Moog Reports Second Quarter Results | Financial Buzz

Moog Reports Second Quarter Results

Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the second quarter ended April 3, 2021.

Second Quarter Highlights

  • Sales of $736 million were down 4% from a year ago;
  • Diluted earnings per share of $1.51 were up 2% from a year ago;
  • Diluted earnings per share includes a one-time pension curtailment gain of $0.18;
  • Operating margins of 9.8% were down from 11.0% a year ago;
  • Effective tax rate of 21.6% compared to 19.2% a year ago; and
  • $43 million cash flow from operating activities, up 12% from a year ago.

Fiscal 2021 Outlook

The company is providing projections for fiscal year 2021.

  • Forecast sales of $2.84 billion;
  • Forecast diluted earnings per share of $5.00, plus or minus $0.20;
  • Forecast full year operating margins of 9.9%;
  • Forecast tax rate of 24.0%; and
  • Forecast $302 million cash flow from operating activities.

Segment Results

Aircraft Controls segment revenues in the quarter were $304 million, down 11% year over year. Military aircraft sales were $202 million, 15% higher than a year ago. Military OEM sales increased 33%, to $153 million, tied to very strong funded development programs and higher F-35 Joint Strike Fighter sales. Military aftermarket sales were down 20%, at $48 million, on weaker activity across the portfolio.

Commercial aircraft revenues were $103 million, 38% lower than last year’s second quarter. Sales to commercial OEM customers were down 39%, as wide body production at Boeing and Airbus were below last year’s levels. Commercial aftermarket repair and overhaul revenues decreased 34%.

In the quarter, Space and Defense segment revenues were $206 million, an increase of 7% year over year. Space sales were up 19%, to $88 million, the result of increased sales for NASA programs and integrated space vehicle products. Defense sales were mostly unchanged at $118 million. Lower sales of missile steering controls and security applications were offset by increases in sales of military vehicle and naval application products.

Industrial Systems segment sales in the quarter were $226 million, down 2% from a year ago. Energy product sales were down 23%, the result of a delays in offshore exploration activity. Simulation and test product sales were off 23%, tied to reduced demand for flight simulation pilot training products. Medical product sales increased 7%, to $67 million, tied to higher enteral feeding pump sales. Sales of products for industrial automation applications were up 5% but unchanged after allowing for foreign exchange movements.

Consolidated 12-month backlog was $1.9 billion, up 5% from a year ago.

“We are pleased with our performance in the first half of the year and looking forward to repeating that performance in the second half,” said John Scannell, Chairman and CEO. “We are reinstating guidance today after a 12-month hiatus. The second half of fiscal 2021 will mirror the first half, resulting in full year sales of $2.84 billion and full year earnings per share of $5.00, plus or minus $0.20. Our businesses continue to operate effectively, despite on-going COVID impositions. Market diversity and financial prudence have guided us through the last 12 months and will continue to be the core of our business going forward.”

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 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:

COVID-19 Pandemic Risks

  • We face various risks related to health pandemics 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.

Strategic Risks

  • We operate in highly competitive markets with competitors who may have greater resources than we possess;
  • 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; and
  • Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or as we conduct divestitures.

Market Condition Risks

  • 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 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;
  • 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; and
  • We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects.

Operational Risks

  • Our business operations may be adversely affected by information systems interruptions, intrusions or new software implementations;
  • 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;
  • 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; and
  • 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.

Financial Risks

  • 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;
  • Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility;
  • The 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; and
  • Unforeseen exposure to additional income tax liabilities may affect our operating results.

Legal and Compliance Risks

  • Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting standards, and any false claims or non-compliance could subject us to fines, penalties or possible debarment;
  • Our operations in foreign countries expose us to political and currency risks and adverse changes in local legal and regulatory environments;
  • Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business;
  • We are involved in various legal proceedings, the outcome of which may be unfavorable to us; and
  • Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs.

General Risks

  • The United Kingdom’s decision to exit the European Union may result in 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;
  • Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our business; and
  • Our performance could suffer if we cannot maintain our culture as well as attract, retain and engage our employees.

