TriMas Reports Third Quarter 2016 Results
TriMas Highlights
- Delivered third quarter 2016 diluted earnings per share, excluding Special Items, of
$0.35 , despite lower sales levels. - Increased operating profit margin, excluding Special Items, by 50 basis points, as compared to third quarter 2015.
- Achieved solid progress against a comprehensive recovery plan in the Aerospace segment which resulted in 530 basis points of sequential quarterly margin improvement, excluding Special Items.
- Generated Free Cash Flow(2) of
$11.2 million for third quarter 2016, resulting in year-to-date Free Cash Flow of approximately 90% of income from continuing operations, excluding Special Items. - Reduced total debt
by 11% as compared to
September 30, 2015 . - Initiated facility rationalization and infrastructure cost savings actions during the quarter to further streamline operations and drive improved performance.
"We achieved third quarter diluted earnings per share of
Amato continued, "During my first three months at
"Regarding our 2016 outlook, we are tightening our full-year 2016 diluted EPS guidance range from
Third Quarter Financial Results - From Continuing Operations
TriMas reported third quarter net sales of$202.3 million , a decrease of 9.0% as compared to$222.2 million in third quarter 2015. The positive sales impacts of a recent acquisition and organic initiatives were more than offset by sales declines resulting primarily from weakness in the oil and gas end markets and the impact of unfavorable currency exchange.- The Company reported operating profit of
$17.8 million in third quarter 2016 as compared to$21.6 million in third quarter 2015. Excluding Special Items related to severance and business restructuring, third quarter 2016 operating profit would have been$28.1 million as compared to$29.9 million during third quarter 2015. Third quarter 2016 operating profit margin, excluding Special Items, increased 50 basis points to 13.9%, as the favorable impact of the Company's Financial Improvement Plan, on-going continuous improvement initiatives and a reduction in corporate expenses, more than offset the unfavorable impact of sales declines as compared to third quarter 2015. - Third
quarter 2016 income from continuing operations was
$8.8 million , or$0.19 per diluted share, as compared to$0.26 per diluted share in third quarter 2015. Excluding Special Items, third quarter 2016 income from continuing operations would have been$16.1 million , or$0.35 per diluted share, as compared to$0.39 in third quarter 2015, as a result of lower sales levels, which was partially offset by the Company's cost savings initiatives. - The Company reported Free Cash Flow (defined as Net Cash Provided by Operating Activities of Continuing Operations, excluding the cash impact of Special Items, less Capital Expenditures) of
$11.2 million for third quarter 2016 as compared to$1.5 million in third quarter 2015. Please see Appendix I for further details.
Financial Position
Segment Results - From Continuing Operations
Packaging
The Packaging segment continues to develop specialty dispensing and closure applications for global markets, including industrial, food and beverage, and health, beauty and home care. Net sales for the third quarter increased 2.7% as compared to the year ago period, as sales increases to the health, beauty and home care, and industrial end markets more than offset the impact of unfavorable currency exchange. Third quarter operating profit and the related margin percentage, excluding Special Items, decreased due to a higher level of selling, general and administrative expenses related to continued investment in growth and global capabilities, and the reversal of acquisition-related liabilities in third quarter 2015 that did not recur in third quarter 2016, partially offset by the impact of continuous improvement initiatives.
Aerospace
The Aerospace segment is focused on increasing manufacturing throughput and manufacturing efficiency, developing and qualifying additional highly-engineered products, and leveraging broader capabilities to better serve its customers. Net sales for the third quarter increased 4.5% as compared to the year ago period, as a result of incremental sales related to the
Energy
The Energy segment continues to leverage lower costs resulting from business restructuring, as well as operational and manufacturing improvements. Third quarter net sales decreased 25.9% as compared to the year ago period, due to reduced demand levels from downstream oil and gas customers, lower sales from international branches, lower levels of new facility engineering and construction activity and the impact of unfavorable currency exchange. Third quarter operating profit, excluding Special Items, decreased due to the impact of the reduced sales levels and lower fixed cost absorption. The related operating profit margin increased, however, as the impact of the sales decline was more than offset by savings achieved from cost reduction actions.
Engineered Components
The Engineered Components segment has responded to the dramatic drop in oil prices by reducing its fixed cost structure. Third quarter net sales decreased 29.5% as compared to the year ago period, primarily due to lower sales of engines and compressors resulting from the impact of low oil prices and significantly reduced oil and gas drilling activity. Sales of industrial cylinders also decreased as a result of continued softness in general industrial end markets and customer consolidation. Third quarter operating profit, excluding Special Items, decreased primarily due to reduced sales levels and lower fixed cost absorption. However, the related operating profit margin increased, as the impact of the sales decline was more than offset by savings achieved from cost reduction actions and continuous improvement initiatives.
