Trimas Reports Fourth Quarter and Full Year 2017 Results
2017 Highlights
- Increased net sales by 3.0% to
$817.7 million with sales increases in all segments - Increased operating profit to
$88.5 million , while operating profit, excluding Special Items(1), increased by 12.3% to$106.3 million - Increased net cash provided by operating activities by 49.2% to
$120.1 million compared to 2016 - Reduced total debt by
$71.6 million , or 19.1%, to$303.1 million compared toDecember 31, 2016
Fourth Quarter 2017
The Company reported a fourth quarter 2017 net loss of
Full Year 2017
For the full year 2017,
The Company
reported full year net income of
"We are pleased with our performance in 2017, particularly the improved operating earnings and excellent cash flow generation," said
"In 2018, our objectives are to continue to drive momentum under the TriMas Business Model, and to better position our businesses strategically to take advantage of market opportunities through innovation and manufacturing efficacy. We anticipate organic sales will increase ~ 3%, and free cash flow to be greater than 120% of net income, both in line with our longer-term targets. We expect full year 2018 diluted EPS to range between
Financial Position
The Company reported net cash provided by operations of
As a result, the Company reported Free Cash Flow(2) of
Impact of the Tax Cuts and Jobs Act of 2017
In
Fourth Quarter Segment Results
Packaging (Approximately 42% 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 and fastener products for the petrochemical, petroleum refining, oil field and other industrial markets. Fourth quarter net sales increased 1.8% compared to the year ago period, primarily due to higher demand as a result of improved delivery performance, partially offset by the impact of de-emphasizing less profitable geographic regions and the delay in the fall turnaround season due to impacts of Hurricane Harvey. Fourth quarter operating loss decreased as a result of improved operating efficiencies and fewer charges associated with business realignment actions compared to the fourth quarter of 2016. Excluding Special Items, operating profit margin improved slightly, as the operating performance improvement was tempered by a less favorable product sales mix resulting from the impact of the hurricane.
Engineered Components
(Approximately 16% of
The Engineered Components segment, which is comprised of the Norris Cylinder™ and Arrow® Engine brands, designs and manufactures highly-engineered steel cylinders, wellhead engines and compression products for use within the industrial, and oil and gas markets. Net sales for fourth quarter increased 27.9% compared to the year ago period, primarily due to higher sales of small and mid-sized cylinders, as well as oil field-related products due to increased oil and gas well completions. Fourth quarter operating profit was relatively flat and the related margin percentage declined, as the impact of higher sales levels was more than offset by a less favorable product mix and higher steel costs on sales of industrial cylinders. Excluding Special Items, operating profit increased as a result of higher sales levels.
2018 Modification to Reporting Segments
Effective with the first quarter of 2018, the Company will realign its reporting segment structure from four segments to three. While there will be no changes to the current Packaging and Aerospace segments,
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: general economic and currency
conditions; material and energy costs; risks and uncertainties associated with intangible assets, including goodwill or other intangible asset impairment charges; competitive factors; future trends; the Company's ability to realize its business strategies; the Company's ability to identify attractive acquisition candidates, successfully integrate acquired operations or realize the intended benefits of such acquisitions; the performance of subcontractors and suppliers; supply constraints; market demand; technology factors; intellectual property factors; litigation; government and regulatory actions; the Company's leverage; liabilities imposed by debt instruments; labor disputes; changes to fiscal and tax policies; contingent liabilities relating to acquisition activities; information technology factors; the disruption of operations from catastrophic or extraordinary events, including
