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EX-32.2 - EXHIBIT 32.2 - CERTIFICATION BY SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICE - TRIUMPH GROUP INCexhibit-322q2fy16.htm
EX-32.1 - EXHIBIT 32.1 - CERTIFICATION BY PRESIDENT AND CHIEF EXECUTIVE OFFICER - TRIUMPH GROUP INCexhibit-321q2fy16.htm
EX-31.1 - EXHIBIT 31.1 - CERTIFICATION BY PRESIDENT AND CHIEF EXECUTIVE OFFICER - TRIUMPH GROUP INCexhibit-311q2fy16.htm
EX-31.2 - EXHIBIT 31.2 - CERTIFICATION BY SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICE - TRIUMPH GROUP INCexhibit-312q2fy16.htm

United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q


ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2015

or

¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From _________ to ________

Commission File Number: 1-12235

TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
51-0347963
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

899 Cassatt Road, Suite 210, Berwyn, PA
 
19312
(Address of principal executive offices)
 
(Zip Code)

(610) 251-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £

Indicate by check mark whether the registrant has submitted electronically and has posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b‑2 of the Exchange Act. (Check one)

Large accelerated filer
ý
 
Accelerated filer
¨
Non-accelerated filer
¨
 
Smaller reporting company
¨
(Do not check if a smaller reporting company)
 
 
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes £ No S

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, par value $0.001 per share, 49,316,991 shares outstanding as of October 30, 2015.



TRIUMPH GROUP, INC.
INDEX
 
 
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets at September 30, 2015 and March 31, 2015
 
 
 
 
 
Condensed Consolidated Statements of Income
Three
 and six months ended September 30, 2015 and 2014
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income
Three
and six months ended September 30, 2015 and 2014
 
 
 
 
 
Six months ended September 30, 2015 and 2014
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 




Part I. Financial Information

Item 1. Financial Statements.

Triumph Group, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
 
September 30,
2015
 
March 31,
2015
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
39,089

 
$
32,617

Trade and other receivables, less allowance for doubtful accounts of $7,389 and $6,475
540,902

 
521,601

Inventories, net of unliquidated progress payments of $138,696 and $189,923
1,556,487

 
1,280,274

Rotable assets
52,335

 
48,820

Deferred income taxes
73,823

 
145,352

Prepaid and other current assets
28,775

 
23,069

Total current assets
2,291,411

 
2,051,733

Property and equipment, net
914,304

 
950,734

Goodwill
2,022,820

 
2,019,225

Intangible assets, net
934,108

 
966,365

Other, net
109,928

 
107,997

Total assets
$
6,272,571

 
$
6,096,054

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
43,048

 
$
42,255

Accounts payable
399,927

 
429,134

Accrued expenses
404,273

 
411,848

Total current liabilities
847,248

 
883,237

Long-term debt, less current portion
1,556,647

 
1,326,345

Accrued pension and other postretirement benefits, noncurrent
492,433

 
538,381

Deferred income taxes, noncurrent
401,396

 
410,543

Other noncurrent liabilities
717,465

 
801,764

Stockholders’ equity:
 
 
 
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,460,920 shares issued; 49,307,138 and 49,273,053 shares outstanding
51

 
51

Capital in excess of par value
849,847

 
851,940

Treasury stock, at cost, 3,153,782 and 3,187,867 shares
(200,457
)
 
(203,514
)
Accumulated other comprehensive loss
(198,677
)
 
(198,910
)
Retained earnings
1,806,618

 
1,686,217

Total stockholders’ equity
2,257,382

 
2,135,784

Total liabilities and stockholders’ equity
$
6,272,571

 
$
6,096,054


SEE ACCOMPANYING NOTES.

1



Triumph Group, Inc.
Condensed Consolidated Statements of Income

(in thousands, except per share data)
(unaudited)

 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net sales
$
954,774

 
$
994,123

 
$
1,914,412

 
$
1,891,028

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown separately below)
730,831

 
771,445

 
1,462,925

 
1,456,262

Selling, general and administrative
71,321

 
68,770

 
144,602

 
134,479

Depreciation and amortization
42,575

 
39,014

 
86,109

 
76,565

Relocation costs

 
196

 

 
3,193

Gain on legal settlement, net of expenses

 

 

 
(134,693
)
Curtailment charge

 

 
2,863

 

 
844,727

 
879,425

 
1,696,499

 
1,535,806

Operating income
110,047

 
114,698

 
217,913

 
355,222

Interest expense and other
15,631

 
15,386

 
33,747

 
57,746

Income before income taxes
94,416

 
99,312

 
184,166

 
297,476

Income tax expense
32,804

 
31,866

 
59,823

 
101,786

Net income
$
61,612

 
$
67,446

 
$
124,343

 
$
195,690

 
 
 
 
 
 
 
 
Earnings per share—basic:
$
1.25

 
$
1.32

 
$
2.53

 
$
3.81

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding—basic
49,219

 
51,015

 
49,208

 
51,351

 
 
 
 
 
 
 
 
Earnings per share—diluted:
$
1.25

 
$
1.32

 
$
2.52

 
$
3.79

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding—diluted
49,308

 
51,169

 
49,311

 
51,627

 
 
 
 
 
 
 
 
Dividends declared and paid per common share
$
0.04

 
$
0.04

 
$
0.08

 
$
0.08



SEE ACCOMPANYING NOTES.

2



Triumph Group, Inc.
Condensed Consolidated Statements of Comprehensive Income
(dollars in thousands)
(unaudited)

 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net income
 
$
61,612

 
$
67,446

 
$
124,343

 
$
195,690

Other comprehensive income:
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
(15,658
)
 
(16,827
)
 
(4,725
)
 
(9,623
)
Defined benefit pension plans and other postretirement benefits:
 
 
 
 
 
 
 
 
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
 
 
 
 
 
 
 
 
Prior service credit, net of taxes of ($211)
 

 

 
360

 

Actuarial gain, net of taxes ($3,110)
 

 

 
5,306

 

Reclassifications from accumulated other comprehensive income - (gains) losses, net of tax expense (benefits):
 
 
 
 
 
 
 
 
Amortization of net loss, net of taxes of ($285) and $0 for the three months ended and ($833) and $0 for the six months ended, respectively
 
487

 

 
1,421

 

Recognized prior service credits, net of taxes of $928 and $921 for the three months ended and $790 and $1,842 for the six months ended, respectively
 
(1,584
)
 
(1,533
)
 
(1,348
)
 
(3,066
)
Total defined benefit pension plans and other postretirement benefits, net of taxes
 
(1,097
)
 
(1,533
)
 
5,739

 
(3,066
)
Cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized (loss) gain arising during period, net of tax of $1,018 and ($685) for the three months ended and $483 and $220 for the six months ended, respectively
 
(1,766
)
 
906

 
(754
)
 
(451
)
Reclassification of gain included in net earnings, net of tax of $2 and $9 for the three months ended and $2 and $29 for the six months ended, respectively
 
(34
)
 
(31
)
 
(27
)
 
(66
)
Net unrealized (loss) gain cash flow hedges, net of tax
 
(1,800
)
 
875

 
(781
)
 
(517
)
Total other comprehensive income
 
(18,555
)
 
(17,485
)
 
233

 
(13,206
)
Total comprehensive income
 
$
43,057

 
$
49,961

 
$
124,576

 
$
182,484


SEE ACCOMPANYING NOTES.

