Moog Reports First Quarter Results

EAST AURORA, N.Y.--()--Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the first quarter ended December 28, 2019.

First Quarter Highlights

  • Sales of $755 million, up 11% from a year ago;
  • Operating margins of 12.0% up from 11.7% a year ago;
  • Effective tax rate of 25.2%;
  • Diluted earnings per share of $1.44, up 18% from a year ago;
  • $42 million cash flow from operating activities.

Segment Results

Total Aircraft Controls segment sales in the quarter were $340 million, up 12% year over year. Military aircraft sales in the quarter were $174 million, 18% higher than a year ago. Military OEM sales increased 19%, to $118 million, on strong foreign program activity. Military aftermarket sales were 17% higher, attributed to F-35 sustainment work.

Commercial aircraft revenues increased 6%, to $166 million. Boeing sales were up 13%, to $69 million, the result of strong 787 sales. Airbus sales of $39 million increased 14% on A350 deliveries. Commercial aftermarket sales were mostly unchanged at $33 million.

In the quarter, Space and Defense segment sales were $186 million, up 19% year over year. Space sales were 25% higher, on increased sales of satellite avionics products, launch vehicle controls and NASA program activity. Defense sales were 17% higher, at $124 million, with increases in missile systems, vehicles and defense components.

Industrial Systems segment sales in the quarter were $229 million, up 4% from a year ago. Medical pumps and associated product sales increased 22%, to $63 million. Energy product sales were 2% higher on offshore exploration activity. Higher flight simulation product sales mostly offset weaker sales of test equipment. Products sold into industrial automation applications were down marginally, to $107 million.

Total backlog was $2.4 billion, with consolidated 12-month backlog at $1.7 billion, up 16% from a year ago.

Fiscal 2020 Outlook

The Company updated its fiscal 2020 projections of 90 days ago to adjust for the closing of a recent acquisition and the impact of recently completed financing activities.

  • Forecast sales of $3.0 billion;
  • Forecast full year operating margins of 11.3%;
  • Forecast effective tax rate of 25.3%;
  • Forecast diluted earnings per share of $5.50, plus or minus $0.20;
  • Forecast cash flow from operations of $272 million.

We’re very pleased with our first quarter results,” said John Scannell, Chairman and CEO. “Sales were up 11% and earnings per share were 18% higher relative to last year’s first quarter. Defense sales were strong across all our applications and we recently completed a very successful senior notes offering. We’re adjusting our forecast for the full year slightly, increasing our sales outlook by $35 million to account for the GAT acquisition. We’re also decreasing our EPS guidance by $0.05 to account for the combined impact of our recent debt offering and our share buyback activity.”

In the first quarter of FY 2020, the Company changed its method of accounting for the determination of the market-related value of certain assets of the qualified U.S. defined benefit plan. This change in accounting principle is preferable based on U.S. generally accepted accounting principles. The change requires retrospective application. The impact of adoption for Q1 FY 2019 was ($0.03) per share and for all of FY 2019 the impact of adoption was ($0.15) per share.

In conjunction with today’s release, Moog will host a conference call beginning at 10:00 a.m. ET, which will be broadcast live over the Internet. John Scannell, Chairman and CEO, and Jennifer Walter, CFO, will host the call.

Listeners can access the call live or in replay mode at www.moog.com/investors/communications. Supplemental financial data will be available on the webcast web page 90 minutes prior to the conference call.

Moog Inc. is a worldwide designer, manufacturer, and integrator of precision control components and systems. Moog’s high-performance systems control military and commercial aircraft, satellites and space vehicles, launch vehicles, missiles, automated industrial machinery, marine and medical equipment. Additional information about the company can be found at www.moog.com.

Cautionary Statement

Information included or incorporated by reference in this report that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company’s current views with respect to certain current and future events and financial performance and are not guarantees of future performance. This includes but is not limited to, the Company’s expectation and ability to pay a quarterly cash dividend on its common stock in the future, subject to the determination by the board of directors, and based on an evaluation of company earnings, financial condition and requirements, business conditions, capital allocation determinations and other factors, risks and uncertainties. The impact or occurrence of these could cause actual results to differ materially from the expected results described in the forward-looking statements. These important factors, risks and uncertainties include:

  • The markets we serve are cyclical and sensitive to domestic and foreign economic conditions and events, which may cause our operating results to fluctuate;
  • We operate in highly competitive markets with competitors who may have greater resources than we possess;
  • We depend heavily on government contracts that may not be fully funded or may be terminated, and the failure to receive funding or the termination of one or more of these contracts could reduce our sales and increase our costs;
  • We make estimates in accounting for over-time contracts, and changes in these estimates may have significant impacts on our earnings;
  • We enter into fixed-price contracts, which could subject us to losses if we have cost overruns;
  • We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects;
  • If our subcontractors or suppliers fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially and adversely impacted;
  • We may not be able to prevent, or timely detect, issues with our products and our manufacturing processes which may adversely affect our operations and our earnings;
  • Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks, and any false claims or non-compliance could subject us to fines, penalties or possible debarment;
  • The loss of The Boeing Company as a customer or a significant reduction in sales to The Boeing Company could adversely impact our operating results;
  • Our new products and technology research and development efforts are substantial and may not be successful which could reduce our sales and earnings;
  • Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete;
  • Our business operations may be adversely affected by information systems interruptions, intrusions or new software implementations;
  • Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility;
  • The potential phase out of LIBOR may negatively impact our debt agreements and financial position, results of operations and liquidity;
  • 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;
  • A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth;
  • Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or if we engage in divesting activities;
  • Our operations in foreign countries expose us to political and currency risks and adverse changes in local legal and regulatory environments;
  • The United Kingdom's decision to exit the European Union may bring short-term and long-term adverse impacts on our results of operations;
  • Escalating tariffs, restrictions on imports or other trade barriers between the United States and various countries may impact our results of operations;
  • Unforeseen exposure to additional income tax liabilities may affect our operating results;
  • Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business;
  • The failure or misuse of our products may damage our reputation, necessitate a product recall or result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages;
  • We are involved in various legal proceedings, the outcome of which may be unfavorable to us;
  • Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our business;
  • Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs.

These factors are not exhaustive. New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. We disclaim any obligation to update the forward-looking statements made in this report.

Moog Inc.

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands, except per share data)

 

 

 

Three Months Ended

 

 

December 28,
2019

 

December 29,
2018

Net sales

 

$

754,843

 

 

$

679,676

 

Cost of sales

 

543,586

 

 

480,174

 

Gross profit

 

211,257

 

 

199,502

 

Research and development

 

28,208

 

 

31,876

 

Selling, general and administrative

 

98,367

 

 

96,326

 

Interest

 

10,232

 

 

9,682

 

Other

 

7,546

 

 

5,135

 

Earnings before income taxes

 

66,904

 

 

56,483

 

Income taxes

 

16,877

 

 

13,714

 

Net earnings

 

$

50,027

 

 

$

42,769

 

 

 

 

 

 

Net earnings per share

 

 

 

 

Basic

 

$

1.45

 

 

$

1.23

 

Diluted

 

$

1.44

 

 

$

1.22

 

 

 

 

 

 

Average common shares outstanding

 

 

 

 

Basic

 

34,540,851

 

 

34,815,255

 

Diluted

 

34,787,404

 

 

35,125,829

 

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

 

 

Three Months Ended

 

 

December 28,
2019

 

December 29,
2018

Net sales:

 

 

 

 

Aircraft Controls

 

$

339,954

 

 

$

304,045

 

Space and Defense Controls

 

186,240

 

 

156,068

 

Industrial Systems

 

228,649

 

 

219,563

 

Net sales

 

$

754,843

 

 

$

679,676

 

Operating profit:

 

 

 

 

Aircraft Controls

 

$

38,592

 

 

$

33,199

 

 

 

11.4

%

 

10.9

%

Space and Defense Controls

 

25,282

 

 

18,473

 

 

 

13.6

%

 

11.8

%

Industrial Systems

 

26,799

 

 

27,705

 

 

 

11.7

%

 

12.6

%

Total operating profit

 

90,673

 

 

79,377

 

 

 

12.0

%

 

11.7

%

Deductions from operating profit:

 

 

 

 

Interest expense

 

10,232

 

 

9,682

 

Equity-based compensation expense

 

2,381

 

 

2,008

 

Non-service pension expense

 

3,601

 

 

4,894

 

Corporate and other expenses, net

 

7,555

 

 

6,310

 

Earnings before income taxes

 

$

66,904

 

 

$

56,483

 

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

December 28,
2019

 

September 28,
2019

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

124,226

 

 

$

89,702

 

Restricted cash

 

3,065

 

 

2,846

 

Receivables

 

989,214

 

 

957,287

 

Inventories, net

 

559,232

 

 

534,974

 

Prepaid expenses and other current assets

 

43,588

 

 

44,164

 

Total current assets

 

1,719,325

 

 

1,628,973

 

Property, plant and equipment, net

 

613,487

 

 

586,767

 

