Moog Inc. Reports Third Quarter Results

Jul 29th, 2022 7:55 EST

EAST AURORA, N.Y.–(BUSINESS WIRE)–Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended July 2, 2022.

Third Quarter Highlights

  • Sales of $773 million were up 9% from a year ago;
  • GAAP diluted earnings per share of $1.57 included $0.03 per share in restructuring and impairment charges;
  • Non-GAAP diluted adjusted earnings per share of $1.61, after rounding, up 44% from earnings per share a year ago;
  • GAAP effective tax rate of 15.7% including the benefit of $0.15 per share from prior year provision to return adjustments;
  • GAAP operating margins of 10.3% with adjusted operating margins of 10.5%; and
  • $4 million GAAP cash flow from operating activities and $15 million adjusted cash flow from operating activities.

Segment Results

Aircraft Controls segment revenues in the quarter were $318 million, 17% higher year over year. Commercial aircraft revenues were $137 million, a 43% increase. Sales to commercial OEM customers were $86 million, driven by increases in sales for the Boeing book of business and strength in business jet sales. Commercial aftermarket sales increased 87% on very strong repair and overhaul activity, a one-time retrofit program, and acquired sales from the TEAM Accessories acquisition.

Military aircraft sales were $181 million, 3% higher year over year. Military OEM sales were up 3%, to $132 million, with increased funded development and helicopter sales compensating for lower fighter aircraft sales and lost sales from the divested Navaids business. Military aftermarket sales were mostly unchanged.

Space and Defense segment revenues were $224 million, an increase of 9% year over year. Defense sales of $135 million increased 14%. Higher sales of the RIwP® turret, tactical missile applications, and defense components more than offset lower sales for international vehicle programs. Space sales were 3% higher, at $88 million, as growth in sales of propulsion and avionics product lines, and integrated space vehicles, offset the winding down of hypersonic development activity.

Industrial Systems segment revenues in the quarter were $231 million, in line with a year ago. Excluding the impact of foreign exchange movements and lost sales from portfolio shaping activities, underlying organic sales increased 8%, with rate-adjusted sales higher in each of the four submarkets. Sales of products for industrial automation applications were $111 million, driven by demand for factory automation equipment. Energy sales were $31 million, with higher sales in both exploration and generation applications. Sales of simulation and test products were $25 million, tied to increased sales of flight simulation products. Medical product sales were $63 million, driven by growth of enteral feeding products.

Consolidated 12-month backlog was $2.2 billion, up 10% from a year ago.

“It was another good quarter for our business, with operational performance in line with our forecast and a tax benefit driving outsized EPS growth,” said John Scannell, Chairman and CEO. “The second half of our fiscal year is playing out as we anticipated. Our sales forecast for Q4 is in line with Q3, and our EPS forecast for Q4 is unchanged from 90 days ago. Demand for our products is strong across all our major markets and we’re managing well through the challenges posed by supply chain constraints, inflation, and labor availability.”

Fiscal 2022 Outlook

The Company updated its fiscal 2022 projections and adjusted figures provided 90 days ago.

  • Forecasted sales of $3.0 billion, unchanged from 90 days ago;
  • Forecasted GAAP diluted earnings per share of $5.36, and adjusted diluted earnings per share of $5.65, both
    plus or minus $0.15;
  • Forecasted GAAP operating margins of 9.9% and adjusted operating margins of 10.3%;
  • Forecasted cash flow from operating activities of $276 million and adjusted cash flow from operating activities
    of $176 million; and
  • Forecasted GAAP effective tax rate of 22.3%.

In conjunction with today’s release, Moog will host a conference call today 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.

About Moog
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 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. In evaluating these forward-looking statements, you should carefully consider the factors set forth below.

Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on

Form 10-K and in our other periodic filings with the SEC. There have been no material changes in the current year regarding our risk factors other than the following:

A reduced supply, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies within our supply chain could have a material impact on our ability to manufacture and ship our products, in addition to adversely impacting our operating profit and balance sheet.

Refer to our Annual Report on form 10-K for a complete discussion of our risk factors, which include the following:

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 or Lockheed Martin as a customer or a significant reduction in sales to either 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 currency, political and trade risks and adverse changes in local legal and regulatory environments could impact our results of operations
  • 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

  • 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.

While we believe we have identified and discussed above the material risks affecting our business, there may be additional factors, risks and uncertainties not currently known to us or that we currently consider immaterial 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. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking statement made in this report, except as required by law.

Moog Inc.