3



Triumph Group, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
Six Months Ended September 30,
 
2015
 
2014
 
 
 
 
Operating Activities
 
 
 
Net income
$
124,343

 
$
195,690

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
86,109

 
76,565

Amortization of acquired contract liabilities
(65,502
)
 
(23,832
)
Curtailment charge
2,863

 

Accretion of debt discount

 
1,577

Other amortization included in interest expense
1,945

 
6,255

Provision for doubtful accounts receivable
1,248

 
(55
)
Provision for deferred income taxes
41,705

 
100,307

Employee stock-based compensation
1,990

 
2,056

Changes in assets and liabilities, excluding the effects of acquisitions and dispositions of businesses:
 
 
 
Trade and other receivables
(30,945
)
 
57,938

Rotable assets
(1,143
)
 
(1,848
)
Inventories
(273,225
)
 
(80,273
)
Prepaid expenses and other current assets
5,446

 
3,405

Accounts payable, accrued expenses
(36,854
)
 
11,231

Accrued pension and other postretirement benefits
(39,549
)
 
(90,071
)
Other
3,114

 
(530
)
Net cash (used in) provided by operating activities
(178,455
)
 
258,415

Investing Activities
 
 
 
Capital expenditures
(38,128
)
 
(59,074
)
Reimbursements of capital expenditures

 
553

Proceeds from sale of assets
1,561

 
1,192

Acquisitions, net of cash acquired
(5,986
)
 
(73,901
)
Net cash used in investing activities
(42,553
)
 
(131,230
)
Financing Activities
 
 
 
Net increase in revolving credit facility
166,094

 
68,421

Proceeds from issuance of long-term debt and capital leases
108,297

 
342,960

Repayment of debt and capital lease obligations
(44,207
)
 
(427,343
)
Purchase of common stock

 
(93,018
)
Payment of deferred financing costs
(143
)
 
(5,513
)
Dividends paid
(3,943
)
 
(4,090
)
Repayment of government grant

 
(3,198
)
Repurchase of restricted shares for minimum tax obligation
(96
)
 
(673
)
Proceeds from exercise of stock options

 
356

Net cash provided by (used in) financing activities
226,002

 
(122,098
)
Effect of exchange rate changes on cash
1,478

 
(719
)
Net change in cash
6,472

 
4,368

Cash and cash equivalents at beginning of period
32,617

 
28,998

Cash and cash equivalents at end of period
$
39,089

 
$
33,366

SEE ACCOMPANYING NOTES.

4



Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

1.     BASIS OF PRESENTATION AND ORGANIZATION

The accompanying unaudited condensed consolidated financial statements of Triumph Group, Inc. (the "Company") have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position and cash flows. The results of operations for the three and six months ended September 30, 2015 are not necessarily indicative of results that may be expected for the year ending March 31, 2016. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the fiscal 2015 audited condensed consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ended March 31, 2015 filed with the Securities and Exchange Commission (the "SEC") on May 21, 2015.

The Company designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerostructures, aircraft components, accessories, subassemblies and systems. The Company serves a broad, worldwide spectrum of the aviation industry, including original equipment manufacturers of commercial, regional, business and military aircraft and aircraft components, as well as commercial and regional airlines and air cargo carriers.
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires companies to present debt issuance costs as a direct deduction from the carrying value of that debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). Effective April 1, 2015, the Company adopted this standard. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows (see Note 5 for further discussion). The Company's policy is to exclude debt issuance costs relating to revolving debt instruments as a direct deduction to debt (see Note 5 for further discussion).

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Revenues are generally recognized in accordance with the contract terms when products are shipped, delivery has occurred or services have been rendered, pricing is fixed and determinable, and collection is reasonably assured. A significant portion of the Company’s contracts are within the scope of the Revenue Recognition - Construction-Type and Production-Type Contracts topic of the ASC 605-35 and revenue and costs on contracts are recognized using the percentage-of-completion method of accounting. Accounting for the revenue and profit on a contract requires estimates of (1) the contract value or total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s scope of work, and (3) the measurement of progress towards completion. Depending on the contract, the Company measures progress toward completion using either the cost-to-cost method or the units-of-delivery method of accounting, with the great majority measured under the units-of-delivery method of accounting.

Under the cost-to-cost method of accounting, progress toward completion is measured as the ratio of total costs incurred to estimated total costs at completion. Costs are recognized as incurred. Profit is determined based on estimated profit margin on the contract multiplied by the progress toward completion. Revenue represents the sum of costs and profit on the contract for the period.

5


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Under the units-of-delivery method of accounting, revenue on a contract is recorded as the units are delivered and accepted during the period at an amount equal to the contractual selling price of those units. The costs recorded on a contract under the units-of-delivery method of accounting are equal to the total costs at completion divided by the total units to be delivered. As contracts can span multiple years, the Company often segments the contracts into production lots for the purposes of accumulating and allocating cost. Profit is recognized as the difference between revenue for the units delivered and the estimated costs for the units delivered.

Adjustments to original estimates for a contract’s revenues, estimated costs at completion and estimated total profit are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. These estimates are also sensitive to the assumed rate of production. Generally, the longer it takes to complete the contract quantity, the more relative overhead that contract will absorb. The impact of revisions in cost estimates is recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident (‘‘forward losses’’) and are first offset against costs that are included in inventory, with any remaining amount reflected in accrued contract liabilities in accordance with the Revenue Recognition - Construction-Type and Production-Type Contracts topic. Revisions in contract estimates, if significant, can materially affect results of operations and cash flows, as well as valuation of inventory. Furthermore, certain contracts are combined or segmented for revenue recognition in accordance with the Revenue Recognition - Construction-Type and Production-Type Contracts topic.

For the three months ended September 30, 2015, cumulative catch-up adjustments from changes in estimates, inclusive of changes in forward loss estimates, decreased operating income, net income and earnings per share by approximately $(6,794), $(4,433) and $(0.09), net of tax, respectively. The cumulative catch-up adjustments to operating income for the three months ended September 30, 2015, included gross favorable adjustments of approximately $14,484 and gross unfavorable adjustments of approximately $(21,278). For the three months ended September 30, 2014, cumulative catch-up adjustments from changes in estimates decreased operating income, net income and earnings per share by approximately $(6,164), $(4,186) and $(0.08), net of tax, respectively.
For the six months ended September 30, 2015, cumulative catch-up adjustments from changes in estimates, inclusive of changes in forward loss estimates, decreased operating income, net income and earnings per share by approximately $(6,324), $(4,270) and $(0.09), net of tax, respectively. The cumulative catch-up adjustments to operating income for the six months ended September 30, 2015, included gross favorable adjustments of approximately $26,862 and gross unfavorable adjustments of approximately $(33,186). For the six months ended September 30, 2014, cumulative catch-up adjustments from changes in estimates decreased operating income, net income and earnings per share by approximately $(4,450), $(2,927) and $(0.06), net of tax, respectively.

Amounts representing contract change orders or claims are only included in revenue when such change orders or claims have been settled with the customer and to the extent that units have been delivered. Additionally, some contracts may contain provisions for revenue sharing, price re-determination, requests for equitable adjustments, change orders or cost and/or performance incentives. Such amounts or incentives are included in contract value when the amounts can be reliably estimated and their realization is reasonably assured.

Although fixed-price contracts, which extend several years into the future, generally permit the Company to keep unexpected profits if costs are less than projected, the Company also bears the risk that increased or unexpected costs may reduce profit or cause the Company to sustain losses on the contract. In a fixed-price contract, the Company must fully absorb cost overruns, notwithstanding the difficulty of estimating all of the costs the Company will incur in performing these contracts and in projecting the ultimate level of revenue that may otherwise be achieved.
As disclosed during fiscal 2015, we recognized a provision for forward losses associated with our long-term contract on the 747-8 program. There is still risk similar to what the Company has experienced on the 747-8 program. In particular, the Company's ability to manage risks related to supplier performance, execution of cost reduction strategies, hiring and retaining skilled production and management personnel, quality and manufacturing execution, program schedule delays and many other risks, will determine the ultimate performance of these programs.

