Author Topic: TDG - Transdigm  (Read 136490 times)

fmnpartners

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Re: TDG - Transdigm
« Reply #40 on: September 02, 2014, 12:04:45 AM »
Has anyone considered the potential downside effects of the Dividend Equivalent Payment (DEP) feature of management's stock options?  While it is nice the DEPs are only available on vested options which (as others have already noted) are based on the achievement of some fairly high performance targets, the feature itself does strike me as a bit odd given the significant amount of capital distributed over the last few years.  Since the first quarter of F1Q13, the company appears to have paid out roughly ~$3.2b in cash for dividends and spent just over ~$1b on acquisitions (all data from CIQ).  As one might expect, Total Debt/EBITDA also looks to have risen from around ~4.5x at the end of fiscal 2012 to around ~7.5x on current LTM 6/30/2014 numbers.  Thus, management seems to have been borrowing significant amounts of money to make special dividend payments equating to roughly 2.8-3.0x annual EBITDA while deploying just a third of that amount into acquisitions.  This train of thought is not meant as a judgment on overall capital allocation and certainly it's not a dealbreaker for me, but it does perplex me somewhat, especially when one considers the fact management is not putting up capital for its share of the cash dividends, recent open market purchases notwithstanding.
« Last Edit: September 02, 2014, 12:18:08 AM by fmnpartners »


Liberty

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Re: TDG - Transdigm
« Reply #41 on: September 02, 2014, 06:37:15 AM »
Their reasons for borrowing money have been explained on various conference calls. They consider high yield debt to be very mispriced currently and decided to reduce their cost of borrowing and load up while they had a chance. They also recap every few years to keep their leverage on target (they're a bit above it now, but they delever quickly); they generate more cash than they can deploy in M&A, hence the special dividends (and sometimes buybacks).

Part of how they create value is definitely leverage. It's up to each investor to determine if they think their businesses are predictable and resilient enough to support that leverage.

« Last Edit: September 02, 2014, 06:58:58 AM by Liberty »
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elevensecsrt4

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Re: TDG - Transdigm
« Reply #42 on: September 04, 2014, 11:30:23 AM »
I've been researching this company and really am impressed with management

Liberty it seems Nicholas bought another block of stock in late August. I'm doing more research and just curious as to what you think the CEO sees in adding now. It sure seems he would know business health better than most.

Liberty

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Re: TDG - Transdigm
« Reply #43 on: September 04, 2014, 11:38:08 AM »
Liberty it seems Nicholas bought another block of stock in late August. I'm doing more research and just curious as to what you think the CEO sees in adding now. It sure seems he would know business health better than most.

It's hard to say, but I think he's a long-term kind of guy, so it could just be that he see things just continuing to go well overall for the indeterminate future.

He made a lot of cash with the recent special dividends, so it could just be that he wanted to reinvest some of his new liquidity.
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Gamecock-YT

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Re: TDG - Transdigm
« Reply #44 on: September 04, 2014, 12:08:47 PM »
Liberty it seems Nicholas bought another block of stock in late August. I'm doing more research and just curious as to what you think the CEO sees in adding now. It sure seems he would know business health better than most.

It's hard to say, but I think he's a long-term kind of guy, so it could just be that he see things just continuing to go well overall for the indeterminate future.

He made a lot of cash with the recent special dividends, so it could just be that he wanted to reinvest some of his new liquidity.

That'd be my guess. You pull down $60 mm in compensation for the year, it has to go somewhere.

elevensecsrt4

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Re: TDG - Transdigm
« Reply #45 on: September 04, 2014, 05:10:32 PM »
Does anyone have a position in tdg at the moment. Just curious. Management appears to be getting the job done for quite a while now. It definitely isn't cheap. But I'm contemplating a position for my children's education fund.

Liberty

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Re: TDG - Transdigm
« Reply #46 on: September 04, 2014, 05:18:33 PM »
Does anyone have a position in tdg at the moment. Just curious.

I do.
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no_thanks

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Re: TDG - Transdigm
« Reply #47 on: September 05, 2014, 05:42:44 AM »
Does anyone have a position in tdg at the moment. Just curious. Management appears to be getting the job done for quite a while now. It definitely isn't cheap. But I'm contemplating a position for my children's education fund.

I do. 

Cunninghamew

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Re: TDG - Transdigm
« Reply #48 on: September 05, 2014, 06:48:34 AM »
same

jouni1

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Re: TDG - Transdigm
« Reply #49 on: September 13, 2014, 09:18:18 AM »
another insider buy, james skulina (executive vice president) bought 1.2 million dollars worth of stock. i might have to "close my eyes" and follow suit.  ;D