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): February 1, 2018
 
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 February 1, 2018, Triumph Group, Inc. issued a press release announcing its financial results for the fiscal quarter ended December 31, 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
 
 
 
 
 








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:
February 1, 2018
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=12015888&doc=29    

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 THIRD QUARTER FISCAL 2018 RESULTS

Reaffirms Fiscal Year 2018 Revenue and EPS Guidance and Updates Cash Guidance


BERWYN, Pa. - February 1, 2018 - Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its third quarter of fiscal year 2018, which ended December 31, 2017.

Third Quarter Fiscal 2018 Highlights

Net sales were $775.2 million.
Operating loss was ($119.7) million, reflecting an operating margin of (15%), and included $190.2 million non-cash goodwill impairment charge for Precision Components. On an adjusted basis, operating income was $62.0 million, reflecting an adjusted operating margin of 8%.
Net loss was ($113.3) million, or ($2.29) per share, and included a $0.45 per diluted share provisional tax-related benefit due to the enactment of the Tax Cuts and Jobs Act of 2017. On an adjusted basis, net income was $37.7 million, or $0.76 per diluted share.
Cash flow from operations was $100.8 million, and free cash flow was $91.6 million, which included an increase in customer advances of approximately $250 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 improves its free cash outlook to a use of $325 million to $375 million from $450 million to $500 million.

“Triumph Group’s third quarter results demonstrate the progress on our transformation strategy to improve operational performance and strengthen customer relationships,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Net sales grew on a sequential basis, driven by Aerospace Structures and Integrated Systems. Precision Components and Product Support delivered sequential and year-over-year margin improvement, and Product Support continues to generate sustained strong profitability.”

Mr. Crowley continued, “During the third quarter we continued to realize the benefits of our efforts to generate organic growth as we posted a book-to-bill ratio in excess of one for the fourth consecutive quarter and increased backlog to $4.36 billion, up 6% sequentially and 10% year-over-year. Our strengthened business development team and capture strategies led to several key customer wins, and we expect to





1



leverage our improved operational performance into new wins that will further strengthen and de-risk the
backlog. We continue to actively manage the portfolio and capitalize on the value creating combination of Precision Components and Aerospace Structures, as evidenced by the strengthening of our partnership with Boeing to support multiple 767 configurations. Fiscal 2018 is unfolding as we anticipated and with our cost reduction goals on track and enhanced financial flexibility, we believe our actions will enable Triumph to benefit from the favorable trends in our markets and generate enhanced value for shareholders.”

Third Quarter Fiscal Year 2018 Overview

After accounting for divestitures, sales for the third quarter of fiscal 2018 were down 3% organically from the comparable prior year period, 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 program.

Operating loss of ($119.7) million included a $190.2 million non-cash goodwill impairment charge for Precision Components, $6.5 million of transformation related expenses and $15.1 million curtailment gain related to post retirement benefits. Net loss for the third quarter of fiscal year 2018 was ($113.3) million, or ($2.29) per share, and included an estimated tax benefit of $22.4 million, or $0.45 per diluted share, related to the enactment of the U.S. Tax Cuts and Jobs Act in December 2017. Triumph’s results included the following:
($ millions except EPS)
 
      Pre-tax
 
    After-tax
 
Diluted EPS
 
Loss from Continuing Operations - GAAP
 
$
(145.5
)
 
$
(113.3
)
 
$
(2.29
)
 
 
 
 
 
 
 
 
 
Goodwill Impairment
 
190.2

 
181.5

 
3.65

 
Curtailment & settlement, net
 
(15.1
)
 
(14.4
)
 
(0.29
)
 
Transformation related costs:
 
 
 
 
 
 
 
Restructuring costs (non-cash)
 
0.4

 
0.4

 
0.01

 
Restructuring costs (cash)
 
6.1

 
5.9

 
0.12

 
Estimated impact of tax reform
 

 
(22.4
)
 
(0.45
)
 
 
 
 
 
 
 
 
 
Adjusted Income from Continuing Operations - non-GAAP
 
$
36.1

 
$
37.7

 
$
0.76

*
  *Difference due to rounding
 
 
 
 
 
 
 

The number of shares used in computing diluted earnings per share for the third quarter of fiscal year 2018 was 49.7 million.

For the quarter ended December 31, 2017, cash flow from operations was $100.8 million, reflecting approximately $250 million of customer advances, partially offset by the liquidation of customer advances received in fiscal year 2017, along with spending on key development programs transitioning into production and transformation related costs.

