TriMas Corporation Reports Second Quarter Results
Company Reports Growth in Sales and Income(1) of 7% for the Quarter
TriMas Highlights
-
Reported record second quarter net sales of
$404.0 million , an increase of 6.9% as compared to second quarter 2013, due to results from bolt-on acquisitions and the successful execution of numerous growth initiatives. - The Packaging segment achieved 9.7% sales growth in second quarter 2014, compared to second quarter 2013, or 15.6% sales growth, excluding the third quarter 2013 divestiture of the rings and levers business.
- The Aerospace and Defense segment achieved 38.2% sales growth in second quarter 2014, compared to second quarter 2013, nearly half of which was from organic growth initiatives.
- Continued initiatives to expand operating profit margins, with a 30 basis point improvement, after Special Items(1), in second quarter 2014 as compared to second quarter 2013, while investing in the acquisitions completed in 2013 and absorbing the lower margin rates associated with these acquisitions.
- Improved Engineered Components and Cequent Americas operating profit margins(2) by 470 and 210 basis points, respectively, compared to second quarter 2013, as a result of recent actions taken to improve the businesses.
-
Reduced interest expense by more than 35% as compared to second
quarter 2013, as a result of the Company's
October 2013 new senior secured credit facilities andApril 2014 accounts receivable facility amendment. -
Earlier this week, announced the acquisition of
Lion Holdings Pvt. Ltd. , a manufacturer of highly engineered dispensing solutions with locations inIndia andVietnam , to broaden Asian market coverage and provide additional in-market capacity for the growing packaging business.
"During the second quarter, we achieved 6.9% sales growth, led by our
packaging and aerospace businesses, offsetting the challenges we
continued to face in our energy end markets and sales reduction
resulting from our third quarter 2013 divestiture of the Italian rings
and levers business," said
"We continue to identify the bright spots and support our customers with new, innovative products and expanded geographic reach. We remain committed to increasing margins across all of our businesses, growing faster in our higher margin businesses, exiting and reducing some lower margin business, and implementing productivity and lean programs throughout the organization. These positive actions help offset the headwinds we are facing, and we remain mindful of the risks and challenges in the back half of 2014," Wathen continued.
Second Quarter Financial Results
-
TriMas reported record second quarter net sales of$404.0 million , an increase of 6.9% as compared to$378.0 million in second quarter 2013. During second quarter, net sales increased in five of the six reportable segments, primarily as a result of additional sales from bolt-on acquisitions, as well as geographic expansion, new customer wins and strength in certain end markets as compared to second quarter 2013. These sales increases were partially offset by a decrease of$4.1 million related to the 2013 sale of the Italian rings and levers business in the Packaging segment and a decrease in the Energy segment primarily due to lower sales to engineering and construction customers and a delay in turnaround activity at petrochemical plants and refineries. -
The Company reported operating profit of
$44.0 million in second quarter 2014, an increase of 5.8% as compared to second quarter 2013. Excluding Special Items(1) related to the facility consolidation and relocation projects within Energy and CequentAmericas , second quarter 2014 operating profit would have been$47.9 million , an increase of 9.7% as compared to$43.6 million during second quarter 2013. Second quarter 2014 operating profit margin percentage, excluding Special Items, improved due to productivity and cost reduction initiatives primarily in the Packaging, Engineered Components and Cequent Americas segments. This improvement was partially offset by a less favorable product sales mix, including the impact related to recent acquisitions which have lower initial margins. The Company continued to generate significant savings from capital investments, productivity projects and lean initiatives, which contributed to the funding of growth initiatives. -
Excluding noncontrolling interests related to
Arminak & Associates , second quarter 2014 income from continuing operations attributable toTriMas Corporation was flat at$26.2 million with second quarter 2013, and$0.58 per diluted share, compared to$0.65 per diluted share, due to 13.4% higher weighted average shares outstanding in second quarter 2014 as compared to second quarter 2013. Excluding Special Items(1), second quarter 2014 income from continuing operations attributable toTriMas Corporation would have been$29.4 million , an improvement of 6.6%, and diluted earnings per share would have been$0.65 , as compared to$0.69 in second quarter 2013. The effects of higher operating profit and lower interest expense were more than offset by significantly higher income tax expense and share count in second quarter 2014, as compared to second quarter 2013. -
The Company reported Free Cash Flow (defined as
Cash Flow from Operating Activities less Capital Expenditures) of$36.2 million for second quarter 2014, compared to$39.5 million in second quarter 2013. On a year-to-date basis, the Company generated$2.5 million in FreeCash Flow as compared to a use of$12.4 million during the first six months of 2013. The Company still expects to generate between$55 million and$65 million in Free Cash Flow for 2014. -
Through June 30, 2014, the Company invested
$20.5 million in capital expenditures (included in Free Cash Flow above) primarily in support of future growth and productivity opportunities and used$51.0 million to acquire the remaining interest ofArminak & Associates in the Packaging reportable segment.
