Triumph Group Reports Third Quarter Fiscal 2020 Results
BERWYN, Pa., Feb. 5, 2020 /PRNewswire/ -- Triumph Group, Inc. (NYSE: TGI) ("Triumph" or the "Company") today reported financial results for its third quarter of fiscal year 2020, which ended December 31, 2019.
Third Quarter Fiscal 2020
-- Net sales of $704.7 million -- Operating income of $1.7 million with operating margin of 0.2%; adjusted operating income of $64.0 million with adjusted operating margin of 9.1% -- Net loss of ($13.8) million, or ($0.27) per share; adjusted net income of $35.4 million, or $0.69 per diluted share -- Cash flow provided by operations of $49.9 million, and free cash flow of $39.6 million
Outlook for Fiscal 2020
-- Net sales of between $2.8 billion to $2.9 billion -- GAAP earnings per diluted share of between $1.28 and $1.48 -- Adjusted earnings per diluted share of between $2.35 to $2.55 -- Positive free cash flow of between $0 to $50.0 million
"Triumph Group delivered strong third quarter results, in line with our expectations," stated Daniel J. Crowley, Triumph's president and chief executive officer. "Organic revenue was up year-over-year across all three of our business segments, driven by increased volume on Airbus commercial programs and aftermarket demand for military rotorcraft components and engine mounted accessories. Integrated Systems margins were driven by increases in MRO and spares sales, as well as improved operational efficiencies and cost reduction initiatives. Aerospace Structures continued to execute its plan, divesting the Nashville large structures business and exiting legacy programs. We expect these actions to benefit margins in future quarters."
Mr. Crowley continued, "Free cash flow was positive for the quarter and year to date, and we remain on track to deliver positive free cash flow for fiscal year 2020 as we guided. Triumph is a more predictable business as we de-risk our portfolio and backlog and stabilize our cash flows."
Mr. Crowley concluded, "We are focused on our core and I remain confident in Triumph's ability to compete, win and create value over the long term for our stakeholders."
737 MAX Update
Boeing and Triumph have agreed that advance repayments will be deferred from Triumph's fiscal fourth quarter and have reached agreement on the rate at which Triumph will continue to manufacture content for the 737 Max program in the near term to protect continuity of supply to Boeing. The parties also agreed to explore balanced solutions to address a number of business considerations between both companies, including certain fiscal 2021 advance repayments.
Third Quarter Fiscal Year 2020 Overview
After accounting for the impact of the divestitures, sales for the third quarter of fiscal 2020 were up 8% organically from the comparable prior year period. Growth was driven by increased volumes on Airbus commercial programs, military rotorcraft components, aftermarket accessory services and legacy structures programs.
Third quarter operating income of $1.7 million included a $1.4 million expense for union OPEB related incentives, $60.0 million for loss on divestitures, ($3.9) million for a legal judgment gain and $4.7 million of restructuring costs. Net loss for the third quarter of fiscal year 2020 was ($13.8) million, or ($0.27) per share. On an adjusted basis, net income was $35.4 million, or $0.69 per diluted share.
Triumph's results included the following:
($ millions except EPS) Pre-tax After-tax Diluted EPS Loss from Continuing Operations - GAAP $ (17.5) $ (13.8) $ (0.27) Loss on sale of assets and businesses 60.0 47.4 0.93 Legal judgment gain, net (3.9) (3.0) (0.06) Union incentives 1.4 1.1 0.02 Transformation related costs: Restructuring costs (cash) 4.7 3.7 0.07 Adjusted Income from Continuing Operations - non-GAAP * $ 44.8 $ 35.4 $ 0.69
* Differences due to rounding
The number of shares used in computing diluted earnings per share for the third quarter of 2020 was 51.0 million.
Backlog was $3.34 billion, down compared to the prior year period and on a sequential basis due to divestitures, sunsetting programs and recent production rate reductions, but partially offset by military program increases in Integrated Systems.
