SOURCE: Moog Inc.

Moog Inc.

July 29, 2016 07:55 ET

Moog Reports Third Quarter Results

EAST AURORA, NY--(Marketwired - Jul 29, 2016) -  Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) announced today third quarter earnings per share of $1.00, up 6% from a year ago on slightly lower sales of $613 million. Cash flow from operating activities was strong in the quarter, at $82 million, while net earnings were flat at $36 million.

Total Aircraft Controls sales in the quarter were $274 million, up 1% from a year ago. Commercial aircraft sales of $140 million were up 8%. Sales of OEM products to Airbus increased 45%, to $28 million, on the A350 production ramp up. Boeing OEM product sales were 13% higher, at $66 million, on increased sales across all platforms. Commercial aftermarket revenues of $27 million were down 12% due to lower initial provisioning of 787 spares and softer business jet activity. 

Military aircraft sales of $134 million were 5% lower year over year. OEM sales were down 6%, to $84 million, due to declines in V-22 tilt rotor and Black Hawk helicopter sales. F-35 production sales were 7% higher. Military aftermarket sales were down 4%, to $50 million, as the C-5M Super Galaxy upgrade program winds down. F-35 aftermarket sales were higher on increased depot repair activity.

Space and Defense segment sales were $91 million, 5% lower than last year. Space sales were $44 million, a decrease of 8% due to lower sales of avionics and components. Defense sales were $47 million, down marginally due to slower military vehicle sales.

Sales in the Company's Industrial Systems segment were flat at $130 million. Energy market sales were 8% higher, at $33 million, helped by higher sales of wind energy products into Europe and China. Industrial automation sales were $69 million, off 3%. Simulation and test product sales were $28 million, also off 3%, reflecting strong prior year sales of test equipment.

Components segment sales, at $92 million, were 18% lower than last year. Sales of aerospace and defense products were $42 million, down 14%, on softer OEM program and aftermarket sales. Sales into energy, industrial and medical markets continued to experience weakness across a range of products and programs.

The Medical Devices segment had sales of $26 million, up 1%, on increased sales of enteral pumps and administration sets. Through the first nine months of the year, excluding the previously divested life sciences business, organic growth in the segment is 8% year over year.

The current backlog is $1.2 billion. 

The Company updated its projections for fiscal 2016, ending October 1, 2016, to include sales of $2.42 billion. The earnings per share midpoint is unchanged, at $3.35, and the range has been narrowed to plus or minus $.10 per share. 

"Overall we had a good third quarter," said John Scannell, Chairman and CEO. "Sales were slightly down but EPS was ahead of our guidance and we had strong cash flow. In addition, our aircraft team celebrated the flawless operation of our flight controls as part of the successful first flight of the Embraer E2 jet. With one quarter left to go, we're refining our sales forecast for the year, while keeping our EPS forecast unchanged from 90 days ago."

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. Supplemental financial data will be available on the webcast web page approximately 60 minutes prior to the conference call. Listeners can access the call live or in replay mode at www.moog.com/investors/communications.

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 2,
 2016
    July 4,
 2015
  July 2,
 2016
    July 4,
 2015
Net sales   $ 613,260     $ 634,539   $ 1,792,859     $ 1,902,308
Cost of sales     429,598       443,963     1,268,550       1,354,264
Gross profit     183,662       190,576     524,309       548,044
  Research and development     36,006       34,157     110,535       96,882
  Selling, general and administrative     88,553       90,733     254,318       280,718
  Interest     8,662       7,916     25,919       20,953
  Restructuring     (39 )     6,604     8,303       6,604
  Other     (1,082 )     442     (2,600 )     1,327
Earnings before income taxes     51,562       50,724     127,834       141,560
Income taxes     15,916       14,393     35,121       37,871
Net earnings attributable to common shareholders and noncontrolling interest   $ 35,646     $ 36,331   $ 92,713     $ 103,689
                             
Net earnings (loss) attributable to noncontrolling interest     (665 )     --     (889 )     --
                             
Net earnings attributable to common shareholders   $ 36,311     $ 36,331   $ 93,602     $ 103,689
                             
Net earnings per share attributable to common shareholders                            
  Basic   $ 1.01     $ 0.95   $ 2.57     $ 2.62
  Diluted   $ 1.00     $ 0.94   $ 2.55     $ 2.59
                             
                             
Average common shares outstanding                            
  Basic     36,038,340       38,389,629     36,411,428       39,555,423
  Diluted     36,267,975       38,744,620     36,663,165       39,963,142
 
 
Moog Inc.
CONSOLIDATED SALES AND OPERATING PROFIT
(dollars in thousands)
 
