Document
Table of Contents

United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q


ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2017

or

¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From _________ to ________

Commission File Number: 1-12235

TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
51-0347963
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

899 Cassatt Road, Suite 210, Berwyn, PA
 
19312
(Address of principal executive offices)
 
(Zip Code)

(610) 251-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £

Indicate by check mark whether the registrant has submitted electronically and has posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No £
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one)
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
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
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o    No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common Stock, par value $0.001 per share, 49,647,572 shares outstanding as of November 7, 2017.


Table of Contents

TRIUMPH GROUP, INC.
INDEX
 
 
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets at September 30, 2017 and March 31, 2017
 
 
 
 
 
Condensed Consolidated Statements of Operations
Three and six months ended September 30, 2017 and 2016
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income
Three
 and six months ended September 30, 2017 and 2016
 
 
 
 
 
Six months ended September 30, 2017 and 2016
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

Part I. Financial Information

Item 1. Financial Statements.

Triumph Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
 
September 30,
2017
 
March 31,
2017
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
33,669

 
$
69,633

Trade and other receivables, less allowance for doubtful accounts of $3,631 and $4,559
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

Total 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 AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
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

Total current liabilities
939,892

 
1,334,260

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

 
1,035,670

Accrued pension and other postretirement benefits
549,211

 
592,134

Deferred income taxes
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


SEE ACCOMPANYING NOTES.

1


Table of Contents

Triumph Group, Inc.
Condensed Consolidated Statements of Operations

(in thousands, except per share data)
(unaudited)

 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net sales
$
745,156

 
$
874,769

 
$
1,526,845

 
$
1,768,022

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown separately below)
579,864

 
673,432

 
1,207,210

 
1,399,820

Selling, general and administrative
74,581

 
70,329

 
153,883

 
138,355

Depreciation and amortization
40,868

 
45,286

 
79,999

 
90,748

Restructuring costs
10,101

 
10,462

 
27,602

 
17,113

Loss on divestitures
20,371

 
4,774

 
20,371

 
4,774

Pension settlement charge
523

 

 
523

 

 
726,308

 
804,283

 
1,489,588

 
1,650,810

Operating income
18,848

 
70,486

 
37,257

 
117,212

Interest expense and other
25,375

 
17,896

 
46,393

 
36,023

(Loss) income before income taxes
(6,527
)
 
52,590

 
(9,136
)
 
81,189

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

 
(1,827
)
 
26,648

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

 
$
(7,309
)
 
$
54,541

 
 
 
 
 
 
 
 
(Loss) earnings per share—basic:
$
(0.11
)
 
$
0.71

 
$
(0.15
)
 
$
1.11

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding—basic
49,428

 
49,304

 
49,400

 
49,281

 
 
 
 
 
 
 
 
(Loss) earnings per share—diluted:
$
(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



SEE ACCOMPANYING NOTES.

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Table of Contents

Triumph Group, Inc.
Condensed Consolidated Statements of Comprehensive Income
(dollars in thousands)
(unaudited)

 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(5,378
)
 
$
34,807

 
$
(7,309
)
 
$
54,541

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
9,905

 
(6,821
)
 
21,326

 
(21,618
)
Defined benefit pension plans and other postretirement benefits:
 
 
 
 
 
 
 
 
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
 
 
 
 
 
 
 
 
Prior service loss
 
523

 

 
523

 

Reclassifications from accumulated other comprehensive income - losses (gains), net of tax expense (benefits):
 
 
 
 
 
 
 
 
Amortization of net loss, net of taxes of $0 and ($489) for the three months ended and $0 and ($977) for the six months ended, respectively
 
1,695

 
834

 
3,390

 
1,671

Recognized prior service credits, net of taxes of $0 for the three months ended and $1,408 for the six months ended
 
(3,042
)
 
(2,408
)
 
(6,084
)
 
(4,817
)
Total defined benefit pension plans and other postretirement benefits, net of taxes
 
(824
)
 
(1,574
)
 
(2,171
)
 
(3,146
)
Cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized (loss) gain arising during period, net of tax of ($2) and ($578) for the three months ended and ($9) and ($238) for the sixth months ended, respectively
 
(561
)
 
928

 
(19
)
 
373

Reclassification of (loss) gain included in net earnings, net of tax of $11 and $1 for the three months ended and $21 and $1 for the six months ended, respectively
 
(2,021
)
 
1

 
(2,380
)
 
(10
)
Net unrealized (loss) gain on cash flow hedges, net of tax
 
(2,582
)
 
929

 
(2,399
)
 
363

Total other comprehensive income (loss)
 
6,499

 
(7,466
)
 
16,756

 
(24,401
)
Total comprehensive income
 
$
1,121

 
$
27,341

 
$
9,447

 
$
30,140


SEE ACCOMPANYING NOTES.

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Table of Contents

Triumph Group, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands) (unaudited)
 
Six Months Ended September 30,
 
2017
 
2016
 
 
 
 
Operating Activities
 
 
 
Net (loss) income
$
(7,309
)
 
$
54,541

Adjustments to reconcile net (loss) income to net cash used in operating activities:
 
 
 
Depreciation and amortization
79,999

 
90,748

Amortization of acquired contract liabilities
(57,371
)
 
(59,825
)
Loss on divestiture
20,371

 
4,774

Other amortization included in interest expense
7,819

 
2,576

Provision for doubtful accounts receivable
(568
)
 
(224
)
(Benefit) provision for deferred income taxes
(422
)
 
15,897

Employee stock-based compensation
3,418

 
3,976

Changes in assets and liabilities, excluding the effects of acquisitions and dispositions of businesses:
 
 
 
Trade and other receivables
(19,678
)
 
108,812

Inventories
(29,269
)
 
(240,361
)
Prepaid expenses and other current assets
2,925

 
17,001

Accounts payable and accrued expenses
(246,118
)
 
(85,769
)
Accrued pension and other postretirement benefits
(46,049
)
 
(48,941
)
Other
(6,813
)
 
5,559

Net cash used in operating activities
(299,065
)
 
(131,236
)
Investing Activities
 
 
 
Capital expenditures
(22,775
)
 
(23,967
)
Proceeds from sale of assets
67,882

 
10,044

Acquisitions, net of cash acquired

 
9

Net cash provided by (used in) investing activities
45,107

 
(13,914
)
Financing Activities
 
 
 
Net increase in revolving credit facility
87,393

 
252,396

Proceeds from issuance of long-term debt and capital leases
510,800

 
12,700

Repayment of debt and capital lease obligations
(357,046
)
 
(73,834
)
Payment of deferred financing costs
(17,120
)
 
(11,079
)
Dividends paid
(3,970
)
 
(3,962
)
Repayment of government grant

 
(14,570
)
Repurchase of restricted shares for minimum tax obligation
(334
)
 
(182
)
Net cash provided by financing activities
219,723

 
161,469

Effect of exchange rate changes on cash
(1,729
)
 
(1,088
)
Net change in cash
(35,964
)
 
15,231

Cash and cash equivalents at beginning of period
69,633

 
20,984

Cash and cash equivalents at end of period
$
33,669

 
$
36,215


SEE ACCOMPANYING NOTES.

