TGI Triumph Group Inc

Triumph Group, Inc. (NYSE:TGI) today reported that, for the fiscal year ended March 31, 2010, net sales totaled $1.295 billion, a four percent increase from fiscal year 2009 net sales of $1.240 billion. Income from continuing operations for fiscal year 2010 was $85.3 million, or $5.12 per diluted share, versus $92.7 million, or $5.59 per diluted share, for fiscal year 2009. Net income for fiscal year 2010 was $67.8 million, or $4.07 per diluted share, versus $88.0 million, or $5.30 per diluted share, for the prior fiscal year. The number of shares used in computing diluted earnings per share for fiscal year 2010 was 16.7 million shares. During the fiscal year, the company generated $169.6 million of cash flow from operations. The results for the fiscal year included $6.1 million of incremental non-cash interest expense associated with the adoption of ASC 470-20 (formerly FSP APB 14-1), which required a change in accounting method for convertible debt interest, and approximately $5.3 million of interest expense associated with the senior subordinated notes issued during the third quarter of fiscal year 2010. Approximately $4.1 million of start up costs related to the Mexican facility were included in the results for the fiscal year. Prior year results were restated to reflect the adoption of ASC 470-20, resulting in an incremental $6.2 million of interest expense over the previously reported amount.

For the fourth quarter ended March 31, 2010, net sales were $352.0 million, a thirteen percent increase from last year’s fourth quarter net sales of $311.2 million. Income from continuing operations for the fourth quarter of fiscal year 2010 increased eleven percent to $25.0 million, or $1.49 per diluted share, versus $22.6 million, or $1.36 per diluted share, for the fourth quarter of the prior fiscal year. Net income for the fourth quarter of fiscal year 2010 increased eighteen percent to $24.7 million, or $1.47 per diluted share, versus $20.9 million, or $1.26 per diluted share, for the fourth quarter of the prior fiscal year. The number of shares used in computing diluted earnings per share for the fourth quarter of fiscal year 2010 was 16.8 million shares. During the quarter, the company generated $43.2 million of cash flow from operations. The results for the quarter included $1.6 million of incremental non-cash interest expense associated with the adoption of ASC 470-20 and approximately $3.6 million of interest expense associated with the senior subordinated notes issued in November, 2009. Approximately $1.25 million of start up costs related to the Mexican facility were also included in the results for the quarter. Prior year fourth quarter results were restated to reflect the adoption of ASC 470-20, resulting in an incremental $1.5 million of interest expense over the previously reported amount.

Richard C. Ill, Triumph’s Chairman and Chief Executive Officer, said, “We are proud of the results we achieved during the fourth quarter. In particular, we were able to deliver organic sales growth within our Aerospace Systems Group, increase operating income and improve our underlying margin on both a year over year and sequential basis. In addition, we saw our backlog grow during the fourth quarter. During the year, we managed our company conservatively, focusing on reducing costs, improving operations and maximizing cash flow. The impact of these efforts is reflected in our fourth quarter results as well as the strong cash flow generated throughout the year.”

Aerospace Systems

The Aerospace Systems segment reported net sales for fiscal year 2010 of $1.073 billion, compared to $988.4 million for the prior fiscal year, an increase of nine percent. For the fourth quarter of fiscal year 2010, net sales increased eighteen percent to $294.2 million from $249.8 million for the prior fiscal year period. Organic sales growth for the quarter was three percent. Operating income for fiscal year 2010 was $170.5 million, compared to $168.0 million for the prior fiscal year, an increase of two percent. For the fourth quarter, operating income increased twenty-three percent to $50.4 million versus $41.2 million for the prior fiscal year quarter. Operating margin for the quarter increased to seventeen percent, a four percent year over year improvement and a fifteen percent sequential improvement. Operating income for the quarter included $1.1 million of legal expenses associated with the previously disclosed trade secret litigation resulting in total associated legal expenses for the full fiscal year of $4.6 million.

