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Moog Reports Third Quarter Results

/EIN News/ -- 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

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