4



Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

1.     BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements of Triumph Group, Inc. (the "Company") have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position and cash flows. The results of operations for the three and six months ended September 30, 2017 are not necessarily indicative of results that may be expected for the year ending March 31, 2018. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the fiscal 2017 audited condensed consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended March 31, 2017 filed with the Securities and Exchange Commission (the "SEC") on May 24, 2017.

The Company 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.
Standards Recently Implemented
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company adopted ASU 2016-09 effective April 1, 2017. The adoption of ASU 2016-09 did not have a material impact on the Company's consolidated financial statements.
Standards Issued Not Yet Implemented
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”, “ASC 606”), which requires recognition of revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has issued several updates to ASU 2014-09 which must be adopted concurrently with ASU 2014-09.
Under ASC 606, revenue is recognized when control of promised goods or services transfers to a customer and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The major provisions include determining enforceable rights and obligation between parties, defining performance obligations as the units of accounting under contract, accounting for variable consideration, and determining whether performance obligations are satisfied over time or at a point of time. Additionally, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
ASC 606 will be effective for the Company beginning April 1, 2018. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the “full retrospective method”), or retrospectively with the cumulative effect of initially applying ASC 606 recognized at the date of initial application (the "modified retrospective method”). The Company is adopting ASC 606 effective April 1, 2018 and the Company expects to do so using the modified retrospective method.
During the fiscal year ended March 31, 2016, we established a cross-functional team to assess and prepare for implementation of the new standard. We are analyzing the impact of the new standard on the Company’s revenue contracts, comparing our current accounting policies and practices to the requirements of the new standard, and identifying potential differences that would result from applying the new standard to our contracts.
While further analysis of ASC 606 and a review of all material contracts is underway, the adoption of ASC 606 may impact the amount and timing of revenue recognition and the accounting treatment of deferred production costs for certain of our

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

contracts. Under ASC 606, the units-of-delivery method is no longer viable and some performance obligations may be satisfied over time which may change the timing of recognition of revenue and associated production costs for certain contracts.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). ASU 2017-07 amends ASC 715, Compensation — Retirement Benefits, to require employers that present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, and settlement and curtailment effects, are to be included in nonoperating expenses. Employers that do not present a measure of operating income are required to include the service cost component in the same line item as other employee compensation costs. Employers are required to include all other components of net benefit cost in a separate line item(s). The line item(s) in which the components of net benefit cost other than the service cost are included need to be identified as such on the income statement or in the disclosures. ASU 2017-07 also stipulates that only the service cost component of net benefit cost is eligible for capitalization. ASU 2017-07 is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently performing its assessment of the impact of adopting the guidance; however based on its expectations for the fiscal year ending March 31, 2018, the Company believes it will likely have a material impact due to the reclassification of pension and OPEB income from capitalized costs (Operating Income) to Other Income. Excluding the service costs, the net periodic pension benefit for the fiscal year ending March 31, 2018 is expected to be $67,000.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). This update requires recognition of lease assets and lease liabilities on the balance sheet of lessees. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim reporting periods within those years. Early adoption is permitted. ASU 2016-02 requires a modified retrospective transition approach and provides certain optional transition relief. The Company is currently evaluating the guidance to determine the impact it may have to the Company's consolidated financial statements.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition

Revenues are generally recognized in accordance with the contract terms when products are shipped, delivery has occurred or services have been rendered, pricing is fixed and determinable, and collection is reasonably assured. A significant portion of the Company’s contracts are within the scope of the Revenue Recognition - Construction-Type and Production-Type Contracts topic of the Accounting Standards Codification ("ASC") 605-35 and revenue and costs on contracts are recognized using the percentage-of-completion method of accounting. Accounting for the revenue and profit on a contract requires estimates of (1) the contract value or total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s scope of work, and (3) the measurement of progress toward completion. Depending on the contract, the Company measures progress toward completion using either the cost-to-cost method or the units-of-delivery method of accounting, with the great majority measured under the units-of-delivery method of accounting.

Under the cost-to-cost method of accounting, progress toward completion is measured as the ratio of total costs incurred to estimated total costs at completion. Costs are recognized as incurred. Profit is determined based on estimated profit margin on the contract multiplied by the progress toward completion. Revenue represents the sum of costs and profit on the contract for the period.
Under the units-of-delivery method of accounting, revenue on a contract is recorded as the units are delivered and accepted during the period at an amount equal to the contractual selling price of those units. The costs recorded on a contract under the units-of-delivery method of accounting are equal to the total costs at completion divided by the total units to be delivered. As contracts can span multiple years, the Company often segments the contracts into production lots for the purposes of accumulating and allocating cost. Profit is recognized as the difference between revenue for the units delivered and the estimated costs for the units delivered.

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


Adjustments to original estimates for a contract’s revenues, estimated costs at completion and estimated total profit are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. These estimates are also sensitive to the assumed rate of production. Generally, the longer it takes to complete the contract quantity, the more relative overhead that contract will absorb. The impact of revisions in cost estimates is recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident (‘‘forward losses’’) and are first offset against costs that are included in inventory, with any remaining amount reflected in accrued contract liabilities in accordance with the Revenue Recognition - Construction-Type and Production-Type Contracts topic. Revisions in contract estimates, if significant, can materially affect results of operations and cash flows, as well as valuation of inventory. Furthermore, certain contracts are combined or segmented for revenue recognition in accordance with the Revenue Recognition - Construction-Type and Production-Type Contracts topic.
During the quarter ended September 30, 2016, the Company discovered an immaterial error in its percentage-of-completion accounting for one of its contracts, which understated cost of sales and overstated net income for the three months ended June 30, 2016, in the amount of $11,800 and $8,142, respectively, and overstated retained earnings as of March 31, 2016 in the amount of $12,700. The Company assessed the materiality of this error on previously issued financial statements in accordance with the ASC 250, Presentation of Financial Statements, and Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 99, Materiality. The Company concluded, based on a review of the quantitative and qualitative factors of the materiality of the amount, that the error was not material to any previously issued financial statements and that the correction of the error in the three months ended September 30, 2016 was not material to that period’s financial statements. Accordingly, in order to correct this immaterial error, the Company recorded a charge to "Cost of sales" in the amount of $24,500, which is presented on the accompanying Condensed Consolidated Statements of Income during the three months ended September 30, 2016.
For the three months ended September 30, 2017, cumulative catch-up adjustments from changes in estimates, inclusive of changes in forward loss estimates, increased operating income, net income and earnings per share by approximately $8,416, $6,733 and $0.14, net of tax, respectively. For the three months ended September 30, 2016 cumulative catch-up adjustments were balanced between positive and negative variances.
For the six months ended September 30, 2017, cumulative catch-up adjustments from changes in estimates, inclusive of changes in forward loss estimates, increased operating income, net income and earnings per share by approximately $7,916, $6,333 and $0.13, net of tax, respectively. For the six months ended September 30, 2016, cumulative catch-up adjustments from changes in estimates decreased operating income, net income and earnings per share by approximately $(20,716), $(13,917) and $(0.28), net of tax, respectively.
Amounts representing contract change orders or claims are only included in revenue when such change orders or claims have been settled with the customer and to the extent that units have been delivered. Additionally, some contracts may contain provisions for revenue sharing, price re-determination, requests for equitable adjustments, change orders or cost and/or performance incentives. Such amounts or incentives are included in contract value when the amounts can be reliably estimated and their realization is reasonably assured.
Although fixed-price contracts, which extend several years into the future, generally permit the Company to keep unexpected profits if costs are less than projected, the Company also bears the risk that increased or unexpected costs may reduce profit or cause the Company to sustain losses on the contract. In a fixed-price contract, the Company must fully absorb cost overruns, notwithstanding the difficulty of estimating all of the costs the Company will incur in performing these contracts and in projecting the ultimate level of revenue that may otherwise be achieved.
As previously disclosed, the Company recognized provisions for forward losses associated with our long-term contracts on the 747-8 and Bombardier programs. There is still risk similar to what the Company has experienced on the 747-8 and Bombardier programs. Particularly, the Company's ability to manage risks related to supplier performance, execution of cost reduction strategies, hiring and retaining skilled production and management personnel, quality and manufacturing execution, program schedule delays, potential need to negotiate facility lease extensions or alternatively relocate work and many other risks, will determine the ultimate performance of these programs.
Included in net sales of Integrated Systems, Aerospace Structures and Precision Components, is the non-cash amortization of acquired contract liabilities that were recognized as fair value adjustments through purchase accounting from various

