TriMas Reports Fourth Quarter and Full Year 2016 Results
Reported 2016 Diluted EPS, Excluding Special Items, of
Provides 2017
Excluding Special Items(1), which consisted primarily of the non-cash impairment charges and severance and business restructuring costs, fourth quarter 2016 diluted earnings per share (EPS) from continuing operations would have been
For the full year,
Excluding Special Items, full year 2016 income from continuing operations would have been
- Achieved 2016 diluted EPS, excluding Special Items, of
$1.26 , at the mid-point of the Company's previously provided guidance range. - Held 2016 operating profit margin relatively flat at 11.9%, excluding Special Items, by successfully implementing the Financial Improvement Plan, on-going continuous improvement and realignment initiatives, and a reduction in corporate expenses, thereby mitigating the impact of lower year-over-year sales levels.
- Increased Free Cash Flow(2) by 43.2% year-over-year to
$72.8 million for 2016, resulting in Free Cash Flow conversion of approximately 126% of income from continuing operations, excluding Special Items. - Despite challenging end markets, reduced
total debt by
$45.0 million , or 10.7%, to$374.7 million , as compared toDecember 31, 2015 .
"2016 was a transitional year at
"As we begin 2017, we believe we are better positioned to generate solid earnings growth, with a continued focus on generating strong cash flow. We sense that our most challenging end markets are stabilizing, and are confident we will benefit from the realignment actions taken throughout 2016. Sales growth is important to our success, and we anticipate sales will increase 2% to 4%, as the positive impact of our organic initiatives are expected to be partially offset by currency exchange
impacts, as well as our decision to de-emphasize certain products in underperforming regions. As a result, we expect full-year 2017 diluted EPS to range between
Non-cash Impairment Charges
As previously disclosed, organic sales levels and operating profitability within the Aerospace segment have declined over the past 18 months, primarily as a result of: 1) lower demand from distribution customers; 2)
scheduling and production challenges, which resulted in higher manufacturing costs; and 3) the current product sales mix. The Company implemented recovery plan actions to address the shorter-term production inefficiencies and to align its operating cost structure to be more consistent with current demand levels in each of its key product lines. However, as a result of current performance and lower future sales and operating profit expectations, the Company recorded pre-tax, non-cash goodwill and indefinite-lived intangible asset impairment charges of
"Over the past several months, we have implemented key operational and organizational changes in our Aerospace segment to better focus and improve manufacturing efficiency and capacity utilization, largely in response to changing dynamics in the aerospace industry," commented Amato. "While I am pleased with our efforts to date, our operational execution challenges will require additional time to work through. We continue to believe our Aerospace segment is well positioned for growth and profit improvement, particularly given our market leading brands and product innovation."
Financial Position
The Company reported total debt of
Fourth Quarter Segment Results - From Continuing Operations
Packaging (Approximately 43% of
The Packaging segment, which consists primarily of the
Aerospace (Approximately 22% of
The Aerospace segment, which is comprised of the
Energy (Approximately 20% of
The Energy segment, which consists of the Lamons® brand, designs, manufactures and distributes industrial sealing products and fasteners for the petrochemical, petroleum refining, oil field and other industrial markets. Fourth quarter net sales decreased 10.9% as compared to the year ago period, primarily due to continued reduced demand levels from oil and gas customers, and consolidating locations and de-emphasizing less profitable regions. Fourth quarter operating profit and the related margin percentage, excluding Special Items, increased as the impact of the sales decline was more than offset by savings achieved from cost reduction actions.
Engineered Components (Approximately 15% of
The Engineered Components segment, which is comprised of the Norris Cylinder™ and Arrow®
Discontinued Operations
On
2017 Outlook
The Company is estimating that 2017 sales will increase 2% to 4% as compared to 2016. The Company expects full-year 2017 diluted earnings per share to be between
Conference Call Information
Notice Regarding Forward-Looking Statements
Any "forward-looking" statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, contained herein, including those relating to the Company's business, financial condition or future results, involve risks and uncertainties with respect to, including, but not limited to: the Company's leverage; liabilities imposed by the Company's debt instruments; market demand; competitive factors; supply constraints; material and energy costs; intangible assets, including goodwill or other intangible asset impairment charges; technology factors; litigation; government and regulatory actions; the
Company's accounting policies; future trends; general economic and currency conditions; the potential impact of Brexit; various conditions specific to the Company's business and industry; the Company's ability to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of such acquisitions; potential costs and savings related to facility consolidation activities; future prospects of the Company; and other risks that are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended
Non-GAAP Financial Measures
In this release, certain non-GAAP financial measures are used. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure may be found in Appendix I at the end of this release. Additional information is available at www.trimascorp.com under the "Investors" section.