Financial Position
Business Segment Results(2)
Packaging
Net sales for the second quarter increased 9.7% compared to the year ago
period primarily due to increases in specialty systems product sales
resulting from additional demand from North American and European
dispensing customers, as well as customer opportunities in
On
Energy
Second quarter net sales decreased 11.1% compared to the year ago period
due to the significant slow down and postponement of turnaround activity
and maintenance spend in the North American refining and petrochemical
end markets, and a reduction in sales to engineering and construction
customers as second quarter 2013 represented a higher-than-normal sales
quarter to these customers. Second quarter operating profit and the
related margin percentage decreased, as manufacturing productivity was
more than offset by the impact of weaker refinery shutdown activity,
which resulted in a less favorable product mix shift toward standard
gaskets and bolts, and higher selling, general and administrative
expenses. The Company is focused on improving margins and has recently
closed a less profitable branch in
Aerospace & Defense
Net sales for the second quarter increased 38.2% compared to the year
ago period primarily due to the results of the acquisition of Mac
Fasteners in
Engineered Components
Second quarter net sales increased 8.6% compared to the year ago period
primarily due to an increase in industrial cylinder sales related to the
small cylinder asset acquisition in
Cequent APEA
Net sales for the second quarter increased 14.4% compared to the year
ago period primarily due to the
Cequent Americas
Net sales for the second quarter increased 4.6% compared to the year ago
period, primarily due to increases in the retail and aftermarket
channels. The aftermarket channel was positively impacted by the
2014 Outlook
The Company maintains its 2014 outlook originally provided on
Wathen concluded, "We continue to focus on capturing the opportunities
and mitigating the risks we face in these choppy end markets. While we
are maintaining our full year 2014 EPS guidance of
Conference Call Information
Cautionary Notice Regarding Forward-Looking Statements
Any "forward-looking" statements contained herein, including those relating to market conditions or the Company's financial condition and results, expense reductions, liquidity expectations, business goals and sales growth, involve risks and uncertainties, including, but not limited to, risks and uncertainties with respect to general economic and currency conditions, various conditions specific to the Company's business and industry, the Company's substantial leverage, liabilities imposed by the Company's debt instruments, market demand, competitive factors, supply constraints, material and energy costs, technology factors, litigation, government and regulatory actions, the Company's accounting policies, future trends, and other risks which are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and in the Company's Quarterly Reports on Form 10-Q. These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available, and the Company assumes no obligation to update any forward-looking statements.
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 at the end of this release. Additional information is available at www.trimascorp.com under the "Investors" section.
About
Headquartered in
(1) Appendix I details certain costs, expenses and other
charges, collectively described as "Special Items," that are included in
the determination of income from continuing operations attributable to
(2) Business Segment Results include Operating Profit that excludes the impact of Special Items. For a complete schedule of Special Items by segment, see "Company and Business Segment Financial Information."