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

acquisitions. For the three months ended September 30, 2017 and 2016, the Company recognized $27,898 and $30,477, respectively, into net sales on the accompanying Condensed Consolidated Statements of Income. For the six months ended September 30, 2017 and 2016, the Company recognized $57,371 and $59,825, respectively, into net sales on the accompanying Condensed Consolidated Statements of Income.
Product Support provides repair and overhaul services, of which a small portion of services are provided under long-term power-by-the-hour contracts. The Company applies the proportional performance method of accounting to recognize revenue under these contracts. Revenue is recognized over the contract period as units are delivered based on the relative value in proportion to the total estimated contract consideration. In estimating the total contract consideration, management evaluates the projected utilization of its customers’ fleet over the term of the contract, in connection with the related estimated repair and overhaul servicing requirements to the fleet based on such utilization. Changes in utilization of the fleet by customers, among other factors, may have an impact on these estimates and require adjustments to estimates of revenue to be realized.
Concentration of Credit Risk
The Company’s trade accounts receivable are exposed to credit risk. However, the risk is limited due to the diversity of the customer base and the customer base’s wide geographical area. Trade accounts receivable from Boeing (representing commercial, military and space) represented approximately 15% and 5% of total trade accounts receivable as of September 30, 2017 and March 31, 2017, respectively. Trade accounts receivable from Gulfstream (representing commercial, military and space) represented approximately 12% and 3% of total trade accounts receivable as of September 30, 2017 and March 31, 2017, respectively. The Company had no other concentrations of credit risk of more than 10%.
Sales to Boeing for the six months ended September 30, 2017, were $507,330, or 33% of net sales, of which $105,304, $201,865, $195,952 and $4,209 were from the Integrated Systems, Aerospace Structures, Precision Components and Product Support, respectively. Sales to Boeing for the six months ended September 30, 2016, were $657,901, or 37% of net sales, of which $106,838, $311,658, $223,256 and $16,149 were from the Integrated Systems, Aerospace Structures, Precision Components and Product Support, respectively.
Sales to Gulfstream for the six months ended September 30, 2017, were $198,525, or 13% of net sales, of which $654, $191,799, $5,875 and $197 were from the Integrated Systems, Aerospace Structures, Precision Components and Product Support, respectively. Sales to Gulfstream for the six months ended September 30, 2016, were $216,651, or 12% of net sales, of which $1,083, $209,684, $5,782 and $102 were from the Integrated Systems, Aerospace Structures, Precision Components and Product Support, respectively.
No other single customer accounted for more than 10% of the Company’s net sales. However, the loss of any significant customer, including Boeing and Gulfstream, could have a material adverse effect on the Company and its operating subsidiaries.
Stock-Based Compensation
The Company recognizes compensation expense for share-based awards based on the fair value of those awards at the date of grant. Stock-based compensation expense for the three months ended September 30, 2017 and 2016, was $3,459 and $2,024, respectively. Stock-based compensation expense for the six months ended September 30, 2017 and 2016, was $3,418 and $3,976, respectively. The Company has classified share-based compensation within selling, general and administrative expenses to correspond with the same line item as the majority of the cash compensation paid to employees. Upon the exercise of stock options or vesting of restricted stock, the Company first transfers treasury stock, then issues new shares.









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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Intangible Assets
The components of intangible assets, net, are as follows:
 
September 30, 2017
 
Weighted-
Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
 
 
 
 
 
 
 
 
Customer relationships
17.1
 
$
620,783

 
$
(237,521
)
 
$
383,262

Product rights, technology and licenses
11.4
 
54,960

 
(40,661
)
 
14,299

Non-compete agreements and other
16.3
 
2,756

 
(876
)
 
1,880

Tradenames
10.0
 
150,000

 
(15,811
)
 
134,189

Total intangibles, net
 
 
$
828,499

 
$
(294,869
)
 
$
533,630


 
March 31, 2017
 
Weighted-
Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
 
 
 
 
 
 
 
 
Customer relationships
16.6
 
$
663,165

 
$
(241,124
)
 
$
422,041

Product rights, technology and licenses
11.4
 
54,347

 
(39,486
)
 
14,861

Non-compete agreements and other
16.3
 
2,756

 
(786
)
 
1,970

Tradenames
10.3
 
163,000

 
(9,508
)
 
153,492

Total intangibles, net
 
 
$
883,268

 
$
(290,904
)
 
$
592,364

Amortization expense for the three months ended September 30, 2017 and 2016, was $14,550 and $13,586, respectively. Amortization expense for the six months ended September 30, 2017 and 2016, was $29,375 and $27,217, respectively.

Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing an asset or liability. The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and Level 3—Unobservable inputs for the asset or liability. The Company has applied fair value measurements to its divestitures and interest rate swap (see Note 3 and Note 5).
Warranty Reserves
A reserve has been established to provide for the estimated future cost of warranties on our delivered products. The Company periodically reviews the reserves and adjustments are made accordingly. A provision for warranty on products delivered is made on the basis of historical experience and identified warranty issues. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. The majority of the Company's agreements include a three-year warranty, although certain programs have warranties up to 20 years. The warranty reserves as of September 30, 2017 and March 31, 2017, were $81,552 and $107,088, respectively. The decrease in warranty reserves during the first half of the fiscal year ended March 31, 2018, was offset by a corresponding decrease to the related indemnification asset, which is included in other assets on the accompanying Condensed Consolidated Balance Sheets.



