assessment of the collectability of customer accounts. The allowance is determined by considering factors such as historical experience, credit quality, age of the accounts receivable, current economic conditions and reasonable forecasted financial information that may affect a customer’s ability to pay.
14
Note 5 - Inventories
Inventories, net of reserves, consist of:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| Raw materials and purchased parts | $ | $ | ||||||||||||
| Work in progress | ||||||||||||||
| Finished goods | ||||||||||||||
| Inventories, net | $ | $ | ||||||||||||
There are no material inventoried costs relating to over-time contracts where revenue is accounted for using the cost-to-cost method of accounting as of December 28, 2024 and September 28, 2024.
Note 6 - Property, Plant and Equipment
Property, plant and equipment consists of:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings and improvements | ||||||||||||||
| Machinery and equipment | ||||||||||||||
| Computer equipment and software | ||||||||||||||
| Property, plant and equipment, at cost | ||||||||||||||
| Less accumulated depreciation and amortization | ( | ( | ||||||||||||
| Property, plant and equipment, net | $ | $ | ||||||||||||
Note 7 - Leases
We lease certain manufacturing facilities, office space and machinery and equipment globally. At inception, we evaluate whether a contractual arrangement contains a lease. Specifically, we consider whether we control the underlying asset and have the right to obtain substantially all the economic benefits or outputs from the asset. If the contractual arrangement contains a lease, we then determine the classification of the lease, operating or finance, using the classification criteria described in ASC 842. We then determine the term of the lease based on terms and conditions of the contractual arrangement, including whether the options to extend or terminate the lease are reasonably certain to be exercised. We have elected to not separate lease components from non-lease components, such as common area maintenance charges and instead, account for the lease and non-lease components as a single component.
Our lease right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and our lease liabilities represent our obligation to make lease payments. The ROU assets and lease liabilities for both operating and finance leases are recognized as of the commencement date at the net present value of the fixed minimum lease payments over the term of the lease including expected buyouts, using the discount rate described below. Variable lease payments are recorded in the period in which the obligation for the payment is incurred. Variable lease payments based on an index or rate are initially measured using the index or rate as of the commencement date of the lease and included in the fixed minimum lease payments. For short-term leases that have a term of 12 months or less as of the commencement date, we do not recognize a ROU asset or lease liability on our balance sheet; we recognize expense as the lease payments are made over the lease term.
Operating lease cost is included in Cost of sales and Selling, general and administrative on the Consolidated Condensed Statements of Earnings. Finance lease cost is included in Cost of sales, Selling, general and administrative and Interest on the Consolidated Condensed Statements of Earnings.
The discount rate used to calculate the present value of our leases is the rate implicit in the lease. If the information necessary to determine the rate implicit in the lease is not available, we use our incremental borrowing rate for collateralized debt, which is determined using our credit rating and other information available as of the lease commencement date.
15
The components of lease expense were as follows:
| Three Months Ended | ||||||||
| December 28, 2024 | December 30, 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total finance lease cost | $ | $ | ||||||
Supplemental cash flow information related to leases was as follows:
| Three Months Ended | ||||||||
| December 28, 2024 | December 30, 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flow for operating leases | $ | $ | ||||||
| Operating cash flow for finance leases | ||||||||
| Financing cash flow for finance leases | ||||||||
| Assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| Finance leases | ||||||||
16
Supplemental balance sheet information related to leases was as follows:
| December 28, 2024 | September 28, 2024 | |||||||
| Operating Leases: | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| $ | $ | |||||||
| $ | $ | |||||||
| Finance Leases: | ||||||||
| Property, plant, and equipment, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ( | ||||||
| $ | $ | |||||||
| $ | $ | |||||||
| $ | $ | |||||||
| Weighted average remaining lease term in years: | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted average discount rates: | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
Maturities of lease liabilities were as follows:
| December 28, 2024 | ||||||||||||||
| Operating Leases | Finance Leases | |||||||||||||
| 2025 | $ | $ | ||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total lease payments | ||||||||||||||
| Less: imputed interest | ( | ( | ||||||||||||
| Total | $ | $ | ||||||||||||
17
Note 8 - Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
| Space and Defense | Military Aircraft | Commercial Aircraft | Industrial | Total | |||||||||||||
| Balance at September 28, 2024 | $ | $ | $ | $ | $ | ||||||||||||
| Foreign currency translation | ( | ( | ( | ( | |||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | $ | $ | ||||||||||||
Goodwill in our Space and Defense segment is net of a $4,800 accumulated impairment loss at December 28, 2024. Goodwill in our Medical Devices reporting unit, included in our Industrial segment, is net of a $38,200 accumulated impairment loss at December 28, 2024.
The components of intangible assets are as follows:
| December 28, 2024 | September 28, 2024 | |||||||||||||||||||||||||||||||
| Weighted- Average Life (years) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||||||||||
| Customer-related | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
| Technology-related | ( | ( | ||||||||||||||||||||||||||||||
| Program-related | ( | ( | ||||||||||||||||||||||||||||||
| Marketing-related | ( | ( | ||||||||||||||||||||||||||||||
| Other | ( | ( | ||||||||||||||||||||||||||||||
| Intangible assets | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
All acquired intangible assets other than goodwill are being amortized. Customer-related intangible assets primarily consist of customer relationships. Technology-related intangible assets primarily consist of technology, patents and intellectual property. Program-related intangible assets consist of long-term programs represented by current contracts and probable follow on work. Marketing-related intangible assets primarily consist of trademarks and trade names.
Amortization of acquired intangible assets is as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Acquired intangible asset amortization | $ | $ | ||||||||||||
Based on acquired intangible assets recorded at December 28, 2024, amortization is estimated to be approximately:
| 2025 | 2026 | 2027 | 2028 | 2029 | |||||||||||||
| Estimated future amortization of acquired intangible assets | $ | $ | $ | $ | $ | ||||||||||||
18
Note 9 - Equity Method and Other Investments
Investments and operating results in which we do not have a controlling interest, however we do have the ability to exercise significant influence over operations, are accounted for using the equity method of accounting. Net investment balances for equity method investments and joint ventures are included as Other assets in the Consolidated Condensed Balance Sheets and consist of:
| December 28, 2024 | September 28, 2024 | ||||||||||
| Moog Aircraft Service Asia | $ | $ | |||||||||
| Suffolk Technologies Fund 1, L.P. | |||||||||||
| Net investment balance | $ | $ | |||||||||
We recorded the following gains and losses from equity method investments and joint ventures which are included in Other in the Consolidated Condensed Statements of Earnings:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Net gain (loss) | ||||||||||||||
| Equity method investments and joint ventures | $ | $ | ( | |||||||||||
Moog Aircraft Services Asia ("MASA") is a joint venture included in our Commercial Aircraft segment in which we currently hold a 51 % ownership share. MASA is intended to provide maintenance, repair and overhaul services for our manufactured flight control systems.