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| Condensed Consolidated Balance Sheet | |||||||
| (Dollars in thousands) | |||||||
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| 2014 | 2013 | ||||||
| Assets | (unaudited) | ||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 38,380 | $ | 27,000 | |||
| Receivables, net | 246,340 | 180,210 | |||||
| Inventories | 260,950 | 270,690 | |||||
| Deferred income taxes | 18,340 | 18,340 | |||||
| Prepaid expenses and other current assets | 18,780 | 18,770 | |||||
| Total current assets | 582,790 | 515,010 | |||||
| Property and equipment, net | 212,130 | 206,150 | |||||
| Goodwill | 312,270 | 309,660 | |||||
| Other intangibles, net | 209,910 | 219,530 | |||||
| Other assets | 47,540 | 50,430 | |||||
| Total assets | $ | 1,364,640 | $ | 1,300,780 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Current maturities, long-term debt | $ | 14,570 | $ | 10,290 | |||
| Accounts payable | 175,300 | 166,090 | |||||
| Accrued liabilities | 79,440 | 85,130 | |||||
| Total current liabilities | 269,310 | 261,510 | |||||
| Long-term debt | 353,910 | 295,450 | |||||
| Deferred income taxes | 54,180 | 64,940 | |||||
| Other long-term liabilities | 100,980 | 99,990 | |||||
| Total liabilities | 778,380 | 721,890 | |||||
| Redeemable noncontrolling interests | — | 29,480 | |||||
| Total shareholders' equity | 586,260 | 549,410 | |||||
| Total liabilities and shareholders' equity | $ | 1,364,640 | $ | 1,300,780 | |||
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| Consolidated Statement of Income | ||||||||||||||||
| (Unaudited - dollars in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net sales | $ | 403,980 | $ | 378,030 | $ | 771,720 | $ | 715,810 | ||||||||
| Cost of sales | (294,220 | ) | (274,720 | ) | (565,380 | ) | (529,100 | ) | ||||||||
| Gross profit | 109,760 | 103,310 | 206,340 | 186,710 | ||||||||||||
| Selling, general and administrative expenses | (65,720 | ) | (61,670 | ) | (129,710 | ) | (121,330 | ) | ||||||||
| Operating profit | 44,040 | 41,640 | 76,630 | 65,380 | ||||||||||||
| Other expense, net: | ||||||||||||||||
| Interest expense | (3,440 | ) | (5,540 | ) | (6,910 | ) | (10,750 | ) | ||||||||
| Other income (expense), net | (1,910 | ) | 300 | (2,930 | ) | (1,930 | ) | |||||||||
| Other expense, net | (5,350 | ) | (5,240 | ) | (9,840 | ) | (12,680 | ) | ||||||||
| Income from continuing operations before income tax expense | 38,690 | 36,400 | 66,790 | 52,700 | ||||||||||||
| Income tax expense | (12,490 | ) | (9,300 | ) | (21,210 | ) | (11,560 | ) | ||||||||
| Income from continuing operations | 26,200 | 27,100 | 45,580 | 41,140 | ||||||||||||
| Income from discontinued operations, net of income tax expense | — | 700 | — | 700 | ||||||||||||
| Net income | 26,200 | 27,800 | 45,580 | 41,840 | ||||||||||||
| Less: Net income attributable to noncontrolling interests | — | 910 | 810 | 1,770 | ||||||||||||
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Net income attributable to |
$ | 26,200 | $ | 26,890 | $ | 44,770 | $ | 40,070 | ||||||||
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Basic earnings per share attributable to |
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| Continuing operations | $ | 0.58 | $ | 0.66 | $ | 1.00 | $ | 1.00 | ||||||||
| Discontinued operations | — | 0.02 | — | 0.02 | ||||||||||||
| Net income per share | $ | 0.58 | $ | 0.68 | $ | 1.00 | $ | 1.02 | ||||||||
| Weighted average common shares—basic | 44,901,090 | 39,425,471 | 44,834,842 | 39,330,125 | ||||||||||||
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Diluted earnings per share attributable to |
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| Continuing operations | $ | 0.58 | $ | 0.65 | $ | 0.99 | $ | 0.99 | ||||||||
| Discontinued operations | — | 0.02 | — | 0.02 | ||||||||||||
| Net income per share | $ | 0.58 | $ | 0.67 | $ | 0.99 | $ | 1.01 | ||||||||
