Form 8-K TRIUMPH GROUP INC For: May 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 2018
TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 1-12235 | 51-0347963 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
899 Cassatt Road, Suite 210 | 19312 | |||
Berwyn, Pennsylvania | (Zip Code) | |||
(Address of principal executive offices) | ||||
(610) 251-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 | Results of Operations and Financial Condition. | |
On May 10, 2018, Triumph Group, Inc. issued a press release announcing its financial results for the fiscal year ended March 31, 2018, and will conduct a conference call to further discuss the financial results. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 7.01 | Regulation FD Disclosure | |
On the conference call referenced in Item 2.02 above, certain information will be presented. The information to be presented during such conference call is attached as Exhibit 99.2 to this Current Report on Form 8-K.
The information in this Item 7.01 of this Current Report on Form 8-K and Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 | Financial Statements and Exhibits. | |
(d) | Exhibits. | |
Exhibit No. | Description | |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | May 10, 2018 | TRIUMPH GROUP, INC. | |
By: | /s/ Thomas A. Quigley, III | ||
Thomas A. Quigley, III | |||
Vice President and Controller | |||
TRIUMPH GROUP, INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
Exhibit No. | Description | |
Exhibit 99.1
NEWS RELEASE
Media Contact: Investor Relations Contact:
Michele Long Sheila Spagnolo
Phone (610) 251-1000 Phone (610) 251-1000
TRIUMPH GROUP REPORTS FOURTH QUARTER FISCAL 2018 RESULTS
Introduces Fiscal Year 2019 Guidance Reflecting Year-Over-Year Sales Growth
BERWYN, Pa. - May 10, 2018 - Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its fourth quarter of fiscal year 2018, which ended March 31, 2018.
Full Fiscal and Fourth Quarter 2018 Highlights
• | For the full fiscal year 2018, sales were $3.2 billion, loss per share was ($8.48), or earnings per diluted share of $2.53 on an adjusted basis, cash used in operations was ($288.9) million and free cash use was ($330.9) million. |
• | Net sales were $896.9 million for fourth quarter fiscal year 2018. |
• | Operating loss for fourth quarter fiscal year 2018 was ($280.0) million, reflecting an operating margin of (31.2%), and included a previously disclosed $345.0 million non-cash charge for the impairment of goodwill in Aerospace Structures. On an adjusted basis, operating income was $71.1 million with an adjusted operating margin of 7.9%. |
• | Net loss for the fourth quarter fiscal year 2018 was ($298.8) million, or ($6.04) per share, and included a $6.91 per share charge related to the aforementioned impairment charge. On an adjusted basis, net income was $50.1 million, or $1.01 per diluted share. |
• | Cash used in operations for fourth quarter fiscal year 2018 was ($90.6) million, and free cash use was ($100.7) million. |
• | Management provides guidance for fiscal 2019 for net sales of $3.3 to $3.4 billion and earnings per diluted share of $0.00 to $0.50, or $1.50 to $2.10 on an adjusted basis. |
“Triumph Group’s fourth quarter results reflect strategic and operational accomplishments as we continue on our path to predictable profitability. We ended the year within our guidance on all measures while net sales increased on a sequential basis, with all three of our segments delivering top line growth.” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Product Support generated year-over-year margin improvement while Integrated Systems produced both year-over-year and sequential improvement in margin.”
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Mr. Crowley continued, “During the quarter, we continued to strengthen our relationships with our customers as we work towards mutually beneficial arrangements as well as program optimization. Our business development results continue to accelerate with new awards yielding a book-to-bill ratio of greater than one for the fifth consecutive quarter and increasing our backlog to $4.49 billion, up 3% sequentially and 13% year-over-year. As part of the ongoing optimization of our portfolio, we completed the divestiture of another non-core business during the fiscal fourth quarter, which we expect to contribute incrementally to our cash flow in fiscal 2019.”
Mr. Crowley concluded, “We are well positioned in FY19 to return to top-line growth as development programs enter production and we expect our cost reduction progress to lead to more consistent profitability. As demonstrated between fiscal 2017 and fiscal 2018, we expect cash flow to improve year over year in fiscal 2019. We are refining our outlook for fiscal 2019 cash guidance to account for potential contract settlements under discussion now, divestitures and working capital needs. We will provide our cash flow outlook, in addition to updates on our progress towards our other guidance targets, in future quarters.”
Fourth Quarter Fiscal Year 2018 Overview
After accounting for divestitures, sales for the fourth quarter of fiscal 2018 were up organically from the comparable prior year period, reflecting higher production deliveries on the Global Hawk/Triton, Global 7000, and G650 programs partially offset by the completion of and production rate reductions on previously disclosed programs.
Fourth quarter operating loss of ($280.0) million included a previously disclosed $345.0 million non-cash goodwill impairment charge for Aerospace Structures as well as the other adjustments shown below. Net loss for the fourth quarter of fiscal year 2018 was ($298.8) million, or ($6.04) per share, or $1.01 earnings per diluted share on an adjusted basis. Triumph’s results included the following:
($ millions except EPS) | Pre-tax | After-tax | Diluted EPS | ||||
Loss from Continuing Operations - GAAP | $(307.2) | $(298.8) | $(6.04) | ||||
Goodwill impairment | 345.0 | 342.0 | 6.91 | ||||
Loss on divestitures | 10.4 | 10.4 | 0.21 | ||||
Curtailment & settlement, net | (11.1) | (8.7) | (0.17) | ||||
Transformation related costs: | |||||||
Restructuring costs (non-cash) | 0.5 | 0.4 | 0.01 | ||||
Restructuring costs (cash) | 6.3 | 4.9 | 0.10 | ||||
Adjusted Income from Continuing Operations - non-GAAP | 43.8 | 50.1 | 1.01 | * | |||
* Difference due to rounding | |||||||
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Net loss for fiscal year 2018 was ($419.4) million or a loss of ($8.48) per share, or $2.53 earnings per diluted share on an adjusted basis, and included the following:
($ millions except EPS) | Pre-tax | After-tax | Diluted EPS | ||||
Loss from Continuing Operations - GAAP | $(461.8) | $(419.4) | $(8.48) | ||||
Goodwill impairment | 535.2 | 513.3 | 10.38 | ||||
Loss on divestitures | 30.7 | 30.7 | 0.62 | ||||
Curtailment & settlements, net | (25.7) | (25.5) | (0.51) | ||||
Refinancing costs | 2.0 | 2.0 | 0.04 | ||||
Transformation related costs: | |||||||
Restructuring costs (non-cash) | 3.0 | 3.0 | 0.06 | ||||
Restructuring costs (cash) | 40.1 | 39.7 | 0.8 | ||||
Estimated impact of tax reform | — | (22.4) | (0.45) | ||||
Adjusted Income from Continuing Operations - non-GAAP | $123.5 | $121.5 | $2.45 | * | |||
* Difference due to rounding | |||||||
The number of shares used in computing diluted earnings per share for the fourth quarter of fiscal year 2018 was 49.8 million and 49.7 million for the full fiscal year 2018.
