Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - FY 2018 Q3 WEBCAST - TRIUMPH GROUP INC | exhibit992triumphq3fy201.htm |
| 8-K - 8-K - DATED 2.1.2018 - TRIUMPH GROUP INC | form8-kq3fy2018earningsrel.htm |
Exhibit 99.1
NEWS RELEASE
Media Contact: Investor Relations Contact:
Michele Long Sheila Spagnolo
Phone (610) 251-1000 Phone (610) 251-1000
mmlong@triumphgroup.com sspagnolo@triumphgroup.com
TRIUMPH GROUP REPORTS THIRD QUARTER FISCAL 2018 RESULTS
Reaffirms Fiscal Year 2018 Revenue and EPS Guidance and Updates Cash Guidance
BERWYN, Pa. - February 1, 2018 - Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its third quarter of fiscal year 2018, which ended December 31, 2017.
Third Quarter Fiscal 2018 Highlights
• | Net sales were $775.2 million. |
• | Operating loss was ($119.7) million, reflecting an operating margin of (15%), and included $190.2 million non-cash goodwill impairment charge for Precision Components. On an adjusted basis, operating income was $62.0 million, reflecting an adjusted operating margin of 8%. |
• | Net loss was ($113.3) million, or ($2.29) per share, and included a $0.45 per diluted share provisional tax-related benefit due to the enactment of the Tax Cuts and Jobs Act of 2017. On an adjusted basis, net income was $37.7 million, or $0.76 per diluted share. |
• | Cash flow from operations was $100.8 million, and free cash flow was $91.6 million, which included an increase in customer advances of approximately $250 million. |
• | Management reaffirms net sales guidance of $3.1 to $3.2 billion and continues to expect organic sales growth in fiscal 2019. |
• | Management maintains guidance for adjusted earnings per diluted share of $2.25 to $2.75 and improves its free cash outlook to a use of $325 million to $375 million from $450 million to $500 million. |
“Triumph Group’s third quarter results demonstrate the progress on our transformation strategy to improve operational performance and strengthen customer relationships,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Net sales grew on a sequential basis, driven by Aerospace Structures and Integrated Systems. Precision Components and Product Support delivered sequential and year-over-year margin improvement, and Product Support continues to generate sustained strong profitability.”
Mr. Crowley continued, “During the third quarter we continued to realize the benefits of our efforts to generate organic growth as we posted a book-to-bill ratio in excess of one for the fourth consecutive quarter and increased backlog to $4.36 billion, up 6% sequentially and 10% year-over-year. Our strengthened business development team and capture strategies led to several key customer wins, and we expect to
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leverage our improved operational performance into new wins that will further strengthen and de-risk the
backlog. We continue to actively manage the portfolio and capitalize on the value creating combination of Precision Components and Aerospace Structures, as evidenced by the strengthening of our partnership with Boeing to support multiple 767 configurations. Fiscal 2018 is unfolding as we anticipated and with our cost reduction goals on track and enhanced financial flexibility, we believe our actions will enable Triumph to benefit from the favorable trends in our markets and generate enhanced value for shareholders.”
Third Quarter Fiscal Year 2018 Overview
After accounting for divestitures, sales for the third quarter of fiscal 2018 were down 3% organically from the comparable prior year period, as anticipated, primarily due to the completion of and production rate reductions on previously disclosed programs along with the timing of deliveries on certain programs. These factors were partially offset by increased production on the 767/Tanker program.
Operating loss of ($119.7) million included a $190.2 million non-cash goodwill impairment charge for Precision Components, $6.5 million of transformation related expenses and $15.1 million curtailment gain related to post retirement benefits. Net loss for the third quarter of fiscal year 2018 was ($113.3) million, or ($2.29) per share, and included an estimated tax benefit of $22.4 million, or $0.45 per diluted share, related to the enactment of the U.S. Tax Cuts and Jobs Act in December 2017. Triumph’s results included the following:
($ millions except EPS) | Pre-tax | After-tax | Diluted EPS | ||||||||||
Loss from Continuing Operations - GAAP | $ | (145.5 | ) | $ | (113.3 | ) | $ | (2.29 | ) | ||||
Goodwill Impairment | 190.2 | 181.5 | 3.65 | ||||||||||
Curtailment & settlement, net | (15.1 | ) | (14.4 | ) | (0.29 | ) | |||||||
Transformation related costs: | |||||||||||||
Restructuring costs (non-cash) | 0.4 | 0.4 | 0.01 | ||||||||||
Restructuring costs (cash) | 6.1 | 5.9 | 0.12 | ||||||||||
Estimated impact of tax reform | — | (22.4 | ) | (0.45 | ) | ||||||||
Adjusted Income from Continuing Operations - non-GAAP | $ | 36.1 | $ | 37.7 | $ | 0.76 | * | ||||||
*Difference due to rounding | |||||||||||||
The number of shares used in computing diluted earnings per share for the third quarter of fiscal year 2018 was 49.7 million.
