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Triumph Group Reports Third Quarter Fiscal 2019 Results

BERWYN, Pa.--(BUSINESS WIRE)--

Reports Third Consecutive Quarter of Organic Sales Growth

Reaffirms Fiscal Year 2019 Net Sales, EPS and Cash Guidance

On Track to Deliver Positive Free Cash Flow in Fourth Quarter

Triumph Group, Inc. (TGI) (“Triumph” or the “Company”) today reported financial results for its third quarter of fiscal year 2019, which ended December 31, 2018.

Third Quarter 2019 Highlights

  • Net sales were $807.9 million.
  • Operating loss was ($16.9) million. On an adjusted basis, operating income was $37.6 million.
  • Net loss was ($30.9) million, or ($0.62) per share. On an adjusted basis, net income was $21.1 million, or $0.42 per diluted share.
  • Cash flow from operations was $4.1 million, and free cash use was ($6.5) million.
  • Management reaffirms guidance for fiscal year 2019 net sales, EPS and cash usage.

“Triumph continues to make strides towards the financial targets and strategic goals we’ve laid out for our fiscal 2019,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “Similar to the first two quarters of the fiscal year, during the third quarter we generated year-over-year organic sales growth as we ramped up production on several narrow-body and development programs. Additionally, on an adjusted basis, all three segments delivered sequential improvement in operating margins, reflecting the benefits of our ongoing cost optimization initiatives.”

Mr. Crowley continued, “Our cash usage trend remains on track with our previously stated guidance. We generated positive operating cash flow in the third quarter, and reduced our free cash use dramatically, both sequentially and year-over-year. We remain highly confident in our ability to deliver positive free cash flow for the fourth quarter of fiscal 2019. Looking ahead to 2020 and beyond, our recently announced portfolio actions enhance line of sight into our prospects for sustained positive free cash flow, and present us opportunities to improve our liquidity position.”

Mr. Crowley concluded, “We continue to reshape our portfolio, reducing our contract manufacturing structures work as evidenced by the divestitures of our Fabrication and Machining operations in our Aerospace Structures business, which represent approximately $310 million combined in sales over the trailing twelve-month period. These transactions further our strategic shift towards our higher margin Integrated Systems and Product Support businesses. By becoming a smaller and more focused company, we believe we are on the path to unlocking the full potential of our most attractive business lines. Enhanced cash flow will enable us to deploy resources towards the pursuit of profitable growth and increased value for shareholders.”

Third Quarter Fiscal Year 2019 Overview

Triumph’s sales growth was 4% year over year. After accounting for divestitures and the impact of the adoption of ASC 606, sales for the third quarter of fiscal 2019 were up 7% organically from the comparable prior year period. Sales growth was driven by increased shipments for narrow body programs such as the 737, 787 and A320, military platforms, aftermarket accessory services and development programs transitioning to production.

Third quarter operating loss of ($16.9) million included $2.3 million of restructuring costs, $40.5 million, $9.2 million and $2.5 million related to forward loss charges on the Global 7500, E2 Jet and G280 programs, respectively. Net loss for the third quarter of fiscal year 2019 was ($30.9) million, or ($0.62) per share. On an adjusted basis, net income was $21.1 million, or $0.42 per diluted share. Triumph’s results included the following:

     
($ millions except EPS) Pre-tax After-tax

Diluted EPS

Loss from Continuing Operations - GAAP $ (29.7 ) $ (30.9 ) $ (0.62 )
 
Global 7500 forward loss charge 40.5 40.5 0.81
E2 Jet program forward loss charge 9.2 7.6 0.15
G280 program forward loss charge 2.5 2.1 0.04
Transformation related costs:
Restructuring costs (cash) 2.3 1.9 0.04
 

Adjusted Income from Continuing Operations - non-GAAP

$

24.8

$

21.1

$

0.42

*

*Difference due to rounding

The number of shares used in computing diluted earnings per share for the third quarter of fiscal year 2019 was 50.0 million.

Backlog was $4.3 billion, flat with the prior year period and on a sequential basis reflecting increased selectivity in pursuing new awards based on projected profitability and cash flow and the impact of divestitures in Aerospace Structures.

