Moog Reports Second Quarter Results

Rhea-AI Summary

Moog Inc. reported second-quarter results with sales of $736 million, down 4% year-over-year. Diluted earnings per share increased by 2% to $1.51, including a $0.18 one-time pension curtailment gain. Operating margins dropped to 9.8% from 11.0% in the previous year. The company forecasts full-year sales of $2.84 billion and diluted EPS of $5.00. The Aircraft Controls segment suffered a 11% revenue drop, while the Space and Defense segment grew by 7%. Consolidated backlog reached $1.9 billion, a 5% increase.

Positive

• Diluted earnings per share increased by 2% to $1.51.
• Space and Defense segment revenues rose 7% year-over-year.
• Consolidated backlog increased 5% to $1.9 billion.

Negative

• Sales decreased by 4% compared to the previous year.
• Operating margins dropped from 11.0% to 9.8%.
• Commercial aircraft revenues declined 38%, impacting OEM sales.

Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the second quarter ended April 3, 2021.

Second Quarter Highlights

• Sales of $736 million were down 4% from a year ago;
• Diluted earnings per share of $1.51 were up 2% from a year ago;
• Diluted earnings per share includes a one-time pension curtailment gain of $0.18;
• Operating margins of 9.8% were down from 11.0% a year ago;
• Effective tax rate of 21.6% compared to 19.2% a year ago; and
• $43 million cash flow from operating activities, up 12% from a year ago.

Fiscal 2021 Outlook

The company is providing projections for fiscal year 2021.

• Forecast sales of $2.84 billion;
• Forecast diluted earnings per share of $5.00, plus or minus $0.20;
• Forecast full year operating margins of 9.9%;
• Forecast tax rate of 24.0%; and
• Forecast $302 million cash flow from operating activities.

Segment Results

Aircraft Controls segment revenues in the quarter were $304 million, down 11% year over year. Military aircraft sales were $202 million, 15% higher than a year ago. Military OEM sales increased 33%, to $153 million, tied to very strong funded development programs and higher F-35 Joint Strike Fighter sales. Military aftermarket sales were down 20%, at $48 million, on weaker activity across the portfolio.

Commercial aircraft revenues were $103 million, 38% lower than last year’s second quarter. Sales to commercial OEM customers were down 39%, as wide body production at Boeing and Airbus were below last year’s levels. Commercial aftermarket repair and overhaul revenues decreased 34%.

In the quarter, Space and Defense segment revenues were $206 million, an increase of 7% year over year. Space sales were up 19%, to $88 million, the result of increased sales for NASA programs and integrated space vehicle products. Defense sales were mostly unchanged at $118 million. Lower sales of missile steering controls and security applications were offset by increases in sales of military vehicle and naval application products.

Industrial Systems segment sales in the quarter were $226 million, down 2% from a year ago. Energy product sales were down 23%, the result of a delays in offshore exploration activity. Simulation and test product sales were off 23%, tied to reduced demand for flight simulation pilot training products. Medical product sales increased 7%, to $67 million, tied to higher enteral feeding pump sales. Sales of products for industrial automation applications were up 5% but unchanged after allowing for foreign exchange movements.

Consolidated 12-month backlog was $1.9 billion, up 5% from a year ago.

“We are pleased with our performance in the first half of the year and looking forward to repeating that performance in the second half,” said John Scannell, Chairman and CEO. “We are reinstating guidance today after a 12-month hiatus. The second half of fiscal 2021 will mirror the first half, resulting in full year sales of $2.84 billion and full year earnings per share of $5.00, plus or minus $0.20. Our businesses continue to operate effectively, despite on-going COVID impositions. Market diversity and financial prudence have guided us through the last 12 months and will continue to be the core of our business going forward.”

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								Six Months Ended
		April 3, 2021				March 28, 2020				April 3, 2021				March 28, 2020
Net sales		$	736,402			$	765,277			$	1,420,356			$	1,520,120
Cost of sales		536,493				557,223				1,030,804				1,100,809
Gross profit		199,909				208,054				389,552				419,311
Research and development		30,453				26,688				58,461				54,896
Selling, general and administrative		105,131				107,251				204,734				205,618
Interest		8,629				10,251				17,049				20,483
Other		(6,432)				2,333				(3,191)				9,879
Earnings before income taxes		62,128				61,531				112,499				128,435
Income taxes		13,440				11,786				25,969				28,663
Net earnings		$	48,688			$	49,745			$	86,530			$	99,772
Net earnings per share
Basic		$	1.51			$	1.49			$	2.69			$	2.94
Diluted		$	1.51			$	1.48			$	2.68			$	2.91
Average common shares outstanding
Basic		32,146,247				33,434,420				32,110,365				33,972,635
Diluted		32,325,494				33,685,395				32,281,158				34,236,399

