Triumph Group Reports First Quarter Fiscal 2020 Results
BERWYN, Pa., July 31, 2019 /PRNewswire/ -- Triumph Group, Inc. (NYSE: TGI) ("Triumph" or the "Company") today reported financial results for its first quarter of fiscal year 2020, which ended June 30, 2019.
First Quarter Fiscal 2020
-- Net sales of $730.2 million
-- Operating income of $35.5 million with operating margin of 5%; adjusted
operating income of $41.6 million with adjusted operating margin of 6%
-- Net income of $18.1 million, or $0.36 per share; adjusted net income of
$22.9 million, or $0.46 per diluted share
-- Cash flow from operations of $5.0 million, and free cash flow use was
($3.1) million
Outlook for Fiscal 2020
-- Net sales guidance of between $2.8 to $2.9 billion
-- GAAP and adjusted earnings per diluted share of between $2.35 to $2.95
-- Free cash flow of between $0 to $50.0 million
"Triumph Group had a strong start to our fiscal 2020," stated Daniel J. Crowley, Triumph's president and chief executive officer. "During our fiscal first quarter, all three of our business segments delivered year-over-year organic growth in net sales, with our Product Support segment posting organic sales growth for the sixth consecutive quarter. Additionally, Product Support and Aerospace Structures generated strong year-over-year organic improvement in operating margin. We see significant opportunity for margin expansion in Integrated Systems over the balance of the year."
Mr. Crowley continued, "Our first quarter cash usage represents a significant improvement over the prior year and establishes a solid start to the year. We expect to be cash flow positive in the second half of the year as the benefits of our Path to Value actions come to fruition. The Boeing 737 MAX delays are currently forecasted to impact Triumph revenue by less than 2% in the year with offsetting actions in progress. Given our solid first quarter results coupled with the enhanced level of visibility and stability we've instilled across our operations, we remain confident with our full-year commitments and guidance."
Mr. Crowley concluded, "Triumph is a healthier and better performing company than it was a year ago. While we still have work to accomplish, we're confident that we are well positioned to deliver predictable results and increased shareholder value."
First Quarter Fiscal Year 2020 Overview
After accounting for divestitures, sales for the first quarter of fiscal 2020 were up 5.8% organically from the comparable prior year period. Growth was driven by increased volumes on engine and military rotorcraft components, aftermarket accessory services, and continuing structures programs and new engineering services.
First quarter operating income of $35.5 million included a $3.1 million adjustment for loss on previous divestitures and $3.0 million of restructuring costs. Net income for the first quarter of fiscal year 2020 was $18.1 million, or $0.36 per share. On an adjusted basis, net income was $22.9 million, or $0.46 per diluted share. Triumph's results included the following:
($ millions except EPS)
Pre-tax After-tax
Diluted EPS
Income from Continuing Operations - GAAP $22.9 $18.1 $0.36
Loss on divestitures 3.1 2.5 0.05
Transformation related costs:
Restructuring costs (cash) 3.0 2.3 0.05
Adjusted Income from Continuing Operations -
non-GAAP $29.0 $22.9 $0.46
The number of shares used in computing diluted earnings per share for the first quarter of 2020 was 50.3 million.
Backlog was $3.7 billion and increased 1% organically compared to the prior year period and is flat on a sequential basis. This reflects growth in Integrated Systems partially offset by sunsetting legacy Aerospace Structures programs.
For the three-months ended June 30, 2019, cash flow from operations was $5.0 million, reflecting continued investment in ramping programs and liquidation of approximately $20.0 million in prior period advances against current period deliveries.
Outlook
Based on anticipated aircraft production rates and including the impacts of pending program transfers, the Company continues to expect that net sales for fiscal year 2020 will be approximately $2.8 to $2.9 billion.
The Company expects fiscal year 2020 earnings per share to be $2.35 to $2.95, per diluted share.
The Company expects fiscal year 2020 cash provided from operations of $50.0 to $110.0 million, and free cash flow of $0 to $50.0 million.
The Company's current outlook reflects adjustments detailed in the attached tables but excludes the impact of any potential future divestitures.
Conference Call
Triumph Group will hold a conference call today, July 31(st) at 8:30 a.m. (ET) to discuss the first quarter fiscal year 2020 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, which presentation has been posted on the Company's website at http://ir.triumphgroup.com/QuarterlyResults. An audio replay will be available from July 31(st) to August 8th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #4958108.
