Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): November 8, 2017
 
TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
1-12235
 
51-0347963
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(IRS Employer Identification
No.)
 
 
 
 
 
899 Cassatt Road, Suite 210
 
19312
Berwyn, Pennsylvania
 
(Zip Code)
(Address of principal executive offices)
 
 
 
(610) 251-1000
(Registrant's telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report.)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o







Item 2.02
 
Results of Operations and Financial Condition.
 
On November 8, 2017, Triumph Group, Inc. issued a press release announcing its financial results for the fiscal quarter ended September 30, 2017, and will conduct a conference call to further discuss the financial results.  The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 7.01
 
Regulation FD Disclosure

On the conference call referenced in Item 2.02 above, certain information will be presented. The information to be presented during such conference call is attached as Exhibit 99.2 to this Current Report on Form 8-K.
The information in this Item 7.01 of this Current Report on Form 8-K and Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 
Item 9.01
 
Financial Statements and Exhibits.
 
 
 
(d)       
 
Exhibits.
 
Exhibit No.
 
Description
 
 
 
99.1
 
Press release dated November 8, 2017
99.2
 
Presentation of Triumph Group, Inc. of November 8, 2017








Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date:
November 8, 2017
TRIUMPH GROUP, INC.
 
 
 
 
 
 
By:
/s/ Thomas A. Quigley, III
 
 
 
Thomas A. Quigley, III
 
 
 
Vice President and Controller









TRIUMPH GROUP, INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX

Exhibit No.
 
Description
 
 
 
 
 



Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11878799&doc=27    

NEWS RELEASE                     
Media Contact:                                Investor Relations Contact:
Michele Long                                Sheila Spagnolo
Phone (610) 251-1000                            Phone (610) 251-1000
mmlong@triumphgroup.com                        sspagnolo@triumphgroup.com


TRIUMPH GROUP REPORTS SECOND QUARTER FISCAL 2018 RESULTS

Reaffirms Fiscal Year 2018 Guidance


BERWYN, Pa. - November 8, 2017 - Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its second quarter of fiscal year 2018, which ended September 30, 2017.

Second Quarter Fiscal 2018 Highlights
Net sales were $745.2 million.
Operating income was $18.8 million. On an adjusted basis, operating income was $50.6 million, reflecting an adjusted operating margin of 7%.
Net loss was ($5.4) million, or ($0.11) per share. On an adjusted basis, net income was $25.7 million, or $0.52 per diluted share.
Cash used in operations was $200.0 million, and free cash use was $210.7 million.
Management reaffirms net sales guidance of $3.1 to $3.2 billion and continues to expect organic sales growth in fiscal 2019.
Management maintains guidance for adjusted earnings per diluted share of $2.25 to $2.75 and free cash use of $450 to $500 million.
“Triumph Group’s second quarter results were consistent with our expectations,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Aftermarket sales in Product Support grew both sequentially and year-over-year, and operating margins in Product Support and Integrated Systems remained strong. Profitability improved in Aerospace Structures, reflecting the progress we are making with our transformation initiatives.  On an adjusted basis, Precision Components was profitable and remains a significant opportunity to contribute to the bottom line as we rationalize our facility footprint and further reduce costs.”


1




Mr. Crowley continued, “Our book-to-bill ratio was above one for the quarter and backlog increased both sequentially and year-over-year to $4.3 billion, led by a 7% quarterly growth in Integrated Systems’ backlog largely due to military programs. In addition, we were selected in September as a supplier of choice for the Boeing T-X trainer. Our favorable backlog trends demonstrate our progress towards our goal of driving organic growth on a sustained basis. We enhanced our financial strength with the refinancing of $500 million of debt and the sale of our Embee metal finishing company in September. These actions enable reinvestment in new areas of opportunity.  Our achievements during the quarter are further evidence of the strategic and operational changes we are making to solidify the foundation for a stronger, more profitable company.”

Second Quarter Fiscal Year 2018 Overview

After accounting for divestitures, sales were down 12% organically, as anticipated, primarily due to the completion of and production rate reductions on previously disclosed programs along with the timing of deliveries on certain programs. These factors were partially offset by increased production on the 767/Tanker and Global Hawk/Triton programs.

Operating income of $18.8 million included $20.4 million loss on divestiture and $11.4 million of transformation related expenses. Net loss for the second quarter of fiscal year 2018 was ($5.4) million, or a loss of ($0.11) per share. Triumph’s results included the following:

($ millions except EPS)
 
      Pre-tax
 
    After-tax
 
Diluted EPS
Income (Loss) from Continuing Operations - GAAP
 
$
(6.5
)
 
$
(5.4
)
 
$
(0.11
)
 
 
 
 
 
 
 
Loss on divestiture
 
20.4

 
20.4

 
0.41

Refinancing costs
 
2.0

 
1.6

 
0.03

Transformation related costs:
 
 
 
 
 
 
Restructuring costs (non-cash)
 
1.3

 
                1.0

 
0.02

Restructuring costs (cash)
 
10.1

 
8.1

 
0.16

 
 
 
 
 
 
 
Adjusted Income from Continuing Operations - non-GAAP
 
$
27.2

 
$
25.7

 
$ 0.52*

  *Difference due to rounding
 
 
 
 
 
 

The number of shares used in computing diluted earnings per share for the second quarter of fiscal year 2018 was 49.6 million.

For the quarter ended September 30, 2017, cash use from operations was $200.0 million, as anticipated, due to the liquidation of customer advances received in fiscal year 2017 along with spending on key development programs transitioning into production, transformation related costs and reduced vendor financing.