Moog Inc. CONSOLIDATED SALES AND OPERATING PROFIT (dollars in thousands)
		Three Months Ended								Six Months Ended
		April 3, 2021				March 28, 2020				April 3, 2021				March 28, 2020
Net sales:
Aircraft Controls		$	304,361			$	341,407			$	591,135			$	681,361
Space and Defense Controls		206,168				193,010				394,330				379,250
Industrial Systems		225,873				230,860				434,891				459,509
Net sales		$	736,402			$	765,277			$	1,420,356			$	1,520,120
Operating profit:
Aircraft Controls		$	22,018			$	34,701			$	49,940			$	73,293
		7.2		%		10.2		%		8.4		%		10.8		%
Space and Defense Controls		26,652				24,652				49,698				49,934
		12.9		%		12.8		%		12.6		%		13.2		%
Industrial Systems		23,813				24,775				43,711				51,574
		10.5		%		10.7		%		10.1		%		11.2		%
Total operating profit		72,483				84,128				143,349				174,801
		9.8		%		11.0		%		10.1		%		11.5		%
Deductions from operating profit:
Interest expense		8,629				10,251				17,049				20,483
Equity-based compensation expense		2,127				890				4,629				3,271
Non-service pension (income) expense		(4,901)				3,598				(3,981)				7,199
Corporate and other expenses, net		4,500				7,858				13,153				15,413
Earnings before income taxes		$	62,128			$	61,531			$	112,499			$	128,435

Moog Inc. CONSOLIDATED BALANCE SHEETS (dollars in thousands)
		April 3, 2021				October 3, 2020
ASSETS
Current assets
Cash and cash equivalents		$	90,110			$	84,583
Restricted cash		902				489
Receivables, net		922,092				855,535
Inventories, net		636,580				623,043
Prepaid expenses and other current assets		48,278				49,837
Total current assets		1,697,962				1,613,487
Property, plant and equipment, net		628,550				600,498
Operating lease right-of-use assets		65,410				68,393
Goodwill		860,239				821,856
Intangible assets, net		114,820				85,046
Deferred income taxes		18,808				18,924
Other assets		20,051				17,627
Total assets		$	3,405,840			$	3,225,831
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current installments of long-term debt		$	71,652			$	350
Accounts payable		175,061				176,868
Accrued compensation		99,223				109,510
Contract advances		256,080				203,338
Accrued liabilities and other		225,915				220,488
Total current liabilities		827,931				710,554
Long-term debt, excluding current installments		896,955				929,982
Long-term pension and retirement obligations		180,112				183,366
Deferred income taxes		48,778				40,474
Other long-term liabilities		113,607				118,372
Total liabilities		2,067,383				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		519,006				472,645
Retained earnings		2,183,218				2,112,734
Treasury shares		(1,000,389)				(990,783)
Stock Employee Compensation Trust		(85,034)				(64,242)
Supplemental Retirement Plan Trust		(70,047)				(53,098)
Accumulated other comprehensive loss		(259,577)				(285,453)
Total shareholders’ equity		1,338,457				1,243,083
Total liabilities and shareholders’ equity		$	3,405,840			$	3,225,831

Moog Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
		Six Months Ended
		April 3, 2021				March 28, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings		$	86,530			$	99,772
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		37,622				36,962
Amortization		6,436				6,676
Deferred income taxes		(1,187)				(1,346)
Equity-based compensation expense		4,629				3,271
Other		(3,115)				5,674
Changes in assets and liabilities providing (using) cash:
Receivables		(47,697)				(42,208)
Inventories		9,301				(49,467)
Accounts payable		(5,088)				(14,891)
Contract advances		51,349				46,468
Accrued expenses		(1,799)				(9,920)
Accrued income taxes		12,691				(14,040)
Net pension and post retirement liabilities		3,846				15,785
Other assets and liabilities		(16,151)				(2,032)
Net cash provided by operating activities		137,367				80,704
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		(77,600)				(54,265)
Purchase of property, plant and equipment		(58,019)				(53,463)
Other investing transactions		1,895				(3,706)
Net cash used by investing activities		(133,724)				(111,434)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving lines of credit		503,200				829,000
Payments on revolving lines of credit		(467,700)				(758,500)
Proceeds from long-term debt		39,800				4,300
Payments on long-term debt		(39,903)				(4,300)
Proceeds from senior notes, net of issuance costs		—				491,769
Payments on senior notes		—				(300,000)
Payments on finance lease obligations		(1,042)				(412)
Payment of dividends		(16,046)				(17,049)
Proceeds from sale of treasury stock		4,230				3,199
Purchase of outstanding shares for treasury		(18,844)				(191,961)
Proceeds from sale of stock held by SECT		274				14,278
Purchase of stock held by SECT		(2,559)				(6,209)
Other financing transactions		—				(5,877)
Net cash provided by financing activities		1,410				58,238
Effect of exchange rate changes on cash		887				(791)
Increase in cash, cash equivalents and restricted cash		5,940				26,717
Cash, cash equivalents and restricted cash at beginning of period		85,072				92,548
Cash, cash equivalents and restricted cash at end of period		$	91,012			$	119,265

 

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FAQ

What were Moog's second quarter 2021 sales results?

Moog reported second quarter sales of $736 million, a 4% decline from the previous year.

What were the diluted earnings per share for Moog in Q2 2021?

Moog's diluted earnings per share for the second quarter of 2021 were $1.51, a 2% increase year-over-year.

How did Moog's operating margins perform in the second quarter of 2021?

Operating margins decreased to 9.8% in Q2 2021, down from 11.0% a year ago.

What is the consolidated backlog for Moog as of Q2 2021?

Moog's consolidated backlog stood at $1.9 billion, reflecting a 5% increase from the previous year.

What outlook has Moog provided for fiscal year 2021?

Moog forecasts full-year sales of $2.84 billion and diluted earnings per share of $5.00, plus or minus $0.20.