TriMas Corporation
Feb 25, 2016

TriMas Corporation Reports Fourth Quarter and Full Year 2015 Results

Achieved 2015 EPS of $1.29(1); Top-End of Previously Provided Guidance Range Projects EPS Growth of 5% to 12% in 2016

BLOOMFIELD HILLS, Mich., Feb. 25, 2016 (GLOBE NEWSWIRE) -- TriMas Corporation (NASDAQ:TRS) today announced financial results for the year and quarter ended December 31, 2015. TriMas reported fourth quarter net sales from continuing operations of $192.8 million, a decrease of 13.7% compared to fourth quarter 2014. The Company reported a fourth quarter 2015 loss from continuing operations of $60.8 million, or a loss of $1.35 per diluted share, as compared to income of $7.7 million, or $0.17 per diluted share during fourth quarter 2014. Excluding Special Items(1), which primarily consisted of non-cash goodwill and indefinite-lived intangible asset impairment charges related to the Company's energy-facing businesses, as well as severance and business restructuring costs, fourth quarter 2015 diluted earnings per share (EPS) from continuing operations would have been $0.29, at the higher end of the Company's previously provided 2015 EPS guidance  range. Fourth quarter 2014 EPS would have been $0.44 on a comparable basis.

For the year, the Company reported net sales from continuing operations of $864.0 million, a decrease of 2.6% as compared to 2014, as the Company's organic and acquisition sales increases were more than offset by sales declines resulting from the impact of lower oil prices, macroeconomic uncertainty and unfavorable currency exchange. The Company reported a full year loss from continuing operations of $28.7 million, or a loss of $0.64 per diluted share, compared to income from continuing operations of $46.1 million, or $1.02 per diluted share, in 2014. Excluding Special Items(1), full year 2015 income from continuing operations would have been $58.7 million, or $1.29 per diluted share, as compared to $63.5 million, or $1.40 per diluted share, in 2014.

TriMas Full Year 2015 Highlights

"Our actions taken in 2015 demonstrate our efforts to continuously improve our company, as our focus continues to trend toward our higher-margin, highly-engineered product solutions," said Dave Wathen, TriMas President and Chief Executive Officer. "During 2015, we invested in our higher growth and higher margin Packaging and Aerospace businesses, and completed the spin-off of our Cequent businesses. We also achieved a 2015 EPS of $1.29(1), which is at the high end of our previously provided guidance range, as better than expected operating performance more than offset the impact of lower than expected revenue. As we faced a continued weak macroeconomic environment, most notably in the energy-facing and industrial end markets, we intensified our efforts to mitigate the impact of weaker demand across all of our businesses through a series of initiatives, which included a corporate-wide Financial Improvement Plan."

Wathen continued, "Given that we experienced additional demand softness during the fourth quarter of 2015, and we expect these macroeconomic pressures to persist in 2016, we recently announced a set of incremental actions in response to this environment, increasing our previously communicated Financial Improvement Plan by 50 percent to $22 million of annual savings on a full run-rate basis. The changes we are making in our organization and business processes will better enable TriMas to navigate this slowdown and provide operational efficiencies that will help us to drive our financial performance regardless of market instability and business conditions. We remain focused on reshaping the businesses to better serve our customers, optimizing our flexible global manufacturing footprint, implementing productivity and lean programs, and leveraging our recent acquisitions."

"As we look forward to 2016, we are estimating a flat top-line, as the positive impact of our organic initiatives are expected to be offset by the continued macroeconomic pressures and anticipated sales declines in our energy-facing businesses year-over-year. We expect our full-year 2016 diluted EPS to range between $1.35 and $1.45 per share, with the midpoint representing EPS growth of approximately 8.5% as compared to 2015. We continue to be confident in our ability to improve our margins and generate strong cash flow, and to deliver increased return on capital," Wathen concluded.

