TransDigm Group Reports Fiscal 2021 Third Quarter Results and Announces Transition of W. Nicholas Howley to Chairman
Third quarter highlights include:
- Net sales of
$1,218 million , up 19% from$1,022 million in the prior year's quarter; - Income from continuing operations of
$317 million , up from a loss from continuing operations of$(5) million ; - Earnings per share from continuing operations of
$5.43 , up from a loss per share from continuing operations of$(0.09) ; - EBITDA As Defined of
$559 million , up 32% from$424 million ; - EBITDA As Defined margin of 45.9%, representing sequential improvement;
- Adjusted earnings per share of
$3.33 , up 116% from$1.54 in the prior year's quarter; and - Strong operating cash flow generation of
$252 million .
Fiscal 2021 financial guidance remains suspended at this time.
Quarter-to-Date Results
Net sales for the quarter increased 19.2%, or
Income from continuing operations for the quarter increased
Adjusted net income for the quarter increased 120.5% to
EBITDA for the quarter increased 56.3% to
"Trends in the commercial aerospace industry are encouraging and have increasingly shown signs of recovery in recent months with vaccination rates expanding and air traffic improving, especially in certain domestic markets. We also saw another quarter of sequential improvement in our commercial aftermarket revenues," stated
The current quarter effective tax rate was (30.0)% compared to 113.5% for the comparable period of fiscal 2020. The effective tax rate in the current quarter was positively impacted by the release of the valuation allowance applicable to the net interest deduction limitation carryforward and the discrete impact of excess tax benefits associated with share-based payments. For the full 2021 fiscal year, the Company expects the effective tax rate to be in the range of 0% to 3% and the adjusted tax rate to be in the range of 18% to 20%.
On
On
The net gain on sale recognized during the third quarter of fiscal 2021 as a result of the
The financial results of the
Year-to-Date Results
Net sales for the thirty-nine week period ended
Income from continuing operations for the thirty-nine week period ended
GAAP earnings per share were reduced in fiscal 2021 and 2020 by
Adjusted net income for the thirty-nine week period ended
EBITDA for the thirty-nine week period ended
Please see the attached tables for a reconciliation of income (loss) from continuing operations 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 (loss) per share to adjusted earnings per share for the periods discussed in this press release.
Fiscal 2021 Outlook
Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic, and how that will continue to impact operations, the Company will not provide fiscal year 2021 guidance at this time.
Transition of
As Chairman and Chair of the Executive Committee,
This transition timeline is accelerated by roughly one year, as
"I have benefited tremendously as the CEO of
Earnings Conference Call
The call will be archived on the website and available for replay at approximately
About
Non-GAAP Supplemental Information
EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income and adjusted earnings per share are non-GAAP financial measures presented in this press release as supplemental disclosures to net income and reported results.
None of EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income or adjusted earnings per share is a measurement of financial performance under
Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with
- neither EBITDA nor EBITDA As Defined reflects the significant interest expense, or the cash requirements, necessary to service interest payments on our indebtedness;
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements;
- the omission of the substantial amortization expense associated with our intangible assets further limits the usefulness of EBITDA and EBITDA As Defined;
- neither EBITDA nor EBITDA As Defined includes the payment of taxes, which is a necessary element of our operations; and
- EBITDA As Defined excludes the cash expense we have incurred to integrate acquired businesses into our operations, which is a necessary element of certain of our acquisitions.
Forward-Looking Statements
Statements in this press release that are not historical facts, including statements under the heading "Fiscal 2021 Outlook," are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate," or "continue" and other words and terms of similar meaning may identify forward-looking statements.