6


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Included in net sales of the Aerostructures and Aerospace Systems group is the non-cash amortization of acquired contract liabilities that were recognized as fair value adjustments through purchase accounting from various acquisitions. For the three months ended September 30, 2015 and 2014, the Company recognized $30,404 and $14,865, respectively, into net sales in the accompanying Condensed Consolidated Statements of Income. For the six months ended September 30, 2015 and 2014, the Company recognized $65,502 and $23,832, respectively, into net sales in the accompanying Condensed Consolidated Statements of Income.
The Aftermarket Services Group provides repair and overhaul services, of which a small portion of services are provided under long-term power-by-the-hour contracts. The Company applies the proportional performance method of accounting to recognize revenue under these contracts. Revenue is recognized over the contract period as units are delivered based on the relative value in proportion to the total estimated contract consideration. In estimating the total contract consideration, management evaluates the projected utilization of its customers’ fleet over the term of the contract, in connection with the related estimated repair and overhaul servicing requirements to the fleet based on such utilization. Changes in utilization of the fleet by customers, among other factors, may have an impact on these estimates and require adjustments to estimates of revenue to be realized.
Concentration of Credit Risk
The Company’s trade accounts receivable are exposed to credit risk. However, the risk is limited due to the diversity of the customer base and the customer base’s wide geographical area. Trade accounts receivable from Boeing (representing commercial, military and space) represented approximately 30% and 13% of total trade accounts receivable as of September 30, 2015 and March 31, 2015, respectively. Trade accounts receivable from Gulfstream Aerospace Corporation ("Gulfstream") represented approximately 15% and 16% of total trade accounts receivable as of September 30, 2015 and March 31, 2015, respectively. The Company had no other concentrations of credit risk of more than 10%.
Sales to Boeing for the six months ended September 30, 2015, were $750,044, or 39% of net sales, of which $634,416, $97,452 and $18,176 were from the Aerostructures segment, the Aerospace Systems segment and Aftermarket Services segment, respectively. Sales to Boeing for the six months ended September 30, 2014, were $826,698, or 44% of net sales, of which $747,762, $66,092 and $12,844 were from the Aerostructures segment, the Aerospace Systems segment and Aftermarket Services segment, respectively.
Sales to Gulfstream for the six months ended September 30, 2015, were $251,384, or 13% of net sales, of which $249,601, $1,776 and $7 were from the Aerostructures segment, the Aerospace Systems segment and Aftermarket Services segment, respectively. Sales to Gulfstream for the six months ended September 30, 2014, were $137,635, or 7% of net sales, of which $135,848, $1,787 and $0 were from the Aerostructures segment, the Aerospace Systems segment and Aftermarket Services segment, respectively.
No other single customer accounted for more than 10% of the Company’s net sales. However, the loss of any significant customer, including Boeing and Gulfstream, could have a material adverse effect on the Company and its operating subsidiaries.
Stock-Based Compensation
The Company recognizes compensation expense for share-based awards based on the fair value of those awards at the date of grant. Stock-based compensation expense for the three months ended September 30, 2015 and 2014, was $1,199 and $1,060, respectively. Stock-based compensation expense for the six months ended September 30, 2015 and 2014, was $1,990 and $2,056, respectively. The Company has classified share-based compensation within selling, general and administrative expenses to correspond with the same line item as the majority of the cash compensation paid to employees. Upon the exercise of stock options or vesting of restricted stock, the Company first transfers treasury stock, then issues new shares.





7


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)



Intangible Assets
The components of intangible assets, net, are as follows:
 
September 30, 2015
 
Weighted-
Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
 
 
 
 
 
 
 
 
Customer relationships
16.3
 
$
678,189

 
$
(204,799
)
 
$
473,390

Product rights, technology and licenses
11.7
 
56,014

 
(35,970
)
 
20,044

Non-compete agreements and other
15.9
 
2,928

 
(654
)
 
2,274

Tradenames
Indefinite-lived
 
438,400

 

 
438,400

Total intangibles, net
 
 
$
1,175,531

 
$
(241,423
)
 
$
934,108


 
March 31, 2015
 
Weighted-
Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net
 
 
 
 
 
 
 
 
Customer relationships
16.5
 
$
683,272

 
$
(180,765
)
 
$
502,507

Product rights, technology and licenses
11.8
 
56,302

 
(33,208
)
 
23,094

Non-compete agreements and other
15.9
 
2,929

 
(565
)
 
2,364

Tradenames
Indefinite-lived
 
438,400

 

 
438,400

Total intangibles, net
 
 
$
1,180,903

 
$
(214,538
)
 
$
966,365

Amortization expense for the three months ended September 30, 2015 and 2014, was $14,447 and $11,848, respectively. Amortization expense for the six months ended September 30, 2015 and 2014, was $30,411 and $23,479, respectively.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing an asset or liability. The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and Level 3—Unobservable inputs for the asset or liability. The Company has applied fair value measurements to its interest rate swap (see Note 5).
Warranty Reserves
A reserve has been established to provide for the estimated future cost of warranties on our delivered products. The Company periodically reviews the reserves and adjustments are made accordingly. A provision for warranty on products delivered is made on the basis of historical experience and identified warranty issues. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. The majority of the Company's agreements include a three-year warranty, although certain programs have warranties up to 20 years. The warranty reserves as of September 30, 2015 and March 31, 2015, were $107,290 and $112,140, respectively.


8


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


Supplemental Cash Flow Information
The Company paid $2,220 for income taxes, net of refunds received, for the six months ended September 30, 2015. The Company received $24,246 for income refunds, net of payments, for the six months ended September 30, 2014. The Company made interest payments of $30,236 and $52,250 for the six months ended September 30, 2015 and 2014, respectively.
During the three and six months ended September 30, 2015 and 2014, respectively, the Company did not finance any property and equipment additions through capital leases.
During the six months ended September 30, 2014, under the existing stock repurchase program, the Company repurchased 1,386,740 shares for $93,018. As of September 30, 2015, the Company remains able to purchase an additional 2,277,789 shares under the existing stock repurchase program.

3.     ACQUISITIONS
FISCAL 2015 ACQUISITIONS
Acquisition of Spirit AeroSystems Holdings, Inc. - Gulfstream G650 and G280 Wing Programs
Effective December 30, 2014, a wholly-owned subsidiary of the Company, Triumph Aerostructures - Tulsa LLC, doing business as Triumph Aerostructures-Vought Aircraft Division-Tulsa, completed the acquisition of the Gulfstream G650 and G280 wing programs (the "Tulsa Programs") located in Tulsa, Oklahoma, from Spirit AeroSystems, Inc. The acquisition of the Tulsa Programs establishes the Company as a leader in fully integrated wing design, engineering and production and advances its standing as a strategic Tier One Capable aerostructures supplier. The acquired business operates as Triumph Aerostructures-Vought Aircraft Division-Tulsa and its results are included in the Aerostructures Group from the date of acquisition.
The Company received $160,000 in cash plus assets required to run the business from Spirit-Tulsa to cover the anticipated future cash flow needs of the programs. Goodwill in the amount of $73,800 was provisionally recognized for this acquisition and is calculated as the excess of consideration transferred over the net assets recognized and represents future economic benefits arising from other assets acquired that could not be individually identified and separately recognized such as assembled workforce. The goodwill is not deductible for tax purposes.
The accounting for the business combination is provisional and dependent upon obtaining final valuations and other information for certain assets and liabilities which have not yet been identified, completed or obtained to a point where definitive estimates can be made. The process for estimating the fair values of identified intangible assets, certain tangible assets and assumed liabilities requires the use of judgment to determine the appropriate assumptions.
As the Company finalizes estimates of the fair value of assets acquired and liabilities assumed, substantially all of the purchase price allocation for the Tulsa Programs is provisional. Additional purchase price adjustments will be recorded during the measurement period not to exceed one year beyond the acquisition date. These adjustments may have a material impact on the Company's results of operations and financial position.
The table below presents the provisional estimated fair value of assets acquired and liabilities assumed on the acquisition date based on the best information the Company has received to date, in accordance with Accounting Standards Codification Topic 805, Business Combinations ("ASC 805"). These estimates will be revised as the Company receives final appraisal of tangible and intangible assets, certain liabilities assumed and other information related to the Tulsa Programs acquisition. Accordingly, the amounts below report the Company's best estimate of fair value based on the information available at this time:

9


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

 
December 30, 2014
Inventory
$
78,660

Property and equipment
15,409

Goodwill
73,800

Deferred taxes
48,608

Other assets
68,941

  Total assets
$
285,418

 
 