Outlook

Based on anticipated aircraft production rates and completed divestitures, the Company continues to expect that revenue for fiscal year 2018 will be approximately $3.1 to $3.2 billion,

2



                                                        


and expects revenue to increase in fiscal year 2019 as development programs enter production and sales from new wins offset sunsetting programs. Additionally, the Company continues to expect fiscal year 2018 adjusted earnings per diluted share of $2.25 to $2.75, and free cash use of $450 to $500 million.

The Company’s current outlook adjusts for transformation related and refinancing costs, as well as any gains/losses on completed divestitures, but does not take into account the impact of any potential future divestitures.

Conference Call

Triumph Group will hold a conference call today, November 8th at 8:30 a.m. (ET) to discuss the second quarter fiscal year 2018 results. The conference call will be available live and archived on the Company’s website at http://www.triumphgroup.com. A slide presentation will be included with the audio portion of the webcast. An audio replay will be available from November 8th to November 15th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #1599357.

About Triumph Group

Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aircraft structures, components, accessories, subassemblies and systems. The Company serves a broad, worldwide spectrum of the aviation industry, including original equipment manufacturers of commercial, regional, business and military aircraft and aircraft components, as well as commercial and regional airlines and air cargo carriers.

More information about Triumph can be found on the Company’s website at www.triumphgroup.com.

Forward Looking Statements

Statements in this release which are not historical facts are forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations of or assumptions about financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies and organizational restructurings. All forward-looking statements involve risks and uncertainties which could affect the Company’s actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Further information regarding the important factors that could cause actual results to differ from projected results can be found in Triumph Group’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.

FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES


3



FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(in thousands, except per share data)

 
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
CONDENSED STATEMENTS OF INCOME
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net sales
 
$
745,156

 
$
874,769

 
$
1,526,845

 
$
1,768,022

 
 
 
 
 
 
 
 
 
Operating income
 
18,848

 
70,486

 
37,257

 
117,212

 
 
 
 
 
 
 
 
 
Interest expense and other
 
25,375

 
17,896

 
46,393

 
36,023

Income tax (benefit) expense
 
(1,149
)
 
17,783

 
(1,827
)
 
26,648

 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(5,378
)
 
$
34,807

 
$
(7,309
)
 
$
54,541

 
 
 
 
 
 
 
 
 
Earnings per share - basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(0.11
)
 
$
0.71

 
$
(0.15
)
 
$
1.11

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
49,428

 
49,304

 
49,400

 
49,281

 
 
 
 
 
 
 
 
 
Earnings per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(0.11
)
 
$
0.70

 
$
(0.15
)
 
$
1.10

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - diluted
 
49,428

 
49,432

 
49,400

 
49,429

 
 
 
 
 
 
 
 
 
Dividends declared and paid per common share
 
$
0.04

 
$
0.04

 
$
0.08

 
$
0.08







4




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except share data)
 
BALANCE SHEET
 
Unaudited
 
Audited
 
 
September 30,
 
March 31,
 
 
2017
 
2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
33,669

 
$
69,633

Accounts receivable, net
 
330,134

 
311,792

Inventories, net of unliquidated progress payments of $429,185 and $222,485
 
1,368,715

 
1,340,175

Prepaid and other current assets
 
28,850

 
30,064

Assets held for sale
 

 
21,255

   Current assets
 
1,761,368

 
1,772,919

 
 
 
 
 
Property and equipment, net
 
768,884

 
805,030

Goodwill
 
1,124,864

 
1,142,605

Intangible assets, net
 
533,630

 
592,364

Other, net
 
93,200

 
101,682

 
 
 
 
 
Total assets
 
$
4,281,946

 
$
4,414,600

 
 
 
 
 
Liabilities & Stockholders' Equity
 
 
 
 
Current portion of long-term debt
 
$
22,883

 
$
160,630

Accounts payable
 
388,221

 
481,243

Accrued expenses
 
528,788

 
674,379

Liabilities related to assets held for sale
 

 
18,008

Current liabilities
 
939,892

 
1,334,260

 
 
 
 
 
Long-term debt, less current portion
 
1,409,130

 
1,035,670

Accrued pension and post-retirement benefits, noncurrent
 
549,211

 
592,134

Deferred income taxes, noncurrent
 
70,325

 
68,107

Other noncurrent liabilities
 
457,543

 
537,956

 
 
 
 
 
Stockholders' Equity:
 
 
 
 
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,460,920 shares issued; 49,632,547 and 49,573,029 shares outstanding
 
51

 
51

Capital in excess of par value
 
848,078

 
846,807

Treasury stock, at cost, 2,828,373 and 2,887,891 shares
 
(181,072
)
 
(183,696
)
Accumulated other comprehensive loss
 
(379,422
)
 
(396,178
)
Retained earnings
 
568,210

 
579,489

Total stockholders' equity
 
855,845

 
846,473

 
 
 
 
 
Total liabilities and stockholders' equity
 
$
4,281,946

 
$
4,414,600




 

5




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Net Sales:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
233,765

 
$
245,367

 
$
471,900

 
$
502,723

Aerospace Structures
 
249,284

 
320,283

 
525,260

 
651,879

Precision Components
 
229,156

 
259,458

 
466,026

 
514,060

Product Support
 
68,366

 
85,826

 
134,799

 
170,025

Elimination of inter-segment sales
 
(35,415
)
 
(36,165
)
 
(71,140
)
 
(70,665
)
 
 
$
745,156

 
$
874,769

 
$
1,526,845

 
$
1,768,022

 
 