natural disasters; the potential impact of Brexit; tax considerations relating to the Cequent spin-off; the Company's future prospects; 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, 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) | ||||||||
2017 | 2016 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 27,580 | $ | 20,710 | ||||
| Receivables, net | 112,220 | 111,570 | ||||||
| Inventories | 155,350 | 160,460 | ||||||
| Prepaid expenses and other current assets | 16,120 | 16,060 | ||||||
| Total current assets | 311,270 | 308,800 | ||||||
| Property and equipment, net | 190,250 | 179,160 | ||||||
| 319,390 | 315,080 | |||||||
| Other intangibles, net | 194,220 | 213,920 | ||||||
| Deferred income taxes | 9,100 | 26,290 | ||||||
| Other assets | 8,970 | 8,400 | ||||||
| Total assets | $ | 1,033,200 | $ | 1,051,650 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities, long-term debt | $ | — | $ | 13,810 | ||||
| Accounts payable | 72,410 | 72,270 | ||||||
| Accrued liabilities | 49,470 | 47,190 | ||||||
| Total current liabilities | 121,880 | 133,270 | ||||||
| Long-term debt, net | 303,080 | 360,840 | ||||||
| Deferred income taxes | 5,650 | 5,910 | ||||||
| Other long-term liabilities | 58,570 | 51,910 | ||||||
| Total liabilities | 489,180 | 551,930 | ||||||
| Total shareholders' equity | 544,020 | 499,720 | ||||||
| Total liabilities and shareholders' equity | $ | 1,033,200 | $ | 1,051,650 | ||||
| Consolidated Statement of Operations | ||||||||||||||||
| (dollars in thousands, except share and per share amounts) | ||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (unaudited) | ||||||||||||||||
| Net sales | $ | 195,210 | $ | 185,530 | $ | 817,740 | $ | 794,020 | ||||||||
| Cost of sales | (146,070 | ) | (146,100 | ) | (598,600 | ) | (583,540 | ) | ||||||||
| Gross profit | 49,140 | 39,430 | 219,140 | 210,480 | ||||||||||||
| Selling, general and administrative expenses | (32,900 | ) | (36,910 | ) | (129,570 | ) | (153,710 | ) | ||||||||
| Net gain (loss) on dispositions of property and equipment | 2,140 | (520 | ) | (1,080 | ) | (1,870 | ) | |||||||||
| Impairment of goodwill and indefinite-lived intangible assets | — | (98,900 | ) | — | (98,900 | ) | ||||||||||
| Operating profit (loss) | 18,380 | (96,900 | ) | 88,490 | (44,000 | ) | ||||||||||
| Other expense, net: | ||||||||||||||||
| Interest expense | (4,040 | ) | (3,490 | ) | (14,400 | ) | (13,720 | ) | ||||||||
| Debt financing and related expenses | — | — | (6,640 | ) | — | |||||||||||
| Other expense, net | (460 | ) | (380 | ) | (1,240 | ) | (510 | ) | ||||||||
| Other expense, net | (4,500 | ) | (3,870 | ) | (22,280 | ) | (14,230 | ) | ||||||||
| Income (loss) before income tax expense | 13,880 | (100,770 | ) | 66,210 | (58,230 | ) | ||||||||||
| Income tax benefit (expense) | (17,890 | ) | 33,410 | (35,250 | ) | 18,430 | ||||||||||
| Net income (loss) | (4,010 | ) | (67,360 | ) | 30,960 | (39,800 | ) | |||||||||
| Basic earnings (loss) per share: | ||||||||||||||||
| Net income (loss) per share | $ | (0.09 | ) | $ | (1.48 | ) | $ | 0.68 | $ | (0.88 | ) | |||||
| Weighted average common shares - basic | 45,721,160 | 45,484,485 | 45,682,627 | 45,407,316 | ||||||||||||
| Diluted earnings (loss) per share: | ||||||||||||||||
| Net income (loss) per share | $ | (0.09 | ) | $ | (1.48 | ) | $ | 0.67 | $ | (0.88 | ) | |||||
| Weighted average common shares - diluted | 45,721,160 | 45,484,485 | 45,990,252 | 45,407,316 | ||||||||||||
| Consolidated Statement of Cash Flow | ||||||||
| (dollars in thousands) | ||||||||
| Twelve months ended | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | 30,960 | $ | (39,800 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Impairment of goodwill and indefinite-lived intangible assets | — | 98,900 | ||||||
| Loss on dispositions of assets | 1,080 | 1,870 | ||||||
| Depreciation | 26,950 | 24,390 | ||||||
| Amortization of intangible assets | 19,920 | 20,470 | ||||||
| Amortization of debt issue costs | 1,320 | 1,370 | ||||||
| Deferred income taxes | 15,260 | (32,160 | ) | |||||
| Non-cash compensation expense | 6,780 | 6,940 | ||||||
| Tax effect from stock based compensation | — | (640 | ) | |||||
| Debt financing and related expenses | 6,640 | — | ||||||
| Decrease in receivables | 1,220 | 7,990 | ||||||
| Decrease in inventories | 4,350 | 5,180 | ||||||
| (Increase) decrease in prepaid expenses and other assets | (310 | ) | 2,550 | |||||
