MOOG INC.

Previous wording

The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report filed on Form 10-K for the fiscal year ended September 28, 2024. In addition, the following should be read in conjunction with our Consolidated Financial Statements and Notes to Consolidated Condensed Financial Statements contained herein. All references to years in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are to fiscal years. Amounts may differ from reported values due to rounding.

Current wording

The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report filed on Form 10-K for the fiscal year ended September 28, 2024. In addition, the following should be read in conjunction with our Consolidated Financial Statements and Notes to Consolidated Condensed Financial Statements contained herein. All references to years in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are to fiscal years. Amounts may differ due to rounding as dollar and percentage variances are computed based on reported values.

Previous wording

For the three months ended December 28, 2024, 35% of revenue was recognized at the point in time control transferred to the customer. This method of revenue recognition is used most frequently in Industrial. We use this method for commercial contracts in which the asset being created has an alternative use. We determine the point in time control transfers to the customer by weighing the five indicators provided by ASC 606. When control has transferred to the customer, profit is generated as cost of sales is recorded and as revenue is recognized.

Current wording

For the three months ended March 29, 2025, 35% of revenue was recognized at the point in time control transferred to the customer. This method of revenue recognition is used most frequently in Industrial. We use this method for commercial contracts in which the asset being createdhas 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.

Previous wording

We focus on improving shareholder value through strategic revenue growth, both organic and acquired, improving operating efficiencies and manufacturing initiatives and utilizing low cost manufacturing facilities without compromising quality. Over time, we strive to have a balanced approach to capital allocation in order to maximize shareholder returns. Investing for organic growth through increased capital expenditures is a key opportunity for us within our capital allocation strategy. With the anticipation of several significant programs that will provide long-term revenue growth starting in a few years, our investments in our facilities will continue at elevated levels to ensure we are well prepared for these opportunities. Also, we have repurchased shares opportunistically and remain committed to our dividend policy.

Current wording

We focus on improving shareholder value through strategic revenue growth, both organic and acquired, improving operating efficiencies and manufacturing initiatives and utilizing low cost manufacturing facilities without compromising quality. Over time, we strive to have a balanced approach to capital allocation in order to maximize shareholder returns. Investing for organic growth through increased capital expenditures is a key element of our capital allocation strategy. With the anticipation of several significant programs that will provide long-term revenue growth starting in a few years, our investments in our facilities will continue at elevated levels to ensure we are well prepared for these opportunities. Also, we have repurchased shares opportunistically and remain committed to our dividend policy.

Previous wording

Net sales increased in the first quarter of 2025 compared to the first quarter of 2024, driven by demand in Commercial Aircraft and by defense market growth in Military Aircraft and Space and Defense. These increases were partially offset by a decrease in Industrial, driven by the lost sales associated with our portfolio shaping activities.

Current wording

Net sales increased in the second quarter and in the first half of 2025 compared to the second quarter and first half of 2024, driven by demand in Commercial Aircraft and by defense market growth in Military Aircraft and Space and Defense. These increases were partially offset by a decrease in Industrial, driven by the lost sales associated with our simplification actions.

Previous wording

Gross margin decreased in the first quarter of 2025 compared to the first quarter of 2024, driven by an unfavorable sales mix in Military Aircraft and an out-of-period warranty expense in Commercial Aircraft.

Current wording

Gross margin decreased in the second quarter of 2025 compared to the second quarter of 2024. In the second quarter of 2024, we had a one-time benefit of $14 million from the Employee Retention Credit associated with the CARES Act. Gross margin decreased in the first half of 2025 compared to the first half of 2024, driven by the out-of-period warranty expense in Commercial Aircraft in the first quarter of 2025 and by the benefit of the Employee Retention Credit in the first half of 2024.

Previous wording

Research and development expenses decreased in the first quarter of 2025 compared to the first quarter of 2024 due to the timing of activities across our segments.

Current wording

Research and development expenses decreased in the second quarter and in the first half of 2025 compared to the second quarter and first half of 2024 due to the timing of activities, primarily in Industrial.

Previous wording

As we continue to simplify our operations, the first quarters of 2025 and 2024 both included charges for various restructuring activities, primarily within Industrial.