 
 
 
 
 
 
 
Operating Income (Loss):
 
 
 
 
 
 
 
 
Integrated Systems
 
$
42,087

 
$
45,797

 
$
89,504

 
$
93,783

Aerospace Structures
 
11,513

 
24,867

 
11,231

 
34,031

Precision Components
 
(1,611
)
 
12,063

 
(4,875
)
 
4,281

Product Support
 
11,233

 
14,265

 
19,670

 
28,324

Corporate
 
(44,374
)
 
(26,506
)
 
(78,273
)
 
(43,207
)
 
 
$
18,848

 
$
70,486

 
$
37,257

 
$
117,212

 
 
 
 
 
 
 
 
 
Operating Margin %
 
 
 
 
 
 
 
 
Integrated Systems
 
18.0
 %
 
18.7
%
 
19.0
 %
 
18.7
%
Aerospace Structures
 
4.6
 %
 
7.8
%
 
2.1
 %
 
5.2
%
Precision Components
 
(0.7
)%
 
4.6
%
 
(1.0
)%
 
0.8
%
Product Support
 
16.4
 %
 
16.6
%
 
14.6
 %
 
16.7
%
Consolidated
 
2.5
 %
 
8.1
%
 
2.4
 %
 
6.6
%
 
 
 
 
 
 
 
 
 
Depreciation and Amortization:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
9,588

 
$
10,157

 
$
19,539

 
$
20,461

Aerospace Structures
 
19,046

 
18,385

 
38,437

 
36,347

Precision Components
 
10,259

 
14,016

 
18,008

 
28,345

Product Support
 
1,667

 
2,452

 
3,405

 
4,936

Corporate
 
308

 
276

 
610

 
659

 
 
$
40,868

 
$
45,286

 
$
79,999

 
$
90,748

 
 
 
 
 
 
 
 
 
Amortization of Acquired Contract Liabilities:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
(9,299
)
 
$
(9,136
)
 
$
(16,602
)
 
$
(19,473
)
Aerospace Structures
 
(17,670
)
 
(20,647
)
 
(38,963
)
 
(39,085
)
Precision Components
 
(929
)
 
(694
)
 
(1,806
)
 
(1,267
)
 
 
$
(27,898
)
 
$
(30,477
)
 
$
(57,371
)
 
$
(59,825
)
 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
1,455

 
$
2,595

 
$
4,020

 
$
5,823

Aerospace Structures
 
2,702

 
3,759

 
7,119

 
7,592

Precision Components
 
5,094

 
3,503

 
9,156

 
8,405

Product Support
 
769

 
703

 
1,030

 
1,333

Corporate
 
670

 
684

 
1,450

 
814

 
 
$
10,690

 
$
11,244

 
$
22,775

 
$
23,967

 
 
 
 
 
 
 
 
 

6




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures
 
We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. In accordance with Securities and Exchange Commission (the "SEC") guidance on Compliance and Disclosure Interpretations, we also disclose and discuss certain non-GAAP financial measures in our public releases. Currently, the non-GAAP financial measure that we disclose is Adjusted EBITDA, which is our net income before interest, income taxes, amortization of acquired contract liabilities, curtailments, settlements and early retirement incentives, legal settlements, depreciation and amortization. We disclose Adjusted EBITDA on a consolidated and an operating segment basis in our earnings releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations.
 
We view Adjusted EBITDA as an operating performance measure and, as such, we believe that the GAAP financial measure most directly comparable to it is net income. In calculating Adjusted EBITDA, we exclude from net income the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-GAAP financial measures as a result of these exclusions. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as a measure of liquidity, as an alternative to net income (loss), income from continuing operations, or as an indicator of any other measure of performance derived in accordance with GAAP. Investors and potential investors in our securities should not rely on Adjusted EBITDA as a substitute for any GAAP financial measure, including net income (loss) or income from continuing operations. In addition, we urge investors and potential investors in our securities to carefully review the reconciliation of Adjusted EBITDA to net income set forth below,  in our earnings releases and in other filings with the SEC and to carefully review the GAAP financial information included as part of our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K that are filed with the SEC, as well as our quarterly earnings releases, and compare the GAAP financial information with our Adjusted EBITDA.
 
Adjusted EBITDA is used by management to internally measure our operating and management performance and by investors as a supplemental financial measure to evaluate the performance of our business that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business. We have spent more than 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 excludes these charges and provides meaningful information about the operating performance of our business, apart from charges for depreciation and amortization. We believe the disclosure of Adjusted EBITDA helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe Adjusted EBITDA is a measure of our ongoing operating performance because the isolation of non-cash income and expenses, such as amortization of acquired contract liabilities, depreciation and amortization, and non-operating items, such as interest and income taxes, provides additional information about our cost structure, and, over time, helps track our operating progress. In addition, investors, securities analysts and others have regularly relied on Adjusted EBITDA to provide a financial measure by which to compare our operating performance against that of other companies in our industry.
 
Set forth below are descriptions of the financial items that have been excluded from our net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income:
Divestitures may be useful for investors to consider because they reflect gains or losses from sale of operating units. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations.
Legal settlements may be useful to investors to consider because they reflect gains or losses from disputes with third parties. We do not believe that these gains or losses necessarily reflect the current and ongoing cash earnings related to our operations.



7




(Continued)
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)

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 (including impairments) may be useful for investors to consider because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights and licenses. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
 
Depreciation may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
 
The amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business.
 
Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business.  However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.
 
Management compensates for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business.