(1) Appendix I details certain costs, expenses and other amounts or charges, collectively described as "Special Items," that are included in the determination of net income, earnings per share and/or cash flows from operating activities under GAAP, but that management believes should be separately considered when evaluating the quality of the Company's core operating results, given they may not reflect the ongoing activities of the business. Management believes that presenting these non-GAAP financial measures, on an after Special Items basis, provides useful information to investors by helping them identify underlying trends in the Company's businesses and facilitating comparisons of performance with prior and future periods. These non-GAAP financial measures should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP financial measures.
(2) The Company defines Free Cash Flow as Net Cash Provided by/Used for Operating Activities of Continuing Operations, excluding the cash impact of Special Items, less Capital Expenditures. Please see Appendix I for additional details.
About
Condensed Consolidated Balance Sheet (dollars in thousands) | ||||||||
2016 | 2015 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 20,710 | $ | 19,450 | ||||
| Receivables, net | 111,570 | 121,990 | ||||||
| Inventories | 160,460 | 167,370 | ||||||
| Prepaid expenses and other current assets | 16,060 | 17,810 | ||||||
| Total current assets | 308,800 | 326,620 | ||||||
| Property and equipment, net | 179,160 | 181,130 | ||||||
| 315,080 | 378,920 | |||||||
| Other intangibles, net | 213,920 | 273,870 | ||||||
| Other assets | 34,690 | 9,760 | ||||||
| Total assets | $ | 1,051,650 | $ | 1,170,300 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities, long-term debt | $ | 13,810 | $ | 13,850 | ||||
| Accounts payable | 72,270 | 88,420 | ||||||
| Accrued liabilities | 47,190 | 50,480 | ||||||
| Total current liabilities | 133,270 | 152,750 | ||||||
| Long-term debt, net | 360,840 | 405,780 | ||||||
| Deferred income taxes | 5,910 | 11,260 | ||||||
| Other long-term liabilities | 51,910 | 53,320 | ||||||
| Total liabilities | 551,930 | 623,110 | ||||||
| Total shareholders' equity | 499,720 | 547,190 | ||||||
| Total liabilities and shareholders' equity | $ | 1,051,650 | $ | 1,170,300 | ||||
Consolidated Statement of Operations (dollars in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Net sales | $ | 185,530 | $ | 192,760 | $ | 794,020 | $ | 863,980 | ||||||||
| Cost of sales | (146,100 | ) | (143,760 | ) | (583,540 | ) | (627,870 | ) | ||||||||
| Gross profit | 39,430 | 49,000 | 210,480 | 236,110 | ||||||||||||
| Selling, general and administrative expenses | (36,910 | ) | (39,630 | ) | (153,710 | ) | (162,350 | ) | ||||||||
| Net loss on dispositions of property and equipment | (520 | ) | (1,730 | ) | (1,870 | ) | (2,330 | ) | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | (98,900 | ) | (75,680 | ) | (98,900 | ) | (75,680 | ) | ||||||||
| Operating loss | (96,900 | ) | (68,040 | ) | (44,000 | ) | (4,250 | ) | ||||||||
| Other expense, net: | ||||||||||||||||
| Interest expense | (3,490 | ) | (3,450 | ) | (13,720 | ) | (14,060 | ) | ||||||||
| Debt financing and extinguishment costs | — | — | — | (1,970 | ) | |||||||||||
| Other income (expense), net | (380 | ) | 490 | (510 | ) | (1,840 | ) | |||||||||
| Other expense, net | (3,870 | ) | (2,960 | ) | (14,230 | ) | (17,870 | ) | ||||||||
| Loss from continuing operations before income taxes | (100,770 | ) | (71,000 | ) | (58,230 | ) | (22,120 | ) | ||||||||
| Income tax benefit (expense) | 33,410 | 10,200 | 18,430 | (6,540 | ) | |||||||||||
| Loss from continuing operations | (67,360 | ) | (60,800 | ) | (39,800 | ) | (28,660 | ) | ||||||||
| Loss from discontinued operations, net of income taxes | — | — | — | (4,740 | ) | |||||||||||
