Attached files
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| 8-K - 8-K - TRIUMPH GROUP INC | form8-kq4fy14earningsrelea.htm |
Exhibit 99.1
NEWS RELEASE
Contact:
Sheila Spagnolo
Vice President - Tax & Investor Relations
Phone (610) 251-1000
sspagnolo@triumphgroup.com
TRIUMPH GROUP REPORTS FOURTH QUARTER
AND FULL FISCAL YEAR 2014 RESULTS
• | Net sales for fourth quarter fiscal year 2014 were $936.4 million |
• | Net income for fourth quarter fiscal year 2014 was $42.3 million, or $0.80 per diluted share, which included non-recurring costs (see Table A below) totaling approximately $48.1 million pre-tax ($0.59 per diluted share) related to the Jefferson Street facility closure and start-up of the Red Oak facility, early retirement incentives offered to certain Triumph Aerostructures employees and a net curtailment gain related to the Triumph Aerostructures pension plans. Excluding these items, earnings per share were $1.39 per diluted share |
• | Full year revenues and earnings per share were $3.763 billion and $3.91 per diluted share. Excluding non-recurring costs (see Table B below) totaling approximately $72.4 million pre-tax ($0.89 per diluted share), earnings per share were $4.80 per diluted share |
• | Cash flow from operations for fiscal year 2014 before pension contribution of $46.3 million was $181.5 million |
• | Completed closure of the Jefferson Street facility ahead of schedule |
• | Increased share repurchase authority to approximately 5.5 million shares and executed 300,000 share buyback for approximately $19.1 million |
Berwyn, PA - May 7, 2014 - Triumph Group, Inc. (NYSE: TGI) today announced its results for the fourth quarter and full fiscal year ended March 31, 2014.
Jeffry D. Frisby, Triumph’s President and Chief Executive Officer, said, “Triumph ended the fiscal year with earnings on an adjusted basis beyond what we expected. The Aerospace Systems Group and the Aftermarket Services Group were able to deliver strong margins, expanding on a sequential quarterly basis, while the Aerostructures Group, excluding the Jefferson Street move related costs and the 747-8 program, delivered a solid quarter. We have made good progress with the execution of the 747-8 program, which is now stabilized and remains on schedule. The closure of our Jefferson Street facility and move to our new, state of the art facility in Red Oak was successfully completed in the quarter, significantly improving our competitive position for large composite structure and integrated
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assemblies with opportunity for growth. We continued the integration of our recent acquisitions and continued to successfully manage our pension obligations. In addition, we increased our share repurchase authority to approximately 5.5 million shares and executed a 300,000 share buyback during the quarter to provide immediate returns to our shareholders. Moreover, we believe that Triumph is well positioned to take advantage of significant growth opportunities which will provide increased value to our shareholders.”
Fourth Quarter Fiscal 2014 Highlights
For the fourth quarter ended March 31, 2014, net sales were $936.4 million, a five percent decrease from last year’s fourth quarter net sales of $986.3 million. Organic sales for the quarter decreased 11 percent primarily due to production rate cuts on the 747-8 program, lower revenues on the 767 program and a decrease in military sales.
Net income for the fourth quarter of fiscal year 2014 was $42.3 million, or $0.80 per diluted share, versus $65.6 million, or $1.24 per diluted share, for the fourth quarter of the prior fiscal year. The quarter’s results included approximately $48.1 million pre-tax ($31.2 million after tax or $0.59 per diluted share) of non-recurring costs related to the Jefferson Street facility closure and start-up of the Red Oak facility, early retirement incentives offered to certain Triumph Aerostructures employees and a net curtailment gain related to the Triumph Aerostructures pension plan. Excluding these items, earnings per share for the fourth quarter of fiscal 2014 were $1.39 per diluted share. The prior fiscal year’s quarter included $36.0 million pre-tax ($23.2 million after tax or $0.44 per diluted share) of non-recurring costs. Excluding these items, earnings per share for the prior fiscal year’s fourth quarter were $1.68 per diluted share. The number of shares used in computing diluted earnings per share for the quarter was 52.8 million shares.
