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