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 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, or ($7.96) to ($8.58) on an unadjusted basis and includes the expected $345 million impairment of the remaining Precision Components’ goodwill in the fourth quarter. Free cash use is now
anticipated to be within a range of $325 to $375 million (or cash used in operations of $270 to $330 million),

2




versus previous guidance of $450 to $500 million, reflecting recently received customer advances and their related liquidation as well as timing of deliveries on development programs.

The Company’s current outlook reflects adjustments detailed in the attached tables but does not take into account the impact of any potential future divestitures.


Conference Call

Triumph Group will hold a conference call today, February 1st at 8:30 a.m. (ET) to discuss the third 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 February 1st to February 7th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #6995048.

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


FINANCIAL DATA (UNAUDITED)

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


3



 
 
Three Months Ended
 
Nine Months Ended
 
 
December 31,
 
December 31,
CONDENSED STATEMENTS OF INCOME
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net sales
 
$
775,246

 
$
844,863

 
$
2,302,091

 
$
2,612,885

 
 
 
 
 
 
 
 
 
Operating (loss) income
 
(119,704
)
 
55,166

 
(82,447
)
 
172,379

 
 
 
 
 
 
 
 
 
Interest expense and other
 
25,836

 
19,698

 
72,229

 
55,721

Income tax (benefit) expense
 
(32,288
)
 
6,136

 
(34,115
)
 
32,786

 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(113,252
)
 
$
29,332

 
$
(120,561
)
 
$
83,872

 
 
 
 
 
 
 
 
 
Earnings per share - basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(2.29
)
 
$
0.59

 
$
(2.44
)
 
$
1.70

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
49,459

 
49,329

 
49,425

 
49,294

 
 
 
 
 
 
 
 
 
Earnings per share - diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(2.29
)
 
$
0.59

 
$
(2.44
)
 
$
1.70

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - diluted
 
49,459

 
49,440

 
49,425

 
49,421

 
 
 
 
 
 
 
 
 
Dividends declared and paid per common share
 
$
0.04

 
$
0.04

 
$
0.12

 
$
0.12







4




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except share data)
 
BALANCE SHEET
 
Unaudited
 
Audited
 
 
December 31,
 
March 31,
 
 
2017
 
2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
64,388

 
$
69,633

Accounts receivable, net
 
320,999

 
311,792

Inventories, net of unliquidated progress payments of $409,040 and $222,485
 
1,462,724

 
1,340,175

Prepaid and other current assets
 
43,500

 
30,064

Assets held for sale
 

 
21,255

   Current assets
 
1,891,611

 
1,772,919

 
 
 
 
 
Property and equipment, net
 
749,922

 
805,030

Goodwill
 
934,500

 
1,142,605

Intangible assets, net
 
520,820

 
592,364

Other, net
 
89,079

 
101,682

 
 
 
 
 
Total assets
 
$
4,185,932

 
$
4,414,600

 
 
 
 
 
Liabilities & Stockholders' Equity
 
 
 
 
Current portion of long-term debt
 
$
15,135

 
$
160,630

Accounts payable
 
387,081

 
481,243

Accrued expenses
 
627,411

 
674,379

Liabilities related to assets held for sale
 

 
18,008

Current liabilities
 
1,029,627

 
1,334,260

 
 
 
 
 
Long-term debt, less current portion
 
1,359,476

 
1,035,670

Accrued pension and post-retirement benefits, noncurrent
 
509,641

 
592,134

Deferred income taxes, noncurrent
 
41,969

 
68,107

Other noncurrent liabilities
 
496,705

 
537,956

 
 
 
 
 
Stockholders' Equity:
 
 
 
 
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,460,920 shares issued; 49,662,507 and 49,573,029 shares outstanding
 
51

 
51

Capital in excess of par value
 
849,806

 
846,807

Treasury stock, at cost, 2,798,413 and 2,887,891 shares
 
(179,692
)
 
(183,696
)
Accumulated other comprehensive loss
 
(374,624
)
 
(396,178
)
Retained earnings
 
452,973

 
579,489

Total stockholders' equity
 
748,514

 
846,473

 
 
 
 
 
Total liabilities and stockholders' equity
 
$
4,185,932

 
$
4,414,600




 

5




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA
 
Three Months Ended
 
Nine Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Net Sales:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
239,198

 
$
256,080

 
$
711,099

 
$
758,803

Aerospace Structures
 
282,495

 
304,235

 
807,754

 
956,114

Precision Components
 
219,675

 
226,294

 
685,701

 
740,354

Product Support
 
68,039

 
87,292

 
202,839

 
257,317

Elimination of inter-segment sales
 
(34,161
)
 