Aftermarket Services

The Aftermarket Services segment reported net sales for fiscal year 2010 of $225.0 million, compared to $254.6 million for the prior fiscal year, a decrease of twelve percent. For the fourth quarter of fiscal year 2010, net sales decreased six percent to $58.5 million from $62.1 million for the prior fiscal year period. Operating income for fiscal year 2010 was $11.1 million, compared to $10.9 million for the prior fiscal year, an increase of two percent. For the fourth quarter, operating income increased 104 percent to $3.8 million versus $1.9 million for the prior fiscal year quarter. Operating margin for the quarter increased to seven percent, a 116 percent year over year improvement and a 141 percent sequential improvement.

Outlook

In commenting on the outlook for fiscal year 2011, Mr. Ill said, “We are entering our new fiscal year with a strong backlog and a very solid balance sheet. Based on current aircraft production rates, we project sales in the range of $1.3 to $1.4 billion and earnings per share from continuing operations for the fiscal year of approximately $4.65 per diluted share, excluding transaction and integration costs from the recently announced agreement to acquire Vought Aircraft Industries, Inc. This guidance does not reflect the earnings and associated accretion which we expect from the Vought acquisition. The number of shares used in computing diluted earnings per share was 17.2 million shares. Included in this guidance is approximately $5.0 million of legal expenses associated with the trade secret litigation, the full year effect of the November, 2009 high yield debt offering and approximately $2.5 million of start up costs related to the Mexican facility, which is in addition to our investment in capital and infrastructure.”

Mr. Ill further stated, “Our acquisition of Vought remains on track for a late June/early July close. We are working our way through the various regulatory requirements leading up to a shareholder vote. We are focusing a significant amount of our time on the integration of our two companies and we remain excited about what the acquisition will mean to our combined business, our employees, our customers and our shareholders. We will update our fiscal year 2011 guidance for the inclusion of Vought upon the closing of the acquisition.”

As previously announced, Triumph Group will hold a conference call tomorrow at 8:30 a.m. (ET) to discuss the fiscal year 2010 fourth quarter and year-end 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 April 29th until May 6th by calling (888)266-2081 (Domestic) or (703)925-2533 (International), passcode #1449287.

Triumph Group, Inc., headquartered in Wayne, Pennsylvania, designs, engineers, manufactures, repairs and overhauls aircraft components and accessories. 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 http://www.triumphgroup.com.

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 expectations of future aerospace market conditions, aircraft production rates, financial and operational performance, revenue and earnings growth, sales and earnings results for fiscal 2011 and the closing of the Vought acquisition and its impact. 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’s reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2009.

        FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (in thousands, except per share data)     Three Months Ended Twelve Months Ended March 31, March 31,   CONDENSED STATEMENTS OF INCOME 2010 2009 2010 2009     Net sales $351,982 $311,188 $1,294,780 $1,240,378   Operating income 47,345 35,441 155,281 151,914   Interest expense and other 10,270 2,663 28,865 16,929 Gain on early extinguishment of debt 0 (299 ) (39 ) (880 ) Income tax expense 12,079   10,508   41,167   43,124     Income from continuing operations 24,996 22,569 85,288 92,741 Loss from discontinued operations, net of tax (324 ) (1,631 ) (17,526 ) (4,745 )   Net income $24,672   $20,938   $67,762   $87,996     Earnings per share - basic:   Income from continuing operations $1.52 $1.38 $5.18 $5.66 Loss from discontinued operations ($0.02 ) ($0.10 ) ($1.06 ) ($0.29 ) Net income $1.50   $1.28   $4.12   $5.37     Weighted average common shares outstanding - basic 16,474   16,392   16,459   16,384     Earnings per share - diluted:   Income from continuing operations $1.49 $1.36 $5.12 $5.59 Loss from discontinued operations ($0.02 ) ($0.10 ) ($1.05 ) ($0.29 ) Net income $1.47   $1.26   $4.07   $5.30     Weighted average common shares outstanding - diluted 16,792   16,587   16,666   16,584     Dividends declared and paid per common share $0.04   $0.04   $0.16   $0.16         FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands, except per share data)   BALANCE SHEET March 31, March 31, 2010 2009 Assets Cash and cash equivalents $157,218 $14,478 Accounts receivable, net 214,497 209,463 Inventory 363,925 389,348 Rotable assets 25,587 25,652 Deferred income taxes 7,616 1,727 Assets held for sale 5,051 27,695 Prepaid income taxes 947 4,434 Prepaid expenses and other 8,834   6,021   Current assets 783,675 678,818   Property and equipment, net 327,634 332,467 Goodwill 502,074 459,541 Intangible assets, net 79,844 108,350 Other 18,392   12,031     Total assets $1,711,619   $1,591,207     Liabilities & Stockholders' Equity   Accounts payable $92,859 $103,711 Accrued expenses 111,158 109,580 Liabilities related to assets held for sale 899 4,283 Current portion of long-term debt 91,929   89,085   Current liabilities 296,845 306,659   Long-term debt, less current portion 424,351 370,311 Income taxes payable, non-current 3,290 2,917 Deferred income taxes, non-current 113,640 108,413 Other non-current liabilities 12,807 14,344   Stockholders' Equity:

Common stock, $.001 par value, 100,000,000 shares authorized, 16,817,931 and 16,763,984 shares issued

17 16 Capital in excess of par value 314,870 311,434 Treasury stock, at cost, 144,677 and 174,417 shares (7,921 ) (9,785 ) Accumulated other comprehensive income (loss) 705 (2,233 ) Retained earnings 553,015   489,131   Total stockholders' equity 860,686   788,563     Total liabilities and stockholders' equity $1,711,619   $1,591,207             FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands)       SEGMENT DATA Three Months Ended Twelve Months Ended March 31, March 31,   2010 2009 2010 2009   Net sales: Aerospace Systems $294,218 $249,807 $1,073,494 $988,359 Aftermarket Services 58,486 62,082 224,991 254,638 Elimination of inter-segment sales (722 ) (701 ) (3,705 ) (2,619 ) $351,982   $311,188   $1,294,780   $1,240,378     Operating income (loss): Aerospace Systems $50,436 $41,152 $170,457 $168,006 Aftermarket Services 3,815 1,874 11,109 10,876 Corporate (6,906 ) (7,585 ) (26,285 ) (26,968 ) $47,345   $35,441   $155,281   $151,914     Depreciation and amortization: Aerospace Systems $10,116 $8,896 $40,789 $34,784 Aftermarket Services 3,244 3,309 12,894 13,515 Corporate 200   121   735   312   $13,560   $12,326   $54,418   $48,611       Capital expenditures: Aerospace Systems $8,816 $10,610 $26,013 $34,618 Aftermarket Services 661 2,128 3,895 8,804 Corporate 421   1,431   1,757   1,999   $9,898   $14,169   $31,665   $45,421    

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 recent 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 EBITDA, which is our income from continuing operations before interest, income taxes, depreciation and amortization. We disclose 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 EBITDA as an operating performance measure and as such we believe that the GAAP financial measure most directly comparable to it is income from continuing operations. In calculating EBITDA, we exclude from income from continuing operations 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. 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 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 EBITDA to income from continuing operations 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 EBITDA.

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 15 years expanding our product and service capabilities partially through acquisitions of complementary businesses. Due to the expansion of our operations, which included acquisitions, our income from continuing operations has included significant charges for depreciation and amortization. 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 EBITDA helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe EBITDA is a measure of our ongoing operating performance because the isolation of non-cash charges, such as 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 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 income from continuing operations to calculate EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to income from continuing operations:

• Amortization expenses may be useful for investors to consider because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights and licenses. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
• Depreciation may be useful for investors to consider because they generally represent the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.
• The amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business.
• Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.

  FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands)   Non-GAAP Financial Measure Disclosures, continued   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 EBITDA reconciled to our income from continuing operations for the indicated periods (in thousands):     Three Months Ended Twelve Months Ended March 31, March 31, 2010   2009 2010   2009 Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):   Income from Continuing Operations $24,996 $22,569 $85,288 $92,741   Add-back: Income Tax Expense 12,079 10,508 41,167 43,124 Gain on Early Extinguishment of Debt 0 (299 ) (39 ) (880 ) Interest Expense and Other 10,270 2,663 28,865 16,929 Depreciation and Amortization 13,560   12,326   54,418   48,611    

Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")

$60,905   $47,767   $209,699   $200,525     Net Sales $351,982   $311,188   $1,294,780   $1,240,378     EBITDA Margin 17.3 % 15.3 % 16.2 % 16.2 %           FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands)   Non-GAAP Financial Measure Disclosures (continued)   Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): Three Months Ended March 31, 2010 Segment Data Total

AerospaceSystems

AftermarketServices

Corporate /Eliminations

  Income from Continuing Operations $24,996   Add-back: Income Tax Expense 12,079 Gain on Early Extinguishment of Debt 0 Interest Expense and Other 10,270     Operating Income (Expense) $47,345 $50,436 $3,815 ($6,906 )   Depreciation and Amortization 13,560   10,116   3,244   200    

Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("EBITDA")

$60,905   $60,552   $7,059   ($6,706 )   Net Sales $351,982   $294,218   $58,486   ($722 )   EBITDA Margin 17.3 % 20.6 % 12.1 % n/a       Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): Twelve Months Ended March 31, 2010 Segment Data Total

AerospaceSystems

AftermarketServices

Corporate /Eliminations

  Income from Continuing Operations $85,288   Add-back: Income Tax Expense 41,167 Gain on Early Extinguishment of Debt (39 ) Interest Expense and Other 28,865     Operating Income (Expense) $155,281 $170,457 $11,109 ($26,285 )   Depreciation and Amortization 54,418   40,789   12,894   735    

Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("EBITDA")

$209,699   $211,246   $24,003   ($25,550 )   Net Sales $1,294,780   $1,073,494   $224,991   ($3,705 )   EBITDA Margin 16.2 % 19.7 % 10.7 % n/a             FINANCIAL DATA (UNAUDITED)   TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands)   Non-GAAP Financial Measure Disclosures (continued)  

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):

Three Months Ended March 31, 2009

Segment Data Total

AerospaceSystems

AftermarketServices

Corporate /Eliminations

  Income from Continuing Operations $22,569   Add-back: Income Tax Expense 10,508 Gain on Early Extinguishment of Debt (299 ) Interest Expense and Other 2,663     Operating Income (Expense) $35,441 $41,152 $1,874 ($7,585 )   Depreciation and Amortization 12,326   8,896   3,309   121    

Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("EBITDA")

$47,767   $50,048   $5,183   ($7,464 )   Net Sales $311,188   $249,807   $62,082   ($701 )   EBITDA Margin 15.3 % 20.0 % 8.3 % n/a       Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): Twelve Months Ended March 31, 2009 Segment Data Total

AerospaceSystems

AftermarketServices

Corporate /Eliminations

  Income from Continuing Operations $92,741   Add-back: Income Tax Expense 43,124 Gain on Early Extinguishment of Debt (880 ) Interest Expense and Other 16,929     Operating Income (Expense) $151,914 $168,006 $10,876 ($26,968 )   Depreciation and Amortization 48,611   34,784   13,515   312    

Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("EBITDA")

$200,525   $202,790   $24,391   ($26,656 )   Net Sales $1,240,378   $988,359   $254,638   ($2,619 )   EBITDA Margin 16.2 % 20.5 % 9.6 % n/a       FINANCIAL DATA (UNAUDITED)     TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands)   Non-GAAP Financial Measure Disclosures  

We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital:

  March 31, March 31, 2010 2009  

Calculation of Net Debt

Current portion $ 91,929 $ 89,085 Long-term debt   424,351   370,311 Total debt 516,280 459,396 Less: Cash and cash equivalents   157,218   14,478 Net debt $ 359,062 $ 444,918

 

Calculation of Capital

Net debt $ 359,062 $ 444,918 Stockholders' equity   860,686   788,563 Total capital $ 1,219,748 $ 1,233,481   Percent of net debt to capital 29.4% 36.1%