About Triumph Group
Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerospace and defense systems, components and structures. The company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators.
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, 2019.
FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(in thousands, except per share data)
Three Months Ended
June 30,
CONDENSED STATEMENTS OF INCOME 2019 2018
Net sales $730,231 $832,900
Cost of sales (excluding depreciation shown below) 582,233 770,214
Selling, general & administrative expenses 62,337 81,656
Depreciation & amortization expense 44,050 38,812
Restructuring expenses 2,964 4,047
Loss on divestitures 3,136 4,719
Operating income (loss) 35,511 (66,548)
Interest expense and other 27,491 25,493
Non-service defined benefit income (14,875) (16,538)
Income tax expense 4,807 1,031
Net income (loss) $18,088 $(76,534)
Earnings per share - basic:
Net income (loss) $0.36 $(1.54)
Weighted average common shares outstanding - basic 49,854 49,552
Earnings per share - diluted:
Net income (loss) $0.36 $(1.54)
Weighted average common shares outstanding - diluted 50,295 49,552
Dividends declared and paid per common share $0.04 $0.04
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
BALANCE SHEET
Unaudited
Audited
June 30,
March 31,
2019 2019
Assets
Cash and cash equivalents $28,927 $92,807
Accounts receivable, net 331,509 373,590
Contract assets 323,869 326,667
Inventory, net 470,448 413,560
Prepaid and other current assets 23,907 34,446
Current assets 1,178,660 1,241,070
Property and equipment, net 515,212 543,710
Goodwill 581,631 583,225
Intangible assets, net 418,494 430,954
Other, net 129,269 55,615
Total assets $2,823,266 $2,854,574
Liabilities & Stockholders' Deficit
Current portion of long-term debt $8,150 $8,201
Accounts payable 426,587 433,783
Contract liabilities 309,985 293,719
Accrued expenses 225,666 239,572
Current liabilities 970,388 975,275
Long-term debt, less current portion 1,427,419 1,480,620
Accrued pension and post-retirement benefits,
noncurrent 522,916 540,479
Deferred income taxes, noncurrent 10,989 6,964
Other noncurrent liabilities 449,473 424,549
Stockholders' Deficit:
Common stock, $.001 par value, 100,000,000
shares
authorized, 52,460,920 and 52,460,920 shares
issued 52 52
Capital in excess of par value 859,280 867,545
Treasury stock, at cost, 2,455,767 and 2,573,652
shares (149,767) (159,154)
Accumulated other comprehensive loss (489,277) (487,684)
Accumulated deficit (778,207) (794,072)
Total stockholders' deficit (557,919) (573,313)
Total liabilities and stockholders' deficit $2,823,266 $2,854,574
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
CASH FLOWS Three Months Ended
June 30,
2019 2018
Operating Activities
Net income (loss) $18,088 $(76,534)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation & amortization 44,050 38,812
Amortization of acquired contract liabilities (16,939) (17,234)
Loss on divestitures & assets held for sale 3,136 4,719
Other amortization included in interest expense 1,958 1,887
Provision for (recovery of) doubtful accounts receivable 671 (14)
Employee stock compensation 2,426 2,462
Changes in assets & liabilities, excluding the effects of acquisitions/
divestitures
Trade and other receivables 41,247 27,598
Contract assets 2,767 (23,221)
Inventories (56,623) (30,833)
Prepaid expenses and other current assets 12,721 3,898
Accounts payable, accrued expenses and contract liabilities (32,119) 23,341
Accrued pension and other postretirement benefits (15,792) (18,691)
Other (573) (1,904)
Net cash provided by (used in) operating activities 5,018 (65,714)
Investing Activities
Capital expenditures (8,090) (12,200)
Proceeds from sale of assets (2,570) 664
Net cash used in investing activities (10,660) (11,536)
Financing Activities
Net increase in revolving credit facility (30,000) 113,186
Proceeds from issuance of long-term debt and capital leases 5,600 19,046
Repayment of debt and capital lease obligations (30,572) (53,762)
Payment of deferred financing costs (104) (64)
Dividends paid (1,998) (1,988)
Repurchase of restricted shares for minimum tax obligation (1,043) (532)
Net cash (used in) provided by financing activities (58,117) 75,886