For the quarter ended March 31, 2018, cash flow used in operations was ($90.6) million, reflecting approximately ($55.0) million for the net liquidation of customer advances, along with spending on key development programs transitioning into production and transformation related costs.
Outlook
Based on anticipated aircraft production rates and completed divestitures, the Company expects that revenue for fiscal year 2019 will be approximately $3.3 to $3.4 billion, up from fiscal 2018 as development programs enter production and sales from continuing programs and new wins offset sunsetting programs. Additionally, the Company expects fiscal year 2019 earnings per diluted share to be $0.00 to $0.50, or $1.50 to $2.10 adjusted for pension accounting changes and transformation related costs.
The Company’s current outlook reflects adjustments detailed in the attached tables but does not take into account the impact of any potential future divestitures. In addition, the Company’s outlook is inclusive of the projected impact of the adoption of ASC 606, Revenue from Contracts with Customers and ASU 2017-07 (Pension).
Conference Call
Triumph Group will hold a conference call today, May 10th at 8:30 a.m. (ET) to discuss the fourth quarter fiscal year 2018 results. The conference call will be available live and archived on the Company’s website at http://www.triumphgroup.com. A slide presentation will be included with the audio portion of the webcast. An audio replay will be available from May 10th to May 17th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #4373459.
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About Triumph Group
Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aircraft structures, components, accessories, subassemblies and systems. The Company serves a broad, worldwide spectrum of the aviation industry, including original equipment manufacturers of commercial, regional, business and military aircraft and aircraft components, as well as commercial and regional airlines and air cargo carriers.
More information about Triumph can be found on the Company’s website at www.triumphgroup.com.
Forward Looking Statements
Statements in this release which are not historical facts are forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations of or assumptions about financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies and organizational restructurings. All forward-looking statements involve risks and uncertainties which could affect the Company’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, the Company. Further information regarding the important factors that could cause actual results to differ from projected results can be found in Triumph Group’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.
FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(in thousands, except per share data)
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Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
CONDENSED STATEMENTS OF INCOME | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 896,860 | $ | 919,914 | $ | 3,198,951 | $ | 3,532,799 | ||||||||
Operating (loss) income | (279,959 | ) | (115,490 | ) | (362,406 | ) | 56,889 | |||||||||
Interest expense and other | 27,213 | 24,780 | 99,442 | 80,501 | ||||||||||||
Income tax (benefit) expense | (8,376 | ) | (13,445 | ) | (42,492 | ) | 19,340 | |||||||||
Net loss | $ | (298,796 | ) | $ | (126,825 | ) | $ | (419,356 | ) | $ | (42,952 | ) | ||||
Earnings per share - basic: | ||||||||||||||||
Net loss | $ | (6.04 | ) | $ | (2.57 | ) | $ | (8.48 | ) | $ | (0.87 | ) | ||||
Weighted average common shares outstanding - basic | 49,488 | 49,350 | 49,442 | 49,303 | ||||||||||||
Earnings per share - diluted: | ||||||||||||||||
Net loss | $ | (6.04 | ) | $ | (2.57 | ) | $ | (8.48 | ) | $ | (0.87 | ) | ||||
Weighted average common shares outstanding - diluted | 49,488 | 49,350 | 49,442 | 49,303 | ||||||||||||
Dividends declared and paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.16 | $ | 0.16 | ||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
BALANCE SHEET | Unaudited | Audited | ||||||
March 31, | March 31, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 35,819 | $ | 69,633 | ||||
Accounts receivable, net | 414,185 | 311,792 | ||||||
Inventories, net of unliquidated progress payments of $387,146 and $222,485 | 1,425,295 | 1,340,175 | ||||||
Prepaid and other current assets | 44,428 | 30,064 | ||||||
Assets held for sale | 1,324 | 21,255 | ||||||
Current assets | 1,921,051 | 1,772,919 | ||||||
Property and equipment, net | 726,003 | 805,030 | ||||||
Goodwill | 592,828 | 1,142,605 | ||||||
Intangible assets, net | 507,681 | 592,364 | ||||||
Other, net | 57,627 | 101,682 | ||||||
Total assets | $ | 3,805,190 | $ | 4,414,600 | ||||
Liabilities & Stockholders' Equity | ||||||||
Current portion of long-term debt | $ | 16,527 | $ | 160,630 | ||||
Accounts payable | 418,367 | 481,243 | ||||||
Accrued expenses | 555,231 | 674,379 | ||||||
Liabilities related to assets held for sale | 440 | 18,008 | ||||||
Current liabilities | 990,565 | 1,334,260 | ||||||
Long-term debt, less current portion | 1,421,757 | 1,035,670 | ||||||
Accrued pension and post-retirement benefits, noncurrent | 483,887 | 592,134 | ||||||
Deferred income taxes, noncurrent | 10,548 | 68,107 | ||||||
Other noncurrent liabilities | 441,864 | 537,956 | ||||||
Stockholders' Equity: | ||||||||
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,460,920 shares issued; 49,669,848 and 49,573,029 shares outstanding | 51 | 51 | ||||||
Capital in excess of par value | 851,280 | 846,807 | ||||||
Treasury stock, at cost, 2,791,072 and 2,887,891 shares | (179,082 | ) | (183,696 | ) | ||||
Accumulated other comprehensive income | (367,870 | ) | (396,178 | ) | ||||
Retained earnings | 152,190 | 579,489 | ||||||
Total stockholders' equity | 456,569 | 846,473 | ||||||
Total liabilities and stockholders' equity | $ | 3,805,190 | $ | 4,414,600 | ||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA | Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Net Sales: | |||||||||||||||||
Integrated Systems | $ | 275,253 | $ | 282,001 | $ | 986,351 | $ | 1,040,805 | |||||||||
Aerospace Structures | 550,371 | 560,696 | 1,954,729 | 2,172,768 | |||||||||||||
Product Support | 79,074 | 81,008 | 281,913 | 338,325 | |||||||||||||
Elimination of inter-segment sales | (7,838 | ) | (3,791 | ) | (24,042 | ) | (19,099 | ) | |||||||||
$ | 896,860 | $ | 919,914 | $ | 3,198,951 | $ | 3,532,799 | ||||||||||
Operating (Loss) Income: | |||||||||||||||||
Integrated Systems | $ | 55,034 | $ | 55,915 | $ | 187,205 | $ | 201,294 | |||||||||
