10-QPeriod: Q3 FY2015

TransDigm Group INC Quarterly Report for Q3 Ended Jun 27, 2015

Filed August 5, 2015For Securities:TDG

Summary

TransDigm Group Inc. (TDG) reported strong performance in the third quarter of fiscal year 2015, with net sales increasing by 13.2% to $691.4 million and net income rising substantially by 512.6% to $99.1 million. This growth was driven by a combination of organic sales increases across its Power & Control and Airframe segments and significant contributions from recent acquisitions, notably Pexco Aerospace, Adams Rite Aerospace GmbH, and Telair. The company also demonstrated robust operational efficiency, with gross profit margin at 52.0% for the quarter. Despite increased interest expenses due to higher borrowings to finance acquisitions, the company managed its debt effectively, supported by strong operating cash flow of $373.4 million for the first nine months of the fiscal year. Management highlighted the strategic benefits of recent acquisitions, which are expected to enhance the company's market position and provide future value creation opportunities through proprietary products and aftermarket content. The company also maintained a significant backlog of $1,416 million as of June 27, 2015, indicating continued demand for its products.

Financial Highlights

48 data points
Beta

Revenue

$691.39M

52.0% Gross Margin

Net Income

$99.11M

14.3% Net Margin

EPS (Diluted)

$1.75

Total Assets

$8.35B

Cash & Equivalents

$915.35M

Free Cash Flow

$173.21M

Financial Statements
Beta
Revenue$691.39M
Cost of Revenue$331.94M
Gross Profit$359.45M
SG&A Expenses$81.85M
Operating Income$263.70M
Net Income$99.11M
EPS (Basic)$1.75
Shares Outstanding (Basic)56.61M

Key Highlights

  • 1Net sales for the thirteen-week period ended June 27, 2015, increased by 13.2% to $691.4 million, driven by both organic growth and acquisitions.
  • 2Net income saw a substantial increase of 512.6% to $99.1 million for the thirteen-week period, compared to $16.2 million in the prior year.
  • 3Gross profit margin remained strong at 52.0% for the thirteen-week period, although it saw a slight decrease from 53.6% in the prior year, impacted by acquisition-related costs and inventory adjustments.
  • 4The company completed several significant acquisitions during the period, including Pexco Aerospace ($496 million), Adams Rite Aerospace GmbH ($75 million), and Telair Cargo Group ($730.9 million), significantly expanding its product offerings and market reach.
  • 5Interest expense increased by 21.9% to $106.8 million due to higher average outstanding borrowings, largely from financing recent acquisitions.
  • 6Operating cash flow remained strong, providing $373.4 million for the first nine months of the fiscal year.
  • 7The company reported a robust backlog of $1,416 million as of June 27, 2015, up from $1,289 million in the prior year, indicating strong future revenue potential.

Frequently Asked Questions

In the thirteen-week period ended June 27, 2015, TransDigm's net sales increased by 13.2% to $691.4 million, up from $610.6 million in the same period last year. Net income surged by 512.6% to $99.1 million, compared to $16.2 million in the prior year. This significant improvement was driven by both organic sales growth and contributions from recent acquisitions.

During the thirty-nine week period ending June 27, 2015, TransDigm completed several major acquisitions: Pexco Aerospace for approximately $496 million, Adams Rite Aerospace GmbH for approximately $75 million, and Telair Cargo Group for approximately $730.9 million. These acquisitions were financed through a combination of existing cash, proceeds from senior subordinated notes ($450 million in 2025 Notes), and borrowings under its revolving credit facility.

The company's total liabilities increased significantly, primarily due to new debt incurred to finance acquisitions. Long-term debt rose to $8.2 billion from $7.2 billion. Consequently, interest expense-net for the thirteen-week period increased by 21.9% to $106.8 million, and for the thirty-nine week period by 21.9% to $305.6 million, reflecting the higher average outstanding borrowings.

The company reported a strong sales order backlog of $1,416 million as of June 27, 2015, an increase from $1,289 million in the prior year, suggesting sustained demand. Both the Power & Control and Airframe segments showed growth in net sales, with the Airframe segment seeing a notable 12.2% increase for the nine-month period, bolstered by acquisitions. Management emphasized the strategic fit of these acquisitions and their contribution to proprietary products and aftermarket content, positioning the company for continued value creation.