Full Year 2015 Financial Results - From Continuing Operations

 Fourth Quarter 2015 Financial Results - From Continuing Operations

Impairment Charges

As previously noted, given the market conditions and the decline in profitability of its energy-facing businesses, the Company recorded pre-tax, non-cash goodwill and indefinite-lived intangible asset impairment charges of $75.7 million, of which $72.5 million and $3.2 million were in the Energy and Engineered Components segments, respectively. These charges represent a write-off of all of the goodwill in the Energy segment and the Arrow Engine business, as well as certain of the indefinite-lived intangibles related to Energy trade names no longer being used as a result of the restructuring. "Although we recorded impairment charges in our energy-facing businesses," Wathen commented, "we believe these businesses are positioned for significant earnings growth when the end market begins to recover, given our reduced fixed cost structure, and leading market positions and products."

Discontinued Operations

On June 30, 2015, the Company completed the spin-off of its Cequent businesses (comprised of the Cequent Americas and Cequent APEA reportable segments), creating a new independent publicly-traded company, Horizon Global Corporation, through a distribution of 100% of the Company's interest in Horizon Global to holders of TriMas common shares. The results of operations of the Cequent businesses, as well as the one-time costs incurred in connection with the separation of the two companies, are included in discontinued operations for all periods presented.

Financial Position

TriMas reported total debt of $419.6 million as of December 31, 2015, a decrease of 33.5% as compared to $630.8 million as of December 31, 2014. The Company used the cash distribution from Horizon Global in conjunction with the spin-off of the Cequent businesses to reduce outstanding borrowings. TriMas ended 2015 with $126.9 million of cash and aggregate availability under its revolving credit and accounts receivable facilities.

Fourth Quarter Business Segment Results - From Continuing Operations(2)

Packaging

Net sales for fourth quarter decreased 3.6% as compared to the year ago period, primarily due to unfavorable currency exchange and lower industrial closure sales as a result of a weaker industrial end market. Operating profit and the related margin percentage for the quarter decreased slightly due to lower sales levels, continued investment in global capabilities and unfavorable currency exchange, partially offset by lower material costs, productivity and cost reduction actions. The Company continues to develop specialty dispensing and closure applications for growing end markets, including food and beverage, and health, beauty and home, as well as follow its customers into growing geographies.

Aerospace

Net sales for fourth quarter increased 20.1% as compared to the year ago period, primarily due to the results of the acquisitions of Allfast in October 2014 and certain assets related to Parker Hannifin's Tolleson, Arizona machined components facility in November 2015. Net sales also benefited from increased levels of demand from larger OE customers, partially offset by lower sales to large distribution customers. Fourth quarter 2015 operating profit and the related margin percentage increased 450 basis points due to the higher sales levels and related operating leverage, manufacturing efficiencies, continued productivity and cost reduction initiatives, and a more favorable product mix, partially offset by increased selling, general and administrative costs. The Company is focused on integrating and leveraging its aerospace businesses to better serve its customers, improving manufacturing efficiencies and throughput, and developing and qualifying additional highly-engineered products for aerospace applications.

Energy

Fourth quarter net sales decreased 21.1% as compared to the year ago period, primarily due to expenditure reductions and deferrals at large refinery and petrochemical customers, reduced demand levels from upstream oil and gas customers related to lower oil production activity, and the impact of unfavorable currency exchange. Fourth quarter operating profit and the related margin percentage declined as the cost savings achieved due to the restructuring and cost reduction initiatives were more than offset by the impact of the reduced sales levels and related lower fixed cost absorption. During the fourth quarter, the Company recorded pre-tax non-cash goodwill and intangible asset impairment charges of approximately $72.5 million related to this segment. The Company continues to restructure this business to improve its cost structure, including consolidating certain facilities, starting up a lower cost manufacturing facility in Reynosa, Mexico, and adding experienced resources to the leadership team. The Company is in the process of restructuring its global footprint and supply chain, driving manufacturing and operational improvements, and increasing the sales of its higher-margin, specialty products.

