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

 

 

 

 


Contacts

Ann Marie Luhr
716-687-4225