9


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Supplemental Cash Flow Information
The Company paid $5,133 and $2,169 for income taxes, net of refunds, for the six months ended September 30, 2017 and 2016, respectively.
The Company made interest payments of $31,507 and $34,514 for the six months ended September 30, 2017 and 2016, respectively.
During the six months ended September 30, 2017 and 2016, the Company financed $1,153 and $11,427, respectively, of property and equipment additions through capital leases.
As of September 30, 2017, the Company remains able to purchase an additional 2,277,789 shares under the existing stock repurchase program. However, there are certain restrictions placed on the repurchase program by the Company's lenders that prevent any repurchases at this time.
3.     DIVESTED OPERATIONS
In September 2017, the Company sold all of the shares of Triumph Processing - Embee Division, Inc. ("Embee") for total cash proceeds of $64,986. As a result of the sale of Embee, the Company recognized a loss of $17,857 which is presented on the accompanying Condensed Consolidated Statements of Operations as "Loss on divestiture." The operating results of Embee were included in Integrated Systems through the date of disposal.
In September 2016, the Company sold all of the shares of Triumph Aerospace Systems-Newport News, Inc. ("Newport News") for total cash proceeds of $9,000. As a result of the sale of Newport News, the Company recognized a loss of $4,774 which is presented on the accompanying Condensed Consolidated Statements of Operations as "Loss on divestiture." The operating results of Newport News were included in Integrated Systems through the date of disposal.
In December 2016, the Company entered into a definitive agreement to divest Triumph Air Repair, the Auxiliary Power Unit Overhaul Operations of Triumph Aviations Services - Asia, Ltd. and Triumph Engines - Tempe ("Engines and APU"). As a result, the Company recognized a loss of $14,263 on the sale. The operating results of Engines and APU were included in Product Support through the date of disposal. The transaction closed during the quarter ended June 30, 2017.
The disposal of these entities does not represent a strategic shift and is not expected to have a major effect on the Company's operations or financial results, as defined by ASC 205-20, Discontinued Operations; as a result, the disposals do not meet the criteria to be classified as discontinued operations.
To measure the amount of impairment related to the divestitures, the Company compared the fair values of assets and liabilities at the evaluation dates to the carrying amounts at the end of the month prior to the respective evaluation dates. The sale of Embee, Newport News and Engines and APU assets and liabilities are categorized as Level 2 within the fair value hierarchy. The key assumption included the negotiated sales price of the assets and the assumptions of the liabilities (see Note 2 above for definition of levels).










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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

4.    INVENTORIES
Inventories are stated at the lower of cost (average-cost or specific-identification methods) or market. The components of inventories are as follows:
 
September 30, 2017
 
March 31, 2017
Raw materials
$
83,511

 
$
89,069

Work-in-process, including manufactured and purchased components
1,547,690

 
1,297,989

Finished goods
109,931

 
118,265

Rotable assets
56,768

 
57,337

Less: unliquidated progress payments
(429,185
)
 
(222,485
)
Total inventories
$
1,368,715

 
$
1,340,175

Work-in-process inventory includes capitalized pre-production costs on newer development programs. Capitalized pre-production costs include nonrecurring engineering, planning and design, including applicable overhead, incurred before production is manufactured on a regular basis. Significant customer-directed work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a contractually determined number of ship set deliveries. The balance of development program inventory, comprised principally of capitalized pre-production costs, excluding progress payments related to the Company's contracts with Bombardier for the Global 7000/8000 program ("Bombardier") and Embraer for the second generation E-Jet program ("Embraer") are as follows:
 
September 30, 2017
 
Inventory
 
Capitalized Pre-Production
 
Forward Loss Provision
 
Total Inventory, net
Bombardier
$
195,157

 
$
648,804

 
$
(374,800
)
 
$
469,161

Embraer
29,550

 
178,262

 
(4,587
)
 
203,225

Total
$
224,707

 
$
827,066

 
$
(379,387
)
 
$
672,386

 
 
 
 
 
 
 
 
 
March 31, 2017
 
Inventory
 
Capitalized Pre-Production
 
Forward Loss Provision
 
Total Inventory, net
Bombardier
$
89,650

 
$
589,449

 
$
(399,758
)
 
$
279,341

Embraer
14,987

 
173,169

 
(5,800
)
 
182,356

Total
$
104,637

 
$
762,618

 
$
(405,558
)
 
$
461,697

Under our contract for the Bombardier Global 7000/8000 wing program ("Global 7000"), the Company has the right to design, develop and manufacture wing components for the Global 7000 program. The Global 7000 contract provides for fixed pricing and requires the Company to fund certain up-front development expenses, with certain milestone payments made by Bombardier.
The Global 7000 program charge resulted in the impairment of previously capitalized pre-production costs due to the combination of cost recovery uncertainty, higher than anticipated non-recurring costs and increased forecasted costs on recurring production. The increases in costs were driven by several factors, including: changing technical requirements, increased spending on the design and engineering phase of the program, and uncertainty regarding cost reduction and cost recovery initiatives with our customer and suppliers.
The Global 7000 program has continued to incur costs since March 2016 in support of the development and transition to production.
In May 2017, Triumph Aerostructures and Bombardier entered into a comprehensive settlement agreement that resolved all outstanding commercial disputes between them, including all pending litigation, related to the design, manufacture and

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

supply of wing components for the Global 7000 business aircraft. The settlement resets the commercial relationship between the companies and allows each company to better achieve its business objectives going forward.
Further cost increases or an inability to meet revised recurring cost forecasts on the Global 7000 program may result in additional forward loss reserves in future periods, while improvements in future costs compared to current estimates may result in favorable adjustments if forward loss reserves are no longer required.
The Company is still in the pre-production stages for the Bombardier and Embraer programs, as these aircrafts are not scheduled to enter service until 2018, or later. Transition of these programs from development to recurring production levels is dependent upon the success of the programs achieving flight testing and certification, as well as the ability of the Bombardier and Embraer programs to generate acceptable levels of aircraft sales. The failure to achieve these milestones and level of sales or significant cost overruns may result in additional forward losses.

5.    LONG-TERM DEBT
Long-term debt consists of the following:
 
September 30, 2017
 
March 31, 2017
 
 
 
 
Revolving line of credit
$
117,393

 
$
29,999

Term loan

 
309,375

Receivable securitization facility
88,800

 
112,900

Capital leases
61,480

 
72,800

Senior notes due 2021
375,000

 
375,000

Senior notes due 2022
300,000

 
300,000

Senior notes due 2025
500,000

 

Other debt
7,978

 
7,978

Less: Debt issuance costs
(18,638
)
 
(11,752
)
 
1,432,013

 
1,196,300

Less: Current portion
22,883

 
160,630

 
$
1,409,130

 
$
1,035,670

Revolving Credit Facility
In July 2017, the Company entered into a Ninth Amendment to the Credit Agreement (the “Ninth Amendment” and the Existing Credit Agreement as amended by the Ninth Amendment, the “Credit Agreement”) with the Administrative Agent and the Lenders party thereto to, among other things, (i) permit the Company to incur High Yield Indebtedness (as defined in the Credit Agreement) in an aggregate principal amount of up to $500,000, subject to the Company’s obligations to apply the net proceeds from this offering to repay the outstanding principal amount of the term loans in full, (ii) limit the mandatory prepayment provisions to eliminate the requirement that net proceeds received from the incurrence of Permitted Indebtedness (as defined in the Credit Agreement), including the High Yield Indebtedness, be applied to reduce the revolving credit commitments once the revolving credit commitments have been reduced to $800,000, (iii) amend certain covenants and other terms and (iv) modify the current interest rate and letter of credit pricing tiers.
In connection with the amendment to the Credit Agreement, the Company incurred $633 of financing costs. These costs, along with the $13,226 of unamortized financing costs subsequent to the amendment, are being amortized over the remaining term of the Credit Agreement. In accordance with the reduction in the capacity of the Credit Agreement, the Company wrote-off a proportional amount of unamortized financing fees prior to the amendment.
In May 2017, the Company entered into an Eighth Amendment to the Third Amended and Restated Credit Agreement, among the Company and its lenders to, among other things, (i) eliminate the total leverage ratio financial covenant, (ii) increase the maximum permitted senior secured leverage ratio financial covenant applicable to each fiscal quarter, commencing with the fiscal quarter ended March 31, 2017, and to revise the step-downs applicable to such financial covenant, (iii) reduce the

