刘玥首次大战黑人

Before we begin, we call your attention to the fact that we may make forward-looking statements during the course of this conference call. These forward-looking statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors that could cause actual performance to differ materially from such statements. A description of these risks, uncertainties and other factors is contained in our news release of November 5, 2021 our most recent Form 8K filed on November 5, 2021 and in certain of our other public filings with the SEC.

We've provided some financial schedules to help our listeners better follow along with the prepared comments. For those of you who do not already have the document, a copy of today's financial presentation is available on our investor relations webcast page at .

听

Good morning.听 Thanks for joining us.听 This morning we鈥檒l report on the fourth quarter of fiscal 鈥�21 and reflect on our performance for the full year.听 We鈥檒l also provide our initial guidance for fiscal 鈥�22.听

As usual, I鈥檝e organized my headlines into 3 broad categories - first macroeconomic, second microeconomic, focused on our end markets, and third 刘玥首次大战黑人specific topics.听

听

Headlines

Macro

The macro trends which affect our business have continued to evolve this quarter.听 鈥淰accines versus Delta鈥� continues to dominate the COVID news with re-openings around the world shifting the balance of power between these competing drivers.听 More folks are returning to the office, while embracing a new world of hybrid work.听 Businesses are seeing surging orders but constrained by labor availability and the effects of the newly coined 鈥済reat resignation鈥�.听 The description of inflation has evolved beyond transitory to longer-lasting with an uncertain timeline for reversion to the norm.听听 Finally, challenges in the supply chain have moved well beyond electronic components and new car deliveries to impact almost every element of global trade.听

Micro

Turning to our major end markets, defense and space remain strong on continued government spending.听 The Chinese demonstrated a hypersonic missile capability in August which has been described as a 鈥淪putnik moment鈥� by some in the military.听 Given this great power rivalry, it would seem that defense and space spending should remain elevated for the foreseeable future.听 Our industrial markets continue to strengthen, although it is hard to distinguish between panic ordering and real underlying demand.听 Commercial air traffic is improving and global travel is starting to open up.听 Balancing this optimism, Boeing continues to face hurdles as they await 737 approval from the Chinese authorities and work with the FAA to get 787 deliveries back on track.听 Finally our medical markets are humming along nicely.听听

刘玥首次大战黑人Q4

Coming into the quarter, we forecasted EPS of $1.20 plus or minus $0.15.听 Our headline result of $1.07 includes $0.18 of charges, compensated by $0.08 of tax benefit.听 The $0.18 of charges were a result of our continuing portfolio refinement.听 They included $0.09 associated with product line exits with the remainder mostly restructuring charges at various sites around the globe. Our adjusted result of $1.17 was slightly below our midpoint but well within our range.听 Last quarter we described supply chain constraints and labor challenges as 鈥渨atch items鈥� for the future.听 This quarter we started to feel the impact more directly on our business.听 Cash in the quarter brought our total for the year to over 100% conversion.听

Looking back on the full year the following headlines stand out.听

1)听听听 First, the year turned out much better than we had anticipated 12 months ago.听 Last year at this time, we projected that COVID would be with us throughout fiscal 鈥�21 and therefore we were anticipating a year similar to the second half of fiscal 鈥�20.听 That projection would have resulted in FY21 sales of $2.73 billion and earnings per share of about $3.50.听 We finished the year with sales of $2.85 billion and earnings per share of $4.87.听 COVID was with us throughout the year, but, despite this, each of our core markets did a little better than forecast and we maintained a tight lid on expenses.听

2)听听听 Second, strong cash flow funded our balanced capital allocation spend.听 We spent approximately $130 million on capital expenditures, $80 million on acquisitions, $32 million on dividends and $30 million on share repurchases.听 We finished the year with our balance sheet in great shape providing us with all the flexibility we need to continue to invest next year.听

3)听听听 Third, we continued to refine our product portfolio throughout the year, exiting businesses and consolidating operations.听 This activity cuts across all 3 of our operating segments and included exiting 4 product lines.听 We also closed 5 sites and consolidated production into larger operations.听 We anticipate that this portfolio journey will accelerate over the coming year.听

