Triumph Group Reports Record Fourth Quarter and Full Fiscal Year 2013 Results

Triumph Group Reports Record Fourth Quarter and Full Fiscal Year 2013 Results

  • Record net sales for fourth quarter fiscal year 2013 increased 4% to $986.3 million
  • Income from continuing operations for fourth quarter fiscal year 2013 was $65.6 million, or $1.24 per diluted share, which included non-recurring costs (see Table A below) totaling approximately $36.0 million pre-tax ($0.44 per diluted share). Excluding these costs, earnings per share from continuing operations was $1.68 per diluted share
  • Record full year revenues and earnings per share from continuing operations of $3.703 billion and $5.67 per diluted share. Excluding non-recurring costs (see Table B below) totaling approximately $44.2 million pre-tax ($0.54 per diluted share), earnings per share from continuing operations was $6.21 per diluted share
  • Record cash flow from operations for fiscal year 2013 before pension contribution of $109.8 million was $453.2 million
  • Successfully completed acquisition of Triumph Engine Control Systems (formerly Goodrich Pump & Engine Control Systems)

BERWYN, Pa.--(BUSINESS WIRE)-- Triumph Group, Inc. (NYSE: TGI) today reported that, for the fourth quarter ended March 31, 2013, net sales were a record $986.3 million, a four percent increase from last year's fourth quarter net sales of $946.4 million. Organic sales growth for the quarter was two percent.

Income from continuing operations for the fourth quarter of fiscal year 2013 was $65.6 million, or $1.24 per diluted share, versus $106.3 million, or $2.03 per diluted share, for the fourth quarter of the prior fiscal year. The quarter's results included approximately $36.0 million pre-tax ($23.2 million after tax or $0.44 per diluted share) of non-recurring costs. Excluding the non-recurring costs, earnings per share from continuing operations for the quarter were $1.68 per diluted share. The prior fiscal year's quarter included a $40.4 million pre-tax ($26.1 million after tax) net curtailment gain and $2.6 million pre-tax ($1.7 million after tax) of integration costs associated with the Vought acquisition Excluding integration costs and the net curtailment gain, earnings per share from continuing operations for the prior fiscal year's fourth quarter was $1.57 per diluted share. The number of shares used in computing diluted earnings per share for the quarter was 52.7 million shares.


The following table quantifies each of the non-recurring costs incurred in the fourth quarter of fiscal year 2013 as well as its impact on earnings per share from continuing operations.

       

TABLE A

Fourth Quarter Ended

March 31, 2013

Pre-tax

After tax

Diluted

Location on

(In thousands)

(In thousands)

EPS

Financial Statements

 
Adjusted Income from Continuing Operations- non-GAAP $ 131,487 $ 88,810 $ 1.68
 
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:
Accelerated Depreciation $ (800 ) $ (516 ) $ (0.01 ) Aerostructures (EAC) **
Disruption $ (600 ) $ (387 ) $ (0.01 ) Aerostructures (EAC) **
Deal Costs- Primarily Triumph Engine Control Systems Acquisition $ (3,027 ) $ (1,951 ) $ (0.04 ) Corporate
Sub-total Non-Recurring Costs $ (36,009 ) $ (23,208 ) $ (0.44 ) *
 
 
Income from Continuing Operations- GAAP $ 95,478   $ 65,602   $ 1.24  
 

*

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"

 

Full Fiscal Year Highlights

For the fiscal year ended March 31, 2013, net sales totaled $3.703 billion, a nine percent increase from fiscal year 2012 net sales of $3.408 billion. Organic sales growth for the fiscal year was eight percent.

Income from continuing operations for fiscal year 2013 was $297.3 million, or $5.67 per diluted share, versus $281.6 million, or $5.43 per diluted share, for fiscal year 2012. The fiscal year's results 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, income from continuing operations for fiscal year 2013 was $325.9 million, or $6.21 per diluted share. The prior fiscal year included a net curtailment gain of $40.4 million pre-tax ($26.1 million after tax) as well as $6.3 million pre-tax ($4.1 million after tax) of integration costs associated with the Vought acquisition. Excluding integration costs and the net curtailment gain, earnings per share from continuing operations for fiscal year 2012 was $5.01 per diluted share. The number of shares used in computing diluted earnings per share for fiscal year 2013 was 52.4 million shares. The following table quantifies each of the non-recurring costs incurred in fiscal year 2013 as well as its impact on earnings per share from continuing operations.