For the nine-months ended December 31, 2018, cash flow used in operations was ($193.1) million, reflecting approximately ($176.5) million for the liquidation of customer advances and approximately ($206.5) million of cash used on the Global 7500 program.

Outlook

Based on anticipated aircraft production rates and excluding the impacts of pending divestitures, the Company continues to expect that net sales for fiscal year 2019 will be approximately $3.3 to $3.4 billion, up from fiscal 2018 as development programs enter production, and sales from continuing programs along with new wins offset waning programs.

The Company expects fiscal year 2019 earnings per share to be ($1.55) to ($2.10), or $1.50 to $2.10 per diluted share, adjusted for pension accounting changes, certain forward loss charges (reductions), transformation related costs and loss on completed divestitures.

The Company expects fiscal year 2019 cash used in operations of ($150.0) to ($190.0) million, and free cash flow use of ($200.0) to ($250.0) million.

The Company’s current outlook reflects adjustments detailed in the attached tables but excludes the impact of any potential future divestitures.

Conference Call

Triumph Group will hold a conference call today, February 7th at 8:30 a.m. (ET) to discuss the third quarter fiscal year 2019 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 7th to February 14th by calling (855) 859-2056 (Domestic) or (404) 537-3406 (International), passcode #9986125.

About Triumph Group

Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerospace and defense systems, components and structures. The company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators.

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, 2018.

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   2018   2017 *   2018   2017 *
 
 
Net sales $ 807,895 $ 775,246 $ 2,495,903 $ 2,302,091
 
Cost of sales (excluding depreciation shown below) 713,274 630,870 2,207,962 1,877,179
Selling, general & administrative expenses 71,823 62,886 223,031 216,479
Depreciation & Amortization expense 37,404 39,320 114,349 119,318
Impairment of intangible assets - 190,227 - 190,227
Restructuring expenses 2,327 6,149 18,206 33,751
Loss on divestitures   -     -     17,837     20,371  
Operating loss (16,933 ) (154,206 ) (85,482 ) (155,234 )
 
Interest expense and other 29,309 25,836 83,515 72,229
Non-service defined benefit income (16,520 ) (34,502 ) (49,581 ) (72,787 )
Income tax expense (benefit)   1,223     (32,288 )   2,739     (34,115 )
 
Net loss $ (30,945 ) $ (113,252 ) $ (122,155 ) $ (120,561 )
 
Earnings per share - basic:
 
Net loss $ (0.62 ) $ (2.29 ) $ (2.46 ) $ (2.44 )
 
Weighted average common shares outstanding - basic   49,668     49,459     49,616     49,425  
 
Earnings per share - diluted:
 
Net loss $ (0.62 ) $ (2.29 ) $ (2.46 ) $ (2.44 )
 
Weighted average common shares outstanding - diluted   49,668     49,459     49,616     49,425  
 
Dividends declared and paid per common share $ 0.04   $ 0.04   $ 0.12   $ 0.12  
 

* Adjusted for ASU 2017-07 (Pension)

 

 

   
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
 
BALANCE SHEET Unaudited Audited
December 31, March 31,
  2018     2018  
Assets
Cash and cash equivalents $ 28,664 $ 35,819
Accounts receivable, net 355,620 376,612
Contract assets 572,543 37,573
Inventory, net of unliquidated progress payments of $0 and $387,146 543,718 1,427,169
Prepaid and other current assets 30,529 44,428
Assets held for sale   1,744     1,324  
Current assets 1,532,818 1,922,925
 
Property and equipment, net 697,492 726,003
Goodwill 584,515 592,828
Intangible assets, net 465,619 507,681
Other, net   50,070     57,627  
 
Total assets $ 3,330,514   $ 3,807,064  
 
Liabilities & Stockholders' (Deficit) Equity
 
Current portion of long-term debt $ 14,460 $ 16,527
Accounts payable 540,265 418,367
Contract liabilities 314,994 321,191
Accrued expenses 241,167 235,914
Liabilities related to assets held for sale   231     440  
Current liabilities 1,111,117 992,439
 