Discontinued Operations
On
2016 Outlook
The Company is
refining its full year 2016 outlook from continuing operations. The Company now estimates that 2016 sales will decline by 6% to 8% as compared to 2015. The Company also expects full-year 2016 diluted earnings per share to be
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 | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 22,550 | $ | 19,450 | ||||
| Receivables, net | 130,440 | 121,990 | ||||||
| Inventories | 171,260 | 167,370 | ||||||
| Prepaid expenses and other current assets | 7,530 | 17,810 | ||||||
| Total current assets | 331,780 | 326,620 | ||||||
| Property and equipment, net | 182,000 | 181,130 | ||||||
| 377,380 | 378,920 | |||||||
| Other intangibles, net | 258,400 | 273,870 | ||||||
| Other assets | 8,840 | 9,760 | ||||||
| Total assets | $ | 1,158,400 | $ | 1,170,300 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities, long-term debt | $ | 13,840 | $ | 13,850 | ||||
| Accounts payable | 76,140 | 88,420 | ||||||
| Accrued liabilities | 45,950 | 50,480 | ||||||
| Total current liabilities | 135,930 | 152,750 | ||||||
| Long-term debt, net | 388,580 | 405,780 | ||||||
| Deferred income taxes | 9,530 | 11,260 | ||||||
| Other long-term liabilities | 57,350 | 53,320 | ||||||
| Total liabilities | 591,390 | 623,110 | ||||||
| Total shareholders' equity | 567,010 | 547,190 | ||||||
| Total liabilities and shareholders' equity | $ | 1,158,400 | $ | 1,170,300 | ||||
| Consolidated Statement of Income | ||||||||||||||||
| (Unaudited - dollars in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net sales | $ | 202,290 | $ | 222,190 | $ | 608,490 | $ | 671,220 | ||||||||
| Cost of sales | (144,240 | ) | (159,720 | ) | (437,440 | ) | (484,110 | ) | ||||||||
| Gross profit | 58,050 | 62,470 | 171,050 | 187,110 | ||||||||||||
| Selling, general and administrative expenses | (40,260 | ) | (40,910 | ) | (118,150 | ) | (123,320 | ) | ||||||||
| Operating profit | 17,790 | 21,560 | 52,900 | 63,790 | ||||||||||||
| Other expense, net: | ||||||||||||||||
| Interest expense | (3,480 | ) | (3,440 | ) | (10,230 | ) | (10,610 | ) | ||||||||
| Debt financing and extinguishment costs | — | — | — | (1,970 | ) | |||||||||||
| Other expense, net | (200 | ) | (720 | ) | (130 | ) | (2,330 | ) | ||||||||
| Other expense, net | (3,680 | ) | (4,160 | ) | (10,360 | ) | (14,910 | ) | ||||||||
| Income from continuing operations before income tax expense | 14,110 | 17,400 | 42,540 | 48,880 | ||||||||||||
| Income tax expense | (5,330 | ) | (5,690 | ) | (14,980 | ) | (16,740 | ) | ||||||||
| Income from continuing operations | 8,780 | 11,710 | 27,560 | 32,140 | ||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | (4,740 | ) | |||||||||||
| Net income | $ | 8,780 | $ | 11,710 | 27,560 | 27,400 | ||||||||||
| Basic earnings per share: | ||||||||||||||||
| Continuing operations | $ | 0.19 | $ | 0.26 | $ | 0.61 | $ | 0.71 | ||||||||
| Discontinued operations | — | — | — | (0.10 | ) | |||||||||||
| Net income per share | $ | 0.19 | $ | 0.26 | $ | 0.61 | $ | 0.61 | ||||||||
| Weighted average common shares—basic | 45,435,936 | 45,157,412 | 45,381,592 | 45,102,067 | ||||||||||||
| Diluted earnings per share: | ||||||||||||||||
| Continuing operations | $ | 0.19 | $ | 0.26 | $ | 0.60 | $ | 0.70 | ||||||||
| Discontinued operations | — | — | — | (0.10 | ) | |||||||||||
| Net income per share | $ | 0.19 | $ | 0.26 | $ | 0.60 | $ | 0.60 | ||||||||
| Weighted average common shares—diluted | 45,760,455 | 45,499,104 | 45,713,873 | 45,439,618 | ||||||||||||
| Consolidated Statement of Cash Flow | ||||||||
| (Unaudited - dollars in thousands) | ||||||||
| Nine months ended | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 27,560 | $ | 27,400 | ||||
| Loss from discontinued operations | — | (4,740 | ) | |||||
| Income from continuing operations | 27,560 | 32,140 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Loss on dispositions of property and equipment | 1,350 | 590 | ||||||
| Depreciation | 17,710 | 16,430 | ||||||
| Amortization of intangible assets | 15,330 | 15,790 | ||||||
| Amortization of debt issue costs | 1,000 | 1,360 | ||||||
| Deferred income taxes | 360 | (4,220 | ) | |||||
| Non-cash compensation expense | 5,240 | 4,590 | ||||||