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

(dollars in thousands, except per share data)

 

 

Three Months Ended

Nine Months Ended

 

July 2,
2022

July 3,
2021

July 2,
2022

July 3,
2021

Net sales

$

772,911

$

707,352

$

2,267,784

$

2,127,708

Cost of sales

 

560,966

 

516,750

 

1,646,742

 

1,547,554

Inventory write-down

 

202

 

 

3,407

 

Gross profit

 

211,743

 

190,602

 

617,635

 

580,154

Research and development

 

25,890

 

33,095

 

84,318

 

91,556

Selling, general and administrative

 

113,886

 

100,597

 

336,702

 

305,331

Interest

 

9,131

 

8,239

 

25,376

 

25,288

Asset impairment

 

692

 

 

15,928

 

Restructuring

 

576

 

 

8,369

 

Gain on sale of business

 

 

 

(16,146)

 

Other

 

1,759

 

76

 

3,143

 

(3,115)

Earnings before income taxes

 

59,809

 

48,595

 

159,945

 

161,094

Income taxes

 

9,400

 

12,473

 

34,184

 

38,442

Net earnings

$

50,409

$

36,122

$

125,761

$

122,652

 

 

 

 

 

Net earnings per share

 

 

 

 

Basic

$

1.58

$

1.12

$

3.93

$

3.82

Diluted

$

1.57

$

1.12

$

3.91

$

3.80

 

 

 

 

 

Average common shares outstanding

 

 

 

 

Basic

 

31,922,377

 

32,125,524

 

31,988,150

 

32,115,400

Diluted

 

32,067,431

 

32,355,238

 

32,125,438

 

32,305,834

Results shown in the previous table include impacts associated with the gain on the sale of our Navigation Aids business, as well as inventory write-down charges, asset impairment and restructuring related to the impact of continued portfolio shaping activities and the Ukraine crisis. The table below adjusts the earnings before income taxes, income taxes, net earnings and diluted net earnings per share to exclude these impacts. While management believes that these non-GAAP financial measures may be useful in evaluating the financial condition and results of operations of the Company, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP.

Reconciliation to non-GAAP adjusted earnings before income taxes, income taxes, net earnings and diluted net earnings per share are as follows:

 

Three Months Ended

Nine Months Ended

 

July 2,
2022

July 3,
2021

July 2,
2022

July 3,
2021

As Reported:

 

 

 

 

Earnings before income taxes

$

59,809

$

48,595

$

159,945

$

161,094

Income taxes

 

9,400

 

12,473

 

34,184

 

38,442

Effective income tax rate

 

15.7 %

 

25.7 %

 

21.4 %

 

23.9 %

Net earnings

 

50,409

 

36,122

 

125,761

 

122,652

Diluted net earnings per share

$

1.57

$

1.12

$

3.91

$

3.80

 

 

 

 

 

Gain on Sale of Business:

 

 

 

 

Earnings before income taxes

$

$

$

(16,146)

$

Income taxes

 

 

 

(4,273)

 

Net earnings

 

 

 

(11,873)

 

Diluted net earnings per share

$

$

$

(0.37)

$

 

 

 

 

 

Other Charges:

 

 

 

 

Earnings before income taxes

$

1,470

$

$

27,704

$

Income taxes

 

364

 

 

6,602

 

Net earnings

 

1,106

 

 

21,102

 

Diluted net earnings per share

$

0.03

$

$

0.66

$

 

 

 

 

 

Pension Curtailment Gain:

 

 

 

 

Earnings before income taxes

$

$

$

$

(5,830)

Income taxes

 

 

 

 

Net earnings

 

 

 

 

(5,830)

Diluted net earnings per share

$

$

$

$

(0.18)

 

 

 

 

 

As Adjusted:

 

 

 

 

Earnings before income taxes

$

61,279

$

48,595

$

171,503

$

155,264

Income taxes

 

9,764

 

12,473

 

36,513

 

38,442

Effective income tax rate

 

15.9 %

 

25.7 %

 

21.3 %

 

24.8 %

Net earnings

 

51,515

 

36,122

 

134,990

 

116,822

Diluted net earnings per share

$

1.61

$

1.12

$

4.20

$

3.61

As reported and as adjusted information above includes a $0.15 diluted earnings per share benefit from prior year provision to return adjustments.

 

The diluted net earnings per share associated with the adjustments have been calculated individually and in total using the quarterly average outstanding shares in the period in which the adjustments occurred. Accordingly, adjusted diluted net earnings per share may not reconcile when totaled due to rounding.

