EX-99.1 2 tgi-ex991_6.htm EX-99.1 tgi-ex991_6.htm

 

Exhibit 99.1

 

NEWS RELEASE

 

Media Contact:

Michele Long

Phone (610) 251-1000

mmlong@triumphgroup.com

 

 

Investor Relations Contact:

Thomas A. Quigley, III

Phone (610) 251-1000

tquigley@triumphgroup.com

 

TRIUMPH GROUP REPORTS THIRD QUARTER FISCAL 2020 RESULTS

 

Reports Organic Revenue Growth of 8%

Generates Solid Free Cash Flow

 

BERWYN, Pa. – February 6, 2020 – Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its third quarter of fiscal year 2020, which ended December 31, 2019.

 

Third Quarter Fiscal 2020

Net sales of $704.7 million

Operating income of $1.7 million with operating margin of 0.2%; adjusted operating income of $64.0 million with adjusted operating margin of 9.1%

Net loss of ($13.8) million, or ($0.27) per share; adjusted net income of $35.4 million, or $0.69 per diluted share

Cash flow provided by operations of $49.9 million, and free cash flow of $39.6 million

 

Outlook for Fiscal 2020

Net sales of between $2.8 billion to $2.9 billion

GAAP earnings per diluted share of between $1.28 and $1.48

Adjusted earnings per diluted share of between $2.35 to $2.55

Positive free cash flow of between $0 to $50.0 million

“Triumph Group delivered strong third quarter results, in line with our expectations,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Organic revenue was up year-over-year across all three of our business segments, driven by increased volume on Airbus commercial programs and aftermarket demand for military rotorcraft components and engine mounted accessories. Integrated Systems margins were driven by increases in MRO and spares sales, as well as improved operational efficiencies and cost reduction initiatives. Aerospace Structures continued to execute its plan, divesting the Nashville large structures business and exiting legacy programs. We expect these actions to benefit margins in future quarters.”

Mr. Crowley continued, “Free cash flow was positive for the quarter and year to date, and we remain on track to deliver positive free cash flow for fiscal year 2020 as we guided. Triumph is a more predictable business as we de-risk our portfolio and backlog and stabilize our cash flows.”  

Mr. Crowley concluded, “We are focused on our core and I remain confident in Triumph’s ability to compete, win and create value over the long term for our stakeholders.”


1


 

737 MAX Update

 

Boeing and Triumph have agreed that advance repayments will be deferred from Triumph’s fiscal fourth quarter and have reached agreement on the rate at which Triumph will continue to manufacture content for the 737 Max program in the near term to protect continuity of supply to Boeing.  The parties also agreed to explore balanced solutions to address a number of business considerations between both companies, including certain fiscal 2021 advance repayments.

 

Third Quarter Fiscal Year 2020 Overview

 

After accounting for the impact of the divestitures, sales for the third quarter of fiscal 2020 were up 8% organically from the comparable prior year period.  Growth was driven by increased volumes on Airbus commercial programs, military rotorcraft components, aftermarket accessory services and legacy structures programs.

Third quarter operating income of $1.7 million included a $1.4 million expense for union OPEB related incentives, $60.0 million for loss on divestitures, ($3.9) million for a legal judgment gain and $4.7 million of restructuring costs.  Net loss for the third quarter of fiscal year 2020 was ($13.8) million, or ($0.27) per share.  On an adjusted basis, net income was $35.4 million, or $0.69 per diluted share.  

Triumph’s results included the following:  

 

($ millions except EPS)

 

Pre-tax

 

 

After-tax

 

 

Diluted EPS

 

Loss from Continuing Operations - GAAP

 

$

(17.5

)

 

$

(13.8

)

 

$

(0.27

)

Loss on sale of assets and businesses

 

 

60.0

 

 

 

47.4

 

 

 

0.93

 

Legal judgment gain, net

 

 

(3.9

)

 

 

(3.0

)

 

 

(0.06

)

Union incentives

 

 

1.4

 

 

 

1.1

 

 

 

0.02

 

Transformation related costs:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring costs (cash)

 

 

4.7

 

 

 

3.7

 

 

 

0.07

 

Adjusted Income from Continuing Operations - non-GAAP *

 

$

44.8

 

 

$

35.4

 

 

$

0.69

 

* Differences due to rounding

 

The number of shares used in computing diluted earnings per share for the third quarter of 2020 was 51.0 million.

