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Moog Reports First Quarter Results

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Moog Inc. (NYSE: MOG.A and MOG.B) reported Q1 financial results for the period ending January 2, 2021. Sales totaled $684 million, a 9% decline from the previous year. Diluted EPS was $1.17, down 19%, but 34% higher than the average adjusted EPS from the second half of FY 2020. The company completed the acquisition of Genesys Aerosystems, while generating $94 million in cash flow from operations, up 123%. Consolidated backlog stands at $1.9 billion, a 14% increase year over year.

Positive
  • Acquired Genesys Aerosystems, enhancing product offerings.
  • $94 million cash flow from operations, up 123% year-over-year.
  • Consolidated backlog at $1.9 billion, up 14% year-over-year.
Negative
  • Sales down 9% year-over-year, reflecting market challenges.
  • Diluted EPS down 19% compared to last year.
  • Commercial aircraft revenues dropped 51%, with significant declines in OEM sales.

Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the first quarter ended January 2, 2021.

First Quarter Highlights

  • Sales of $684 million were down 9% from a year ago and in line with second half fiscal 2020 average sales;
  • Diluted earnings per share of $1.17 were down 19% from a year ago and were 34% higher than average adjusted second half fiscal 2020 diluted EPS;
  • Operating margins of 10.4% were down from 12.0% a year ago and 210 basis points higher than the average adjusted second half fiscal 2020 operating margins;
  • Effective tax rate of 24.9%;
  • Completed the acquisition of Genesys Aerosystems, a manufacturer of electronic flight instrument systems and autopilot solutions; and
  • $94 million cash flow from operating activities, up 123% from a year ago.

Segment Results

Aircraft Controls segment revenues in the quarter were $287 million, down 16% year over year. Military aircraft sales were $206 million, 18% higher than a year ago. Military OEM sales increased 26%, to $149 million, tied to very strong F-35 Joint Strike Fighter sales, foreign military sales and funded development programs. Military aftermarket sales were 3% higher, on increased sales across most of the portfolio.

Commercial aircraft revenues were $81 million, 51% lower than a year ago. Sales to commercial OEM customers were down 56%, as production declined significantly at both Boeing and Airbus. Commercial aftermarket sales decreased 32% on lower repair and overhaul activity.

In the quarter, Space and Defense segment revenues were $188 million, an increase of 1% year over year. Space sales were up 24%, to $78 million, the result of increased sales for NASA programs, hypersonics programs and integrated space vehicles. Defense sales were down 11%, at $110 million. Lower sales of missile steering controls and security applications partially offset increases in sales of military vehicle and naval application products.

Industrial Systems segment sales in the quarter were $209 million, down 9% from a year ago. Medical product sales increased 3%, to $65 million, on higher pump sales. Energy product sales were down 4%, the result of a decrease in offshore exploration activity. Sales of products for industrial automation applications were off 11%, with weakness seen across the portfolio. Simulation and test product sales were off 29% on lower demand for flight simulation products used for aircraft pilot training.

Consolidated 12-month backlog was $1.9 billion, up 14% from a year ago.

“Given the continued challenges of COVID, our first quarter results were very respectable,” said John Scannell, Chairman and CEO. “Comparing our first quarter performance with the third and fourth quarters of FY ’20, our sales held steady and our earnings per share were up nicely. We had another quarter of strong free cash flow and we completed the acquisition of Genesys Aerosystems in our Aircraft Controls segment.”

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 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.

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

(dollars in thousands, except per share data)

 

 

 

Three Months Ended

 

 

January 2,
2021

 

December 28,
2019

Net sales

 

$

683,954

 

 

$

754,843

 

Cost of sales

 

494,311

 

 

543,586

 

Gross profit

 

189,643

 

 

211,257

 

Research and development

 

28,008

 

 

28,208

 

Selling, general and administrative

 

99,603

 

 

98,367

 

Interest

 

8,420

 

 

10,232

 

Other

 

3,241

 

 

7,546

 

Earnings before income taxes

 

50,371

 

 

66,904

 

Income taxes

 

12,529

 

 

16,877

 

Net earnings

 

$

37,842

 

 

$

50,027

 

 

 

 

 

 

Net earnings per share

 

 

 

 

Basic

 

$

1.18

 

 

$

1.45

 

Diluted

 

$

1.17

 

 

$

1.44

 

 

 

 

 

 

Average common shares outstanding

 

 

 

 

Basic

 

32,074,873

 

 

34,510,851

 

Diluted

 

32,237,212

 

 

34,787,404

 

 

 

 

 

 

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT

(dollars in thousands)

 

 

 

Three Months Ended

 

 

January 2,
2021

 

December 28,
2019

Net sales:

 

 

 

 

Aircraft Controls

 

$

286,774

 

 

$

339,954

 

Space and Defense Controls

 

188,162

 

 

186,240

 

Industrial Systems

 

209,018

 

 

228,649

 

Net sales

 

$

683,954

 

 

$

754,843

 

Operating profit:

 

 

 

 

Aircraft Controls

 

$

27,922

 

 

$

38,592

 

 

 

9.7

%

 

11.4

%

Space and Defense Controls

 

23,046

 

 

25,282

 

 

 

12.2

%

 

13.6

%

Industrial Systems

 

19,898

 

 

26,799

 

 

 

9.5

%

 

11.7

%

Total operating profit

 

70,866

 

 

90,673

 

 

 

10.4

%

 

12.0

%

Deductions from operating profit:

 

 

 

 

Interest expense

 

8,420

 

 

10,232

 

Equity-based compensation expense

 

2,502

 

