Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 202230, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________  to _________

Commission file number 1-05129
MOOG Inc.
(Exact name of registrant as specified in its charter)
New York16-0757636
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
400 Jamison RoadEast Aurora,New York14052-0018
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A common stockMOG.ANew York Stock Exchange
Class B common stockMOG.BNew York Stock Exchange

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   



Table of Contents
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.
Large accelerated filerAccelerated 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 23, 202322, 2024 was:
Class A commoncommon stock, 28,715,56328,753,750 shares
Class B common stock, 3,130,9933,202,563 shares


Table of Contents

moogimage2a16.jpg
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PAGE




Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
moogimage2a16.jpg
Consolidated Condensed Statements of Earnings
(Unaudited)
Three Months EndedThree Months Ended
(dollars in thousands, except share and per share data)(dollars in thousands, except share and per share data)December 31,
2022
January 1,
2022
(dollars in thousands, except share and per share data)December 30,
2023
December 31,
2022
Net salesNet sales$760,103 $724,086 Net sales$856,850 $760,103 
Cost of salesCost of sales556,417 529,706 Cost of sales623,651 556,417 
Inventory write-down— 1,500 
Gross profitGross profit203,686 192,880 Gross profit233,199 203,686 
Research and developmentResearch and development23,862 27,708 Research and development30,579 23,862 
Selling, general and administrativeSelling, general and administrative113,165 111,797 Selling, general and administrative118,725 113,165 
InterestInterest13,132 7,982 Interest16,694 13,132 
RestructuringRestructuring1,078 — Restructuring1,889 1,078 
Gain on sale of businesses— (16,146)
Gain on sale of buildingsGain on sale of buildings(9,503)— Gain on sale of buildings— (9,503)
OtherOther1,651 116 Other2,701 1,651 
Earnings before income taxesEarnings before income taxes60,301 61,423 Earnings before income taxes62,611 60,301 
Income taxesIncome taxes14,285 15,158 Income taxes14,799 14,285 
Net earningsNet earnings$46,016 $46,265 Net earnings$47,812 $46,016 
Net earnings per shareNet earnings per shareNet earnings per share
BasicBasic$1.45 $1.44 Basic$1.50 $1.45 
DilutedDiluted$1.44 $1.44 Diluted$1.48 $1.44 
Average common shares outstanding
Weighted average common shares outstandingWeighted average common shares outstanding
BasicBasic31,746,001 32,057,399 Basic31,902,101 31,746,001 
DilutedDiluted31,874,718 32,188,158 Diluted32,249,313 31,874,718 
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.


4

Table of Contents
Image2.jpg
Consolidated Condensed Statements of Comprehensive Income
(Unaudited)
Three Months EndedThree Months Ended
(dollars in thousands)(dollars in thousands)December 31,
2022
January 1,
2022
(dollars in thousands)December 30,
2023
December 31,
2022
Net earningsNet earnings$46,016 $46,265 Net earnings$47,812 $46,016 
Other comprehensive income (loss) ("OCI"), net of tax:
Other comprehensive income ("OCI"), net of tax:Other comprehensive income ("OCI"), net of tax:
Foreign currency translation adjustmentForeign currency translation adjustment50,735 (6,560)Foreign currency translation adjustment31,013 50,735 
Retirement liability adjustmentRetirement liability adjustment1,199 4,090 Retirement liability adjustment1,678 1,199 
Change in accumulated income on derivatives1,919 135 
Other comprehensive income (loss), net of tax53,853 (2,335)
Change in accumulated loss on derivativesChange in accumulated loss on derivatives318 1,919 
Other comprehensive income, net of taxOther comprehensive income, net of tax33,009 53,853 
Comprehensive incomeComprehensive income$99,869 $43,930 Comprehensive income$80,821 $99,869 
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.


5

Table of Contents
Image3.jpg
Consolidated Condensed Balance Sheets
(Unaudited)
(dollars in thousands)(dollars in thousands)December 31,
2022
October 1,
2022
(dollars in thousands)December 30,
2023
September 30,
2023
ASSETSASSETSASSETS
Current assetsCurrent assetsCurrent assets
Cash and cash equivalentsCash and cash equivalents$143,069 $103,895 Cash and cash equivalents$126,398 $68,959 
Restricted cashRestricted cash22,842 15,338 Restricted cash430 185 
Receivables, netReceivables, net1,066,340 990,262 Receivables, net381,609 434,723 
Unbilled receivablesUnbilled receivables760,561 706,601 
Inventories, netInventories, net648,160 588,466 Inventories, net788,040 724,002 
Prepaid expenses and other current assetsPrepaid expenses and other current assets52,772 60,349 Prepaid expenses and other current assets59,577 50,862 
Total current assetsTotal current assets1,933,183 1,758,310 Total current assets2,116,615 1,985,332 
Property, plant and equipment, netProperty, plant and equipment, net689,339 668,908 Property, plant and equipment, net842,682 814,696 
Operating lease right-of-use assetsOperating lease right-of-use assets68,653 69,072 Operating lease right-of-use assets59,489 56,067 
GoodwillGoodwill822,901 805,320 Goodwill833,413 821,301 
Intangible assets, netIntangible assets, net85,396 85,410 Intangible assets, net72,663 71,637 
Deferred income taxesDeferred income taxes9,300 8,630 Deferred income taxes9,284 8,749 
Other assetsOther assets49,273 36,191 Other assets53,809 50,254 
Total assetsTotal assets$3,658,045 $3,431,841 Total assets$3,987,955 $3,808,036 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilitiesCurrent liabilitiesCurrent liabilities
Current installments of long-term debt$822 $916 
Accounts payableAccounts payable226,188 232,104 Accounts payable$261,155 $264,573 
Accrued compensationAccrued compensation76,770 93,141 Accrued compensation64,099 111,154 
Contract advances372,262 296,899 
Contract advances and progress billingsContract advances and progress billings445,706 377,977 
Accrued liabilities and otherAccrued liabilities and other209,624 215,376 Accrued liabilities and other238,871 211,769 
Total current liabilitiesTotal current liabilities885,666 838,436 Total current liabilities1,009,831 965,473 
Long-term debt, excluding current installmentsLong-term debt, excluding current installments916,058 836,872 Long-term debt, excluding current installments920,103 863,092 
Long-term pension and retirement obligationsLong-term pension and retirement obligations146,919 140,602 Long-term pension and retirement obligations160,825 157,455 
Deferred income taxesDeferred income taxes65,385 63,527 Deferred income taxes35,214 37,626 
Other long-term liabilitiesOther long-term liabilities118,836 115,591 Other long-term liabilities154,765 148,303 
Total liabilitiesTotal liabilities2,132,864 1,995,028 Total liabilities2,280,738 2,171,949 
Shareholders’ equityShareholders’ equityShareholders’ equity
Common stock - Class ACommon stock - Class A43,807 43,807 Common stock - Class A43,826 43,822 
Common stock - Class BCommon stock - Class B7,473 7,473 Common stock - Class B7,454 7,458 
Additional paid-in capitalAdditional paid-in capital550,511 516,123 Additional paid-in capital673,261 608,270 
Retained earningsRetained earnings2,397,814 2,360,055 Retained earnings2,536,172 2,496,979 
Treasury sharesTreasury shares(1,055,735)(1,047,012)Treasury shares(1,065,654)(1,057,938)
Stock Employee Compensation TrustStock Employee Compensation Trust(89,689)(73,602)Stock Employee Compensation Trust(146,373)(114,769)
Supplemental Retirement Plan TrustSupplemental Retirement Plan Trust(71,811)(58,989)Supplemental Retirement Plan Trust(119,869)(93,126)
Accumulated other comprehensive lossAccumulated other comprehensive loss(257,189)(311,042)Accumulated other comprehensive loss(221,600)(254,609)
Total shareholders’ equityTotal shareholders’ equity1,525,181 1,436,813 Total shareholders’ equity1,707,217 1,636,087 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$3,658,045 $3,431,841 Total liabilities and shareholders’ equity$3,987,955 $3,808,036 
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.

6

Table of Contents
Image4.jpg
Consolidated Condensed Statements of Shareholders' Equity
(Unaudited)

Three Months Ended Three Months Ended
(dollars in thousands)(dollars in thousands)December 31,
2022
January 1,
2022
(dollars in thousands)December 30,
2023
December 31,
2022
COMMON STOCKCOMMON STOCKCOMMON STOCK
Beginning and end of periodBeginning and end of period$51,280 $51,280 Beginning and end of period$51,280 $51,280 
ADDITIONAL PAID-IN CAPITALADDITIONAL PAID-IN CAPITALADDITIONAL PAID-IN CAPITAL
Beginning of periodBeginning of period516,123 509,622 Beginning of period608,270 516,123 
Issuance of treasury sharesIssuance of treasury shares2,228 1,755 Issuance of treasury shares2,160 2,228 
Equity-based compensation expenseEquity-based compensation expense2,443 2,405 Equity-based compensation expense3,454 2,443 
Adjustment to market - SECT and SERPAdjustment to market - SECT and SERP29,717 5,075 Adjustment to market - SECT and SERP59,377 29,717 
End of periodEnd of period550,511 518,857 End of period673,261 550,511 
RETAINED EARNINGSRETAINED EARNINGSRETAINED EARNINGS
Beginning of periodBeginning of period2,360,055 2,237,848 Beginning of period2,496,979 2,360,055 
Net earningsNet earnings46,016 46,265 Net earnings47,812 46,016 
Dividends (1)
Dividends (1)
(8,257)(8,031)
Dividends (1)
(8,619)(8,257)
End of periodEnd of period2,397,814 2,276,082 End of period2,536,172 2,397,814 
TREASURY SHARES AT COSTTREASURY SHARES AT COSTTREASURY SHARES AT COST
Beginning of periodBeginning of period(1,047,012)(1,007,506)Beginning of period(1,057,938)(1,047,012)
Class A and B shares issued related to compensationClass A and B shares issued related to compensation1,724 1,077 Class A and B shares issued related to compensation995 1,724 
Class A and B shares purchasedClass A and B shares purchased(10,447)(16,657)Class A and B shares purchased(8,711)(10,447)
End of periodEnd of period(1,055,735)(1,023,086)End of period(1,065,654)(1,055,735)
STOCK EMPLOYEE COMPENSATION TRUST ("SECT")STOCK EMPLOYEE COMPENSATION TRUST ("SECT")STOCK EMPLOYEE COMPENSATION TRUST ("SECT")
Beginning of periodBeginning of period(73,602)(79,776)Beginning of period(114,769)(73,602)
Issuance of sharesIssuance of shares2,561 2,075 Issuance of shares5,001 2,561 
Purchase of sharesPurchase of shares(1,753)(2,275)Purchase of shares(3,971)(1,753)
Adjustment to marketAdjustment to market(16,895)(2,745)Adjustment to market(32,634)(16,895)
End of periodEnd of period(89,689)(82,721)End of period(146,373)(89,689)
SUPPLEMENTAL RETIREMENT PLAN ("SERP") TRUSTSUPPLEMENTAL RETIREMENT PLAN ("SERP") TRUSTSUPPLEMENTAL RETIREMENT PLAN ("SERP") TRUST
Beginning of periodBeginning of period(58,989)(63,764)Beginning of period(93,126)(58,989)
Adjustment to marketAdjustment to market(12,822)(2,330)Adjustment to market(26,743)(12,822)
End of periodEnd of period(71,811)(66,094)End of period(119,869)(71,811)
ACCUMULATED OTHER COMPREHENSIVE LOSSACCUMULATED OTHER COMPREHENSIVE LOSSACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning of periodBeginning of period(311,042)(247,560)Beginning of period(254,609)(311,042)
Other comprehensive income (loss)53,853 (2,335)
Other comprehensive incomeOther comprehensive income33,009 53,853 
End of periodEnd of period(257,189)(249,895)End of period(221,600)(257,189)
TOTAL SHAREHOLDERS’ EQUITYTOTAL SHAREHOLDERS’ EQUITY$1,525,181 $1,424,423 TOTAL SHAREHOLDERS’ EQUITY$1,707,217 $1,525,181 
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.
(1) Cash dividends were $0.26$0.27 per share for the three months ended December 31, 202230, 2023 and $0.25$0.26 per share for three months ended January 1,December 31, 2022.
7