Suffolk Technologies Fund 1, L.P., is a limited partnership included in our Industrial segment that invests in startups to transform the construction, real estate and property maintenance industries in the U.S. We have a remaining on-call capital commitment of up to $5,158 .
19
Note 10 - Indebtedness
We maintain short-term line of credit facilities with banks throughout the world that are principally demand lines subject to revision by the banks.
Long-term debt consists of:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| U.S. revolving credit facility | $ | $ | ||||||||||||
| SECT revolving credit facility | ||||||||||||||
| Senior notes 4.25% | ||||||||||||||
| Senior debt | ||||||||||||||
| Less deferred debt issuance cost | ( | ( | ||||||||||||
| Long-term debt | $ | $ | ||||||||||||
Our U.S. revolving credit facility, which matures on October 27, 2027, has a capacity of $1,100,000 and provides an expansion option, which permits us to request an increase of up to $400,000 to the credit facility upon satisfaction of certain conditions. Interest on our outstanding borrowings is based on SOFR plus the applicable margin. The credit facility is secured by substantially all of our U.S. assets. The loan agreement contains various covenants which, among others, specify interest coverage and maximum leverage. We are in compliance with all covenants.
On November 6, 2024, the SECT amended the revolving credit facility, which reduced the borrowing capacity from $35,000 to $25,000 and extended the maturity date from October 26, 2025 to October 26, 2026. Interest is based on SOFR plus an applicable margin. A commitment fee is also charged based on a percentage of the unused amounts available and is not material.
We have $500,000 aggregate principal amount of 4.25 % senior notes due December 15, 2027 with interest paid semiannually on June 15 and December 15 of each year. The senior notes are unsecured obligations, guaranteed on a senior unsecured basis by certain subsidiaries and contain normal incurrence-based covenants and limitations such as the ability to incur additional indebtedness, pay dividends, make other restricted payments and investments, create liens and certain corporate acts such as mergers and consolidations. We are in compliance with all covenants.
20
Note 11 - Other Accrued Liabilities
Other accrued liabilities consists of:
| December 28, 2024 | September 28, 2024 | |||||||||||||
| Employee benefits | $ | $ | ||||||||||||
| Contract reserves | ||||||||||||||
| Warranty accrual | ||||||||||||||
| Accrued income taxes | ||||||||||||||
| Other | ||||||||||||||
| Other accrued liabilities | $ | $ | ||||||||||||
In the ordinary course of business, we warrant our products against defects in design, materials and workmanship typically over periods ranging from twelve to sixty months. We determine warranty reserves needed by product line based on historical experience and current facts and circumstances. Activity in the warranty accrual is summarized as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Warranty accrual at beginning of period | $ | $ | ||||||||||||
| Warranties issued during current period | ||||||||||||||
| Adjustments to pre-existing warranties | ( | |||||||||||||
| Reductions for settling warranties | ( | ( | ||||||||||||
| Foreign currency translation | ( | |||||||||||||
| Warranty accrual at end of period | $ | $ | ||||||||||||
Note 12 - Derivative Financial Instruments
We principally use derivative financial instruments to manage foreign exchange risk related to foreign operations and foreign currency transactions and interest rate risk associated with long-term debt. We enter into derivative financial instruments with a number of major financial institutions to minimize counterparty credit risk.
Derivatives designated as hedging instruments
We use foreign currency contracts as cash flow hedges to effectively fix the exchange rates on future payments and revenue. To mitigate exposure in movements between various currencies, including the Philippine peso, we had
outstanding foreign currency contracts with notional amounts of $55,424 at December 28, 2024. These contracts mature at various times through August 28, 2026.
We use forward currency contracts to hedge our net investment in certain foreign subsidiaries. As of December 28, 2024, we had no outstanding net investment hedges.
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. The interest rate swaps are designated as hedges of the amount of future cash flows related to interest payments on variable-rate debt that, in combination with the interest payments on the debt, convert a portion of the variable-rate debt to fixed-rate debt. At December 28, 2024, we had no outstanding interest rate swaps.
Foreign currency contracts, net investment hedges and interest rate swaps are recorded in the Consolidated Condensed Balance Sheets at fair value and the related gains or losses are deferred in Shareholders’ Equity as a component of Accumulated Other Comprehensive Income (Loss) ("AOCIL"). These deferred gains and losses are reclassified into the Consolidated Condensed Statements of Earnings, as necessary, during the periods in which the related payments or receipts affect earnings. However, to the extent the foreign currency contracts and interest rate swaps are not perfectly effective in offsetting the change in the value of the payments and revenue being hedged, the ineffective portion of these contracts is recognized in earnings immediately. Ineffectiveness was not material in the first three months of 2025 or 2024.
21
Derivatives not designated as hedging instruments
We also have foreign currency exposure on balances, primarily intercompany, that are denominated in a foreign currency and are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in the Consolidated Condensed Statements of Earnings. To minimize foreign currency exposure, we have foreign currency contracts with notional amounts of $164,506 at December 28, 2024. The foreign currency contracts are recorded in the Consolidated Condensed Balance Sheets at fair value and resulting gains or losses are recorded in the Consolidated Condensed Statements of Earnings. We recorded the following gains and losses on foreign currency contracts which are included in other income or expense and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other income or expense:
| Three Months Ended | |||||||||||||||||
| Statements of Earnings location | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Net gain (loss) | |||||||||||||||||
| Foreign currency contracts | Other | $ | ( | $ | |||||||||||||
Summary of derivatives
The fair value and classification of derivatives is summarized as follows:
| Balance Sheets location | December 28, 2024 | September 28, 2024 | |||||||||||||||
| Derivatives designated as hedging instruments: | |||||||||||||||||
| Foreign currency contracts | Other current assets | $ | $ | ||||||||||||||
| Foreign currency contracts | Other assets | ||||||||||||||||
| Total asset derivatives | $ | $ | |||||||||||||||
| Foreign currency contracts | Accrued liabilities and other | $ | $ | ||||||||||||||
| Foreign currency contracts | Other long-term liabilities | ||||||||||||||||
| Total liability derivatives | $ | $ | |||||||||||||||
| Derivatives not designated as hedging instruments: | |||||||||||||||||
| Foreign currency contracts | Other current assets | $ | $ | ||||||||||||||
| Foreign currency contracts | Accrued liabilities and other | $ | $ | ||||||||||||||
22
Note 13 - Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. The definition of the fair value hierarchy is as follows:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.
Level 3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.