 

2,381

 

Non-service pension expense

 

920

 

 

3,601

 

Corporate and other expenses, net

 

8,653

 

 

7,555

 

Earnings before income taxes

 

$

50,371

 

 

$

66,904

 

Moog Inc.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

 

January 2,
2021

 

October 3,
2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

97,639

 

 

$

84,583

 

Restricted cash

 

695

 

 

489

 

Receivables, net

 

872,843

 

 

855,535

 

Inventories, net

 

646,627

 

 

623,043

 

Prepaid expenses and other current assets

 

47,119

 

 

49,837

 

Total current assets

 

1,664,923

 

 

1,613,487

 

Property, plant and equipment, net

 

609,358

 

 

600,498

 

Operating lease right-of-use assets

 

68,772

 

 

68,393

 

Goodwill

 

866,366

 

 

821,856

 

Intangible assets, net

 

117,717

 

 

85,046

 

Deferred income taxes

 

20,524

 

 

18,924

 

Other assets

 

18,888

 

 

17,627

 

Total assets

 

$

3,366,548

 

 

$

3,225,831

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Current installments of long-term debt

 

$

69,148

 

 

$

350

 

Accounts payable

 

173,256

 

 

176,868

 

Accrued compensation

 

102,138

 

 

109,510

 

Contract advances

 

234,480

 

 

203,338

 

Accrued liabilities and other

 

234,840

 

 

220,488

 

Total current liabilities

 

813,862

 

 

710,554

 

Long-term debt, excluding current installments

 

898,078

 

 

929,982

 

Long-term pension and retirement obligations

 

189,081

 

 

183,366

 

Deferred income taxes

 

47,829

 

 

40,474

 

Other long-term liabilities

 

114,454

 

 

118,372

 

Total liabilities

 

2,063,304

 

 

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

 

505,038

 

 

472,645

 

Retained earnings

 

2,142,566

 

 

2,112,734

 

Treasury shares

 

(1,000,795

)

 

(990,783

)

Stock Employee Compensation Trust

 

(78,597

)

 

(64,242

)

Supplemental Retirement Plan Trust

 

(65,986

)

 

(53,098

)

Accumulated other comprehensive loss

 

(250,262

)

 

(285,453

)

Total shareholders’ equity

 

1,303,244

 

 

1,243,083

 

Total liabilities and shareholders’ equity

 

$

3,366,548

 

 

$

3,225,831

 

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

 

 

Three Months Ended

 

 

January 2,
2021

 

December 28,
2019

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

37,842

 

 

$

50,027

 

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

 

 

 

 

Depreciation

 

18,647

 

 

18,386

 

Amortization

 

2,841

 

 

3,281

 

Deferred income taxes

 

(139

)

 

3,205

 

Equity-based compensation expense

 

2,502

 

 

2,381

 

Other

 

1,544

 

 

(1,017

)

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

3,664

 

 

(19,519

)

Inventories

 

(4,058

)

 

(13,782

)

Accounts payable

 

(7,510

)

 

(29,153

)

Contract advances

 

29,712

 

 

40,215

 

Accrued expenses

 

6,989

 

 

(26,998

)

Accrued income taxes

 

8,831

 

 

5,349

 

Net pension and post retirement liabilities

 

5,022

 

 

8,327

 

Other assets and liabilities

 

(11,792

)

 

1,404

 

Net cash provided by operating activities

 

94,095

 

 

42,106

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

(77,708

)

 

(53,906

)

Purchase of property, plant and equipment

 

(20,309

)

 

(27,310

)

Other investing transactions

 

1,604

 

 

(3,684

)

Net cash used by investing activities

 

(96,413

)

 

(84,900

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from revolving lines of credit

 

271,700

 

 

272,000

 

Payments on revolving lines of credit

 

(235,700

)

 

(617,500

)

Proceeds from long-term debt

 

25,100

 

 

 

Payments on long-term debt

 

(27,586

)

 

 

Proceeds from senior notes, net of issuance costs

 

 

 

492,750

 

Payments on finance lease obligations

 

(488

)

 

(88

)

Payment of dividends

 

(8,010

)

 

(8,661

)

Purchase of outstanding shares for treasury

 

(11,674

)

 

(57,776

)

Proceeds from sale of stock held by SECT

 

274

 

 

 

Purchase of stock held by SECT

 

(655

)

 

(2,440

)

Other financing transactions

 

 

 

(1,895

)

Net cash provided by financing activities

 

12,961

 

 

76,390

 

Effect of exchange rate changes on cash

 

2,619

 

 

1,147

 

Increase in cash, cash equivalents and restricted cash

 

13,262

 

 

34,743

 

Cash, cash equivalents and restricted cash at beginning of period

 

85,072

 

 

92,548

 

Cash, cash equivalents and restricted cash at end of period

 

$

98,334

 

 

$

127,291

 

 

 

 

 

 

 

FAQ

What were Moog Inc.'s sales for the first quarter of 2021?

Moog Inc. reported sales of $684 million for the first quarter ended January 2, 2021.

How much did Moog's diluted EPS change in Q1 2021?

Moog's diluted earnings per share for Q1 2021 was $1.17, down 19% from the previous year.

What acquisition did Moog Inc. complete recently?

Moog Inc. completed the acquisition of Genesys Aerosystems.

What is Moog Inc.'s cash flow from operations for Q1 2021?

Moog Inc. generated $94 million in cash flow from operations, which is a 123% increase from a year ago.

What are the key segments that Moog operates in?

Moog operates in Aircraft Controls, Space and Defense, and Industrial Systems segments.

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