10-K FY 2022 FINAL MOOG Inc - Flipbook - Page 62
Table of Contents
Note 11 - Derivative Financial Instruments
We principally use derivative financial instruments to manage foreign exchange risk related to foreign operations and
foreign currency transactions and interest rate risk associated with long-term debt. We enter into derivative financial
instruments with a number of major financial institutions to minimize counterparty credit risk.
Derivatives designated as hedging instruments
We use foreign currency contracts as cash flow hedges to effectively fix the exchange rates on future payments and
revenue. To mitigate exposure in movements between various currencies, including the Philippine peso and the
British pound, we had outstanding foreign currency contracts with notional amounts of $31,740 at October 1, 2022.
These contracts mature at various times through March 1, 2024.
We use forward currency contracts to hedge our net investment in certain foreign subsidiaries. As of October 1, 2022,
we had no outstanding net investment hedges.
Interest rate swaps are used to adjust the proportion of total debt that is subject to variable and fixed interest rates.
The interest rate swaps are designated as hedges of the amount of future cash flows related to interest payments on
variable-rate debt that, in combination with the interest payments on the debt, convert a portion of the variable-rate
debt to fixed-rate debt. At October 1, 2022, we had no outstanding interest rate swaps.
Foreign currency contracts, net investment hedges and interest rate swaps are recorded in the Consolidated Balance
Sheets at fair value and the related gains or losses are deferred in Shareholders’ Equity as a component of
Accumulated Other Comprehensive Income (Loss) ("AOCIL"). These deferred gains and losses are reclassified into
the Consolidated Statements of Earnings, as necessary, during the periods in which the related payments or receipts
affect earnings. However, to the extent the foreign currency contracts and interest rate swaps are not perfectly
effective in offsetting the change in the value of the payments and revenue being hedged, the ineffective portion of
these contracts is recognized in earnings immediately. Ineffectiveness was not material in 2022, 2021 or 2020.
Derivatives not designated as hedging instruments
We also have foreign currency exposure on balances, primarily intercompany, that are denominated in a foreign
currency and are adjusted to current values using period-end exchange rates. The resulting gains or losses are
recorded in the Consolidated Statements of Earnings. To minimize foreign currency exposure, we have foreign
currency contracts with notional amounts of $106,219 at October 1, 2022. The foreign currency contracts are recorded
in the Consolidated Balance Sheets at fair value and resulting gains or losses are recorded in the Consolidated
Statements of Earnings. We recorded the following gains and losses on foreign currency contracts which are included
in other income or expense and generally offset the gains or losses from the foreign currency adjustments on the
intercompany balances that are also included in other income or expense:
Statements of Earnings location
2022
2021
2020
Net gain (loss)
Foreign currency contracts
Other
$
(10,396) $
648
$
1,306
Summary of derivatives
The fair value and classification of derivatives is summarized as follows:
October 1,
2022
Balance Sheets location
Derivatives designated as hedging instruments:
Foreign currency contracts
Foreign currency contracts
Foreign currency contracts
Foreign currency contracts
Derivatives not designated as hedging instruments:
Foreign currency contracts
Foreign currency contracts
Other current assets
Other assets
Total asset derivatives
Accrued liabilities and other
Other long-term liabilities
Total liability derivatives
$
Other current assets
Accrued liabilities and other
62
October 2,
2021
$
$
562
165
727
3,877
751
4,628
$
325
104
429
1,235
537
1,772
$
$
679
738
$
$
226
480
$
$
$
$