Moog Reports Third Quarter Results

EAST AURORA, NY--(Marketwired - Jul 31, 2015) - Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) announced today third quarter earnings of $36 million, or $.94 a share. Included in the third quarter earnings is a per share restructuring charge of $.11, resulting in adjusted EPS of $1.05, down slightly from last year's $1.08 per share. Sales in the quarter of $635 million were down 7% from a year ago.

Aircraft segment sales in the quarter were $270 million, down 8% from a year ago. Commercial aircraft sales of $129 million were down $17 million, or 12%. Sales of OEM products to Boeing were 16% lower compared to last year's unusually strong third quarter. Airbus sales increased 12%, to $19 million, as the A350 production continues to ramp up. Commercial aftermarket revenues of $31 million were down 9% due to lower initial provisioning of 787 spares.

Military aircraft sales of $141 million were 5% lower year over year. Military aftermarket sales were down 5%, mainly due to the winding down of the C-5M Super Galaxy modernization program. F-35 sales, at $22 million, were down $1 million as work on the development program subsided.

Space and Defense sales of $95 million were 7% lower in the quarter. Space market sales were down 21%, to $48 million, as various satellite programs were completed and NASA Soft Capture activity slowed. Defense sales were $47 million, up 13%, on improved defense vehicle and naval program sales and higher sales of defense products sold into European markets.

Sales in the Industrial Systems segment were down 12%, to $131 million, with most of the decline tied to foreign currency effects. Excluding currency adjustments, energy market sales were down $3 million on lower sales of steam and gas turbine products as well as weaker sales of wind energy products into Europe. Industrial automation sales, excluding foreign currency effects, were up $3 million from stronger aftermarket sales. Simulation and test product sales, excluding foreign currency effects, increased $1 million with gains in the simulation market offset by lower test product sales.

The Components segment had sales in the quarter of $107 million, down 3% from a year ago. Excluding foreign currency effects, sales were flat. Sales into aerospace and defense markets were higher on military aircraft OEM sales and space activity. Sales of general industrial products were 9% higher while medical products sales decreased 4%. Energy components, including products sold into marine energy markets, were down $7 million, to $15 million, a combination of weaker oil prices and a strong quarter a year ago.

The Medical Devices segment had sales of $32 million, up $3 million on stronger sales of both pumps and administration sets.

The current backlog is $1.3 billion.

The Company updated its projections for fiscal 2015, ending October 3, 2015, to include sales of $2.53 billion, net earnings of $138 million and earnings per share of $3.50, reflecting additional restructuring costs.

The Company also provided its initial projections for fiscal 2016 with sales of $2.57 billion, net earnings of $148 million and earnings per share of $4.00, a 14% increase over fiscal 2015 guidance.

"Fiscal '15 is turning out to be a year of multiple headwinds for our company," said John Scannell, Chairman and CEO. "Despite this, our underlying businesses remain strong and we're responding to the short term challenges to position our company for improvement in fiscal '16 and beyond. Next year we're forecasting a modest increase in sales, another year of strong cash flow and a 14% increase in earnings per share to $4.00."

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. Supplemental financial data will be available on the webcast web page approximately 60 minutes prior to the conference call. Listeners can access the call live or in replay mode at www.moog.com/investors/communications.

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;

• new 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share data)
		Three Months Ended						Nine Months Ended
		July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
Net sales		$	634,539		$	683,698		$	1,902,308		$	1,976,961
Cost of sales			443,963			481,431			1,354,264			1,378,567
Gross profit			190,576			202,267			548,044			598,394
	Research and development		34,157			32,498			96,882			105,478
	Selling, general and administrative		90,733			102,616			280,718			307,349
	Interest		7,916			2,215			20,953			9,788
	Restructuring		6,604			--			6,604			--
	Other		442			283			1,327			10,656
Earnings before income taxes			50,724			64,655			141,560			165,123
Income taxes			14,393			16,533			37,871			47,179
Net earnings		$	36,331		$	48,122		$	103,689		$	117,944
Net earnings per share
	Basic	$	0.95		$	1.09		$	2.62		$	2.62
	Diluted	$	0.94		$	1.08		$	2.59		$	2.59
Average common shares outstanding
	Basic		38,389,629			44,077,121			39,555,423			44,946,413
	Diluted		38,744,620			44,669,248			39,963,142			45,541,561