Accounts payable
$
1,782

Accrued expenses
16,810

Acquired contract liabilities
358,735

Other noncurrent liabilities
68,091

  Total liabilities
$
445,418

Based on the information accumulated through the reporting date, the Company has recognized an accrued warranty liability of $74,132 and a related indemnification asset of $68,941 for amounts reimbursed by the seller. The provisional amounts recognized are based on the Company's best estimate using information that it has obtained as of the reporting date. The Company will finalize its estimate once it is able to determine that it has obtained all necessary information that existed as of the acquisition date related to this matter or one year following the acquisition of the Tulsa Programs, whichever is earlier.
The Tulsa Programs acquisition has been accounted for under the acquisition method and, accordingly, is included in the condensed consolidated financial statements from the effective date of acquisition. The Company incurred $5,000 in acquisition-related costs in connection with the Tulsa Programs acquisition.
Acquisition of North American Aircraft Services, Inc.
Effective October 17, 2014, the Company acquired the ownership of all of the outstanding shares of North American Aircraft Services, Inc. and its affiliates ("NAAS"). NAAS is based in San Antonio, Texas, with fixed-based operator units throughout the United States as well as international locations and delivers line maintenance and repair, fuel leak detection and fuel bladder cell repair services. The acquired business operates as Triumph Aviation Services - NAAS Division and its results are included in Aftermarket Services Group from the date of acquisition.
The purchase price for the NAAS acquisition was $44,520, net of working capital adjustment of $167. Goodwill in the amount of $25,217 was recognized for this acquisition and is calculated as the excess of consideration transferred over the net assets recognized and represents future economic benefits arising from other assets acquired that could not be individually identified and separately recognized such as assembled workforce. The goodwill is not deductible for tax purposes. The Company has also identified an intangible asset related to customer relationships valued at $17,000 with a weighted-average life of 11.0 years.







10


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

The following condensed balance sheet represents the amounts assigned to each major asset and liability caption in the aggregate from the acquisition of NAAS, in accordance with ASC 805:
 
October 17, 2014
Cash
$
818

Accounts receivable
4,939

Inventory
848

Property and equipment
216

Goodwill
25,217

Intangible assets
17,000

Other assets
225

  Total assets
$
49,263

 
 
Accounts payable
$
232

Accrued expenses
911

Other noncurrent liabilities
3,600

  Total liabilities
$
4,743

The Company finalized its estimate after it was able to determine that it had obtained all necessary information that existed as of the acquisition date related to these amounts.
The NAAS acquisition has been accounted for under the acquisition method and, accordingly, is included in the condensed consolidated financial statements from the effective date of acquisition. The NAAS acquisition was funded by the Company's long-term borrowings in place at the date of acquisition. The Company incurred $654 in acquisition-related costs in connection with the NAAS acquisition.
Acquisition of GE Aviation - Hydraulic Actuation
Effective June 27, 2014, the Company acquired the hydraulic actuation business of GE Aviation ("GE"). GE's hydraulic actuation business consisted of three facilities located in Yakima, Washington, Cheltenham, England and the Isle of Man (IOM) and is a technology leader in actuation systems. GE's key product offerings include complete landing gear actuation systems, door actuation, nose-wheel steerings, hydraulic fuses, manifolds flight control actuation and locking mechanisms for the commercial, military and business jet markets. The acquired business operates as Triumph Actuation Systems-Yakima and Triumph Actuation Systems-UK & IOM and its results are included in Aerospace Systems Group from the date of acquisition.
The purchase price for the GE acquisition was $75,609, which includes cash paid at closing, working capital adjustments and deferred payments of $6,000, which was paid in fiscal 2016. Goodwill in the amount of $150,772 was recognized for this acquisition and is calculated as the excess of consideration transferred over the net assets recognized and represents future economic benefits arising from other assets acquired that could not be individually identified and separately recognized such as assembled workforce. The goodwill is deductible for tax purposes. The Company has also identified intangible assets including customer relationships and technology valued at $26,472 with a weighted-average life of 12.0 years.






11


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

The following condensed balance sheet represents the amounts assigned to each major asset and liability caption in the aggregate from the acquisition of GE, in accordance with ASC 805:
 
June 27, 2014
Cash
$
4,608

Accounts receivable
35,376

Inventory
49,585

Property and equipment
30,985

Goodwill
150,772

Intangible assets
26,472

Deferred taxes
63,341

Other assets
2,023

  Total assets
$
363,162

 
 
Accounts payable
$
17,734

Accrued expenses
37,483

Acquired contract liabilities
232,336

  Total liabilities
$
287,553

Based on the information accumulated during the measurement period, and the Company's assessment of the probable outcome of warranty claims, the Company has recognized a liability of $24,514. The Company finalized its estimates after it was able to determine that it had obtained all necessary information that existed as of the acquisition date related to these matters.
The GE acquisition has been accounted for under the acquisition method and, accordingly, is included in the condensed consolidated financial statements from the effective date of acquisition. The GE acquisition was funded by the Company's long-term borrowings in place at the date of acquisition. The Company incurred $1,834 in acquisition-related costs in connection with the GE acquisition.
The acquisitions of the Tulsa Programs, NAAS and GE are referred to in this report as the "fiscal 2015 acquisitions."
The pro forma results presented below include the effects of the GE acquisition as if it had been consummated as of April 1, 2014. The pro forma results include the amortization associated with an estimate of acquired intangible assets and interest expense on debt to fund these acquisitions, as well as fair value adjustments for property and equipment and off-market contracts. To better reflect the combined operating results, nonrecurring charges directly attributable to the transaction have been excluded. In addition, the pro forma results do not include any expected benefits of the acquisition. Accordingly, the pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of April 1, 2014, and have been included in the Company's results of operations for fiscal years 2016 and 2015.
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
954,774

 
$
994,123

 
$
1,914,412

 
$
1,941,965

Net income
61,612

 
67,446

 
124,343

 
197,560

Earnings per share—basic
$
1.25

 
$
1.32

 
$
2.53

 
$
3.85

Earnings per share—diluted
$
1.25

 
$
1.32

 
$
2.52

 
$
3.83



12


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

4.    INVENTORIES
Inventories are stated at the lower of cost (average-cost or specific-identification methods) or market. The components of inventories are as follows:
 
September 30, 2015
 
March 31, 2015
Raw materials
$
88,279

 
$
73,168

Work-in-process, including manufactured and purchased components
1,490,091

 
1,305,390

Finished goods
116,813

 
91,639

Less: unliquidated progress payments
(138,696
)
 
(189,923
)
Total inventories
$
1,556,487

 
$
1,280,274

Work-in-process inventory includes capitalized pre-production costs. Capitalized pre-production costs include nonrecurring engineering, planning and design, including applicable overhead, incurred before production is manufactured on a regular basis. Significant customer-directed work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a contractually determined number of ship-set deliveries and the Company believes these amounts will be fully recovered. The balance of capitalized pre-production costs related to the Company's contracts with Bombardier for the Global 7000/8000 program ("Bombardier") and Embraer for the second generation E-Jet ("Embraer") are as follows:
 
September 30, 2015
 
March 31, 2015
Bombardier
$
308,311

 
$
238,871

Embraer
118,229

 
68,112

Total
$
426,540

 
$
306,983

The Company is still in the pre-production stages for the Bombardier and Embraer programs, as these aircrafts are not scheduled to enter service until 2018 or later. The transition of these programs from development to recurring production levels is dependent upon the success of the programs achieving flight testing and certification, as well as the ability of the Bombardier and Embraer programs to generate acceptable levels of aircraft sales. The failure to achieve these milestones and level of sales or significant cost overruns may result in an impairment of the capitalized pre-production costs.



