MOG-A 10-K & 10-Q changes, risk factors and insider trading
Moog Inc. (also MOG-B) · NYSE · Misc Industrial & Commercial Machinery & Equipment · CIK 67887 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
“We may not be able to remediate material weaknesses effectively, identify additional material weaknesses in the future or achieve and maintain effective disclosure controls and procedures and internal control over financial reporting, which may affect our ability to ensure timely and reliable financial reports and affect the ability of our auditors to attest to the effectiveness of our internal controls. We identified a material weakness in the design and operation of our controls over a distinct group of long-term aftermarket service revenue contracts in our Commercial Aircraft segment. …”see in full comparison
The loss of The Boeing Company as a customer or a significant reduction in the sales to The Boeing Company could adversely impact our operating results. We provide Boeing with controls for both military and commercial applications, as well as controls for space and defense applications, which totaledsee in full comparison12%10% of our20242025 sales. Sales to Boeing's commercial airplane group are generally made under long-term supply agreements. Boeing operates in a competitive environment and continues to evaluate the size, scope and cost of their supplier base. Labor disruptions or other supply chain constraints experienced by Boeing or its supplier base could delay planned production and negatively impact commercial aircraft production rates. Also, Boeing continues to match their commercial production rates to the resized global air trafficvolume and is increasing production rates following the COVID-19 pandemic.volume. In addition, a portion of our sales to Boeing is tied to varying levels of government defense spending, and a reduction in futureDepartmentU.S.of Defensedefense spending levels could adversely impact our sales, operating profit and cash flow. Furthermore, a loss of Boeing as a customer could materially reduce our sales and earnings.
“A constrained supply chain, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies have 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. Constraints in our supply chain due to worldwide demand for electronics and components across several end markets has affected our business. …”see in full comparison
“Inflated prices across various raw materials and third-party provided components and sub-assemblies have adversely impacted, and could continue to adversely impact, our financial condition, operating profit and cash flow. A constrained supply chain could have a material impact on our ability to manufacture and ship products. The prices for materials and components used in our products has increased, adding additional pressures to our operating margins. Also, sole-source suppliers could apply leverage over price or other terms. …”see in full comparison
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. We have significant manufacturing and sales operations in foreign countries. In addition, our domestic operations sell to foreign customers. Our financial results may be adversely affected by fluctuations in foreign currencies and by the translation of the financial statements of our foreign subsidiaries from local currencies into U.S. dollars. Both the sales from international operations and export sales are subject to varying degrees of risks inherent in doing business outside of the U.S. Such risks include the possibility of unfavorable circumstances arising from host country laws, regulations or customs including, but not limited to privacy laws protecting personal data, changes in tariff and trade barriers and import or export licensing requirements. The tariffs recently implemented in the U.S. on steel, aluminum and other raw materials, potential of further tariffs and potential retaliatory actions by other countries could increase costs and reduce availability of raw materials. This could adversely impact our sales, operating profit and cash flow. Uncertainty also remains with respect to trade policies and treaties between the U.S. and other countries including China, where we both source products and have customers. Changes to tariffs or other trade restrictions may result in higher prices for new aircraft, which may negatively impact customer order volume, and restrict our future orders. The potential loss of orders could negatively impact our financial results including lower sales, operating profits and cash flow. For our sales mix by country, see Note 22 - Segments, of Item 8, Financial Statements and Supplementary Data, of this report.see in full comparison
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 rely extensively on various information technologies throughout our company supporting nearly every business activity. In doing so, we work with sensitive data types including proprietary business information, intellectual property and confidential employee data. Handling and storage of this data, either onsite or managed by authorized third parties, subjects us to privacy, security, or other regulatory requirements, which could, if not handled or stored in compliance with applicable requirements, result in a potential liability. Business operations face risks, and may continue to face risks, due to information system errors, equipment failures, or ever-evolving cyber-attacks. In addition, advancements in artificial intelligence and quantum computing present risks to our business, as they may be used to identify vulnerabilities and produce advanced cybersecurity attacks. Unauthorized access or tampering via cybersecurity incidents may result in potential data corruption, exposure of proprietary or confidential information and work stoppages. Additionally, we have and expect to incur additional costs to comply with our customers' increased cybersecurity protections and standards, including those of the U.S.see in full comparisonGovernment.government. We have embarked on multi-year business information system transformation and standardization projects. These endeavors are complex and company-wide, involving new technologies and may introduce risk to our cybersecurity infrastructure. While we are investing significant resources throughout the planning, project managing and deployment processes, unanticipated delays could occur and could adversely affect our financial results. Any of these cybersecurity issues may cause operational stoppages, increased operational costs, fines, penalties and diminished competitive advantages through reputational damages.
Full comparison: every changed paragraph (13)
The markets we serve are cyclical and sensitive to domestic and foreign economic conditions and events, which may cause our operating results to fluctuate. The markets we serve are sensitive to fluctuations in general business cycles, global pandemics, domestic and foreign governmental tariffs, trade and monetary policies and economic conditions and events. Boeing and Airbus are producing widebody aircraft at rates to support the post-pandemic air traffic volumes, as well as working through their current supply-chain challenges. Any adjustments to their ramp schedules affects the demand for our flight control systems. Also, U.S. Department of Defensedefense and other foreign governments' defense funding levels, driven in part by the current global unrest, can fluctuate and affect our defense and our space programs. Our industrial product demand depends upon several factors including levels of capital investment, the pace of product innovations and technology upgrades, changing economic conditions and the current and forecasted price of oil and natural gas.
The loss of The Boeing Company as a customer or a significant reduction in the sales to The Boeing Company could adversely impact our operating results. We provide Boeing with controls for both military and commercial applications, as well as controls for space and defense applications, which totaled 12%10% of our 20242025 sales. Sales to Boeing's commercial airplane group are generally made under long-term supply agreements. Boeing operates in a competitive environment and continues to evaluate the size, scope and cost of their supplier base. Labor disruptions or other supply chain constraints experienced by Boeing or its supplier base could delay planned production and negatively impact commercial aircraft production rates. Also, Boeing continues to match their commercial production rates to the resized global air traffic volume and is increasing production rates following the COVID-19 pandemic.volume. In addition, a portion of our sales to Boeing is tied to varying levels of government defense spending, and a reduction in future DepartmentU.S. of Defensedefense spending levels could adversely impact our sales, operating profit and cash flow. Furthermore, a loss of Boeing as a customer could materially reduce our sales and earnings.
We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects. As of September 28,27, 2024,2025, our total backlog was $5.1$6.0 billion, which represents confirmed orders we believe will be recognized as revenue. There is no assurance that our customers will purchase all the orders represented in our backlog. If customers do not purchase these orders, it would increase our risk of inventory obsolescence and inventory write-downs, which would adversely affect our operations and our earnings. A significant portion of our backlog relates to commercial aircraft programs, and any adjustments to their planned production schedules will affect the demand for our flight control systems. Also, given the uncertain nature of our contracts with the U.S. Government and other foreign governments, in part due to governments' abilities to modify, curtail or terminate major programs, we may not realize the full revenue value of the orders included in our backlog. If this occurs, our future revenue and growth prospects may be adversely affected.
