Business News

TriMas Corporation Reports Third Quarter 2010 Results

Friday 29. October 2010 - Company Reports $0.37 Diluted EPS on 22% Sales Growth; Company Raises 2010 Outlook to $1.05 to $1.10 EPS

TriMas Corporation (Nasdaq: TRS) today announced financial results for the quarter ended September 30, 2010. The Company reported quarterly net sales from continuing operations of $247.9 million, an increase of 22.1% from third quarter 2009. Third quarter 2010 income from continuing operations was $12.8 million, a 78.5% improvement from $7.2 million in third quarter 2009. The Company reported third quarter 2010 diluted earnings per share from continuing operations of $0.37, as compared to $0.21 during third quarter 2009. Excluding Special Items,(1) third quarter 2009 income from continuing operations would have been $8.2 million, or $0.24 per share.

TriMas Highlights

Reported 22.1% sales growth in third quarter 2010, as compared to third quarter 2009, due to overall improved economic conditions and the continued successful execution of several of the Company’s growth initiatives.
Improved both income and earnings per share from continuing operations in excess of 50%, as compared to third quarter 2009, excluding the impact of Special Items.
Generated third quarter 2010 Free Cash Flow(2) of $18.3 million, and $66.7 million for the nine months ended September 30, 2010, or almost $2.00 per diluted share.
Today announced agreement to acquire South Texas Bolt & Fitting, Inc. (STBF), a diversified manufacturer and distributor of specialized fasteners, serving the oilfield and other industrial markets. Upon deal completion, STBF will become part of Lamons, within the Energy segment.

“We experienced sustained momentum across our businesses during the quarter,” said David Wathen, TriMas President and Chief Executive Officer. “We are pleased that our balanced approach to growth, productivity and cash generation is driving positive results across our company. Our ability to quickly respond to our customers’ needs by offering new products, unique solutions, superior service and expanded geographic coverage enabled us to secure incremental business during the quarter and for the future.”

Wathen continued, “Sales improved 22% compared to the third quarter of 2009, with all five segments reporting double-digit sales percentage growth. Third quarter income from continuing operations increased 56% compared to third quarter 2009, excluding the impact of Special Items. We continue to generate cash, lower operating working capital as a percentage of sales and reduce outstanding debt, resulting in cash and available liquidity of approximately $196 million.”

“Based on the third quarter results and our current outlook, we are raising our 2010 earnings expectations. We now expect 2010 diluted earnings per share (EPS) from continuing operations to range from $1.05 to $1.10 per share, an increase from our previous guidance of $0.90 to $1.00 per share. Although the economic outlook remains uncertain, we are confident in our ability to grow the top-line faster than the economy, create sustainable operating leverage and improve the balance sheet. We remain committed to continuing to improve earnings and margin levels, as we balance growth, productivity and debt reduction,” Wathen concluded.

Third Quarter Results – From Continuing Operations

TriMas reported third quarter net sales of $247.9 million, an increase of 22.1% in comparison to $203.0 million in third quarter 2009. Sales in all five business segments increased by a double-digit percentage in comparison to third quarter 2009. The effects of currency exchange did not have a material impact during the quarter.
The Company reported operating profit of $33.0 million in third quarter 2010, as compared to operating profit of $21.2 million during third quarter 2009. Excluding the impact of Special Items, operating profit would have improved 37.5%, from $24.0 million in third quarter 2009 to $33.0 million in third quarter 2010, and would have represented an increase in operating profit margin of 150 basis points.
Adjusted EBITDA(2) for third quarter 2010 increased to $42.0 million, as compared to $32.6 million in third quarter 2009. Excluding the impact of Special Items, Adjusted EBITDA would have increased 25.4%, from $33.5 million in third quarter 2009 to $42.0 million in third quarter 2010, and Adjusted EBITDA margin would have improved 50 basis points.
Income from continuing operations for third quarter 2010 increased 78.5% to $12.8 million, or $0.37 per diluted share, compared to income from continuing operations of $7.2 million, or $0.21 per diluted share, in third quarter 2009. Excluding the impact of Special Items, third quarter 2010 income from continuing operations would have improved 55.6% to $12.8 million, as compared to a third quarter 2009 income of $8.2 million, or $0.24 per share.
The Company reported Free Cash Flow(2) for third quarter 2010 of $18.3 million, compared to $44.4 million in third quarter 2009. Free Cash Flow for the nine months ended September 30, 2010 was $66.7 million, or almost $2.00 per diluted share. Operating working capital as a percentage of last twelve months (LTM) sales continued to improve, declining from 15.9% in third quarter 2009 to 15.2% in third quarter 2010.

