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Moog Inc. Reports Third Quarter 2021 Results

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EAST AURORA, N.Y., July 30, 2021--(BUSINESS WIRE)--Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended July 3, 2021.

Third Quarter Highlights

  • Sales of $707 million, up 8% from a year ago;

  • GAAP diluted earnings per share of $1.12, up from ($0.39) a year ago;

  • GAAP diluted earnings per share of $1.12 were up 20% over adjusted earnings per share of $0.93 a year ago;

  • Operating margins of 9.2%;

  • Effective tax rate of 25.7%; and

  • $93 million cash flow from operating activities.

Segment Results

Aircraft Controls segment sales in the quarter were $272 million, up 9% year over year with higher commercial sales compensating for marginally lower military sales. Total commercial aircraft revenues were $96 million, 34% higher. Sales to commercial OEM customers increased 26% mostly tied to acquired sales from the recent Genesys acquisition. Commercial aftermarket sales were up 56%, to $28 million, the result of aircraft returning to service and repair and overhaul work on legacy components.

Total military aircraft sales were down marginally, to $176 million. Military OEM sales of $128 million were 19% higher, helped by funded development and activity across a range of programs in the portfolio. Military aftermarket sales of $48 million decreased 31%, as our customers adjusted their inventory.

Space and Defense segment sales were $205 million, up 11% year over year. Space sales of $86 million increased 16% on strength across the portfolio, led by integrated space vehicles and work on NASA programs. Defense sales were 8% higher, at $119 million, the result of increased sales of vehicle and naval applications and component products.

Industrial Systems segment sales were $230 million, a 3% increase over last year. Sales of industrial automation products were up 19%, attributed to stronger capital spending globally. Medical product sales, including pumps and components for respirator products, were down 15% as sales moderated from the COVID-driven demand seen a year ago. Energy sales and sales into simulation and test applications were mostly unchanged.

Consolidated 12-month backlog was $2.0 billion, up 21% from a year ago.

"It was solid quarter for our business with strong cash flow and earnings per share in line with our projections," said John Scannell, Chairman and CEO. "For the full year, we’re tweaking our sales outlook slightly and keeping our earnings per share forecast unchanged at $5.00, plus or minus $0.15. All in all, steady as she goes."

Fiscal 2021 Outlook

The Company updated its fiscal 2021 projections of 90 days ago.

  • Forecast sales of $2.82 billion;

  • Forecast diluted earnings per share of $5.00, plus or minus $0.15;

  • Forecast full year operating margins of 10.0%;

  • Forecast effective tax rate of 24.2%; and

  • Forecast cash flow from operations of $292 million.

In conjunction with today’s release, Moog will host a conference call on Friday, July 30, 2021 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.

About Moog Inc.
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 (LOSS) (UNAUDITED)
(dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Net sales

$

707,352

$

657,539

$

2,127,708

$

2,177,659

Cost of sales

516,750

486,760

1,547,554

1,587,569

Inventory write-down

18,795

18,795

Gross profit

190,602

151,984

580,154

571,295

Research and development

33,095

27,407

91,556

82,303

Selling, general and administrative

100,597

96,899

305,331

302,517

Interest

8,239

9,440

25,288

29,923

Long-lived asset impairment

31,871

31,871

Restructuring

5,306

5,306

Other

76

4,415

(3,115

)

14,294

Earnings (loss) before income taxes

48,595

(23,354

)

161,094

105,081

Income taxes (benefit)

12,473

(10,764

)

38,442

17,899

Net earnings (loss)

$

36,122

$

(12,590

)

$

122,652

$

87,182

Net earnings (loss) per share

Basic

$

1.12

$

(0.39

)

$

3.82

$

2.60

Diluted

$

1.12

$

(0.39

)

$

3.80

$

2.59

Average common shares outstanding

Basic

32,125,524

32,601,481

32,115,400

33,515,584

Diluted

32,355,238

32,601,481

32,305,834

33,722,723

Results shown in the previous table include 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

