Attached files
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| EX-99.1 - EXHIBIT 99.1 - EARNINGS RELEASE DATED 2.2.2017 - TRIUMPH GROUP INC | exhibit991q3fy2017.htm |
| 8-K - 8-K - DATED 2.2.2017 - TRIUMPH GROUP INC | form8-kq3fy2017earningsrel.htm |
Third Quarter FY 2017 Conference Call
Daniel J. Crowley
President, Chief Executive Officer
James F. McCabe, Jr.
Senior Vice President, Chief Financial Officer
February 2, 2017
TRIUMPH GROUP, INC. Q3’17 UPDATE // 2
FORWARD LOOKING STATEMENTS
Parts of this presentation contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements involve known and
unknown risks, uncertainties, and other factors which may cause Triumph’s actual results,
performance, or achievements to be materially different from any expected future results,
performance, or achievements. For more information, see the risk factors described in Triumph’s
current Form 10-K and other SEC filings.
TRIUMPH GROUP, INC. Q3’17 UPDATE // 3
INTRODUCTION
Improving margins YOY in 2 of 4
business units
Improved execution and
operational performance
Improved cash performance
Increased competitive wins
Exceeding FY17 savings goals
Net sales $845M
Operating income $55M
Net income $29M
EPS $0.59
Adjusted EPS $1.01
Free cash use $37M
Reaffirming revenue and EPS
guidance, and updating cash
guidance
FY17 Q3 Operational &
Financial Summary Highlights
Q3 Builds on Q2 Success
P
P
P
P
P
TRIUMPH GROUP, INC. Q3’17 UPDATE // 4
TRANSFORMATION PROGRESS
Progress Against Plan
• Five facility consolidations underway
• Reductions in force ongoing
• New Senior Leadership Team in place
• Upgrading Operating Company leaders
• Cash Conversion focus improved free cash
use from $49M in Q2 to $37M in Q3
• Supply Chain Initiatives benefiting new bids
• Divesting Triumph Air Repair and APU
• Lean deployment accelerating
• Planning for FY18 savings underway
Transformation on track to exceed expected results
Realized Forecast Target
FY 17 In-Year CRI Savings (in Millions)
70
60
50
40
30
20
10
0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
On Track to
Exceed FY17
savings target
TRIUMPH GROUP, INC. Q3’17 UPDATE // 5
BUSINESS UNIT HIGHLIGHTS
Integrated Systems Product Support
• 29% of TGI revenue – generates 57% of OI *
• 20% operating margin in Q3
• Broad platform participation
• Well positioned on ramping aircraft programs
• Engaged on new start programs
• Targeting “own” aftermarket
• Benefiting from aircraft refreshes (e.g. FADECs)
• Winning dual-source opportunities/takeaways
• Player in aircraft “electrification”
• TGI investment priority
Integrated Systems and Product Support Driving Shareholder Value
* YTD figures, OI excludes corporate costs
• 10% of TGI revenue – generates 17% of OI *
• 17% operating margin in Q3
• 6% revenue CAGR over the last three years
• Strong customer relationships
• Winning new MRO work
• Expanding customer base
• Partnering with OEMs on sustainment LTAs
• Partnering with leading distribution companies
• Supporting out of production and new fleets
• Piloting new business models
TRIUMPH GROUP, INC. Q3’17 UPDATE // 6
BUSINESS UNIT HIGHLIGHTS
Restructuring and Driving Operational Excellence
Precision Components Aerospace Structures
• 25% of TGI revenue – generates 3% of OI *
• 1% operating margin in Q3 (6% excluding NR)
• Impacted by restructuring and forward loss
• A350 Cabin Brackets and B767 Landing Gear
“Returned to Green”
• Bidding consolidation savings into new bids
• Highest new business win rate of 4 BUs
• Dual-sourced on F-35 components
• 2016 Partner of the Year from Mitsubishi Heavy
Industries at Interiors Business
• 36% of TGI revenue – generates 23% of OI *
• 8% operating margin in Q3
• Customer relationships improving
• B747 and B767 recovered to OTD
• Global Hawk/Triton Program on Track
