Search

News Release

Print Page Print Page | E-mail Page E-mail Page | RSS Feeds RSS Feeds | E-mail Alerts E-mail Alerts | Financial Tear Sheet Financial Tear Sheet

Printer Friendly Version View printer-friendly version
<< Back
Triumph Group Reports Fourth Quarter and Full Fiscal Year 2016 Results; Implementing ‘One Triumph’ Transformation Strategy

Fourth Quarter and Full Fiscal Year 2016 Results

  • Net sales of $1.058 billion for fourth quarter fiscal year 2016
  • Adjusted operating income for fourth quarter fiscal year 2016 of $122.5 million, reflecting an operating margin of 12%
  • Adjusted net income for fourth quarter fiscal year 2016 of $65.3 million, or $1.32 per diluted share
  • Net loss for fourth quarter fiscal year 2016 of ($1.080) billion, or ($21.93) per share, and reflected net pre-tax charges totaling $1.305 billion related to:

    • Non-cash impairment of goodwill and trade names
    • Impairment of development costs on the Bombardier Global 7000/8000 program capitalized in inventory
    • Production rate reduction on the 747-8 program
    • Restructuring activities
  • Full year sales and adjusted earnings per share of $3.886 billion and $5.34 per diluted share
  • Cash flow from operations for fourth quarter fiscal year 2016 of $257.8 million, exceeding the high end of the company’s forecasted range of $200.0 to $250.0 million
  • Amended and extended maturity date of existing $1.0 billion revolving credit facility and $337.5 million term loan to April, 2021

Key Developments from Comprehensive Business Review

  • Completed comprehensive business diagnostic and restructuring plan. Transformation implementation underway.
  • Organized into four market-focused business units to align customer focus, operational execution, and financial reporting.
  • Reduced number of operating companies from 47 to 22, eliminating overlaps and increasing the scale of combined companies.
  • Launched $300.0 million cost reduction initiative to enhance competitiveness and margins and fund growth.
  • Consolidating ten facilities of which five will be implemented in fiscal 2017.
  • Provisioning for restructuring and inventory write-downs and disposals.
  • Continued assessment of portfolio changes to prioritize investment opportunities for growth and capability building.
  • Deploying new Triumph Operating System (TOS) to align performance improvement efforts and established the Transformation Delivery Office (TDO) to oversee successful execution of transformation plan.
  • Focused on delivering on customer commitments, becoming predictably profitable and driving organic growth

BERWYN, Pa.--(BUSINESS WIRE)--May 4, 2016-- Triumph Group, Inc. (NYSE:TGI) today reported financial results for its fourth quarter and full fiscal year ended March 31, 2016 and provided an update on the company’s implementation of the ‘One Triumph’ transformation strategy.

“During the fourth quarter and early April, we completed our comprehensive review of the company as planned, which focused on improving operational performance, identifying organic growth opportunities, assessing end-market attractiveness and improving our facility footprint and utilization,” said Daniel J. Crowley, Triumph’s President and Chief Executive Officer. “As part of our assessment, we also reviewed each business’ ability to compete and win, and we’re confident that through the implementation of our transformation strategy, Triumph has a strong base from which to grow and deliver the performance shareholders and customers expect. Last month we took a critical step forward in implementing the first phase of Triumph’s transformation by consolidating from six to four market-focused business units, substantially reducing the number of operating companies and locations and launching the Triumph Operating System.”

Mr. Crowley continued, “Our actions to simplify our company and operate as One Triumph Team reflect a commitment to our shareholders, customers and employees to sharpen Triumph’s focus, improve performance, generate organic growth and deliver predictable profitability. We are moving immediately to begin realizing the benefits of our transformation strategy. We expect improved performance in fiscal year 2017 and follow through in fiscal years 2018 and 2019.”

Commenting on the quarter and fiscal year results, Mr. Crowley added, “Triumph’s full year and adjusted fourth quarter results reflect strong operating margins in the Aerospace Systems and Aftermarket Services segments as we reduce costs, integrate our supply chain and strengthen our customer relationships. Additionally, we generated a significant amount of cash during the quarter. Continuing our cost discipline and performance improvement efforts will yield consistent cash generation going forward.”

Operating results were impacted by several significant adjustments. The write-off of previously incurred development costs on the Bombardier Global 7000/8000 program will substantially reduce the risk the Bombardier program poses to future earnings as it transitions from development to production.