Aerospace Structures | (324,610 | ) | (155,610 | ) | (492,457 | ) | (90,489 | ) | |||||||||
Product Support | 13,633 | 12,814 | 45,702 | 55,801 | |||||||||||||
Corporate | (24,016 | ) | (28,609 | ) | (102,856 | ) | (109,717 | ) | |||||||||
$ | (279,959 | ) | $ | (115,490 | ) | $ | (362,406 | ) | $ | 56,889 | |||||||
Depreciation and Amortization: | |||||||||||||||||
Integrated Systems | $ | 8,128 | $ | 10,104 | * | $ | 35,986 | $ | 40,332 | * | |||||||
Aerospace Structures | 373,444 | * | 295,781 | * | 649,013 | * | 392,414 | * | |||||||||
Product Support | 1,675 | 1,807 | 6,744 | 9,037 | |||||||||||||
Corporate | 801 | 472 | 1,852 | 1,461 | |||||||||||||
$ | 384,048 | $ | 308,164 | $ | 693,595 | $ | 443,244 | ||||||||||
Amortization of Acquired Contract Liabilities: | |||||||||||||||||
Integrated Systems | $ | (10,058 | ) | $ | (9,659 | ) | $ | (38,293 | ) | $ | (36,760 | ) | |||||
Aerospace Structures | (23,228 | ) | (22,314 | ) | (86,855 | ) | (84,244 | ) | |||||||||
$ | (33,286 | ) | $ | (31,973 | ) | $ | (125,148 | ) | $ | (121,004 | ) | ||||||
Capital Expenditures: | |||||||||||||||||
Integrated Systems | $ | 223 | $ | 7,901 | $ | 6,146 | $ | 16,487 | |||||||||
Aerospace Structures | 7,453 | 9,574 | 29,519 | 30,434 | |||||||||||||
Product Support | 577 | 610 | 2,206 | 2,630 | |||||||||||||
Corporate | 1,865 | 624 | 4,179 | 2,281 | |||||||||||||
$ | 10,118 | $ | 18,709 | $ | 42,050 | $ | 51,832 | ||||||||||
* - Includes Impairment Charges | |||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures
We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. In accordance with Securities and Exchange Commission (the "SEC") guidance on Compliance and Disclosure Interpretations, we also disclose and discuss certain non-GAAP financial measures in our public releases. Currently, the non-GAAP financial measure that we disclose is Adjusted EBITDA, which is our net income before interest, income taxes, amortization of acquired contract liabilities, curtailments, settlements and early retirement incentives, legal settlements, depreciation and amortization. We disclose Adjusted EBITDA on a consolidated and an operating segment basis in our earnings releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.
We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income. In calculating Adjusted EBITDA, we exclude from net income the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-GAAP financial measures as a result of these exclusions. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as a measure of liquidity, as an alternative to net income (loss), income from continuing operations, or as an indicator of any other measure of performance derived in accordance with GAAP. Investors and potential investors in our securities should not rely on Adjusted EBITDA as a substitute for any GAAP financial measure, including net income (loss) or income from continuing operations. In addition, we urge investors and potential investors in our securities to carefully review the reconciliation of Adjusted EBITDA to net income set forth below, in our earnings releases and in other filings with the SEC and to carefully review the GAAP financial information included as part of our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K that are filed with the SEC, as well as our quarterly earnings releases, and compare the GAAP financial information with our Adjusted EBITDA.
Adjusted EBITDA is used by management to internally measure our operating and management performance and by investors as a supplemental financial measure to evaluate the performance of our business that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business. We have spent more than 15 years expanding our product and service capabilities partially through acquisitions of complementary businesses. Due to the expansion of our operations, which included acquisitions, our net income has included significant charges for depreciation and amortization. Adjusted EBITDA excludes these charges and provides meaningful information about the operating performance of our business, apart from charges for depreciation and amortization. We believe the disclosure of Adjusted EBITDA helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe Adjusted EBITDA is a measure of our ongoing operating performance because the isolation of non-cash income and expenses, such as amortization of acquired contract liabilities, depreciation and amortization, and non-operating items, such as interest and income taxes, provides additional information about our cost structure, and, over time, helps track our operating progress. In addition, investors, securities analysts and others have regularly relied on Adjusted EBITDA to provide a financial measure by which to compare our operating performance against that of other companies in our industry.
Set forth below are descriptions of the financial items that have been excluded from our net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income:
• | Divestitures may be useful for investors to consider because they reflect gains or losses from sale of operating units. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations. |
• | Legal settlements may be useful to investors to consider because they reflect gains or losses from disputes with third parties. We do not believe that these gains or losses necessarily reflect the current and ongoing cash earnings related to our operations. |
• | Curtailments, settlements and early retirement incentives may be useful to investors to consider because it represents the current period impact of the change in defined benefit obligation due to the reduction in future service costs. We do not believe these charges (gains) necessarily reflect the current and ongoing cash earnings related to our operations. |
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
• | Amortization of acquired contract liabilities may be useful for investors to consider because it represents the non-cash earnings on the fair value of below market contracts acquired through acquisitions. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations. |
• | Amortization expenses (including impairments) may be useful for investors to consider because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights and licenses. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |
• | Depreciation may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |
• | The amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business. |
• | Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business. |
Management compensates for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business.