Effect of exchange rate changes on cash (121) (1,400)
Net change in cash (63,880) (2,764)
Cash and equivalents at beginning of period 92,807 35,819
Cash and equivalents at end of period $28,927 $33,055
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA Three Months Ended
June 30,
2019 2018
Net sales:
Integrated Systems $252,226 $241,039
Aerospace Structures 419,178 532,387
Product Support 61,756 66,215
Elimination of inter-segment
sales (2,929) (6,741)
$730,231 $832,900
Operating income (loss):
Integrated Systems $34,772 $35,409
Aerospace Structures 12,283 (79,587)
Product Support 9,276 7,669
Corporate (18,394) (27,577)
Share-based compensation
expense (2,426) (2,462)
$35,511 $(66,548)
Operating Margin %
Integrated Systems 13.8% 14.7%
Aerospace Structures 2.9% -14.9%
Product Support 15.0% 11.6%
Consolidated 4.9% -8.0%
Depreciation and amortization:
Integrated Systems $7,067 $7,555
Aerospace Structures 35,059 28,920
Product Support 1,090 1,670
Corporate 834 667
$44,050 $38,812
Amortization of acquired contract liabilities:
Integrated Systems $(8,125) $(8,849)
Aerospace Structures (8,814) (8,385)
$(16,939) $(17,234)
Capital expenditures:
Integrated Systems $2,851 $1,609
Aerospace Structures 3,973 10,138
Product Support 1,033 348
Corporate 233 105
$8,090 $12,200
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 and Adjusted EBITDAP, 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 and Adjusted EBITDA, less pension & other postretirement
benefits. We disclose Adjusted EBITDA and Adjusted EBITDAP on a consolidated and Adjusted
EBITDAP 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
We view Adjusted EBITDA and Adjusted EBITDAP as 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 and Adjusted EBITDAP, 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 and Adjusted EBITDAP are not measurements 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
Adjusted EBITDA and Adjusted EBITDAP 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 and Adjusted EBITDAP exclude these
charges and provides meaningful information about the operating performance of our
business, apart from charges for depreciation and amortization. We believe the disclosure
Set forth below are descriptions of the financial items that have been excluded from our
net income to calculate Adjusted EBITDA and Adjusted EBITDAP 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 earnings necessarily reflect the current and
ongoing cash earnings related to our operations.
Non-service defined benefit income (inclusive of the
adoption of ASU 2017-07) may be useful to investors
to consider because they represent the cost of post
retirement benefits to plan participants, net of the
assumption of returns on the plan's assets and are
not indicative of the cash paid for such benefits.
We do not believe these earnings (expenses)
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 may be useful for investors to
consider because it represents the estimated
attrition of our acquired customer base and the
diminishing value of product rights and licenses. We
do not believe these charges necessarily reflect the
current and ongoing cash charges related to our
operating cost structure.
Depreciation may be useful for investors to consider
because they generally represent the wear and tear on
our property and equipment used in our operations. We
do not believe these charges necessarily reflect the
current and ongoing cash charges related to our
operating cost structure.
The amount of interest expense and other we incur may
be useful for investors to consider and may result in
current cash inflows or outflows. However, we do not
consider the amount of interest expense and other to
be a representative component of the day-to-day
operating performance of our business.
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change
in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the
amount of income tax expense to be a representative component of the day-to-day operating performance of our business.
Management compensates for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results
and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business.