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT (UNAUDITED)

(dollars in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 2,
2022

 

July 3,
2021

 

July 2,
2022

 

July 3,
2021

Net sales:

 

 

 

 

 

 

 

 

Aircraft Controls

 

$

318,017

 

$

272,131

 

$

932,602

 

$

863,266

Space and Defense Controls

 

 

223,644

 

 

204,887

 

 

654,849

 

 

599,217

Industrial Systems

 

 

231,250

 

 

230,334

 

 

680,333

 

 

665,225

Net sales

 

$

772,911

 

$

707,352

 

$

2,267,784

 

$

2,127,708

Operating profit:

 

 

 

 

 

 

 

 

Aircraft Controls

 

$

34,453

 

$

20,545

 

$

88,809

 

$

70,485

 

 

 

10.8 %

 

 

7.5 %

 

 

9.5 %

 

 

8.2 %

Space and Defense Controls

 

 

25,368

 

 

21,339

 

 

70,742

 

 

71,037

 

 

 

11.3 %

 

 

10.4 %

 

 

10.8 %

 

 

11.9 %

Industrial Systems

 

 

19,484

 

 

23,004

 

 

57,398

 

 

66,715

 

 

 

8.4 %

 

 

10.0 %

 

 

8.4 %

 

 

10.0 %

Total operating profit

 

 

79,305

 

 

64,888

 

 

216,949

 

 

208,237

 

 

 

10.3 %

 

 

9.2 %

 

 

9.6 %

 

 

9.8 %

Deductions from operating profit:

 

 

 

 

 

 

 

 

Interest expense

 

 

9,131

 

 

8,239

 

 

25,376

 

 

25,288

Equity-based compensation expense

 

 

2,169

 

 

1,791

 

 

6,747

 

 

6,420

Non-service pension expense (income)

 

 

1,442

 

 

928

 

 

4,399

 

 

(3,053)

Corporate and other expenses, net

 

 

6,754

 

 

5,335

 

 

20,482

 

 

18,488

Earnings before income taxes

 

$

59,809

 

$

48,595

 

$

159,945

 

$

161,094

Operating Profit and Margins – as adjusted are as follows:

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 2,
2022

 

July 3,
2021

 

July 2,
2022

 

July 3,
2021

Aircraft Controls operating profit – as reported

 

$

34,453

 

$

20,545

 

$

88,809

 

$

70,485

Gain on sale of business

 

 

 

 

 

 

(16,146)

 

 

Inventory write-down

 

 

202

 

 

 

 

202

 

 

Restructuring

 

 

(236)

 

 

 

 

3,996

 

 

Asset impairment

 

 

692

 

 

 

 

15,286

 

 

Aircraft Controls operating profit – as adjusted

 

$

35,111

 

$

20,545

 

$

92,147

 

$

70,485

 

 

 

11.0 %

 

 

7.5 %

 

 

9.9 %

 

 

8.2 %

 

 

 

 

 

 

 

 

 

Space and Defense Controls operating profit – as reported

 

$

25,368

 

$

21,339

 

$

70,742

 

$

71,037

Inventory write-down

 

 

 

 

 

 

1,500

 

 

Restructuring

 

 

87

 

 

 

 

1,924

 

 

Space and Defense Controls operating profit – as adjusted

 

$

25,455

 

$

21,339

 

$

74,166

 

$

71,037

 

 

 

11.4 %

 

 

10.4 %

 

 

11.3 %

 

 

11.9 %

 

 

 

 

 

 

 

 

 

Industrial Systems operating profit – as reported

 

$

19,484

 

$

23,004

 

$

57,398

 

$

66,715

Inventory write-down

 

 

 

 

 

 

1,705

 

 

Restructuring

 

 

725

 

 

 

 

2,449

 

 

Asset impairment

 

 

 

 

 

 

642

 

 

Industrial Systems operating profit – as adjusted

 

$

20,209

 

$

23,004

 

$

62,194

 

$

66,715

 

 

 

8.7 %

 

 

10.0 %

 

 

9.1 %

 

 

10.0 %

 

 

 

 

 

 

 

 

 

Total operating profit – as adjusted

 

$

80,775

 

$

64,888

 

$

228,507

 

$

208,237

 

 

 

10.5 %

 

 

9.2 %

 

 

10.1 %

 

  

9.8 %

Moog Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands)

 

 

July 2,
2022

October 2,
2021

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

$

93,912

$

99,599

Restricted cash

 

1,952

 

1,315

Receivables, net

 