For the nine months ended December 31, 2019, cash flow provided by operations was $39.3 million, reflecting continued investment in ramping programs and liquidation of approximately $60.0 million in prior period advances against current period deliveries.
Outlook
As noted previously, the Boeing 737 MAX program historically has contributed a single-digit percentage of annual revenue. The Company now expects the FY20 revenue impact from the reduction in rates from the beginning of the year to be less than 3% of sales with similar impacts to operating income and cash.
Based on anticipated aircraft production rates and including the timing of pending program transfers, the Company continues to expect that net sales for fiscal year 2020 will be approximately $2.8 billion to $2.9 billion.
The Company has narrowed its expected GAAP fiscal year 2020 earnings per diluted share from a range of $1.34 to $2.35 to a range of $1.28 to $1.48 and adjusted earning per diluted share from a range of $2.35 to $2.95 to a range of $2.35 to $2.55.
The Company has updated is expected fiscal year 2020 cash provided from operations from a range of $50.0 million to $110.0 million to a range of $40.0 million to $100.0 million. The Company continues to expect positive free cash flow of $0 to $50.0 million in fiscal year 2020.
The Company's current outlook reflects the divestiture of its Nashville business, planned 737MAX production rates and adjustments detailed in the attached tables but excludes the impact of any potential future divestitures.
Conference Call
Triumph will hold a conference call today, February 6(th), at 8:30 a.m. (ET) to discuss the third 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, and the presentation has been posted on the Company's website at http://ir.triumphgroup.com/QuarterlyResults. An audio replay will be available from February 6th to February 13th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #1487806.
About Triumph
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 Nine Months Ended December 31, December 31, CONDENSED STATEMENTS OF OPERATIONS 2019 2018 2019 2018 Net sales $ 704,666 $ 807,895 $ 2,207,007 $ 2,495,903 Cost of sales (excluding depreciation shown below) 546,282 713,274 1,750,751 2,207,962 Selling, general & administrative 65,974 71,823 194,512 223,031 Depreciation & amortization 29,843 37,404 104,112 114,349 Restructuring costs 4,744 2,327 13,490 18,206 Legal judgment gain, net of expenses (3,857) (9,257) Loss on sale of assets and businesses, net 60,019 55,190 17,837 Operating income (loss) 1,661 (16,933) 98,209 (85,482) Interest expense and other, net 33,178 29,309 96,069 83,515 Non-service defined benefit income (13,989) (16,520) (57,280) (49,581) Income tax (benefit) expense (3,682) 1,223 12,477 2,739 Net (loss) income $ (13,846) $ (30,945) $ 46,943 $ (122,155) Earnings per share - basic: Net (loss) income $ (0.27) $ (0.62) $ 0.94 $ (2.46) Weighted average common shares outstanding - basic 50,395 49,668 50,074 49,616 Earnings per share - diluted: Net (loss) income $ (0.27) $ (0.62) $ 0.93 $ (2.46) Weighted average common shares outstanding - diluted 50,395 49,668 50,591 49,616 Dividends declared and paid per common share $ 0.04 $ 0.04 $ 0.12 $ 0.12
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except share data) BALANCE SHEETS Unaudited Audited December 31, March 31, 2019 2019 Assets Cash and cash equivalents $ 53,594 $ 92,807 Accounts receivable, net 300,730 373,590 Contract assets 241,875 326,667 Inventory, net 473,863 413,560 Prepaid and other current assets 26,133 34,446 Current assets 1,096,195 1,241,070 Property and equipment, net 433,475 543,710 Goodwill 583,699 583,225 Intangible assets, net 394,782 430,954 Other, net 117,235 55,615 Total assets $ 2,625,386 $ 2,854,574 Liabilities & Stockholders' Deficit Current portion of long-term debt $ 7,795 $ 8,201 Accounts payable 379,989 433,783 Contract liabilities 264,463 293,719 Accrued expenses 231,065 239,572 Current liabilities 883,312 975,275 Long-term debt, less current portion 1,400,893 1,480,620 Accrued pension and post-retirement benefits, noncurrent 496,284 540,479 Deferred income taxes, noncurrent 16,709 6,964 Other noncurrent liabilities 361,085 424,549 Stockholders' Deficit: Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 52 52 and 52,460,920 shares issued Capital in excess of par value 804,133 867,545 Treasury stock, at cost, 631,146 and 2,573,652 shares (38,424) (159,154) Accumulated other comprehensive loss (545,299) (487,684) Accumulated deficit (753,359) (794,072) Total stockholders' deficit (532,897) (573,313) Total liabilities and stockholders' deficit $ 2,625,386 $ 2,854,574
