TriMas Corporation
Jul 28, 2016

TriMas Corporation Reports Second Quarter 2016 Results

Achieved Second Quarter 2016 EPS, Excluding Special Items, of $0.34, an increase of 13.3% 

Revised Full Year 2016 Guidance

BLOOMFIELD HILLS, Mich., July 28, 2016 (GLOBE NEWSWIRE) -- TriMas Corporation (NASDAQ:TRS) today announced financial results for the quarter ended June 30, 2016. The Company reported second quarter net sales from continuing operations of $203.3 million, a decrease of 9.6% compared to second quarter 2015. The Company reported second quarter 2016 income from continuing operations of $10.5 million, or $0.23 per diluted share, as compared to income of $8.5 million, or $0.19 per diluted share, in the second quarter of 2015. Excluding Special Items(1) related to severance, business restructuring and 2015 debt extinguishment costs, second quarter 2016 diluted earnings per share from continuing operations would have been $0.34, an increase of 13.3% as compared to $0.30 in second quarter 2015.

TriMas Highlights

"We achieved second quarter earnings per share of $0.34, excluding Special Items, representing a 13.3% increase over 2015, in spite of a 9.6% decline in sales," said Bob Zalupski, TriMas Chief Financial Officer. "During the quarter, we continued to experience top-line challenges, most notably in our energy-facing and industrial cylinder businesses, as well as continued short-term margin pressures in Aerospace. We were largely able to mitigate the impact of these items through cost reduction and productivity initiatives, driving an increase in year-over-year operating profit and related margin, excluding Special Items. We also significantly improved Free Cash Flow as compared to second quarter 2015 as a result of our working capital reductions."

Zalupski continued, "As we move forward through 2016, we will continue to focus on holding or improving margins in a challenging top-line environment. Our Energy restructuring efforts are working, as evidenced by expanded margins in the quarter despite a more than 20% reduction in sales year-over-year.  Within Aerospace, we implemented recovery plan actions to address scheduling and manufacturing capacity challenges in two of our fastener facilities and to minimize the incremental costs related to the integration of an acquired facility. While these actions contributed to 270 basis points of sequential Aerospace margin improvement in the quarter, excluding Special Items, the second quarter margin level was lower than planned."

"Regarding our outlook, we are revising our full-year 2016 diluted EPS guidance range to $1.22 to $1.30 per share, excluding Special Items, as a result of lower than expected second quarter earnings and a reduction in our second half 2016 Aerospace guidance. We continue to focus our attention on the areas we can control and are intently focused on execution of the Aerospace improvement plan," Zalupski concluded.

Second Quarter Financial Results - From Continuing Operations

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.

Financial Position

TriMas reported total debt of $406.3 million as of June 30, 2016, as compared to $419.6 million as of December 31, 2015, and $457.3 million as of June 30, 2015. TriMas ended second quarter 2016 with $123.7 million of cash and aggregate availability under its revolving credit and accounts receivable facilities.

Business Segment Results - From Continuing Operations

Packaging

Net sales for the second quarter decreased 1.6% as compared to the year ago period, as sales increases in the industrial end market were more than offset by the impact of unfavorable currency exchange and lower product sales to the health, beauty and home care end market due to customer new program launches during the second quarter of 2015 that did not repeat in 2016. Second quarter operating profit and the related margin percentage, excluding Special Items, increased due to a more favorable product sales mix and the impact of ongoing productivity and automation initiatives, partially offset by unfavorable currency exchange and continued investment in global capabilities. The Company continues to develop specialty dispensing and closure applications for global markets, including industrial, food and beverage, and health, beauty and home care.

Aerospace

Net sales for the second quarter increased 2.0% as compared to the year ago period, as a result of incremental sales resulting from the November 2015 acquisition of certain assets related to Parker Hannifin's Tolleson, Arizona, machined components facility, partially offset by lower demand from larger distribution customers. Second quarter operating profit and the related margin percentage, excluding Special Items, decreased due to a less favorable product mix, cost of recovery actions to address short-term production inefficiencies and higher costs of new product qualifications. The Company is focused on executing a comprehensive recovery plan to increase manufacturing throughput and reduce the costs of production-related inefficiencies, developing and qualifying additional highly-engineered products for aerospace applications, and leveraging its aerospace platform to better serve its customers.

