Moog Inc. Announces Second Quarter Results

EAST AURORA, NY--(Marketwired - Apr 29, 2016) - Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) today announced second quarter earnings per share of $0.85, up 6% from last year on slightly lower sales of $611 million. Cash flow from operating activities was strong, at $79 million, while net earnings of $31 million were down marginally from a year ago.

Total Aircraft Controls sales in the quarter were slightly higher at $276 million. Commercial OEM sales were 3% higher, at $114 million. Increased sales to Airbus, up 36%, offset slightly weaker Boeing sales, down 5%, and business jet sales, down 20%. Commercial aftermarket sales were $30 million, up 2%, on initial provisioning spares for the A350 program.

Military aircraft sales were down 2%, to $132 million. OEM sales were slightly higher, at $81 million, with higher foreign military sales offsetting lower V-22 tilt rotor sales. Military aftermarket sales were down 6%, to $51 million, as the C-5 modernization program continues to wind down.

Space and Defense segment sales were $89 million, 4% lower than a year ago. Space sales were $43 million, a decrease of 12% due to lower sales of controls for satellites. Defense sales of $46 million were up 4% on improved military vehicle sales.

Sales in the Company's Industrial Systems segment were flat at $128 million. Sales of simulation and test products, including motion bases for flight training simulators, were 11% higher, at $31 million. Excluding currency effects, industrial automation sales of $66 million were stable and in line with the broader industrial economy. Sales into energy markets were down 6% from last year, to $31 million.

Components segment sales at $94 million, were 18% lower than last year but up nicely from the first quarter. Sales of aerospace and defense products were $40 million, down 13%, partly due to softer helicopter program and aftermarket sales. Sales into energy, industrial and medical markets experienced slowdowns across a range of programs.

The Medical Devices segment had sales of $24 million in the quarter, mostly unchanged from a year ago. Through the first six months of the year, excluding previously divested life sciences sales, organic sales are up 11%.

The Company incurred $8 million in restructuring during the quarter, mostly associated with the Aircraft Controls segment.

The twelve month consolidated backlog is $1.2 billion compared to $1.3 billion a year ago.

The Company maintained its previous guidance for 2016 to include sales for the year at $2.47 billion and earnings per share of $3.35, plus or minus $0.15 per share. 

"We're pleased with the results of the quarter," said John Scannell, Chairman and CEO. "We came in at the high end of our guidance, had strong cash flow and we're maintaining our sales and EPS forecast for the full year."

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 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 link 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, 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;
• governmental regulations and customer demands related to conflict minerals may adversely impact our operating results;
• 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							Six Months Ended
			April 2, 2016				April 4, 2015			April 2, 2016				April 4, 2015
Net sales			$	611,142			$	637,246		$	1,179,599			$	1,267,769
Cost of sales				431,955				463,696			838,952				910,301
Gross profit				179,187				173,550			340,647				357,468
	Research and development			39,731				31,404			74,529				62,725
	Selling, general and administrative			82,771				92,158			165,765				189,985
	Interest			8,935				7,669			17,257				13,037
	Restructuring			8,069				-			8,342				-
	Other			(936	)			921			(1,518	)			885
Earnings before income taxes				40,617				41,398			76,272				90,836
Income taxes				9,710				9,305			19,205				23,478
Net earnings attributable to common shareholders and noncontrolling interest			$	30,907			$	32,093		$	57,067			$	67,358
Net earnings (loss) attributable to noncontrolling interest				(143	)			-			(224	)			-
Net earnings attributable to common shareholders			$	31,050			$	32,093		$	57,291			$	67,358
Net earnings per share attributable to common shareholders
	Basic		$	0.85			$	0.81		$	1.57			$	1.68
	Diluted		$	0.85			$	0.80		$	1.55			$	1.66
Average common shares outstanding
	Basic			36,481,996				39,601,795			36,597,972				40,116,731
	Diluted			36,693,190				39,984,668			36,860,760				40,550,814

