Business News
TriMas Corporation Reports Third Quarter 2008 Results
Tuesday 11. November 2008 - TriMas Corporation (NYSE:TRS) today announced financial results for the quarter ended September 30, 2008. The Company reported quarterly net sales from continuing operations of $276.9 million, an increase of 7.1% from the third quarter of 2007.
Third quarter 2008 income from continuing operations increased 53.1% from third quarter 2007 to $8.3 million, or $0.25 diluted earnings per share, including ($0.01) per share in severance and facility closure costs(1). In comparison, the third quarter 2007 income from continuing operations was $5.4 million, or a $0.16 per diluted share.
THIRD QUARTER SUMMARY – From Continuing Operations
— TriMas reported third quarter net sales of $276.9 million, an increase
of 7.1% in comparison to $258.6 million in the third quarter 2007.
Sales in the Packaging Systems, Energy Products and Industrial
Specialties segments increased 13.0%, 37.4% and 16.1%, respectively.
Sales in the RV & Trailer Products and Recreational Accessories
segments declined 8.6% and 11.3%, respectively, due to lower demand as
a result of reduced consumer discretionary spending and current
economic uncertainty.
— The Company reported operating profit of $27.9 million for the third
quarter 2008, an increase of 9.5% in comparison to operating profit of
$25.5 million in the third quarter 2007.
— Adjusted EBITDA(2) for the third quarter 2008 increased 8.5% to $38.1
million, as compared to $35.1 million in the third quarter 2007,
consistent with the increase in operating profit.
— Income from continuing operations for the third quarter 2008 increased
53.1% to $8.3 million, or $0.25 per diluted share, compared to income
from continuing operations of $5.4 million, or $0.16 per diluted share,
in the third quarter 2007.
— The Company reduced total indebtedness, including amounts utilized
under its receivables securitization facility, by $42.0 million
compared to the end of the third quarter 2007. TriMas ended the quarter
with $4.6 million of cash and $141.6 million of aggregate availability
under its revolving credit and receivables securitization facilities.
— The Company is announcing an acceleration of its $30 million Profit
Improvement Plan designed to reduce its fixed cost structure and
improve productivity across all of its business segments. The plan
includes manufacturing and distribution center consolidations,
consolidation of business unit activities, staffing reductions and
other cost saving actions. The projected savings resulting from these
activities is expected to approximate $15 million in 2009, with a $20
million effective run-rate by the end of 2009. The Company expects to
record pre-tax charges of approximately $7 to $9 million as actions are
implemented associated with the $15 million in 2009 savings.
— The Company is revising its full year 2008 diluted earnings per share
from continuing operations guidance range to $0.71 to $0.75, excluding
Special Items(1) and any charges related to the Profit Improvement
Plan, as a result of recent economic events and other drivers. The
Company has experienced additional demand weakness in the RV & Trailer
Products and Recreational Accessories segments and moderated growth in
some of its other businesses. The other drivers of the decrease in
guidance are the impact of commodity cost volatility and management’s
decision to reduce production and inventory levels during the fourth
quarter which will result in lower absorption of fixed costs.
(1) See Appendix I for additional information regarding Special Items
impacting reported GAAP financial measures. In evaluating the
quality of the Company’s operating performance, management
considers Adjusted EBITDA, among other metrics, as a key indicator
of financial operating performance together with a careful review
of results reported under GAAP. Appendix I details certain one-time
costs, expenses and other charges, collectively described as
“Special Items,” that are included in the determination of net
income (loss) under GAAP and are not added back to net income
(loss) in determining Adjusted EBITDA, but that management would
consider important in evaluating the quality of the Company’s
Adjusted EBITDA and operating results under GAAP.
(2) See Appendix II for reconciliation of Non-GAAP financial measure
Adjusted EBITDA to the Company’s reported results of operations
prepared in accordance with GAAP.
“During the third quarter, the Packaging Systems, Energy Products and Industrial Specialties segments collectively grew sales by 21% year over year, and generated 88% of our segment operating profit,” said Grant H. Beard, TriMas’ President and Chief Executive Officer. “While we believe our RV & Trailer Products and Recreational Accessories outperformed their end markets, these businesses were down approximately 10% in sales. During the quarter, it was evident that the diversity of our businesses and end markets remain a benefit as the U.S. faces challenging economic times.”
“The recent economic events of October have dramatically changed our demand outlook, most notably in our RV & Trailer Products and Recreational Accessories segments,” Beard continued. “Accordingly, we are reducing plant hours and taking other aggressive cost actions now to right-size these businesses. We will leverage our capabilities across these two segments, while consolidating our footprint, driving costs out and improving efficiency.”
