Moog Inc. (NYSE:MOG.A) Q1 2020 Earnings Conference Call - Final Transcript

Jan 24, 2020 • 10:00 am ET

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Moog Inc. (NYSE:MOG.A) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] And our first question will be from Cai von Rumohr with Cowen.

Analyst
Cai von Rumohr

Terrific. Thank you very much and very nice quarter. So John, Max, are you still running at 42 per month? And given it's likely that you as along with all the others are going to see something of a dip? What can you do to kind of mitigate the fact that, if the rate goes down, do you keep the people or do you let them go, try to hire them again and alternatively maybe some comment on the potential benefit to test and to the simulation business?

Executive
John R. Scannell

So, let me answer one piece of that, it's really, we're not going to be letting anybody go in this context, Cai. As we've said before, the Max, it's a nice piece of business for us, but it's in that $30 million to $40 million a year range. And so, it's not an enormous part of our business. And we have plenty to do for our folks that make that stuff. So there is no question that we'll be reducing staff or anything like that. We are still producing, Cai, and I would say, it's a very fluid situation at the moment, which is why we decided not to guide to something in our numbers. We'll do that at the end of the next quarter when we know for definite. We have received notifications from our customer about potentially moving some stuff out, but they've not necessarily changed orders.

We also have the issue around that the -- we can still continue to produce. We will probably -- even if they stop taking deliveries produced at a lower rates to build some safety stock and it's still very fluid as to what the re-ramp up is. And so at this stage, I think, there's no question, it will be a hit to both the sales and it is a profitable program. So you can assume on the margin contribution, it's perhaps similar to the average of the aircraft business. So I've no doubt that there will be some negative impact for us. But exactly what that looks like will depend on exactly what Boeing would like to do. And then, I'll respond to that in terms of how much we continue to produce versus how much we slow down. But we have plenty of other things for folks to do, so that's not a concern.

The simulation piece, I just don't know, Cai. So they've announced that they, I believe, that Boeing is now saying that they believe that some additional simulator training would be useful. But myself and Jennifer were at a defense conference -- a commercial and defense conference a couple of weeks ago and listening to the pilot unions at the time, they didn't know anything about it and they couldn't size it. I gather from what I've heard that there are somewhere in the mid-30s, high 30s Max simulators on the planet at