‘One Triumph’ Transformation Strategy

As part of its transformation strategy, Triumph has taken the initial actions necessary to enable the company to operate as One Triumph Team and leverage its scale in support of delivering predictable profitability:

  • Realigning business units. On April 12, 2016, Triumph established four market-focused business units (Integrated Systems, Aerospace Structures, Precision Components, and Product Support) to better support its go-to-market strategies and allow the company to more effectively satisfy the needs of its customers while continuing to deliver on its commitments. Triumph expects to immediately realize approximately $10.0 million in annual savings as a result of the realigned structure. As previously announced, Triumph will report its financial performance in four segments, consistent with its realigned business unit structure, effective with the company’s first fiscal quarter of 2017.
  • Reducing the number of operating companies from 47 to 22 businesses. Triumph has grown through acquisitions that have significantly expanded the company’s platforms and capabilities, making it a critical supplier and partner to the leading Tier 1 aerospace and defense OEMs. Triumph will rationalize its structure and combine operating companies with closely-related products, capabilities and customers to eliminate redundancies, better align talent, enhance supply chain economies, and drive value through a consolidated functional support structure.
  • Optimize portfolio. As part of its strategic review of the business, the company continues to review its portfolio to enhance its capabilities and reduce debt.
  • Consolidating facilities. Following an evaluation of its facility footprint, utilization, and cost structure, Triumph plans to reduce its overall footprint by approximately 3.5 million square feet, or 24% percent of total square footage. Although the consolidations benefit all business segments, the majority will occur in the Aerostructures segment. The facility consolidations are expected to result in workforce reductions of approximately eight percent over the next year. Individual consolidations will be announced and implemented on a time-phased basis and, once completed, will generate approximately $55.0 million in annualized pre-tax cost savings.
  • Strengthening leadership team. Triumph has hired and promoted several executives to fill key leadership roles and strengthen its shared services functions in support of the company’s business unit realignment and overall transformation efforts.
  • Standardizing operating procedures and providing oversight for the Transformation. In support of Triumph’s transformation and objective to operate as a more unified enterprise, the company will deploy the Triumph Operating System (TOS), a business management system that emphasizes lean operations through standard, repeatable practices. This operating system will be instrumental in driving growth, innovation, and execution across all of the company’s businesses. The company has also created the Transformation Delivery Office (TDO), which is responsible for driving the successful realization of the transformation plan and execution of the ‘One Triumph’ strategy and Triumph Operating System. The TDO will govern and drive the implementation of critical projects needed to achieve breakthrough value and attain full potential results.

In connection with the facility consolidation efforts and other fourth quarter activities, Triumph incurred approximately $75.6 million in pre-tax restructuring charges during the fourth quarter fiscal year 2016 of which approximately $21.2 million was non-cash. The company expects to incur an additional $77.3 million of restructuring charges in fiscal year 2017 and fiscal year 2018, of which $15.6 million are estimated to be non-cash.

Mr. Crowley continued, “We are now implementing our transformation as we take decisive action to improve execution, reduce costs and operate as an integrated enterprise as part of an overall effort to drive value. We remain confident in our strategic plan and the path we are taking to position Triumph for long-term success.”

Fourth Quarter Fiscal 2016 Results

For the fourth quarter ended March 31, 2016, net sales were $1.058 billion, a two percent decrease from fiscal fourth quarter 2015 net sales of $1.080 billion. Organic sales for the quarter decreased three percent primarily due to rate reductions on key Aerostructures programs.

Net loss for the fourth quarter of fiscal year 2016 was ($1.080) billion, or ($21.93) per diluted share, compared to $82.8 million, or $1.66 per diluted share, for the fourth quarter of the prior fiscal year. Adjusted net income for the fourth quarter of fiscal 2016 was $65.3 million or $1.32 per diluted share and included the net charges noted below. In addition, the fourth quarter of fiscal 2016 also included a ($142.1 million), or ($2.88) per share, negative impact due to the establishment of a full valuation allowance against net deferred tax assets. These results compare to earnings per share for the prior fiscal year’s fourth quarter of $1.71 per diluted share, excluding restructuring charges. The number of shares used in computing diluted earnings per share for the fourth quarter of fiscal year 2016 was 49.3 million shares.

For the quarter ended March 31, 2016, the company generated $257.8 million of cash flow from operations.

The company has extended the maturity date of the existing $1.0 billion revolving credit facility (“Revolver”) and $337.5 million term loan (“Term Loan,” and together with the Revolver, the “Credit Facilities”) to April 2021. In addition, the covenants of the Credit Facilities were amended to reflect the fourth quarter charges and the restructuring costs to be recognized in fiscal year 2017 and fiscal year 2018. The amendment and extension provides the company with liquidity and the flexibility to proceed with its transformation plan while remaining in compliance with its bank covenants.