Current wording

As we continue to simplify our operations, the second quarter and first half of 2025 included charges for various simplification activities, primarily within Industrial. The second quarter and first half of 2024 included impairments in Military Aircraft and charges related to simplification efforts, primarily in Industrial and Military Aircraft.

Previous wording

The twelve-month backlog in the first quarter of 2025 compared with the first quarter of 2024 was relatively flat. Within Space and Defense, we had higher orders across our satellite programs, as well as across our defense programs. This was partially offset by twelve-month backlog decreases in Industrial and Military Aircraft. The twelve-month backlog in Industrial decreased due to divestitures and weaker foreign currencies. The Military Aircraft twelve-month backlog decrease was due to the unfavorable timing of orders across various OEM programs.

Current wording

The twelve-month backlog in the second quarter of 2025 compared with the second quarter of 2024 was relatively flat. Within Space and Defense, we had higher orders across our satellite programs, as well as across our defense programs. This was partially offset by twelve-month backlog decreases in Commercial Aircraft and Industrial. The twelve-month backlog in Commercial Aircraft decreased due to the timing of OEM orders. The twelve-month backlog in Industrial decreased due to divestitures and the timing of a large order in the second quarter of 2024.

Previous wording

Military Aircraft net sales increased in the first quarter of 2025 compared to the first quarter of 2024. Sales increased $25 million in military OEM programs, driven by the ramp-up of activity on the FLRAA program and our new production work. Sales also increased $2 million in military aftermarket programs.

Current wording

In the second quarter of 2025 and in the first half of 2025, sales increased in military OEM programs $11 million and $36 million, respectively, driven by the ramp-up of activity on the FLRAA program and our new production work.

Previous wording

Operating margin increased in the first quarter of 2025 compared to the first quarter of 2024, driven by aftermarket sales growth, largely offset by an $8 million out-of-period warranty expense.

Current wording

Operating margin decreased in the second quarter of 2025 compared to the second quarter of 2024, driven by our OEM customers’ experiencing disruptions and delays in their production, mostly offset by a favorable sales mix. Operating margin increased in the first half of 2025 compared to the first half of 2024, driven by a favorable sales mix, partially offset by an $8 million out-of-period warranty expense.

Previous wording

Industrial net sales decreased in the first quarter of 2025 compared to the first quarter of 2024, driven by the lost sales associated with our portfolio shaping activities. In the first quarter of 2025, industrial automation sales decreased $20 million, driven by divestitures and lower demand. Sales also decreased $4 million in energy and $2 million in simulation and test. These decreases were partially offset by a sales increase of $9 million in our medical market due to higher demand for our medical device products.

Current wording

In the second quarter of 2025 and in the first half of 2025, industrial automation sales decreased $21 million and $41 million, respectively, driven by divestitures and purposeful product and customer exits. This decrease was partially offset by a sales increase in our medical market due to higher demand for our medical device products.

Previous wording

Operating margin decreased in the first quarter of 2025 compared to the first quarter of 2024. The first quarters of 2025 and 2024 included $5 million and $2 million, respectively, of restructuring and other charges. Excluding the net impacts of these charges, adjusted operating margins in the first quarter of 2025 and 2024 were 13.2% and 12.6%, respectively. The resulting increase in adjusted operating margin was primarily due to simplification initiatives.

Current wording

Operating margin increased in the second quarter of 2025 compared to the second quarter of 2024. The second quarters of 2025 and 2024 each included $4 million of restructuring and other charges. Excluding the impacts of these charges, operating margins in the second quarter of 2025 and 2024 were 13.4% and 12.5%, respectively. The resulting increase in operating margin was primarily due to simplification initiatives, which was partially offset by the one-time benefit from the Employee Retention Credit in the second quarter of 2024.

Previous wording

Net cash used by investing activities in the first quarter of 2025 included $33 million of capital expenditures and $13 million of proceeds from the sales of businesses.

Current wording

Net cash used by investing activities in the first half of 2025 included $70 million of capital expenditures and $13 million of proceeds from the sales of businesses.

Previous wording

Net cash used by investing activities in the first quarter of 2024 included $37 million of capital expenditures and $5 million associated with the acquisition of DCL.