Inflated prices across various raw materials and third-party provided components and sub-assemblies have adversely impacted, and could continue to adversely impact, our financial condition, operating profit and cash flow. A constrained supply chain could have a material impact on our ability to manufacture and ship products. The prices for materials and components used in our products has increased, adding additional pressures to our operating margins. Also, sole-source suppliers could apply leverage over price or other terms. We may be unable to raise our prices for our products equal to the increased prices for supplied materials and components, which could adversely affect our financial condition, operating results and cash flow. In addition, constraints in our supply chain that cause shortages or delays in materials and components could prevent us from completing and shipping our final products on time. We have taken actions to strengthen our supply chain, including making supplier changes and internalizing some processes. Transitions to new suppliers and internalizing processes could result in significant additional costs and delays, preventing us from meeting customer demand for our products, which could damage customer relationships and adversely affect our financial condition, operating results and cash flow.
A constrained supply chain, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies have 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. Constraints in our supply chain due to worldwide demand for electronics and components across several end markets has affected our business. We have experienced and may continue to experience shortages and delays in materials and components necessary in our manufacturing processes, preventing us from completing and shipping our final products on time. As a result of these interruptions and long lead times that may continue, we are selectively purchasing, in advance, certain raw materials and third-party provided components and sub-assemblies that we are concerned might otherwise be delayed. Additionally, the prices for materials and components used in our products has increased, adding additional pressures to our operating margins. We may be unable to raise our prices for our products equal to the increased prices for supplied materials and components, and if our constrained supply chain continues or we otherwise face continued price increases from our suppliers, our operating profit and balance sheet may be negatively impacted. Additionally, sole-source suppliers could apply leverage over price or other terms, which could adversely affect our financial condition, operating results and cash flow.
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 rely extensively on various information technologies throughout our company supporting nearly every business activity. In doing so, we work with sensitive data types including proprietary business information, intellectual property and confidential employee data. Handling and storage of this data, either onsite or managed by authorized third parties, subjects us to privacy, security, or other regulatory requirements, which could, if not handled or stored in compliance with applicable requirements, result in a potential liability. Business operations face risks, and may continue to face risks, due to information system errors, equipment failures, or ever-evolving cyber-attacks. In addition, advancements in artificial intelligence and quantum computing present risks to our business, as they may be used to identify vulnerabilities and produce advanced cybersecurity attacks. Unauthorized access or tampering via cybersecurity incidents may result in potential data corruption, exposure of proprietary or confidential information and work stoppages. Additionally, we have and expect to incur additional costs to comply with our customers' increased cybersecurity protections and standards, including those of the U.S. Government.government. We have embarked on multi-year business information system transformation and standardization projects. These endeavors are complex and company-wide, involving new technologies and may introduce risk to our cybersecurity infrastructure. While we are investing significant resources throughout the planning, project managing and deployment processes, unanticipated delays could occur and could adversely affect our financial results. Any of these cybersecurity issues may cause operational stoppages, increased operational costs, fines, penalties and diminished competitive advantages through reputational damages.
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. Defects in the design and manufacture of our products or our subcontractors' products may necessitate a product recall. We include complex system designs and components in our products that could contain errors or defects, particularly when we incorporate new technologies into our customercustomers’ solutions. If any of our products are defective, we could be required to redesign or recall those products, pay substantial damages or warranty claims or face actions by regulatory bodies and government authorities. Such an event could result in significant expenses, delay sales, inflate inventory, cause reputational damage or cause us to withdraw from certain markets. We are also exposed to product liability claims. Many of our products are used in applications where their failure or misuse could result in significant property or economic loss and serious personal injury or death. We carry product liability insurance consistent with industry norms. However, these insurance coverages may not be sufficient to fully cover the payment of any potential claim. A product recall or a product liability claim not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
As an aerospace and defense company, we face risks related to the security of our facilities and employees. Threats to the physical security of our facilities and employees, such as civil unrest, terrorism, sabotage and workplace violence, could disrupt production, delay deliveries, compromise sensitive information or assets and increase security and insurance costs. These threats could adversely impact our sales, operating profit, cash flow and reputation.
Unforeseen exposure to additional income tax liabilities may affect our operating results. Our distribution of taxable income is subject to domestic and foreign tax jurisdictions. Our effective tax rate and earnings may be affected by shifts in our mix of earnings in countries with varying statutory tax rates, changes in the valuation of deferred tax assets and outcomes of any audits performed on previous tax returns. Additionally, any alterations to domestic and foreign government tax regulations or interpretations, global minimum taxes or other tax law changes could have significant impacts on our effective tax rate and on our deferred tax assets and liabilities. During OctoberIn 2021, the Organization for Economic Cooperation and Development (OECD) passed Pillar Two, an inclusive framework on Base Erosion and Profit Sharing, which would enact a minimum 15% tax for large multinational companies. Many countries are considering changes to their tax laws or proposing new tax laws to align with the recommendations that have been made by the OECD regarding Pillar Two. We are closely monitoring developments and evaluating the potential impacts of Pillar Two, which could adversely affect our effective tax rate, tax payments and results of operations.
We may not be able to remediate material weaknesses effectively, identify additional material weaknesses in the future or achieve and maintain effective disclosure controls and procedures and internal control over financial reporting, which may affect our ability to ensure timely and reliable financial reports and affect the ability of our auditors to attest to the effectiveness of our internal controls. We identified a material weakness in the design and operation of our controls over a distinct group of long-term aftermarket service revenue contracts in our Commercial Aircraft segment. That material weakness led to a conclusion that our internal controls over financial reporting and disclosure controls and procedures were not effective as of September 27, 2025. Management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule 13a-15(f) and 15d15(f) under the Securities Exchange Act. We are actively engaged in developing a remediation plan designed to address the material weakness but cannot be certain as to when our remediation plan will be fully completed. If the remedial measures are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in the internal controls are discovered or occur in the future, the consolidated financial statements may contain material misstatements. We may also be required to restate our financial results, which could materially and adversely affect our business and results of operations or financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weaknesses or significant deficiencies, subject us to fines, lawsuits, penalties, judgments or other legal expenses, harm our reputation, create delays or the inability to meet future SEC reporting obligations. For more information related to our material weakness and its remediation, see Item 9A. Controls and Procedures of this report.
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. We have significant manufacturing and sales operations in foreign countries. In addition, our domestic operations sell to foreign customers. Our financial results may be adversely affected by fluctuations in foreign currencies and by the translation of the financial statements of our foreign subsidiaries from local currencies into U.S. dollars. Both the sales from international operations and export sales are subject to varying degrees of risks inherent in doing business outside of the U.S. Such risks include the possibility of unfavorable circumstances arising from host country laws, regulations or customs including, but not limited to privacy laws protecting personal data, changes in tariff and trade barriers and import or export licensing requirements. The tariffs recently implemented in the U.S. on steel, aluminum and other raw materials, potential of further tariffs and potential retaliatory actions by other countries could increase costs and reduce availability of raw materials. This could adversely impact our sales, operating profit and cash flow. Uncertainty also remains with respect to trade policies and treaties between the U.S. and other countries including China, where we both source products and have customers. Changes to tariffs or other trade restrictions may result in higher prices for new aircraft, which may negatively impact customer order volume, and restrict our future orders. The potential loss of orders could negatively impact our financial results including lower sales, operating profits and cash flow. For our sales mix by country, see Note 22 - Segments, of Item 8, Financial Statements and Supplementary Data, of this report.
