Moog Reports First Quarter Results

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EAST AURORA, N.Y., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Moog Inc. MOG MOG announced today financial results for the first quarter ended December 30, 2017.

First Quarter Highlights

  • Sales of $628 million, up 6%;
  • Operating margins of 10.6%, up from 8.9% a year ago;
  • Non-GAAP adjusted diluted earnings per share, excluding the impacts of the Tax Cuts and Jobs Act (the Tax Act), was $.93, up 11% from a year ago;
  • Diluted earnings per share of $.04, including the impacts of the Tax Act;
  • $44 million cash flow from operating activities.

Segment Results

Total Aircraft Controls segment sales in the quarter were $279 million, up 4% year over year. Commercial aircraft revenues increased 10%, to $154 million. Sales of OEM products to Airbus increased 14%, driven by strong A350 sales. Boeing OEM product sales were mostly unchanged, at $61 million. Commercial aftermarket sales increased 27%, to $34 million, on strong A350 initial provisioning spares.

Military aircraft sales in the quarter were $124 million, down 3% from a year ago. Military OEM sales were 2% higher, at $82 million. Military aftermarket sales were down 10%, attributed to lower B-2 and V-22 activity, due to the timing of orders and deliveries.

In the quarter, Space and Defense segment sales were $133 million, up 9% year over year. Defense sales were 11% higher on strong sales into military vehicle applications in the U.S and Europe. Space sales were 5% higher, partly due to increased sales of satellite avionics products.

Industrial System segment sales in the quarter were $216 million, up 9% from last year. Sales were higher in the four major markets served with particularly strong sales in industrial automation. Higher simulation and test sales reflected increases in auto and aerospace test systems. Energy products were up on sales of exploration and power generation products. Medical sales were higher for a variety of OEM components.

Consolidated 12-month backlog was $1.3 billion.

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Fiscal 2018 Outlook

The Company updated its projections for fiscal 2018.

  • Forecasted sales of $2.62 billion, up 5%, unchanged from 90 days ago;
  • Forecasted full-year operating margins of 11.0%, unchanged from 90 days ago;
  • Non-GAAP full-year adjusted diluted earnings per share of $4.10, plus or minus $0.20, unchanged from 90 days ago, excluding the impacts of the Tax Act;
  • GAAP forecasted range for full-year earnings per share is $3.43, plus or minus $0.20, including the impacts of the Tax Act;
  • Forecast cash flow from operations, including incremental accelerated pension contributions, of $180 million;

"The quarter got us off to a good start for the year," said John Scannell, Chairman and CEO. "Earnings per share was above our guidance and we're pleased to affirm our operating projections from 90 days ago. The recent Tax Act changes resulted in a one-time charge for us in the quarter but we'll see benefits longer-term."

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. 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.

As a reminder, segment reporting has changed to three segments, Aircraft Controls, Space and Defense Controls and Industrial Systems. The Components segment has been reorganized with A&D products moving to the Space and Defense segment and industrial and medical products moving to the Industrial Systems segment. 

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;
  • 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
  December 30,
 2017
 December 31,
 2016
Net sales $627,535  $589,670 
Cost of sales 443,426  417,164 
Gross profit 184,109  172,506 
Research and development 32,420  34,564 
Selling, general and administrative 95,950  85,063 
Interest 8,646  8,486 
Other (741) 7,905 
Earnings before income taxes 47,834  36,488 
Income taxes 46,535  6,430 
Net earnings attributable to Moog and noncontrolling interest 1,299  30,058 
Net earnings (loss) attributable to noncontrolling interest   (506)
Net earnings attributable to Moog $1,299  $30,564 
     
Net earnings per share attributable to Moog    
Basic $0.04  $0.85 
Diluted $0.04  $0.84 
     
Average common shares outstanding    
Basic 35,772,406  35,869,052 
Diluted 36,201,054  36,272,767 
       

Results above include the impacts of the Tax Cuts and Jobs Act of 2017. The table below adjusts the income taxes, net earnings and diluted net earnings per share attributable to Moog to exclude these impacts.

