MOOG INC. - FORM 8-K - EX-99.1 - January 29, 2021

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Exhibit 99.1
                            
Moog Inc. ▪ East Aurora, New York ▪ 14052 ▪ 716-652-2000

Press Information
Release Date:IMMEDIATEContact:Ann Marie Luhr
 January 29, 2021 716-687-4225
 

MOOG REPORTS FIRST QUARTER RESULTS


East Aurora, NY -- 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.


Exhibit 99.1
“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.


Exhibit 99.1
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.




Exhibit 99.1
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.






Exhibit 99.1

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 sales494,311 543,586 
Gross profit189,643 211,257 
Research and development28,008 28,208 
Selling, general and administrative99,603 98,367 
Interest8,420 10,232 
Other3,241 7,546 
Earnings before income taxes50,371 66,904 
Income taxes12,529 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 
Basic32,074,873 34,510,851 
Diluted32,237,212 34,787,404 
 


























Exhibit 99.1

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 Controls188,162 186,240 
Industrial Systems209,018 228,649 
Net sales$683,954 $754,843 
Operating profit:
Aircraft Controls$27,922 $38,592 
9.7 %11.4 %
Space and Defense Controls23,046 25,282 
12.2 %13.6 %
Industrial Systems19,898 26,799 
9.5 %11.7 %
Total operating profit 70,866 90,673 
10.4 %12.0 %
Deductions from operating profit:
Interest expense8,420 10,232 
Equity-based compensation expense2,502 2,381 
Non-service pension expense920 3,601 
Corporate and other expenses, net8,653 7,555 
Earnings before income taxes$50,371 $66,904 


























Exhibit 99.1
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 cash695 489 
Receivables, net872,843 855,535 
Inventories, net646,627 623,043 
Prepaid expenses and other current assets47,119 49,837 
Total current assets1,664,923 1,613,487 
Property, plant and equipment, net609,358 600,498 
Operating lease right-of-use assets68,772 68,393 
Goodwill866,366 821,856 
Intangible assets, net117,717 85,046 
Deferred income taxes20,524 18,924 
Other assets18,888 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 payable173,256 176,868 
Accrued compensation102,138 109,510 
Contract advances234,480 203,338 
Accrued liabilities and other234,840 220,488 
Total current liabilities813,862 710,554 
Long-term debt, excluding current installments898,078 929,982 
Long-term pension and retirement obligations189,081 183,366 
Deferred income taxes47,829 40,474 
Other long-term liabilities114,454 118,372 
Total liabilities2,063,304 1,982,748 
Shareholders’ equity
Common stock - Class A43,802 43,799 
Common stock - Class B7,478 7,481 
Additional paid-in capital505,038 472,645 
Retained earnings2,142,566 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’ equity1,303,244 1,243,083 
Total liabilities and shareholders’ equity$3,366,548 $3,225,831 


Exhibit 99.1
 
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:
Depreciation18,647 18,386 
Amortization2,841 3,281 
Deferred income taxes(139)3,205 
Equity-based compensation expense2,502 2,381 
Other1,544 (1,017)
Changes in assets and liabilities providing (using) cash:
Receivables3,664 (19,519)
Inventories(4,058)(13,782)
Accounts payable(7,510)(29,153)
Contract advances29,712 40,215 
Accrued expenses6,989 (26,998)
Accrued income taxes8,831 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 activities94,095 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 transactions1,604 (3,684)
Net cash used by investing activities(96,413)(84,900)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving lines of credit271,700 272,000 
Payments on revolving lines of credit(235,700)(617,500)
Proceeds from long-term debt25,100 — 
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 SECT274 — 
Purchase of stock held by SECT(655)(2,440)
Other financing transactions— (1,895)
Net cash provided by financing activities12,961 76,390 
Effect of exchange rate changes on cash2,619 1,147 
Increase in cash, cash equivalents and restricted cash13,262 34,743 
Cash, cash equivalents and restricted cash at beginning of period85,072 92,548 
Cash, cash equivalents and restricted cash at end of period$98,334 $127,291 

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