Our operations are subject to environmental laws and complying with those laws may cause us to incur significant costs. Our operations and facilities are subject to numerous stringent environmental laws and regulations. Although we believe that we are in material compliance with these laws and regulations, future changes in these laws, regulations or interpretations of them, or changes in the nature of our operations may require us to make significant capital expenditures to ensure continued compliance. We have been, and are currently involved in, environmental remediation activities. The cost of these activities may become significant depending on the discovery of additional environmental exposures at sites that we currently own or operate, at sites that we formerly owned or operated, or at sites to which we have sent hazardous substances or wastes for treatment, recycling or disposal.
Future terror attacks, war, natural disasters, public health crises or other catastrophic events beyond our control could negatively impact our business. Terror attacks, war or other civil disturbances, natural disasters, public health crises and other catastrophic events could lead to economic instability and decreased demand for commercial products, which could negatively impact our business, financial condition, results of operations and cash flows. From time to time, terrorist attacks worldwide have caused instability in global financial markets and in the aviation industry. Also, our facilities and suppliers are located throughout the world and could be subject to damage from fires, floods, earthquakes or other natural or man-made disasters. Although we carry third party property insurance covering these and other risks, our inability to meet customers' schedules as a result of a catastrophe may result in the loss of customers or significantly increase costs, including penalty claims under customer contracts. Insurance for certain risks may be unavailable, insufficient or subject to dispute, which could adversely impact our financial condition, operating profit and cash flow.
Management's Discussion & Analysis (MD&A)
New heading “Space and Defense”
Removed heading “Assets Held for Sale”
Removed heading “Reviews for Impairment of Goodwill”
Removed heading “Reviews for Impairment of Long-Lived Assets”
Removed heading “Pension Assumptions”
Removed heading “SEGMENT OUTLOOK”
Removed heading “Consolidated Statement of Cash Flows”
Largest changes
“Reviews for Impairment of Goodwill”see in full comparison
Operating margin increased in 2024 compared to 2023 driven by strong operational performance, including improved performance on our space vehiclesee in full comparisonprograms and byprograms, the benefits from our pricinginitiatives. In 2024initiatives and2023,theweone-timeincurredbenefitrestructuring,frominventorythewrite-down,EmployeeimpairmentRetentionandCreditotherassociatedchargeswithofthe$9CARESmillion and $3 million, respectively. Excluding these charges, adjusted operating margins in 2024 and 2023 were 13.4% and 10.5%, respectively.Act.
“At September 28, 2024, we had $834 million of goodwill, or 20% of total assets. We test goodwill for impairment for each of our reporting units at least annually, during our fourth quarter, and whenever events occur or circumstances change, such as changes in the business climate, poor indicators of operating performance or the sale or disposition of a significant portion of a reporting unit. We also test goodwill for impairment when there is a change in reporting units.”see in full comparison
“Long-lived assets held for use, which primarily includes finite-lived intangible assets, property, plant and equipment and right-of-use assets, are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition are less than their carrying value. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test. …”see in full comparison
“When we evaluate the potential for goodwill impairment using a qualitative assessment, we consider factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. …”see in full comparison
Full comparison: every changed paragraph (109)
•Defense market - primary and secondary flight controls and components for military aircraft, turreted weapon systems, tactical and strategic missile steering controlscontrols, defense ground vehicle systems including turreted weapon systems and various other defense product components.
•Space market - satellite avionics, propulsion and positioning controls and components, launcher thrust vector controls and components, as well as integrated space vehicles.
•Industrial market - various components and systems used in various applications including: heavy industrial machinery used for metal forming and pressing, flight simulation motion control systems, energy exploration and generation products, material and automotive structural and fatigue testing systems, as well as forliquid thecooling electrificationpumps ofused constructionin vehicles.data centers.
•Medical market - componentspumps and pumpssets for enteral clinical nutrition and infusion therapy, slip rings used in CT scan medical equipment,equipment and various components used in ultrasonic sensors and surgical handpieces and sleep apnea equipment.handpieces.
Our products and technologies affect the lives of millions of people around the world.worldwide. Our solutions are critical to preservingpreserve national security, ensuringensure safe air transportation, reducingreduce industrial factory emissions and enhancingenhance patient'spatients' lives alllives, while driving innovation. Our engineers collaboratively design and manufacture the most advanced motion control products, to the highest quality standards, for use in demanding applications. By capitalizingbuilding on these core foundational strengths,capabilities, we believe we have achieved a leadership position in the high performance,high-performance, precision controls marketmarket, and are "Shaping The Way Our World Moves™."
ByWe leveragingleverage our engineering heritageexpertise and by focusing onclose customer intimacyrelationships to solve our customers' most demandingcomplex technical problems,problems. weThis haveapproach beenhas ableallowed us to expand our control product franchise to multiple markets;expand, organically growingand fromthrough aacquisitions, our high-performance components manufacturerbusiness to aalso offer the design, manufacture and integration of high-performance systems designer,across manufacturermultiple andmarkets. integrator. In addition, weWe continue to expand our content positions on ourexisting currentplatforms platforms,as well, seeking to be the leading precision motion-controls supplier inacross the niche markets we serve. We are also lookmodernizing foroperations innovationthrough in all aspects of our business, employing newproductivity‑enhancing technologies toand improve productivity, while focusing ontargeted talent development to strengthen our employee operational performance.
Our fundamental long-term strategies that will help usto achieve our financial objectives centerfocus aroundon pricing and simplification initiatives. Our pricing initiativesstrategy focus on receivingseeks recognition for the value we deliver to our customers across all of our markets. Our simplification initiativesinitiatives, centerguided aroundby 80/20 methodologies, andprinciples, include:
•shaping our product and business portfolio to invest in growth areas and to divest thosenon-core that no longer fit,assets,
•rationalizing our global footprint to align withmeet current and future business levels,volumes,
•focusing our factories so that individual sitesto meet the uniquespecific needs of a specificeach market, and
•investing in automation and technologies to improve businessoperational operations.efficiency.
We focusaim onto improvingimprove shareholder value through strategic revenue growth, both organic and acquired, improvingmanufacturing and operating efficiencies and manufacturing initiatives and utilizing low costlow-cost manufacturing facilities without compromising quality. Historically,Historically weand haveover takenthe along-term, balanced approach toour capital deployment instrategy orderhas to maximize shareholder returns over the long term. These activities have includedbalanced strategic acquisitions, share buybacks and dividend payments.payments Today,to maximize shareholder returns. In the near term, our capital deployment priority in the near-term continues to be investing forprioritizes organic growth.growth Withwhile theopportunistically anticipationpursuing of several significant programsacquisitions that will provide long-term revenue growth starting in a few years,complement our investments in our facilities will continue at elevated levels to ensure we are well prepared for these opportunities.business.
All of our acquisitions are accounted for under the purchase method and, accordingly, the operating results for the acquired companies are included in the Consolidated Statements of Earnings from the respective dates of acquisition. Under purchase accounting, we record assets and liabilities at fair value and such amounts are reflected in the respective captions on the Consolidated Balance Sheets. The purchase price described for each acquisition below is net of any cash acquired, includes debt issued or assumed and the fair value of contingent consideration.