       

TABLE B

Fiscal Year Ended

March 31, 2013

Pre-tax

After tax

Diluted

Location on

(In thousands)

(In thousands)

EPS

Financial Statements

 
Adjusted Income from Continuing Operations- non-GAAP $ 507,295 $ 325,859 $ 6.21
 
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:
Accelerated Depreciation $ (800 ) $ (516 ) $ (0.01 ) Aerostructures (EAC) **
Disruption $ (600 ) $ (387 ) $ (0.01 ) Aerostructures (EAC) **
Deal Costs- Primarily Triumph Engine Control Systems Acquisition $ (3,892 ) $ (2,508 ) $ (0.05 ) Corporate
Sub-total Non-Recurring Costs $ (44,238 ) $ (28,512 ) $ (0.54 )
 
 
Income from Continuing Operations- GAAP $ 463,057   $ 297,347   $ 5.67  
 

**

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 the fiscal year, the company generated $453.2 million of cash flow from operations before Triumph Aerostructures' pension contributions of $109.8 million; after these contributions, cash flow from operations was $343.4 million.

Jeffry D. Frisby, Triumph's President and Chief Executive Officer, said, "Triumph had an excellent fiscal year 2013 capped by a strong fourth quarter. Full year and fourth quarter sales and earnings were at record levels and we generated record cash flow for the year. In fiscal year 2013, all three of our business segments executed well and delivered year-over-year operating margin expansion. We successfully completed the acquisitions of Embee, Inc. and Goodrich Pump and Engine Control Systems, which in addition to providing a better balance within our business, significantly advanced our technical capabilities and positioned us well for future growth. In early April, we completed the sale of our two Aftermarket Services' Instruments Companies, which we determined to be non-core. In addition, we continued the successful integration of Triumph Aerostructures and continued to successfully manage our pension obligations."

"As we enter fiscal year 2014, Triumph is a strong company with a very solid balance sheet and an increasing backlog. Even as we face the challenges of political and fiscal uncertainty, we are confident that Triumph is well positioned to deliver long-term growth and profitability."

Segments

Aerostructures

The Aerostructures segment reported net sales for the fourth quarter of fiscal year 2013 of $720.7 million compared to $714.2 million for the prior fiscal year period, an increase of one percent, all of which was organic. For the fiscal year 2013, net sales increased eight percent to $2.781 billion from $2.572 billion for the prior fiscal year, all of which was organic. For the fourth quarter of fiscal year 2013, operating income was $110.9 million versus $119.0 million for the prior fiscal year quarter and included a net unfavorable cumulative catch-up adjustment on long-term contracts of $10.2 million. Operating income for fiscal year 2013 was $469.9 million, compared to $403.4 million for the prior fiscal year, an increase of sixteen percent. The segment's operating margin for the quarter was fifteen percent. The segment's operating results and the cumulative catch-up adjustment for the quarter included charges of $1.8 million related to pension remeasurement, $1.0 million related to early retirement incentives and $1.4 million related to the Jefferson Street facility move.

Aerospace Systems

The Aerospace Systems segment reported net sales for the fourth quarter of fiscal year 2013 of $184.1 million compared to $151.7 million for the prior fiscal year period, an increase of twenty-one percent. Organic sales growth for the quarter was eight percent. For the fiscal year 2013, net sales increased twelve percent to $615.8 million from $551.8 million for the prior fiscal year. Organic sales growth for the fiscal year was eight percent. Operating income for the fourth quarter of fiscal year 2013 increased twenty-seven percent to $33.4 million versus $26.4 million for the prior fiscal year quarter. Operating margin for the quarter increased to eighteen percent versus seventeen percent in the prior fiscal year period. Operating income for fiscal year 2013 was $103.2 million, compared to $90.0 million for the prior fiscal year, an increase of fifteen percent. Operating margin for the fiscal year was seventeen percent. The segment's fourth quarter and fiscal year 2013 operating results included approximately $0.9 million and $1.6 million, respectively, of costs associated with Hurricane Sandy as well as $1.3 million and $4.8 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 2013 of $83.9 million, compared to $83.1 million for the prior fiscal year period, an increase of one percent, all of which was organic. For the fiscal year 2013, net sales increased seven percent to $314.5 million from $292.7 million for the prior fiscal year. Organic sales growth for the fiscal year was five percent. Operating income for the fourth quarter of fiscal year 2013 increased eighteen percent to $13.0 million versus $11.0 million for the prior fiscal year quarter. Operating margin for the quarter increased to a record fifteen percent, a 220 basis points improvement over the prior year, driven primarily by market growth and improved operating performance. Operating income for fiscal year 2013 was $45.4 million, compared to $31.9 million for the prior fiscal year, an increase of forty-two percent. Operating margin for the fiscal year was fourteen percent. Results for the fourth quarter of fiscal year 2013 included a net loss on assets held for sale of $0.8 million, which was primarily attributable to the sale of the assets of the Instruments Companies.