Engineered Components

Net sales for fourth quarter decreased 42.6% as compared to the year ago period, primarily due to lower sales of engines and compressors resulting from the impact of lower oil prices and significantly reduced oil production activity. Sales of industrial cylinders also decreased as a result of weaker demand in industrial end markets and lower levels of export sales due to the strong U.S. dollar. Fourth quarter 2015 operating profit and the related margin percentage also decreased primarily due to the reduced sales levels and lower fixed cost absorption related to engine and compression products, which were partially offset by cost reductions and productivity initiatives. The Company has responded to the dramatic drop in oil prices and the impact on engine and compressor demand by reducing its fixed cost structure, and continues to drive new product sales and expand its international sales efforts.

2016 Outlook

The Company is estimating that 2016 sales will be relatively flat, ranging between a decline of 2% to an increase of 2%, as compared to 2015. The Company expects full-year 2016 diluted earnings per share to be between $1.35 and $1.45 per share, excluding any future events that may be considered Special Items. In addition, the Company expects 2016 Free Cash Flow (defined as Cash Flow from Operating Activities, excluding the cash impact of the Financial Improvement Plan, less Capital Expenditures) to be between $60 million and $70 million, or approximately 100% of net income.

Wathen commented, "We are not counting on an upturn in demand in 2016, and are expecting the weak macroeconomic environment to persist, most notably in the energy-facing and industrial end markets.  As a result, we continue to take actions to mitigate the impact of these external challenges and to improve our business performance, while continuing to invest in development programs and capital in our growth businesses. We are focusing on what we can control and believe we have created a solid foundation for the future with a focus of enhancing long-term shareholder value."

Conference Call Information

TriMas Corporation will host its fourth quarter and full year 2015 earnings conference call today, Thursday, February 25, 2016, at 10:00 a.m. Eastern Time. The call-in number is (888) 481-2877. Participants should request to be connected to the TriMas Corporation fourth quarter and full year 2015 earnings conference call (Conference ID #4461698). The conference call will also be simultaneously webcast via TriMas' website at www.trimascorp.com, under the "Investors" section, with an accompanying slide presentation. A replay of the conference call will be available on the TriMas website or by dialing (888) 203-1112 (Replay Passcode #4461698) beginning February 25, 2016 at 3:00 p.m. Eastern Time through March 3, 2016 at 3:00 p.m. Eastern Time.

Cautionary Notice Regarding Forward-looking Statements

Any "forward-looking" statements contained herein, including, but not limited to, those relating to the Company's business, financial condition or future results, involve risks and uncertainties, including, but not limited to, risks and uncertainties with respect to: the Company's leverage; liabilities imposed by the Company's debt instruments; market demand; competitive factors; supply constraints; material and energy costs; risks and uncertainties associated with 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; various conditions specific to the Company's business and industry; the Company's ability to integrate Allfast and attain the expected synergies, including that the acquisition is accretive; the Company's ability to attain the Financial Improvement Plan targeted savings and free cash flow amounts; 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 December 31, 2015. 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 TriMas

Headquartered in Bloomfield Hills, Michigan, TriMas Corporation (NASDAQ:TRS) provides engineered and applied products for growing markets worldwide. TriMas is organized into four reportable segments: Packaging, Aerospace, Energy and Engineered Components. TriMas has approximately 4,000 employees in 13 countries. For more information, visit www.trimascorp.com.

(1)  Appendix I details certain costs, expenses and other charges, collectively described as "Special Items," that are included in the determination of net income from continuing operations attributable to TriMas Corporation under GAAP,  but that management would consider important in evaluating the quality of the Company's operating results.
(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 - Continuing Operations."