Acquisitions
On October 20, 2023, we acquired Data Collection Limited ("DCL") based in Auckland, New Zealand for a purchase price, net of acquired cash, of $6 million. DCL specializes in manufacturing and operating pavement surveying equipment and providing innovative solutions for measuring and managing pavements. This operation is included in our Military Aircraft segment.
Assets Held for Sale
In 2024, we recorded losses in Asset impairment and fair value adjustment of $15 million related to selling a motors business in the Czech Republic and a hydraulic systems business in Luxembourg that were included in our Industrial segment. We reclassified $9 million in other current assets and $5 million in accrued liabilities as held for sale. We completed the sale of these businesses on September 30, 2024. We do not expect any significant additional losses as a result of completing the transactions.
For further information, refer toSee Note 3 - Acquisitions, Divestitures and Assets Held for Sale, of Item 8, Financial Statements and Supplementary Data, of this report.report for details.
We use the equity method of accounting to record investments and operating results of those investments in which we do not have a controlling interest, however we do have the ability to exercise significant influence over operations. We held the following equity method investments and joint ventures as of the year ended September 28, 2024.
Moog Aircraft Services Asia ("MASA") is a joint venture included in our Commercial Aircraft segment in which we currently hold a 51% ownership share. MASA is intended to provide maintenance, repair and overhaul services for our manufactured flight control systems.
We continued to divest our interest in NOVI LLC, which is included in our Space and Defense segment. Our ownership is now below the threshold for equity accounting and as such is now recorded at fair value.
Suffolk Technologies Fund 1, L.P., is a limited partnership included in our Industrial segment that invests in startups to transform the construction, real estate and property maintenance industries in the U.S. We have a remaining on-call capital commitment of up to $6 million.
Hybrid Motion Solutions (“HMS”) is a joint venture in our Industrial 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 September 28, 2024. In addition to the investment, we had a loan to HMS for $3 million, which we wrote off during 2023 and is included in Asset Impairment in the Consolidated Statement of Earnings.
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 at historical cost or fair value using readily determinable financial information. In 2024, we recorded an impairment for the devaluation of an investment of $5 million, which is included as Asset impairment in the Consolidated Statement of Earnings. As of September 28, 2024 we had investments of $5 million, which are included as Other assets in the Consolidated Balance Sheets.
For further information, refer toSee Note 9 - Equity Method and Other Investments, of Item 8, Financial Statements and Supplementary Data, of this report.report for details.
We recognize revenue from contracts with customers using the five-step model prescribed in ASC 606. For contracts that qualify for over timeover-time treatment, we recognize revenue as control of the promised goods or services is being transferred to the customer. This is accomplished by using the cost-to-cost method of accounting, which measures progress 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 this 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. Revenue recognized using the cost-to-cost method of accounting over time for the year ended September 28,27, 20242025 was 64% of total revenue. Revenue and cost estimates for substantially all over-time contract performance obligations are reviewed and updated quarterly. For further information, refer to Note 2 - Revenue from Contracts with Customers and Note 22 - Segments, of Item 8, Financial Statements and Supplementary Data, of this report.
Reviews for Impairment of Goodwill
At September 28, 2024, we had $834 million of goodwill, or 20% of total assets. We test goodwill for impairment for each of our reporting units at least annually, during our fourth quarter, and whenever events occur or circumstances change, such as changes in the business climate, poor indicators of operating performance or the sale or disposition of a significant portion of a reporting unit. We also test goodwill for impairment when there is a change in reporting units.
We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We aggregate certain components based upon an evaluation of the facts and circumstances, including the nature of products and services and the extent of shared assets and resources. As a result, we have four reporting units.
Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units. Companies are also allowed to bypass the qualitative analysis and perform a quantitative analysis if desired. Economic uncertainties and the length of time from the calculation of a baseline fair value are factors that we consider in determining whether to perform a quantitative test.
When we evaluate the potential for goodwill impairment using a qualitative assessment, we consider factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative two-step impairment test.
Quantitative testing first requires a comparison of the fair value of each reporting unit to its carrying value. We principally use the discounted cash flow method to estimate the fair value of our reporting units. The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, operating margins and cash flows, the terminal growth rate and the discount rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit's current business, expected developments and operational strategies typically over a five-year period. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and any loss must be measured.
In measuring the impairment loss, the implied fair value of goodwill is determined by assigning a fair value to all of the reporting unit's assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination at fair value. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss would be recognized in an amount equal to that excess.
The determination of our assumptions is subjective and requires estimation. Substantial changes in these estimates and assumptions could materially affect the results of our reviews for impairment of goodwill.
For our annual test of goodwill for impairment in 2024, we performed a qualitative assessment for each of our four reporting units.
We evaluated the potential for goodwill impairment by considering macroeconomic conditions, industry and market conditions, cost factors, both current and future expected financial performance, and relevant entity-specific events for each of the reporting units. We also considered our overall market performance discretely as well as in relation to our peers. The results of our qualitative assessment indicated that is more likely than not that the fair value of each of the reporting units exceed its carrying value; and therefore, a quantitative two-step impairment test was not necessary and goodwill was not impaired.
Reviews for Impairment of Long-Lived Assets
Long-lived assets held for use, which primarily includes finite-lived intangible assets, property, plant and equipment and right-of-use assets, are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition are less than their carrying value. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test. For further information, refer to Note 6 - Property, Plant and Equipment and Note 8 - Goodwill and Intangible Assets, of Item 8, Financial Statements and Supplementary Data, of this report.
Pension Assumptions
We maintain various defined benefit pension plans covering employees at certain locations. In 2024, pension expense for all defined benefit plans, which includes the postretirement benefit plan, was $26 million. For further information, refer to Note 15 - Employee Benefit Plans, of Item 8, Financial Statements and Supplementary Data, of this report. Pension obligations and the related costs are determined using actuarial valuations that involve several assumptions. The most critical assumptions are the discount rate, the long-term expected return on assets and mortality rates. Other assumptions include salary increases and retirement age.
We use the spot rate approach to estimate the service and interest cost components of the net periodic benefit cost for most of our plans. Under this approach the service cost is determined by applying the discount rates along the yield curve to the specific service cost cash flows to determine the present value. The interest cost component is computed by using each assumed discount rate along the curve. The discount rates used in determining expense for the U.S. Employees’ Retirement Plan, our largest plan, in 2024 were 6.0% for service cost and 5.8% for interest cost, compared to 5.5% and 5.4%, respectively, in 2023. A 50 basis point decrease in the discount rates would decrease our annual pension expense by approximately $2 million. The discount rates are used to state expected future cash flows at present value. Using a higher discount rate typically decreases the present value of pension obligations and decreases pension expense. We use the Aon Hewitt AA Above Median yield curve to determine the discount rate for our U.S. defined benefit plans at year end. We believe that the Aon Hewitt AA Above Median yield curve best mirrors the yields of bonds that would be selected by management if actions were taken to settle our obligation.
Mortality rates are used to estimate the life expectancy of plan participants during which they are expected to receive benefit payments. We use a modified version of the mortality table and projection scale published by the Society of Actuaries, which reflects improvements consistent with the Social Security Administration, as a basis for our mortality assumptions for our U.S. plans. We believe the use of this modified table and projection scale best reflects our demographics and anticipated plan outcomes.