For the quarter ended December 31, 2017, cash flow from operations was $100.8 million, reflecting approximately $250 million of customer advances, partially offset by the liquidation of customer advances received in fiscal year 2017, along with spending on key development programs transitioning into production and transformation related costs.
Outlook
Based on anticipated aircraft production rates and completed divestitures, the Company continues to expect that revenue for fiscal year 2018 will be approximately $3.1 to $3.2 billion and expects revenue to increase in fiscal year 2019 as development programs enter production and sales from new wins offset sunsetting programs. Additionally, the Company continues to expect fiscal year 2018 adjusted earnings per diluted share of $2.25 to $2.75, or ($7.96) to ($8.58) on an unadjusted basis and includes the expected $345 million impairment of the remaining Precision Components’ goodwill in the fourth quarter. Free cash use is now
anticipated to be within a range of $325 to $375 million (or cash used in operations of $270 to $330 million),
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versus previous guidance of $450 to $500 million, reflecting recently received customer advances and their related liquidation as well as timing of deliveries on development programs.
The Company’s current outlook reflects adjustments detailed in the attached tables but does not take into account the impact of any potential future divestitures.
Conference Call
Triumph Group will hold a conference call today, February 1st at 8:30 a.m. (ET) to discuss the third quarter fiscal year 2018 results. The conference call will be available live and archived on the Company’s website at http://www.triumphgroup.com. A slide presentation will be included with the audio portion of the webcast. An audio replay will be available from February 1st to February 7th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #6995048.
About Triumph Group
Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aircraft structures, 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.
More information about Triumph can be found on the Company’s website at www.triumphgroup.com.
Forward Looking Statements
Statements in this release which are not historical facts are forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995, including statements of expectations of or assumptions about financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies and organizational restructurings. All forward-looking statements involve risks and uncertainties which could affect the Company’s actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Further information regarding the important factors that could cause actual results to differ from projected results can be found in Triumph Group’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.
FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(in thousands, except per share data)
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Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
CONDENSED STATEMENTS OF INCOME | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 775,246 | $ | 844,863 | $ | 2,302,091 | $ | 2,612,885 | ||||||||
Operating (loss) income | (119,704 | ) | 55,166 | (82,447 | ) | 172,379 | ||||||||||
Interest expense and other | 25,836 | 19,698 | 72,229 | 55,721 | ||||||||||||
Income tax (benefit) expense | (32,288 | ) | 6,136 | (34,115 | ) | 32,786 | ||||||||||
Net (loss) income | $ | (113,252 | ) | $ | 29,332 | $ | (120,561 | ) | $ | 83,872 | ||||||
Earnings per share - basic: | ||||||||||||||||
Net (loss) income | $ | (2.29 | ) | $ | 0.59 | $ | (2.44 | ) | $ | 1.70 | ||||||
Weighted average common shares outstanding - basic | 49,459 | 49,329 | 49,425 | 49,294 | ||||||||||||
Earnings per share - diluted: | ||||||||||||||||
Net (loss) income | $ | (2.29 | ) | $ | 0.59 | $ | (2.44 | ) | $ | 1.70 | ||||||
Weighted average common shares outstanding - diluted | 49,459 | 49,440 | 49,425 | 49,421 | ||||||||||||
Dividends declared and paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except share data)
