Investor Presentation June 2017

Transcription

1 Investor Presentation June 2017 Daniel J. Crowley, President and Chief Executive Officer James F. McCabe Jr., Senior Vice President and Chief Financial Officer Sheila G. Spagnolo, Vice President, Tax and Investor Relations

2 Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements are often, but not always, identified by the use of words such as anticipate, believe, expect, plan, intend, project, may, will, should, could, or similar words suggesting future outcomes or outlooks. These forward-looking statements include, but are not limited to, statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions, aerospace market conditions, aircraft production rates, financial and operational performance, revenue and earnings growth and profitability and earnings results. These statements are based on the current projections, expectations and beliefs of Triumph s management. These forward looking statements involve known and unknown risks, uncertainties and other factors which could cause actual results to differ materially from any expected future results, performance or achievements, including, but not limited to, competitive and cyclical factors relating to the aerospace industry, dependence of some of Triumph s business on key customers, requirements of capital, uncertainties relating to the integration of acquired businesses, general economic conditions affecting Triumph s business segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or skilled personnel, changes in governmental regulation and oversight and international hostilities and terrorism. Further information regarding the important factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking statements can be found in Triumph s reports filed with the SEC, including in the risk factors described in Triumph s Annual Report on Form 10-K for the fiscal year ended March 31, 2017.

3 Serving the entire aircraft lifecycle at all levels of the supply chain Triumph Group is a global leader in manufacturing aircraft structures, accessories, subassemblies and systems, as well as repair and overhaul.

4 Integrated Systems ~$1.0B Aerospace Structures ~$1.3B FY 17 Revenue Consolidated Highlights Precision Components ~$1.0B Product Support ~$340M FY 17 Sales by End Market $3.5B Regional, 2% Non-Aviation, 1% Business, 18% Precision Components, 9% FY 17 Adjusted Segment Operating Income $500M Product Support, 12% $600 $400 Cash Flow from Operations ($ in billions) $200 Military, 22% Commerical, 57% Aerospace Structures, 37% Integrated Systems, 43% $- FY'15 FY'16 FY'17

5 Focused on Value Creation Leading positions in key aerospace segments Operational turnaround yielding benefits Strengthening balance sheet to reinvest Experienced management team

6 Integrated Systems Superior design, development and support of proprietary components and systems as well as production of complex assemblies using external designs

7 Products & Services Major Customers Business Overview Business 6% Regional 3% Non-Aviation 3% Integrated solutions including design, development, and support of components and systems and subsystems Boeing Airbus Lockheed Martin GE $1.0B Revenue 3,060 Employees 22 Locations Military 36% Commercial 52% Rolls Royce

8 Aerospace Structures Extensive capabilities to engineer complex metallic and composite aerostructures

9 Products & Services Major Customers Business Overview Business 39% Commercial 47% Tier 1 capability to manufacture large complex structures and integrate subsystems for military and commercial OEMs Gulfstream Boeing Airbus Bombardier $1.3B Revenue 4,538 Employees 7 Locations Military 14% Northrup Grumman

10 Precision Components Unparalleled precision component capability, including a wide range of metal and composite structures

11 Products & Services Close-tolerance parts to customer designs and model-definition Major Customers Boeing Airbus Northrop Grumman Bell Helicopter Lockheed Martin Aeronautics Business Overview $1.0B Revenue 5,479 Employees Military 18% Business 8% Regional 2% Non-Aviation 1% 26 Locations Commercial 71%

12 Product Support Superior lifecycle solutions for commercial, regional and military aircraft for OEMs and operators

13 Products & Services Full lifecycle solutions for commercial, regional and military aircraft Major Customers Southwest Delta FedEx UPS Business Overview $340M 1,069 Employees 9 Locations Military 15% Business 1% Regional 7% Commercial 77% Boeing

14 Top Programs Integrated Systems Aerospace Structures Precision Components Boeing 737 Airbus A320, A321 Boeing 787 Boeing V-22 Boeing CH-47 Lockheed Martin C-130 Sikorsky UH60 Airbus A380 Boeing 777 Boeing AH-64 Represents 58% of Integrated Systems backlog Gulfstream Airbus A330, A340 Boeing 747 Boeing 767/Tanker Bombardier Global Boeing 777 NG Global Hawk Boeing V-22 Bell Helicopter 525 Airbus A320, A321 Represents 97% of Aerospace Structures backlog Boeing 777 Airbus A350 Boeing 787 Boeing 737 Boeing V-22 Boeing 767/Tanker Boeing F-15 NG Global Hawk Bell Helicopter AH1 Bombardier C Series Represents 75% of Precision Components backlog

15 Transformation on Track

16 Summary Financial Results Fiscal Year ends March 31 ($ in millions) FY 15 FY 16 FY 17 Net Sales $3,888.7 $3,886.1 $3,532.8 Operating Income ( )* 56.9 Adjusted EPS Adjusted EBITDA (167.1) *FY 16 included $1,434.2m of non-cash impairment charges and provisions for forward losses

