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Moog Reports Third Quarter Results

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

Third Quarter Highlights

  • Diluted earnings per share of $1.11, up 11% from a year ago;
  • Sales of $626 million, up 2% from a year ago;
  • Operating margins of 10.2%, down from a comparatively high Q3 last year and in line with expectations;
  • Unusually low tax rate, at 17%;
  • Strong cash flow from operating activities;
  • Completed the sale of European space businesses.

Segment Results

Total Aircraft Controls sales in the quarter were $283 million, up 4% year over year. Commercial aircraft revenues increased 10%, to $153 million. Sales of OEM products to Airbus increased 41%, to $40 million, driven by an increase in A350 program sales. Boeing OEM sales were off 6%, at $62 million. Commercial aftermarket sales increased $4 million, to $31 million.

Military aircraft sales of $130 million were down 3%. Military aftermarket sales of $43 million were down 14%, mostly due to the timing of F-35 depot activity. Military OEM sales were 3% higher on an increase in F-35 sales.

Space and Defense segment sales were $95 million, up 2% year over year. Defense sales were up 7% on increased demand for U.S. ground vehicle and naval systems, which offset lower sales of missile systems. Space sales were 3% lower, the result of the European space business divested in Q1 fiscal ‘17.

Industrial Systems segment sales in the quarter were $122 million, down 6% from a year ago but up 6% from Q2. About one-third of the decline was due to weaker foreign currencies relative to the U.S. Dollar. Energy sales were off 20% and industrial automation sales were off 13%. Simulation and test sales were very strong, up 28%.

Components segment sales in the quarter were $127 million, 7% higher year over year. Aerospace and defense sales were flat while industrial sales for specialty markets were 26% higher, benefitting from the recent Rotary Transfer Systems acquisition which closed in early April. Medical market sales of $47 million were slightly higher as increased sales of pumps and sensors offset lower CT scan slip ring sales.

Consolidated 12-month backlog was $1.2 billion.

Fiscal 2017 Outlook

  • Forecast sales raised $10 million from last quarter’s forecast, to $2.46 billion, up 2% over last year;
  • Forecast earnings per share raised $0.25 to $3.75, plus or minus $0.10;
  • Forecast full year operating margins of 10.1%, a slight increase from last quarter’s forecast;
  • Another year of solid cash flow from operations.

“Q3 was another good quarter,” said John Scannell, Chairman and CEO. “With nine months behind us, FY17 is shaping up nicely. Today we’re pleased to be raising our full-year guidance by $0.25 per share to reflect a stronger operational performance and a reduced tax rate.”

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.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
July 1,
2017
July 2,
2016
July 1,
2017
July 2,
2016
Net sales $626,183 $613,260 $1,848,256 $1,792,859
Cost of sales 443,769 429,598 1,308,256 1,268,550
Gross profit 182,414 183,662 540,000 524,309
Research and development 36,314 36,006 107,828 110,535
Selling, general and administrative 89,144 88,553 261,271 254,318
Interest 8,654 8,662 25,789 25,919
Restructuring (39) 8,303
Other 29 (1,082) 12,148 (2,600)
Earnings before income taxes 48,273 51,562 132,964 127,834
Income taxes 8,185 15,916 31,156 35,121
Net earnings attributable to Moog and noncontrolling interest 40,088 35,646 101,808 92,713
Net earnings (loss) attributable to noncontrolling interest (665) (870) (889)
Net earnings attributable to Moog $40,088 $36,311 $102,678 $93,602
Net earnings per share attributable to Moog
Basic $1.12 $1.01 $2.86 $2.57
Diluted $1.11 $1.00 $2.83 $2.55
Average common shares outstanding
Basic 35,847,842 36,038,340 35,868,315 36,411,428
Diluted 36,212,779 36,267,975 36,240,794 36,663,165