| Weighted average common shares—diluted | 45,230,862 | 39,886,593 | 45,208,488 | 39,790,349 | ||||||||||||
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Consolidated Statement of |
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| (Unaudited - dollars in thousands) | ||||||||
| Six months ended | ||||||||
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| 2014 | 2013 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 45,580 | $ | 41,840 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact: | ||||||||
| Loss on dispositions of property and equipment | 240 | 10 | ||||||
| Depreciation | 16,320 | 14,560 | ||||||
| Amortization of intangible assets | 10,990 | 10,230 | ||||||
| Amortization of debt issue costs | 960 | 870 | ||||||
| Deferred income taxes | (2,420 | ) | (3,470 | ) | ||||
| Non-cash compensation expense | 4,360 | 4,750 | ||||||
| Excess tax benefits from stock based compensation | (1,030 | ) | (1,180 | ) | ||||
| Increase in receivables | (63,500 | ) | (54,460 | ) | ||||
| Decrease in inventories | 11,520 | 1,320 | ||||||
| (Increase) decrease in prepaid expenses and other assets | 1,250 | (2,240 | ) | |||||
| Increase (decrease) in accounts payable and accrued liabilities | (1,880 | ) | 2,320 | |||||
| Other, net | 600 | (1,010 | ) | |||||
| Net cash provided by operating activities, net of acquisition impact | 22,990 | 13,540 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditures | (20,490 | ) | (25,920 | ) | ||||
| Acquisition of businesses, net of cash acquired | — | (46,610 | ) | |||||
| Net proceeds from disposition of assets | 240 | 700 | ||||||
| Net cash used for investing activities | (20,250 | ) | (71,830 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from borrowings on term loan facilities | 89,730 | 106,420 | ||||||
| Repayments of borrowings on term loan facilities | (91,030 | ) | (104,830 | ) | ||||
| Proceeds from borrowings on revolving credit and accounts receivable facilities | 552,110 | 475,890 | ||||||
| Repayments of borrowings on revolving credit and accounts receivable facilities | (489,310 | ) | (418,900 | ) | ||||
| Distributions to noncontrolling interests | (580 | ) | (1,350 | ) | ||||
| Payment for noncontrolling interests | (51,000 | ) | — | |||||
| Proceeds from contingent consideration related to disposition of businesses | — | 1,030 | ||||||
| Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations | (2,740 | ) | (3,760 | ) | ||||
| Proceeds from exercise of stock options | 430 | 860 | ||||||
| Excess tax benefits from stock based compensation | 1,030 | 1,180 | ||||||
| Net cash provided by financing activities | 8,640 | 56,540 | ||||||
| Cash and Cash Equivalents: | ||||||||
| Increase (decrease) for the period | 11,380 | (1,750 | ) | |||||
| At beginning of period | 27,000 | 20,580 | ||||||
| At end of period | $ | 38,380 | $ | 18,830 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 5,550 | $ | 8,280 | ||||
| Cash paid for taxes | $ | 10,740 | $ | 13,830 | ||||
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| Company and Business Segment Financial Information | ||||||||||||||||
| (Unaudited - dollars in thousands) | ||||||||||||||||
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Three months ended |
Six months ended |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Packaging | ||||||||||||||||
| Net sales | $ | 86,250 | $ | 78,640 | $ | 167,680 | $ | 152,990 | ||||||||
| Operating profit | $ | 20,540 | $ | 19,600 | $ | 38,900 | $ | 34,230 | ||||||||
| Energy | ||||||||||||||||
| Net sales | $ | 52,320 | $ | 58,820 | $ | 105,100 | $ | 113,740 | ||||||||
| Operating profit (loss) | $ | (630 | ) | $ | 5,210 | $ | 1,970 | $ | 11,080 | |||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 2,350 | $ | — | $ | 2,350 | $ | — | ||||||||
| Excluding Special Items, operating profit would have been | $ | 1,720 | $ | 5,210 | $ | 4,320 | $ | 11,080 | ||||||||