BALANCE SHEET | Unaudited | Audited | ||||||
December 31, | March 31, | |||||||
2017 | 2017 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 64,388 | $ | 69,633 | ||||
Accounts receivable, net | 320,999 | 311,792 | ||||||
Inventories, net of unliquidated progress payments of $409,040 and $222,485 | 1,462,724 | 1,340,175 | ||||||
Prepaid and other current assets | 43,500 | 30,064 | ||||||
Assets held for sale | — | 21,255 | ||||||
Current assets | 1,891,611 | 1,772,919 | ||||||
Property and equipment, net | 749,922 | 805,030 | ||||||
Goodwill | 934,500 | 1,142,605 | ||||||
Intangible assets, net | 520,820 | 592,364 | ||||||
Other, net | 89,079 | 101,682 | ||||||
Total assets | $ | 4,185,932 | $ | 4,414,600 | ||||
Liabilities & Stockholders' Equity | ||||||||
Current portion of long-term debt | $ | 15,135 | $ | 160,630 | ||||
Accounts payable | 387,081 | 481,243 | ||||||
Accrued expenses | 627,411 | 674,379 | ||||||
Liabilities related to assets held for sale | — | 18,008 | ||||||
Current liabilities | 1,029,627 | 1,334,260 | ||||||
Long-term debt, less current portion | 1,359,476 | 1,035,670 | ||||||
Accrued pension and post-retirement benefits, noncurrent | 509,641 | 592,134 | ||||||
Deferred income taxes, noncurrent | 41,969 | 68,107 | ||||||
Other noncurrent liabilities | 496,705 | 537,956 | ||||||
Stockholders' Equity: | ||||||||
Common stock, $.001 par value, 100,000,000 shares authorized, 52,460,920 and 52,460,920 shares issued; 49,662,507 and 49,573,029 shares outstanding | 51 | 51 | ||||||
Capital in excess of par value | 849,806 | 846,807 | ||||||
Treasury stock, at cost, 2,798,413 and 2,887,891 shares | (179,692 | ) | (183,696 | ) | ||||
Accumulated other comprehensive loss | (374,624 | ) | (396,178 | ) | ||||
Retained earnings | 452,973 | 579,489 | ||||||
Total stockholders' equity | 748,514 | 846,473 | ||||||
Total liabilities and stockholders' equity | $ | 4,185,932 | $ | 4,414,600 | ||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA | Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Sales: | ||||||||||||||||
Integrated Systems | $ | 239,198 | $ | 256,080 | $ | 711,099 | $ | 758,803 | ||||||||
Aerospace Structures | 282,495 | 304,235 | 807,754 | 956,114 | ||||||||||||
Precision Components | 219,675 | 226,294 | 685,701 | 740,354 | ||||||||||||
Product Support | 68,039 | 87,292 | 202,839 | 257,317 | ||||||||||||
Elimination of inter-segment sales | (34,161 | ) | (29,038 | ) | (105,302 | ) | (99,703 | ) | ||||||||
$ | 775,246 | $ | 844,863 | $ | 2,302,091 | $ | 2,612,885 | |||||||||
Operating (Loss) Income: | ||||||||||||||||
Integrated Systems | $ | 42,667 | $ | 51,596 | $ | 132,171 | $ | 145,379 | ||||||||
Aerospace Structures | 12,022 | 23,867 | 23,253 | 57,898 | ||||||||||||
Precision Components | (186,225 | ) | 2,942 | (191,100 | ) | 7,223 | ||||||||||
Product Support | 12,399 | 14,662 | 32,069 | 42,986 | ||||||||||||
Corporate | (567 | ) | (37,901 | ) | (78,840 | ) | (81,107 | ) | ||||||||
$ | (119,704 | ) | $ | 55,166 | $ | (82,447 | ) | $ | 172,379 | |||||||
Operating Margin % | ||||||||||||||||
Integrated Systems | 17.8 | % | 20.1 | % | 18.6 | % | 19.2 | % | ||||||||
Aerospace Structures | 4.3 | % | 7.8 | % | 2.9 | % | 6.1 | % | ||||||||
Precision Components | (84.8 | )% | 1.3 | % | (27.9 | )% | 1.0 | % | ||||||||
Product Support | 18.2 | % | 16.8 | % | 15.8 | % | 16.7 | % | ||||||||
Consolidated | (15.4 | )% | 6.5 | % | (3.6 | )% | 6.6 | % | ||||||||
Depreciation and Amortization: | ||||||||||||||||
Integrated Systems | $ | 8,318 | $ | 9,766 | $ | 27,857 | $ | 30,228 | ||||||||
Aerospace Structures | 19,048 | 17,942 | 57,484 | 54,289 | ||||||||||||
Precision Components | 200,077 | 13,999 | 218,085 | 42,344 | ||||||||||||
Product Support | 1,663 | 2,294 | 5,068 | 7,230 | ||||||||||||
Corporate | 441 | 330 | 1,051 | 989 | ||||||||||||
$ | 229,547 | $ | 44,331 | $ | 309,545 | $ | 135,080 | |||||||||
Amortization of Acquired Contract Liabilities: | ||||||||||||||||
Integrated Systems | $ | (11,634 | ) | $ | (7,628 | ) | $ | (28,235 | ) | $ | (27,101 | ) | ||||