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

 

Six Months Ended

 

 

April 3,

2021

 

March 28,

2020

 

April 3,

2021

 

March 28,

2020

Net sales

 

$

736,402

 

 

$

765,277

 

 

$

1,420,356

 

 

$

1,520,120

 

Cost of sales

 

536,493

 

 

557,223

 

 

1,030,804

 

 

1,100,809

 

Gross profit

 

199,909

 

 

208,054

 

 

389,552

 

 

419,311

 

Research and development

 

30,453

 

 

26,688

 

 

58,461

 

 

54,896

 

Selling, general and administrative

 

105,131

 

 

107,251

 

 

204,734

 

 

205,618

 

Interest

 

8,629

 

 

10,251

 

 

17,049

 

 

20,483

 

Other

 

(6,432)

 

 

2,333

 

 

(3,191)

 

 

9,879

 

Earnings before income taxes

 

62,128

 

 

61,531

 

 

112,499

 

 

128,435

 

Income taxes

 

13,440

 

 

11,786

 

 

25,969

 

 

28,663

 

Net earnings

 

$

48,688

 

 

$

49,745

 

 

$

86,530

 

 

$

99,772

 

 

 

 

 

 

 

 

 

 

Net earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

1.51

 

 

$

1.49

 

 

$

2.69

 

 

$

2.94

 

Diluted

 

$

1.51

 

 

$

1.48

 

 

$

2.68

 

 

$

2.91

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

32,146,247

 

 

33,434,420

 

 

32,110,365

 

 

33,972,635

 

Diluted

 

32,325,494

 

 

33,685,395

 

 

32,281,158

 

 

34,236,399

 

 

 

 

 

 

 

 

 

 

 

 

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

April 3,

2021

 

March 28,

2020

 

April 3,

2021

 

March 28,

2020

Net sales:

 

 

 

 

 

 

 

 

Aircraft Controls

 

$

304,361

 

 

$

341,407

 

 

$

591,135

 

 

$

681,361

 

Space and Defense Controls

 

206,168

 

 

193,010

 

 

394,330

 

 

379,250

 

Industrial Systems

 

225,873

 

 

230,860

 

 

434,891

 

 

459,509

 

Net sales

 

$

736,402

 

 

$

765,277

 

 

$

1,420,356

 

 

$

1,520,120

 

Operating profit:

 

 

 

 

 

 

 

 

Aircraft Controls

 

$

22,018

 

 

$

34,701

 

 

$

49,940

 

 

$

73,293

 

 

 

7.2

%

 

10.2

%

 

8.4

%

 

10.8

%

Space and Defense Controls

 

26,652

 

 

24,652

 

 

49,698

 

 

49,934

 

 

 

12.9

%

 

12.8

%

 

12.6

%

 

13.2

%

Industrial Systems

 

23,813

 

 

24,775

 

 

43,711

 

 

51,574

 

 

 

10.5

%

 

10.7

%

 

10.1

%

 

11.2

%

Total operating profit

 

72,483

 

 

84,128

 

 

143,349

 

 

174,801

 

 

 

9.8

%

 

11.0

%

 

10.1

%

 

11.5

%

Deductions from operating profit:

 

 

 

 

 

 

 

 

Interest expense

 

8,629

 

 

10,251

 

 

17,049

 

 

20,483

 

Equity-based compensation expense

 

2,127

 

 

890

 

 

4,629

 

 

3,271

 

Non-service pension (income) expense

 

(4,901)

 

 

3,598

 

 

(3,981)

 

 

7,199

 

Corporate and other expenses, net

 

4,500

 

 

7,858

 

 

13,153

 

 

15,413

 

Earnings before income taxes

 

$

62,128

 

 

$

61,531

 

 

$

112,499

 

 

$

128,435

 

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

 

April 3,

2021

 

October 3,

2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

90,110

 

 

$

84,583

 

Restricted cash

 

902

 

 

489

 

Receivables, net

 

922,092

 

 

855,535

 

Inventories, net

 

636,580

 

 

623,043

 

Prepaid expenses and other current assets

 

48,278

 

 

49,837

 

Total current assets

 

1,697,962

 

 

1,613,487

 

Property, plant and equipment, net

 

628,550

 

 

600,498

 

Operating lease right-of-use assets

 

65,410

 

 

68,393

 

Goodwill

 

860,239

 

 

821,856

 

Intangible assets, net

 

114,820

 

 

85,046

 

Deferred income taxes

 

18,808

 

 

18,924

 

Other assets

 

20,051

 

 

17,627

 

Total assets

 

$

3,405,840

 

 