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

As Reported:

Earnings (loss) before income taxes

$

48,595

$

(23,354

)

$

161,094

$

105,081

Income taxes (benefit)

12,473

(10,764

)

38,442

17,899

Effective income tax rate

25.7

%

46.1

%

23.9

%

17.0

%

Net earnings (loss)

36,122

(12,590

)

122,652

87,182

Diluted net earnings (loss) per share

$

1.12

$

(0.39

)

$

3.80

$

2.59

COVID-19 Pandemic Charges:

Earnings before income taxes

$

$

55,972

$

$

55,972

Income taxes

13,012

13,012

Net earnings

42,960

42,960

Diluted net earnings per share

$

$

1.32

$

$

1.32

As Adjusted:

Earnings before income taxes

$

48,595

$

32,618

$

161,094

$

161,053

Income taxes

12,473

2,248

38,442

30,911

Effective income tax rate

25.7

%

6.9

%

23.9

%

19.2

%

Net earnings

36,122

30,370

122,652

130,142

Diluted net earnings per share

$

1.12

$

0.93

$

3.80

$

3.91

The diluted net earnings per share associated with the charges have been calculated using the quarterly average outstanding shares in the period in which the charges were incurred.

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

Three Months Ended

Nine Months Ended

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Net sales:

Aircraft Controls

$

272,131

$

249,388

$

863,266

$

930,749

Space and Defense Controls

204,887

183,906

599,217

563,156

Industrial Systems

230,334

224,245

665,225

683,754

Net sales

$

707,352

$

657,539

$

2,127,708

$

2,177,659

Operating profit (loss):

Aircraft Controls

$

20,545

$

(42,053

)

$

70,485

$

31,240

7.5

%

(16.9

)%

8.2

%

3.4

%

Space and Defense Controls

21,339

22,290

71,037

72,224

10.4

%

12.1

%

11.9

%

12.8

%

Industrial Systems

23,004

17,903

66,715

69,477

10.0

%

8.0

%

10.0

%

10.2

%

Total operating profit (loss)

64,888

(1,860

)

208,237

172,941

9.2

%

(0.3

)%

9.8

%

7.9

%

Deductions from operating profit:

Interest expense

8,239

9,440

25,288

29,923

Equity-based compensation expense

1,791

1,390

6,420

4,661

Non-service pension expense (income)

928

4,241

(3,053

)

11,440

Corporate and other expenses, net

5,335

6,423

18,488

21,836

Earnings (loss) before income taxes

$

48,595

$

(23,354

)

$

161,094

$

105,081

Operating Profit and Margins - as adjusted are as follows:

Three Months Ended

Nine Months Ended

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Aircraft Controls operating profit (loss) - as reported

$

20,545

$

(42,053

)

$

70,485

$

31,240

Inventory write-down

18,535

18,535

Long-lived asset impairment

31,530

31,530

Restructuring

2,896

2,896

Aircraft Controls operating profit - as adjusted

$

20,545

$

10,908

$

70,485

$

84,201

7.5

%

4.4

%

8.2

%

9.0

%

Space and Defense Controls operating profit - as reported

$

21,339

$

22,290

$

71,037

$

72,224

Long-lived asset impairment

341

341

Restructuring

185

185

Space and Defense Controls operating profit - as adjusted

$

21,339

$

22,816

$

71,037

$

72,750

10.4

%

12.4

%

11.9

%

12.9

%

Industrial Systems operating profit - as reported

$

23,004

$

17,903

$

66,715

$

69,477

Inventory write-down

260

260

Restructuring

2,225

2,225

Industrial Systems operating profit - as adjusted

$

23,004

$

20,388

$

66,715

$

71,962

10.0

%

9.1

%

10.0

%

10.5

%

Total operating profit - as adjusted

$

64,888

$

54,112

$

208,237

$

228,913

9.2

%

8.2

%

9.8

%

10.5

%

Moog Inc.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)