Backlog was $3.34 billion, down compared to the prior year period and on a sequential basis due to divestitures, sunsetting programs and recent production rate reductions, but partially offset by military program increases in Integrated Systems.  

 

For the nine months ended December 31, 2019, cash flow provided by operations was $39.3 million, reflecting continued investment in ramping programs and liquidation of approximately $60.0 million in prior period advances against current period deliveries.    

 

Outlook

As noted previously, the Boeing 737 MAX program historically has contributed a single-digit percentage of annual revenue. The Company now expects the FY20 revenue impact from the reduction in rates from the beginning of the year to be less than 3% of sales with similar impacts to operating income and cash.

 

Based on anticipated aircraft production rates and including the timing of pending program transfers, the Company continues to expect that net sales for fiscal year 2020 will be approximately $2.8 billion to $2.9 billion.

 

The Company has narrowed its expected GAAP fiscal year 2020 earnings per diluted share from a range of $1.34 to $2.35 to a range of $1.28 to $1.48 and adjusted earning per diluted share from a range of $2.35 to $2.95 to a range of $2.35 to $2.55.

 

The Company has updated is expected fiscal year 2020 cash provided from operations from a range of $50.0 million to $110.0 million to a range of $40.0 million to $100.0 million. The Company continues to expect positive free cash flow of $0 to $50.0 million in fiscal year 2020.    

 

The Company’s current outlook reflects the divestiture of its Nashville business, planned 737MAX production rates and adjustments detailed in the attached tables but excludes the impact of any potential future divestitures.  

 

 

 

2


 

 

Conference Call

 

Triumph will hold a conference call today, February 6th, at 8:30 a.m. (ET) to discuss the third quarter fiscal year 2020 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, and the presentation has been posted on the Company’s website at http://ir.triumphgroup.com/QuarterlyResults. An audio replay will be available from February 6th to February 13th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #1487806.

 

About Triumph

 

Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerospace and defense systems, components and structures. The company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators.

 

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, 2019.

FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES

3


 

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(in thousands, except per share data)

 

 

 

Three Months Ended

December 31,

 

 

Nine Months Ended

December 31,

 

CONDENSED STATEMENTS OF OPERATIONS

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

704,666

 

 

$

807,895

 

 

$

2,207,007

 

 

$

2,495,903

 

Cost of sales (excluding depreciation shown below)

 

 

546,282

 

 

 

713,274

 

 

 

1,750,751

 

 

 

2,207,962

 

Selling, general & administrative

 

 

65,974

 

 

 

71,823

 

 

 

194,512

 

 

 

223,031

 

Depreciation & amortization

 

 

29,843

 

 

 

37,404

 

 

 

104,112

 

 

 

114,349

 

Restructuring costs

 

 

4,744

 

 

 

2,327

 

 

 

13,490

 

 

 

18,206

 

Legal judgment gain, net of expenses

 

 

(3,857

)

 

 

 

 

 

(9,257

)

 

 

 

Loss on sale of assets and businesses, net

 

 

60,019

 

 

 

 

 

 

55,190

 

 

 

17,837

 

Operating income (loss)

 

 

1,661

 

 

 

(16,933

)

 

 

98,209

 

 

 

(85,482

)

Interest expense and other, net

 

 

33,178

 

 

 

29,309

 

 

 

96,069

 

 

 

83,515

 

Non-service defined benefit income

 

 

(13,989

)

 

 

(16,520

)

 

 

(57,280

)

 

 

(49,581

)

Income tax (benefit) expense

 

 

(3,682

)

 

 

1,223

 

 

 

12,477

 

 

 

2,739

 

Net (loss) income

 

$

(13,846

)

 

$

(30,945

)

 

$

46,943

 

 

$

(122,155

)

Earnings per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.27

)

 

$

(0.62

)

 

$

0.94

 

 

$

(2.46

)

Weighted average common shares outstanding - basic

 

 

50,395

 

 

 

49,668

 

 

 

50,074

 

 

 

49,616

 

Earnings per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(0.27

)

 

$

(0.62

)

 

$

0.93

 

 

$

(2.46

)

Weighted average common shares outstanding - diluted

 

 

50,395

 

 

 

49,668

 

 

 

50,591

 

 

 

49,616

 

Dividends declared and paid per common share

 

$

0.04

 

 

$

0.04

 

 

$

0.12

 

 

$

0.12

 

 

4


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data)

 

BALANCE SHEETS

 

