Moog Inc. (NYSE:MOG) announced today financial results for the quarter ended July 3, 2021.

Third Quarter Highlights

Sales of $707 million, up 8% from a year ago;
GAAP diluted earnings per share of $1.12, up from ($0.39) a year ago;
GAAP diluted earnings per share of $1.12 were up 20% over adjusted earnings per share of $0.93 a year ago;
Operating margins of 9.2%;
Effective tax rate of 25.7%; and
$93 million cash flow from operating activities.

Segment Results

Aircraft Controls segment sales in the quarter were $272 million, up 9% year over year with higher commercial sales compensating for marginally lower military sales. Total commercial aircraft revenues were $96 million, 34% higher. Sales to commercial OEM customers increased 26% mostly tied to acquired sales from the recent Genesys acquisition. Commercial aftermarket sales were up 56%, to $28 million, the result of aircraft returning to service and repair and overhaul work on legacy components.

Total military aircraft sales were down marginally, to $176 million. Military OEM sales of $128 million were 19% higher, helped by funded development and activity across a range of programs in the portfolio. Military aftermarket sales of $48 million decreased 31%, as our customers adjusted their inventory.

Space and Defense segment sales were $205 million, up 11% year over year. Space sales of $86 million increased 16% on strength across the portfolio, led by integrated space vehicles and work on NASA programs. Defense sales were 8% higher, at $119 million, the result of increased sales of vehicle and naval applications and component products.

Industrial Systems segment sales were $230 million, a 3% increase over last year. Sales of industrial automation products were up 19%, attributed to stronger capital spending globally. Medical product sales, including pumps and components for respirator products, were down 15% as sales moderated from the COVID-driven demand seen a year ago. Energy sales and sales into simulation and test applications were mostly unchanged.

Consolidated 12-month backlog was $2.0 billion, up 21% from a year ago.

"It was solid quarter for our business with strong cash flow and earnings per share in line with our projections," said John Scannell, Chairman and CEO. "For the full year, we're tweaking our sales outlook slightly and keeping our earnings per share forecast unchanged at $5.00, plus or minus $0.15. All in all, steady as she goes."

Fiscal 2021 Outlook

The Company updated its fiscal 2021 projections of 90 days ago.

Forecast sales of $2.82 billion;
Forecast diluted earnings per share of $5.00, plus or minus $0.15;
Forecast full year operating margins of 10.0%;
Forecast effective tax rate of 24.2%; and
Forecast cash flow from operations of $292 million.

In conjunction with today's release, Moog will host a conference call on Friday, July 30, 2021 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 approximately 90 minutes prior to the conference call.

About Moog Inc.

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 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.

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.

Moog Inc. CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED) (dollars in thousands, except per share data)

	Three Months Ended					Nine Months Ended
	July 3, 2021		June 27, 2020			July 3, 2021			June 27, 2020
Net sales	$	707,352	$	657,539		$	2,127,708		$	2,177,659
Cost of sales		516,750		486,760			1,547,554			1,587,569
Inventory write-down		—		18,795			—			18,795
Gross profit		190,602		151,984			580,154			571,295
Research and development		33,095		27,407			91,556			82,303
Selling, general and administrative		100,597		96,899			305,331			302,517
Interest		8,239		9,440			25,288			29,923
Long-lived asset impairment		—		31,871			—			31,871
Restructuring		—		5,306			—			5,306
Other		76		4,415			(3,115	)		14,294
Earnings (loss) before income taxes		48,595		(23,354	)		161,094			105,081
Income taxes (benefit)		12,473		(10,764	)		38,442			17,899
Net earnings (loss)	$	36,122	$	(12,590	)	$	122,652		$	87,182

Net earnings (loss) per share
Basic	$	1.12	$	(0.39	)	$	3.82		$	2.60
Diluted	$	1.12	$	(0.39	)	$	3.80		$	2.59

Average common shares outstanding
Basic		32,125,524		32,601,481			32,115,400			33,515,584
Diluted		32,355,238		32,601,481			32,305,834			33,722,723

Results shown in the previous table include charges associated with the COVID-19 pandemic. These impacts include inventory write-down, long-lived asset impairment and restructuring charges. The table below adjusts the income taxes (benefit), net earnings (loss) and diluted net earnings (loss) per share to exclude these impacts.