The following table quantifies each of the non-recurring costs incurred in the fourth quarter of fiscal year 2014 as well as its impact on earnings per share.
TABLE A
Fourth Quarter Ended | ||||||||||||||
March 31, 2014 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
(In thousands) | (In thousands) | |||||||||||||
Adjusted Income from Continuing Operations - non-GAAP | $ | 111,373 | $ | 73,467 | $ | 1.39 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Curtailments | (395 | ) | (256 | ) | (0.00) | Corporate | ||||||||
Early Retirement Incentives | 916 | 594 | 0.01 | Corporate | ||||||||||
Jefferson Street Move: | ||||||||||||||
Relocation Costs (including interest) | 24,125 | 15,633 | 0.30 | Aerostructures (Primarily) | ||||||||||
Disruption | 17,801 | 11,535 | 0.22 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 5,643 | 3,657 | 0.07 | Aerostructures (EAC)** | ||||||||||
Income from Continuing Operations - GAAP | $ | 63,283 | $ | 42,304 | $ | 0.80 | * | |||||||
* Difference due to rounding. | ||||||||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
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Full Fiscal Year 2014 Highlights
For the fiscal year ended March 31, 2014, net sales totaled $3.763 billion, a two percent increase from fiscal year 2013 net sales of $3.703 billion. Organic sales for the fiscal year decreased six percent.
Net income for fiscal year 2014 was $206.3 million, or $3.91 per diluted share, versus $297.3 million, or $5.67 per diluted share, for fiscal year 2013. The fiscal year’s results included approximately $72.4 million pre-tax ($46.9 million after tax or $0.89 per diluted share) of non-recurring costs. Excluding the non-recurring costs, net income for fiscal year 2014 was $253.2 million, or $4.80 per diluted share. The prior fiscal year included approximately $44.2 million pre-tax ($28.5 million after tax or $0.54 per diluted share) of non-recurring costs. Excluding the non-recurring costs, earnings per share for fiscal year 2013 were $6.21 per diluted share. The number of shares used in computing diluted earnings per share for fiscal year 2014 was 52.8 million shares.
The following table quantifies each of the non-recurring costs incurred in fiscal year 2014 as well as its impact on earnings per share.
TABLE B
Fiscal Year Ended | ||||||||||||||
March 31, 2014 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
(In thousands) | (In thousands) | |||||||||||||
Adjusted Income from Continuing Operations - non-GAAP | $ | 384,615 | $ | 253,161 | $ | 4.80 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Settlements and Curtailments, net | 1,166 | 756 | 0.01 | Corporate | ||||||||||
Early Retirement Incentives | 916 | 594 | 0.01 | Corporate | ||||||||||
Jefferson Street Move: | ||||||||||||||
Relocation Costs (including interest) | 31,910 | 20,678 | 0.39 | Aerostructures (Primarily) | ||||||||||
Disruption | 24,714 | 16,015 | 0.30 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 13,676 | 8,862 | 0.17 | Aerostructures (EAC)** | ||||||||||
Income from Continuing Operations - GAAP | $ | 312,233 | $ | 206,256 | $ | 3.91 | * | |||||||
* Difference due to rounding. | ||||||||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
During fiscal year 2014, the company generated $181.5 million of cash flow from operations before Triumph Aerostructures’ pension contributions of $46.3 million; after these contributions, cash flow from operations was $135.1 million.
