TriMas announced financial results for the quarter ended 30 June 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 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
Today announced the appointment of Thomas Amato as TriMas President and Chief Executive Officer; brings more than 25 years of broad industrial experience and a track record of enhancing shareholder value.
Increased second quarter 2016 diluted earnings per share by 13.3%, and operating profit margin by 180 basis points, both excluding Special Items, as compared to second quarter 2015.
Completed execution of the cost savings actions included in the $22 million Financial Improvement Plan, which mitigated the impact of lower sales levels.
Continued strong margin performance in Packaging, while investing in the sales organization and new products and related applications.
Achieved approximately 210 basis points of sequential quarterly margin expansion in Energy, excluding Special Items, and significant margin improvement as compared to second quarter 2015, on lower revenue as a result of leveraging the business restructuring, and driving manufacturing and operational improvements.
Developed and executed upon a comprehensive Aerospace recovery plan which resulted in 270 basis points of sequential quarterly margin improvement, excluding Special Items.
Generated Free Cash Flow of $34.2 million for second quarter 2016, yielding year-to-date Free Cash Flow of more than 100% of net income from continuing operations, excluding Special Items.
"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
TriMas reported second quarter net sales of $203.3 million, a decrease of 9.6% as compared to $224.9 million in second quarter 2015. The positive impacts of a recent acquisition and organic initiatives were more than offset by sales declines primarily resulting from the weakness in the energy-facing end markets, industrial softness, lower Aerospace distributor sales and the impact of unfavorable currency exchange.The Company reported operating profit of $18.7 million in second quarter 2016 as compared to $19.2 million in second quarter 2015. Excluding Special Items related to severance and business restructuring, second quarter 2016 operating profit would have been $25.7 million, an increase of 5.6% as compared to $24.3 million during second quarter 2015. Second quarter 2016 operating profit margin, excluding Special Items, increased 180 basis points to 12.6%, as margin improvements in Packaging and Energy, and a reduction in corporate expenses, more than offset the declines in Aerospace and Engineered Components as compared to second quarter 2015. These improvements are a result of successful execution of the Company's Financial Improvement Plan and on-going productivity initiatives.Second quarter 2016 income from continuing operations was $10.5 million, or $0.23 per diluted share, as compared to $0.19 per diluted share in second quarter 2015. Excluding Special Items, second quarter 2016 income from continuing operations would have been $15.6 million, or $0.34 per diluted share, an increase of 13.3% as compared to $0.30 in second quarter 2015, as a result of higher operating profit and currency gains.The Company reported Free Cash Flow (defined as Net Cash Provided by/Used for Operating Activities of Continuing Operations, excluding the cash impact of Special Items, less Capital Expenditures) of $34.2 million for second quarter 2016 as compared to $9.4 million in second quarter 2015. Please see Appendix I for further details. The Company expects to generate between $55 million and $65 million for full year 2016, excluding Special Items.
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.
