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TransDigm Group Reports Fiscal 2017 Third Quarter Results and Announces Potential Financing Transaction

Highlights for the third quarter include:

  • Net income of $169.1 million, up 5.2% from $160.6 million;
  • Reaffirms previously stated fiscal 2017 financial guidance.

Net sales for the quarter rose 13.8%, or $110.0 million, to $907.7 million from $797.7 million in the comparable quarter a year ago. The favorable contribution from the businesses acquired in the last twelve month period was $87.1 million. Organic net sales growth was up approximately 3%.

Net income for the quarter increased 5.2% to $169.1 million, or $3.08 per share, compared to $160.6 million, or $2.88 per share, in the comparable quarter a year ago. The increase in net income primarily reflects the increase in net sales described above, lower refinancing expenses and improvements to our operating margin resulting from the strength of our proprietary products and continued productivity efforts. This growth in net income was partially offset by higher interest expense and a higher effective tax rate.

Adjusted net income for the quarter rose 5.1% to $181.1 million, or $3.30 per share, from $172.3 million, or $3.09 per share, in the comparable quarter a year ago.

EBITDA for the quarter increased 23.1% to $424.2 million from $344.6 million for the comparable quarter a year ago. EBITDA As Defined for the period increased 15.4% to $442.9 million compared with $383.9 million in the comparable quarter a year ago. EBITDA As Defined as a percentage of net sales for the quarter was 48.8%.

"We are pleased with our operating results for both the fiscal third quarter and year-to-date periods," stated W. Nicholas Howley, TransDigm Group's Chairman and Chief Executive Officer. "Our overall performance was in-line with our expectations with some modest puts and takes across our markets. Fiscal third quarter commercial transport aftermarket revenues were up in the mid to high-single digit percentage range despite ongoing weakness in our interior businesses. This was partially offset by continuing weakness in our business jet and helicopter aftermarket revenues. Our defense revenues continue to grow more than originally anticipated. We stayed focused on our value drivers and continued to expand our EBITDA margins. All in all, a good quarter for intrinsic shareholder value creation."

During the thirteen week period ended July 1, 2017, TransDigm repurchased 205,800 shares of its common stock with a weighted average per share price of $243 at an aggregate cost of approximately $50 million.

Year-to-Date Results

Net sales for the thirty-nine week period ended July 1, 2017 rose 13.0% to $2,594.9 million from $2,296.2 million in the comparable period last year. Organic net sales growth was approximately 2.5%.

Net income for the thirty-nine week period ended July 1, 2017 increased 2.7% to $443.4 million, or $6.23 per share, compared with $431.7 million, or $7.63 per share, in the comparable period last year. Earnings per share were reduced in both 2017 and 2016 by $1.72 per share and $0.05 per share, respectively, representing dividend equivalent payments made during each fiscal year. The increase in net income primarily reflects growth in net sales described above and improvements to our operating margin resulting from the strength of our proprietary products and continued productivity efforts. This growth in net income was partially offset by higher interest expense due to an increase in the level of outstanding borrowings to $11.3 billion from $8.5 billion outstanding in the comparable period last year, higher refinancing costs, higher acquisition-related costs and higher effective tax rate.

Adjusted net income for the thirty-nine week period ended July 1, 2017 rose 7.8% to $497.1 million, or $8.91 per share, from $461.1 million, or $8.20 per share, in the comparable period a year ago.

EBITDA for the thirty-nine week period ended July 1, 2017 increased 15.9% to $1,144.9 million from $988.2 million for the comparable period a year ago. EBITDA As Defined for the period increased 16.5% to $1,249.0 million compared with $1,071.9 million in the comparable period a year ago. EBITDA As Defined as a percentage of net sales for the period was 48.1%.

Please see the attached tables for a reconciliation of net income to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined, and a reconciliation of earnings per share to adjusted earnings per share for the periods discussed in this press release.

During the thirty-nine week period ended July 1, 2017, TransDigm repurchased 1,723,624 shares of its common stock with a weighted average per share price of $226 at an aggregate cost of approximately $390 million.

Fiscal 2017 Outlook

Assuming no additional acquisitions and based on current market conditions, the fiscal 2017 financial guidance remains as follows:

  • Net sales are anticipated to be in the range of $3,530 million to $3,570 million compared with $3,171 million in fiscal 2016;
  • Net income is anticipated to be in the range of $605 million to $619 million compared with $586 million in fiscal 2016;
  • Earnings per share are expected to be in the range of $9.16 to $9.40 per share based upon weighted average shares outstanding of 55.6 compared with $10.39 per share in fiscal 2016;
  • EBITDA As Defined is anticipated to be in the range of $1,693 million to $1,713 million compared with $1,495 million in fiscal 2016; and
  • Adjusted earnings per share are expected to be in the range of $12.09 to $12.33 per share compared with $11.49 per share in fiscal 2016.

Please see the attached table 6 for a reconciliation of EBITDA, EBITDA As Defined to net income and reported earnings per share to adjusted earnings per share guidance mid-point estimated for the fiscal year ending September 30, 2017. Additionally, please see the attached table 7 for comparison of the current fiscal year 2017 guidance versus the previously issued fiscal year 2017 guidance.

Potential Financing

TransDigm Group today announced its intention to issue a new $1.8 billion first lien term loan. TransDigm intends to use the proceeds, together with cash on hand, to repay $1.2 billion of its existing tranche C term loans and to fund a potential special dividend in the range of $1.0 billion to $1.25 billion.

In connection with the senior credit facility refinancing, TransDigm will make a presentation to its lenders on Tuesday, August 8, 2017 beginning at 1:00 p.m., Eastern Time. Additional information will be available via Credit Suisse Securities (USA) LLC.

Earnings Conference Call

TransDigm Group will host a conference call for investors and security analysts on August 8, 2017, beginning at 11:00 a.m., Eastern Time. To join the call, dial (888) 558-9538 and enter the pass code 61153185. International callers should dial (760) 666-3183 and use the same pass code. A live audio webcast can be accessed online at http://www.transdigm.com. A slide presentation will also be available for reference during the conference call; go to the investor relations page of our website and click on "Presentations."

The call will be archived on the website and available for replay at approximately 2:00 p.m., Eastern Time. A telephone replay will be available for two weeks by dialing (855) 859-2056 and entering the pass code 61153185. International callers should dial (404) 537-3406 and use the same pass code.

About TransDigm Group

TransDigm Group, through its wholly-owned subsidiaries, is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, databus and power controls, cockpit security components and systems, specialized cockpit displays, aircraft audio systems, specialized lavatory components, seatbelts and safety restraints, engineered interior surfaces and related components, lighting and control technology, military...


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