Current wording

Net cash used by investing activities in the first half of 2024 included $78 million of capital expenditures and a $6 million use of cash associated with the acquisition of DCL.

Previous wording

Net cash provided by financing activities in the first quarter of 2025 included $230 million of net borrowings on our credit facilities. Financing activities also included $39 million for shares under the repurchase program authorized by the Board of Directors and $9 million of cash dividends.

Current wording

Net cash provided by financing activities in the first half of 2025 included $291 million of net borrowings on our credit facilities. Financing activities also included $100 million for shares under the repurchase program authorized by the Board of Directors and $18 million of cash dividends.

Previous wording

Net cash provided by financing activities in the first quarter of 2024 included $57 million of net borrowings on our credit facilities. Financing activities also included $9 million of cash dividends.

Current wording

Net cash provided by financing activities in the first half of 2024 included $85 million of net borrowings on our credit facilities. Financing activities also included $18 million of cash dividends.

Previous wording

At December 28, 2024, our cash balances were $74 million, which includes $64 million held outside of the U.S. by foreign operations. We regularly assess our cash needs, including repatriation of foreign earnings which may be subject to regulatory approvals and withholding taxes, where applicable by law.

Current wording

At March 29, 2025, our cash balances were $63 million, which includes $60 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.

Previous wording

Our U.S. revolving credit facility, which matures on October 27, 2027, has a capacity of $1.1 billion and also provides an expansion option, which permits us to request an increase of up to $400 million to the credit facility upon satisfaction of certain conditions. The weighted-average interest rate on the outstanding credit facility borrowings was 6.04% and is based on SOFR plus the applicable margin, which was 1.60% at December 28, 2024.

Current wording

Our U.S. revolving credit facility, which matures on October 27, 2027, has a capacity of $1.1 billion and also provides an expansion option, which permits us to request an increase of up to $400 million to the credit facility upon satisfaction of certain conditions. The weighted-average interest rate on the outstanding credit facility borrowings was 5.92% and is based on SOFR plus the applicable margin, which was 1.60% at March 29, 2025.

Previous wording

The SECT has a revolving credit facility with a borrowing capacity of $25 million, maturing on October 26, 2026. Interest was 6.60% as of December 28, 2024 and is based on SOFR plus a margin of 2.23%.

Current wording

The SECT has a revolving credit facility with a borrowing capacity of $25 million, maturing on October 26, 2026. Interest was 6.54% as of March 29, 2025 and is based on SOFR plus a margin of 2.23%.

Previous wording

At December 28, 2024, we had $515 million of unused capacity, including $492 million from the U.S. revolving credit facility after considering standby letters of credit and other limitations.

Current wording

At March 29, 2025, we had $455 million of unused capacity, including $432 million from the U.S. revolving credit facility after considering standby letters of credit and other limitations.

Previous wording

Our Receivables Purchase Agreement, which matures on December 11, 2026, allows the Receivables Subsidiary to sell receivables to the Purchasers in amounts up to a $125 million limit so long as certain conditions are satisfied. The receivables are sold to the Purchasers in consideration for the Purchasers making payments of cash. Each Purchaser’s share of capital accrues yield at a variable rate plus an applicable margin, which totaled 5.41% as of December 28, 2024.

Current wording

Our Receivables Purchase Agreement, which matures on December 11, 2026, allows the Receivables Subsidiary to sell receivables to the Purchasers in amounts up to a $125 million limit so long as certain conditions are satisfied. The receivables are sold to the Purchasers in consideration for the Purchasers making payments of cash. Each Purchaser’s share of capital accrues yield at a variable rate plus an applicable margin, which totaled 5.37% as of March 29, 2025.

Previous wording

The Board of Directors authorized a share repurchase program that permits repurchases for both Class A and Class B common stock, and allows us to buy up to an aggregate 3 million common shares. There are approximately 2 million common shares remaining under this authorization. See the Consolidated Condensed Statement of Shareholders Equity and Cash Flows, of Part I, Item 1, Financial Information and Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report for additional details.