| Net loss | (67,360 | ) | (60,800 | ) | (39,800 | ) | (33,400 | ) | ||||||||
| Basic loss per share: | ||||||||||||||||
| Continuing operations | $ | (1.48 | ) | $ | (1.35 | ) | $ | (0.88 | ) | $ | (0.64 | ) | ||||
| Discontinued operations | — | — | — | (0.10 | ) | |||||||||||
| Net loss per share | $ | (1.48 | ) | $ | (1.35 | ) | $ | (0.88 | ) | $ | (0.74 | ) | ||||
| Weighted average common shares - basic | 45,484,485 | 45,188,303 | 45,407,316 | 45,123,626 | ||||||||||||
| Diluted loss per share: | ||||||||||||||||
| Continuing operations | $ | (1.48 | ) | $ | (1.35 | ) | $ | (0.88 | ) | $ | (0.64 | ) | ||||
| Discontinued operations | — | — | — | (0.10 | ) | |||||||||||
| Net loss per share | $ | (1.48 | ) | $ | (1.35 | ) | $ | (0.88 | ) | $ | (0.74 | ) | ||||
| Weighted average common shares - diluted | 45,484,485 | 45,188,303 | 45,407,316 | 45,123,626 | ||||||||||||
Consolidated Statement of Cash Flow (dollars in thousands) | ||||||||
| Twelve months ended | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (39,800 | ) | $ | (33,400 | ) | ||
| Loss from discontinued operations | — | (4,740 | ) | |||||
| Loss from continuing operations | (39,800 | ) | (28,660 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | 98,900 | 75,680 | ||||||
| Loss on dispositions of property and equipment | 1,870 | 2,330 | ||||||
| Depreciation | 24,390 | 22,570 | ||||||
| Amortization of intangible assets | 20,470 | 20,970 | ||||||
| Amortization of debt issue costs | 1,370 | 1,710 | ||||||
| Deferred income taxes | (32,160 | ) | (8,750 | ) | ||||
| Non-cash compensation expense | 6,940 | 6,340 | ||||||
| Excess tax benefits from stock based compensation | (640 | ) | (590 | ) | ||||
| Debt financing and extinguishment expenses | — | 1,970 | ||||||
| Decrease in receivables | 7,990 | 5,300 | ||||||
| Decrease in inventories | 5,180 | 3,250 | ||||||
| Decrease in prepaid expenses and other assets | 2,550 | 4,730 | ||||||
| Decrease in accounts payable and accrued liabilities | (18,120 | ) | (29,530 | ) | ||||
| Other, net | 1,530 | (750 | ) | |||||
| Net cash provided by operating activities of continuing operations | 80,470 | 76,570 | ||||||
| Net cash used for operating activities of discontinued operations | — | (14,030 | ) | |||||
| Net cash provided by operating activities | 80,470 | 62,540 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditures | (31,330 | ) | (28,660 | ) | ||||
| Acquisition of businesses, net of cash acquired | — | (10,000 | ) | |||||
| Net proceeds from dispositions of property and equipment | 220 | 1,700 | ||||||
| Net cash used for investing activities of continuing operations | (31,110 | ) | (36,960 | ) | ||||
| Net cash used for investing activities of discontinued operations | — | (2,510 | ) | |||||
| Net cash used for investing activities | (31,110 | ) | (39,470 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from borrowings on term loan facilities | — | 275,000 | ||||||
| Repayments of borrowings on term loan facilities | (13,850 | ) | (444,890 | ) | ||||
| Proceeds from borrowings on revolving credit and accounts receivable facilities | 402,420 | 1,129,840 | ||||||
| Repayments of borrowings on revolving credit and accounts receivable facilities | (433,350 | ) | (1,169,370 | ) | ||||
| Payments for deferred purchase price | (2,530 | ) | (6,440 | ) | ||||
| Debt financing fees | — | (1,850 | ) | |||||
| Shares surrendered upon options and restricted stock vesting to cover taxes | (1,590 | ) | (2,770 | ) | ||||
| Proceeds from exercise of stock options | 160 | 500 | ||||||
| Excess tax benefits from stock based compensation | 640 | 590 | ||||||
| Cash transferred to the Cequent businesses | — | (17,050 | ) | |||||
| Net cash used for financing activities of continuing operations | (48,100 | ) | (236,440 | ) | ||||
| Net cash provided by financing activities of discontinued operations | — | 208,400 | ||||||
| Net cash used for financing activities | (48,100 | ) | (28,040 | ) | ||||
| Cash and Cash Equivalents: | ||||||||
| Increase (decrease) for the year | 1,260 | (4,970 | ) | |||||
| At beginning of year | 19,450 | 24,420 | ||||||
| At end of year | $ | 20,710 | $ | 19,450 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 11,800 | $ | 15,170 | ||||
| Cash paid for income taxes | $ | 17,210 | $ | 30,580 | ||||
Company and Business Segment Financial Information Continuing Operations (Unaudited - dollars in thousands) | ||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Packaging | ||||||||||||||||
| Net sales | $ | 82,790 | $ | 77,800 | $ | 341,340 | $ | 334,270 | ||||||||
| Operating profit | $ | 18,500 | $ | 18,380 | $ | 77,840 | $ | 78,470 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 1,870 | $ | 1,050 | $ | 4,590 | $ | 1,760 | ||||||||
| Excluding Special Items, operating profit would have been: | $ | 20,370 | $ | 19,430 | $ | 82,430 | $ | 80,230 | ||||||||
| Aerospace | ||||||||||||||||
| Net sales | $ | 42,900 | $ | 42,140 | $ | 174,920 | $ | 176,480 | ||||||||
| Operating profit (loss) | $ | (104,480 | ) | $ | 5,910 | $ | (90,810 | ) | $ | 28,320 | ||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 6,900 | $ | 870 | $ | 9,700 | $ | 3,610 | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | $ | 98,900 | $ | — | $ | 98,900 | $ | — | ||||||||
| Excluding Special Items, operating profit would have been: | $ | 1,320 | $ | 6,780 | $ | 17,790 | $ | 31,930 | ||||||||
| Energy | ||||||||||||||||
| Net sales | $ | 36,060 | $ | 40,480 | $ | 158,990 | $ | 193,390 | ||||||||
| Operating loss | $ | (5,270 | ) | $ | (86,770 | ) | $ | (13,840 | ) | $ | (97,160 | ) | ||||
| Special Items to consider in evaluating operating profit (loss): | ||||||||||||||||
| Severance and business restructuring costs | $ | 6,230 | $ | 11,940 | $ | 19,460 | $ | 23,140 | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | $ | — | $ | 72,500 | $ | — | $ | 72,500 | ||||||||
| Excluding Special Items, operating profit (loss) would have been: | $ | 960 | $ | (2,330 | ) | $ | 5,620 | $ | (1,520 | ) | ||||||
| Engineered Components | ||||||||||||||||
| Net sales | $ | 23,780 | $ | 32,340 | $ | 118,770 | $ | 159,840 | ||||||||
| Operating profit | $ | 2,680 | $ | 1,670 | $ | 15,300 | $ | 18,240 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 130 | $ | 50 | $ | 530 | $ | 280 | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | $ | — | $ | 3,180 | $ | — | $ | 3,180 | ||||||||
| Excluding Special Items, operating profit would have been: | $ | 2,810 | $ | 4,900 | $ | 15,830 | $ | 21,700 | ||||||||
| Corporate Expenses | ||||||||||||||||
| Operating loss | $ | (8,330 | ) | $ | (7,230 | ) | $ | (32,490 | ) | $ | (32,120 | ) | ||||
| Special Items to consider in evaluating operating loss: | ||||||||||||||||
| Severance and business restructuring costs | $ | 1,910 | $ | 500 | $ | 5,470 | $ | 1,440 | ||||||||
| Excluding Special Items, operating loss would have been: | $ | (6,420 | ) | $ | (6,730 | ) | $ | (27,020 | ) | $ | (30,680 | ) | ||||
| Net sales | $ | 185,530 | $ | 192,760 | $ | 794,020 | $ | 863,980 | ||||||||
| Operating loss | $ | (96,900 | ) | $ | (68,040 | ) | $ | (44,000 | ) | $ | (4,250 | ) | ||||
| Total Special Items to consider in evaluating operating profit: | $ | 115,940 | $ | 90,090 | $ | 138,650 | $ | 105,910 | ||||||||
| Excluding Special Items, operating profit would have been: | $ | 19,040 | $ | 22,050 | $ | 94,650 | $ | 101,660 | ||||||||
| Appendix I | ||||||||||||||||
Additional Information Regarding Special Items Impacting Reported GAAP Financial Measures (Unaudited - dollars in thousands, except per share amounts) | ||||||||||||||||