Long-term debt, less current portion 1,619,233 1,421,757
Accrued pension and post-retirement benefits, noncurrent 429,952 483,887
Deferred income taxes, noncurrent 17,338 16,582
Other noncurrent liabilities 429,371 441,865
 
Stockholders' (Deficit) 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 852,843 851,280
Treasury stock, at cost, 2,612,847 and 2,791,072 shares (171,771 ) (179,082 )
Accumulated other comprehensive loss (390,629 ) (367,870 )
(Accumulated deficit) Retained earnings   (566,991 )   146,155  
Total stockholders' (deficit) equity   (276,497 )   450,534  
 
Total liabilities and stockholders' (deficit) equity $ 3,330,514   $ 3,807,064  
 

 

   
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
CASH FLOWS Nine Months Ended
December 31,
 
  2018     2017  
Operating Activities
Net loss $ (122,155 ) $ (120,561 )
 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation & amortization 114,349 119,318
Impairment of intangible assets - 190,227
Amortization of acquired contract liabilities (48,769 ) (91,862 )
Loss on divestitures & assets held for sale 17,837 20,371
Curtailment and settlement gain, net - (14,576 )
Other amortization included in interest expense 6,811 9,791
Provision for (recovery of) doubtful accounts receivable 622 (365 )
Provision (benefit) for deferred income taxes - (24,432 )
Employee stock compensation 8,509 6,137
 
Changes in assets & liabilities, excluding the effects of acquisitions/divestitures
Trade and other receivables 8,669 (26,508 )
Contract assets 6,240 15,954
Inventories (61,563 ) (154,090 )
Prepaid expenses and other current assets 1,615 (1,376 )
Accounts payable, accrued expenses and contract liabilities (72,639 ) (53,208 )
Accrued pension and other postretirement benefits (55,150 ) (67,368 )
Other   2,508     (5,731 )
Net cash used in operating activities (193,116 ) (198,279 )
Investing Activities
Capital expenditures (34,824 ) (31,932 )
Proceeds from sale of assets   41,417     68,412  
Net cash provided by investing activities 6,593 36,480
Financing Activities
Net increase in revolving credit facility 218,066 20,000
Proceeds from issuance of long-term debt and capital leases 45,000 531,500
Repayment of debt and capital lease obligations (73,011 ) (369,261 )
Payment of deferred financing costs (1,941 ) (17,729 )
Dividends paid (5,975 ) (5,956 )
Repurchase of restricted shares for minimum tax obligation   (645 )   (369 )
Net cash provided by financing activities   181,494     158,185  
Effect of exchange rate changes on cash   (2,126 )   (1,631 )
Net change in cash (7,155 ) (5,245 )
Cash and equivalents at beginning of period   35,819     69,633  
Cash and equivalents at end of period $ 28,664   $ 64,388  
 
 
FINANCIAL DATA (UNAUDITED)
       
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
 
 
SEGMENT DATA Three Months Ended Nine Months Ended
December 31, December 31,
 
  2018   2017 *   2018   2017 *
 
Net sales:
Integrated Systems $ 252,437 $ 239,198 $ 754,193 $ 711,099
Aerospace Structures 490,337 473,273 1,551,090 1,404,359
Product Support 71,446 68,039 209,860 202,839
Elimination of inter-segment sales   (6,325 )   (5,264 )   (19,240 )   (16,206 )
$ 807,895   $ 775,246   $ 2,495,903   $ 2,302,091  
 
Operating (loss) income:
Integrated Systems $ 39,947 $ 42,216 $ 115,221 $ 130,839
Aerospace Structures (49,813 ) (193,155 ) (152,143 ) (224,726 )
Product Support 11,421 12,399 30,604 32,069
Corporate   (18,488 )   (15,666 )   (79,164 )   (93,416 )
$ (16,933 ) $ (154,206 ) $ (85,482 ) $ (155,234 )
 
Operating Margin %
Integrated Systems 15.8 % 17.6 % 15.3 % 18.4 %
Aerospace Structures -10.2 % -40.8 % -9.8 % -16.0 %
Product Support 16.0 % 18.2 % 14.6 % 15.8 %
Consolidated -2.1 % -19.9 % -3.4 % -6.7 %
 