17 Consolidated Results Quarterly Comparison ($ in millions) FY 16 Q4 FY 17 Q4 Variance % Net Sales $1,057.8 $919.9 (13)% Operating Loss (1,182.8) (115.5) 90% Operating Margin (112)% (13)% Adjusted Operating Income Adjusted Operating Margin % 18% Adjusted EBITDA (530.5) % Adjusted EBITDA Margin (52)% 18% Net Sales decrease due to: Rate reductions on 747-8, C-17, G450/550 Partially offset by increased production on 767/Tanker and stronger organic sales in Product Support Adjusted Operating Income excludes: $266.3M impairment of Aerospace Structures goodwill $14.5M restructuring costs

18 Cash Flow ($ in millions) Cash used in operations Capital expenditures FY 17 Q1 FY 17 Q2 FY 17 Q3 FY 17 Q4 YTD 17 $(84.0) $(47.2) $(42.4) $454.0 $281.3 (12.7) (11.2) (9.2) (18.7) (51.8) Sale of assets Q4 Cash Drivers $324M advances provided $60M closed on sale of APU/Engines business $44M development programs used $14M restructuring used Sale of businesses Continued improvement in cash throughout FY17 Free cash flow $(95.8) $(49.4) $(37.4) $498.3 $315.7

19 Capitalization, Leverage, & Liquidity ($ in millions) FY 17 Q1 Cash $(70) Revolver & Term Loan 339 Securitized Debt Senior Notes Due Senior Notes Due Other Debt 8 Net Debt $1,138 Shareholders Equity 846 Total Book Capitalization $1,984 Net Debt-to-Capitalization 57% Senior Secured Leverage Ratio 1.6x Cash and Availability $661 Key Elements of Bank Amendment Total leverage eliminated as financial covenant Senior secured leverage of 4.0x Moves maturity of term loan of $309M to March 2019 from May 2021 In compliance with our covenants as of March 31 Amendment provides additional flexibility through the transformation

20 Appendix

21 Management Bios Daniel J. Crowley, President and Chief Executive Officer Daniel J. Crowley was named President & CEO of Triumph Group in January Mr. Crowley joins Triumph from Raytheon Company, where he served as President of Integrated Defense Systems since 2013, with annual revenues over $6 billion, and Network Centric Systems from 2010 until Mr. Crowley brings 33 years of industry experience, including key leadership roles in the development, production and deployment of some of the largest and most complex aerospace and defense products, such as the P-3 and S-3 aircraft, the Atlas launch vehicle, commercial and classified spacecraft, the THAAD and Patriot defense missile defense systems, flight training and logistics, the F-35 Joint Strike Fighter and air traffic control systems. Prior to working at Raytheon, Mr. Crowley served in a variety of leadership positions at Lockheed Martin, including President of their training and logistics business, Executive Vice President of the F-35 Joint Strike Fighter Program and Chief Operating Officer of Lockheed Martin Aeronautics. As COO, Mr. Crowley was responsible for supporting Lockheed Martin s key tactical fighter and military transport programs as well as the Advanced Development Programs (Skunk Works ) organization. While serving as Executive Vice President of the F-35 Joint Strike Fighter Program, Mr. Crowley was responsible for the design, development and transition to initial production of three fighter variants and logistics system. Under his oversight, critical franchise aerospace and defense programs have contributed billions of dollars in backlog and revenue to their respective prime contractors in support of domestic and international customers. He earned a bachelor s degree in mechanical engineering and a master s degree in manufacturing systems engineering from the University of Texas at Austin. Mr. Crowley also received a master s degree in management from Stanford University as a Sloan Fellow. James F. McCabe, Senior Vice President and Chief Financial Officer James F. McCabe joined Triumph in August 2016 from Steel Partners Holdings, where he last served as Senior Vice President and CFO, President, Shared Services, and SVP and CFO of its affiliates Handy & Harman and Steel Excel. Prior to joining Steel Partners Holdings, Mr. McCabe served as Vice President, Finance and Treasurer of American Water s Northeast Region, and President and CFO of Teleflex Aerospace, which served the global aviation industry. Mr. McCabe received a Bachelor of Science degree in business and economics from Lehigh University. He is a certified public accountant and Six Sigma Green Belt, and served as a member of the Board of Governors and the Civil Aviation Council Executive Committee for the Aerospace Industries Association.