• E2 and Global 7000 transitioning to production
• G650 deliveries increasing
• 500th G550 wing delivered
• Bidding new starts
• Bombardier claim litigation initiated
* YTD figures, OI excludes corporate costs
TRIUMPH GROUP, INC. Q3’17 UPDATE // 7
DRIVING ORGANIC GROWTH
Q3 $350M Won*
Integrated Systems:
21%
Product Support:
30%
Precision
Components:
49%
YTD $710M Won*
Integrated Systems:
25%
Product Support:
26%
Precision
Components:
34%
Aerospace Structures:
14%
* Excludes contract continuations/extensions awarded in G650, Hale, C-17 and others
$16.5B PIPELINE
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
$
(M
illi
on
s)
OPPORTUNITY PURSUIT PROPOSAL CUST EVAL BEST & FINAL
• Strong pipeline with large % in final
customer review
• Increasing win rate
◦ Q3 wins ~ Q1 & Q2 combined
• Competitive wins YTD equivalent to 3%
net sales growth
Highlights
COMPETITIVE WINS
TRIUMPH GROUP, INC. Q3’17 UPDATE // 8
($ in thousands) FY2017 Q3 FY2016 Q3 Variance %
Net Sales $ 844,863 $ 913,866 (8)%
Operating Income (Loss) 55,166 (126,250) 144 %
Operating Margin 7% (14)%
Adjusted Operating Income 83,648 115,350
Adjusted Operating Margin 10% 13 %
Adjusted EBITDA 84,641 121,953 (31)%
Adjusted EBITDA Margin 10% 14 %
CONSOLIDATED RESULTS
• Net sales decrease due to:
◦ Rate reductions on 747-8, G450/550, C-17
◦ Partially offset by increased production on 767/Tanker and stronger sales in Product
Support
• Adjusted operating income excludes:
◦ $14.1M of restructuring costs
◦ $14.4M loss on assets held for sale
TRIUMPH GROUP, INC. Q3’17 UPDATE // 9
EARNINGS PER SHARE
Quarter Ended
(Shares in thousands) December 31,
2016
December 31,
2015
Earnings per share (GAAP - Diluted) $ 0.59 $ (1.80)
Adjustments to earnings per share:
Loss on assets held for sale 0.21 —
Tradename impairment — 3.02
Legal settlements — 0.17
Restructuring costs (non-cash) 0.05 —
Restructuring costs (cash) 0.16 —
Adjusted earnings per share (Non-GAAP - Diluted) $ 1.01 $ 1.39
Weighted-average shares outstanding (diluted) 49,440 49,228
TRIUMPH GROUP, INC. Q3’17 UPDATE // 10
INTEGRATED SYSTEMS
• Increased EBITDA margin driven by Cost Reduction Initiatives
• Net sales decrease due to:
• $5.7 million decline from unfavorable currency change in GBP,
• $4.5 million decline from Q2 divestiture, partially offset by $1.2 million
increase from the October 2015 acquisition of Fairchild Controls
• Continued softness in rotorcraft market (both commercial and military)
• Selected by Raytheon to provide U.S. Navy’s Next Generation
Jammer Pod Servo Control System.
• Received the “Excellence in the Use of Technology” Award for
Isle of Man facility
($ in thousands) FY2017 Q3 FY2016 Q3 Variance
Net Sales $ 256,080 $ 271,849 (6)%
Operating Income 51,596 52,321 (1)%
Operating Margin 20% 19%
Adjusted EBITDA 53,734 53,176 1 %
Adjusted EBITDA Margin 22% 20%
Integrated Systems will provide Servo Control System
for U.S. Navy’s Next Generation Jammer Increment 1
external jamming pod.
(Photo from Director Operational Test and Evaluation, FY2016 Annual Report)
TRIUMPH GROUP, INC. Q3’17 UPDATE // 11
AEROSPACE STRUCTURES
• Net sales decrease due to production rate
reductions on 747-8, G450/550 and C-17, partially
offset by the increase in 767/ Tanker
• $2.6M restructuring in Q3 in operating income
• Improved execution resulting in net favorable EAC
adjustments of $2.1M
• Negotiating key contract extensions
($ in thousands) FY2017 Q3 FY2016 Q3 Variance
Net Sales $ 304,235 $ 346,639 (12)%
Operating Income (Loss) 23,867 (210,938) (111)%
Operating Margin 8% (61)%
Adjusted Operating Income 23,867 28,762 (17)%
Adjusted Operating Margin 8% 8 %
Adjusted EBITDA 20,704 20,997 (1)%
Adjusted EBITDA Margin 7% 7 %
G600 first flight, Dec. 2016. Triumph Aerospace
Structures provides composite skins for the horizontal
tail on the Gulfstream G600.
