Press release

Moog Reports Second Quarter Results

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Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for
the quarter ended March 30, 2019.

Second Quarter Highlights

  • Sales of $719 million, up 4% from a year ago;
  • Diluted earnings per share of $1.20 includes a $0.20 per share charge
    related to a supplier quality issue in the Aircraft Controls segment;
  • Cash flow from operations of $45 million.

Segment Results

Total Aircraft Controls segment sales in the quarter were $321 million,
up 3% year over year. Military aircraft sales of $155 million were
unchanged. F-35 Joint Strike Fighter sales increased 4%. Other OEM
military sales were down 11%, to $68 million, attributed to lower sales
in helicopter product lines. Military aftermarket sales were $53
million, up 13% on F-35 and V-22 program activity.

Commercial aircraft revenues increased 6%, to $166 million. Boeing OEM
sales were $64 million, up 12% on strong 787 sales. Airbus sales of $44
million increased 12% on A350 deliveries. Other legacy OEM sales were
higher year over year. Commercial aftermarket sales were down 9%, mostly
due to lower business jet and 787 activity.

Space and Defense segment sales were $165 million, up 15% year over
year. Defense sales were up 30%, to $111 million, on increases in all
product lines. Space sales were off 8%, attributed to decreases in sales
of space avionics and satellite products, compared to last year’s strong
second quarter.

Industrial Systems segment sales in the quarter were $233 million,
mostly unchanged from last year’s second quarter. The Company’s exit
from the wind pitch controls business last year reduced energy market
sales, but were offset, in part, by higher sales for energy exploration
applications. Industrial automation sales were up a healthy 7%, to $116
million, helped by the large motor acquisition in the Czech Republic.
Medical market sales were 6% higher on strong enteral pump sales.
Simulation and test sales were mostly unchanged.

Total backlog was $2.2 billion, with consolidated 12-month backlog at
$1.6 billion, up 26% from a year ago.

Fiscal 2019 Outlook

The Company updated its projections for fiscal 2019.

  • Forecast sales of $2.88 billion, unchanged from 90 days ago;
  • Forecast earnings per share of $5.05, plus or minus $0.20;
  • Forecast full year operating margins of 11.4%;
  • Forecast cash flow from operations of $270 million;
  • Forecast effective tax rate of 26.0%.

“Overall, Q2 was another good quarter for our operations with sales up
and adjusted earnings per share ahead of our guidance,” said John
Scannell, Chairman and CEO. “We took a reserve in the quarter for the
future costs associated with a supplier quality issue in our Aircraft
Group, but apart from this reserve, at the half way mark, the year is
shaping up nicely.”

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 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 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:

  • 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 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;
  • 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;
  • 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;
  • we are involved in various legal proceedings, the outcome of which may
    be unfavorable to us;
  • future terror attacks, war, natural disasters or other catastrophic
    events beyond our control could negatively impact our business; and
  • our operations are subject to environmental laws, and complying with
    those laws may cause us to incur significant costs.

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
      March 30,
2019 		    March 31,
2018 		    March 30,
2019 		    March 31,
2018
Net sales $ 718,811     $ 689,049 $ 1,398,487     $ 1,316,584
Cost of sales 521,410 488,788 1,001,584 931,938
Inventory write-down – restructuring —       7,329       —       7,329
Gross profit 197,401 192,932 396,903 377,317
Research and development 31,344 33,995 63,220 66,329
Selling, general and administrative 99,860 98,665 196,186 193,284
Interest 9,939 9,089 19,621 17,735
Restructuring — 24,058 — 24,058
Other 640       1,456       4,074       2,408
Earnings before income taxes 55,618 25,669 113,802 73,503
Income taxes 13,259       11,704       27,374       58,239
Net earnings $ 42,359       $ 13,965       $ 86,428       $ 15,264
 
Net earnings per share
Basic $ 1.21 $ 0.39 $ 2.48 $ 0.43
Diluted $ 1.20       $ 0.39       $ 2.46       $ 0.42
 
Average common shares outstanding
Basic 34,886,541 35,770,089 34,850,898 35,771,247
Diluted     35,241,113       36,179,858       35,183,471       36,190,455
 

Diluted net earnings per share for the three and six months ended March
30, 2019 includes an increase of $0.10 related to our adoption of
Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with
Customers (ASC 606). Results shown in the previous table include the
one-time impacts of the Tax Cuts and Jobs Act of 2017 and restructuring
related to our wind pitch controls business. The table below adjusts the
income taxes, net earnings and diluted net earnings per share to exclude
these impacts.