Aerospace Structures | (21,352 | ) | (21,105 | ) | (60,315 | ) | (60,190 | ) | ||||||||
Precision Components | (1,506 | ) | (473 | ) | (3,312 | ) | (1,740 | ) | ||||||||
$ | (34,492 | ) | $ | (29,206 | ) | $ | (91,862 | ) | $ | (89,031 | ) | |||||
Capital Expenditures: | ||||||||||||||||
Integrated Systems | $ | 1,903 | $ | 2,763 | $ | 5,923 | $ | 8,586 | ||||||||
Aerospace Structures | 2,384 | 2,228 | 9,503 | 9,820 | ||||||||||||
Precision Components | 3,407 | 2,636 | 12,563 | 11,040 | ||||||||||||
Product Support | 599 | 687 | 1,629 | 2,020 | ||||||||||||
Corporate | 864 | 843 | 2,314 | 1,657 | ||||||||||||
$ | 9,157 | $ | 9,157 | $ | 31,932 | $ | 33,123 | |||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures
We prepare and publicly release quarterly unaudited financial statements prepared in accordance with GAAP. In accordance with Securities and Exchange Commission (the "SEC") guidance on Compliance and Disclosure Interpretations, we also disclose and discuss certain non-GAAP financial measures in our public releases. Currently, the non-GAAP financial measure that we disclose is Adjusted EBITDA, which is our net income before interest, income taxes, amortization of acquired contract liabilities, curtailments, settlements and early retirement incentives, legal settlements, depreciation 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 the 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, over time, 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. |
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
• | 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. |
• | Depreciation may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure. |
• | The amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business. |
• | Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business. |
Management compensates for the above-described limitations of using non-GAAP measures by using a non-GAAP measure only to supplement our GAAP results and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business.
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
The following table shows our Adjusted EBITDA reconciled to our net income for the indicated periods (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA): | ||||||||||||||||
Net (Loss) Income | $ | (113,252 | ) | $ | 29,332 | $ | (120,561 | ) | $ | 83,872 | ||||||
Add-back: | ||||||||||||||||
Income tax (benefit) expense | (32,288 | ) | 6,136 | (34,115 | ) | 32,786 | ||||||||||
Interest expense and other | 25,836 | 19,698 | 72,229 | 55,721 | ||||||||||||
Curtailment & settlement gain, net | (15,099 | ) | — | (14,576 | ) | — | ||||||||||
Loss on divestitures | — | 14,350 | 20,371 | 19,124 | ||||||||||||
Amortization of acquired contract liabilities | (34,492 | ) | (29,206 | ) | (91,862 | ) | (89,031 | ) | ||||||||
Depreciation and amortization | 229,547 | 44,331 | 309,545 | 135,080 | ||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 60,252 | $ | 84,641 | $ | 141,031 | $ | 237,552 | ||||||||
Net Sales # | $ | 775,246 | $ | 844,863 | $ | 2,302,091 | $ | 2,612,885 | ||||||||
Operating (Loss) Income Margin | (15.4 | )% | 6.5 | % | (3.6 | )% | 6.6 | % | ||||||||
Adjusted EBITDA Margin # | 8.1% | 10.4% | 6.4% | 9.4% | ||||||||||||
# 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. | ||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended December 31, 2017 | |||||||||||||||||||||||||
Segment Data | |||||||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Precision Components | Product Support | Corporate/Eliminations | |||||||||||||||||||
Net Loss | $ | (113,252 | ) | ||||||||||||||||||||||
Add-back: | |||||||||||||||||||||||||
Income tax benefit | (32,288 | ) | |||||||||||||||||||||||
Interest expense and other | 25,836 | ||||||||||||||||||||||||
Operating (Loss) Income | $ | (119,704 | ) | $ | 42,667 | $ | 12,022 | $ | (186,225 | ) | $ | 12,399 | $ | (567 | ) | ||||||||||
Curtailment & settlement gain, net | (15,099 | ) | — | — | — | — | (15,099 | ) | |||||||||||||||||
