MOOG Inc.

11/01/2024 | Press release | Distributed by Public on 11/01/2024 05:57

Moog Inc. Reports Strong Performance for Fourth Quarter 2024 and Issues Positive Guidance for Fiscal 2025

EAST AURORA, N.Y.--(BUSINESS WIRE)-- Moog Inc. (NYSE: MOG.A and MOG.B), a worldwide designer, manufacturer and systems integrator of high-performance precision motion and fluid controls and control systems, today reported strong fiscal fourth quarter 2024 results that marked another record year.

"Our fourth quarter was strong, bringing to a close an exceptional year with record sales and expanded margins," said Pat Roche, CEO. "Our performance reflects the success in pricing and simplification initiatives that continue to build momentum into 2025, with stronger sales, expanded margin and improved cash flow generation."

(in millions, except per share results)

Three Months Ended

Twelve Months Ended

Q4 2024

Q4 2023

Deltas

Q4 2024

Q4 2023

Deltas

Net sales

$

917

$

872

5

%

$

3,609

$

3,319

9

%

Operating margin

9.1

%

10.1

%

(100 bps)

11.0

%

10.3

%

70 bps

Adjusted operating margin

12.5

%

12.5

%

0 bps

12.4

%

10.9

%

150 bps

Diluted net earnings per share

$

1.33

$

1.23

8

%

$

6.40

$

5.34

20

%

Adjusted diluted net earnings per share

$

2.16

$

2.10

3

%

$

7.80

$

6.15

27

%

Net cash provided by operating activities

$

156

$

153

$

3

$

202

$

136

$

66

Free cash flow

$

109

$

105

$

5

$

21

$

(37

)

$

59

See the reconciliations of adjusted financial results and free cash flow to reported results included in the financial statements herein for the periods ended September 28, 2024 and September 30, 2023.

Quarter Highlights

  • Net sales increased driven by growth in defense businesses.
  • Operating margin declined due to higher levels of charges related to simplification initiatives.
  • Adjusted operating margin improved within Military Aircraft, Industrial and Space and Defense, while Commercial Aircraft declined from a strong quarter a year ago.
  • Diluted net earnings per share increased due to improved operational performance, partially offset by the net of prior and current year one-time charges and benefits.
  • Adjusted diluted net earnings per share increased due to incremental profit from higher sales and the benefit of capitalizing interest, partially offset by the absence of last year's favorable litigation settlement.
  • Twelve-month backlog increased 3%, reaching a record level of $2.5 billion.

Year Highlights

  • Net sales increased due to higher demand across our aerospace and defense businesses.
  • Operating margin increased within Space and Defense and Military Aircraft, while Industrial and Commercial Aircraft declined.
  • Adjusted operating margin expanded in Military Aircraft, Space and Defense and Industrial reflecting the benefits of pricing and simplification initiatives, while Commercial Aircraft declined from a strong prior year.
  • Diluted net earnings per share increased due to largely the same factors as the fourth quarter.
  • Adjusted diluted net earnings per share increased driven by operating margin expansion and incremental profit from higher sales.

Quarter Results
 "We had a great quarter," said Jennifer Walter, CFO. "Sales were very strong, adjusted operating margin was robust and on plan, and adjusted earnings per share exceeded the high end of our guidance range. In addition, we generated a substantial amount of free cash flow."

Sales in the fourth quarter of 2024 increased compared to the fourth quarter of 2023, with notable growth in Military Aircraft and Space and Defense. Military Aircraft sales increased 17% to $216 million due to the ramp of the FLRAA and other production programs. Space and Defense sales increased 9% to $263 million driven by strong European defense demand and launch vehicle activity. Commercial Aircraft sales increased 2% to $197 million due to increased production volume, muted by the absence of last year's retroactive pricing benefit and inventory sale from exiting a mature product line. Industrial segment sales decreased 5% to $242 million due to a slowdown in orders for industrial automation applications, partially offset by higher medical product and automotive test business demand.

Operating margin decreased 100 basis points to 9.1% in the fourth quarter of 2024 compared to the fourth quarter of 2023. Commercial Aircraft operating margin declined 680 basis points to 11.0%, driven by the absence of last year's benefits. Operating margins in Space and Defense and in Industrial declined 200 basis points and 130 basis points, respectively, due to incremental charges related to simplification initiatives. Military Aircraft operating margin improved 590 basis points to 11.8%, driven by reduced research and development expense, improved sales mix and cost absorption on the FLRAA program.