| Three months ended December 31, | Twelve months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Loss from continuing operations, as reported | $ | (67,360 | ) | $ | (60,800 | ) | $ | (39,800 | ) | $ | (28,660 | ) | ||||
| After-tax impact of Special Items to consider in evaluating quality of income (loss) from continuing operations: | ||||||||||||||||
| Severance and business restructuring costs | 13,050 | 9,760 | 29,620 | 21,810 | ||||||||||||
| Impairment of goodwill and indefinite-lived intangible assets | 67,910 | 64,260 | 67,910 | 64,260 | ||||||||||||
| Debt financing and extinguishment costs | — | — | — | 1,240 | ||||||||||||
| Excluding Special Items, income from continuing operations would have been | $ | 13,600 | $ | 13,220 | $ | 57,730 | $ | 58,650 | ||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Diluted loss per share from continuing operations, as reported | $ | (1.48 | ) | $ | (1.35 | ) | $ | (0.88 | ) | $ | (0.64 | ) | ||||
| Dilutive impact (a) | 0.01 | 0.02 | 0.01 | 0.01 | ||||||||||||
| After-tax impact of Special Items to consider in evaluating quality of EPS from continuing operations: | ||||||||||||||||
| Severance and business restructuring costs | 0.29 | 0.21 | 0.65 | 0.48 | ||||||||||||
| Impairment of goodwill and indefinite-lived intangible assets | 1.48 | 1.41 | 1.48 | 1.41 | ||||||||||||
| Debt financing and extinguishment costs | — | — | — | 0.03 | ||||||||||||
| Excluding Special Items, diluted EPS from continuing operations would have been | $ | 0.30 | $ | 0.29 | $ | 1.26 | $ | 1.29 | ||||||||
| Weighted-average shares outstanding for the three and twelve months ended | 45,786,801 | 45,613,000 | 45,732,105 | 45,482,964 | ||||||||||||
| (a) Impact of 302,316 and 424,697 shares
for the three months ended | ||||||||||||||||
| Appendix I | ||||||||||||||||||||||||
Additional Information Regarding Special Items Impacting Reported GAAP Financial Measures (Unaudited - dollars in thousands, except per share amounts) | ||||||||||||||||||||||||
| Three months ended | ||||||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||||
| As reported | Special Items | Excluding Special Items | As reported | Special Items | Excluding Special Items | |||||||||||||||||||
| Net cash provided by operating activities of continuing operations | $ | 34,060 | $ | 8,090 | $ | 42,150 | $ | 47,830 | $ | 2,160 | $ | 49,990 | ||||||||||||
| Less: Capital expenditures of continuing operations | (8,940 | ) | — | (8,940 | ) | (8,300 | ) | — | (8,300 | ) | ||||||||||||||
| Free Cash Flow from continuing operations | 25,120 | 8,090 | 33,210 | 39,530 | 2,160 | 41,690 | ||||||||||||||||||
| Income (loss) from continuing operations | (67,360 | ) | 80,960 | 13,600 | (60,800 | ) | 74,020 | 13,220 | ||||||||||||||||
| Free Cash Flow as a percentage of income from continuing operations | (37 | )% | 244 | % | (65 | )% | 315 | % | ||||||||||||||||
| Twelve months ended | ||||||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||||
| As reported | Special Items | Excluding Special Items | As reported | Special Items | Excluding Special Items | |||||||||||||||||||
| Net cash provided by operating activities of continuing operations | $ | 80,470 | $ | 23,610 | $ | 104,080 | $ | 2,890 | $ | 79,460 | ||||||||||||||
| Less: Capital expenditures of continuing operations | (31,330 | ) | — | (31,330 | ) | (28,660 | ) | — | (28,660 | ) | ||||||||||||||
| Free Cash Flow from continuing operations | 49,140 | 23,610 | 72,750 | 47,910 | 2,890 | 50,800 | ||||||||||||||||||
| Income (loss) from continuing operations | (39,800 | ) | 97,530 | 57,730 | (28,660 | ) | 87,310 | 58,650 | ||||||||||||||||
| Free Cash Flow as a percentage of income from continuing operations | (123 | )% | 126 | % | (167 | )% | 87 | % | ||||||||||||||||
Sherry Lauderback VP, Investor Relations& Communications (248) 631-5506 sherrylauderback@trimascorp.com
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