4)听听听 Fourth, a new administration in Washington has shifted the debate from tax reductions to spending increases. Defense spending continues to be well supported on both sides of the aisle and new opportunities in Green initiatives are starting to emerge.听

5)听听听 Fifth, as the year progressed, it became clear that COVID was not going away with the arrival of a vaccine and that the supply chain and labor shortages were new challenges we would need to contend with.听 The discussion around working from home versus in the office shifted to hybrid working arrangements and we introduced a new flexible working policy to our workforce.听 This is perhaps the most dramatic shift in working conditions for a generation.听

6)听听听 Finally, as I do every year at this time, I鈥檇 like to recognize the contribution of all our employees around the world for their continued dedication to serving our customers

Now, let me provide some more details on the quarter.听

Q4 Fiscal 鈥�21

Sales in the quarter of $724 million were 2% higher than last year.听 Excluding the impact of forex and acquired sales, underlying organic sales were flat.听 Sales were up in Aircraft controls, about flat in Industrial Systems and down marginally in Space & Defense.听 Taking a look at the P&L, our gross margin was up significantly on improved mix, particularly in Aircraft.听 R&D was also up on higher investment in new technologies and the additional engineers at our Genesys acquisition.听 SG&A expenses were up as we returned to a more normal operating environment after the crisis management last year.听 Interest expense was down marginally on lower rates.听 Our effective tax rate of 19.0% was unusually low on some special items.听 The overall result was net income of $35 million up from an adjusted net income last year of $26 million and earnings per share of $1.07, up 32% from the adjusted EPS last year.听

Fiscal 鈥�21

In comparing the full year fiscal 鈥�21 with fiscal 鈥�20, we need to remember that fiscal 鈥�20 included only 2 quarters of COVID conditions whereas fiscal 鈥�21 was a full year of COVID conditions.听 With that backdrop, fiscal 鈥�21 turned out much better than we had anticipated 12 months ago.听 Full year sales of $2.85 billion were 1% lower than last year.听 We had low single digit sales changes in each of our 3 operating groups, with sales up in Space & Defense but down slightly in Aircraft and Industrial Systems.听 Gross margin for the year was higher on strength in the Aircraft business.听 R&D and SG&A were both higher, reflecting the same story as we saw in the quarter, increased investments and a move away from crisis management.听 Interest expense was lower on lower rates.听 Last year we incurred significant restructuring charges as we resized the business.听 We also incurred a pension settlement charge as we annuitized half of our Defined Benefit plan.听 Adjusting for these charges last year, this year鈥檚 net income was up slightly and diluted earnings per share were 1% higher.听

Fiscal 鈥�22 Outlook

For next year we鈥檙e projecting sales of $3 billion, an increase of 6% over fiscal 鈥�21.听 We anticipate growth in each of our operating groups, with the strongest gains in commercial aircraft and in military ground vehicles.听 Full year margins of 10.3% will be up about 80 basis points and earnings per share of $5.50, plus or minus $0.20, will be 13% higher than fiscal 鈥�21.听 We forecast that cash flow next year will moderate from the very strong performance of the last couple of years as we invest more in growth.听

Now to the segments.听 I鈥檇 remind our listeners that we鈥檝e provided a 3-page supplemental data package, posted on our website, which provides all the detailed numbers for your models.听 We suggest you follow this in parallel with the text.听

鈥�

Aircraft

Aircraft Q4

Sales in the quarter of $298 million were 8% higher than last year.听 This quarter, the commercial business drove the increase.听 Commercial OEM sales were up on the acquired sales of Genesys.听 Lower OEM sales to Boeing on the 787 were compensated by higher A350 sales to Airbus.听 Sales to commercial aftermarket customers were up 25% driven primarily by higher 787 activity.听 Sales on business jets doubled to $7 million, but from a low point 12 months ago.听