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The following table shows our Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):
Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA): | ||||||||||||||||
Net Loss | $ | (298,796 | ) | $ | (126,825 | ) | $ | (419,356 | ) | $ | (42,952 | ) | ||||
Add-back: | ||||||||||||||||
Income tax (benefit) expense | (8,376 | ) | (13,445 | ) | (42,492 | ) | 19,340 | |||||||||
Interest expense and other | 27,213 | 24,780 | 99,442 | 80,501 | ||||||||||||
Curtailment Gain | (11,146 | ) | — | (25,722 | ) | — | ||||||||||
Loss on divestitures | 10,370 | — | 30,741 | 19,124 | ||||||||||||
Amortization of acquired contract liabilities | (33,286 | ) | (31,973 | ) | (125,148 | ) | (121,004 | ) | ||||||||
Depreciation and amortization | 384,048 | 308,164 | 693,595 | 443,244 | ||||||||||||
Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 70,027 | $ | 160,701 | $ | 211,060 | $ | 398,253 | ||||||||
Net sales # | 896,860 | 919,914 | 3,198,951 | 3,532,799 | ||||||||||||
Net Loss Margin | (33.3)% | (13.8)% | (13.1)% | (1.2)% | ||||||||||||
Adjusted EBITDA Margin | 8.1% | 18.1% | 6.9% | 11.7% | ||||||||||||
# Net sales includes amortization of acquired contract liabilities. Since Adjusted EBTIDA excludes amortization of acquired contract liabilities, we've also excluded it from net sales in arriving at Adjusted EBITDA margin throughout this document. | ||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended March 31, 2018 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Product Support | Corporate/Eliminations | ||||||||||||||||
Net Loss | $ | (298,796 | ) | ||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax benefit | (8,376 | ) | |||||||||||||||||||
Interest expense and other | 27,213 | ||||||||||||||||||||
Operating (Loss) Income | $ | (279,959 | ) | $ | 55,034 | $ | (324,610 | ) | $ | 13,633 | $ | (24,016 | ) | ||||||||
Loss on divestitures | 10,370 | — | — | — | 10,370 | ||||||||||||||||
Curtailment & settlement gain, net | (11,146 | ) | — | — | — | (11,146 | ) | ||||||||||||||
Amortization of acquired contract liabilities | (33,286 | ) | (10,058 | ) | (23,228 | ) | — | — | |||||||||||||
Depreciation and amortization | 384,048 | 8,128 | 373,444 | 1,675 | 801 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 70,027 | $ | 53,104 | $ | 25,606 | $ | 15,308 | $ | (23,991 | ) | ||||||||||
Net sales | $ | 896,860 | $ | 275,253 | $ | 550,371 | $ | 79,074 | $ | (7,838 | ) | ||||||||||
Adjusted EBITDA Margin | 8.1% | 20.0% | 4.9% | 19.4% | n/a | ||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Twelve Months Ended March 31, 2018 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Product Support | Corporate/Eliminations | ||||||||||||||||
Net Loss | $ | (419,356 | ) | ||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax benefit | (42,492 | ) | |||||||||||||||||||
Interest expense and other | 99,442 | ||||||||||||||||||||
Operating (Loss) Income | $ | (362,406 | ) | $ | 187,205 | $ | (492,457 | ) | $ | 45,702 | $ | (102,856 | ) | ||||||||
Loss on divestitures | 30,741 | — | — | — | 30,741 | ||||||||||||||||
Curtailment & settlement gain, net | (25,722 | ) | — | — | — | (25,722 | ) | ||||||||||||||
Amortization of acquired contract liabilities | (125,148 | ) | (38,293 | ) | (86,855 | ) | — | — | |||||||||||||
Depreciation and amortization | 693,595 | 35,986 | 649,013 | 6,744 | 1,852 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 211,060 | $ | 184,898 | $ | 69,701 | $ | 52,446 | $ | (95,985 | ) | ||||||||||
Net sales | $ | 3,198,951 | $ | 986,351 | $ | 1,954,729 | $ | 281,913 | $ | (24,042 | ) | ||||||||||
Adjusted EBITDA Margin | 6.9% | 19.5% | 3.7% | 18.6% | n/a | ||||||||||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended March 31, 2017 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Product Support | Corporate/Eliminations | ||||||||||||||||
Net Loss | $ | (126,825 | ) | ||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax benefit | (13,445 | ) | |||||||||||||||||||
Interest expense and other | 24,780 | ||||||||||||||||||||
Operating (Loss) Income | $ | (115,490 | ) | $ | 55,915 | $ | (155,610 | ) | $ | 12,814 | $ | (28,609 | ) | ||||||||
Amortization of acquired contract liabilities | (31,973 | ) | (9,659 | ) | (22,314 | ) | — | — | |||||||||||||
Depreciation and amortization | 308,164 | 10,104 | 295,781 | 1,807 | 472 | ||||||||||||||||
Adjusted Earnings (Losses). before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 160,701 | $ | 56,360 | $ | 117,857 | $ | 14,621 | $ | (28,137 | ) | ||||||||||
Net sales | $ | 919,914 | $ | 282,001 | $ | 560,696 | $ | 81,008 | $ | (3,791 | ) | ||||||||||
Adjusted EBITDA Margin | 18.1% | 20.7% | 21.9% | 18.0% | n/a | ||||||||||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Twelve Months Ended March 31, 2017 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Product Support | Corporate/Eliminations | ||||||||||||||||
Net Loss | $ | (42,952 | ) | ||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax expense | 19,340 | ||||||||||||||||||||
Interest expense and other | 80,501 | ||||||||||||||||||||
Operating Income (Loss) | $ | 56,889 | $ | 201,294 | $ | (90,489 | ) | $ | 55,801 | $ | (109,717 | ) | |||||||||
Loss on divestiture | 19,124 | — | — | — | 19,124 | ||||||||||||||||
Amortization of acquired contract liabilities | (121,004 | ) | (36,760 | ) | (84,244 | ) | — | — | |||||||||||||
Depreciation and amortization | 443,244 | 40,332 | 392,414 | 9,037 | 1,461 | ||||||||||||||||
