Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended June 29, 2019.
Third Quarter Highlights
- Sales of $741 million, up 7% from a year ago;
- Diluted earnings per share of $1.35, up 19% from a year ago;
- Operating margins of 11.4%, up from 10.9% last year;
- Cash flow from operating activities of $20 million.
Segment Results
Total Aircraft Controls segment sales in the quarter were $337 million, up 12% year over year. Military aircraft sales of $162 million were 13% higher on strong military OEM sales for foreign military platforms and helicopters. Military aftermarket sales were $55 million, up 14% on F-35 and V-22 program activity.
Commercial aircraft revenues increased 12% to $174 million. Boeing OEM sales were $67 million, up 11%, the result of strong 787 sales. Airbus sales of $47 million increased 29% on A350 deliveries. Business jet sales were 42% higher year over year, on Gulfstream program activity. Commercial aftermarket sales were down 7%, due to lower initial provisioning for the A350.
Space and Defense segment sales were $173 million, up 16% year over year. Defense sales were up 23%, to $117 million, on increases in missile controls, ground vehicles and slip ring products. Space sales were 2% higher, with increases in sales to NASA and launch vehicles offsetting lower satellite avionics sales.
Industrial Systems segment sales in the quarter were $231 million, down 5% from last year’s third quarter. The Company’s exit from the wind pitch controls business last year accounted for most of the decrease, as energy sales were lower, at $30 million. Medical market sales were 5% higher, at $59 million, on strong enteral pump sales. Industrial automation sales of $114 million were in line with last year. Simulation and test sales of $28 million were mostly unchanged.
Total backlog was $2.1 billion, with consolidated 12-month backlog at $1.6 billion, up 7% from a year ago.
Fiscal 2019 Outlook
The Company updated its projections for fiscal 2019.
- Forecast sales of $2.9 billion, unchanged from 90 days ago;
- Forecast earnings per share of $5.05, plus or minus $0.10, unchanged from 90 days ago;
- Forecast full year operating margins of 11.3%;
- Forecast cash flow from operating activities of $210 million;
- Forecast effective tax rate of 24.2%.
“It was a record quarter for our company in terms of both sales and earnings per share,” said John Scannell, Chairman and CEO. “As we look to the remainder of this year, we’re confident that we’ll meet our guidance for both sales and earnings per share, and we remain very optimistic about our longer-term growth prospects. Fifty years after Moog products helped steer the Apollo 11 mission to the Moon, our company continues to evolve and prosper. Our long-term outlook, continual investment in new technologies, unrelenting focus on meeting our customer’s demands and a deep rooted culture of mutual trust and respect are the ingredients for our success. We believe these values will continue to serve us well as we look to the next 50 years.”
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, 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;
- 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;
- 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;
- 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; and
- 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 | Nine Months Ended | |||||||||||||||
June 29,
|
June 30,
| June 29,
|
June 30,
| |||||||||||||
Net sales | $ | 740,969 | $ | 692,018 | $ | 2,139,456 | $ | 2,008,602 | ||||||||
Cost of sales | 529,050 | 491,959 | 1,530,634 | 1,423,897 | ||||||||||||
Inventory write-down - restructuring | — | 2,398 | — | 9,727 | ||||||||||||
Gross profit | 211,919 | 197,661 | 608,822 | 574,978 | ||||||||||||
Research and development | 31,298 | 30,953 | 94,518 | 97,282 | ||||||||||||
Selling, general and administrative | 103,655 | 101,722 | 299,841 | 295,006 | ||||||||||||
Interest | 9,780 | 8,850 | 29,401 | 26,585 | ||||||||||||
Restructuring | — | (1,549 | ) | — | 22,509 | |||||||||||
Other | 5,466 | 2,730 | 9,540 | 5,138 | ||||||||||||
Earnings before income taxes | 61,720 | 54,955 | 175,522 | 128,458 | ||||||||||||
Income taxes | 14,255 | 14,205 | 41,629 | 72,444 | ||||||||||||
Net earnings attributable to Moog and noncontrolling interest | 47,465 | 40,750 | 133,893 | 56,014 | ||||||||||||
Net earnings attributable to noncontrolling interest | — | 67 | — | 67 | ||||||||||||
Net earnings attributable to Moog | $ | 47,465 | $ | 40,683 | $ | 133,893 | $ | 55,947 | ||||||||
Net earnings per share attributable to Moog | ||||||||||||||||
Basic | $ | 1.36 | $ | 1.14 | $ | 3.84 | $ | 1.56 | ||||||||
Diluted | $ | 1.35 | $ | 1.13 | $ | 3.80 | $ | 1.55 | ||||||||
Average common shares outstanding | ||||||||||||||||
Basic | 34,904,487 | 35,762,918 | 34,869,021 | 35,768,471 | ||||||||||||
Diluted | 35,239,834 | 36,143,367 | 35,202,519 | 36,174,759 |
Diluted net earnings per share for the three and nine months ended June 29, 2019 include increases of $0.13 and $0.23, respectively, related to our adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASC 606).