973,771

 

945,929

Inventories, net

 

592,358

 

613,095

Prepaid expenses and other current assets

 

60,693

 

58,842

Total current assets

 

1,722,686

 

1,718,780

Property, plant and equipment, net

 

673,620

 

645,778

Operating lease right-of-use assets

 

68,800

 

60,355

Goodwill

 

826,307

 

851,605

Intangible assets, net

 

98,375

 

106,095

Deferred income taxes

 

15,010

 

17,769

Other assets

 

34,258

 

32,787

Total assets

$

3,439,056

$

3,433,169

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities

 

 

Current installments of long-term debt

$

1,008

$

80,365

Accounts payable

 

219,428

 

200,602

Accrued compensation

 

86,593

 

112,703

Contract advances

 

293,794

 

263,686

Accrued liabilities and other

 

211,769

 

212,005

Total current liabilities

 

812,592

 

869,361

Long-term debt, excluding current installments

 

856,097

 

823,355

Long-term pension and retirement obligations

 

153,277

 

162,728

Deferred income taxes

 

71,799

 

64,642

Other long-term liabilities

 

113,866

 

112,939

Total liabilities

 

2,007,631

 

2,033,025

Shareholders’ equity

 

 

Common stock – Class A

 

43,806

 

43,803

Common stock – Class B

 

7,474

 

7,477

Additional paid-in capital

 

528,571

 

509,622

Retained earnings

 

2,338,956

 

2,237,848

Treasury shares

 

(1,031,904)

 

(1,007,506)

Stock Employee Compensation Trust

 

(85,565)

 

(79,776)

Supplemental Retirement Plan Trust

 

(65,929)

 

(63,764)

Accumulated other comprehensive loss

 

(303,984)

 

(247,560)

Total shareholders’ equity

 

1,431,425

 

1,400,144

Total liabilities and shareholders’ equity

$

3,439,056

$

3,433,169

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

 

 

 

Nine Months Ended

 

 

July 2,
2022

 

July 3,
2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

125,761

 

$

122,652

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

 

 

 

 

Depreciation

 

 

56,169

 

 

56,806

Amortization

 

 

9,998

 

 

10,000

Deferred income taxes

 

 

7,644

 

 

4,161

Equity-based compensation expense

 

 

6,747

 

 

6,420

Gain on sale of business

 

 

(16,146)

 

 

Asset impairment and Inventory write-down

 

 

19,335

 

 

Other

 

 

4,960

 

 

(2,781)

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

 

(58,668)

 

 

(21,329)

Inventories

 

 

(6,778)

 

 

9,509

Accounts payable

 

 

27,184

 

 

(17,530)

Contract advances

 

 

35,867

 

 

54,414

Accrued expenses

 

 

(24,066)

 

 

3,503

Accrued income taxes

 

 

7,692

 

 

14,776

Net pension and post retirement liabilities

 

 

13,490

 

 

8,380

Other assets and liabilities

 

 

(24,925)

 

 

(18,401)

Net cash provided by operating activities

 

 

184,264

 

 

230,580

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

 

(11,837)

 

 

(77,600)

Purchase of property, plant and equipment

 

 

(106,713)

 

 

(88,573)

Other investing transactions

 

 

33,283

 

 

3,615

Net cash used by investing activities

 

 

(85,267)

 

 

(162,558)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from revolving lines of credit

 

 

661,675

 

 

653,500

Payments on revolving lines of credit

 

 

(629,251)

 

 

(651,986)

Proceeds from long-term debt

 

 

 

 

42,300

Payments on long-term debt

 

 

(80,273)

 

 

(55,891)

Payments on finance lease obligations

 

 

(1,779)

 

 

(1,588)

Payment of dividends

 

 

(24,653)

 

 

(24,081)

Proceeds from sale of treasury stock

 

 

10,792

 

 

4,603

Purchase of outstanding shares for treasury

 

 

(30,485)

 

 

(26,702)

Proceeds from sale of stock held by SECT

 

 

7,586

 

 

679

Purchase of stock held by SECT

 

 

(11,484)

 

 

(3,535)

Net cash used by financing activities

 

 

(97,872)

 

 

(62,701)

Effect of exchange rate changes on cash

 

 

(6,175)

 

 

1,265

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

 

 

(5,050)

 

 

6,586

Cash, cash equivalents and restricted cash at beginning of period

 

 

100,914

 

 

85,072

Cash, cash equivalents and restricted cash at end of period

 

$

95,864

 

$

91,658

 

Link to Source

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