Current wording

The Board of Directors authorized a share repurchase program that permits repurchases for both Class A and Class B common stock, and allows us to buy up to an aggregate 3 million common shares. There are approximately 1.7 million common shares remaining under this authorization. See the Consolidated Condensed Statement of Shareholders Equity and Cash Flows, of Part I, Item 1, Financial Information and Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report for additional details.

Previous wording

The commercial OEM aircraft market depends on a number of factors, including both the last decade's increasing global demand for air travel and increasing fuel prices. Both factors contributed to the demand for new, more fuel-efficient aircraft with lower operating costs that led to large production backlogs for Boeing and Airbus. Boeing and Airbus are producing widebody aircraft at rates to support the current air traffic volumes, as well as working through their current supply-chain challenges. Any adjustments to their ramp schedules affects the timing of the demand for our flight control systems.

Current wording

The commercial OEM aircraft market depends on a number of factors, including both the increasing global demand for air travel and increasing fuel prices. Both factors contributed to the demand for new, more fuel-efficient aircraft with lower operating costs that led to large production backlogs for Boeing and Airbus. Boeing and Airbus are producing widebody aircraft at rates to support the current air traffic volumes, as well as working through their current supply-chain challenges. Any adjustments to their production rates affects the timing of the demand for our flight control systems.

Previous wording

The space market is comprised of three customer markets: the civil market, the U.S. Department of Defense market and the commercial space market. The civil market, namely NASA, is driven by investment for commercial and exploration activities, including NASA's return to the moon. The U.S. Department of Defense market is driven by governmental-authorized levels of defense spending, including funding for defense-related satellite and space vehicle technologies. Levels of U.S. defense spending could increase as there is growing emphasis on space as the next frontier of potential future conflicts. The commercial space market is driven by demand for small satellites, which offer new innovative space applications. Trends for this market, as well as for commercial launch vehicles, follow demand for increased capacity. Our launch vehicle and satellite components and systems will continue to benefit from increased investments in these markets.

Current wording

The space market is comprised of three customer markets: civil, U.S. Department of Defense and commercial space. The civil market, namely NASA, is driven by investment for commercial and exploration activities. The U.S. Department of Defense market is driven by government-authorized levels of defense spending, including funding for defense-related satellite and space vehicle technologies. Levels of U.S. defense spending could increase as there is growing emphasis on space as the next frontier of potential future conflicts. The commercial space market is driven by demand for small satellites, which increases the demand for increased launch vehicle capacity. Our launch vehicle and satellite components and systems will continue to benefit from increased investments in each of these markets.

Previous wording

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.

Current wording

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 component products.

Previous wording

The industrial market we serve with our industrial automation products is influenced by several factors including capital investment levels, the pace of product and technology innovation, economic conditions and cost-reduction efforts. Our industrial automation customers mainly serve the automotive market.

Current wording

The industrial market we serve with our industrial automation products is influenced by several factors including capital investment levels, the pace of product and technology innovation, economic conditions and cost-reduction efforts. A portion of our industrial automation customers serve the automotive market.

Previous wording

Our simulation and test products operate in markets that were largely affected by the same factors and investment challenges as our commercial aircraft market. However, we have seen stronger order demand for flight simulation systems as the airline training market recovers in line with domestic and foreign flight hours.

Current wording

Our simulation and test products operate in markets that were largely affected by the same factors and investment challenges as our commercial aircraft market. We will see stronger order demand for flight simulation systems as the airline training market grows in line with domestic and foreign flight hours.

Previous wording

We are affected by the movement of foreign currencies compared to the U.S. dollar. About one-sixth of our 2024 sales were denominated in foreign currencies. During the first three months of 2025, average foreign currency rates generally were the same against the U.S. dollar compared to 2024. The translation of the results of our foreign subsidiaries into U.S. dollars had no material impact on sales compared to the same period one year ago.

Current wording

We are affected by the movement of foreign currencies compared to the U.S. dollar. About one-sixth of our 2024 sales were denominated in foreign currencies. During the first six months of 2025, average foreign currency rates generally weakened against the U.S. dollar compared to 2024. The translation of the results of our foreign subsidiaries into U.S. dollars decreased sales by $5 million compared to the same period one year ago.