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

aggregate principal amount of commitments under the revolving line of credit to $850,000 from $1,000,000, (iv) modify the maturity date of the term loans so that all of the term loans will mature on March 31, 2019, and (v) establish a new higher pricing tier for the interest rate, commitment fee and letter of credit fee pricing provisions.
The obligations under the Credit Facility and related documents are secured by liens on substantially all assets of the Company and its domestic subsidiaries pursuant to a Second Amended and Restated Guarantee and Collateral Agreement, dated as of November 19, 2013, among the administrative agent, the Company and the subsidiaries of the Company party thereto.
Pursuant to the Credit Facility, the Company can borrow, repay and re-borrow revolving credit loans, and cause to be issued letters of credit, in an aggregate principal amount not to exceed $800,000 outstanding at any time. The Credit Facility bears interest at either: (i) LIBOR plus between 1.50% and 3.50%; (ii) the prime rate; or (iii) an overnight rate at the option of the Company. The applicable interest rate is based upon the Company’s ratio of total indebtedness to earnings before interest, taxes, depreciation and amortization. In addition, the Company is required to pay a commitment fee of 0.50% on the unused portion of the Credit Facility. The Company’s obligations under the Credit Facility are guaranteed by the Company’s domestic subsidiaries.
At September 30, 2017, there were $117,393 in borrowings and $30,302 in letters of credit outstanding under the Revolving Line of Credit provisions of the Credit Facility, primarily to support insurance policies. At March 31, 2017, there were $29,999 in borrowings and $27,240 in letters of credit outstanding under the Revolving Line of Credit provisions of the Credit Facility, primarily to support insurance policies. The level of unused borrowing capacity under the Revolving Line of Credit provisions of the Credit Facility varies from time to time depending in part upon its compliance with financial and other covenants set forth in the related agreement. The Credit Facility contains certain affirmative and negative covenants, including limitations on specified levels of indebtedness to earnings before interest, taxes, depreciation and amortization, and interest coverage requirements, and includes limitations on, among other things, liens, mergers, consolidations, sales of assets, and incurrence of debt. If an event of default were to occur under the Credit Facility, the lenders would be entitled to declare all amounts borrowed under it immediately due and payable. The occurrence of an event of default under the Credit Facility could also cause the acceleration of obligations under certain other agreements. The Company is currently in compliance with all such covenants. Although the Company does not anticipate any violations of the financial covenants, its ability to comply with these covenants is dependent upon achieving earnings and cash flow projections. As of September 30, 2017, the Company had borrowing capacity under this facility of $652,305 after reductions for borrowings, letters of credit outstanding under the facility and consideration of covenant limitations.
The Credit Facility also provided for a variable rate term loan (the "2013 Term Loan"). The Company repaid the outstanding principal amount of the 2013 Term Loan in quarterly installments, on the first business day of each January, April, July and October. The 2013 Term Loan was paid in full with the proceeds from the Senior Notes due 2025 (see below).
The Company previously maintained an interest rate swap agreement to reduce its exposure to interest on the variable rate portion of its long-term debt. In conjunction with the repayment of the 2013 Term Loan, the Company terminated the interest rate swap receiving $280 upon settlement which is included in Interest expense and other on the accompanying Condensed Consolidated Statements of Operations.
Receivables Securitization Facility
In November 2014, the Company amended its Securitization Facility, increasing the purchase limit from $175,000 to $225,000 and extending the term through November 2017. In connection with the Securitization Facility, the Company sells on a revolving basis certain trade accounts receivable to Triumph Receivables, LLC, a wholly-owned special-purpose entity, which in turn sells a percentage ownership interest in the receivables to commercial paper conduits sponsored by financial institutions. The Company is the servicer of the trade accounts receivable under the Securitization Facility. As of September 30, 2017, the maximum amount available under the Securitization Facility was $225,000. Interest rates are based on LIBOR plus a program fee and a commitment fee. The program fee is 0.40% on the amount outstanding under the Securitization Facility. Additionally, the commitment fee is 0.40% on 100.00% of the maximum amount available under the Securitization Facility. The Company secures its trade accounts receivable, which are generally non-interest bearing, in transactions that are accounted for as borrowings pursuant to the Transfers and Servicing topic of the ASC 860.

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

In November 2017, the Company amended the Securitization Facility decreasing the purchase limit from $225,000 to $125,000 and extending the term through November 2020. .
The agreement governing the Securitization Facility contains restrictions and covenants, including limitations on the making of certain restricted payments, creation of certain liens, and certain corporate acts such as mergers, consolidations and the sale of all or substantially all of the Company's assets.
Senior Notes Due 2021
On February 26, 2013, the Company issued $375,000 principal amount of 4.875% Senior Notes due 2021 (the "2021 Notes"). The 2021 Notes were sold at 100% of principal amount and have an effective interest yield of 4.875%. Interest on the 2021 Notes accrues at the rate of 4.875% per annum and is payable semiannually in cash in arrears on April 1 and October 1 of each year, commencing on October 1, 2013.
Senior Notes Due 2022
On June 3, 2014, the Company issued $300,000 principal amount of 5.250% Senior Notes due 2022 (the "2022 Notes"). The 2022 Notes were sold at 100% of principal amount and have an effective interest yield of 5.250%. Interest on the 2022 Notes accrues at the rate of 5.250% per annum and is payable semiannually in cash in arrears on June 1 and December 1 of each year, commencing on December 1, 2014.
Senior Notes Due 2025
On August 17, 2017, the Company issued $500,000 principal amount of 7.750% Senior Notes due 2025 (the "2025 Notes"). The 2025 Notes were sold at 100% of principal amount and have an effective interest yield of 7.750%. Interest on the 2025 Notes accrues at the rate of 7.750% per annum and is payable semiannually in cash in arrears on February 15 and August 15 of each year, commencing on February 15, 2018. In connection with the issuance of the 2025 Notes, the Company incurred approximately $8,779 of costs, which were deferred and are being amortized on the effective interest method over the term of the 2025 Notes.
The 2025 Notes are the Company's senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The 2025 Notes are guaranteed on a full, joint and several basis by each of the Guarantor Subsidiaries.
The Company may redeem some or all of the 2025 Notes prior to August 15, 2020 by paying a "make-whole" premium. The Company may redeem some or all of the 2025 Notes on or after August 15, 2020, at specified redemption prices. In addition, prior to August 15, 2020, the Company may redeem up to 35% of the 2025 Notes with the net proceeds of certain equity offerings at a redemption price equal to 107.750% of the aggregate principal amount plus accrued and unpaid interest, if any, subject to certain limitations set forth in the indenture governing the 2025 Notes (the "2025 Indenture").
The Company is obligated to offer to repurchase the 2025 Notes at a price of (i) 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change-of-control events and (ii) 100% of their principal amount plus accrued and unpaid interest, if any, in the event of certain asset sales. These restrictions and prohibitions are subject to certain qualifications and exceptions.
The 2025 Indenture contains covenants that, among other things, limit the Company's ability and the ability of any of the guarantor subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of the Guarantor Subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (viii) enter into transactions with affiliates.
Receivables Purchase Agreement
On March 28, 2016, the Company entered into a Purchase Agreement ("Receivables Purchase Agreement") to sell certain accounts receivables to a financial institution without recourse. The Company is the servicer of the accounts receivable under the Receivables Purchase Agreement. As of September 30, 2017, the maximum amount available under the Receivables

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Purchase Agreement was $90,000. Interest rates are based on LIBOR plus 0.65% - 0.70%. As of September 30, 2017 and March 31, 2017, the Company sold $0 and $78,006, respectively, worth of eligible accounts receivable.
Financial Instruments Not Recorded at Fair Value
The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of their short maturities (Level 1 inputs). Carrying amounts and the related estimated fair values of the Company’s financial instruments not recorded at fair value in the financial statements are as follows:
 
September 30, 2017
 
March 31, 2017
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
Long-term debt
$
1,432,013

 
$
1,466,578

 
$
1,196,300

 
$
1,178,968

The fair value of the long-term debt was calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs).