Table of Contents
Image5.jpg
Consolidated Condensed Statements of Shareholders’ Equity, Shares
(Unaudited)
Three Months Ended Three Months Ended
(share data)(share data)December 31,
2022
January 1,
2022
(share data)December 30,
2023
December 31,
2022
COMMON STOCK - CLASS ACOMMON STOCK - CLASS ACOMMON STOCK - CLASS A
Beginning and end of period43,806,835 43,803,236 
Beginning of periodBeginning of period43,822,344 43,806,835 
Conversion of Class B to Class AConversion of Class B to Class A3,573 — 
End of periodEnd of period43,825,917 43,806,835 
COMMON STOCK - CLASS BCOMMON STOCK - CLASS BCOMMON STOCK - CLASS B
Beginning and end of period7,472,878 7,476,477 
Beginning of periodBeginning of period7,457,369 7,472,878 
Conversion of Class B to Class AConversion of Class B to Class A(3,573)— 
End of periodEnd of period7,453,796 7,472,878 
TREASURY SHARES - CLASS A COMMON STOCKTREASURY SHARES - CLASS A COMMON STOCKTREASURY SHARES - CLASS A COMMON STOCK
Beginning of periodBeginning of period(14,614,444)(14,157,721)Beginning of period(14,657,897)(14,614,444)
Class A shares issued related to compensationClass A shares issued related to compensation35,550 22,042 Class A shares issued related to compensation18,411 35,550 
Class A shares purchasedClass A shares purchased(87,614)(190,439)Class A shares purchased(7,533)(87,614)
End of periodEnd of period(14,666,508)(14,326,118)End of period(14,647,019)(14,666,508)
TREASURY SHARES - CLASS B COMMON STOCKTREASURY SHARES - CLASS B COMMON STOCKTREASURY SHARES - CLASS B COMMON STOCK
Beginning of periodBeginning of period(3,020,291)(3,179,055)Beginning of period(2,896,845)(3,020,291)
Class B shares issued related to compensationClass B shares issued related to compensation72,740 58,338 Class B shares issued related to compensation64,263 72,740 
Class B shares purchasedClass B shares purchased(44,350)(33,550)Class B shares purchased(59,112)(44,350)
End of periodEnd of period(2,991,901)(3,154,267)End of period(2,891,694)(2,991,901)
SECT - CLASS A COMMON STOCKSECT - CLASS A COMMON STOCKSECT - CLASS A COMMON STOCK
Beginning and end of periodBeginning and end of period(425,148)(425,148)Beginning and end of period(425,148)(425,148)
SECT - CLASS B COMMON STOCKSECT - CLASS B COMMON STOCKSECT - CLASS B COMMON STOCK
Beginning of periodBeginning of period(611,942)(600,880)Beginning of period(592,128)(611,942)
Issuance of sharesIssuance of shares30,069 25,000 Issuance of shares37,308 30,069 
Purchase of sharesPurchase of shares(20,727)(27,827)Purchase of shares(29,780)(20,727)
End of periodEnd of period(602,600)(603,707)End of period(584,600)(602,600)
SERP - CLASS B COMMON STOCKSERP - CLASS B COMMON STOCKSERP - CLASS B COMMON STOCK
Beginning and end of periodBeginning and end of period(826,170)(826,170)Beginning and end of period(826,170)(826,170)
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.

8

Table of Contents
Image6.jpg
Consolidated Condensed Statements of Cash Flows
(Unaudited)

Three Months EndedThree Months Ended
(dollars in thousands)(dollars in thousands)December 31,
2022
January 1,
2022
(dollars in thousands)December 30,
2023
December 31,
2022
CASH FLOWS FROM OPERATING ACTIVITIESCASH FLOWS FROM OPERATING ACTIVITIESCASH FLOWS FROM OPERATING ACTIVITIES
Net earningsNet earnings$46,016 $46,265 Net earnings$47,812 $46,016 
Adjustments to reconcile net earnings to net cash provided by operating activities:Adjustments to reconcile net earnings to net cash provided by operating activities:Adjustments to reconcile net earnings to net cash provided by operating activities:
DepreciationDepreciation18,392 19,290 Depreciation20,927 18,392 
AmortizationAmortization2,992 3,402 Amortization2,720 2,992 
Deferred income taxesDeferred income taxes(1,342)7,895 Deferred income taxes(4,547)(1,342)
Equity-based compensation expenseEquity-based compensation expense2,974 2,658 Equity-based compensation expense4,165 2,974 
Gain on sale of businesses— (16,146)
Gain on sale of buildingsGain on sale of buildings(9,503)— Gain on sale of buildings— (9,503)
Inventory write-down— 1,500 
OtherOther1,145 699 Other(2,478)1,145 
Changes in assets and liabilities providing (using) cash:Changes in assets and liabilities providing (using) cash:Changes in assets and liabilities providing (using) cash:
ReceivablesReceivables(53,957)38,941 Receivables58,887 (27,387)
Unbilled receivablesUnbilled receivables(51,015)(26,570)
InventoriesInventories(44,435)7,179 Inventories(46,852)(44,435)
Accounts payableAccounts payable(9,679)(20,833)Accounts payable(5,752)(9,679)
Contract advances72,889 105,548 
Contract advances and progress billingsContract advances and progress billings64,171 72,889 
Accrued expensesAccrued expenses(35,186)(26,914)Accrued expenses(31,814)(35,186)
Accrued income taxesAccrued income taxes12,632 5,173 Accrued income taxes12,324 12,632 
Net pension and post retirement liabilitiesNet pension and post retirement liabilities3,988 4,501 Net pension and post retirement liabilities2,957 3,988 
Other assets and liabilitiesOther assets and liabilities1,157 (21,973)Other assets and liabilities(11,114)1,157 
Net cash provided by operating activitiesNet cash provided by operating activities8,083 157,185 Net cash provided by operating activities60,391 8,083 
CASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquiredAcquisitions of businesses, net of cash acquired(5,212)— 
Purchase of property, plant and equipmentPurchase of property, plant and equipment(30,125)(37,059)Purchase of property, plant and equipment(37,416)(30,125)
Net proceeds from businesses soldNet proceeds from businesses sold1,124 38,611 Net proceeds from businesses sold— 1,124 
Net proceeds from buildings soldNet proceeds from buildings sold7,432 — Net proceeds from buildings sold— 7,432 
Other investing transactionsOther investing transactions(3,724)(1,275)Other investing transactions(479)(3,724)
Net cash provided (used) by investing activities(25,293)277 
Net cash used by investing activitiesNet cash used by investing activities(43,107)(25,293)
CASH FLOWS FROM FINANCING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving lines of creditProceeds from revolving lines of credit241,000 215,200 Proceeds from revolving lines of credit279,500 241,000 
Payments on revolving lines of creditPayments on revolving lines of credit(160,300)(263,476)Payments on revolving lines of credit(223,000)(160,300)
Payments on long-term debtPayments on long-term debt(93)(80,060)Payments on long-term debt— (93)
Payments on finance lease obligationsPayments on finance lease obligations(884)(505)Payments on finance lease obligations(1,286)(884)
Payment of dividendsPayment of dividends(8,257)(8,031)Payment of dividends(8,619)(8,257)
Proceeds from sale of treasury stockProceeds from sale of treasury stock1,869 2,144 Proceeds from sale of treasury stock581 1,869 
Purchase of outstanding shares for treasuryPurchase of outstanding shares for treasury(12,721)(16,657)Purchase of outstanding shares for treasury(8,711)(12,721)
Proceeds from sale of stock held by SECTProceeds from sale of stock held by SECT2,561 2,075 Proceeds from sale of stock held by SECT5,001 2,561 
Purchase of stock held by SECTPurchase of stock held by SECT(1,753)(2,275)Purchase of stock held by SECT(4,561)(1,753)
Other financing transactionsOther financing transactions(2,026)— Other financing transactions— (2,026)
Net cash provided (used) by financing activities59,396 (151,585)
Net cash provided by financing activitiesNet cash provided by financing activities38,905 59,396 
Effect of exchange rate changes on cashEffect of exchange rate changes on cash4,492 (65)Effect of exchange rate changes on cash1,495 4,492 
Increase in cash, cash equivalents and restricted cashIncrease in cash, cash equivalents and restricted cash46,678 5,812 Increase in cash, cash equivalents and restricted cash57,684 46,678 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period119,233 100,914 Cash, cash equivalents and restricted cash at beginning of period69,144 117,328 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$165,911 $106,726 Cash, cash equivalents and restricted cash at end of period$126,828 $164,006 
SUPPLEMENTAL CASH FLOW INFORMATIONSUPPLEMENTAL CASH FLOW INFORMATIONSUPPLEMENTAL CASH FLOW INFORMATION
Treasury shares issued as compensationTreasury shares issued as compensation$1,532 $688 Treasury shares issued as compensation$2,574 $1,532 
Equipment and property acquired through lease financing5,970 8,755 
Assets acquired through lease financingAssets acquired through lease financing7,845 5,970 
See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.See accompanying Notes to Consolidated Condensed Financial Statements.
9

Table of Contents
Image7.jpg
Notes to Consolidated Condensed Financial Statements
Three Months Ended December 31, 202230, 2023
(Unaudited)
(dollars in thousands, except per share data)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The results of operations for the three months ended December 31, 202230, 2023 are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K for the fiscal year ended October 1, 2022.September 30, 2023. All references to years in these financial statements are to fiscal years.
Effective October 1, 2023, we made changes to our segment reporting structure that resulted in four reporting segments. Our former Aircraft Controls segment has been separated into Military Aircraft and Commercial Aircraft. The Goodwill, Restructuring and Segment footnotes have been restated to reflect this change.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year's presentation, which management does not consider to be material.presentation.

Recent Accounting Pronouncements Adopted

There have been no new accounting pronouncements adopted for the three months ended December 31, 2022.30, 2023.

Recent Accounting Pronouncements Not Yet Adopted
StandardDescriptionFinancial 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 annual periods 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

We consider the applicability and impact of all Accounting Standard Updates ("ASU"). ASUs not listed above were assessed and determined to be either not applicable, or had or are expected to have an immaterial impact on our financial statements and related disclosures.

10

Table of Contents
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.

Revenue is recognized using either the over time using the cost-to-cost method, or point in time method. The over-time method of revenue recognition is predominantly used in Aircraft Controls and Space and Defense, Controls.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.

11

Table of Contents
Revenue recognized at the point in time control is transferred to the customer is used most frequently in Industrial Systems.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. contracts. For the three months ended December 31, 202230, 2023 and January 1,December 31, 2022 we recognized lower revenue of $4,300$95 and additional revenue of $10,978,$4,300, respectively, 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 31, 2022.30, 2023.

As of December 31, 2022,30, 2023, we had contract reserves of $43,739.$54,553. For contracts with anticipated losses at completion, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations that are treated as period expenses. Loss reserves are more common on firm fixed-price contracts that involve, to varying degrees, the design and development of new and unique controls or control systems to meet the customers’ specifications. In accordance with ASC 606, 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

Table of Contents
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. TheseUnbilled receivables are includedclassified as Receivables oncurrent assets and in accordance with industry practice, include amounts that may be billed and collected beyond one year due to the Consolidated Condensed Balance Sheets. 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 (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 31,
2022
October 1, 2022December 30,
2023
September 30, 2023
Unbilled receivablesUnbilled receivables$645,234 $614,760 Unbilled receivables$760,561 $706,601 
Contract advances372,262 296,899 
Contract advances and progress billingsContract advances and progress billings445,706 377,977 
Net contract assetsNet contract assets$272,972 $317,861 Net contract assets$314,855 $328,624 

The increase in contract assets reflects the net impact of additional unbilled revenues recorded in excess of revenue recognized during the period. The increase in contract liabilities reflects the net impact of additional deferred revenues recorded in excess of revenue recognized during the period. For the three months ended December 31, 2022,30, 2023, we recognized $88,799 of$97,705 of revenue, that was included in the contract liability balance at the beginning of the period.year.