13


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


5.    LONG-TERM DEBT
Long-term debt consists of the following:
 
September 30, 2015
 
March 31, 2015
 
 
 
 
Revolving line of credit
$
314,350

 
$
148,255

Term loan
346,875

 
356,250

Receivable securitization facility
178,700

 
100,000

Equipment leasing facility and other capital leases
86,679

 
91,913

Senior notes due 2021
375,000

 
375,000

Senior notes due 2022
300,000

 
300,000

Other debt
7,978

 
7,978

Less: Debt issuance costs
(9,887
)
 
(10,796
)
 
1,599,695

 
1,368,600

Less: Current portion
43,048

 
42,255

 
$
1,556,647

 
$
1,326,345

Revolving Credit Facility
In May 2014, the Company amended the Credit Facility (defined below) with its lenders to (i) increase the maximum amount allowed for the receivable securitization facility (the “Securitization Facility”) and (ii) amend certain other terms and covenants.
In November 2013, the Company amended and restated its existing credit agreement (the “Credit Facility”) with its lenders to (i) provide for a $375,000 Term Loan with a maturity date of May 14, 2019 (the "2013 Term Loan"), (ii) maintain a Revolving Line of Credit under the Credit Facility of $1,000,000 with a $250,000 accordion feature, (iii) extend the maturity date to November 19, 2018, and (iv) amend certain other terms and covenants. In connection with the amendment to the Credit Facility, the Company incurred $2,795 of financing costs. These costs, along with the $6,507 of unamortized financing costs prior to the amendment, are being amortized over the remaining term of the Credit Facility.
The Company will repay the outstanding principal amount of the 2013 Term Loan in quarterly installments, on the first business day of each January, April, July and October, commencing April 2014.
The obligations under the Credit Facility and related documents are secured by liens on substantially all assets of the Company and its domestic subsidiaries pursuant to a Second Amended and Restated Guarantee and Collateral Agreement, dated as of November 19, 2013, among the administrative agent, the Company and the subsidiaries of the Company party thereto.
Pursuant to the Credit Facility, the Company can borrow, repay and re-borrow revolving credit loans, and cause to be issued letters of credit, in an aggregate principal amount not to exceed $1,000,000 outstanding at any time. The Credit Facility bears interest at either: (i) LIBOR plus between 1.38% and 2.50%; (ii) the prime rate; or (iii) an overnight rate at the option of the Company. The applicable interest rate is based upon the Company’s ratio of total indebtedness to earnings before interest, taxes, depreciation and amortization. In addition, the Company is required to pay a commitment fee of between 0.25% and 0.45% on the unused portion of the Credit Facility. The Company’s obligations under the Credit Facility are guaranteed by the Company’s domestic subsidiaries.



14


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

At September 30, 2015, there were $314,350 in borrowings and $25,672 in letters of credit outstanding under the Revolving Line of Credit provisions of the Credit Facility primarily to support insurance policies. At March 31, 2015, there were $148,255 in borrowings and $35,384 in letters of credit outstanding under the Revolving Line of Credit provisions of the Credit Facility primarily to support insurance policies. The level of unused borrowing capacity under the Revolving Line of Credit provisions of the Credit Facility varies from time to time depending in part upon its compliance with financial and other covenants set forth in the related agreement. The Credit Facility contains certain affirmative and negative covenants, including limitations on specified levels of indebtedness to earnings before interest, taxes, depreciation and amortization, and interest coverage requirements, and includes limitations on, among other things, liens, mergers, consolidations, sales of assets, and incurrence of debt. If an event of default were to occur under the Credit Facility, the lenders would be entitled to declare all amounts borrowed under it immediately due and payable. The occurrence of an event of default under the Credit Facility could also cause the acceleration of obligations under certain other agreements. The Company is currently in compliance with all such covenants. As of September 30, 2015, the Company had borrowing capacity under this facility of $659,978 after reductions for borrowings and letters of credit outstanding under the facility.
In connection with the Company amending and restating the Credit Facility to add the 2013 Term Loan, the Company also entered into an interest rate swap agreement through November 2018 to reduce its exposure to interest on the variable rate portion of its long-term debt. On the date of inception, the Company designated the interest rate swap as a cash flow hedge in accordance with FASB guidance on accounting for derivatives and hedges and linked the interest rate swap to the 2013 Term Loan. The Company formally documented the hedging relationship between 2013 Term Loan and the interest rate swap, as well as its risk-management objective and strategy for undertaking the hedge, the nature of the risk being hedged, how the hedging instrument's effectiveness will be assessed and a description of the method of measuring the ineffectiveness. The Company also formally assesses, both at the hedge's inception and on a quarterly basis, whether the derivative item is highly effective offsetting changes in cash flows.
As of September 30, 2015 and March 31, 2015, the interest rate swap agreement had a notional amount of $346,875 and $356,250, respectively. As of September 30, 2015 and March 31, 2015, the interest rate swap agreement had a fair value of $4,378 and $2,743, respectively, which is recorded in other noncurrent liabilities with an offset to other comprehensive income, net of applicable taxes (Level 2). The interest rate swap settles on a monthly basis when interest payments are made. These settlements occur through the maturity date.
Receivables Securitization Facility
In November 2014, the Company amended its $225,000 Securitization Facility, increasing the purchase limit from $175,000 to $225,000 and extending the term through November 2017. In connection with the Securitization Facility, the Company sells on a revolving basis certain trade accounts receivable to Triumph Receivables, LLC, a wholly-owned special-purpose entity, which in turn sells a percentage ownership interest in the receivables to commercial paper conduits sponsored by financial institutions. The Company is the servicer of the trade accounts receivable under the Securitization Facility. As of September 30, 2015, the maximum amount available under the Securitization Facility was $225,000. Interest rates are based on LIBOR plus a program fee and a commitment fee. The program fee is 0.40% on the amount outstanding under the Securitization Facility. Additionally, the commitment fee is 0.40% on 100.00% of the maximum amount available under the Securitization Facility. At September 30, 2015, there was $178,700 outstanding under the Securitization Facility. In connection with amending the Securitization Facility, the Company incurred approximately $252 of financing costs. These costs, along with the $341 of unamortized financing costs prior to the amendment, are being amortized over the life of the Securitization Facility. The Company securitizes its trade accounts receivable, which are generally non-interest bearing, in transactions that are accounted for as borrowings pursuant to the Transfers and Servicing topic of the ASC 860.
The agreement governing the Securitization Facility contains restrictions and covenants which include limitations on the making of certain restricted payments, creation of certain liens, and certain corporate acts such as mergers, consolidations and the sale of all or substantially all of the Company's assets.



15


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Capital Leases
During the six months ended September 30, 2015 and 2014, respectively, the Company did not enter into any new leases. During the six months ended September 30, 2015 and 2014, the Company obtained financing for existing fixed assets in the amount of $6,497 and $20,160, respectively.
Senior Notes Due 2021
On February 26, 2013, the Company issued $375,000 principal amount of 4.875% Senior Notes due 2021 (the "2021 Notes"). The 2021 Notes were sold at 100% of principal amount and have an effective interest yield of 4.875%. Interest on the 2021 Notes accrues at the rate of 4.875% per annum and is payable semiannually in cash in arrears on April 1 and October 1 of each year, commencing on October 1, 2013. In connection with the issuance of the 2021 Notes, the Company incurred approximately $6,327 of costs, which are a direct deduction to the face amount of the note and are being amortized on the effective interest method over the term of the 2021 Notes.
The 2021 Notes are the Company's senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The 2021 Notes are guaranteed on a full, joint and several basis by each of the Guarantor Subsidiaries.
The Company may redeem some or all of the 2021 Notes prior to April 1, 2017, by paying a "make-whole" premium. The Company may redeem some or all of the 2021 Notes on or after April 1, 2017, at specified redemption prices. In addition, prior to April 1, 2016, the Company may redeem up to 35% of the 2021 Notes with the net proceeds of certain equity offerings at a redemption price equal to 104.875% of the aggregate principal amount plus accrued and unpaid interest, if any, subject to certain limitations set forth in the indenture governing the 2021 Notes (the "2021 Indenture").
The Company is obligated to offer to repurchase the 2021 Notes at a price of (i) 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change-of-control events, and (ii) 100% of their principal amount plus accrued and unpaid interest, if any, in the event of certain asset sales. These restrictions and prohibitions are subject to certain qualifications and exceptions.
The 2021 Indenture contains covenants that, among other things, limit the Company's ability and the ability of any of the Guarantor Subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of the Guarantor Subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (viii) enter into transactions with affiliates.
Senior Notes Due 2022
On June 3, 2014, the Company issued $300,000 principal amount of 5.250% Senior Notes due 2022 (the "2022 Notes"). The 2022 Notes were sold at 100% of principal amount and have an effective interest yield of 5.250%. Interest on the 2022 Notes accrues at the rate of 5.250% per annum and is payable semiannually in cash in arrears on June 1 and December 1 of each year, commencing on December 1, 2014. In connection with the issuance of the 2022 Notes, the Company incurred approximately $4,990 of costs, which are a direct deduction to the face amount of the note and are being amortized on the effective interest method over the term of the 2022 Notes.
The 2022 Notes are the Company's senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The 2022 Notes are guaranteed on a full, joint and several basis by each of the Guarantor Subsidiaries.
The Company may redeem some or all of the 2022 Notes prior to June 1, 2017, by paying a "make-whole" premium. The Company may redeem some or all of the 2022 Notes on or after June 1, 2017, at specified redemption prices. In addition, prior to June 1, 2017, the Company may redeem up to 35% of the 2022 Notes with the net proceeds of certain equity offerings at a redemption price equal to 105.250% of the aggregate principal amount plus accrued and unpaid interest, if any, subject to certain limitations set forth in the indenture governing the 2022 Notes (the "2022 Indenture").