| Increase (decrease) in accounts payable and accrued liabilities | 3,640 | (18,120 | ) | |||||
| Other operating activities | 2,250 | 1,530 | ||||||
| Net cash provided by operating activities | 120,060 | 80,470 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditures | (36,800 | ) | (31,330 | ) | ||||
| Net proceeds from dispositions of property and equipment | 4,450 | 220 | ||||||
| Net cash used for investing activities | (32,350 | ) | (31,110 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of senior notes | 300,000 | — | ||||||
| Repayments of borrowings on term loan facilities | (257,940 | ) | (13,850 | ) | ||||
| Proceeds from borrowings on revolving credit and accounts receivable facilities | 401,300 | 402,420 | ||||||
| Repayments of borrowings on revolving credit and accounts receivable facilities | (517,310 | ) | (433,350 | ) | ||||
| Payments for deferred purchase price | — | (2,530 | ) | |||||
| Debt financing fees | (6,070 | ) | — | |||||
| Shares surrendered upon options and restricted stock vesting to cover taxes | (510 | ) | (1,590 | ) | ||||
| Other financing activities | (310 | ) | 800 | |||||
| Net cash used for financing activities | (80,840 | ) | (48,100 | ) | ||||
| Cash and Cash Equivalents: | ||||||||
| Increase for the year | 6,870 | 1,260 | ||||||
| At beginning of year | 20,710 | 19,450 | ||||||
| At end of year | $ | 27,580 | $ | 20,710 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 9,430 | $ | 11,800 | ||||
| Cash paid for income taxes | $ | 16,230 | $ | 17,210 | ||||
Appendix I
| Additional Information Regarding Special Items Impacting | ||||||||||||||||
| Reported GAAP Financial Measures | ||||||||||||||||
| (Unaudited - dollars in thousands) | ||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Packaging | ||||||||||||||||
| Net sales | $ | 85,310 | $ | 82,790 | $ | 344,570 | $ | 341,340 | ||||||||
| Operating profit | $ | 18,900 | $ | 18,500 | $ | 80,380 | $ | 77,840 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Business restructuring and severance costs | 40 | 1,870 | 1,710 | 4,590 | ||||||||||||
| Excluding Special Items, operating profit would have been: | $ | 18,940 | $ | 20,370 | $ | 82,090 | $ | 82,430 | ||||||||
| Aerospace | ||||||||||||||||
| Net sales | $ | 42,760 | $ | 42,900 | $ | 184,310 | $ | 174,920 | ||||||||
| Operating profit (loss) | $ | 6,500 | $ | (104,480 | ) | $ | 26,190 | $ | (90,810 | ) | ||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Business restructuring and severance costs | — | 6,900 | — | 9,700 | ||||||||||||
| Impairment of goodwill and indefinite-lived intangible assets | — | 98,900 | — | 98,900 | ||||||||||||
| Excluding Special Items, operating profit would have been: | $ | 6,500 | $ | 1,320 | $ | 26,190 | $ | 17,790 | ||||||||
| Energy | ||||||||||||||||
| Net sales | $ | 36,720 | $ | 36,060 | $ | 161,580 | $ | 158,990 | ||||||||
| Operating loss | $ | (2,860 | ) | $ | (5,270 | ) | $ | (5,410 | ) | $ | (13,840 | ) | ||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Business restructuring and severance costs | 3,950 | 6,230 | 14,750 | 19,460 | ||||||||||||
| Excluding Special Items, operating profit would have been: | $ | 1,090 | $ | 960 | $ | 9,340 | $ | 5,620 | ||||||||
| Engineered Components | ||||||||||||||||
| Net sales | $ | 30,420 | $ | 23,780 | $ | 127,280 | $ | 118,770 | ||||||||
| Operating profit | $ | 2,740 | $ | 2,680 | $ | 15,740 | $ | 15,300 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Business restructuring and severance costs | 600 | 130 | 600 | 530 | ||||||||||||
| Excluding Special Items, operating profit would have been: | $ | 3,340 | $ | 2,810 | $ | 16,340 | $ | 15,830 | ||||||||
| Corporate Expenses | ||||||||||||||||
| Operating loss | $ | (6,900 | ) | $ | (8,330 | ) | $ | (28,410 | ) | $ | (32,490 | ) | ||||
| Special Items to consider in evaluating operating loss: | ||||||||||||||||
| Business restructuring and severance costs | 390 | 1,910 | 750 | 5,470 | ||||||||||||
| Excluding Special Items, operating loss would have been: | $ | (6,510 | ) | $ | (6,420 | ) | $ | (27,660 | ) | $ | (27,020 | ) | ||||
| Net sales | $ | 195,210 | $ | 185,530 | $ | 817,740 | $ | 794,020 | ||||||||
| Operating profit (loss) | $ | 18,380 | $ | (96,900 | ) | $ | 88,490 | $ | (44,000 | ) | ||||||
| Total Special Items to consider in evaluating operating profit: | 4,980 | 115,940 | 17,810 | 138,650 | ||||||||||||
