TransDigm Group Reports Record Fiscal 2008 Third Quarter Results

CLEVELAND, Aug. 5 /PRNewswire-FirstCall/ -- TransDigm Group Incorporated
(NYSE: TDG), a leading global designer, producer and supplier of highly
engineered aircraft components, today reported results for the fiscal third
quarter ended June 28, 2008. Highlights for the quarter include:
-- Earnings per share up 60.0% to $0.72 from $0.45

-- Net sales up 18.0% to $186.0 million from $157.6 million

-- Net income up 62.7% to $36.0 million from $22.1 million

-- Adjusted earnings per share up 38.9% to $0.75 from $0.54

-- EBITDA As Defined up 17.9% to $86.8 million from $73.6 million

-- Fiscal 2008 financial outlook revised upward

Net sales for the quarter rose 18.0% to $186.0 million from $157.6 million
in the comparable quarter a year ago. Organic net sales growth was
approximately 12%. The acquisitions of Bruce Aerospace, Inc. and CEF
Industries, Inc. accounted for the balance of the sales increase.
Net income for the quarter rose 62.7% to $36.0 million, or $0.72 per
share, compared with $22.1 million, or $0.45 per share, in the comparable
quarter a year ago. This increase of $13.9 million was primarily due to the
growth in net sales, continued productivity improvement and lower interest
expense. Also contributing to the increase in net income was the reduction in
acquisition-related expenses in fiscal 2008 and the non-recurring costs
related to the May 2007 secondary offering.
Adjusted net income for the quarter increased 41.8% to $37.5 million, or
$0.75 per share, from $26.5 million, or $0.54 per share, in the comparable
quarter a year ago. Adjusted net income for the current quarter excludes $1.5
million, net of tax, or $0.03 per share, of non-cash compensation costs and
acquisition-related expenses. Adjusted net income for the prior-year quarter
excluded $4.4 million, net of tax, or $0.09 per share, of acquisition-related
costs, non-recurring costs related to the secondary offering, and non-cash
compensation-related expenses.
EBITDA for the quarter increased 24.5% to $84.6 million from $67.9 million
for the comparable quarter a year ago. EBITDA As Defined for the quarter
increased 17.9% to $86.8 million from $73.6 million for the comparable quarter
a year ago. EBITDA As Defined as a percentage of net sales for the quarter
was 46.6%.
"We are pleased with the operating results of our fiscal 2008 third
quarter, particularly in light of the uncertainties in both the general
economy as well as the commercial airline industry," stated W. Nicholas
Howley, TransDigm Group's Chairman and Chief Executive Officer. "Our organic
sales growth of 12% and EBITDA As Defined margin of almost 47% continue to
reflect the strength of our proprietary and sole source products as well as
the diverse global commercial aerospace and military markets we serve. The
ongoing strong EBITDA As Defined margin was again achieved in spite of the
dilutive impact of recent acquisitions and Boeing 787 development expenses."
As previously disclosed, TransDigm Group acquired aerospace component
supplier CEF Industries on May 7, 2008.
Year-to-Date Results
Net sales for the 39-week period ended June 28, 2008, were $524.5 million,
a 23.5% increase over net sales of $424.8 million in the comparable period
last year. Organic net sales growth was approximately 10%. The recent
acquisitions accounted for the balance of the sales increase.
Net income for the period increased 48.7% to $95.1 million, or $1.90 per
share, from $64.0 million, or $1.33 per share, in the comparable period a year
ago. The increase was primarily due to the growth in net sales, the strength
of our proprietary products, continued productivity efforts and lower interest
expense. Also contributing to the increase in net income was the reduction
in acquisition-related expenses incurred during fiscal 2008 and the
non-recurring expense related to the secondary offering in fiscal 2007.
Adjusted net income for the period increased 36.3% to $100.5 million, or
$2.01 per share, from $73.8 million, or $1.53 per share, in the comparable
period a year ago. Adjusted net income in the current year-to-date period
excludes $2.4 million of acquisition-related costs, net of tax, or $0.05 per
share, and $3.0 million of certain non-cash compensation-related expenses, net
of tax, or $0.06 per share. Adjusted net income in the prior year-to-date
period excluded $9.8 million, net of tax, or $0.20 per share, of