Adjusted (Losses) Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 398,253 | $ | 204,866 | $ | 217,681 | $ | 64,838 | $ | (89,132 | ) | ||||||||||
Net sales | $ | 3,532,799 | $ | 1,040,805 | $ | 2,172,768 | $ | 338,325 | $ | (19,099 | ) | ||||||||||
Adjusted EBITDA Margin | 11.7% | 20.4% | 10.4% | 19.2% | n/a | ||||||||||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs
Three Months Ended | |||||||||||||
March 31, 2018 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (307,172 | ) | $ | (298,796 | ) | $ | (6.04 | ) | ||||
Adjustments: | |||||||||||||
Goodwill Impairment | 345,000 | 341,970 | 6.91 | ||||||||||
Loss on divestitures | 10,370 | 10,370 | 0.21 | ||||||||||
Curtailment & settlement, net | (11,146 | ) | (8,694 | ) | (0.17 | ) | |||||||
Restructuring costs (non-cash) | 467 | 364 | 0.01 | ||||||||||
Restructuring costs (cash) | 6,319 | 4,929 | 0.10 | ||||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 43,838 | $ | 50,143 | $ | 1.01 | * | ||||||
* Difference due to rounding | |||||||||||||
Twelve Months Ended | |||||||||||||
March 31, 2018 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (461,848 | ) | $ | (419,356 | ) | $ | (8.48 | ) | ||||
Adjustments: | |||||||||||||
Goodwill Impairment | 535,227 | 523,510 | 10.59 | ||||||||||
Loss on divestitures | 30,741 | 30,741 | 0.62 | ||||||||||
Curtailment & settlement, net | (25,722 | ) | (17,491 | ) | (0.35 | ) | |||||||
Refinancing costs | 1,986 | 1,350 | 0.03 | ||||||||||
Restructuring costs (non-cash) | 3,005 | 2,043 | 0.04 | ||||||||||
Restructuring costs (cash) | 40,069 | 27,247 | 0.55 | ||||||||||
Estimated impact of Tax Reform | — | (22,398 | ) | (0.45 | ) | ||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 123,458 | $ | 125,646 | $ | 2.53 | * | ||||||
* Difference due to rounding | |||||||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended | |||||||||||||
March 31, 2017 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (140,270 | ) | $ | (126,825 | ) | $ | (2.57 | ) | ||||
Adjustments: | |||||||||||||
Goodwill impairment | 266,298 | 266,298 | 5.38 | ||||||||||
Restructuring costs (non-cash) | 501 | 461 | 0.01 | ||||||||||
Restructuring costs (cash) | 13,997 | 12,882 | 0.26 | ||||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 140,526 | $ | 152,816 | $ | 3.09 | * | ||||||
* Difference due to rounding | |||||||||||||
Twelve Months Ended | |||||||||||||
March 31, 2017 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (23,612 | ) | $ | (42,952 | ) | $ | (0.87 | ) | ||||
Adjustments: | |||||||||||||
Goodwill impairment | 266,298 | 266,298 | 5.39 | ||||||||||
Loss on divestitures | 19,124 | 17,980 | 0.36 | ||||||||||
Triumph Precision Components - Strike related costs | 15,701 | 14,450 | 0.29 | ||||||||||
Triumph Precision Components - Inventory write-down | 6,089 | 5,604 | 0.11 | ||||||||||
Triumph Aerospace Structures - UAS program | 14,200 | 13,068 | 0.26 | ||||||||||
Restructuring costs (non-cash) | 10,797 | 9,937 | 0.20 | ||||||||||
Restructuring costs (cash) | 42,177 | 38,816 | 0.79 | ||||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 350,774 | $ | 323,201 | $ | 6.59 | * | ||||||
* Difference due to rounding | |||||||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Cash provided by operations, is provided for consistency and comparability. We also use free cash flow as a key factor in planning for and consideration of strategic acquisitions and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles our Operating income to Adjusted Operating income as noted above.
Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating (loss) income - GAAP | $ | (279,959 | ) | $ | (115,490 | ) | $ | (362,406 | ) | $ | 56,889 | |||||
Adjustments: | ||||||||||||||||
Goodwill & tradename impairments | 345,000 | 266,298 | 535,227 | 266,298 | ||||||||||||
Restructuring costs (non-cash) | 467 | 501 | 3,005 | 10,797 | ||||||||||||
Restructuring costs (cash) | 6,319 | 13,997 | 40,069 | 42,177 | ||||||||||||
Loss on divestitures | 10,370 | — | 30,741 | 19,124 | ||||||||||||
Triumph Precision Components - Strike related costs | — | — | — | 15,701 | ||||||||||||
Other inventory impairments | — | — | — | 20,289 | ||||||||||||
Curtailment & settlement, net | (11,146 | ) | — | (25,722 | ) | — | ||||||||||
Adjusted Operating income - non-GAAP | $ | 71,051 | $ | 165,306 | $ | 220,914 | $ | 431,275 | ||||||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Cash provided by operations, before pension contributions has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles cash provided by operations, before pension contributions to cash provided by operations, as well as cash provided by operations to free cash flow available for debt reduction.
Three Months Ended | Twelve Months Ended | ||||||||||
March 31, | March 31, | ||||||||||
2018 | 2018 | 2017 | |||||||||
Cash flow from operations | $ | (90,615 | ) | $ | (288,893 | ) | $ | 281,522 | |||
Less: | |||||||||||
Capital expenditures | (10,118 | ) | (42,050 | ) | (51,832 | ) | |||||
Free cash flow | $ | (100,733 | ) | $ | (330,943 | ) | $ | 229,690 | |||
The Company provides earnings per share guidance on an adjusted non-GAAP basis excluding the effects of transformation related costs, gains (losses) on divestitures, impairments, one-time pension & OPEB benefits (charges) and other non-recurring items, such as the adoption ASU 2017-07. The following table reconciles earnings per share on a GAAP basis to adjusted earnings per diluted share guidance.