(29,038
)
 
(105,302
)
 
(99,703
)
 
 
$
775,246

 
$
844,863

 
$
2,302,091

 
$
2,612,885

 
 
 
 
 
 
 
 
 
Operating (Loss) Income:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
42,667

 
$
51,596

 
$
132,171

 
$
145,379

Aerospace Structures
 
12,022

 
23,867

 
23,253

 
57,898

Precision Components
 
(186,225
)
 
2,942

 
(191,100
)
 
7,223

Product Support
 
12,399

 
14,662

 
32,069

 
42,986

Corporate
 
(567
)
 
(37,901
)
 
(78,840
)
 
(81,107
)
 
 
$
(119,704
)
 
$
55,166

 
$
(82,447
)
 
$
172,379

 
 
 
 
 
 
 
 
 
Operating Margin %
 
 
 
 
 
 
 
 
Integrated Systems
 
17.8
 %
 
20.1
%
 
18.6
 %
 
19.2
%
Aerospace Structures
 
4.3
 %
 
7.8
%
 
2.9
 %
 
6.1
%
Precision Components
 
(84.8
)%
 
1.3
%
 
(27.9
)%
 
1.0
%
Product Support
 
18.2
 %
 
16.8
%
 
15.8
 %
 
16.7
%
Consolidated
 
(15.4
)%
 
6.5
%
 
(3.6
)%
 
6.6
%
 
 
 
 
 
 
 
 
 
Depreciation and Amortization:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
8,318

 
$
9,766

 
$
27,857

 
$
30,228

Aerospace Structures
 
19,048

 
17,942

 
57,484

 
54,289

Precision Components
 
200,077

 
13,999

 
218,085

 
42,344

Product Support
 
1,663

 
2,294

 
5,068

 
7,230

Corporate
 
441

 
330

 
1,051

 
989

 
 
$
229,547

 
$
44,331

 
$
309,545

 
$
135,080

 
 
 
 
 
 
 
 
 
Amortization of Acquired Contract Liabilities:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
(11,634
)
 
$
(7,628
)
 
$
(28,235
)
 
$
(27,101
)
Aerospace Structures
 
(21,352
)
 
(21,105
)
 
(60,315
)
 
(60,190
)
Precision Components
 
(1,506
)
 
(473
)
 
(3,312
)
 
(1,740
)
 
 
$
(34,492
)
 
$
(29,206
)
 
$
(91,862
)
 
$
(89,031
)
 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
Integrated Systems
 
$
1,903

 
$
2,763

 
$
5,923

 
$
8,586

Aerospace Structures
 
2,384

 
2,228

 
9,503

 
9,820

Precision Components
 
3,407

 
2,636

 
12,563

 
11,040

Product Support
 
599

 
687

 
1,629

 
2,020

Corporate
 
864

 
843

 
2,314

 
1,657

 
 
$
9,157

 
$
9,157

 
$
31,932

 
$
33,123

 
 
 
 
 
 
 
 
 

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
 
Nine Months Ended
 
 
December 31,
 
December 31,
 
 
2017
 
2016
 
2017
 
2016
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA):
 
 
 
 
 
 
 
 
Net (Loss) Income
 
$
(113,252
)
 
$
29,332

 
$
(120,561
)
 
$
83,872

 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
     Income tax (benefit) expense
 
(32,288
)
 
6,136

 
(34,115
)
 
32,786

     Interest expense and other
 
25,836

 
19,698

 
72,229

 
55,721

   Curtailment & settlement gain, net
 
(15,099
)
 

 
(14,576
)
 

   Loss on divestitures
 

 
14,350

 
20,371

 
19,124

     Amortization of acquired contract liabilities
 
(34,492
)
 
(29,206
)
 
(91,862
)
 
(89,031
)
     Depreciation and amortization
 
229,547

 
44,331

 
309,545

 
135,080

 
 
 
 
 
 
 
 
 
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
60,252

 
$
84,641

 
$
141,031

 
$
237,552

 
 
 
 
 
 
 
 
 
Net Sales #
 
$
775,246

 
$
844,863

 
$
2,302,091

 
$
2,612,885

 
 
 
 
 
 
 
 
 
Operating (Loss) Income Margin
 
(15.4
)%
 
6.5
%
 
(3.6
)%
 
6.6
%
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin #
 
8.1%
 
10.4%
 
6.4%
 
9.4%
 
 
 
 
 
 
 
 
 
# 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 December 31, 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
 
