FY2021 10-K Document - FINAL 11 15 21 - Flipbook - Page 38
Table of Contents
The space market is comprised of four customer markets: the civil market, the department of defense market, the
commercial space market and the new space market. The civil market, namely NASA, is driven by investment for
commercial and exploration activities, including NASA's return to the moon. The department of defense market is
driven by governmental-authorized levels of funding for satellite communications, as well as funding for hypersonic
defense technologies. The commercial space market is comprised of large satellite customers, which traditionally sell
to communications companies. Trends for this market, as well as for commercial launch vehicles, follow demand for
increased capacity. This, in turn tends to track with underlying demand for increased consumption of
telecommunication services, satellite replacements and global navigation needs. The new space market is driven by
investments to increase the speed and access to space through integrated space vehicles and smaller satellites at
reduced cost. Similar to the defense market, funding for these four markets have not been impacted by the COVID-19
pandemic to-date.
Industrial
Within industrial, we serve two end markets: industrial, consisting of industrial automation products, simulation and
test products and energy generation and exploration products; and medical.
The industrial market we serve with our industrial automation products is influenced by several factors including
capital investment levels, the pace of product innovation, economic conditions, cost-reduction efforts and technology
upgrades. As governments around the world implemented measures to help control the spread of the COVID-19 virus,
the subsequent economic downturn constrained capital investment and slowed spending for product innovation and
upgrades. During the second half of 2021, we started to see a modest recovery in these markets; however concerns
regarding supply chain constraints still exist.
Our simulation and test products operate in markets that are largely affected by these same factors and investment
challenges stemming from the COVID-19 pandemic. Reduced air travel and the subsequent reduction in new
commercial aircraft have reduced the demand for flight simulator training, for which we supply motion control
products. Similarly, the recent lower capital spend has reduced the demand for our automotive and material testing
applications.
Our energy generation and exploration products operate in a market that is influenced by changing oil and natural gas
prices, global urbanization and the resulting change in supply and demand for global energy. Historically, drivers for
global growth include investments in power generation infrastructure and exploration of new oil and gas resources.
However, the COVID-19 pandemic led to reduced oil prices, reducing the economic feasibility for these investments
and explorations, which to-date, have not returned to the pre-pandemic levels.
The medical market we serve, in general, is influenced by economic conditions, regulatory environments, hospital and
outpatient clinic spending on equipment, population demographics, medical advances, patient demands and the need
for precision control components and systems. The outbreak of the COVID-19 virus created unprecedented demand
for medical equipment and has shifted the way hospitals optimize their capacity. Our medical components products
are critical motion control components for life saving medical equipment, including ventilators, oxygen concentrators
and continuous positive airway pressure (CPAP) machines, among others. The COVID-19 pandemic increased the
demand for ventilators, of which our products are a key component of that industry's supply chain. Additionally, our
medical devices products, including infusion and enteral feeding pumps and their corresponding disposable sets, are
used primarily in the home healthcare environment. Since the COVID-19 pandemic has altered the way hospitals
provide care by asking non-critical patients to recuperate at home, our medical devices products saw an increase in
orders. As this level of demand was directly related to pandemic, we have already moved beyond the initial surge in
demand as our customers resize their inventory levels.
Foreign Currencies
We are affected by the movement of foreign currencies compared to the U.S. dollar, particularly in Aircraft Controls
and Industrial Systems. About one-fifth of our 2021 sales were denominated in foreign currencies. During 2021,
average foreign currency rates generally strengthened against the U.S. dollar compared to 2020. The translation of
the results of our foreign subsidiaries into U.S. dollars increased sales by $34 million compared to one year ago.
During 2020, average foreign currency rates generally weakened against the U.S. dollar compared to 2019. The
translation of the results of our foreign subsidiaries into U.S. dollars decreased 2020 sales by $4 million compared to
2019.
38