Triumph Group Reports First Quarter Fiscal 2015 Earnings
-
Net sales for first quarter fiscal year 2015 were
$896.9 million -
Operating income for first quarter fiscal year 2015 was
$240.5 million and included a settlement gain, net of legal fees, of$134.7 million related to theEaton litigation and$8.7 million of costs related to theJefferson Street /Red Oak facility transition. Excluding these items, operating income was$114.6 million , reflecting an operating margin of 13% -
Net income for first quarter fiscal year 2015 was
$128.2 million , or$2.46 per diluted share, which included non-recurring items totaling$103.3 million pre-tax ($66.1 million after tax or$1.27 per diluted share). Excluding these items, earnings per share were$1.19 per diluted share -
Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) for first quarter fiscal year 2015 were
$134.4 million , reflecting an Adjusted EBITDA margin of 15% -
Cash flow utilization from operations for first quarter fiscal 2015
was
$6.8 million prior to pension contributions of$45.2 million
“Triumph’s fiscal year is off to a solid start with adjusted first
quarter results coming in slightly above the upper end of our guidance,”
said
Net sales for the fiscal first quarter of 2015 were
Net income for the first quarter of fiscal year 2015 was
Adjusted earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA) for the first quarter of fiscal year 2015 were
For the quarter ended
Segment Results
Aerostructures
The Aerostructures segment reported net sales of
Aerospace Systems
The Aerospace Systems segment reported net sales of
Aftermarket Services
The Aftermarket Services segment reported net sales in the first quarter
of fiscal year 2015 of
Outlook
Mr. Frisby continued, “We expect to see our performance strengthen as we move through fiscal 2015, particularly in the second half of the year. We remain focused on execution and supporting our vision to expand Triumph’s global presence and achieve balance in our segments, end markets and customers. We will continue to leverage our deep customer relationships and pursue strategic growth opportunities to create additional value for shareholders.”
Based on current projected aircraft production rates and a weighted
average share count of 51.6 million shares, the company reaffirmed its
fiscal year 2015 revenue guidance of
| Adjusted Earnings Per Share - Non-GAAP | $ | 5.75 - $5.90 | |||
| Non-Recurring Costs/(Income): | |||||
| Jefferson Street/Red Oak Facility Transition Costs | $ | 0.31 | |||
| Refinancing Costs Related to the Senior Notes Due 2018 | $ | 0.28 | |||
| Settlement Gain, Net of Legal Fees, Related to Eaton Litigation | ($1.67 | ) | |||
| Earnings Per Share – GAAP | $ | 6.83 - $6.98 | |||
Conference Call
About
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 future aerospace market conditions,
aircraft production rates, financial and operational performance,
revenue and earnings growth, profitability and earnings results for
fiscal year 2015. 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
| FINANCIAL DATA (UNAUDITED) | ||||||||
| TRIUMPH GROUP, INC. AND SUBSIDIARIES | ||||||||
| (in thousands, except per share data) | ||||||||
| Three Months Ended | ||||||||
| June 30, | ||||||||
| CONDENSED STATEMENTS OF INCOME | 2014 | 2013 | ||||||
| Net sales | $ | 896,905 | $ | 943,683 | ||||
| Operating income | 240,524 | 141,346 | ||||||
| Interest expense and other | 42,360 | 19,710 | ||||||
| Income tax expense | 69,921 | 42,593 | ||||||
| Net income | $ | 128,243 | $ | 79,043 | ||||
| Earnings per share - basic: | ||||||||
| Net income | $ | 2.48 | $ | 1.56 | ||||
| Weighted average common shares outstanding - basic | 51,691 | 50,815 | ||||||
| Earnings per share - diluted: | ||||||||
| Net income | $ | 2.46 | $ | 1.50 | ||||
| Weighted average common shares outstanding - diluted | 52,089 | 52,806 | ||||||
| Dividends declared and paid per common share | $ | 0.04 | $ | 0.04 | ||||
| FINANCIAL DATA (UNAUDITED) | ||||||||||
| TRIUMPH GROUP, INC. AND SUBSIDIARIES | ||||||||||