$
(113,252
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax benefit
 
(32,288
)
 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
25,836

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (Loss) Income
 
$
(119,704
)
 
$
42,667

 
$
12,022

 
$
(186,225
)
 
$
12,399

 
$
(567
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Curtailment & settlement gain, net
 
(15,099
)
 

 

 

 

 
(15,099
)
 
Amortization of acquired contract liabilities
 
(34,492
)
 
(11,634
)
 
(21,352
)
 
(1,506
)
 

 

 
Depreciation and amortization
 
229,547

 
8,318

 
19,048

 
200,077

 
1,663

 
441

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
60,252

 
$
39,351

 
$
9,718

 
$
12,346

 
$
14,062

 
$
(15,225
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
775,246

 
$
239,198

 
$
282,495

 
$
219,675

 
$
68,039

 
$
(34,161
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (Loss) Income Margin
 
(15.4
)%
 
17.8
%
 
4.3
%
 
(84.8
)%
 
18.2
%
 
n/a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
8.1%
 
17.3%
 
3.7%
 
5.7%
 
20.7%
 
n/a
 



10



 
 
Nine Months Ended December 31, 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
 
$
(120,561
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax benefit
 
(34,115
)
 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
72,229

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
(82,447
)
 
$
132,171

 
$
23,253

 
$
(191,100
)
 
$
32,069

 
$
(78,840
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 

 

 

 

 
20,371

 
Curtailment & settlement gain, net
 
(14,576
)
 

 

 

 

 
(14,576
)
 
Amortization of acquired contract liabilities
 
(91,862
)
 
(28,235
)
 
(60,315
)
 
(3,312
)
 

 

 
Depreciation and amortization
 
309,545

 
27,857

 
57,484

 
218,085

 
5,068

 
1,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
141,031

 
$
131,793

 
$
20,422

 
$
23,673

 
$
37,137

 
$
(71,994
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
2,302,091

 
$
711,099

 
$
807,754

 
$
685,701

 
$
202,839

 
$
(105,302
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (Loss) Income Margin
 
(3.6
)%
 
18.6
%
 
2.9
%
 
(27.9
)%
 
15.8
%
 
n/a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
6.4%
 
19.3%
 
2.7%
 
3.5%
 
18.3%
 
n/a
 





















11




(Continued)
 FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)
 
 
Three Months Ended December 31, 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
 
$
29,332

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
6,136

 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
19,698

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
55,166

 
51,596

 
$
23,867

 
$
2,942

 
$
14,662

 
(37,901
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
14,350

 

 

 

 

 
14,350

 
Amortization of acquired contract liabilities
 
(29,206
)
 
(7,628
)
 
(21,105
)
 
(473
)
 

 

 
Depreciation and amortization
 
44,331

 
9,766

 
17,942

 
13,999

 
2,294

 
330

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
84,641

 
$
53,734

 
$
20,704

 
$
16,468

 
$
16,956

 
$
(23,221
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
844,863

 
$
256,080

 
$
304,235

 
$
226,294

 
$
87,292

 
$
(29,038
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income Margin
 
6.5
%
 
20.1
%
 
7.8
%
 
1.3
%
 
16.8
%
 
n/a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
10.4%
 
21.6%
 
7.3%
 
7.3%
 
19.4%
 
n/a
 



12



 
 
Nine Months Ended December 31, 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
 
$
83,872

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add-back:
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
32,786

 
 
 
 
 
 
 
 
 
 
 
Interest expense and other
 
55,721

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
172,379

 
$
145,379

 
$
57,898

 
$
7,223

 
$
42,986

 
(81,107
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on divestiture
 
19,124

 

 

 

 

 
19,124

 
Amortization of acquired contract liabilities
 
(89,031
)
 
(27,101
)
 
(60,190
)
 
(1,740
)
 

 

 
Depreciation and amortization
 
135,080

 
30,228

 
54,289

 
42,344

 
7,230

 
989

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
 
$
237,552

 
$
148,506

 
$
51,997

 
$
47,827

 
$
50,216

 
$
(60,994
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
2,612,885

 
$
758,803

 
$
956,114

 
$
740,354

 
$
257,317

 
$
(99,703
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income Margin
 
6.6
%
 
19.2
%
 
6.1
%
 
1.0
%
 
16.7
%
 
n/a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin
 
9.4%
 
20.3%
 
5.8%
 
6.5%
 
19.5%
 
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
 
 
 
December 31, 2017
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Loss from Continuing Operations - GAAP
 
$
(145,540
)
 
$
(113,252
)
 
$
(2.29
)
 
Adjustments:
 
 
 