| Excess tax benefits from stock based compensation | (640 | ) | (300 | ) | ||||
| Debt financing and extinguishment costs | — | 1,970 | ||||||
| Increase in receivables | (9,790 | ) | (15,790 | ) | ||||
| Increase in inventories | (4,560 | ) | (7,010 | ) | ||||
| (Increase) decrease in prepaid expenses and other assets | 10,780 | (1,020 | ) | |||||
| Decrease in accounts payable and accrued liabilities | (17,150 | ) | (15,540 | ) | ||||
| Other, net | (780 | ) | (250 | ) | ||||
| Net cash provided by operating activities of continuing operations | 46,410 | 28,740 | ||||||
| Net cash used for operating activities of discontinued operations | — | (14,030 | ) | |||||
| Net cash provided by operating activities | 46,410 | 14,710 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditures | (22,390 | ) | (20,360 | ) | ||||
| Net proceeds from disposition of property and equipment | 120 | 1,680 | ||||||
| Net cash used for investing activities of continuing operations | (22,270 | ) | (18,680 | ) | ||||
| Net cash used for investing activities of discontinued operations | — | (2,510 | ) | |||||
| Net cash used for investing activities | (22,270 | ) | (21,190 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from borrowings on term loan facilities | — | 275,000 | ||||||
| Repayments of borrowings on term loan facilities | (10,380 | ) | (441,410 | ) | ||||
| Proceeds from borrowings on revolving credit and accounts receivable facilities | 314,860 | 995,620 | ||||||
| Repayments of borrowings on revolving credit and accounts receivable facilities | (324,780 | ) | (1,006,490 | ) | ||||
| Payments for deferred purchase price | — | (5,810 | ) | |||||
| Debt financing fees | — | (1,850 | ) | |||||
| Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations | (1,500 | ) | (2,620 | ) | ||||
| Proceeds from exercise of stock options | 120 | 430 | ||||||
| Excess tax benefits from stock based compensation | 640 | 300 | ||||||
| Cash transferred to the Cequent businesses | — | (17,050 | ) | |||||
| Net cash used for financing activities of continuing operations | (21,040 | ) | (203,880 | ) | ||||
| Net cash provided by financing activities of discontinued operations | — | 208,400 | ||||||
| Net cash provided by (used for) financing activities | (21,040 | ) | 4,520 | |||||
| Cash and Cash Equivalents: | ||||||||
| Net increase (decrease) for the period | 3,100 | (1,960 | ) | |||||
| At beginning of period | 19,450 | 24,420 | ||||||
| At end of period | $ | 22,550 | $ | 22,460 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 8,870 | $ | 12,320 | ||||
| Cash paid for taxes | $ | 9,130 | $ | 22,260 | ||||
Appendix I
| Additional Information Regarding Special Items Impacting | ||||||||||||||||
| Reported GAAP Financial Measures | ||||||||||||||||
| Continuing Operations | ||||||||||||||||
| (Unaudited - dollars in thousands) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Packaging | ||||||||||||||||
| Net sales | $ | 90,330 | $ | 87,930 | $ | 258,550 | $ | 256,470 | ||||||||
| Operating profit | $ | 20,090 | $ | 21,870 | $ | 59,340 | $ | 60,090 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 1,660 | $ | 280 | $ | 2,720 | $ | 710 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 21,750 | $ | 22,150 | $ | 62,060 | $ | 60,800 | ||||||||
| Aerospace | ||||||||||||||||
| Net sales | $ | 47,430 | $ | 45,380 | $ | 132,020 | $ | 134,340 | ||||||||
| Operating profit | $ | 6,660 | $ | 7,110 | $ | 13,670 | $ | 22,410 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 1,240 | $ | 1,120 | $ | 2,800 | $ | 2,740 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 7,900 | $ | 8,230 | $ | 16,470 | $ | 25,150 | ||||||||
| Energy | ||||||||||||||||
| Net sales | $ | 38,230 | $ | 51,600 | $ | 122,930 | $ | 152,910 | ||||||||
| Operating loss | $ | (1,870 | ) | $ | (3,560 | ) | $ | (8,570 | ) | $ | (10,390 | ) | ||||
| Special Items to consider in evaluating operating profit (loss): | ||||||||||||||||
| Severance and business restructuring costs | $ | 3,640 | $ | 5,860 | $ | 13,230 | $ | 11,200 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 1,770 | $ | 2,300 | $ | 4,660 | $ | 810 | ||||||||
| Engineered Components | ||||||||||||||||
| Net sales | $ | 26,300 | $ | 37,280 | $ | 94,990 | $ | 127,500 | ||||||||