| (dollars in thousands, except per share data) | ||||||||||
| BALANCE SHEET | Unaudited | Audited | ||||||||
| June 30, | March 31, | |||||||||
| 2014 | 2014 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 25,465 | $ | 28,998 | ||||||
| Accounts receivable, net | 667,202 | 517,707 | ||||||||
| Inventory, net of unliquidated progress payments of $189,976 and $165,019 | 1,202,163 | 1,111,767 | ||||||||
| Rotable assets | 43,230 | 41,666 | ||||||||
| Deferred income taxes | 46,898 | 57,308 | ||||||||
| Prepaid and other current assets | 25,249 | 24,897 | ||||||||
| Current assets | 2,010,207 | 1,782,343 | ||||||||
| Property and equipment, net | 965,424 | 930,973 | ||||||||
| Goodwill | 1,867,668 | 1,791,831 | ||||||||
| Intangible assets, net | 976,464 | 978,182 | ||||||||
| Other, net | 38,849 | 69,954 | ||||||||
| Total assets | $ | 5,858,612 | $ | 5,553,283 | ||||||
| Liabilities & Stockholders' Equity | ||||||||||
| Current portion of long-term debt | $ | 43,323 | $ | 49,575 | ||||||
| Accounts payable | 301,808 | 317,334 | ||||||||
| Accrued expenses | 237,814 | 273,290 | ||||||||
| Current liabilities | 582,945 | 640,199 | ||||||||
| Long-term debt, less current portion | 1,714,310 | 1,500,808 | ||||||||
| Accrued pension and post-retirement benefits, noncurrent | 448,767 | 508,524 | ||||||||
| Deferred income taxes, noncurrent | 386,686 | 385,085 | ||||||||
| Other noncurrent liabilities | 372,356 | 234,756 | ||||||||
| Stockholders' Equity: | ||||||||||
|
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,459,020 shares issued |
52 | 52 | ||||||||
| Capital in excess of par value | 856,496 | 866,281 | ||||||||
| Treasury stock, at cost, 1,037,112 and 300,000 shares | (70,178 | ) | (19,134 | ) | ||||||
| Accumulated other comprehensive loss | (14,629 | ) | (18,908 | ) | ||||||
| Retained earnings | 1,581,807 | 1,455,620 | ||||||||
| Total stockholders' equity | 2,353,548 | 2,283,911 | ||||||||
| Total liabilities and stockholders' equity | $ | 5,858,612 | $ | 5,553,283 | ||||||
| FINANCIAL DATA (UNAUDITED) | ||||||||||
| TRIUMPH GROUP, INC. AND SUBSIDIARIES | ||||||||||
| (dollars in thousands) | ||||||||||
| SEGMENT DATA | Three Months Ended | |||||||||
| June 30, | ||||||||||
| 2014 | 2013 | |||||||||
| Net sales: | ||||||||||
| Aerostructures | $ | 611,863 | $ | 651,888 | ||||||
| Aerospace Systems | 219,852 | 219,526 | ||||||||
| Aftermarket Services | 67,608 | 74,353 | ||||||||
| Elimination of inter-segment sales | (2,418 | ) | (2,084 | ) | ||||||
| $ | 896,905 | $ | 943,683 | |||||||
| Operating income (loss): | ||||||||||
| Aerostructures | $ | 70,866 | $ | 100,387 | ||||||
| Aerospace Systems | 37,352 | 42,643 | ||||||||
| Aftermarket Services | 10,504 | 11,279 | ||||||||
| Corporate | 121,802 | (12,963 | ) | |||||||
| $ | 240,524 | $ | 141,346 | |||||||
| Depreciation and amortization: | ||||||||||
| Aerostructures | $ | 24,979 | $ | 26,313 | ||||||
| Aerospace Systems | 9,517 | 8,539 | ||||||||
| Aftermarket Services | 1,877 | 1,877 | ||||||||
| Corporate | 1,178 | 1,205 | ||||||||
| $ | 37,551 | $ | 37,934 | |||||||
| Amortization of acquired contract liabilities: | ||||||||||
| Aerostructures | $ | (5,117 | ) | $ | (6,141 | ) | ||||
| Aerospace Systems | (3,850 | ) | (5,009 | ) | ||||||
| $ | (8,967 | ) | $ | (11,150 | ) | |||||
| Capital expenditures: | ||||||||||
| Aerostructures | $ | 15,369 | $ | 45,945 | ||||||
| Aerospace Systems | 5,663 | 4,432 | ||||||||
| Aftermarket Services | 1,680 | 4,152 | ||||||||
| Corporate | 365 | 1,700 | ||||||||
| $ | 23,077 | $ | 56,229 | |||||||
FINANCIAL DATA (UNAUDITED)
(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
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
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:
- 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.
- 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.
- 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.
FINANCIAL DATA (UNAUDITED)
(dollars in
thousands)
Non-GAAP Financial Measure Disclosures (continued)
- 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.