(Photo: Gulfstream Aerospace Corp.)
TRIUMPH GROUP, INC. Q3’17 UPDATE // 12
PRECISION COMPONENTS
• TTM book to bill 1.2 : 1
• Restructuring of $4.8M and related inefficiencies
impacted Q3 margins
• $5M forward loss on an engine program in Q3
• New wins on Rolls Royce for Trent XWB Engine
Components & Cessna Citation Longitude
• Facility consolidations tracking close to plan
($ in thousands) FY2017 Q3 FY2016 Q3 Variance
Net Sales $ 226,294 $ 250,284 (10)%
Operating Income 2,942 24,106 (88)%
Operating Margin 1% 10%
Adjusted EBITDA 16,468 34,723 (53)%
Adjusted EBITDA Margin 7% 14%
Triumph Precision Components - Toronto facility
awarded $53 million agreement from Rolls Royce to
supply thrust links for the Trent 900/1000 engines.
TRIUMPH GROUP, INC. Q3’17 UPDATE // 13
PRODUCT SUPPORT FY17
• Net sales increase due primarily to key contract
wins with regional jet and commercial operators
for components and accessories
• Announced pending sale of APU/Engines
businesses
• Strong margins supported by increased organic
sales and cost reduction initiatives
• Facility consolidations and benefits ahead of
schedule
($ in thousands) FY2017 Q3 FY2016 Q3 Variance
Net Sales $ 87,292 $ 78,127 12%
Operating Income 14,662 12,402 18%
Operating Margin 17% 16%
Adjusted EBITDA 16,956 16,764 1%
Adjusted EBITDA Margin 19% 21%
Triumph Product Support to partner with L3 Technologies
for the KC-10 thrust reverser aerial refueling boom.
TRIUMPH GROUP, INC. Q3’17 UPDATE // 14
CASH
Operating Activities
($ in millions)
FY17 Q1 FY17 Q2 FY17 Q3 YTD 2017
Cash used in operations $ (84.0) $ (47.2) $ (41.4) $ (172.7)
Capital expenditures (12.7) (11.2) (9.2) (33.1)
Sale of assets 0.9 9.1 13.1 23.2
Free cash use $ (95.8) $ (49.4) $ (37.4) $ (182.6)
• Development programs used $48M
• G650/G280 used $22M
• Restructuring used $11M
• Customer advances provided $12M
Q3 Cash Drivers
Continued improvement in cash use
TRIUMPH GROUP, INC. Q3’17 UPDATE // 15
CAPITALIZATION, LEVERAGE & LIQUIDITY
($ in millions)
12/31/2016
Cash $ (35)
Revolver & Term Loan 773
Securitized Debt 215
2013 Senior Notes Due 2021 375
2014 Senior Notes Due 2022 300
Other Debt 8
Net Debt $ 1,636
Shareholders’ Equity 981
Total Book Capitalization $ 2,616
Net Debt-to-Capitalization 63%
Total Leverage Ratio 4.3x
Senior Secured Leverage Ratio 2.6x
Cash and Availability $ 284
Compliant with all financial covenants
TRIUMPH GROUP, INC. Q3’17 UPDATE // 16
FY 2017 GUIDANCE
Revenue $3.5 - $3.6B
EPS $3.15 - $3.45/share
($190 - $210M)
Free Cash Flow ($100 - $120M)
Capital Expenditures $40 - $60M*
Effective Tax Rate ~ 18%**
~ 7%***
Cash Tax Rate ~ 5%
* Net of leasing as reported
** Potential opportunity to lower through release of valuation allowance and use of deferred tax benefits from Newport News sale and risk
of increasing if projected pre-tax income not achieved; cash taxes would not be effected
*** Reflects expected tax payments in fiscal 2017
TRIUMPH GROUP, INC. Q3’17 UPDATE // 17
• Stabilizing operational and financial performance
• On track to exceed cost savings targets
• Pipeline and win rate improving
• Driving shareholder value
CONCLUDING REMARKS
MQ-4C Triton Unmanned Aircraft System.