Unaudited

December 31,

2019

 

 

Audited

March 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,594

 

 

$

92,807

 

Accounts receivable, net

 

 

300,730

 

 

 

373,590

 

Contract assets

 

 

241,875

 

 

 

326,667

 

Inventory, net

 

 

473,863

 

 

 

413,560

 

Prepaid and other current assets

 

 

26,133

 

 

 

34,446

 

Current assets

 

 

1,096,195

 

 

 

1,241,070

 

Property and equipment, net

 

 

433,475

 

 

 

543,710

 

Goodwill

 

 

583,699

 

 

 

583,225

 

Intangible assets, net

 

 

394,782

 

 

 

430,954

 

Other, net

 

 

117,235

 

 

 

55,615

 

Total assets

 

$

2,625,386

 

 

$

2,854,574

 

Liabilities & Stockholders' Deficit

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

7,795

 

 

$

8,201

 

Accounts payable

 

 

379,989

 

 

 

433,783

 

Contract liabilities

 

 

264,463

 

 

 

293,719

 

Accrued expenses

 

 

231,065

 

 

 

239,572

 

Current liabilities

 

 

883,312

 

 

 

975,275

 

Long-term debt, less current portion

 

 

1,400,893

 

 

 

1,480,620

 

Accrued pension and post-retirement benefits, noncurrent

 

 

496,284

 

 

 

540,479

 

Deferred income taxes, noncurrent

 

 

16,709

 

 

 

6,964

 

Other noncurrent liabilities

 

 

361,085

 

 

 

424,549

 

Stockholders' Deficit:

 

 

 

 

 

 

 

 

Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920

   and 52,460,920 shares issued

 

 

52

 

 

 

52

 

Capital in excess of par value

 

 

804,133

 

 

 

867,545

 

Treasury stock, at cost, 631,146 and 2,573,652 shares

 

 

(38,424

)

 

 

(159,154

)

Accumulated other comprehensive loss

 

 

(545,299

)

 

 

(487,684

)

Accumulated deficit

 

 

(753,359

)

 

 

(794,072

)

Total stockholders' deficit

 

 

(532,897

)

 

 

(573,313

)

Total liabilities and stockholders' deficit

 

$

2,625,386

 

 

$

2,854,574

 

 

5


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except share data)

 

 

 

Nine Months Ended

December 31,

 

CASH FLOWS

 

2019

 

 

2018

 

Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

46,943

 

 

$

(122,155

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation & amortization

 

 

104,112

 

 

 

114,349

 

Amortization of acquired contract liabilities

 

 

(56,153

)

 

 

(48,769

)

Loss on sale of assets & businesses, net

 

 

55,190

 

 

 

17,837

 

Curtailment and special termination benefit gain, net

 

 

(14,373

)

 

 

 

Other amortization included in interest expense

 

 

9,114

 

 

 

6,811

 

Provision for doubtful accounts receivable

 

 

632

 

 

 

622

 

Provision for deferred income taxes

 

 

8,108

 

 

 

 

Employee stock-based compensation

 

 

8,245

 

 

 

8,509

 

Changes in assets and liabilities, excluding the effects of acquisitions/divestitures:

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

72,278

 

 

 

8,669

 

Contract assets

 

 

53,047

 

 

 

6,240

 

Inventories

 

 

(67,764

)

 

 

(61,563

)

Prepaid expenses and other current assets

 

 

11,315

 

 

 

1,615

 

Accounts payable, accrued expenses and contract liabilities

 

 

(143,718

)

 

 

(72,639

)

Accrued pension and other postretirement benefits

 

 

(46,693

)

 

 

(55,150

)

Other

 

 

(995

)

 

 

2,508

 

Net cash provided by (used in) operating activities

 

 

39,288

 

 

 

(193,116

)

Investing Activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(27,250

)

 

 

(34,824

)

Proceeds from sale of assets

 

 

49,956

 

 

 

41,417

 

Net cash provided by investing activities

 

 

22,706

 

 

 

6,593

 

Financing Activities

 

 

 

 

 

 

 

 

Net (decrease) increase in revolving credit facility

 

 

(215,000

)

 

 

218,066

 

Proceeds from issuance of long-term debt and finance leases

 

 

570,980

 

 

 

45,000

 

Repayment of debt and finance lease obligations

 

 

(433,197

)

 

 

(73,011

)

Payment of deferred financing costs

 

 

(17,545

)

 

 