Our derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market data, such as interest rate yield curves and currency rates, and are classified as Level 2 within the valuation hierarchy.
The following table presents the fair values and classification of our financial assets and liabilities measured on a recurring basis, all of which are classified as Level 2, except for the acquisition contingent consideration, which is classified as Level 3:
| Balance Sheets location | December 28, 2024 | September 28, 2024 | ||||||||||||||||||
| Foreign currency contracts | Other current assets | $ | $ | |||||||||||||||||
| Foreign currency contracts | Other assets | |||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
| Foreign currency contracts | Accrued liabilities and other | $ | $ | |||||||||||||||||
| Foreign currency contracts | Other long-term liabilities | |||||||||||||||||||
| Acquisition contingent consideration | Accrued liabilities and other | |||||||||||||||||||
| Total liabilities | $ | $ | ||||||||||||||||||
The changes in financial liabilities classified as Level 3 within the fair value hierarchy are as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Balance at beginning of period | $ | $ | ||||||||||||
| Increase in discounted future cash flows recorded as interest expense | ||||||||||||||
| Settlements paid in cash | ( | |||||||||||||
| Balance at end of period | $ | $ | ||||||||||||
23
Note 14 - Restructuring
The 2023 plan has elements, primarily retention agreements, that will continue through 2027 and could result in additional costs of up to approximately $4,100 .
Restructuring activity for severance and other costs by segment and reconciliation to consolidated amounts is as follows:
| Space and Defense | Military Aircraft | Commercial Aircraft | Industrial | Total | |||||||||||||
| Balance at September 28, 2024 | $ | $ | $ | $ | $ | ||||||||||||
| Charged to expense - 2024 plan | |||||||||||||||||
| Charged to expense - 2023 plan | |||||||||||||||||
| Adjustments to provision | ( | ( | |||||||||||||||
| Non-cash charges - 2024 plan | ( | ( | |||||||||||||||
| Cash payments - 2024 plan | ( | ( | ( | ( | ( | ||||||||||||
| Cash payments - 2023 plan | ( | ( | |||||||||||||||
| Cash payments - 2022 plan | ( | ( | |||||||||||||||
| Cash payments - 2020 plan | ( | ( | |||||||||||||||
| Cash payments - 2018 plan | ( | ( | |||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | $ | $ | ||||||||||||
Note 15 - Employee Benefit Plans
Pension expense for our defined contribution plans consists of:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| U.S. defined contribution plans | $ | $ | ||||||||||||
| Non-U.S. defined contribution plans | ||||||||||||||
| Total expense for defined contribution plans | $ | $ | ||||||||||||
Net periodic benefit costs for our defined benefit pension plans are as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| U.S. Plans | ||||||||||||||
| Service cost | $ | $ | ||||||||||||
| Interest cost | ||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||
| Amortization of actuarial loss | ||||||||||||||
| Expense for U.S. defined benefit plans | $ | $ | ||||||||||||
| Non-U.S. Plans | ||||||||||||||
| Service cost | $ | $ | ||||||||||||
| Interest cost | ||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||
| Amortization of prior service cost | ||||||||||||||
| Amortization of actuarial loss | ||||||||||||||
| Expense for non-U.S. defined benefit plans | $ | $ | ||||||||||||
24
Note 16 - Income Taxes
The effective tax rate for the three months ended December 28, 2024 and December 30, 2023 was 22.6 % and 23.6 %, respectively. The effective tax rate for the three months ended December 28, 2024 and December 30, 2023 was higher than expected from applying the U.S. federal statutory tax rate of 21 % to earnings before income taxes due to tax on earnings generated outside the U.S. with higher statutory rates.
25
Note 17 - Accumulated Other Comprehensive Income (Loss)
The changes in AOCIL, net of tax, by component for the three months ended December 28, 2024 are as follows:
| Accumulated foreign currency translation | Accumulated retirement liability | Accumulated gain (loss) on derivatives | Total | |||||||||||||||||||||||
| AOCIL at September 28, 2024 | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| OCI before reclassifications | ( | ( | ||||||||||||||||||||||||
| Amounts reclassified from AOCIL | ||||||||||||||||||||||||||
| OCI, net of tax | ( | ( | ||||||||||||||||||||||||
| AOCIL at December 28, 2024 | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
Net gains and losses on net investment hedges are recorded in Accumulated foreign currency translation to the extent that the instruments are effective in hedging the designated risk.
The amounts reclassified from AOCIL into earnings are as follows:
| Three Months Ended | ||||||||||||||||||||
| Statements of Earnings location | December 28, 2024 | December 30, 2023 | ||||||||||||||||||
| Retirement liability: | ||||||||||||||||||||
| Prior service cost | $ | $ | ||||||||||||||||||
| Actuarial losses | ||||||||||||||||||||
| Reclassification from AOCIL into earnings | ||||||||||||||||||||
| Tax effect | ( | ( | ||||||||||||||||||
| Net reclassification from AOCIL into earnings | $ | $ | ||||||||||||||||||
| Derivatives: | ||||||||||||||||||||
| Foreign currency contracts | Cost of sales | $ | $ | |||||||||||||||||
| Reclassification from AOCIL into earnings | ||||||||||||||||||||
| Tax effect | ( | ( | ||||||||||||||||||
| Net reclassification from AOCIL into earnings | $ | $ | ||||||||||||||||||
| Foreign currency translation: | ||||||||||||||||||||
| Business dispositions | Other | $ | $ | ( | ||||||||||||||||
| Reclassification from AOCIL into earnings | ( | |||||||||||||||||||
| Tax effect | ||||||||||||||||||||
| Net reclassification from AOCIL into earnings | $ | $ | ( | |||||||||||||||||
Reclassification from AOCIL into earnings for the Retirement liability are included in the computation of non-service pension expense, which is included in Other on the Consolidated Condensed Statement of Earnings.