TRIUMPH GROUP, INC. Q3’17 UPDATE // 18
Q & A
TRIUMPH GROUP, INC. Q3’17 UPDATE // 19
APPENDIX
TRIUMPH GROUP, INC. Q3’17 UPDATE // 20
TOP PROGRAMS
Integrated Systems Aerospace Structures Precision Components
1. Airbus A320, A321 1. Gulfstream 1. Boeing 777
2. Boeing 737 2. Boeing 767, Tanker 2. Boeing 787
3. Boeing 787 3. Airbus A330, A340 3. Airbus A350
4. Boeing V-22 4. Boeing 747 4. Boeing 737
5. Sikorsky UH60 5. Bombardier Global 5. Boeing 767, Tanker
6. Boeing CH-47 6. Boeing 777 6. Boeing V-22
7. Lockheed Martin C-130 7. NG Global Hawk 7. Boeing F-15
8. Airbus A380 8. Boeing V-22 8. Sikorsky UH60
9. Boeing 777 9. Bell Helicopter 525 9. Bell Helicopter AH1
10. Boeing AH-64 10. Boeing C-17 10. Airbus A320, A321
Represents 56% of Integrated
Systems backlog
Represents 97% of
Aerospace Structures
backlog
Represents 76% of Precision
Components backlog
TRIUMPH GROUP, INC. Q3’17 UPDATE // 21
PENSION/OPEB ANALYSIS
Pension/OPEB Analysis Fiscal Year 2016 Fiscal Year 2017
Pension Expense (Income) ≈ ($57) million ≈ ($67) million
Cash Pension Contribution ≈ $0 ≈ $0
OPEB Expense (Income) ≈ ($8) million ≈ ($14) million
Cash OPEB Contribution ≈ $21 million ≈ $16 million
TRIUMPH GROUP, INC. Q3’17 UPDATE // 22
RESTRUCTURING COSTS BY SEGMENT
For the Three Months Ended December 31, 2016
($ in thousands)
Integrated
Systems
Aerospace
Structures
Precision
Components
Product
Support Corporate Total
Termination benefits $ — $ — $ 494 $ 57 $ — $ 551
Facility closure and other exit costs — 297 1,209 180 — 1,686
Other 49 2,296 133 121 6,231 8,830
49 2,593 1,836 358 6,231 11,067
Depreciation and Amortization 46 — 3,006 13 — 3,065
$ 95 $ 2,593 $ 4,842 $ 371 $ 6,231 $ 14,132
For the Nine Months Ended December 31, 2016
($ in thousands)
Integrated
Systems
Aerospace
Structures
Precision
Components
Product
Support Corporate Total
Termination benefits $ 286 $ 250 $ 966 $ 147 $ — $ 1,649
Facility closure and other exit costs — 297 1,456 215 — 1,968
Other 49 6,307 2,185 191 15,831 24,563
335 6,854 4,607 553 15,831 28,180
Depreciation and Amortization 139 — 9,854 303 — 10,296
$ 474 $ 6,854 $ 14,461 $ 856 $ 15,831 $ 38,476
TRIUMPH GROUP, INC. Q3’17 UPDATE // 23
SALES BY MARKET
($ in millions) Q3 FY 2017 Q3 FY 2016
Sales % of Total Sales % of Total $ Change % Change
Commercial $461 55% $499 55% $(38) (8)%
Military 202 24% 214 23% (12) (6)%
Business Jets 156 18% 169 19% (13) (8)%
Regional Jets 18 2% 18 2% — — %
Non-Aviation 8 1% 13 1% (5) (38)%
Total Sales $845 100% $913 100% $(68) (7)%
OEM 81% 82%
Aftermarket 18% 16%
Other 1% 2%
Total 100% 100%
TRIUMPH GROUP, INC. Q3’17 UPDATE // 24
Organic Sales
($ in millions)
FY2017 Q3 FY2016 Q3 Change
Integrated Systems $246 $258 (5)%
Aerospace Structures 304 347 (12)%
Precision Components 226 250 (10)%
Product Support 87 78 12 %
Total Organic Sales * $863 $933 (7)%
*Includes Intercompany sales
Export Sales
($ in millions)
FY2017 Q3 FY2016 Q3 Change
Export Sales $198 $194 2%
SALES ANALYSIS
TRIUMPH GROUP, INC. Q3’17 UPDATE // 25
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures 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 measures that we disclose is Adjusted EBITDA, which is our net income before interest, income taxes, amortization of acquired contract liabilities, curtailments,
settlements and early retirement incentives, legal settlements, deprecation and amortization. We disclose Adjusted EBITDA on a consolidated and an operating segment basis in
our earnings releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we use may not be comparable to similarly titled measures
reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors more meaningfully evaluate and compare
our future results of operations to our previously reported results of operations.