Adjusted operating margin in the fourth quarter of 2024 was unchanged at 12.5% compared to the fourth quarter of 2023. We incurred charges primarily in Industrial and in Space and Defense. Adjusted operating margin in Industrial increased 90 basis points to 12.8% as the benefits of pricing more than offset an unfavorable sales mix and planned product transfers. Adjusted operating margin in Space and Defense increased 70 basis points to 13.5% associated with improved performance across the business.

Non-operating expenses in the fourth quarter of 2024 declined compared to the fourth quarter of 2023. The fourth quarter of 2024 included a $10 million adjustment to capitalize interest for 2023 and 2024. Non-operating expenses in the fourth quarter of 2023 included a pension settlement charge and a favorable litigation settlement.

Free cash flow in the fourth quarter was driven by strong customer collections and by timing of vendor payments.

Year Results
 Sales in 2024 increased compared to 2023 with notable growth in Commercial Aircraft, Military Aircraft and Space and Defense. Commercial Aircraft sales increased 18% to $788 million due to increased production ramps on widebody, narrowbody and business jet programs. Military Aircraft sales increased 13% to $812 million due largely to having a full year's worth FLRAA sales. Space and Defense sales increased 7% to $1 billion due to strong, broad-based, defense demand. Industrial sales increased slightly at 1% to $991 million, as softening industrial automation sales were compensated by growth in other sub-markets.

Operating margin in 2024 increased compared to 2023, reflecting the benefits of pricing and simplification efforts, partially offset by higher amounts of charges related to simplifying our operations. Operating margin increased in Space and Defense and Military Aircraft, while Commercial Aircraft operating margin decreased, all due to the same factors as the fourth quarter. Also, Industrial operating margin decreased due to higher amounts of simplification charges.

Adjusted operating margin increased in 2024 compared to 2023, inclusive of a 40 basis-point contribution from the Employee Retention Credit, and increased in all of our segments except for Commercial Aircraft. Adjusted operating margin in Military Aircraft increased 300 basis points to 12.0% due to cost absorption on the FLRAA program and due to lower research and development expense. Adjusted operating margin in Space and Defense increased 290 basis points to 13.4% due to strong operational performance, including improved performance on space vehicle programs. Adjusted operating margin in Industrial increased 90 basis points to 12.4% due largely to pricing initiatives. Adjusted operating margin in Commercial Aircraft decreased 90 basis points to 11.8% due to the absence of the prior year's one-time benefits, partially offset by efficiencies from the current year's higher production sales volume.

2025 Financial Guidance

(in millions, except per share results)

FY 2025

FY 2024

Net sales

$

3,700

$

3,609

Operating margin

13.0

%

11.0

%

Adjusted operating margin

13.0

%

12.4

%

Diluted net earnings per share*

$

8.20

$

6.40

Adjusted diluted net earnings per share*

$

8.20

$

7.80

Free cash flow conversion

50 - 75

%

8

%

*Diluted net earnings per share figures for 2025 are forecasted to be within range of +/- $0.20.

When the company provides adjusted, non-GAAP figures on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort.

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 and supplemental financial materials at www.moog.com/investors/communications.

Cautionary Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by words such as: "may," "will," "should," "believes," "expects," "expected," "intends," "plans," "projects," "approximate," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," "assume" and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology). These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, are neither historical facts nor 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.

Although it is not possible to create a comprehensive list of all factors that may cause our 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 are described in Item 1A "Risk Factors" of our Annual Report on Form 10-K and in our other periodic filings with the Securities and Exchange Commission ("SEC") and include, but are not limited to, risks relating to: (i) our operation in highly competitive markets with competitors who may have greater resources than we possess; (ii) our operation in cyclical markets that are sensitive to domestic and foreign economic conditions and events; (iii) our heavy dependence on government contracts that may not be fully funded or may be terminated; (iv) supply chain constraints and inflationary impacts on prices for raw materials and components used in our products; (v) failure of our subcontractors or suppliers to perform their contractual obligations; and (vi) our accounting estimations for over-time contracts and any changes we need to make thereto. You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties.

While we believe we have identified and discussed in our SEC filings 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 we make 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 press release, except as required by applicable law.

Moog Inc.