Guidance - earnings per diluted share - GAAP | $0.00 - $0.50 | |
per share effect of: | ||
Cumulative effect of adoption of ASU 2017-07 (Pension) | $1.46 - $1.52 | |
Transformation related costs | $0.04 - $0.08 | |
Guidance - adjusted earnings per diluted share | $1.50 - $2.10 | |
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:
March 31, | March 31, | |||||||
2018 | 2017 | |||||||
Calculation of Net Debt | ||||||||
Current portion | $ | 16,527 | $ | 160,630 | ||||
Long-term debt | 1,421,757 | 1,035,670 | ||||||
Total debt | 1,438,284 | 1,196,300 | ||||||
Plus: Deferred debt issuance costs | 16,949 | 11,752 | ||||||
Less: Cash | (35,819 | ) | (69,633 | ) | ||||
Net debt | $ | 1,419,414 | $ | 1,138,419 | ||||
Calculation of Capital | ||||||||
Net debt | $ | 1,419,414 | $ | 1,138,419 | ||||
Stockholders' equity | 456,569 | 846,473 | ||||||
Total capital | $ | 1,875,983 | $ | 1,984,892 | ||||
Percent of net debt to capital | 75.7 | % | 57.4 | % | ||||
#######
May 10, 2018 Fourth Quarter FY’18 Earnings Conference Call Daniel J. Crowley, President and Chief Executive Officer James F. McCabe Jr., Senior Vice President and Chief Financial Officer
Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward- looking statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “project”, “may”, “will”, “should”, “could”, or similar words suggesting future outcomes or outlooks. These forward-looking statements include, but are not limited to, statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions, aerospace market conditions, aircraft production rates, financial and operational performance, revenue and earnings growth and profitability and earnings results. These statements are based on the current projections, expectations and beliefs of Triumph’s management. These forward looking statements involve known and unknown risks, uncertainties and other factors which could cause actual results to differ materially from any expected future results, performance or achievements, including, but not limited to, competitive and cyclical factors relating to the aerospace industry, dependence on some of Triumph’s business from key customers, requirements of capital, uncertainties relating to the integration of acquired businesses, general economic conditions affecting Triumph’s business segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or skilled personnel, changes in governmental regulation and oversight and international hostilities and terrorism. Further information regarding the important factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking statements can be found in Triumph’s reports filed with the SEC, including in the risk factors described in Triumph’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017. Triumph Group — Fourth Quarter FY'18 2
FY18 Highlights FY’18 Q4 FY’18 YTD • Finished FY18 in Q4 on an upswing Financial Summary Financial Summary • High end of full year revenue range Net Sales $897M $3,199M • Organic sales increased sequentially • Strengthened the balance sheet Adjusted EPS * $1.01 $2.53 • De-risking Aerospace Structures backlog • Executed G650 agreement with Gulfstream • Grew backlog to $4.5B - BTB ratio 1.16:1 Free Cash Use ($101M) ($331M) *See appendix for adjustments Achieved Guidance for FY 18 Sales, Adjusted EPS and Free Cash Use Triumph Group — Fourth Quarter FY'18 3
Transformation Progress Combined Aerospace Structures and Precision Components - benefits on track Completed 1025 continuous improvement events in FY18 Achieved in-year cost reduction target of $96M – on track for three year goal of $300M Portfolio reshaping through divestitures, consolidations and strategic outsourcing Enterprise-wide Inventory Attack Team (IAT) reducing physical inventory Customer recognition of our Return To Green efforts New business pipeline, win rate, BTB, and backlog all up Executing our Path To Value Triumph Group — Fourth Quarter FY'18 4
De-risking our Structures Backlog Gulfstream G650 Bombardier Global 7000 Global Bombardier Boeing 767 Embraer E2 Triumph Group — Fourth Quarter FY'18 5
Market Trends Military Commercial • Defense Budget - FY18 and FY19 ($165B above sequestration) • Desire to convert backlog leading Boeing and Airbus to increase narrow body rates. Opportunities are created. • Aging fleet replacements and SLEPs creating opportunities: • Narrow-bodies driving Integrated Systems growth • T-X, MQ-25, OA-X, T38, A-10, F18, F-15 • Lockheed MQ-25 Partnership (also supporting Boeing and GA) • Systems represent hightest shipset content • T-38 SLEP - TAS wing qualification attained (actuation, insulation, ducting) • LEAP engine deliveries rising, driving +30% YOY • Key new starts - T-X and MQ-25 (Summer decisions) revenue growth on gearing • Strong ultra long range business jet market demand • Delivery ramp up on Global 7000 • Asian Fleet Growth - Partnership MOA with China Southern Budget $ Billions Budget Triumph Benefiting from Defense Budget and Commercial Rate Increases Triumph Group — Fourth Quarter FY'18 6
Driving Organic Growth Competitive Wins Customer BU Engine LRU’s Support P&W V2500/4168 TPS AMAD - Gearbox (Takeaway) Saab Grippen TIS Performance based logistics Sikorsky Ch-53E TIS Follow-on Business Customer BU Composite Fuselage Frames Boeing 787 TAS Partnership Customer BU Industrial Partner Lockheed MQ-25 TAS MOA for JV and Fleet Support China Southern TPS Elite Supplier Status Sikorsky TAS Supplier of the Year Sikorsky TIS Reshaping Pipeline ($12B, ~50% Military), Improved Win Rates, Backlog Up 13% Triumph Group — Fourth Quarter FY'18 7
FY19 Outlook • Operational performance stability in FY19 • Revenue guidance of $3.3B - $3.4B • GAAP EPS guidance $0 - $0.50 per share; adjusted EPS guidance of $1.50 - $2.10 per share • Reduced cash use YOY - restructuring and development expenses declining, deliveries increasing • Portfolio changes focus company on higher value-added offerings Triumph Celebrating 25th Anniversary As We Complete Turnaround Triumph Group — Fourth Quarter FY'18 8