The following table shows our Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):
| Three Months Ended | ||||||||||
| June 30, | ||||||||||
| 2014 | 2013 | |||||||||
| Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | ||||||||||
| Net Income | $ | 128,243 | $ | 79,043 | ||||||
| Add-back: | ||||||||||
| Income Tax Expense | 69,921 | 42,593 | ||||||||
| Interest Expense and Other | 42,360 | 19,710 | ||||||||
| Gain on Legal Settlement, net | (134,693 | ) | - | |||||||
| Amortization of Acquired Contract Liabilities | (8,967 | ) | (11,150 | ) | ||||||
| Depreciation and Amortization | 37,551 | 37,934 | ||||||||
| Adjusted Earnings before Interest, Taxes, | ||||||||||
| Depreciation and Amortization ("Adjusted EBITDA") | $ | 134,415 | $ | 168,130 | ||||||
| Net Sales | $ | 896,905 | $ | 943,683 | ||||||
| Adjusted EBITDA Margin | 15.1 | % | 18.0 | % | ||||||
| FINANCIAL DATA (UNAUDITED) | |||||||||||||||||||||||||
| TRIUMPH GROUP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||
| Non-GAAP Financial Measure Disclosures (continued) | |||||||||||||||||||||||||
| Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): |
Three Months Ended June 30, 2014 |
||||||||||||||||||||||||
| Segment Data | |||||||||||||||||||||||||
|
Aerospace |
Aftermarket |
Corporate / |
|||||||||||||||||||||||
|
Total |
Aerostructures |
Systems |
Services |
Eliminations |
|||||||||||||||||||||
| Net Income | $ | 128,243 | |||||||||||||||||||||||
| Add-back: | |||||||||||||||||||||||||
| Income Tax Expense | 69,921 | ||||||||||||||||||||||||
| Interest Expense and Other | 42,360 | ||||||||||||||||||||||||
| Operating Income (Loss) | $ | 240,524 | $ | 70,866 | $ | 37,352 | $ | 10,504 | $ | 121,802 | |||||||||||||||
| Gain on Legal Settlement | (134,693 | ) | - | - | - | (134,693 | ) | ||||||||||||||||||
| Amortization of Acquired Contract Liabilities | (8,967 | ) | (5,117 | ) | (3,850 | ) | - | - | |||||||||||||||||
| Depreciation and Amortization | 37,551 | 24,979 | 9,517 | 1,877 | 1,178 | ||||||||||||||||||||
| Adjusted Earnings (Losses) before Interest, Taxes, | |||||||||||||||||||||||||
| Depreciation and Amortization ("Adjusted EBITDA") | $ | 134,415 | $ | 90,728 | $ | 43,019 | $ | 12,381 | $ | (11,713 | ) | ||||||||||||||
| Net Sales | $ | 896,905 | $ | 611,863 | $ | 219,852 | $ | 67,608 | $ | (2,418 | ) | ||||||||||||||
| Adjusted EBITDA Margin | 15.1 | % | 15.0 | % | 19.9 | % | 18.3 | % | n/a | ||||||||||||||||
| Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Three Months Ended June 30, 2013 | ||||||||||||||||||||||||
| Segment Data | |||||||||||||||||||||||||
|
Aerospace |
Aftermarket |
Corporate / |
|||||||||||||||||||||||
|
Total |
Aerostructures |
Systems |
Services |
Eliminations |
|||||||||||||||||||||
| Net Income | $ | 79,043 | |||||||||||||||||||||||
| Add-back: | |||||||||||||||||||||||||
| Income Tax Expense | 42,593 | ||||||||||||||||||||||||
| Interest Expense and Other | 19,710 | ||||||||||||||||||||||||
| Operating Income (Loss) | $ | 141,346 | $ | 100,387 | $ | 42,643 | $ | 11,279 | $ | (12,963 | ) | ||||||||||||||
| Amortization of Acquired Contract Liabilities | (11,150 | ) | (6,141 | ) | (5,009 | ) | - | - | |||||||||||||||||
| Depreciation and Amortization | 37,934 | 26,313 | 8,539 | 1,877 | 1,205 | ||||||||||||||||||||
| Adjusted Earnings (Losses) before Interest, Taxes, | |||||||||||||||||||||||||
| Depreciation and Amortization ("Adjusted EBITDA") | $ | 168,130 | $ | 120,559 | $ | 46,173 | $ | 13,156 | $ | (11,758 | ) | ||||||||||||||
| Net Sales | $ | 943,683 | $ | 651,888 | $ | 219,526 | $ | 74,353 | $ | (2,084 | ) | ||||||||||||||