All forward-looking statements involve risks and uncertainties that could cause
Contact: |
Investor Relations |
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216-706-2945 |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
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FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED |
Table 1 |
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(Amounts in millions, except per share amounts) |
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(Unaudited) |
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Thirteen Week Periods Ended |
Thirty-Nine Week Periods Ended |
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|
|
|
|
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|
$ |
1,218 |
$ |
1,022 |
$ |
3,519 |
$ |
3,930 |
||||||||
COST OF SALES |
563 |
531 |
1,731 |
1,819 |
||||||||||||
GROSS PROFIT |
655 |
491 |
1,788 |
2,111 |
||||||||||||
SELLING AND ADMINISTRATIVE EXPENSES |
172 |
163 |
531 |
544 |
||||||||||||
AMORTIZATION OF INTANGIBLE ASSETS |
36 |
42 |
101 |
128 |
||||||||||||
INCOME FROM OPERATIONS |
447 |
286 |
1,156 |
1,439 |
||||||||||||
INTEREST EXPENSE—NET |
263 |
262 |
798 |
762 |
||||||||||||
REFINANCING COSTS |
13 |
1 |
36 |
27 |
||||||||||||
OTHER INCOME |
(5) |
(11) |
(37) |
(14) |
||||||||||||
GAIN ON SALE OF BUSINESSES—NET |
(68) |
— |
(69) |
— |
||||||||||||
INCOME FROM CONTINUING OPERATIONS |
244 |
34 |
428 |
664 |
||||||||||||
INCOME TAX (BENEFIT) PROVISION |
(73) |
39 |
(45) |
112 |
||||||||||||
INCOME (LOSS) FROM CONTINUING |
317 |
(5) |
473 |
552 |
||||||||||||
(LOSS) INCOME FROM DISCONTINUED |
— |
(1) |
— |
66 |
||||||||||||
NET INCOME (LOSS) |
317 |
(6) |
473 |
618 |
||||||||||||
LESS: NET INCOME ATTRIBUTABLE TO |
— |
— |
(2) |
(1) |
||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO TD |
$ |
317 |
$ |
(6) |
$ |
471 |
$ |
617 |
||||||||
NET INCOME (LOSS) APPLICABLE TO TD |
$ |
317 |
$ |
(6) |
$ |
398 |
$ |
432 |
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Earnings (Loss) per share attributable to |
||||||||||||||||
Earnings (Loss) per share from continuing operations— |
$ |
5.43 |
$ |
(0.09) |
$ |
6.83 |
$ |
6.38 |
||||||||
(Loss) Earnings per share from discontinued |
— |
(0.01) |
— |
1.15 |
||||||||||||
Earnings (Loss) per share |
$ |
5.43 |
$ |
(0.10) |
$ |
6.83 |
$ |
7.53 |
||||||||
Cash dividends paid per common share |
$ |
— |
$ |
— |
$ |
— |
$ |
32.50 |
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Weighted-average shares outstanding: |
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Basic and diluted |
58.4 |
57.3 |
58.4 |
57.4 |
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF EBITDA, |
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EBITDA AS DEFINED TO INCOME (LOSS) FROM CONTINUING OPERATIONS |
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FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED |
Table 2 |
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(Amounts in millions, except per share amounts) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
Thirteen Week Periods Ended |
Thirty-Nine Week Periods Ended |
|||||||||||||||
|
|
|
|
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Income (loss) from continuing operations |
$ |
317 |
$ |
(5) |
$ |
473 |
$ |
552 |
||||||||
Adjustments: |
||||||||||||||||
Depreciation and amortization expense |
65 |
70 |
188 |
211 |
||||||||||||
Interest expense, net |
263 |
262 |
798 |
762 |
||||||||||||
Income tax (benefit) provision |
(73) |
39 |
(45) |
112 |
||||||||||||
EBITDA |
572 |
366 |
1,414 |
1,637 |
||||||||||||
Adjustments: |
||||||||||||||||
Acquisition-related expenses and adjustments (1) |
6 |
3 |
24 |
19 |
||||||||||||
Non-cash stock compensation expense (2) |
35 |
21 |
105 |
59 |
||||||||||||
Refinancing costs (3) |
