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| 8-K - 8-K - DATED 7.26.2017 - TRIUMPH GROUP INC | form8-kq1fy2018earningsrel.htm |
| EX-99.1 - EXHIBIT 99.1 - EARNINGS RELEASE DATED 7.25.2017 - TRIUMPH GROUP INC | exhibit991q1fy2018.htm |
Daniel J. Crowley, President and Chief Executive Officer
James F. McCabe Jr., Senior Vice President and Chief Financial Officer
First Quarter FY’18 Earnings Conference Call
July 26, 2017
2Triumph Group — First Quarter FY'18
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”,
“project”, “may”, “will”, “should”, “could”, or similar words suggesting future outcomes or outlooks. These forward-looking statements
include, but are not limited to, statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions,
aerospace market conditions, aircraft production rates, financial and operational performance, revenue and earnings growth and
profitability and earnings results. These statements are based on the current projections, expectations and beliefs of Triumph’s
management. These forward looking statements involve known and unknown risks, uncertainties and other factors which could cause
actual results to differ materially from any expected future results, performance or achievements, including, but not limited to, competitive
and cyclical factors relating to the aerospace industry, dependence of some of Triumph’s business on key customers, requirements of
capital, uncertainties relating to the integration of acquired businesses, general economic conditions affecting Triumph’s business
segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or skilled personnel,
changes in governmental regulation and oversight and international hostilities and terrorism. Further information regarding the important
factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking statements can
be found in Triumph’s reports filed with the SEC, including in the risk factors described in Triumph’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2017.
3Triumph Group — First Quarter FY'18
Overview
Stabilized Foundation:
• Transformation on track
• Settlements enhance backlog profitability
Delivering on Commitments:
• Improved operational performance
• Strengthened customer relationships
Driving Organic Growth:
• Backlog up over 5% sequentially and YOY
• TTM book to bill exceeding 1:1
FY’18 Q1
Financial Summary
FY’18
Guidance
Net Sales $782M $3.1B - $3.2B
Adjusted EPS * $0.24 $2.25 - $2.75
Free Cash Use ^ ($111M) ($450M) - ($500M)
*excludes restructuring costs of $18M Q1 FY18 and $54M full year
^includes $275M reduction in customer advances full year and $200M of production inventory build
4Triumph Group — First Quarter FY'18
Transformation Progress
Fixing loss making and negative cash programs
• Global 7000 dispute resolved
• Omnibus settlement reached in Q1 FY 18 with Gulfstream
◦ Implementation planned for Q2 FY18
• Implemented Q4 FY17 Boeing Settlement
◦ Expanded relationship with Boeing based on FY17 MOA
• Operating margins and cash to improve FY 19 and beyond as
accelerating deliveries occur
• Increased incentives for good performance
Contract settlements across five OEMs brought ~$600M in
Cash and $1B in contract value increases
Cost Reductions on Track
5Triumph Group — First Quarter FY'18
Driving Organic Growth
Competitive Wins
A320 Key Components "Takeaway" UTAS TIS
F-35 Key Components "Takeaway" LMT TIS
F-135 Engine Ducts P&W TAS
Engine Machined Details GE TPC
CH-47 Frame Details & Assemblies L-3 TPC
A320neo Cowl Actuators Safran TIS
Follow-on Business
V-22 Multi-Year 3 BA/Bell TAS
737 MAX/777X Systems BA TIS
Backlog Increase of 5.4% in Q1 to $4.2B
6Triumph Group — First Quarter FY'18
FY '19 - '21 Drivers
ORDERS
• Follow on orders on backlog programs
• Award decisions on key military programs
• Expanded F-35, A320neo, and 737 orders tied to rate
• Sustainment LTA awards
CASH
• Greatly reduced customer advance repayments
• Development spending returns to sustaining levels
• Additional customer advances
• Potential divestitures
SALES
• Increasing Global 7000, E2, GAC deliveries
• 90% of growth from existing programs
• End of our contractual 747-8 deliveries
• Global Hawk and A320neo rate increases
OPERATING INCOME
• Increasing production deliveries
• Triumph Operating System efficiencies
• Reduced restructuring charges YOY
• Reduced development spending YOY
FY '17-'18 create the foundation for future success
7Triumph Group — First Quarter FY'18
Consolidated Quarterly Results
• Net sales decrease due to:
◦ C-17 & G450 program
completions and rate reductions
and price step downs on 747-8,
777 and G550
◦ Partially offset by increased
production on A330 & Global
Hawk/Triton
• Adjusted operating income excludes:
◦ $18M restructuring costs
($ in millions) FY’18 Q1 FY’17 Q1 Variance %
Net Sales $782 $893 (12)%
Operating Income 18 47 (62)%
Operating Margin 2% 5%
Adjusted Operating
Income
37 93 (60)%
Adjusted Operating Margin 5% 10%
Revenue on track, Earnings ramp into 2H FY'18
8Triumph Group — First Quarter FY'18
Integrated Systems
Highlights
• Awarded additional A320neo and F-35 content by
displacing incumbents
• Broad platform participation
• Well positioned on ramping aircraft programs
• TGI investment priority
• YTD Book to bill of 1.2:1
Year Over Year Comparison
Financial
• Net sales decrease due to:
◦ FY17 divestiture ($5M)
◦ Rate reductions on 777 and A380 and timing of
deliveries on other key commercial and military
programs
• Operating margin reflected favorable resolution of open
assertions with key customers
Triumph Integrated Systems EVP, Tom Holzthum, signs an agreement with Arnaud DeBussac, VP of
Procurement, Safran Nacelles for TRCOS actuators for nacelles built for the A320neo powered by CFM
International LEAP-1A engine offering at the Paris Air Show.
