tgi-ex991

BERWYN, Pa. – August 4, 2020 – Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its first quarter of fiscal year 2021, which ended June 30, 2020.

“For the first quarter of our fiscal year, organic revenue decreased by 29% due primarily to expected declines in Aerospace Structures associated with planned reductions from our portfolio transformation and the COVID-19 pandemic. Systems & Support gross margins were in line with the prior year, benefitting from increased military volumes, improved operational efficiencies and cost reduction initiatives,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. We continued executing our plan to exit legacy programs in Aerospace Structures with the recent announcements of the sales of our G650 wing kitting and engineering services program to Gulfstream and of our two Composite structures factories to Arlington Capital Partners. These transactions will benefit Triumph in fiscal 2021 and beyond.”

Mr. Crowley continued, “Our total cash usage for the first quarter was largely associated with working capital expansion, yet contained by the actions we implemented early in the quarter to conserve cash. We expect our cash use to slow in the second quarter and recover in the second half as we exit the last of our cash burning programs and begin to generate positive free cash flow. We are continuing to identify further cost reduction actions to enhance our liquidity position and ensure financial flexibility in the current operating environment while supporting the needs of our customers.”

Mr. Crowley concluded, “The steps we took this quarter build on our momentum and drive improved profitability and cash flow to become a more predictable and diverse business. As we look out to the rest of the year, Triumph remains focused on protecting the health and safety of our people, conserving our cash and partnering with our customers to ensure we are best positioned for recovery for the benefit of all our stakeholders.”

After accounting for the impact of the divestitures, sales for the first quarter of fiscal 2021 were down 29% organically from the comparable prior year period. The decline was driven by planned reductions on sunsetting and transitioned programs, impacts of the COVID-19 pandemic and resulting production rate decreases primarily on commercial programs, partially offset by increases in military programs.

First quarter operating loss of $252.4 million included a $252.4 million impairment charge of the legacy Aerospace Structures long-lived assets, and $15.4 million of restructuring costs associated with reductions in work force. Net loss for the first quarter of fiscal year 2021 was $277.3 million, or ($5.35) per share. On an adjusted basis, net loss was $9.5 million, or $(0.19) per share.

The number of shares used in computing earnings per share for the first quarter of 2021 was 51.9 million.

Backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $2.7 billion, down compared to the prior year period and on a sequential basis due to sunsetting programs and recent production rate reductions, but partially offset by military program increases in Systems & Support.

For the first quarter of fiscal 2021, cash flow used in operations was $(197.5) million, reflecting increasing working capital and liquidation of approximately $10.0 million in prior period advances against current period deliveries.

Based on anticipated aircraft production rates and MRO demand, including the impacts of pending program exits and no additional extended shut-down of operations due to the pandemic, the Company expects that net sales for fiscal year 2021 will be approximately $1.8 to $1.9 billion.

The Company anticipates that the trends in cash used in operations that were experienced in the first quarter of fiscal 2021 to continue, but to a lesser degree in the second quarter, and expects it to recover somewhat in the second half of the fiscal year. Therefore, the Company expects cash used in operations and free cash use to be moderately higher for the full fiscal year.

The Company’s outlook excludes the impact of the recent announcements of the sales of our G650 program and our Composite Structures factories and any potential future divestitures.

Triumph will hold a conference call today, August 4^th, at 5:30 p.m. (ET) to discuss the first quarter of fiscal year 2021 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 August 4th to August 11th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #8498495.

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.

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, 2020.

Widespread health developments, including the recent global coronavirus (COVID-19), and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities) could adversely and materially affect, among other things, the economic and financial markets and labor resources of the countries in which we operate, our manufacturing and supply chain operations, commercial operations and sales force, administrative personnel, third-party service providers, business partners and customers and the demand for our products, which could result in a material adverse effect on our business, financial conditions and results of operations.

	Three Months Ended
	June 30,
CONDENSED STATEMENTS OF OPERATIONS	2020			2019
Net sales	$	495,077		$	730,231
Cost of sales (excluding depreciation shown below)		393,843			582,233
Selling, general & administrative		57,203			62,337
Depreciation & amortization		28,602			44,050
Impairment of long-lived assets		252,382			—
Restructuring costs		15,439			2,964
Loss on sale of assets and businesses, net		—			3,136
Operating (loss) income		(252,392	)		35,511
Interest expense and other, net		34,957			27,491
Non-service defined benefit income		(10,888	)		(14,875	)
Income tax expense		853			4,807
Net (loss) Income	$	(277,314	)	$	18,088
(Loss) earnings per share - basic:
Net (loss) income	$	(5.35	)	$	0.36
Weighted average common shares outstanding - basic		51,860			49,854
(Loss) earnings per share - diluted:
Net (loss) income	$	(5.35	)	$	0.36
Weighted average common shares outstanding - diluted		51,860			50,295
Dividends declared and paid per common share	$	—		$	0.04