(1,941

)

Dividends paid

 

 

(6,005

)

 

 

(5,975

)

Repurchase of restricted shares for minimum tax obligation

 

 

(1,179

)

 

 

(645

)

Net cash (used in) provided by financing activities

 

 

(101,946

)

 

 

181,494

 

Effect of exchange rate changes on cash

 

 

739

 

 

 

(2,126

)

Net change in cash

 

 

(39,213

)

 

 

(7,155

)

Cash and equivalents at beginning of period

 

 

92,807

 

 

 

35,819

 

Cash and equivalents at end of period

 

$

53,594

 

 

$

28,664

 

 

6


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

SEGMENT DATA

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

$

275,248

 

 

$

252,437

 

 

$

813,454

 

 

$

754,193

 

Aerospace Structures

 

 

368,972

 

 

 

490,337

 

 

 

1,210,729

 

 

 

1,551,090

 

Product Support

 

 

63,978

 

 

 

71,446

 

 

 

193,127

 

 

 

209,860

 

Elimination of inter-segment sales

 

 

(3,532

)

 

 

(6,325

)

 

 

(10,303

)

 

 

(19,240

)

 

 

$

704,666

 

 

$

807,895

 

 

$

2,207,007

 

 

$

2,495,903

 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

$

47,896

 

 

$

39,947

 

 

$

134,140

 

 

$

115,221

 

Aerospace Structures

 

 

18,039

 

 

 

(49,813

)

 

 

43,930

 

 

 

(152,143

)

Product Support

 

 

9,538

 

 

 

11,421

 

 

 

29,680

 

 

 

30,604

 

Corporate

 

 

(70,857

)

 

 

(15,222

)

 

 

(101,296

)

 

 

(70,655

)

Share-based compensation expense

 

 

(2,955

)

 

 

(3,266

)

 

 

(8,245

)

 

 

(8,509

)

 

 

$

1,661

 

 

$

(16,933

)

 

$

98,209

 

 

$

(85,482

)

Operating margin %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

 

17.4

%

 

 

15.8

%

 

 

16.5

%

 

 

15.3

%

Aerospace Structures

 

 

4.9

%

 

 

(10.2

%)

 

 

3.6

%

 

 

(9.8

%)

Product Support

 

 

14.9

%

 

 

16.0

%

 

 

15.4

%

 

 

14.6

%

Consolidated

 

 

0.2

%

 

 

(2.1

%)

 

 

4.4

%

 

 

(3.4

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

$

6,992

 

 

$

7,376

 

 

$

21,042

 

 

$

22,316

 

Aerospace Structures

 

 

20,921

 

 

 

27,673

 

 

 

77,265

 

 

 

84,888

 

Product Support

 

 

1,083

 

 

 

1,611

 

 

 

3,272

 

 

 

4,944

 

Corporate

 

 

847

 

 

 

744

 

 

 

2,533

 

 

 

2,201

 

 

 

$

29,843

 

 

$

37,404

 

 

$

104,112

 

 

$

114,349

 

Amortization of acquired contract liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

$

(8,377

)

 

$

(8,172

)

 

$

(26,126

)

 

$

(25,789

)

Aerospace Structures

 

 

(8,220

)

 

 

(6,559

)

 

 

(30,027

)

 

 

(22,980

)

 

 

$

(16,597

)

 

$

(14,731

)

 

$

(56,153

)

 

$

(48,769

)

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrated Systems

 

$

2,974

 

 

$

3,951

 

 

$

9,734

 

 

$

9,388

 

Aerospace Structures

 

 

5,910

 

 

 

5,722

 

 

 

13,915

 

 

 

22,937

 

Product Support

 

 

955

 

 

 

852

 

 

 

2,621

 

 

 

1,871

 

Corporate

 

 

416

 

 

 

45

 

 

 

980

 

 

 

628

 

 

 

$

10,255

 

 

$

10,570

 

 

$

27,250

 

 

$

34,824

 

 

7


 

(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 and Adjusted EBITDAP, 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 and Adjusted EBITDA, less pension & other postretirement benefits. We disclose Adjusted EBITDA and Adjusted EBITDAP on a consolidated and Adjusted EBITDAP 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 and Adjusted EBITDAP as 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 and Adjusted EBITDAP, 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 and Adjusted EBITDAP are not measurements 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 or Adjusted EBITDAP as substitutes 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 and Adjusted EBITDAP 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 and Adjusted EBITDAP.

