Moog Inc. Announces First Quarter Results

January 25th, 2019

East Aurora, NY -- Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the first quarter ended December 29, 2018.

First Quarter Highlights

·   Sales of $680 million, up 8% from a year ago;

·   GAAP earnings per share of $1.25, versus $.04 a year ago;

·   Earnings per share of $1.25, up 25% over last year’s adjusted earnings per share of $1.00, excluding one-time Tax Act effects;

·   Operating margins of 11.7%, up from 10.7% a year ago;

·   Effective tax rate of 24.3%;

·   $64 million cash flow from operating activities.

Segment Results

 

Total Aircraft Controls segment sales in the quarter were $304 million, up 9% year over year. Military aircraft sales in the quarter were $147 million, up 18% from a year ago. Military OEM sales increased 22%, to $99 million, on very strong F-35 activity.  Military aftermarket sales were 11% higher, attributed to V-22 repair work.

Commercial aircraft revenues increased 2%, to $157 million. Boeing OEM product sales were slightly higher, at $62 million. The production ramp of the Embraer E2 and higher business jet sales offset a decrease in sales of OEM products to Airbus. Commercial aftermarket sales were unchanged at $34 million.

In the quarter, Space and Defense segment sales were $156 million, up 17% year over year. Defense sales were 26% higher, to $106 million, with increases in missile systems, defense controls and security products for UAV tracking. Space sales were 2% higher, with increased sales of launch vehicle systems and satellite avionics products offsetting marginally lower sales to NASA.

 

Industrial Systems segment sales in the quarter were $220 million, up 2% from last year. Stronger sales in industrial automation were helped by the Brno acquisition based in the Czech Republic. Medical pumps and associated products were up 4%. Simulation and test sales were off marginally while lower energy product sales reflected the company’s recent exit from the wind pitch control business.

 

Total backlog was $2.1 billion, with consolidated 12-month backlog at $1.4 billion, up 10% from a year ago.

 

 

Fiscal 2019 Outlook

The Company affirmed its fiscal 2019 projections of 90 days ago.

·      Forecast sales of $2.88 billion;

·      Forecast earnings per share of $5.25, plus or minus $0.20;

·      Forecast full year operating margins of 11.7%;

·      Forecast cash flow from operations of $280 million;

·      Forecast effective tax rate of 26.0%. 

“We’re pleased to get off to a good start in Q1,” said John Scannell, Chairman and CEO. “Sales were up 8%, operating margins expanded 100 basis points and earnings per share were up 25% relative to an adjusted first quarter last year. Our major markets are doing well with defense particularly strong across all our applications. Commercial aerospace is also very healthy and our industrial markets remain solid. With one quarter in the bank, we are increasingly confident about our forecast for the full year.”

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 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;

•     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

 

 

December 29,
2018

 

December 30,
2017

Net sales

 

$

679,676

 

 

$

627,535

 

Cost of sales

 

480,174

 

 

443,150

 

Gross profit

 

199,502

 

 

184,385

 

Research and development

 

31,876

 

 

32,334

 

Selling, general and administrative

 

96,326

 

 

94,619

 

Interest

 

9,682

 

 

8,646

 

Other

 

3,434

 

 

952

 

Earnings before income taxes

 

58,184

 

 

47,834

 

Income taxes

 

14,115

 

 

46,535

 

Net earnings

 

$

44,069

 

 

$

1,299

 

 

 

 

 

 

Net earnings per share

 

 

 

 

Basic

 

$

1.27

 

 

$

0.04

 

Diluted

 

$

1.25

 

 

$

0.04

 

 

 

 

 

 

Average common shares outstanding

 

 

 

 

Basic

 

34,815,255

 

 

35,772,406

 

Diluted

 

35,125,829

 

 

36,201,054

 

Results shown in the previous table include the one-time impacts of the Tax Cuts and Jobs Act of 2017. The table below adjusts the income taxes, net earnings and diluted net earnings per share to exclude these impacts.

Reconciliation to non-GAAP adjusted income taxes, net earnings and diluted net earnings per share:

 

 

Three Months Ended

 

 

December 29,
2018

 

December 30,
2017

As Reported:

 

 

 

 

Earnings before income taxes

 

$

58,184

 

 

$

47,834

 

Income taxes

 

14,115

 

 

46,535

 

Effective income tax rate

 

24.3

%

 

97.3

%

Net earnings

 

44,069

 

 

1,299

 

Diluted net earnings per share

 

$

1.25

 

 

$

0.04

 

 

 

 

 

 

Non-GAAP Adjustments - Due to Tax Reform:

 

 

 

 

Income taxes

 

$

 

 

$

(34,722

)

Net earnings

 

 

 

34,722

 

Diluted net earnings per share

 

$

 

 

$

0.96

 

 

 

 

 

 

As Adjusted:

 

 

 

 

Earnings before income taxes

 

$

58,184

 

 

$

47,834

 

Income taxes

 

14,115

 

 

11,813

 

Effective income tax rate

 

24.3

%

 

24.7

%

Net earnings

 

44,069

 

 

36,021

 

Diluted net earnings per share

 

$

1.25

 

 

$

1.00

 

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

 

 

Three Months Ended

 

 

December 29,
2018

 

December 30,
2017

Net sales:

 

 

 

 

Aircraft Controls

 

$

304,045

 

 

$

278,534

 

Space and Defense Controls

 

156,068

 

 

133,393

 

Industrial Systems

 

219,563

 

 

215,608

 

Net sales

 

$

679,676

 

 

$

627,535

 

Operating profit:

 

 

 

 

Aircraft Controls

 

$

33,199

 

 

$

31,043

 

 

 

10.9

%

 

11.1

%

Space and Defense Controls

 

18,473

 

 

16,473

 

 

 

11.8

%

 

12.3

%

Industrial Systems

 

27,705

 

 

19,911

 

 

 

12.6

%

 

9.2

%

Total operating profit

 

79,377

 

 

67,427

 

 

 

11.7

%

 

10.7

%

Deductions from operating profit:

 

 

 

 

Interest expense

 

9,682

 

 

8,646

 

Equity-based compensation expense

 

2,008

 

 

2,001

 

Non-service pension expense

 

3,193

 

 

1,693

 

Corporate and other expenses, net

 

6,310

 

 

7,253

 

Earnings before income taxes

 

$

58,184

 

 

$

47,834

 

 .