8



(Continued)
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)


The following table shows our Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA):
 
 
 
 
 
 
 
 
Net (Loss) Income
 
$
(5,378
)
 
$
34,807

 
$
(7,309
)
 
$
54,541

 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
     Income tax (benefit) expense
 
(1,149
)
 
17,783

 
(1,827
)
 
26,648

     Interest expense and other
 
25,375

 
17,896

 
46,393

 
36,023

   Pension settlement charge
 
523

 

 
523

 

   Loss on divestitures
 
20,371

 
4,774

 
20,371

 
4,774

     Amortization of acquired contract liabilities
 
(27,898
)
 
(30,477
)
 
(57,371
)
 
(59,825
)
     Depreciation and amortization
 
40,868

 
45,286

 
79,999

 
90,748

 
 
 
 
 
 
 
 
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
52,712

 
$
90,069

 
$
80,779

 
$
152,909

 
 
 
 
 
 
 
 
 
Net Sales #
 
$
745,156

 
$
874,769

 
$
1,526,845

 
$
1,768,022

 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin #
 
7.3%
 
10.7%
 
5.5%
 
9.0%
 
 
 
 
 
 
 
 
 
# Net Sales includes Amortization of Acquired Contract Liabilities. Since Adjusted EBITDA excludes Amortization of Acquired
 
 
   Contract Liabilities, we've also excluded it from Net Sales in arriving at Adjusted EBITDA margin throughout this document.
 
 





















9




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

 
 
Three Months Ended September 30, 2017
 
 
 
 
 
Segment Data
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):
 
Total
 
Integrated Systems
 
Aerospace Structures
 
Precision Components
 
Product Support
 
Corporate/Eliminations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
$
(5,378
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax benefit
 
(1,149
)
 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
25,375

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
18,848

 
$
42,087

 
$
11,513

 
$
(1,611
)
 
$
11,233

 
$
(44,374
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 

 

 

 

 
20,371

 
Pension settlement charge
 
523

 

 

 

 

 
523

 
Amortization of acquired contract liabilities
 
(27,898
)
 
(9,299
)
 
(17,670
)
 
(929
)
 

 

 
Depreciation and amortization
 
40,868

 
9,588

 
19,046

 
10,259

 
1,667

 
308

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
52,712

 
$
42,376

 
$
12,889

 
$
7,719

 
$
12,900

 
$
(23,172
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
745,156

 
$
233,765

 
$
249,284

 
$
229,156

 
$
68,366

 
$
(35,415
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
7.3%
 
18.9%
 
5.6%
 
3.4%
 
18.9%
 
n/a
 



10



 
 
Six Months Ended September 30, 2017
 
 
 
 
 
Segment Data
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):
 
Total
 
Integrated Systems
 
Aerospace Structures
 
Precision Components
 
Product Support
 
Corporate/Eliminations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
$
(7,309
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax benefit
 
(1,827
)
 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
46,393

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
37,257

 
$
89,504

 
$
11,231

 
$
(4,875
)
 
$
19,670

 
$
(78,273
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 

 

 

 

 
20,371

 
Pension settlement charge
 
523

 

 

 

 

 
523

 
Amortization of acquired contract liabilities
 
(57,371
)
 
(16,602
)
 
(38,963
)
 
(1,806
)
 

 

 
Depreciation and amortization
 
79,999

 
19,539

 
38,437

 
18,008

 
3,405

 
610

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
80,779

 
$
92,441

 
$
10,705

 
$
11,327

 
$
23,075

 
$
(56,769
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
1,526,845

 
$
471,900

 
$
525,260

 
$
466,026

 
$
134,799

 
$
(71,140
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
5.5%
 
20.3%
 
2.2%
 
2.4%
 
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 September 30, 2016
 
 
 
 
 
Segment Data
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):
 
Total
 
Integrated Systems
 
Aerospace Structures
 
Precision Components
 
Product Support
 
Corporate / Eliminations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
34,807

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
17,783

 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
17,896

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
70,486

 
45,797

 
$
24,867

 
$
12,063

 
$
14,265

 
(26,506
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
4,774

 

 

 

 

 
4,774

 
Amortization of acquired contract liabilities
 
(30,477
)
 
(9,136
)
 
(20,647
)
 
(694
)
 

 

 
Depreciation and amortization
 
45,286

 
10,157

 
18,385

 
14,016

 
2,452

 
276

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
90,069

 
$
46,818

 
$
22,605

 
$
25,385

 
$
16,717

 
$
(21,456
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
874,769

 
$
245,367

 
$
320,283

 
$
259,458

 
$
85,826

 
$
(36,165
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
10.7%
 
19.8%
 
7.5%
 
9.8%
 
19.5%
 
n/a
 



12



 
 
Six Months Ended September 30, 2016
 
 
 
 
 
Segment Data
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):
 
Total
 
Integrated Systems
 
Aerospace Structures
 
Precision Components
 
Product Support
 
Corporate / Eliminations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
54,541

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
26,648

 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
36,023

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
117,212

 
$
93,783

 
$
34,031

 
$
4,281

 
$
28,324

 
(43,207
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
4,774

 

 

 

 

 
4,774

 
Amortization of acquired contract liabilities
 
(59,825
)
 
(19,473
)
 
(39,085
)
 
(1,267
)
 

 

