Moog Reports Second Quarter Results
Friday, April 27, 2018
Second Quarter Highlights
· Sales of $689 million, up 9% from a year ago;
· Decision to wind down the pitch control portion of the wind energy business in 2018, while continuing to support current customer needs;
· GAAP diluted earnings per share of $.39 includes restructuring expenses of $0.72 per share related to the wind energy pitch control business and $0.05 per share charge related to the Tax Cuts and Jobs Act;
· Non-GAAP adjusted earnings per share from operations of $1.16, up from $0.88 a year ago;
· Announcement of a quarterly cash dividend of $0.25 per share, starting in June;
· Acquisition of VUES Brno s.r.o, a customized motion controls manufacturer in the Czech Republic;
· Cash flow from operations of $1 million, including $81 million of pension contributions.
Total Aircraft Controls segment sales in the quarter were $311 million, up 8% year over year. Military aircraft sales of $156 million were 14% higher. F-35 Joint Strike Fighter sales increased 12%. Other OEM sales were up 29%, to $76 million, attributed to foreign military sales and helicopter programs. Military aftermarket sales were $47 million, down 3%.
Commercial aircraft revenues increased 2%, to $156 million. Commercial aftermarket sales were up 39% on strong initial provisioning and spares, offsetting lower OEM sales. Airbus OEM sales were down 10% due to timing of deliveries. Boeing 787 sales were flat while other legacy OEM sales to Boeing were down 17%, mostly due to a decline in 777 volume.
Space and Defense segment sales were $144 million, up 3% year over year. Space sales were very strong, 19% higher, attributed to increases in sales of space avionics and launch vehicle controls. Defense sales were down 5%, mostly due to lower demand for military vehicle controls and naval products.
Industrial Systems segment sales in the quarter were $234 million, 15% higher from a year ago. Excluding currency effects and acquisitions, sales increased 6%. Industrial automation sales were up a healthy 16%, to $108 million. Energy sales were up 19% on sales of exploration and power generation products. Simulation and test sales were up 12% on strong sales of test equipment. Medical market sales were 10% higher.
Consolidated 12-month backlog was $1.3 billion.
Fiscal 2018 Outlook
The Company updated its projections for fiscal 2018.
· Sales of $2.69 billion, up 8% over last year and increased $70 million from 90 days ago;
· GAAP earnings per share of $2.67, plus or minus $0.20, including the impact of wind energy restructuring and one-time tax reform effects;
· Non-GAAP diluted earnings per share of $4.40, plus or minus $0.20;
· Adjusted operating margins of 10.9% and GAAP margins of 9.7%;
· Cash flow from operating activities of $170 million.
“Our underlying operations had another solid quarter,” said John Scannell, Chairman and CEO. “Six months into the year we’re comfortable with our earnings projections and have increased our sales forecast by $70 million. During the quarter, we announced an acquisition and initiated a quarterly cash dividend. We also decided to wind down our activities in the wind pitch control business by year end, resulting in a charge of $0.72 per share. Over the next six months, we’ll continue to meet the needs of our present wind customers and develop long-term support solutions for their products in the field. As we look out to fiscal ’19, we’ll see a benefit from this decision of 100 basis points in our Industrial Systems margins.”
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.
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 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;
• 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.
Ann Marie Luhr