The long-term expected return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. In determining the long-term expected return on assets assumption, we consider our current and target asset allocations. We consider the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and to provide adequate liquidity to meet immediate and future benefit payment requirements. In determining the 2024 expense for our largest plan, we used a 7.3% return on assets assumption, compared to 6.5% for 2023. A 25 basis point decrease in the long-term expected return on assets assumption would increase our annual pension expense by approximately $1 million.
Valuation allowances associated with deferred tax assets isare another area that requires judgment. We record a valuation allowance to reduce deferred tax assets to the amount of future tax benefit that we believe is more likely than not to be realized. We consider recent earnings projections, allowable tax carryforward periods, tax planning strategies and historical earnings performance to determine the amount of the valuation allowance. Changes in these factors could cause us to adjust our valuation allowance,allowances, which would impact our income tax expense when we determine that these factors have changed.
During the preparation of our consolidated financial statements for the year ended September 27, 2025, management identified misstatements in previously issued annual consolidated financial statements and interim consolidated condensed financial statements, impacting prior periods.
The principal misstatement related to the accounting for a distinct group of long-term aftermarket service contracts with customers in the Commercial Aircraft segment. Specifically, there were inaccurate inputs used in the total costs at completion estimate within the over-time revenue recognition calculation for these contracts that accumulated over several years. Additionally, other unrelated misstatements, including an adjustment for the understatement of certain warranty costs, were also identified.
We evaluated the nature and magnitude of all identified misstatements to assess the materiality, including quantitative and qualitative considerations and determined that the misstatements were not material, individually or in aggregate, to any previously issued quarterly or annual consolidated financial statements. However, correcting these misstatements entirely in the current period would have been material to our 2025 financial statements. As a result, within this annual report, we have revised our prior period annual consolidated financial statements for 2023 and 2024 and our quarterly consolidated condensed financial statements for 2024 and 2025 to reflect the corrections in the periods in which the misstatements originated.
A summary of the corrections and their related impacts on each financial statement line items from our previously issued financial statements are presented in Note 1 - Summary of Significant Accounting Policies and Note 25 – Revision of Previously Issued Consolidated Financial Statements.
The following is a discussion of our results of operations in 20242025 compared to 2023.revised A2024 discussionresults ofand our 2023revised 2024 results of operations compared to 2022 results can be found within Part II, Item 7. Management's Discussion and Analysis within ourrevised 2023 Annual Report on Form 10-K, filed with the SEC on November 14, 2023.results.
Net sales increased in 2025 compared to 2024, driven by demand in Commercial Aircraft and by defense market growth in Space and Defense and Military Aircraft. These increases were partially offset by a decrease in Industrial, driven by the lost sales associated with our divestitures at the beginning of 2025. Net sales increased across all our segments in 2024 compared to 2023, driven by production ramps in Commercial Aircraft and by defense market growth in Military Aircraft and Space and Defense.
Gross margin decreased in 2025 compared to 2024. This was driven by a benefit of $14 million from the Employee Retention Credit associated with the CARES Act in 2024. Gross margin increased in 2024 compared to 2023, driven by improved performance on our space vehicle development programs, a $14 million benefit from the Employee Retention Credit associated with the CARES Act and the results of our pricing and simplification initiatives across all of our segments.
Research and development expenses decreased in 2025 compared to 2024 due to lower level of activity, primarily in Industrial. Research and development expenses increased in 2024 compared to 2023.2023, Activitiesdriven by activities supporting our new growth programs in Space and Defense and Industrial were partially offset by a reduction in Military Aircraft.Industrial.
Selling, general and administrative expenses as a percentage of sales increased in 2025 compared to 2024, driven by expenses associated with the settlement of a legal dispute of $12 million and increased business capture activities. Selling, general and administrative expenses as a percentage of sales decreased in 2024 compared to 2023, reflecting the incremental benefit from higher sales volume.
Interest expense increased in 2025 compared to 2024, driven by higher outstanding debt balances, partially offset by lower interest rates. Interest expense increased in 2024 compared to 2023, driven by higher interest rates, as well as higher debt balances.
Interest expense decreased in 2024 compared to 2023 due to capitalizing $10 million of interest associated with certain major long term capital projects in 2023 and 2024. Mostly offsetting the reduction was the impact of higher rates on outstanding debt balances, as well as higher debt balances.
In 2025, 2024 and 2023, weinventory incurredwrite-down, asset impairment and restructuring charges,charges impairment charges, inventory write-downs and otherincluded charges acrossfor allvarious oursimplification segments,activities, asprimarily wewithin continued to simplify our business.Industrial. In 2023, we also incurred a non-cash pension settlement charge, which was mostly offset by the gain from the sales of three buildings in Industrial.
The effective tax rate was higher in 2025 compared to 2024, as 2024 included a benefit associated with a capital investment incentive in the United Kingdom. The effective tax rate was higher in 2024 compared to 2023, as the prioreffective yeartax includedrate in 2023 reflected higher amounts of research and development tax credit benefits.
The twelve-month backlog at September 27, 2025 increased as compared with the twelve-month backlog at September 28, 2024. The twelve-month backlog in Military Aircraft increased due to the timing of orders for the F-35 program and new production programs. Within Space and Defense, we had higher orders across the entire portfolio of the business, reflecting strong business capture and broad-based growth in both space and defense. The twelve-month backlog in Industrial increased due to increased orders in medical and liquid cooling pumps used in data centers.
Space and Defense
Space and Defense net sales increased in 2025 compared to 2024, reflecting broad-based defense demand. Higher demand for components for both satellites and defense applications, including missiles, was partially offset by timing of activity on spacecraft vehicles and turrets.
What changed in the latest 10-Q
Risk Factors
Refer to the Company’s Annual Report on Form 10-K for the year ended September 27, 2025 for a complete discussion of our risk factors. There have been no material changes in the current year regarding our risk factors.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “U.S. GOVERNMENT TARIFFS AND IEEPA TARIFF REFUND CLAIMS”
Largest changes
“U.S. GOVERNMENT TARIFFS AND IEEPA TARIFF REFUND CLAIMS”see in full comparison
“Operating margin increased in the first three quarters of 2026 compared to the first three quarters of 2025, driven by IEEPA tariff refund claims, lower charges related to simplification initiatives, an asset impairment recorded in the third quarter of 2025 and the growing data center cooling pump business.”see in full comparison
Operating margin increased in thesee in full comparisonsecondthird quarterand first halfof 2026 compared to thesecondthird quarterand first halfof 2025, driven bylowerIEEPAchargestariffrelatedrefundtoclaims,simplificationaninitiativesasset impairment recorded in the third quarter of 2025 and thebenefitsgrowingfromdatabusinesscenteroptimization,coolingpartiallypumpoffset by tariff pressure.business.
Net cash provided by operating activities wassee in full comparison$85$245 million and $32 million in the firsthalfthree quarters of2026.2026Netandcash2025,used by operating activities was $93 million in the first half of 2025.respectively. The year-over-year improvement was primarily driven by higher net earnings and increased customer advances on multiple Commercial Aircraft,Military Aircraft andSpace and Defense and Military Aircraft programs. Also,reduced estimated tax payments related to research and development expense capitalization rules andlower cash outflow for inventoryusagedrove the year-over-year improvement.Inventory decreased inThe Commercial Aircraft inventory balance decreased, primarily due to delayed material receipts during the firsthalfthree quarters of 2026. These were partially offset by accounts receivable, unbilled receivables and other assets and liabilities. Accounts receivable used more cash, driven by the timing of collections. Unbilled receivables also used more cash, driven by timing. Other assets and liabilities reflect the tariff refund receivables.