acquisition-related costs, certain non-cash compensation-related expenses and
non-recurring costs related to the secondary offering.
Year-to-date EBITDA increased 27.7% to $236.8 million compared with $185.3
million for the comparable period a year ago. EBITDA As Defined for the period
increased 22.9% to $243.6 million from $198.1 million for the comparable
period a year ago.
Upward Revision to Fiscal 2008 Outlook
"We continue to be optimistic about the fourth quarter and fiscal 2008.
At this time, we expect fiscal 2009 revenues to be above fiscal 2008 revenues.
However, it appears increasingly possible that fiscal 2009 could see modest,
if any, growth in worldwide air traffic. Demand for commercial OEM aircraft
production remains strong and we expect will continue to do so in 2009,"
continued Howley.
"Our practice has been to reduce our cost structure ahead of softening
market conditions. This has proven to be an effective means of protecting
long term shareholder value. Given this uncertain market outlook, we have
started to reduce our cost structure and expect to have made significant
reductions by the end of the current fourth quarter to position ourselves for
fiscal 2009. We will closely monitor our cost structure and make additional
adjustments, up or down, as we move forward into fiscal 2009."
Based upon current market conditions, the recent acquisition of CEF
Industries and assuming no further acquisition activity, the Company is
raising full year fiscal 2008 guidance as follows:
-- Revenues are anticipated in the range of $710 million to $715 million
(previously in the range of $700 million to $710 million);
-- Net income is anticipated in the range of $130 million to $132 million
(previously in the range of $128.5 million to $131.5 million);
-- EBITDA As Defined is anticipated in the range of $330 million to $333
million (previously in the range of $326 million to $331 million);
-- Earnings per share are expected to be in the range of $2.59 to $2.63
per share (previously in the range of $2.56 to $2.62 per share) compared with
$1.83 in fiscal 2007; and
-- Adjusted earnings per share are expected to be in the range of $2.75 to
$2.79 per share (previously in the range of $2.69 to $2.75 per share) compared
with $2.10 in fiscal 2007.
The Company will provide fiscal 2009 guidance at the time fourth quarter
earnings are released.
Please see the attached tables for a reconciliation of net income to
EBITDA, EBITDA As Defined, and adjusted net income for the periods discussed
in this press release.
Conference Call
TransDigm Group will host a conference call for investors and security
analysts on August 5, 2008, beginning at 11:00 a.m., Eastern Time. To join the
call, dial (866) 510-0711 and enter the pass code 36856015. International
callers should dial (617) 597-5379 and use the same pass code. A live audio
webcast can be accessed online at http://www.transdigm.com . The call will be
archived on the website and available for replay at approximately 1:00 p.m.,
Eastern Time. A telephone replay will be available for two weeks by dialing
(888) 286-8010 and entering the pass code 77654017. International callers
should dial (617) 801-6888 and use the same pass code.
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 ignition systems and
components, mechanical/electro-mechanical actuators and controls, gear pumps,
engineered connectors, specialized valving, power conditioning devices,
engineered latches and cockpit security devices, specialized AC/DC electric
motors, lavatory hardware and components, hold-open rods and locking devices,
aircraft audio systems, NiCad batteries/chargers, and specialized fluorescent
lighting and cockpit displays.
Non-GAAP Supplemental Information
EBITDA, EBITDA As Defined, adjusted net income and adjusted earnings per
share are non-GAAP financial measures presented in this press release as
supplemental disclosures to net income and reported results. TransDigm Group
defines EBITDA as earnings before interest, taxes, depreciation and
amortization and defines EBITDA As Defined as EBITDA plus certain
non-operating items, acquisition-related costs, non-cash charges incurred in
connection with certain employee benefit plans and certain expenses incurred
in connection with our financing activities, including the public equity
offerings. TransDigm Group defines adjusted net income as net income plus
purchase accounting backlog amortization expense, non-operating items,