13 |
1 |
36 |
27 |
||||||||||||
COVID-19 pandemic restructuring costs (4) |
1 |
30 |
40 |
30 |
||||||||||||
Gain on sale of businesses, net (5) |
(68) |
— |
(69) |
— |
||||||||||||
Other, net (6) |
— |
3 |
2 |
8 |
||||||||||||
Gross Adjustments to EBITDA |
(13) |
58 |
138 |
143 |
||||||||||||
EBITDA As Defined |
$ |
559 |
$ |
424 |
$ |
1,552 |
$ |
1,780 |
||||||||
EBITDA As Defined, Margin (7) |
45.9 |
% |
41.5 |
% |
44.1 |
% |
45.3 |
% |
(1) |
Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into |
(2) |
Represents the compensation expense recognized by |
(3) |
Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. |
(4) |
Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic (less than $1 million and |
(5) |
Represents the gain or loss on sale of businesses, which is primarily attributable to the net gain on sale recognized as a result of the divestitures completed during the third quarter of fiscal 2021 (TAC, |
(6) |
Primarily represents the gain on insurance proceeds from the |
(7) |
The EBITDA As Defined margin represents the amount of EBITDA As Defined as a percentage of net sales. |
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
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REPORTED EARNINGS (LOSS) PER SHARE TO |
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ADJUSTED EARNINGS PER SHARE |
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FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED |
Table 3 |
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|
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(Amounts in millions, except per share amounts) |
|||||||||||||||||
(Unaudited) |
|||||||||||||||||
Thirteen Week Periods Ended |
Thirty-Nine Week Periods Ended |
||||||||||||||||
|
|
|
|
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Reported Earnings (Loss) Per Share |
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Income (loss) from continuing operations |
$ |
317 |
$ |
(5) |
$ |
473 |
$ |
552 |
|||||||||
Less: Net income attributable to noncontrolling interests |
— |
— |
(2) |
(1) |
|||||||||||||
Net income (loss) from continuing operations attributable to |
317 |
(5) |
471 |
551 |
|||||||||||||
Less: Special dividends declared or paid on participating |
— |
— |
(73) |
(185) |
|||||||||||||
(Loss) income from discontinued operations, net of tax |
— |
(1) |
— |
66 |
|||||||||||||
Net income (loss) applicable to |
$ |
317 |
$ |
(6) |
$ |
398 |
$ |
432 |
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Weighted-average shares outstanding under the two-class |
|||||||||||||||||
Weighted-average common shares outstanding |
55.0 |
54.1 |
54.8 |
53.9 |
|||||||||||||
Vested options deemed participating securities |
3.4 |
3.2 |
3.6 |
3.5 |
|||||||||||||
Total shares for basic and diluted earnings (loss) per share |
58.4 |
57.3 |
58.4 |
57.4 |
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Earnings (Loss) per share from continuing operations—basic |
$ |
5.43 |
$ |
(0.09) |
$ |
6.83 |
$ |
6.38 |
|||||||||
(Loss) Earnings per share from discontinued operations—basic |
— |
(0.01) |
— |
1.15 |
|||||||||||||
Earnings (Loss) per share |
$ |
5.43 |
$ |
(0.10) |
$ |
6.83 |
$ |
7.53 |
|||||||||
Adjusted Earnings Per Share |
|||||||||||||||||
Income (loss) from continuing operations |
$ |
317 |
$ |
(5) |
$ |
473 |
$ |
552 |
|||||||||
Gross adjustments to EBITDA |
(13) |
58 |
138 |
143 |
|||||||||||||
Purchase accounting backlog amortization |
3 |
14 |
7 |
41 |
|||||||||||||
Tax adjustment (1) |
(113) |
21 |
(158) |
(72) |
|||||||||||||
Adjusted net income |
$ |
194 |
$ |
88 |
$ |
460 |
$ |
664 |
|||||||||
Adjusted diluted earnings per share under the two-class |
$ |
3.33 |
$ |
1.54 |
$ |
7.88 |
$ |
11.57 |
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Diluted Earnings (Loss) Per Share to Adjusted Earnings |