 
 
 
 
Goodwill Impairment
 
190,227

 
181,540

 
3.65

 
Curtailment & settlement, net
 
(15,099
)
 
(14,374
)
 
(0.29
)
 
Restructuring cost (non-cash)
 
382

 
364

 
0.01

 
Restructuring costs (cash)
 
6,149

 
5,854

 
0.12

 
Estimated impact of Tax Reform
 

 
(22,398
)
 
(0.45
)
 
Adjusted Income from Continuing Operations - non-GAAP
 
$
36,119

 
$
37,734

 
$
0.76

*
* - Difference due to rounding
 
 
 
 
 
 
 

 
 
Nine Months Ended
 
 
 
December 31, 2017
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Loss from Continuing Operations - GAAP
 
$
(154,676
)
 
$
(120,561
)
 
$
(2.44
)
 
Adjustments:
 
 
 
 
 
 
 
Loss on divestiture
 
20,371

 
20,371

 
0.41

 
Goodwill Impairment
 
190,227

 
181,540

 
3.66

 
Curtailment & settlement, net
 
(14,576
)
 
(13,876
)
 
(0.28
)
 
Refinancing costs
 
1,986

 
1,891

 
0.04

 
Restructuring cost (non-cash)
 
2,538

 
2,416

 
0.05

 
Restructuring costs (cash)
 
33,751

 
32,131

 
0.65

 
Estimated impact of Tax Reform
 

 
(22,398
)
 
(0.45
)
 
Adjusted Income from Continuing Operations - non-GAAP
 
$
79,621

 
$
81,514

 
$
1.64

 
 
 
 
 
 
 
 
 


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
 
 
 
December 31, 2016
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Income from Continuing Operations - GAAP
 
$
35,468

 
$
29,332

 
$
0.59

 
Adjustments:
 
 
 
 
 
 
 
Loss on divestiture
 
14,350

 
10,476

 
0.21

 
Restructuring costs (non-cash)
 
3,065

 
2,237

 
0.05

 
Restructuring costs (cash)
 
11,067

 
8,079

 
0.16

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
63,950

 
$
50,124

 
$
1.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Nine Months Ended
 
 
 
December 31, 2016
 
 
 
Pre-Tax
 
After-Tax
 
Diluted EPS
 
Income from Continuing Operations - GAAP
 
$
116,658

 
$
83,872

 
$
1.70

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

 
11,462

 
0.23

 
Triumph Precision Components - Inventory write-down
 
6,089

 
4,445

 
0.09

 
Triumph Aerospace Structures - UAS program
 
14,200

 
10,366

 
0.21

 
Loss on divestiture
 
19,124

 
15,250

 
0.31

 
Restructuring costs (non-cash)
 
10,296

 
7,516

 
0.15

 
Restructuring costs (cash)
 
28,180

 
20,571

 
0.42

 
Adjusted Income from Continuing Operations - non-GAAP
 
$
210,248

 
$
153,482

 
$
3.11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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
 
 
December 31, 2017
 
December 31, 2016
Operating (Loss) Income - GAAP
 
$
(119,704
)
 
55,166

 
 
 
 
 
Adjustments:
 
 
 
 
Goodwill Impairment
 
190,227

 

Loss on divestiture
 

 
14,350

Curtailment & settlement, net
 
(15,099
)
 

Restructuring costs (non-cash)
 
382

 
3,065

Restructuring costs (cash)
 
6,149

 
11,067

Adjusted Operating Income - non-GAAP
 
$
61,955

 
$
83,648






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
 
Nine Months Ended
 
 
 
December 31,
 
December 31,
 
Guidance
 
2017
 
2017
 
 
 
 
 
 
Cash (used in) provided by operations
$(270,000 - 330,000)
 
$
100,786

 
$
(198,279
)
Less:
 
 
 
 
 
Capital expenditures
(45,000 - 55,000)
 
(9,157
)
 
(31,932
)
Free cash flow (use)
$(325,000 - 375,000)
 
$
91,629

 
$
(230,211
)


The Company provides earnings per share guidance on an adjusted non-GAAP basis excluding the effects of transformation related costs, gains (losses) on divestitures, impairments, one-time pension & OPEB benefits (charges) and other non-recurring items, such as income tax reform. The following table reconciles adjusted earnings per diluted share guidance to earnings per share on a GAAP basis.

