TransDigm Q4 Results Top Estimates; But Sees FY14 Adj. EPS Below View

(RTTNews) - TransDigm Group Inc. (TDG), a global designer, producer and supplier of highly engineered aircraft components, reported that its fourth quarter ended September 30, 2013 loss applicable to common stock was $11.11 million or $0.20 per share, compared to net income of $87.87 million or $1.63 per share in the same quarter last year.

Net income for the quarter decreased 4.4% to $84.0 million from $87.9 million in the comparable quarter a year ago. Earnings per share were reduced by $1.67 per share representing dividend equivalent payments of $95.1 million made during the quarter. The decrease in net income was primarily due to higher interest expense as a result of an increase in the level of outstanding borrowings and higher acquisition related costs partially offset by the growth in net sales and a lower effective tax rate.

The higher interest expense was due to an increase in outstanding borrowings from $3.6 billion to $5.7 billion to fund the $12.85 per share dividend paid in November 2012 and the $22.00 per share dividend paid in July 2013.

The latest-quarter included acquisition-related costs and non-cash compensation costs of $14.4 million, net of tax, or $0.26 per share. The comparable quarter a year ago reflected acquisition-related and non-cash compensation costs of $5.1 million, net of tax, or $0.09 per share.

Adjusted net income for the quarter rose to $99.7 million, or $1.75 per share, from $93.0 million, or $1.72 per share, in the comparable quarter a year ago. Adjusted earnings per share were negatively impacted by $0.10 due to a higher share count in the latest-quarter. Analysts polled by Thomson Reuters expected the company to report earnings of $1.71 per share for the quarter. Analysts' estimates typically exclude special items.

EBITDA for the quarter increased 9.8% to $229.5 million from $209.0 million for the comparable quarter a year.

Net sales for the quarter rose 16.7% to $539.7 million from $462.6 million in the comparable quarter a year ago. Sixteen analysts estimated revenues of $536.17 million for the quarter. Organic net sales growth of 5.6% was driven by an increase in commercial OEM and defense sales over the prior year. The favorable contribution from the acquisitions of Aerosonic, Arkwin and Whippany accounted for the balance of the sales increase.

"The commercial aftermarket appears to be recovering. However, both the rate of recovery as well as the status of defense funding is still unclear…..With that in mind, our fiscal 2014 guidance assumes that our commercial OEM and aftermarket revenues will both be up in the high single-digit percentage range and revenues from the defense market will be flat," said Nicholas Howley, TransDigm Group's Chairman and Chief Executive Officer.

Looking ahead for fiscal 2014, the company expects net income to be in the range of $372 million to $390 million, earnings per share of $6.16 to $6.48, adjusted earnings per share of $7.00 to $7.32 per share, and net sales of $2.155 billion to $2.215 billion. Analysts expected the company to report earnings of $7.40 per share and revenues of $2.17 billion for fiscal 2014.

For fiscal 2014, EBITDA As Defined is anticipated to be in the range of $1.004 billion to $1.032 billion compared with $900 million in fiscal 2013.