 

 

 

 

 

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

December 29,
2018

 

September 29,
2018

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

110,759

 

 

$

125,584

 

Receivables

 

867,415

 

 

793,911

 

Inventories

 

467,811

 

 

512,522

 

Prepaid expenses and other current assets

 

45,505

 

 

44,404

 

Total current assets

 

1,491,490

 

 

1,476,421

 

Property, plant and equipment, net

 

554,725

 

 

552,865

 

Goodwill

 

791,200

 

 

797,217

 

Intangible assets, net

 

90,591

 

 

95,537

 

Deferred income taxes

 

15,902

 

 

17,328

 

Other assets

 

23,596

 

 

24,680

 

Total assets

 

$

2,967,504

 

 

$

2,964,048

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Short-term borrowings

 

$

2,126

 

 

$

3,623

 

Current installments of long-term debt

 

326

 

 

365

 

Accounts payable

 

199,435

 

 

213,982

 

Accrued compensation

 

128,763

 

 

147,765

 

Contract advances

 

183,855

 

 

151,687

 

Contract and contract-related loss reserves

 

42,683

 

 

42,258

 

Other accrued liabilities

 

119,622

 

 

120,944

 

Total current liabilities

 

676,810

 

 

680,624

 

Long-term debt, excluding current installments

 

815,107

 

 

858,836

 

Long-term pension and retirement obligations

 

117,887

 

 

117,471

 

Deferred income taxes

 

49,333

 

 

46,477

 

Other long-term liabilities

 

35,103

 

 

35,654

 

Total liabilities

 

1,694,240

 

 

1,739,062

 

Commitment and contingencies

 

 

 

 

Shareholders’ equity

 

 

 

 

Common stock - Class A

 

43,786

 

 

43,785

 

Common stock - Class B

 

7,494

 

 

7,495

 

Additional paid-in capital

 

487,284

 

 

502,257

 

Retained earnings

 

2,023,803

 

 

1,973,514

 

Treasury shares

 

(743,239

)

 

(738,494

)

Stock Employee Compensation Trust

 

(102,182

)

 

(118,449

)

Supplemental Retirement Plan Trust

 

(67,597

)

 

(72,941

)

Accumulated other comprehensive loss

 

(376,085

)

 

(372,181

)

Total shareholders’ equity

 

1,273,264

 

 

1,224,986

 

Total liabilities and shareholders’ equity

 

$

2,967,504

 

 

$

2,964,048

 

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

 

Three Months Ended

 

 

December 29,
2018

 

December 30,
2017

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

44,069

 

 

$

1,299

 

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:

 

 

 

 

Depreciation

 

17,848

 

 

17,487

 

Amortization

 

3,746

 

 

4,674

 

Deferred income taxes

 

92

 

 

37,617

 

Equity-based compensation expense

 

2,008

 

 

2,001

 

Other

 

1,020

 

 

1,563

 

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

12,810

 

 

(10,350

)

Inventories

 

(24,399

)

 

(22,236

)

Accounts payable

 

(13,774

)

 

(14,393

)

Contract advances

 

31,531

 

 

19,888

 

Accrued expenses

 

(17,898

)

 

(27,233

)

Accrued income taxes

 

511

 

 

6,965

 

Net pension and post retirement liabilities

 

7,068

 

 

(4,562

)

Other assets and liabilities

 

(394

)

 

31,450

 

Net cash provided by operating activities

 

64,238

 

 

44,170

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Purchase of property, plant and equipment

 

(24,375

)

 

(21,084

)

Other investing transactions

 

2,785

 

 

(506

)

Net cash (used) by investing activities

 

(21,590

)

 

(21,590

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Net short-term borrowings (repayments)

 

(1,490

)

 

 

Proceeds from revolving lines of credit

 

131,100

 

 

103,500

 

Payments on revolving lines of credit

 

(175,200

)

 

(108,610

)

Proceeds from long-term debt

 

 

 

10,000

 

Payments on long-term debt

 

(85

)

 

(44

)

Payment of dividends

 

(8,703

)

 

 

Proceeds from sale of treasury stock

 

 

 

1,048

 

Purchase of outstanding shares for treasury

 

(9,450

)

 

(2,734

)

Proceeds from sale of stock held by SECT

 

6,636

 

 

 

Purchase of stock held by SECT

 

(1,930

)

 

(3,823

)

Net cash (used) by financing activities

 

(59,122

)

 

(663

)

Effect of exchange rate changes on cash

 

(473

)

 

5,021

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

(16,947

)

 

26,938

 

Cash, cash equivalents and restricted cash at beginning of period

 

127,706

 

 

386,969

 

Cash, cash equivalents and restricted cash at end of period

 

$

110,759

 

 

$

413,907

 

(##)

Contact

Ann Marie Luhr

+1 716.687.4225