Consolidated Quarterly Results • Organic sales increased $7M ($ in millions) FY’18 Q4 FY’17 Q4 Variance % • Net sales decrease includes: Net Sales $897 $920 (3)% ◦ Divestitures ◦ Increased deliveries on Global Operating Loss (280) (115) 142% Hawk/Triton, Global 7000 & G650 ◦ Offset by Boeing and Gulfstream program completions and rate Operating Margin (31)% (13)% reductions • Adjusted operating income excludes: Adjusted Operating 71 165 (57)% Income ◦ $345M goodwill impairment ◦ $(11M) OPEB curtailment gain Adjusted Operating Margin 8% 18% ◦ $10M loss on divestiture ◦ $7M restructuring costs Achieved FY '18 Revenue & Adjusted Earnings Guidance • Adjusted operating income and margin improved sequentially Triumph Group — Fourth Quarter FY'18 9
Integrated Systems Year Over Year Comparison Triumph Integrated Systems is providing fuel pumps and actuators for the advanced jet engine for the sixth generation U.S. Air Force fighter jets. Highlights Financial • Recognized by Lockheed Martin Rotary & Mission • Net sales change included: Systems as Supplier of the Year for exceptional ◦ Divestitures ($11M), partially offset by support of the S-97 Raider program ◦ Organic growth ~2% driven by OE volumes in • Selected to design, develop and produce fuel pumps and actuators for an advanced jet engine for sixth- A320, 737 and 787 generation U.S. Air Force fighter jets • Continued strong operating margin with favorable • YTD Book to Bill of 1.26:1 balance of OE and aftermarket volumes Triumph Group — Fourth Quarter FY'18 10
Product Support Year Over Year Comparison Triumph Product Support signed MOU to provide nacelle maintenance and for a potential JV. Highlights Financial • Signed MOU with China Southern Airlines (6th largest • Organic sales increased 20% due primarily to increased airline in the world) for nacelle maintenance, as well demand of accessory components as establishment of potential JV ◦ Q4 FY17 sales included $15M from divested • Selected by Boeing to provide aftermarket support in businesses Asia Pacific region for flight controls and engine nacelles program • Operating margin improved 140 basis points year over • Signed agreement with Pratt & Whitney for engine year Line Replaceable Unit (LRU) repairs Triumph Group — Fourth Quarter FY'18 11
Aerospace Structures Year Over Year Comparison Triumph’s Aerospace Structures produces 787 section 47/48 fuselage for integration into the aft body section of the airplane. Financial Highlights • Net favorable cumulative catch-up adjustments on long-term • Follow-on contract award for 787 & 767 programs contracts of $7.4M • Achieved Global 7000 first production wing • Net sales and operating margin decreased as expected due • Partnered with Gulfstream to optimize supply chain to completion of and continued rate reductions on certain model on G650 Boeing and Gulfstream programs, partially offset by • YTD Book to Bill 1.13:1 supported by Global 7000, E2 increased deliveries on Global Hawk/Triton, Global 7000 and 767/Tanker orders and G650 programs • Operating margins impacted by previously disclosed $345M goodwill impairment Triumph Group — Fourth Quarter FY'18 12
Free Cash Flow Walk - FY'18 Q4 Consolidated ($ in millions) FY’18 Q4 FY’18 YTD Q4 & FY 18 Cash Drivers Net Loss $ (299) $ (420) • Development programs used $18M in Q4 Non-cash items: & $105M YTD Depreciation & Amortization 384 694 • Restructuring used $6M in Q4 and $40M Interest Expense & Other 27 99 YTD Amortization of Acquired Contracts (33) (125) • Net working capital growth of $108M in Q4 Loss on divestiture 10 30 and $319M YTD includes: Pension Income (15) (60) • Reduction of $55M of prior customer OPEB Income (14) (37) advances in Q4 and $264M YTD Income Tax Benefit (8) (42) Cash uses: • Build of Global 7000 production inventory of $57M in Q4 and $232M Working Capital Change (108) (319) YTD Interest Payments (32) (86) Capital Expenditures (10) (42) OPEB Payments (3) (13) Improving Free Cash Flow Tax Payments — (10) Free Cash Flow (Use) $ (101) $ (331) 13
Net Debt & Liquidity ($ in millions) FY’18 Q4 • Cash and Availability ~ $680M Cash $ (36) • Senior Secured Leverage Ratio ~ 1.3x vs. $800M Revolving Credit Facility 113 3.5x $125M Receivable Securitization Facility 108 • Interest Coverage Ratio ~ 3.1x vs. 2.75x Capital Leases 60 2013 Senior Notes Due 2021 375 Sufficient Financial Capacity & Liquidity 2014 Senior Notes Due 2022 300 2017 Senior Notes Due 2025 500 Net Debt $ 1,420 Triumph Group — Fourth Quarter FY'18 14
FY'19 Guidance Net Sales $3.3B - $3.4B Adjusted EPS * $1.50 - $2.10 Effective Tax Rate ^ ~ 17% Capital Expenditures $50M - $70M 4% - 7% Organic Sales Growth *see adjustments in the appendix ^ Potential opportunity to lower through release of valuation allowance and use of deferred tax benefits from prior divestitures. Triumph Group — Fourth Quarter FY'18 15
FY'19 Earnings per Share Drivers FY 18 FY 19 Headwinds Decline in Amortization of Acquired Contract Liabilities $125M $65M - $75M Increased Income Tax Rate ~2% ~17% Increased Interest Expense & Other $99M $102M - $108M Decreased Pension/OPEB Income ~$72M ~$61M Tailwinds Organic Sales Growth 4% - 7% Cost Reductions Up to 1% of sales Triumph Group — Fourth Quarter FY'18 16
Concluding Remarks • Financial performance improving • Strong market tail winds – Triumph reversing four year revenue contraction in FY19 • Program and portfolio actions creating streamlined company • Systems and Aftermarket priorities for reinvestment Triumph Group — Fourth Quarter FY'18 17
Our Vision Our Mission Our Values We aspire to be the premier design, As One Team, we partner with our Integrity manufacturing and support company customers to triumph over the Continuous Improvement whose comprehensive capabilities, hardest aerospace, defense and integrated processes and innovative industrial challenges, enabling us to Teamwork employees advance the safety and deliver value to our shareholders. Innovation prosperity of the world. Act with Velocity Triumph Group — Fourth Quarter FY'18 18
Appendix Triumph Group — Fourth Quarter FY'18 19
Top Programs Integrated Systems Aerospace Structures Boeing 737 Bombardier Global Airbus A320, A321 Boeing 767/Tanker Boeing 787 Gulfstream Boeing AH-64 Boeing 777 Boeing CH-47 Airbus A330, A340 Boeing V-22 Boeing 747 Lockheed Martin C-130 Boeing 787 Lockheed Martin F-35 Airbus A350 Sikorsky UH60 Boeing 737 Boeing 777 Boeing V-22 Represents 59% of Represents 81% of Integrated Systems backlog Aerospace Structures backlog 20