Segments
Aerostructures
The Aerostructures segment reported net sales for the fourth quarter of fiscal year 2014 of $632.6 million compared to $720.7 million for the prior fiscal year period. Organic sales for the quarter declined fourteen percent primarily due to production rate cuts on the 747-8 program, lower revenues on the 767
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program and a decrease in military sales. For the fiscal year 2014, net sales decreased six percent to $2.612 billion from $2.781 billion for the prior fiscal year. For the fourth quarter of fiscal
year 2014, operating income was $36.2 million compared to $110.9 million for the prior fiscal year period and included $47.4 million of pre-tax charges related to the Jefferson Street facility move and $16.0 million of previously disclosed pre-tax charges resulting from reductions in the profitability estimates on the 747-8 program. Operating income for fiscal year 2014 was $255.0 million, compared to $469.9 million for the prior fiscal year. The segment’s operating results for the quarter included a net unfavorable cumulative catch-up adjustment on long-term contracts of $27.4 million, of which $20.6 million was related to the Jefferson Street facility move and $6.8 million was related primarily to the C-17 program. The segment’s operating margin for the quarter was six percent. Excluding the Jefferson Street move related costs and the 747-8 program, the segment’s operating margin for the quarter was approximately 17 percent.
Aerospace Systems
The Aerospace Systems segment reported net sales for the fourth quarter of fiscal year 2014 of $235.3 million compared to $184.1 million for the prior fiscal year period, an increase of twenty-eight percent. Organic sales growth for the quarter was one percent. For the fiscal year 2014, net sales increased forty-two percent to $871.8 million from $615.8 million for the prior fiscal year. Organic sales growth for the fiscal year was one percent. Operating income for the fourth quarter of fiscal year 2014 increased twenty-eight percent to $42.8 million versus $33.4 million for the prior fiscal year quarter. Operating margin for the quarter, while unchanged from the prior fiscal year period, increased sequentially to eighteen percent, a 280 basis points improvement. Operating income for fiscal year 2014 was $149.7 million, compared to $103.2 million for the prior fiscal year, an increase of forty-five percent. Operating margin for the fiscal year was seventeen percent. The segment’s fourth quarter and fiscal year 2014 operating results included $0.5 million and $6.8 million, respectively, of legal expenses associated with the ongoing trade secret litigation.
Aftermarket Services
The Aftermarket Services segment reported net sales for the fourth quarter of fiscal year 2014 of $70.5 million, compared to $83.9 million for the prior fiscal year period. The year over year decrease reflected the impact of the divestitures of the Instrument Companies. Organic sales for the quarter decreased nine percent primarily due to the timing of completion of certain contracts and continued military weakness. For the fiscal year 2014, net sales decreased nine percent to $287.3 million from $314.5 million for the prior fiscal year. Organic sales for the fiscal year decreased one percent. Operating income for the fourth quarter of fiscal year 2014 was $11.6 million compared to $13.0 million for the prior fiscal year quarter. Operating margin for the quarter increased to sixteen percent, a 100 basis points improvement over the prior year, driven primarily by a gain on the sale of a rotable asset and improved operating performance. Operating income for fiscal year 2014 was $42.3 million, compared to $45.4 million for the prior fiscal year. Operating margin for the fiscal year was fifteen percent.
Outlook
In commenting on the outlook for fiscal year 2015, Mr. Frisby said, “We are entering our new fiscal year with continued focus on improving operational execution and efficiency, reducing our cost structure, investing in key programs and technologies that will position Triumph for long-term growth and profitability and opportunistically buying back shares to return capital to our shareholders. We project
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sales in the range of $3.7 to $3.8 billion and earnings per share excluding non-recurring costs detailed below for fiscal year 2015 of $5.65 to $5.75 per diluted share.”
Adjusted Earnings Per Share-non-GAAP | $5.65 - $5.75 | ||
Non-Recurring Costs: | |||
Jefferson Street/Red Oak Overhang Costs | $ | 0.26 | |
Anticipated Refinancing Fees Related to | |||
the Senior Notes Due 2018 | $ | 0.26 | |
Earnings Per Share - GAAP | $5.13 - $5.23 | ||
The overall guidance is based on the following assumptions for fiscal year 2015:
• | interest expense of $68.0 million, excluding refinancing fees |
• | tax rate of 35.5%, which assumes the extension of the Research and Development tax credit |
• | capital expenditures and investments in major new programs of $240.0 million to $260.0 million, of which approximately $125.0 million relates to investments in major new programs |
• | pension income of approximately $52.0 million and cash contributions to the plan of approximately $110.0 million |
• | OPEB expense of approximately $11.0 million and cash expenditures of approximately $27.0 million |
• | productions rates based on known customer schedules |
• | completion of C-17 production three months earlier than previously planned |
• | cash available for debt reduction, acquisitions and share repurchases of approximately $250.0 million |
As previously announced, Triumph Group will hold a conference call tomorrow at 8:30 a.m. (ET) to discuss the fiscal year 2014 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 May 8th to May 14th by calling (888) 266-2081 (Domestic) or (703) 925-2533 (International), passcode #1636202.
Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerostructures, aircraft 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 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 statements of expectations of or assumptions about future aerospace market conditions, aircraft production rates, financial and operational performance and revenue, earnings and cash flow for fiscal year 2015. All forward-looking statements involve risks and uncertainties which could affect the company’s actual results and could cause
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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, 2013.
FINANCIAL DATA (UNAUDITED) ON FOLLOWING PAGES
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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 | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net sales | $ | 936,410 | $ | 986,268 | $ | 3,763,254 | $ | 3,702,702 | ||||||||
Operating income | 80,908 | 112,966 | 400,004 | 531,213 | ||||||||||||
Interest expense and other | 17,625 | 17,488 | 87,771 | 68,156 | ||||||||||||
Income tax expense | 20,979 | 29,876 | 105,977 | 165,710 | ||||||||||||
Net Income | $ | 42,304 | $ | 65,602 | $ | 206,256 | $ | 297,347 | ||||||||
Earnings per share - basic: | ||||||||||||||||
Net income | $ | 0.81 | $ | 1.32 | $ | 3.99 | $ | 5.99 | ||||||||
Weighted average common shares outstanding - basic | 52,199 | 49,814 | 51,711 | 49,663 | ||||||||||||
Earnings per share - diluted: | ||||||||||||||||
Net income | $ | 0.80 | $ | 1.24 | $ | 3.91 | $ | 5.67 | ||||||||
Weighted average common shares outstanding - diluted | 52,752 | 52,708 | 52,787 | 52,446 | ||||||||||||
Dividends declared and paid per common share | $ | 0.04 | $ | 0.04 | $ | 0.16 | $ | 0.16 | ||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
BALANCE SHEET | Unaudited | Audited | ||||||
March 31 | March 31, | |||||||
2014 | 2013 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 28,998 | $ | 32,037 | ||||
Accounts receivable, net | 517,665 | 448,865 | ||||||
Inventory, net of unliquidated progress payments of $165,019 and $124,128 | 1,109,887 | 985,535 | ||||||
Rotable assets | 41,666 | 34,853 | ||||||
Deferred income taxes | 57,308 | 99,546 | ||||||
Prepaid and other current assets | 24,897 | 24,481 | ||||||
Assets held for sale | — | 14,747 | ||||||
Current assets | 1,780,421 | 1,640,064 | ||||||
Property and equipment, net | 930,973 | 815,084 | ||||||
Goodwill | 1,793,487 | 1,721,720 | ||||||
Intangible assets, net | 978,182 | 995,519 | ||||||
Other, net | 69,954 | 66,792 | ||||||
Total assets | $ | 5,553,017 | $ | 5,239,179 | ||||
Liabilities & Stockholders' Equity | ||||||||
Current portion of long-term debt | $ | 49,575 | $ | 133,930 | ||||
Accounts payable | 317,334 | 327,008 | ||||||
Accrued expenses | 273,024 | 283,687 | ||||||
Liabilities related to assets held for sale | — | 2,621 | ||||||
639,933 | 747,246 | |||||||
Long-term debt, less current portion | 1,500,808 | 1,195,933 | ||||||
Accrued pension and post-retirement benefits, noncurrent | 508,516 | 671,175 | ||||||
Deferred income taxes, noncurrent | 385,085 | 310,794 | ||||||
Other noncurrent liabilities | 234,764 | 268,873 | ||||||
Stockholders' Equity: | ||||||||
Common stock, $.001 par value, 100,000,000 shares authorized, 52,459,020 and 50,123,035 shares issued | 52 | 50 | ||||||
Capital in excess of par value | 866,281 | 848,372 | ||||||
Treasury stock, at cost, 300,000 and 0 shares | (19,134 | ) | — | |||||
Accumulated other comprehensive income | (18,908 | ) | (60,972 | ) | ||||
Retained earnings | 1,455,620 | 1,257,708 | ||||||