Reconciliation to non-GAAP adjusted income taxes, net earnings and
diluted net earnings per share:

             
    Three Months Ended     Six Months Ended
      March 30,
2019 		    March 31,
2018 		    March 30,
2019 		    March 31,
2018
As Reported:            
Earnings before income taxes $ 55,618 $ 25,669 $ 113,802 $ 73,503
Income taxes 13,259 11,704 27,374 58,239
Effective income tax rate 23.8 % 45.6 % 24.1 % 79.2 %
Net earnings 42,359 13,965 86,428 15,264
Diluted net earnings per share $ 1.20 $ 0.39 $ 2.46 $ 0.42
 
Non-GAAP Adjustments – Due to Restructuring – Wind pitch controls
business:
Earnings before income taxes $ — $ 31,387 $ — $ 31,387
Income taxes — 5,485 — 5,485
Net earnings — 25,902 — 25,902
Diluted net earnings per share $ — $ 0.72 $ — $ 0.72
 
Non-GAAP Adjustments – Due to Tax Reform:
Income taxes $ — $ (1,958 ) $ — $ (36,776 )
Net earnings — 1,958 — 36,776
Diluted net earnings per share $ — $ 0.05 $ — $ 1.02
 
As Adjusted:
Earnings before income taxes $ 55,618 $ 57,056 $ 113,802 $ 104,890
Income taxes 13,259 15,231 27,374 26,948
Effective income tax rate 23.8 % 26.7 % 24.1 % 25.7 %
Net earnings 42,359 41,825 86,428 52,066
Diluted net earnings per share     $ 1.20       $ 1.16       $ 2.46       $ 2.15  
 

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

             
    Three Months Ended     Six Months Ended
      March 30,
2019 		    March 31,
2018 		    March 30,
2019 		    March 31,
2018
Net sales:            
Aircraft Controls $ 320,627 $ 311,439 $ 624,672 $ 589,973
Space and Defense Controls 164,825 143,527 320,893 276,920
Industrial Systems 233,359       234,083       452,922       449,691  
Net sales     $ 718,811       $ 689,049       $ 1,398,487       $ 1,316,584  
Operating profit (loss):
Aircraft Controls $ 27,122 $ 33,793 $ 60,321 $ 64,836
8.5 % 10.9 % 9.7 % 11.0 %
Space and Defense Controls 20,504 17,042 38,977 33,515
12.4 % 11.9 % 12.1 % 12.1 %
Industrial Systems 30,228 (5,428 ) 57,933 14,483
13.0 %     (2.3 )%     12.8 %     3.2 %
Total operating profit 77,854 45,407 157,231 112,834
10.8 % 6.6 % 11.2 % 8.6 %
Deductions from operating profit:
Interest expense 9,939 9,089 19,621 17,735
Equity-based compensation expense 1,683 1,499 3,691 3,500
Non-service pension expense 3,187 1,707 6,380 3,400
Corporate and other expenses, net     7,427       7,443       13,737       14,696  
Earnings before income taxes     $ 55,618       $ 25,669       $ 113,802       $ 73,503  
 

Operating Profit (Loss) and Margins – as adjusted

             
    Three Months Ended     Six Months Ended
      March 30,
2019 		    March 31,
2018 		    March 30,
2019 		    March 31,
2018
Industrial Systems operating profit – as reported $ 30,228     $ (5,428 )     $ 57,933     $ 14,483
Inventory write-down – restructuring — 7,329 — 7,329
Restructuring – Wind pitch controls business —       24,058       —       24,058  
Industrial Systems operating profit- as adjusted 30,228 25,959 57,933 45,870
13.0 %     11.1 %     12.8 %     10.2 %
Total operating profit – as adjusted $ 77,854       $ 76,794       $ 157,231       $ 144,221  
      10.8 %     11.1 %     11.2 %     11.0 %
 

Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars
in thousands)

             
      March 30,
2019 		    September 29,
2018
ASSETS        
Current assets
Cash and cash equivalents $ 112,072 $ 125,584
Receivables 898,801 793,911
Inventories 489,067 512,522
Prepaid expenses and other current assets 47,229       44,404  

Total current assets

1,547,169 1,476,421
Property, plant and equipment, net 569,624 552,865
Goodwill 791,398 797,217
Intangible assets, net 88,089 95,537
Deferred income taxes 15,671 17,328
Other assets 21,006       24,680  
Total assets     $ 3,032,957       $ 2,964,048  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings $ 90 $ 3,623
Current installments of long-term debt 315 365
Accounts payable 224,555 213,982
Accrued compensation 126,819 147,765
Contract advances 169,836 151,687
Contract and contract-related loss reserves 49,383 42,258
Other accrued liabilities 117,094       120,944  
Total current liabilities 688,092 680,624
Long-term debt, excluding current installments 825,692 858,836
Long-term pension and retirement obligations 116,466 117,471
Deferred income taxes 53,272 46,477
Other long-term liabilities 34,993       35,654  
Total liabilities 1,718,515       1,739,062  
Commitment and contingencies — —
Shareholders’ equity
Common stock – Class A 43,786 43,785
Common stock – Class B 7,494 7,495
Additional paid-in capital 510,538 502,257
Retained earnings 2,057,435 1,973,514
Treasury shares (749,845 ) (738,494 )
Stock Employee Compensation Trust (109,506 ) (118,449 )
Supplemental Retirement Plan Trust (75,079 ) (72,941 )
Accumulated other comprehensive loss (370,381 )     (372,181 )
Total shareholders’ equity 1,314,442       1,224,986  
Total liabilities and shareholders’ equity     $ 3,032,957       $ 2,964,048  
 

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

       
    Six Months Ended
      March 30,
2019 		    March 31,
2018
CASH FLOWS FROM OPERATING ACTIVITIES    
Net earnings $ 86,428 $ 15,264
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation 36,074 35,536
Amortization 7,212 9,425
Deferred income taxes 2,182 30,709
Equity-based compensation expense 3,691 3,500
Impairment of long-lived assets and inventory write-down associated
with restructuring 		— 21,811
Other 1,331 2,960
Changes in assets and liabilities providing (using) cash:
Receivables (16,621 ) (30,111 )
Inventories (44,428 ) (20,685 )
Accounts payable 11,158 11,351
Contract advances 17,127 5,547
Accrued expenses (6,715 ) 10,558
Accrued income taxes (1,767 ) 4,953
Net pension and post retirement liabilities 13,039 (70,309 )
Other assets and liabilities 137       14,721  

Net cash provided by operating activities

108,848       45,230  
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired — (42,116 )
Purchase of property, plant and equipment (59,971 ) (43,924 )
Other investing transactions 2,447       (3,710 )
Net cash (used) by investing activities (57,524 )     (89,750 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term repayments (3,560 ) —
Proceeds from revolving lines of credit 327,300 209,500
Payments on revolving lines of credit (361,300 ) (269,610 )
Proceeds from long-term debt — 10,000
Payments on long-term debt (167 ) (20,614 )
Payment of dividends (17,430 ) —
Proceeds from sale of treasury stock 2,443 2,451
Purchase of outstanding shares for treasury (16,319 ) (5,118 )
Proceeds from sale of stock held by SECT 9,479 1,941
Purchase of stock held by SECT (7,354 )     (7,914 )
Net cash (used) by financing activities (66,908 )     (79,364 )
Effect of exchange rate changes on cash (50 )     11,418  
Increase (decrease) in cash, cash equivalents and restricted cash (15,634 ) (112,466 )
Cash, cash equivalents and restricted cash at beginning of period 127,706       386,969  
Cash, cash equivalents and restricted cash at end of period     $ 112,072       $ 274,503  
 
SUPPLEMENTAL CASH FLOW INFORMATION
Treasury shares issued as compensation $ 11,795 $ —
Equipment acquired through financing     $ 148       $ —