MOGB Vaneck Esg Moat

Moog Inc. (NYSE: MOG.A and MOG.B), a worldwide designer, manufacturer and systems integrator of high-performance precision motion and fluid controls and controls systems, today reported fiscal first quarter 2024 diluted earnings per share of $1.48 and adjusted diluted earnings per share of $1.53.

(in millions, except per share results)

Three Months Ended

 

Q1 2024

Q1 2023

Deltas

Net sales

$

857

 

$

760

 

 

13

%

Operating margin

 

11.0

%

 

11.4

%

-40 bps

Adjusted operating margin

 

11.3

%

 

10.4

%

90 bps

Diluted net earnings per share

$

1.48

 

$

1.44

 

 

3

%

Adjusted diluted net earnings per share

$

1.53

 

$

1.25

 

 

22

%

Net cash provided by operating activities*

$

60

 

$

8

 

$

52

 

Free cash flow*

$

23

 

$

(22

)

$

45

 

See the reconciliations of adjusted financial results to reported results included in the financial statements herein for the quarters ended December 30, 2023 and December 31, 2022.

* Favorably impacted by a $25 million benefit related to the expansion of the securitization facility.

Quarter Highlights

• Net sales of $857 million increased 13%, with increases across all four segments, including a near 50% increase in Commercial Aircraft.
• Operating margin of 11.0% decreased 40 basis points. The absence of the prior year's gain on the sale of two buildings more than offset the current quarter's benefits from pricing and higher production volume. Adjusted operating margin, excluding the gain on the sale of two buildings, expanded 90 basis points to 11.3%.
• Diluted earnings per share of $1.48 increased 3% due to higher operating profit, offset by the absence of the prior year's gain on the sale of two buildings. Adjusted diluted earnings per share of $1.53 increased 22%.
• Free cash flow improved by $45 million as compared to last year.
• Twelve-month backlog increased 6% to $2.5 billion due to growth across our aerospace and defense businesses.

"We had a great start to fiscal 2024, setting us up nicely to deliver margin enhancement in line with our investor day plan," said Pat Roche, CEO. "Our highly engaged employees are delivering for our customers and are driving margin improvements across the business."

Quarter Results

Sales in the first quarter of 2024 increased across all segments compared to the first quarter of 2023. Commercial Aircraft sales increased 47% to $194 million due to the continued market recovery in widebody aircraft in both OEM and aftermarket programs. Sales in Industrial increased 6% to $246 million due to higher demand for flight simulation systems and industrial automation applications. Within Space and Defense, sales increased 6% to $230 million, driven by strong defense demand across both the space and defense markets. Sales in Military Aircraft increased 5% to $186 million due to the ramp up on the V-280 program.

Operating margin decreased 40 basis points to 11.0% in the first quarter of 2024 compared to the first quarter of 2023. Industrial operating margin decreased 400 basis points, as the prior year benefited $10 million from the sale of two buildings related to the footprint rationalization initiative. Military Aircraft operating margin increased 200 basis points to 10.5%, driven by increased activity on the V-280 program and by a more favorable sales mix. Space and Defense operating margin increased 170 basis points to 11.0% due to production efficiencies and pricing initiatives. Commercial Aircraft operating margin decreased 40 basis points to 10.6% since favorable retrofit activity from last year did not repeat.

Adjusted operating margin in the first quarter of 2024 increased 90 basis points to 11.3% compared to the first quarter of 2023. The only segment with significant adjustments is Industrial, which increased 30 basis points to 12.6% as the benefits of pricing initiatives were partially offset by the absence of the prior year's favorable sales mix.

Free Cash Flow Results

Free cash flow was $23 million, which included a $25 million benefit related to the expansion of the securitization facility. Higher collections from customers were mostly offset by growth in physical inventories to support the growth across the aerospace and defense businesses. Capital expenditures were $37 million.

2024 Financial Guidance

"We are raising our sales and earnings per share guidance for the year based on our first quarter results, and are holding our operating margin guidance," said Jennifer Walter, CFO. "Our sales in fiscal year 2024 will grow by 5%, operating margin will expand by 110 basis points and earnings per share will increase by 12%. We are confident we are on track to deliver exceptional results again this year."

(in millions, except per share results)

 

 

 

 

 

 

FY 2024 Guidance

 

 

Current

 

Previous

Net sales

 

$

3,500

 

 

$

3,450

 

Operating margin

 

 

12.0

%

 

 

12.0

%

Adjusted diluted net earnings per share

 

$

6.90

 

 

$

6.80

 

Adjusted earnings per share figures are forecasted to be within range of +/- $0.20.

 

 

 

 

Diluted net earnings per share for the second quarter of 2024 is forecasted to be $1.70, plus or minus $0.10.

