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Moog Reports Second Quarter Results

/EIN News/ -- 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
 
    Three Months Ended   Six Months Ended
    April 1,
 2017
  April 2,
 2016
  April 1,
 2017
  April 2,
 2016
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.
CONSOLIDATED SALES AND OPERATING PROFIT
(dollars in thousands)
 
    Three Months Ended   Six Months Ended
    April 1,
 2017
  April 2,
 2016
  April 1,
 2017
  April 2,
 2016
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.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 
    April 1,
 2017
  October 1,
 2016
ASSETS        
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  
LIABILITIES AND SHAREHOLDERS’ EQUITY        
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.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 
    Six Months Ended
    April 1,
 2017
  April 2,
 2016
CASH FLOWS FROM OPERATING ACTIVITIES        
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  
CASH FLOWS FROM INVESTING ACTIVITIES        
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 )
CASH FLOWS FROM FINANCING ACTIVITIES        
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

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