Moog Reports Third Quarter Results

EAST AURORA, N.Y.–(BUSINESS WIRE)–Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended June 27, 2020.

Third Quarter Highlights

  • Sales of $658 million, down 11% from a year ago;
  • Provisional GAAP diluted loss per share of ($0.44) includes $1.37 per share in pandemic-related charges;
  • Non-GAAP adjusted earnings per share of $0.93;
  • Operating margins of (0.7%), with adjusted operating margins of 8.2%;
  • $107 million cash flow from operating activities;
  • Reinstatement of quarterly cash dividend of $0.25 per share.

Segment Results

Aircraft Controls segment sales in the quarter were $249 million, down 26% year over year. Military OEM aircraft sales of $108 million were 1% higher. Strong F-35 Joint Strike Fighter sales, up 36% to $45 million, offset lower foreign military sales. Military aftermarket sales of $70 million increased 26%, the result of sustainment activity across multiple programs.

Total commercial aircraft revenues were $72 million, 59% lower. Sales to commercial OEM customers were down 61%. The combination of declining production rates and actions taken by OEMs to reduce inventory led to the steep decline. Commercial aftermarket sales decreased 49% on slowing repair activity and flight reductions across all platforms.

Space and Defense segment sales were $184 million, up 6% year over year. Space sales of $74 million increased 33% on strength across the portfolio, led by Department of Defense and NASA launch vehicle programs. Defense sales were down 7%, at $110 million, mostly tied to weaker sales of missile and component products.

Industrial Systems segment sales were $224 million, 3% lower compared to last year’s third quarter. Sales of industrial automation products were off 17%, with the decrease attributed to reduced capital spending globally. Sales into simulation and test applications declined 14%, partly due to soft demand for pilot training. Medical product sales, including pumps and components for respirator products, increased 26%. Energy market sales increased nominally, helped by acquired sales from the recent GAT acquisition.

Total backlog was $2.5 billion, with consolidated 12-month backlog at $1.7 billion, unchanged from a year ago.

“Our underlying operations performed extremely well this quarter under very difficult circumstances,” said John Scannell, Chairman and CEO. “It is a credit to our staff around the world for their commitment and flexibility. Our results reflect the importance of our diversity across markets. This diversity and our strong balance sheet are key to navigating today’s challenges. Over the last three months we’ve taken action to reduce spending and resize our business. These actions have paid off and, today, our balance sheet in terms of leverage and liquidity is stronger than it was three months ago.”

Fiscal 2020 Outlook

Given the considerable uncertainty around the extent and duration of business disruptions related to the pandemic, and how they will impact operations, the Company suspended its previously provided fiscal year 2020 guidance.

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 Jennifer Walter, 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 approximately 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 face various risks related to health epidemics such as the global COVID-19 pandemic, which may have material adverse consequences on our operations, financial position, cash flows, and those of our customers and suppliers;
  • 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;
  • We may not be able to prevent, or timely detect, issues with our products and our manufacturing processes which may adversely affect our operations and our earnings;
  • Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks, and any false claims or non-compliance could subject us to fines, 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 products and technology research and development efforts are substantial and 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;
  • The potential phase out of LIBOR may negatively impact our debt agreements and financial position, results of operations and liquidity;
  • 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;
  • The United Kingdom’s decision to exit the European Union may bring short-term and long-term adverse impacts on our results of operations;
  • Escalating tariffs, restrictions on imports or other trade barriers between the United States and various countries may impact our results of operations;
  • 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;
  • 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 (LOSS)

(dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

June 27,

2020

June 29,

2019

June 27,

2020

June 29,

2019

Net sales

$

657,539

$

740,969

$

2,177,659

$

2,139,456

Cost of sales

486,760

529,050

1,587,569

1,530,634

Inventory write-down

19,271

19,271

Gross profit

151,508

211,919

570,819

608,822

Research and development

27,407

31,298

82,303

94,518

Selling, general and administrative

96,899

103,655

302,517

299,841

Interest

9,440

9,780

29,923

29,401

Long-lived asset impairment

34,327

34,327

Restructuring

4,830

4,830

Other

4,415

7,168

14,294

14,645

Earnings (loss) before income taxes

(25,810

)

60,018

102,625

170,417

Income taxes (benefit)

(11,386

)

13,853

17,277

40,424

Net earnings (loss)

$

(14,424

)

$

46,165

$

85,348

$

129,993

Net earnings (loss) per share

Basic

$

(0.44

)

$

1.32

$

2.55

$

3.73

Diluted

$

(0.44

)

$

1.31

$

2.53

$

3.69

Average common shares outstanding

Basic

32,601,481

34,904,487

33,515,584

34,869,021

Diluted

32,695,369

35,239,834

33,722,723

35,202,519

Long-lived asset impairment includes a provisional charge of $9,015 for an asset with a net book value of $18,397. The value of this charge could change in subsequent filings as management receives additional information and performs additional analysis.