Conference call information

In conjunction with today’s release, Pat Roche, CEO, and Jennifer Walter, CFO, will host a conference call today beginning at 10:00 a.m. ET, which will be simultaneously broadcast live online. Listeners can access the call live, or in replay mode, at www.moog.com/investors/communications. Supplemental financial data will be available on the website approximately 90 minutes prior to the conference call.

Cautionary Statement

Information included or incorporated by reference in this press release 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 and include the following:

Strategic risks

• We operate in highly competitive markets with competitors who may have greater resources than we possess;
• Our research and development and innovation efforts are substantial and may not be successful, which could reduce our sales and earnings;
• If we are unable to adequately enforce and protect our intellectual property or defend against assertions of infringement, our business and our ability to compete could be harmed; and
• Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or as we conduct portfolio shaping and footprint rationalization initiatives.

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 the 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

• A constrained supply chain, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies have had, and could continue to have, a material impact on our ability to manufacture and ship our products, in addition to adversely impacting our operating profit and balance sheet;
• 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 face, and may continue to face, risks related to information systems interruptions, intrusions and or new software implementations, which may adversely affect our business operations;
• 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; 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 and indenture governing our senior notes 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; 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;
• Our operations are subject to environmental laws and complying with those laws may cause us to incur significant costs;
• We may face reputational, regulatory or financial risks from a perceived, or an actual, failure to achieve our sustainability goals; and
• The recently received invalidation of our facility security clearance by the U.S. Defense Counterintelligence and Security Agency could impact potential future business as well as adversely affect our operating results.

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.

Moog Inc.

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

(dollars in thousands, except per share data)

       

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

Net sales

 

$

856,850

 

$

760,103

 

Cost of sales

 

 

623,651

 

 

556,417

 

Gross profit

 

 

233,199

 

 

203,686

 

Research and development

 

 

30,579

 

 

23,862

 

Selling, general and administrative

 

 

118,725

 

 

113,165

 

Interest

 

 

16,694

 

 

13,132

 

Restructuring

 

 

1,889

 

 

1,078

 

Gain on sale of buildings

 

 

—

 

 

(9,503

)

Other

 

 

2,701

 

 

1,651

 

Earnings before income taxes

 

 

62,611

 

 

60,301

 

Income taxes

 

 

14,799

 

 

14,285

 

Net earnings

 

$

47,812

 

$

46,016

 

 

 

 

 

 

Net earnings per share

 

 

 

 

Basic

 

$

1.50

 

$

1.45

 

Diluted

 

$

1.48

 

$

1.44

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

Basic

 

 

31,902,101

 

 

31,746,001

 

Diluted

 

 

32,249,313

 

 

31,874,718

 

Moog Inc.

RECONCILIATION TO ADJUSTED NET EARNINGS BEFORE TAXES, INCOMES TAXES, NET EARNINGS AND DILUTIVE NET EARNINGS PER SHARE (UNAUDITED)

(dollars in thousands)

   

 

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

As Reported:

 

 

 

 

Earnings before income taxes

 

$

62,611

 

 

$

60,301

 

Income taxes

 

 

14,799

 

 

 

14,285

 

Effective income tax rate

 

 

23.6

%

 

 

23.7

%

Net earnings

 

 

47,812

 

 

 

46,016

 

Diluted net earnings per share

 

$

1.48

 

 

$

1.44

 

 

 

 

 

 

Gain on Sale of Buildings:

 

 

 

 

Earnings before income taxes

 

$

—

 

 

$

(9,503

)

Income taxes

 

 

—

 

 

 

(1,986

)

Net earnings

 

 

—

 

 

 

(7,517

)

Diluted net earnings per share

 

$

—

 

 

$

(0.24

)

 

 

 

 

 

Restructuring and Other Charges:

 

 

 

 

Earnings before income taxes

 

$

1,889

 

 

$

1,533

 

Income taxes

 

 

498

 

 

 

274

 

Net earnings

 

 

1,391

 

 

 

1,259

 

Diluted net earnings per share

 

$

0.04

 

 

$

0.04

 

 

 

 

 

 

As Adjusted:

 

 

 

 

Earnings before income taxes

 

$

64,500

 

 

$

52,331

 

Income taxes

 

 

15,297

 

 

 

12,573

 

Effective income tax rate

 

 

23.7

%

 

 

24.0

%

Net earnings

 

 

49,203

 

 

 

39,758

 

Diluted net earnings per share

 

$

1.53

 

 

$

1.25

 

The diluted net earnings per share associated with the adjustments in the table above may not reconcile when totaled due to rounding.

Results shown above have been adjusted to exclude impacts associated with the sale of buildings formerly used in Industrial, as well as restructuring and other charges including the impact of continued portfolio shaping activities. While management believes that these adjusted 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.

