10-QPeriod: Q3 FY2010

TransDigm Group INC Quarterly Report for Q3 Ended Apr 3, 2010

Filed May 11, 2010For Securities:TDG

Summary

TransDigm Group Inc. (TDG) reported its quarterly results for the period ending April 3, 2010. The company experienced an increase in net sales, driven primarily by recent acquisitions, although organic sales saw a slight decline. This was attributed to weaker commercial OEM and aftermarket demand due to the ongoing economic downturn, partially offset by an increase in defense sales. Despite revenue growth, net income and earnings per share decreased compared to the prior year's comparable period. This was largely due to increased interest expenses from new debt issuance and higher selling and administrative costs associated with integrating acquisitions. The company's balance sheet shows a significant increase in long-term debt, reflecting the financing activities, including the issuance of senior subordinated notes to fund a substantial dividend payment to shareholders. The company's backlog remains strong, supported by acquisition-related purchase orders.

Financial Highlights

24 data points
Beta

Revenue

$206.08M

55.9% Gross Margin

Net Income

$38.05M

18.5% Net Margin

EPS (Diluted)

$0.72

Cash & Equivalents

$187.35M

Free Cash Flow

$20.80M

Financial Statements
Beta
Revenue$206.08M
Cost of Revenue$90.87M
Gross Profit$115.20M
SG&A Expenses$23.59M
Operating Income$88.06M
Net Income$38.05M
EPS (Basic)$0.72

Key Highlights

  • 1Net sales increased by 6.7% to $206.1 million for the thirteen-week period ended April 3, 2010, primarily driven by acquisitions.
  • 2Organic sales declined by 3.4% year-over-year, mainly due to weaker commercial OEM and aftermarket demand influenced by the economic downturn.
  • 3Net income decreased by 5.6% to $38.0 million for the thirteen-week period ended April 3, 2010, compared to $40.3 million in the prior year's period.
  • 4Basic and diluted EPS fell to $0.72 from $0.77 in the comparable prior year period.
  • 5Long-term debt significantly increased, notably due to the issuance of $425 million in 7 3/4% senior subordinated notes.
  • 6The company utilized proceeds from the new debt issuance to pay a special cash dividend of $7.65 per share to stockholders.
  • 7Sales order backlog increased to $429.5 million from $407.2 million, largely due to purchase orders from recent acquisitions.

Frequently Asked Questions

TransDigm's sales growth was primarily driven by recent acquisitions, which contributed $19.6 million in sales for the thirteen-week period. However, organic sales experienced a decline.

The decrease in net income and EPS was mainly due to higher interest expenses resulting from the issuance of new senior subordinated notes and increased selling and administrative expenses related to integrating recent acquisitions. These factors outweighed the revenue increase.

TransDigm significantly increased its long-term debt, most notably by issuing $425 million in 7 3/4% senior subordinated notes. A substantial portion of these proceeds were used to pay a special dividend to shareholders.

The company's sales order backlog increased to $429.5 million, supported by purchase orders acquired through recent acquisitions. However, the backlog is subject to customer cancellations or deferrals and may not fully reflect future shipments.