$

3,225,831

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Current installments of long-term debt

 

$

71,652

 

 

$

350

 

Accounts payable

 

175,061

 

 

176,868

 

Accrued compensation

 

99,223

 

 

109,510

 

Contract advances

 

256,080

 

 

203,338

 

Accrued liabilities and other

 

225,915

 

 

220,488

 

Total current liabilities

 

827,931

 

 

710,554

 

Long-term debt, excluding current installments

 

896,955

 

 

929,982

 

Long-term pension and retirement obligations

 

180,112

 

 

183,366

 

Deferred income taxes

 

48,778

 

 

40,474

 

Other long-term liabilities

 

113,607

 

 

118,372

 

Total liabilities

 

2,067,383

 

 

1,982,748

 

Shareholders’ equity

 

 

 

 

Common stock – Class A

 

43,802

 

 

43,799

 

Common stock – Class B

 

7,478

 

 

7,481

 

Additional paid-in capital

 

519,006

 

 

472,645

 

Retained earnings

 

2,183,218

 

 

2,112,734

 

Treasury shares

 

(1,000,389)

 

 

(990,783)

 

Stock Employee Compensation Trust

 

(85,034)

 

 

(64,242)

 

Supplemental Retirement Plan Trust

 

(70,047)

 

 

(53,098)

 

Accumulated other comprehensive loss

 

(259,577)

 

 

(285,453)

 

Total shareholders’ equity

 

1,338,457

 

 

1,243,083

 

Total liabilities and shareholders’ equity

 

$

3,405,840

 

 

$

3,225,831

 

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

 

 

Six Months Ended

 

 

April 3,

2021

 

March 28,

2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

86,530

 

 

$

99,772

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

Depreciation

 

37,622

 

 

36,962

 

Amortization

 

6,436

 

 

6,676

 

Deferred income taxes

 

(1,187)

 

 

(1,346)

 

Equity-based compensation expense

 

4,629

 

 

3,271

 

Other

 

(3,115)

 

 

5,674

 

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

(47,697)

 

 

(42,208)

 

Inventories

 

9,301

 

 

(49,467)

 

Accounts payable

 

(5,088)

 

 

(14,891)

 

Contract advances

 

51,349

 

 

46,468

 

Accrued expenses

 

(1,799)

 

 

(9,920)

 

Accrued income taxes

 

12,691

 

 

(14,040)

 

Net pension and post retirement liabilities

 

3,846

 

 

15,785

 

Other assets and liabilities

 

(16,151)

 

 

(2,032)

 

Net cash provided by operating activities

 

137,367

 

 

80,704

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

(77,600)

 

 

(54,265)

 

Purchase of property, plant and equipment

 

(58,019)

 

 

(53,463)

 

Other investing transactions

 

1,895

 

 

(3,706)

 

Net cash used by investing activities

 

(133,724)

 

 

(111,434)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from revolving lines of credit

 

503,200

 

 

829,000

 

Payments on revolving lines of credit

 

(467,700)

 

 

(758,500)

 

Proceeds from long-term debt

 

39,800

 

 

4,300

 

Payments on long-term debt

 

(39,903)

 

 

(4,300)

 

Proceeds from senior notes, net of issuance costs

 

 

 

491,769

 

Payments on senior notes

 

 

 

(300,000)

 

Payments on finance lease obligations

 

(1,042)

 

 

(412)

 

Payment of dividends

 

(16,046)

 

 

(17,049)

 

Proceeds from sale of treasury stock

 

4,230

 

 

3,199

 

Purchase of outstanding shares for treasury

 

(18,844)

 

 

(191,961)

 

Proceeds from sale of stock held by SECT

 

274

 

 

14,278

 

Purchase of stock held by SECT

 

(2,559)

 

 

(6,209)

 

Other financing transactions

 

 

 

(5,877)

 

Net cash provided by financing activities

 

1,410

 

 

58,238

 

Effect of exchange rate changes on cash

 

887

 

 

(791)

 

Increase in cash, cash equivalents and restricted cash

 

5,940

 

 

26,717

 

Cash, cash equivalents and restricted cash at beginning of period

 

85,072

 

 

92,548

 

Cash, cash equivalents and restricted cash at end of period

 

$

91,012

 

 

$

119,265

 

 

 

 

 

 

 

Contacts

Ann Marie Luhr

716-687-4225