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except share data) Nine Months Ended December 31, CASH FLOWS 2019 2018 Operating Activities Net income (loss) $ 46,943 $ (122,155) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation & amortization 104,112 114,349 Amortization of acquired contract liabilities (56,153) (48,769) Loss on sale of assets & businesses, net 55,190 17,837 Curtailment and special termination benefit gain, net (14,373) Other amortization included in interest expense 9,114 6,811 Provision for doubtful accounts receivable 632 622 Provision for deferred income taxes 8,108 Employee stock-based compensation 8,245 8,509 Changes in assets and liabilities, excluding the effects of acquisitions/divestitures: Trade and other receivables 72,278 8,669 Contract assets 53,047 6,240 Inventories (67,764) (61,563) Prepaid expenses and other current assets 11,315 1,615 Accounts payable, accrued expenses and contract liabilities (143,718) (72,639) Accrued pension and other postretirement benefits (46,693) (55,150) Other (995) 2,508 Net cash provided by (used in) operating activities 39,288 (193,116) Investing Activities Capital expenditures (27,250) (34,824) Proceeds from sale of assets 49,956 41,417 Net cash provided by investing activities 22,706 6,593 Financing Activities Net (decrease) increase in revolving credit facility (215,000) 218,066 Proceeds from issuance of long-term debt and finance leases 570,980 45,000 Repayment of debt and finance lease obligations (433,197) (73,011) Payment of deferred financing costs (17,545) (1,941) Dividends paid (6,005) (5,975) Repurchase of restricted shares for minimum tax obligation (1,179) (645) Net cash (used in) provided by financing activities (101,946) 181,494 Effect of exchange rate changes on cash 739 (2,126) Net change in cash (39,213) (7,155) Cash and equivalents at beginning of period 92,807 35,819 Cash and equivalents at end of period $ 53,594 $ 28,664
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Three Months Ended Nine Months Ended December 31, December 31, SEGMENT DATA 2019 2018 2019 2018 Net sales: Integrated Systems $ 275,248 $ 252,437 $ 813,454 $ 754,193 Aerospace Structures 368,972 490,337 1,210,729 1,551,090 Product Support 63,978 71,446 193,127 209,860 Elimination of inter-segment sales (3,532) (6,325) (10,303) (19,240) $ 704,666 $ 807,895 $ 2,207,007 $ 2,495,903 Operating income (loss): Integrated Systems $ 47,896 $ 39,947 $ 134,140 $ 115,221 Aerospace Structures 18,039 (49,813) 43,930 (152,143) Product Support 9,538 11,421 29,680 30,604 Corporate (70,857) (15,222) (101,296) (70,655) Share-based compensation expense (2,955) (3,266) (8,245) (8,509) $ 1,661 $ (16,933) $ 98,209 $ (85,482) Operating margin % Integrated Systems 17.4 15.8 16.5 15.3 % % % % Aerospace Structures 4.9 (10.2) 3.6 (9.8) % % % % Product Support 14.9 16.0 15.4 14.6 % % % % Consolidated 0.2 (2.1) 4.4 (3.4) % % % % Depreciation and amortization: Integrated Systems $ 6,992 $ 7,376 $ 21,042 $ 22,316 Aerospace Structures 20,921 27,673 77,265 84,888 Product Support 1,083 1,611 3,272 4,944 Corporate 847 744 2,533 2,201 $ 29,843 $ 37,404 $ 104,112 $ 114,349 Amortization of acquired contract liabilities: Integrated Systems $ (8,377) $ (8,172) $ (26,126) $ (25,789) Aerospace Structures (8,220) (6,559) (30,027) (22,980) $ (16,597) $ (14,731) $ (56,153) $ (48,769) Capital expenditures: Integrated Systems $ 2,974 $ 3,951 $ 9,734 $ 9,388 Aerospace Structures 5,910 5,722 13,915 22,937 Product Support 955 852 2,621 1,871 Corporate 416 45 980 628 $ 10,255 $ 10,570 $ 27,250 $ 34,824
(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 and Adjusted EBITDAP, which is our net income 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 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 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. -- 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.