On the military OEM side, higher funded development and acquired sales from Genesys more than compensated for lower F-35 sales, yielding a 12% increase in total.听 The military aftermarket was down 16% from a very strong Q4 last year.听 Aftermarket sales were lower across most of our major platforms including the F-35, F-18 and V-22.听 On a more positive note, the military aftermarket showed a modest recovery from the low points in Q2 and Q3.听

Aircraft fiscal 鈥�21

Full year sales of $1.16 billion were down 4% from last year.听 Sales into military applications were up 8% for the year while sales to commercial customers were down over 20%.听听

On the military side of the house, strong OEM sales compensated for a weaker aftermarket.听 OEM sales were up across a range of programs including the F-35 and some foreign military platforms.听 Higher funded development and the acquired sales of Genesys also contributed to the growth.听 Sales into the military aftermarket were down across a broad range of programs with the biggest reductions in the F-35 and V-22.听

Turning to the commercial side, OEM sales were 26% lower than last year, while aftermarket sales were down a more modest 7%.听 Comparing our commercial sales to fiscal 鈥�19, before COVID hit, we see the dramatic impact of the pandemic on our business.听 Sales to OEM customers are down 50% from 2019, from $540 million to just over $270 million in 2021.听 Aftermarket sales fared better, down from $141 million in 2019 to $106 million in 2021, a drop of 25%.听

Aircraft Margins

Margins in the quarter were 8.8%, up from an adjusted margin of 2.7% last year.听 The higher sales and improving commercial aftermarket more than compensated for weaker military aftermarket sales.听 Full year margins of 8.3% were up from adjusted margins of 7.6% last year.听 This year鈥檚 margins included almost 100 basis points of additional R&D spending as we invested in the next generation of military platforms.听听

Aircraft fiscal 鈥�22

We鈥檙e projecting fiscal 鈥�22 sales of $1.25 billion, up 7% from this year.听 The strength is on the commercial platforms, with OEM sales up on the 737, business jets, the E-2 and a full year of Genesys. We鈥檙e also anticipating that the commercial aftermarket will continue to strengthen across our portfolio of platforms.听 In contrast, Military OEM sales will be more or less in line with this year, with higher helicopter sales compensating for lower F-35 sales.听 We anticipate military aftermarket sales will be up on higher F-35 and V-22 activity.听 We鈥檙e encouraged by the uptick in the fourth quarter and are modeling that this run rate will continue through fiscal 鈥�22.听

With stronger sales and an improving mix, we鈥檙e forecasting full year margins in FY22 of 10.1%, up 180 basis points from fiscal 鈥�21.听

听

Space and Defense

Space and Defense Q4

Sales in the quarter of $200 million were 3% lower than last year.听 This is the first time in 5 years that we鈥檝e had a down quarter year over year.听 This quarter, sales were marginally lower in both our Space and our Defense markets.听 On the Space side, lower revenue on launch vehicles, hypersonics and satellite engines, was partially compensated by increased activity on our integrated space vehicles product line.听

Defense sales were down on lower tactical missile production and continued challenges in our security business.听 On the plus side, sales on missile defense, turret systems and into naval applications were slightly higher.听

Space and Defense fiscal 鈥�21

Full year sales of $799 million were 4% higher than last year.听 Over the last 6 years, sales in this business have more than doubled.听 The growth in fiscal 鈥�21 was all in the Space market.听 The biggest driver was our new integrated space vehicles business which more than doubled from a year ago to $60 million.听 We also saw double digit growth in our avionics product line to over $50 million.听 Defense sales were down 2% on the year, driven by lower tactical missile work and challenges in the security business.听听

Space and Defense Margins

Margins in the quarter of 8.6% were disappointing.听 Our Space & Defense sector has had a tough second half of this fiscal year after several years of strong margin performance.听 Similar to the third quarter, we saw some cost growth in several of our fixed price development contracts across both end markets.听 In addition, we incurred $2.5 million of impairment charges as we exited certain product and contract arrangements.听 Taken together, these pressures depressed margins by 300 basis points in the quarter.听 As is always the case, we believe we鈥檝e captured the impact of all future cost increases within the quarter.听