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

(dollars in thousands, except per share data)

Three Months Ended

Twelve Months Ended

September 28,
2024

September 30,
2023

September 28,
2024

September 30,
2023

Net sales

$

917,272

$

872,051

$

3,609,160

$

3,319,122

Cost of sales

666,541

623,808

2,605,214

2,423,245

Inventory write-down

5,252

4,345

7,027

4,345

Gross profit

245,479

243,898

996,919

891,532

Research and development

26,021

29,444

112,773

106,551

Selling, general and administrative

124,840

118,041

494,887

469,836

Interest (1)

9,262

18,227

62,112

63,578

Asset impairment and fair value adjustment

15,287

12,974

22,149

14,628

Restructuring

11,165

3,260

23,788

7,997

Loss on sale of businesses

-

900

-

900

Gain on sale of buildings

(979

)

-

(979

)

(10,030

)

Pension settlement

-

12,542

-

12,542

Other

4,335

(599

)

14,376

9,478

Earnings before income taxes

55,548

49,109

267,813

216,052

Income taxes

12,503

9,527

60,593

45,054

Net earnings

$

43,045

$

39,582

$

207,220

$

170,998

Net earnings per share

Basic

$

1.35

$

1.24

$

6.48

$

5.37

Diluted

$

1.33

$

1.23

$

6.40

$

5.34

Weighted average common shares outstanding

Basic

31,988,662

31,893,646

31,954,689

31,831,687

Diluted

32,458,411

32,187,501

32,359,338

32,044,226

(1) During the three months ended September 28, 2024, we capitalized interest associated with major capital projects for a total of $9,847, which included an adjustment of $4,023 related to 2023 and an adjustment of $4,206 related to the nine months ended June 29, 2024.

Moog Inc.

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

(dollars in thousands)

Three Months Ended

Twelve Months Ended

September 28,
2024

September 30,
2023

September 28,
2024

September 30,
2023

As Reported:

Earnings before income taxes

$

55,548

$

49,109

$

267,813

$

216,052

Income taxes

12,503

9,527

60,593

45,054

Effective income tax rate

22.5

%

19.4

%

22.6

%

20.9

%

Net earnings

43,045

39,582

207,220

170,998

Diluted net earnings per share

$

1.33

$

1.23

$

6.40

$

5.34

Inventory Write-down, Restructuring and Other Charges:

Earnings before income taxes

$

16,930

$

7,605

$

32,226

$

13,391

Income taxes

4,270

1,746

8,122

3,050

Net earnings

12,660

5,859

24,104

10,341

Diluted net earnings per share

$

0.39

$

0.18

$

0.74

$

0.32

Asset Impairment

Earnings before income taxes

$

391

$

12,974

$

7,253

$

14,628

Income taxes

92

937

462

1,285

Net earnings

299

12,037

6,791

13,343

Diluted net earnings per share

$

0.01

$

0.37

$

0.21

$

0.42

Loss (Gain) on Sale of Businesses, Buildings and Fair Value Adjustments:

Earnings before income taxes

$

13,918

$

900

$

13,918

$

(9,130

)

Income taxes

(245

)

212

(245

)

(1,874

)

Net earnings

14,163

688

14,163

(7,256

)

Diluted net earnings per share

$

0.44

$

0.02

$

0.44

$

(0.23

)

Pension Settlement:

Earnings before income taxes

$

-

$

12,542

$

-

$

12,542

Income taxes

-

2,960

-

2,960

Net earnings

-

9,582

-

9,582

Diluted net earnings per share

$

-

$

0.30

$

-

$

0.30

As Adjusted:

Earnings before income taxes

$

86,787

$

83,130

$

321,210

$

247,483

Income taxes

16,620

15,382

68,932

50,475

Effective income tax rate

19.2

%

18.5

%

21.5

%

20.4

%

Net earnings

70,167

67,748

252,278

197,008

Diluted net earnings per share

$

2.16

$

2.10

$

7.80

$

6.15

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 restructuring and other charges related to continued portfolio shaping activities, asset impairments and other charges due to program termination and the devaluation of an investment, fair value adjustments from businesses being held for sale at year end, a one-time pension settlement charge, as well as impacts from the sale of buildings and a business. 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

Twelve Months Ended

September 28,
2024

September 30,
2023

September 28,
2024

September 30,
2023

Net sales:

Space and Defense

$

262,824

$

241,211

$

1,018,148

$

947,251

Military Aircraft

215,645

183,562

811,566

720,332

Commercial Aircraft

197,119

193,297

788,300

668,815

Industrial

241,684

253,981

991,146

982,724

Net sales

$

917,272

$

872,051

$

3,609,160

$

3,319,122

Operating profit:

Space and Defense

$

27,179

$

29,563

$

127,354

$

95,949

10.3

%

12.3

%

12.5

%

10.1

%

Military Aircraft

25,535

10,891

85,858

60,416

11.8

%

5.9

%

10.6

%

8.4

%

Commercial Aircraft

21,634

34,444

91,472

84,387

11.0

%

17.8

%

11.6

%

12.6

%

Industrial

9,065

12,982

90,657

102,165

3.8

%

5.1

%

9.1

%

10.4

%

Total operating profit

83,413

87,880

395,341

342,917

9.1

%

10.1

%

11.0

%

10.3

%

Deductions from operating profit:

Interest expense

9,262

18,227

62,112

63,578

Equity-based compensation expense

3,658

2,461

14,959

10,582

Pension settlement

-

12,542

-

12,542

Non-service pension expense

3,119

2,986

12,685

12,324

Corporate and other expenses, net

11,826

2,555

37,772

27,839

Earnings before income taxes

$

55,548

$

49,109

$

267,813

$

216,052

Moog Inc.

RECONCILIATION TO ADJUSTED OPERATING PROFIT AND MARGINS (UNAUDITED)

(dollars in thousands)

Three Months Ended

Twelve Months Ended

September 28,
2024

September 30,
2023

September 28,
2024

September 30,
2023

Space and Defense operating profit - as reported

$

27,179

$

29,563

$

127,354

$

95,949

Inventory write-down

1,918

-

1,918

-

Asset impairment

-

-

416

219

Restructuring and other

6,307

1,348

6,307

2,902

Space and Defense operating profit - as adjusted

$

35,404

$

30,911

$

135,995

$

99,070

13.5

%

12.8

%

13.4

%

10.5

%

Military Aircraft operating profit - as reported

$

25,535

$

10,891

$

85,858

$

60,416

Inventory write-down

-

1,616

175

1,616

Asset impairment

-

235

6,446

1,332

Loss on sale of business

-

900

-

900

Restructuring and other

335

124

4,732

399

Military Aircraft operating profit - as adjusted

$

25,870

$

13,766

$

97,211

$

64,663

12.0

%

7.5

%

12.0

%

9.0

%

Commercial Aircraft operating profit - as reported

$

21,634

$

34,444

$

91,472

$

84,387

Asset impairment

391

-

391

338

Gain on sale of buildings

(979

)

-

(979

)

-

Restructuring and other

1,342

44

1,750

44

Commercial Aircraft operating profit - as adjusted

$

22,388

$

34,488

$

92,634

$

84,769

11.4

%

17.8

%

11.8

%

12.7

%

Industrial operating profit - as reported

$

9,065

$

12,982

$

90,657

$

102,165

Inventory write-down

3,334

2,729

4,934

2,729

Asset impairment

-

12,739

-

12,739

Fair value adjustment

14,897

-

14,897

-

Gain on sale of buildings

-

-

-

(10,030

)

Restructuring and other

3,694

1,744

12,410

5,701

Industrial operating profit - as adjusted

$

30,990

$

30,194

$

122,898

$

113,304

12.8

%

11.9

%

12.4

%

11.5

%

Total operating profit - as adjusted

$

114,652

$

109,359

$

448,738

$

361,806

12.5

%

12.5

%

12.4

%

10.9

%

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 BALANCE SHEETS (UNAUDITED)

(dollars in thousands)

September 28,
2024

September 30,
2023

ASSETS

Current assets

Cash and cash equivalents

$

61,694

$

68,959

Restricted cash

123

185

Receivables, net

388,517

434,723

Unbilled receivables

775,294

706,601

Inventories, net

863,702

724,002

Prepaid expenses and other current assets

86,245

50,862

Total current assets

2,175,575

1,985,332

Property, plant and equipment, net

929,357

814,696

Operating lease right-of-use assets

52,591

56,067

Goodwill

833,764

821,301

Intangible assets, net

63,479

71,637

Deferred income taxes

20,991

8,749

Other assets

52,695

50,254

Total assets

$

4,128,452

$

3,808,036

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

$

292,988

$

264,573

Accrued compensation

101,127

111,154

Contract advances and progress billings

334,558

377,977

Accrued liabilities and other

305,180

211,769

Total current liabilities

1,033,853

965,473

Long-term debt, excluding current installments

874,139

863,092

Long-term pension and retirement obligations

167,161

157,455

Deferred income taxes

27,738

37,626

Other long-term liabilities

164,928

148,303

Total liabilities

2,267,819

2,171,949

Shareholders' equity

Common stock - Class A

43,835

43,822

Common stock - Class B

7,445

7,458

Additional paid-in capital

784,509

608,270

Retained earnings

2,668,723

2,496,979

Treasury shares

(1,082,240

)

