SOURCE: Moog Inc.

Moog Inc.

July 31, 2015 08:07 ET

Moog Reports Third Quarter Results

EAST AURORA, NY--(Marketwired - Jul 31, 2015) - Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) announced today third quarter earnings of $36 million, or $.94 a share. Included in the third quarter earnings is a per share restructuring charge of $.11, resulting in adjusted EPS of $1.05, down slightly from last year's $1.08 per share. Sales in the quarter of $635 million were down 7% from a year ago. 

Aircraft segment sales in the quarter were $270 million, down 8% from a year ago. Commercial aircraft sales of $129 million were down $17 million, or 12%. Sales of OEM products to Boeing were 16% lower compared to last year's unusually strong third quarter. Airbus sales increased 12%, to $19 million, as the A350 production continues to ramp up. Commercial aftermarket revenues of $31 million were down 9% due to lower initial provisioning of 787 spares. 

Military aircraft sales of $141 million were 5% lower year over year. Military aftermarket sales were down 5%, mainly due to the winding down of the C-5M Super Galaxy modernization program. F-35 sales, at $22 million, were down $1 million as work on the development program subsided.

Space and Defense sales of $95 million were 7% lower in the quarter. Space market sales were down 21%, to $48 million, as various satellite programs were completed and NASA Soft Capture activity slowed. Defense sales were $47 million, up 13%, on improved defense vehicle and naval program sales and higher sales of defense products sold into European markets.

Sales in the Industrial Systems segment were down 12%, to $131 million, with most of the decline tied to foreign currency effects. Excluding currency adjustments, energy market sales were down $3 million on lower sales of steam and gas turbine products as well as weaker sales of wind energy products into Europe. Industrial automation sales, excluding foreign currency effects, were up $3 million from stronger aftermarket sales. Simulation and test product sales, excluding foreign currency effects, increased $1 million with gains in the simulation market offset by lower test product sales.

The Components segment had sales in the quarter of $107 million, down 3% from a year ago. Excluding foreign currency effects, sales were flat. Sales into aerospace and defense markets were higher on military aircraft OEM sales and space activity. Sales of general industrial products were 9% higher while medical products sales decreased 4%. Energy components, including products sold into marine energy markets, were down $7 million, to $15 million, a combination of weaker oil prices and a strong quarter a year ago.

The Medical Devices segment had sales of $32 million, up $3 million on stronger sales of both pumps and administration sets.

The current backlog is $1.3 billion. 

The Company updated its projections for fiscal 2015, ending October 3, 2015, to include sales of $2.53 billion, net earnings of $138 million and earnings per share of $3.50, reflecting additional restructuring costs.

The Company also provided its initial projections for fiscal 2016 with sales of $2.57 billion, net earnings of $148 million and earnings per share of $4.00, a 14% increase over fiscal 2015 guidance.

"Fiscal '15 is turning out to be a year of multiple headwinds for our company," said John Scannell, Chairman and CEO. "Despite this, our underlying businesses remain strong and we're responding to the short term challenges to position our company for improvement in fiscal '16 and beyond. Next year we're forecasting a modest increase in sales, another year of strong cash flow and a 14% increase in earnings per share to $4.00."

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;
  • new 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 4,
 2015
  June 28,
 2014
  July 4,
 2015
  June 28,
 2014
Net sales $ 634,539   $ 683,698   $ 1,902,308   $ 1,976,961
Cost of sales   443,963     481,431     1,354,264     1,378,567
Gross profit   190,576     202,267     548,044     598,394
  Research and development   34,157     32,498     96,882     105,478
  Selling, general and administrative   90,733     102,616     280,718     307,349
  Interest   7,916     2,215     20,953     9,788
  Restructuring   6,604     --     6,604     --
  Other   442     283     1,327     10,656
Earnings before income taxes   50,724     64,655     141,560     165,123
Income taxes   14,393     16,533     37,871     47,179
Net earnings $ 36,331   $ 48,122   $ 103,689   $ 117,944
                       
                       
Net earnings per share                      
  Basic $ 0.95   $ 1.09   $ 2.62   $ 2.62
  Diluted $ 0.94   $ 1.08   $ 2.59   $ 2.59
                       
                       
Average common shares outstanding                      
  Basic   38,389,629     44,077,121     39,555,423     44,946,413
  Diluted   38,744,620     44,669,248     39,963,142     45,541,561
                         
                         
                         
Moog Inc.  
CONSOLIDATED SALES AND OPERATING PROFIT  
(dollars in thousands)  
   
  Three Months Ended     Nine Months Ended  
  July 4,
 2015
    June 28,
 2014
    July 4,
 2015
    June 28,
 2014
 