Full Fiscal Year 2016 Results

For the fiscal year ended March 31, 2016, net sales totaled $3.886 billion, a slight decrease compared to fiscal year 2015 net sales of $3.889 billion. Organic sales for the fiscal year decreased ten percent, partially offset by the acquisition of Triumph Thermal Systems-Maryland.

Net loss for fiscal year 2016 was ($1.044) billion, or ($21.21) earnings per share compared to $238.7 million or $4.68 per diluted share for fiscal year 2015. Adjusted net income for fiscal year 2016 was $263.3 million or $5.34 earnings per diluted share and included the adjustments noted below. This compares to adjusted net income for the prior fiscal year of $292.1 million or $5.73 earnings per diluted share, excluding adjustments during the 2015 fiscal year period. The number of shares used in computing diluted earnings per share for the fiscal year 2016 was 49.3 million shares.

         
Three Months Ended Fiscal Year Ended

March 31, 2016

March 31, 2016

Pre-tax

 

After-tax

Diluted EPS

Pre-tax

 

After-tax

Diluted EPS

Loss from Continuing Operations-GAAP

$ (1,201,271 ) $ (1,079,702 ) $ (21.93 ) $ (1,159,147 ) $ (1,044,008 ) $ (21.21 )
Adjustments:
Goodwill/Tradename impairment 645,161 596,054 12.08 874,361 745,584 15.15
Development Program impairment 399,758 246,428 5.00 399,758 246,428 5.01
747-8 forward loss 161,400 99,494 2.02 161,400 99,494 2.02
Restructuring charges 75,596 46,601 0.94 80,956 49,905 1.01
Other inventory impairments 34,353 21,177 0.43 34,353 21,177 0.43
Legal settlements, net (6,924 ) (4,268 ) (0.09 ) 5,476 3,376 0.07
Curtailment (gain) loss (4,107 ) (2,532 ) (0.05 ) (1,244 ) (767 ) (0.02 )
Valuation allowance   -     142,093     2.88     -     142,093     2.88  

Adjusted Income from Continuing

Operations- non-GAAP

$ 103,966   $ 65,345   $ 1.32  

*

$ 395,913   $ 263,282   $ 5.34  
 
* difference due to rounding
 

Fourth Quarter Fiscal 2016 Charges

In addition to the $75.6 million in charges related to Triumph’s restructuring activities, Triumph recorded net pre-tax charges of $1.230 billion during the fiscal fourth quarter of 2016. These include:

  • A pre-tax, non-cash impairment of $645.2 million related to goodwill and tradenames. The charge was incurred as part of Triumph’s annual assessment of the fair value of its goodwill and indefinite-lived intangible assets, which recognized incremental charges above the impairment charge taken in the fiscal third quarter of 2016.
  • A pre-tax charge of approximately $400.0 million related to the impairment of previously incurred development costs associated with the Bombardier Global 7000/8000 program due to the higher level of spending and delays experienced to date.
  • A pre-tax charge of $161.4 million related to the 747-8 production slowdown.
  • A pre-tax, charge of $34.4 million primarily related to inventory associated with certain slow moving Aftermarket programs the company decided to no longer support.
         

 

 

Aerospace

Aftermarket

Corporate /

Total

Aerostructures

Systems

Services

Eliminations

Q4 Adjustments:

 

Goodwill/Tradename impairment ^ $ 645,161 $ 644,658 $ 503 $ - $ -
Bombardier Global 7000/8000 Program impairment 399,758 399,758 - - -
747-8 forward loss 161,400 161,400 - - -
Other inventory impairments 34,353 9,826 3,463 21,064 -
Restructuring charges 75,596 61,986 2,721 542 10,347
Legal settlements, net (6,924 ) 1,570 (8,494 ) - -
Curtailment charge   (4,107 )   -     -     -     (4,107 )
Subtotals $ 1,305,237   $ 1,279,198   $ (1,807 ) $ 21,606   $ 6,240  
 
Operating Income QTD (1,182,769 ) (1,220,619 ) 66,372 (6,537 ) (21,985 )
Adjusted Operating Income QTD 122,468 58,579 64,565 15,069 (15,745 )
Sales 1,057,794 657,471 320,704 84,745
Adjusted Operating Margin YTD 11.6 % 8.9 % 20.1 % 17.8 % n/a
 
^ This charge represents our best estimate of goodwill impairment, which will be finalized when we file our Form 10-K
 

Segment Results

Aerostructures

The Aerostructures segment reported net sales of $657.5 million in the fourth quarter of fiscal year 2016 compared to $705.4 million in the prior fiscal year period. Organic sales for the quarter declined seven percent primarily due to decreased production on the 747-8 and G450/550 programs. For fiscal year 2016, net sales were $2.428 billion as compared to $2.510 billion for the prior fiscal year. For the fourth quarter of fiscal year 2016, operating loss was ($1.221) billion, compared to operating income of $86.4 million for the prior year period, and included previously noted pre-tax charges totaling $1.279 billion. Operating loss for fiscal year 2016 was ($1.278) billion, compared to operating income of $121.0 million for the prior fiscal year. Excluding the charges, the segment’s operating margin for the quarter was nine percent.