22 Non-GAAP Disclosure Non-GAAP Financial Measures Disclosures FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) 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 measures that we disclose is Adjusted EBITDA, which is our net income before interest, income taxes, amortization of acquired contract liabilities, curtailments, settlements and early retirement incentives, legal settlements, deprecation 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 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 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 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, overtime, helps track our operating progress. In addition, investors, securities analysts and others have regularly relied on Adjusted EBITDA to provide a financial measure by which to compare our operating performance against that of other companies in our industry. Set forth below are descriptions of the financial items that have been excluded from our net income to calculate Adjusted EBITDA and the material limitations associated with using this non-gaap financial measure as compared to net income: Divestitures may be useful for investors to consider because they reflect gains or losses from sale of operating units. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations. Legal settlements may be useful to investors to consider because they reflect gains or losses from disputes with third parties. We do not believe that these gains or losses necessarily reflect the current and ongoing cash earnings related to our operations. Curtailments, settlements and early retirement incentives may be useful to investors to consider because it represents the current period impact of the change in defined benefit obligation due to the reduction in future service costs. We do not believe these charges (gains) necessarily reflect the current and ongoing cash earnings related to our operations. Amortization of acquired contract liabilities may be useful for investors to consider because it represents the non-cash earnings on the fair value of below market contracts acquired through acquisitions. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations. Amortization expenses (including impairments) 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. Deprecation 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 changes necessarily reflect the current and ongoing cash charges related to our operating cost structure. -More-

23 Non-GAAP Disclosure (Continued) Non-GAAP Financial Measures Disclosures (continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) 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 (in thousands): Twelve Months Ended March 31, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA): Net Loss $ (42,952) $ (1,047,960) Add-back: Income Tax (Benefit) Expense 19,340 (111,187) Interest Expense and Other 80,501 68,041 Curtailment (Gain) Loss (1,244) Loss on divestitures 19,124 Legal Settlement (Gain) Charge, net 5,476 Amortization of Acquired Contract Liabilities (121,004) (132,363) Depreciation and Amortization 443,244 1,052,116 Adjusted Earnings (Losses) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") $ 398,253 $ (167,121) Net Sales # $ 3,532,799 $ 3,886,072 Adjusted EBITDA Margin # 11.7% (4.5)% # Net Sales includes Amortization of Acquired Contract Liabilities. Since Adjusted EBITDA excludes Amortization of Acquired Contract Liabilities, we've also excluded it from Net Sales in arriving at Adjusted EBITDA margin throughout this document.

24 Non-GAAP Disclosure (Continued) Non-GAAP Financial Measures Disclosures (continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) 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. Twelve Months Ended March 31, 2017 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (23,612) $ (42,952) $ (0.87) Triumph Aerospace Structures - Goodwill impairment 266, , Loss on divestitures 19,124 17, Income from Continuing Operations ex-goodwill impairment & divestitures 261, , Transformation related costs: Restructuring costs (non-cash) 10,797 9, Restructuring costs (cash) 42,177 38, Other adjustments: Triumph Precision Components - Strike related costs 15,701 14, Triumph Precision Components - Inventory write-down 6,089 5, Triumph Aerospace Structures - UAS program 14,200 13, Adjusted Income from Continuing Operations - Non-GAAP $ 350,774 $ 323,201 $ 6.54 * * Difference due to rounding

25 Non-GAAP Disclosure (Continued) Non-GAAP Financial Measures Disclosures (continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) 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. Twelve Months Ended March 31, 2016 Pre-Tax After-Tax Diluted EPS Loss from Continuing Operations - GAAP $ (1,159,147) $ (1,047,960) $ (21.29) Adjustments: Triumph Aerospace Structures - Goodwill / Tradename impairment 874, , Triumph Aerospace Structures - Bombardier impairment 399, , Triumph Aerospace Structures forward loss ^ 161,400 99, Restructuring charges 80,956 49, Other inventory impairments 34,353 21, Legal settlements, net 5,476 3, Curtailment (gain) loss (1,244) Valuation allowance 146, Adjusted Income from Continuing Operations - Non-GAAP $ 395,913 $ 264,816 $ 5.37 * * Difference due to rounding ^FY forward loss was driven by customer imposed production rate reductions; operational and contractual improvements in FY 17 resulted in partial reversals of this reserve and have not been removed from adjusted earnings in FY 17.

26 Non-GAAP Disclosure (Continued) Non-GAAP Financial Measures Disclosures (continued) FINANCIAL DATA (UNAUDITED) TRIUMPH GROUP, INC. AND SUBSIDIARIES (dollars in thousands) Cash provided by operations 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 to free cash flow available for debt reduction. Twelve Months Ended March 31, Cash flow from operations $ 281,319 $ 83,863 Less: Capital expenditures (51,832) (80,047) Sale of assets 16,823 Sale of businesses 69,364 Free cash flow $ 315,674 $ 3,816 We use "Net Debt to Capital" as a measure of financial leverage. The following table sets forth the computation of Net Debt to Capital: Calculation of Net Debt March 31, March 31, Current portion $ 160,630 $ 42,441 Long-term debt 1,035,670 1,374,879 Total debt 1,196,300 1,417,320 Plus: Deferred debt issuance costs 11,752 8,971 Less: Cash (69,633) (20,984) Net debt $ 1,138,419 $ 1,405,307 Calculation of Capital Net debt $ 1,138,419 $ 1,405,307 Stockholders' equity 846, ,944 Total capital $ 1,984,892 $ 2,340,251 Percent of net debt to capital 57.4% 60.0%