The effective portion of amounts deferred in AOCIL are as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Foreign currency contracts | $ | $ | ||||||||||||
| Net gain | ||||||||||||||
| Tax effect | ( | ( | ||||||||||||
| Net deferral in AOCIL of derivatives | $ | $ | ||||||||||||
26
Note 18 - Stock Employee Compensation Trust and Supplemental Retirement Plan Trust
Note 19 - Earnings per Share
Basic and diluted weighted-average shares outstanding, as well as shares considered to be anti-dilutive, are as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Basic weighted-average shares outstanding | ||||||||||||||
| Dilutive effect of equity-based awards | ||||||||||||||
| Diluted weighted-average shares outstanding | ||||||||||||||
| Anti-dilutive shares from equity-based awards | ||||||||||||||
Note 20 - Segments
Disaggregation of net sales by segment for the three months ended December 28, 2024 and December 30, 2023 are as follows:
| Three Months Ended | ||||||||||||||
| Market Type | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net sales: | ||||||||||||||
| Space | $ | $ | ||||||||||||
| Defense | ||||||||||||||
| Space and Defense | ||||||||||||||
| Original Equipment Manufacturers | ||||||||||||||
| Aftermarket | ||||||||||||||
| Military Aircraft | ||||||||||||||
| Original Equipment Manufacturers | ||||||||||||||
| Aftermarket | ||||||||||||||
| Commercial Aircraft | ||||||||||||||
| Energy | ||||||||||||||
| Industrial Automation | ||||||||||||||
| Simulation and Test | ||||||||||||||
| Medical | ||||||||||||||
| Industrial | ||||||||||||||
| Net sales | $ | $ | ||||||||||||
27
| Three Months Ended | ||||||||||||||
| Customer Type | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net sales: | ||||||||||||||
| Commercial | $ | $ | ||||||||||||
| U.S. Government (including OEM) | ||||||||||||||
| Other | ||||||||||||||
| Space and Defense | ||||||||||||||
| U.S. Government (including OEM) | ||||||||||||||
| Other | ||||||||||||||
Military Aircraft | ||||||||||||||
| Commercial | ||||||||||||||
| Other | ||||||||||||||
Commercial Aircraft | ||||||||||||||
| Commercial | ||||||||||||||
| U.S. Government (including OEM) | ||||||||||||||
| Other | ||||||||||||||
| Industrial | ||||||||||||||
| Commercial | ||||||||||||||
| U.S. Government (including OEM) | ||||||||||||||
| Other | ||||||||||||||
| Net sales | $ | $ | ||||||||||||
| Three Months Ended | ||||||||||||||
| Revenue Recognition Method | December 28, 2024 | December 30, 2023 | ||||||||||||
| Net sales: | ||||||||||||||
| Over-time | $ | $ | ||||||||||||
| Point in time | ||||||||||||||
| Space and Defense | ||||||||||||||
| Over-time | ||||||||||||||
| Point in time | ||||||||||||||
| Military Aircraft | ||||||||||||||
| Over-time | ||||||||||||||
| Point in time | ||||||||||||||
| Commercial Aircraft | ||||||||||||||
| Over-time | ||||||||||||||
| Point in time | ||||||||||||||
| Industrial | ||||||||||||||
| Over-time | ||||||||||||||
| Point in time | ||||||||||||||
| Net sales | $ | $ | ||||||||||||
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Operating profit is net sales less cost of sales and other operating expenses, excluding interest expense, equity-based compensation expense, non-service pension expense and other corporate expenses. Cost of sales and other operating expenses are directly identifiable to the respective segment or allocated on the basis of sales, manpower or profit. Operating profit by segment and reconciliations for the three months ended December 28, 2024 and December 30, 2023 are as follows:
| Three Months Ended | ||||||||||||||
| December 28, 2024 | December 30, 2023 | |||||||||||||
| Operating profit: | ||||||||||||||
| Space and Defense | $ | $ | ||||||||||||
| Military Aircraft | ||||||||||||||
| Commercial Aircraft | ||||||||||||||
| Industrial | ||||||||||||||
| Total operating profit | ||||||||||||||
| Deductions from operating profit: | ||||||||||||||
| Interest expense | ||||||||||||||
| Equity-based compensation expense | ||||||||||||||
| Corporate and other expenses, net | ||||||||||||||
| Earnings before income taxes | $ | $ | ||||||||||||
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Note 21 - Related Party Transactions
Note 22 - Commitments and Contingencies
From time to time, we are involved in legal proceedings. We are not a party to any pending legal proceedings which management believes will result in a material adverse effect on our financial condition, results of operations or cash flows.
We are engaged in administrative proceedings with governmental agencies and legal proceedings with governmental agencies and other third parties in the normal course of our business, including litigation under Superfund laws, regarding environmental matters. We believe that adequate reserves have been established for our share of the estimated cost for all currently pending environmental administrative or legal proceedings and do not expect that these environmental matters will have a material adverse effect on our financial condition, results of operations or cash flows.
In the ordinary course of business we could be subject to ongoing claims or disputes from our customers, the ultimate settlement of which could have a material adverse impact on our consolidated results of operations. While the receivables and any loss provisions recorded to date reflect management's best estimate of the projected costs to complete a given project, there is still significant effort required to complete the ultimate deliverable. Future variability in internal cost and future profitability is dependent upon a number of factors including deliveries, performance and government budgetary pressures. The inability to achieve a satisfactory contractual solution, further unplanned delays, additional developmental cost growth or variations in any of the estimates used in the existing contract analysis could lead to further loss provisions. Additional losses could have a material adverse impact on our financial condition, results of operations or cash flows in the period in which the loss may be recognized.
We are contingently liable for $14,518 related to standby letters of credit issued by banks to third parties on our behalf at December 28, 2024.
Note 23 - Subsequent Event
On January 23, 2025 , we declared a $0.29 per share quarterly dividend payable on issued and outstanding shares of our Class A and Class B common stock on February 25, 2025 to shareholders of record at the close of business on February 7, 2025.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report filed on Form 10-K for the fiscal year ended September 28, 2024. In addition, the following should be read in conjunction with our Consolidated Financial Statements and Notes to Consolidated Condensed Financial Statements contained herein. All references to years in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are to fiscal years. Amounts may differ from reported values due to rounding.
OVERVIEW
We are a worldwide designer, manufacturer and systems integrator of high performance precision motion and fluid controls and control systems for a broad range of applications in aerospace and defense and industrial markets.
Within the aerospace and defense market, our products and systems include:
•Defense market - primary and secondary flight controls and components for military aircraft, turreted weapon systems, tactical and strategic missile steering controls and various defense product components.
•Commercial aircraft market - primary and secondary flight controls and components for commercial aircraft.
•Space market - satellite avionics, positioning controls and components, launcher thrust vector controls and components, as well as integrated space vehicles.
In the industrial market, our products are used in a wide range of applications including:
•Industrial market - various components and systems used in various applications including: heavy industrial machinery used for metal forming and pressing, flight simulation motion control systems, energy exploration and generation products, material and automotive structural and fatigue testing systems, as well as for the electrification of construction vehicles.
•Medical market - components and pumps for enteral clinical nutrition and infusion therapy, CT scan medical equipment, ultrasonic sensors and surgical handpieces and sleep apnea equipment.
We operate under four segments, Space and Defense, Military Aircraft, Commercial Aircraft and Industrial. Our principal manufacturing facilities are located in the United States, Philippines, United Kingdom, Germany, Italy, Costa Rica, China, Netherlands, Japan, Canada, India and Lithuania.