Aerospace Systems

The Aerospace Systems segment reported net sales of $320.7 million in the fourth quarter of fiscal year 2016 compared to $301.2 million in the prior year period, an increase of six percent. Organic sales for the quarter increased four percent. For the fiscal year 2016, net sales increased seven percent to $1.167 billion from $1.089 billion for the prior fiscal year. Operating income for the fourth quarter of fiscal year 2016 was $66.4 million compared to $58.6 million for the prior year period, an increase of thirteen percent, reflecting an operating margin of twenty-one percent. Operating income for fiscal year 2016 was $216.5 million, compared to $184.0 million for the prior fiscal year, an increase of eighteen percent, reflecting an operating margin of nineteen percent.

Aftermarket Services

The Aftermarket Services segment reported net sales in the fourth quarter of fiscal year 2016 of $84.7 million compared to $81.4 million in the prior year period, an increase of four percent, all of which was organic. For the fiscal year 2016, net sales increased two percent to $311.4 million from $304.0 million for the prior fiscal year. Operating loss for the fourth quarter of fiscal year 2016 was ($6.5) million reflecting inventory charges of $21.1 million. Operating income for fiscal year 2016 was $25.0 million, compared to $47.9 million for the prior fiscal year. Excluding the charges, the segment’s operating margin for the quarter was eighteen percent.

Outlook

Based on current aircraft production rates, Triumph expects revenue for fiscal year 2017 to be approximately $3.6 to $3.7 billion. Diluted earnings per share for fiscal year 2017 is projected to be between $4.90 to $5.10 and includes approximately $0.68 per share of projected restructuring charges, approximately $0.15 per share of financing activity charges and approximately $0.12 per share of trade name amortization. The company expects to generate sufficient free cash flow to fund restructuring efforts during fiscal year 2017.

Commenting on the outlook, Mr. Crowley said, “In fiscal year 2017, we are primarily focused on driving free cash flow and operating margins, funding and implementing our strategic plan and prudently managing the balance sheet to ensure that Triumph is well positioned to drive significant value in the future.”

Conference Call

Triumph Group will hold a conference call today, May 4th at 8:30 a.m. (ET) to discuss the fourth quarter and full fiscal year 2016 results. The conference call will be available live and archived on the company’s website at http://www.triumphgroup.com. Slides will be included with the audio portion of the webcast. An audio replay will be available from May 4th to May 10th by calling (888) 266-2081 (Domestic) or (703) 925-2533 (International), passcode #1671426.

About Triumph Group

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

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

           
FINANCIAL DATA (UNAUDITED)
   
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(in thousands, except per share data)
 
 
Three Months Ended Twelve Months Ended
March 31, March 31,
 
CONDENSED STATEMENTS OF OPERATIONS 2016 2015 2016 2015
 
 
Net sales $ 1,057,794 $ 1,080,277 $ 3,886,072 $ 3,888,722
 
Operating (loss) income (1,182,769 ) 140,717 (1,091,106 ) 434,673
 
Interest expense and other 18,502 14,059 68,041 85,379
Income tax (benefit) expense   (121,569 )   43,818   (115,139 )   110,597
 
Net income $ (1,079,702 ) $ 82,840 $ (1,044,008 ) $ 238,697
 
Earnings per share - basic:
 
Net (loss) income $ (21.93 ) $ 1.66 $ (21.21 ) $ 4.70
 
Weighted average common shares outstanding - basic   49,239     49,823   49,218     50,796
 
Earnings per share - diluted:
 
Net (loss) income $ (21.93 ) $ 1.66 $ (21.21 ) $ 4.68
 
Weighted average common shares outstanding - diluted   49,239     49,985   49,218     51,005
 
Dividends declared and paid per common share $ 0.04   $ 0.04 $ 0.16   $ 0.16
 

 

         
FINANCIAL DATA (UNAUDITED)
   
