January 29, 2016 - 7:55 AM EST
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Moog Reports First Quarter Results

EAST AURORA, NY--(Marketwired - Jan 29, 2016) - Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) today announced first quarter sales of $568 million, down 10% from a year ago on weaker industrial and energy markets. Net earnings of $26 million decreased by 26% and earnings per share of $.71 were 17% lower.

Aircraft Controls segment sales in the quarter were $255 million, down 4% year over year. Commercial aircraft revenues were off 4%, to $135 million. Lower OEM sales to Boeing were offset by higher OEM sales to Airbus. Commercial aftermarket sales were down marginally to $28 million, the result of lower 787 initial provisioning.

Military aircraft sales were down 5%, to $120 million. Lower F-18 and V-22 OEM sales were partly offset by a 31% increase in F-35 sales. Military aftermarket sales were nominally lower at $49 million, as the C-5 modernization program winds down.

Space and Defense Controls segment sales of $83 million were 17% lower than a year ago. Space market sales of $40 million were down 24%, mostly the result of a cyclical decrease in demand for satellite components. Defense sales were $43 million, down 10%, all on lower security sales.

Industrial Systems segment sales of $125 million were down 6%, all due to the stronger U.S. dollar. Energy sales were down 17% due to lower sales of oil and gas exploration equipment. Sales of industrial automation products were off by 11% but offset by a 19% increase in sales of simulation and test systems.

Components segment sales, at $80 million, were 26% lower than a year ago. Decreases were seen across all markets as the segment was impacted by weaker oil prices, the slowing economy in China and the strong U.S. dollar. 

Medical Devices segment sales of $26 million were 13% higher than last year on very strong sales of IV and enteral pumps and associated administration sets.

Twelve month consolidated backlog was $1.2 billion.

Projections for fiscal 2016 were also updated based on a weakening outlook for the industrial and energy businesses. The company is reducing its sales forecast for the year by $100 million which will result in sales of $2.47 billion, net earnings of $124 million and earnings per share of $3.35, plus or minus $0.15 per share. 

"We expected a slow start to the year and we came in at the low end of our guidance for the quarter," said John Scannell, Chairman and CEO. "Over the last 90 days, our outlook for A&D markets has held fairly firm, but our view on our non-A&D markets has changed based on evolving global economics. We're still investing in the long-term future across all of our markets and we're promoting more efficient processes in our operations. Over the past couple of years we've seen improvements in several operating segments and our team will continue to work very hard to deliver the best results possible for our shareholders."