Adjusted EBITDA and Adjusted EBITDAP 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 20 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 and Adjusted EBITDAP exclude these charges and provide meaningful information about the operating performance of our business, apart from charges for depreciation and amortization. We believe the disclosure of Adjusted EBITDA and Adjusted EBITDAP helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe Adjusted EBITDA and Adjusted EBITDAP 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 and Adjusted EBITDAP 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 Adjusted EBITDAP 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.

8


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

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 earnings necessarily reflect the current and ongoing cash earnings related to our operations.

Non-service defined benefit income (inclusive of the adoption of ASU 2017-07) may be useful to investors to consider because they represent the cost of post retirement benefits to plan participants, net of the assumption of returns on the plan's assets and are not indicative of the cash paid for such benefits.  We do not believe these earnings (expenses) necessarily reflect the current and ongoing cash earnings related to our operations.

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 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.

9


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands)

The following table shows our Adjusted EBITDA and Adjusted EBITDAP reconciled to our net income for the indicated periods (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

Adjusted Earnings before Interest, Taxes, Depreciation,

Amortization, and Pension (Adjusted EBITDAP):

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(13,846

)

 

$

(30,945

)

 

$

46,943

 

 

$

(122,155

)

Add-back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (benefit) expense

 

 

(3,682

)

 

 

1,223

 

 

 

12,477

 

 

 

2,739

 

Interest expense and other, net

 

 

33,178

 

 

 

29,309

 

 

 

96,069

 

 

 

83,515

 

Curtailment gain & special termination, net

 

 

 

 

 

 

 

 

(14,373

)

 

 

 

Union incentives

 

 

1,400

 

 

 

 

 

 

7,071

 

 

 

 

Loss on sales of assets and businesses, net

 

 

60,019

 

 

 

 

 

 

55,190

 

 

 

17,837

 

Legal judgment gain, net of expenses

 

 

(3,857

)

 

 

 

 

 

(9,257

)

 

 

 

Adoption of ASU 2017-07

 

 

 

 

 

 

 

 

 

 

 

87,241

 

Amortization of acquired contract liabilities

 

 

(16,597

)

 

 

(14,731

)

 

 

(56,153

)

 

 

(48,769

)

Depreciation and amortization

 

 

29,843

 

 

 

37,404

 

 

 

104,112

 

 

 

114,349

 

Adjusted Earnings before Interest, Taxes, Depreciation

   and Amortization ("Adjusted EBITDA")

 

$

86,458

 

 

$

22,260

 

 

$

242,079

 

 

$

134,757

 

Non-service defined benefit income (excluding settlements)

 

 

(13,989

)

 

 

(16,520

)

 

 

(42,907

)

 

 

(49,581

)

Adjusted Earnings before Interest, Taxes, Depreciation

   and Amortization, and Pension ("Adjusted EBITDAP")

 

$

72,469

 

 

$

5,740

 

 

$

199,172

 

 

$

85,176

 

Net sales

 

$

704,666

 

 

$

807,895

 

 

$

2,207,007

 

 

$

2,495,903

 

Net (loss) income margin

 

 

(2.0

%)

 

 

(3.8

%)

 

 

2.1

%

 

 

(4.9

%)

Adjusted EBITDAP margin

 

 

10.5

%

 

 

0.7

%

 

 

9.3

%

 

 

3.5

%

 

10


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

 

 

 

Three Months Ended December 31, 2019

 

 

 

 

 

 

 

Segment Data

 

Adjusted Earnings before Interest, Taxes, Depreciation,

Amortization, and Pension (EBITDAP):

 

Total

 

 

Integrated

Systems

 

 

Aerospace

Structures

 

 

Product

Support

 

 

Corporate/

Eliminations*

 

Net loss

 

$

(13,846

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add-back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-service defined benefit income

 

 

(13,989

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(3,682

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

 

33,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

1,661

 

 

$

47,896

 

 

$

18,039

 

 

$

9,538

 

 

$

(73,812

)

Loss on sales of assets & businesses, net

 

 

60,019

 

 

 

 

 

 

 

 

 

 

 

 

60,019

 

Legal settlement gain, net of expenses

 

 

(3,857

)

 

 

 

 

 

 

 

 

 

 

 

(3,857

)

Union represented employee incentives

 

 

1,400

 

 

 

 

 

 

1,400

 

 

 

 

 

 

 

Amortization of acquired contract liabilities

 