TriMas Corporation
Condensed Consolidated Balance Sheet
(dollars in thousands)
 
  December 31,
 2015
 December 31,
 2014
Assets    
Current assets:    
Cash and cash equivalents $19,450  $24,420 
Receivables, net 121,990  132,800 
Inventories 167,370  171,260 
Prepaid expenses and other current assets 17,810  8,690 
Current assets, discontinued operations   192,580 
Total current assets 326,620  529,750 
Property and equipment, net 181,130  177,470 
Goodwill 378,920  460,080 
Other intangibles, net 273,870  297,420 
Other assets 9,760  20,030 
Non-current assets, discontinued operations   140,680 
Total assets $1,170,300  $1,625,430 
Liabilities and Shareholders' Equity    
Current liabilities:    
Current maturities, long-term debt $13,850  $23,400 
Accounts payable 88,420  103,510 
Accrued liabilities 50,480  60,150 
Current liabilities, discontinued operations   119,900 
Total current liabilities 152,750  306,960 
Long-term debt, net 405,780  607,410 
Deferred income taxes 11,260  22,120 
Other long-term liabilities 53,320  67,410 
Non-current liabilities, discontinued operations    30,900 
Total liabilities 623,110  1,034,800 
Total shareholders' equity 547,190  590,630 
Total liabilities and shareholders' equity $1,170,300  $1,625,430 
 


TriMas Corporation
Consolidated Statement of Operations
(dollars in thousands, except per share amounts)
 
  Three months ended
December 31,
 Twelve months ended
December 31,
  2015 2014 2015 2014
  (unaudited)    
Net sales $192,760  $223,430  $863,980  $887,300 
Cost of sales (143,760) (169,490) (627,870) (650,290 )
Gross profit 49,000  53,940  236,110  237,010 
Selling, general and administrative expenses (39,630) (33,960) (162,350) (146,590)
Net loss on dispositions of property and equipment (1,730) (3,330) (2,330) (3,770)
Impairment of goodwill and indefinite-lived intangible assets (75,680)   (75,680)  
Operating profit (loss) (68,040) 16,650  (4,250) 86,650 
Other expense, net:        
Interest expense (3,450) (3,280) (14,060) (9,590)
Debt financing and extinguishment costs   (3,360) (1,970) (3,360)
Other expense, net 490  (650) (1,840) (4,100)
Other expense, net (2,960) (7,290) (17,870) (17,050)
Income (loss) from continuing operations before income tax expense (71,000) 9,360  (22,120) 69,600 
Income tax benefit (expense) 10,200  (1,690) (6,540) (22,710)
Income (loss) from continuing operations (60,800) 7,670  (28,660) 46,890 
Income (loss) from discontinued operations, net of income taxes   (6,200) (4,740) 22,390 
Net income (loss) (60,800) 1,470  (33,400) 69,280 
Less: Net income attributable to noncontrolling interests       810 
Net income (loss) attributable to TriMas Corporation $(60,800) $1,470  $(33,400) $68,470 
Basic earnings (loss) per share attributable to TriMas Corporation:        
Continuing operations $(1.35) $0.17  $(0.64) $1.03 
Discontinued operations   (0.14) (0.10) 0.50 
Net income (loss) per share $(1.35) $0.03  $(0.74) $1.53 
Weighted average common shares - basic 45,188,303  44,938,675  45,123,626  44,881,925 
Diluted earnings (loss) per share attributable to TriMas Corporation:        
Continuing operations $(1.35) $0.17  $(0.64) $1.02 
Discontinued operations    (0.14) (0.10) 0.49 
Net income (loss) per share $(1.35) $0.03  $(0.74) $1.51 
Weighted average common shares - diluted 45,188,303  45,384,460  45,123,626  45,269,409 
 


TriMas Corporation
Consolidated Statement of Cash Flow
(dollars in thousands)
 