Remaining Performance Obligations
As of December 31, 2022,30, 2023, the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) was $5,200,000.$5,300,000. We expect to recognize approximately 44%47% 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.
13

Table of Contents
Note 3 - Acquisitions and Divestitures

Acquisitions

On February 21, 2022,October 20, 2023, we acquired TEAM AccessoriesData Collection Limited ("TEAM"DCL") based in Dublin, IrelandAuckland, New Zealand for a purchase price, net of acquired cash, of $14,885,$5,882, consisting of $11,832$5,212 in cash and contingent consideration with an initial fair valuea working capital adjustment to be paid of $3,053. TEAMapproximately $670. DCL specializes in Maintenance, Repairmanufacturing and Overhaul of engineoperating pavement surveying equipment and airframe components.providing innovative solutions for measuring and managing pavements. This operation is included in our Military Aircraft Controls segment. The purchase price allocation is subject to adjustments as we obtain additional information for our estimates during the measurement period.

Divestitures
On September 30, 2022, we sold a sonar business based in the United Kingdom previously included in our Industrial Systems segment. We have cumulatively received net proceeds of $13,075 and recorded a loss of $15,246, net of transaction costs. An immaterial adjustment to the loss was recorded during the three months ended December 31, 2022.
On September 20, 2022, we sold assets of a security business based in Northbrook, Illinois previously included in our Space and Defense Controls segment. We have cumulatively received net proceeds of $9,273$13,075 and recorded a loss of $4,112,$15,246, net of transaction costs. The losstransaction is subject to adjustments associated with amounts currently held in escrow.

On December 3, 2021, we sold the assets of our Navigation Aids ("NAVAIDS") business based in Salt Lake City, Utah previously included in our Military Aircraft Controls segment to THALESThales USA Inc. We have cumulatively received net proceeds of $36,550 and recorded a gain of $16,146,$15,242, net of transaction costs. The gaintransaction is subject to adjustments associated with amounts currently held in escrow.

1314

Table of Contents
Note 4 - Receivables
Receivables consist of:
December 31,
2022
October 1,
2022
December 30,
2023
September 30,
2023
Accounts receivableAccounts receivable$399,705 $363,137 Accounts receivable$369,853 $426,804 
Unbilled receivables645,234 614,760 
OtherOther26,149 16,973 Other15,467 11,929 
Less allowance for credit lossesLess allowance for credit losses(4,748)(4,608)Less allowance for credit losses(3,711)(4,010)
Receivables, netReceivables, net$1,066,340 $990,262 Receivables, net$381,609 $434,723 
On December 13, 2023, 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 anthe Third Amendment to the Amended and Restated Receivables Purchase Agreement (the "RPA"). The RPA matures onamendment increased the capacity from $100,000 to $125,000 and extended the maturity date from November 4, 2024 andto December 11, 2026. The RPA 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 $100,000$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. We also provided a performance guarantee for the benefit of the Purchaser.

The proceeds of the RPA are classified as operating activities in our Consolidated Condensed StatementStatements of Cash Flows and were used to pay off the outstanding balance of the Securitization Program.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 $115,042$148,827 and $123,827 for thethe three months ended December 31, 2022. 30, 2023, 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 lossloss on sale of receivables was recorded.

As of December 31, 2022,30, 2023, the amount sold to the Purchasers was $100,000,$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 $730,504$583,838 at December 31, 2022.30, 2023.

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.
1415


Note 5 - Inventories
Inventories, net of reserves, consist of:
December 31,
2022
October 1,
2022
December 30,
2023
September 30,
2023
Raw materials and purchased partsRaw materials and purchased parts$250,228 $219,893 Raw materials and purchased parts$292,483 $270,305 
Work in progressWork in progress325,718 305,328 Work in progress405,599 368,277 
Finished goodsFinished goods72,214 63,245 Finished goods89,958 85,420 
Inventories, netInventories, net$648,160 $588,466 Inventories, net$788,040 $724,002 
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 31, 202230, 2023 and October 1, 2022.September 30, 2023.
Note 6 - Property, Plant and Equipment
Property, plant and equipment consists of:
December 31,
2022
October 1,
2022
December 30,
2023
September 30,
2023
LandLand$29,714 $32,164 Land$32,107 $31,417 
Buildings and improvementsBuildings and improvements515,862 502,050 Buildings and improvements672,924 646,079 
Machinery and equipmentMachinery and equipment816,689 786,562 Machinery and equipment849,330 827,257 
Computer equipment and softwareComputer equipment and software211,985 201,960 Computer equipment and software228,926 228,284 
Property, plant and equipment, at costProperty, plant and equipment, at cost1,574,250 1,522,736 Property, plant and equipment, at cost1,783,287 1,733,037 
Less accumulated depreciation and amortizationLess accumulated depreciation and amortization(884,911)(853,828)Less accumulated depreciation and amortization(940,605)(918,341)
Property, plant and equipment, netProperty, plant and equipment, net$689,339 $668,908 Property, plant and equipment, net$842,682 $814,696 
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. Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Condensed Balance Sheets. Finance lease ROU assets are included in Property, plant and equipment and finance lease liabilities are included in Accrued liabilities and other, and Other long-term liabilities on the Consolidated Condensed Balance Sheets. 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.





1516



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, 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.

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.

The components of lease expense were as follows:
Three Months EndedThree Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
Operating lease costOperating lease cost$7,395 $6,940 $6,970 $7,395 
Finance lease cost:Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets$972 $587 Amortization of right-of-use assets$1,826 $972 
Interest on lease liabilitiesInterest on lease liabilities364 217 Interest on lease liabilities1,232 364 
Total finance lease costTotal finance lease cost$1,336 $804 Total finance lease cost$3,058 $1,336 
Supplemental cash flow information related to leases was as follows:
Three Months EndedThree Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow for operating leasesOperating cash flow for operating leases$7,531 $7,239 Operating cash flow for operating leases$7,151 $7,531 
Operating cash flow for finance leasesOperating cash flow for finance leases364 217 Operating cash flow for finance leases1,232 364 
Financing cash flow for finance leasesFinancing cash flow for finance leases884 505 Financing cash flow for finance leases1,286 884 
Assets obtained in exchange for lease obligations:Assets obtained in exchange for lease obligations:Assets obtained in exchange for lease obligations:
Operating leasesOperating leases$1,086 $6,008 Operating leases$5,717 $1,086 
Finance leasesFinance leases4,884 2,747 Finance leases2,128 4,884 



1617



Supplemental balance sheet information related to leases was as follows:
December 31,
2022
October 1,
2022
December 30,
2023
September 30,
2023
Operating Leases:Operating Leases:Operating Leases:
Operating lease right-of-use assetsOperating lease right-of-use assets$68,653 $69,072 Operating lease right-of-use assets$59,489 $56,067 
Accrued liabilities and otherAccrued liabilities and other$12,939 $13,002 Accrued liabilities and other$11,687 $11,283 
Other long-term liabilitiesOther long-term liabilities65,800 66,167 Other long-term liabilities59,306 56,398 
Total operating lease liabilitiesTotal operating lease liabilities$78,739 $79,169 Total operating lease liabilities$70,993 $67,681 
Finance Leases:Finance Leases:Finance Leases:
Property, plant, and equipment, at costProperty, plant, and equipment, at cost$36,115 $30,614 Property, plant, and equipment, at cost$89,862 $85,324 
Accumulated depreciationAccumulated depreciation(6,728)(5,606)Accumulated depreciation(13,256)(10,913)
Property, plant, and equipment, netProperty, plant, and equipment, net$29,387 $25,008 Property, plant, and equipment, net$76,606 $74,411 
Accrued liabilities and otherAccrued liabilities and other$3,903 $3,244 Accrued liabilities and other$5,968 $5,621 
Other long-term liabilitiesOther long-term liabilities27,352 23,529 Other long-term liabilities73,661 71,225 
Total finance lease liabilitiesTotal finance lease liabilities$31,255 $26,773 Total finance lease liabilities$79,629 $76,846 
Weighted average remaining lease term in years:Weighted average remaining lease term in years:Weighted average remaining lease term in years:
Operating leasesOperating leases7.67.7Operating leases6.76.9
Finance leasesFinance leases15.616.7Finance leases23.023.1
Weighted average discount rates:Weighted average discount rates:Weighted average discount rates:
Operating leasesOperating leases5.1 %5.0 %Operating leases5.2 %5.0 %
Finance leasesFinance leases5.1 %4.8 %Finance leases6.5 %6.5 %
Maturities of lease liabilities were as follows:
December 31, 2022 December 30, 2023
Operating LeasesFinance LeasesOperating LeasesFinance Leases
2023$12,602 $4,021 
2024202414,525 5,348 2024$11,378 $7,749 
2025202512,339 5,167 202513,772 10,150 
2026202611,291 4,884 202613,093 9,866 
2027202710,074 4,131 202711,804 9,112 
202820289,708 8,113 
ThereafterThereafter36,953 29,346 Thereafter24,359 139,269 
Total lease paymentsTotal lease payments97,784 52,897 Total lease payments84,114 184,259 
Less: imputed interestLess: imputed interest(19,045)(21,642)Less: imputed interest(13,121)(104,630)
TotalTotal$78,739 $31,255 Total$70,993 $79,629 


1718


Table of Contents
Note 8 - Goodwill and Intangible Assets
Effective October 1, 2023, we made a change to our reporting structure to separate our former Aircraft Controls operating segment into two operating segments, Military Aircraft and Commercial Aircraft, which also represent reporting units for purposes of assessing goodwill. We performed an impairment test consistent with the rules set forth under ASC 350, “Intangibles—Goodwill and Other,” by performing a quantitative analysis on the former reporting unit. Following this test, the Company reassigned the goodwill from the former Aircraft Controls reporting unit to its new reporting units using a relative fair value allocation approach. We then performed quantitative goodwill impairment tests on each of the new reporting units. Quantitative testing requires a comparison of the fair value of a reporting unit to its carrying value. We principally use the discounted cash flow method to estimate the fair value of a reporting unit. The discounted cash flow method incorporates various assumptions, the most significant being projected cash flows (inclusive of projected revenue growth rates and operating margins), the terminal growth rate and the discount rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit's current business, expected developments and operational strategies typically over a five-year period. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss must be measured. The results of our quantitative assessments showed the fair value of the two new reporting units, Military Aircraft and Commercial Aircraft, exceeded their carrying value; and therefore, goodwill was not impaired.

The changes in the carrying amount of goodwill are as follows:
Aircraft
Controls
Space and
Defense
Controls
Industrial
Systems
Total
Balance at October 1, 2022$199,519 $259,407 $346,394 $805,320 
Foreign currency translation3,825 62 13,694 17,581 
Balance at December 31, 2022$203,344 $259,469 $360,088 $822,901 
Space and
Defense
Military AircraftCommercial AircraftIndustrialTotal
Balance at September 30, 2023$259,475 $111,276 $92,612 $357,938 $821,301 
Acquisition— 2,689 — — 2,689 
Foreign currency translation(473)2,390 — 7,506 9,423 
Balance at December 30, 2023$259,002 $116,355 $92,612 $365,444 $833,413 
Goodwill in our Space and Defense Controls segment is net of a $4,800 accumulated impairment loss at December 31, 2022.30, 2023. Goodwill in our Medical Devices reporting unit, included in our Industrial Systems segment, is net of a $38,200 accumulated impairment loss at December 31, 2022.30, 2023.

The components of intangible assets are as follows:
December 31, 2022October 1, 2022
  Weighted-
Average
Life (years)
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Customer-related11$139,068 $(91,325)$135,899 $(88,179)
Technology-related971,334 (54,811)69,856 (52,951)
Program-related2337,250 (20,296)35,305 (18,817)
Marketing-related822,328 (18,371)21,925 (17,833)
Other101,848 (1,629)1,693 (1,488)
Intangible assets12$271,828 $(186,432)$264,678 $(179,268)

December 30, 2023September 30, 2023
  Weighted-
Average
Life (years)
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Customer-related11$134,739 $(95,943)$133,269 $(93,648)
Technology-related971,978 (57,381)69,242 (56,106)
Program-related2338,566 (22,751)37,465 (21,672)
Marketing-related822,644 (19,386)21,890 (18,995)
Other101,842 (1,645)1,773 (1,581)
Intangible assets12$269,769 $(197,106)$263,639 $(192,002)
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, intellectual property and software. 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, trade names and non-compete agreements.




