Moog Reports Second Quarter Results

EAST AURORA, N.Y., April 28, 2017 (GLOBE NEWSWIRE) -- Moog Inc. (NYSE:MOG.A) (NYSE:MOG.B) announced today financial results for the quarter ended April 1, 2017.

Second Quarter Highlights

  • Diluted earnings per share of $0.88, up 4% from a year ago;
  • Pre-tax earnings were up 19% from a year ago;
  • Sales of $632 million, up 3% from a year ago;
  • Operating margins of 10.3%, up from 9.3% a year ago;
  • Strong cash flow from operating activities;
  • Announcement of the acquisition of Rotary Transfer Systems, a slip ring business in Europe.

Segment Results

Total Aircraft Controls sales in the quarter were $290 million, up 6% year over year. Military aircraft sales of $137 million were 4% higher, driven by F-35 Joint Strike Fighter sales which were up 26%. Other OEM sales were up 3%, to $59 million. Military aftermarket sales were $48 million, down 5% on lower B-1B spares and C-5 modernization activity.

Commercial aircraft revenues increased 9%, to $153 million. Sales of OEM products to Airbus increased 44%, to $43 million, including a 70% increase in A350 program sales. Boeing OEM sales were marginally higher at $62 million. Commercial aftermarket sales declined $1 million, to $29 million.

Space and Defense segment sales were $106 million, up 14% year over year. Defense sales were up 26% on increased demand for U.S. and European ground vehicle programs, naval and security products. Space sales were 2% higher, attributed to an increase in sales of satellite controls.

Industrial Systems segment sales in the quarter were $115 million, down 10% from a year ago but up 3% from Q1. Energy sales were off 15%, simulation and test sales were down 9% and industrial automation sales were off 8%.

Components segment sales in the quarter were $121 million, up 3% from a year ago, with the strongest sales increase seen in the medical market. Medical market sales of $48 million were up 10% on increased sales of pumps and sensors. Aerospace and defense sales of $41 million were flat while industrial product sales for specialty markets, at $33 million, were down 3%.

Consolidated 12-month backlog was $1.2 billion.

Fiscal 2017 Outlook

  • Forecast sales of $2.45 billion, up 2% over last year and increased $30 million from last quarter’s forecast;
  • Forecast earnings per share of $3.50, plus or minus $0.15;
  • Forecast full year operating margins of 10.0%, with no change from last quarter’s forecast;
  • Another year of solid cash flow from operations.

“Earnings per share of $0.88 was above our guidance from 90 days ago,” said John Scannell, Chairman and CEO. “We’ve had a good first half of the year and we’re on track for our full year guidance. Our premier military and commercial aircraft programs continue their production ramps and we’ve seen sales gains in several of the defense programs in our portfolio.”

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 Don Fishback, 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, wind energy, 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 statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which 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 long-term 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;
  • contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and 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 product research and development efforts 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;
  • 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;
  • 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;
  • governmental regulations and customer demands related to conflict minerals may adversely impact our operating results;
  • 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;
  • 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; and
  • we are involved in various legal proceedings, the outcome of which may be unfavorable to us.

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.
(dollars in thousands, except per share data)
Three Months Ended Six Months Ended
April 1,
April 2,
April 1,
April 2,
Net sales $632,403 $611,142 $1,222,073 $1,179,599
Cost of sales 447,323 431,955 864,487 838,952
Gross profit 185,080 179,187 357,586 340,647
Research and development 36,950 39,731 71,514 74,529
Selling, general and administrative 87,064 82,771 172,127 165,765
Interest 8,649 8,935 17,135 17,257
Restructuring 8,069 8,342
Other 4,214 (936) 12,119 (1,518)
Earnings before income taxes 48,203 40,617 84,691 76,272
Income taxes 16,541 9,710 22,971 19,205
Net earnings attributable to Moog and noncontrolling interest 31,662 30,907 61,720 57,067
Net earnings (loss) attributable to noncontrolling interest (364) (143) (870) (224)
Net earnings attributable to Moog $32,026 $31,050 $62,590 $57,291
Net earnings per share attributable to Moog
Basic $0.89 $0.85 $1.74 $1.57
Diluted $0.88 $0.85 $1.73 $1.55
Average common shares outstanding
Basic 35,888,053 36,481,996 35,878,552 36,597,972
Diluted 36,236,838 36,693,190 36,254,802 36,860,760