Total stockholders' equity | 2,283,911 | 2,045,158 | ||||||
Total liabilities and stockholders' equity | $ | 5,553,017 | $ | 5,239,179 | ||||
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FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
SEGMENT DATA | Three Months Ended | Twelve Months Ended | ||||||||||||||
March 31, | March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net Sales: | ||||||||||||||||
Aerostructures | $ | 632,601 | $ | 720,722 | $ | 2,612,439 | $ | 2,781,344 | ||||||||
Aerospace Systems | 235,339 | 184,061 | 871,750 | 615,771 | ||||||||||||
Aftermarket Services | 70,463 | 83,881 | 287,343 | 314,506 | ||||||||||||
Elimination of inter-segment sales | (1,993 | ) | (2,396 | ) | (8,278 | ) | (8,919 | ) | ||||||||
$ | 936,410 | $ | 986,268 | $ | 3,763,254 | $ | 3,702,702 | |||||||||
Operating Income (Loss): | ||||||||||||||||
Aerostructures | $ | 36,208 | $ | 110,901 | $ | 254,993 | $ | 469,873 | ||||||||
Aerospace Systems | 42,834 | 33,440 | 149,721 | 103,179 | ||||||||||||
Aftermarket Services | 11,586 | 12,950 | 42,264 | 45,380 | ||||||||||||
Corporate | (9,720 | ) | (44,325 | ) | (46,974 | ) | (87,219 | ) | ||||||||
$ | 80,908 | $ | 112,966 | $ | 400,004 | $ | 531,213 | |||||||||
Depreciation and Amortization: | ||||||||||||||||
Aerostructures | $ | 31,300 | $ | 23,751 | $ | 114,302 | $ | 95,884 | ||||||||
Aerospace Systems | 9,542 | 6,199 | 37,453 | 19,869 | ||||||||||||
Aftermarket Services | 1,926 | 2,221 | 7,529 | 9,118 | ||||||||||||
Corporate | 1,229 | 1,190 | 4,993 | 4,635 | ||||||||||||
$ | 43,997 | $ | 33,361 | $ | 164,277 | $ | 129,506 | |||||||||
Amortization of Acquired Contract Liabilities: | ||||||||||||||||
Aerostructures | $ | (5,071 | ) | $ | (5,683 | ) | $ | (25,207 | ) | $ | (25,457 | ) | ||||
Aerospace Systems | (3,185 | ) | (187 | ) | (17,422 | ) | (187 | ) | ||||||||
$ | (8,256 | ) | $ | (5,870 | ) | $ | (42,629 | ) | $ | (25,644 | ) | |||||
Capital Expenditures: | ||||||||||||||||
Aerostructures | $ | 34,993 | $ | 24,300 | $ | 167,198 | $ | 90,466 | ||||||||
Aerospace Systems | 5,946 | 8,328 | 21,935 | 19,388 | ||||||||||||
Aftermarket Services | 3,145 | 4,009 | 13,940 | 14,820 | ||||||||||||
Corporate | 531 | 596 | 3,341 | 2,216 | ||||||||||||
$ | 44,615 | $ | 37,233 | $ | 206,414 | $ | 126,890 | |||||||||
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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, 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:
• | 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. |
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
• | 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 reconciled to our net income for the indicated periods:
Three Months Ended | Twelve Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | ||||||||||||||||
Net income | $ | 42,304 | $ | 65,602 | $ | 206,256 | $ | 297,347 | ||||||||
Add-back: | ||||||||||||||||
Income tax expense | 20,979 | 29,876 | 105,977 | 165,710 | ||||||||||||
Interest expense and other | 17,625 | 17,488 | 87,771 | 68,156 | ||||||||||||
Curtailments, settlements and early retirement incentives | (395 | ) | 29,344 | 1,166 | 34,481 | |||||||||||
Amortization of acquired contract liabilities | (8,256 | ) | (5,870 | ) | (42,629 | ) | (25,644 | ) | ||||||||
Depreciation and amortization | 43,997 | 33,361 | 164,277 | 129,506 | ||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 116,254 | $ | 169,801 | $ | 522,818 | $ | 669,556 | ||||||||
Net sales | $ | 936,410 | $ | 986,268 | $ | 3,763,254 | $ | 3,702,702 | ||||||||
