Moog 2021 Annual Overview - Report - Page 4
CHAIRMAN’S LETTER
OFFICERS AND DIRECTORS
To Our Shareholders, Employees and Friends,
Our fiscal ’21 was a full year of living with COVID. Moog employees around the world
demonstrated resilience as they continued to serve our customers and ensure the
success of our business. I have always opened my letters with a thank you to our
employees. This year in particular, I am humbled by their commitment to our company
and the collective results they have achieved. This report provides a small window into
their accomplishments while serving as a permanent record of their dedication.
When the pandemic hit in March 2020, we set two priorities. First and foremost,
we wanted to protect the health and safety of our employees and their families.
Second, Moog wanted to protect the needs of our customers, thereby securing the
financial well-being of the company. We successfully met both objectives.
Our workplace measures to prevent infection were effective, and our business
performed better than we could have imagined 12 months ago.
Coming into 2021, we assumed COVID would be with us throughout the year and that
our financial performance would therefore mirror the second half of fiscal ’20.
That projection would have resulted in sales of $2.73 billion and earnings per share
of $3.50. We finished the year much stronger, with sales of $2.85 billion and earnings per
share of $4.87. Our diversity across end markets, combined with our tight management
of expenses, delivered these results. In total, sales in fiscal ’21 were only 2% lower
than pre-COVID sales levels in 2019. As we wrap up fiscal ’21 and look to a new year,
I believe it’s helpful for our investors to look at our business through an end market
lens. We’re organized in three operating segments, but our business serves five major
markets: defense, industrial including energy, commercial aircraft, space, and medical.
Defense is our largest single end market, making up 44% of our sales in 2021, a 15%
increase from pre-COVID fiscal ’19 sales. The majority of our defense business is driven
by U.S. government spending. Despite a change in administration in Washington, both
sides of the aisle continue to support defense spending. The priorities for the defense
establishment have not changed as concerns about near-peer threats have only increased.
Industrial systems, excluding medical products, made up 22% of sales in fiscal ’21.
We serve a variety of industrial sub-markets including automation, energy,
simulation and test. This business contracted slightly through the initial stages of
COVID as our customers cut capital spending to conserve cash. In fiscal ’21,
sales into industrial markets were down 8% from pre-COVID levels. However, as the
year closed out, we started to see a rebound in orders as global economies opened
up and capital investment spending picked up.
Our sales into the commercial aircraft market have been the hardest hit by the
pandemic. In fiscal ’21, sales were down almost 50% from pre-COVID levels.
Sales into this market made up 23% of our total sales in fiscal ’19 but dropped to
just 13% in fiscal ’21. Our major customers, Boeing and Airbus, continued to adjust
their wide-body production rates down as international air travel remained depressed.
There were some bright spots in the aftermarket as domestic travel around the
world picked up and air cargo services were in demand.
providing us tremendous flexibility as we look to the future. Long term, we believe
that growth is necessary to create sustained shareholder value. However, growth
simply for the sake of growth is not a sensible strategy, and return on capital must
always be at the forefront of any investment decision. In the present environment of
elevated acquisition prices, we are cautious not to overpay. We are also choosing to
invest more in organic opportunities as well as return capital to our shareholders
through our dividend and buyback programs.
Officers
I believe that managing through COVID has brought about a generational change in
our workplace—something I never would have foreseen when I started in the CEO
role 10 years ago. We have introduced and adapted to a hybrid working policy, and we
continue to design critical systems and components for aircraft, space and industry
utilizing online collaboration tools and virtual meetings across our businesses. We rely
on our employees to determine where they need to be to get their work done most
effectively to best support our customers. While in-person meetings and trade show
attendance are desirable, the tools we have in place allow us to connect with customers,
demonstrate our capabilities, and meet the needs of our global customer base.
Paul Wilkinson
“I am excited about our business. We’re
forecasting both top-line growth and margin
expansion in 2022. We’re anticipating
growth across our entire portfolio, led by
stronger defense and space sales and a
recovering commercial aircraft market.”