Supplemental Data Pension/OPEB Analysis ($ in millions) FY’18 FY’19 Pension Expense (Income) ^ ≈ ($61) ≈ ($51) Cash Pension Contribution ≈ $5 ≈ $2 OPEB Expense (Income) ^ ≈ ($11) ≈ ($10) Cash OPEB Contribution ≈ $12 ≈ $12 • The Company anticipates the cumulative effect from the adoption of ASC 2017-07 to be approximately $88M to $92M and will be recorded as a current period charge to earnings in our first quarter of fiscal year ended March 31, 2019. ^ Excludes impact from one-time adjustments such as curtailments, settlements or special termination benefits 21
ASC 606 Adoption • The adoption of this standard may impact the amount and timing of revenue recognition and the accounting treatment of capitalized pre-production costs for certain of our contracts. • The units-of-delivery method is no longer viable and some performance obligations may be satisfied over time which may change the timing of recognition of revenue and associated production costs for certain contracts. • For performance obligations satisfied over time, will most likely use an input method as basis for recognizing revenue Ex. resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used • We will continue to record forward losses relating to unfulfilled contracts and options consistent with historical accounting policies • Accounting for tooling, and certain other costs to fulfill contracts are expected to continue under existing guidance 22
FINANCIAL DATA (UNAUDITED) Non-GAAP TRIUMPH GROUP, INC. AND SUBSIDIARIES Disclosure (dollars in thousands) Non-GAAP Financial Measures Disclosures Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs. Three Months Ended March 31, 2018 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (307,172) $ (298,796) $ (6.04) Adjustments: Goodwill impairment 345,000 341,970 6.91 Loss on divestitures 10,370 10,370 0.21 Curtailment & settlement, net (11,146) (8,694) (0.17) Restructuring costs (non-cash) 467 364 0.01 Restructuring costs (cash) 6,319 4,929 0.10 Adjusted Income from Continuing Operations - Non-GAAP $ 43,838 $ 50,143 $ 1.01 Twelve Months Ended March 31, 2018 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (461,848) $ (419,356) $ (8.48) Adjustments: Goodwill impairment 535,227 523,510 10.59 Loss on divestitures 30,741 30,741 0.62 Curtailment & settlement, net (25,722) (17,491) (0.35) Refinancing costs 1,986 1,350 0.03 Restructuring costs (non-cash) 3,005 2,043 0.04 Restructuring costs (cash) 40,069 27,247 0.55 Estimated impact of Tax Reform — (22,398) (0.45) Adjusted Income from Continuing Operations - Non-GAAP $ 123,458 $ 125,647 $ 2.53 * 23 * Difference due to rounding
FINANCIAL DATA (UNAUDITED) Non-GAAP TRIUMPH GROUP, INC. AND SUBSIDIARIES Disclosure (dollars in thousands) Non-GAAP Financial Measures Disclosures (continued) Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs. Three Months Ended March 31, 2017 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ (140,270) $ (126,825) $ (2.57) Adjustments: Goodwill Impairment 266,298 266,298 5.38 Restructuring costs (non-cash) 501 461 0.01 Restructuring costs (cash) 13,997 12,882 0.26 Adjusted Income from Continuing Operations - Non-GAAP $ 140,526 $ 152,816 $ 3.09 Twelve Months Ended March 31, 2017 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ (23,612) $ (42,952) $ (0.87) Adjustments: Goodwill Impairment 266,298 266,298 5.39 Loss on divestitures 19,124 17,980 0.36 Triumph Aerospace Structures - Strike related costs 15,701 14,450 0.29 Triumph Aerospace Structures - Inventory write-down 6,089 5,604 0.11 Triumph Aerospace Structures - UAS program 14,200 13,068 0.26 Restructuring costs (non-cash) 10,797 9,937 0.20 Restructuring costs (cash) 42,177 38,816 0.79 Adjusted Income from Continuing Operations - Non-GAAP $ 350,774 $ 323,201 $ 6.54 * * Difference due to rounding 24
(Continued) Non-GAAP FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES Disclosure (dollars in thousands) Non-GAAP Financial Measures Disclosures (continued) Cash provided by operations has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles cash provided by operations to free cash flow. Three Months Twelve Months Twelve Months Ended Ended Ended March 31, 2018 March 31, 2018 March 31, 2017 Cash flow from operations $ (90,615) $ (288,893) $ 281,522 Less: Capital expenditures (10,118) (42,050) (51,832) Free cash flow $ (100,733) $ (330,943) $ 229,690 The Company provides earnings per share guidance on an adjusted non-GAAP basis excluding the effects of transformation related costs, gains (losses) on divestitures, impairments, one-time pension & OPEB benefits (charges) and other non-recurring items, such as the adoption ASU 2017-07. The following table reconciles earnings per share on a GAAP basis to adjusted earnings per diluted share guidance. Guidance - earnings per diluted share - GAAP $0.00 - $0.50 Per share effect of: Cumulative effect of adoption of ASU 2017-07 (Pension) $1.46 - $1.52 Transformation related costs $0.04 - $0.08 Guidance - adjusted earnings per diluted share $1.50 - $2.10 25
(Continued) Non-GAAP FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES Disclosure (dollars in thousands) Non-GAAP Financial Measures Disclosures (continued) Cash provided by operations, is provided for consistency and comparability. We also use free cash flow as a key factor in planning for and consideration of strategic acquisitions and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles our Operating income to Adjusted Operating income as noted above. Three Months Ended Twelve Months Ended March 31, March 31, 2018 2017 2018 2017 Operating (loss) income - GAAP $ (279,959) $ (115,490) $ (362,406) $ 56,889 Adjustments: Goodwill & tradename impairments 345,000 266,298 535,227 266,298 Restructuring costs (non-cash) 467 501 3,005 10,797 Restructuring costs (cash) 6,319 13,997 40,069 42,177 Loss on divestitures 10,370 — 30,741 19,124 Triumph Precision Components - Strike related costs — — — 15,701 Other inventory impairments — — — 20,289 Curtailment & settlement, net (11,146) — (25,722) — Adjusted Operating income - non-GAAP $ 71,051 $ 165,306 $ 220,914 $ 431,275 26