Adjusted EBITDA Margin | 12.5 | % | 17.3 | % | 14.1 | % | 18.2 | % | ||||||||
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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 March 31, 2014 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Aerostructures | Aerospace Systems | Aftermarket Services | Corporate/Eliminations | ||||||||||||||||
Net Income | $ | 42,304 | |||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax expense | 20,979 | ||||||||||||||||||||
Interest expense and other | 17,625 | ||||||||||||||||||||
Operating income (loss) | $ | 80,908 | $ | 36,208 | $ | 42,834 | $ | 11,586 | $ | (9,720 | ) | ||||||||||
Pension/OPEB curtailment | (395 | ) | — | — | — | (395 | ) | ||||||||||||||
Amortization of acquired contract liabilities | (8,256 | ) | (5,071 | ) | (3,185 | ) | — | — | |||||||||||||
Depreciation and amortization | 43,997 | 31,300 | 9,542 | 1,926 | 1,229 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 116,254 | $ | 62,437 | $ | 49,191 | $ | 13,512 | $ | (8,886 | ) | ||||||||||
Net sales | $ | 936,410 | $ | 632,601 | $ | 235,339 | $ | 70,463 | $ | (1,993 | ) | ||||||||||
Adjusted EBITDA Margin | 12.5% | 9.9% | 21.2% | 19.2% | n/a | ||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Twelve Months Ended March 31, 2014 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Aerostructures | Aerospace Systems | Aftermarket Services | Corporate/Eliminations | ||||||||||||||||
Net Income | $ | 206,256 | |||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax expense | 105,977 | ||||||||||||||||||||
Interest expense and other | 87,771 | ||||||||||||||||||||
Operating income (loss) | $ | 400,004 | $ | 254,993 | $ | 149,721 | $ | 42,264 | $ | (46,974 | ) | ||||||||||
Net pension (curtailment) settlement | 1,166 | — | — | — | 1,166 | ||||||||||||||||
Amortization of acquired contract liabilities | (42,629 | ) | (25,207 | ) | (17,422 | ) | — | — | |||||||||||||
Depreciation and amortization | 164,277 | 114,302 | 37,453 | 7,529 | 4,993 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 522,818 | $ | 344,088 | $ | 169,752 | $ | 49,793 | $ | (40,815 | ) | ||||||||||
Net sales | $ | 3,763,254 | $ | 2,612,439 | $ | 871,750 | $ | 287,343 | $ | (8,278 | ) | ||||||||||
Adjusted EBITDA Margin | 14.1% | 13.3% | 19.9% | 17.3% | n/a | ||||||||||||||||
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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 March 31, 2013 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Aerostructures | Aerospace Systems | Aftermarket Services | Corporate / Eliminations | ||||||||||||||||
Net Income | $ | 65,602 | |||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax expense | 29,876 | ||||||||||||||||||||
Interest expense and other | 17,488 | ||||||||||||||||||||
Operating income (loss) | $ | 112,966 | $ | 110,901 | $ | 33,440 | $ | 12,950 | $ | (44,325 | ) | ||||||||||
Curtailments and early retirement incentives | 29,344 | — | — | — | 29,344 | ||||||||||||||||
Amortization of acquired contract liabilities | (5,870 | ) | (5,683 | ) | (187 | ) | — | — | |||||||||||||
Depreciation and amortization | 33,361 | 23,751 | 6,199 | 2,221 | 1,190 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 169,801 | $ | 128,969 | $ | 39,452 | $ | 15,171 | $ | (13,791 | ) | ||||||||||
Net sales | $ | 986,268 | $ | 720,722 | $ | 184,061 | $ | 83,881 | $ | (2,396 | ) | ||||||||||
Adjusted EBITDA Margin | 17.3% | 18.0% | 21.5% | 18.1% | n/a | ||||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Twelve Months Ended March 31, 2013 | |||||||||||||||||||||
Segment Data | |||||||||||||||||||||
