(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Item 2.02 | Results of Operations and Financial Condition |
Item 8.01 | Other Events |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits. |
MOOG INC. | |||
Dated: | July 24, 2020 | By: | /s/ Michael J. Swope |
Name: | Michael J. Swope | ||
Controller |
Release Date: | July 24, 2020 | Contact: | Ann Marie Luhr |
IMMEDIATE | 716-687-4225 |
• | Sales of $658 million, down 11% from a year ago; |
• | Provisional GAAP diluted loss per share of ($0.44) includes $1.37 per share in pandemic-related charges; |
• | Non-GAAP adjusted earnings per share of $0.93; |
• | Operating margins of (0.7%), with adjusted operating margins of 8.2%; |
• | $107 million cash flow from operating activities; |
• | Reinstatement of quarterly cash dividend of $0.25 per share. |
• | 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 face various risks related to health epidemics 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; |
• | 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; |
• | 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; |
• | Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks, and any false claims or non-compliance could subject us to fines, 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 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; |
• | 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; |
• | The potential 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; |
• | 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; |
• | The United Kingdom's decision to exit the European Union may bring 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; |
• | 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; |
• | Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs. |
Moog Inc. |
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) |
(dollars in thousands, except per share data) |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||
Net sales | $ | 657,539 | $ | 740,969 | $ | 2,177,659 | $ | 2,139,456 | ||||||||
Cost of sales | 486,760 | 529,050 | 1,587,569 | 1,530,634 | ||||||||||||
Inventory write-down | 19,271 | — | 19,271 | — | ||||||||||||
Gross profit | 151,508 | 211,919 | 570,819 | 608,822 | ||||||||||||
Research and development | 27,407 | 31,298 | 82,303 | 94,518 | ||||||||||||
Selling, general and administrative | 96,899 | 103,655 | 302,517 | 299,841 | ||||||||||||
Interest | 9,440 | 9,780 | 29,923 | 29,401 | ||||||||||||
Long-lived asset impairment | 34,327 | — | 34,327 | — | ||||||||||||
Restructuring | 4,830 | — | 4,830 | — | ||||||||||||
Other | 4,415 | 7,168 | 14,294 | 14,645 | ||||||||||||
Earnings (loss) before income taxes | (25,810 | ) | 60,018 | 102,625 | 170,417 | |||||||||||
Income taxes (benefit) | (11,386 | ) | 13,853 | 17,277 | 40,424 | |||||||||||
Net earnings (loss) | $ | (14,424 | ) | $ | 46,165 | $ | 85,348 | $ | 129,993 | |||||||
Net earnings (loss) per share | ||||||||||||||||
Basic | $ | (0.44 | ) | $ | 1.32 | $ | 2.55 | $ | 3.73 | |||||||
Diluted | $ | (0.44 | ) | $ | 1.31 | $ | 2.53 | $ | 3.69 | |||||||
Average common shares outstanding | ||||||||||||||||
Basic | 32,601,481 | 34,904,487 | 33,515,584 | 34,869,021 | ||||||||||||
Diluted | 32,601,481 | 35,239,834 | 33,722,723 | 35,202,519 | ||||||||||||
Long-lived asset impairment includes a provisional charge of $9,015 for an asset with a net book value of $18,397. The value of this charge could change in subsequent filings as management receives additional information and performs additional analysis. |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||
As Reported: | ||||||||||||||||
Earnings (loss) before income taxes | $ | (25,810 | ) | $ | 60,018 | $ | 102,625 | $ | 170,417 | |||||||
Income taxes (benefit) | (11,386 | ) | 13,853 | 17,277 | 40,424 | |||||||||||
Effective income tax rate | 44.1 | % | 23.1 | % | 16.8 | % | 23.7 | % | ||||||||
Net earnings (loss) | (14,424 | ) | 46,165 | 85,348 | 129,993 | |||||||||||
Diluted net earnings (loss) per share | $ | (0.44 | ) | $ | 1.31 | $ | 2.53 | $ | 3.69 | |||||||
COVID-19 Pandemic charges: | ||||||||||||||||
Earnings before income taxes | $ | 58,428 | $ | — | $ | 58,428 | $ | — | ||||||||
Income taxes | 13,591 | — | 13,591 | — | ||||||||||||
Net earnings | 44,837 | — | 44,837 | — | ||||||||||||
Diluted net earnings per share | $ | 1.37 | $ | — | $ | 1.33 | $ | — | ||||||||
As Adjusted: | ||||||||||||||||
Earnings before income taxes | $ | 32,618 | $ | 60,018 | $ | 161,053 | $ | 170,417 | ||||||||
Income taxes | 2,205 | 13,853 | 30,868 | 40,424 | ||||||||||||
Effective income tax rate | 6.8 | % | 23.1 | % | 19.2 | % | 23.7 | % | ||||||||