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
 
BALANCE SHEET Unaudited Audited
March 31, March 31,
  2016     2015  
Assets
Cash and cash equivalents $ 20,984 $ 32,617
Accounts receivable, net 445,032 521,601
Inventory, net of unliquidated progress payments of $123,155 and $189,923 1,192,611 1,280,274
Rotable assets 51,952 48,820
Prepaid and other current assets   41,259     23,069  
Current assets 1,751,838 1,906,381
 
Property and equipment, net 889,735 950,734
Goodwill 1,445,029 2,024,846
Intangible assets, net 649,612 966,365
Other, net   111,301     107,999  
 
Total assets $ 4,847,515   $ 5,956,325  
 
Liabilities & Stockholders' Equity
 
Current portion of long-term debt $ 42,441 $ 42,255
Accounts payable 418,598 429,134
Accrued expenses   682,527     411,848  
Current liabilities 1,143,566 883,237
 
Long-term debt, less current portion 1,374,879 1,326,345
Accrued pension and post-retirement benefits, noncurrent 664,664 538,381
Deferred income taxes, noncurrent 62,547 261,100
Other noncurrent liabilities 661,856 811,478
 
Stockholders' Equity:
Common stock, $.001 par value, 100,000,000 shares
authorized, 52,460,920 and 52,460,920 shares issued 51 51
Capital in excess of par value 851,102 851,940
Treasury stock, at cost, 3,131,921 and 3,187,867 shares (199,415 ) (203,514 )
Accumulated other comprehensive loss (346,055 ) (198,910 )
Retained earnings   634,320     1,686,217  
Total stockholders' equity   940,003     2,135,784  
 
Total liabilities and stockholders' equity $ 4,847,515   $ 5,956,325  
 

 

 
FINANCIAL DATA (UNAUDITED)
   
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
 
 
SEGMENT DATA Three Months Ended Twelve Months Ended
March 31, March 31,
 
2016 2015 2016 2015
 
Net sales:
Aerostructures $ 657,471 $ 705,355 $ 2,427,809 $ 2,510,371
Aerospace Systems 320,704 301,165 1,166,795 1,089,117
Aftermarket Services 84,745 81,372 311,394 304,013
Elimination of inter-segment sales   (5,126 )   (7,615 )   (19,926 )   (14,779 )
$ 1,057,794   $ 1,080,277   $ 3,886,072   $ 3,888,722  
 
Operating (loss) income:
Aerostructures $ (1,220,619 ) $ 86,390 $ (1,277,640 ) $ 120,985
Aerospace Systems 66,372 58,612 216,520 184,042
Aftermarket Services (6,537 ) 13,317 24,977 47,931
Corporate   (21,985 )   (17,602 )   (54,963 )   81,715  
$ (1,182,769 ) $ 140,717   $ (1,091,106 ) $ 434,673  
 
Depreciation and amortization:
Aerostructures $ 679,300 * $ 25,956 $ 988,947 * $ 102,296
Aerospace Systems 12,403 13,173 50,518 45,200
Aftermarket Services 3,657 2,422 11,009 8,559
Corporate   419     399     1,642     2,268  
$ 695,779   $ 41,950   $ 1,052,116   $ 158,323  
 
Amortization of acquired contract liabilities:
Aerostructures $ (21,167 ) $ (24,408 ) $ (90,778 ) $ (38,719 )
Aerospace Systems   (11,268 )   (11,993 )   (41,585 )   (37,014 )
$ (32,435 ) $ (36,401 ) $ (132,363 ) $ (75,733 )
 
Capital expenditures:
Aerostructures $ 7,556 $ 18,584 $ 45,478 $ 72,681
Aerospace Systems 8,023 5,979 30,883 30,531
Aftermarket Services 653 220 2,700 5,645
Corporate   240     51     953     1,147  
$ 16,472   $ 24,834   $ 80,014   $ 110,004  
 
 
* - Includes Impairment Charge
 

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:

  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.
 
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.
 

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

  Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.

Management compensates for the above-described limitations of using non-GAAP measures 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.

Modified Adjusted EBITDA is included to adjust for the impacts of our Restructuring plan, inventory charges associated with developmental programs, our provision for forward losses on our 747-8 long-term contract and relocation from our Jefferson Street Facility, in order to show the more comparable results period to period.