Full year fiscal 鈥�21 margins of 11.1% were lower than prior years as a result of the second half impacts described above.听听

听

Space and Defense fiscal 鈥�22

Our forecast for fiscal 鈥�22 projects another year of double-digit sales growth.听 Defense will lead the way with sales up 14% from fiscal 鈥�21.听 The growth is primarily in our vehicles product line across both US and foreign programs.听 We also anticipate stronger component sales for our slip-rings.听 Space sales will be up 5% as a result of the continued growth in our integrated space vehicles product line.听

We鈥檙e projecting operating margins of 11.5% in fiscal 鈥�22.听 This is up from fiscal 鈥�21 but not back to the level we enjoyed a few years ago.听 There are 2 reasons for this.听 First, we鈥檙e cautious after the experience of the last 6 months.听 Second, we鈥檙e seeing a mix shift in the business to newer, more integrated product offerings.听 On the defense side it is our turret business and on the space side it is our satellite bus offerings.听 Combined, these new product lines are delivering most of the sales growth in fiscal 鈥�22, but, as with many new business endeavors, they are at slightly lower margins that our legacy business. 鈥�

听

Industrial Systems

Industrial Systems Q4

Sales in the quarter of $226 million were more or less in line with last year after adjusting for foreign exchange movements. Sales were up in Industrial Automation, Energy and Simulation & Test but sharply lower in Medical.听 Industrial Automation sales were up 11% on strength across the portfolio.听 We鈥檝e seen a nice rebound in this business over the last 6 months as the global economies have started to recover from COVID.听 Energy sales were up on increased off-shore production activity.听 Simulation & Test sales were up slightly on some project work in the material test area.听 Core flight simulation sales were down slightly from a year ago.听 Our medical pump business was marginally lower as the after-effects of the COVID surge slowly work their way out of the supply chain. In addition, sales of components into sleep therapy and medical imaging were lower.听听

Industrial Systems fiscal 鈥�21

Full year sales of $892 million were 2% lower than last year. Adjusting for the impact of foreign currency gains, underlying sales were down almost 5% on the year.听 Three of our four major markets were weaker with Industrial Automation being the exception with modest growth.听 Industrial automation makes up half our segment sales.听 Sales into this market dropped significantly with the onset of COVID in our third quarter last year.听 They remained depressed for about 9 months and since the second quarter this year we鈥檝e seen a recovery as investment in capital goods has ramped up to meet surging demand.听 This quarter, our core hydraulics and electric components business was up across most of the portfolio of end markets.听听 Energy sales for the year were down as oil prices remained subdued, Simulation & Test sales were depressed, all attributable to flight simulation where our annual sales for full-flight simulators were down almost 30% from the prior year.听 Finally, medical sales were lower, as anticipated, as the COVID surge we enjoyed in fiscal 鈥�20 waned.听 On a more positive note, fiscal 鈥�21 sales into medical applications were 12% higher than our pre-COVID fiscal 鈥�19 sales.听

Industrial Systems Margins

Margins in the quarter of 8.5% included almost 200 basis points of restructuring and impairment charges.听 In the quarter we continued our portfolio refinement, selling a small product line and closing a site in Asia.听听

Full year margins of 9.6% were down from fiscal 鈥�20 on the lower sales volume and inefficiencies associated with 12 months managing through COVID

Industrial Systems fiscal 鈥�22

Our first look at fiscal 鈥�22 suggests modest sales growth over last year.听 We anticipate that our Industrial Automation and Energy markets will be flat with this year, while both Simulation & Test and Medical should be higher.听 Industrial Automation sales will remain flat as modest underlying growth is negated by the portfolio refinement we鈥檙e going through.听 Our growth in this market is primarily limited by our ability to ramp production rather than a shortfall in demand.听 Both supply chain and labor constraints are impacting our ability to grow sales.听 Our Energy market has been pretty stable over the last few years as the price of oil has remained muted.听 The recent surge in oil prices may have a longer-term impact on our business if prices remain elevated.听 However, given the long cycle in this industry, we鈥檙e not anticipating any material impact in our fiscal 鈥�22.听听 Simulation & Test sales will be higher on additional auto test work and a modest recovery in flight simulator volumes.听 We continue to anticipate a very slow recovery in the flight simulator market over several years.听 Finally, sales into medical applications will be higher on additional component sales, with the biggest increase in motors for sleep therapy products.听