Net sales:                              
  Aircraft Controls $ 270,339     $ 294,194     $ 811,103     $ 834,420  
  Space and Defense Controls   95,266       102,505       288,477       297,260  
  Industrial Systems   130,581       147,722       393,092       442,998  
  Components   106,826       110,587       315,432       314,433  
  Medical Devices   31,527       28,690       94,204       87,850  
Net sales $ 634,539     $ 683,698     $ 1,902,308     $ 1,976,961  
Operating profit and margins:                              
  Aircraft Controls $ 28,401     $ 30,342     $ 75,195     $ 87,980  
    10.5 %     10.3 %     9.3 %     10.5 %
  Space and Defense Controls   6,149       8,664       19,784       25,523  
    6.5 %     8.5 %     6.9 %     8.6 %
  Industrial Systems   13,068       16,826       38,972       44,010  
    10.0 %     11.4 %     9.9 %     9.9 %
  Components   13,602       16,972       42,258       46,707  
    12.7 %     15.3 %     13.4 %     14.9 %
  Medical Devices   4,870       2,343       12,128       7,348  
    15.4 %     8.2 %     12.9 %     8.4 %
Total operating profit   66,090       75,147       188,337       211,568  
    10.4 %     11.0 %     9.9 %     10.7 %
Deductions from operating profit:                              
  Interest expense   7,916       2,215       20,953       9,788  
  Equity-based compensation expense   603       1,553       4,569       6,545  
  Corporate expenses and other   6,847       6,724       21,255       30,112  
Earnings before income taxes $ 50,724     $ 64,655     $ 141,560     $ 165,123  
                               
                               
                               
Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 
  July 4,
2015
  September 27,
2014
ASSETS          
Current assets          
  Cash and cash equivalents $ 277,444   $ 231,292
  Receivables   710,965     780,874
  Inventories   505,187     517,056
  Other current assets   128,162     134,842
    Total current assets   1,621,758     1,664,064
Property, plant and equipment, net   537,012     555,348
Goodwill   740,184     757,852
Intangible assets, net   154,223     178,070
Other assets   47,792     53,118
Total assets $ 3,100,969   $ 3,208,452
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities          
  Short-term borrowings $ 407   $ 103,660
  Current installments of long-term debt   33     5,262
  Accounts payable   166,649     162,667
  Customer advances   138,962     145,500
  Contract loss reserves   31,388     35,984
  Other accrued liabilities   235,224     269,731
    Total current liabilities   572,663     722,804
Long-term debt, excluding current installments   1,075,075     765,114
Long-term pension and retirement obligations   237,544     288,216
Deferred income taxes   100,962     83,931
Other long-term liabilities   1,705     972
    Total liabilities   1,987,949     1,861,037
Commitment and contingencies   --     --
Shareholders' equity          
  Common stock   51,280     51,280
  Other shareholders' equity   1,061,740     1,296,135
    Total shareholders' equity   1,113,020     1,347,415
Total liabilities and shareholders' equity $ 3,100,969   $ 3,208,452
           
           
           
Moog Inc.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(dollars in thousands)  
   
  Nine Months Ended  
  July 4,
 2015
    June 28,
 2014
 
CASH FLOWS FROM OPERATING ACTIVITIES              
  Net earnings $ 103,689     $ 117,944  
  Adjustments to reconcile net earnings to net cash provided (used) by operating activities:              
    Depreciation   59,468       57,997  
    Amortization   19,010       23,589  
    Equity-based compensation expense   4,569       6,545  
    Redemption of senior subordinated notes   --       8,002  
    Other   18,781       9,182  
    Changes in assets and liabilities providing (using) cash:              
    Receivables   51,547       34,651  
    Inventories   (4,763 )     449  
    Accounts payable   7,332       (18,857 )
    Customer advances   (5,008 )     (11,953 )
    Accrued expenses   (21,182 )     (4,449 )
    Accrued income taxes   (8,205 )     9,695  
    Pension assets and liabilities   (23,817 )     (16,902 )
    Other assets and liabilities   5,407       (5,844 )
      Net cash provided by operating activities   206,828       210,049  
               
CASH FLOWS FROM INVESTING ACTIVITIES              
    Purchase of property, plant and equipment   (57,712 )     (57,842 )
    Other investing transactions   12,597       (8,404 )
    Net cash used by investing activities   (45,115 )     (66,246 )
               
CASH FLOWS FROM FINANCING ACTIVITIES              
    Net short term repayments   (3,337 )     (977 )
    Net (repayments) proceeds from revolving lines of credit   (90,000 )     266,135  
    Net repayments on long-term debt   (5,250 )     (3,377 )
    Proceeds from senior notes, net of issuance costs   294,430       --  
    Payments on senior subordinated notes   --       (191,575 )
    Payment of premium on redemption of senior subordinated notes   --       (6,945 )
    Proceeds from sale of treasury stock   11,437       2,413  
    Purchase of outstanding shares for treasury   (297,417 )     (147,360 )
    Proceeds from sale of stock held by SECT   7,328       1,144  
    Purchase of stock held by SECT   (12,121 )     (5,206 )
    Purchase of stock held by SERP   (7,328 )     --  
    Excess tax benefits from equity-based payment arrangements   5,973       2,695  
    Other financing transactions   --       (2,238 )
      Net cash used by financing activities   (96,285 )     (85,291 )
               
Effect of exchange rate changes on cash   (19,276 )     583  
Increase in cash and cash equivalents   46,152       59,095  
    Cash and cash equivalents at beginning of period   231,292       157,090  
    Cash and cash equivalents at end of period $ 277,444     $ 216,185  
                   

Contact Information

  • Contact:
    Ann Marie Luhr
    716-687-4225