Depreciation and amortization:
Integrated Systems $ 7,376 $ 8,318 $ 22,316 $ 27,857
Aerospace Structures 27,673 28,898 84,888 85,342
Product Support 1,611 1,663 4,944 5,068
Corporate   744     441     2,201     1,051  
$ 37,404   $ 39,320   $ 114,349   $ 119,318  
 
Amortization of acquired contract liabilities:
Integrated Systems $ (8,172 ) $ (11,634 ) $ (25,789 ) $ (28,235 )
Aerospace Structures   (6,559 )   (22,858 )   (22,980 )   (63,627 )
$ (14,731 ) $ (34,492 ) $ (48,769 ) $ (91,862 )
 
Capital expenditures:
Integrated Systems $ 3,951 $ 1,903 $ 9,388 $ 5,923
Aerospace Structures 5,722 5,791 22,937 22,066
Product Support 852 599 1,871 1,629
Corporate   45     864     628     2,314  
$ 10,570   $ 9,157   $ 34,824   $ 31,932  
 

* Adjusted for ASU 2017-07 (Pension)

 
 
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 and Adjusted EBITDAP, 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 and Adjusted EBITDA, less pension & other postretirement benefits. We disclose Adjusted EBITDA and Adjusted EBITDAP on a consolidated and Adjusted EBITDAP 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 and Adjusted EBITDAP as 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 and Adjusted EBITDAP, 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 and Adjusted EBITDAP are not measurements 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 or Adjusted EBITDAP as substitutes 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 and Adjusted EBITDAP 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 and Adjusted EBITDAP 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 and Adjusted EBITDAP exclude 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 and Adjusted EBITDAP helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe Adjusted EBITDA and Adjusted EBITDAP 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 and Adjusted EBITDAP 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 Adjusted EBITDAP 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.
  • Non-service defined benefit income (inclusive of the adoption of ASU 2017-07) may be useful to investors to consider because they represent the cost of post retirement benefits to plan participants, net of the assumption of returns on the plan's assets and are not indicative of the cash paid for such benefits. We do not believe these earnings (expenses) 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.
  • 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 and Adjusted EBITDAP reconciled to our net income for the indicated periods (in thousands):

   
Three Months Ended Nine Months Ended
December 31, December 31,
  2018       2017     2018       2017  
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA):
Net Loss $ (30,945 ) $ (113,252 ) $ (122,155 ) $ (120,561 )
 
Add-back:
Income Tax Expense (Benefit) 1,223 (32,288 ) 2,739 (34,115 )
Interest Expense and Other 29,309 25,836 83,515 72,229
Loss on divestitures - - 17,837 20,371
Pension settlement charge - (15,099 ) - (14,576 )
Adoption of ASU 2017-07 - - 87,241 -
Amortization of Acquired Contract Liabilities (14,731 ) (34,492 ) (48,769 ) (91,862 )
Depreciation and Amortization   37,404     229,547     114,349     309,545  
 
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") $ 22,260   $ 60,252   $ 134,757   $ 141,031  
 
Non-service defined benefit income (excluding settlements)   (16,520 )   (19,403 )   (49,581 )   (58,211 )
Adjusted Earnings before Interest, Taxes,
Depreciation and Amortization, and Pension ("Adjusted EBITDAP") $ 5,740   $ 40,849   $ 85,176   $ 82,820  
 
Net Sales $ 807,895   $ 775,246   $ 2,495,903   $ 2,302,091  
 
Net Loss Margin   -3.8 %   -14.6 %   -4.9 %   -5.2 %
 
Adjusted EBITDAP Margin   0.7 %   5.5 %   3.5 %   3.7 %
 
         
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)
Three Months Ended December 31, 2018

 

Segment Data

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

Total

Integrated
Systems

Aerospace
Structures

Product Support

Corporate /
Eliminations

 
 
Net Loss $ (30,945 )
 
Add-back:
Non-service defined benefit income $ (16,520 )
Income Tax Expense 1,223
Interest Expense and Other   29,309  
 