BALANCE SHEETS	Unaudited June 30, 2020			Audited March 31, 2020
Assets
Cash and cash equivalents	$	30,909		$	485,463
Accounts receivable, net		256,848			359,487
Contract assets		203,984			244,417
Inventory, net		467,105			452,976
Assets held for sale		195,073			—
Prepaid and other current assets		18,708			19,289
Current assets		1,172,627			1,561,632
Property and equipment, net		370,820			418,141
Goodwill		513,392			513,527
Intangible assets, net		120,928			381,968
Other, net		88,553			105,065
Total assets	$	2,266,320		$	2,980,333
Liabilities & Stockholders' Deficit
Current portion of long-term debt	$	7,555		$	7,336
Accounts payable		299,269			457,694
Contract liabilities		199,463			295,320
Accrued expenses		199,267			227,403
Liabilities related to assets held for sale		83,806			—
Current liabilities		789,360			987,753
Long-term debt, less current portion		1,557,066			1,800,171
Accrued pension and post-retirement benefits, noncurrent		643,256			660,065
Deferred income taxes, noncurrent		7,487			7,439
Other noncurrent liabilities		316,532			306,169
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		796,186			804,830
Treasury stock, at cost, 458,710 and 602,831 shares		(25,188	)		(36,217	)
Accumulated other comprehensive loss		(710,616	)		(719,428	)
Accumulated deficit		(1,107,815	)		(830,501	)
Total stockholders' deficit		(1,047,381	)		(781,264	)
Total liabilities and stockholders' deficit	$	2,266,320		$	2,980,333

	Three Months Ended June 30,
CASH FLOWS	2020			2019
Operating Activities
Net (loss) income	$	(277,314	)	$	18,088
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation & amortization		28,602			44,050
Impairment of long-lived assets		252,382			—
Amortization of acquired contract liabilities		(10,987	)		(16,939	)
Loss on sale of assets & businesses, net		—			3,136
Other amortization included in interest expense		2,191			1,958
Provision for credit losses		3,280			671
Provision for deferred income taxes		—			3,307
Employee stock-based compensation		2,786			2,426
Changes in assets and liabilities, excluding the effects of acquisitions/divestitures:
Trade and other receivables		86,004			41,247
Contract assets		(63,391	)		2,767
Inventories		(33,330	)		(56,623	)
Prepaid expenses and other current assets		549			12,721
Accounts payable, accrued expenses, and contract liabilities		(184,114	)		(35,426	)
Accrued pension and other postretirement benefits		(3,526	)		(15,792	)
Other		(665	)		(573	)
Net cash (used in) provided by operating activities		(197,533	)		5,018
Investing Activities
Capital expenditures		(7,723	)		(8,090	)
Proceeds from (payments on) sale of assets and businesses		792			(2,570	)
Net cash used in investing activities		(6,931	)		(10,660	)
Financing Activities
Net decrease in revolving credit facility		(225,000	)		(30,000	)
Proceeds from issuance of long-term debt and finance leases		6,300			5,600
Repayment of debt and finance lease obligations		(27,468	)		(30,572	)
Payment of deferred financing costs		(4,277	)		(104	)
Dividends paid		—			(1,998	)
Repurchase of restricted shares for minimum tax obligation		(474	)		(1,043	)
Net cash used in financing activities		(250,919	)		(58,117	)
Effect of exchange rate changes on cash		829			(121	)
Net change in cash		(454,554	)		(63,880	)
Cash and equivalents at beginning of period		485,463			92,807
Cash and equivalents at end of period	$	30,909		$	28,927

	Three Months Ended
	June 30,
SEGMENT DATA	2020			2019
Net sales:
Systems & Support	$	239,887		$	313,606
Aerospace Structures		257,877			419,178
Elimination of inter-segment sales		(2,687	)		(2,553	)
	$	495,077		$	730,231
Operating (loss) income:
Systems & Support	$	25,431		$	44,048
Aerospace Structures		(256,120	)		12,283
Corporate		(18,917	)		(18,394	)
Share-based compensation expense		(2,786	)		(2,426	)
	$	(252,392	)	$	35,511
Operating margin %
Systems & Support		10.6	%		14.0	%
Aerospace Structures		(99.3	%)		2.9	%
Consolidated		(51.0	%)		4.9	%

Depreciation and amortization^:
Systems & Support	$	8,356		$	8,157
Aerospace Structures		271,772			35,059
Corporate		856			834
	$	280,984		$	44,050
Amortization of acquired contract liabilities:
Systems & Support	$	(3,719	)	$	(8,125	)
Aerospace Structures		(7,268	)		(8,814	)
	$	(10,987	)	$	(16,939	)
Capital expenditures:
Systems & Support	$	6,283		$	3,884
Aerospace Structures		1,029			3,973
Corporate		411			233
	$	7,723		$	8,090
^ includes long-lived asset impairment charge

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 special termination benefits, 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:

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.