Outlook

In commenting on the outlook for fiscal year 2014, Mr. Frisby said, "We are entering our new fiscal year with a continued focus on improving execution, driving integration and controlling costs. We project sales in the range of $3.8 to $4.0 billion and earnings per share from continuing operations for the fiscal year of $5.65 to $5.75 per diluted share. Excluding the Jefferson Street move related costs, earnings per share from continuing operations for fiscal year 2014 are expected to be $6.30 to $6.40 per diluted share."

From a segment perspective, the company expects the following:

  • Aerostructures- revenue down slightly as a result of reductions in 767 and 747-8. Excluding Jefferson Street move related costs, operating income and operating margin will increase
  • Aerospace Systems- revenue up significantly due to fiscal year 2013 acquisitions with modest increase organically. Operating income up with expected margin impact from fiscal year 2013 acquisitions
  • Aftermarket Services- revenues essentially flat- organic growth offsetting the impact of the sale of the Instrument Companies with growth in operating income and margins

The overall guidance is based on the following assumptions for fiscal year 2014:

  • the number of shares used in computing diluted earnings per share is 53.1 million
  • $5.0 million of legal expenses associated with the trade secret litigation
  • interest expense of $80.0 million
  • tax rate of 36.0% reflecting the expiration of the R&D tax credit at December 31, 2013
  • capital expenditures and investments in major new programs of $340.0 million to $360.0 million, of which $50.0 million relates to capital for the Bombardier 7000/8000 wing, $100.0 million relates to capital for the Jefferson Street move, and $115.0 million to be reflected in inventory (net of advances)
  • pension income of approximately $31.0 million and cash contributions to the plan of approximately $116.0 million
  • OPEB expense of approximately $11.0 million and cash expenditures of approximately $33.0 million
  • current productions rates - specifically:
    • 777 production rate at 8 per month
    • 737 production rates of 38 per month increasing to 42 per month in the second half of the fiscal year
    • 747 production rates of 2 per month declining to 1.75 per month in the second half of the fiscal year
    • the most recent 787 production schedule
    • 767/tanker production rates decreasing to approximately 1 per month
    • A330 production of 10 per month
    • C-17 production of 10 units
    • other than C-17 mentioned above, production rates for the company's largest military programs (i.e. V-22, UH 60, C130) will show modest declines of approximately 10 to 15 percent
  • business jet market generally consistent with fiscal year 2013
  • continued strength in the Aftermarket Services segment of the business
  • cash available for debt reduction of approximately $150 million, excluding new acquisitions
  • reflects estimates for customer price concessions (net of cost reduction) and projected cost of two union negotiations

As previously announced, Triumph Group will hold a conference call tomorrow at 8:30 a.m. (ET) to discuss the fiscal year 2013 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 2nd to May 9th by calling (888) 266-2081 (Domestic) or (703) 925-2533 (International), passcode #1610837.

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, revenue and earnings growth, and earnings results for fiscal 2014. All forward-looking statements involve risks and uncertainties which could affect the company's actual results and could cause its actual results to differ materially from those expressed in any forward looking statements made by, or on behalf of, the company.

Further information regarding the important factors that could cause actual results to differ from projected results can be found in Triumph's reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

 
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 2013 2012 2013 2012
 
 
Net sales $ 986,268 $ 946,376 $ 3,702,702 $ 3,407,929
 
Operating income 112,966 183,239 531,213 514,715
 
Interest expense and other 17,488 18,462 68,156 77,138
Income tax expense   29,876   58,526   165,710   155,955  
 
Income from continuing operations 65,602 106,251 297,347 281,622
Loss from discontinued operations, net of tax   -   -   -   (765 )
 
Net income $ 65,602 $ 106,251 $ 297,347 $ 280,857  
 
Earnings per share - basic:
 
Income from continuing operations $ 1.32 $ 2.16 $ 5.99 $ 5.77
Loss from discontinued operations   -   -   -   (0.02 )
Net income $ 1.32 $ 2.16 $ 5.99 $ 5.75  
 
Weighted average common shares outstanding - basic   49,814   49,174   49,663   48,821  
 
Earnings per share - diluted:

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