Guidance - adjusted earnings per diluted share
$2.25 - $2.75

Per share effect of:
 
Transformation related costs - cash
$ (0.60 - 0.70)

Transformation related costs - non-cash
$ (0.06 - 0.08)

Goodwill impairment
$
(10.33
)
Loss on completed divestitures
$
(0.41
)
Refinancing costs
$
(0.04
)
Curtailment & settlement, net
$
0.28

Estimated impact of Tax Reform
$
0.45

Guidance - earnings per share- GAAP
$(7.96 - 8.58)













17



We use "Net Debt to Capital" as a measure of financial leverage.  The following table sets forth the computation of Net Debt to Capital:
 
 
December 31,
 
March 31,
 
 
2017
 
2017
Calculation of Net Debt
 
 
 
 
Current portion
 
$
15,135

 
$
160,630

Long-term debt
 
1,359,476

 
1,035,670

Total debt
 
1,374,611

 
1,196,300

Plus: Deferred debt issuance costs
 
17,886

 
11,752

Less: Cash
 
(64,388
)
 
(69,633
)
Net debt
 
$
1,328,109

 
$
1,138,419

 
 
 
 
 
Calculation of Capital
 
 
 
 
Net debt
 
$
1,328,109

 
$
1,138,419

Stockholders' equity
 
748,514

 
846,473

Total capital
 
$
2,076,623

 
$
1,984,892

 
 
 
 
 
Percent of net debt to capital
 
64.0
%
 
57.4
%


18
exhibit992triumphq3fy201
Daniel J. Crowley, President and Chief Executive Officer James F. McCabe Jr., Senior Vice President and Chief Financial Officer Third Quarter FY’18 Earnings Conference Call February 1, 2018


 
2Triumph Group — Third 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 — Third Quarter FY'18 Overview FY 18 Imperatives: • Eliminating program cost overruns • Ramping down development spending • Fixing Aerospace Structures backlog • Reversing trend of increasing inventory • Increasing our backlog Reaffirming FY 18 Sales & Adjusted EPS Guidance Adjusts Free Cash Use Guidance FY’18 Q3 Financial Summary FY’18 Guidance Net Sales $775M $3.1B - $3.2B Adjusted EPS * $0.76 $2.25 - $2.75 Free Cash Flow (Use) $92M ($325M) - ($375M) *See Appendix for adjustments


 
4Triumph Group — Third Quarter FY'18 Transformation Progress Expanding Cost Reduction Opportunities • $75M in cost reductions YTD towards $96M goal • Optimizing Supply Chain costs through strategic outsourcing • Announced combination of TAS & TPC, effective January 1st ◦ Significant synergies across the business units • Completed 820 continuous improvement events YTD • Launched enterprise-wide Inventory Attack Team (IAT) to drive further working capital improvements Cost reductions on track, enhancing competiveness and financial performance


 
5Triumph Group — Third Quarter FY'18 Driving Organic Growth Competitive Wins Customer BU Landing Gear System SNC Dream Chaser TIS ECS Pressure Door & Latches Boeing 737/787 TIS Gearbox (Takeaway) P & W TIS Prop. Gearbox (New Program) Lockheed Martin TIS Interiors Refurbishment Major US Carrier TPS Line (Field) Installations IS&S TPS Follow-on Business Customer BU Metal Bond Ti Panels (5 yrs) Bell AH1Z TAS Partnership Customer BU Platform Agreement Boeing 767 TAS (All Variants 10 yrs) Triumph Thailand MRO BGS-Multi-Platforms TPS (Exchange Agreement) Robust Pipeline ($12B, ~50% Military), growing backlog (up 9.5%), and improving win rates (47% for 3QFY18)


 
6Triumph Group — Third Quarter FY'18 Market Trends Military • Defense Outlook $621B (+$66B OCO) • Triumph is fully engaged in pursuits on multiple platforms: - T-X, B21, MQ-25, T-38/F15 SLEPS, Light Attack (OA-X) • CH-53K ramp up, and Military platform "take-aways" add nearer term growth Commercial • Rate increases – accelerated backlog conversion: – Narrow-bodies, A320 and B737, driving Integrated Systems growth – CFM & LEAP engine deliveries rising, driving +30% yr./yr. revenue growth for TIS (related to gearing on these engines) • Strong ultra long range business jet market demand – Delivery ramp up on Global 7000 FY19 • Beneficial effects with A380 Emirates order • Industry vertical integration initiatives: – Nacelles, Avionics, Seats, Space • MRO focus in Asia; Triumph is well positioned in the region Increasing Defense opportunities accompany robust and growing Commercial deliveries FY 18 B ud ge t $ B ill io ns