We鈥檙e forecasting full year margins next year of 9.5% in line with fiscal 鈥�21.听 Investments in new electric vehicle applications and our continued journey to refine our portfolio are suppressing margin expansion this coming year.听 These activities should start to pay dividends as we get into fiscal 鈥�23 and beyond.听 鈥�

听

Summary Guidance

In fiscal 鈥�21, we learned to live with the pandemic through a full 12 months and delivered much better results than we had imagined going into the year.听 Looking forward to fiscal 鈥�22 we鈥檙e optimistic that the pandemic will continue to recede, however we anticipate we will be living with the effects of the pandemic on both the supply chain and labor market for all of this coming 12 months.听 Based on what we know today, we鈥檙e optimistic about our business and are forecasting both top and bottom line growth.听 听听

Looking at our 5 major markets in fiscal 鈥�22, we believe Defense and Space will remain strong, Industrial markets will continue to improve, Commercial Aircraft will show nice recovery and Medical will return to modest growth.听

In normal circumstances, we believe our projection for the coming year accurately balances the risks and opportunities we鈥檙e seeing.听 However, we鈥檙e living through extraordinary circumstances and it is very difficult to quantify the potential impact of supply chain disruptions and labor challenges.听 Our forecast assumes some level of continued disruption, in line with the trends we鈥檝e seen in the last 2 quarters.听 Additional risks include rising inflation and the impact of the vaccine mandate on our ability to deliver products to our customers.听 On the positive side, should COVID continue to recede, and the supply chain constraints start to unwind, we could see upside in our industrial and commercial aircraft businesses.听听

After 18 months of a pandemic, our strategy remains unchanged from pre-pandemic times.听 We鈥檙e a technology company, focused on solving our customer鈥檚 most difficult technical challenges.听 Customer intimacy is at the core of our strategy and we believe long-term relationships with our customers drive long-term value.听听 We focus on our core technologies of motion and fluid control, while serving a wide-range of end markets which benefit from our expertise.听 Capital allocation is focused first and foremost on growth, both organic and via acquisitions.听 We believe this is the best way to generate long-term shareholder value.听 We will also return capital to shareholders through our dividend policy and use our share buyback program opportunistically.听 Finally, our culture of trust and collaboration has stood the test of time and carried through the extraordinary challenges of the last 18 months.听

We鈥檙e optimistic about our future, while remaining realistic about the challenges.听 In fiscal 鈥�22 we anticipate sales of just over $3 billion and earnings per share of $5.50, plus or minus $0.20.听 These results represent an increase of 6% on the top line and 13% on the bottom line.听 We believe the year will start slowly and accelerate sequentially.听 For Q1, we anticipate earnings per share of $1.10, plus or minus $0.15.听

听

Now let me pass you to Jennifer who will provide more color on our cash flow and balance sheet.听听

鈥�

Thank you, John. Good morning, everyone.

Free cash flow in the quarter was $22 million, or 65% conversion. We had another strong year for free cash flow, coming in at $164 million and topping 100% conversion. That compares to free cash flow of $73 million in the same quarter a year ago and $191 million for all of last year. Free cash flow has been especially strong since the start of the pandemic six quarters ago. In the first few quarters of the pandemic, we were focused on preserving cash to ensure we had sufficient liquidity to manage through the uncertain times ahead. We鈥檝e since begun to increasingly invest in our business as the markets we serve have stabilized. Over this 18-month period, we鈥檝e generated $328 million of free cash flow, which is just over 150% conversion on an adjusted basis.

The $22 million of free cash flow in Q4 compares with a decrease in our net debt of $23 million. During the fourth quarter, we paid our quarterly dividend and repurchased some shares. These outflows were partially offset by the divestiture of a small product line in our industrial motors business.