6.    (LOSS) EARNINGS PER SHARE
The following is a reconciliation between the weighted-average outstanding shares used in the calculation of basic and diluted earnings per share:
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
(in thousands)
 
(in thousands)
 
2017
 
2016
 
2017
 
2016
Weighted-average common shares outstanding – basic
49,428

 
49,304

 
49,400

 
49,281

Net effect of dilutive stock options and nonvested stock

 
128

 

 
148

Weighted-average common shares outstanding – diluted
49,428

 
49,432

 
49,400

 
49,429

 

7.    INCOME TAXES
The Company follows the Income Taxes topic of ASC 740, which prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company has classified uncertain tax positions as noncurrent income tax liabilities unless expected to be paid in one year. Penalties and tax-related interest expense are reported as a component of income tax expense. As of September 30, 2017 and March 31, 2017, the total amount of accrued income tax-related interest and penalties was $304 and $282, respectively.

As of September 30, 2017 and March 31, 2017, the total amount of unrecognized tax benefits was $10,875 and $10,266, respectively, of which $10,875 and $10,266, respectively, would impact the effective rate, if recognized. The Company does not anticipate that total unrecognized tax benefits will be reduced in the next 12 months.
As of September 30, 2017, the Company has a valuation allowance against principally all of its net deferred tax assets given insufficient positive evidence to support the realization of the Company’s deferred tax assets.  The Company intends to continue maintaining a valuation allowance on its deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.  A reduction in the valuation allowance could result in a significant decrease

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

in income tax expense in the period that the release is recorded.  However, the exact timing and amount of the reduction in its valuation allowance is unknown at this time and will be subject to the earnings level the Company achieves during fiscal 2018 as well as the Company's projected income in future periods.
The effective income tax rate for the three months ended September 30, 2017, was 17.6% as compared to 33.8% for the three months ended September 30, 2016. For the three months ended September 30, 2017, contributing factors to the decrease in the effective tax rate are that the income tax provision reflects the disallowed capital loss generated from the divestiture of Embee, as well as the ratio of forecasted pre-tax book income comparative to tax credits and benefits generated by the Company. For the three months ended September 30, 2016, the income tax provision reflected the disallowed tax benefit of $1,466 related to the capital loss generated from the divestiture of Newport News.
The effective income tax rate for the six months ended September 30, 2017, was 20.0% as compared to 32.8% for the six months ended September 30, 2016. For the six months ended September 30, 2017, contributing factors to the decrease in the effective tax rate are that the income tax provision reflects the disallowed capital loss generated from the divestiture of Embee, as well as the ratio of forecasted pre-tax book income comparative to tax credits and benefits generated by the Company. For the six months ended September 30, 2016, the income tax provision reflected the disallowed tax benefit of $1,466 related to the capital loss generated from the divestiture of Newport News.
With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for fiscal years ended before March 31, 2011, U.S. federal income tax examinations for fiscal years ended March 31, 2012 and 2013, state or local examinations for fiscal years ended before March 31, 2013, or foreign income tax examinations by tax authorities for fiscal years ended before March 31, 2011.

As of September 30, 2017, the Company is subject to examination in one state jurisdiction. The Company has filed appeals in a prior state examination related to fiscal years ended March 31, 1999 through March 31, 2005. Because of net operating losses acquired as part of the acquisition of Vought, the Company is subject to U.S. federal income tax examinations and various state jurisdictions for the years ended December 31, 2001 and after related to previously filed Vought tax returns. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.
8.    GOODWILL
The following is a summary of the changes in the carrying value of goodwill by reportable segment, from March 31, 2017 through September 30, 2017:
 
Integrated Systems
 
Precision Components
 
Product Support
 
Total
Balance, March 31, 2017
$
541,155

 
$
532,418

 
$
69,032

 
$
1,142,605

Goodwill derecognized in connection with divestitures and assets held for sale
(27,709
)
 

 

 
(27,709
)
Effect of exchange rate changes
6,383

 
3,681

 
(96
)
 
9,968

Balance, September 30, 2017
$
519,829

 
$
536,099

 
$
68,936

 
$
1,124,864


9.     PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors several defined benefit pension plans covering some of its employees. Certain employee groups are ineligible to participate in the plans or have ceased to accrue additional benefits under the plans based upon their service to the Company or years of service accrued under the defined benefit pension plans. Benefits under the defined benefit plans are based on years of service and, for most non-represented employees, on average compensation for certain years. It is the Company’s policy to fund at least the minimum amount required for all qualified plans, using actuarial cost methods and assumptions acceptable under U.S. government regulations, by making payments into a separate trust.
In addition to the defined benefit pension plans, the Company provides certain healthcare and life insurance benefits for eligible retired employees. Such benefits are unfunded. Employees achieve eligibility to participate in these contributory plans upon retirement from active service if they meet specified age and years of service requirements. Election to participate for some employees must be made at the date of retirement. Qualifying dependents at the date of retirement are also eligible for

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Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

medical coverage. Current plan documents reserve the right to amend or terminate the plans at any time, subject to applicable collective bargaining requirements for represented employees. From time to time, changes have been made to the benefits provided to various groups of plan participants. Premiums charged to most retirees for medical coverage prior to age 65 are based on years of service and are adjusted annually for changes in the cost of the plans as determined by an independent actuary. In addition to this medical inflation cost-sharing feature, the plans also have provisions for deductibles, co-payments, coinsurance percentages, out-of-pocket limits, schedules of reasonable fees, preferred provider networks, coordination of benefits with other plans and a Medicare carve-out.
In accordance with the Compensation – Retirement Benefits topic of ASC 715, the Company has recognized the funded status of the benefit obligation as of the date of the last remeasurement, on the accompanying Condensed Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of the plan’s assets and the pension benefit obligation or accumulated postretirement benefit obligation, of the plan. In order to recognize the funded status, the Company determined the fair value of the plan assets. The majority of the plan assets are publicly traded investments which were valued based on the market price as of the date of remeasurement. Investments that are not publicly traded were valued based on the estimated fair value of those investments based on our evaluation of data from fund managers and comparable market data.
Net Periodic Benefit Plan Costs
The components of net periodic benefit costs (income) for our postretirement benefit plans are shown in the following table:
 
Pension benefits
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Components of net periodic benefit costs:
 
 
 
 
 
 
 