“We have paid IEEPA tariffs to the U.S. government and subsequently submitted refund requests to recover those amounts. Based on the following: the U.S. Supreme Court’s ruling, related CIT proceedings, CBP’s refund process, our receipt of $10 million of cash refunds under the initial phase of the refund process, our submission of refund requests for the remaining amounts and our assessment of the recoverability of amounts paid, we have concluded that recovery of previously incurred IEEPA tariffs is probable under a loss recovery accounting model.”see in full comparison
“During the three and nine months ended June 27, 2026, we recognized $30 million for the recovery of previously incurred IEEPA tariffs. This amount included $10 million of cash refunds received and $20 million recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets as of June 27, 2026. The recovery was recorded as a reduction of cost of sales in the Consolidated Statements of Earnings for the three and nine months ended June 27, 2026.”see in full comparison
Full comparison: every changed paragraph (46)
Under ASC 606, 65%64% of revenue was recognized over time for the three months ended MarchJune 28,27, 2026, using the cost-to-cost method of accounting. The over-time method of revenue recognition is predominantly used in Space and Defense, Military Aircraft and Commercial Aircraft. We use this method for U.S. Government contracts and repair and overhaul arrangements as we are creating or enhancing assets that the customer controls. In addition, many of our large commercial contracts qualify for over-time accounting as our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed to date.
For the three months ended MarchJune 28,27, 2026, 35%36% of revenue was recognized at the point in time control transferred to the customer. This method of revenue recognition is used most frequently in Industrial. We use this method for commercial contracts in which the asset being created has an alternative use. We determine the point in time control transfers to the customer by weighing the five indicators provided by ASC 606. When control has transferred to the customer, profit is generated as cost of sales is recorded and as revenue is recognized.
Our products and technologies affect millions of people worldwide. Our solutions preserve national security, ensure safe air transportation, reduce industrial factory emissions and enhance patients' lives, while driving innovation. Moog engineers collaboratively design and manufacture the most advanced motion control products, to the highest quality standards, for use in demanding applications. By building on these core foundational capabilities, we believe we have achieved a leadership position in the high-performance, precision controls market, and are "Shaping the way our world moves™.".
We aim to improve shareholder value through strategic revenue growth, both organic and acquired, manufacturing and operating efficiencies and utilizing low-cost manufacturing facilities without compromising quality. Historically and over the long-term, our capital deployment strategy has balanced strategic acquisitions, share buybacks and dividend payments to maximize shareholder returns. In the near term, our capital deployment prioritizes investing in our organic growth while opportunistically pursuing acquisitions that complement our business.
U.S. GOVERNMENT TARIFFS AND IEEPA TARIFF REFUND CLAIMS
On February 20, 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid. Following the ruling and related proceedings before the U.S. Court of International Trade (“CIT”), U.S. Customs and Border Protection (“CBP”) established a process to request refunds of certain tariffs previously paid under IEEPA.
We have paid IEEPA tariffs to the U.S. government and subsequently submitted refund requests to recover those amounts. Based on the following: the U.S. Supreme Court’s ruling, related CIT proceedings, CBP’s refund process, our receipt of $10 million of cash refunds under the initial phase of the refund process, our submission of refund requests for the remaining amounts and our assessment of the recoverability of amounts paid, we have concluded that recovery of previously incurred IEEPA tariffs is probable under a loss recovery accounting model.
During the three and nine months ended June 27, 2026, we recognized $30 million for the recovery of previously incurred IEEPA tariffs. This amount included $10 million of cash refunds received and $20 million recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets as of June 27, 2026. The recovery was recorded as a reduction of cost of sales in the Consolidated Statements of Earnings for the three and nine months ended June 27, 2026.
Net sales increased across all our segments in the secondthird quarter and in the first halfthree quarters of 2026 compared to the secondthird quarter and the first halfthree quarters of 2025.
Gross margin decreasedincreased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, driven by higherIEEPA tariffstariff refund claims across all our segments, particularlyas inwell Commercial Aircraft, partially offsetas by profitablebusiness sales growth in Space and Defense.performance.
Research and development expenses increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondprior quarteryear and first half of 2025,periods, driven by activities supporting our current and future growth programs in Space and Defense.
Selling, general and administrative expenses as a percentage of sales decreased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, reflecting the incremental benefit from higher sales volume.
Interest expense decreased in the secondthird quarter and first half of 2026 compared to the secondthird quarter andof 2025, driven by lower outstanding debt balances. Interest expense decreased in the first halfthree quarters of 2026 compared to the first three quarters of 2025, driven by lower outstanding debt balances and lower interest rates.
In the secondthird quarter and first halfthree quarters of 2026 and in the secondthird quarter and first halfthree quarters of 2025, we incurred restructuring charges included charges for various simplification activities, primarily within Industrial and Space and Defense.
The effective tax rate was lower in the third quarter and first three quarters of 2026 compared to the third quarter and first three quarters of 2025, driven by our re-evaluation and adjustment of our domestic research and development tax credits. For further information, refer to Note 14 - Income Taxes.
The effective tax rate was higher in the second quarter of 2026 compared to the second quarter of 2025, driven by recently enacted legislation. The effective tax rate was unchanged in the first half of 2026 compared to the first half of 2025, as discrete items, primarily related to equity-based compensation, offset by the recently enacted legislation.
The twelve-month backlog as of MarchJune 28,27, 2026 increased as compared with the twelve-month backlog as of MarchJune 29,28, 2025. Within Commercial Aircraft, we had higher orders for narrowbody and widebody OEM programs. Military Aircraft's twelve-month backlog increased due to higher orders for new and current aircraft. Within Commercial Aircraft, we had higher orders for narrowbody and widebody OEM programs. Within Space and Defense, we had higher orders across the entire portfolio of the business, reflecting strong business capture and broad-based growth in both defense and space markets. Industrial's twelve-month backlog increased primarily due to higher demand for liquiddata center cooling pumps used in data centers.pumps.
Space and Defense net sales increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, reflecting broad-based defense demand. Demand was particularly strong for space vehicles and missile controls.
Operating margin increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, driven by profitablebusiness salesperformance growth.and ThisIEEPA wastariff refund claims. These increases were partially offset by increased costs for product development, business capture, product developmentcapture and operational readiness.
Military Aircraft net sales increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025.
In the secondthird quarter of 2026 compared to the secondthird quarter of 2025, military aftermarket sales increased $16 million, driven by higher repair activity and new contract awards. Military OEM sales increased $18$5 million, driven by higher activity on the MV-75 program. Military aftermarket sales increased $3 million.
In the first halfthree quarters of 2026 compared to the first halfthree quarters of 2025, military OEM sales increased $30 million, driven by higher activity on the MV-75 program. Military aftermarket sales increased $26$42 million, driven by a significant V-22 spares order in the first quarter of 2026.2026 and higher repair activity and new contract awards. Military OEM sales increased $34 million, driven by higher activity on the MV-75 program.