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) The following table shows our Adjusted EBITDA and Adjusted EBITDAP reconciled to our net income for the indicated periods (in thousands): Three Months Ended Nine Months Ended December 31, December 31, Adjusted Earnings before Interest, Taxes, Depreciation, 2019 2018 2019 2018 Amortization, and Pension (Adjusted EBITDAP): Net (loss) income $ (13,846) $ (30,945) $ 46,943 $ (122,155) Add-back: Income tax (benefit) expense (3,682) 1,223 12,477 2,739 Interest expense and other, net 33,178 29,309 96,069 83,515 Curtailment gain & special termination, net (14,373) Union incentives 1,400 7,071 Loss on sales of assets and businesses, net 60,019 55,190 17,837 Legal judgment gain, net of expenses (3,857) (9,257) Adoption of ASU 2017-07 87,241 Amortization of acquired contract liabilities (16,597) (14,731) (56,153) (48,769) Depreciation and amortization 29,843 37,404 104,112 114,349 Adjusted Earnings before Interest, Taxes, Depreciation $ 86,458 $ 22,260 $ 242,079 $ 134,757 and Amortization ("Adjusted EBITDA") Non-service defined benefit income (excluding settlements) (13,989) (16,520) (42,907) (49,581) Adjusted Earnings before Interest, Taxes, Depreciation $ 72,469 $ 5,740 $ 199,172 $ 85,176 and Amortization, and Pension ("Adjusted EBITDAP") Net sales $ 704,666 $ 807,895 $ 2,207,007 $ 2,495,903 Net (loss) income margin (2.0) (3.8) 2.1 (4.9) % % % % Adjusted EBITDAP margin 10.5 0.7 9.3 3.5 % % % %
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Non-GAAP Financial Measure Disclosures (continued) Three Months Ended December 31, 2019 Segment Data Adjusted Earnings before Interest, Taxes, Depreciation, Total Integrated Aerospace Product Corporate/ Amortization, and Pension (EBITDAP): Systems Structures Support Eliminations* Net loss $ (13,846) Add-back: Non-service defined benefit income (13,989) Income tax expense (3,682) Interest expense and other, net 33,178 Operating income (loss) $ 1,661 $ 47,896 $ 18,039 $ 9,538 $ (73,812) Loss on sales of assets & businesses, net 60,019 60,019 Legal settlement gain, net of expenses (3,857) (3,857) Union represented employee incentives 1,400 1,400 Amortization of acquired contract liabilities (16,597) (8,377) (8,220) Depreciation and amortization 29,843 6,992 20,921 1,083 847 Adjusted Earnings (Losses) before Interest, Taxes, $ 72,469 $ 46,511 $ 32,140 $ 10,621 $ (16,803) Depreciation and Amortization, and Pension ("Adjusted EBITDAP") Net sales $ 704,666 $ 275,248 $ 368,972 $ 63,978 $ (3,532) Adjusted EBITDAP margin 10.5 17.4 8.9 16.6 % % % % n/a