Results shown in the previous table include the one-time impacts of the Tax Cuts and Jobs Act of 2017 and restructuring related to our wind pitch controls business. The table below adjusts the income taxes, net earnings and diluted net earnings per share attributable to Moog to exclude these impacts.
Reconciliation to non-GAAP adjusted income taxes, net earnings and diluted net earnings per share attributable to Moog:
Three Months Ended | Nine Months Ended | |||||||||||||||
June 29,
|
June 30,
| June 29,
|
June 30,
| |||||||||||||
As Reported: | ||||||||||||||||
Earnings before income taxes | $ | 61,720 | $ | 54,955 | $ | 175,522 | $ | 128,458 | ||||||||
Income taxes | 14,255 | 14,205 | 41,629 | 72,444 | ||||||||||||
Effective income tax rate | 23.1 | % | 25.8 | % | 23.7 | % | 56.4 | % | ||||||||
Net earnings attributable to Moog and noncontrolling interest | 47,465 | 40,750 | 133,893 | 56,014 | ||||||||||||
Net earnings attributable to Moog | 47,465 | 40,683 | 133,893 | 55,947 | ||||||||||||
Diluted net earnings per share attributable to Moog | $ | 1.35 | $ | 1.13 | $ | 3.80 | $ | 1.55 | ||||||||
Non-GAAP Adjustments - Due to Restructuring - Wind pitch controls business: | ||||||||||||||||
Earnings before income taxes | $ | — | $ | 849 | $ | — | $ | 32,236 | ||||||||
Income taxes | — | — | — | 5,485 | ||||||||||||
Net earnings attributable to Moog | — | 849 | — | 26,751 | ||||||||||||
Diluted net earnings per share attributable to Moog | $ | — | $ | 0.02 | $ | — | $ | 0.74 | ||||||||
Non-GAAP Adjustments - Due to Tax Reform: | ||||||||||||||||
Income taxes | $ | — | $ | — | $ | — | $ | (36,776 | ) | |||||||
Net earnings attributable to Moog | — | — | — | 36,776 | ||||||||||||
Diluted net earnings per share attributable to Moog | $ | — | $ | — | $ | — | $ | 1.02 | ||||||||
As Adjusted: | ||||||||||||||||
Earnings before income taxes | $ | 61,720 | $ | 55,804 | $ | 175,522 | $ | 160,694 | ||||||||
Income taxes | 14,255 | 14,205 | 41,629 | 41,153 | ||||||||||||
Effective income tax rate | 23.1 | % | 25.5 | % | 23.7 | % | 25.6 | % | ||||||||
Net earnings attributable to Moog and noncontrolling interest | 47,465 | 41,599 | 133,893 | 119,541 | ||||||||||||
Net earnings attributable to Moog | 47,465 | 41,532 | 133,893 | 119,474 | ||||||||||||
Diluted net earnings per share attributable to Moog | $ | 1.35 | $ | 1.15 | $ | 3.80 | $ | 3.30 |
Moog Inc. | |||||||||||||||||
CONSOLIDATED SALES AND OPERATING PROFIT | |||||||||||||||||
(dollars in thousands) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
June 29,
|
June 30,
| June 29,
|
June 30,
| ||||||||||||||
Net sales: | |||||||||||||||||
Aircraft Controls | $ | 336,735 | $ | 299,606 | $ | 961,407 | $ | 889,579 | |||||||||
Space and Defense Controls | 173,045 | 149,815 | 493,938 | 426,735 | |||||||||||||
Industrial Systems | 231,189 | 242,597 | 684,111 | 692,288 | |||||||||||||
Net sales | $ | 740,969 | $ | 692,018 | $ | 2,139,456 | $ | 2,008,602 | |||||||||
Operating profit: | |||||||||||||||||
Aircraft Controls | $ | 34,484 | $ | 33,601 | $ | 94,805 | $ | 98,437 | |||||||||
10.2 | % | 11.2 | % | 9.9 | % | 11.1 | % | ||||||||||
Space and Defense Controls | 24,133 | 16,689 | 63,110 | 50,204 | |||||||||||||
13.9 | % | 11.1 | % | 12.8 | % | 11.8 | % | ||||||||||
Industrial Systems | 25,495 | 24,972 | 83,428 | 39,455 | |||||||||||||