Under ASC 606, 65% of revenue was recognized over time for the three months ended December 28, 2024, using the cost-to-cost method of accounting. The over-time method of revenue recognition is predominantly used in Space and Defense, Military Aircraft and Commercial Aircraft. We use this method for U.S. Government contracts and repair and overhaul arrangements as we are creating or enhancing assets that the customer controls. In addition, many of our large commercial contracts qualify for over-time accounting as our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed to date.
For the three months ended December 28, 2024, 35% of revenue was recognized at the point in time control transferred to the customer. This method of revenue recognition is used most frequently in Industrial. We use this method for commercial contracts in which the asset being created has an alternative use. We determine the point in time control transfers to the customer by weighing the five indicators provided by ASC 606. When control has transferred to the customer, profit is generated as cost of sales is recorded and as revenue is recognized.
Our products and technologies affect the lives of millions of people around the world. Our solutions are critical to preserving national security, ensuring safe air transportation, reducing factory emissions and enhancing patient's lives all while driving innovation. Our engineers collaboratively design and manufacture the most advanced motion control products, to the highest quality standards, for use in demanding applications. By capitalizing on these core foundational strengths, we believe we have achieved a leadership position in the high performance precision controls market and are "Shaping The Way Our World Moves™."
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By leveraging our engineering heritage and by focusing on customer intimacy to solve our customers' most demanding technical problems, we have been able to expand our control product franchise to multiple markets; organically growing from a high-performance components manufacturer to a high-performance systems designer, manufacturer and integrator. In addition, we continue to expand our content positions on our current platforms, seeking to be the leading supplier in the niche markets we serve. We also look for innovation in all aspects of our business, employing new technologies to improve productivity, while focusing on talent development to strengthen our employee operational performance.
Our fundamental long-term strategies that will help us achieve our financial objectives center around pricing and simplification initiatives. Our pricing initiatives focus on receiving recognition for the value we deliver to our customers across all of our markets. Our simplification initiatives center around 80/20 methodologies and include:
•shaping our product and business portfolio to invest in growth areas and to divest those that no longer fit,
•rationalizing our footprint to align with current and future business levels,
•focusing our factories so that individual manufacturing sites meet the unique needs of a specific market, and
•investing in automation and technologies to improve business operations.
We focus on improving shareholder value through strategic revenue growth, both organic and acquired, improving operating efficiencies and manufacturing initiatives and utilizing low cost manufacturing facilities without compromising quality. Over time, we strive to have a balanced approach to capital allocation in order to maximize shareholder returns. Investing for organic growth through increased capital expenditures is a key opportunity for us within our capital allocation strategy. With the anticipation of several significant programs that will provide long-term revenue growth starting in a few years, our investments in our facilities will continue at elevated levels to ensure we are well prepared for these opportunities. Also, we have repurchased shares opportunistically and remain committed to our dividend policy.
Acquisitions and Divestitures
Acquisitions
On October 20, 2023, we acquired Data Collection Limited ("DCL") based in Auckland, New Zealand for a purchase price, net of acquired cash, of $6 million. DCL specializes in manufacturing and operating pavement surveying equipment and providing innovative solutions for measuring and managing pavements. This operation is included in our Military Aircraft segment.
Divestitures
In 2024, we recorded losses in Asset impairment and fair value adjustment of $15 million related to selling a motors business in the Czech Republic and a hydraulic systems business in Luxembourg that were included in our Industrial segment. As a result, we reclassified $9 million in other current assets and $5 million in accrued liabilities as held for sale at September 28, 2024. We completed the sale of these businesses on September 30, 2024. There has been no significant change to the losses recognized as a result of completing the transactions.
CRITICAL ACCOUNTING POLICIES
On a regular basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements, including revenue recognition on long-term contracts, contract reserves, reserves for inventory valuation, reviews for impairment of goodwill, reviews for impairment of long-lived assets, pension assumptions and income taxes.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 - Basis of Presentation in the Consolidated Condensed Financial Statements included in Item 1, Financial Statements of this report for further information regarding Financial Accounting Standards Board issued ASUs.
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| CONSOLIDATED RESULTS OF OPERATIONS | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| (dollars and shares in millions, except per share data) | December 28, 2024 | December 30, 2023 | $ Variance | % Variance | |||||||||||||
| Net sales | $ | 910 | $ | 857 | $ | 53 | 6 | % | |||||||||
| Gross margin | 26.6 | % | 27.2 | % | |||||||||||||
| Research and development expenses | 24 | 31 | (7) | (23 | %) | ||||||||||||
| Selling, general and administrative expenses as a percentage of sales | 14.0 | % | 13.9 | % | |||||||||||||
| Interest expense | 17 | 17 | — | 2 | % | ||||||||||||
| Restructuring expense | 4 | 2 | 2 | N/M | |||||||||||||
| Other | 2 | 3 | (1) | (44 | %) | ||||||||||||
| Effective tax rate | 22.6 | % | 23.6 | % | |||||||||||||
| Net earnings | $ | 53 | $ | 48 | $ | 5 | 11 | % | |||||||||
| Diluted earnings per share | $ | 1.64 | $ | 1.48 | $ | 0.16 | 11 | % | |||||||||
| Twelve-month backlog | $ | 2,500 | $ | 2,490 | $ | 10 | — | % | |||||||||
Net sales increased in the first quarter of 2025 compared to the first quarter of 2024, driven by demand in Commercial Aircraft and by defense market growth in Military Aircraft and Space and Defense. These increases were partially offset by a decrease in Industrial, driven by the lost sales associated with our portfolio shaping activities.
Gross margin decreased in the first quarter of 2025 compared to the first quarter of 2024, driven by an unfavorable sales mix in Military Aircraft and an out-of-period warranty expense in Commercial Aircraft.
Research and development expenses decreased in the first quarter of 2025 compared to the first quarter of 2024 due to the timing of activities across our segments.
As we continue to simplify our operations, the first quarters of 2025 and 2024 both included charges for various restructuring activities, primarily within Industrial.
The twelve-month backlog in the first quarter of 2025 compared with the first quarter of 2024 was relatively flat. Within Space and Defense, we had higher orders across our satellite programs, as well as across our defense programs. This was partially offset by twelve-month backlog decreases in Industrial and Military Aircraft. The twelve-month backlog in Industrial decreased due to divestitures and weaker foreign currencies. The Military Aircraft twelve-month backlog decrease was due to the unfavorable timing of orders across various OEM programs.