16


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

The Company is obligated to offer to repurchase the 2022 Notes at a price of (i) 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change-of-control events and (ii) 100% of their principal amount plus accrued and unpaid interest, if any, in the event of certain asset sales. These restrictions and prohibitions are subject to certain qualifications and exceptions.
The 2022 Indenture contains covenants that, among other things, limit the Company's ability and the ability of any of the Guarantor Subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of the Guarantor Subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (viii) enter into transactions with affiliates.
Senior Notes Due 2018
On June 23, 2014, the Company completed the redemption of the 8.63% Senior Notes due 2018 (the “2018 Notes”). The principal amount of $350,000 was redeemed at a price of 104.79% plus accrued and unpaid interest. As a result of the redemption, the Company recognized a pre-tax loss on redemption of $22,615, consisting of early termination premium, write-off of unamortized discount and deferred financing fees and was recorded on the Condensed Consolidated Statements of Income as a component of "Interest expense and other" for the six months ended September 30, 2014.
Convertible Senior Subordinated Notes
On May 22, 2014, the Company announced the redemption of the convertible senior subordinated notes (the “Convertible Notes”). The redemption price for the Convertible Notes was equal to the sum of 100% of the principal amount of the Convertible Notes outstanding, plus accrued and unpaid interest on the Convertible Notes up to, but not including, the redemption date of June 23, 2014. The Convertible Notes were able to be converted at the option of the holder.
The Convertible Notes were eligible for conversion upon meeting certain conditions as provided in the indenture governing the Convertible Notes. For the periods from January 1, 2011 through June 23, 2014, the Convertible Notes were eligible for conversion. During the six months ended September 30, 2014, the Company settled the conversion of $12,834 in principal value of the Convertible Notes, with the principal and the conversion benefit settled in cash.
To be included in the calculation of diluted earnings per share, the average price of the Company’s common stock for the quarter must exceed the conversion price per share of $27.12. The average price of the Company's common stock for the six months ended September 30, 2014, was $67.20. Therefore, for the six months ended September 30, 2014, there were 99,090 additional shares included in the calculation of diluted earnings per share.
Financial Instruments Not Recorded at Fair Value
The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of their short maturities (Level 1 inputs). Carrying amounts and the related estimated fair values of the Company’s financial instruments not recorded at fair value in the financial statements are as follows:
 
September 30, 2015
 
March 31, 2015
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
Long-term debt
$
1,599,695

 
$
1,566,174

 
$
1,368,600

 
$
1,358,306

The fair value of the long-term debt was calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs).


17


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


6.    EARNINGS PER SHARE
The following is a reconciliation between the weighted-average outstanding shares used in the calculation of basic and diluted earnings per share:
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
(in thousands)
 
(in thousands)
 
2015
 
2014
 
2015
 
2014
Weighted-average common shares outstanding – basic
49,219

 
51,015

 
49,208

 
51,351

Net effect of dilutive stock options and nonvested stock
89

 
154

 
103

 
177

Potential common shares – convertible debt

 

 

 
99

Weighted-average common shares outstanding – diluted
49,308

 
51,169

 
49,311

 
51,627

 

7.    INCOME TAXES
The Company follows the Income Taxes topic of the ASC 740, which prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company has classified uncertain tax positions as noncurrent income tax liabilities unless expected to be paid in one year. Penalties and tax-related interest expense are reported as a component of income tax expense. As of September 30, 2015 and March 31, 2015, the total amount of accrued income tax-related interest and penalties was $223 and $207, respectively.

As of September 30, 2015 and March 31, 2015, the total amount of unrecognized tax benefits was $8,358 and $8,348, respectively, of which $8,358 and $8,348, respectively, would impact the effective rate, if recognized. The Company does not anticipate that total unrecognized tax benefits will be reduced in the next 12 months.
The effective income tax rate for the three months ended September 30, 2015 was 34.7% as compared to 32.1% for the three months ended September 30, 2014. For the three months ended September 30, 2015, the income tax provision included the benefit of $421 related to the effects of transfer pricing adjustments carried back to prior periods. For the three months ended September 30, 2014, the income tax provision included the benefit of $1,999 from the decrease to the state deferred tax rates.
The effective income tax rate for the six months ended September 30, 2015, was 32.5% as compared to 34.2% for the six months ended September 30, 2014. For the six months ended September 30, 2015, the income tax provision included the benefit of $4,213 from a decrease to the state deferred tax rate and the benefit of $421 related to the effects of transfer pricing adjustments carried back to prior periods. For the six months ended September 30, 2014, the income tax provision included an unrecognized tax benefits of $1,051, an additional tax benefit related to a net operating loss carryback claim of $367 and the benefit of $1,999 from the decrease to the state deferred tax rates.
With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for fiscal years ended before March 31, 2011, state or local examinations for fiscal years ended before March 31, 2011, or foreign income tax examinations by tax authorities for fiscal years ended before March 31, 2009.

As of September 30, 2015, the Company was not subject to examination in any state jurisdiction. The Company has filed appeals in a prior state examination related to fiscal years ended March 31, 1999 through March 31, 2005. Because of net operating losses acquired as part of the acquisition of Vought, the Company is subject to U.S. federal income tax examinations

18


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

and various state jurisdictions for the years ended December 31, 2001 and after related to previously filed Vought tax returns. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.

8.    GOODWILL
The following is a summary of the changes in the carrying value of goodwill by reportable segment, from March 31, 2015 through September 30, 2015:
 
Aerostructures
 
Aerospace
 Systems
 
Aftermarket
Services
 
Total
Balance, March 31, 2015
$
1,414,663

 
$
523,253

 
$
81,309

 
$
2,019,225

Effect of exchange rate changes
435

 
3,194

 
(34
)
 
3,595

Balance, September 30, 2015
$
1,415,098

 
$
526,447

 
$
81,275

 
$
2,022,820



9.     PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors several defined benefit pension plans covering some of its employees. Certain employee groups are ineligible to participate in the plans or have ceased to accrue additional benefits under the plans based upon their service to the Company or years of service accrued under the defined benefit pension plans. Benefits under the defined benefit plans are based on years of service and, for most non-represented employees, on average compensation for certain years. It is the Company’s policy to fund at least the minimum amount required for all qualified plans, using actuarial cost methods and assumptions acceptable under U.S. Government regulations, by making payments into a separate trust.
In addition to the defined benefit pension plans, the Company provides certain healthcare and life insurance benefits for eligible retired employees. Such benefits are unfunded. Employees achieve eligibility to participate in these contributory plans upon retirement from active service if they meet specified age and years of service requirements. Election to participate for some employees must be made at the date of retirement. Qualifying dependents at the date of retirement are also eligible for medical coverage. Current plan documents reserve the right to amend or terminate the plans at any time, subject to applicable collective bargaining requirements for represented employees. From time to time, changes have been made to the benefits provided to various groups of plan participants. Premiums charged to most retirees for medical coverage prior to age 65 are based on years of service and are adjusted annually for changes in the cost of the plans as determined by an independent actuary. In addition to this medical inflation cost-sharing feature, the plans also have provisions for deductibles, co-payments, coinsurance percentages, out-of-pocket limits, schedules of reasonable fees, preferred provider networks, coordination of benefits with other plans and a Medicare carve-out.
In accordance with the Compensation – Retirement Benefits topic of ASC 715, the Company has recognized the funded status of the benefit obligation as of the date of the last remeasurement, in the accompanying Condensed Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of the plan’s assets and the PBO or accumulated postretirement benefit obligation of the plan. In order to recognize the funded status, the Company determined the fair value of the plan assets. The majority of the plan assets are publicly traded investments which were valued based on the market price as of the date of remeasurement. Investments that are not publicly traded were valued based on the estimated fair value of those investments based on our evaluation of data from fund managers and comparable market data.