Financial Position

TriMas reported total indebtedness of $499.4 million as of September 30, 2010, as compared to $514.6 million as of December 31, 2009. After consideration of $46.5 million in cash on the balance sheet as of September 30, 2010, total indebtedness, net of cash, was $452.9 million, as compared to $505.1 million as of December 31, 2009. In addition, TriMas ended third quarter 2010 with $149.2 million of aggregate availability under its revolving credit and accounts receivable facilities.

Business Segment Results – From Continuing Operations (Excluding the impact of Special Items(3))

Packaging – Sales for the third quarter increased 12.0% compared to the year ago period, due to improved demand for industrial closure products, as well as sales growth in specialty dispensing and other new products. Operating profit for the quarter increased due to higher sales volumes and lower costs as a result of productivity initiatives, partially offset by an increase in selling, general and administrative costs in support of sales growth initiatives, as well as unfavorable currency exchange. Overall, third quarter 2010 operating profit margin improved by approximately 520 basis points compared to third quarter 2009. 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 – Third quarter sales increased 31.8% compared to the year ago period, due to improved demand for engines, other well-site content and new compression products. Sales in the Energy segment were also positively impacted by higher sales of specialty gaskets and related fastening hardware due to higher levels of turn-around activity at petrochemical refineries, increased demand from the chemical industry and incremental sales from newly opened branch facilities. Operating profit for the quarter increased due to higher sales volumes and lower costs as a result of productivity initiatives, partially offset by increased selling, general and administrative costs in support of sales growth initiatives. The Company continues to launch new well-site and compression products to complement its engine business. In the specialty gasket and fastener business, the Company continues to grow its sales and service branch network, as well as expand its lines of complementary products as demonstrated by the bolt-on acquisition announced today.

Aerospace & Defense – Sales for the third quarter increased 19.4% compared to the year ago period, due to increased sales in the defense business and improved demand from aerospace distribution customers. While sales in the defense business increased compared to the year ago period, the increased revenue associated with managing the facility closure and relocation was at lower margin levels. Overall, operating profit for the quarter increased slightly as a result of the increased sales volumes and lower selling, general and administrative costs in the defense business, largely offset by an unfavorable product mix in both businesses and unfavorable absorption of fixed costs in the aerospace business. Given the long-term prospects for its aerospace business, the Company continues to invest in this high-margin segment by developing and marketing highly-engineered products for the aerospace market, as well as expanding its offerings to military and defense customers.

Engineered Components – Third quarter sales increased 65.2% compared to the year ago period, primarily due to improved demand in the industrial cylinder business, as well as the acquisition of a cylinder business during the second quarter of 2010. The specialty fittings and precision cutting tools businesses also experienced improved demand, primarily resulting from the upturn in the domestic economy and new product offerings. Operating profit and related margins improved compared to third quarter 2009 due to the Company’s productivity initiatives and higher sales levels. The Company continues to develop new products and expand its international sales efforts.

Cequent – Sales for the third quarter increased 16.4% compared to the year ago period, resulting from increased sales in the North American towing, trailer and electrical products, retail and Australia/Asia Pacific businesses. Sales increases during the quarter were the result of improved customer demand, new product introductions and market share gains, as well as the favorable impact of currency exchange. Due to cost reduction actions, alternative sourcing arrangements, productivity initiatives and improved sales levels, operating profit and related margins improved as compared to third quarter 2009. The Company continues to aggressively reduce fixed costs, minimize its investment in working capital and leverage Cequent’s strong brand positions and new products for increased market share.

Outlook

Based on the Company’s third quarter results and current outlook for the remainder of 2010, management raised its outlook for full-year 2010 diluted earnings per share (EPS) from continuing operations to $1.05 to $1.10 per share, as compared to $0.43 per share in 2009, excluding Special Items in both periods. The Company previously provided an outlook for 2010 EPS of $0.90 to $1.00 per share. The Company also raised its 2010 sales outlook from an increase of 10% to 14% to a range of 15% to 17% as compared to 2009. In addition, the Company expects its full-year 2010 operating profit margin to improve by approximately 250 to 300 basis points as compared to 2009, excluding Special Items. The Company also raised its Free Cash Flow outlook from a range of $65 to $70 million to a range of $75 to $80 million.