Results shown in the previous table includes charges associated with the COVID-19 pandemic. These impacts include inventory write-down, long-lived asset impairment and restructuring charges. The table below adjusts the income taxes (benefit), net earnings (loss) and diluted net earnings (loss) per share to exclude these impacts.

Reconciliation to non-GAAP adjusted income taxes (benefit), net earnings (loss) and diluted net earnings (loss) per share are as follows:

Three Months Ended

Nine Months Ended

June 27,

2020

June 29,

2019

June 27,

2020

June 29,

2019

As Reported:

Earnings (loss) before income taxes

$

(25,810

)

$

60,018

$

102,625

$

170,417

Income taxes (benefit)

(11,386

)

13,853

17,277

40,424

Effective income tax rate

44.1

%

23.1

%

16.8

%

23.7

%

Net earnings (loss)

(14,424

)

46,165

85,348

129,993

Diluted net earnings (loss) per share

$

(0.44

)

$

1.31

$

2.53

$

3.69

COVID-19 Pandemic charges:

Earnings before income taxes

$

58,428

$

$

58,428

$

Income taxes

13,591

13,591

Net earnings

44,837

44,837

Diluted net earnings per share

$

1.37

$

$

1.33

$

As Adjusted:

Earnings before income taxes

$

32,618

$

60,018

$

161,053

$

170,417

Income taxes

2,205

13,853

30,868

40,424

Effective income tax rate

6.8

%

23.1

%

19.2

%

23.7

%

Net earnings

30,413

46,165

130,185

129,993

Diluted net earnings per share

$

0.93

$

1.31

$

3.86

$

3.69

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

Three Months Ended

Nine Months Ended

June 27,

2020

June 29,

2019

June 27,

2020

June 29,

2019

Net sales:

Aircraft Controls

$

249,388

$

336,735

$

930,749

$

961,407

Space and Defense Controls

183,906

173,045

563,156

493,938

Industrial Systems

224,245

231,189

683,754

684,111

Net sales

$

657,539

$

740,969

$

2,177,659

$

2,139,456

Operating profit (loss):

Aircraft Controls

$

(44,287

)

$

34,484

$

29,006

$

94,805

(17.8

)%

10.2

%

3.1

%

9.9

%

Space and Defense Controls

22,177

24,133

72,111

63,110

12.1

%

13.9

%

12.8

%

12.8

%

Industrial Systems

17,794

25,495

69,368

83,428

7.9

%

11.0

%

10.1

%

12.2

%

Total operating profit (loss)

(4,316

)

84,112

170,485

241,343

(0.7

)%

11.4

%

7.8

%

11.3

%

Deductions from operating profit:

Interest expense

9,440

9,780

29,923

29,401

Equity-based compensation expense

1,390

1,439

4,661

5,130

Non-service pension expense

4,241

4,883

11,440

14,666

Corporate and other expenses, net

6,423

7,992

21,836

21,729

Earnings (loss) before income taxes

$

(25,810

)

$

60,018

$

102,625

$

170,417

Operating Profit and Margins – as adjusted are as follows:

Three Months Ended

Nine Months Ended

June 27,

2020

June 29,

2019

June 27,

2020

June 29,

2019

Aircraft Controls operating profit (loss) – as reported

$

(44,287

)