Energy

Second quarter net sales decreased 20.3% as compared to the year ago period, due to reduced demand levels from upstream oil and gas customers related to lower oil production activity, lower sales from international branches due to restructuring activities in those regions, and the impact of unfavorable currency exchange. Second quarter operating profit and the related margin percentage, excluding Special Items, improved as the cost savings achieved due to the restructuring and cost reduction initiatives more than offset by the impact of the reduced sales levels and related lower fixed cost absorption. The Company continues to leverage lower costs resulting from the business restructuring, accelerate the manufacturing of products in Reynosa, Mexico, and drive operational and manufacturing improvements.

Engineered Components

Second quarter net sales decreased 25.7% 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 continued softness in industrial end markets. Second quarter operating profit and the related margin percentage, excluding Special Items, decreased primarily due to reduced sales levels and lower fixed cost absorption related to engine and compression products partially offset by savings achieved from cost reduction actions and ongoing 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 revising its full year 2016 outlook from continuing operations. The Company is now estimating that 2016 sales will decline from 4% to 7% as compared to 2015. The Company also expects full-year 2016 diluted earnings per share to be $1.22 to $1.30 per share, excluding any current or future events that may be considered Special Items, a reduction from the previous outlook of $1.35 to $1.45 per share. In addition, the Company expects 2016 Free Cash Flow (defined as Cash Flow from Operating Activities, excluding the cash impact of Special Items, less Capital Expenditures) to be between $55 million and $65 million, or approximately 100% of net income, excluding Special Items.

"While we believe we will be able to offset the majority of the impact of our lowered sales outlook through continued cost management and productivity savings," said Zalupski, "the combined impact of the reduced level of higher margin distributor sales and the more gradual improvement of fastener production within Aerospace is tempering our previously expected profitability for the back half of 2016. We have taken actions to effectively address these challenges and remain positive on the longer-term prospects for revenue and earnings growth in our businesses."

Conference Call Information

TriMas Corporation will host its second quarter 2016 earnings conference call today, Thursday, July 28, 2016, at 10 a.m. ET. The call-in number is (888) 329-8893. Participants should request to be connected to the TriMas Corporation second quarter 2016 earnings conference call (Conference ID #4304981). 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 Code #4304981) beginning July 28, 2016 at 3 p.m. ET through August 4, 2016 at 3 p.m. ET

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, 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; 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; 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 in Appendix I 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 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.                  

TriMas Corporation
Condensed Consolidated Balance Sheet
(Dollars in thousands)
 
  June 30,
 2016
 December 31,
 2015
Assets (unaudited)  
Current assets:    
Cash and cash equivalents $23,660  $19,450 
Receivables, net 124,620  121,990 
Inventories 165,800  167,370 
Prepaid expenses and other current assets 7,440  17,810 
Total current assets 321,520  326,620 
Property and equipment, net 178,660  181,130 
Goodwill 377,430  378,920 
Other intangibles, net 263,510  273,870 
Other assets 9,080  9,760 
Total assets $1,150,200  $1,170,300 
Liabilities and Shareholders' Equity    
Current liabilities:    
Current maturities, long-term debt $13,820  $ 13,850 
Accounts payable 77,820  88,420 
Accrued liabilities 41,690  50,480 
Total current liabilities 133,330  152,750 
Long-term debt, net 392,460  405,780 
Deferred income taxes 8,320  11,260 
Other long-term liabilities 57,890  53,320 
Total liabilities 592,000  623,110 
Total shareholders' equity 558,200  547,190 
Total liabilities and shareholders' equity $1,150,200  $1,170,300 


TriMas Corporation
 Consolidated Statement of Income
 (Unaudited - dollars in thousands, except per share amounts)
 