 
Depreciation and amortization
 
90,748

 
20,461

 
36,347

 
28,345

 
4,936

 
659

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
152,909

 
$
94,771

 
$
31,293

 
$
31,359

 
$
33,260

 
$
(37,774
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
1,768,022

 
$
502,723

 
$
651,879

 
$
514,060

 
$
170,025

 
$
(70,665
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
9.0%
 
19.6%
 
5.1%
 
6.1%
 
19.6%
 
n/a
 

















13




(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 has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs

 
 
Three Months Ended
 
 
 
September 30, 2017
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Loss from Continuing Operations - GAAP
 
$
(6,527
)
 
$
(5,378
)
 
$
(0.11
)
 
Adjustments:
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 
20,371

 
0.41

 
Refinancing costs
 
1,986

 
1,589

 
0.03

 
Restructuring cost (non-cash)
 
1,295

 
1,036

 
0.02

 
Restructuring costs (cash)
 
10,101

 
8,081

 
0.16

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
27,226

 
$
25,699

 
$
0.52

*
* - Difference due to rounding
 
 
 
 
 
 
 

 
 
Six Months Ended
 
 
 
September 30, 2017
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Loss from Continuing Operations - GAAP
 
$
(9,136
)
 
$
(7,309
)
 
$
(0.15
)
 
Adjustments:
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 
20,371

 
0.41

 
Refinancing costs
 
1,986

 
1,589

 
0.03

 
Restructuring cost (non-cash)
 
2,156

 
1,725

 
0.03

 
Restructuring costs (cash)
 
27,602

 
22,082

 
0.45

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
42,979

 
$
38,458

 
$
0.78

*
* - Difference due to rounding
 
 
 
 
 
 
 


14




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
 
Non-GAAP Financial Measure Disclosures (continued)

 
 
Three Months Ended
 
 
 
September 30, 2016
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Income from Continuing Operations - GAAP
 
$
52,590

 
$
34,807

 
$
0.70

 
Adjustments:
 
 
 
 
 
 
 
Loss on divestiture
 
4,774

 
4,774

 
0.10

 
Restructuring costs (non-cash)
 
3,740

 
2,581

 
0.05

 
Restructuring costs (cash)
 
10,462

 
7,219

 
0.15

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
71,566

 
$
49,381

 
$
1.00

 
 
 
 
 
 
 
 
 
* Difference due to rounding.
 
 
 
 
 
 
 

 
 
Six Months Ended
 
 
 
September 30, 2016
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Income from Continuing Operations - GAAP
 
$
81,189

 
$
54,541

 
$
1.10

 
Adjustments:
 
 
 
 
 
 
 
Triumph Precision Components - Strike related costs
 
15,701

 
10,834

 
0.22

 
Triumph Precision Components - Inventory write-down
 
6,089

 
4,201

 
0.08

 
Triumph Aerospace Structures - UAS program
 
14,200

 
9,798

 
0.20

 
Loss on divestiture
 
4,774

 
4,774

 
0.10

 
Restructuring costs (non-cash)
 
7,231

 
4,989

 
0.10

 
Restructuring costs (cash)
 
17,113

 
11,808

 
0.24

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
146,297

 
$
100,945

 
$
2.04

 
 
 
 
 
 
 
 
 
* Difference due to rounding.
 
 
 
 
 
 
 



15






(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)


The following table reconciles our Operating income to Adjusted Operating income as noted above.
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2017
 
September 30, 2016
Operating Income - GAAP
 
$
18,848

 
70,486

 
 
 
 
 
Adjustments:
 
 
 
 
Loss on divestiture
 
20,371

 
4,774

Restructuring costs (non-cash)
 
1,295

 
3,740

Restructuring costs (cash)
 
10,101

 
10,462

Adjusted Operating Income - non-GAAP
 
$
50,615

 
$
89,462






16




(Continued)
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)

Cash provided by operations has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions 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 available for debt reduction.

 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
September 30,
 
September 30,
 
 
2017
2017
 
2017
 
 
 
 
 
 
Cash flow from operations
 
$
(99,048
)
$
(200,017
)
 
$
(299,065
)
Less:
 
 
 
 
 
Capital expenditures
 
(12,085
)
(10,690
)
 
(22,775
)
Free cash flow available for debt reduction, acquisitions and share repurchases
 
$
(111,133
)
$
(210,707
)
 
$
(321,840
)

We use "Net Debt to Capital" as a measure of financial leverage.  The following table sets forth the computation of Net Debt to Capital:
 
 
September 30,
 
March 31,
 
 
2017
 
2017
Calculation of Net Debt
 
 
 
 
Current portion
 
$
22,883

 
$
160,630

Long-term debt
 
1,409,130

 
1,035,670

Total debt
 
1,432,013

 
1,196,300

Plus: Deferred debt issuance costs
 
18,638

 
11,752

Less: Cash
 
(33,669
)
 
(69,633
)
Net debt
 
$
1,416,982

 
$
1,138,419

 
 
 
 
 
Calculation of Capital
 
 
 
 
Net debt
 
$
1,416,982

 
$
1,138,419

Stockholders' equity
 
855,845

 
846,473

Total capital
 
$
2,272,827

 
$
1,984,892

 
 
 
 
 
Percent of net debt to capital
 
62.3
%
 
57.4
%


17
exhibit992triumphq2fy201
Daniel J. Crowley, President and Chief Executive Officer James F. McCabe Jr., Senior Vice President and Chief Financial Officer Second Quarter FY’18 Earnings Conference Call November 8, 2017


 
2Triumph Group — Second Quarter FY'18 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “project”, “may”, “will”, “should”, “could”, or similar words suggesting future outcomes or outlooks. These forward-looking statements include, but are not limited to, statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions, aerospace market conditions, aircraft production rates, financial and operational performance, revenue and earnings growth and profitability and earnings results. These statements are based on the current projections, expectations and beliefs of Triumph’s management. These forward looking statements involve known and unknown risks, uncertainties and other factors which could cause actual results to differ materially from any expected future results, performance or achievements, including, but not limited to, competitive and cyclical factors relating to the aerospace industry, dependence on some of Triumph’s business from key customers, requirements of capital, uncertainties relating to the integration of acquired businesses, general economic conditions affecting Triumph’s business segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or skilled personnel, changes in governmental regulation and oversight and international hostilities and terrorism. Further information regarding the important factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking statements can be found in Triumph’s reports filed with the SEC, including in the risk factors described in Triumph’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017.