(1,057,938

)

Stock Employee Compensation Trust

(194,049

)

(114,769

)

Supplemental Retirement Plan Trust

(163,821

)

(93,126

)

Accumulated other comprehensive loss

(203,769

)

(254,609

)

Total shareholders' equity

1,860,633

1,636,087

Total liabilities and shareholders' equity

$

4,128,452

$

3,808,036

Moog Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)

Twelve Months Ended

September 28,
2024

September 30,
2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings

$

207,220

$

170,998

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:

Depreciation

82,957

78,692

Amortization

10,149

11,541

Deferred income taxes

(31,735

)

(35,531

)

Equity-based compensation expense

14,959

10,582

Loss on sale of businesses

-

900

Gain on sale of buildings

(979

)

(10,030

)

Inventory write-down, asset impairment and fair value adjustments

29,176

18,973

Pension settlement

-

12,542

Other

6,512

6,244

Changes in assets and liabilities providing (using) cash:

Receivables

54,716

(56,575

)

Unbilled receivables

(63,424

)

(87,915

)

Inventories

(126,978

)

(130,378

)

Accounts payable

26,446

28,641

Contract advances and progress billings

(49,470

)

79,983

Accrued expenses

43,989

(1,692

)

Accrued income taxes

16,219

22,869

Net pension and post retirement liabilities

11,791

13,940

Other assets and liabilities

(29,204

)

2,151

Net cash provided (used) by operating activities

202,344

135,935

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of businesses, net of cash acquired

(5,911

)

-

Purchase of property, plant and equipment

(156,018

)

(173,286

)

Net proceeds from businesses sold

1,627

1,892

Net proceeds from buildings sold

1,453

19,702

Other investing transactions

(766

)

(11,455

)

Net cash provided (used) by investing activities

(159,615

)

(163,147

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from revolving lines of credit

1,038,500

1,044,101

Payments on revolving lines of credit

(1,029,500

)

(1,017,420

)

Payments on long-term debt

-

(916

)

Payments on finance lease obligations

(6,496

)

(4,620

)

Payment of dividends

(35,476

)

(34,074

)

Proceeds from sale of treasury stock

15,685

19,785

Purchase of outstanding shares for treasury

(36,738

)

(29,306

)

Proceeds from sale of stock held by SECT

28,202

15,713

Purchase of stock held by SECT

(22,837

)

(14,251

)

Other financing transactions

-

(2,027

)

Net cash provided (used) by financing activities

(48,660

)

(23,015

)

Effect of exchange rate changes on cash

1,324

2,043

Increase (decrease) in cash, cash equivalents and restricted cash

(4,607

)

(48,184

)

Cash, cash equivalents and restricted cash at beginning of year

69,144

117,328

Cash, cash equivalents and restricted cash at end of year (1)

$

64,537

$

69,144

(1) End of year cash balance at September 28, 2024 includes cash related to assets held for sale of $2,720.

Moog Inc.

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

(dollars in thousands)

Three Months Ended

Twelve Months Ended

September 28,
2024

September 30,
2023

September 28,
2024

September 30,
2023

Net cash provided by operating activities

$

155,789

$

153,032

$

202,344

$

135,935

Purchase of property, plant and equipment

(46,402

)

(48,212

)

(156,018

)

(173,286

)

Receivables Purchase Agreement

-

-

(25,000

)

-

Free cash flow

$

109,387

$

104,820

$

21,326

$

(37,351

)

Adjusted net earnings

$

70,167

$

67,748

$

252,278

$

197,008

Free cash flow conversion

156

%

155

%

8

%

(19

)%

Free cash flow is defined as net cash provided (used) by operating activities, less purchase of property, plant and equipment, less the benefit from the Receivables Purchase Agreement. Free cash flow conversion is defined as free cash flow divided by adjusted net earnings. Free cash flow and free cash flow conversion are not measures 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 liquidity, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241101207281/en/

Aaron Astrachan
716.687.4225

Source: Moog Inc.