19


Table of Contents
Amortization of acquired intangible assets is as follows:
Three Months Ended
December 31, 2022January 1, 2022
Acquired intangible asset amortization$2,987 $3,398 
Three Months Ended
December 30, 2023December 31, 2022
Acquired intangible asset amortization$2,725 $2,987 
Based on acquired intangible assets recorded at December 31, 2022,30, 2023, amortization is estimated to be approximately:
20232024202520262027
Estimated future amortization of acquired intangible assets$11,700 $10,900 $9,800 $9,600 $8,600 


18

20242025202620272028
Estimated future amortization of acquired intangible assets$10,900 $9,800 $9,600 $8,300 $7,500 

Table of Contents
Note 9 - Equity Method Investments and Joint Ventures
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. EquityNet investment balances for equity method investments and joint ventures consists of:

December 31, 2022
Net investment balanceIncome (loss) for the three months ended
Moog Aircraft Service Asia$1,056 $(128)
NOVI LLC609 — 
Suffolk Technologies Fund 1, L.P.851 (77)
Total$2,516 $(205)

Net investment balances are included as Other assets in the Consolidated Condensed Balance Sheets. Income (loss)Sheets and consist of:
December 30, 2023September 30, 2023
Moog Aircraft Service Asia$1,511 $1,302 
NOVI LLC325 325
Suffolk Technologies Fund 1, L.P.1,257 1,180 
Net investment balance$3,093 $2,807 
Losses from equity method investments and joint ventures iswere $67 and $204 for three months ended December 30, 2023 and December 31, 2022, respectively and are included in Other in the Consolidated Condensed Statements of Earnings.

Moog Aircraft Services Asia ("MASA") is a joint venture included in our Commercial Aircraft Controls 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.

We hold a 42.5%20% ownership interest in NOVI LLC ("NOVI") that is included in our Space and Defense Controls segment. NOVI specializes in applying machine learning algorithms to space situational awareness.

Suffolk Technologies Fund 1, L.P., is a limited partnership included in our Industrial Systems 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 $6,976.$6,295.
Hybrid Motion Solutions (“HMS”) is a joint venture in our Industrial Systems segment in which we hold a 50% ownership interest. HMS specializes in hydrostatic servo drives and leverages synergies to enter new markets. The joint venture focuses on research and development, design and assembly as well as service. Our share of cumulative losses to date has exceeded our initial investment, and as such, we had no net investment balance recorded as of December 31, 2022. In addition to the investment, we have also loaned HMS $2,654 that is included as Other assets in the Consolidated Condensed Balance Sheet.30, 2023.

Investments in, and the operating results of, entities in which we do not have a controlling financial interest or the ability to exercise significant influence over the operations are accounted for using the cost method of accounting. As of December 31, 202230, 2023 we had cost method investments of $9,730,$9,875, which are included as Other assets in the Consolidated Condensed Balance Sheets.



1920


Table of Contents
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 31,
2022
October 1,
2022
December 30,
2023
September 30,
2023
U.S. revolving credit facilityU.S. revolving credit facility$399,000 $321,300 U.S. revolving credit facility$423,000 $334,500 
SECT revolving credit facilitySECT revolving credit facility23,000 20,000 SECT revolving credit facility1,000 33,000 
Senior notes 4.25%Senior notes 4.25%500,000 500,000 Senior notes 4.25%500,000 500,000 
Other long-term debt822 916 
Senior debtSenior debt922,822 842,216 Senior debt924,000 867,500 
Less deferred debt issuance costLess deferred debt issuance cost(5,942)(4,428)Less deferred debt issuance cost(3,897)(4,408)
Less current installments(822)(916)
Long-term debtLong-term debt$916,058 $836,872 Long-term debt$920,103 $863,092 
On October 27, 2022, we amended ourOur U.S. revolving credit facility, which extended the maturity date of the credit facility from October 15, 2024 tomatures on October 27, 2027. The credit facility2027, 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 the majority of our outstanding borrowings is principally 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.

The SECT has a revolving credit facility with a borrowing capacity of $35,000, maturing on JulyOctober 26, 2024.2025. Interest is based on LIBORSOFR 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.



2021


Table of Contents
Note 11 - Other Accrued Liabilities
Other accrued liabilities consists of:
December 31,
2022
October 1, 2022December 30,
2023
September 30, 2023
Employee benefitsEmployee benefits$54,090 $56,136 Employee benefits$57,677 $47,653 
Contract reservesContract reserves43,739 46,547 Contract reserves54,553 45,257 
Warranty accrualWarranty accrual22,429 23,072 Warranty accrual24,096 22,939 
Accrued income taxesAccrued income taxes24,223 17,776 Accrued income taxes42,011 29,631 
OtherOther65,143 71,845 Other60,534 66,289 
Other accrued liabilitiesOther accrued liabilities$209,624 $215,376 Other accrued liabilities$238,871 $211,769 
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 EndedThree Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
Warranty accrual at beginning of periodWarranty accrual at beginning of period$23,072 $26,602 Warranty accrual at beginning of period$22,939 $23,072 
Warranties issued during current periodWarranties issued during current period1,958 565 Warranties issued during current period3,319 1,958 
Adjustments to pre-existing warrantiesAdjustments to pre-existing warranties(214)(24)Adjustments to pre-existing warranties(526)(214)
Reductions for settling warrantiesReductions for settling warranties(2,805)(1,715)Reductions for settling warranties(1,876)(2,805)
Divestiture adjustment— (330)
Foreign currency translationForeign currency translation418 (72)Foreign currency translation240 418 
Warranty accrual at end of periodWarranty accrual at end of period$22,429 $25,026 Warranty accrual at end of period$24,096 $22,429 
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, and the British pound, we had outstanding foreign currency contracts with notional amounts of $22,572$2,792 at December 31, 2022.30, 2023. These contracts mature at various times through March 1, 2024.

We use forward currency contracts to hedge our net investment in certain foreign subsidiaries. As of December 31, 2022,30, 2023, 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 31, 2022,30, 2023, 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 20232024 or 2022.2023.


2122


Table of Contents
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 $89,000$149,110 at December 31, 2022.30, 2023. 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 EndedThree Months Ended
Statements of Earnings locationDecember 31,
2022
January 1,
2022
Statements of Earnings locationDecember 30,
2023
December 31,
2022
Net gain (loss)
Net gainNet gain
Foreign currency contractsForeign currency contractsOther$3,955 $(1,904)Foreign currency contractsOther$4,452 $3,955 
Summary of derivatives
The fair value and classification of derivatives is summarized as follows:
Balance Sheets locationDecember 31,
2022
October 1,
2022
Balance Sheets locationDecember 30,
2023
September 30,
2023
Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:
Foreign currency contractsOther current assets$693 $562 
Foreign currency contractsForeign currency contractsOther assets97 165 Foreign currency contractsOther current assets$123 $295 
Total asset derivatives$790 $727 
Foreign currency contractsForeign currency contractsAccrued liabilities and other$1,991 $3,877 Foreign currency contractsAccrued liabilities and other$176 $581 
Foreign currency contractsOther long-term liabilities190 751 
Total liability derivatives$2,181 $4,628 
Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:
Foreign currency contractsForeign currency contractsOther current assets$348 $679 Foreign currency contractsOther current assets$968 $93 
Foreign currency contractsForeign currency contractsAccrued liabilities and other$602 $738 Foreign currency contractsAccrued liabilities and other$145 $324 



2223


Table of Contents
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 locationDecember 31,
2022
October 1,
2022
Balance Sheets locationDecember 30,
2023
September 30,
2023
Foreign currency contractsOther current assets$1,041 $1,241 
Foreign currency contractsForeign currency contractsOther assets97 165 Foreign currency contractsOther current assets$1,091 $388 
Total assets$1,138 $1,406 
Total assets$1,091 $388 
Foreign currency contractsForeign currency contractsAccrued liabilities and other$2,593 $4,615 Foreign currency contractsAccrued liabilities and other$321 $905 
Foreign currency contractsOther long-term liabilities190 751 
Acquisition contingent considerationAcquisition contingent considerationOther long-term liabilities3,365 3,272 Acquisition contingent considerationOther long-term liabilities3,172 3,089 
Total liabilities$6,148 $8,638 Total liabilities$3,493 $3,994 
The changes in financial liabilities classified as Level 3 within the fair value hierarchy are as follows:
Three Months Ended
December 31,
2022
Balance at beginning of period$3,272 
Increase in discounted future cash flows recorded as interest expense93 
Balance at end of period$3,365 
Three Months Ended
December 30,
2023
December 31,
2022
Balance at beginning of period$3,089 $3,272 
Increase in discounted future cash flows recorded as interest expense83 93 
Balance at end of period$3,172 $3,365 
Our only financial instrument for which the carrying value differs from its fair value is long-term debt. At December 31, 2022,30, 2023, the fair value of long-term debt was $884,378$893,656 compared to its carrying value of $922,822.$924,000. The fair value of long-term debt is classified as Level 2 within the fair value hierarchy and was estimated based on quoted market prices.



2324


Table of Contents
Note 14 - Restructuring
In 2023, we initiated restructuring actions in relation to portfolio shaping activities which contains certain elements, primarily retention agreements, that will continue through 2027 and could result in additional costs of up to approximately $10,400.

Restructuring activity for severance and other costs by segment and reconciliation to consolidated amounts is as follows:
Aircraft ControlsSpace and Defense ControlsIndustrial SystemsTotal
Balance at October 1, 2022$229 $228 $6,678 $7,135 
Charged to expense - 2022 plan— 175 903 1,078 
Cash payments - 2022 plan— (366)(355)(721)
Cash payments - 2020 plan— — (22)(22)
Cash payments - 2018 plan(153)— (97)(250)
Foreign currency translation— — 390 390 
Balance at December 31, 2022$76 $37 $7,497 $7,610 
Space and DefenseMilitary AircraftIndustrialTotal
Balance at October 1, 2023$1,622 $347 $8,208 $10,177 
Charged to expense - 2023 plan— — 1,889 1,889 
Adjustments to provision(155)— (11)(166)
Cash payments - 2023 plan(727)(72)(1,238)(2,037)
Cash payments - 2022 plan— — (79)(79)
Cash payments - 2018 plan— — (94)(94)
Foreign currency translation— — 288 288 
Balance at December 30, 2023$740 $275 $8,963 $9,978 
As of December 31, 2022,30, 2023, the restructuring accrual consists of $3,317$6,072 for the 2023 plan, $387 for the 2022 plan, $2,965$2,385 for the 2020 plan and $1,328$1,134 for the 2018 plan. Restructuring is expectedexpected to be paid within a year, except portions classified as long-term liabilities based on the nature of the reserve.
Note 15 - Employee Benefit Plans
Pension expense for our defined contribution plans consists of:
Three Months Ended Three Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
U.S. defined contribution plansU.S. defined contribution plans$10,185 $10,545 U.S. defined contribution plans$12,052 $10,185 
Non-U.S. defined contribution plansNon-U.S. defined contribution plans2,065 2,152 Non-U.S. defined contribution plans2,298 2,065 
Total expense for defined contribution plansTotal expense for defined contribution plans$12,250 $12,697 Total expense for defined contribution plans$14,350 $12,250 
Net periodic benefit costs for our defined benefit pension plans are as follows:
Three Months EndedThree Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
U.S. PlansU.S. PlansU.S. Plans
Service costService cost$3,228 $4,957 Service cost$2,694 $3,228 
Interest costInterest cost7,028 4,562 Interest cost6,973 7,028 
Expected return on plan assetsExpected return on plan assets(7,147)(7,451)Expected return on plan assets(6,817)(7,147)
Amortization of actuarial lossAmortization of actuarial loss3,362 3,896 Amortization of actuarial loss3,072 3,362 
Expense for U.S. defined benefit plansExpense for U.S. defined benefit plans$6,471 $5,964 Expense for U.S. defined benefit plans$5,922 $6,471 
Non-U.S. PlansNon-U.S. PlansNon-U.S. Plans
Service costService cost$642 $1,122 Service cost$650 $642 
Interest costInterest cost1,303 634 Interest cost1,418 1,303 
Expected return on plan assetsExpected return on plan assets(1,017)(897)Expected return on plan assets(1,096)(1,017)
Amortization of prior service costAmortization of prior service cost13 15 Amortization of prior service cost14 13 
Amortization of actuarial lossAmortization of actuarial loss96 1,022 Amortization of actuarial loss52 96 
Expense for non-U.S. defined benefit plansExpense for non-U.S. defined benefit plans$1,037 $1,896 Expense for non-U.S. defined benefit plans$1,038 $1,037 



25



Note 16 - Income Taxes
The effective tax rate for the three months ended December 30, 2023 and December 31, 2022 was 23.6% and January 1, 2022 was 23.7% and 24.7%, respectively. The effective tax ratesrate for the three months ended December 30, 2023 and December 31, 2022 and January 1, 2022 arewas 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.