Operating (Loss) Income (16,933 ) 39,947 (49,813 ) 11,421 (18,488 )
Amortization of Acquired Contract Liabilities (14,731 ) (8,172 ) (6,559 ) - -
Depreciation and Amortization   37,404     7,376     27,673     1,611     744  
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization, Pension ("Adjusted EBITDAP") $ 5,740   $ 39,151   $ (28,699 ) $ 13,032   $ (17,744 )
 
Net Sales $ 807,895   $ 252,437   $ 490,337   $ 71,446   $ (6,325 )
 
Adjusted EBITDAP Margin   0.7 %   16.0 %   -5.9 %   18.2 %   n/a  
 
 

 

Nine Months Ended December 31, 2018
Segment Data

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

Total

Integrated
Systems

Aerospace
Structures

Product Support

Corporate /
Eliminations

 
Net Loss $ (122,155 )
 
Add-back:
Non-service defined benefit income $ (49,581 )
Income Tax Expense 2,739
Interest Expense and Other   83,515  
 
Operating (Loss) Income (85,482 ) 115,221 (152,143 ) 30,604 (79,164 )
Loss on divestitures 17,837 - - - 17,837
Adoption of ASU 2017-07 87,241 - 87,241 - -
Amortization of Acquired Contract Liabilities (48,769 ) (25,789 ) (22,980 ) - -
Depreciation and Amortization   114,349     22,316     84,888     4,944     2,201  
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization, Pension ("Adjusted EBITDAP") $ 85,176   $ 111,748   $ (2,994 ) $ 35,548   $ (59,126 )
 
Net Sales $ 2,495,903   $ 754,193   $ 1,551,090   $ 209,860   $ (19,240 )
 
Adjusted EBITDAP Margin   3.5 %   15.3 %   -0.2 %   16.9 %   n/a  
 
 
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, and Pension
(EBITDAP):

Total

Integrated
Systems

Aerospace
Structures

Product Support

Corporate /
Eliminations

 
 
Net Loss $ (113,252 )
 
Add-back:
Non-service defined benefit income $ (34,502 )
Income Tax Benefit (32,288 )
Interest Expense and Other   25,836  
 
Operating (Loss) Income (154,206 ) 42,216 (193,155 ) 12,399 (15,666 )
Amortization of Acquired Contract Liabilities (34,492 ) (11,634 ) (22,858 ) - -
Depreciation and Amortization   229,547     8,318     219,125     1,663     441  
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDAP") $ 40,849   $ 38,900   $ 3,112   $ 14,062   $ (15,225 )
 
Net Sales $ 775,246   $ 239,198   $ 473,273   $ 68,039   $ (5,264 )
 
Adjusted EBITDAP Margin   5.5 %   17.1 %   0.7 %   20.7 %   n/a  
 

 

Nine Months Ended December 31, 2017

 

Segment Data

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

Total

Integrated
Systems

Aerospace
Structures

Product Support

Corporate /
Eliminations

 
Net Loss $ (120,561 )
 
Add-back:
Non-service defined benefit income $ (72,787 )
Income Tax Benefit (34,115 )
Interest Expense and Other   72,229  
 
Operating (Loss) Income $ (155,234 ) $ 130,839 $ (224,726 ) $ 32,069 $ (93,416 )
Loss on divestitures 20,371 - - - 20,371
Amortization of Acquired Contract Liabilities (91,862 ) (28,235 ) (63,627 ) - -
Depreciation and Amortization   309,545     27,857     275,569     5,068     1,051  
 
Adjusted Earnings (Losses) before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDAP") $ 82,820   $ 130,461   $ (12,784 ) $ 37,137   $ (71,994 )
 
Net Sales $ 2,302,091   $ 711,099   $ 1,404,359   $ 202,839   $ (16,206 )
 
Adjusted EBITDAP Margin   3.7 %   19.1 %   -1.0 %   18.3 %   n/a  
 
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 

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, 2018

Pre-tax

 

After-tax

 