Operating margin increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, driven by profitablethe salesabsence growth.of the prior year’s $8 million charge associated with the termination of a product development effort and business performance. In addition, we benefitted from the IEEPA tariff refund claims.
Commercial Aircraft net sales increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025.
In the secondthird quarter of 2026 compared to the secondthird quarter of 2025, commercial OEM sales increased $28$25 million, driven by increased volume and pricing on certain production programs. Commercial aftermarket sales increased $3$11 million.million, driven by higher repair activity.
In the first halfthree quarters of 2026 compared to the first halfthree quarters of 2025, commercial OEM sales increased $57$82 million, driven by increased volume and pricing on certain production programs. Commercial aftermarket sales increased $23$34 million, driven by the timing ofhigher repair volumes in the first quarter of 2026.activity.
Operating margin increased in the secondthird quarter of 2026 compared to the secondthird quarter of 2025. The increase was2025, driven by pricingIEEPA benefits,tariff whichrefund wereclaims, partially offset by tariffthe pressure.benefit of the sale of a non-core product line that occurred in the third quarter of 2025 and an unfavorable sales mix.
Operating margin decreased in the first halfthree quarters of 2026 compared to the first halfthree quarters of 2025. The decrease was2025, driven by tariffthe pressure,benefit whichof wasthe sale of a non-core product line that occurred in the third quarter of 2025 and an unfavorable sales mix. These were partially mitigatedoffset by pricingIEEPA benefits.tariff refund claims.
Industrial net sales increased in the secondthird quarter and first halfthree quarters of 2026 compared to the secondthird quarter and first halfthree quarters of 2025, driven by strong demand for data center cooling pumps and otherhigher industrialdemand automationfor our medical device products and our energy products, as well as a favorable impact of foreign currency translation.
Operating margin increased in the secondthird quarter and first half of 2026 compared to the secondthird quarter and first half of 2025, driven by lowerIEEPA chargestariff relatedrefund toclaims, simplificationan initiativesasset impairment recorded in the third quarter of 2025 and the benefitsgrowing fromdata businesscenter optimization,cooling partiallypump offset by tariff pressure.business.
Operating margin increased in the first three quarters of 2026 compared to the first three quarters of 2025, driven by IEEPA tariff refund claims, lower charges related to simplification initiatives, an asset impairment recorded in the third quarter of 2025 and the growing data center cooling pump business.
Net cash provided by operating activities was $85$245 million and $32 million in the first halfthree quarters of 2026.2026 Netand cash2025, used by operating activities was $93 million in the first half of 2025.respectively. The year-over-year improvement was primarily driven by higher net earnings and increased customer advances on multiple Commercial Aircraft, Military Aircraft and Space and Defense and Military Aircraft programs. Also, reduced estimated tax payments related to research and development expense capitalization rules and lower cash outflow for inventory usage drove the year-over-year improvement. Inventory decreased inThe Commercial Aircraft inventory balance decreased, primarily due to delayed material receipts during the first halfthree quarters of 2026. These were partially offset by accounts receivable, unbilled receivables and other assets and liabilities. Accounts receivable used more cash, driven by the timing of collections. Unbilled receivables also used more cash, driven by timing. Other assets and liabilities reflect the tariff refund receivables.
Net cash used by investing activities in the first halfthree quarters of 2026 included capital expenditures of $66$94 million.
Net cash used by investing activities in the first halfthree quarters of 2025 included $70$103 million of capital expenditures and $13 million of proceeds from the sales of businesses.
Net cash providedused by financing activities in the first halfthree quarters of 2026 included $297$27 million of net borrowingspayments on our revolving credit facilities. ThisIn includesMarch the2026, issuancewe ofissued $500 million of 5.5%5.50% senior notes.notes due 2034 and used the net proceeds of $491 million, together with cash on hand, to redeem all $500 million of our 4.25% senior notes due 2027 in April 2026. We also amended ourand $1.1 billion revolving credit facility andrestated our $250Credit million term loan,Facility, extending the maturities of eachthe out$1.1 billion revolving loan and the $250 million term loan to fiveFebruary years.2031. In addition, we made dividend payments of $19$28 million.
Net cash provided by financing activities in the first halfthree quarters of 2025 included $291$44 million of net borrowingspayments on our revolving credit facilities. In addition, on May 30, 2025, we amended and restated our loan agreement to include a $250 million term loan, with a maturity date of October 2027. Financing activities also included $100 million for shares under the authorized repurchase program and $18$27 million of cash dividends.
At MarchJune 28,27, 2026, our cash balances were $308$68 million, the majority of which is held inoutside 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. On April 3, 2026, we redeemed in full all $500 million aggregate principal amount of our outstanding 4.25% senior notes, due 2027, at a redemption price equal to 100.00%. See Note 9 - Indebtedness for additional details.
On February 26, 2026, we entered into the Eighth Amended and Restated Loan Agreement (the "Credit Facility"), which amended and restated our prior credit agreement and, among other things, extended the maturity date of our revolving loan from October 27, 2027 to February 26, 2031. The revolving loan has aggregate commitments of $1.1 billion. The agreement also permits us to request incremental revolving commitments and/or one or more incremental term loan facilities in an aggregate amount of up to $400 million, upon satisfaction of certain conditions. The weighted-average interest rate on the outstanding revolving loan borrowings was 4.88% and is based on SOFR plus the applicable margin, which was 1.25% at MarchJune 28, 2026. There were no outstanding borrowings as of March 28,27, 2026. The agreement also includes a $250 million term loan maturing on February 26, 2031. The term loan amortizes in quarterly installments of $5 million in 2027, $6 million in 2028, $11 million in 2029, $9 million in 2030, $6 million in 2031 and the remaining balance on the maturity date of February 26, 2031. The interest rate on the term loan borrowings was 4.93% and is based on SOFR plus the applicable margin, which was 1.25% at MarchJune 28,27, 2026. As of MarchJune 28,27, 2026, we were in compliance with all covenants.
The SECT has a revolving loan with a borrowing capacity of $25 million, maturing on April 24, 2027.2028. Interest was 5.91%5.76% as of MarchJune 28,27, 2026 and is based on SOFR plus a margin of 2.23%.2.13%.
On March 24, 2026, we completed the sale of $500 million aggregate principal amount of 5.50% senior notes due October 15, 2034. Interest on the senior notes is payable semiannually on April 15 and October 15 of each year, beginning on October 15, 2026. The senior notes are senior unsecured obligations and are guaranteed on a senior unsecured basis by certain subsidiaries that are guarantors under the indenture. The indenture governing the senior notes contains certain restrictive covenants that, subject to important exceptions and limitations, limit our ability and the ability of certain of our subsidiaries to incur certain liens, enter into certain sale and leaseback transactions and consolidate, merge or sell substantially all of our assets. As of MarchJune 28,27, 2026, we were in compliance with all covenants under the indenture.
At MarchJune 28,27, 2026, we had $1.1$952 billionmillion of unused capacity, including $1.1$932 billionmillion from the revolving loan after considering standby letters of credit and other limitations.
Our Receivables Purchase Agreement, which matures on February 20, 2028, 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 4.67%4.64% as of MarchJune 28,27, 2026.