19


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

Net Periodic Benefit Plan Costs
The components of net periodic benefit costs (income) for our postretirement benefit plans are shown in the following table:
 
Pension benefits
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Components of net periodic benefit costs:
 
 
 
 
 
 
 
Service cost
$
2,726

 
$
3,257

 
$
5,494

 
$
6,513

Interest cost
22,755

 
21,950

 
45,432

 
43,902

Expected return on plan assets
(40,855
)
 
(36,913
)
 
(81,709
)
 
(73,826
)
Amortization of prior service credits
(1,059
)
 
(1,322
)
 
(2,205
)
 
(2,644
)
Amortization of net loss
2,468

 

 
4,990

 

Curtailment charge

 

 
2,863

 

Net periodic benefit income
$
(13,965
)
 
$
(13,028
)
 
$
(25,135
)
 
$
(26,055
)

 
Other postretirement benefits
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Components of net periodic benefit costs:
 
 
 
 
 
 
 
Service cost
$
306

 
$
717

 
$
632

 
$
1,434

Interest cost
2,056

 
3,082

 
4,126

 
6,164

Amortization of prior service credits
(1,451
)
 
(1,132
)
 
(2,796
)
 
(2,264
)
Amortization of net loss
(1,657
)
 

 
(3,301
)
 

Net periodic benefit (income) expense
$
(746
)
 
$
2,667

 
$
(1,339
)
 
$
5,334

The Company periodically experiences events or makes changes to its benefit plans that result in special charges. Some require remeasurements. The following summarizes the key events whose effects on net periodic benefit costs are included in the tables above:
In April 2015, the Company's largest union-represented group of employees ratified a new collective bargaining agreement. The agreement includes an amendment to the retirement plan, for which actively employed participants will no longer continue to accrue a benefit after 30 years of service. This change resulted in a curtailment charge of approximately $2,863 and is presented on the accompanying Condensed Consolidated Statements of Income as "Curtailment charge"







20


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


10.     STOCKHOLDERS' EQUITY
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive income (loss) ("AOCI") by component for the three and six months ended September 30, 2015 and 2014, respectively, were as follows:
 
 
Currency Translation Adjustment
 
Unrealized Gains and Losses on Derivative Instruments
 
Defined Benefit Pension Plans and Other Postretirement Benefits
 
Total (1)
Balance June 30, 2015
 
$
(35,818
)
 
$
(1,738
)
 
$
(142,566
)
 
$
(180,122
)
   AOCI before reclassifications
 
(15,658
)
 
(1,766
)
 

 
(17,424
)
   Amounts reclassified from AOCI
 

 
(34
)
 
(1,097
)
(2
)
(1,131
)
 Net current period AOCI
 
(15,658
)
 
(1,800
)
 
(1,097
)
 
(18,555
)
Balance September 30, 2015
 
$
(51,476
)
 
$
(3,538
)
 
$
(143,663
)
 
$
(198,677
)
Balance June 30, 2014
 
$
7,402

 
$
104

 
$
(22,135
)
 
$
(14,629
)
   AOCI before reclassifications
 
(16,827
)
 
906

 

 
(15,921
)
   Amounts reclassified from AOCI
 

 
(31
)
 
(1,533
)
(2
)
(1,564
)
 Net current period AOCI
 
(16,827
)
 
875

 
(1,533
)
 
(17,485
)
Balance September 30, 2014
 
$
(9,425
)
 
$
979

 
$
(23,668
)
 
$
(32,114
)
Balance March 31, 2015
 
$
(46,751
)
 
$
(2,757
)
 
$
(149,402
)
 
$
(198,910
)
   AOCI before reclassifications
 
(4,725
)
 
(754
)
 
5,666

 
187

   Amounts reclassified from AOCI
 

 
(27
)
 
73

(2
)
46

 Net current period AOCI
 
(4,725
)
 
(781
)
 
5,739

 
233

Balance September 30, 2015
 
$
(51,476
)
 
$
(3,538
)
 
$
(143,663
)
 
$
(198,677
)
Balance March 31, 2014
 
$
198

 
$
1,496

 
$
(20,602
)
 
$
(18,908
)
   AOCI before reclassifications
 
(9,623
)
 
(451
)
 

 
(10,074
)
   Amounts reclassified from AOCI
 

 
(66
)
 
(3,066
)
(2
)
(3,132
)
 Net current period AOCI
 
(9,623
)
 
(517
)
 
(3,066
)
 
(13,206
)
Balance September 30, 2014
 
$
(9,425
)
 
$
979

 
$
(23,668
)
 
$
(32,114
)
(1) Net of tax.
(2) Includes amortization of actuarial losses and recognized prior service (credits) costs, which are included in the net periodic pension cost of which a portion is allocated to production as inventoried costs.



21


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

11.     SEGMENTS
The Company has three reportable segments: the Aerostructures Group, the Aerospace Systems Group and the Aftermarket Services Group. The Company’s reportable segments are aligned with how the business is managed and the markets that the Company serves are viewed. The Chief Operating Decision Maker (the "CODM") evaluates performance and allocates resources based upon review of segment information. The CODM utilizes earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) as a primary measure of segment profitability to evaluate performance of its segments and allocate resources.
The Aerostructures segment consists of the Company’s operations that manufacture products primarily for the aerospace original equipment manufacturer ("OEM") market. The Aerostructures segment’s revenues are derived from the design, manufacture, assembly and integration of metallic and composite aerostructures and structural components, including aircraft wings, fuselage sections, tail assemblies, engine nacelles, flight control surfaces as well as helicopter cabins. Further, the segment’s operations also design and manufacture composite assemblies for floor panels and environmental control system ducts. These products are sold to various aerospace OEMs on a global basis.
The Aerospace Systems segment consists of the Company’s operations that also manufacture products primarily for the aerospace OEM market, as well as the related aftermarket. The segment’s operations design and engineer mechanical and electromechanical controls, such as hydraulic systems, main engine gearbox assemblies, accumulators, mechanical control cables and non-structural cockpit components. These products are sold primarily to various aerospace OEMs on a global basis.
The Aftermarket Services segment consists of the Company’s operations that provide maintenance, repair and overhaul services to both commercial and military markets on components and accessories manufactured by third parties. Maintenance, repair and overhaul revenues are derived from services on auxiliary power units, airframe and engine accessories, including constant-speed drives, cabin compressors, starters and generators and pneumatic drive units. In addition, the segment’s operations repair and overhaul thrust reversers, nacelle components and flight control surfaces. The segment’s operations also perform repair and overhaul services and supply spare parts for various types of gauges for a broad range of commercial airlines on a worldwide basis.
Segment Adjusted EBITDA is total segment revenue reduced by operating expenses (less depreciation and amortization) identifiable with that segment. Corporate includes general corporate administrative costs and any other costs not identifiable with one of the Company’s segments, including a curtailment charge, of $2,863 for the six months ended September 30, 2015.
The Company does not accumulate net sales information by product or service or groups of similar products and services and, therefore, the Company does not disclose net sales by product or service because to do so would be impracticable. Selected financial information for each reportable segment and the reconciliation of Adjusted EBITDA to operating income is as follows:

22


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales:
 
 
 
 
 
 
 