$

34,484

$

29,006

$

94,805

Inventory write-down

18,535

18,535

Long-lived asset impairment

33,986

33,986

Restructuring

2,896

2,896

Aircraft Controls operating profit – as adjusted

$

11,130

$

34,484

$

84,423

$

94,805

4.5

%

10.2

%

9.1

%

9.9

%

Space and Defense Controls operating profit – as reported

$

22,177

$

24,133

$

72,111

$

63,110

Long-lived asset impairment

341

341

Restructuring

185

185

Space and Defense Controls operating profit – as adjusted

$

22,703

$

24,133

$

72,637

$

63,110

12.3

%

13.9

%

12.9

%

12.8

%

Industrial Systems operating profit – as reported

$

17,794

$

25,495

$

69,368

$

83,428

Inventory write-down

736

736

Restructuring

1,749

1,749

Industrial Systems operating profit – as adjusted

$

20,279

$

25,495

$

71,853

$

83,428

9.0

%

11.0

%

10.5

%

12.2

%

Total operating profit – as adjusted

$

54,112

$

84,112

$

228,913

$

241,343

8.2

%

11.4

%

10.5

%

11.3

%

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

June 27,

2020

September 28,

2019

ASSETS

Current assets

Cash and cash equivalents

$

102,323

$

89,702

Restricted cash

3,286

2,846

Receivables

896,658

954,355

Inventories, net

609,189

534,974

Prepaid expenses and other current assets

48,406

47,096

Total current assets

1,659,862

1,628,973

Property, plant and equipment, net

593,086

586,767

Operating lease right-of-use assets

58,627

Goodwill

811,851

784,240

Intangible assets, net

91,368

79,646

Deferred income taxes

19,183

19,992

Other assets

15,915

14,619

Total assets

$

3,249,892

$

3,114,237

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Current installments of long-term debt

$

478

$

249

Accounts payable

174,496

257,677

Accrued compensation

120,906

143,765

Contract advances

209,368

137,242

Accrued liabilities and other

212,020

188,725

Total current liabilities

717,268

727,658

Long-term debt, excluding current installments

987,704

832,984

Long-term pension and retirement obligations

164,341

160,034

Deferred income taxes

41,162

40,528

Other long-term liabilities

95,490

30,552

Total liabilities

2,005,965

1,791,756

Shareholders’ equity

Common stock – Class A

43,799

43,795

Common stock – Class B

7,481

7,485

Additional paid-in capital

462,286

510,546

Retained earnings

2,197,038

2,128,739

Treasury shares

(957,082

)

(769,569

)

Stock Employee Compensation Trust

(61,807

)

(111,492

)

Supplemental Retirement Plan Trust

(49,655

)

(71,546

)

Accumulated other comprehensive loss

(398,133

)

(415,477

)

Total shareholders’ equity

1,243,927

1,322,481

Total liabilities and shareholders’ equity

$

3,249,892

$

3,114,237

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

Nine Months Ended

June 27,

2020

June 29,

2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings

$

85,348

$

129,993

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

Depreciation

55,859

53,744

Amortization

9,847

10,364

Deferred income taxes

(11,346

)

3,764

Equity-based compensation expense

4,661

5,130

Impairment of long-lived assets and inventory write-down

53,598

Other

6,831

2,550

Changes in assets and liabilities providing (using) cash:

Receivables

63,272

(47,966

)

Inventories

(86,526

)

(68,519

)

Accounts payable

(85,136

)

19,076

Contract advances

73,040

(4,670

)

Accrued expenses

1,827

(410

)

Accrued income taxes

(23,528

)

(5,564

)

Net pension and post retirement liabilities

24,706

24,386

Other assets and liabilities

15,395

7,217

Net cash provided by operating activities

187,848

129,095

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of businesses, net of cash acquired

(54,265

)

Purchase of property, plant and equipment

(70,423

)

(91,083

)

Other investing transactions

(3,429

)

2,518

Net cash used by investing activities

(128,117

)

(88,565

)

CASH FLOWS FROM FINANCING ACTIVITIES

Net short-term repayments

(3,560

)

Proceeds from revolving lines of credit

977,850

570,200

Payments on revolving lines of credit

(968,459

)

(604,513

)

Proceeds from long-term debt

6,935

Payments on long-term debt

(52,253

)

(255

)

Proceeds from senior notes, net of issuance costs

491,769

Payments on senior notes

(300,000

)

Payments on finance lease obligations

(730

)

Payment of dividends

(17,049

)

(26,156

)

Proceeds from sale of treasury stock

3,199

2,443

Purchase of outstanding shares for treasury

(191,961

)

(17,986

)

Proceeds from sale of stock held by SECT

17,082

10,036

Purchase of stock held by SECT

(6,241

)

(13,327

)

Proceeds from sale of SERP stock

4,293

Other financing transactions

(5,879

)

Net cash used by financing activities

(45,737

)

(78,825

)

Effect of exchange rate changes on cash

(932

)

(366

)

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

13,062

(38,661

)

Cash, cash equivalents and restricted cash at beginning of period

92,548

127,706

Cash, cash equivalents and restricted cash at end of period

$

105,610

$

89,045

SUPPLEMENTAL CASH FLOW INFORMATION

Treasury shares issued as compensation

$

9,063

$

11,795

Equipment acquired through lease financing

$

16,192

$

148

Spread the word

Discuss

This site uses Akismet to reduce spam. Learn how your comment data is processed.