Service cost
$
1,124

 
$
1,635

 
$
2,244

 
$
3,284

Interest cost
18,801

 
18,161

 
37,589

 
36,350

Expected return on plan assets
(38,084
)
 
(39,002
)
 
(76,132
)
 
(78,059
)
Amortization of prior service credits
(710
)
 
(445
)
 
(1,421
)
 
(891
)
Amortization of net loss
3,477

 
3,029

 
6,925

 
6,060

Settlement charge
523

 

 
523

 

Net periodic benefit income
$
(14,869
)
 
$
(16,622
)
 
$
(30,272
)
 
$
(33,256
)

 
Other postretirement benefits
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Components of net periodic benefit costs:
 
 
 
 
 
 
 
Service cost
$
102

 
$
179

 
$
203

 
$
358

Interest cost
1,219

 
1,247

 
2,438

 
2,494

Amortization of prior service credits
(2,328
)
 
(3,366
)
 
(4,656
)
 
(6,732
)
Amortization of gain
(1,775
)
 
(1,647
)
 
(3,549
)
 
(3,294
)
Net periodic benefit income
$
(2,782
)
 
$
(3,587
)
 
$
(5,564
)
 
$
(7,174
)



17


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

10.     STOCKHOLDERS' EQUITY
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive income (loss) ("AOCI") by component for the three and six months ended September 30, 2017 and 2016, respectively, were as follows:
 
 
Currency Translation Adjustment
 
Unrealized Gains and Losses on Derivative Instruments
 
Defined Benefit Pension Plans and Other Postretirement Benefits
 
Total (1)
Balance June 30, 2017
 
$
(75,791
)
 
$
2,336

 
$
(312,466
)
 
$
(385,921
)
   AOCI before reclassifications
 
9,905

 
(561
)
 
523

 
9,867

   Amounts reclassified from AOCI
 

 
(2,021
)
 
(1,347
)
(2
)
(3,368
)
 Net current period AOCI
 
9,905

 
(2,582
)
 
(824
)
 
6,499

Balance September 30, 2017
 
$
(65,886
)
 
$
(246
)
 
$
(313,290
)
 
$
(379,422
)
Balance June 30, 2016
 
$
(73,613
)
 
$
(3,486
)
 
$
(286,998
)
 
$
(364,097
)
   AOCI before reclassifications
 
(6,821
)
 
928

 

 
(5,893
)
   Amounts reclassified from AOCI
 

 
1

 
(1,574
)
(2
)
(1,573
)
 Net current period AOCI
 
(6,821
)
 
929

 
(1,574
)
 
(7,466
)
Balance September 30, 2016
 
$
(80,434
)
 
$
(2,557
)
 
$
(288,572
)
 
$
(371,563
)
Balance March 31, 2017
 
$
(87,212
)
 
$
2,153

 
$
(311,119
)
 
$
(396,178
)
   AOCI before reclassifications
 
21,326

 
(19
)
 
523

 
21,830

   Amounts reclassified from AOCI
 

 
(2,380
)
 
(2,694
)
(2
)
(5,074
)
 Net current period AOCI
 
21,326

 
(2,399
)
 
(2,171
)
 
16,756

Balance September 30, 2017
 
$
(65,886
)
 
$
(246
)
 
$
(313,290
)
 
$
(379,422
)
Balance March 31, 2016
 
$
(58,816
)
 
$
(2,920
)
 
$
(285,426
)
 
$
(347,162
)
   AOCI before reclassifications
 
(21,618
)
 
373

 

 
(21,245
)
   Amounts reclassified from AOCI
 

 
(10
)
 
(3,146
)
(2
)
(3,156
)
 Net current period AOCI
 
(21,618
)
 
363

 
(3,146
)
 
(24,401
)
Balance September 30, 2016
 
$
(80,434
)
 
$
(2,557
)
 
$
(288,572
)
 
$
(371,563
)

(1) Net of tax.
(2) Includes amortization of actuarial losses and recognized prior service (credits) costs, which are included in the net periodic pension cost of which a portion is allocated to production as inventoried costs.
Issuance of Restricted Stock Awards and Stock Options
Included in the employment agreement for the Company's CEO were restricted stock awards totaling 179,134 shares. The awards generally vest in full after four to seven years. The fair value of the awards is determined by the product of the number of shares granted, the grant date market price of the Company's stock and adjusted for the market conditions necessary to achieve the awards. Certain of these awards contain performance conditions, in addition to service conditions. The fair value of the awards is expensed over a graded vesting period of the requisite service period of four to seven years. In addition the employment agreement included 150,000 stock options with an exercise price of $30.86, a contractual term of 10 years and vesting over a 4-year period.


18


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

11.     SEGMENTS
The Company has four reportable segments: Integrated Systems, Aerospace Structures, Precision Components and Product Support. The Company’s reportable segments are aligned with how the business is managed and views the markets that the Company serves. The Chief Operating Decision Maker (the "CODM") evaluates performance and allocates resources based upon review of segment information. The CODM utilizes earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) as a primary measure of segment profitability to evaluate performance of its segments and allocate resources.
Integrated Systems consists of the Company’s operations that provides integrated solutions including design, development and support of proprietary components, subsystems and systems, as well as production of complex assemblies using external designs.  Capabilities include hydraulic, mechanical and electro-mechanical actuation, power and control; a complete suite of aerospace gearbox solutions including engine accessory gearboxes and helicopter transmissions; active and passive heat exchange technology; fuel pumps, fuel metering units and Full Authority Digital Electronic Control fuel systems; hydro-mechanical and electromechanical primary and secondary flight controls; and a broad spectrum of surface treatment options.
Aerospace Structures consists of the Company’s operations that supply commercial, business, regional and military manufacturers with large metallic and composite structures. Products include wings, wing boxes, fuselage panels, horizontal and vertical tails and sub-assemblies such as floor grids. Inclusive of most of the former Vought Aircraft Division, Aerospace Structures also has the capability to engineer detailed structural designs in metal and composites.
Precision Components consists of the Company’s operations that produce close-tolerance parts primarily to customer designs and model-based definition, including a wide range of aluminum, hard metal and composite structure capabilities. Capabilities include complex machining, gear manufacturing, sheet metal fabrication, forming, advanced composite and interior structures, joining processes such as welding, autoclave bonding and conventional mechanical fasteners and a variety of special processes including: super plastic titanium forming, aluminum and titanium chemical milling and surface treatments.
Product Support consists of the Company’s operations that provide full life cycle solutions for commercial, regional and military aircraft. The Company’s extensive product and service offerings include full post-delivery value chain services that simplify the MRO supply chain. Through its line maintenance, component MRO and postproduction supply chain activities, Product Support is positioned to provide integrated planeside repair solutions globally. Capabilities include fuel tank repair, metallic and composite aircraft structures, nacelles, thrust reversers, interiors, auxiliary power units and a wide variety of pneumatic, hydraulic, fuel and mechanical accessories.
Segment Adjusted EBITDA is total segment revenue reduced by operating expenses (less depreciation and amortization) identifiable with that segment. Corporate includes general corporate administrative costs and any other costs not identifiable with one of the Company’s segments, including restructuring of $14,708 for the six months ended September 30, 2017.
The Company does not accumulate net sales information by product or service or groups of similar products and services and, therefore, the Company does not disclose net sales by product or service because to do so would be impracticable. Selected financial information for each reportable segment and the reconciliation of Adjusted EBITDA to operating income is as follows:
 