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): | Total | Aerostructures | Aerospace Systems | Aftermarket Services | Corporate / Eliminations | ||||||||||||||||
Net Income | $ | 297,347 | |||||||||||||||||||
Add-back: | |||||||||||||||||||||
Income tax expense | 165,710 | ||||||||||||||||||||
Interest expense and other | 68,156 | ||||||||||||||||||||
Operating income (loss) | $ | 531,213 | $ | 469,873 | $ | 103,179 | $ | 45,380 | $ | (87,219 | ) | ||||||||||
Curtailments and early retirement incentives | 34,481 | — | — | — | 34,481 | ||||||||||||||||
Amortization of acquired contract liabilities | (25,644 | ) | (25,457 | ) | (187 | ) | — | — | |||||||||||||
Depreciation and amortization | 129,506 | 95,884 | 19,869 | 9,118 | 4,635 | ||||||||||||||||
Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") | $ | 669,556 | $ | 540,300 | $ | 122,861 | $ | 54,498 | $ | (48,103 | ) | ||||||||||
Net sales | $ | 3,702,702 | $ | 2,781,344 | $ | 615,771 | $ | 314,506 | $ | (8,919 | ) | ||||||||||
Adjusted EBITDA Margin | 18.2% | 19.6% | 20.0% | 17.3% | n/a | ||||||||||||||||
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(Continued)
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 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 | ||||||||||||||
March 31, 2014 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
Income from Continuing Operations - GAAP | $ | 63,283 | $ | 42,304 | $ | 0.80 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Curtailments | (395 | ) | (256 | ) | (0.00) | Corporate | ||||||||
Early retirement incentives | 916 | 594 | 0.01 | Corporate | ||||||||||
Relocation Costs (including interest) | 24,125 | 15,633 | 0.30 | Aerostructures (Primarily) | ||||||||||
Jefferson Street Move: | ||||||||||||||
Disruption | 17,801 | 11,535 | 0.22 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 5,643 | 3,657 | 0.07 | Aerostructures (EAC)** | ||||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 111,373 | $ | 73,467 | $ | 1.39 | * | |||||||
* Difference due to rounding. | ||||||||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
Twelve Months Ended | ||||||||||||||
March 31, 2014 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
Income from Continuing Operations - GAAP | $ | 312,233 | $ | 206,256 | $ | 3.91 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Settlements and curtailments, net | 1,166 | 756 | 0.01 | Corporate | ||||||||||
Early retirement incentives | 916 | 594 | 0.01 | Corporate | ||||||||||
Relocation Costs (including interest) | 31,910 | 20,678 | 0.39 | Aerostructures (Primarily) | ||||||||||
Jefferson Street Move: | ||||||||||||||
Disruption | 24,714 | 16,015 | 0.30 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 13,676 | 8,862 | 0.17 | Aerostructures (EAC)** | ||||||||||
Adjusted Income from continuing operations - non-GAAP | $ | 384,615 | $ | 253,161 | $ | 4.80 | * | |||||||
* Difference due to rounding. | ||||||||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
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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 | ||||||||||||||
March 31, 2014 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
Income from Continuing Operations - GAAP | $ | 95,478 | $ | 65,602 | $ | 1.24 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Curtailments | 23,662 | 15,250 | 0.29 | Corporate | ||||||||||
Early retirement incentives | 5,682 | 3,662 | 0.07 | Corporate | ||||||||||
Integration | 438 | 282 | 0.01 | Aerostructures (Primarily) | ||||||||||