Diluted EPS

Loss from Continuing Operations- GAAP $ (29,722 ) $ (30,945 ) $ (0.62 )
Adjustments:
Global 7500 forward loss charge 40,498 40,498 0.81
E2 Jet program forward loss charge 9,162 7,604 0.15
G280 program forward loss charge 2,516 2,088 0.04
Restructuring costs   2,327     1,891     0.04  
 
Adjusted Income from Continuing Operations- non-GAAP $ 24,781   $ 21,137   $ 0.42  
 
  Nine Months Ended  

December 31, 2018

FY 19 EPS

Pre-tax

 

After-tax

 

Diluted EPS

Guidance Range

 
Loss from Continuing Operations- GAAP $ (119,416 ) $ (122,155 ) $ (2.46 ) $(1.55) - $(2.10)
Adjustments:
Adoption of ASU 2017-07 87,241 85,474 1.71 $1.71
Loss on divestitures 17,837 17,837 0.36 $0.36
Global 7500 forward loss charge 60,424 57,664 1.16 $1.16
E2 Jet program forward loss charge 9,162 7,604 0.15 $0.15
G280 program forward loss charge 2,516 2,088 0.04 $0.04
Reduction of prior Gulfstream forward loss (7,624 ) (6,328 ) (0.13 ) ($0.13)
Restructuring costs 18,206 15,111 0.30 $0.45 - $0.50
Refinancing costs   1,281     1,063     0.02   $0.02
 
Adjusted Income from Continuing Operations- non-GAAP $ 69,627   $ 58,359   $ 1.17   * $1.50 - $2.10
 
* Difference due to rounding.
 
 
FINANCIAL DATA (UNAUDITED)
     
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 
Non-GAAP Financial Measure Disclosures (continued)
 
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 - included in depreciation) 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 divestitures 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 - included in depreciation) 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.

 
The following table reconciles our Operating income to Adjusted Operating income as noted above.
       
Three Months Ended Nine Months Ended
December 31, December 31,

2018

2017

2018

2017

Operating Income - GAAP $ (16,933 ) $ (154,206 ) $ (85,482 ) $ (155,234 )
Adjustments:
Adoption of ASU 2017-07 - - 87,241 -
Loss on divestitures - - 17,837 20,371
Global 7500 forward loss charge 40,498 - 60,424 -
E2 Jet program forward loss charge 9,162 - 9,162 -
G280 program forward loss charge 2,516 - 2,516 -
Reduction of prior Gulfstream forward loss - - (7,624 ) -
Goodwill Impairment - 190,227 - 190,227
Restructuring costs (non-cash - included in depreciation) - 382 - 2,538
Restructuring costs (cash)   2,327     6,149     18,206     33,751  
Adjusted Operating Income-non-GAAP $ 37,570   $ 42,552   $ 102,280   $ 91,653  
 
 
FINANCIAL DATA (UNAUDITED)
 
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
 

Non-GAAP Financial Measure Disclosures (continued)

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

       
Three Months Ended Nine Months Ended
December 31, December 31,
  2018   2017   2018     2017  
 
Cash flow from operations $ 4,063 $ 100,786 $ (193,116 ) $ (198,279 )
Less:
Capital expenditures (10,570 ) (9,157) (34,824 ) (31,932 )
       
Free cash flow
$ (6,507 ) $ 91,629 $ (227,940 ) $ (230,211 )
 
FY 19 Cash Flow
Guidance Range
 
Cash flow from operations $(150,000) - $(190,000)
Less:
Capital expenditures (50,000) - (60,000)
     
Free cash flow
$(200,000) - ($250,000)
 

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,
  2018     2018  
 

Calculation of Net Debt

Current portion $ 14,460 $ 16,527
Long-term debt   1,619,233     1,421,757  
Total debt 1,633,693 1,438,284
Plus: Deferred debt issuance costs 14,117 16,949
Less: Cash   (28,664 )   (35,819 )
Net debt $ 1,619,146   $ 1,419,414  
 

Calculation of Capital

Net debt $ 1,619,146 $ 1,419,414
Stockholders' (deficit) equity   (276,497 )   450,534  
Total capital $ 1,342,649   $ 1,869,948  
 
Percent of net debt to capital 120.6 % 75.9 %
 

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