The following table shows our Adjusted EBITDA and Modified Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):

         
Three Months Ended Twelve Months Ended
March 31, March 31,
  2016       2015     2016     2015  
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA):
Net (Loss) Income $ (1,079,702 ) $ 82,840 $ (1,044,008 ) $ 238,697
 
Add-back:
Income Tax (Benefit) Expense (121,569 ) 43,818 (115,139 ) 110,597
Interest Expense and Other 18,502 14,059 68,041 85,379
Curtailment (Gain) Loss (4,107 ) - (1,244 ) -
Legal Settlement Charge (Gain), net (6,924 ) - 5,476 (134,693 )
Amortization of Acquired Contract Liabilities (32,435 ) (36,401 ) (132,363 ) (75,733 )
Depreciation and Amortization   695,779     41,950     1,052,116     158,323  
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ (530,456 ) $ 146,266   $ (167,121 ) $ 382,570  
 
747-8 forward loss $ 161,400 $ - $ 161,400 $ 151,992
Bombardier and other inventory charges 434,111 - 434,111 -
Restructuring charges   66,772     2,844     69,172     16,902  
Modified Adjusted EBITDA $ 131,827 $ 149,110 $ 497,562 $ 551,464
 
Net Sales # $ 1,057,794   $ 1,080,277   $ 3,886,072   $ 3,888,722  
 
Adjusted EBITDA Margin #   -51.7 %   14.0 %   -4.5 %   10.0 %
 
Modified Adjusted EBITDA Margin   12.9 %   14.3 %   13.3 %   14.5 %
 
  # Net Sales includes Amortization of Acquired Contract Liabilities. Since Adjusted EBITDA excludes Amortization of Acquired
Acquired Contract Liabilities, we've also excluded it from Net Sales in arriving at Adjusted EBITDA margin throughout this document.
           
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)
 

Adjusted Earnings before Interest, Taxes,

Three Months Ended March 31, 2016

Depreciation and Amortization (EBITDA):

 

Segment Data

 

 

Aerospace

Aftermarket

Corporate /

Total

Aerostructures

Systems

Services

Eliminations

 
Net Loss $ (1,079,702)
 
Add-back:
Income Tax Benefit (121,569)
Interest Expense and Other

18,502

 
Operating (Loss) Income $ (1,182,769) $ (1,220,619) $ 66,372 $ (6,537) $ (21,985)
 
Curtailment (Gain) Loss (4,107) - - - (4,107)
Legal Settlement Charges

(6,924)

1,570 (8,494) - -
Amortization of Acquired Contract Liabilities (32,435) (21,167) (11,268) - -
Depreciation and Amortization

695,779

679,300

12,403

3,657

419

 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ (530,456) $ (560,916) $ 59,013 $ (2,880) $ (25,673)
 

747-8 forward loss

161,400 161,400 - - -

Bombardier and other inventory charges

434,111 409,584 3,463 21,064 -

Restructuring charges

66,772 53,825 2,203 397 $ 10,347
Modified Adjusted EBITDA $ 131,827 $ 63,893 $ 64,679 $ 18,581 $ (15,326)
 
Net Sales $ 1,057,794 $ 657,471 $ 320,704 $ 84,745 $ (5,126)
 
Adjusted EBITDA Margin -51.7% -88.2% 19.1% -3.4% n/a
Modified Adjusted EBITDA Margin 12.9% 10.0% 20.9% 21.9% n/a
 

Adjusted Earnings before Interest, Taxes,

Twelve Months Ended March 31, 2016

Depreciation and Amortization (EBITDA):

Segment Data

 

 

Aerospace

Aftermarket

Corporate /

Total

Aerostructures

Systems

Services

Eliminations

 
Net Income $ (1,044,008)

 

 
Add-back:
Income Tax Expense (115,139)
Interest Expense and Other

68,041

 
Operating Income (Loss)

$ (1,091,106)

$ (1,277,640) $ 216,520 $ 24,977 $ (54,963)
 
Curtailment (Gain) Loss (1,244) - - - (1,244)
Legal Settlement Charges 5,476 12,070 (8,494) 1,900 -
Amortization of Acquired Contract Liabilities (132,363) (90,778) (41,585) - -
Depreciation and Amortization 1,052,116 988,947 50,518 11,009 1,642
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ (167,121) $ (367,401) $ 216,959 $ 37,886 $ (54,565)
 

747-8 forward loss

161,400 161,400 - - -

Bombardier and other inventory charges

434,111 409,584 3,463 21,064 -

Restructuring charges

69,172 53,825 4,603 397 10,347
Modified Adjusted EBITDA $ 497,562 $ 257,408 $ 225,025 $ 59,347 $ (44,218)
 
Net Sales $ 3,886,072 $ 2,427,809 $ 1,166,795 $ 311,394 $ (19,926)
 