 

(16,597

)

 

 

(8,377

)

 

 

(8,220

)

 

 

 

 

 

 

Depreciation and amortization

 

 

29,843

 

 

 

6,992

 

 

 

20,921

 

 

 

1,083

 

 

 

847

 

Adjusted Earnings (Losses) before Interest, Taxes,

   Depreciation and Amortization, and Pension

   ("Adjusted EBITDAP")

 

$

72,469

 

 

$

46,511

 

 

$

32,140

 

 

$

10,621

 

 

$

(16,803

)

Net sales

 

$

704,666

 

 

$

275,248

 

 

$

368,972

 

 

$

63,978

 

 

$

(3,532

)

Adjusted EBITDAP margin

 

 

10.5

%

 

 

17.4

%

 

 

8.9

%

 

 

16.6

%

 

n/a

 

 

 

 

Nine Months Ended December 31, 2019

 

 

 

 

 

 

 

Segment Data

 

Adjusted Earnings before Interest, Taxes, Depreciation,

Amortization, and Pension (EBITDAP):

 

Total

 

 

Integrated

Systems

 

 

Aerospace

Structures

 

 

Product

Support

 

 

Corporate/

Eliminations*

 

Net income

 

$

46,943

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add-back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-service defined benefit income

 

 

(57,280

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

12,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

 

96,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

98,209

 

 

$

134,140

 

 

$

43,930

 

 

$

29,680

 

 

$

(109,541

)

Loss (gain) on sales of assets & businesses, net

 

 

55,190

 

 

 

 

 

 

(10,121

)

 

 

 

 

 

65,311

 

Legal judgment gain, net of expenses

 

 

(9,257

)

 

 

 

 

 

 

 

 

 

 

 

(9,257

)

Union represented employee incentives

 

 

7,071

 

 

 

 

 

 

7,071

 

 

 

 

 

 

 

Amortization of acquired contract liabilities

 

 

(56,153

)

 

 

(26,126

)

 

 

(30,027

)

 

 

 

 

 

 

Depreciation and amortization

 

 

104,112

 

 

 

21,042

 

 

 

77,265

 

 

 

3,272

 

 

 

2,533

 

Adjusted Earnings (Losses) before Interest, Taxes,

   Depreciation and Amortization, and Pension

   ("Adjusted EBITDAP")

 

$

199,172

 

 

$

129,056

 

 

$

88,118

 

 

$

32,952

 

 

$

(50,954

)

Net sales

 

$

2,207,007

 

 

$

813,454

 

 

$

1,210,729

 

 

$

193,127

 

 

$

(10,303

)

Adjusted EBITDAP margin

 

 

9.3

%

 

 

16.4

%

 

 

7.5

%

 

 

17.1

%

 

n/a

 

11


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

 

 

 

Three Months Ended December 31, 2018

 

 

 

 

 

 

 

Segment Data

 

Adjusted Earnings before Interest, Taxes, Depreciation,

Amortization, and Pension (EBITDAP):

 

Total

 

 

Integrated

Systems

 

 

Aerospace

Structures

 

 

Product

Support

 

 

Corporate/

Eliminations*

 

Net loss

 

$

(30,945

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add-back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-service defined benefit income

 

 

(16,520

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

1,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

 

29,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

$

(16,933

)

 

$

39,947

 

 

$

(49,813

)

 

$

11,421

 

 

$

(18,488

)

Amortization of acquired contract liabilities

 

 

(14,731

)

 

 

(8,172

)

 

 

(6,559

)

 

 

 

 

 

 

Depreciation and amortization

 

 

37,404

 

 

 

7,376

 

 

 

27,673

 

 

 

1,611

 

 

 

744

 

Adjusted Earnings (Losses) before Interest, Taxes,

   Depreciation and Amortization, and Pension

   ("Adjusted EBITDAP")

 

$

5,740

 

 

$

39,151

 

 

$

(28,699

)

 

$

13,032

 

 

$

(17,744

)

Net sales

 

$

807,895

 

 

$

252,437

 

 

$

490,337

 

 

$

71,446

 

 

$

(6,325

)

Adjusted EBITDAP margin

 

 

0.7

%

 

 

16.0

%

 

 

(5.9

%)

 

 

18.2

%

 

n/a

 

 

 

 

Nine Months Ended December 31, 2018

 

 

 

 

 

 

 

Segment Data

 