9Triumph Group — First Quarter FY'18
Product Support
Highlights
• Awarded three-year contract extension for Boeing
ground service equipment support
• Partnering with OEMs on sustainment
• Triumph Total Life Cycle (TLC) Solutions
introduced at MRO Americas April 2017
Year Over Year Comparison
Financial
• Organic sales decreased 6% due primarily to customer
deferred maintenance
◦ FY17 divestiture ($14M)
• Operating margin impacted by restructuring and
changes in sales mix
Triumph Product Support is contracted to provide line
maintenance support to Airbus for the A330 MRTT.
10Triumph Group — First Quarter FY'18
Precision Components
Highlights
• New leadership appointed
• Delivered first shipments on nuclear program
• Two site closures accomplished ahead of schedule
• Increased work share for F-35 components
Year Over Year Comparison
Financial
• Net sales decrease due to decreased production rate
and pricing on 777 as well as pricing on 787
• Restructuring of $4M and related inefficiencies impacted
Q1 margins
First F-35 Engine Mount delivers out of Complex Machining
from Wichita to East Texas for assembly.
11Triumph Group — First Quarter FY'18
Aerospace Structures
Highlights
• Continued settlement negotiations with OEM
customers on key contracts
• Bombardier program executing to achieve schedule
• V-22 follow-on awarded to Red Oak, including
additional statement of work
• Achieved Silver Quality Rating as Boeing Enterprise
Supplier
• TTM Book to Bill 1.1:1
Year Over Year Comparison
Financial
• Net sales and operating margin decreased as expected due
to completion of production on strong margin programs (C-
17 & G450) and rate reductions on 747-8 and G550
• Negotiated improvements in business cases of key
contracts to be realized over life of program during
production phases
Global 7000 FTVs have passed 500 flight test hours and there are
currently four aircraft on the production line.
12
Free Cash Flow Walk - FY'18 Q1
Cash Drivers
• Development programs used $32M
• Restructuring used $18M
• Net working capital usage $79M
◦ Reduction of customer advances
◦ Build of production inventory
◦ Customer settlements
Consolidated ($ in millions) FY’18 Q1
Net Loss $ (2)
Non-cash items:
Depreciation & Amortization 39
Interest Expense & Other 21
Amortization of Acquired Contracts (29)
Pension Income (15)
OPEB Income (3)
Income Tax Benefit (1)
Cash uses:
Working Capital Usage (79)
Interest Payments (24)
Capital Expenditures (12)
OPEB Payments (3)
Tax Payments (3)
Free Cash Use $ (111)
13Triumph Group — First Quarter FY'18
Capitalization, Leverage & Liquidity
Senior Secured Leverage Ratio 2.15x
Cash and Availability ~ $600M
($ in millions) FY’18 Q1
Cash $ (37)
Revolver & Term Loan 451
Securitized Debt 159
2013 Senior Notes Due 2021 375
2014 Senior Notes Due 2022 300
Other Debt 8
Net Debt $ 1,256
Low leverage, covenant compliant and adequate availability
14Triumph Group — First Quarter FY'18
FY'18 Guidance Pro forma Free Cash
FY’18
Guidance
Net Sales $3.1B - $3.2B
Adjusted EPS * $2.25 - $2.75
Free Cash Use ^ ($450M) - ($500M)
Effective Tax Rate ~ 6%
Capital Expenditures $80M - $90M
*excludes restructuring costs of $54M for FY'18
^ includes $275M reduction in customer advances full year and $200M of production inventory build
# includes proceeds from sales of business and cash from divested operations
FY'17 FY'18E
Free Cash $315M ($450M) - ($500M)
Q4 Advances ($324M) $275M
FY'17 Divestitures # ($79M) —
Production Build — $200M
Pro forma Free Cash ($88M) ($25M) - $25M
15Triumph Group — First Quarter FY'18
Concluding Remarks
• Transformation on plan and setting foundation for the future
• Created significant value through renegotiated contracts
• Growing backlog positions Triumph for sales growth in FY'19 after trough year in FY'18
• Continuing process of optimizing portfolio of businesses to strengthen margins and develop greater
financial flexibility
16Triumph Group — First Quarter FY'18
Our Vision
We aspire to be the premier design,
manufacturing and support company
whose comprehensive capabilities,
integrated processes and innovative
employees advance the safety and
prosperity of the world.
