10-K FY 2022 FINAL MOOG Inc - Flipbook - Page 40
Table of Contents
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, we are exposed to interest rate risk from our long-term debt and foreign exchange
rate risk related to our foreign operations and foreign currency transactions. To manage these risks, we may enter into
derivative instruments such as interest rate swaps and foreign currency contracts. We do not hold or issue financial
instruments for trading purposes. In 2022, our derivative instruments consisted of foreign currency contracts.
At October 1, 2022, we had $341 million of borrowings subject to variable interest rates. At October 1, 2022, we had
no outstanding interest rate swaps. During 2022, our average borrowings subject to variable interest rates were $366
million and, therefore, if interest rates had been one percentage point higher during 2022, our interest expense would
have been $4 million higher.
We also enter into forward contracts to reduce fluctuations in foreign currency cash flows related to third party
purchases and revenue, intercompany product shipments and to reduce exposure on intercompany balances that are
denominated in foreign currencies. We have foreign currency contracts with notional amounts of $138 million
outstanding at October 1, 2022 that mature at various times through March 1, 2024. These include notional amounts
of $108 million outstanding where the U.S. dollar is one side of the trade. The net fair value of all of our foreign
currency contracts involving the U.S. dollar was a $3 million net liability at October 1, 2022. A hypothetical 10%
increase in the value of the U.S. dollar against all currencies would decrease the fair value of our foreign currency
contracts at October 1, 2022 by approximately $9 million, while a hypothetical 10% decrease in the value of the U.S.
dollar against all currencies would increase the fair value of our foreign currency contracts at October 1, 2022 by
approximately $11 million. It is important to note that gains and losses indicated in the sensitivity analysis would often
be offset by gains and losses on the underlying receivables and payables.
Although the majority of our sales, expenses and cash flows are transacted in U.S. dollars, we have exposure to
changes in foreign currency exchange rates such as the Euro and British pound. If average annual foreign exchange
rates collectively weakened or strengthened against the U.S. dollar by 10%, our net earnings in 2022 would have
decreased or increased by $7 million from foreign currency translation. This sensitivity analysis assumed that each
exchange rate would change in the same direction relative to the U.S. dollar and excludes the potential effects that
changes in foreign currency exchange rates may have on actual transactions.
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