24


Table of Contents
Note 17 - Accumulated Other Comprehensive Income (Loss)
The changes in AOCIL, net of tax, by component for the three months ended December 31, 202230, 2023 are as follows:
Accumulated foreign currency translationAccumulated retirement liabilityAccumulated gain (loss) on derivativesTotalAccumulated foreign currency translationAccumulated retirement liabilityAccumulated gain (loss) on derivativesTotal
AOCIL at October 1, 2022$(182,024)$(125,231)$(3,787)$(311,042)
AOCIL at September 30, 2023AOCIL at September 30, 2023$(140,486)$(113,605)$(518)$(254,609)
OCI before reclassificationsOCI before reclassifications50,399 (1,013)928 50,314 OCI before reclassifications31,040 (366)93 30,767 
Amounts reclassified from AOCILAmounts reclassified from AOCIL336 2,212 991 3,539 Amounts reclassified from AOCIL(27)2,044 225 2,242 
OCI, net of taxOCI, net of tax50,735 1,199 1,919 53,853 OCI, net of tax31,013 1,678 318 33,009 
AOCIL at December 31, 2022$(131,289)$(124,032)$(1,868)$(257,189)
AOCIL at December 30, 2023AOCIL at December 30, 2023$(109,473)$(111,927)$(200)$(221,600)
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 EndedThree Months Ended
Statements of Earnings locationDecember 31,
2022
January 1,
2022
Statements of Earnings locationDecember 30,
2023
December 31,
2022
Retirement liability:Retirement liability:Retirement liability:
Prior service costPrior service cost$13 $15 Prior service cost$14 $13 
Actuarial lossesActuarial losses2,877 4,600 Actuarial losses2,658 2,877 
Reclassification from AOCIL into earningsReclassification from AOCIL into earnings2,890 4,615 Reclassification from AOCIL into earnings2,672 2,890 
Tax effectTax effect(678)(1,093)Tax effect(628)(678)
Net reclassification from AOCIL into earningsNet reclassification from AOCIL into earnings$2,212 $3,522 Net reclassification from AOCIL into earnings$2,044 $2,212 
Derivatives:Derivatives:Derivatives:
Foreign currency contractsForeign currency contractsSales$306 $68 Foreign currency contractsSales$— $306 
Foreign currency contractsForeign currency contractsCost of sales972 50 Foreign currency contractsCost of sales295 972 
Reclassification from AOCIL into earningsReclassification from AOCIL into earnings1,278 118 Reclassification from AOCIL into earnings295 1,278 
Tax effectTax effect(287)(24)Tax effect(70)(287)
Net reclassification from AOCIL into earningsNet reclassification from AOCIL into earnings$991 $94 Net reclassification from AOCIL into earnings$225 $991 
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 EndedThree Months Ended
December 31,
2022
January 1,
2022
December 30,
2023
December 31,
2022
Foreign currency contractsForeign currency contracts$1,198 $55 Foreign currency contracts$122 $1,198 
Net gainNet gain1,198 55 Net gain122 1,198 
Tax effectTax effect(270)(14)Tax effect(29)(270)
Net deferral in AOCIL of derivativesNet deferral in AOCIL of derivatives$928 $41 Net deferral in AOCIL of derivatives$93 $928 



2526


Table of Contents
Note 18 - Stock Employee Compensation Trust and Supplemental Retirement Plan Trust
The SECT assists in administering and provides funding for equity-based compensation plans and benefit programs, including the Moog Inc. Retirement Savings Plan ("RSP"), RSP(+) and the Employee Stock Purchase Plan ("ESPP"). The SERP Trust provides funding for benefits under the SERP provisions of the Moog Inc. Plan to Equalize Retirement Income and Supplemental Retirement Income. Both the SECT and the SERP Trust hold Moog shares as investments. The shares in the SECT and SERP Trust are not considered outstanding for purposes of calculating earnings per share. However, in accordance with the trust agreements governing the SECT and SERP Trust, the trustees vote all shares held by the SECT and SERP Trust on all matters submitted to shareholders.
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 31,
2022
January 1,
2022
Basic weighted-average shares outstanding31,746,001 32,057,399 
Dilutive effect of equity-based awards128,717 130,759 
Diluted weighted-average shares outstanding31,874,718 32,188,158 
Anti-dilutive shares from equity-based awards21,727 62,350 
Three Months Ended
December 30,
2023
December 31,
2022
Basic weighted-average shares outstanding31,902,101 31,746,001 
Dilutive effect of equity-based awards347,212 128,717 
Diluted weighted-average shares outstanding32,249,313 31,874,718 
Anti-dilutive shares from equity-based awards— 21,727 


26


Table of Contents
Note 20 - Segments
Disaggregation of net sales by segment for the three months ended December 31, 202230, 2023 and January 1,December 31, 2022 are as follows:
Three Months Ended
Market TypeDecember 31,
2022
January 1,
2022
Net sales:
Military$171,718 $185,949 
Commercial138,541 117,368 
Aircraft Controls310,259 303,317 
Space95,885 87,583 
Defense121,900 120,273 
Space and Defense Controls217,785 207,856 
Energy31,570 31,466 
Industrial Automation111,118 102,143 
Simulation and Test28,325 22,175 
Medical61,046 57,129 
Industrial Systems232,059 212,913 
Net sales$760,103 $724,086 
Three Months Ended
Customer TypeDecember 31,
2022
January 1,
2022
Net sales:
Commercial$138,541 $117,368 
U.S. Government (including OEM)129,783 143,879 
Other41,935 42,070 
Aircraft Controls310,259 303,317 
Commercial24,573 24,323 
U.S. Government (including OEM)179,438 170,015 
Other13,774 13,518 
Space and Defense Controls217,785 207,856 
Commercial225,839 207,235 
U.S. Government (including OEM)1,280 3,786 
Other4,940 1,892 
Industrial Systems232,059 212,913 
Commercial388,953 348,926 
U.S. Government (including OEM)310,501 317,680 
Other60,649 57,480 
Net sales$760,103 $724,086 
Three Months Ended
Market TypeDecember 30,
2023
December 31,
2022
Net sales:
Space$99,610 $95,885 
Defense130,518 121,900 
Space and Defense230,128 217,785 
Original Equipment Manufacturers141,371 132,768 
Aftermarket44,873 45,032 
Military Aircraft186,244 177,800 
Original Equipment Manufacturers129,702 80,675 
Aftermarket64,520 51,784 
Commercial Aircraft194,222 132,459 
Energy32,770 31,570 
Industrial Automation116,415 111,118 
Simulation and Test37,505 28,325 
Medical59,566 61,046 
Industrial246,256 232,059 
Net sales$856,850 $760,103 


27


Table of Contents
Three Months Ended
Revenue Recognition MethodDecember 31,
2022
January 1,
2022
Net sales:
Over-time$246,895 $246,649 
Point in time63,364 56,668 
Aircraft Controls310,259 303,317 
Over-time202,090 192,446 
Point in time15,695 15,410 
Space and Defense Controls217,785 207,856 
Over-time33,056 29,025 
Point in time199,003 183,888 
Industrial Systems232,059 212,913 
Over-time482,041 468,120 
Point in time278,062 255,966 
Net sales$760,103 $724,086 
Three Months Ended
Customer TypeDecember 30,
2023
December 31,
2022
Net sales:
Commercial$34,304 $24,576 
U.S. Government (including OEM)176,402 179,435 
Other19,422 13,774 
Space and Defense230,128 217,785 
U.S. Government (including OEM)135,165 129,782 
Other51,079 48,018 
Military Aircraft186,244 177,800 
Commercial184,675 129,006 
Other9,547 3,453 
Commercial Aircraft194,222 132,459 
Commercial242,386 225,839 
U.S. Government (including OEM)2,840 1,280 
Other1,030 4,940 
Industrial246,256 232,059 
Commercial461,365 379,421 
U.S. Government (including OEM)314,407 310,497 
Other81,078 70,185 
Net sales$856,850 $760,103 
Three Months Ended
Revenue Recognition MethodDecember 30,
2023
December 31,
2022
Net sales:
Over-time$210,195 $202,090 
Point in time19,933 15,695 
Space and Defense230,128 217,785 
Over-time151,956 143,290 
Point in time34,288 34,510 
Military Aircraft186,244 177,800 
Over-time142,903 103,566 
Point in time51,319 28,893 
Commercial Aircraft194,222 132,459 
Over-time31,750 33,056 
Point in time214,506 199,003 
Industrial246,256 232,059 
Over-time536,804 482,002 
Point in time320,046 278,101 
Net sales$856,850 $760,103 
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 for the three months ended December 31, 202230, 2023 and January 1,December 31, 2022 and a reconciliation of segment operating profit to earnings before income taxes are as follows:
Three Months Ended
December 31,
2022
January 1,
2022
Operating profit:
Aircraft Controls$29,718 $41,915 
Space and Defense Controls20,294 21,299 
Industrial Systems36,751 17,191 
Total operating profit86,763 80,405 
Deductions from operating profit:
Interest expense13,132 7,982 
Equity-based compensation expense2,974 2,658 
Non-service pension expense3,099 1,485 
Corporate and other expenses, net7,257 6,857 
Earnings before income taxes$60,301 $61,423 


28


Table of Contents
Three Months Ended
December 30,
2023
December 31,
2022
Operating profit:
Space and Defense$25,297 $20,294 
Military Aircraft19,589 15,201 
Commercial Aircraft20,626 14,517 
Industrial29,024 36,751 
Total operating profit94,536 86,763 
Deductions from operating profit:
Interest expense16,694 13,132 
Equity-based compensation expense4,165 2,974 
Non-service pension expense3,187 3,099 
Corporate and other expenses, net7,879 7,257 
Earnings before income taxes$62,611 $60,301 
Effective October 1, 2023, we made changes to our segment reporting structure that resulted in four reporting segments. Our former Aircraft Controls segment has been separated into Military Aircraft and Commercial Aircraft. All amounts in the preceding tables have been restated to reflect this change. Segment assets for Military and Commercial Aircraft were approximately $874,000 and $809,000, respectively as of September 30, 2023, as a result of the change to our segment reporting structure.


2829


Table of Contents
Note 21 - Related Party Transactions
John Scannell, Moog's Non-Executive Chairman of the Board of Directors, is a member of the Board of Directors of M&T Bank Corporation and M&T Bank. We currently engage with M&T Bank in the ordinary course of business for various financing activities, all of which were initiated prior to the election of Mr. Scannell to the Board. M&T Bank provides credit extension for routine purchases and lease transactions, which for the three months ended December 31, 202230, 2023 and January 1, 2022 totaled $3,417 and $3,643, respectively. At December 31, 2022 totaled $3,707 and $3,417. At December 30, 2023, we held outstanding leases with a total original costremaining obligation of $16,994. $12,085. At December 31, 2022,30, 2023, outstanding deposits on our behalf for future equipment leases totaled $2,559.totaled $2,840. M&T BankBank also maintains an interest of approximately 12% in our U.S. revolving credit facility. Further details of the U.S. revolving credit facility can be found in Note 10 - Indebtedness. Wilmington Trust, a subsidiary of M&T Bank, is the trustee of the pension assets for our qualified U.S. defined benefit plan.
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 flor $19,315 ofe for $19,285 related to standby letters of credit issued by a bankbanks to third parties on our behalf at December 31, 2022.30, 2023.
Note 23 - Subsequent Event
On February 2, 2023,January 25, 2024, we declared a $0.27$0.28 per share quarterly dividend payable on issued and outstanding shares of our Class A and Class B common stock on March 6, 2023February 27, 2024 to shareholders of record at the close of business on February 17, 2023.9, 2024.