|||||||||||||||||
Diluted earnings (loss) per share from continuing operations |
$ |
5.43 |
$ |
(0.09) |
$ |
6.83 |
$ |
6.38 |
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Adjustments to diluted earnings (loss) per share: |
|||||||||||||||||
Inclusion of the dividend and dividend equivalent payments |
— |
— |
1.24 |
3.22 |
|||||||||||||
Acquisition-related expenses and adjustments |
0.13 |
0.24 |
0.44 |
0.82 |
|||||||||||||
Non-cash stock compensation expense |
0.50 |
0.31 |
1.45 |
0.80 |
|||||||||||||
Refinancing costs |
0.18 |
0.01 |
0.50 |
0.37 |
|||||||||||||
Tax adjustment on pre-tax income (1) |
(1.97) |
0.58 |
(2.22) |
(0.56) |
|||||||||||||
COVID-19 pandemic restructuring costs |
0.02 |
0.43 |
0.54 |
0.42 |
|||||||||||||
Gain on sale of businesses, net |
(0.96) |
— |
(0.95) |
— |
|||||||||||||
Other, net |
— |
0.06 |
0.05 |
0.12 |
|||||||||||||
Adjusted earnings per share |
$ |
3.33 |
$ |
1.54 |
$ |
7.88 |
$ |
11.57 |
(1) |
For the thirteen and thirty-nine week periods ended |
|
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
||||||||
PROVIDED BY OPERATING ACTIVITIES TO EBITDA, |
||||||||
EBITDA AS DEFINED |
||||||||
FOR THE THIRTY-NINE WEEK PERIODS ENDED |
Table 4 |
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|
||||||||
(Amounts in millions) |
||||||||
(Unaudited) |
||||||||
Thirty-Nine Week Periods Ended |
||||||||
|
|
|||||||
Net cash provided by operating activities |
$ |
624 |
$ |
991 |
||||
Adjustments: |
||||||||
Changes in assets and liabilities, net of effects from acquisitions and sales of businesses |
102 |
(166) |
||||||
Interest expense, net (1) |
772 |
737 |
||||||
Income tax (benefit) provision - current |
(59) |
129 |
||||||
Loss contract amortization |
47 |
32 |
||||||
Non-cash stock compensation expense (2) |
(105) |
(59) |
||||||
Refinancing costs (3) |
(36) |
(27) |
||||||
Gain on sale of businesses, net (4) |
69 |
— |
||||||
EBITDA |
1,414 |
1,637 |
||||||
Adjustments: |
||||||||
Acquisition-related expenses and adjustments (5) |
24 |
19 |
||||||
Non-cash stock compensation expense (2) |
105 |
59 |
||||||
Refinancing costs (3) |
36 |
27 |
||||||
COVID-19 pandemic restructuring costs (6) |
40 |
30 |
||||||
Gain on sale of businesses, net (4) |
(69) |
— |
||||||
Other, net (7) |
2 |
8 |
||||||
EBITDA As Defined |
$ |
1,552 |
$ |
1,780 |
(1) |
Represents interest expense excluding the amortization of debt issue costs and premium and discount on debt. |
(2) |
Represents the compensation expense recognized by |
(3) |
Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. |
(4) |
Represents the gain or loss on sale of businesses, which is primarily attributable to the net gain on sale recognized as a result of the divestitures completed during the third quarter of fiscal 2021 (TAC, |
(5) |
Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when inventory was sold; costs incurred to integrate acquired businesses and product lines into |
(6) |
Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic ( |
(7) |
Primarily represents the gain on insurance proceeds from the |
|
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SUPPLEMENTAL INFORMATION - BALANCE SHEET DATA |
Table 5 |
|||||||
(Amounts in millions) |
||||||||
(Unaudited) |
||||||||
|
|
|||||||
Cash and cash equivalents |
$ |
4,529 |
$ |
4,717 |
||||
Trade accounts receivable - net |
694 |
720 |
||||||
Inventories - net |
1,225 |
1,283 |
||||||
Current portion of long-term debt |
276 |
276 |
||||||
Short-term borrowings-trade receivable securitization facility |
350 |
349 |
||||||
Accounts payable |
206 |
218 |
||||||
Accrued and other current liabilities |
804 |
773 |
||||||
Long-term debt |
19,384 |
19,384 |
||||||
|
(3,138) |
(3,972) |
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