Moog Inc.
CONSOLIDATED SALES AND OPERATING PROFIT
(dollars in thousands)
Three Months Ended Nine Months Ended
July 1,
2017
July 2,
2016
July 1,
2017
July 2,
2016
Net sales:
Aircraft Controls $282,555 $272,564 $840,666 $798,594
Space and Defense Controls 94,518 92,375 293,296 268,764
Industrial Systems 122,490 130,103 350,320 383,526
Components 126,620 118,218 363,974 341,975
Net sales $626,183 $613,260 $1,848,256 $1,792,859
Operating profit:
Aircraft Controls $29,080 $33,024 $83,372 $71,198
10.3% 12.1% 9.9% 8.9%
Space and Defense Controls 10,005 11,255 27,589 35,427
10.6% 12.2% 9.4% 13.2%
Industrial Systems 12,471 11,534 35,490 38,437
10.2% 8.9% 10.1% 10.0%
Components 12,039 12,936 34,333 31,854
9.5% 10.9% 9.4% 9.3%
Total operating profit 63,595 68,749 180,784 176,916
10.2% 11.2% 9.8% 9.9%
Deductions from operating profit:
Interest expense 8,654 8,662 25,789 25,919
Equity-based compensation expense 997 875 4,151 2,794
Corporate and other expenses, net 5,671 7,650 17,880 20,369
Earnings before income taxes $48,273 $51,562 $132,964 $127,834


Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
July 1,
2017
October 1,
2016
ASSETS
Current assets
Cash and cash equivalents $344,541 $325,128
Receivables 677,918 688,388
Inventories 475,050 479,040
Prepaid expenses and other current assets 41,418 34,688
Total current assets 1,538,927 1,527,244
Property, plant and equipment, net 510,536 522,369
Goodwill 768,581 740,162
Intangible assets, net 111,900 113,560
Deferred income taxes 59,879 75,800
Other assets 29,994 25,839
Total assets $3,019,817 $3,004,974
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings $120,089 $1,379
Current installments of long-term debt 323 167
Accounts payable 155,492 144,450
Accrued salaries, wages and commissions 130,294 126,319
Customer advances 162,332 167,514
Contract loss reserves 37,093 32,543
Other accrued liabilities 100,486 116,577
Total current liabilities 706,109 588,949
Long-term debt, excluding current installments 836,101 1,004,847
Long-term pension and retirement obligations 352,361 401,747
Deferred income taxes 13,515 11,026
Other long-term liabilities 3,807 4,343
Total liabilities 1,911,893 2,010,912
Commitment and contingencies
Redeemable noncontrolling interest 5,651
Shareholders’ equity
Common stock - Class A 43,695 43,667
Common stock - Class B 7,585 7,613
Additional paid-in capital 479,712 465,762
Retained earnings 1,809,217 1,706,539
Treasury shares (739,412) (741,700)
Stock Employee Compensation Trust (71,445) (49,463)
Supplemental Retirement Plan Trust (10,800) (8,946)
Accumulated other comprehensive loss (410,628) (435,061)
Total Moog shareholders’ equity 1,107,924 988,411
Total liabilities and shareholders’ equity $3,019,817 $3,004,974


Moog Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Nine Months Ended
July 1,
2017
July 2,
2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings attributable to Moog and noncontrolling interest $101,808 $92,713
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 53,027 58,674
Amortization 14,078 16,485
Deferred income taxes 2,968 7,765
Equity-based compensation expense 4,151 2,794
Other 15,493 6,967
Changes in assets and liabilities providing (using) cash:
Receivables 176 43,214
Inventories 3,786 (9,959)
Accounts payable 11,312 (16,456)
Customer advances (3,097) 9,689
Accrued expenses (180) (7,106)
Accrued income taxes (2,767) 686
Net pension and post retirement liabilities (25,982) (38,828)
Other assets and liabilities (5,449) (5,858)
Net cash provided by operating activities 169,324 160,780
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired (40,545) (11,016)
Purchase of property, plant and equipment (45,349) (42,605)
Other investing transactions 3,031 1,164
Net cash (used) by investing activities (82,863) (52,457)
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term repayments (1,280)
Proceeds from revolving lines of credit 185,045 274,670
Payments on revolving lines of credit (235,045) (261,570)
Proceeds from long-term debt 20,000
Payments on long-term debt (133) (10,047)
Proceeds from sale of treasury stock 2,135 2,229
Purchase of outstanding shares for treasury (5,714) (42,203)
Proceeds from sale of stock held by SECT 867 2,897
Purchase of stock held by SECT (12,162) (1,634)
Purchase of stock held by SERP Trust (2,300)
Excess tax benefits from equity-based payment arrangements 442
Other financing transactions (1,656) (1,909)
Net cash (used) by financing activities (67,943) (19,425)
Effect of exchange rate changes on cash 895 (4,322)
Increase in cash and cash equivalents 19,413 84,576
Cash and cash equivalents at beginning of period 325,128 309,853
Cash and cash equivalents at end of period $344,541 $394,429

Contact: Ann Marie Luhr 716-687-4225

Source: Moog Inc