  Twelve months ended
December 31,
  2015 2014
Cash Flows from Operating Activities:    
Net income (loss) $(33,400) $69,280 
Income (loss) from discontinued operations (4,740) 22,390 
Income (loss) from continuing operations  (28,660) 46,890 
Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisition impact:    
Impairment of goodwill and indefinite-lived intangible assets 75,680   
Loss on dispositions of businesses and other assets 2,330  3,770 
Depreciation 22,570  21,380 
Amortization of intangible assets 20,970  16,060 
Amortization of debt issue costs 1,710  1,940 
Deferred income taxes (8,750) (6,530)
Non-cash compensation expense 6,340  7,110 
Excess tax benefits from stock based compensation (590) (1,180)
Debt financing and extinguishment expenses 1,970  3,360 
(Increase) decrease in receivables 5,300  (9,790)
(Increase) decrease in inventories 3,250  (6,010)
Decrease in prepaid expenses and other assets 4,730  5,250 
Increase (decrease) in accounts payable and accrued liabilities (29,530) 11,830 
Other, net (750) (1,560)
Net cash provided by operating activities of continuing operations, net of acquisition impact 76,570  92,520 
Net cash provided by (used for) operating activities of discontinued operations (14,030) 30,880 
Net cash provided by operating activities, net of acquisition impact 62,540  123,400 
Cash Flows from Investing Activities:    
Capital expenditures (28,660) (23,000)
Acquisition of businesses, net of cash acquired (10,000) (382,880)
Net proceeds from disposition of businesses and other assets 1,700  200 
Net cash used for investing activities of continuing operations (36,960) (405,680)
Net cash used for investing activities of discontinued operations (2,510) (4,410 )
Net cash used for investing activities (39,470) (410,090)
Cash Flows from Financing Activities:    
Proceeds from borrowings on term loan facilities 275,000  275,000 
Repayments of borrowings on term loan facilities (444,890) (8,910)
Proceeds from borrowings on revolving credit and accounts receivable facilities 1,129,840  1,063,960 
Repayments of borrowings on revolving credit and accounts receivable facilities (1,169,370) (989,090)
Payments for deferred purchase price (6,440)  
Debt financing fees (1,850) (3,840)
Distributions to noncontrolling interests   (580)
Payment for noncontrolling interests   (51,000)
Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations (2,770) (2,910)
Proceeds from exercise of stock options  500  640 
Excess tax benefits from stock based compensation 590  1,180 
Cash transferred to the Cequent businesses (17,050)  
Net cash provided by (used for) financing activities of continuing operations (236,440) 284,450 
Net cash provided by (used for) financing activities of discontinued operations 208,400  (340)
Net cash provided by (used for) financing activities (28,040) 284,110 
Cash and Cash Equivalents:    
Decrease for the year (4,970) (2,580)
At beginning of year 24,420  27,000 
At end of year $19,450  $24,420 
Supplemental disclosure of cash flow information:    
Cash paid for interest $15,170  $10,870 
Cash paid for income taxes $30,580  $41,110 
 


TriMas Corporation
Company and Business Segment Financial Information
Continuing Operations
(Unaudited - dollars in thousands)
 
  Three months ended
December 31,
 Twelve months ended
December 31,
   2015 2014 2015 2014
Packaging        
Net sales $77,800  $80,710  $ 334,270  $337,710 
Operating profit $18,380  $18,180  $78,470  $77,850 
Special Items to consider in evaluating operating profit:        
Severance and business restructuring costs $1,050  $2,220  $1,760  $2,840 
Excluding Special Items, operating profit would have been: $19,430  $20,400  $80,230  $ 80,690 
         
Aerospace        
Net sales $42,140  $35,090  $176,480  $121,510 
Operating profit $5,910  $3,440   $28,320  $17,830 
Special Items to consider in evaluating operating profit:        
Severance and business restructuring costs $870  $620  $3,610  $620  
Excluding Special Items, operating profit would have been: $6,780  $4,060  $31,930   $18,450 
         
Energy        
Net sales $40,480  $51,330  $193,390  $206,720 
Operating loss $(86,770) $(7,530) $(97,160) $(6,660)
Special Items to consider in evaluating operating profit (loss):        
Severance and business restructuring costs $11,940  $7,460  $23,140  $11,890 
Release of historical translation adjustments related to the closure of Brazilian manufacturing facility $  $1,270  $  $1,270 
Impairment of goodwill and indefinite-lived intangible assets $72,500  $  $72,500  $ 
Excluding Special Items, operating profit (loss) would have been: $(2,330) $1,200  $(1,520) $6,500 
         