Amortization of acquired contract liabilities | (34,492 | ) | (11,634 | ) | (21,352 | ) | (1,506 | ) | — | — | |||||||||||||||
Depreciation and amortization | 229,547 | 8,318 | 19,048 | 200,077 | 1,663 | 441 | |||||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 60,252 | $ | 39,351 | $ | 9,718 | $ | 12,346 | $ | 14,062 | $ | (15,225 | ) | ||||||||||||
Net Sales | $ | 775,246 | $ | 239,198 | $ | 282,495 | $ | 219,675 | $ | 68,039 | $ | (34,161 | ) | ||||||||||||
Operating (Loss) Income Margin | (15.4 | )% | 17.8 | % | 4.3 | % | (84.8 | )% | 18.2 | % | n/a | ||||||||||||||
Adjusted EBITDA Margin | 8.1% | 17.3% | 3.7% | 5.7% | 20.7% | n/a | |||||||||||||||||||
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Nine Months Ended December 31, 2017 | |||||||||||||||||||||||||
Segment Data | |||||||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Integrated Systems | Aerospace Structures | Precision Components | Product Support | Corporate/Eliminations | |||||||||||||||||||
Net Loss | $ | (120,561 | ) | ||||||||||||||||||||||
Add-back: | |||||||||||||||||||||||||
Income tax benefit | (34,115 | ) | |||||||||||||||||||||||
Interest expense and other | 72,229 | ||||||||||||||||||||||||
Operating Income (Loss) | $ | (82,447 | ) | $ | 132,171 | $ | 23,253 | $ | (191,100 | ) | $ | 32,069 | $ | (78,840 | ) | ||||||||||
Loss on divestiture | 20,371 | — | — | — | — | 20,371 | |||||||||||||||||||
Curtailment & settlement gain, net | (14,576 | ) | — | — | — | — | (14,576 | ) | |||||||||||||||||
Amortization of acquired contract liabilities | (91,862 | ) | (28,235 | ) | (60,315 | ) | (3,312 | ) | — | — | |||||||||||||||
Depreciation and amortization | 309,545 | 27,857 | 57,484 | 218,085 | 5,068 | 1,051 | |||||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 141,031 | $ | 131,793 | $ | 20,422 | $ | 23,673 | $ | 37,137 | $ | (71,994 | ) | ||||||||||||
Net Sales | $ | 2,302,091 | $ | 711,099 | $ | 807,754 | $ | 685,701 | $ | 202,839 | $ | (105,302 | ) | ||||||||||||
Operating (Loss) Income Margin | (3.6 | )% | 18.6 | % | 2.9 | % | (27.9 | )% | 15.8 | % | n/a | ||||||||||||||
Adjusted EBITDA Margin | 6.4% | 19.3% | 2.7% | 3.5% | 18.3% | n/a | |||||||||||||||||||
11
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended December 31, 2016 | |||||||||||||||||||||||||
Segment Data | |||||||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | 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 divestiture | 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 | ) | ||||||||||||
Operating Income Margin | 6.5 | % | 20.1 | % | 7.8 | % | 1.3 | % | 16.8 | % | n/a | ||||||||||||||
Adjusted EBITDA Margin | 10.4% | 21.6% | 7.3% | 7.3% | 19.4% | n/a | |||||||||||||||||||
12
Nine Months Ended December 31, 2016 | |||||||||||||||||||||||||
Segment Data | |||||||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | 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 | 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 | ) | ||||||||||||
Operating Income Margin | 6.6 | % | 19.2 | % | 6.1 | % | 1.0 | % | 16.7 | % | n/a | ||||||||||||||
Adjusted EBITDA Margin | 9.4% | 20.3% | 5.8% | 6.5% | 19.5% | n/a | |||||||||||||||||||
13
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
Non-GAAP Financial Measure Disclosures (continued)
Adjusted income from continuing operations, before income taxes, adjusted income from continuing operations and adjusted income from continuing operations per diluted share, before non-recurring costs 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, 2017 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (145,540 | ) | $ | (113,252 | ) | $ | (2.29 | ) | ||||
Adjustments: | |||||||||||||
Goodwill Impairment | 190,227 | 181,540 | 3.65 | ||||||||||
Curtailment & settlement, net | (15,099 | ) | (14,374 | ) | (0.29 | ) | |||||||
Restructuring cost (non-cash) | 382 | 364 | 0.01 | ||||||||||
Restructuring costs (cash) | 6,149 | 5,854 | 0.12 | ||||||||||
Estimated impact of Tax Reform | — | (22,398 | ) | (0.45 | ) | ||||||||
Adjusted Income from Continuing Operations - non-GAAP | $ | 36,119 | $ | 37,734 | $ | 0.76 | * | ||||||