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SEGMENT RESULTS OF OPERATIONS
Operating profit, as presented below, is net sales less cost of sales and other operating expenses, excluding interest expense, equity-based compensation expense, non-service pension expense and other corporate expenses. Cost of sales and other operating expenses are directly identifiable to the respective segment or allocated on the basis of sales, headcount or profit. Operating profit is reconciled to earnings before income taxes in Note 20 - Segments in the Notes to Consolidated Condensed Financial Statements included in this report.
Space and Defense
| Three Months Ended | |||||||||||||||||
| (dollars in millions) | December 28, 2024 | December 30, 2023 | $ Variance | % Variance | |||||||||||||
| Net sales | $ | 248 | $ | 230 | $ | 18 | 8 | % | |||||||||
| Operating profit | $ | 29 | $ | 25 | $ | 3 | 13 | % | |||||||||
| Operating margin | 11.5 | % | 11.0 | % | |||||||||||||
Space and Defense net sales increased in the first quarter of 2025 compared to the first quarter of 2024 driven by higher broad-based demand. In the first quarter of 2025, net sales increased $9 million in each of our defense and space markets. Within our defense market, higher U.S. demand for our component products and the ramp of new defense pursuits serving European needs increased sales. Within our space market, higher demand for satellite components and launch vehicles increased sales.
Operating margin increased in the first quarter of 2025 compared to the first quarter of 2024, driven by sales growth, partially offset by sales mix and investments to prepare for upcoming major programs.
Military Aircraft
| Three Months Ended | |||||||||||||||||
| (dollars in millions) | December 28, 2024 | December 30, 2023 | $ Variance | % Variance | |||||||||||||
| Net sales | $ | 213 | $ | 186 | $ | 27 | 15 | % | |||||||||
| Operating profit | $ | 23 | $ | 20 | $ | 3 | 17 | % | |||||||||
| Operating margin | 10.7 | % | 10.5 | % | |||||||||||||
Military Aircraft net sales increased in the first quarter of 2025 compared to the first quarter of 2024. Sales increased $25 million in military OEM programs, driven by the ramp-up of activity on the FLRAA program and our new production work. Sales also increased $2 million in military aftermarket programs.
Operating margin increased in the first quarter of 2025 compared to the first quarter of 2024, driven by the increased activity on the FLRAA program and lower research and development expenses, partially offset by an unfavorable sales mix.
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Commercial Aircraft
| Three Months Ended | |||||||||||||||||
| (dollars in millions) | December 28, 2024 | December 30, 2023 | $ Variance | % Variance | |||||||||||||
| Net sales | $ | 221 | $ | 194 | $ | 27 | 14 | % | |||||||||
| Operating profit | $ | 24 | $ | 21 | $ | 4 | 17 | % | |||||||||
| Operating margin | 11.0 | % | 10.6 | % | |||||||||||||
Commercial Aircraft net sales increased in the first quarter of 2025 compared to the first quarter of 2024 due to increased demand across our OEM and aftermarket programs. In the first quarter of 2025, commercial aftermarket sales increased $15 million, driven by strong repair activity and by initial provisioning of spares. OEM sales increased $11 million, driven by the timing of orders on certain programs.
Operating margin increased in the first quarter of 2025 compared to the first quarter of 2024, driven by aftermarket sales growth, largely offset by an $8 million out-of-period warranty expense.
Industrial
| Three Months Ended | |||||||||||||||||
| (dollars in millions) | December 28, 2024 | December 30, 2023 | $ Variance | % Variance | |||||||||||||
| Net sales | $ | 228 | $ | 246 | $ | (18) | (7 | %) | |||||||||
| Operating profit | $ | 25 | $ | 29 | $ | (4) | (12 | %) | |||||||||
| Operating margin | 11.2 | % | 11.8 | % | |||||||||||||
Industrial net sales decreased in the first quarter of 2025 compared to the first quarter of 2024, driven by the lost sales associated with our portfolio shaping activities. In the first quarter of 2025, industrial automation sales decreased $20 million, driven by divestitures and lower demand. Sales also decreased $4 million in energy and $2 million in simulation and test. These decreases were partially offset by a sales increase of $9 million in our medical market due to higher demand for our medical device products.
Operating margin decreased in the first quarter of 2025 compared to the first quarter of 2024. The first quarters of 2025 and 2024 included $5 million and $2 million, respectively, of restructuring and other charges. Excluding the net impacts of these charges, adjusted operating margins in the first quarter of 2025 and 2024 were 13.2% and 12.6%, respectively. The resulting increase in adjusted operating margin was primarily due to simplification initiatives.
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LIQUIDITY AND CAPITAL RESOURCES
Consolidated Statements of Cash Flows
| Three Months Ended | |||||||||||
| (dollars in millions) | December 28, 2024 | December 30, 2023 | $ Variance | ||||||||
| Net cash provided (used) by: | |||||||||||
| Operating activities | $ | (132) | $ | 60 | $ | (193) | |||||
| Investing activities | (19) | (43) | 24 | ||||||||
| Financing activities | 163 | 39 | 124 | ||||||||
Operating activities
Net cash provided by operating activities in the first quarter of 2025 decreased compared to the first quarter of 2024. Accounts receivable used $122 million more of cash, driven by pressure from strong collections in the fourth quarter of fiscal year 2024. Customer advances used $65 million more of cash, as we worked down advances in Space and Defense and in Military Aircraft.
Investing activities
Net cash used by investing activities in the first quarter of 2025 included $33 million of capital expenditures and $13 million of proceeds from the sales of businesses.
Net cash used by investing activities in the first quarter of 2024 included $37 million of capital expenditures and $5 million associated with the acquisition of DCL.
Financing activities
Net cash provided by financing activities in the first quarter of 2025 included $230 million of net borrowings on our credit facilities. Financing activities also included $39 million for shares under the repurchase program authorized by the Board of Directors and $9 million of cash dividends.
Net cash provided by financing activities in the first quarter of 2024 included $57 million of net borrowings on our credit facilities. Financing activities also included $9 million of cash dividends.
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General
Cash flows from our operations, together with our various financing arrangements, fund on-going activities, debt service requirements, organic growth, acquisition opportunities and the ability to return capital to shareholders. We believe these sources of funding will be sufficient to meet our cash requirements for the next 12 months and for the foreseeable future thereafter.
At December 28, 2024, our cash balances were $74 million, which includes $64 million held outside of the U.S. by foreign operations. We regularly assess our cash needs, including repatriation of foreign earnings which may be subject to regulatory approvals and withholding taxes, where applicable by law.
Financing Arrangements
In addition to operations, our capital resources include bank credit facilities and an accounts receivable financing program to fund our short and long-term capital requirements. We continuously evaluate various forms of financing to improve our liquidity and position ourselves for future opportunities, which, from time to time, may result in selling debt and equity securities to fund acquisitions or take advantage of favorable market conditions.