   Three months ended
June 30,
 Six months ended
June 30,
  2016 2015 2016 2015
Net sales $203,320  $224,900  $406,200  $449,030 
Cost of sales (146,240) (163,180) (293,200) (324,390)
Gross profit 57,080  61,720  113,000  124,640 
Selling, general and administrative expenses (38,420) (42,510) (77,890) (82,410)
Operating profit 18,660  19,210  35,110  42,230 
Other expense, net:        
Interest expense (3,310) (3,720) (6,750)  (7,170)
Debt financing and extinguishment costs   (1,970)   (1,970)
Other income (expense), net 130  (290) 70  (1,610)
Other expense, net (3,180) (5,980) (6,680 ) (10,750)
Income from continuing operations before income tax expense 15,480  13,230  28,430  31,480 
Income tax expense (5,000) (4,740) (9,650)  (11,050)
Income from continuing operations 10,480  8,490  18,780  20,430 
Loss from discontinued operations, net of tax   (6,780)   (4,740)
Net income $10,480  $1,710  18,780  15,690 
Basic earnings per share:        
Continuing operations $0.23  $0.19   $0.41  $0.45 
Discontinued operations   (0.15)   (0.10)
Net income per share $0.23  $0.04  $0.41  $0.35 
Weighted average common shares—basic 45,429,851  45,150,827  45,354,421  45,074,394 
Diluted earnings per share:        
Continuing operations $0.23  $0.19  $0.41  $0.45 
Discontinued operations    (0.15)   (0.10)
Net income per share $0.23  $0.04  $0.41  $0.35 
Weighted average common shares—diluted 45,726,348  45,418,907  45,690,582  45,409,875 


TriMas Corporation
 Consolidated Statement of Cash Flow
 (Unaudited - dollars in thousands)
 
  Six months ended
June 30,
  2016 2015
Cash Flows from Operating Activities:    
Net income $18,780  $15,690 
Loss from discontinued operations   (4,740)
Income from continuing operations 18,780   20,430 
Adjustments to reconcile net income to net cash provided by operating activities:    
Loss on dispositions of property and equipment 1,120  300 
Depreciation 11,980  10,830 
Amortization of intangible assets 10,190  10,580  
Amortization of debt issue costs 670  1,020 
Deferred income taxes 230  (250)
Non-cash compensation expense 4,140  2,870 
Excess tax benefits from stock based compensation (170) (270)
Debt financing and extinguishment costs   1,970 
Increase in receivables (3,660)  (8,930)
(Increase) decrease in inventories 1,130  (9,210)
Decrease in prepaid expenses and other assets 10,650   510 
Decrease in accounts payable and accrued liabilities (21,710) (8,550)
Other, net (410) (820)
Net cash provided by operating activities of continuing operations 32,940  20,480  
Net cash used for operating activities of discontinued operations   (14,030)
Net cash provided by operating activities 32,940  6,450 
Cash Flows from Investing Activities:    
Capital expenditures (12,960 ) (12,890)
Net proceeds from disposition of property and equipment 120  690 
Net cash used for investing activities of continuing operations (12,840) (12,200)
Net cash used for investing activities of discontinued operations   (2,510)
Net cash used for investing activities (12,840) (14,710)
Cash Flows from Financing Activities:    
Proceeds from borrowings on term loan facilities   275,000 
Repayments of borrowings on term loan facilities (6,950) (441,360)
Proceeds from borrowings on revolving credit and accounts receivable facilities 216,580  697,890 
Repayments of borrowings on revolving credit and accounts receivable facilities (225,050) (703,390)
Payments for deferred purchase price   (5,710)
Debt financing fees   (1,850)
Shares surrendered upon vesting of options and restricted stock awards to cover tax obligations (650) (2,620)
Proceeds from exercise of stock options 10  430 
Excess tax benefits from stock based compensation 170  270 
Cash transferred to the Cequent businesses   (17,050)
Net cash used for financing activities of continuing operations (15,890) (198,390)
Net cash provided by financing activities of discontinued operations   208,400 
Net cash provided by (used for) financing activities (15,890) 10,010 
Cash and Cash Equivalents:    
Net increase for the period 4,210  1,750 
At beginning of period 19,450  24,420 
At end of period $23,660  $26,170 
Supplemental disclosure of cash flow information:    
Cash paid for interest $5,860  $9,690 
Cash paid for taxes $3,170  $17,390 
         

Appendix I

TriMas Corporation
Additional Information Regarding Special Items Impacting
Reported GAAP Financial Measures
Continuing Operations
(Unaudited - dollars in thousands)
 