We view Adjusted EBITDA as an operating performance measure and as such we believe that the GAAP financial measure most directly comparable to it is net income. In
calculating Adjusted EBITDA, we exclude from net income the financial items that we believe should be separately identified to provide additional analysis of the financial
components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-
GAAP financial measures as a result of these exclusions. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as a
measure of liquidity, as an alternative to net income (loss), income from continuing operations, or as an indicator of any other measure of performance derived in accordance with
GAAP. Investors and potential investors in our securities should not rely on Adjusted EBITDA as a substitute for any GAAP financial measure, including net income (loss) or
income from continuing operations. In addition, we urge investors and potential investors in our securities to carefully review the reconciliation of Adjusted EBITDA to net
income set forth below, in our earnings releases and in other filings with the SEC and to carefully review GAAP financial information included as part of our Quarterly Reports
on Form 10-Q and our Annual Reports on Form 10-K that are filed with the SEC, as well as our quarterly earnings releases, and compare the GAAP financial information with
our Adjusted EBITDA.
Adjusted EBITDA is used by management to internally measure our operating and management performance and by investors as a supplemental financial measure to evaluate the
performance of our business that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an
understanding of the factors and trends affecting our business. We have spent more than 20 years expanding our product and service capabilities partially through acquisitions of
complementary businesses. Due to the expansion of our operations, which included acquisitions, our net income has included significant charges for depreciation and
amortization. Adjusted EBITDA excludes these charges and provides meaningful information about the operating performance of our business, apart from charges for
depreciation and amortization. We believe the disclosure of Adjusted EBITDA helps investors meaningfully evaluate and compare our performance from quarter to quarter and
from year to year. We also believe Adjusted EBITDA is a measure of our ongoing operating performance because the isolation of non-cash income and expenses, such as
amortization of acquired contract liabilities, depreciation and amortization, and non-operating items, such as interest and income taxes, provides additional information about our
cost structure, and, overtime, helps track our operating progress. In addition, investors, securities analysts and others have regularly relied on Adjusted EBITDA to provide a
financial measure by which to compare our operating performance against that of other companies in our industry.
Set forth below are descriptions of the financial items that have been excluded from our net income to calculate Adjusted EBITDA and the material limitations associated with
using this non-GAAP financial measure as compared to net income:
• 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 gains or losses
necessarily reflect the current and ongoing cash earnings related to our operations.
• Curtailments, settlements and early retirement incentives may be useful to investors to consider because it represents the current period impact of the change in defined
benefit obligation due to the reduction in future service costs. We do not believe these charges (gains) necessarily reflect the current and ongoing cash earnings related to our
operations.
• Amortization of acquired contract liabilities may be useful for investors to consider because it represents the non-cash earnings on the fair value of below market contracts
acquired through acquisitions. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations.
• Amortization expenses (including impairments) may be useful for investors to consider because it represents the estimated attrition of our acquired customer base and the
diminishing value of product rights and licenses. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost
structure.
• Deprecation 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 changes necessarily reflect the current and ongoing cash charges related to our operating cost structure.
-More-
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 26
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
• 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.
The following table shows our Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):
Three Months Ended December 31, Nine Months Ended December 31,
2016 2015 2016 2015
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA):
Net Income (Loss) $ 29,332 $ (88,649) $ 83,872 $ 35,695
Add-back:
Income Tax Expense 6,136 (53,393) 32,786 6,429
Interest Expense and Other 19,698 15,792 55,721 49,539
Curtailment Charge — — — 2,863
Loss on divestiture and assets held for sale 14,350 — 19,124 —
Legal settlement charges — 12,400 — 12,400
Amortization of Acquired Contract Liabilities (29,206) (34,425) (89,031) (99,928)
Depreciation and Amortization 44,331 270,228 135,080 356,337
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 84,641 $ 121,953 $ 237,552 $ 363,335
Net Sales # $ 844,863 $ 913,866 $ 2,612,885 $ 2,828,278
Adjusted EBITDA Margin # 10.4 % 13.9 % 9.4 % 13.3 %
# Net Sales includes Amortization of Acquired Contract Liabilities. Since Adjusted EBITDA excludes Amortization of Acquired
Contract Liabilities, we've also excluded it from Net Sales in arriving at Adjusted EBITDA margin throughout this document.