| Adjusted EBITDA Margin | 18.0 | % | 18.7 | % | 21.5 | % | 17.7 | % | n/a | ||||||||||||||||
FINANCIAL DATA (UNAUDITED)
(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 diluted per 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 table reconciles 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, 2014 |
||||||||||||||||||
|
Pre-tax |
After-tax |
Diluted EPS |
Location on |
|||||||||||||||
|
Financial Statements |
||||||||||||||||||
| Income from Continuing Operations- GAAP | $ | 198,164 | $ | 128,243 | $ | 2.46 | ||||||||||||
| Non-Recurring Costs: | ||||||||||||||||||
| Gain on Legal Settlement | (134,693 | ) | (86,204 | ) | (1.65 | ) | Corporate | |||||||||||
| Refinancing Costs | 22,615 | 14,474 | 0.28 | Corporate | ||||||||||||||
| Relocation Costs | 2,997 | 1,918 | 0.04 | Aerostructures (Primarily) | ||||||||||||||
| Jefferson Street Move: | ||||||||||||||||||
| Disruption | 3,360 | 2,150 | 0.04 | Aerostructures (EAC) ** | ||||||||||||||
| Accelerated Depreciation | 2,375 | 1,520 | 0.03 | Aerostructures (EAC) ** | ||||||||||||||
| Adjusted Income from Continuing Operations- non-GAAP | $ | 94,818 | $ | 62,101 | $ | 1.19 | * | |||||||||||
|
|
||||||||||||||||||
|
Three Months Ended |
||||||||||||||||||
|
June 30, 2013 |
||||||||||||||||||
|
Pre-tax |
After-tax |
Diluted EPS |
Location on |
|||||||||||||||
|
Financial Statements |
||||||||||||||||||
| Income from Continuing Operations- GAAP | $ | 121,636 | $ | 79,043 | $ | 1.50 | ||||||||||||
| Non-Recurring Costs: | ||||||||||||||||||
| Relocation Costs (including interest) | 1,321 | 851 | 0.02 | Aerostructures (Primarily) | ||||||||||||||
| Jefferson Street Move: | ||||||||||||||||||
| Disruption | 1,551 | 999 | 0.02 | Aerostructures (EAC) ** | ||||||||||||||
| Accelerated Depreciation | 758 | 488 | 0.01 | Aerostructures (EAC) ** | ||||||||||||||
| Adjusted Income from Continuing Operations- non-GAAP | $ | 125,266 | $ | 81,381 | $ | 1.54 | * | |||||||||||
| * | Difference due to rounding. | ||
|
** |
EAC- estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue Recognition-Construction-Type and Production-Type Contracts" |
||
|
|
FINANCIAL DATA (UNAUDITED)
(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 | ||||||||||
| June 30, | ||||||||||
| 2014 | 2013 | |||||||||
| Cash flow from operations, before pension contributions | $ | (6,843 | ) | $ | 37,682 | |||||
| Pension contributions | 45,209 | 25,800 | ||||||||
| Cash (used in) provided by operations | (52,052 | ) | 11,882 | |||||||
|
Less: |
||||||||||
| Capital expenditures | 23,077 | 56,229 | ||||||||
| Dividends | 2,056 | 2,069 | ||||||||
|
Free cash flow available for debt reduction, acquisitions and share repurchases |
$ | (77,185 | ) | $ | (46,416 | ) | ||||
We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:
| June 30, | March 31, | |||||||||
| 2014 | 2014 | |||||||||
|
Calculation of Net Debt |
||||||||||
| Current portion | $ | 43,323 | $ | 49,575 | ||||||
| Long-term debt | 1,714,310 | 1,500,808 | ||||||||
| Total debt | 1,757,633 | 1,550,383 | ||||||||
| Less: Cash | 25,465 | 28,998 | ||||||||
| Net debt | $ | 1,732,168 | $ | 1,521,385 | ||||||
|
|
||||||||||
|
Calculation of Capital |
||||||||||
| Net debt | $ | 1,732,168 | $ | 1,521,385 | ||||||
| Stockholders' equity | 2,353,548 | 2,283,911 | ||||||||
| Total capital | $ | 4,085,716 | $ | 3,805,296 | ||||||
| Percent of net debt to capital | 42.4 | % | 40.0 | % | ||||||
Source:
Triumph Group, Inc.
Sheila G. Spagnolo
Vice President, Tax &
Investor Relations
610-251-1000
sspagnolo@triumphgroup.com
