TransDigm Group Earnings Call Insights: Aerospace Aftermarket and Constraint Spending
TransDigm Group Inc (NYSE:TDG) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Robert Stallard – Royal Bank of Canada: Nick, I heard your kick-off on the acquisition front. I was wondering you said that the pipeline was still pretty robust, but obviously the disappointment that DOJ is now behind this. I was wondering if you could maybe characterize what sort of properties you are still seeing out there in terms of perhaps size and if you are still seeing the right quality of assets in terms of the exposure to the aerospace aftermarket?
W. Nicholas Howley – CEO and Chairman: I would say the size interestingly is all over the map kind of small, mid and fairly good size. I would say the small and mid, which is what we more typically done and to be the ones we’re seeing tend to be pretty well right on point, sort of the bigger they get the more sort of dilution you get. That’s sort of the law of the land right now. I would say we’ve been pretty busy in the last 60 days.
Robert Stallard – Royal Bank of Canada: What are you seeing on the pricing front, has there been any changes there?
W. Nicholas Howley – CEO and Chairman: No, I can’t say there’s been any change. The things that have closed around the industry have continued to close at pretty hefty prices.
Robert Stallard – Royal Bank of Canada: Then on the aerospace aftermarket, you mentioned that there are some puts and takes there. One of the things the industry has been struggling with is airlines deferring maintenance activity. Are you seeing signs, have they started to comeback or this could last longer than we expect?
W. Nicholas Howley – CEO and Chairman: I don’t know that I can draw any conclusion. As I said, our quarter was kind of mixed. On the one hand the bookings were up and they were up in the commercial aftermarket versus the prior quarter. In a quarter when there is less days, so you’d expect all things being equal, they’d be down. So that was a positive. On the other hand we saw a little softening, little more than we had before in discretionary items. So, I think it’s still mixed. I don’t know quite how to draw a conclusion there. I mean you will know we are continuing with the forecast that we’d anticipate a pick-up in the back half of the year.
Carter Copeland – Barclays: Just I wondered if you might speak to your comments around constraint spending. I know Ray you made a comment about head count reduction, I wondered if you could size that for us, but in general, I noticed in the proxy you noted that you had finished two facility relocations and you’ve reduced the headcount, you are talking about constraining spending, I am wondering if you might just give us a bit more color about the scale of how you are thinking about some of this stuff on the cost front given the uncertainty you are highlighting again this quarter?
Raymond F. Laubenthal – President and COO: Well, all of our units are concerned and we are uncertain across the board, so and it’s been so since the softening in the second half of our fiscal year last year. So, our unit not just ones that have done some consolidation work for acquisitions but all the base units have run their costs tightly and they have squeezed out some headcount. Overall some are more than less but overall they took some out and it’s been in the low single digit, I don’t want to start giving exact numbers and have somebody track in this and that there is many factors that occur with headcount fluctuations, but the overall point is we’ve been managing it very tightly not just at the places we consolidated. But at each of the base businesses, we are just concerned about the economy and we don’t want to get over capacity during this tight time.
Gregory Rufus – EVP, CFO and Secretary: Let me just expand on that, just to be clear, it means low-single-digits across the whole company not at every operating unit and anyway we have not as we did in ’08 and ’09 we didn’t go, we have not gone and said we need a step down change of 10% to 12%. We’ve just led each operating unit deal with it as their backlog sort of indicates.
Carter Copeland – Barclays: But if you look at the components of cost it sounds like your infrastructure related costs as a result of some of the relocation should be down year-over-year if you just roll forward the headcount. Your headcount should be down year-over-year it sounds like there is a little bit more in SG&A, but it sounds like the cost base is a tailwind for the remainder of this year that just based on the things you had from last year?
W. Nicholas Howley – CEO and Chairman: That’s sure our hope.