The following table shows our Adjusted EBITDA and Adjusted EBITDAP reconciled to our net income for the indicated periods (in thousands):
Three Months Ended
June 30,
2019 2018
Adjusted Earnings before Interest, Taxes,
Depreciation, Amortization, and Pension (EBITDAP):
Net Income (Loss) $18,088 $(76,534)
Add-back:
Income Tax Expense 4,807 1,031
Interest Expense and Other 27,491 25,493
Loss on divestitures 3,136 4,719
Adoption of ASU 2017-07 87,241
Amortization of Acquired Contract Liabilities (16,939) (17,234)
Depreciation and Amortization 44,050 38,812
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $80,633 $63,528
Non-service defined benefit income (excluding
settlements) (14,875) (16,538)
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization, and Pension ("Adjusted
EBITDAP") $65,758 $46,990
Net Sales $730,231 $832,900
Net Income (Loss) Margin 2.5% -9.2%
Adjusted EBITDAP Margin 9.2% 5.8%
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 June 30, 2019
Depreciation, Amortization, and Pension (EBITDAP):
Segment Data
Total Integrated Aerospace Product Corporate */
Systems Structures Support Eliminations
Net Income $18,088
Add-back:
Non-service defined benefit income (14,875)
Income Tax Expense 4,807
Interest Expense and Other 27,491
Operating Income (Loss) $35,511 $34,772 $12,283 $9,276 $(20,820)
Loss on divestitures 3,136 3,136
Amortization of Acquired Contract Liabilities (16,939) (8,125) (8,814)
Depreciation and Amortization 44,050 7,067 35,059 1,090 834
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization, Pension ("Adjusted EBITDAP") $65,758 $33,714 $38,528 $10,366 $(16,850)
Net Sales $730,231 $252,226 $419,178 $61,756 $(2,929)
Adjusted EBITDAP Margin 9.2% 13.8% 9.4% 16.8%
n/a
Adjusted Earnings before Interest, Taxes,
Three Months Ended June 30, 2018
Depreciation, Amortization and Pension (EBITDAP):
Segment Data
Total Integrated Aerospace Product Corporate */
Systems Structures Support Eliminations
Net Loss $(76,534)
Add-back:
Non-service defined benefit income (16,538)
Income Tax Expense 1,031
Interest Expense and Other 25,493
Operating (Loss) Income $(66,548) $35,409 $(79,587) $7,669 $(30,039)
Loss on divestitures 4,719 4,719
Adoption of ASU 2017-07 87,241 87,241
Amortization of Acquired Contract Liabilities (17,234) (8,849) (8,385)
Depreciation and Amortization 38,812 7,555 28,920 1,670 667
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization, Pension ("Adjusted EBITDAP") $46,990 $34,115 $28,189 $9,339 $(24,653)
Net Sales $832,900 $241,039 $532,387 $66,215 $(6,741)
Adjusted EBITDAP Margin 5.8% 14.7% 5.4% 14.1%
n/a
* Operating loss at Corporate includes share-based compensation
expense
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
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
June 30, 2019
Pre-tax After-tax Diluted EPS
Income from Continuing Operations- GAAP $22,895 $18,088 $0.36
Adjustments:
Loss on divestitures - incurred to date 3,136 2,477 0.05
Restructuring costs - incurred to date 2,964 2,342 0.05
Adjusted Income from Continuing Operations- non-GAAP $28,995 $22,907 $0.46
Three Months Ended
June 30, 2018
Pre-tax After-tax Diluted EPS
Loss from Continuing Operations- GAAP $(75,503) $(76,534) $(1.54)
Adjustments:
Adoption of ASU 2017-07 87,241 85,474 1.72
Loss on divestitures 4,719 4,719 0.09
Restructuring costs (cash) 4,047 3,359 0.07
Adjusted Income from Continuing Operations- non-GAAP $20,504 $17,018 $0.34
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Adjusted Operating Income is defined as GAAP Operating Income, less expenses/gains associated with the Company's transformation, such as restructuring
expenses, gains/losses on divestitures, defined benefit plan gains/losses from curtailments, settlements, etc; impairments of goodwill and other assets.
Management believes that this is useful in evaluating operating performance, but this measure should not be used in isolation.
The following table reconciles our Operating income to Adjusted Operating income as noted above.
Three Months Ended
June 30, 2019 June 30, 2018
Operating Income (Loss) - GAAP $35,511 $(66,548)
Adjustments:
Adoption of ASU 2017-07 87,241
Restructuring costs (cash) 2,964 4,047
Loss on divestitures 3,136 4,719
Adjusted Operating Income-non-GAAP $41,611 $29,459
Cash provided by operations, is provided for consistency and comparability. We also use free cash flow 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.
Three Months Ended
June 30,
2019 2018
Cash flow provided by (used in) operations $5,018 $(65,714)
Less:
Capital expenditures (8,090) (12,200)
Free cash use $(3,072) $(77,914)
The Company provides cash flow guidance on non-GAAP basis adjusting capital expenditures from cash from operations to arrive at free cash flow.
The following table reconciles cash from operations on a GAAP basis to free cash flow guidance.
FY 20 Cash Flow
Guidance Range
Cash flow from operations
$50,000 - $110,000
Less:
Capital expenditures
$50,000 - $60,000
Free cash flow
$0 - $50,000
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SOURCE Triumph Group, Inc.