| Aerospace & Defense | ||||||||||||||||
| Net sales | $ | 32,800 | $ | 23,740 | $ | 62,340 | $ | 44,710 | ||||||||
| Operating profit | $ | 5,290 | $ | 5,520 | $ | 10,470 | $ | 9,270 | ||||||||
| Engineered Components | ||||||||||||||||
| Net sales | $ | 54,320 | $ | 50,020 | $ | 109,750 | $ | 96,290 | ||||||||
| Operating profit | $ | 8,950 | $ | 5,890 | $ | 16,830 | $ | 11,590 | ||||||||
| Cequent APEA | ||||||||||||||||
| Net sales | $ | 43,800 | $ | 38,290 | $ | 83,270 | $ | 70,380 | ||||||||
| Operating profit | $ | 2,220 | $ | 2,550 | $ | 4,720 | $ | 5,730 | ||||||||
| Cequent Americas | ||||||||||||||||
| Net sales | $ | 134,490 | $ | 128,520 | $ | 243,580 | $ | 237,700 | ||||||||
| Operating profit | $ | 16,940 | $ | 12,890 | $ | 22,650 | $ | 13,590 | ||||||||
| Special Items to consider in evaluating operating profit: | ||||||||||||||||
| Severance and business restructuring costs | $ | 1,460 | $ | 1,960 | $ | 2,440 | $ | 7,790 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 18,400 | $ | 14,850 | $ | 25,090 | $ | 21,380 | ||||||||
| Corporate Expenses | ||||||||||||||||
| Operating loss | $ | (9,270 | ) | $ | (10,020 | ) | $ | (18,910 | ) | $ | (20,110 | ) | ||||
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| Net sales | $ | 403,980 | $ | 378,030 | $ | 771,720 | $ | 715,810 | ||||||||
| Operating profit | $ | 44,040 | $ | 41,640 | $ | 76,630 | $ | 65,380 | ||||||||
| Total Special Items to consider in evaluating operating profit: | $ | 3,810 | $ | 1,960 | $ | 4,790 | $ | 7,790 | ||||||||
| Excluding Special Items, operating profit would have been | $ | 47,850 | $ | 43,600 | $ | 81,420 | $ | 73,170 | ||||||||
| Appendix I | |||||||||||||||
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| Additional Information Regarding Special Items Impacting | |||||||||||||||
| Reported GAAP Financial Measures | |||||||||||||||
| (Unaudited - dollars in thousands, except per share amounts) | |||||||||||||||
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Three months ended |
Six months ended |
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| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Income from continuing operations, as reported | $ | 26,200 | $ | 27,100 | $ | 45,580 | $ | 41,140 | |||||||
| Less: Net income attributable to noncontrolling interests | — | 910 | 810 | 1,770 | |||||||||||
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Income from continuing operations attributable to |
26,200 | 26,190 | 44,770 | 39,370 | |||||||||||
| After-tax impact of Special Items to consider in evaluating quality of income from continuing operations: | |||||||||||||||
| Severance and business restructuring costs | 3,190 | 1,390 | 3,860 | 5,590 | |||||||||||
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Excluding Special Items, income from continuing operations
attributable to |
$ | 29,390 | $ | 27,580 | $ | 48,630 | $ | 44,960 | |||||||
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Three months ended |
Six months ended |
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| 2014 | 2013 | 2014 | 2013 | ||||||||||||
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Diluted earnings per share from continuing operations attributable
to |
$ | 0.58 | $ | 0.65 | $ | 0.99 | $ | 0.99 | |||||||
| After-tax impact of Special Items to consider in evaluating quality of EPS from continuing operations: | |||||||||||||||
| Severance and business restructuring costs | 0.07 | 0.04 | 0.09 | 0.14 | |||||||||||
| Excluding Special Items, EPS from continuing operations would have been | $ | 0.65 | $ | 0.69 | $ | 1.08 | $ | 1.13 | |||||||
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Weighted-average shares outstanding for the three and six months
ended |
45,230,862 | 39,886,593 | 45,208,488 | 39,790,349 | |||||||||||
VP, Investor Relations
(248) 631-5506
sherrylauderback@trimascorp.com
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