 
3Triumph Group — Second Quarter FY'18 Overview Solidified Foundation: • Transformation on track • Enhanced financial flexibility • Improved profitability Driving Organic Growth: • Backlog up over 7% year-to-date • TTM book to bill exceeding 1:1 Reaffirming FY 18 Guidance FY’18 Q2 Financial Summary FY’18 Guidance Net Sales $745M $3.1B - $3.2B Adjusted EPS * $0.52 $2.25 - $2.75 Free Cash Use ($211M) ($450M) - ($500M) *excludes restructuring costs of $11M Q2 FY18 and $54M full year and impact of loss on divestiture and refinancing


 
4Triumph Group — Second Quarter FY'18 Transformation Progress Enabling Increased Efficiency • Completed 822 continuous improvement events YTD • $43M in cost reduction YTD towards $96M goal • Two additional facility closures announced in Q2 • 3rd divestiture successfully completed in Q2 • Reduced footprint by 1.3M sq. ft. to date • Closed Bombardier Global 7000 negotiations in Q2 • Improved working capital managementFY 17 FY 18 FY 19 Cost Reduction Run Rate 200 150 100 50 0 $ M illi on s Supply Chain Efficiency Consolidations Headcount Period Ending Cost reductions on track, enhancing competiveness and financial performance


 
5Triumph Group — Second Quarter FY'18 Driving Organic Growth Competitive Wins Customer BU A320 V2500 Support AA / VA TPS CFM56 Int. Gear Box GE TIS Follow-on Business Customer BU V-22 Sponson & Fuse Comp's Boeing TPC ECS Ducting & Floor Panels Boeing TPC C5 MLG Rotary Actuators DLA TIS Partnership Customer BU T-X Trainer Fuselage and Systems Boeing TAS $12B Pipeline (50% Military) …..7% YTD backlog growth to $4.3B Integrated Systems Aerospace Structures Precision Components Backlog Trend 5,000 4,000 3,000 2,000 1,000 0 $ M ill io ns FY 2016 FY 2017 Q1 FY18 Q2 FY18 Military Pipeline 8,000 6,000 4,000 2,000 0 $ M ill io ns 2018 JOP Q1 Q2 +7% +41%


 
6Triumph Group — Second Quarter FY'18 Market Trends Military • Military budget outlook $632B (+OSC) • Triumph opportunities on multiple platforms: - T-X, B21, MQ-25, T-38/F15 SLEPS, Light Attack • CH-53K ramp up adds nearer term growth Commercial • Commercial aviation remains long term growth industry - 41,000+ new airplanes in next 20 years - 11 year production backlog at current production rates - Triumph benefiting from narrow-body rate increases • Increasing long-range business jet outlook • Higher efficiency engine development programs • eCommerce shipments driving aircraft sales and MRO • A/C deliveries & MRO center of mass shifting to Asia • Vertical integration, off-shoring, IP ownership • M&A accelerating Healthy market, growing demand, increasing opportunities. FY18 Budge t $ Billion s


 
7Triumph Group — Second Quarter FY'18 Consolidated Quarterly Results • Organic sales decrease was 12% • Net sales decrease due to: ◦ Boeing and Gulfstream program completions and rate reductions ◦ Timing of deliveries on certain programs ◦ Partially offset by increased production on 767/Tanker & Global Hawk/Triton • Adjusted operating income excludes: ◦ $20M loss on divestiture ◦ $11M restructuring costs • Adjusted operating income and margin improved sequentially ($ in millions) FY’18 Q2 FY’17 Q2 Variance % Net Sales $745 $875 (15)% Operating Income 19 70 (73)% Operating Margin 3% 8% Adjusted Operating Income 51 89 (43)% Adjusted Operating Margin 7% 10% Revenue & Earnings ramp through 2H FY'18


 
8Triumph Group — Second Quarter FY'18 Integrated Systems Highlights • Selected as sole source supplier of aftermarket spare rotary actuators on the C-5 Galaxy • Non-core divestiture yielded $65M in proceeds • Opened new facility in Windsor, CT to consolidate three locations • YTD Book to bill of 1.3:1 Year Over Year Comparison Net Sales ($ in M) 300 250 200 150 100 50 0 $ M illi on s FY'18 Q2 FY'17 Q2 $234 $245 Operating Margin (%) 25 20 15 10 5 0 % FY'18 Q2 FY'17 Q2 18% 19% Financial • Net sales change included: ◦ Growth in CH47, 737 and 787, offset by: ▪ Divestitures ($6M) ▪ Rate reductions on A380 and 777 and timing of deliveries on other programs • Operating margin included $1M in restructuring costs • Excluding restructuring costs, operating margin was 19% Triumph Integrated Systems' spare main landing gear rotary actuators will be used on the C-5 Galaxy, one of the largest aircraft in the world.


