GR Goodrich Corp. (The)

Triumph Group Inc. (TGI) reported encouraging results for the fourth quarter and fiscal 2011 ended March 31, 2011. Fourth quarter earnings per share came in at $2.14, showing an improvement from $1.49 in the year-ago comparable quarter even after excluding 3 cents of integration cost related to the Vought acquisition. Results also surpassed the Zacks Consensus Estimate of $1.89.

For fiscal 2011, earnings per share were $7.08, up from $5.12 in the previous year and fairly ahead of the Zacks Consensus Estimate of $6.09. The result excluded 66 cents of transaction and integration costs related to the Vought acquisition.

Revenue

In the fourth quarter, net sales shot up 161% year over year to $919.1 million, with organic growth reaching roughly 8%. The year-over-year jump was fueled by the Vought acquisition. The quarter’s revenue also bettered the Zacks Consensus Estimate of $865 million.

Segment-wise, sales from Aerostructures surged 311% to $703.5 million from $171 million in the prior-year comparable quarter. Aerospace System revenue grew 19% year over year to $147.8 million, while Aftermarket Services increased 20% to $69.5 million from $58.2 million in the year-ago quarter.

For fiscal 2011, net sales were $2,905 million, up 124% year over year and ahead of the Zacks Consensus Estimate of $2,850 million. Organic sales growth was roughly 8% for the year.

In early fiscal 2011, Triumph had completed the acquisition of Vought Aircraft Industries Inc. from a private equity firm, The Carlyle Group, for $1.44 billion. Triumph paid $525 million in cash and allotted 7.5 million shares (a 31% stake) to Carlyle. Triumph had issued senior notes to fund the acquisition. The acquired business now operates as Triumph Aerostructures-Vought Aircraft Division.

Margins

Operating income in the fourth quarter accelerated to $109.7 million from $47.3 million during the prior-year quarter. However, operating margin decreased to 11.9% from 13.5% in fourth quarter 2010.

EBITDA margin also plunged 310 basis points to 14.2% based on an increase in sales at a higher rate than EBITDA. The quarter’s EBITDA increased to $130.1 million from $60.9 million in the year-ago quarter.

Balance Sheet

Exiting the fourth quarter, Triumph’s cash and cash equivalents were approximately $39.3 million compared with $33.3 million in the previous quarter. Long-term debt (net of current portion) was down sequentially at $1,011.8 million from $1,035.2 million in the previous quarter.

Cash Flow

Cash flow from operations was $27.6 million, down from $43.2 million in the year-ago quarter, while capital spending increased to $21.3 million from $9.9 million in the prior-year quarter.

Outlook

For fiscal 2012, management expects sales between $3.2 billion and $3.5 billion and earnings per share within $8.35 to $8.45, excluding integration costs related to the Vought Aircraft acquisition. Shares outstanding are anticipated to be roughly 25.7 million and the tax rate is likely to be around 35.5%. Capital expenditure is expected in the range of $130 million to $145 million.

Management anticipates incurring $7.7 million pre-tax charge or $5.0 million after-tax charge (19 cents per share) in relation to the retirement of Term Loan B.

Based in Wayne, Pennsylvania, the company offers a variety of products and services to the aerospace industry. It faces stiff competition from peers like AAR Corp. (AIR) and Goodrich Corp. (GR). WE currently maintain a Neutral recommendation on the stock.

 
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