2930


Table of Contents
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 October 1, 2022.September 30, 2023. 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, stabilization and automatic ammunition loading controls for armored combat vehicles, tactical and strategic missile steering controls and gun aiming controls.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 launch vehicles and hypersonic applications.vehicles.

In the industrial market, our products are used in a wide range of applications including:
Industrial automation market - various components and systems for injection and blow moldingused in various applications including: heavy industrial machinery heavy industry applicationsused for steel and aluminum production, metal forming presses,and pressing, flight simulation motion control systems, energy exploration and generation products, material and automotive structural and fatigue testing systems.systems, as well as for the electrification of construction vehicles.
Medical market - components and systemspumps for enteral clinical nutrition and infusion therapy, pumps, CT scan medical equipment, ultrasonic sensors and surgical handpieces and sleep apnea equipment.
Energy market - control and safety components for steam and gas power generation turbines and oil and gas exploration components and systems.
We operate under threefour segments, Aircraft Controls, Space and Defense, ControlsMilitary Aircraft, Commercial Aircraft and Industrial Systems.Industrial. Our principal manufacturing facilities are located in the United States, Philippines, United Kingdom, Germany, Italy, Costa Rica, China, Netherlands, Luxembourg, Japan, Czech Republic, Canada, India and Lithuania.

Under ASC 606, 63% of revenue was recognized over time for the quarter ended December 31, 2022,30, 2023, using the cost-to-cost method of accounting. The over-time method of revenue recognition is predominantly used in Aircraft Controls and Space and Defense, Controls.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 quarter ended December 31, 2022, 30, 2023, 37% 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 Systems.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.
We concentrate on providing our customers with
Our products designed and manufacturedtechnologies 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. Our technical experts work collaboratively around the world, delivering capabilitiesstandards, for mission-critical solutions. These core operational principles are necessary as our products are applieduse in demanding applications, "When Performance Really Matters®."applications. By capitalizing on these core foundational strengths, we believe we have achieved a leadership position in the high performance, precision controls market. Additionally, these strengths yield a broad control product portfolio, across a diverse base of customersmarket and end markets.are "Shaping The Way Our World Moves™."



3031


Table of Contents
By leveraging our engineering heritage and by focusing on customer intimacy and commitment to solvingsolve 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 systems integrator. In addition, we continue expandingto expand our content positions on our current platforms, seeking to be the market-leadingleading supplier in the niche markets we serve. We also look for innovation in all aspects of our business, employing new technologies to improve productivity, andwhile focusing on talent development to strengthen our employee operational performance.

Our pathfundamental long-term strategies that will help us achieve our financial objectives center around pricing and simplification initiatives. Our pricing initiatives focus on receiving fair recognition for the value we deliver to success comes from our talented employees building a sustainable company forcustomers across all of our markets. Our simplification initiatives include:
utilizing 80/20 processes to unlock and capture value,
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 generations. Our strategies include business levels,
focusing onour factories so that individual sites meet the customer, focusing on our culture, communityunique needs of a specific market, and the planet,
investing in automation and focusing on financial strength. These focus areas will drive accountability and improved operational performance, will increase engagement and workforce diversity and, withtechnologies to improve business simplification, result in improved financial results and increased shareholder value.operations.

We will improvefocus on improving shareholder value through strategic revenue growth, both organic and acquired, through improving operating efficiencies and manufacturing initiatives and through utilizing low cost manufacturing facilities without compromising quality. Historically, we have taken a balanced approach to capital deployment in order to maximize shareholder returns over the long term. These activities have included strategic acquisitions, share buybacks and dividend payments. Today, we believe we can create long term value for our shareholders by continuing to invest in our business through both capital expenditures as well asand investments in new market opportunities. We will also continue exploring opportunities to make strategic acquisitions and return capital to shareholders.

Acquisitions and Divestitures
Acquisitions
On February 21, 2022,October 20, 2023, we acquired TEAM AccessoriesData Collection Limited ("TEAM"DCL") based in Dublin, IrelandAuckland, New Zealand for a purchase price, net of acquired cash, of $15$6 million, consisting of $12$5 million in cash and contingent consideration with an initial fair valuea working capital adjustment to be paid of $3approximately $1 million. TEAMDCL specializes in Maintenance, Repairmanufacturing and Overhaul of engineoperating pavement surveying equipment and airframe components.providing innovative solutions for measuring and managing pavements. This operation is included in our Military Aircraft Controls segment.The purchase price allocation is subject to adjustments as we obtain additional information for our estimates during the measurement period.

Divestitures
On September 30, 2022, we sold a sonar business based in the United Kingdom previously included in our Industrial Systems segment. We have cumulatively received net proceeds of $13 million and recorded a loss of $15 million, net of transaction costs. An immaterial adjustment to the loss was recorded during the three months ended December 31, 2022.
On September 20, 2022, we sold assets of a security business based in Northbrook, Illinois previously included in our Space and Defense Controls segment. We have cumulatively received net proceeds of $9$13 million and recorded a loss of $4$15 million, net of transaction costs. The losstransaction is subject to adjustments associated with amounts currently held in escrow.

On December 3, 2021, we sold the assets of our Navigation Aids ("NAVAIDS") business based in Salt Lake City, Utah previously included in our Military Aircraft Controls segment to THALESThales USA Inc. We have cumulatively received net proceeds of $37 million and recorded a gain of $16$15 million, net of transaction costs. The gaintransaction is subject to adjustments associated with amounts currently held in escrow.




3132


Table of Contents
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.



3233


Table of Contents
CONSOLIDATED RESULTS OF OPERATIONSCONSOLIDATED RESULTS OF OPERATIONSCONSOLIDATED RESULTS OF OPERATIONS
Three Months EndedThree Months Ended
(dollars and shares in millions, except per share data)(dollars and shares in millions, except per share data)December 31, 2022January 1, 2022$ Variance% Variance(dollars and shares in millions, except per share data)December 30, 2023December 31, 2022$ Variance% Variance
Net salesNet sales$760 $724 $36 %Net sales$857 $760 $97 13 %
Gross marginGross margin26.8 %26.6 %Gross margin27.2 %26.8 %
Research and development expensesResearch and development expenses$24 $28 $(4)(14 %)Research and development expenses$31 $24 $28 %
Selling, general and administrative expenses as a percentage of salesSelling, general and administrative expenses as a percentage of sales14.9 %15.4 %Selling, general and administrative expenses as a percentage of sales13.9 %14.9 %
Interest expenseInterest expense$13 $$65 %Interest expense$17 $13 $27 %
Restructuring expenseRestructuring expense$$— $n/aRestructuring expense$$$75 %
Gain on sale of buildingsGain on sale of buildings$(10)$— $(10)n/aGain on sale of buildings$— (10)$10 n/a
Gain on sale of business$— $(16)$16 (100)%
OtherOther$$— $n/aOther$$$n/a
Effective tax rateEffective tax rate23.7 %24.7 %Effective tax rate23.6 %23.7 %
Net earningsNet earnings$46 $46 $— (1 %)Net earnings$48 $46 $%
Diluted earnings per shareDiluted earnings per share$1.44 $1.44 $— — %Diluted earnings per share$1.48 $1.44 $0.04 %
Twelve-month backlogTwelve-month backlog$2,343 $2,167 $176 %Twelve-month backlog$2,500 $2,300 $200 %
Net sales increased across all of our segments in the first quarter of 20232024 compared to the first quarter of 2022. Weaker foreign currencies, primarily the Euro and the British Pound, relative2023 due to the U.S. Dollar, decreased sales $17 million. Additionally, the absence of sales associated with our divested businesses in 2022 decreased sales $12 millioncontinued commercial aircraft recovery and due to higher product demand across all segments.

Gross margin increased in the first quarter of 2023. The resulting sales increase in the first quarter of 2023 was 9%2024 compared to the first quarter of 2022.2023. We benefited from improved efficiencies associated with the higher sales, partially offset by the absence of a favorable sales mix last year.
Gross margin
Research and development expenses in the first quarter of 2023 benefited from higher sales volumes in Industrial Systems as well as favorable sales mixes in both Aircraft Controls and in Industrial Systems when2024 increased compared to the same period of 2022. Mostly offsetting these benefits were charges2023. Higher activity supporting our new growth programs in both Space and Defense Controls associated with development programs.and Industrial drove the increase.
Research and development expenses decreased in the first quarter of 2023 compared to the same period of 2022, as we had lower activity in Aircraft Controls.
Selling, general and administrative expenseexpenses as a percentage of sales decreased in the first quarter of 20232024 compared to the first quarter of 20222023, reflecting the incremental benefit of higher sales volume.

Interest expense increased $5 million in the first quarter of 20232024 increased compared to the first quartersame period of 20222023 due to higher interest rates on our outstanding debt balances.
The
As we continue to simplify our operations, the first quarters of 2024 and 2023 both included charges for various restructuring activities, primarily within Industrial. Also in Industrial, the first quarter of 2023 included a $10 million gain from the sale of two buildings in Industrial Systems. The first quarter of 2022 included a $16 million gain from the sale of our NAVAIDS business in Aircraft Controls.buildings.
The effective tax rate in the first quarter of 2022 included impacts associated with the divestiture of our NAVAIDS business that did not repeat in the first quarter of 2023.
The twelve-month backlog increased in the first quarter of 2023 as2024 compared with the first quarter of 2022 across all of our segments. The twelve-month backlog increased in Aircraft Controls due to higher orders for our commercial programs. Industrial Systems’ backlog increased due to recovering demand in industrial automation and industrial components.2023. Within Space and Defense, Controls,we had higher orders across our satellite and launch vehicle programs, as well as across our defense programs. We also had higher orders across our Military Aircraft programs including the increase is driven byF-35 and various funded development programs. Partially offsetting these increases was a decline in Industrial's twelve-month backlog due to lower orders for defense components.across our industrial automation programs.



3334


Table of Contents
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, manpower 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.
Aircraft ControlsSpace and Defense
Three Months EndedThree Months Ended
(dollars in millions)(dollars in millions)December 31, 2022January 1, 2022$  Variance%  Variance(dollars in millions)December 30, 2023December 31, 2022$  Variance%  Variance
Net sales - military aircraft$172 $186 $(14)(8 %)
Net sales - commercial aircraft139 117 21 18 %
$310 $303 $%
Net salesNet sales$230 $218 $12 %
Operating profitOperating profit$30 $42 $(12)(29 %)Operating profit$25 $20 $25 %
Operating marginOperating margin9.6 %13.8 %Operating margin11.0 %9.3 %
Aircraft Controls'Space and Defense net sales increased in the first quarter of 20232024 compared to the first quarter of 2022, as the continued commercial aircraft market recovery was partially offset2023 driven by lower military sales.higher demand for both defense and space applications.

In the first quarter of 2023,2024, sales increased $18$9 million in our commercial aftermarket programs and $3 million in our commercial OEM programs. Within commercial aftermarket programs, higher spares and repair volumes, driven by recovering flight-hour levels on the 787 and A350 programs, as well as additional retrofit activity increased sales $13 million. Across our commercial OEM programs, higher sales volumes for business jets and higher bookings for our Genesys programs were partially offset by delayed material receipt timing in other OEM programs.

Also in the first quarter of 2023, sales decreased $10 million in our military OEMdefense programs and $4 million in our military aftermarketspace programs. Within military OEM programs, delayed material receiptsour defense market, higher demand across severalmost of our defense programs, including the V-22 and KC-46 programs, and lower activity on development programs reducednew defense pursuits, increased sales. Additionally, sales decreased $4 million due to the absence of prior year sales related to our NAVAIDS business that we divested

Operating margin increased in the first quarter of 2022. Within military aftermarket programs, we had lower repair activity across various programs, including the F-15 and V-22 programs.

Operating margin decreased in the first quarter of 20232024 compared to the first quarter of 2022. Last year's first quarter included a $16 million gain2023. We benefited from production efficiencies associated with the divestiture ofhigher sales volume. Also, benefits from our NAVAIDS business. Excluding this gain,pricing initiatives increased operating margin. Partially offsetting the adjusted operating margin for the first quarter of 2022increase was 8.5%. The increase in adjusted margin was driven by a favorable sales mix due to higher commercial aftermarket sales. We also benefited from $3 million of lowerhigher research and development expense.


34

expense associated with activity on new growth programs.

Table of Contents
Military Aircraft
Space and Defense Controls
Three Months Ended
(dollars in millions)December 30, 2023December 31, 2022$  Variance%  Variance
Net sales$186 $178 $%
Operating profit$20 $15 $29 %
Operating margin10.5 %8.5 %
Three Months Ended
(dollars in millions)December 31, 2022January 1, 2022$  Variance%  Variance
Net sales$218 $208 $10 %
Operating profit$20 $21 $(1)(5 %)
Operating margin9.3 %10.2 %
Space and Defense Controls'Military Aircraft net sales increased in the first quarter of 20232024 compared to the first quarter of 2022 primarily driven by growth2023 due to expanding demand in our defense market.OEM programs.

In the first quarter of 2023,2024, military OEM sales increased $14 million due to$9 million. A higher amount of activity on the V-280 program drove the sales growth. Higher production rampsales on our RIwP turretthe F-35 program within defense controls. This increase was partially offset by a $5 million sales decrease due to the absencelower amounts of prior year sales related to our security business that we divested in the fourth quarter of 2022.funded development program activity.

Operating margin decreasedincreased in the first quarter of 20232024 compared to the same period of 2022. In the first quarter of 2023,2023. The increased activity on the V-280 program, as we incurred cost growth on our space vehicle development programs and experienced continued supply chain pressures.

approached full staffing levels, as well as a more favorable sales mix, increased operating margin.


35


Table of Contents
Industrial SystemsCommercial Aircraft
Three Months EndedThree Months Ended
(dollars in millions)(dollars in millions)December 31, 2022January 1, 2022$  Variance%  Variance(dollars in millions)December 30, 2023December 31, 2022$  Variance%  Variance
Net salesNet sales$232 $213 $19 %Net sales$194 $132 $62 47 %
Operating profitOperating profit$37 $17 $20 114 %Operating profit$21 $15 $42 %
Operating marginOperating margin15.8 %8.1 %Operating margin10.6 %11.0 %
Industrial Systems'Commercial Aircraft net sales increased in all of our markets in the first quarter of 20232024 compared to the first quarter of 2022. Weaker foreign currencies, primarily the Euro and the British Pound relative to the U.S. Dollar, decreased sales $12 million. Also, sales decreased $3 million2023 due to the absencemarket recoveries across all of prior year sales associated with our sonar business that we divested in the fourth quarter of 2022. Excluding the impacts of weaker foreign currencies and the divested sales, the resulting sales increase in the first quarter of 2023 was 17%.programs.

In the first quarter of 20232024, commercial OEM sales increased $49 million and aftermarket sales increased $13 million. Within OEM, more then half of the sales increase came from our Boeing and Airbus widebody programs. Also, all of our other commercial OEM programs increased due to the continued market recovery. Within aftermarket, airlines continued to provision more on-hand spares across our widebody and other programs.

Operating margin decreased in the first quarter of 2024 compared to the same periodfirst quarter of 2022,2023, as favorable retrofit activity from last year did not repeat, offsetting the benefits of our pricing initiatives.
Industrial
Three Months Ended
(dollars in millions)December 30, 2023December 31, 2022$  Variance%  Variance
Net sales$246 $232 $14 %
Operating profit$29 $37 $(8)(21 %)
Operating margin11.8 %15.8 %
Industrial net sales increased in the first quarter of 2024 compared to the first quarter of 2023 due to higher demand in select markets.

In the first quarter of 2024, sales increased $9 million in our simulation and test market. Higher orders for flight simulation products, associated with the demand for increased pilot training, as well for automobile testing increased sales. Sales also increased $5 million in our industrial automation market driven by increaseddue to the demand for industrial components and electric construction vehicles. Sales also increased $6 million in our simulation and test market driven by the timing of orders received for flight training simulators. Additionally, sales increased $4 million in our medical market as we benefited from higher demand for our medical components and devices.capital equipment.

Operating margin increaseddecreased in the first quarter of 20232024 compared to the first quarter of 2022. The first2023 as the prior year's quarter of 2023 included abenefited $10 million gain related tofrom the salessale of two buildings as we consolidated operations. Excluding this gain, as well aspart of our simplification initiatives. Also the first quarters of 2024 and 2023 included $2 million and $1 million, respectively, of various restructuring charges incurred inand other charges. Excluding the quarter,net impacts of the gain and charges, adjusted operating marginmargins in the first quarter of 2024 and 2023 waswere 12.6% and 12.3%., respectively. The resulting increase in adjusted operating margin was drivendue to the benefits of pricing initiatives, but were partially offset by the incremental margin from higher sales volumes, as well as a moreabsence of the prior year's favorable sales mix.




36


Table of Contents
CONSOLIDATED SEGMENT OUTLOOK
    2023 vs. 2022
(dollars in millions, except per share data)2023 Outlook2022$  Variance %  Variance  
Net sales:
Aircraft Controls$1,330 $1,256 $74 %
Space and Defense Controls920 872 48 %
Industrial Systems925 907 18 %
$3,175 $3,036 $139 %
Operating profit:
Aircraft Controls$137 $124 $13 11 %
Space and Defense Controls110 87 23 26 %
Industrial Systems109 72 37 51 %
$356 $283 $73 26 %
Operating margin:
Aircraft Controls10.3 %9.8 %


Space and Defense Controls11.9 %10.0 %


Industrial Systems11.8 %8.0 %


11.2 %9.3 %

Net earnings$188 $155 
Diluted earnings per share$5.89 $4.83 
    2024 vs. 2023
(dollars in millions, except per share data)2024 Outlook2023$  Variance %  Variance  
Net sales:
Space and Defense$1,015 $947 $68 %
Military Aircraft745 720 25 %
Commercial Aircraft815 669 146 22 %
Industrial925 983 (58)(6 %)
$3,500 $3,319 $181 %
Operating profit:
Space and Defense$137 $96 $41 43 %
Military Aircraft87 60 26 43 %
Commercial Aircraft83 84 (1)(2 %)
Industrial112 102 10 %
$418 $343 $75 22 %
Operating margin:
Space and Defense13.5 %10.1 %


Military Aircraft11.6 %8.4 %
Commercial Aircraft10.2 %12.6 %


Industrial12.1 %10.4 %


12.0 %10.3 %

Net earnings$222 $171 
Diluted earnings per share$6.86 $5.34 
Total Company2024 Outlook – We expect higher sales in 2023,2024, driven by the continued market recoveriesrecovery in commercial OEMour aerospace and industrial programs.defense markets. However the lost sales associated with our divestitures in 2022Industrial, an anticipated slowdown of orders will moderate our sales growth.reduce sales. We also expect operating margin will increase due to operational improvements within all segments, combined with the absencecontinued benefits of charges related to restructuring, impairmentsour pricing and losses associated with the sales of businesses in 2022. Excluding these charges, we expect adjusted operating margin will also increase. Net earnings in 2023 are expected to benefit fromsimplification initiatives. Partially offsetting the incremental operating margin, which we expect to be partially offset byprofit is expected higher interest expense due toand a higher interest rates.tax rate. We expect adjusted diluted earnings per share will range between $5.50$6.70 and $5.90,$7.10, with a midpoint of $5.70.$6.90. Management believes that the adjusted outlook may be useful in evaluating the financial condition and results of operations of the company.Company

Aircraft Controls– In 2023, we anticipate sales increases across all of our major commercial OEM programs as the commercial aircraft market recovers and as our customers match the increasing air travel demand with increased orders. We also anticipate a slight sales decrease across our military programs. We expect operating margin in 2023 will increase slightly due to improved factory utilization from the higher sales volume.

2024 Outlook for Space and Defense Controls In 2023, we anticipate sales increases in our space programs from the continued higher activity for integrated space vehicles programs and for our launch vehicle programs. Excluding the impact of lost sales associated with our security business divestiture,2024, we expect sales increasesgrowth across both of our space and defense programs,markets, primarily driven by the continued production ramp of our RIwP program and byincreased investment in defense components programs.spending. We expect operating margin will increase in 2023 resulting from the incremental margin from higher sales volume, in additiondue to the absence of the prior year's charges from portfolio refinements, our business sale and incremental costs associated with our constrained supply chain.space vehicle programs, and due to the benefits of our pricing initiatives.

Industrial Systems2024 Outlook for Military Aircraft – In 2023,2024, we anticipate sales increases across our markets. Theexpect sales growth is expected primarily in our flight simulation products, driven byOEM programs, in particular sales for the continued demand for flight training simulators, andV-280 program. Partially offsetting the increase is an expected sales decline in our medical device products.military aftermarket programs as defense funding shifts from legacy refurbishments to product modernization. We expect operating margin will increase in 2023 resulting fromdue to having a full year of activity on the higher sales volumesV-280 program, and due to the absencelower amounts of charges associated with funded development contracts which are winding down.

2024 Outlook for Commercial Aircraft – In 2024, we expect sales growth from our widebody OEM programs as build rates continue to ramp. However, we expect lower sales in commercial aftermarket as the prior year's retrofit activity won't repeat, which will also reduce our operating margin in 2024.

2024 Outlook for Industrial – In 2024, we expect a decrease in sales due to lower orders in our industrial automation market consistent with macroeconomic indicators for capital spending. We also expect a sales decrease associated with the lost sales associated with our footprint and portfolio refinements, impairmentsinitiatives. We expect operating margin will increase due to the benefits of our pricing initiatives and business sale.the savings from our simplified operations.


37


Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Statement of Cash Flows
Three Months EndedThree Months Ended
(dollars in millions)(dollars in millions)December 31,
2022
January 1,
2022
$ Variance(dollars in millions)December 30,
2023
December 31,
2022
$ Variance
Net cash provided (used) by:Net cash provided (used) by:Net cash provided (used) by:
Operating activitiesOperating activities$$157 $(149)Operating activities$60 $$52 
Investing activitiesInvesting activities(25)— (26)Investing activities(43)(25)(18)
Financing activitiesFinancing activities59 (152)211 Financing activities39 59 (20)
Operating activities
Net cash provided by operating activities decreased in the first quarter of 20232024 increased compared to the first quarter of 2022. The prior year's first quarter included a $902023. Accounts receivable provided $86 million benefit frommore of cash, driven by strong collections, primarily in our aircraft segments. Also, accounts receivable increased $25 million due to the expansion of our Receivables Purchase Agreement ("RPA") program. Additionally, inventoryAgreement. Partially offsetting the source of cash was inventories and unbilled receivables, which combined used $52$27 million more of cash, as our aerospace and defense segments grew inventory to support the business growth.
Investing activities
Net cash used by investing activities in the first quarter of 2023 as all our segments experienced supply chain constraints preventing2024 included $37 million of capital expenditures and $5 million associated with the releaseacquisition of products, Aircraft Controls' continued higher production levels for the 787 program and delayed milestones for billing in Space and Defense Controls.DCL.
We expect cash from operations in 2023 to be $250 million, a slight increase compared to 2022, driven primarily due to improved cash generation from net working capital.
Investing activities
Net cash used by investing activities in the first quarter of 2023 included $30 million of capital expenditures, which was partially offset by the proceeds from the sale of a building.
Financing activities
Net cash usedprovided by investingfinancing activities in the first quarter of 20222024 included $37$57 million for capital expenditures, as we increased investment in infrastructure, facilities and advanced manufacturing systems. These outflows were offset by the proceeds from the sale of the NAVAIDS business.
We expect capital expenditures in 2023 to be $150 million, as we continue to invest in facilities and infrastructure to support future growth and operational improvements.
net borrowings on our credit facilities. Financing activities also included $9 million of cash dividends.

Net cash provided by financing activities in the first quarter of 2023 included $81 million of net borrowings on our credit facilities. Additionally, financing activities included $8 million of share repurchases and an additional $8 million of cash dividends.
Net cash provided by financing activities in the first quarter of 2022 included $128 million of net pay down on our credit facilities. Additionally, financing activities in the first quarter of 2022 included $13 million of share repurchases and $8 million of dividends.