Adjusted EBITDA Margin -4.5% -15.7% 19.3% 12.2% n/a
Modified Adjusted EBITDA Margin 13.3% 11.0% 20.0% 19.1% n/a
 

 

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

Adjusted Earnings before Interest, Taxes,

Three Months Ended March 31, 2015

Depreciation and Amortization (EBITDA):

Segment Data

 

 

Aerospace

Aftermarket

Corporate /

Total

Aerostructures

Systems

Services

Eliminations

 
Net Loss $ 82,840

 

 
Add-back:
Income Tax Benefit 43,818
Interest Expense and Other

14,059

 

 
Operating (Loss) Income $ 140,717 $ 86,390 $ 58,612 $ 13,317 $ (17,602)
 
Amortization of Acquired Contract Liabilities (36,401) (24,408) (11,993) - -
Depreciation and Amortization

41,950

25,956

13,173

2,422

399

 
Adjusted Earnings (Losses) before Interest, Taxes,

 

Depreciation and Amortization ("Adjusted EBITDA") $ 146,266 $ 87,938 $ 59,792 $ 15,739 $ (17,203)
 

Restructuring charges

2,844 2,844 - - -
Modified Adjusted EBITDA $ 149,110 $ 90,782 $ 59,792 $ 15,739 $ (17,203)
 
Net Sales $ 1,080,277 $ 705,355 $ 301,165 $ 81,372 $ (7,615)
 
Adjusted EBITDA Margin 14.0% 12.9% 20.7% 19.3% n/a
Modified Adjusted EBITDA Margin 14.3% 13.3% 20.7% 19.3% n/a
 

Adjusted Earnings before Interest, Taxes,

Twelve Months Ended March 31, 2015

Depreciation and Amortization (EBITDA):

 

Segment Data

 

 

Aerospace

Aftermarket

Corporate /

Total

Aerostructures

Systems

Services

Eliminations

 
Net Income $ 238,697
 
Add-back:

 

Income Tax Expense 110,597
Interest Expense and Other

85,379

 
Operating Income $ 434,673 $ 120,985 $ 184,042 $ 47,931 $ 81,715
 
Gain on Legal Settlement, net (134,693) - - - (134,693)
Amortization of Acquired Contract Liabilities

(75,733)

(38,719) (37,014) - -
Depreciation and Amortization

158,323

102,296

45,200

8,559

2,268

 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 382,570 $ 184,562 $ 192,228 $ 56,490 $ (50,710)

 

747-8 forward loss

151,992 151,992 - - -

Restructuring charges

16,902 16,902 - - -
Modified Adjusted EBITDA $ 551,464 $ 353,456 $ 192,228 $ 56,490 $ (50,710)
 
Net Sales $ 3,888,722 $ 2,510,371 $ 1,089,117 $ 304,013 $ (14,779)
 
Adjusted EBITDA Margin 10.0% 7.5% 18.3% 18.6% n/a
Modified Adjusted EBITDA Margin 14.5% 14.3% 18.3% 18.6% n/a
 

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

         
Three Months Ended

March 31, 2016

Pre-tax

After-tax

Diluted EPS

Location on

Financial Statements

Loss from Continuing Operations- GAAP $ (1,201,271 ) $ (1,079,702 ) $ (21.93 )
Adjustments:
Goodwill/Tradename impairment 645,161 596,054 12.08 Aerostructures
Bombardier Global 7000/8000 Program impairment 399,758 246,428 5.00 Aerostructures (EAC) **
747-8 forward loss 161,400 99,494 2.02 Aerostructures (EAC) **
Restructuring charges 75,596 46,601 0.94 All segments
Other inventory impairments 34,353 21,177 0.43 All segments
Legal settlements, net (6,924 ) (4,268 ) (0.09 ) All segments
Curtailment (gain) loss (4,107 ) (2,532 ) (0.05 ) Corporate
Valuation allowance   -     142,093     2.88  
 
Adjusted Income from Continuing Operations- non-GAAP $ 103,966   $ 65,345   $ 1.32  
 
 
Twelve Months Ended

March 31, 2016

Pre-tax

After-tax

Diluted EPS

Location on

Financial Statements

Loss from Continuing Operations- GAAP $ (1,159,147 ) $ (1,044,008 ) $ (21.21 )
Adjustments:
Goodwill/Tradename impairment 874,361 745,584 15.15 Aerostructures
Bombardier Global 7000/8000 Program impairment 399,758 246,428 5.01 Aerostructures (EAC) **
747-8 forward loss 161,400 99,494 2.02 Aerostructures (EAC) **
Restructuring charges 80,956 49,905 1.01 All segments
Other inventory impairments 34,353 21,177 0.43 All segments
Legal settlements, net 5,476 3,376 0.07 All segments
Curtailment (gain) loss (1,244 ) (767 ) (0.02 ) Corporate
Valuation allowance   -     142,093     2.88  
 