“We expect our Profit Improvement Plan to mitigate the effects of these volatile economic conditions and drive enhanced future results,” Beard noted. “We will be better positioned to take advantage of growing markets when the economy recovers. In the meantime, we continue to focus on organic growth through the launch of innovative products, the pursuit of new end-market opportunities and the execution of our geographic expansion plans. We continue to employ disciplined capital allocation, proactively manage working capital and drive free cash flow to enable continued debt pay-down.”
Third Quarter Segment Results – From Continuing Operations
Packaging Systems – Sales for the third quarter of 2008 increased 13.0% compared to the prior year. Sales of industrial closures and specialty dispensing products, which comprise the majority of sales in this segment, increased, while laminate and insulation product sales were essentially flat in the third quarter 2008. Operating profit for the quarter improved 6.9% due to increased sales volumes, which were partially offset by increases in raw material costs and expenses incurred to support sales growth initiatives. The Company continues to diversify its product offering by developing specialty dispensing product applications for growing end markets, including pharmaceutical, personal care and food/beverage markets, and expanding geographically to generate long-term growth.
Energy Products – Sales increased 37.4% for the third quarter due to strong market demand and continued high utilization rates at refinery and petrochemical facilities. These trends, combined with the Company’s initiatives to gain additional share, resulted in increased sales of engines and related parts, new compressor and gas production equipment products for use at well-sites, and specialty gaskets and related fastening hardware for the refinery and petrochemical industries. Operating profit for the quarter increased 68.1%, in line with higher sales volumes, favorable cost leverage and as a result of prior investments to support the segment’s growth initiatives. The Company plans to continue to launch new products to complement its engine business, while expanding its gasket business internationally.
Industrial Specialties – Sales for the third quarter increased 16.1% compared to the prior year, primarily due to strong growth in the aerospace fastener and industrial cylinder businesses resulting from market share gains, the introduction of new products and applications, international expansion and strong overall market demand. Operating profit for the quarter increased 22.0% due to higher sales volumes and improved margins in the specialty tools, defense and aerospace businesses, which were partially offset by lower absorption of fixed costs in the specialty fittings business. The Company continues to drive growth in this segment by developing specialty products for growing end markets such as medical and aerospace, while continuing to expand international sales efforts.
RV & Trailer Products – Sales for the third quarter declined a net 8.6%, as sales growth in the Australian business was more than offset by the continued weak demand in most end markets in the United States. Operating profit decreased 69.6% due to reduced sales volumes and lower absorption of fixed costs as the Company reduced its production to manage inventory levels. The Company’s focus in this segment is to aggressively reduce fixed costs and to leverage strong brand positions for increased market share, cross-sell the product portfolio into all channels and expand internationally.
Recreational Accessories – Sales decreased 11.3% for the third quarter, as the Company continued to experience weak consumer demand for towing accessories. Operating profit declined 45.1% as a result of lower sales volumes and a less favorable sales mix. The Company plans to continue to aggressively reduce costs and increase market share in the United States and Canada.
Financial Position
TriMas ended the quarter with cash of $4.6 million and $141.6 million of aggregate availability under its revolving credit and receivables securitization facilities. The Company reduced total indebtedness, including amounts outstanding under its receivables securitization facility, by $42.0 million from September 30, 2007 to September 30, 2008. TriMas ended the quarter with total debt of $615.8 million and funding under its receivables securitization facility of $11.0 million for a total of $626.8 million. The Company does not have any significant debt maturities under its credit agreement or subordinated notes until 2012.
Outlook
The Company is revising its full year 2008 diluted earnings per share from continuing operations guidance range to $0.71 to $0.75, excluding Special Items(1) and any charges related to the Profit Improvement Plan, as a result of recent economic events and other drivers. The Company has experienced additional demand weakness in the RV & Trailer Products and Recreational Accessories segments and moderated growth in some of its other businesses. The other drivers of the decrease in guidance are the impact of commodity cost volatility and management’s decision to reduce production and inventory levels during the fourth quarter which will result in lower absorption of fixed costs.
This outlook does not include the impact of any future unidentified restructuring charges and divestitures or acquisitions of operating assets that may occur from time to time due to management decisions and changing business circumstances. The outlook above also does not include the impact of any potential future non-cash impairment charges of goodwill, intangibles and fixed assets. This outlook also excludes benefit costs related to contractual obligations to Metaldyne or discontinued operations. The Company is currently unable to forecast the likelihood of occurrence, timing and/or magnitude of any such amounts or events. See also “Cautionary Notice Regarding Forward- looking Statements” below.