TransDigm Group Incorporated (NYSE:TDG) Q4 2019 Earnings Conference Call - Final Transcript

Nov 19, 2019 • 11:00 am ET


TransDigm Group Incorporated (NYSE:TDG) Q4 2019 Earnings Conference Call - Final Transcript


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Mike Lisman

one-time benefit from the implementation of US tax reform, that muddies [Phonetic] on a year-over-year EPS comparisons.

On taxes, we came in slightly better than expected with an FY '19 GAAP and cash tax rates of 21% and an adjusted rate of 25%. On cash and liquidity, we ended the year with approximately $1.5 billion of cash on the balance sheet and net debt to EBITDA ratio of 6.2 times. Pro forma for the recent debt raise which we closed last week on the 13th, our cash balance increased to just under $3 billion. Should Souriau close as expected during our second quarter of FY '20, we will receive almost $900 million of cash proceeds and subsequently have the cash balances just under $4 billion. We also currently have access to about $720 million of our revolver.

Next on the FY '20 guidance, I'm going to really quickly give some more details on the financial assumptions around the interest expense, taxes and then the share count. Interest expense is expected to be about $1.02 billion in FY '20. This estimate assumes an average LIBOR rate of 1.7% for the full year, which is just an average of the forward consensus curve currently. This yields the weighted average cash interest rate of about 5.5%.

On taxes, our fiscal 2020 GAAP cash and adjusted rates are all expected to be in the 24% to 26% range. We expect our weighted average shares outstanding to increase to $57.4 million from $56.3 million in FY '19, and that assumes no buybacks occurred during the fiscal year. Similar to prior years, the increase in shares outstanding is due to employee stock options divested at the end of our FY '19.

With regard to liquidity and leverage at the end of FY '20 and assuming no additional acquisitions or capital market transactions, we expect to have roughly $5 billion of cash on hand at the end of the year. This assumes that Souriau divestiture closes as expected, and we estimate our net leverage will be below 5 times EBITDA As Defined at September 30th of 2020. In closing, we expect fiscal 2020 to be a good year for TransDigm.

With that, I'll turn it back over to the operator to kick off the Q&A.