10-K FY 2022 FINAL MOOG Inc - Flipbook - Page 15
Table of Contents
Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors
could adversely affect our earnings and equity and increase our pension funding requirements. Pension costs
and obligations are determined using actual results as well as actuarial valuations that involve several assumptions.
The most critical assumptions are the discount rate, the long-term expected return on assets and mortality tables.
Other assumptions include salary increases and retirement age. Some of these assumptions, such as the discount
rate and return on pension assets, are reflective of economic conditions and largely out of our control. Despite our
largest pension plan being essentially fully funded, changes in the pension assumptions could adversely affect our
earnings, equity and funding requirements.
A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results
and net worth. Goodwill and other intangible assets are a substantial portion of our assets. At October 1, 2022,
goodwill was $805 million and other intangible assets were $85 million of our total assets of $3.4 billion. Our goodwill
and other intangible assets may increase in the future since our growth strategy includes acquisitions. However, we
may have to write off all or part of our goodwill or other intangible assets if their value becomes impaired. Although this
write-off would be a non-cash charge, it could reduce our earnings and our financial condition significantly. We review
whether goodwill or other intangible assets have been impaired annually, or more frequently, if there have been
changes in circumstances or conditions.
Unforeseen exposure to additional income tax liabilities may affect our operating results. Our distribution of
taxable income is subject to domestic and, as a result of our significant manufacturing and sales presence in foreign
countries, 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.
LEGAL AND COMPLIANCE RISKS
Contracting on government programs is subject to significant regulation, including rules related to bidding,
billing and accounting standards, and any false claims or non-compliance could subject us to fines, penalties
or possible debarment. We are subject to risks associated with government program contracting, including
substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow
procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost
accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to
be, subjected to audits and investigations by U.S. and foreign government agencies and authorities. The failure to
comply with the terms of our government contracts could harm our business reputation. We also could be subject to
withheld progress payments or suspension or debarment from future government contracts, which could have a
material effect on our operational and financial results.
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 United States. 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. Uncertainty also remains with respect to trade policies and
treaties between the United States 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 21 - Segments, of Item 8, Financial Statements and Supplementary Data, of this report.
15