Aerostructures
$
604,874

 
$
632,510

 
$
1,216,711

 
$
1,244,670

Aerospace systems
280,155

 
288,902

 
557,803

 
508,754

Aftermarket services
73,777

 
74,343

 
148,522

 
141,951

Elimination of inter-segment sales
(4,032
)
 
(1,632
)
 
(8,624
)
 
(4,347
)
 
$
954,774

 
$
994,123

 
$
1,914,412

 
$
1,891,028

 
 
 
 
 
 
 
 
Income before income taxes:
 
 
 
 
 
 
 
Operating income (expense):
 
 
 
 
 
 
 
Aerostructures
$
67,099

 
$
70,008

 
$
130,243

 
$
138,827

Aerospace systems
46,140

 
46,214

 
97,393

 
83,567

Aftermarket services
9,125

 
11,620

 
19,112

 
22,124

Corporate
(12,317
)
 
(13,144
)
 
(28,835
)
 
110,704

 
110,047

 
114,698

 
217,913

 
355,222

Interest expense and other
15,631

 
15,386

 
33,747

 
57,746

 
$
94,416

 
$
99,312

 
$
184,166

 
$
297,476

 
 
 
 
 
 
 
 
Depreciation and amortization:
 
 
 
 
 
 
 
Aerostructures
$
25,506

 
$
25,314

 
$
54,225

 
$
50,835

Aerospace systems
14,251

 
11,147

 
26,205

 
20,665

Aftermarket services
2,428

 
1,926

 
4,890

 
3,803

Corporate
390

 
627

 
789

 
1,262

 
$
42,575

 
$
39,014

 
$
86,109

 
$
76,565

 
 
 
 
 
 
 
 
Amortization of acquired contract liabilities, net:
 
 
 
 
 
 
 
Aerostructures
$
20,393

 
$
4,783

 
$
44,990

 
$
9,900

Aerospace systems
10,011

 
10,082

 
20,512

 
13,932

 
$
30,404

 
$
14,865

 
$
65,502

 
$
23,832

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Aerostructures
$
72,212

 
$
90,539

 
$
139,478

 
$
179,762

Aerospace systems
50,380

 
47,279

 
103,086

 
90,300

Aftermarket services
11,553

 
13,546

 
24,002

 
25,927

Corporate
(11,927
)
 
(12,517
)
 
(25,183
)
 
(22,727
)
 
$
122,218

 
$
138,847

 
$
241,383

 
$
273,262

 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
Aerostructures
$
12,897

 
$
23,027

 
$
24,523

 
$
38,638

Aerospace systems
6,423

 
10,588

 
11,934

 
16,251

Aftermarket services
711

 
2,353

 
1,333

 
4,033

Corporate
81

 
29

 
338

 
152

 
$
20,112

 
$
35,997

 
$
38,128

 
$
59,074


23


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)


 
September 30, 2015
 
March 31, 2015
Total Assets:
 
 
 
Aerostructures
$
4,365,902

 
$
4,091,852

Aerospace systems
1,432,958

 
1,460,064

 Aftermarket services
368,746

 
375,752

 Corporate
104,965

 
168,386

 
$
6,272,571

 
$
6,096,054


During the three months ended September 30, 2015 and 2014, the Company had international sales of $188,308 and $191,849, respectively. During the six months ended September 30, 2015 and 2014, the Company had international sales of $379,625 and $351,683, respectively.


12.
SELECTED CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS

The 2021 Notes and the 2022 Notes are fully and unconditionally guaranteed on a joint and several basis by the Guarantor Subsidiaries. The total assets, stockholders' equity, revenue, earnings and cash flows from operating activities of the Guarantor Subsidiaries exceeded a majority of the consolidated total of such items as of and for the periods reported. The only consolidated subsidiaries of the Company that are not guarantors of the 2021 Notes and the 2022 Notes (the “Non-Guarantor Subsidiaries”) are: (a) the receivables securitization special-purpose entity; and (b) the international operating subsidiaries. The following tables present condensed consolidating financial statements including the Company (the “Parent”), the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries. Such financial statements include summary Condensed Consolidating Balance Sheets as of September 30, 2015 and March 31, 2015, Condensed Consolidating Statements of Comprehensive Income for the three and six months ended September 30, 2015 and 2014, and Condensed Consolidating Statements of Cash Flows for the six months ended September 30, 2015 and 2014.


24


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)

12.
SELECTED CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (Continued)

SUMMARY CONDENSED CONSOLIDATING BALANCE SHEETS:

 
September 30, 2015
 
Parent
 
Guarantor
 Subsidiaries
 
Non-Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
612

 
$
312

 
$
38,165

 
$

 
$
39,089

Trade and other receivables, net
3,203

 
224,361

 
313,338

 

 
540,902

Inventories

 
1,455,368

 
101,119

 

 
1,556,487

Rotable assets

 
35,750

 
16,585

 

 
52,335

Deferred income taxes

 
73,700

 
123

 

 
73,823

Prepaid expenses and other
4,336

 
17,694

 
6,745

 

 
28,775

Total current assets
8,151

 
1,807,185

 
476,075

 

 
2,291,411

Property and equipment, net
7,573

 
776,184

 
130,547

 

 
914,304

Goodwill and other intangible assets, net

 
2,754,973

 
201,955

 

 
2,956,928

Other, net
12,903

 
79,806

 
17,219

 

 
109,928

Intercompany investments and advances
4,029,045

 
81,541

 
78,195

 
(4,188,781
)
 

Total assets
$
4,057,672

 
$
5,499,689

 
$
903,991

 
$
(4,188,781
)
 
$
6,272,571

 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
23,720

 
$
19,328

 
$

 
$

 
$
43,048

Accounts payable
3,912

 
350,812

 
45,203

 

 
399,927

Accrued expenses
42,550

 
322,721

 
39,002

 

 
404,273

Total current liabilities
70,182

 
692,861

 
84,205

 

 
847,248

Long-term debt, less current portion
1,308,097

 
69,850

 
178,700

 

 
1,556,647

Intercompany advances
402,762

 
2,021,140

 
341,450

 
(2,765,352
)
 

Accrued pension and other postretirement benefits, noncurrent
7,633

 
482,895

 
1,905

 

 
492,433

Deferred income taxes and other
11,617

 
1,047,351

 
59,893

 

 
1,118,861

Total stockholders’ equity
2,257,381

 
1,185,592

 
237,838

 
(1,423,429
)
 
2,257,382

Total liabilities and stockholders’ equity
$
4,057,672

 
$
5,499,689

 
$
903,991

 
$
(4,188,781
)
 
$
6,272,571


25


Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)



SUMMARY CONDENSED CONSOLIDATING BALANCE SHEETS:
 
March 31, 2015
 
Parent
 
Guarantor
 Subsidiaries
 
Non-Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
620

 
$
419

 
$
31,578

 
$

 
$
32,617

Trade and other receivables, net
3,578

 
180,874

 
337,149

 

 
521,601

Inventories

 
1,200,941

 
79,333

 

 
1,280,274

Rotable assets

 
35,248

 
13,572

 

 
48,820

Deferred income taxes

 
145,352

 

 

 
145,352

Prepaid expenses and other
6,509

 
10,549

 
6,011

 

 
23,069

Total current assets
10,707

 
1,573,383

 
467,643

 

 
2,051,733

Property and equipment, net
8,209

 
807,070

 
135,455

 

 
950,734

Goodwill and other intangible assets, net

 
2,780,855

 
204,735

 

 
2,985,590

Other, net
13,805

 
80,806

 
13,386

 

 
107,997

Intercompany investments and advances
4,062,058

 
81,540

 
63,897

 
(4,207,495
)
 

Total assets
$
4,094,779

 
$
5,323,654

 
$
885,116

 
$
(4,207,495
)
 
$
6,096,054

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
19,024

 
$
23,231

 
$

 
$

 
$
42,255

Accounts payable
8,919

 
382,143

 
38,072

 

 
429,134

Accrued expenses
38,275

 
326,694

 
46,879

 

 
411,848

Total current liabilities
66,218

 
732,068

 
84,951

 

 
883,237

Long-term debt, less current portion
1,155,299