11.0 | % | 10.3 | % | 12.2 | % | 5.7 | % | ||||||||||
Total operating profit | 84,112 | 75,262 | 241,343 | 188,096 | |||||||||||||
11.4 | % | 10.9 | % | 11.3 | % | 9.4 | % | ||||||||||
Deductions from operating profit: | |||||||||||||||||
Interest expense | 9,780 | 8,850 | 29,401 | 26,585 | |||||||||||||
Equity-based compensation expense | 1,439 | 894 | 5,130 | 4,394 | |||||||||||||
Non-service pension expense | 3,182 | 1,693 | 9,562 | 5,093 | |||||||||||||
Corporate and other expenses, net | 7,991 | 8,870 | 21,728 | 23,566 | |||||||||||||
Earnings before income taxes | $ | 61,720 | $ | 54,955 | $ | 175,522 | $ | 128,458 |
Operating Profit and Margins - as adjusted | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
June 29,
|
June 30,
| June 29,
|
June 30,
| |||||||||||||
Industrial Systems operating profit - as reported | $ | 25,495 | $ | 24,972 | $ | 83,428 | $ | 39,455 | ||||||||
Inventory write-down - restructuring | — | 2,398 | — | 9,727 | ||||||||||||
Restructuring - Wind pitch controls business | — | (1,549 | ) | — | 22,509 | |||||||||||
Industrial Systems operating profit- as adjusted | 25,495 | 25,821 | 83,428 | 71,691 | ||||||||||||
11.0 | % | 10.6 | % | 12.2 | % | 10.4 | % | |||||||||
Total operating profit - as adjusted | $ | 84,112 | $ | 76,111 | $ | 241,343 | $ | 220,332 | ||||||||
11.4 | % | 11.0 | % | 11.3 | % | 11.0 | % |
Moog Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(dollars in thousands) | ||||||||
June 29,
|
September 29,
| |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 89,045 | $ | 125,584 | ||||
Receivables | 922,853 | 793,911 | ||||||
Inventories | 515,055 | 512,522 | ||||||
Prepaid expenses and other current assets | 44,239 | 44,404 | ||||||
Total current assets | 1,571,192 | 1,476,421 | ||||||
Property, plant and equipment, net | 582,105 | 552,865 | ||||||
Goodwill | 791,678 | 797,217 | ||||||
Intangible assets, net | 84,629 | 95,537 | ||||||
Deferred income taxes | 15,736 | 17,328 | ||||||
Other assets | 20,799 | 24,680 | ||||||
Total assets | $ | 3,066,139 | $ | 2,964,048 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Short-term borrowings | $ | 93 | $ | 3,623 | ||||
Current installments of long-term debt | 292 | 365 | ||||||
Accounts payable | 227,600 | 208,823 | ||||||
Accrued compensation | 134,015 | 147,765 | ||||||
Contract advances | 147,677 | 151,687 | ||||||
Contract loss and contract-related reserves | 57,556 | 47,417 | ||||||
Other accrued liabilities | 108,541 | 120,944 | ||||||
Total current liabilities | 675,774 | 680,624 | ||||||
Long-term debt, excluding current installments | 825,965 | 858,836 | ||||||
Long-term pension and retirement obligations | 119,269 | 117,471 | ||||||
Deferred income taxes | 56,664 | 46,477 | ||||||
Other long-term liabilities | 32,810 | 35,654 | ||||||
Total liabilities | 1,710,482 | 1,739,062 | ||||||
Shareholders’ equity | ||||||||
Common stock - Class A | 43,789 | 43,785 | ||||||
Common stock - Class B | 7,491 | 7,495 | ||||||
Additional paid-in capital | 525,962 | 502,257 | ||||||
Retained earnings | 2,096,174 | 1,973,514 | ||||||
Treasury shares | (750,326 | ) | (738,494 | ) | ||||
Stock Employee Compensation Trust | (124,128 | ) | (118,449 | ) | ||||
Supplemental Retirement Plan Trust | (76,751 | ) | (72,941 | ) | ||||