Moog Inc.
CONSOLIDATED SALES AND OPERATING PROFIT
(dollars in thousands)
		Three Months Ended								Nine Months Ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
Net sales:
	Aircraft Controls	$	270,339			$	294,194			$	811,103			$	834,420
	Space and Defense Controls		95,266				102,505				288,477				297,260
	Industrial Systems		130,581				147,722				393,092				442,998
	Components		106,826				110,587				315,432				314,433
	Medical Devices		31,527				28,690				94,204				87,850
Net sales		$	634,539			$	683,698			$	1,902,308			$	1,976,961
Operating profit and margins:
	Aircraft Controls	$	28,401			$	30,342			$	75,195			$	87,980
			10.5	%			10.3	%			9.3	%			10.5	%
	Space and Defense Controls		6,149				8,664				19,784				25,523
			6.5	%			8.5	%			6.9	%			8.6	%
	Industrial Systems		13,068				16,826				38,972				44,010
			10.0	%			11.4	%			9.9	%			9.9	%
	Components		13,602				16,972				42,258				46,707
			12.7	%			15.3	%			13.4	%			14.9	%
	Medical Devices		4,870				2,343				12,128				7,348
			15.4	%			8.2	%			12.9	%			8.4	%
Total operating profit			66,090				75,147				188,337				211,568
			10.4	%			11.0	%			9.9	%			10.7	%
Deductions from operating profit:
	Interest expense		7,916				2,215				20,953				9,788
	Equity-based compensation expense		603				1,553				4,569				6,545
	Corporate expenses and other		6,847				6,724				21,255				30,112
Earnings before income taxes		$	50,724			$	64,655			$	141,560			$	165,123

Moog Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
			July 4, 2015			September 27, 2014
ASSETS
Current assets
	Cash and cash equivalents		$	277,444		$	231,292
	Receivables			710,965			780,874
	Inventories			505,187			517,056
	Other current assets			128,162			134,842
		Total current assets		1,621,758			1,664,064
Property, plant and equipment, net				537,012			555,348
Goodwill				740,184			757,852
Intangible assets, net				154,223			178,070
Other assets				47,792			53,118
Total assets			$	3,100,969		$	3,208,452
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Short-term borrowings		$	407		$	103,660
	Current installments of long-term debt			33			5,262
	Accounts payable			166,649			162,667
	Customer advances			138,962			145,500
	Contract loss reserves			31,388			35,984
	Other accrued liabilities			235,224			269,731
		Total current liabilities		572,663			722,804
Long-term debt, excluding current installments				1,075,075			765,114
Long-term pension and retirement obligations				237,544			288,216
Deferred income taxes				100,962			83,931
Other long-term liabilities				1,705			972
		Total liabilities		1,987,949			1,861,037
Commitment and contingencies				--			--
Shareholders' equity
	Common stock			51,280			51,280
	Other shareholders' equity			1,061,740			1,296,135
		Total shareholders' equity		1,113,020			1,347,415
Total liabilities and shareholders' equity			$	3,100,969		$	3,208,452

Moog Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
				Nine Months Ended
				July 4, 2015				June 28, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
	Net earnings			$	103,689			$	117,944
	Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
		Depreciation			59,468				57,997
		Amortization			19,010				23,589
		Equity-based compensation expense			4,569				6,545
		Redemption of senior subordinated notes			--				8,002
		Other			18,781				9,182
		Changes in assets and liabilities providing (using) cash:
		Receivables			51,547				34,651
		Inventories			(4,763	)			449
		Accounts payable			7,332				(18,857	)
		Customer advances			(5,008	)			(11,953	)
		Accrued expenses			(21,182	)			(4,449	)
		Accrued income taxes			(8,205	)			9,695
		Pension assets and liabilities			(23,817	)			(16,902	)
		Other assets and liabilities			5,407				(5,844	)
			Net cash provided by operating activities		206,828				210,049
CASH FLOWS FROM INVESTING ACTIVITIES
		Purchase of property, plant and equipment			(57,712	)			(57,842	)
		Other investing transactions			12,597				(8,404	)
		Net cash used by investing activities			(45,115	)			(66,246	)
CASH FLOWS FROM FINANCING ACTIVITIES
		Net short term repayments			(3,337	)			(977	)
		Net (repayments) proceeds from revolving lines of credit			(90,000	)			266,135
		Net repayments on long-term debt			(5,250	)			(3,377	)
		Proceeds from senior notes, net of issuance costs			294,430				--
		Payments on senior subordinated notes			--				(191,575	)
		Payment of premium on redemption of senior subordinated notes			--				(6,945	)
		Proceeds from sale of treasury stock			11,437				2,413
		Purchase of outstanding shares for treasury			(297,417	)			(147,360	)
		Proceeds from sale of stock held by SECT			7,328				1,144
		Purchase of stock held by SECT			(12,121	)			(5,206	)
		Purchase of stock held by SERP			(7,328	)			--
		Excess tax benefits from equity-based payment arrangements			5,973				2,695
		Other financing transactions			--				(2,238	)
			Net cash used by financing activities		(96,285	)			(85,291	)
Effect of exchange rate changes on cash					(19,276	)			583
Increase in cash and cash equivalents					46,152				59,095
		Cash and cash equivalents at beginning of period			231,292				157,090
		Cash and cash equivalents at end of period		$	277,444			$	216,185