38


Table of Contents
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 31, 2022,30, 2023, our cash balances were $166$127 million, which includes $115$106 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 majority of the outstanding credit facility borrowings was 5.86%6.84% and is principally based on SOFR plus the applicable margin, which was 1.60% at December 31, 2022.30, 2023.

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 $35 million, maturing on JulyOctober 26, 2024.2025. Interest was 6.47%7.58% as of December 31, 202230, 2023 and is based on LIBORSOFR plus a margin of 2.13%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 30, 2023, we had $656 million of unused capacity, including $622 million from the U.S. revolving credit facility after considering standby letters of credit and other limitations.

Our Receivables Purchase Agreement, which matures on November 4, 2024,December 11, 2026, allows the Receivables Subsidiary to sell receivables to the Purchasers in amounts up to a $100$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 5.29%6.35% as of December 31, 2022.
At December 31, 2022, we had $709 million of unused capacity, including $686 million from the U.S. revolving credit facility after considering standby letters of credit. Our leverage ratio covenant limits our ability to increase net debt by $659 million as of December 31, 2022.
We are in compliance with all covenants under each of our financing arrangements.30, 2023.


39


Table of Contents
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 reportsreport 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 allowsallows us to buy up to an aggregate 3 million common shares. There are approximately 2.2 million shares 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.

Today, 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.
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 October 1, 2022.September 30, 2023. 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.


40


Table of Contents
ECONOMIC CONDITIONS AND MARKET TRENDS
We operate within the aerospace and defense and industrial markets. Our businesses are facing varying levels of supply chain and production level pressures from the residual impacts of the COVID-19 pandemic.

Our aerospace and defense businesses represented 70% of our 20222023 sales. Within the defense market, our programs are directly affected by funding levels, which have remained relatively stable.has recently increased. Our commercial aircraft market, which represented less than 18%20% of our 20222023 sales, is still recovering from the initial, dramatic, reductions in air travel at the onset of the COVID-19 pandemic.aligning with our customers' growing demand. While domestic travel has recovered, global international travel remains slightly below pre-pandemic levels.

Within our industrial markets, which represented 30% of our 20222023 sales, our programs benefited from increased order demand within industrial automation, simulation and test and energy markets. However, as customer demand increases, across these markets, we are now experiencing supply chain pressures.

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 hypersonic missiles,turret programs, and we strive to embed our technologies within these high-performance military programs of the future.future, including the Textron Bell V-280 Valor. 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 and V-22 Osprey.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. defense spending can increase; at other times, defense spending can decrease. Future levels of defense spending are uncertain, subject to presidential and congressional approval, and could increasehave increased in the near-term given the current global tensions.tensions, and are subject to presidential and congressional approval.

The commercial OEM aircraft market has depended 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. While domesticDomestic air travelstravel has recovered from the impact of the COVID-19 pandemic, and international travel utilizing wide-bodyprimarily widebody aircraft will take longeris close to fully recover. Furthermore, as companies and employees become accustomed to working remotely, business travel and the associated flight hours may not fully reach the pre-pandemic2019 levels. As such, weWe believe Boeing and Airbus will continue to directionally matchincrease their wide-bodywidebody aircraft production rates with the reduced, albeit recovering,post-pandemic air traffic volume,volumes, which has lowered theiraffects our demand for our flight control systems. We believe the commercial OEM market's recovery is heavily dependent on the return to pre-COVID-19 global international air traffic activity levels and therefore will face pressures for a prolonged period of time.

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. While there were initial dramatic reductions in flight hours at the onset of the COVID-19 pandemic, weWe have seen a recovery in the demand volume for our maintenance services and spare parts.parts after the COVID-19 pandemic. During the pandemic, there were very few new A350 and 787 entries into service. These delays had subsequent impacts on our aftermarket revenue, as sales are generated after the warranty period. Therefore, we expect aftermarket sales growth to be modest over the next few years.

The space market is comprised of fourthree customer markets: the civil market, the U.S. Department of Defense market the commercial space market and the newcommercial 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 hypersonic defensedefense-related satellite 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 compriseddriven by demand for small satellites, which offer new innovative space applications, including the support of large satellite customers, which traditionally sell to communications companies.broadband internet connectivity. Trends for this market, as well as for commercial launch vehicles, follow demand for increased capacity. This, in turn tends to track with underlying demand for increased consumption of telecommunication services,Our launch vehicle and satellite replacementscomponents and global navigation needs. Thesystems, as well as our new space market is driven byvehicle programs, will continue to benefit from increased investments to increase the speed and access to space through smaller satellites at reduced cost.in these markets.




41


Table of Contents
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 innovation, economic conditions, cost-reduction efforts, technology upgrades and the subsequent effects of the COVID-19 pandemic. As ourWe experienced challenges from changing demands from customers that have changed their industrial market continues to recover, ongoing supply chain constraints continue to impact our operations, as will potential future economic recessions.product orders.

Our simulation and test products operate in markets that were largely affected by the same factors and investment challenges stemming from the COVID-19 pandemic.as our commercial aircraft market. However, we have seen stronger order demand for flight simulation systems as the airline training market recovers.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. Recently, we have seen oil prices rise above pre-pandemic levels due, in part, to global disruptions; but future energy crises could increase the market's uncertainty.

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. WhenAdvances in medical technology and treatments have resulted in the COVID-19 pandemic alteredgreater need for medical services, which drive the way hospitals provided care by asking non-critical patients to recuperate at home,demand for our medical devices products saw an increase in orders. This surge in demand has waned, as our customers have resized their inventory levels.and components programs.

Foreign Currencies
We are affected by the movement of foreign currencies compared to the U.S. dollar, particularly in Industrial, Military Aircraft Controls and Industrial Systems.Commercial Aircraft. About one-fifthone-sixth of our 20222023 sales were denominated in foreign currencies. During the first three months of 2023,2024, average foreign currency rates generally weakenedstrengthened against the U.S. dollar compared to 2022.2023. The translation of the results of our foreign subsidiaries into U.S. dollars decreasedincreased sales by $17$6 million compared to the same period one year ago.



42


Table of Contents
Cautionary Statement
Information included or incorporated by reference in this report that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. In evaluating these forward-looking statements, you should carefully consider the factors set forth below.

Although it is not possible to create a comprehensive list of all factors that may cause 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 that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:

STRATEGIC RISKS
▪    We operate in highly competitive markets with competitors who may have greater resources than we possess;
▪    Our research and development and innovation efforts are substantial and may not be successful, which could reduce our sales and earnings;
▪     If we are unable to adequately enforce and protect our intellectual property or defend against assertions of infringement, our business and our ability to compete could be harmed; and
▪     Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or as we conduct divestitures.portfolio shaping and footprint rationalization initiatives.

MARKET CONDITION RISKS
▪    The markets we serve are cyclical and sensitive to domestic and foreign economic conditions and events, which may cause our operating results to fluctuate;
▪    We depend heavily on government contracts that may not be fully funded or may be terminated, and the failure to receive funding or the termination of one or more of these contracts could reduce our sales and increase our costs;
▪    The loss of The Boeing Company or Lockheed Martin as a customer or a significant reduction in the sales to either companyThe Boeing Company could adversely impact our operating results; and
▪    We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects.

OPERATIONAL RISKS
▪    A reducedconstrained supply chain, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies within our supply chainhave had, and could continue to have, a material impact on our ability to manufacture and ship our products, in addition to adversely impacting our operating profit and balance sheet;
▪ We face various risks related to health pandemics, such as the COVID-19 pandemic, which have had material adverse consequences on our operations, financial position, cash flows, and those of our customers and suppliers;
▪    If our subcontractors or suppliers fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially and adversely impacted;
▪    We face, and may continue to face, risks related to information systems interruptions, intrusions and or new software implementations, which may adversely affect our business operations;
▪    We may not be able to prevent, or timely detect, issues with our products and our manufacturing processes which may adversely affect our operations and our earnings; and
▪    The failure or misuse of our products may damage our reputation, necessitate a product recall or result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages.




43


Table of Contents
FINANCIAL RISKS
▪    We make estimates in accounting for over-time contracts, and changes in these estimates may have significant impacts on our earnings;
▪    We enter into fixed-price contracts, which could subject us to losses if we have cost overruns;
▪    Our indebtedness and restrictive covenants under our credit facilities and indenture governing our senior notes could limit our operational and financial flexibility;
▪    Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could adversely affect our earnings and equity and increase our pension funding requirements;
▪    A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth; and
▪    Unforeseen exposure to additional income tax liabilities may affect our operating results.

LEGAL AND COMPLIANCE RISKS
▪    Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting standards, and any false claims or non-compliance could subject us to fines, penalties or possible debarment;
▪    Our operations in foreign countries expose us to currency, political and trade risks and adverse changes in local legal and regulatory environments could impact our results of operations;
▪    Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business;
▪    We are involved in various legal proceedings, the outcome of which may be unfavorable to us;
▪    Our operations are subject to environmental laws and complying with those laws may cause us to incur significant costs; and
▪    We may face reputational, regulatory or financial risks from a perceived, or an actual, failure to achieve our sustainability goals.goals; and
The recently received invalidation of our facility security clearance by the U.S. Defense Counterintelligence and Security Agency (DCSA) could impact potential future business as well as adversely affect our operating results.

GENERAL RISKS
▪    Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our business; and
▪    Our performance could suffer if we cannot maintain our culture as well as attract, retain and engage our employees.

While we believe we have identified and discussed above 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 made 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 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 October 1, 2022September 30, 2023 for a complete discussion of our market risk. There have been no material changes in the current year regarding this market risk information.


44



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 31, 202230, 2023 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.


4445


Table of Contents
PART II OTHER INFORMATION

Item 1A. Risk Factors.
Refer to the Company’s Annual Report on Form 10-K for the year ended October 1, 2022September 30, 2023 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 31, 2022.30, 2023.
Period(a) Total
Number of
Shares
Purchased (1) (2)(3)
(b) Average
Price Paid
Per Share
(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)
October 2, 2022 - October 29, 202281,981 $75.03 71,849 2,198,081 
October 30, 2022 - December 3, 202267,698 85.41 — 2,198,081 
December 4, 2022 - December 31, 20223,012 88.32 — 2,198,081 
Total152,691 $79.90 71,849 2,198,081 
Period(a) Total
Number of
Shares
Purchased (1) (2)(3)
(b) Average
Price Paid
Per Share
(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)
October 1, 2023 - October 28, 20236,732 $114.38 — 2,172,081 
October 29, 2023 - December 2, 202372,498 130.36 — 2,172,081 
December 3, 2023 - December 30, 202317,195 143.20 — 2,172,081 
Total96,425 $131.53 — 2,172,081 
(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: 9,9543,929 shares at $82.10$113.73 in October; 7,988October, 9,378 shares at $86.31$124.22 in November and 2,78516,473 shares at $88.34$143.22 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 1092,803 Class A shares at $75.62.$115.29. In November, we accepted delivery of 15,5534,534 Class A shares at $85.11$132.36 and 14,15721,519 Class B shares at $85.76.$126.37. In December, we accepted delivery of 103196 Class A shares at $87.49$140.56 and 124285 Class B shares at $88.48.$141.56. In connection with the issuance of equity-based awards, we purchased 6937,067 Class B shares at $82.94$133.98 per share from the SECT in OctoberNovember and 30,000241 Class B shares at $85.17$145.48 in November.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 October we purchased 71,849 Class A shares at an average price of $74.04.



4546


Table of Contents
Item 6. Exhibits.
 (a)Exhibits
Form of Restricted Stock Unit Award under the 2014 Long Term Incentive Plan (for awards granted on or after November 15, 2022)14, 2023). (Filed herewith).
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.
101Interactive 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
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101.



4647


Table of Contents
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:February 3, 2023January 26, 2024By/s/ Pat Roche
Pat Roche
Chief Executive Officer
(Principal Executive Officer)

Date:February 3, 2023January 26, 2024By/s/ Jennifer Walter
Jennifer Walter
Vice President and Chief Financial Officer
(Principal Financial Officer)

Date:February 3, 2023January 26, 2024By/s/ Michael J. Swope
Michael J. Swope
Controller (Principal Accounting Officer)















4748