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

			Three Months Ended									Six Months Ended
			April 2, 2016					April 4, 2015				April 2, 2016					April 4, 2015
Net sales:
	Aircraft Controls		$	275,769				$	274,396			$	530,604				$	540,764
	Space and Defense Controls			89,175					93,256				171,815					193,211
	Industrial Systems			128,244					129,145				253,423					262,511
	Components			93,813					115,062				173,388					222,766
	Medical Devices			24,141					25,387				50,369					48,517
Net sales			$	611,142				$	637,246			$	1,179,599				$	1,267,769
Operating profit:
	Aircraft Controls		$	19,042				$	22,336			$	37,173				$	46,794
				6.9	%	*			8.1	%			7.0	%	*			8.7	%
	Space and Defense Controls			13,357					4,909				25,173					13,635
				15.0	%				5.3	%			14.7	%				7.1	%
	Industrial Systems			13,270					12,685				26,903					25,904
				10.3	%				9.8	%			10.6	%				9.9	%
	Components			8,385					15,900				13,085					32,862
				8.9	%				13.8	%			7.5	%				14.8	%
	Medical Devices			2,554					716				5,833					3,052
				10.6	%				2.8	%			11.6	%				6.3	%
Total operating profit				56,608					56,546				108,167					122,247
				9.3	%				8.9	%			9.2	%				9.6	%
Deductions from operating profit:
	Interest expense			8,935					7,669				17,257					13,037
	Equity-based compensation expense			983					568				1,919					3,966
	Corporate and other expenses, net			6,073					6,911				12,719					14,408
Earnings before income taxes			$	40,617				$	41,398			$	76,272				$	90,836

* Included $5,923 of restructuring charges. Adjusted operating margin is 9.1% and 8.1% for the three and six months ended April 2, 2016, respectively.

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

				April 2, 2016			October 3, 2015
ASSETS
Current assets
	Cash and cash equivalents			$	348,322		$	309,853
	Receivables				703,022			698,419
	Inventories				500,224			493,360
	Deferred income taxes				92,127			91,210
	Prepaid expenses and other current assets				38,096			34,653
		Total current assets			1,681,791			1,627,495
Property, plant and equipment, net					529,735			536,756
Goodwill					752,826			737,212
Intangible assets, net					129,350			143,723
Other assets					41,943			41,285
Total assets				$	3,135,645		$	3,086,471
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Short-term borrowings			$	1,370		$	83
	Current installments of long-term debt				434			34
	Accounts payable				155,763			165,973
	Accrued salaries, wages and commissions				119,204			125,270
	Customer advances				177,557			167,423
	Contract loss reserves				29,740			30,422
	Other accrued liabilities				112,738			116,300
		Total current liabilities			596,806			605,505
Long-term debt, excluding current installments					1,103,342			1,075,067
Long-term pension and retirement obligations					322,407			348,239
Deferred income taxes					69,364			60,209
Other long-term liabilities					3,211			2,919
		Total liabilities			2,095,130			2,091,939
Commitment and contingencies					-			-
Redeemable noncontrolling interest					8,377			-
Shareholders' equity
Common stock					51,280			51,280
Other shareholders' equity					980,858			943,252
		Total shareholders' equity			1,032,138			994,532
Total liabilities and shareholders' equity				$	3,135,645		$	3,086,471

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

					Six Months Ended
					April 2, 2016				April 4, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
	Net earnings attributable to common shareholders and noncontrolling interest				$	57,067			$	67,358
	Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
		Depreciation				38,554				40,460
		Amortization				11,428				12,946
		Deferred income taxes				2,292				9,071
		Equity-based compensation expense				1,919				3,966
		Other				5,991				3,348
	Changes in assets and liabilities providing (using) cash:
		Receivables				(5,606	)			20,461
		Inventories				(5,330	)			(7,847	)
		Accounts payable				(13,439	)			18,934
		Customer advances				10,888				(3,358	)
		Accrued expenses				(5,802	)			(20,747	)
		Accrued income taxes				2,552				(7,729	)
		Net pension and post retirement liabilities				(13,171	)			(7,014	)
		Other assets and liabilities				(8,920	)			1,699
			Net cash provided by operating activities			78,423				131,548
CASH FLOWS FROM INVESTING ACTIVITIES
	Acquisitions of businesses, net of cash acquired					(11,016	)			-
	Purchase of property, plant and equipment					(27,685	)			(37,921	)
	Other investing transactions					1,058				3,551
			Net cash used by investing activities			(37,643	)			(34,370	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Net short-term repayments					-				(3,237	)
	Proceeds from revolving lines of credit					210,320				248,785
	Payments on revolving lines of credit					(182,455	)			(383,785	)
	Payments on long-term debt					(9,660	)			(5,241	)
	Proceeds from senior notes, net of issuance costs					-				294,430
	Proceeds from sale of treasury stock					2,229				10,542
	Purchase of outstanding shares for treasury					(25,156	)			(204,958	)
	Proceeds from sale of stock held by SECT					2,897				-
	Purchase of stock held by SECT					(1,515	)			(8,440	)
	Purchase of stock held by SERP Trust					(2,300	)			-
	Excess tax benefits from equity-based payment arrangements					471				5,888
			Net cash used by financing activities			(5,169	)			(46,016	)
Effect of exchange rate changes on cash						2,858				(20,796	)
Increase in cash and cash equivalents						38,469				30,366
	Cash and cash equivalents at beginning of period					309,853				231,292
	Cash and cash equivalents at end of period				$	348,322			$	261,658