Reconciliation to non-GAAP adjusted income taxes (benefit), net earnings (loss) and diluted net earnings (loss) per share are as follows:

	Three Months Ended						Nine Months Ended
	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
As Reported:
Earnings (loss) before income taxes	$	48,595		$	(23,354	)	$	161,094		$	105,081
Income taxes (benefit)		12,473			(10,764	)		38,442			17,899
Effective income tax rate		*25.7*	%		46.1	%		*23.9*	%		17.0	%
Net earnings (loss)		36,122			(12,590	)		122,652			87,182
Diluted net earnings (loss) per share	$	1.12		$	(0.39	)	$	3.80		$	2.59

COVID-19 Pandemic Charges:
Earnings before income taxes	$	—		$	55,972		$	—		$	55,972
Income taxes		—			13,012			—			13,012
Net earnings		—			42,960			—			42,960
Diluted net earnings per share	$	—		$	1.32		$	—		$	1.32

As Adjusted:
Earnings before income taxes	$	48,595		$	32,618		$	161,094		$	161,053
Income taxes		12,473			2,248			38,442			30,911
Effective income tax rate		*25.7*	%		6.9	%		*23.9*	%		19.2	%
Net earnings		36,122			30,370			122,652			130,142
Diluted net earnings per share	$	1.12		$	0.93		$	3.80		$	3.91

The diluted net earnings per share associated with the charges have been calculated using the quarterly average outstanding shares in the period in which the charges were incurred.

Moog Inc. CONSOLIDATED SALES AND OPERATING PROFIT (LOSS) (UNAUDITED) (dollars in thousands)

	Three Months Ended						Nine Months Ended
	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
Net sales:
Aircraft Controls	$	272,131		$	249,388		$	863,266		$	930,749
Space and Defense Controls		204,887			183,906			599,217			563,156
Industrial Systems		230,334			224,245			665,225			683,754
Net sales	$	707,352		$	657,539		$	2,127,708		$	2,177,659
Operating profit (loss):
Aircraft Controls	$	20,545		$	(42,053	)	$	70,485		$	31,240
		*7.5*	%		(16.9	)%		*8.2*	%		3.4	%
Space and Defense Controls		21,339			22,290			71,037			72,224
		*10.4*	%		12.1	%		*11.9*	%		12.8	%
Industrial Systems		23,004			17,903			66,715			69,477
		*10.0*	%		8.0	%		*10.0*	%		10.2	%
Total operating profit (loss)		64,888			(1,860	)		208,237			172,941
		*9.2*	%		(0.3	)%		*9.8*	%		7.9	%
Deductions from operating profit:
Interest expense		8,239			9,440			25,288			29,923
Equity-based compensation expense		1,791			1,390			6,420			4,661
Non-service pension expense (income)		928			4,241			(3,053	)		11,440
Corporate and other expenses, net		5,335			6,423			18,488			21,836
Earnings (loss) before income taxes	$	48,595		$	(23,354	)	$	161,094		$	105,081

Operating Profit and Margins - as adjusted are as follows:
	Three Months Ended						Nine Months Ended
	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
Aircraft Controls operating profit (loss) - as reported	$	20,545		$	(42,053	)	$	70,485		$	31,240
Inventory write-down		—			18,535			—			18,535
Long-lived asset impairment		—			31,530			—			31,530
Restructuring		—			2,896			—			2,896
Aircraft Controls operating profit - as adjusted	$	20,545		$	10,908		$	70,485		$	84,201
		*7.5*	%		4.4	%		*8.2*	%		9.0	%

Space and Defense Controls operating profit - as reported	$	21,339		$	22,290		$	71,037		$	72,224
Long-lived asset impairment		—			341			—			341
Restructuring		—			185			—			185
Space and Defense Controls operating profit - as adjusted	$	21,339		$	22,816		$	71,037		$	72,750
		10.4	%		12.4	%		11.9	%		12.9	%

Industrial Systems operating profit - as reported	$	23,004		$	17,903		$	66,715		$	69,477
Inventory write-down		—			260			—			260
Restructuring		—			2,225			—			2,225
Industrial Systems operating profit - as adjusted	$	23,004		$	20,388		$	66,715		$	71,962
		*10.0*	%		9.1	%		*10.0*	%		10.5	%