 
9Triumph Group — Second Quarter FY'18 Product Support Highlights • Returned to organic growth following short-term customer deferrals • Awarded contract extension with OEM Thrust Reverser support on key programs • Secured two deals with operators in the U.S. and Asia to provide MRO support for V2500-A5 Nacelles • Hosted meeting in China attended by over 50 airline representatives from various Asian operators Year Over Year Comparison Net Sales ($ in M) 100 80 60 40 20 0 $ M illi on s FY'18 Q2 FY'17 Q2 $68 $86 Operating Margin (%) 30 25 20 15 10 5 0 % FY'18 Q2 FY'17 Q2 16% 17% Financial • Organic sales increased 9% due primarily to increased demand of accessory components ◦ Sales in FY17 included $23M from divested businesses • Operating margin improved sequentially by 370 basis points Triumph Product Support is contracted to provide MRO support for V2500-A5 Nacelles.


 
10Triumph Group — Second Quarter FY'18 Precision Components Highlights • Awarded contract extension on ducting and floor panels on Boeing commercial programs • Composites obtained green rating with all external customers for quality and delivery performance • Interiors earned green rating from Boeing on their annual Production Readiness for all Boeing programs • YTD Book to bill of 1.1:1, including two significant awards at our Fabrications operating company Year Over Year Comparison Net Sales ($ in M) 300 250 200 150 100 50 0 $ M illi on s FY'18 Q2 FY'17 Q2 $229 $259 Operating Margin (%) 6 5 4 3 2 1 0 -1 -2 % FY'18 Q2 FY'17 Q2 (1)% 5% Financial • Net sales and operating margin decreased primarily due to decreased production rates and pricing on 777 as well as pricing on 787 • Operating results impacted by restructuring costs of $4M and related inefficiencies Triumph Precision Components floor panels and ducting will be utilized on Boeing’s 737 (legacy and MAX), 747, 767, 777 (legacy) and 787 airplanes


 
11Triumph Group — Second Quarter FY'18 Aerospace Structures Highlights • Selected as a supplier of choice for the Boeing T-X trainer • Key Flight Test Vehicle milestones completed on Global 7000 and production wings delivery ramping • Successful execution of build rate increase on 767 program • YTD Book to Bill 1.3:1 Year Over Year Comparison Net Sales ($ in M) 300 200 100 0 $ M illi on s FY'18 Q2 FY'17 Q2 $249 $320 Operating Margin (%) 10 8 6 4 2 0 % FY'18 Q2 FY'17 Q2 5% 8% Financial • Net favorable cumulative catch-up adjustments on long-term contracts of $8M • Net sales and operating margin decreased as expected due to completion of and continued rate reductions on certain Boeing and Gulfstream programs, partially offset by increased production on 767/Tanker and Global Hawk/Triton • Adjusted for restructuring costs of $2M, operating margin sequentially improved 505 basis points Triumph’s Aerospace Structures will supply the wing, vertical tail and horizontal tail structures for the Boeing T-X.


 
12 Free Cash Flow Walk - FY'18 Q2 Q2 Cash Drivers • Development programs used $33M • Restructuring used $10M • Net working capital usage of $221M includes: ◦ Reduction of customer advances ◦ Build of production inventory ◦ Reduced vendor financing • Peak cash usage through Q3, recovering in Q4 Consolidated ($ in millions) FY’18 Q2 FY’18 YTD Net Income $ (5) $ (7) Non-cash items: Depreciation & Amortization 41 80 Interest Expense & Other 25 46 Amortization of Acquired Contracts (28) (57) Loss on divestiture 20 20 Pension Income (15) (30) OPEB Income (3) (6) Income Tax Benefit (1) (2) Cash uses: Working Capital Usage (221) (300) Interest Payments (8) (32) Capital Expenditures (11) (23) OPEB Payments (3) (6) Tax Payments (2) (5) Free Cash Use $ (211) $ (322) On track to achieve guidance


 
13Triumph Group — Second Quarter FY'18 Capitalization, Leverage & Liquidity • Completed $500M bond offering • Amended and extended Securitization Facility • Cash and Availability ~ $680M • Senior Secured Leverage Ratio ~ 1.1x • Interest Coverage Ratio ~ 3.5x ($ in millions) FY’18 Q2 Cash $ (34) $800M Revolving Credit Facility 117 $125M Receivable Securitization Facility 89 Capital Leases 61 2013 Senior Notes Due 2021 375 2014 Senior Notes Due 2022 300 2017 Senior Notes Due 2025 500 Other Debt 8 Net Debt $ 1,416 Enhanced Financial Strength & Liquidity


 
14Triumph Group — Second Quarter FY'18 FY'18 Guidance Net Sales $3.1B - $3.2B Adjusted EPS * $2.25 - $2.75 Free Cash Use ($450M) - ($500M) Effective Tax Rate ^ ~ 6% Capital Expenditures $80M - $90M$50M - $60M *excludes restructuring costs of $54M for FY'18 ^ Potential opportunity to lower through release of valuation allowance and use of deferred tax benefits from prior divestitures. Expect third quarter effective tax rate of approximately 15% Expect stronger 2nd half results, with Q4 better than Q3


 
15Triumph Group — Second Quarter FY'18 Concluding Remarks • Operational performance stabilizing as CI culture takes hold – transformation setting foundation for future • Enhanced backlog profitability through renegotiated contracts • New wins increasing backlog - positions Triumph for sales growth in FY'19 • Disciplined portfolio and balance sheet actions strengthening margins and financial flexibility