Nine Months Ended December 31, 2019 Segment Data Adjusted Earnings before Interest, Taxes, Depreciation, Total Integrated Aerospace Product Corporate/ Amortization, and Pension (EBITDAP): Systems Structures Support Eliminations* Net income $ 46,943 Add-back: Non-service defined benefit income (57,280) Income tax expense 12,477 Interest expense and other, net 96,069 Operating income (loss) $ 98,209 $ 134,140 $ 43,930 $ 29,680 $ (109,541) Loss (gain) on sales of assets & businesses, net 55,190 (10,121) 65,311 Legal judgment gain, net of expenses (9,257) (9,257) Union represented employee incentives 7,071 7,071 Amortization of acquired contract liabilities (56,153) (26,126) (30,027) Depreciation and amortization 104,112 21,042 77,265 3,272 2,533 Adjusted Earnings (Losses) before Interest, Taxes, $ 199,172 $ 129,056 $ 88,118 $ 32,952 $ (50,954) Depreciation and Amortization, and Pension ("Adjusted EBITDAP") Net sales $ 2,207,007 $ 813,454 $ 1,210,729 $ 193,127 $ (10,303) Adjusted EBITDAP margin 9.3 16.4 7.5 17.1 % % % % n/a
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Non-GAAP Financial Measure Disclosures (continued) Three Months Ended December 31, 2018 Segment Data Adjusted Earnings before Interest, Taxes, Depreciation, Total Integrated Aerospace Product Corporate/ Amortization, and Pension (EBITDAP): Systems Structures Support Eliminations* Net loss $ (30,945) Add-back: Non-service defined benefit income (16,520) Income tax expense 1,223 Interest expense and other, net 29,309 Operating (loss) income $ (16,933) $ 39,947 $ (49,813) $ 11,421 $ (18,488) Amortization of acquired contract liabilities (14,731) (8,172) (6,559) Depreciation and amortization 37,404 7,376 27,673 1,611 744 Adjusted Earnings (Losses) before Interest, Taxes, $ 5,740 $ 39,151 $ (28,699) $ 13,032 $ (17,744) Depreciation and Amortization, and Pension ("Adjusted EBITDAP") Net sales $ 807,895 $ 252,437 $ 490,337 $ 71,446 $ (6,325) Adjusted EBITDAP margin 0.7 16.0 (5.9) 18.2 % % % % n/a
Nine Months Ended December 31, 2018 Segment Data Adjusted Earnings before Interest, Taxes, Depreciation, Total Integrated Aerospace Product Corporate/ Amortization, and Pension (EBITDAP): Systems Structures Support Eliminations* Net loss $ (122,155) Add-back: Non-service defined benefit income (49,581) Income tax expense 2,739 Interest expense and other, net 83,515 Operating (loss) income $ (85,482) $ 115,221 $ (152,143) $ 30,604 $ (79,164) Loss on sales of assets & businesses, net 17,837 17,837 Adoption of ASU 2017-07 87,241 87,241 Amortization of acquired contract liabilities (48,769) (25,789) (22,980) Depreciation and amortization 114,349 22,316 84,888 4,944 2,201 Adjusted Earnings (Losses) before Interest, $ 85,176 $ 111,748 $ (2,994) $ 35,548 $ (59,126) Taxes, Depreciation and Amortization, and Pension ("Adjusted EBITDAP") Net sales $ 2,495,903 $ 754,193 $ 1,551,090 $ 209,860 $ (19,240) Adjusted EBITDAP margin 3.5 15.3 (0.2) 16.9 % % % % n/a * Operating loss at Corporate includes share-based compensation expense.