Adjusted Income from Continuing Operations- non-GAAP $ 395,913   $ 263,282   $ 5.34  
     
FINANCIAL DATA (UNAUDITED)
   
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
 
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended

March 31, 2015

Pre-tax

After-tax

Diluted EPS

Location on

Financial Statements

Loss from Continuing Operations- GAAP $ 126,658 $ 82,840 $ 1.66
Adjustments:
Jefferson Street Move:
Disruption 2,844 1,843 0.04 Aerostructures (EAC) **
Accelerated Depreciation   1,326     859     0.02   Aerostructures (EAC) **
 
Adjusted Income from Continuing Operations- non-GAAP $ 130,828   $ 85,542   $ 1.71   *
 
Twelve Months Ended
March 31, 2015

Pre-tax

After-tax

Diluted EPS

Location on

Financial Statements

Income from Continuing Operations- GAAP $ 349,294 $ 238,697 $ 4.68
Adjustments:
Gain on Legal Settlement (134,693 ) (87,281 ) (1.71 ) Corporate
Refinancing Costs 22,615 14,655 0.29
Transaction fees - Tulsa Acquisition 4,606 2,985 0.06 Corporate
747-8 forward loss 151,992 98,491 1.93 Aerostructures (EAC) **
Structures - International 13,919 9,020 0.18 Aerostructures
Relocation Costs 3,193 2,069 0.04 Aerostructures
Jefferson Street Move:
Disruption 13,709 8,883 0.17 Aerostructures (EAC) **
Accelerated Depreciation   7,126     4,618     0.09   Aerostructures (EAC) **
 
Adjusted Income from Continuing Operations- non-GAAP $ 431,761   $ 292,137   $ 5.73  
  *   Difference due to rounding.
* * EAC- estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35,
"Revenue Recognition-Construction-Type and Production-Type Contracts"
 

The following table reconciles our Operating income to Adjusted Operating income as noted above.

        Three Months Ended   Twelve Months Ended
March 31, March 31,

2016

 

2015

2016

 

2015

Operating loss - GAAP $ (1,182,769 ) $ 140,717 $ (1,091,106 ) $ 434,673
Adjustments:
747-8 forward loss 161,400 - 161,400 151,992
Goodwill/Tradename impairment 645,161 - 874,361 -
Bombardier Global 7000/8000 Program impairment 399,758 - 399,758 -
Restructuring charges 75,596 4,170 80,956 24,028
Inventory impairments and other 34,353 - 34,353 18,525
Legal settlements, net (6,924 ) - 5,476 (134,693 )
Curtailment charge   (4,107 )   -     (1,244 )   -  
Adjusted Operating income - non-GAAP $ 122,468   $ 144,887   $ 463,954   $ 494,525  
Adjusted Operating margin - non-GAAP   11.6 %   13.4 %   11.9 %   12.7 %
 

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

Cash provided by operations, before pension contributions has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles cash provided by operations, before pension contributions to cash provided by operations, as well as cash provided by operations to free cash flow available for debt reduction.

          Twelve Months Ended
March 31,
  2016       2015
 
Cash flow from operations, before pension contributions $ 83,831 $ 579,670
Pension contributions   -     112,338
Cash (used in) provided by operations 83,831 467,332
Less:
Capital expenditures 80,014 110,004
Dividends   7,889     8,100
Free cash flow available for debt reduction, acquisitions
and share repurchases $ (4,072 ) $ 349,228

We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:

         
March 31, March 31,
  2016     2015  
 

Calculation of Net Debt

Current portion $ 42,441 $ 42,255
Long-term debt   1,374,879     1,326,345  
Total debt 1,417,320 1,368,600
Plus: Deferred debt issuance costs 8,971 10,796
Less: Cash   (20,984 )   (32,617 )
Net debt $ 1,405,307   $ 1,346,779  
 

Calculation of Capital

Net debt $ 1,405,307 $ 1,346,779
Stockholders' equity   940,003     2,135,784  
Total capital $ 2,345,310   $ 3,482,563  
 
Percent of net debt to capital 59.9 % 38.7 %
 

Source: Triumph Group, Inc.

Triumph Group, Inc.
Sheila G. Spagnolo, 610-251-1000
Vice President, Tax & Investor Relations
sspagnolo@triumphgroup.com

Background Shadow
Container Bottom Shadow