 
16Triumph Group — Second Quarter FY'18 Our Vision We aspire to be the premier design, manufacturing and support company whose comprehensive capabilities, integrated processes and innovative employees advance the safety and prosperity of the world. Our Mission As One Team, we partner with our customers to triumph over the hardest aerospace, defense and industrial challenges, enabling us to deliver value to our shareholders. Our Values Integrity Continuous Improvement Teamwork Innovation Act with Velocity


 
17Triumph Group — Second Quarter FY'18 Appendix


 
18 Top Programs Integrated Systems Aerospace Structures Precision Components Boeing 777 Boeing 787 Airbus A350 Boeing 737 Boeing 767, Tanker Boeing V-22 Boeing F-15 Bell Helicopter AH1 Bombardier C Series NG Global Hawk Represents 73% of Precision Components backlog Gulfstream Boeing 767, Tanker Bombardier Global Airbus A330, A340 Boeing 747 Boeing V-22 Boeing 777 NG Global Hawk Bell Helicopter 525 Embraer E2 Represents 97% of Aerospace Structures backlog Airbus A320, A321 Boeing 737 Boeing 787 Boeing V-22 Boeing AH-64 Boeing CH-47 Lockheed Martin C-130 Sikorsky UH60 Lockheed Martin F-35 Boeing 777 Represents 58% of Integrated Systems backlog


 
19 Supplemental Data Pension/OPEB Analysis ($ in millions) FY’17 FY’18 Pension Expense (Income) ≈ ($67) ≈ ($60) Cash Pension Contribution ≈ $2 ≈ $0 OPEB Expense (Income) ≈ ($14) ≈ ($11) Cash OPEB Contribution ≈ $17 ≈ $16 Restructuring ($ in millions) Remaining Estimate FY’18 E FY’19 + Transformation Related — Cash Based Costs $72 $52 $20 Transformation Related — Non-Cash Based Costs 3 2 1 Total $75 $54 $21


 
20 FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Non-GAAP Financial Measures Disclosures Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs. Three Months Ended September 30, 2017 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (6,527) $ (5,378) $ (0.11) Adjustments: Loss on divestiture 20,371 20,371 0.41 Refinancing costs 1,986 1,589 0.03 Restructuring costs (non-cash) 1,295 1,036 0.02 Restructuring costs (cash) 10,101 8,081 0.16 Adjusted Income from Continuing Operations - Non-GAAP $ 27,226 $ 25,699 $ 0.52 * * Difference due to rounding Non-GAAP Disclosure Six Months Ended September 30, 2017 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (9,136) $ (7,309) $ (0.15) Adjustments: Loss on divestiture 20,371 20,371 0.41 Refinancing costs 1,986 1,589 0.03 Restructuring costs (non-cash) 2,156 1,725 0.03 Restructuring costs (cash) 27,602 22,082 0.45 Adjusted Income from Continuing Operations - Non-GAAP $ 42,979 $ 38,458 $ 0.78 * * Difference due to rounding


 
21 FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Non-GAAP Financial Measures Disclosures (continued) Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs has been provided for consistency and comparability. These measures should not be considered in isolation or as alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted share presented in accordance with GAAP. The following tables reconcile income from continuing operations before income taxes, income from continuing operations, and income from continuing operations per diluted share, before non-recurring costs. Non-GAAP Disclosure Six Months Ended September 30, 2016 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ 81,189 $ 54,541 $ 1.10 Adjustments: Triumph Precision Components - Strike related costs 15,701 10,834 0.22 Triumph Precision Components - Inventory write-down 6,089 4,201 0.08 Triumph Aerospace Structures - UAS program 14,200 9,798 0.20 Loss on divestiture 4,774 4,774 0.10 Restructuring costs (non-cash) 7,231 4,989 0.10 Restructuring costs (cash) 17,113 11,808 0.24 Adjusted Income from Continuing Operations - Non-GAAP $ 146,297 $ 100,945 $ 2.04 * * Difference due to rounding Three Months Ended September 30, 2016 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ 52,590 $ 34,807 $ 0.70 Adjustments: Loss on divestiture 4,774 4,774 0.10 Restructuring costs (non-cash) 3,740 2,581 0.05 Restructuring costs (cash) 10,462 7,219 0.15 Adjusted Income from Continuing Operations - Non-GAAP $ 71,566 $ 49,381 $ 1.00 * * Difference due to rounding


 
22 (Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Non-GAAP Financial Measures Disclosures (continued) Cash provided by operations has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles cash provided by operations to free cash flow available for debt reduction. We use "Net Debt to Capital" as a measure of financial leverage.  The following table sets forth the computation of Net Debt to Capital: Three Months Ended Six Months Ended June 30, 2017 September 30, 2017 September 30, 2017 Cash flow from operations $ (99,048) $ (200,017) $ (299,065) Less: Capital expenditures (12,085) (10,690) (22,775) Free cash flow $ (111,133) $ (210,707) $ (321,840) September 30, March 31, 2017 2017 Calculation of Net Debt Current portion $ 22,883 $ 160,630 Long-term debt 1,409,130 1,035,670 Total debt 1,432,013 1,196,300 Plus: Deferred debt issuance costs 18,638 11,752 Less: Cash (33,669) (69,633) Net debt $ 1,416,982 $ 1,138,419 Calculation of Capital Net debt $ 1,416,982 $ 1,138,419 Stockholders' equity 855,845 846,473 Total capital $ 2,272,827 $ 1,984,892 Percent of net debt to capital 62.3% 57.4% Non-GAAP Disclosure