President
Industrial Systems
Finally, our medical products had a good year, but sales were off from the peak we
experienced in FY ’20, the result of a demand surge in the early months of COVID.
Compared to 2019 pre-COVID levels, medical sales increased 12% in 2021.
Chairman of the Board
Chief Executive Officer
Jennifer Walter
Vice President
Chief Financial Officer
Vice President
Chief Human Resources Officer
Mark J. Trabert
President
Aircraft Controls
Maureen M. Athoe
President
Space and Defense
Patrick J. Roche
Michael J. Swope
John R. Scannell
Jennifer Walter
Paul Wilkinson
Robert J. Olivieri
Secretary
Partner
Hodgson Russ, LLP
Directors
The longer-term outlook for Moog remains very positive. Global challenges resulting from
climate change and shifting demographics will drive increased demand for automation
solutions. The continued rebalancing of global power between the east and the west
ensures continued investment in advanced defense technologies. Finally, a recovery in the
commercial aircraft market will contribute nicely to our top and bottom line.
Director
Executive Vice Chair
Rich Products Corporation
Janet M. Coletti
Director
Retired Executive Vice President
M&T Bank Corporation
Donald R. Fishback
Director
Retired Vice President
Chief Financial Officer
Moog Inc.
William G. Gisel, Jr.
Peter J. Gundermann
Mark J. Trabert
Maureen M. Athoe
Patrick J. Roche
John Scannell
Chairman and Chief Executive Officer
4
Director
Chairman and CEO
Astronics Corporation
Kraig H. Kayser
Director
Retired President and CEO
Seneca Foods Corporation
R. Bradley Lawrence
Director
Retired Chairman and CEO
Esterline Technologies
Brian J. Lipke
Respectfully submitted,
Strong cash flow throughout the year funded our balanced approach to capital
allocation and we completed one acquisition. Genesys is a small company that
brings new capabilities to our Aircraft Controls segment and extends our target
markets beyond flight controls. We ended the year with a healthy balance sheet,
Controller
Principal Accounting Officer
I am excited about our business. We’re forecasting both top-line growth and margin
expansion in 2022. We’re anticipating growth across our entire portfolio, led by
stronger defense and space sales and a recovering commercial aircraft market.
We’re assuming COVID will be with us throughout the coming year and that we
have the internal controls in place to manage the impact in our facilities.
More concerning are the indirect effects of COVID, including challenges in the
supply chain, skilled labor availability and the potential fallout from inflation.
We’re confident that we have the talent and resources to navigate these headwinds.
Over the coming year, we’ll also devote additional resources to our initiatives
around diversity, equity and inclusion as well as the broader topic of sustainability.
We summarize our strategy in the tag line When Performance Really Matters.
For us, performance includes all elements of our business. At its core is the
performance of our products—as demonstrated by the successful landing of NASA’s
Perseverance Rover on Mars this past year, aided by Moog components. It also means
performance for our customers—delivering the highest quality products on-time and
ensuring we are available for engineering, program management, and post-delivery
support. It means performance for our investors—focusing on increasing value over
the long-term. Finally, it’s the performance of our employees—who demonstrate their
commitment every day to making our company an enduring success.
Sales into space applications were very strong this year, driven by U.S. government
spending, both military and civil. Over the last few years, space has emerged as the
next frontier in any future global conflict. It has also become an exciting business
opportunity for start-ups and billionaires. In the last two years, our space business
has grown by over 50% from pre-COVID levels, and it now accounts for 12% of total sales.
John R. Scannell
Tragically, this last year, some of our employees lost their lives to COVID and others
experienced loss in their wider family or circle of friends. Our deepest sympathy goes out
to all our colleagues who have experienced loss and sadness.
5
Director
Retired Chairman and CEO
Gibraltar Industries
Brenda L. Reichelderfer
Director
Retired Group President
ITT Inc.