Net earnings | 30,413 | 46,165 | 130,185 | 129,993 | ||||||||||||
Diluted net earnings per share | $ | 0.93 | $ | 1.31 | $ | 3.86 | $ | 3.69 |
Moog Inc. |
CONSOLIDATED SALES AND OPERATING PROFIT |
(dollars in thousands) |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||
Net sales: | ||||||||||||||||
Aircraft Controls | $ | 249,388 | $ | 336,735 | $ | 930,749 | $ | 961,407 | ||||||||
Space and Defense Controls | 183,906 | 173,045 | 563,156 | 493,938 | ||||||||||||
Industrial Systems | 224,245 | 231,189 | 683,754 | 684,111 | ||||||||||||
Net sales | $ | 657,539 | $ | 740,969 | $ | 2,177,659 | $ | 2,139,456 | ||||||||
Operating profit (loss): | ||||||||||||||||
Aircraft Controls | $ | (44,287 | ) | $ | 34,484 | $ | 29,006 | $ | 94,805 | |||||||
(17.8 | )% | 10.2 | % | 3.1 | % | 9.9 | % | |||||||||
Space and Defense Controls | 22,177 | 24,133 | 72,111 | 63,110 | ||||||||||||
12.1 | % | 13.9 | % | 12.8 | % | 12.8 | % | |||||||||
Industrial Systems | 17,794 | 25,495 | 69,368 | 83,428 | ||||||||||||
7.9 | % | 11.0 | % | 10.1 | % | 12.2 | % | |||||||||
Total operating profit (loss) | (4,316 | ) | 84,112 | 170,485 | 241,343 | |||||||||||
(0.7 | )% | 11.4 | % | 7.8 | % | 11.3 | % | |||||||||
Deductions from operating profit: | ||||||||||||||||
Interest expense | 9,440 | 9,780 | 29,923 | 29,401 | ||||||||||||
Equity-based compensation expense | 1,390 | 1,439 | 4,661 | 5,130 | ||||||||||||
Non-service pension expense | 4,241 | 4,883 | 11,440 | 14,666 | ||||||||||||
Corporate and other expenses, net | 6,423 | 7,992 | 21,836 | 21,729 | ||||||||||||
Earnings (loss) before income taxes | $ | (25,810 | ) | $ | 60,018 | $ | 102,625 | $ | 170,417 |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | |||||||||||||
Aircraft Controls operating profit (loss) - as reported | $ | (44,287 | ) | $ | 34,484 | $ | 29,006 | $ | 94,805 | |||||||
Inventory write-down | 18,535 | — | 18,535 | — | ||||||||||||
Long-lived asset impairment | 33,986 | — | 33,986 | — | ||||||||||||
Restructuring | 2,896 | — | 2,896 | — | ||||||||||||
Aircraft Controls operating profit - as adjusted | $ | 11,130 | $ | 34,484 | $ | 84,423 | $ | 94,805 | ||||||||
4.5 | % | 10.2 | % | 9.1 | % | 9.9 | % | |||||||||
Space and Defense Controls operating profit - as reported | $ | 22,177 | $ | 24,133 | $ | 72,111 | $ | 63,110 | ||||||||
Long-lived asset impairment | 341 | — | 341 | — | ||||||||||||
Restructuring | 185 | — | 185 | — | ||||||||||||
Space and Defense Controls operating profit - as adjusted | $ | 22,703 | $ | 24,133 | $ | 72,637 | $ | 63,110 | ||||||||
12.3 | % | 13.9 | % | 12.9 | % | 12.8 | % | |||||||||
Industrial Systems operating profit - as reported | $ | 17,794 | $ | 25,495 | $ | 69,368 | $ | 83,428 | ||||||||
Inventory write-down | 736 | — | 736 | — | ||||||||||||
Restructuring | 1,749 | — | 1,749 | — | ||||||||||||
Industrial Systems operating profit- as adjusted | $ | 20,279 | $ | 25,495 | $ | 71,853 | $ | 83,428 | ||||||||
9.0 | % | 11.0 | % | 10.5 | % | 12.2 | % | |||||||||
Total operating profit - as adjusted | $ | 54,112 | $ | 84,112 | $ | 228,913 | $ | 241,343 | ||||||||
8.2 | % | 11.4 | % | 10.5 | % | 11.3 | % | |||||||||
Moog Inc. |
CONSOLIDATED BALANCE SHEETS |
(dollars in thousands) |
June 27, 2020 | September 28, 2019 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 102,323 | $ | 89,702 | ||||
Restricted cash | 3,286 | 2,846 | ||||||
Receivables | 896,658 | 954,355 | ||||||
Inventories, net | 609,189 | 534,974 | ||||||
Prepaid expenses and other current assets | 48,406 | 47,096 | ||||||
Total current assets | 1,659,862 | 1,628,973 | ||||||
Property, plant and equipment, net | 593,086 | 586,767 | ||||||
Operating lease right-of-use assets | 58,627 | — | ||||||
Goodwill | 811,851 | 784,240 | ||||||
Intangible assets, net | 91,368 | 79,646 | ||||||
Deferred income taxes | 19,183 | 19,992 | ||||||
Other assets | 15,915 | 14,619 | ||||||
Total assets | $ | 3,249,892 | $ | 3,114,237 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current installments of long-term debt | $ | 478 | $ | 249 | ||||
Accounts payable | 174,496 | 257,677 | ||||||
Accrued compensation | 120,906 | 143,765 | ||||||
Contract advances | 209,368 | 137,242 | ||||||
Accrued liabilities and other | 212,020 | 188,725 | ||||||
Total current liabilities | 717,268 | 727,658 | ||||||
Long-term debt, excluding current installments | 987,704 | 832,984 | ||||||
Long-term pension and retirement obligations | 164,341 | 160,034 | ||||||
Deferred income taxes | 41,162 | 40,528 | ||||||
Other long-term liabilities | 95,490 | 30,552 | ||||||
Total liabilities | 2,005,965 | 1,791,756 | ||||||
Shareholders’ equity | ||||||||
Common stock - Class A | 43,799 | 43,795 | ||||||