 
7Triumph Group — Third Quarter FY'18 Consolidated Quarterly Results • Organic sales decrease was 3% • 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 • Adjusted operating income excludes: ◦ $190M goodwill impairment ◦ $(15M) OPEB curtailment gain ◦ $6M restructuring costs • Adjusted operating income and margin improved sequentially ($ in millions) FY’18 Q3 FY’17 Q3 Variance % Net Sales $775 $845 (8)% Operating (Loss) Income (120) 55 (318)% Operating Margin (15)% 7% Adjusted Operating Income 62 84 (26)% Adjusted Operating Margin 8% 10% On track to acheive FY '18 Revenue & Adjusted Earnings Guidance


 
8Triumph Group — Third Quarter FY'18 Integrated Systems Highlights • Selected to design, develop and produce the Landing gear system for the Sierra Nevada Dream Chaser spacecraft • Awarded new 737 Max engineered component content and extended 787 content with Boeing • YTD Book to bill of 1.3:1 Year Over Year Comparison Financial • Net sales change included: ◦ Divestitures ($10M) ◦ Decline in A380, 777 and various military programs • Operating margin impacted by facility consolidation cost and volume/mix impact Triumph Integrated Systems’ Landing gear system will be used on the Sierra Nevada Dream Chaser reusable lifting body Spacecraft


 
9Triumph Group — Third Quarter FY'18 Product Support Highlights • Awarded 3-year contract with Universal Asset Management to provide component repair support • Secured 3-year agreement with NokScoot Airlines for B777 Wheel & Brake maintenance • Signed agreement with Innovative Solutions & Support to provide installation services for IS&S cockpit modifications. Year Over Year Comparison Financial • Organic sales increased 9% due primarily to increased demand of accessory components ◦ Q3 FY17 sales included $25M from divested businesses • Operating margin improved 140 basis points Triumph Product Support is contracted to provide MRO support for B777 Wheels & Brakes.


 
10Triumph Group — Third Quarter FY'18 Precision Components Highlights • Received follow on AH1Z landing gear orders • Commenced shipments on M777 Howitzer program • YTD book-to-bill above 1:1 • Combining with Aerospace Structures in Q4 Year Over Year Comparison Financial • Net sales decreased primarily due to decreased production rates on 777 as well as pricing on 787 • Operating income, excluding $190M impairment of goodwill, was $4M or approximately 2% margin • The lower operating margins associated with the 777 and 787 programs are offset by lower consolidation spend in FY18 Engine link assembly in test fixture.


 
11Triumph Group — Third Quarter FY'18 Aerospace Structures Highlights • Follow-on contract award for 767 program • Achieved multiple Global 7000 Wing Certification milestones and related incentives • Strong operational performance on HALE and V-22 programs with zero defects. • YTD Book to Bill 1.1:1 supported by Global 7000 and V-22 orders Year Over Year Comparison Financial • Net favorable cumulative catch-up adjustments on long-term contracts of $5M • 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 other Gulfstream programs Triumph’s Aerospace Structures produces the 767 horizontal stabilizers, doors, aft fuselage and wing center sections for both the 767 freighter and KC-46A Tanker variants.


 
12 Free Cash Flow Walk - FY'18 Q3 Q3 Cash Drivers • Development programs used $22M • Restructuring used $6M • Net working capital improvement of $71M includes: ◦ Receipt of $250M in additional customer advances, partially offset by ▪ Build of production inventory ▪ Liquidation of prior advances • Expected cash use in Q4 driven by liquidation of advances and timing of deliveries on development programs Consolidated ($ in millions) FY’18 Q3 FY’18 YTD Net Income $ (113) $ (121) Non-cash items: Depreciation & Amortization 230 310 Interest Expense & Other 26 72 Amortization of Acquired Contracts (34) (92) Loss on divestiture — 20 Pension Income (15) (45) OPEB Income (18) (23) Income Tax Benefit (24) (24) Cash uses: Working Capital Change 79 (221) Interest Payments (22) (54) Capital Expenditures (9) (32) OPEB Payments (3) (10) Tax Payments (5) (10) Free Cash Flow (Use) $ 92 $ (230) Updating guidance - ($325M) - ($375M)


 
13Triumph Group — Third Quarter FY'18 Net Debt & Liquidity • Cash and Availability ~ $780M • Senior Secured Leverage Ratio ~ 1.1x • Interest Coverage Ratio ~ 3.5x ($ in millions) FY’18 Q3 Cash $ (64) $800M Revolving Credit Facility 50 $125M Receivable Securitization Facility 109 Capital Leases 58 2013 Senior Notes Due 2021 375 2014 Senior Notes Due 2022 300 2017 Senior Notes Due 2025 500 Net Debt $ 1,328 Sufficient Financial Capacity & Liquidity