* - Difference due to rounding | |||||||||||||
Nine Months Ended | |||||||||||||
December 31, 2017 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Loss from Continuing Operations - GAAP | $ | (154,676 | ) | $ | (120,561 | ) | $ | (2.44 | ) | ||||
Adjustments: | |||||||||||||
Loss on divestiture | 20,371 | 20,371 | 0.41 | ||||||||||
Goodwill Impairment | 190,227 | 181,540 | 3.66 | ||||||||||
Curtailment & settlement, net | (14,576 | ) | (13,876 | ) | (0.28 | ) | |||||||
Refinancing costs | 1,986 | 1,891 | 0.04 | ||||||||||
Restructuring cost (non-cash) | 2,538 | 2,416 | 0.05 | ||||||||||
Restructuring costs (cash) | 33,751 | 32,131 | 0.65 | ||||||||||
Estimated impact of Tax Reform | — | (22,398 | ) | (0.45 | ) | ||||||||
Adjusted Income from Continuing Operations - non-GAAP | $ | 79,621 | $ | 81,514 | $ | 1.64 | |||||||
14
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended | |||||||||||||
December 31, 2016 | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | |||||||||||
Income from Continuing Operations - GAAP | $ | 35,468 | $ | 29,332 | $ | 0.59 | |||||||
Adjustments: | |||||||||||||
Loss on divestiture | 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 | 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 | |||||||
15
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
The following table reconciles our Operating income to Adjusted Operating income as noted above.
Three Months Ended | Three Months Ended | |||||||
December 31, 2017 | December 31, 2016 | |||||||
Operating (Loss) Income - GAAP | $ | (119,704 | ) | 55,166 | ||||
Adjustments: | ||||||||
Goodwill Impairment | 190,227 | — | ||||||
Loss on divestiture | — | 14,350 | ||||||
Curtailment & settlement, net | (15,099 | ) | — | |||||
Restructuring costs (non-cash) | 382 | 3,065 | ||||||
Restructuring costs (cash) | 6,149 | 11,067 | ||||||
Adjusted Operating Income - non-GAAP | $ | 61,955 | $ | 83,648 | ||||
16
(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure 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 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.
Three Months Ended | Nine Months Ended | ||||||||
December 31, | December 31, | ||||||||
Guidance | 2017 | 2017 | |||||||
Cash (used in) provided by operations | $(270,000 - 330,000) | $ | 100,786 | $ | (198,279 | ) | |||
Less: | |||||||||
Capital expenditures | (45,000 - 55,000) | (9,157 | ) | (31,932 | ) | ||||
Free cash flow (use) | $(325,000 - 375,000) | $ | 91,629 | $ | (230,211 | ) | |||
The Company provides earnings per share guidance on an adjusted non-GAAP basis excluding the effects of transformation related costs, gains (losses) on divestitures, impairments, one-time pension & OPEB benefits (charges) and other non-recurring items, such as income tax reform. The following table reconciles adjusted earnings per diluted share guidance to earnings per share on a GAAP basis.
Guidance - adjusted earnings per diluted share | $2.25 - $2.75 | ||
Per share effect of: | |||
Transformation related costs - cash | $ (0.60 - 0.70) | ||
Transformation related costs - non-cash | $ (0.06 - 0.08) | ||
Goodwill impairment | $ | (10.33 | ) |
Loss on completed divestitures | $ | (0.41 | ) |
Refinancing costs | $ | (0.04 | ) |
Curtailment & settlement, net | $ | 0.28 | |
Estimated impact of Tax Reform | $ | 0.45 | |
Guidance - earnings per share- GAAP | $(7.96 - 8.58) | ||
17
We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:
December 31, | March 31, | |||||||
2017 | 2017 | |||||||
Calculation of Net Debt | ||||||||
Current portion | $ | 15,135 | $ | 160,630 | ||||
Long-term debt | 1,359,476 | 1,035,670 | ||||||
Total debt | 1,374,611 | 1,196,300 | ||||||
Plus: Deferred debt issuance costs | 17,886 | 11,752 | ||||||
Less: Cash | (64,388 | ) | (69,633 | ) | ||||
Net debt | $ | 1,328,109 | $ | 1,138,419 | ||||
Calculation of Capital | ||||||||
Net debt | $ | 1,328,109 | $ | 1,138,419 | ||||
Stockholders' equity | 748,514 | 846,473 | ||||||
Total capital | $ | 2,076,623 | $ | 1,984,892 | ||||
Percent of net debt to capital | 64.0 | % | 57.4 | % | ||||
18