Triumph Group Reports Third Quarter Fiscal 2018 Results

Reaffirms Fiscal Year 2018 Revenue and EPS Guidance and Updates Cash Guidance

BERWYN, Pa.--()--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.

“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.”

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 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), 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)
           
 
Three Months Ended Nine Months Ended
December 31, December 31,
 
CONDENSED STATEMENTS OF OPERATIONS 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
 
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per 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
Inventory, 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 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  
 
 
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  
 

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 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 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 earnings 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 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.

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)

Non-GAAP Financial Measure Disclosures (continued)

  • 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     Nine Months Ended
December 31, December 31,
2017   2016 2017   2016

Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization (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 %
 
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
   
Non-GAAP Financial Measure Disclosures (continued)
 

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

Three Months Ended December 31, 2017
  Segment Data

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  
 
 

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

Nine Months Ended December 31, 2017
Segment Data

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  
 
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
           
Non-GAAP Financial Measure Disclosures (continued)

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

Three Months Ended December 31, 2016
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 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  
 

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

Nine Months Ended December 31, 2016
Segment Data
 
 
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  
 

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 diluted per 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 table reconciles 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 costs (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  
 
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 costs (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  
* Difference due to rounding
 
 
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
 
 
The following table reconciles our Operating income to Adjusted Operating income as noted above.
 
Three Months Ended
December 31,
2017 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
 

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)

Non-GAAP Financial Measure Disclosures (continued)

Cash provided by operations, is provided for consistency and comparability. We also use free cash flow (use) 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 (use).

       
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)
 

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 %
 

Contacts

Triumph Group, Inc.
Media:
Michele Long, 610-251-1000
mmlong@triumphgroup.com
or
Investor Relations:
Sheila G. Spagnolo, 610-251-1000
sspagnolo@triumphgroup.com

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