Three Months Ended September 30,
 
Six Months Ended 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


19


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
(Loss) income before income taxes:
 
 
 
 
 
 
 
Operating income (expense):
 
 
 
 
 
 
 
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

Interest expense and other
25,375

 
17,896

 
46,393

 
36,023

 
$
(6,527
)
 
$
52,590

 
$
(9,136
)
 
$
81,189

 
 
 
 
 
 
 
 
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, net:
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Integrated Systems
$
42,376

 
$
46,818

 
$
92,441

 
$
94,771

Aerospace Structures
12,889

 
22,605

 
10,705

 
31,293

Precision Components
7,719

 
25,385

 
11,327

 
31,359

Product Support
12,900

 
16,717

 
23,075

 
33,260

Corporate
(23,172
)
 
(21,456
)
 
(56,769
)
 
(37,774
)
 
$
52,712

 
$
90,069

 
$
80,779

 
$
152,909

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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


20


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

 
September 30, 2017
 
March 31, 2017
Total Assets:
 
 
 
Integrated Systems
$
1,217,998

 
$
1,281,828

Aerospace Structures
1,503,886

 
1,548,239

Precision Components
1,254,729

 
1,262,691

Product Support
278,346

 
284,231

Corporate
26,987

 
37,611

 
$
4,281,946

 
$
4,414,600

During the three months ended September 30, 2017 and 2016, the Company had international sales of $166,637 and $182,706, respectively.
During the six months ended September 30, 2017 and 2016, the Company had international sales of $345,044 and $363,125, respectively.


12.
SELECTED CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS

The 2021 Notes, the 2022 Notes and the 2025 Notes are fully and unconditionally guaranteed on a joint and several basis by the Guarantor Subsidiaries. The total assets, stockholders' equity, revenue, earnings and cash flows from operating activities of the Guarantor Subsidiaries exceeded a majority of the consolidated total of such items as of and for the periods reported. The only consolidated subsidiaries of the Company that are not guarantors of the 2021 Notes, the 2022 Notes and the 2025 Notes (the “Non-Guarantor Subsidiaries”) are: (a) the receivables securitization special-purpose entity; and (b) the foreign operating subsidiaries. The following tables present condensed consolidating financial statements including the Company (the “Parent”), the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries. Such financial statements include summary Condensed Consolidating Balance Sheets as of September 30, 2017 and March 31, 2017, Condensed Consolidating Statements of Comprehensive Income for the three and six months ended September 30, 2017 and 2016, and Condensed Consolidating Statements of Cash Flows for the six months ended September 30, 2017 and 2016.





21


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


SUMMARY CONDENSED CONSOLIDATING BALANCE SHEETS:

 
September 30, 2017
 
Parent
 
Guarantor
 Subsidiaries
 
Non-Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
654

 
$
42

 
$
32,973

 
$

 
$
33,669

Trade and other receivables, net

 
80,970

 
249,164

 

 
330,134

Inventories

 
1,254,772

 
113,943

 

 
1,368,715

Prepaid expenses and other
7,773

 
8,974

 
12,103

 

 
28,850

Total current assets
8,427

 
1,344,758

 
408,183

 

 
1,761,368

Property and equipment, net
10,309

 
635,234

 
123,341

 

 
768,884

Goodwill and other intangible assets, net

 
1,470,637

 
187,857

 

 
1,658,494

Other, net
22,246

 
48,730

 
22,224

 

 
93,200

Intercompany investments and advances
2,280,189

 
81,541

 
75,874

 
(2,437,604
)
 

Total assets
$
2,321,171

 
$
3,580,900

 
$
817,479

 
$
(2,437,604
)
 
$
4,281,946

 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
349

 
$
22,534

 
$

 
$

 
$
22,883

Accounts payable
5,769

 
341,091

 
41,361

 

 
388,221

Accrued expenses
53,079

 
430,313

 
45,396

 

 
528,788

Total current liabilities
59,197

 
793,938

 
86,757

 

 
939,892

Long-term debt, less current portion
1,274,818

 
45,512

 
88,800

 

 
1,409,130

Intercompany advances
118,656

 
1,987,567

 
387,680

 
(2,493,903
)
 

Accrued pension and other postretirement benefits, noncurrent
3,177

 
546,034

 

 

 
549,211

Deferred income taxes and other
9,478

 
479,510

 
38,880

 

 
527,868

Total stockholders’ equity
855,845

 
(271,661
)
 
215,362

 
56,299

 
855,845

Total liabilities and stockholders’ equity
$
2,321,171

 
$
3,580,900

 
$
817,479

 
$
(2,437,604
)
 
$
4,281,946








22


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)



SUMMARY CONDENSED CONSOLIDATING BALANCE SHEETS:
 
March 31, 2017
 
Parent
 
Guarantor
 Subsidiaries
 
Non-Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
19,942

 
$
24,137

 
$
25,554

 
$

 
$
69,633

Trade and other receivables, net
546

 
34,874

 
276,372

 

 
311,792

Inventories

 
1,243,461

 
96,714

 

 
1,340,175

Prepaid expenses and other
7,763

 
11,678

 
10,623

 

 
30,064

Assets held for sale

 
3,250

 
18,005

 

 
21,255

Total current assets
28,251

 
1,317,400

 
427,268

 

 
1,772,919

Property and equipment, net
8,315

 
673,153

 
123,562

 

 
805,030

Goodwill and other intangible assets, net

 
1,560,050

 
174,919

 

 
1,734,969

Other, net
17,902

 
67,955

 
15,825

 

 
101,682

Intercompany investments and advances
2,057,534

 
81,541

 
77,090

 
(2,216,165
)
 

Total assets
$
2,112,002

 
$
3,700,099

 
$
818,664

 
$
(2,216,165
)
 
$
4,414,600

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
33,298

 
$
14,432

 
$
112,900

 
$

 
$
160,630

Accounts payable
17,291

 
426,646

 
37,306

 

 
481,243

Accrued expenses
53,829

 
578,457

 
42,093

 

 
674,379

Liabilities related to assets held for sale

 

 
18,008

 

 
18,008

Total current liabilities
104,418

 
1,019,535

 
210,307

 

 
1,334,260

Long-term debt, less current portion
974,693

 
60,977

 

 

 
1,035,670

Intercompany advances
178,381

 
1,754,529

 
370,907

 
(2,303,817
)
 

Accrued pension and other postretirement benefits, noncurrent
6,633

 
585,501

 

 

 
592,134

Deferred income taxes and other
1,403

 
564,358

 
40,302

 

 
606,063

Total stockholders’ equity
846,474

 
(284,801
)
 
197,148

 
87,652

 
846,473

Total liabilities and stockholders’ equity
$
2,112,002

 
$
3,700,099

 
$
818,664

 
$
(2,216,165
)
 
$
4,414,600






23


Table of Contents
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME:

 
For the Three Months Ended September 30, 2017
 
Parent
 
Guarantor
 Subsidiaries
 
Non-Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
 Total
Net sales
$

 
$
676,026

 
$
89,750

 
$
(20,620
)
 
$
745,156

 
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of sales

 
527,417

 
73,067

 
(20,620
)
 
579,864

Selling, general and administrative
18,921