Moog Inc. Reports Third Quarter Results

Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended July 2, 2022.

Third Quarter Highlights

• Sales of $773 million were up 9% from a year ago;
• GAAP diluted earnings per share of $1.57 included $0.03 per share in restructuring and impairment charges;
• Non-GAAP diluted adjusted earnings per share of $1.61, after rounding, up 44% from earnings per share a year ago;
• GAAP effective tax rate of 15.7% including the benefit of $0.15 per share from prior year provision to return adjustments;
• GAAP operating margins of 10.3% with adjusted operating margins of 10.5%; and
• $4 million GAAP cash flow from operating activities and $15 million adjusted cash flow from operating activities.

Segment Results

Aircraft Controls segment revenues in the quarter were $318 million, 17% higher year over year. Commercial aircraft revenues were $137 million, a 43% increase. Sales to commercial OEM customers were $86 million, driven by increases in sales for the Boeing book of business and strength in business jet sales. Commercial aftermarket sales increased 87% on very strong repair and overhaul activity, a one-time retrofit program, and acquired sales from the TEAM Accessories acquisition.

Military aircraft sales were $181 million, 3% higher year over year. Military OEM sales were up 3%, to $132 million, with increased funded development and helicopter sales compensating for lower fighter aircraft sales and lost sales from the divested Navaids business. Military aftermarket sales were mostly unchanged.

Space and Defense segment revenues were $224 million, an increase of 9% year over year. Defense sales of $135 million increased 14%. Higher sales of the RIwP^® turret, tactical missile applications, and defense components more than offset lower sales for international vehicle programs. Space sales were 3% higher, at $88 million, as growth in sales of propulsion and avionics product lines, and integrated space vehicles, offset the winding down of hypersonic development activity.

Industrial Systems segment revenues in the quarter were $231 million, in line with a year ago. Excluding the impact of foreign exchange movements and lost sales from portfolio shaping activities, underlying organic sales increased 8%, with rate-adjusted sales higher in each of the four submarkets. Sales of products for industrial automation applications were $111 million, driven by demand for factory automation equipment. Energy sales were $31 million, with higher sales in both exploration and generation applications. Sales of simulation and test products were $25 million, tied to increased sales of flight simulation products. Medical product sales were $63 million, driven by growth of enteral feeding products.

Consolidated 12-month backlog was $2.2 billion, up 10% from a year ago.

“It was another good quarter for our business, with operational performance in line with our forecast and a tax benefit driving outsized EPS growth,” said John Scannell, Chairman and CEO. “The second half of our fiscal year is playing out as we anticipated. Our sales forecast for Q4 is in line with Q3, and our EPS forecast for Q4 is unchanged from 90 days ago. Demand for our products is strong across all our major markets and we’re managing well through the challenges posed by supply chain constraints, inflation, and labor availability.”

Fiscal 2022 Outlook

The Company updated its fiscal 2022 projections and adjusted figures provided 90 days ago.

• Forecasted sales of $3.0 billion, unchanged from 90 days ago;
• Forecasted GAAP diluted earnings per share of $5.36, and adjusted diluted earnings per share of $5.65, both
  
  plus or minus $0.15;
• Forecasted GAAP operating margins of 9.9% and adjusted operating margins of 10.3%;
• Forecasted cash flow from operating activities of $276 million and adjusted cash flow from operating activities
  
  of $176 million; and
• Forecasted GAAP effective tax rate of 22.3%.

In conjunction with today’s release, Moog will host a conference call today 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.

About Moog

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 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. In evaluating these forward-looking statements, you should carefully consider the factors set forth below.

Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on

Form 10-K and in our other periodic filings with the SEC. There have been no material changes in the current year regarding our risk factors other than the following:

A reduced supply, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies within our supply chain could have a material impact on our ability to manufacture and ship our products, in addition to adversely impacting our operating profit and balance sheet.

Refer to our Annual Report on form 10-K for a complete discussion of our risk factors, which include the following:

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 or Lockheed Martin as a customer or a significant reduction in sales to either 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 currency, political and trade risks and adverse changes in local legal and regulatory environments could impact our results of operations
• 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

• 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.

While we believe we have identified and discussed above the material risks affecting our business, there may be additional factors, risks and uncertainties not currently known to us or that we currently consider immaterial 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. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking statement made in this report, except as required by law.

Results shown in the previous table include impacts associated with the gain on the sale of our Navigation Aids business, as well as inventory write-down charges, asset impairment and restructuring related to the impact of continued portfolio shaping activities and the Ukraine crisis. The table below adjusts the earnings before income taxes, income taxes, net earnings and diluted net earnings per share to exclude these impacts. While management believes that these non-GAAP financial measures may be useful in evaluating the financial condition and results of operations of the Company, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP.

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

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