Engineered Components        
Net sales $32,340  $56,300  $159,840  $221,360 
Operating profit $1,670  $9,160  $18,240  $34,080 
Special Items to consider in evaluating operating profit:        
Severance and business restructuring costs $50  $  $280  $ 
Impairment of goodwill and indefinite-lived intangible assets $3,180  $  $3,180  $ 
Excluding Special Items, operating profit would have been: $4,900  $ 9,160  $21,700  $34,080 
         
Corporate Expenses        
Operating loss $(7,230) $(6,600) $(32,120) $(36,450)
Special Items to consider in evaluating operating loss:        
Severance and business restructuring costs $500  $  $1,440  $ 
Excluding Special Items, operating loss would have been: $(6,730)  $(6,600) $(30,680) $(36,450)
          
Total Company        
Net sales $192,760  $223,430  $863,980  $887,300 
Operating profit (loss) $(68,040) $16,650  $(4,250) $86,650 
Total Special Items to consider in evaluating operating profit: $90,090  $11,570  $105,910  $16,620  
Excluding Special Items, operating profit would have been: $22,050  $28,220  $101,660  $103,270 
 


Appendix I


TriMas Corporation
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
December 31,
  2015 2014 2015 2014
Income (loss) from continuing operations, as reported $(60,800) $7,670  $(28,660) $46,890 
Less: Net income attributable to noncontrolling interests       810 
Income (loss) from continuing operations attributable to TriMas Corporation $(60,800) $7,670  $(28,660) $46,080 
After-tax impact of Special Items to consider in evaluating quality of income (loss) from continuing operations:        
Release of historical translation adjustments related to the closure of Brazilian manufacturing facility   1,270    1,270 
Severance and business restructuring costs 9,760   9,180  21,810  13,980 
Impairment of goodwill and indefinite-lived intangible assets 64,260    64,260   
Debt financing and extinguishment costs   2,120  1,240  2,120 
Excluding Special Items, income from continuing operations attributable to TriMas Corporation would have been $13,220  $20,240  $58,650  $63,450 
         
   Three months ended
December 31,
 Twelve months ended
December 31,
  2015 2014 2015 2014
Diluted earnings (loss) per share from continuing operations attributable to TriMas Corporation, as reported $(1.35) $0.17  $(0.64) $1.02 
Dilutive impact (a) 0.02    0.01   
After-tax impact of Special Items to consider in evaluating quality of EPS from continuing operations:        
Release of historical translation adjustments related to the closure of Brazilian manufacturing facility   0.03    0.03 
Severance and business restructuring costs 0.21  0.20  0.48  0.31 
Impairment of goodwill and indefinite-lived intangible assets 1.41    1.41   
Debt financing and extinguishment costs   0.04  0.03  0.04 
Excluding Special Items, diluted EPS from continuing operations would have been $0.29  $0.44  $1.29  $1.40 
Weighted-average shares outstanding for the three and twelve months ended December 31, 2015 and 2014 45,613,000  45,384,460  45,482,964  45,269,409 
         
(a) Impact of 424,697 and 359,338 shares for the three months and twelve months ended December 31, 2015, respectively, which would have been dilutive to the computation of earnings per share in an income position.
         
  Three months ended
December 31,
 Twelve months ended
December 31,
  2015 2014 2015 2014
Net cash provided by operating activities of continuing operations  $47,830  $39,880  $76,570  $92,520 
Add: Cash impact of Financial Improvement Plan 2,160    2,890    
Cash Flows from operating activities excluding special items 50,940  39,880  80,410  92,520 
Less: Capital expenditures of continuing operations (8,300) (4,680) (28,660) (23,000)
Free Cash Flow from continuing operations $41,690  $35,200  $50,800  $69,520 
 


CONTACT:

Sherry Lauderback

VP, Investor Relations & Communications

(248) 631-5506

sherrylauderback@trimascorp.com

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Source: TriMas Corporation

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