Our Mission
As One Team, we partner with our
customers to triumph over the
hardest aerospace, defense and
industrial challenges, enabling us to
deliver value to our shareholders.
Our Values
Integrity
Continuous Improvement
Teamwork
Innovation
Act with Velocity
17Triumph Group — First Quarter FY'18
Appendix
18
Top Programs
Integrated Systems Aerospace Structures Precision Components
Boeing 777
Boeing 787
Airbus A350
Boeing 737
Boeing V-22
Boeing 767, Tanker
Cessna 680
NG Global Hawk
Boeing F-15
Bombardier C Series
Represents 74% of
Precision Components backlog
Gulfstream
Boeing 767, Tanker
Bombardier Global
Airbus A330, A340
Boeing 747
NG Global Hawk
Boeing 777
Boeing V-22
Embraer E2
Bell Helicopter 525
Represents 97% of
Aerospace Structures backlog
Boeing 737
Airbus A320, A321
Boeing 787
Boeing V-22
Boeing CH-47
Lockheed Martin C-130
Sikorsky UH60
Boeing AH-64
Boeing 777
Airbus A380
Represents 58% of
Integrated Systems backlog
19
Supplemental Data
Pension/OPEB Analysis ($ in millions) FY’17 FY’18
Pension Expense (Income) ≈ ($67) ≈ ($60)
Cash Pension Contribution ≈ $2 ≈ $0
OPEB Expense (Income) ≈ ($14) ≈ ($11)
Cash OPEB Contribution ≈ $17 ≈ $16
Restructuring ($ in millions) Remaining Estimate FY’18 E FY’19 +
Transformation Related — Cash
Based Costs
$72 $52 $20
Transformation Related — Non-
Cash Based Costs
3 2 1
Total $75 $54 $21
20
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measures Disclosures
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
June 30, 2017
Pre-Tax After-Tax Diluted EPS
Loss from Continuing Operations - GAAP $ (2,609) $ (1,931) $ (0.04)
Transformation related costs:
Restructuring costs (non-cash) 860 636 0.01
Restructuring costs (cash) 17,500 12,950 0.26
Adjusted Income from Continuing Operations - Non-GAAP $ 15,751 $ 11,655 $ 0.24 *
* Difference due to rounding
Non-GAAP
Disclosure
Three Months Ended
June 30, 2016
Pre-Tax After-Tax Diluted EPS
Income from Continuing Operations - GAAP $ 28,600 $ 19,734 $ 0.40
Adjustments:
Triumph Precision Components - Strike related costs 15,701 10,834 0.22
Triumph Precision Components - Inventory write-down 6,089 4,201 0.09
Triumph Aerospace Structures - UAS program 14,200 9,798 0.20
Transformation related costs
Restructuring costs (non-cash) 3,491 2,409 0.05
Restructuring costs (cash) 6,651 4,589 0.09
Adjusted Income from Continuing Operations - Non-GAAP $ 74,732 $ 51,565 $ 1.04 *
* Difference due to rounding
21
(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
June 30,
2017 2016
Cash flow from operations $ (99,048) $ (84,035)
Less:
Capital expenditures (12,085) (12,723)
Free cash flow $ (111,133) $ (96,758)
June 30, March 31,
2017 2017
Calculation of Net Debt
Current portion $ 140,869 $ 160,630
Long-term debt 1,140,165 1,035,670
Total debt 1,281,034 1,196,300
Plus: Deferred debt issuance costs 12,710 11,752
Less: Cash (36,968) (69,633)
Net debt $ 1,256,776 $ 1,138,419
Calculation of Capital
Net debt $ 1,256,776 $ 1,138,419
Stockholders' equity 852,890 846,473
Total capital $ 2,109,666 $ 1,984,892
Percent of net debt to capital 59.6% 57.4%
Non-GAAP
Disclosure