We are generally not required to obtain the consent of lenders of the U.S. revolving credit facility before raising significant additional debt financing; however, certain limitations and conditions may apply that would require consent to be obtained. We have demonstrated our ability to secure consents to access debt markets. We have also been successful in accessing equity markets from time to time. We believe that we will be able to obtain additional debt or equity financing as needed.
In the normal course of business, we are exposed to interest rate risk from our long-term debt. To manage these risks, we may enter into derivative instruments such as interest rate swaps which are used to adjust the proportion of total debt that is subject to variable and fixed interest rates.
Our U.S. revolving credit facility, which matures on October 27, 2027, has a capacity of $1.1 billion and also provides an expansion option, which permits us to request an increase of up to $400 million to the credit facility upon satisfaction of certain conditions. The weighted-average interest rate on the outstanding credit facility borrowings was 6.04% and is based on SOFR plus the applicable margin, which was 1.60% at December 28, 2024.
The U.S. revolving credit facility contains various covenants. The minimum for the interest coverage ratio, defined as the ratio of EBITDA to interest expense for the most recent four quarters, is 3.0. The maximum for the leverage ratio, defined as the ratio of net debt to EBITDA for the most recent four quarters, is 4.0. EBITDA is defined in the loan agreement as (i) the sum of net income, interest expense, income taxes, depreciation expense, amortization expense, other non-cash items reducing consolidated net income and non-cash equity-based compensation expenses minus (ii) other non-cash items increasing consolidated net income.
The SECT has a revolving credit facility with a borrowing capacity of $25 million, maturing on October 26, 2026. Interest was 6.60% as of December 28, 2024 and is based on SOFR plus a margin of 2.23%.
We have $500 million aggregate principal amount of 4.25% senior notes due December 15, 2027 with interest paid semiannually on June 15 and December 15 of each year. The senior notes are unsecured obligations, guaranteed on a senior unsecured basis by certain subsidiaries and contain normal incurrence-based covenants and limitations such as the ability to incur additional indebtedness, pay dividends, make other restricted payments and investments, create liens and certain corporate acts such as mergers and consolidations.
At December 28, 2024, we had $515 million of unused capacity, including $492 million from the U.S. revolving credit facility after considering standby letters of credit and other limitations.
Our Receivables Purchase Agreement, which matures on December 11, 2026, allows the Receivables Subsidiary to sell receivables to the Purchasers in amounts up to a $125 million limit so long as certain conditions are satisfied. The receivables are sold to the Purchasers in consideration for the Purchasers making payments of cash. Each Purchaser’s share of capital accrues yield at a variable rate plus an applicable margin, which totaled 5.41% as of December 28, 2024.
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We are in compliance with all covenants under each of our financing arrangements. See Note 4 - Receivables and Note 10 – Indebtedness, of Part I, Item 1, Financial Information of this report for additional details.
Dividends and Common Stock
We believe we can create long term value for our shareholders by continuing to invest in our business through both capital expenditures as well as investments in new market opportunities. We will also continue exploring opportunities to make strategic acquisitions and return capital to shareholders.
We are currently paying quarterly cash dividends on our Class A and Class B common stock and expect to continue to do so for the foreseeable future. See the Consolidated Condensed Statement of Shareholders Equity and Cash Flows, of Part I, Item 1, Financial Information, of this report for additional details.
The Board of Directors authorized a share repurchase program that permits repurchases for both Class A and Class B common stock, and allows us to buy up to an aggregate 3 million common shares. There are approximately 2 million common shares remaining under this authorization. See the Consolidated Condensed Statement of Shareholders Equity and Cash Flows, of Part I, Item 1, Financial Information and Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report for additional details.
Off Balance Sheet Arrangements
We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, results of operations or cash flows.
Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments have not changed materially from the disclosures in our Annual Report on Form 10-K for the year ended September 28, 2024. See Note 7 - Leases, Note 10 - Indebtedness, Note 15 - Employee Benefit Plans and Note 22 - Commitments and Contingencies, of Part I, Item 1, Financial Information, of this report for additional details.
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ECONOMIC CONDITIONS AND MARKET TRENDS
We operate within the aerospace and defense and industrial markets.
Our aerospace and defense businesses represented 73% of our 2024 sales. Our defense market, which represented 51% of our 2024 sales, is directly affected by defense funding levels and product demand, which have recently increased. Our commercial aircraft market, which represented 22% of our 2024 sales, is aligning with our customers' current plans.
Within our industrial markets, which represented 27% of our 2024 sales, our programs benefited from increased order demand within industrial automation, simulation and test and energy markets.
A common factor throughout our markets is the continuing demand for technologically advanced products.
Aerospace and Defense
Within aerospace and defense, we serve three end markets: defense, commercial aircraft and space.
The defense market is dependent on military spending for development and production programs. We have a growing development program order book for future generation aircraft and turret programs, and we strive to embed our technologies within these high-performance military programs of the future, including the Textron Bell FLRAA. Aircraft production programs are typically long-term in nature, offering predictable capacity needs and future revenues. We maintain positions on numerous high priority programs, including the Lockheed Martin F-35 Lightning II. The large installed base of our products leads to attractive aftermarket sales and service opportunities. The tactical and strategic missile, missile defense and defense controls markets are dependent on many of the same market conditions as military aircraft, including overall military spending and program funding levels. At times when there are perceived threats to national security, U.S. and European defense spending can increase; at other times, defense spending can decrease. Future levels of defense spending have increased in the near-term given the current global tensions, and are subject to governmental approvals.
The commercial OEM aircraft market depends on a number of factors, including both the last decade's increasing global demand for air travel and increasing fuel prices. Both factors contributed to the demand for new, more fuel-efficient aircraft with lower operating costs that led to large production backlogs for Boeing and Airbus. Boeing and Airbus are producing widebody aircraft at rates to support the current air traffic volumes, as well as working through their current supply-chain challenges. Any adjustments to their ramp schedules affects the timing of the demand for our flight control systems.
The commercial aftermarket is driven by usage and the age of the existing aircraft fleet for passenger and cargo aircraft, which drives the need for maintenance and repairs. We have seen higher demand levels for our maintenance services and spare parts due to the increased number of flight hours across existing fleets.
The space market is comprised of three customer markets: the civil market, the U.S. Department of Defense market and the commercial space market. The civil market, namely NASA, is driven by investment for commercial and exploration activities, including NASA's return to the moon. The U.S. Department of Defense market is driven by governmental-authorized levels of defense spending, including funding for defense-related satellite and space vehicle technologies. Levels of U.S. defense spending could increase as there is growing emphasis on space as the next frontier of potential future conflicts. The commercial space market is driven by demand for small satellites, which offer new innovative space applications. Trends for this market, as well as for commercial launch vehicles, follow demand for increased capacity. Our launch vehicle and satellite components and systems will continue to benefit from increased investments in these markets.