Common stock - Class B | 7,481 | 7,485 | ||||||
Additional paid-in capital | 462,286 | 510,546 | ||||||
Retained earnings | 2,197,038 | 2,128,739 | ||||||
Treasury shares | (957,082 | ) | (769,569 | ) | ||||
Stock Employee Compensation Trust | (61,807 | ) | (111,492 | ) | ||||
Supplemental Retirement Plan Trust | (49,655 | ) | (71,546 | ) | ||||
Accumulated other comprehensive loss | (398,133 | ) | (415,477 | ) | ||||
Total shareholders’ equity | 1,243,927 | 1,322,481 | ||||||
Total liabilities and shareholders’ equity | $ | 3,249,892 | $ | 3,114,237 |
Moog Inc. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(dollars in thousands) |
Nine Months Ended | ||||||||
June 27, 2020 | June 29, 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 85,348 | $ | 129,993 | ||||
Adjustments to reconcile net earnings to net cash provided (used) by operating activities: | ||||||||
Depreciation | 55,859 | 53,744 | ||||||
Amortization | 9,847 | 10,364 | ||||||
Deferred income taxes | (11,346 | ) | 3,764 | |||||
Equity-based compensation expense | 4,661 | 5,130 | ||||||
Impairment of long-lived assets and inventory write-down | 53,598 | — | ||||||
Other | 6,831 | 2,550 | ||||||
Changes in assets and liabilities providing (using) cash: | ||||||||
Receivables | 63,272 | (47,966 | ) | |||||
Inventories | (86,526 | ) | (68,519 | ) | ||||
Accounts payable | (85,136 | ) | 19,076 | |||||
Contract advances | 73,040 | (4,670 | ) | |||||
Accrued expenses | 1,827 | (410 | ) | |||||
Accrued income taxes | (23,528 | ) | (5,564 | ) | ||||
Net pension and post retirement liabilities | 24,706 | 24,386 | ||||||
Other assets and liabilities | 15,395 | 7,217 | ||||||
Net cash provided by operating activities | 187,848 | 129,095 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisitions of businesses, net of cash acquired | (54,265 | ) | — | |||||
Purchase of property, plant and equipment | (70,423 | ) | (91,083 | ) | ||||
Other investing transactions | (3,429 | ) | 2,518 | |||||
Net cash used by investing activities | (128,117 | ) | (88,565 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net short-term repayments | — | (3,560 | ) | |||||
Proceeds from revolving lines of credit | 977,850 | 570,200 | ||||||
Payments on revolving lines of credit | (968,459 | ) | (604,513 | ) | ||||
Proceeds from long-term debt | 6,935 | — | ||||||
Payments on long-term debt | (52,253 | ) | (255 | ) | ||||
Proceeds from senior notes, net of issuance costs | 491,769 | — | ||||||
Payments on senior notes | (300,000 | ) | — | |||||
Payments on finance lease obligations | (730 | ) | — | |||||
Payment of dividends | (17,049 | ) | (26,156 | ) | ||||
Proceeds from sale of treasury stock | 3,199 | 2,443 | ||||||
Purchase of outstanding shares for treasury | (191,961 | ) | (17,986 | ) | ||||
Proceeds from sale of stock held by SECT | 17,082 | 10,036 | ||||||
Purchase of stock held by SECT | (6,241 | ) | (13,327 | ) | ||||
Proceeds from sale of SERP stock | — | 4,293 | ||||||
Other financing transactions | (5,879 | ) | — | |||||
Net cash used by financing activities | (45,737 | ) | (78,825 | ) | ||||
Effect of exchange rate changes on cash | (932 | ) | (366 | ) | ||||
Increase (decrease) in cash, cash equivalents and restricted cash | 13,062 | (38,661 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 92,548 | 127,706 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 105,610 | $ | 89,045 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Treasury shares issued as compensation | $ | 9,063 | $ | 11,795 | ||||
Equipment acquired through lease financing | $ | 16,192 | $ | 148 |
Release Date: | IMMEDIATE | Contact: | Ann Marie Luhr |
July 24, 2020 | 716-687-4225 |
• | 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 face various risks related to health epidemics 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; |
• | 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; |
• | 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; |
• | Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks, and any false claims or non-compliance could subject us to fines, 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 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; |
• | 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; |
• | The potential 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; |
• | 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; |
• | The United Kingdom's decision to exit the European Union may bring 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; |
• | 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; |
• | Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs. |
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