Our aerospace and defense businesses currently represent 76% of our 2026 sales. Our defense market, which currently represents 52% of our 2026 sales, is directly affected by defense funding levels and product demand, which have recently increased. Our commercial aircraft market, which currently represents 24% of our 2026 sales, aligns with our customers' plans. Within our various industrial and medical markets, which collectively represented 24% of our 2026 sales, our customers are affected by a broad range of factors.
The defense market is dependent on military spending for development and production programs. We have a growing development program order book for future generation aircraft and turret programs, and we strive to embed our technologies within these high-performance military programs of the future, including the Textron Bell MV-75.MV-75 Cheyenne II. Aircraft production programs are typically long-term in nature, offering predictable capacity needs and future revenues. We maintain positions on numerous high priority programs, including the Lockheed Martin F-35 Lightning II. The large installed base of our products leads to attractive aftermarket sales and service opportunities. The tactical and strategic missile, missile defense and defense vehicle controls markets are dependent on many of the same market conditions as military aircraft, including missile stockpile levels, overall military spending and program funding levels. At times when there are perceived threats to national security, U.S. and Europeaninternational defense spending can increase; at other times, defense spending can decrease. Future levels of defense spending have increased in the near-term given the current global tensions, and are subject to governmental approvals.
We are affected by the movement of foreign currencies compared to the U.S. dollar. About one-sixth of our 2025 sales were denominated in foreign currencies. During the first sixnine months of 2026, average foreign currency rates generally strengthened against the U.S. dollar to the comparable 2025 period. The translation of the results of our foreign subsidiaries into U.S. dollars increased sales by $23$28 million compared to the same period one year ago.
Although it is not possible to create a comprehensive list of all factors that may cause our actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the Securities and Exchange Commission (“SEC”) and include, but are not limited to, risks relating to: (i) our operation in highly competitive markets with competitors who may have greater resources than we possess; (ii) our operation in cyclical markets that are sensitive to domestic and foreign economic conditions and events; (iii) current and future geopolitical conditions and events, including wars, armed conflicts, sanctions, trade restrictions and related disruptions to global markets and supply chains; (iv) our heavy dependence on government contracts that may not be fully funded, delayed or terminated; (v) our ability to remediate the material weakness in internal control over financial reporting and maintain effective disclosure controls and procedures; (vi) supply chain constraints and inflationary impacts on prices for raw materials and components used in our products; (vii) failure of our subcontractors or suppliers to perform their contractual obligations; (viii) risks related to information systems interruptions, intrusions, cybersecurity threats or new software implementations; and (ix) our accounting estimates for over-time contracts and any changes we may need to make thereto. You should evaluate all forward-looking statements made in this press releasereport in the context of these risks and uncertainties.
MOG-A insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 3 filings (2 insiders, 3 trade dates, 6,604 shares, about $2.6M; 1 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -6,604 (purchases minus sales); net value about -$2.6M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-11 | Fishback Donald R |
Gift | 45 | — | — |
| 2026-09-10 | Mclachlan Stuart |
Option exercise | 2,000 | $71.65 | $143.3K |
| 2026-09-10 | Mclachlan Stuart |
Shares withheld for tax | 1,146 | $370.11 | $424.1K |
| 2026-08-11 | Scannell John |
Open-market sale |
247 | $416.49 | $102.9K |
| 2026-08-11 | Scannell John |
Open-market sale |
483 | $417.39 | $201.6K |
| 2026-08-11 | Scannell John |
Open-market sale |
185 | $414.28 | $76.6K |
| 2026-08-11 | Scannell John |
Open-market sale |
275 | $415.21 | $114.2K |
| 2026-08-11 | Scannell John |
Open-market sale |
400 | $410.97 | $164.4K |
| 2026-08-11 | Scannell John |
Open-market sale |
510 | $411.00 | $209.6K |
| 2026-08-11 | Scannell John |
Open-market sale |
413 | $412.48 | $170.4K |
| 2026-08-11 | Scannell John |
Open-market sale |
242 | $413.56 | $100.1K |
| 2026-08-11 | Scannell John |
Open-market sale |
20 | $418.11 | $8.4K |
| 2026-08-11 | Scannell John |
Open-market sale |
225 | $409.81 | $92.2K |
| 2026-07-08 | Fishback Donald R |
Option exercise | 5,000 | $71.65 | $358.2K |
| 2026-07-08 | Fishback Donald R |
Shares withheld for tax | 2,962 | $428.40 | $1.3M |
| 2026-06-23 | Scannell John |
Option exercise | 10,000 | $71.65 | $716.5K |
| 2026-06-23 | Scannell John |
Shares withheld for tax | 5,972 | $416.00 | $2.5M |
| 2026-06-22 | Wilkinson Paul |
Option exercise | 1,000 | $71.65 | $71.7K |
| 2026-06-22 | Wilkinson Paul |
Shares withheld for tax | 584 | $430.54 | $251.4K |
| 2026-06-11 | Fishback Donald R |
Shares withheld for tax | 3,018 | $398.00 | $1.2M |
| 2026-06-11 | Fishback Donald R |
Option exercise | 5,000 | $71.65 | $358.2K |
| 2026-06-10 | Coletti Janet M. |
Open-market sale | 604 | $379.66 | $229.3K |
| 2026-06-09 | Scannell John |
Open-market sale | 1,326 | $373.83 | $495.7K |
| 2026-06-09 | Scannell John |
Open-market sale | 674 | $374.19 | $252.2K |
| 2026-06-09 | Scannell John |
Open-market sale | 1,000 | $372.83 | $372.8K |
| 2026-05-27 | Roche Patrick J |
Option exercise | 5,000 | $71.65 | $358.2K |
| 2026-05-27 | Roche Patrick J |
Shares withheld for tax | 4,591 | $345.26 | $1.6M |
| 2026-04-17 | Fishback Donald R |
Gift | 6,400 | — | — |
| 2026-04-17 | Fishback Donald R |
Gift | 6,400 | — | — |
| 2026-04-16 | Fishback Donald R |
Gift | 2,499 | — | — |
| 2026-04-16 | Fishback Donald R |
Gift | 2,499 | — | — |
Well-known investors holding MOG-A (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| PRIMECAP Management | 2026-06-30 | 428,460 | $181.6M | 0.11% | Reduced 1% |
| D. E. Shaw & Co. | 2026-06-30 | 193,548 | $82.0M | 0.05% | Reduced 29% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 129,241 | $54.8M | 0.02% | Added 228% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 128,786 | $54.6M | 0.08% | Reduced 22% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 61,198 | $17.9M | — | Sold out |
| Millennium Management (Israel Englander) | 2026-06-30 | 18,347 | $7.8M | 0.01% | Reduced 91% |
| Bridgewater Associates | 2026-06-30 | 10,359 | $4.4M | 0.02% | Reduced 34% |
| Renaissance Technologies | 2026-06-30 | 4,440 | $1.9M | 0.0% | Reduced 3% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 5,670 | $1.7M | — | Sold out |
| ARK Investment Management (Cathie Wood) | 2026-06-30 | 3,455 | $1.5M | 0.01% | Reduced 17% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 2,210 | $936.7K | 0.0% | New position |
| Two Sigma Investments | 2026-06-30 | 780 | $330.6K | 0.0% | Reduced 95% |