TransDigm Group Incorporated , a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the third quarter ended July 2, 2022. The Company also announced that its Board of Directors has authorized and declared a special cash dividend of $18.50 on each outstanding share of common stock and cash dividend equivalent payments under options granted under its stock options plans. The record date for the special dividend is August 19, 2022, and the payment date for the dividend is August 26, 2022.
Third quarter highlights include:
The Company’s full fiscal 2022 guidance remains suspended as a result of the continued disruption in our primary commercial end markets. Refer to the “Fiscal 2022 Outlook” section below for further information.
Net sales for the quarter increased 14.8%, or $180 million, to $1,398 million from $1,218 million in the comparable quarter a year ago. Organic sales growth as a percentage of net sales was 16.7%.
Income from continuing operations for the quarter decreased $78 million, or 24.6%, to $239 million from $317 million in the comparable quarter a year ago. The decrease in income from continuing operations primarily reflects the higher effective tax rate and a pension settlement charge for the Esterline Retirement Plan. The comparable quarter a year ago also included the benefit of the net gain on sale recognized as a result of the divestitures completed during the third quarter of fiscal 2021. These unfavorable items contributing to the decrease in income from continuing operations were partially offset by the increase in net sales described above and favorable sales mix, along with lower one-time refinancing costs.
Adjusted net income for the quarter increased 44.8% to $281 million, or $4.85 per share, from $194 million, or $3.33 per share, in the comparable quarter a year ago.
EBITDA for the quarter increased 12.4% to $643 million from $572 million for the comparable quarter a year ago. EBITDA As Defined for the quarter increased 24.5% to $696 million compared with $559 million in the comparable quarter a year ago. EBITDA As Defined as a percentage of net sales for the quarter was 49.8% compared with 45.9% in the comparable quarter a year ago.
During the thirteen week period ended July 2, 2022, TransDigm repurchased 443,598 shares of its common stock with a weighted-average price per share of $553.62 at an aggregate cost of approximately $245 million.
As previously reported, on May 25, 2022, TransDigm completed the acquisition of DART Aerospace (“DART”), a portfolio company of Greenbriar Equity Group, L.P., for approximately $360 million in cash. DART is an industry leader in helicopter mission equipment with established positions on a diverse range of rotary-wing platforms.
“Global air traffic continues to trend upwards with the pent-up demand for air travel. This positive momentum bodes well for the commercial aerospace recovery. Domestic air travel remains the leader in the air traffic recovery, but the international air traffic recovery made strides these past few months as more passengers returned to long-haul travel,” stated Kevin Stein, TransDigm Group’s President and Chief Executive Officer. “I am pleased to see another quarter of sequential improvement in our commercial aftermarket revenues, with the commercial aftermarket bookings for the quarter outpacing revenues. We also saw further sequential expansion of our EBITDA As Defined margin this quarter to 49.8%. This was a result of the continued recovery in our commercial aftermarket revenues, coupled with careful management of our cost structure and focus on our operating strategy.
During the quarter, we returned $245 million of capital to shareholders via open market repurchases of our common stock. We view these repurchases like any other capital investment, and we expect this investment will meet or exceed our long-term return objectives.
Additionally, given the significant amount of cash currently available, our solid operating performance and ongoing expectations, we believe that this is the appropriate time to declare and pay a special dividend, as we have done in the past. The payout of a special dividend of $18.50 per share will leave us with significant liquidity and financial flexibility to meet any likely range of capital requirements or other opportunities.
In the aggregate, thus far this fiscal year, we have deployed approximately $2.4 billion of capital across the DART acquisition, today’s announced dividend, and share repurchases. As you know, we are always continuously evaluating our capital allocation options and are pleased to have deployed this amount of capital across the range of options available to us.”
Net sales for the thirty-nine week period ended July 2, 2022 increased 11.4%, or $400 million, to $3,919 million from $3,519 million in the comparable period a year ago. Organic sales growth as a percentage of net sales was 13.6%.
Income from continuing operations for the thirty-nine week period ended July 2, 2022 increased $128 million, or 27.1%, to $601 million from $473 million in the comparable period a year ago. The increase in income from continuing operations primarily reflects the increase in net sales described above and favorable sales mix, along with lower COVID-19 restructuring costs and lower one-time refinancing costs, partially offset by a higher effective tax rate. The comparable period a year ago also included the benefit of the net gain on sale recognized as a result of the divestitures completed during the third quarter of fiscal 2021.
GAAP earnings per share were reduced in fiscal 2022 and 2021 by $0.78 per share and $1.24 per share, respectively, as a result of dividend equivalent payments made during each year. As a reminder, GAAP earnings per share are reduced when TransDigm makes dividend equivalent payments pursuant to the Company’s stock option plans. These dividend equivalent payments are made during the Company’s first fiscal quarter each year and also upon payment of any special dividends.
Adjusted net income for the thirty-nine week period ended July 2, 2022 increased 48.9% to $685 million, or $11.68 per share, from $460 million, or $7.88 per share, in the comparable period a year ago.
EBITDA for the thirty-nine week period ended July 2, 2022 increased 24.0% to $1,753 million from $1,414 million for the comparable period a year ago. EBITDA As Defined for the period increased 22.0% to $1,894 million compared with $1,552 million in the comparable period a year ago. EBITDA As Defined as a percentage of net sales for the period was 48.3% compared with 44.1% in the comparable period a year ago.
During the thirty-nine week period ended July 2, 2022, TransDigm repurchased 1,490,413 shares of its common stock with a weighted-average price per share of $612.13 at an aggregate cost of approximately $912 million. As previously reported, on January 27, 2022, our Board of Directors authorized a new $2,200 million stock repurchase program to replace the existing program permitting the repurchase of a portion of TransDigm’s outstanding shares. As of July 2, 2022, the remaining amount of repurchases allowed under the new program was approximately $1,288 million.
Please see the attached tables for a reconciliation of income from continuing operations to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined, and a reconciliation of earnings per share to adjusted earnings per share for the periods discussed in this press release.
Fiscal 2022 Outlook
Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic and its impact on our primary commercial OEM and commercial aftermarket end markets, the Company is not providing full fiscal year 2022 guidance. Information regarding fiscal 2022 EBITDA As Defined margins, expected defense market revenue growth, tax rates, interest expense, capital expenditures and select accounting information is included in the slide presentation available for today’s earnings call.
Earnings Conference Call
TransDigm Group will host a conference call for investors and security analysts on August 9, 2022, beginning at 11:00 a.m., Eastern Time. To join the call telephonically, please register for the call at https://register.vevent.com/register/BI198da0d708c042ce9c77cf865ef01588. Once registered, participants will receive the dial-in information and a unique pin to access the call. The dial-in information and unique pin will be sent to the email used to register for the call. The unique pin is exclusive to the registrant and can only be used by one person at a time. A live audio webcast of the call can also be accessed online at http://www.transdigm.com. A slide presentation will also be available for reference during the conference call; go to the investor relations page of our website and click on “Presentations.”
The call will be archived on the website and available for replay at approximately 2:00 p.m., Eastern Time.
About TransDigm Group
TransDigm Group, through its wholly-owned subsidiaries, is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, parachutes, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems.