Triumph Group Reports Record Fourth Quarter and Full Fiscal Year 2013 Results

• Record net sales for fourth quarter fiscal year 2013 increased 4% to $986.3 million
• Income from continuing operations for fourth quarter fiscal year 2013 was $65.6 million, or $1.24 per diluted share, which included non-recurring costs (see Table A below) totaling approximately $36.0 million pre-tax ($0.44 per diluted share). Excluding these costs, earnings per share from continuing operations was $1.68 per diluted share
• Record full year revenues and earnings per share from continuing operations of $3.703 billion and $5.67 per diluted share. Excluding non-recurring costs (see Table B below) totaling approximately $44.2 million pre-tax ($0.54 per diluted share), earnings per share from continuing operations was $6.21 per diluted share
• Record cash flow from operations for fiscal year 2013 before pension contribution of $109.8 million was $453.2 million
• Successfully completed acquisition of Triumph Engine Control Systems (formerly Goodrich Pump & Engine Control Systems)

BERWYN, Pa.--(BUSINESS WIRE)--May. 1, 2013-- Triumph Group, Inc. (NYSE: TGI) today reported that, for the fourth quarter ended March 31, 2013, net sales were a record $986.3 million, a four percent increase from last year’s fourth quarter net sales of $946.4 million. Organic sales growth for the quarter was two percent.

Income from continuing operations for the fourth quarter of fiscal year 2013 was $65.6 million, or $1.24 per diluted share, versus $106.3 million, or $2.03 per diluted share, for the fourth quarter of the prior fiscal year. The quarter’s results included approximately $36.0 million pre-tax ($23.2 million after tax or $0.44 per diluted share) of non-recurring costs. Excluding the non-recurring costs, earnings per share from continuing operations for the quarter were $1.68 per diluted share. The prior fiscal year’s quarter included a $40.4 million pre-tax ($26.1 million after tax) net curtailment gain and $2.6 million pre-tax ($1.7 million after tax) of integration costs associated with the Vought acquisition Excluding integration costs and the net curtailment gain, earnings per share from continuing operations for the prior fiscal year’s fourth quarter was $1.57 per diluted share. The number of shares used in computing diluted earnings per share for the quarter was 52.7 million shares.

The following table quantifies each of the non-recurring costs incurred in the fourth quarter of fiscal year 2013 as well as its impact on earnings per share from continuing operations.

Full Fiscal Year Highlights

For the fiscal year ended March 31, 2013, net sales totaled $3.703 billion, a nine percent increase from fiscal year 2012 net sales of $3.408 billion. Organic sales growth for the fiscal year was eight percent.

Income from continuing operations for fiscal year 2013 was $297.3 million, or $5.67 per diluted share, versus $281.6 million, or $5.43 per diluted share, for fiscal year 2012. The fiscal year’s results included approximately $44.2 million pre-tax ($28.5 million after tax or $0.54 per diluted share) of non-recurring costs. Excluding the non-recurring costs, income from continuing operations for fiscal year 2013 was $325.9 million, or $6.21 per diluted share. The prior fiscal year included a net curtailment gain of $40.4 million pre-tax ($26.1 million after tax) as well as $6.3 million pre-tax ($4.1 million after tax) of integration costs associated with the Vought acquisition. Excluding integration costs and the net curtailment gain, earnings per share from continuing operations for fiscal year 2012 was $5.01 per diluted share. The number of shares used in computing diluted earnings per share for fiscal year 2013 was 52.4 million shares. The following table quantifies each of the non-recurring costs incurred in fiscal year 2013 as well as its impact on earnings per share from continuing operations.

During the fiscal year, the company generated $453.2 million of cash flow from operations before Triumph Aerostructures’ pension contributions of $109.8 million; after these contributions, cash flow from operations was $343.4 million.

Jeffry D. Frisby, Triumph’s President and Chief Executive Officer, said, “Triumph had an excellent fiscal year 2013 capped by a strong fourth quarter. Full year and fourth quarter sales and earnings were at record levels and we generated record cash flow for the year. In fiscal year 2013, all three of our business segments executed well and delivered year-over-year operating margin expansion. We successfully completed the acquisitions of Embee, Inc. and Goodrich Pump and Engine Control Systems, which in addition to providing a better balance within our business, significantly advanced our technical capabilities and positioned us well for future growth. In early April, we completed the sale of our two Aftermarket Services’ Instruments Companies, which we determined to be non-core. In addition, we continued the successful integration of Triumph Aerostructures and continued to successfully manage our pension obligations.”

“As we enter fiscal year 2014, Triumph is a strong company with a very solid balance sheet and an increasing backlog. Even as we face the challenges of political and fiscal uncertainty, we are confident that Triumph is well positioned to deliver long-term growth and profitability.”

Segments

Aerostructures

The Aerostructures segment reported net sales for the fourth quarter of fiscal year 2013 of $720.7 million compared to $714.2 million for the prior fiscal year period, an increase of one percent, all of which was organic. For the fiscal year 2013, net sales increased eight percent to $2.781 billion from $2.572 billion for the prior fiscal year, all of which was organic. For the fourth quarter of fiscal year 2013, operating income was $110.9 million versus $119.0 million for the prior fiscal year quarter and included a net unfavorable cumulative catch-up adjustment on long-term contracts of $10.2 million. Operating income for fiscal year 2013 was $469.9 million, compared to $403.4 million for the prior fiscal year, an increase of sixteen percent. The segment’s operating margin for the quarter was fifteen percent. The segment’s operating results and the cumulative catch-up adjustment for the quarter included charges of $1.8 million related to pension remeasurement, $1.0 million related to early retirement incentives and $1.4 million related to the Jefferson Street facility move.

Aerospace Systems

The Aerospace Systems segment reported net sales for the fourth quarter of fiscal year 2013 of $184.1 million compared to $151.7 million for the prior fiscal year period, an increase of twenty-one percent. Organic sales growth for the quarter was eight percent. For the fiscal year 2013, net sales increased twelve percent to $615.8 million from $551.8 million for the prior fiscal year. Organic sales growth for the fiscal year was eight percent. Operating income for the fourth quarter of fiscal year 2013 increased twenty-seven percent to $33.4 million versus $26.4 million for the prior fiscal year quarter. Operating margin for the quarter increased to eighteen percent versus seventeen percent in the prior fiscal year period. Operating income for fiscal year 2013 was $103.2 million, compared to $90.0 million for the prior fiscal year, an increase of fifteen percent. Operating margin for the fiscal year was seventeen percent. The segment’s fourth quarter and fiscal year 2013 operating results included approximately $0.9 million and $1.6 million, respectively, of costs associated with Hurricane Sandy as well as $1.3 million and $4.8 million, respectively, of legal expenses associated with the ongoing trade secret litigation.

Aftermarket Services

The Aftermarket Services segment reported net sales for the fourth quarter of fiscal year 2013 of $83.9 million, compared to $83.1 million for the prior fiscal year period, an increase of one percent, all of which was organic. For the fiscal year 2013, net sales increased seven percent to $314.5 million from $292.7 million for the prior fiscal year. Organic sales growth for the fiscal year was five percent. Operating income for the fourth quarter of fiscal year 2013 increased eighteen percent to $13.0 million versus $11.0 million for the prior fiscal year quarter. Operating margin for the quarter increased to a record fifteen percent, a 220 basis points improvement over the prior year, driven primarily by market growth and improved operating performance. Operating income for fiscal year 2013 was $45.4 million, compared to $31.9 million for the prior fiscal year, an increase of forty-two percent. Operating margin for the fiscal year was fourteen percent. Results for the fourth quarter of fiscal year 2013 included a net loss on assets held for sale of $0.8 million, which was primarily attributable to the sale of the assets of the Instruments Companies.

Outlook

In commenting on the outlook for fiscal year 2014, Mr. Frisby said, “We are entering our new fiscal year with a continued focus on improving execution, driving integration and controlling costs. We project sales in the range of $3.8 to $4.0 billion and earnings per share from continuing operations for the fiscal year of $5.65 to $5.75 per diluted share. Excluding the Jefferson Street move related costs, earnings per share from continuing operations for fiscal year 2014 are expected to be $6.30 to $6.40 per diluted share.”

From a segment perspective, the company expects the following:

• Aerostructures- revenue down slightly as a result of reductions in 767 and 747-8. Excluding Jefferson Street move related costs, operating income and operating margin will increase
• Aerospace Systems- revenue up significantly due to fiscal year 2013 acquisitions with modest increase organically. Operating income up with expected margin impact from fiscal year 2013 acquisitions
• Aftermarket Services- revenues essentially flat- organic growth offsetting the impact of the sale of the Instrument Companies with growth in operating income and margins

The overall guidance is based on the following assumptions for fiscal year 2014:

• the number of shares used in computing diluted earnings per share is 53.1 million
• $5.0 million of legal expenses associated with the trade secret litigation
• interest expense of $80.0 million
• tax rate of 36.0% reflecting the expiration of the R&D tax credit at December 31, 2013
• capital expenditures and investments in major new programs of $340.0 million to $360.0 million, of which $50.0 million relates to capital for the Bombardier 7000/8000 wing, $100.0 million relates to capital for the Jefferson Street move, and $115.0 million to be reflected in inventory (net of advances)
• pension income of approximately $31.0 million and cash contributions to the plan of approximately $116.0 million
• OPEB expense of approximately $11.0 million and cash expenditures of approximately $33.0 million
• current productions rates – specifically:
  • 777 production rate at 8 per month
  • 737 production rates of 38 per month increasing to 42 per month in the second half of the fiscal year
  • 747 production rates of 2 per month declining to 1.75 per month in the second half of the fiscal year
  • the most recent 787 production schedule
  • 767/tanker production rates decreasing to approximately 1 per month
  • A330 production of 10 per month
  • C-17 production of 10 units
  • other than C-17 mentioned above, production rates for the company’s largest military programs (i.e. V-22, UH 60, C130) will show modest declines of approximately 10 to 15 percent

• business jet market generally consistent with fiscal year 2013
• continued strength in the Aftermarket Services segment of the business
• cash available for debt reduction of approximately $150 million, excluding new acquisitions
• reflects estimates for customer price concessions (net of cost reduction) and projected cost of two union negotiations

As previously announced, Triumph Group will hold a conference call tomorrow at 8:30 a.m. (ET) to discuss the fiscal year 2013 fourth quarter and year-end 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 2^nd to May 9^th by calling (888) 266-2081 (Domestic) or (703) 925-2533 (International), passcode #1610837.

Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerostructures, aircraft 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 http://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, and earnings results for fiscal 2014. 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’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

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 income from continuing operations before interest, income taxes, amortization of acquired contract liabilities, early retirement incentives, 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 income from continuing operations. In calculating Adjusted EBITDA, we exclude from income from continuing operations 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 income from continuing operations 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 income from continuing operations 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 income from continuing operations to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to income from continuing operations:

• Curtailments 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 the acquisition of Vought. 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)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(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 income from continuing operations for the indicated periods (in thousands):

Source: Triumph Group, Inc.

Triumph Group, Inc.
Sheila Spagnolo
Vice President
610-251-1000
sspagnolo@triumphgroup.com