Moog Inc.

CONSOLIDATED SALES AND OPERATING PROFIT (UNAUDITED)

(dollars in thousands)

   

 

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

Net sales:

 

 

 

 

Space and Defense

 

$

230,128

 

 

$

217,785

 

Military Aircraft

 

 

186,244

 

 

 

177,800

 

Commercial Aircraft

 

 

194,222

 

 

 

132,459

 

Industrial

 

 

246,256

 

 

 

232,059

 

Net sales

 

$

856,850

 

 

$

760,103

 

Operating profit:

 

 

 

 

Space and Defense

 

$

25,297

 

 

$

20,294

 

 

 

 

11.0

%

 

 

9.3

%

Military Aircraft

 

 

19,589

 

 

 

15,201

 

 

 

 

10.5

%

 

 

8.5

%

Commercial Aircraft

 

 

20,626

 

 

 

14,517

 

 

 

 

10.6

%

 

 

11.0

%

Industrial

 

 

29,024

 

 

 

36,751

 

 

 

 

11.8

%

 

 

15.8

%

Total operating profit

 

 

94,536

 

 

 

86,763

 

 

 

 

11.0

%

 

 

11.4

%

Deductions from operating profit:

 

 

 

 

Interest expense

 

 

16,694

 

 

 

13,132

 

Equity-based compensation expense

 

 

4,165

 

 

 

2,974

 

Non-service pension expense

 

 

3,187

 

 

 

3,099

 

Corporate and other expenses, net

 

 

7,879

 

 

 

7,257

 

Earnings before income taxes

 

$

62,611

 

 

$

60,301

 

Moog Inc.

RECONCILIATION TO ADJUSTED OPERATING PROFIT AND MARGINS (UNAUDITED)

(dollars in thousands)

   

 

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

Space and Defense operating profit - as reported

 

$

25,297

 

 

$

20,294

 

Restructuring

 

 

—

 

 

 

176

 

Space and Defense operating profit - as adjusted

 

$

25,297

 

 

$

20,470

 

 

 

 

11.0

%

 

 

9.4

%

 

 

 

 

 

Military Aircraft operating profit - as reported and adjusted

 

$

19,589

 

 

$

15,201

 

 

 

 

10.5

%

 

 

8.5

%

 

 

 

 

 

Commercial Aircraft operating profit - as reported and adjusted

 

$

20,626

 

 

$

14,517

 

 

 

 

10.6

%

 

 

11.0

%

 

 

 

 

 

Industrial operating profit - as reported

 

$

29,024

 

 

$

36,751

 

Gain on sale of buildings

 

 

—

 

 

 

(9,503

)

Restructuring and other

 

 

1,889

 

 

 

1,357

 

Industrial operating profit - as adjusted

 

$

30,913

 

 

$

28,605

 

 

 

 

12.6

%

 

 

12.3

%

 

 

 

 

 

Total operating profit - as adjusted

 

$

96,425

 

 

$

78,793

11.3

%

10.4

%

Moog Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollars in thousands)

   

 

December 30, 2023

 

September 30, 2023

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

126,398

 

 

$

68,959

 

Restricted cash

 

 

430

 

 

 

185

 

Receivables, net

 

 

381,609

 

 

 

434,723

 

Unbilled receivables

 

 

760,561

 

 

 

706,601

 

Inventories, net

 

 

788,040

 

 

 

724,002

 

Prepaid expenses and other current assets

 

 

59,577

 

 

 

50,862

 

Total current assets

 

 

2,116,615

 

 

 

1,985,332

 

Property, plant and equipment, net

 

 

842,682

 

 

 

814,696

 

Operating lease right-of-use assets

 

 

59,489

 

 

 

56,067

 

Goodwill

 

 

833,413

 

 

 

821,301

 

Intangible assets, net

 

 

72,663

 

 

 

71,637

 

Deferred income taxes

 

 

9,284

 

 

 

8,749

 

Other assets

 

 

53,809

 

 

 

50,254

 

Total assets

 

$

3,987,955

 

 

$

3,808,036

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

 

261,155

 

 

 

264,573

 

Accrued compensation

 

 

64,099

 

 

 

111,154

 

Contract advances and progress billings

 

 

445,706

 

 

 

377,977

 

Accrued liabilities and other

 

 

238,871

 

 

 

211,769

 

Total current liabilities

 

 

1,009,831

 

 

 

965,473

 

Long-term debt, excluding current installments

 

 

920,103

 

 

 

863,092

 

Long-term pension and retirement obligations

 

 

160,825

 

 

 

157,455

 

Deferred income taxes

 

 

35,214

 

 

 

37,626

 

