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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Presentation
Executive
John R. Scannell

We completed the acquisition of an industrial manufacturing company in Germany, which further strengthens our market leadership position in rotating devices. We refinanced our debt structure, reducing our interest rates and providing additional capital deployment flexibility. Our balance sheet is now nicely set up for the next several years and provides us with tremendous flexibility in how we allocate capital to create value for our shareholders. Finally, in the quarter, we repurchased 670,000 shares under our outstanding authorization.

And then lastly, our colleagues and friends Don Fishback decided to retire at the end of our first quarter. Don spent 38 years with our company in various finance functions, spending the last nine years of his career as CFO. He was a wonderful CFO, great business adviser and personal friend. I will miss him, as well many of our listeners who have known Don. He continue as a director of Moog. Our new CFO is Jennifer Walter, who's been with Moog almost 20 years as Controller and more recently as Vice President of Finance. She will do an excellent job taking over from Don.

Now let me move to the details starting with the first quarter results. Sales in the quarter of $755 million were 11% higher than last year, driven by strong organic growth particularly in our A&D portfolio. Sales were up in each of our operating groups, with Space and Defense up 19%, Aircraft up 12% and Industrial up 4% over last year. Taking a look at the P&L, our gross margin was down from last year on a less favorable mix. R&D was down on lower Aircraft spend while SG&A was lower as a percentage of sales.

Interest expense was up slightly on higher debt levels. In other income, we had a benefit of about $2 million last year as a result of the sale of a small product line. Excluding this unusual item, the other income line is flat with last year. The effective tax rate this quarter was 25.2% resulting in net income of $50 million, up 17% from last year, and earnings per share of $1.44, up 18% on a slightly lower share count.

Fiscal 20 outlook. Our forecast for operating performance is unchanged from 90 days ago. However, we're making two minor adjustments to our full year outlook to reflect events in the first quarter which we had not forecasted. First, we're increasing our sales forecast by $35 million to account for the sales of the GAT acquisition in our Industrial Group. Given first year acquisition accounting impacts, we're modeling this business to be breakeven in fiscal '20. Second, we're adjusting our EPS forecast to include the combined impact of calling our High Yield bonds and the first quarter share buyback activity. The net impact is a $0.05 reduction in our EPS forecast. The overall result is full year sales of $3.05 billion and earnings per share of $5.50 plus or minus $0.20.

Now to the segments. I'd remind our listeners that we've provided