Operating lease right-of-use assets

 

62,669

 

 

 

Goodwill

 

812,602

 

 

784,240

 

Intangible assets, net

 

103,783

 

 

79,646

 

Deferred income taxes

 

20,069

 

 

19,992

 

Other assets

 

16,143

 

 

14,619

 

Total assets

 

$

3,348,078

 

 

$

3,114,237

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Current installments of long-term debt

 

$

 

 

$

249

 

Accounts payable

 

231,692

 

 

257,677

 

Accrued compensation

 

113,230

 

 

143,765

 

Contract advances

 

177,107

 

 

137,242

 

Accrued liabilities and other

 

211,290

 

 

188,725

 

Total current liabilities

 

733,319

 

 

727,658

 

Long-term debt, excluding current installments

 

977,573

 

 

832,984

 

Long-term pension and retirement obligations

 

163,286

 

 

160,034

 

Deferred income taxes

 

54,238

 

 

40,528

 

Other long-term liabilities

 

82,971

 

 

30,552

 

Total liabilities

 

2,011,387

 

 

1,791,756

 

Shareholders’ equity

 

 

 

 

Common stock - Class A

 

43,796

 

 

43,795

 

Common stock - Class B

 

7,484

 

 

7,485

 

Additional paid-in capital

 

518,822

 

 

510,546

 

Retained earnings

 

2,170,105

 

 

2,128,739

 

Treasury shares

 

(828,453

)

 

(769,569

)

Stock Employee Compensation Trust

 

(115,503

)

 

(111,492

)

Supplemental Retirement Plan Trust

 

(71,381

)

 

(71,546

)

Accumulated other comprehensive loss

 

(388,179

)

 

(415,477

)

Total Moog shareholders’ equity

 

1,336,691

 

 

1,322,481

 

Total liabilities and shareholders’ equity

 

$

3,348,078

 

 

$

3,114,237

 

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

 

Three Months Ended

 

 

December 28,
2019

 

December 29,
2018

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

50,027

 

 

$

42,769

 

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:

 

 

 

 

Depreciation

 

18,386

 

 

17,848

 

Amortization

 

3,281

 

 

3,746

 

Deferred income taxes

 

3,205

 

 

92

 

Equity-based compensation expense

 

2,381

 

 

2,008

 

Other

 

(1,017

)

 

1,020

 

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

(18,879

)

 

12,810

 

Inventories

 

(13,782

)

 

(24,399

)

Accounts payable

 

(29,153

)

 

(13,199

)

Contract advances

 

40,215

 

 

31,531

 

Accrued expenses

 

(26,998

)

 

(18,473

)

Accrued income taxes

 

4,709

 

 

511

 

Net pension and post retirement liabilities

 

8,327

 

 

8,368

 

Other assets and liabilities

 

1,404

 

 

(394

)

Net cash provided by operating activities

 

42,106

 

 

64,238

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

(53,906

)

 

 

Purchase of property, plant and equipment

 

(27,310

)

 

(24,375

)

Other investing transactions

 

(3,684

)

 

2,785

 

Net cash used by investing activities

 

(84,900

)

 

(21,590

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Net short-term repayments

 

 

 

(1,490

)

Proceeds from revolving lines of credit

 

272,000

 

 

131,100

 

Payments on revolving lines of credit

 

(617,500

)

 

(175,200

)

Payments on long-term debt

 

 

 

(85

)

Proceeds from senior notes, net of issuance costs

 

492,750

 

 

 

Payments on finance lease obligations

 

(88

)

 

 

Payment of dividends

 

(8,661

)

 

(8,703

)

Purchase of outstanding shares for treasury

 

(57,776

)

 

(9,450

)

Proceeds from sale of stock held by SECT

 

 

 

6,636

 

Purchase of stock held by SECT

 

(2,440

)

 

(1,930

)

Other financing transactions

 

(1,895

)

 

 

Net cash provided (used) by financing activities

 

76,390

 

 

(59,122

)

Effect of exchange rate changes on cash

 

1,147

 

 

(473

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

34,743

 

 

(16,947

)

Cash, cash equivalents and restricted cash at beginning of period

 

92,548

 

 

127,706

 

Cash, cash equivalents and restricted cash at end of period

 

$

127,291

 

 

$

110,759

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

Treasury shares issued as compensation

 

$

5,016

 

 

$

5,720

 

Equipment acquired through financing

 

$

568

 

 

$

 

 

Contacts

Ann Marie Luhr
716-687-4225

Release Summary

Moog Reports First Quarter Results

Contacts

Ann Marie Luhr
716-687-4225