Adjusted Earnings before Interest, Taxes, Depreciation,

Amortization, and Pension (EBITDAP):

 

Total

 

 

Integrated

Systems

 

 

Aerospace

Structures

 

 

Product

Support

 

 

Corporate/

Eliminations*

 

Net loss

 

$

(122,155

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add-back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-service defined benefit income

 

 

(49,581

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

2,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

 

83,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

$

(85,482

)

 

$

115,221

 

 

$

(152,143

)

 

$

30,604

 

 

$

(79,164

)

Loss on sales of assets & businesses, net

 

 

17,837

 

 

 

 

 

 

 

 

 

 

 

 

17,837

 

Adoption of ASU 2017-07

 

 

87,241

 

 

 

 

 

 

87,241

 

 

 

 

 

 

 

Amortization of acquired contract liabilities

 

 

(48,769

)

 

 

(25,789

)

 

 

(22,980

)

 

 

 

 

 

 

Depreciation and amortization

 

 

114,349

 

 

 

22,316

 

 

 

84,888

 

 

 

4,944

 

 

 

2,201

 

Adjusted Earnings (Losses) before Interest,

   Taxes, Depreciation and Amortization,

   and Pension ("Adjusted EBITDAP")

 

$

85,176

 

 

$

111,748

 

 

$

(2,994

)

 

$

35,548

 

 

$

(59,126

)

Net sales

 

$

2,495,903

 

 

$

754,193

 

 

$

1,551,090

 

 

$

209,860

 

 

$

(19,240

)

Adjusted EBITDAP margin

 

 

3.5

%

 

 

15.3

%

 

 

(0.2

)%

 

 

16.9

%

 

n/a

 

 

*Operating loss at Corporate includes share-based compensation expense.

12


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except per share data)

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 have 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

December 31, 2019

 

 

 

Pre-Tax

 

 

After-Tax

 

 

Diluted EPS

 

Loss from continuing operations - GAAP

 

$

(17,528

)

 

$

(13,846

)

 

$

(0.27

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of assets and businesses, net

 

 

60,019

 

 

 

47,415

 

 

 

0.93

 

Legal judgment gain, net of expenses

 

 

(3,857

)

 

 

(3,047

)

 

 

(0.06

)

Union incentives

 

 

1,400

 

 

 

1,106

 

 

 

0.02

 

Restructuring costs

 

 

4,744

 

 

 

3,748

 

 

 

0.07

 

Adjusted income from continuing operations - non-GAAP

 

$

44,778

 

 

$

35,376

 

 

$

0.69

 

 

 

 

Nine Months Ended

December 31, 2019

 

 

 

Pre-Tax

 

 

After-Tax

 

 

Diluted EPS

 

 

FY20 EPS

Guidance Range

 

Income from continuing operations - GAAP

 

$

59,420

 

 

$

46,943

 

 

$

0.93

 

 

$1.28 - $1.48

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of assets and businesses, net

 

 

55,190

 

 

 

43,600

 

 

 

0.86

 

 

 

1.07

 

Curtailment gain & special termination gain, net

 

 

(14,373

)

 

 

(11,355

)

 

 

(0.22

)

 

 

(0.28

)

Legal settlement gain, net of expenses

 

 

(9,257

)

 

 

(7,313

)

 

 

(0.14

)

 

 

(0.18

)

Union incentives

 

 

7,071

 

 

 

5,586

 

 

 

0.11

 

 

 

0.14

 

Restructuring costs

 

 

13,490

 

 

 

10,657

 

 

 

0.21

 

 

 

0.26

 

Refinancing cost

 

 

3,030

 

 

 

2,394

 

 

 

0.05

 

 

 

0.06

 

Adjusted income from continuing operations - non-GAAP*

 

$

114,571

 

 

$

90,512

 

 

$

1.79

 

 

$2.35 - $2.55

 

* Differences due to rounding

 

 

 

Three Months Ended

December 31, 2018

 

 

 

Pre-Tax

 

 

After-Tax

 

 

Diluted EPS

 

Loss from continuing operations - GAAP

 

$

(29,722

)

 

$

(30,945

)

 

$

(0.62

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Global 7500 forward loss charge

 

 

40,498

 

 

 

40,498

 

 

 

0.81

 

E2 Jet program forward loss charge

 

 

9,162

 

 

 

7,604

 

 

 

0.15

 

G280 program forward loss charge

 

 

2,516

 

 

 

2,088

 

 

 

0.04

 