Accumulated other comprehensive loss | (366,554 | ) | (372,181 | ) | ||||
Total Moog shareholders’ equity | 1,355,657 | 1,224,986 | ||||||
Total liabilities and shareholders’ equity | $ | 3,066,139 | $ | 2,964,048 |
Moog Inc. | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(dollars in thousands) | |||||||||
Nine Months Ended | |||||||||
June 29,
|
June 30,
| ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
Net earnings attributable to Moog and noncontrolling interest | $ | 133,893 | $ | 56,014 | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||
Depreciation | 53,744 | 54,693 | |||||||
Amortization | 10,364 | 13,628 | |||||||
Deferred income taxes | 3,764 | 35,549 | |||||||
Equity-based compensation expense | 5,130 | 4,394 | |||||||
Impairment of long-lived assets and inventory write-down associated with restructuring | — | 24,246 | |||||||
Other | 2,550 | 4,743 | |||||||
Changes in assets and liabilities providing (using) cash: | |||||||||
Receivables | (42,267 | ) | (27,597 | ) | |||||
Inventories | (68,519 | ) | (27,840 | ) | |||||
Accounts payable | 19,412 | 12,778 | |||||||
Contract advances | (4,670 | ) | (165 | ) | |||||
Accrued expenses | (9,450 | ) | 11,709 | ||||||
Accrued income taxes | (5,564 | ) | (1,817 | ) | |||||
Net pension and post retirement liabilities | 20,486 | (130,135 | ) | ||||||
Other assets and liabilities | 10,222 | 16,150 | |||||||
Net cash provided by operating activities | 129,095 | 46,350 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||
Acquisitions of businesses, net of cash acquired | — | (47,947 | ) | ||||||
Purchase of property, plant and equipment | (91,083 | ) | (70,759 | ) | |||||
Other investing transactions | 2,518 | (3,448 | ) | ||||||
Net cash used by investing activities | (88,565 | ) | (122,154 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||
Net short-term (borrowings) repayments | (3,560 | ) | 1,357 | ||||||
Proceeds from revolving lines of credit | 570,200 | 301,500 | |||||||
Payments on revolving lines of credit | (604,513 | ) | (411,610 | ) | |||||
Proceeds from long-term debt | — | 11,216 | |||||||
Payments on long-term debt | (255 | ) | (21,849 | ) | |||||
Payment of dividends | (26,156 | ) | (8,941 | ) | |||||
Proceeds from sale of treasury stock | 2,443 | 2,451 | |||||||
Purchase of outstanding shares for treasury | (17,986 | ) | (5,210 | ) | |||||
Proceeds from sale of stock held by SECT | 10,036 | 1,941 | |||||||
Purchase of stock held by SECT | (13,327 | ) | (8,444 | ) | |||||
Proceeds from sale of SERP stock | 4,293 | — | |||||||
Other financing transactions | — | 484 | |||||||
Net cash used by financing activities | (78,825 | ) | (137,105 | ) | |||||
Effect of exchange rate changes on cash | (366 | ) | 2,266 | ||||||
Decrease in cash, cash equivalents and restricted cash | (38,661 | ) | (210,643 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 127,706 | 386,969 | |||||||
Cash, cash equivalents and restricted cash at end of period | $ | 89,045 | $ | 176,326 | |||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||
Treasury shares issued as compensation | $ | 11,795 | $ | — | |||||
Equipment acquired through financing | $ | 148 | $ | — | |||||
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Contacts:
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