(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 have 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, 2019 Pre-Tax After-Tax Diluted EPS Loss from continuing operations - GAAP $ (17,528) $ (13,846) $ (0.27) Adjustments: Loss on sale of assets and businesses, net 60,019 47,415 0.93 Legal judgment gain, net of expenses (3,857) (3,047) (0.06) Union incentives 1,400 1,106 0.02 Restructuring costs 4,744 3,748 0.07 Adjusted income from continuing operations - non-GAAP $ 44,778 $ 35,376 $ 0.69
Nine Months Ended December 31, 2019 Pre-Tax After-Tax Diluted EPS FY20 EPS Guidance Range Income from continuing operations - GAAP $ 59,420 $ 46,943 $ 0.93 $1.28 - $1.48 Adjustments: Loss on sale of assets and businesses, net 55,190 43,600 0.86 1.07 Curtailment gain & special termination gain, net (14,373) (11,355) (0.22) (0.28) Legal settlement gain, net of expenses (9,257) (7,313) (0.14) (0.18) Union incentives 7,071 5,586 0.11 0.14 Restructuring costs 13,490 10,657 0.21 0.26 Refinancing cost 3,030 2,394 0.05 0.06 Adjusted income from continuing operations - non-GAAP* $ 114,571 $ 90,512 $ 1.79 $2.35 - $2.55 * Differences due to rounding
Three Months Ended December 31, 2018 Pre-Tax After-Tax Diluted EPS Loss from continuing operations - GAAP $ (29,722) $ (30,945) $ (0.62) Adjustments: Global 7500 forward loss charge 40,498 40,498 0.81 E2 Jet program forward loss charge 9,162 7,604 0.15 G280 program forward loss charge 2,516 2,088 0.04 Restructuring costs 2,327 1,891 0.04 Adjusted income from continuing operations - non-GAAP $ 24,781 $ 21,136 $ 0.42
(Continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except per share data) Non-GAAP Financial Measure Disclosures (continued) Nine Months Ended December 31, 2018 Pre-Tax After-Tax Diluted EPS Loss from continuing operations - GAAP $ (119,416) $ (122,155) $ (2.46) Adjustments: Adoption of ASU 2017-07 87,241 85,474 1.71 Loss on sale of assets and businesses, net 17,837 17,837 0.36 Global 7500 forward loss charge 60,424 57,664 1.16 E2 Jet program forward loss charge 9,162 7,604 0.15 G280 program forward loss charge 2,516 2,088 0.04 Reduction of prior Gulfstream forward loss (7,624) (6,328) (0.13) Restructuring costs 18,206 15,111 0.30 Refinancing costs 1,281 1,063 0.02 Adjusted income from continuing operations - non-GAAP* $ 69,627 $ 58,358 $ 1.17 * Differences due to rounding
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 Nine Months Ended December December December December 31, 31, 31, 31, 2019 2018 2019 2018 Operating income (loss) - GAAP $ 1,661 $ (16,933) $ 98,209 $ (85,482) Adjustments: Adoption of ASU 2017-07 87,241 Loss on sale of assets and businesses, net 60,019 55,190 17,837 Global 7500 forward loss charge 40,498 60,424 E2 Jet program forward loss charge 9,162 9,162 G280 program forward loss charge 2,516 2,516 Reduction of prior Gulfstream forward loss (7,624) Restructuring costs 4,744 2,327 13,490 18,206 Legal judgment gain, net of expenses (3,857) (9,257) Union incentives 1,400 7,071 Adjusted operating income - non-GAAP $ 63,967 $ 37,570 $ 164,703 $ 102,280
(Continued) FINANCIAL DATA (UNAUDITED) (dollars in thousands, except per share data) TRIUMPH GROUP, INC. AND SUBSIDIARIES Non-GAAP Financial Measure Disclosures (continued) 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 Nine Months Ended December 31, December 31, 2019 2018 2019 2018 Cash flow (provided by) used in operations $ 49,881 $ 4,063 $ 39,288 $ (193,116) Less: Capital expenditures (10,255) (10,570) (27,250) (34,824) Free cash flow (use) $ 39,626 $ (6,507) $ 12,038 $ (227,940)
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. FY20 Cash Flow Guidance Range Cash flow from operations $40,000 - $100,000 Less: Capital expenditures $40,000 - $50,000 Free cash flow $0 - $50,000
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SOURCE Triumph Group