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.
(dollars in thousands, except per share data)
    Three Months Ended  
    January 2,
  January 3,
Net sales   $ 568,457   $ 630,523  
Cost of sales     406,997     446,605  
Gross profit     161,460     183,918  
  Research and development     34,798     31,321  
  Selling, general and administrative     82,994     97,827  
  Interest     8,322     5,368  
  Restructuring     273     --  
  Other     (582 )   (36 )
Earnings before income taxes     35,655     49,438  
Income taxes     9,495     14,173  
Net earnings attributable to common shareholders and noncontrolling interest   $ 26,160   $ 35,265  
Net earnings (loss) attributable to noncontrolling interest     (81 )   --  
Net earnings attributable to common shareholders   $ 26,241   $ 35,265  
Net earnings per share attributable to common shareholders              
  Basic   $ 0.71   $ 0.87  
  Diluted   $ 0.71   $ 0.86  
Average common shares outstanding              
  Basic     36,713,949     40,594,886  
  Diluted     37,028,331     41,080,179  
Moog Inc.
(dollars in thousands)
    Three Months Ended  
    January 2,
    January 3,
Net sales:                
  Aircraft Controls   $ 254,835     $ 266,368  
  Space and Defense Controls     82,640       99,955  
  Industrial Systems     125,179       133,366  
  Components     79,575       107,704  
  Medical Devices     26,228       23,130  
Net sales   $ 568,457     $ 630,523  
Operating profit:                
  Aircraft Controls   $ 18,131     $ 24,458  
        7.1 %     9.2 %
  Space and Defense Controls     11,816       8,726  
        14.3 %     8.7 %
  Industrial Systems     13,633       13,219  
        10.9 %     9.9 %
  Components     4,700       16,962  
        5.9 %     15.7 %
  Medical Devices     3,279       2,336  
      12.5 %     10.1 %
Total operating profit     51,559       65,701  
      9.1 %     10.4 %
Deductions from operating profit:                
  Interest expense     8,322       5,368  
  Equity-based compensation expense     936       3,398  
  Corporate and other expenses, net     6,646       7,497  
Earnings before income taxes   $ 35,655     $ 49,438  
Moog Inc.
(dollars in thousands)
    January 2,
  October 3,
Current assets            
  Cash and cash equivalents   $ 323,318   $ 309,853
  Receivables     690,876     698,419
  Inventories     501,653     493,360
  Deferred income taxes     91,225     91,210
  Prepaid expenses and other current assets     37,933     34,653
    Total current assets     1,645,005     1,627,495
Property, plant and equipment, net     535,393     536,756
Goodwill     752,791     737,212
Intangible assets, net     143,048     143,723
Other assets     40,603     41,285
Total assets   $ 3,116,840   $ 3,086,471
Current liabilities            
  Short-term borrowings   $ 1,363   $ 83
  Current installments of long-term debt     443     34
  Accounts payable     147,971     165,973
  Accrued salaries, wages and commissions     115,457     125,270
  Customer advances     166,491     167,423
  Contract loss reserves     29,724     30,422
  Other accrued liabilities     106,740     116,300
    Total current liabilities     568,189     605,505
Long-term debt, excluding current installments     1,130,569     1,075,067
Long-term pension and retirement obligations     333,441     348,239
Deferred income taxes     69,136     60,209
Other long-term liabilities     3,363     2,919
  Total liabilities     2,104,698     2,091,939
Commitment and contingencies     --     --
Redeemable noncontrolling interest     9,106     --
Shareholders' equity            
  Common stock     51,280     51,280
  Other shareholders' equity     951,756     943,252
    Total shareholders' equity     1,003,036     994,532
Total liabilities and shareholders' equity   $ 3,116,840   $ 3,086,471
Moog Inc.
(dollars in thousands)
    Three Months Ended  
    January 2,
    January 3,
  Net earnings attributable to common shareholders and noncontrolling interest   $ 26,160     $ 35,265  
  Adjustments to reconcile net earnings to net cash provided (used) by operating activities:                
    Depreciation     19,208       19,833  
    Amortization     5,877       6,741  
    Deferred income taxes     3,532       6,713  
    Equity-based compensation expense     936       3,398  
    Other     804       1,111  
  Changes in assets and liabilities providing (using) cash:                
    Receivables     5,221       62,772  
    Inventories     (11,131 )     (15,381 )
    Accounts payable     (22,522 )     (6,528 )
    Customer advances     (498 )     (1,019 )
    Accrued expenses     (17,114 )     (35,922 )
    Accrued income taxes     (2,685 )     (3,060 )
    Net pension and post retirement liabilities     (5,709 )     970  
    Other assets and liabilities     (2,534 )     3,580  
      Net cash provided (used) by operating activities     (455 )     78,473  
  Acquisitions of businesses, net of cash acquired     (11,016 )     --  
  Purchase of property, plant and equipment     (12,305 )     (20,160 )
  Other investing transactions     1,021       71  
      Net cash used by investing activities     (22,300 )     (20,089 )
  Net short-term repayments     --       (3,236 )
  Proceeds from revolving lines of credit     148,605       123,170  
  Payments on revolving lines of credit     (93,605 )     (337,170 )
  Payments on long-term debt     (9,540 )     (5,234 )
  Proceeds from senior notes, net of issuance costs     --       294,718  
  Proceeds from sale of treasury stock     2,230       9,951  
  Purchase of outstanding shares for treasury     (3,034 )     (122,443 )
  Purchase of stock held by SECT     (1,020 )     (4,460 )
  Excess tax benefits from equity-based payment arrangements     580       4,855  
      Net cash provided (used) by financing activities     44,216       (39,849 )
Effect of exchange rate changes on cash     (7,996 )     (9,587 )
Increase in cash and cash equivalents     13,465       8,948  
  Cash and cash equivalents at beginning of period     309,853       231,292  
  Cash and cash equivalents at end of period   $ 323,318     $ 240,240  

Ann Marie Luhr

Source: Marketwired (January 29, 2016 - 7:55 AM EST)

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