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Industrial
Within industrial, we serve two end markets: industrial and medical. The industrial market consists of industrial automation products, simulation and test products and energy generation and exploration products. The medical market consists of medical devices and medical components products.
The industrial market we serve with our industrial automation products is influenced by several factors including capital investment levels, the pace of product and technology innovation, economic conditions and cost-reduction efforts. Our industrial automation customers mainly serve the automotive market.
Our simulation and test products operate in markets that were largely affected by the same factors and investment challenges as our commercial aircraft market. However, we have seen stronger order demand for flight simulation systems as the airline training market recovers in line with domestic and foreign flight hours.
Our energy generation and exploration products operate in a market that is influenced by changing oil and natural gas prices, global urbanization and the resulting change in supply and demand for global energy. Historically, drivers for global growth include investments in power generation infrastructure and exploration of new oil and gas resources.
The medical market we serve, in general, is influenced by economic conditions, regulatory environments, hospital and outpatient clinic spending on equipment, population demographics, medical advances, patient demands and the need for precision control components and systems. Advances in medical technology and treatments have resulted in the greater need for medical services, which drive the demand for our medical devices and components programs.
Foreign Currencies
We are affected by the movement of foreign currencies compared to the U.S. dollar. About one-sixth of our 2024 sales were denominated in foreign currencies. During the first three months of 2025, average foreign currency rates generally were the same against the U.S. dollar compared to 2024. The translation of the results of our foreign subsidiaries into U.S. dollars had no material impact on sales compared to the same period one year ago.
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Cautionary Statement
Information included or incorporated by reference in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by words such as: “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume,” “assume” and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology). These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, are neither historical facts nor guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements.
Although it is not possible to create a comprehensive list of all factors that may cause our actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the Securities and Exchange Commission (“SEC”) and include, but are not limited to, risks relating to: (i) our operation in highly competitive markets with competitors who may have greater resources than we possess; (ii) our operation in cyclical markets that are sensitive to domestic and foreign economic conditions and events; (iii) our heavy dependence on government contracts that may not be fully funded or may be terminated; (iv) supply chain constraints and inflationary impacts on prices for raw materials and components used in our products; (v) failure of our subcontractors or suppliers to perform their contractual obligations; and (vi) our accounting estimations for over-time contracts and any changes we need to make thereto. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.
While we believe we have identified and discussed in our SEC filings the material risks affecting our business, there may be additional factors, risks and uncertainties not currently known to us or that we currently consider immaterial that may affect the forward-looking statements we make herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking statement made in this report, except as required by applicable law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Refer to the Company’s Annual Report on Form 10-K for the year ended September 28, 2024 for a complete discussion of our market risk. There have been no material changes in the current year regarding this market risk information.
Item 4. Controls and Procedures.
(a)Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective as of December 28, 2024 to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
(b)Changes in Internal Control over Financial Reporting. There have been no changes during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1A. Risk Factors.
Refer to the Company’s Annual Report on Form 10-K for the year ended September 28, 2024 for a complete discussion of our risk factors. There have been no material changes in the current year regarding our risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c)The following table summarizes our purchases of our common stock for the quarter ended December 28, 2024.
| Period | (a) Total Number of Shares Purchased (1) (2)(3) | (b) Average Price Paid Per Share (4) | (c) Total number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) | (d) Maximum Number (or Approx. Dollar Value) of Shares that May Yet Be Purchased Under Plans or Programs (3) | ||||||||||||||||||||||
| September 29, 2024 - November 2, 2024 | 15,918 | $ | 203.55 | — | 2,172,081 | |||||||||||||||||||||
| November 3, 2024 - November 30, 2024 | 90,734 | 213.78 | — | 2,172,081 | ||||||||||||||||||||||
| December 1, 2024 - December 28, 2024 | 229,328 | 195.42 | 220,983 | 1,951,098 | ||||||||||||||||||||||
| Total | 335,980 | $ | 200.76 | 220,983 | 1,951,098 | |||||||||||||||||||||
(1)Reflects purchases by the SECT of shares of Class B common stock from the ESPP, the RSP and from equity-based compensation award recipients under right of first refusal terms at average prices as follows: 15,632 shares at $203.82 in October, 16,616 shares at $214.59 in November and 6,237 shares at $214.13 in December.
(2)In connection with the exercise of equity-based compensation awards, we accept delivery of shares to pay for the exercise price and withhold shares for tax withholding obligations at average prices as follows: In October, we accepted delivery of 286 Class A shares at $188.35. In November, we accepted delivery of 2,743 Class A shares at $224.42 and 27,422 Class B shares at $210.35. In December, we accepted delivery of 95 Class A shares at $196.88 and 867 Class B shares at $209.41. In connection with the issuance of equity-based awards, we purchased 43,953 Class B shares at $214.95 per share from the SECT in November and 1,146 Class B shares at $189.87 in December.
(3)The Board of Directors has authorized a share repurchase program that permits the purchase of up to 3 million common shares of Class A or Class B common stock in open market or privately negotiated transactions at the discretion of management. In December we purchased 220,983 Class A shares at an average price of $194.86.
(4)Excludes 1% excise tax accrued pursuant to the Inflation Reduction Act of 2022.
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Item 6. Exhibits.
| (a) | Exhibits | |||||||||||||
| TVA Form of Agreement | ||||||||||||||
| Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||
| Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||
| Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||
| 101 | Interactive Date files (submitted electronically herewith) | |||||||||||||
| (101.INS) | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||
| (101.SCH) | XBRL Taxonomy Extension Schema Document | |||||||||||||
| (101.CAL) | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||
| (101.DEF) | XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||
| (101.LAB) | XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||
| (101.PRE) | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101. | |||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Moog Inc. | |||||||||||||||||
| (Registrant) | |||||||||||||||||
| Date: | January 24, 2025 | By | /s/ Pat Roche | ||||||||||||||
| Pat Roche | |||||||||||||||||
Chief Executive Officer (Principal Executive Officer) | |||||||||||||||||
| Date: | January 24, 2025 | By | /s/ Jennifer Walter | ||||||||||||||
| Jennifer Walter | |||||||||||||||||
Chief Financial Officer (Principal Financial Officer) | |||||||||||||||||
| Date: | January 24, 2025 | By | /s/ Nicholas Hart | ||||||||||||||
| Nicholas Hart | |||||||||||||||||
| Controller (Principal Accounting Officer) | |||||||||||||||||
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