    Three Months Ended   Nine Months Ended
    July 2,
 2016
  July 4,
 2015
  July 2,
 2016
  July 4,
 2015
Net sales:                
  Aircraft Controls   $ 274,175     $ 270,339     $ 804,779     $ 811,103  
  Space and Defense Controls     90,764       95,266       262,579       288,477  
  Industrial Systems     130,103       130,581       383,526       393,092  
  Components     92,285       112,630       265,673       335,396  
  Medical Devices     25,933       25,723       76,302       74,240  
Net sales   $ 613,260     $ 634,539     $ 1,792,859     $ 1,902,308  
Operating profit:                                
  Aircraft Controls   $ 30,532     $ 28,401     $ 67,705     $ 75,195  
      11.1 %     10.5 %     8.4 %     9.3 %
  Space and Defense Controls     13,747       6,149       38,920       19,784  
      15.1 %     6.5 %     14.8 %     6.9 %
  Industrial Systems     11,534       13,068       38,437       38,972  
      8.9 %     10.0 %     10.0 %     9.9 %
  Components     10,754       14,966       23,839       47,828  
      11.7 %     13.3 %     9.0 %     14.3 %
  Medical Devices     2,182       3,506       8,015       6,558  
      8.4 %     13.6 %     10.5 %     8.8 %
Total operating profit     68,749       66,090       176,916       188,337  
      11.2 %     10.4 %     9.9 %     9.9 %
Deductions from operating profit:                                
  Interest expense     8,662       7,916       25,919       20,953  
  Equity-based compensation expense     875       603       2,794       4,569  
  Corporate and other expenses, net     7,650       6,847       20,369       21,255  
Earnings before income taxes   $ 51,562     $ 50,724     $ 127,834     $ 141,560  
 
 
Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 
    July 2,
 2016
  October 3,
 2015
ASSETS        
Current assets        
  Cash and cash equivalents   $ 394,429   $ 309,853
  Receivables     647,987     698,419
  Inventories     500,734     493,360
  Deferred income taxes     93,121     91,210
  Prepaid expenses and other current assets     36,415     34,653
    Total current assets     1,672,686     1,627,495
Property, plant and equipment, net     518,233     536,756
Goodwill     746,590     737,212
Intangible assets, net     119,284     143,723
Other assets     43,932     41,285
Total assets   $ 3,100,725   $ 3,086,471
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
  Short-term borrowings   $ 1,377   $ 83
  Current installments of long-term debt     184     34
  Accounts payable     150,091     165,973
  Accrued salaries, wages and commissions     124,898     125,270
  Customer advances     174,700     167,423
  Contract loss reserves     31,413     30,422
  Other accrued liabilities     102,432     116,300
    Total current liabilities     585,095     605,505
Long-term debt, excluding current installments     1,108,438     1,075,067
Long-term pension and retirement obligations     288,732     348,239
Deferred income taxes     77,803     60,209
Other long-term liabilities     3,107     2,919
    Total liabilities     2,063,175     2,091,939
Commitment and contingencies     --     --
Redeemable noncontrolling interest     7,875     --
Shareholders' equity            
  Common stock     51,280     51,280
  Other shareholders' equity     978,395     943,252
    Total shareholders' equity     1,029,675     994,532
Total liabilities and shareholders' equity   $ 3,100,725   $ 3,086,471
 
 
Moog Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 
    Nine Months Ended
    July 2,
 2016
  July 4,
 2015
CASH FLOWS FROM OPERATING ACTIVITIES        
  Net earnings attributable to common shareholders and noncontrolling interest   $ 92,713     $ 103,689  
  Adjustments to reconcile net earnings to net cash provided (used) by operating activities:                
    Depreciation     58,674       59,468  
    Amortization     16,485       19,010  
    Deferred income taxes     7,765       14,569  
    Equity-based compensation expense     2,794       4,569  
    Other     6,967       4,212  
  Changes in assets and liabilities providing (using) cash:                
    Receivables     43,214       51,547  
    Inventories     (9,959 )     (4,763 )
    Accounts payable     (16,456 )     7,332  
    Customer advances     9,689       (5,008 )
    Accrued expenses     (7,106 )     (21,182 )
    Accrued income taxes     686       (8,205 )
    Net pension and post retirement liabilities     (38,828 )     (23,817 )
    Other assets and liabilities     (5,858 )     5,407  
      Net cash provided by operating activities     160,780       206,828  
CASH FLOWS FROM INVESTING ACTIVITIES                
  Acquisitions of businesses, net of cash acquired     (11,016 )     --  
  Purchase of property, plant and equipment     (42,605 )     (57,712 )
  Other investing transactions     1,164       12,597  
      Net cash used by investing activities     (52,457 )     (45,115 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Net short-term repayments     --       (3,337 )
  Proceeds from revolving lines of credit     274,670       335,185  
  Payments on revolving lines of credit     (261,570 )     (425,185 )
  Proceeds from long-term debt     20,000       --  
  Payments on long-term debt     (10,047 )     (5,250 )
  Proceeds from senior notes, net of issuance costs     --       294,430  
  Proceeds from sale of treasury stock     2,229       11,437  
  Purchase of outstanding shares for treasury     (42,203 )     (297,417 )
  Proceeds from sale of stock held by SECT     2,897       7,328  
  Purchase of stock held by SECT     (1,634 )     (12,121 )
  Purchase of stock held by SERP Trust     (2,300 )     (7,328 )
  Excess tax benefits from equity-based payment arrangements     442       5,973  
  Other financing transactions     (1,909 )     --  
      Net cash used by financing activities     (19,425 )     (96,285 )
Effect of exchange rate changes on cash     (4,322 )     (19,276 )
Increase in cash and cash equivalents     84,576       46,152  
  Cash and cash equivalents at beginning of period     309,853       231,292  
  Cash and cash equivalents at end of period   $ 394,429     $ 277,444  
                   

Contact Information

  • Contact:
    Ann Marie Luhr
    716-687-4225