Total operating profit - as adjusted	$	64,888		$	54,112		$	208,237		$	228,913
		*9.2*	%		8.2	%		*9.8*	%		10.5	%

Moog Inc. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands)

	July 3, 2021		October 3, 2020
ASSETS
Current assets
Cash and cash equivalents	$	90,550	$	84,583
Restricted cash	1,108		489
Receivables, net	896,998		855,535
Inventories, net	632,359		623,043
Prepaid expenses and other current assets	49,513		49,837
Total current assets	1,670,528		1,613,487
Property, plant and equipment, net	639,202		600,498
Operating lease right-of-use assets	62,507		68,393
Goodwill	860,268		821,856
Intangible assets, net	111,867		85,046
Deferred income taxes	18,467		18,924
Other assets	20,471		17,627
Total assets	$	3,383,310	$	3,225,831
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt	$	56,062	$	350
Accounts payable	162,890		176,868
Accrued compensation	111,159		109,510
Contract advances	259,425		203,338
Accrued liabilities and other	216,625		220,488
Total current liabilities	806,161		710,554
Long-term debt, excluding current installments	863,682		929,982
Long-term pension and retirement obligations	181,400		183,366
Deferred income taxes	54,168		40,474
Other long-term liabilities	110,694		118,372
Total liabilities	2,016,105		1,982,748
Shareholders' equity
Common stock - Class A	43,802		43,799
Common stock - Class B	7,478		7,481
Additional paid-in capital	519,636		472,645
Retained earnings	2,211,305		2,112,734
Treasury shares	(1,007,754)		(990,783)
Stock Employee Compensation Trust	(85,314)		(64,242)
Supplemental Retirement Plan Trust	(69,448)		(53,098)
Accumulated other comprehensive loss	(252,500)		(285,453)
Total shareholders' equity	1,367,205		1,243,083
Total liabilities and shareholders' equity	$	3,383,310	$	3,225,831

Moog Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands)

	Nine Months Ended
	July 3, 2021			June 27, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	122,652		$	87,182
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		56,806			55,859
Amortization		10,000			9,847
Deferred income taxes		4,161			(10,766	)
Equity-based compensation expense		6,420			4,661
Impairment of long-lived assets and inventory write-down		—			50,666
Other		(2,781	)		6,831
Changes in assets and liabilities providing (using) cash:
Receivables		(21,329	)		63,272
Inventories		9,509			(86,050	)
Accounts payable		(17,530	)		(85,136	)
Contract advances		54,414			73,040
Accrued expenses		3,503			1,827
Accrued income taxes		14,776			(20,555	)
Net pension and post retirement liabilities		8,380			24,706
Other assets and liabilities		(18,401	)		12,463
Net cash provided by operating activities		230,580			187,847
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		(77,600	)		(54,265	)
Purchase of property, plant and equipment		(88,573	)		(70,423	)
Other investing transactions		3,615			(3,429	)
Net cash used by investing activities		(162,558	)		(128,117	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving lines of credit		653,500			977,850
Payments on revolving lines of credit		(651,986	)		(968,459	)
Proceeds from long-term debt		42,300			6,935
Payments on long-term debt		(55,891	)		(52,253	)
Proceeds from senior notes, net of issuance costs		—			491,769
Payments on senior notes		—			(300,000	)
Payments on finance lease obligations		(1,588	)		(730	)
Payment of dividends		(24,081	)		(17,049	)
Proceeds from sale of treasury stock		4,603			3,199
Purchase of outstanding shares for treasury		(26,702	)		(191,961	)
Proceeds from sale of stock held by SECT		679			17,082
Purchase of stock held by SECT		(3,535	)		(6,241	)
Other financing transactions		—			(5,879	)
Net cash used by financing activities		(62,701	)		(45,737	)
Effect of exchange rate changes on cash		1,265			(932	)
Increase in cash, cash equivalents and restricted cash		6,586			13,061
Cash, cash equivalents and restricted cash at beginning of period		85,072			92,548
Cash, cash equivalents and restricted cash at end of period	$	91,658		$	105,609

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Moog Inc. Reports Third Quarter 2021 Results