  Three months ended
June 30,
 Six months ended
June 30,
  2016  2015 2016 2015
Packaging        
Net sales $88,110  $89,580  $168,220  $168,540 
Operating profit $21,410  $20,710  $39,250  $38,220 
Special Items to consider in evaluating operating profit:        
Severance and business restructuring costs  $590  $280  $1,060  $430 
Excluding Special Items, operating profit would have been $22,000  $20,990  $40,310  $38,650 
         
Aerospace        
Net sales $44,090  $43,220  $84,590  $88,960 
Operating profit $3,550  $7,220  $7,010  $15,300 
Special Items to consider in evaluating operating profit:        
Severance and business restructuring costs $1,490  $830  $1,560  $1,620 
Excluding Special Items, operating profit would have been $5,040  $8,050  $8,570  $16,920 
         
Energy        
Net sales $39,950  $50,150  $84,700  $101,310 
Operating loss $(3,090) $ (7,170) $(6,700) $(6,830)
Special Items to consider in evaluating operating profit (loss):        
Severance and business restructuring costs $4,890  $3,910  $ 9,590  $5,340 
Excluding Special Items, operating profit (loss) would have been $1,800  $(3,260)  $2,890  $(1,490)
         
Engineered Components        
Net sales $31,170  $41,950  $68,690  $90,220 
Operating profit $3,860   $6,220  $9,440  $12,190 
Special Items to consider in evaluating operating profit:         
Severance and business restructuring costs $20  $60  $170  $140 
Excluding Special Items, operating profit would have been $3,880  $6,280  $9,610  $12,330 
         
Corporate Expenses        
Operating loss $(7,070) $(7,770) $(13,890) $(16,650)
         
Total Continuing Operations        
Net sales $203,320  $224,900  $406,200  $449,030 
Operating profit $18,660  $19,210  $35,110   $42,230 
Total Special Items to consider in evaluating operating profit $6,990  $5,080  $12,380  $7,530 
Excluding Special Items, operating profit would have been $25,650  $24,290  $47,490  $49,760 
                 

 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
June 30,
 Six months ended
June 30,
  2016 2015 2016 2015
Income from continuing operations, as reported $10,480   $8,490  $18,780  $20,430 
After-tax impact of Special Items to consider in evaluating quality of income from continuing operations:        
Severance and business restructuring costs 5,130  4,030  9,220  5,930 
Debt extinguishment costs   1,240     1,240 
Excluding Special Items, income from continuing operations would have been $15,610  $13,760  $28,000  $27,600 
         
  Three months ended
June 30,
 Six months ended
June 30,
  2016 2015 2016  2015
Diluted earnings per share from continuing operations, as reported $0.23  $0.19  $0.41  $0.45 
After-tax impact of Special Items to consider in evaluating quality of EPS from continuing operations:        
Severance and business restructuring costs 0.11  0.08  0.20  0.13 
Debt extinguishment costs   0.03    0.03 
Excluding Special Items, diluted EPS from continuing operations would have been $0.34  $0.30  $0.61  $0.61 
Weighted-average shares outstanding 45,726,348  45,418,907  45,690,582  45,409,875 
         

Appendix I

TriMas Corporation
Additional Information Regarding Special Items Impacting
Reported GAAP Financial Measures
(Unaudited - dollars in thousands)
 
  Three months ended June 30,
  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 $36,280  $4,920  $41,200  $16,620  $  $16,620 
Less: Capital expenditures of continuing operations (6,980)   (6,980) (7,200)   (7,200)
Free Cash Flow from continuing operations 29,300  4,920  34,220   9,420    9,420 
Income from continuing operations 10,480  5,130  15,610  8,490  5,270  13,760 
Free Cash Flow as a percentage of income from continuing operations 280%   219% 111%   68%
             
  Six months ended June 30,
  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 $32,940  $8,360  $41,300  20,480  $  $20,480 
Less: Capital expenditures of continuing operations (12,960)    (12,960) (12,890)   (12,890)
Free Cash Flow from continuing operations 19,980  8,360  28,340  7,590    7,590 
Income from continuing operations 18,780  9,220  28,000  20,430  7,170  27,600 
Free Cash Flow as a percentage of income from continuing operations  106%   101% 37%   28%

 

CONTACT:

Sherry Lauderback

VP, Investor Relations & Communications

(248) 631-5506

sherrylauderback@trimascorp.com

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Source: TriMas Corporation

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