Restructuring costs

 

 

2,327

 

 

 

1,891

 

 

 

0.04

 

Adjusted income from continuing operations - non-GAAP

 

$

24,781

 

 

$

21,136

 

 

$

0.42

 

13


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except per share data)

Non-GAAP Financial Measure Disclosures (continued)

 

 

 

Nine Months Ended

December 31, 2018

 

 

 

Pre-Tax

 

 

After-Tax

 

 

Diluted EPS

 

Loss from continuing operations - GAAP

 

$

(119,416

)

 

$

(122,155

)

 

$

(2.46

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of ASU 2017-07

 

 

87,241

 

 

 

85,474

 

 

 

1.71

 

Loss on sale of assets and businesses, net

 

 

17,837

 

 

 

17,837

 

 

 

0.36

 

Global 7500 forward loss charge

 

 

60,424

 

 

 

57,664

 

 

 

1.16

 

E2 Jet program forward loss charge

 

 

9,162

 

 

 

7,604

 

 

 

0.15

 

G280 program forward loss charge

 

 

2,516

 

 

 

2,088

 

 

 

0.04

 

Reduction of prior Gulfstream forward loss

 

 

(7,624

)

 

 

(6,328

)

 

 

(0.13

)

Restructuring costs

 

 

18,206

 

 

 

15,111

 

 

 

0.30

 

Refinancing costs

 

 

1,281

 

 

 

1,063

 

 

 

0.02

 

Adjusted income from continuing operations - non-GAAP*

 

$

69,627

 

 

$

58,358

 

 

$

1.17

 

* Differences due to rounding

Adjusted Operating Income is defined as GAAP Operating Income, less expenses/gains associated with the Company's transformation, such as restructuring expenses, gains/losses on divestitures, defined benefit plan gains/losses from curtailments, settlements, etc; impairments of goodwill and other assets. Management believes that this is useful in evaluating operating performance, but this measure should not be used in isolation. The following table reconciles our Operating income to Adjusted Operating income as noted above.

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

December 31,

2019

 

 

December 31,

2018

 

 

December 31,

2019

 

 

December 31,

2018

 

Operating income (loss) - GAAP

 

$

1,661

 

 

$

(16,933

)

 

$

98,209

 

 

$

(85,482

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of ASU 2017-07

 

 

 

 

 

 

 

 

 

 

 

87,241

 

Loss on sale of assets and businesses, net

 

 

60,019

 

 

 

 

 

 

55,190

 

 

 

17,837

 

Global 7500 forward loss charge

 

 

 

 

 

40,498

 

 

 

 

 

 

60,424

 

E2 Jet program forward loss charge

 

 

 

 

 

9,162

 

 

 

 

 

 

9,162

 

G280 program forward loss charge

 

 

 

 

 

2,516

 

 

 

 

 

 

2,516

 

Reduction of prior Gulfstream forward loss

 

 

 

 

 

 

 

 

 

 

 

(7,624

)

Restructuring costs

 

 

4,744

 

 

 

2,327

 

 

 

13,490

 

 

 

18,206

 

Legal judgment gain, net of expenses

 

 

(3,857

)

 

 

 

 

 

(9,257

)

 

 

 

Union incentives

 

 

1,400

 

 

 

 

 

 

7,071

 

 

 

 

Adjusted operating income - non-GAAP

 

$

63,967

 

 

$

37,570

 

 

$

164,703

 

 

$

102,280

 

 

14


 

(Continued)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

(dollars in thousands, except per share data)

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 cash provided by operations to free cash flow.

 

 

 

Three Months Ended

December 31,

 

 

Nine Months Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Cash flow (provided by) used in operations

 

$

49,881

 

 

$

4,063

 

 

$

39,288

 

 

$

(193,116

)

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,255

)

 

 

(10,570

)

 

 

(27,250

)

 

 

(34,824

)

Free cash flow (use)

 

$

39,626

 

 

$

(6,507

)

 

$

12,038

 

 

$

(227,940

)

 

The Company provides cash flow guidance on non-GAAP basis adjusting capital expenditures from cash from operations to arrive at free cash flow.  The following table reconciles cash from operations on a GAAP basis to free cash flow guidance.

 

 

 

FY20 Cash Flow

Guidance Range

Cash flow from operations

 

$40,000 - $100,000

Less:

 

 

Capital expenditures

 

$40,000 - $50,000

Free cash flow

 

$0 - $50,000

 

15