TransDigm Group Reports Fiscal 2013 Second Quarter Results

CLEVELAND, May 7, 2013 /PRNewswire/ — TransDigm Group Incorporated (NYSE: TDG), a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the second quarter ended March 30, 2013.

Highlights for the second quarter include:

Net sales of $465.6 million, up 10.0% from $423.5 million;
EBITDA As Defined of $219.3 million, up 8.0% from $203.1 million;
Net income of $67.9 million, down 16.7% from $81.6 million;
Earnings per share of $1.25, down 17.2% from $1.51; and
Adjusted earnings per share of $1.74, up 5.5% from $1.65.
Net sales for the quarter rose 10.0% to $465.6 million from $423.5 million in the comparable quarter a year ago. The favorable contribution from acquisitions, primarily AmSafe and Aero-Instruments, accounted for the majority of the increase in net sales. Organic net sales growth was up slightly.

Net income for the quarter decreased 16.7% to $67.9 million, or $1.25 per share, compared with $81.6 million, or $1.51 per share, in the comparable quarter a year ago. The decrease in net income primarily reflects one-time costs attributable to the refinancing of our senior secured credit facility in February 2013 of $20.5 million, net of tax, or $0.38 per share and higher interest expense. This is partially offset by the growth in net sales described above and a lower effective tax rate. The current quarter included acquisition-related and non-cash compensation costs of $6.5 million, net of tax, or $0.11 per share. The comparable quarter a year ago reflected acquisition-related and non-cash compensation costs of $7.5 million, net of tax, or $0.14 per share.

Adjusted net income for the quarter rose 6.6% to $95.0 million, or $1.74 per share, from $89.1 million, or $1.65 per share, in the comparable quarter a year ago.

EBITDA for the quarter decreased 6.4% to $180.2 million from $192.5 million for the comparable quarter a year ago. The current quarter included $30.3 million of one-time costs attributable to the refinancing in February 2013. EBITDA As Defined for the period increased 8.0% to $219.3 million compared with $203.1 million in the quarter a year ago. EBITDA As Defined as a percentage of net sales for the quarter was 47.1%.

“Despite the continued uncertain global economic and defense market environments, we are pleased with our Company’s overall results in both the fiscal second quarter and year-to-date periods,” stated W. Nicholas Howley, TransDigm Group’s Chairman and Chief Executive Officer. “Although both periods benefitted from recent acquisitions, our organic commercial OEM and defense revenues continued to perform well given the difficult market conditions. In spite of our commercial aftermarket revenues continuing softer than anticipated and acquisition dilution of approximately 2.5 margin points, our first half EBITDA As Defined margin remained strong at 47%.”

Mr. Howley continued, “During the quarter, we successfully refinanced our senior secured credit facility. We ended the quarter with $680 million in cash and about $300 million of capacity on our revolver. This strong liquidity position and additional capacity should provide us with the financial flexibility to support growth, continue to pursue appropriate acquisition opportunities and optimize our capital structure to maximize shareholder value.”

Year-to-Date Results

Net sales for the twenty-six week period ended March 30, 2013 rose 15.5% to $896.0 million from $775.9 million in the comparable period last year. The favorable contribution from acquisitions, primarily Harco, AmSafe and Aero-Instruments, accounted for the majority of the increase in net sales. Organic net sales growth was up slightly.

Net income for the twenty-six week period decreased 3.1% to $142.1 million, or $1.91 per share, compared with $146.7 million, or $2.66 per share. The decrease in net income primarily reflects one-time costs attributable to the refinancing of our senior secured credit facility in February 2013 of $20.5 million, net of tax, or $0.38 per share and higher interest expense. This is partially offset by the growth in net sales described above and a lower effective tax rate. The twenty-six week period ended March 30, 2013 included acquisition-related and non-cash compensation costs of $14.7 million, net of tax, or $0.27 per share. The comparable period a year ago reflected acquisition-related and non-cash compensation costs of $18.9 million, net of tax, or $0.35 per share.

Earnings per share were reduced in both fiscal 2013 and 2012 by $0.70 per share and $0.06 per share respectively, representing dividend equivalent payments made in the first quarter of each fiscal year.

Adjusted net income for the twenty-six week period rose 7.1% to $177.3 million, or $3.26 per share, from $165.5 million, or $3.07 per share, in the comparable period a year ago.

EBITDA for the twenty-six week period increased 4.2% to $370.5 million from $355.5 million for the comparable period a year ago. EBITDA As Defined for the period increased 11.4% to $420.2 million compared with $377.3 million in the comparable period a year ago. EBITDA As Defined as a percentage of net sales for the period was 46.9%.

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.

As previously announced on April 22, 2013, TransDigm entered into a definitive merger agreement with Aerosonic Corporation (NYSE MKT: AIM) to acquire all of the outstanding shares of Aerosonic in a cash transaction valued at approximately $39 million. The transaction is subject to customary terms and conditions.

Fiscal 2013 Outlook

Mr. Howley continued, “The Company is revising the full year fiscal 2013 guidance to reflect our recent capital structure refinancing and performance experienced in the first half of the year.”

The Company is adjusting full year fiscal 2013 guidance, which assumes no additional acquisitions, as follows:

Net sales are anticipated to be in the range of $1,840 million to $1,880 million (previously in the range of $1,820 million to $1,880 million) compared with $1,700 million in fiscal 2012;
EBITDA As Defined is anticipated to be in the range of $878 million to $898 million, maintaining mid-point of $888 million (previously in the range of $874 million to $902 million) compared with $809 million in fiscal 2012;
Net income is anticipated to be in the range of $326 million to $338 million (previously in the range of $344 million to $356 million) compared with $325 million in fiscal 2012;
Earnings per share are expected to be in the range of $5.29 to $5.51 per share (previously in the range of $5.60 to $5.84 per share) compared with $5.97 per share in fiscal 2012; and
Adjusted earnings per share are expected to be in the range of $6.83 to $7.05 per share (previously in the range of $6.74 to $6.98 per share) compared with $6.67 per share in fiscal 2012.