Other long-term liabilities

 

 

154,765

 

 

 

148,303

 

Total liabilities

 

 

2,280,738

 

 

 

2,171,949

 

Shareholders’ equity

 

 

 

 

Common stock - Class A

 

 

43,826

 

 

 

43,822

 

Common stock - Class B

 

 

7,454

 

 

 

7,458

 

Additional paid-in capital

 

 

673,261

 

 

 

608,270

 

Retained earnings

 

 

2,536,172

 

 

 

2,496,979

 

Treasury shares

 

 

(1,065,654

)

 

 

(1,057,938

)

Stock Employee Compensation Trust

 

 

(146,373

)

 

 

(114,769

)

Supplemental Retirement Plan Trust

 

 

(119,869

)

 

 

(93,126

)

Accumulated other comprehensive loss

 

 

(221,600

)

 

 

(254,609

)

Total shareholders’ equity

 

 

1,707,217

 

 

 

1,636,087

 

Total liabilities and shareholders’ equity

 

$

3,987,955

 

 

$

3,808,036

 

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

   

 

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net earnings

 

$

47,812

 

 

$

46,016

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

Depreciation

 

 

20,927

 

 

 

18,392

 

Amortization

 

 

2,720

 

 

 

2,992

 

Deferred income taxes

 

 

(4,547

)

 

 

(1,342

)

Equity-based compensation expense

 

 

4,165

 

 

 

2,974

 

Gain on sale of buildings

 

 

—

 

 

 

(9,503

)

Other

 

 

(2,478

)

 

 

1,145

 

Changes in assets and liabilities providing (using) cash:

 

 

 

 

Receivables

 

 

58,887

 

 

 

(27,387

)

Unbilled receivables

 

 

(51,015

)

 

 

(26,570

)

Inventories

 

 

(46,852

)

 

 

(44,435

)

Accounts payable

 

 

(5,752

)

 

 

(9,679

)

Contract advances and progress billings

 

 

64,171

 

 

 

72,889

 

Accrued expenses

 

 

(31,814

)

 

 

(35,186

)

Accrued income taxes

 

 

12,324

 

 

 

12,632

 

Net pension and post retirement liabilities

 

 

2,957

 

 

 

3,988

 

Other assets and liabilities

 

 

(11,114

)

 

 

1,157

 

Net cash provided by operating activities

 

 

60,391

 

 

 

8,083

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

 

(5,212

)

 

 

—

 

Purchase of property, plant and equipment

 

 

(37,416

)

 

 

(30,125

)

Net proceeds from businesses sold

 

 

—

 

 

 

1,124

 

Net proceeds from buildings sold

 

 

—

 

 

 

7,432

 

Other investing transactions

 

 

(479

)

 

 

(3,724

)

Net cash used by investing activities

 

 

(43,107

)

 

 

(25,293

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from revolving lines of credit

 

 

279,500

 

 

 

241,000

 

Payments on revolving lines of credit

 

 

(223,000

)

 

 

(160,300

)

Payments on long-term debt

 

 

—

 

 

 

(93

)

Payments on finance lease obligations

 

 

(1,286

)

 

 

(884

)

Payment of dividends

 

 

(8,619

)

 

 

(8,257

)

Proceeds from sale of treasury stock

 

 

581

 

 

 

1,869

 

Purchase of outstanding shares for treasury

 

 

(8,711

)

 

 

(12,721

)

Proceeds from sale of stock held by SECT

 

 

5,001

 

 

 

2,561

 

Purchase of stock held by SECT

 

 

(4,561

)

 

 

(1,753

)

Other financing transactions

 

 

—

 

 

 

(2,026

)

Net cash provided by financing activities

 

 

38,905

 

 

 

59,396

 

Effect of exchange rate changes on cash

 

 

1,495

 

 

 

4,492

 

Increase in cash, cash equivalents and restricted cash

 

 

57,684

 

 

 

46,678

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

69,144

 

 

 

117,328

 

Cash, cash equivalents and restricted cash at end of period

 

$

126,828

 

 

$

164,006

 

Moog Inc.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)

(dollars in thousands)

   

 

Three Months Ended

 

 

December 30, 2023

 

December 31, 2022

Net cash provided by operating activities

 

$

60,391

 

 

$

8,083

 

Purchase of property, plant and equipment

 

 

(37,416

)

 

 

(30,125

)

Free cash flow

 

 

22,975

 

 

 

(22,042

)

Amounts may not reconcile when totaled due to rounding.

Free cash flow is defined as net cash provided by operating activities less capital expenditures. Free cash flow is not a measure determined in accordance with GAAP and may not be comparable with the measures as used by other companies, however management believes these adjusted 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.

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Aaron Astrachan - 716.687.4225