 
14Triumph Group — Third Quarter FY'18 FY'18 Guidance Net Sales $3.1B - $3.2B Adjusted EPS * $2.25 - $2.75 Free Cash Use ($450M) - ($500M) ($325M) - ($375M) Effective Tax Rate ^ ~ 6% ~ 1% Capital Expenditures $50M - $60M $45M - $55M *see adjustments in the appendix ^ Potential opportunity to lower through release of valuation allowance and use of deferred tax benefits from prior divestitures. Q4 Sales & Adjusted EPS to reach their highest level of FY 18


 
15Triumph Group — Third Quarter FY'18 Concluding Remarks • Operational performance accelerating as CI culture takes hold • Consolidating to three business units to drive additional synergies • Expect FY19 to be an inflection point • 25th year anniversary of Triumph in March 2018


 
16Triumph Group — Third 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 — Third 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 Cessna 680 Bell Helicopter AH1 Boeing F-15 Bombardier C Series Represents 74% of Precision Components backlog Boeing 767, Tanker Bombardier Global Gulfstream Airbus A330, A340 Boeing 747 Boeing 777 NG Global Hawk Boeing V-22 Embraer E2 Lockheed Martin F-35 Represents 97% of Aerospace Structures backlog Boeing 737 Airbus A320, A321 Boeing 787 Boeing AH-64 Boeing V-22 Boeing CH-47 Sikorsky UH60 Lockheed Martin C-130 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 • The Company anticipates the cumulative effect from the adoption of ASC 2017-07 to be approximately $130,000 to $150,000 and will be recorded as a current period charge to earnings in our fiscal year ended March 31, 2019.


 
20 ASC 606 Adoption • The adoption of this standard may impact the amount and timing of revenue recognition and the accounting treatment of capitalized pre-production costs for certain of our contracts. • 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. • For performance obligations satisfied over time, will most likely use an input method as basis for recognizing revenue Ex. resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used • We will continue to record forward losses relating to unfulfilled contracts and options consistent with historical accounting policies • Accounting for tooling, and certain other costs to fulfill contracts are expected to continue under existing guidance


 
21 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 December 31, 2017 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (145,540) $ (113,252) $ (2.29) Adjustments: Goodwill impairment 190,227 181,540 3.65 Curtailment & settlement, net (15,099) (14,374) (0.29) Restructuring costs (non-cash) 382 364 0.01 Restructuring costs (cash) 6,149 5,854 0.12 Estimated impact of Tax Reform — (22,398) (0.45) Adjusted Income from Continuing Operations - Non-GAAP $ 36,119 $ 37,734 $ 0.76 * * Difference due to rounding Non-GAAP Disclosure Nine Months Ended December 31, 2017 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (154,676) $ (120,561) $ (2.44) Adjustments: Loss on divestiture 20,371 20,371 0.41 Goodwill impairment 190,227 181,540 3.66 Curtailment & settlement, net (14,576) (13,876) (0.28) Refinancing costs 1,986 1,891 0.04 Restructuring costs (non-cash) 2,538 2,416 0.05 Restructuring costs (cash) 33,751 32,131 0.65 Estimated impact of Tax Reform — (22,398) (0.45) Adjusted Income from Continuing Operations - Non-GAAP $ 79,621 $ 81,514 $ 1.64


 
22 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 Nine Months Ended December 31, 2016 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ 116,658 $ 83,872 $ 1.70 Adjustments: Triumph Precision Components - Strike related costs 15,701 11,462 0.23 Triumph Precision Components - Inventory write-down 6,089 4,445 0.09 Triumph Aerospace Structures - UAS program 14,200 10,366 0.21 Loss on divestiture 19,124 15,250 0.31 Restructuring costs (non-cash) 10,296 7,516 0.15 Restructuring costs (cash) 28,180 20,571 0.42 Adjusted Income from Continuing Operations - Non-GAAP $ 210,248 $ 153,482 $ 3.11 Three Months Ended December 31, 2016 Pre-Tax After-Tax Diluted EPS Income from Continuing Operations - GAAP $ 35,468 $ 29,332 $ 0.59 Adjustments: Loss on divestiture 14,350 10,476 0.21 Restructuring costs (non-cash) 3,065 2,237 0.05 Restructuring costs (cash) 11,067 8,079 0.16 Adjusted Income from Continuing Operations - Non-GAAP $ 63,950 $ 50,124 $ 1.01


 
23 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 measu