For the year, $164 million of free cash flow compares with a decrease in our net debt of $42 million. During the year, we acquired Genesys for $78 million, paid dividends of $32 million and repurchased 400,000 shares for $30 million. These outflows were partially offset by divestitures.

Net working capital (excluding cash and debt) as a percentage of sales at the end of Q4 was 29.1%, about the same as a quarter ago. We鈥檝e continued our trend in reducing inventories. We also benefited from the timing of payments. Growth in receivables offset these benefits. Receivables increased due to billings late in the quarter, certain customers not taking deliveries and supply chain issues that delayed shipments.

Capital expenditures in the fourth quarter were $40 million. We increased our investments in capital expenditures beginning in the second quarter this year, once the level of uncertainties from the pandemic subsided. We continue to catch up on capital investments that we had previously delayed. In addition, we are consolidating some of our operations into new facilities to reduce our footprint over time and recapitalizing for next generation manufacturing capabilities to increase production efficiencies through automation.

At quarter end, our net debt was $803 million, including $101 million of cash. The major components of our debt were $500 million of senior notes, $322 million of borrowings on our U.S. revolving credit facilities and $80 million outstanding on our securitization facility.听

We have $746 million of unused borrowing capacity on our U.S. revolving credit facility. Our ability to draw on the unused balance is limited by our leverage covenant, which is a maximum of 4.0x on a net debt basis. Based on our leverage, we could have incurred an additional $609 million of net debt as of the end of our fourth quarter.听 We are confident that our existing facilities provide us with the flexibility to invest in our future.

Our leverage ratio was 2.3x on a net debt basis as of the end of the fourth quarter, compared to 2.4x a year ago. Strong cash generation was offset by the pressures on EBITDA from the impacts of the pandemic as well as capital allocated towards acquisitions and share repurchases. Our leverage ratio continues to be within our target zone of 2.25x to 2.75x.

Cash contributions to our global retirement plans totaled $16 million in the quarter, compared to $12 million in the fourth quarter of 2020. Contributions have increased for our defined contribution plans. In the U.S., participation has increased in our defined contribution plan as our defined benefit plan remains closed to new participants. Global retirement plan expense in the fourth quarter was $20 million, down from $21 million the fourth quarter of 2020, excluding the settlement loss from last year. For the year, expense was $71 million, down from $79 million without the settlement loss in 2020. Defined benefit plan expense is down due to settlement of about half of the liability for our largest plan, with defined contribution expense up related to increased plan participation.

Our effective tax rate was 19.0% in the fourth quarter, compared to 28.3%, excluding charges associated with the pandemic, in the same period a year ago. The lower rate this quarter is attributable to the release of valuation reserves. For the full year, our effective tax rate was 22.8% compared to a 20.9% adjusted rate in 2020. This year鈥檚 rate includes charges associated with the revaluation of deferred tax liabilities in the UK, mostly offset by adjustments to last year鈥檚 provision in the U.S.

We amended our securitization facility yesterday. Under the facility, a receivables financing subsidiary may sell receivables to a financial institution in an amount up to $100 million. These transfers are treated as sales and accordingly, the receivables are derecognized from our balance sheet. The new structure reduces our working capital levels.听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听听

We expect free cash flow generation in 2022, including the benefit of $100 million from the securitization facility, to be in line with our long-term target of 100% conversion. Receivables will be the greatest source of cash due to the securitization facility. We also expect inventories to continue to be a source of cash, while customer advances get worked down. We expect capital expenditures in 2022 to increase to $160 million as we invest in facilities and infrastructure to support future growth and operational improvements in the business. Depreciation and amortization are expected to be $96 million.

Our financial situation is strong. We鈥檙e well positioned to invest and deploy our capital. Our priority at this point is to invest in our business and fund organic growth. We continue to explore M&A opportunities, though pricing remains high on that front. We may also complement our growth strategy with returning capital to shareholders.

With that, we鈥檒l turn it back to John for any questions you may have.

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听