July 3,
2021

October 3,
2020

ASSETS

Current assets

Cash and cash equivalents

$

90,550

$

84,583

Restricted cash

1,108

489

Receivables, net

896,998

855,535

Inventories, net

632,359

623,043

Prepaid expenses and other current assets

49,513

49,837

Total current assets

1,670,528

1,613,487

Property, plant and equipment, net

639,202

600,498

Operating lease right-of-use assets

62,507

68,393

Goodwill

860,268

821,856

Intangible assets, net

111,867

85,046

Deferred income taxes

18,467

18,924

Other assets

20,471

17,627

Total assets

$

3,383,310

$

3,225,831

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Current installments of long-term debt

$

56,062

$

350

Accounts payable

162,890

176,868

Accrued compensation

111,159

109,510

Contract advances

259,425

203,338

Accrued liabilities and other

216,625

220,488

Total current liabilities

806,161

710,554

Long-term debt, excluding current installments

863,682

929,982

Long-term pension and retirement obligations

181,400

183,366

Deferred income taxes

54,168

40,474

Other long-term liabilities

110,694

118,372

Total liabilities

2,016,105

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

519,636

472,645

Retained earnings

2,211,305

2,112,734

Treasury shares

(1,007,754)

(990,783)

Stock Employee Compensation Trust

(85,314)

(64,242)

Supplemental Retirement Plan Trust

(69,448)

(53,098)

Accumulated other comprehensive loss

(252,500)

(285,453)

Total shareholders’ equity

1,367,205

1,243,083

Total liabilities and shareholders’ equity

$

3,383,310

$

3,225,831

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

Nine Months Ended

July 3,
2021

June 27,
2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings

$

122,652

$

87,182

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

Depreciation

56,806

55,859

Amortization

10,000

9,847

Deferred income taxes

4,161

(10,766

)

Equity-based compensation expense

6,420

4,661

Impairment of long-lived assets and inventory write-down

50,666

Other

(2,781

)

6,831

Changes in assets and liabilities providing (using) cash:

Receivables

(21,329

)

63,272

Inventories

9,509

(86,050

)

Accounts payable

(17,530

)

(85,136

)

Contract advances

54,414

73,040

Accrued expenses

3,503

1,827

Accrued income taxes

14,776

(20,555

)

Net pension and post retirement liabilities

8,380

24,706

Other assets and liabilities

(18,401

)

12,463

Net cash provided by operating activities

230,580

187,847

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of businesses, net of cash acquired

(77,600

)

(54,265

)

Purchase of property, plant and equipment

(88,573

)

(70,423

)

Other investing transactions

3,615

(3,429

)

Net cash used by investing activities

(162,558

)

(128,117

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from revolving lines of credit

653,500

977,850

Payments on revolving lines of credit

(651,986

)

(968,459

)

Proceeds from long-term debt

42,300

6,935

Payments on long-term debt

(55,891

)

(52,253

)

Proceeds from senior notes, net of issuance costs

491,769

Payments on senior notes

(300,000

)

Payments on finance lease obligations

(1,588

)

(730

)

Payment of dividends

(24,081

)

(17,049

)

Proceeds from sale of treasury stock

4,603

3,199

Purchase of outstanding shares for treasury

(26,702

)

(191,961

)

Proceeds from sale of stock held by SECT

679

17,082

Purchase of stock held by SECT

(3,535

)

(6,241

)

Other financing transactions

(5,879

)

Net cash used by financing activities

(62,701

)

(45,737

)

Effect of exchange rate changes on cash

1,265

(932

)

Increase in cash, cash equivalents and restricted cash

6,586

13,061

Cash, cash equivalents and restricted cash at beginning of period

85,072

92,548

Cash, cash equivalents and restricted cash at end of period

$

91,658

$

105,609

View source version on businesswire.com: https://www.businesswire.com/news/home/20210730005110/en/

Contacts

Ann Marie Luhr
716-687-4225

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