| Excluding Special Items, operating profit would have been: | $ | 23,360 | $ | 19,040 | $ | 106,300 | $ | 94,650 | ||||||||
Appendix I
| Additional Information Regarding Special Items Impacting | ||||||||||||||||
| Reported GAAP Financial Measures | ||||||||||||||||
| (Unaudited - dollars in thousands, except share and per share amounts) | ||||||||||||||||
| Three months ended December 31, | Twelve months ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income (loss), as reported | $ | (4,010 | ) | $ | (67,360 | ) | $ | 30,960 | $ | (39,800 | ) | |||||
| Special Items to consider in evaluating quality of net income: | ||||||||||||||||
| Business restructuring and severance costs | 5,580 | 17,210 | 18,130 | 40,560 | ||||||||||||
| Impairment of goodwill and indefinite-lived intangible assets | — | 98,900 | — | 98,900 | ||||||||||||
| Debt financing and related expenses | — | — | 6,640 | — | ||||||||||||
| Income tax effect of Special Items (1) | 270 | (35,150 | ) | (4,010 | ) | (41,930 | ) | |||||||||
| Tax reform charges (2) | 12,660 | — | 12,660 | — | ||||||||||||
| Excluding Special Items, net income would have been | $ | 14,500 | $ | 13,600 | $ | 64,380 | $ | 57,730 | ||||||||
| Three months ended | Twelve months ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Diluted earnings (loss) per share, as reported | $ | (0.09 | ) | $ | (1.48 | ) | $ | 0.67 | $ | (0.88 | ) | |||||
| Dilutive impact (3) | — | 0.01 | — | 0.01 | ||||||||||||
| Special Items to consider in evaluating quality of EPS: | ||||||||||||||||
| Business restructuring and severance costs | 0.12 | 0.38 | 0.40 | 0.89 | ||||||||||||
| Impairment of goodwill and indefinite-lived intangible assets | — | 2.16 | — | 2.16 | ||||||||||||
| Debt financing and related expenses | — | — | 0.14 | — | ||||||||||||
| Income tax effect of Special Items (1) | — | (0.77 | ) | (0.09 | ) | (0.92 | ) | |||||||||
| Tax reform charges (2) | 0.28 | — | 0.28 | — | ||||||||||||
| Excluding Special Items, diluted EPS would have been | $ | 0.31 | $ | 0.30 | $ | 1.40 | $ | 1.26 | ||||||||
| Weighted-average shares outstanding for the three and twelve months ended | 46,100,275 | 45,786,801 | 45,990,252 | 45,732,105 | ||||||||||||
(1) Income tax effect of Special Items is calculated on an item-by-item basis, utilizing the tax rate in the jurisdiction where the Special Item occurred. For the three and twelve month periods ended
(2) As a result of the Tax Cuts and Jobs Act of 2017,
(3) Impact of 379,115 and 302,316 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 | ||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||
| As reported | Special Items | Excluding Special Items | As reported | Special Items | Excluding Special Items | |||||||||||||||||||
| Net cash provided by operating activities | $ | 47,410 | $ | 1,970 | $ | 49,380 | $ | 34,060 | $ | 8,090 | $ | 42,150 | ||||||||||||
| Less: Capital expenditures | (12,680 | ) | — | (12,680 | ) | (8,940 | ) | — | (8,940 | ) | ||||||||||||||
| Free Cash Flow | 34,730 | 1,970 | 36,700 | 25,120 | 8,090 | 33,210 | ||||||||||||||||||
| Net income (loss) | (4,010 | ) | 18,510 | 14,500 | (67,360 | ) | 80,960 | 13,600 | ||||||||||||||||
| Free Cash Flow as a percentage of net income (loss) | (866 | )% | 253 | % | (37 | )% | 244 | % | ||||||||||||||||
| Twelve months ended | ||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||
| As reported | Special Items | Excluding Special Items | As reported | Special Items | Excluding Special Items | |||||||||||||||||||
| Net cash provided by operating activities | $ | 120,060 | $ | 16,970 | $ | 137,030 | 80,470 | $ | 23,610 | $ | 104,080 | |||||||||||||
| Less: Capital expenditures | (36,800 | ) | — | (36,800 | ) | (31,330 | ) | — | (31,330 | ) | ||||||||||||||
| Free Cash Flow | 83,260 | 16,970 | 100,230 | 49,140 | 23,610 | 72,750 | ||||||||||||||||||
| Net income (loss) | 30,960 | 33,420 | 64,380 | (39,800 | ) | 97,530 | 57,730 | |||||||||||||||||
| Free Cash Flow as a percentage of net income (loss) | 269 | % | 156 | % | (123 | )% | 126 | % | ||||||||||||||||
2017 | 2016 | |||||||
| Current maturities, long-term debt | $ | — | $ | 13,810 | ||||
| Long-term debt, net | 303,080 | 360,840 | ||||||
| Total Debt | 303,080 | 374,650 | ||||||
| Less: Cash and cash equivalents | 27,580 | 20,710 | ||||||
| Net Debt | $ | 275,500 | $ | 353,940 | ||||
CONTACT:
VP, Investor
Relations
(248) 631-5506
sherrylauderback@trimascorp.com
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