| Operating profit | $ | 3,180 | $ | 4,380 | $ | 12,620 | $ | 16,570 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 230 | $ | 90 | $ | 400 | $ | 230 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 3,410 | $ | 4,470 | $ | 13,020 | $ | 16,800 | ||||||||
| Corporate Expenses | ||||||||||||||||
| Operating loss | $ | (10,270 | ) | $ | (8,240 | ) | $ | (24,160 | ) | $ | (24,890 | ) | ||||
| Special Items to consider in evaluating operating loss: | ||||||||||||||||
| Severance and business restructuring costs | $ | 3,560 | $ | 940 | 3,560 | 940 | ||||||||||
| Excluding Special Items, operating loss would have been | $ | (6,710 | ) | $ | (7,300 | ) | (20,600 | ) | (23,950 | ) | ||||||
| Total Continuing Operations | ||||||||||||||||
| Net sales | $ | 202,290 | $ | 222,190 | $ | 608,490 | $ | 671,220 | ||||||||
| Operating profit | $ | 17,790 | $ | 21,560 | $ | 52,900 | $ | 63,790 | ||||||||
| Total Special Items to consider in evaluating operating profit | $ | 10,330 | $ | 8,290 | $ | 22,710 | $ | 15,820 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 28,120 | $ | 29,850 | $ | 75,610 | $ | 79,610 | ||||||||
Appendix I
| Additional Information Regarding Special Items Impacting | ||||||||||||||||
| Reported GAAP Financial Measures | ||||||||||||||||
| (Unaudited - dollars in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Nine months ended |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Income from continuing operations, as reported | $ | 8,780 | $ | 11,710 | $ | 27,560 | $ | 32,140 | ||||||||
| After-tax impact of Special Items to consider in evaluating quality of income from continuing operations: | ||||||||||||||||
| Severance and business restructuring costs | 7,350 | 6,120 | 16,570 | 12,050 | ||||||||||||
| Debt extinguishment costs | — | — | — | 1,240 | ||||||||||||
| Excluding Special Items, income from continuing operations would have been | $ | 16,130 | $ | 17,830 | $ | 44,130 | $ | 45,430 | ||||||||
|
Three months ended | Nine months ended | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Diluted earnings per share from continuing operations, as reported | $ | 0.19 | $ | 0.26 | $ | 0.60 | $ | 0.70 | ||||||||
| After-tax impact of Special Items to consider in evaluating quality of EPS from continuing operations: | ||||||||||||||||
| Severance and business restructuring costs | 0.16 | 0.13 | 0.36 | 0.27 | ||||||||||||
| Debt extinguishment costs | — | — | — | 0.03 | ||||||||||||
| Excluding Special Items, diluted EPS from continuing operations would have been | $ | 0.35 | $ | 0.39 | $ | 0.96 | $ | 1.00 | ||||||||
| Weighted-average shares outstanding | 45,760,455 | 45,499,104 | 45,713,873 | 45,439,618 | ||||||||||||
Appendix I
| Additional Information Regarding Special Items Impacting | ||||||||||||||||||||||||
| Reported GAAP Financial Measures | ||||||||||||||||||||||||
| (Unaudited - dollars in thousands) | ||||||||||||||||||||||||
| 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 | $ | 13,470 | $ | 7,160 | $ | 20,630 | $ | 8,260 | $ | 730 | $ | 8,990 | ||||||||||||
| Less: Capital expenditures of continuing operations | (9,430 | ) | — | (9,430 | ) | (7,470 | ) | — | (7,470 | ) | ||||||||||||||
| Free Cash Flow from continuing operations | 4,040 | 7,160 | 11,200 | 790 | 730 | 1,520 | ||||||||||||||||||
| Income from continuing operations | 8,780 | 7,350 | 16,130 | 11,710 | 6,120 | 17,830 | ||||||||||||||||||
| Free Cash Flow as a percentage of income from continuing operations | 46 | % | 69 | % | 7 | % | 9 | % | ||||||||||||||||
| Nine 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 | $ | 46,410 | $ | 15,520 | $ | 61,930 | 28,740 | $ | 730 | $ | 29,470 | |||||||||||||
| Less: Capital expenditures of continuing operations | (22,390 | ) | — | (22,390 | ) | (20,360 | ) | — | (20,360 | ) | ||||||||||||||
| Free Cash Flow from continuing operations | 24,020 | 15,520 | 39,540 | 8,380 | 730 | 9,110 | ||||||||||||||||||
| Income from continuing operations | 27,560 | 16,570 | 44,130 | 32,140 | 13,290 | 45,430 | ||||||||||||||||||
| Free Cash Flow as a percentage of income from continuing operations | 87 | % | 90 | % | 26 | % | 20 | % | ||||||||||||||||
CONTACT:Sherry Lauderback VP, Investor Relations& Communications (248) 631-5506 sherrylauderback@trimascorp.com
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