Moog Inc.
(dollars in thousands)
Three Months Ended Six Months Ended
April 1,
April 2,
April 1,
April 2,
Net sales:
Aircraft Controls $289,661 $272,073 $558,111 $526,030
Space and Defense Controls 105,848 92,871 198,778 176,389
Industrial Systems 115,431 128,244 227,830 253,423
Components 121,463 117,954 237,354 223,757
Net sales $632,403 $611,142 $1,222,073 $1,179,599
Operating profit:
Aircraft Controls $31,181 $19,742 $54,292 $38,174
10.8% 7.3% 9.7% 7.3%
Space and Defense Controls 10,488 12,657 17,584 24,172
9.9% 13.6% 8.8% 13.7%
Industrial Systems 12,318 13,270 23,019 26,903
10.7% 10.3% 10.1% 10.6%
Components 10,840 10,939 22,294 18,918
8.9% 9.3% 9.4% 8.5%
Total operating profit 64,827 56,608 117,189 108,167
10.3% 9.3% 9.6% 9.2%
Deductions from operating profit:
Interest expense 8,649 8,935 17,135 17,257
Equity-based compensation expense 986 983 3,154 1,919
Corporate and other expenses, net 6,989 6,073 12,209 12,719
Earnings before income taxes $48,203 $40,617 $84,691 $76,272

Moog Inc.
(dollars in thousands)
April 1,
October 1,
Current assets
Cash and cash equivalents $305,123 $325,128
Restricted cash 37,366
Receivables 688,649 688,388
Inventories 458,211 479,040
Prepaid expenses and other current assets 42,274 34,688
Total current assets 1,531,623 1,527,244
Property, plant and equipment, net 507,091 522,369
Goodwill 731,924 740,162
Intangible assets, net 100,978 113,560
Deferred income taxes 65,569 75,800
Other assets 29,117 25,839
Total assets $2,966,302 $3,004,974
Current liabilities
Short-term borrowings $90 $1,379
Current installments of long-term debt 350 167
Accounts payable 155,519 144,450
Accrued salaries, wages and commissions 120,808 126,319
Customer advances 172,583 167,514
Contract loss reserves 35,743 32,543
Other accrued liabilities 106,236 116,577
Total current liabilities 591,329 588,949
Long-term debt, excluding current installments 956,053 1,004,847
Long-term pension and retirement obligations 370,037 401,747
Deferred income taxes 9,721 11,026
Other long-term liabilities 4,174 4,343
Total liabilities 1,931,314 2,010,912
Commitment and contingencies
Redeemable noncontrolling interest 5,651
Shareholders’ equity
Common stock - Class A 43,692 43,667
Common stock - Class B 7,588 7,613
Additional paid-in capital 474,123 465,762
Retained earnings 1,769,129 1,706,539
Treasury shares (739,551) (741,700)
Stock Employee Compensation Trust (61,887) (49,463)
Supplemental Retirement Plan Trust (10,094) (8,946)
Accumulated other comprehensive loss (448,012) (435,061)
Total Moog shareholders’ equity 1,034,988 988,411
Total liabilities and shareholders’ equity $2,966,302 $3,004,974

Moog Inc.
(dollars in thousands)
Six Months Ended
April 1,
April 2,
Net earnings attributable to Moog and noncontrolling interest $61,720 $57,067
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 35,372 38,554
Amortization 9,325 11,428
Deferred income taxes 423 2,292
Equity-based compensation expense 3,154 1,919
Other 15,481 5,991
Changes in assets and liabilities providing (using) cash:
Receivables (20,989) (5,606)
Inventories 14,327 (5,330)
Accounts payable 13,536 (13,439)
Customer advances 8,869 10,888
Accrued expenses 449 (5,802)
Accrued income taxes (858) 2,552
Net pension and post retirement liabilities (9,413) (13,171)
Other assets and liabilities (9,690) (8,920)
Net cash provided by operating activities 121,706 78,423
Acquisitions of businesses, net of cash acquired (11,016)
Purchase of property, plant and equipment (30,210) (27,685)
Other investing transactions (928) 1,058
Net cash (used) by investing activities (31,138) (37,643)
Net short-term repayments (1,280)
Proceeds from revolving lines of credit 94,145 210,320
Payments on revolving lines of credit (143,700) (182,455)
Payments on long-term debt (97) (9,660)
Proceeds from sale of treasury stock 2,135 2,229
Purchase of outstanding shares for treasury (5,305) (25,156)
Proceeds from sale of stock held by SECT 867 2,897
Purchase of stock held by SECT (7,038) (1,515)
Excess tax benefits from equity-based payment arrangements 471
Other financing transactions (1,656)
Net cash (used) by financing activities (61,929) (5,169)
Effect of exchange rate changes on cash (11,278) 2,858
Increase in cash, cash equivalents and restricted cash 17,361 38,469
Cash, cash equivalents and restricted cash at beginning of period 325,128 309,853
Cash, cash equivalents and restricted cash at end of period $342,489 $348,322

Contact: Ann Marie Luhr 716-687-4225

Source: Moog Inc