Moog Virtual Investor Day 2020 - Presentation - Page 4
To Our Shareholders, Employees and Friends,
2018 was a very good year for our Company. We had top-line growth in each of our operating segments with consolidated sales up 8% over the prior year. Our Aircraft
segment was up on higher military investment in new platforms and the production ramp-up on the F-35 program. In the commercial aircraft market, our major programs
continued at record production rates, and our aftermarket powered ahead on strong initial provisioning and solid legacy work. In Space and Defense, both markets benefited
from higher U.S. defense spending and the success of strategic investments we have made in new technologies over the last few years. Finally, our Industrial markets were
up across the board, as we benefited from the strong economic activity across the globe as well as the recovery in energy prices. We continued to invest in new products
and technologies in each of our segments; investments which will transition into annuity businesses for future decades. In addition, we intensified our focus on operational
excellence to ensure we are delivering outstanding products in the shortest possible lead times to our customers around the globe.
Our bottom-line earnings were impacted adversely by the transition taxes associated with the change in the U.S. Tax Code and our strategic decision to exit the wind pitch
control business. Absent these one-time effects, our earnings per share were up a very healthy 17%. Over the course of the year, we used our free cash flow to fully fund
our U.S. defined benefit pension plan. We also started paying a quarterly dividend, reflecting our belief in the positive long-term outlook for our business.
As we look to 2019, we’re optimistic. Our aerospace and defense portfolio, representing over 60% of our business, enters the year with a record backlog and a very positive
outlook across both commercial and military platforms. Our industrial businesses are also starting the year in a healthy state. However, political uncertainty, the threat of a
trade war, and falling oil prices are reasons for caution. We’ll monitor these developments carefully and respond appropriately as events unfold throughout 2019.
Looking beyond 2019, we are very excited about our longer-term future. We are a company with outstanding engineering talent that is dedicated to solving the most
challenging problems for our customers. As we think about the developments that are happening in the world, we see enormous opportunities for our Company. Entire
industries are changing as concerns about global warming and international security combine with demographic shifts and technological advances to reshape industries
from transportation and agriculture to defense and space. Robots are emerging from the structured setting of the factory floor onto the streets and into the fields of everyday
life. Autonomous technology and artificial intelligence will change our lives in ways we cannot yet imagine. All of this change is creating exciting opportunities for Moog’s
technical capabilities. Our continued investment in innovation is the key to bringing these opportunities to life.
Every year, we invest in incremental innovation in each of our business lines to ensure we are meeting the needs of our existing customers. Beyond that, we invest in selected
emerging technologies in entirely new markets. We identify lead customers who share our vision of a new future and are seeking to work collaboratively to define that future.
These customers are trying to solve whole new challenges that have never been tackled in the past. For example, we’re collaborating with customers looking to automate
agricultural production by using autonomous technology to address the challenge of scarce labor. In addition, we have customers who are working to create the next
generation of connected machines using internet of things technology or by seeking smart, miniaturized actuators manufactured using additive 3D technology for use in
medical applications. In each of these areas, we are investing to create an entirely new set of markets for Moog.
In this environment of revolutionary opportunities, we believe our culture and values are our most important assets. Our culture encourages working together to overcome
technical challenges and unexpected setbacks – because what we do is never easy. When we make a commitment, we keep it. At Moog, success is a team effort and our
customers know that Moog employees will support them through the tough times and deliver on our promises. On day one, every new Moog employee is introduced to our
culture. From newly hired machinists to seasoned design engineers and assembly technicians, our employees count on each other to produce the very best products.
Products that will be tested in the toughest and most demanding environments. In the face of the dramatic change we are seeing in many of our industries, we remain
steadfast in our values. These values have served us well in the past and I believe they will continue to do so into the future.
We believe our employees are what make our Company successful. Our goal is to make Moog a great place to work, where every employee feels like they are making a
valuable contribution to the long-term success of the Company. This goal guides our daily actions and is the foundation of our employee recruitment and retention activities.
Our employees create value for customers and returns for our shareholders. As we close out 2018, I am pleased to report that over half of our employees are also
shareholders. Our retirement plans, our employee stock ownership plan, and our profit-sharing plan have provided avenues for more of our employees than ever to be able
to acquire Moog stock in 2018, thus allowing them to share in the success of our Company while investing for their future.
Over the course of the last year, Larry Ball and Gary Szakmary retired from the ranks of our officer group. Larry led our Components Group and Gary was our Chief Human
Resources Officer. Each of them was with our Company for over three decades and dedicated their working lives to making Moog a success. Their contributions are too
numerous to mention. We will miss them both. We thank them for their tireless efforts and wish them well in their retirement.
Chairman and Chief Executive Officer