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 27
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
Adjusted Earnings before Interest, Taxes, For the Three Months Ended December 31, 2016
Depreciation and Amortization (EBITDA): Segment Data
Total Integrated Systems
Aerospace
Structures
Precision
Components Product Support
Corporate/
Eliminations
Net Income $ 29,332
Add-back:
Income Tax Expense 6,136
Interest Expense and Other 19,698
Operating Income (Loss) $ 55,166 $ 51,596 $ 23,867 $ 2,942 $ 14,662 $ (37,901)
Loss on assets held for sale 14,350 — — — — 14,350
Amortization of Acquired Contract Liabilities (29,206) (7,628) (21,105) (473) — —
Depreciation and Amortization 44,331 9,766 17,942 13,999 2,294 330
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 84,641 $ 53,734 $ 20,704 $ 16,468 $ 16,956 $ (23,221)
Net Sales $ 844,863 $ 256,080 $ 304,235 $ 226,294 $ 87,292 $ (29,038)
Adjusted EBITDA Margin 10.4% 21.6% 7.3% 7.3% 19.4% n/a
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 28
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
Adjusted Earnings before Interest, Taxes, For the Nine Months Ended December 31, 2016
Depreciation and Amortization (EBITDA): Segment Data
Total Integrated Systems
Aerospace
Structures
Precision
Components Product Support
Corporate/
Eliminations
Net Income $ 83,872
Add-back:
Income Tax Expense 32,786
Interest Expense and Other 55,721
Operating Income (Loss) $ 172,379 $ 145,379 $ 57,898 $ 7,223 $ 42,986 $ (81,107)
Loss on divestiture and assets held for sale 19,124 — — — — 19,124
Amortization of Acquired Contract Liabilities (89,031) (27,101) (60,190) (1,740) — —
Depreciation and Amortization 135,080 30,228 54,289 42,344 7,230 989
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 237,552 $ 148,506 $ 51,997 $ 47,827 $ 50,216 $ (60,994)
Net Sales $ 2,612,885 $ 758,803 $ 956,114 $ 740,354 $ 257,317 $ (99,703)
Adjusted EBITDA Margin 9.4% 20.3% 5.8% 6.5% 19.5% n/a
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 29
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
Adjusted Earnings before Interest, Taxes, For the Three Months Ended December 31, 2015
Depreciation and Amortization (EBITDA): Segment Data
Total Integrated Systems
Aerospace
Structures
Precision
Components Product Support
Corporate/
Eliminations
Net Loss $ (88,649)
Add-back:
Income Tax Expense (53,393)
Interest Expense and Other 15,792
Operating (Loss) Income $ (126,250) $ 52,321 $ (210,938) $ 24,106 $ 12,402 $ (4,141)
Legal settlement charges 12,400 — 10,500 — 1,900 —
Amortization of Acquired Contract Liabilities (34,425) (9,804) (23,831) (790) — —
Depreciation and Amortization 270,228 10,659 245,266 11,407 2,462 434
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 121,953 $ 53,176 $ 20,997 $ 34,723 $ 16,764 $ (3,707)
Net Sales $ 913,866 $ 271,849 $ 346,639 $ 250,284 $ 78,127 $ (33,033)
Adjusted EBITDA Margin 13.9% 20.3% 6.5% 13.9% 21.5% n/a
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 30
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
Adjusted Earnings before Interest, Taxes, For the Nine Months Ended December 31, 2015
Depreciation and Amortization (EBITDA): Segment Data
Total Integrated Systems
Aerospace
Structures
Precision
Components Product Support
Corporate/
Eliminations
Net Income $ 35,695
Add-back:
Income Tax Expense 6,429
Interest Expense and Other 49,539
Operating Income (Loss) $ 91,663 $ 153,978 $ (132,458) $ 74,468 $ 31,514 $ (35,839)
Curtailment charge 2,863 — — — — 2,863
Legal settlement charges 12,400 — 10,500 — 1,900 —
Amortization of Acquired Contract Liabilities (99,928) (30,316) (67,039) (2,573) — —
Depreciation and Amortization 356,337 31,316 276,845 39,600 7,352 1,224
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 363,335 $ 154,978 $ 87,848 $ 111,495 $ 40,766 $ (31,752)
Net Sales $ 2,828,278 $ 791,901 $ 1,127,230 $ 781,250 $ 226,649 $ (98,752)
Adjusted EBITDA Margin 13.3% 20.3% 8.3% 14.3% 18.0% n/a
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 31
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures 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 has been provided for consistency and comparability. These measures should not be considered in isolation or as
alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted
share presented in accordance with GAAP. The following 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, 2016
Pre-Tax After-Tax Diluted EPS
Income from Continuing Operations - GAAP $ 35,468 $ 29,332 $ 0.59
Transformation related costs:
Loss on assets held for sale 14,350 10,476 0.21
Restructuring costs (non-cash) 3,065 2,237 0.05
Restructuring costs (cash) 11,067 8,079 0.16
Adjusted Income from Continuing Operations - Non-GAAP $ 63,950 $ 50,124 $ 1.01
Nine Months Ended
December 31, 2016
Pre-Tax After-Tax Diluted EPS
Income from Continuing Operations - GAAP $ 116,658 $ 83,872 $ 1.70
Adjustments:
Triumph Precision Components - Strike related costs 15,701 11,462 0.23
Triumph Precision Components - Inventory write-down 6,089 4,445 0.09
Triumph Aerospace Structures - UAS program 14,200 10,366 0.21
Loss on divestiture and assets held for sale 19,124 15,250 0.31
Restructuring costs (non-cash) 10,296 7,516 0.15
Restructuring costs (cash) 28,180 20,571 0.42
Adjusted Income from Continuing Operations - Non-GAAP $ 210,248 $ 153,482 $ 3.11
NON-GAAP DISCLOSURE
TRIUMPH GROUP, INC. Q3’17 UPDATE // 32
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures 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 has been provided for consistency and comparability. These measures should not be considered in isolation or as
alternatives to income from continuing operations before income taxes, income from continuing operations and income from continuing operations per diluted
share presented in accordance with GAAP. The following 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, 2015
Pre-Tax After-Tax Diluted EPS
Loss from Continuing Operations - GAAP $ (142,042) $ (88,649) $ (1.80)
Adjustments:
Legal settlement charges 12,400 8,531 0.17
Tradename impairment 229,200 148,751 3.02
Adjusted Income from Continuing Operations - Non-GAAP $ 99,558 $ 68,633 $ 1.39
Nine Months Ended
December 31, 2015
Pre-Tax After-Tax Diluted EPS
Income from Continuing Operations - GAAP $ 42,124 $ 35,695 $ 0.72
Adjustments:
Legal settlement charges 12,400 8,531 0.17
Tradename impairment 229,200 148,751 3.02
Facility consolidation costs 5,360 3,688 0.07
Curtailment charge 2,863 1,970 0.04
Adjusted Income from Continuing Operations - Non-GAAP $ 291,947 $ 198,635 $ 4.03 *
* Difference due to rounding.
NON-GAAP DISCLOSURE
The following table reconciles our Operating income to Adjusted Operating income as noted above. Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Operating Income (Loss) - GAAP $ 55,166 $ (126,250)
Adjustments:
Loss on assets held for sale 14,350 —
Tradename impairment — 229,200
Legal settlement charges — 12,400
Restructuring costs (non-cash) 3,065 —
Restructuring costs (cash) 11,067 —
Adjusted Operating Income - Non-GAAP $ 83,648 $ 115,350
TRIUMPH GROUP, INC. Q3’17 UPDATE // 33
NON-GAAP DISCLOSURE
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures (continued)
Cash provided by operations has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in
planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a
measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following
table reconciles cash provided by operations to free cash flow available for debt reduction.
We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:
Three Months Ended Nine Months Ended
December 31, December 31,
2016 2016
Cash flow from operations $ (41,415) $ (172,651)
Less:
Capital expenditures (9,157) (33,123)
Sale of assets 13,141 23,185
Free cash flow available for debt reduction, acquisitions and share repurchases $ (37,431) $ (182,589)
December 31, March 31,
2016 2016
Calculation of Net Debt
Current portion $ 187,731 $ 42,441
Long-term debt 1,470,649 1,374,879
Total debt 1,658,380 1,417,320
Plus: Deferred debt issuance costs 12,493 8,971
Less: Cash (35,461) (20,984)
Net debt $ 1,635,412 $ 1,405,307
Calculation of Capital
Net debt $ 1,635,412 $ 1,405,307
Stockholders' equity 980,816 934,944
Total capital $ 2,616,228 $ 2,340,251
Percent of net debt to capital 62.5% 60.0%