Pension remeasurement | 1,800 | 1,160 | 0.02 | Aerostructures (EAC)** | ||||||||||
Jefferson Street Move: | ||||||||||||||
Disruption | 600 | 387 | 0.01 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 800 | 516 | 0.01 | Aerostructures (EAC)** | ||||||||||
Deal Costs-Primarily Triumph Engine Control Systems | 3,027 | 1,951 | 0.04 | Corporate | ||||||||||
Income from continuing operations - non-GAAP | $ | 131,487 | $ | 88,810 | $ | 1.68 | * | |||||||
* Difference due to rounding. | ||||||||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
Twelve Months Ended | ||||||||||||||
March 31, 2013 | Location on | |||||||||||||
Pre-Tax | After-Tax | Diluted EPS | Financial Statements | |||||||||||
Income from Continuing Operations - GAAP | $ | 463,057 | $ | 297,347 | $ | 5.67 | ||||||||
Non-Recurring Costs: | ||||||||||||||
Curtailments | 23,662 | 15,250 | 0.29 | Corporate | ||||||||||
Early retirement incentives | 10,819 | 6,973 | 0.13 | Corporate | ||||||||||
Integration | 2,665 | 1,718 | 0.03 | Aerostructures (Primarily) | ||||||||||
Pension remeasurement | 1,800 | 1,160 | 0.02 | Aerostructures (EAC)** | ||||||||||
Jefferson Street Move: | ||||||||||||||
Disruption | 600 | 387 | 0.01 | Aerostructures (EAC)** | ||||||||||
Accelerated Depreciation | 800 | 516 | 0.01 | Aerostructures (EAC)** | ||||||||||
Deal Costs-Primarily Triumph Engine Control Systems | 3,892 | 2,508 | 0.05 | Corporate | ||||||||||
Income from continuing operations - non-GAAP | $ | 507,295 | $ | 325,859 | $ | 6.21 | ||||||||
** EAC - estimated costs at completion with respect to contracts within the scope of Accounting Standards Codification 605-35, "Revenue-Construction-Type and Production-Type Contracts" | ||||||||||||||
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(Continued)
FINANCIAL DATA (UNAUDITED)
TRIUMPH GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
Non-GAAP Financial Measure Disclosures (continued)
Cash provided by operations, before pension contributions has been provided for consistency and comparability. We also use free cash flow available for debt reduction as a key factor in planning for and consideration of strategic acquisitions, stock repurchases and the repayment of debt. This measure should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. The following table reconciles cash provided by operations, before pension contributions to cash provided by operations, as well as cash provided by operations to free cash flow available for debt reduction.
Twelve Months Ended | ||||||||
March 31, | ||||||||
2014 | 2012 | |||||||
Cash provided by operations, before pension contributions | $ | 181,483 | $ | 430,736 | ||||
Pension contributions | 46,347 | 109,818 | ||||||
Cash provided by operations | 135,136 | 320,918 | ||||||
Less: | ||||||||
Capital expenditures | 206,414 | 126,890 | ||||||
Dividends | 8,334 | 8,005 | ||||||
Free cash flow available for debt reduction | $ | (79,612 | ) | $ | 186,023 | |||
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, | |||||||
2014 | 2013 | |||||||
Calculation of Net Debt | ||||||||
Current portion | $ | 49,575 | $ | 133,930 | ||||
Long-term debt | 1,500,808 | 1,195,933 | ||||||
Total debt | 1,550,383 | 1,329,863 | ||||||
Less: Cash | 28,998 | 32,037 | ||||||
Net debt | $ | 1,521,385 | $ | 1,297,826 | ||||
Calculation of Capital | ||||||||
Net debt | $ | 1,521,385 | $ | 1,297,826 | ||||
Stockholders' equity | 2,283,911 | 2,045,158 | ||||||
Total capital | $ | 3,805,296 | $ | 3,342,984 | ||||
Percent of net debt to capital | 40.0 | % | 38.8 | % | ||||
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