Reconciliation to non-GAAP adjusted income taxes, net earnings and diluted net earnings per share attributable to Moog:

  Three Months Ended
  December 30,
 2017
 December 31,
 2016
Earnings before income taxes $47,834  $36,488 
Income taxes 46,535  6,430 
Effective income tax rate 97.3% 17.6%
Non-GAAP adjustment for change in tax law (32,357)  
Non-GAAP adjusted income taxes 14,178  6,430 
Non-GAAP adjusted effective income tax rate 29.6% 17.6%
Net earnings (loss) attributable to noncontrolling interest   (506)
Non-GAAP adjusted net earnings attributable to Moog $33,656  $30,564 
Non-GAAP adjusted diluted net earnings per share attributable to Moog $0.93  $0.84 
         


Moog Inc.
CONSOLIDATED SALES AND OPERATING PROFIT
(dollars in thousands)
 


  Three Months Ended
  December 30,
 2017
 December 31,
 2016
Net sales:    
Aircraft Controls $278,534  $268,450 
Space and Defense Controls 133,393  122,590 
Industrial Systems 215,608  198,630 
Net sales $627,535  $589,670 
Operating profit:    
Aircraft Controls $30,768  $23,111 
  11.0% 8.6%
Space and Defense Controls 16,289  9,088 
  12.2% 7.4%
Industrial Systems 19,246  20,163 
  8.9% 10.2%
Total operating profit 66,303  52,362 
  10.6% 8.9%
Deductions from operating profit:    
Interest expense 8,646  8,486 
Equity-based compensation expense 2,001  2,168 
Corporate and other expenses, net 7,822  5,220 
Earnings before income taxes $47,834  $36,488 
         


Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 


  December 30,
 2017
 September 30,
 2017
ASSETS    
Current assets    
Cash and cash equivalents $394,980  $368,073 
Receivables 739,731  727,740 
Inventories 511,653  489,127 
Prepaid expenses and other current assets 38,800  41,499 
Total current assets 1,685,164  1,626,439 
Property, plant and equipment, net 527,356  522,991 
Goodwill 776,156  774,268 
Intangible assets, net 104,914  108,818 
Deferred income taxes 11,395  26,558 
Other assets 33,510  31,518 
Total assets $3,138,495  $3,090,592 
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities    
Short-term borrowings $89  $89 
Current installments of long-term debt 259  295 
Accounts payable 156,967  170,878 
Accrued compensation 122,763  148,406 
Customer advances 179,598  159,274 
Contract loss reserves 41,786  43,214 
Other accrued liabilities 112,072  107,278 
Total current liabilities 613,534  629,434 
Long-term debt, excluding current installments 962,006  956,653 
Long-term pension and retirement obligations 260,741  271,272 
Deferred income taxes 40,782  13,320 
Other long-term liabilities 33,483  5,609 
Total liabilities 1,910,546  1,876,288 
Commitment and contingencies    
Shareholders' equity    
Common stock - Class A 43,716  43,704 
Common stock - Class B 7,564  7,576 
Additional paid-in capital 498,699  492,246 
Retained earnings 1,849,118  1,847,819 
Treasury shares (739,210) (739,157)
Stock Employee Compensation Trust (98,990) (89,919)
Supplemental Retirement Plan Trust (13,311) (12,474)
Accumulated other comprehensive loss (319,637) (335,491)
Total Moog shareholders' equity 1,227,949  1,214,304 
Total liabilities and shareholders' equity $3,138,495  $3,090,592 
         


Moog Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 


  Three Months Ended
  December 30,
 2017
 December 31,
 2016
CASH FLOWS FROM OPERATING ACTIVITIES    
Net earnings attributable to Moog and noncontrolling interest $1,299  $30,058 
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:    
Depreciation 17,487  17,918 
Amortization 4,674  4,541 
Deferred income taxes 37,617  1,371 
Equity-based compensation expense 2,001  2,168 
Other 1,563  9,868 
Changes in assets and liabilities providing (using) cash:    
Receivables (10,350) (11,012)
Inventories (22,236) 6,996 
Accounts payable (14,393) 6,737 
Customer advances 19,888  8,287 
Accrued expenses (27,233) (17,479)
Accrued income taxes 6,965  (8,885)
Net pension and post retirement liabilities (4,562) (1,295)
Other assets and liabilities 31,450  1,309 
Net cash provided by operating activities 44,170  50,582 
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of property, plant and equipment (21,084) (14,849)
Other investing transactions (537) (976)
Net cash (used) by investing activities (21,621) (15,825)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from revolving lines of credit 103,500  62,400 
Payments on revolving lines of credit (108,610) (67,400)
Proceeds from long-term debt 10,000   
Payments on long-term debt (44) (50)
Proceeds from sale of treasury stock 1,048  2,135 
Purchase of outstanding shares for treasury (2,734) (5,211)
Proceeds from sale of stock held by SECT   867 
Purchase of stock held by SECT (3,823) (5,709)
Net cash (used) by financing activities (663) (12,968)
Effect of exchange rate changes on cash 5,021  (15,253)
Increase in cash and cash equivalents 26,907  6,536 
Cash and cash equivalents at beginning of period 368,073  325,128 
Cash and cash equivalents at end of period $394,980  $331,664 
         
Contact:
Ann Marie Luhr
716-687-4225

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