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

	Three Months Ended
	June 30,
Adjusted Earnings before Interest, Taxes, Depreciation, Amortization, and Pension (Adjusted EBITDAP):	2020			2019
Net (loss) income	$	(277,314	)	$	18,088
Add-back:
Income tax expense		853			4,807
Interest expense and other, net		34,957			27,491
Loss on sales of assets and businesses, net		—			3,136
Amortization of acquired contract liabilities		(10,987	)		(16,939	)
Depreciation and amortization^		280,984			44,050
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")	$	28,493		$	80,633
Non-service defined benefit income (excluding settlements)		(10,888	)		(14,875	)
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, and Pension ("Adjusted EBITDAP")	$	17,605		$	65,758
Net sales	$	495,077		$	730,231
Net (loss) income margin		(56.0	%)		2.5	%
Adjusted EBITDAP margin		3.6	%		9.2	%
^ includes long-lived asset impairment charge

	Three Months Ended June 30, 2020
				Segment Data
Adjusted Earnings before Interest, Taxes, Depreciation, Amortization, and Pension (EBITDAP):	Total			Systems & Support			Aerospace Structures			Corporate/ Eliminations*
Net loss	$	(277,314	)
Add-back:
Non-service defined benefit income		(10,888	)
Income tax expense		853
Interest expense and other, net		34,957
Operating income (loss)	$	(252,392	)	$	25,431		$	(256,120	)	$	(21,703	)
Amortization of acquired contract liabilities		(10,987	)		(3,719	)		(7,268	)		—
Depreciation and amortization		280,984			8,356			271,772			856
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization, and Pension ("Adjusted EBITDAP")	$	17,605		$	30,068		$	8,384		$	(20,847	)
Net sales	$	495,077		$	239,887		$	257,877		$	(2,687	)
Adjusted EBITDAP margin		3.6	%		12.7	%		3.3	%	n/a

	Three Months Ended June 30, 2019
				Segment Data
Adjusted Earnings before Interest, Taxes, Depreciation, Amortization, and Pension (EBITDAP):	Total			Systems & Support			Aerospace Structures			Corporate/ Eliminations*
Net income	$	18,088
Add-back:
Non-service defined benefit income		(14,875	)
Income tax expense		4,807
Interest expense and other, net		27,491
Operating (loss) income	$	35,511		$	44,048		$	12,283		$	(20,820	)
Loss on sales of assets & businesses, net		3,136			—			—			3,136
Amortization of acquired contract liabilities		(16,939	)		(8,125	)		(8,814	)		—
Depreciation and amortization		44,050			8,157			35,059			834
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization, and Pension ("Adjusted EBITDAP")	$	65,758		$	44,080		$	38,528		$	(16,850	)
Net sales	$	730,231		$	313,606		$	419,178		$	(2,553	)
Adjusted EBITDAP margin		9.2	%		14.4	%		9.4	%	n/a

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 June 30, 2020
	Pre-Tax			After-Tax			EPS
Loss from continuing operations - GAAP	$	(276,461	)	$	(277,314	)	$	(5.35	)
Adjustments:
Impairment of long-lived assets		252,382			252,382			4.87
Restructuring costs		15,439			15,439			0.30
Adjusted loss from continuing operations - non-GAAP*	$	(8,640	)	$	(9,493	)	$	(0.19	)
* Differences due to rounding

	Three Months Ended June 30, 2019
	Pre-Tax		After-Tax		Diluted EPS
Income from continuing operations - GAAP	$	22,895	$	18,088	$	0.36
Adjustments:
Loss on sale of assets and businesses, net		3,136		2,477		0.05
Restructuring costs		2,964		2,342		0.05
Adjusted income from continuing operations - non-GAAP*	$	28,995	$	22,907	$	0.46
* 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 June 30,
	2020			2019
Operating (loss) income - GAAP	$	(252,392	)	$	35,511
Adjustments:
Loss on sale of assets and businesses, net		—			3,136
Impairment of long-lived assets		252,382			—
Restructuring costs		15,439			2,964
Adjusted operating income - non-GAAP	$	15,429		$	41,611
Adjusted operating margin		3.1	%		5.7	%

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.

($ millions except EPS)	Pre-tax			After-tax			EPS
Loss from Continuing Operations - GAAP	$	(276.5	)	$	(277.3	)	$	(5.35	)
Impairment of long-lived assets		252.4			252.4			4.87
Restructuring costs (cash)		15.4			15.4			0.30
Adjusted Loss from Continuing Operations - non-GAAP *	$	(8.6	)	$	(9.5	)	$	(0.19	)