10-QPeriod: Q1 FY2013

TransDigm Group INC Quarterly Report for Q1 Ended Dec 29, 2012

Filed February 5, 2013For Securities:TDG

Summary

TransDigm Group Incorporated (TDG) reported a strong increase in net sales and net income for the thirteen-week period ended December 29, 2012, compared to the same period in the prior year. Net sales grew by 22.1% to $430.4 million, driven by significant contributions from recent acquisitions (Aero-Instruments, AmSafe, and Harco) and organic growth in commercial OEM and defense sectors. Net income rose by 13.9% to $74.2 million, although diluted earnings per share decreased to $0.66 from $1.15, largely due to a substantial special dividend paid in November 2012 that reduced net income applicable to common stock. The company's financial position remains robust, with total assets increasing and a significant increase in long-term debt reflecting financing for recent acquisitions and a substantial special dividend. Operating cash flow improved significantly, providing ample liquidity. The company continues its strategy of acquiring and integrating businesses in niche aerospace component markets, demonstrating a commitment to growth through strategic M&A.

Financial Highlights

48 data points
Beta

Revenue

$430.42M

55.4% Gross Margin

Net Income

$74.17M

17.2% Net Margin

EPS (Diluted)

$0.66

Total Assets

$5.55B

Cash & Equivalents

$554.43M

Free Cash Flow

$89.44M

Financial Statements
Beta
Revenue$430.42M
Cost of Revenue$191.87M
Gross Profit$238.55M
SG&A Expenses$55.16M
Operating Income$172.85M
Net Income$74.17M
EPS (Basic)$0.66
Shares Outstanding (Basic)54.45M

Key Highlights

  • 1Net sales increased by 22.1% to $430.4 million for the thirteen-week period ended December 29, 2012, compared to the prior year, driven by acquisitions and organic growth.
  • 2Net income grew by 13.9% to $74.2 million, although EPS was impacted by a large special dividend.
  • 3The company paid a special cash dividend of $12.85 per share in November 2012, totaling approximately $664.3 million.
  • 4Long-term debt increased significantly to $4.3 billion from $3.6 billion, primarily due to debt incurred for acquisitions and refinancing.
  • 5Operating cash flow improved substantially, increasing to $98.1 million from $68.1 million year-over-year.
  • 6The company's sales order backlog increased to $886 million from $777 million, indicating positive future demand.
  • 7Acquisitions of Aero-Instruments and AmSafe contributed significantly to sales growth, with the integration of these businesses ongoing.

Frequently Asked Questions

The primary drivers of revenue growth were the acquisitions of Aero-Instruments and AmSafe, which contributed significant acquisition sales. Additionally, organic growth was observed in commercial OEM and defense sectors, partially offset by a slight decrease in commercial aftermarket sales.

The company financed its activities through a combination of debt. This included drawing down additional term loans under its senior secured credit facility and issuing new Senior Subordinated Notes due 2020. The substantial special dividend was also facilitated by amendments to its credit facilities allowing for restricted payments.

The acquisitions have significantly increased total assets and long-term debt on the balance sheet. Operationally, they are contributing to sales growth and expanding the company's product offerings in niche aerospace markets. The integration of these businesses is ongoing, and their results are being included in the consolidated financial statements.

The company's sales order backlog increased to $886 million from $777 million in the prior year, primarily due to the recent acquisitions and increased orders across existing OEM product lines. This suggests a positive outlook for future sales, though the company notes that backlogs are subject to customer cancellations or deferrals.