acquisition-related costs, non-cash charges incurred in connection with
certain employee benefit plans and certain expenses incurred in connection
with our financing activities, including the public equity offerings. For
more information regarding the computation of EBITDA, EBITDA As Defined and
adjusted net income, please see the attached financial tables.
TransDigm Group presents these non-GAAP financial measures because it
believes that they are a useful indicator of its operating performance.
TransDigm Group believes that EBITDA is useful to investors because it is
frequently used by securities analysts, investors and other interested parties
to measure a company's operating performance without regard to items such as
interest expense, income tax expense and depreciation and amortization, which
can vary substantially from company to company. EBITDA As Defined is used to
measure TransDigm Inc.'s compliance with the financial covenant contained in
its credit facility. TransDigm Group's management also uses EBITDA As Defined
to review and assess its operating performance and management team in
connection with employee incentive programs and the preparation of its annual
budget and financial projections. In addition, TransDigm Group's management
and our investors use adjusted net income as a measure of comparable operating
performance between time periods and among companies as it is reflective of
changes in pricing decisions, cost controls and other factors that affect
operating performance.
None of EBITDA, EBITDA As Defined, adjusted net income or adjusted
earnings per share is a measurement of financial performance under GAAP and
such financial measures should not be considered as an alternative to net
income, operating income, cash flows from operating activities or other
measures of performance determined in accordance with GAAP. In addition,
TransDigm Group's calculation of these non-GAAP financial measures may not be
comparable to the calculation of similarly titled measures reported by other
companies.
Forward-Looking Statements
Statements in this press release that are not historical facts are
forward-looking statements under the provisions of the Private Securities
Litigation Reform Act of 1995, including expectations of future performance,
profitability, growth and earnings. All statements other than statements of
historical fact that address activities, events or developments that we
expect, believe or anticipate will or may occur in the future are
forward-looking statements, including, in particular, statements about our
plans, objectives, strategies and prospects regarding, among other things, our
financial condition, results of operations, and business. We have identified
some of these forward-looking statements with words like "believe," "may,"
"will," "should," "expect," "intend," "plan," "predict," "anticipate,"
"estimate," or "continue" and other words and terms of similar meaning.
Specifically, statements contained under the heading "Upward Revision to
Fiscal 2008 Outlook" constitute forward-looking statements.
All forward-looking statements involve risks and uncertainties which could
affect TransDigm Group's actual results and could cause its actual results to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, TransDigm Group. These risks and uncertainties include
but are not limited to: future terrorist attacks; a decrease in flight hours
and our customers' profitability, both of which are impacted by general
economic conditions; our substantial indebtedness; our reliance on certain
customers; our fixed price contracts; the U.S. defense budget and risks
associated with being a government supplier; failure to maintain government or
industry approvals; the pricing review to which certain of our divisions and
subsidiaries have been subject; failure to complete or successfully integrate
acquisitions; future sales of common stock in the market caused by the
substantial amount of stock held by affiliates; and other factors. Further
information regarding the important factors that could cause actual results to
differ materially from projected results can be found in TransDigm Group's
Annual Report on Form 10-K and any other reports that TransDigm Group or its
subsidiaries have filed with the Securities and Exchange Commission. Except as
required by law, TransDigm Group undertakes no obligation to revise or update
the forward-looking statements contained in this press release.

TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED
JUNE 28, 2008 AND JUNE 30, 2007
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirteen Week Thirty-Nine Week
Periods Ended Periods Ended

June 28, June 30, June 28, June 30,
2008 2007 2008 2007

NET SALES $186,052 $157,613 $524,473 $424,760

COST OF SALES 85,570 75,360 241,980 203,802

GROSS PROFIT 100,482 82,253 282,493 220,958

OPERATING EXPENSES:
Selling and administrative 19,317 17,340 55,549 44,047
Amortization of intangibles 2,747 3,607 8,841 8,617

Total operating expenses 22,064 20,947 64,390 52,664

INCOME FROM OPERATIONS 78,418 61,306 218,103 168,294

INTEREST EXPENSE - Net 21,849 25,924 70,371 66,320

INCOME BEFORE INCOME TAXES 56,569 35,382 147,732 101,974

INCOME TAX PROVISION 20,570 13,261 52,595 38,004

NET INCOME $35,999 $22,121 $95,137 $63,970

Net Earnings Per Share:
Basic earnings per share $0.75 $0.48 $2.00 $1.42
Diluted earnings per share $0.72 $0.45 $1.90 $1.33

Weighted-Average Shares
Outstanding:
Basic 48,084 45,800 47,639 45,182
Diluted 50,273 48,832 50,058 48,272

TRANSDIGM GROUP INCORPORATED
SUPPLEMENTAL INFORMATION
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED
JUNE 28, 2008 AND JUNE 30, 2007
(Amounts in thousands)
(Unaudited)
Thirteen Week Thirty-Nine Week
Periods Ended Periods Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007

Net Income $35,999 $22,121 $95,137 $63,970
Depreciation and Amortization 6,155 6,612 18,649 17,040
Interest Expense, net 21,849 25,924 70,371 66,320
Income Tax Provision 20,570 13,261 52,595 38,004
EBITDA 84,573 67,918 236,752 185,334

Add: As Defined Adjustments:

Deferred Compensation
Costs (1) 562 329 1,643 1,339
Stock Option Expense (2) 855 983 3,066 2,432
Acquisition-Related Costs (3) 765 2,682 2,117 7,051
Write Down of PPE Held
for Sale (4) - - - 302
Non-Recurring Equity
Offering Costs(5) - 1,691 - 1,691
Gross Adjustments to EBITDA 2,182 5,685 6,826 12,815

EBITDA As Defined $86,755 $73,603 $243,578 $198,149
EBITDA As Defined,
Margin(6) 46.6% 46.7% 46.4% 46.6%

(1) Represents the expenses recognized by TransDigm Group under its
deferred compensation plans.
(2) Represents the non-cash compensation expense recognized by TransDigm
Group under its stock plans.
(3) Represents costs incurred to integrate acquired businesses into
TransDigm Group's operations, purchase accounting adjustments to inventory
that were charged to cost of sales when the inventory was sold, facility
relocation costs and other acquisition-related costs.
(4) Represents the write-down of certain property to its fair value that
was reclassified as held for sale in fiscal 2007.
(5) Represents non-recurring costs and expenses incurred by TransDigm
Group related to the secondary offering completed in May 2007.
(6) The EBITDA As Defined margin represents the amount of EBITDA As
Defined as a percentage of net sales.

TRANSDIGM GROUP INCORPORATED
SUPPLEMENTAL INFORMATION
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED
JUNE 28, 2008 AND JUNE 30, 2007
(Amounts in thousands, except per share amounts)
(Unaudited)
Thirteen Week Thirty-Nine Week
Periods Ended Periods Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007

Net Income $35,999 $22,121 $95,137 $63,970

Gross Adjustments to EBITDA 2,182 5,685 6,826 12,815
Purchase Accounting Backlog
Amortization 225 1,266 1,597 2,815
Tax Adjustment (887) (2,607) (2,999) (5,830)

Adjusted Net Income $37,519 $26,465 $100,561 $73,770

Basic Earnings per Share $0.75 $0.48 $2.00 $1.42
Diluted Earnings per Share $0.72 $0.45 $1.90 $1.33

Adjusted Basic Earnings per Share $0.78 $0.58 $2.11 $1.63
Adjusted Diluted Earnings per Share $0.75 $0.54 $2.01 $1.53

Weighted-Average Shares Outstanding:
Basic 48,084 45,800 47,639 45,182
Diluted 50,273 48,832 50,058 48,272

TRANSDIGM GROUP INCORPORATED
SELECTED BALANCE SHEET DATA
(Amounts in thousands)
(Unaudited)
June 28, September 30,
2008 2007

Cash and cash equivalents $189,193 $105,946
Trade accounts receivable - net 100,947 100,094
Income taxes receivable --- 4,472
Inventories 142,993 126,763

Accounts payable 26,136 24,753
Income taxes payable 6,728 ---
Accrued liabilities 57,751 42,466

Long-term debt 1,357,348 1,357,854

SOURCE TransDigm Group Incorporated

Sean Maroney, Investor Relations of TransDigm Group Incorporated,
+1-216-706-2945, ir@transdigm.com