<PAGE>
RULE 424(B)(4)
FILE NO. 333-39439
2,000,845 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
---------
All of the 2,000,845 shares of Common Stock offered hereby are being offered
by Triumph Group, Inc. (the "Company"). The Company's Common Stock is traded on
the New York Stock Exchange ("NYSE") under the symbol "TGI." On November 19,
1997, the closing price of the Common Stock on the NYSE was $33 9/16 per share.
See "Price Range of Common Stock."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSION COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $33.00 $1.65 $31.35
Total(2)................................. $66,027,885 $3,301,394 $62,726,491
</TABLE>
(1) Before deducting estimated expenses of $400,000 payable by the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
200,100 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public as shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $72,631,185,
$3,631,559 and $68,999,626, respectively. See "Underwriting."
--------------
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about November 25,
1997.
BT ALEX. BROWN SBC WARBURG DILLON READ INC.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 20, 1997
<PAGE>
Committed to growth through integrity, quality and service, and customer
focus.
AVIATION
A. BIEDERMAN
GLENDALE, CALIFORNIA
ADVANCED MATERIALS
TECHNOLOGIES, INC.
TEMPE, ARIZONA
AEROSPACE TECHNOLOGIES
FORT WORTH, TEXAS
HYDRO-MILL CO.
CHATSWORTH, CALIFORNIA
JDC COMPANY [PHOTO OF B-747 AIRCRAFT]
FT. LAUDERDALE, FLORIDA
GEORGETOWN, TEXAS
K-T CORPORATION
SHELBYVILLE, INDIANA
L.A. GAUGE CO.
SUN VALLEY, CALIFORNIA
LAMAR ELECTRO-AIR
WELLINGTON, KANSAS
NORTHWEST INDUSTRIES
ALBANY, OREGON
STOLPER-FABRALLOY COMPANY THE COMPANY DESIGNS, ENGINEERS, MANUFACTURES, REPAIRS
AND OVERHAULS COMPONENTS
BROOKFIELD, WISCONSIN
PHOENIX, ARIZONA FOR AIRCRAFT, SUCH AS FOR THE B-747 SHOWN ABOVE.
TRIUMPH AIR REPAIR
PHOENIX, ARIZONA
TRIUMPH CONTROLS, INC.
NORTH WALES, PENNSYLVANIA [LOGO] TRIUMPH GROUP, INC.
METALS
DELUXE SPECIALTIES MFG. CO. WAYNE, PENNSYLVANIA -- (610) 975-0420
HUTCHINSON, KANSAS
GREAT WESTERN STEEL
CHICAGO, ILLINOIS
KILROY STRUCTURAL STEEL CO.
CLEVELAND, OHIO
TRIUMPH INDUSTRIES
BRIDGEVIEW, ILLINOIS
------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK PRIOR TO THE PRICING OF
THIS OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, THE
PURCHASE OF COMMON STOCK FOLLOWING THE PRICING OF THIS OFFERING TO COVER A
SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING
THE PRICE OF THE COMMON STOCK AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
2
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES INCORPORATED BY REFERENCE HEREIN. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION WILL NOT BE EXERCISED. UNLESS THE CONTEXT INDICATES OR REQUIRES
OTHERWISE, AS USED IN THIS PROSPECTUS, REFERENCES TO "THE COMPANY" INCLUDE
TRIUMPH GROUP, INC. AND ITS DIRECT AND INDIRECT SUBSIDIARIES AND THE OPERATING
DIVISIONS OF SUCH SUBSIDIARIES. THE COMPANY CONDUCTS ITS OPERATIONS THROUGH ITS
WHOLLY OWNED SUBSIDIARY, TRIUMPH GROUP HOLDINGS, INC. AND ITS DIRECT AND
INDIRECT SUBSIDIARIES.
THE COMPANY
The Company designs, engineers, manufactures, repairs and overhauls aviation
components such as mechanical and electromechanical control systems, aircraft
and engine accessories, auxiliary power units ("APUs"), avionics and aircraft
instruments. The Company serves a broad spectrum of the aviation industry,
including commercial airlines and air cargo carriers, as well as original
equipment manufacturers of aircraft and aircraft components ("OEMs"), on a
worldwide basis.
According to 1996 U.S. Department of Commerce statistics, the annual
worldwide market for aircraft, including components, is approximately $56.7
billion. This market is expected to grow at an annual rate of 5% to 6% through
2000. AVIATION WEEK AND SPACE TECHNOLOGY has stated that the global airline
industry spends at least $20 billion annually to maintain its aircraft. Both the
aircraft component production and component repair industries are highly
fragmented, each consisting of a limited number of well-capitalized companies,
which offer a broad range of products and services, and a large number of
smaller, specialized companies. The aviation industry has been consolidating at
an increasing pace in recent years, and it is expected that such consolidation
will continue for the foreseeable future.
The Company believes that there are a number of significant trends affecting
the demand for its products and services. In addition to increased air transit
and aircraft in service, these trends include (i) increased outsourcing of the
manufacture and maintenance of aircraft components, assemblies and subassemblies
by aircraft operators and OEMs, (ii) reductions by customers in the number of
approved suppliers and vendors of aviation products and services, (iii) reduced
supply of surplus aircraft, (iv) increased emphasis on component traceability
and (v) more stringent maintenance and safety requirements.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of these
trends due to:
BROAD ARRAY OF PRODUCTS AND SERVICES. The Company offers to the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers. In
certain cases, principally at Triumph Controls, Inc. ("TCI"), a subsidiary of
the Company, the Company owns the proprietary right to these designs and,
accordingly, the customer generally relies on the Company to provide service on
such aircraft components at every stage of their useful lives, including the
repair and overhaul or replacement of such components. In addition, the Company
manufactures aviation components according to its customers' specifications. The
Company also performs repair and overhaul services for customers on various
aviation components manufactured by third parties. The Company offers to
maintain and manage inventories of aircraft components and other products for
certain of its customers. In certain instances, the Company's customers require
it to maintain and manage their inventories.
GOVERNMENT CERTIFICATIONS. The Company operates 12 repair stations
certified by the United States Federal Aviation Administration (the "FAA") and
has been granted licenses from the FAA and certain foreign regulatory
authorities to perform repair and overhaul services on broad classifications of
3
<PAGE>
aircraft instruments and accessories. Without such broad certifications and
licenses, which are often expensive and time-consuming to obtain and involve
extensive audit procedures, other companies are precluded from offering these
products and services, thereby constituting a significant barrier to entry. In
addition, the Company holds two exclusive licenses issued by the FAA which
permit the Company to design, engineer, repair, test and release into service,
without FAA approval, certain products to its own specifications for certain
aircraft components and therefore to compete directly with OEMs with respect to
such components. These licenses, known as SFAR 36 certifications, enable the
Company to offer, on a proprietary basis, certain repaired parts to its
customers at a lower cost than other companies that must purchase replacement
parts from third parties. The Company also employs three Designated Engineering
Representatives ("DERs") who are certified to act on behalf of the FAA to
develop, substantiate and approve repairs on components for certain of the
Company's operating divisions and subsidiaries.
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that the Company satisfy certain
requirements relating to the quality of its products and services. The Company
performs testing and certification procedures on all of the products that it
designs, engineers, manufactures, repairs and overhauls, and maintains detailed
records to ensure traceability of the production of and service on each aircraft
component. The expense required to institute and maintain the Company's quality
control procedures represents a barrier to entry to other companies.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers. The Company
expects that its customer base will continue to strengthen and broaden with
increased cross-selling efforts by the Company of its related products and
services.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's Aviation Group have substantial experience in the aviation
industry. These entities are characterized by experienced management and
highly-skilled employees. Because of its established industry presence, the
Company enjoys strong customer relations, name recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further expand its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
increasing trend toward outsourcing and the reduction by aircraft operators and
OEMs of the number of approved suppliers and vendors.
ACQUISITIONS. The Company expects to continue its growth through
acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
has successfully completed six acquisitions since October 1995, three of which
were completed since the Company's initial public offering. Because of the
fragmented nature of much of the market for aircraft products and services, the
Company believes that many additional acquisition opportunities exist in the
aviation industry. The Company intends to further capitalize on the
consolidation trend in the aviation industry and, therefore, the Company is
currently evaluating acquisition opportunities.
4
<PAGE>
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. The Company
intends to build on its existing international presence through continued market
penetration and, as appropriate opportunities arise, foreign acquisitions.
CAPITALIZING ON GROUP AFFILIATION. Utilizing the group affiliation of the
Company's operating divisions and subsidiaries, the Company plans to increase
cross-selling of related capabilities to its customers. The Company's operating
divisions and subsidiaries will continue to share independent sales
representatives and jointly bid on projects where appropriate, while still
maintaining their individual identities.
RECENT ACQUISITIONS
The Company has completed three acquisitions since its initial public
offering in October 1996:
On April 30, 1997, the Company acquired J.D. Chapdelaine Co. ("JDC
Company"), located in Ft. Lauderdale, Florida and Georgetown, Texas. JDC Company
repairs, overhauls, exchanges and sells instrumentation for the aviation
industry.
On September 2, 1997, the Company acquired Hydro-Mill Co. ("Hydro-Mill"),
based in Chatsworth, California. Hydro-Mill manufactures, repairs and overhauls
precision machine parts and assemblies for the aircraft industry, serving a
broad range of OEMs and commercial airlines and air cargo carriers with aircraft
parts and assemblies and overhaul and repair services.
On October 29, 1997, the Company acquired Stolper-Fabralloy Company, LLC
("Stolper"), which fabricates precision sheet metal turbomachinery components
for OEMs serving both commercial and military markets. It manufactures hot
section components for small propulsion jet engines and APUs and combustion
system components for power generation equipment manufacturers. Stolper operates
two FAA-certified repair stations located in Brookfield, Wisconsin and Phoenix,
Arizona.
On a combined basis, the Company believes that the annual operating revenue
for these three companies will be approximately $69.0 million.
ADDITIONAL BUSINESSES
The Company's Metals Group consists of three operating divisions and one
subsidiary, all with substantial experience in the metals industry. These
businesses include a leading producer of electrogalvanized steel products, a
steel service center specializing in flat rolled steel products and a leading
manufacturer of fuel tanks and hydraulic reservoirs. These entities supply
products to several hundred manufacturers and other customers in the computer,
electronics and agricultural industries on a regional and national basis. In
addition, the Company operates a business engaged in the erection of structural
frameworks for buildings and bridges in the midwestern United States. The
Company's Metals Group is a significant contributor to the Company's financial
strength and has consistently generated profits and positive cash flows for the
Company. The Company believes that it competes successfully in this established
market on the basis of price, quality and reliability of service.
5
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COMPANY ORGANIZATION
The Company was incorporated in Delaware in 1993 and its executive offices
are located at Four Glenhardie Corporate Center, 1255 Drummers Lane, Suite 200,
Wayne, Pennsylvania 19087-1565, and its telephone number is (610) 975-0420.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..................... 2,000,845 shares
Common Stock to be outstanding after this offering...... 11,750,433 shares(1)
Use of Proceeds......................................... For the repayment of indebtedness.
See "Use of Proceeds."
NYSE symbol............................................. TGI
</TABLE>
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(1) Includes 3,727,962 shares of Class D Common Stock, par value $.001 per share
("Class D Common Stock"), held by Citicorp Venture Capital, Ltd. ("CVC");
excludes 241,513 shares of Common Stock issuable upon the exercise of
outstanding stock options held by certain employees of the Company at
September 30, 1997 and 650,000 shares of Common Stock issuable upon the
exercise of a certain warrant. See "Principal Stockholders."
6
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1995 1996(1) 1997(1)(5) 1996(1)(5) 1997(5)
--------- --------- ----------- ----------- ---------
OPERATING DATA:
AVIATION GROUP
Net sales............................................. $ 70,714 $ 100,166 $ 167,731 $ 76,570 $ 102,773
Group operating income, before corporate expense(2)... 8,778 14,095 27,505 12,604 16,862
METALS GROUP
Net sales............................................. 93,451 86,608 82,747 42,530 44,229
Group operating income, before corporate expense(2)... 6,379 4,638 4,473 1,396 2,700
Combined operating income, before gain on sale of assets
and corporate expense................................. 15,157 18,733 31,978 14,000 19,562
Gain on sale of assets.................................. -- -- -- -- 1,250
Corporate expense(3).................................... 1,606 2,522 4,371 2,152 2,233
--------- --------- ----------- ----------- ---------
Operating income........................................ 13,551 16,211 27,607 11,848 18,579
Interest expense........................................ 6,589 7,318 6,591 4,404 1,879
--------- --------- ----------- ----------- ---------
Income from continuing operations, before income taxes
and extraordinary item................................ 6,962 8,893 21,016 7,444 16,700
--------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- ---------
Income from continuing operations, before extraordinary
item.................................................. 4,364 5,194 12,555 4,439 10,187
Income (loss) from discontinued operations.............. (2,852) 4,496 -- -- --
--------- ---------
Net income.............................................. $ 1,512 $ 9,690 $ 11,077 $ 2,961 $ 10,797
--------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- ---------
Earnings per share(4):
Income from continuing operations, before
extraordinary item(4)............................... $ 0.68 $ 0.80 $ 1.50 $ 0.65 $ 0.97
Shares used in computing earnings per share(4)........ 7,268 7,369 8,648 7,386 10,508
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
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<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED(6)
--------- --------------
BALANCE SHEET DATA:
Working capital....................................................................... $ 81,293 $ 81,293
Total assets.......................................................................... 241,521 241,521
Long-term debt, including current portion............................................. 66,740 38,019
Total stockholders' equity............................................................ $ 102,210 $ 164,536
</TABLE>
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(1) The operating results of Air Lab, Inc. ("Air Lab"), TCI and Advanced
Materials Technologies, Inc. ("AMTI") are included since October 2, 1995,
January 1, 1996 and July 31, 1996, respectively. The combined operations of
Air Lab, TCI and AMTI contributed $11.0 million and $62.7 million to the
Aviation Group's net sales and $2.3 million and $13.2 million to the
Aviation Group's operating income, before corporate expense, for the fiscal
years ended March 31, 1996 and 1997, respectively.
(2) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(3) Corporate expenses primarily consist of compensation, rent and costs
related to the operation of the Company's corporate office and other general
expenses of the Company including professional fees.
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(4) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding, restated to give retroactive
effect to the 65-for-one stock split effected immediately prior to the
Company's initial public offering, the dilutive effects of warrants, stock
issued during the period commencing 12 months prior to the Company's initial
public offering at prices below the public offering price, the conversion of
all of the Company's capital stock and junior subordinated promissory notes
("JSDs") immediately prior to the Company's initial public offering, the
exchange of capital stock and JSDs immediately prior to the Company's
initial public offering into shares of Common Stock and shares of Class D
Common Stock and an adjustment for the interest on the JSDs net of tax
expense. Primary and fully diluted earnings per share are the same.
(5) The operating results of AMTI, JDC Company and Hydro-Mill are included
since August 1, 1996, May 1, 1997 and September 1, 1997, respectively. The
combined operations of AMTI, JDC Company and Hydro-Mill contributed $4.5
million and $19.9 million to the Aviation Group's net sales and $1.0 million
and $4.0 million to the Aviation Group's operating income, before corporate
expense, for the six months ended September 30, 1996 and 1997, respectively.
(6) Adjusted to reflect the consummation of the Stolper acquisition and the
sale of shares offered by the Company hereby at the offering price of $33.00
per share and the application of the net proceeds therefrom as described in
"Use of Proceeds."
8
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
DEPENDENCE ON AVIATION INDUSTRY. A substantial percentage of the Company's
gross profit and operating income is derived from its Aviation Group. The
Company's aviation operations are focused on designing, engineering and
manufacturing aircraft components on new aircraft and performing repair and
overhaul services on existing aircraft and aircraft components; therefore, the
Company's business is directly affected by economic factors and other trends
that affect its customers in the aviation industry, including a possible
decrease in outsourcing by aircraft operators and OEMs or projected market
growth that may not materialize or be sustainable. When such economic and other
factors adversely affect the aviation industry, they tend to reduce the overall
customer demand for the Company's products and services, thereby decreasing the
Company's operating income. There can be no assurance that economic and other
factors that might affect the aviation industry will not have an adverse impact
on the Company's results of operations. See "Business--Industry Overview and
Trends."
CAPITAL REQUIREMENTS AND INTEGRATION OF ACQUIRED BUSINESSES. A key element
of the Company's strategy has been, and continues to be, internal growth and
growth through the acquisition of additional companies engaged in the aviation
industry. In order to grow internally, the Company will be required to make
significant capital expenditures. The Company's ability to grow by acquisition
is dependent upon, and may be limited by, the availability of suitable
acquisition candidates and capital, and by certain restrictions contained in the
Company's revolving credit facility (the "Credit Facility") and its other
financing arrangements. Growth by acquisition involves risks that could
adversely affect the Company's operating results, including difficulties in
integrating the operations and personnel of acquired companies, the potential
amortization of acquired intangible assets and the potential loss of key
employees of acquired companies. The Company recently acquired three companies,
JDC Company, Hydro-Mill and Stolper, and there can be no assurance that these
acquired companies will be successfully integrated into the Company. There can
be no assurance that the Company will be able to obtain the capital necessary to
pursue its internal growth and acquisition strategy, consummate acquisitions on
satisfactory terms or, if any such acquisitions are consummated, satisfactorily
integrate such acquired businesses into the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Business--Company Strategy."
COMPETITION. There are numerous competitors of the Company in both the
aviation services and metals processing and distribution industries. Competition
in the aviation industry comes from three primary sources: major commercial
airlines, many of which operate their own maintenance and overhaul units, OEMs,
which manufacture, repair and overhaul their own components, and other
independent service companies. The Company's principal competitors in the metals
industry include national and regional steel mills, other steel service centers,
steel erection companies and pre-engineered building manufacturers. Certain of
the Company's competitors in both aviation and metals have substantially greater
financial and other resources than the Company. There can be no assurance that
competitive pressures in either industry will not materially adversely affect
the Company's business, financial condition or results of operations. See
"Business--Competition."
GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT. The aviation industry is
highly regulated in the United States by the FAA and in other countries by
similar agencies. The Company must be certified by the FAA and, in some cases,
by individual OEMs in order to engineer and service parts and components used in
specific aircraft models. If material authorizations or approvals were revoked
or suspended, the operations of the Company would be adversely affected. New and
more stringent government regulations may be adopted, or industry oversight
heightened, in the future and any such new regulations, if enacted, or any
industry oversight, if heightened, may have an adverse impact on the Company.
See "Business--Government Regulation."
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FLUCTUATIONS IN OPERATING RESULTS. The Company's overall operating results
are affected by many factors, including the timing of orders from large
customers and the timing of expenditures to manufacture parts and purchase
inventory in anticipation of future sales of products and services. A large
portion of the Company's operating expenses are relatively fixed. Because
several operating divisions and subsidiaries of the Company typically do not
obtain long-term purchase orders or commitments from their customers, they must
anticipate the future volume of orders based upon the historic purchasing
patterns of customers and upon their discussions with customers as to their
future requirements. Cancellations, reductions or delays in orders by a customer
or group of customers could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE OF CERTAIN BUSINESSES ON KEY CUSTOMERS. One customer of the
Company, The Boeing Company ("Boeing")(including McDonnell Douglas, which has
been recently acquired by Boeing), accounted for more than 10%, and one other
customer accounted for more than 5%, of the Company's consolidated revenues
during the 12 months ended September 30, 1997, and the loss of either of these
customers could have a material adverse effect on the Company. In addition,
certain of the Company's operating divisions and subsidiaries have significant
customers, the loss of which could have an adverse effect on such businesses.
LIMITED AVAILABILITY OF RAW MATERIALS. Recently, the Company has
experienced extended lead times for delivery of aircraft-quality aluminum sheet
and extrusions. Such extended lead times may affect the Company's ability to
meet its customers' demands on a timely basis. There can be no assurance that
the Company will be able to purchase sufficient aircraft-quality aluminum sheet
and extrusions or other raw materials to meet the demands of its customers in
the future or that such aircraft-quality aluminum sheet and extrusions or other
raw materials will be available on satisfactory terms or reasonable prices or
that such limited availability will not have a material adverse effect on the
Company.
TECHNOLOGICAL DEVELOPMENTS. The aviation industry is constantly undergoing
development and change, and accordingly, it is likely that new products,
equipment and methods of repair and overhaul service will be introduced in the
future. In order to keep pace with any new developments, the Company may need to
expend significant capital to purchase new equipment and machines or to train
its employees in the new methods of production and service. There can be no
assurance that the Company will be successful in developing new products or,
that such capital expenditures will not have a material adverse effect on the
Company.
RISKS REGARDING THE COMPANY'S INVENTORY. The Company offers to maintain and
manage inventories of aircraft components and other products for certain of its
customers. In addition, certain of the Company's customers require the Company
to maintain and manage their inventories. If this inventory is not used by the
Company, because the Company ceases to supply such customers with the related
products or services or because such components or other products become
obsolete, the Company will not realize any income to offset the expenses
incurred by the Company to acquire and maintain such inventory.
RELIANCE ON SKILLED PERSONNEL. From time to time, certain of the Company's
operating divisions and subsidiaries have experienced difficulties in attracting
and retaining skilled personnel to design, engineer, manufacture, repair and
overhaul sophisticated aircraft components. The ability of the Company to
operate successfully could be jeopardized if the Company is unable to attract
and retain a sufficient number of skilled personnel.
EXISTENCE OF COLLECTIVE BARGAINING AGREEMENTS. Several of the Company's
subsidiaries are parties to collective bargaining agreements with labor unions.
None of these collective bargaining agreements will expire in the next 12
months. Under those agreements, the Company currently employs approximately 228
full-time employees, and from time to time employs up to an additional 150
temporary
10
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employees for its steel erection business, all of whom are members of labor
unions. Currently, approximately 11% of the Company's permanent employees are
represented by labor unions and approximately 15% of the Aviation Group's
revenues and 88% of the Metals Group's revenues are derived from the operating
divisions and subsidiaries a portion of whose employees are unionized. The
Company's inability to negotiate acceptable contracts with these unions could
result in strikes by the affected workers and increased operating costs as a
result of higher wages or benefits paid to union members. If the unionized
workers were to engage in a strike or other work stoppage, or other employees
were to become unionized, the Company could experience a significant disruption
of its operations and higher ongoing labor costs, which could have an adverse
effect on the Company's business and results of operations. The Company is
currently contesting the election of a union for certain employees at one of the
Company's operating divisions in the Metals Group. There can be no assurance
that the Company will be successful with respect to its contest and, if the
Company is unsuccessful, the Company may experience increased labor costs which
may have a material adverse effect on such division of the Company.
PRODUCT LIABILITY; CLAIMS EXPOSURE. The Company's overall operations expose
it to potential liability for personal injury or death as a result of the
failure of an aircraft component that has been serviced by the Company, the
failure of an aircraft component designed or manufactured by the Company or the
irregularity of metal products processed or distributed by the Company. While
the Company believes that its liability insurance is adequate to protect it from
such liabilities and while no material claims have been made against the
Company, no assurance can be given that claims will not arise in the future or
that such insurance coverage will be adequate. Additionally, there can be no
assurance that insurance coverage can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance or for which third
party indemnification is not available could have a material adverse effect on
the financial condition of the Company. See "Business--Legal Proceedings."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. The Company's business
operations and facilities are subject to a number of federal, state and local
environmental laws and regulations. Although management believes that the
Company's operations and facilities are in material compliance with such laws
and regulations, there can be no assurance that future changes in such laws,
regulations or interpretations thereof or the nature of the Company's operations
will not require the Company to make significant additional capital expenditures
to ensure compliance in the future. Certain of Company's facilities have been or
are currently the subject of environmental remediation activities, the cost of
which is subject to indemnification provided by IKON Office Solutions, Inc.,
formerly Alco Standard Corporation ("IKON"), from whom the Company originally
purchased its business. One of these facilities is connected with a site
included in the National Priorities List of Superfund sites maintained by the
United States Environmental Protection Agency ("EPA"). Another of these
facilities is located on a site included in the EPA's database of potential
Superfund sites. The IKON indemnification covers both (i) the costs and claims
associated with all of these environmental remediation activities and
liabilities and (ii) the cost of unidentified liabilities that arise from
conditions or activities existing at facilities prior to their acquisition from
IKON and that are identified before July 22, 2000. Certain other facilities
acquired and operated by the Company or one of its subsidiaries, including a
leased facility located on an EPA National Priorities List site, are under
active investigation for environmental contamination by federal or state
agencies when acquired, and continue to be under such investigation. The Company
is indemnified by prior operators and/or present owners of the facilities for
liabilities which the Company incurs as a result of these investigations and the
environmental contamination found which pre-dates the Company's acquisition of
these facilities. Two Company facilities also have been the subject of notices
from a citizen group alleging failure to notify and file reports with
appropriate agencies regarding the presence of certain hazardous chemicals in
excess of specified threshold quantities. The Company has denied these
allegations. The Company does not maintain environmental liability insurance,
and if the Company were required to pay the expenses related to these
environmental liabilities, such expenses could have a material adverse effect on
the Company. See "Business--Environmental Matters."
11
<PAGE>
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL. The Company's
Certificate of Incorporation, as amended, and Bylaws contain provisions,
including cumulative voting, that may have the effect of discouraging certain
transactions involving an actual or threatened change of control of the Company.
In addition, the Board of Directors of the Company has the authority to issue up
to 1,000,000 shares of Preferred Stock in one or more series in connection with
the purchase by the Company of the assets or stock of another corporation or the
merger of the Company with or into another corporation, and to fix the
preferences, rights and limitations of any such series without stockholder
approval. Cumulative voting and the ability to issue Preferred Stock could have
the effect of discouraging unsolicited acquisition proposals or making it more
difficult for a third party to gain control of the Company, or otherwise could
adversely affect the market price of the Common Stock.
CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this offering, CVC,
if it were to convert its shares of Class D Common Stock, would own 39.6% of the
outstanding Common Stock and the Company's executive officers will own an
aggregate of 5.4% of the outstanding Common Stock. After this offering, CVC,
either acting alone or together with the Company's executive officers, may be
able to control the election of a majority of the members of the Company's Board
of Directors and, therefore, to control the business, policies and affairs of
the Company. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE. As of the date of this Prospectus, in
addition to the 2,000,845 shares of Common Stock offered pursuant to this
offering, which will be freely tradeable without restriction, an additional
6,021,626 shares of Common Stock and 3,727,962 shares of Common Stock issuable
upon conversion from Class D Common Stock held by current stockholders will be
either freely tradeable or eligible for sale pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). The Company, its
executive officers and directors and CVC, its largest stockholder, who
beneficially own 5,436,917 shares in the aggregate (as well as options to
purchase shares of Common Stock), and the holder of a warrant to purchase
650,000 shares of Common Stock, have agreed not to offer, sell, contract to
sell, or otherwise dispose of, any shares of Common Stock or any securities
convertible into or exchangeable for, shares of Common Stock, for a period of 90
days after the date of this Prospectus without the prior written consent of BT
Alex. Brown Incorporated. In addition, CVC, which owns an aggregate of 920,573
shares of Common Stock and 3,727,962 shares of Class D Common Stock, certain of
its affiliates and certain members of management have certain demand and
piggyback registration rights with respect to the shares of Common Stock held by
such individuals and entities. Sales of a substantial number of shares of Common
Stock in the public market following the date of this Prospectus could adversely
affect the market price for the Common Stock.
12
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,000,845 shares of Common Stock
offered by the Company are estimated to be approximately $62.3 million ($68.6
million if the Underwriters exercise their over-allotment option in full), at
the offering price per share of $33.00 and after deducting underwriting
discounts and commissions and estimated offering expenses. The Company intends
to use the net proceeds, including the net proceeds from the sale of shares of
Common Stock subject to the over-allotment, if any, for repayment of
indebtedness under the Credit Facility. The Credit Facility matures on March 31,
2002 and bears interest, at the option of the Company, at the fluctuating prime
rate or LIBOR plus applicable basis points. On October 31, 1997, an aggregate
amount of approximately $76.8 million was outstanding under the Credit Facility,
$50.0 million of which was accruing interest at LIBOR plus applicable basis
points, or 6.1875% per annum, and $26.8 million of which was accruing interest
at the prime rate of 8.5% per annum. Amounts repaid on the Credit Facility may
be reborrowed. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing investments.
DIVIDEND POLICY
The Company has paid no dividends on its Common Stock. The Board of
Directors of the Company does not intend to declare any dividends on its Common
Stock in the foreseeable future. Rather, the Company intends, after consummation
of this offering, to retain its earnings, if any, for use in the operation of
its business. The Common Stock and the Class D Common Stock will be treated the
same with respect to any dividends declared by the Board of Directors.
Furthermore, the Company's ability to declare or pay dividends on its Common
Stock is limited by the terms of the Credit Facility and other financing
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK
The Common Stock has been traded on the NYSE under the symbol "TGI" since
October 25, 1996, the date of the Company's initial public offering. The
following table sets forth, for the periods indicated, the high and the low
sales prices for the Common Stock, as reported on the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
--------- ----------
<S> <C> <C> <C> <C>
FISCAL 1997
Third Quarter (from October 25, 1996)......................................... $27 1/4 $20 7/8
Fourth Quarter................................................................ 31 3/4 24
FISCAL 1998
First Quarter................................................................. $31 7/8 $23
Second Quarter................................................................ 33 5/8 27 1/8
Third Quarter (through November 19, 1997)..................................... 37 1/4 31 13/16
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1997: (i) on an actual basis; (ii) on a pro forma basis; and
(iii) on a pro forma as adjusted basis. The pro forma amounts give effect to the
acquisition of Stolper which occurred on October 29, 1997. The pro forma as
adjusted amounts give effect to the sale of 2,000,845 shares of Common Stock in
this offering (at the offering price of $33.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company), the acquisition of Stolper and the application of the net
proceeds from this offering as described under "Use of Proceeds." This table
should be read in conjunction with the Company's Unaudited Interim Condensed
Consolidated Financial Statements and the Notes thereto and the Company's
Audited Consolidated Financial Statements and the Notes thereto incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current portion):
Revolving credit facility............................................... $ 54,013 $ 87,618 $ 25,292
Subordinated note....................................................... 6,607 6,607 6,607
Junior subordinated promissory notes.................................... 426 426 426
Other debt and capital lease obligations................................ 5,694 5,694 5,694
----------- ----------- ------------
Total debt............................................................ 66,740 100,345 38,019
Stockholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares authorized; no shares
outstanding........................................................... -- -- --
Common Stock, $.001 par value, 15,000,000 shares authorized; 6,021,626
shares issued on an actual and pro forma basis(1); 8,022,471 shares
issued on a pro forma as adjusted basis(1)............................ 6 6 8
Class D Common Stock, $.001 par value, 6,000,000 shares authorized;
3,727,962 shares issued............................................... 4 4 4
Additional paid-in capital.............................................. 68,479 68,479 130,803
Retained earnings....................................................... 33,721 33,721 33,721
----------- ----------- ------------
Total stockholders' equity............................................ 102,210 102,210 164,536
----------- ----------- ------------
Total capitalization................................................ $ 168,950 $ 202,555 $ 202,555
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
- ------------------------
(1) Excludes 241,513 shares of Common Stock issuable upon exercise of stock
options granted to certain employees of the Company and 650,000 shares of
Common Stock issuable upon the exercise of a warrant.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial data of the
Company as of the dates and for the periods indicated. The operating data and
balance sheet data are derived from the audited and unaudited consolidated
financial statements of the Company. The selected consolidated financial data as
of September 30, 1996 and 1997 and for the six months ended September 30, 1996
and 1997 are unaudited; however, in the Company's opinion, include all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of such information. The interim results of operations may not be
indicative of the results for the full fiscal year or for any other interim
period. The selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the audited and unaudited consolidated financial statements and
notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY TRIUMPH GROUP, INC.
------------------------ --------------------------------------------------------------------
EIGHT
MONTHS TEN MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED YEARS ENDED ENDED
SEPTEMBER 30, MAY 31, MARCH 31, MARCH 31, SEPTEMBER 30,
------------- --------- ----------- --------------------------------- --------------------
1992(1) 1993(1) 1994 1995 1996(2) 1997(2) 1996(6) 1997(6)
------------- --------- ----------- ----------- --------- --------- --------- ---------
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVIATION GROUP
Net sales................... $ 76,346 $ 46,517 $ 57,257 $ 70,714 $ 100,166 $ 167,731 $ 76,570 $ 102,773
Cost of products sold....... 55,254 34,568 39,941 51,395 70,643 110,932 50,398 68,758
------------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................ 21,092 11,949 17,316 19,319 29,523 56,799 26,172 34,015
Selling, general and
administrative............ 9,161 5,830 6,799 8,761 12,915 24,228 11,228 13,818
Depreciation and
amortization.............. 2,060 1,413 1,379 1,780 2,513 5,066 2,340 3,335
------------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3)...... 9,871 4,706 9,138 8,778 14,095 27,505 12,604 16,862
METALS GROUP
Net sales................... 78,258 57,216 72,738 93,451 86,608 82,747 42,530 44,229
Cost of products sold....... 60,178 45,293 57,154 74,441 69,097 65,118 34,288 35,012
------------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................ 18,080 11,923 15,584 19,010 17,511 17,629 8,242 9,217
Selling, general and
administrative............ 10,741 7,704 9,614 11,715 11,874 12,177 6,343 5,995
Depreciation and
amortization.............. 832 658 594 916 999 979 503 522
------------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3)...... 6,507 3,561 5,376 6,379 4,638 4,473 1,396 2,700
------------- --------- ----------- ----------- --------- --------- --------- ---------
------------- --------- ----------- ----------- --------- --------- --------- ---------
Combined operating income,
before gain on sale of
assets and corporate
expense..................... $ 16,378 $ 8,267 14,514 15,157 18,733 31,978 14,000 19,562
------------- ---------
------------- ---------
Gain on sale of assets........ -- -- -- -- -- 1,250
----------- ----------- --------- --------- --------- ---------
Corporate expense(4).......... 1,573 1,606 2,522 4,371 2,152 2,233
----------- ----------- --------- --------- --------- ---------
Operating income.............. 12,941 13,551 16,211 27,607 11,848 18,579
Interest expense.............. 4,908 6,589 7,318 6,591 4,404 1,879
----------- ----------- --------- --------- --------- ---------
Income from continuing
operations, before income
taxes and extra-ordinary
item........................ 8,033 6,962 8,893 21,016 7,444 16,700
Income tax expense............ 3,125 2,598 3,699 8,461 3,005 6,513
----------- ----------- --------- --------- --------- ---------
Income from continuing
operations, before
extraordinary item.......... 4,908 4,364 5,194 12,555 4,439 10,187
Extraordinary (loss) gain, net
of income taxes............. -- -- -- (1,478) (1,478) 610
Income (loss) from
discontinued operations..... (462) (2,852) 4,496 -- -- --
----------- ----------- --------- --------- --------- ---------
Net income.................... $ 4,446 $ 1,512 $ 9,690 $ 11,077 $ 2,961 $ 10,797
----------- ----------- --------- --------- --------- ---------
----------- ----------- --------- --------- --------- ---------
Earnings per share(5):
Income from continuing
operations, before
extraordinary item(5)..... $ 0.73 $ 0.68 $ 0.80 $ 1.50 $ 0.65 $ 0.97
Shares used in computing
earnings per share(5)..... 7,180 7,268 7,369 8,648 7,386 10,508
BALANCE SHEET DATA:
Working capital............. $ 32,360 $ 33,296 $ 49,152 $ 39,609 $ 60,379 $ 56,288 $ 55,365 $ 81,293
Total assets................ 154,343 152,761 104,905 111,386 161,406 171,315 168,862 241,521
Long-term debt, including
current portion........... 64,477 69,013 74,403 71,738 98,769 24,392 96,198 66,740
Redeemable preferred
stock..................... -- -- 1,423 1,912 2,652 -- -- --
Total stockholders'
equity.................... 69,283 63,398 5,080 6,094 15,065 91,413 18,462 102,210
</TABLE>
15
<PAGE>
- ------------------------------
(1) Financial information related to the year ended September 30, 1992 and the
eight month period ended May 31, 1993 is unaudited and represents operating
results for the divisions and subsidiaries of the predecessor company which
were purchased by the Company as of June 1, 1993. Information is provided
through operating income to assist the reader in evaluating the Company's
historical operating trends. Financial information after operating income is
excluded as the information is not comparable to subsequent periods because
of the significantly changed corporate organization and capital structure
which resulted from such acquisition.
(2) The operating results of Air Lab, TCI and AMTI are included since October 2,
1995, January 1, 1996 and July 31, 1996, respectively. The combined
operations of Air Lab, TCI and AMTI contributed $11.0 million and $62.7
million to the Aviation Group's net sales and $2.3 million and $13.2 million
to the Aviation Group's operating income, before corporate expense, for the
fiscal years ended March 31, 1996 and 1997, respectively.
(3) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(4) Corporate expenses primarily consist of compensation, rent and general costs
related to the operation of the Company's corporate office and other general
expenses of the Company including professional fees.
(5) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding, restated to give retroactive
effect to the 65-for-one stock split effected immediately prior to the
Company's initial public offering, the dilutive effects of warrants, stock
issued during the period commencing 12 months prior to the Company's initial
public offering at prices below the public offering price, the conversion of
all of the Company's capital stock and JSDs immediately prior to the
Company's initial public offering, the exchange of capital stock and JSDs
immediately prior to the Company's initial public offering into shares of
Common Stock and shares of Class D Common Stock and an adjustment for the
interest on the JSDs net of tax expense. Primary and fully diluted earnings
per share are the same.
(6) The operating results of AMTI, JDC Company and Hydro-Mill are included since
August 1, 1996, May 1, 1997 and September 1, 1997, respectively. The
combined operations of AMTI, JDC Company and Hydro-Mill contributed $4.5
million and $19.9 million to the Aviation Group's net sales and $1.0 million
and $4.0 million to the Aviation Group's operating income, before corporate
expense, for the six months ended September 30, 1996 and 1997, respectively.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
audited and unaudited consolidated financial statements and notes thereto
incorporated by reference in this Prospectus.
OVERVIEW
The Aviation Group designs, engineers, manufactures, repairs and overhauls
aircraft components for commercial airlines and air cargo carriers, as well as
OEMs, on a worldwide basis. The Metals Group manufactures, machines, forges,
processes and distributes metal products to customers in the computer,
construction, container, farm equipment and office furniture industries,
primarily within North America.
Net sales consist of sales of aircraft components and metal products, as
well as revenues derived from repairing and overhauling aircraft components. Net
sales are recorded when services are performed or when products are shipped,
except for long-term construction contracts entered into by the Metals Group,
which are recorded on the percentage-of-completion method based on the
relationship between actual costs incurred and total estimated costs at
completion. Net sales from long-term construction contracts which are recorded
on the percentage-of-completion method approximated 4.3% and 8.6% of total net
sales in 1997 and 1996, respectively.
Operating costs consist primarily of cost of products sold, selling, general
and administrative expenses and depreciation and amortization. Selling, general
and administrative expenses consist primarily of compensation and related
benefits to certain administrative employees, marketing, communications and
professional fees.
The Company focuses its acquisition activities on companies engaged in the
aviation products and services industry. The Aviation Group has historically
provided, and the Company believes that it will continue to provide, higher
operating margins than the Metals Group.
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1996
AVIATION GROUP
NET SALES. The Aviation Group's net sales increased by $26.2 million, or
34.2%, to $102.8 million for the six months ended September 30, 1997 from $76.6
million for the six months ended September 30, 1996. This increase was primarily
due to the inclusion of an aggregate of $19.9 million and $4.5 million for the
six months ended September 30, 1997 and 1996, respectively, in net sales of
AMTI, JDC Company and Hydro-Mill. The other operating divisions and subsidiaries
in the Aviation Group experienced a 16.2% increase in net sales from the six
months ended September 30, 1996. Increased demand for overhaul and repair
services from the commercial airlines and air cargo carriers, as well as
increased orders of aircraft components from OEMs, accounted for the increase in
net sales in the Aviation Group.
COST OF PRODUCTS SOLD. The Aviation Group's cost of products sold increased
by $18.4 million, or 36.4%, to $68.8 million for the six months ended September
30, 1997 from $50.4 million for the six months ended September 30, 1996. This
increase was primarily due to the inclusion of an aggregate of $12.0 million and
$1.9 million for the six months ended September 30, 1997 and 1996, respectively,
in cost of products sold associated with the net sales generated by AMTI, JDC
Company and Hydro-Mill. The remaining increase is associated with the increase
in net sales of the other operating divisions and subsidiaries in the Aviation
Group.
GROSS PROFIT. The Aviation Group's gross profit increased by $7.8 million,
or 30.0%, to $34.0 million for the six months ended September 30, 1997 from
$26.2 million for the six months ended September 30, 1996. Of this increase,
$5.4 million was a result of the inclusion of gross profit on the net sales
generated by AMTI, JDC Company and Hydro-Mill. In addition, the other operating
divisions and
17
<PAGE>
subsidiaries in the Aviation Group experienced a 12.0% increase in gross profit
on the increased sales volume. As a percentage of net sales, gross profit for
the Aviation Group was 33.1% and 34.2% for the six months ended September 30,
1997 and 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Aviation Group's selling,
general and administrative expenses increased by $2.6 million, or 23.1%, to
$13.8 million for the six months ended September 30, 1997 from $11.2 million for
the six months ended September 30, 1996. This increase was primarily due to the
inclusion of an aggregate of $2.8 million and $1.2 million for the six months
ended September 30, 1997 and 1996, respectively, in selling, general and
administrative expenses of AMTI, JDC Company and Hydro-Mill. The remaining
increase is associated with the increase in net sales of the other operating
divisions and subsidiaries in the Aviation Group.
DEPRECIATION AND AMORTIZATION. The Aviation Group's depreciation and
amortization increased by $1.0 million, or 42.5%, to $3.3 million for the six
months ended September 30, 1997 from $2.3 million for the six months ended
September 30, 1996. This increase was primarily due to the depreciation and
amortization attributable to the assets acquired in connection with the AMTI,
JDC Company and Hydro-Mill acquisitions.
OPERATING INCOME. The Aviation Group's operating income increased by $4.3
million, or 33.8%, to $16.9 million for the six months ended September 30, 1997
from $12.6 million for the six months ended September 30, 1996. This increase
was assisted by the continued growth in aircraft production and the increased
outsourcing of repair and overhaul services by commercial aircraft operators.
This increase was primarily due to the inclusion of an aggregate of $4.0 million
and $1.0 million for the six months ended September 30, 1997 and 1996,
respectively, in operating income generated by AMTI, JDC Company and Hydro-Mill.
This increase was accompanied by $1.3 million of incremental operating income
resulting from increased sales volume at the other operating divisions and
subsidiaries in the Aviation Group, which experienced an 11.9% increase in the
six months ended September 30, 1997 from the six months ended September 30,
1996. As a percentage of net sales, operating income for the Aviation Group was
16.4% and 16.5% for the six months ended September 30, 1997 and 1996,
respectively.
METALS GROUP
NET SALES. The Metals Group's net sales increased by $1.7 million, or 4.0%,
to $44.2 million for the six months ended September 30, 1997 from $42.5 million
for the six months ended September 30, 1996. This increase was primarily due to
increased volume over the prior year.
COST OF PRODUCTS SOLD. The Metals Group's cost of products sold increased
by $0.7 million, or 2.1%, to $35.0 million for the six months ended September
30, 1997 from $34.3 million for the six months ended September 30, 1996.
GROSS PROFIT. The Metals Group's gross profit increased by $1.0 million, or
11.8%, to $9.2 million for the six months ended September 30, 1997 from $8.2
million for the six months ended September 30, 1996. As a percentage of net
sales, gross profit for the Metals Group was 20.8% and 19.4% for the six months
ended September 30, 1997 and 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Metals Group's selling,
general and administrative expenses decreased by $0.3 million, or 5.5%, to $6.0
million for the six months ended September 30, 1997 from $6.3 million for the
six months ended September 30, 1996.
DEPRECIATION AND AMORTIZATION. The Metals Group's depreciation and
amortization remained relatively unchanged at $0.5 million for the six months
ended September 30, 1997 and 1996.
OPERATING INCOME. The Metals Group's operating income increased by $1.3
million, or 93.4%, to $2.7 million for the six months ended September 30, 1997
from $1.4 million for six months ended
18
<PAGE>
September 30, 1996. This increase was due to improved margins and reduced
selling, general and administrative expenses. As a percentage of net sales,
operating income for the Metals Group was 6.1% and 3.3% for the six months ended
September 30, 1997 and 1996, respectively.
OVERALL RESULTS
GAIN ON SALE OF ASSETS. The results for the six months ended September 30,
1997 benefited from the $1.3 million pre-tax gain on the sale of substantially
all of the assets of the Company's Seattle, Washington division, Air Lab to
Sextant Avionique, Inc. ("Sextant") for approximately $5.9 million in cash and
the assumption by the purchaser of certain liabilities.
CORPORATE EXPENSES. Corporate expenses increased by $0.1 million, or 3.8%,
to $2.2 million for the six months ended September 30, 1997 from $2.1 million
for the six months ended September 30, 1996.
INTEREST EXPENSE. Interest expense decreased by $2.5 million to $1.9
million for the six months ended September 30, 1997 from $4.4 million for the
six months ended September 30, 1996. This decrease was primarily due to reduced
debt levels associated with the application of the proceeds from the initial
public offering of the Company's Common Stock and proceeds from the sale of Air
Lab, which amount was partially offset by the acquisitions of AMTI, JDC Company
and Hydro-Mill, the cash portions of such acquisitions were financed by
borrowings under the Credit Facility.
INCOME FROM CONTINUING OPERATIONS, BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM. Income from continuing operations, before income taxes and extraordinary
item, increased by $9.3 million, or 124.3%, to $16.7 million for the six months
ended September 30, 1997 from $7.4 million for the six months ended September
30, 1996. This increase was primarily due to the contribution generated by AMTI,
JDC Company and Hydro-Mill, the overall favorable conditions in the aviation
industry resulting in increased net sales of the Company's products and services
and the gain on sale of the assets of Air Lab.
INCOME TAX EXPENSE. The effective tax rate was 39.0% and 40.4% for the six
months ended September 30, 1997 and 1996, respectively.
EXTRAORDINARY ITEM, NET OF INCOME TAXES. An extraordinary gain of $0.6
million for the six months ended September 30, 1997 relates to a discount
realized on the prepayment of a subordinated note payable to IKON. An
extraordinary loss of $1.5 million for the six months ended September 30, 1996
relates to prepayment premiums and the related write-off of unamortized deferred
financing cost due to the retirement of 11% senior subordinated notes, senior
term loans and the Credit Facility.
NET INCOME. Net income increased by $7.8 million, or 264.6%, to $10.8
million for the six months ended September 30, 1997 from $3.0 million for the
six months ended September 30, 1996. This increase in net income was primarily
attributable to the strong results of the Aviation Group, improved operating
results of the Metals Group, the gain on the sale of assets of Air Lab and the
extraordinary gain on the repayment of indebtedness.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $67.6 million, or
67.5%, to $167.7 million for fiscal 1997 from $100.2 million for fiscal 1996.
This increase was primarily due to the inclusion of an aggregate of $62.7
million and $11.0 million in net sales for TCI, Air Lab and AMTI in fiscal 1997
and fiscal 1996, respectively. Net sales for the other operating divisions and
subsidiaries in the Aviation Group, experienced a 17.8% increase in net sales
over fiscal 1996. Increased demand for overhaul and repair services from the
commercial airlines and cargo carriers, as well as increased orders of aircraft
components from OEMs, accounted for the increase in net sales in the Aviation
Group.
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COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $40.3 million, or 57.0%, to $110.9 million for fiscal 1997 from
$70.6 million for fiscal 1996. This increase was primarily due to inclusion of
$35.5 million and $6.0 million in fiscal 1997 and fiscal 1996, respectively, of
costs of products sold associated with net sales generated by TCI, Air Lab and
AMTI. The remaining increase is associated with the increase in net sales of the
remaining operating divisions and subsidiaries in the Aviation Group.
GROSS PROFIT. Gross profit for the Aviation Group increased by $27.3
million or 92.4%, to $56.8 million for fiscal 1997 from $29.5 million for fiscal
1996. Of this increase, $22.2 million was a result of the inclusion of gross
profit on the net sales generated by TCI, Air Lab and AMTI. In addition, $5.1
million of gross profit was generated on the increased sales volume of the other
operating divisions and subsidiaries in the Aviation Group. As a percentage of
net sales, gross profit for the Aviation Group was 33.9% and 29.5% for fiscal
1997 and fiscal 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $11.3 million, or
87.6%, to $24.2 million for fiscal 1997 from $12.9 million for fiscal 1996, due
to increased sales volume and the TCI, Air Lab and AMTI acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $2.6 million, or 101.6%, to $5.1 million for fiscal
1997 from $2.5 million for fiscal 1996, primarily due to the assets acquired in
connection with the TCI, Air Lab and AMTI acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by
$13.4 million, or 95.1%, to $27.5 million for fiscal 1997 from $14.1 million for
fiscal 1996. This increase was assisted by the growth in aircraft production and
the increased outsourcing of repair and overhaul services by commercial aircraft
operators. This increase was also due to the addition of net sales and profits
generated by TCI, Air Lab and AMTI, as well as the incremental operating income
resulting from increased sales volume. As a percentage of net sales, operating
income for the Aviation Group was 16.4% and 14.1% for fiscal 1997 and fiscal
1996, respectively.
METALS GROUP
NET SALES. Net sales for the Metals Group decreased by $3.9 million, or
4.5%, to $82.7 million for fiscal 1997 from $86.6 million for fiscal 1996. This
decrease was primarily due to reduced sales volume at the Company's steel
erecting facility.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
decreased by $4.0 million, or 5.8%, to $65.1 million for fiscal 1997 from $69.1
million for fiscal 1996. This decrease was primarily due to the reduced sales
volume as a result of reorganizing the fabrication operations at the Company's
steel erecting facility.
GROSS PROFIT. Gross profit for the Metals Group increased by $.1 million,
or .7%, to $17.6 million for fiscal 1997 from $17.5 million for fiscal 1996, due
to the reasons discussed above. As a percentage of net sales, gross profit for
the Metals Group was 21.3% and 20.2% for fiscal 1997 and fiscal 1996,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group increased by $.3 million, or 2.6%,
to $12.2 million for fiscal 1997 from $11.9 million for fiscal 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group remained unchanged at $1.0 million for fiscal 1997 and 1996.
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OPERATING INCOME. Operating income for the Metals Group decreased by $.1
million, or 3.6%, to $4.5 million for fiscal 1997 from $4.6 million for fiscal
1996, due to the reasons discussed above. As a percentage of net sales,
operating income for the Metals Group was 5.4% for both years.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $1.9 million, or 73.3%,
to $4.4 million for fiscal 1997 from $2.5 million for fiscal 1996. This increase
was primarily due to additional incentive compensation and staffing and
professional fees associated with public company reporting requirements.
INTEREST EXPENSE. Interest expense decreased by $0.7 million, or 9.9%, to
$6.6 million for fiscal 1997 from $7.3 million for fiscal 1996. This decrease
was primarily due to reduced debt levels associated with the application of the
proceeds from the initial public offering of the Company's Common Stock and the
proceeds from the sale of Quality Park Products, Inc. ("Quality Park"),
partially offset by the acquisitions of TCI, Air Lab and AMTI, the cash portions
of which were financed by borrowings under the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 40.3% for fiscal 1997 and
41.6% for fiscal 1996.
INCOME FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY LOSS. Income from
continuing operations, before extraordinary loss, increased by $7.4 million, or
141.7%, to $12.6 million for fiscal 1997 from $5.2 million for fiscal 1996. This
increase was primarily due to the contribution generated by TCI, Air Lab and
AMTI and the overall favorable conditions in the aviation industry resulting in
increased net sales of the Company's products and services.
INCOME FROM DISCONTINUED OPERATIONS. The Company had income from
discontinued operations of $4.5 million in fiscal 1996, principally as a result
of the sale of Quality Park, which resulted in an after-tax gain of $2.5
million, and improved operating results at Quality Park due to the favorable
effects of restructuring efforts.
EXTRAORDINARY LOSS. An extraordinary loss in fiscal 1997 of $1.5 million
(net of tax benefit of $1.0 million), relates to prepayment premiums and the
related write-off of unamortized deferred financing costs due to the early
retirement of 11% senior subordinated notes, senior term loans and the Credit
Facility.
NET INCOME. Net income increased by $1.4 million, or 14.3%, to $11.1
million for fiscal 1997 from $9.7 million for fiscal 1996. The increase in
fiscal 1997 net income was primarily attributable to the strong results of the
Aviation Group, partially offset by the extraordinary loss recorded in fiscal
1997 and the comparison to fiscal 1996 which included the results of
discontinued operations.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $29.5 million, or
41.6%, to $100.2 million for fiscal 1996 from $70.7 million for fiscal 1995.
This increase was primarily due to an $18.4 million increase in net sales for
the operating divisions and subsidiaries in the Aviation Group, representing a
26.0% increase in net sales over fiscal 1995, and the inclusion of an aggregate
of $11.0 million in net sales for TCI and Air Lab. Increased demand for overhaul
and repair services from the commercial airlines and cargo carriers, as well as
increased orders of aircraft components from OEMs, accounted for the increase in
net sales in the Aviation Group.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $19.2 million, or 37.5%, to $70.6 million for fiscal 1996 from
$51.4 million for fiscal 1995. This increase was primarily due
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to $6.4 million of increased costs of products sold associated with net sales
generated by TCI and Air Lab. The remaining increase is associated with the
increase in net sales of the remaining operating divisions and subsidiaries in
the Aviation Group.
GROSS PROFIT. Gross profit for the Aviation Group increased by $10.2
million, or 52.8%, to $29.5 million for fiscal 1996 from $19.3 million for
fiscal 1995. Of this increase, $5.0 million was a result of the increased sales
volume and $0.6 million was a result of improved margins at the operating
divisions and subsidiaries in the Aviation Group. This increase was also
attributable to the inclusion of $4.6 million of gross profit on the net sales
generated by TCI and Air Lab. As a percentage of net sales, gross profit for the
Aviation Group was 29.5% and 27.3% for fiscal 1996 and fiscal 1995,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $4.2 million, or
47.4%, to $12.9 million for fiscal 1996 from $8.8 million for fiscal 1995, due
to increased sales volume and the TCI and Air Lab acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $0.7 million, or 41.2%, to $2.5 million for fiscal
1996 from $1.8 million for fiscal 1995, primarily due to the assets acquired in
connection with the TCI and Air Lab acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by $5.3
million, or 60.6%, to $14.1 million for fiscal 1996 from $8.8 million for fiscal
1995. This increase was assisted by the growth in aircraft production and the
increased outsourcing of repair and overhaul services by commercial aircraft
operators. This increase was also due to the addition of net sales and profits
generated by TCI and Air Lab, as well as the incremental operating income
resulting from increased sales volume. As a percentage of net sales, operating
income for the Aviation Group was 14.1% and 12.4% for fiscal 1996 and fiscal
1995, respectively.
METALS GROUP
NET SALES. Net sales for the Metals Group decreased by $6.8 million, or
7.3%, to $86.6 million for fiscal 1996 from $93.5 million for fiscal 1995. This
decrease was primarily due to weakened demand and lower selling prices for
flatrolled steel products processed by the Company. In addition, the Company's
electrogalvanized products experienced greater competition from hot-dipped
rolled steel products.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
decreased by $5.3 million, or 7.2%, to $69.1 million for fiscal 1996 from $74.4
million for fiscal 1995. This decrease was primarily due to the reduced sales
volume and lower costs of raw materials.
GROSS PROFIT. Gross profit for the Metals Group decreased by $1.5 million,
or 7.9%, to $17.5 million for fiscal 1996 from $19.0 million for fiscal 1995,
due to the reasons discussed above. As a percentage of net sales, gross profit
for the Metals Group was 20.2% and 20.3% for fiscal 1996 and fiscal 1995,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group increased by $0.2 million, or 1.4%,
to $11.9 million for fiscal 1996 from $11.7 million for fiscal 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group increased by $0.1 million, or 9.1%, to $1.0 million for fiscal 1996 from
$0.9 million for fiscal 1995. This increase was primarily due to depreciation of
certain assets recently placed into service.
OPERATING INCOME. Operating income for the Metals Group decreased by $1.7
million or 27.3%, to $4.6 million for fiscal 1996 from $6.4 million for fiscal
1995, due to the reasons discussed above. As a percentage of net sales,
operating income for the Metals Group was 5.4% and 6.8% for fiscal 1996 and
fiscal 1995, respectively.
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OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.9 million, or 57.0%,
to $2.5 million for fiscal 1996 from $1.6 million for fiscal 1995. This increase
was primarily due to additional incentive compensation, staffing and
professional fees.
INTEREST EXPENSE. Interest expense increased by $0.7 million, or 11.1%, to
$7.3 million for fiscal 1996 from $6.6 million for fiscal 1995. This increase
was primarily due to increased debt levels associated with the acquisitions of
TCI and Air Lab, the cash portions of which were financed by borrowings under
the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 41.6% for fiscal 1996 and
37.3% for fiscal 1995.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased by $0.8 million, or 19.0%, to $5.2 million for fiscal 1996 from $4.4
million for fiscal 1995. This increase was primarily due to the net sales
generated by TCI and Air Lab and the overall favorable conditions in the
aviation industry resulting in increased net sales of the Company's products and
services.
INCOME (LOSS FROM DISCONTINUED OPERATIONS). The Company had income from
discontinued operations of $4.5 million in fiscal 1996, principally as a result
of the sale of Quality Park, which resulted in an after-tax gain of $2.5
million, and improved operating results at Quality Park due to the favorable
effects of restructuring efforts. The Company had a loss from discontinued
operations of $2.9 million in fiscal 1995 due to $2.0 million in operating
losses at Quality Park and a $0.9 million loss on the sale of certain assets of
Quality Park.
NET INCOME. Net income increased by $8.2 million, or 540.9%, to $9.7
million for fiscal 1996 from $1.5 million for fiscal 1995. Of this increase,
$7.3 million was attributable to the income from the discontinued Quality Park
operations in fiscal 1996 as compared to the loan at these operations during
fiscal 1995. The increase in fiscal 1996 net income was also attributable to the
strong results of the Aviation Group, partially offset by a decline in
profitability in the Metals Group. As a percentage of net sales, net income was
5.2% and 0.9% for fiscal 1996 and fiscal 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash flows
from operations and borrowings under its credit arrangments. The Company used
approximately $3.8 million of cash flows from operating activities, principally
for working capital requirements, for the six months ended September 30, 1997.
The Company used approximately $35.0 million in investing activities, while
providing $43.2 million in financing activities for the six months ended
September 30, 1997. As of September 30, 1997, $29.7 million was available under
the Credit Facility.
The Company provided approximately $8.1 million from operating activities
and $11.2 million from investing activities, while using $18.9 million in
financing activities, net of the Company's initial public offering, primarily
for retirement of debt for the fiscal year ended March 31, 1997.
On July 19, 1996, the Company entered into an unsecured five-year credit
agreement for $85.0 million ($50.0 million revolver and $35.0 million term
loan). On December 31, 1996, the Company amended the credit agreement increasing
the revolving credit facility to $85.0 million and retiring the term loan. The
term loan of $33.8 million was repaid using proceeds from the Company's initial
public offering and borrowings under the Company's revolving credit facility.
On March 31, 1997, the Company entered into an amended and restated
agreement (the "Credit Facility") with its lenders to extend the maturity date
of the existing credit agreement, reduce interest rates and amend certain
covenants. The Credit Facility contains restrictions and covenants applicable to
the Company which include limitations on the ability to incur additional
indebtedness, issue stock
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options or warrants, make certain restricted payments and acquisitions, create
liens, enter into transactions with affiliates, sell substantial portions of its
assets and make capital expenditures. The Company's long-term debt generally
prohibits the Company from paying any dividends or making any distributions on
its capital stock. On October 24, 1997, the Company amended the Credit Facility,
increasing the availability from $85.0 million to $125.0 million.
The Credit Facility matures on March 31, 2002 and bears interest, at the
option of the Company, at the fluctuating prime rate or LIBOR plus applicable
basis points. On September 30, 1997, an aggregate amount of approximately $54.0
million was outstanding under the Credit Facility, $50.0 million of which was
accruing interest at LIBOR plus applicable basis points, or, 6.1875% per annum,
and $4.0 million of which was accruing interest at the prime rate of 8.5% per
annum. Amounts repaid on the Credit Facility may be reborrowed.
The proceeds of borrowings under the Company's credit arrangements and the
proceeds from the sale of the discontinued paper operations of Quality Park were
used to extinguish the outstanding balances of the revolving credit facility,
the senior term loans and the senior subordinated notes existing at March 31,
1996. The early extinguishment of this debt resulted in an extraordinary loss of
approximately $1.5 million, net of an income tax benefit of approximately $1.0
million.
The Company's 10.5% junior subordinated promissory notes are unsecured
obligations of the Company, which are contractually subordinated to all
liabilities of TCI and its subsidiaries. These notes were issued to TFX
Equities, Inc. and certain members of management of TCI and are due in equal
installments on December 31, 2005 and 2006, although the holders of these notes
have no right to demand payment of principal until all superior debt, as
defined, has been paid in full.
In the third quarter of fiscal 1997, the Company completed the sale of
2,875,000 shares of its Common Stock for $19.00 per share through an
underwritten public offering and the sale of 125,000 shares of its Common Stock
for $17.67 per share through a direct sale by the Company. The net proceeds from
the sales, of approximately $51.8 million, were used to pay down a portion of
the Company's long-term borrowings under its five-year credit agreement and $5.5
million of the 10% subordinated promissory note.
On May 5, 1997, the Company entered into a loan agreement with the City of
Shelbyville, Indiana relating to the City of Shelbyville, Indiana Adjustable
Rate Economic Development Revenue Bonds, Series 1997 (the "Bonds"). The proceeds
of the Bonds of $5.0 million are being used to fund the expansion of the
Company's K-T Corporation facility. The Bonds mature on May 1, 2012 and are
secured by an irrevocable letter of credit issued by PNC Bank, N.A. The Bonds
bear interest at a variable weekly rate.
In July 1997, the Company entered into a $10.0 million discretionary line of
credit (the "Line of Credit"). The Line of Credit bears interest at the current
rate offered by the lender. Borrowings under the Line of Credit are payable on
the last day of the applicable interest period or on demand. The Line of Credit
expires in July 1998 and may be continued or renewed at that time; provided,
however, that the lender may terminate such Line of Credit or may refuse to lend
under such Line of Credit at any time.
On September 15, 1997, the Company retired the remaining $8.0 million
subordinated note payable to IKON. The terms of the note provided for a $1.0
million discount in the event the note was repaid by October 1, 1997. The cash
payment of $7.0 million was funded by the Company's long-term borrowings under
its revolving credit facility. The early extinguishment of this debt resulted in
an extraordinary gain of $0.6 million, net of income taxes of $0.4 million.
Capital expenditures were approximately $7.4 million for the six months
ended September 30, 1997 primarily for manufacturing machinery and equipment for
the Aviation Group. Capital expenditures were approximately $8.2 million for the
fiscal year ended March 31, 1997 primarily for manufacturing machinery and
equipment for the Aviation Group. The Company funded these expenditures through
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borrowings under its Credit Facility and from the proceeds from the Bonds. The
Company expects capital expenditures to be approximately $15.0 million for its
fiscal year ending March 31, 1998. The expenditures are expected to be used
primarily to expand capacity at several facilities in the Aviation Group.
On July 31, 1996, the Company acquired all of the outstanding stock of AMTI
based in Tempe, Arizona for an aggregate purchase price of approximately $21.2
million, including cash consideration of approximately $8.0 million, an option
to purchase 13,000 shares of the Company's Class A common stock at an exercise
price of $1.87 per share, a five-year covenant not-to-compete contract valued at
$2.8 million and the assumption of liabilities and costs related to the
transaction of approximately $10.3 million. The acquisition was accounted for
under the purchase method, and the purchase price was allocated to the assets
based on their estimated fair values, with any excess recorded as cost over net
assets acquired. The acquisition was funded through the Company's long-term
borrowings.
As of April 30, 1997, the Company purchased substantially all of the assets
of JDC Company in a cash transaction. The transaction was funded by borrowings
under the Credit Facility. JDC Company, based in Ft. Lauderdale, Florida,
specializes in the repair, overhaul and exchange of electromechanical aircraft
instruments. The cash purchase price was approximately $2.1 million.
On July 31, 1997, the Company sold substantially all of the assets of its
Seattle, Washington based facility, Air Lab, to Sextant for approximately $5.9
million in cash and the assumption by the purchaser of certain liabilities. In
connection with the sale of Air Lab, the Company and Sextant entered into a
five-year marketing and service agreement pursuant to which A. Biederman, a
division of the Company, will serve as an authorized warranty and non-warranty
repair station for certain products of Sextant and as an authorized distributor
for spare parts of Sextant. The Company believes that such marketing and service
agreement will enhance customer service and increase its market share in
instrument repair and distribution.
On September 1, 1997, the Company purchased substantially all of the capital
stock of Hydro-Mill in a cash transaction. The transaction was funded by
borrowings under the Credit Facility. Hydro-Mill, based in Chatsworth,
California, specializes in the manufacture of precision machine parts and
assemblies for the aircraft industry. The cash purchase price was approximately
$31.5 million.
On October 29, 1997, the Company acquired all of the outstanding stock of
Stolper. The transaction was funded by borrowings under the Credit Facility.
Stolper fabricates sheet metal from high temperature alloys, which is used
primarily in the hot section of jet engines. Stolper also provides repair and
overhaul services to aerospace end-users. Stolper operates facilities in
Brookfield, Wisconsin and Phoenix, Arizona. The cash portion of the purchase
price was approximately $33.6 million.
The Company believes that cash generated by operations, borrowings under the
Credit Facility and proceeds from the Bonds will be sufficient to meet
anticipated cash requirements for its operations in the next 12 months. However,
the Company intends to grow through acquisition and is continuously evaluating
various acquisition opportunities. As a result, the Company currently is
considering a number of candidates. In the event that more than one of these
transactions were successfully consummated, the availability under the Credit
Facility might be fully utilized and additional funding sources may be needed.
There can be no assurance that such funding sources will be available to the
Company.
FORWARD-LOOKING STATEMENTS
The foregoing discussion and analysis contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
relating to the Company's future operations and prospects, including statements
that are based on current projections and expectations about the markets in
which the Company operates, and management's beliefs concerning future
performance and capital requirements based upon current available information.
Actual results could differ materially from management's current expectations
and there can be no assurance that additional capital will not
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be required or that additional capital, if required, will be available on
reasonable terms, if at all, at such times and in such amounts as may be needed
by the Company. In addition to these factors, among other
factors that could cause actual results to differ materially are uncertainties
relating to the integration of acquired businesses, general economic conditions
affecting the Company's two business segments, dependence of certain of the
Company's businesses on certain key customers as well as competitive factors
relating to the aviation and metals industries. For a more detailed discussion
of these and other factors affecting the Company, see "Risk Factors."
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BUSINESS
GENERAL OVERVIEW
The Company designs, engineers, manufactures, repairs and overhauls aircraft
components such as mechanical and electromechanical control systems, aircraft
and engine accessories, APUs, avionics and aircraft instruments. The Company
serves a broad spectrum of the aviation industry, including commercial airlines
and air cargo carriers, as well as OEMs of aircraft and aircraft components, on
a worldwide basis.
PRODUCTS AND SERVICES
The Company's aviation products and services may generally be divided into
three categories: structural components, instrument and flight controls and
operational components. The following is a description of some of the products
and services offered by the Company in each of these three categories:
STRUCTURAL COMPONENTS. The Company performs stretch forming, bending, die
forming, machining, milling, welding, assembly and other fabrication on aircraft
wings, fuselages and skins for aircraft produced by OEMs such as Boeing. The
Company also manufactures metallic and composite bonded honeycomb assemblies for
fuselage, wings and flight control surface parts for commercial airlines and
other aircraft operators.
INSTRUMENT AND FLIGHT CONTROLS. The Company designs and engineers
mechanical and electromechanical controls such as remote valve operators and
push/pull controls ranging from simple vent controls to sophisticated
flight-critical engine controls for OEMs and commercial airlines and general
aviation. In certain cases, principally at TCI, the Company's designs and
engineering for such controls are proprietary because such designs are not sold
to the OEM for whom the control is manufactured. Consequently, the OEM generally
relies on the Company to repair or replace such component. The Company also
performs repair and overhaul services and supplies spare parts for various types
of cockpit instruments and gauges for a broad range of commercial airlines on a
worldwide basis.
OPERATIONAL COMPONENTS. The Company performs complete repair and overhaul
services on APUs and components for APUs for both commercial airlines and OEMs.
APUs are used to provide power for all non-propulsion aircraft functions such as
air conditioning, lights and other electrical functions. The Company also
repairs and overhauls aircraft accessories, including constant speed drives,
pneumatic or electrically actuated valves, cabin compressors, starters and
generators, and manufactures refueling booms. Certain of these components, like
the APUs, are repaired pursuant to SFAR 36 certifications. In addition, the
Company manufactures hot section components for small propulsion jet engines,
APUs and land-based power units and combustion system components for power
equipment manufacturers. Finally, the Company provides precision machining
services for other operational components manufactured from refractory and other
metals for the aviation and aerospace industry.
INDUSTRY OVERVIEW AND TRENDS
According to 1996 U.S. Department of Commerce statistics, the annual
worldwide market for aircraft, including components, is approximately $56.7
billion. This market is expected to grow at an annual rate of 5% to 6% through
2000. AVIATION WEEK AND SPACE TECHNOLOGY has stated that the global airline
industry spends at least $20 billion annually to maintain its aircraft. Both the
aircraft component production and component repair industries are highly
fragmented, each consisting of a limited number of well-capitalized companies,
which offer a broad range of products and services, and a large number of
smaller, specialized companies. The aviation industry has been consolidating at
an increasing pace in recent years, and it is expected that such consolidation
will continue for the foreseeable future.
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A number of significant trends are currently affecting the market for the
design, engineering, manufacture, repair and overhaul of aircraft components.
These trends include the following:
INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION. Boeing's 1997 Market
Outlook projected that global air travel will increase by 75% and that the
number of passenger and cargo delivery aircraft in service will increase by 48%
through the year 2006. This trend will be driven, in part, by the anticipated
continued growth of established carriers engaged in the air freight and package
delivery businesses. Average passenger seat miles flown is also expected to
increase significantly over the next few years. Further, many new airlines are
expected to commence operations in the United States and abroad, especially in
China and other countries in Asia where air traffic previously was limited.
Because start-up airlines generally do not invest in the infrastructure
necessary to service their aircraft, such airlines outsource all or most of
their repair and overhaul services. To meet their needs, certain foreign and
many start-up airlines have turned to older aircraft which generally require
more frequent servicing. Further, as aging aircraft are retired, new aircraft
production is increasing. The number of surplus aircraft is expected to
significantly decline while new aircraft production is expected to increase over
the next several years. The continued growth in air transit and aircraft
production will increase the demand for aircraft component purchases and
repairs.
INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators
have come under increasing pressure to reduce both operating and capital costs
associated with providing aviation services. While several of the expenditures
incurred by aircraft operators are beyond their direct control, such as fuel
prices and labor costs, aircraft operators seeking cost reductions have
increased purchases of certain components from third parties and have outsourced
repair and overhaul functions. Aircraft components sold by third party suppliers
and aircraft components that have been repaired and overhauled are generally
less expensive than new aircraft components sold by OEMs. In addition, OEMs are
increasingly becoming "assemblers" of aviation products by outsourcing more
manufacturing and repair functions to third parties. In this regard, the Company
supplies many OEMs with aircraft components and subassemblies, in addition to
performing repair and overhaul services. In addition, as consolidation in the
aviation services industry continues, aviation services consumers are requiring
vendors to offer a broader range of services including, in some instances,
inventory maintenance and management services. The Company believes that its
broad array of aviation products and services and its reputation for quality and
timely and reliable delivery will position the Company to continue to capitalize
on the outsourcing trend. The Company anticipates that increased reliance on
outsourcing will continue to cause consolidation in the industry since only
those suppliers with extensive capacities and adequate capital will secure such
agreements with OEMs and aircraft operators.
REDUCTION IN THE NUMBER OF APPROVED SUPPLIERS AND VENDORS. In order to
reduce purchasing costs, streamline purchasing decisions and have greater
control over quality, purchasing departments of OEMs and aircraft operators have
been reducing the number of approved suppliers and vendors. In the past year,
several OEMs and aircraft operators have reduced their supplier and vendor lists
from as many as 50 to a core group of five to ten "mega-suppliers" or
"mega-vendors" who have the size and capacity to meet their needs. The Company
has secured a position on such lists of a number of OEMs and airlines. The
Company believes that this trend will continue in the future and that, due to
its established market presence and reputation for quality, the Company will
continue to be selected as an approved supplier and vendor. See "-- Government
Regulation."
INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations
promulgated by the FAA and similar agencies in other countries, including the
Joint Aviation Authority (the "JAA") and the Civil Aviation Administration of
China (the "CAAC"), as well as guidelines established by OEMs and aircraft
operators, when an aircraft component fails to perform within certain prescribed
limits or after logging a prescribed number of flight hours, the aircraft
component must be brought to a repair facility certified by the FAA or similar
agency of a foreign nation for various types of designated service or
replacement. The FAA has changed the nature of the licenses that it grants, from
the grant of broad licenses for aircraft
28
<PAGE>
accessories or instruments within broad classifications to more limited licenses
covering specific parts within more narrow classifications. The Company holds
many perpetual broad licenses that will continue unless abandoned, suspended or
revoked. In addition, aircraft components require regular maintenance and
inspection and replacement of "life-limited" components. The trend toward more
stringent maintenance requirements and more frequent maintenance and overhaul
has increased the size of the market for the repair of such components, because
the use of new components is not always cost effective. In addition, a proposed
change in FAA regulations will require aircraft repair stations and others to
implement and follow internal maintenance and safety requirements in addition to
FAA regulations. The Company believes that, because of its broad licenses and
long-standing emphasis on quality control, it will benefit from these higher
maintenance and safety standards.
INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding
the use of unapproved aircraft spare parts, regulatory authorities have
increased the level of documentation that must be maintained on spare parts.
This requirement has been extended by OEMs and aircraft operators to the vendors
of spare parts. The high cost of required technology to compete effectively in
the redistribution market has made entry into and survival in the aircraft spare
parts redistribution market increasingly difficult and expensive. The Company
has implemented technology to enable it to meet these more stringent
traceability requirements and intends to continue to do so in the future.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of trends
affecting the market for the design, engineering, manufacture, repair and
overhaul of aircraft components due to:
BROAD ARRAY OF PRODUCTS AND SERVICES. The Company offers the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers,
including electromechanical controls and fuselage structural components for the
777 model aircraft for Boeing. In certain cases, principally at TCI, the Company
owns the proprietary rights to these designs and, accordingly, the customer
generally relies on the Company to provide service on such aircraft components
at every stage of their useful lives, including the repair and overhaul or
replacement of such components. In addition, the Company manufactures aviation
components according to its customers' specifications. The Company also performs
repair and overhaul services for customers on various aviation components
manufactured by third parties such as AlliedSignal Inc. ("AlliedSignal"). The
Company offers to maintain and manage inventories of aircraft components and
other products for certain of its customers. In certain instances, the Company's
customers require it to maintain and manage their inventories.
GOVERNMENT CERTIFICATIONS. The Company operates 12 FAA-certified repair
stations and has been granted licenses from the FAA and foreign regulatory
counterparts, including the JAA and the CAAC, to perform repair and overhaul
services on broad classifications of aircraft instruments and accessories.
Without such broad certifications and licenses, which are often expensive and
time-consuming to obtain and involve extensive audit procedures, other companies
are precluded from offering these products and services, thereby constituting a
significant barrier to entry. See "-- Government Regulation." In addition, the
Company holds two exclusive licenses issued by the FAA which permit the Company
to design, engineer, repair, test and release into service without FAA approval
certain products to its own specifications for certain aircraft components and
therefore to compete directly with OEMs with respect to such components. These
exclusive licenses, known as SFAR 36 certifications, enable the Company to
offer, on a proprietary basis, certain repaired parts relating to various
aircraft accessories such as APUs and constant speed drives to its customers at
a lower cost than other companies that must purchase replacement parts from
third parties. The Company employs three DERs who are certified to act on behalf
of the FAA to develop, substantiate and approve repairs on components.
29
<PAGE>
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that the Company satisfy certain
requirements relating to the quality of its products and services. The Company
has continually met or exceeded these requirements, and has successfully
completed many audits conducted on a regular basis by the Coordinated Agency for
Supplier Evaluation ("C.A.S.E."), a consortium of United States airlines. As a
C.A.S.E.-listed vendor, the Company is reviewed on a regular basis for quality
and efficiency. In addition, the Company conducts voluntary, thorough
self-auditing, utilizing inspectors from its various companies to audit other
companies in its Aviation Group. The Company also performs testing and
certification procedures on all of the products that it designs, engineers,
manufactures, repairs and overhauls, and maintains detailed records to ensure
traceability of the production of and service on each aircraft component. The
Company believes that its emphasis on quality control has enabled it to obtain
many of the FAA licenses it enjoys, including its exclusive SFAR 36
certifications. The expense required to institute and maintain the Company's
quality control procedures represents a barrier to entry for other companies.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers, including
Federal Express Corporation and United Parcel Service of America Inc., and OEMs
such as Boeing, Bombardier Inc., Aerospatiale (Airbus) and AlliedSignal. The
Company expects that its customer base will continue to strengthen and broaden
with increased cross-selling efforts by the Company of its related products and
services. Boeing (including McDonnell Douglas, which has been recently acquired
by Boeing) accounted for more than 10% of the Company's consolidated revenues
for the 12 months ended September 30, 1997. Although the loss of Boeing could
have a material adverse effect on the Company, the Company provides various
products and services to numerous Boeing facilities and, accordingly, the
Company believes that the loss of all Boeing business is unlikely.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's Aviation Group have substantial experience in the aviation
industry. These entities are characterized by experienced management and
highly-skilled employees. Because of its established industry presence, the
Company enjoys strong customer relations, name recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further expand its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
increasing trend toward outsourcing and the reduction by aircraft operators and
OEMs of the number of approved suppliers and vendors.
ACQUISITIONS. The Company expects to continue its growth through
acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
successfully completed six acquisitions since October 1995, three of which were
completed since the Company's initial public offering. The Company acquired JDC
Company as of April 30, 1997. JDC Company is engaged in the business of
repairing, overhauling, exchanging and selling instrumentation for the aviation
industry. In addition, the Company purchased Hydro-Mill on
30
<PAGE>
September 2, 1997. Hydro-Mill manufactures, repairs and overhauls precision
machine parts and assemblies for the airline industry. The Company also acquired
Stolper on October 29, 1997. Stolper fabricates precision sheet metal
turbomachinery components, manufactures hot section components for small
propulsion jet engines and APUs and manufactures combustion system components.
Because of the fragmented nature of much of the market for aircraft products and
services, the Company believes that many additional acquisition opportunities
exist in the aviation industry. The Company intends to further capitalize on the
consolidation trend in the aviaition industry and, therefore, the Company is
currently evaluating acquisition opportunities. There can be no assurance that
the Company will successfully complete any of these acquisitions or, that if so
acquired, such entities will be properly integrated into the Company.
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. In addition,
the Company participates each year in several international trade shows,
including the Paris Air Show and the Singapore Air Show. The Company intends to
build on its existing international presence through continued market
penetration and, as appropriate opportunities arise, foreign acquisitions.
CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation
of the Company's operating divisions and subsidiaries, the Company plans to
increase cross-selling of related capabilities to its customers. For example,
one of the Company's operating divisions distributes certain electromechanical
controls manufactured by a subsidiary of the Company. The Company's operating
divisions and subsidiaries will continue to share independent sales
representatives and jointly bid on projects where appropriate, while still
maintaining their individual identities.
HISTORICAL BACKGROUND
The Company was formed by members of management and CVC to acquire (the
"Acquisition") certain businesses and assets from IKON. In connection with the
Acquisition, 19 members of management contributed capital in the aggregate
amount of approximately $1.1 million and CVC, an institutional investor,
contributed capital in the aggregate amount of approximately $6.9 million.
PROPRIETARY RIGHTS
The Company benefits from its proprietary rights relating to certain
designs, engineering, manufacturing processes and repair and overhaul
procedures. For example, at TCI, the Company designs and engineers flight
control systems and retains the proprietary rights to these designs and
engineering. Accordingly, the customer generally relies on the Company to
provide initial and additional components, as well as to redesign, reengineer,
replace or repair and provide overhaul services on such aircraft components at
every stage of their useful lives. In addition, the Company has proprietary
rights to certain of its manufacturing processes. For certain products, the
Company's unique manufacturing capabilities are required by the customer's
specifications or designs, thereby necessitating reliance on the Company for
production of such designed product. The Company also holds two SFAR 36
certifications that permit it to develop proprietary repair procedures to be
used in certain repair and overhaul processes, enabling the Company to offer the
customer a lower cost alternative to purchasing the OEM's replacement part. The
Company employs three DERs who are certified to act on behalf of the FAA to
develop, substantiate and approve repairs on components for certain of the
Company's operating divisions and subsidiaries.
31
<PAGE>
RAW MATERIALS AND REPLACEMENT PARTS
The Company purchases raw materials, primarily consisting of steel and
aluminum coils, sheets and shapes, from various vendors. The Company also
purchases replacement parts which are utilized in its various repair and
overhaul operations. Although the Company believes that these raw materials and
replacement parts are generally available at competitive prices from numerous
sources, the Company has recently had difficulty purchasing aluminum sheet and
extrusions in sufficient amount to meets its customers' demands. See "Risk
Factors-- Limited Availability of Raw Materials."
OPERATING DIVISIONS AND SUBSIDIARIES
The Company operates through several operating divisions and subsidiaries
which are divided into two groups: the Aviation Group and the Metals Group. The
following chart describes the operations, customer base and certain other
information with respect to the Company's operating divisions and subsidiaries:
<TABLE>
<CAPTION>
OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------- ----------------- -------------------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
AVIATION GROUP
A. Biederman(1) Glendale, CA Sells and services Commercial airlines, U.S. 85
(1933) aircraft and industrial military and cargo
instruments. carriers.
Advanced Materials Tempe, AZ Repairs and manufactures Aviation OEMs and aircraft 255
Technologies, Inc.(3) components for APUs and operators.
(1987) gas turbine engines.
Aerospace Technologies, Forth Worth, TX Manufactures metallic/ Commercial airlines, U.S. 100
Inc.(1) composite bonded honeycomb military and component
(1969) assemblies and repairs supplier industry.
fuselage, wing, flight
control surface parts and
other flight critical
components.
JDC Company(3) Ft. Lauderdale, Repairs and services Aircraft manufacturers 49
(1985) FL Georgetown, TX aircraft instruments. ranging from general
aviation to wide-body air
transport.
Hydro-Mill Co. Chatsworth, CA Manufactures, repairs and Aviation OEMs, commercial 170
(1937) overhauls precision airlines and aircargo
machine parts and carriers.
assemblies.
K-T Corporation Shelbyville, IN Performs stretch forming, Aviation OEMs, U.S. 255
(1963) bending, die forming, military and aerospace,
machining, welding, mass transportation,
assembly and other energy and heavy trucking
fabrication on aircraft industries.
wings, fuselages and
skins.
L.A. Gauge Co. Sun Valley, CA Machines, bonds and Defense, aerospace, 42
(1954) fabricates ultra-precision medical, automotive and
parts. computer industries.
Lamar Electro-Air Wellington, KS Repairs and overhauls U.S. government, 116
Corporation (1)(2) aircraft and engine commercial airlines and
(1965) accessories, manufactures general aviation aircraft
pneumatic and electrically operators.
actuated valves for
aircraft and assembles
axles and aluminum wheels
for automobiles.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------- ----------------- -------------------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Northwest Industries Albany, OR Machines and fabricates Aerospace, nuclear, 29
(1960) refractory, reactive, heat medical, electronic and
and corrosion-resistant chemical industries.
precision products.
Special Processes of Phoenix, AZ Produces and applies Aviation OEMs and aircraft 15
Arizona, Inc.(1) plasma coating. operators.
(1987)
Stolper-Fabralloy Phoenix, AZ Fabricates precision sheet Commercial, military and 207
Company, LLC(3) Brookfield, WI metal turbomachinery aerospace OEMs.
(1908) components, manufactures
hot section components for
small propulsion jet
engines and APUs and
manufactures combustion
system components.
Triumph Air Repair, Phoenix, AZ Repairs and overhauls APUs Worldwide commercial 174
Inc.(1)(2) and supplemental airlines.
(1979) equipment.
Triumph Controls, Inc.(1) North Wales, PA Designs and manufactures Aviation OEMs, shipyards, 283
(1943) mechanical and repair and overhaul
electromechanical control facilities, airlines and
systems. U.S. and NATO military
forces.
METALS GROUP
Deluxe Specialties Mfg. Hutchinson, KS Manufactures fuel tanks U.S. manufacturers of 115
Co. and hydraulic reservoirs. mobile, material handling,
(1961) agricultural, construction
and power generation
equipment.
Great Western Steel Co. Chicago, IL Produces steel products, Manufacturers, primarily 38
(1918) specializing in flat in the home and office
rolled products. products industries.
Kilroy Structural Steel Cleveland, OH Erects structural steel General contractors, 11
Co. frameworks. engineers and architects
(1918) of commercial buildings
and bridges.
Triumph Industries Bridgeview, IL Produces and distributes Computer and electronic 54
(1960) specialty industries.
electrogalvanized
products.
</TABLE>
- ------------------------
(1) Designates FAA-certified repair station.
(2) Designates SFAR 36 certification.
(3) Designates that two locations are FAA-certified repair stations.
METALS PROCESSING AND DISTRIBUTION
The Company's Metals Group consists of three operating divisions and one
subsidiary with substantial experience in the metals industry. These businesses
include a leading producer of electrogalvanized steel products, a steel service
center specializing in flat rolled steel products and a leading manufacturer of
fuel tanks and hydraulic reservoirs. These entities supply products to several
hundred manufacturers and other customers in the computer, electronics and
agricultural industries on a regional and national basis. In addition, the
Company operates a business engaged in the erection of structural frameworks for
buildings and bridges in the midwestern United States.
The Company's Metals Group processes, converts and distributes steel and
steel products including electrogalvanized steel products which are stamped,
formed, welded and painted, and coated steel for
33
<PAGE>
the electronic and computer industries. The Company's steel service center
specializes in flat rolled products and their processing, including hot or cold
rolled sheet and coil and galvanized sheet and coil used primarily by the home
and office products and appliance industry. The Company's fuel tanks and
hydraulic reservoirs are used in off-highway mobile equipment units, which are
sold primarily to the agricultural industry.
The Company also erects structural framework, including steel members and
allied materials, for buildings and bridges, with a specialty in commercial and
industrial buildings. Included among the Company's projects are Jacobs' Field,
the Cleveland Indians' baseball stadium, and the Rock 'n Roll Hall of Fame in
Cleveland, Ohio. These structural erection services are provided on a
project-by-project basis primarily in the midwestern United States. These
projects are generally awarded on a fixed fee, competitive bid basis.
SALES AND MARKETING
Each of the Company's operating divisions and subsidiaries independently
conducts sales and marketing efforts directed at their respective customers and
industries and, in some cases, collaborates with other operating divisions and
subsidiaries within its group for cross-marketing efforts. Each sales force and
the respective officers of the operating divisions and subsidiaries are
responsible for obtaining new customers and maintaining relationships with
existing customers. Sales and marketing efforts are conducted primarily by
independent regional manufacturer's representatives and in-house personnel.
Generally, manufacturer's representatives receive a commission on sales and the
in-house sales personnel receive a base salary plus commission. Engaging
independent sales representatives at the local level facilitates responsiveness
to each customer's changing needs and current trends in each marketplace in
which the Company operates.
Presidents of each of the Company's operating divisions and subsidiaries in
the Aviation Group meet periodically to discuss ways to improve sales and
cross-marketing opportunities. The management of each operating division and
subsidiary of the Company also maintains close business relationships with many
customers, thereby furthering the sales and marketing efforts of their
businesses.
A significant portion of the Company's government and defense contracts are
awarded on a competitive bidding basis. The Company generally does not bid or
act as the primary contractor, but will typically bid and contract as a
subcontractor on contracts on a fixed fee basis. The Company generally sells to
its other customers on a fixed fee, negotiated contract or purchase order basis.
BACKLOG
As of September 30, 1997, the Company's Aviation and Metals Groups had
outstanding purchase orders representing an aggregate invoice price of
approximately $133.0 million and $13.0 million, respectively. As of September
30, 1996, the Company's Aviation and Metals Groups had outstanding purchase
orders representing an aggregate invoice price of approximately $71.0 million
and $13.0 million, respectively. The Company believes that purchase orders in an
aggregate approximate amount of $29.0 million will not be shipped by the
Aviation Group by March 31, 1998. The Company believes that all of the purchase
orders will be shipped by the Metals Group by March 31, 1998.
COMPETITION
The aircraft components production and repair industry is highly fragmented,
consisting of both a limited number of well-capitalized companies which offer a
broad range of products and services and a large number of smaller, specialized
companies. The Company believes that the principal competitive factors in the
aviation products and services industry are quality, turnaround time, overall
customer service and price. See "--Competitive Advantages." The Company believes
that it competes favorably on the basis of the foregoing factors. The Company
does not believe that the location of its repair facilities is
34
<PAGE>
a significant factor to its customers in selecting the Company, as substantially
all of the components serviced by the Company are transported by common carrier
to the Company's facilities for service.
The Company competes with third party manufacturers, some of which are
divisions or subsidiaries of OEMs or other large companies in the manufacture of
aircraft components and subassemblies. Competition for the repair and overhaul
of aviation components comes from three primary sources, some with greater
financial and other resources than the Company: OEMs, major commercial airlines
and other independent service companies. Certain major commercial airlines
continue to own and operate their own service centers, while others have begun
to sell their repair and overhaul services to other aircraft operators. The
repair and overhaul services provided by domestic airlines are primarily for
their own aircraft, although these airlines may outsource a limited amount of
repair and overhaul services to third parties. Foreign airlines that provide
repair and overhaul services typically provide these services not only for their
own aircraft but for other airlines as well. OEMs also maintain service centers
which provide repair and overhaul services for the components they manufacture.
Other independent service organizations also compete for the repair and overhaul
business of other users of aircraft components.
The Company's principal competitors in the metals industry include national
and regional steel mills, other steel service centers, steel erection companies
and pre-engineered building manufacturers. Some of these competitors have
greater financial and other resources than the Company.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. The Company must be certified by the
FAA and, in some cases, by individual OEMs, in order to engineer and service
parts and components used in specific aircraft models. If material
authorizations or approvals were revoked or suspended, the operations of the
Company would be adversely affected. New and more stringent government
regulations may be adopted, or industry oversight heightened, in the future and
such new regulations, if enacted, or any industry oversight, if heightened, may
have an adverse impact on the Company.
The Company must also satisfy the requirements of its customers, including
OEMs, that are subject to FAA regulations, and provide these customers with
products and services that comply with the government regulations applicable to
aircraft components used in commercial flight operations. The FAA regulates
commercial flight operations and requires that aircraft components meet its
stringent standards. In addition, the FAA requires that various maintenance
routines be performed on aircraft components, and the Company currently
satisfies these maintenance standards in its repair and overhaul services.
Several of the Company's operating divisions are FAA-approved repair stations.
Currently, the FAA is granting licenses only for the manufacture or repair
of a specific aircraft component, rather than the broader licenses that have
been granted in the past. The FAA licensing process may be costly and
time-consuming. In order to obtain an FAA license, an applicant must satisfy all
applicable regulations of the FAA governing repair stations. These regulations
require that an applicant have experienced personnel, inspection systems,
suitable facilities and equipment. In addition, the applicant must demonstrate a
need for the license. Because an applicant must procure manufacturing and repair
manuals from third parties relating to a particular aircraft component in order
to obtain a license with respect to such component, the application process may
involve substantial cost.
The license approval processes for the JAA and CAAC are similarly stringent,
involving potentially lengthy audits conducted by these regulatory authorities.
The Company's aviation and metals operations are also subject to a variety
of worker and community safety laws. The Occupational Safety and Health Act of
1970 ("OSHA") mandates general requirements for safe workplaces for all
employees. In addition, OSHA provides special procedures and measures for the
handling of certain hazardous and toxic substances. Specific safety standards
have been
35
<PAGE>
promulgated for workplaces engaged in the treatment, disposal or storage of
hazardous waste. The Company believes that its operations are in material
compliance with OSHA's health and safety requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulation by government agencies, including the EPA.
Among other matters, these regulatory authorities impose requirements that
regulate the emission, discharge, generation, management, transportation and
disposal of hazardous materials, pollutants and contaminants, govern public and
private response actions to hazardous or regulated substances which may be or
have been released to the environment, and require the Company to obtain and
maintain licenses and permits in connection with its operations. This extensive
regulatory framework imposes significant compliance burdens and risks on the
Company. Although management believes that the Company's operations and its
facilities are in material compliance with such laws and regulations, there can
be no assurance that future changes in such laws, regulations or interpretations
thereof or the nature of the Company's operations will not require the Company
to make significant additional capital expenditures to ensure compliance in the
future.
Certain of the Company's facilities have been or are currently the subject
of environmental remediation activities, the cost of which is subject to
indemnification provided by IKON pursuant to the Acquisition. One of these
facilities is connected with a site included on the National Priorities List of
Superfund sites maintained by the EPA. Another of these facilities is located on
a site included in the EPA's database of potential Superfund sites. IKON's
indemnification covers the Company for losses the Company might suffer in
connection with liabilities and obligations (and other liabilities and
obligations arising out of or in connection with the Acquisition) arising under
environmental, health and safety laws with respect to operations or use of those
facilities prior to their acquisition by the Company. More specifically, this
IKON indemnification covers both (i) the costs, claims and potential losses
associated with environmental matters identified in the purchase agreement for
the Acquisition as the result of environmental assessments or other disclosures
made in connection with the Acquisition, including the costs, claims and
potential losses associated with all the environmental remediation activities
and identified liabilities, and (ii) the losses connected to environmental
liabilities which were not identified in the purchase agreement and which arise
from conditions or activities existing at the facilities or operations acquired
from IKON prior to their acquisition from IKON, provided that they are
identified by the Company to IKON before July 22, 2000. Certain other facilities
acquired and operated by the Company or one of its subsidiaries, including a
leased facility located on an EPA National Priorities List site, are under
active investigation for environmental contamination by federal or state
agencies when acquired, and continue to be under such investigation. The Company
is indemnified by prior operators and/or present owners of the facilities for
liabilities which the Company incurs as a result of these investigations and the
environmental contamination found which pre-dates the Company's acquisition of
these facilities. Two Company facilities also have been the subject of notices
from a citizen group alleging failure to notify and file reports with
appropriate agencies regarding the presence of certain hazardous chemicals in
excess of specified threshold quantities. The Company has denied these
allegations. See "Risk Factors -- Potential Exposure to Environmental
Liabilities."
EMPLOYEES
As of September 30, 1997, the Company employed approximately 1,900 persons,
of whom 193 were management employees, 50 were sales and marketing personnel,
156 were technical personnel, 266 were administrative personnel and 1,235 were
production workers. As of September 30, 1997, approximately 228 employees were
subject to collective bargaining agreements. None of these collective bargaining
agreements will expire in the next 12 months. The Company is currently
contesting the election of a union for certain employees at one of the Company's
operating divisions in the Metals Group. The Company has not experienced any
material labor-related work stoppage and considers its relations with its
employees to be good.
36
<PAGE>
PROPERTIES
The Company's executive offices are located in Wayne, Pennsylvania, where
the Company leases 7,695 square feet of space. This lease expires in November
2002. In addition, the Company owns or leases the following facilities in which
its operating divisions and subsidiaries are located.
<TABLE>
<CAPTION>
OWNED/
SQUARE LEASE
LOCATION DESCRIPTION FOOTAGE EXPIRATION
- -------------------------------------------- -------------------------------------------- --------- -----------
<S> <C> <C> <C>
Chandler, AZ................................ Thermal processing facility/office 7,000 2017
Phoenix, AZ................................. Plasma spray facility/office 13,500 2000
Phoenix, AZ................................. Repair and overhaul shop/office 50,000 1998
Phoenix, AZ................................. Manufacturing facility/office 35,000 1999
Tempe, AZ................................... Manufacturing facility/office 13,500 Owned
Tempe, AZ................................... Machine shop 9,300 Owned
Tempe, AZ................................... Machine shop 32,000 Owned
Chatsworth, CA.............................. Manufacturing facility/office 101,900 Owned
Chatsworth, CA.............................. Manufacturing facility 10,000 1998
Glendale, CA................................ Instrument shop/warehouse/office 25,000 2005
Milpitas, CA................................ Warehouse/repair shop/office 3,700 1997
Sun Valley, CA.............................. Mechanic shop/office 30,000 Owned
Ft. Lauderdale, FL.......................... Instrument shop/warehouse/office 7,200 2002
Bridgeview, IL.............................. Steel processing facility/office 135,700 2006
Chicago, IL................................. Steel distributing facility/office 140,000 Owned
Shelbyville, IN............................. Manufacturing facility/office 192,300 Owned
Shelbyville, IN............................. Manufacturing facility/office 50,000 Owned
Hutchinson, KS.............................. Manufacturing facility/office 75,000 Owned
Wellington, KS.............................. Repair and overhaul/office 90,000 1997
Cleveland, OH............................... Steel fabrication facility/office 163,000 Owned
Plain City, OH.............................. Office 2,000 1997
Albany, OR.................................. Machine shop/office 25,000 Owned
North Wales, PA............................. Manufacturing facility/office 111,400 2002
Fort Worth, TX.............................. Manufacturing facility/office 114,100 Owned
Georgetown, TX.............................. Instrument shop/warehouse/office 2,200 1997
Brookfield, WI.............................. Manufacturing facility/office 62,000 2006
</TABLE>
The Company believes that its properties are adequate to support its
operations for the foreseeable future.
LEGAL PROCEEDINGS
The Company is not presently involved in any material legal proceedings
outside of the ordinary course of business. The Company may in the future be
named as a defendant in lawsuits involving product defects, breach of warranty
or other actions relating to products that it manufactures or products that it
distributes that are manufactured by others. The Company believes that its
potential exposure is adequately covered by its aviation product and general
liability insurance.
37
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of October 31, 1997 by (i) all
persons known to the Company to be the beneficial owner of 5% or more of the
Common Stock; (ii) each director of the Company; (iii) each executive officer of
the Company; and (iv) all directors and executive officers of the Company as a
group. This table does not include shares of Common Stock that may be purchased
pursuant to options not excercisable within 60 days of October 31, 1997. All
persons listed have sole voting and investment power with respect to their
shares unless otherwise noted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING(1) AFTER OFFERING
------------------------ ------------------------
SHARES PERCENT SHARES PERCENT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Richard C. Ill(2)................................................. 278,943 2.9% 278,943 2.4%
John R. Bartholdson(2)(3)......................................... 264,376 2.7% 264,376 2.2%
Richard M. Eisenstaedt(4)......................................... 3,500 * 3,500 *
Paul T. Stimmler(4)(5)............................................ 57,500 * 57,500 *
Kevin E. Kindig(4)(6)............................................. 33,253 * 33,253 *
Richard C. Gozon.................................................. 66,095 * 66,095 *
Claude F. Kronk................................................... 64,969 * 64,969 *
Joseph M. Silvestri(7)............................................ 23,824 * 23,824 *
Michael A. Delaney(8)............................................. 20,922 * 20,922 *
Citicorp Venture Capital, Ltd.(9)................................. 4,648,535 47.7% 4,648,535 39.6%
World Equity Partners, L.P.(10)................................... 650,000 6.3% 650,000 5.2%
All executive officers and directors as a group (9 persons)....... 813,382 8.3% 813,382 6.9%
</TABLE>
- ------------------------
* Less than one percent.
(1) Based upon outstanding shares of Common Stock and Class D Common Stock.
(2) Includes 8,750 shares of Common Stock which are subject to currently
exercisable stock options.
(3) Includes 1,500 shares of Common Stock beneficially owned by Mr.
Bartholdson's daughters for which he disclaims beneficial ownership.
(4) Includes 2,500 shares of Common Stock which are subject to currently
exercisable stock options.
(5) Includes 25,000 shares of Common Stock held by Mr. Stimmler's wife for
which he disclaims beneficial ownership.
(6) Includes 200 shares of Common Stock beneficially owned by Mr. Kindig's
children for which he disclaims beneficial ownership.
(7) Mr. Silvestri disclaims beneficial ownership relating to shares of Common
Stock and Class D Common Stock held by CVC and any affiliates of CVC.
(8) Mr. Delaney disclaims beneficial ownership relating to shares of Common
Stock and Class D Common Stock held by CVC and any affiliates of CVC.
(9) Includes 920,753 shares of Common Stock and 3,727,962 shares of Class D
Common Stock. Excludes 650,000 shares of Common Stock which may be acquired
by World Equity Partners, L.P. upon exercise of a warrant and shares of
Common Stock held by certain affiliates of CVC, including Messrs. Silvestri
and Delaney, as to which CVC disclaims beneficial ownership.
(10) Includes 650,000 shares of Common Stock issuable upon exercise of a
warrant. World Equity Partners, L.P. is a limited partnership, the general
partner of which is Citicorp Capital Investors, Ltd., an affiliate of CVC.
World Equity Partners, L.P. disclaims beneficial ownership relating to
shares of Common Stock and Class D Common Stock held by CVC and any
affiliates of CVC.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters named below have severally agreed to purchase from the Company
the following respective numbers of shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
BT. Alex. Brown Incorporated......................................................................... 1,000,423
SBC Warburg Dillon Read Inc.......................................................................... 1,000,422
-----------
Total................................................................................................ 2,000,845
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase the total number of shares of Common Stock offered hereby if any of
such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $.95 per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $.10 per share to certain other dealers. The public offering price and other
selling terms may be changed by the Underwriters.
The Company has granted to the Underwriters an option, excercisable not
later than 30 days after the date of this Prospectus, to purchase up to 200,100
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 2,000,845, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,000,845 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company, its executive officers and directors and CVC, its largest
stockholder, who beneficially own 5,436,917 shares in the aggregate (as well as
options to purchase shares of Common Stock), and the holder of a warrant to
purchase 650,000 shares of Common Stock, have agreed not to offer, sell,
contract to sell, or otherwise dispose of, any shares of Common Stock or any
securities convertible into or exchangeable for, shares of Common Stock, for a
period of 90 days after the date of this Prospectus without the prior written
consent BT Alex. Brown Incorporated.
Certain principals of SBC Warburg Dillon Read Inc. held an ownership
interest in Stolper for which they received a portion of the purchase price from
the sale of Stolper to the Company. SBC Warburg Dillon Read Inc. received usual
and customary fees in connection with the transaction.
39
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Philadelphia, Pennsylvania. Certain legal matters related to this
offering will be passed upon for the Underwriters by Wilmer, Cutler & Pickering,
Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedule of Triumph Group, Inc. as
of March 31, 1997 and 1996 and for each of the three years in the period ended
March 31, 1997 incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated by reference
herein and in the Registration Statement. Such consolidated financial statements
and schedule are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
40
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and other information with the Securities and
Exchange Commission ("Commission"). Such reports, proxy and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549-1004 and at its Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-1004. Such reports
and other information can also be inspected at the NYSE where the Company's
Common Stock is listed. In addition, the Commission maintains a Web site that
contains reports, proxy and other information regarding registrants that file
electronically with the Commission. The address of such Web site is
http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-3
("Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended March 31, 1997;
2. Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997 and
September 30, 1997;
3. Current Report on Form 8-K filed on September 15, 1997; and
4. Registration Statement on Form 8-A filed on September 27, 1996.
All other reports filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Common Stock
offered hereby shall be deemed to be incorporated herein by reference and to be
part hereof from the date of filing of such documents.
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein hereby modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will furnish without charge upon written or oral request to each
person to whom this Prospectus is delivered a copy of any or all documents
incorporated by reference herein other than exhibits to such documents not
specifically incorporated by reference thereto. Such request should be directed
to Richard M. Eisenstaedt, Vice President, General Counsel and Secretary,
Triumph Group, Inc., at Four Glenhardie Corporate Center, 1255 Drummers Lane,
Suite 200, Wayne, Pennsylvania 19087 or at (610) 975-0420.
41
<PAGE>
[Photo of instrument]
A. Biederman/JDC Co.
A. Biederman and JDC Company are dedicated to the highest standards in the
aircraft and industrial instrument, and avionics industry for over 60 years.
[Photo of turbine parts]
Advanced Materials Technologies, Inc.
AMTI's future lies in the manufacture and restoration of turbine parts to
maintain the turbine engine fleet.
[Photo of plant]
Aerospace Technologies
Aerospace Technologies, Inc. is a world class manufacturer of
metallic/composite honeycomb assemblies as well as a certified FAA Repair
Station for fuselage, wing and flight control surface parts.
[Photo of plant]
Hydro-Mill Co.
Hydro-Mill is dedicated to providing precision machined structural parts and
assemblies to the aerospace industry. These products include landing gear
components, bulkheads, rib chords, wing spars, beams and welded duct
assemblies.
[Photo of stretch forming machine]
K-T Corporation
K-T Corporation performs stretch forming, machining and other fabrication for
the aerospace, transportation and general industry sectors.
[Photo of product]
L.A. Gauge Co.
L.A. Gauge is an ultra precision machining, bonding and fabrication shop
serving the aerospace, computer, medical and transportation industries.
[Photo of products]
Lamar Electro-Air
Lamar Electro-Air Corporation is a diverse, high quality company serving the
transportation, military and aerospace industries with manufactured products
and accessory overhaul support.
[Photo of products]
Northwest Industries
Northwest Industries is a leader in rare metals including precision machining
and fabrication of refractory, reactive, heat and corrosion-resistant
products for the aerospace, nuclear, chemical, medical and electronic
industries.
[Photo of product]
Stolper-Fabralloy Company
Stolper-Fabralloy is a fabricator of precision sheet metal engine components
for the commercial, military and industrial turbine engine markets.
[Photo of auxiliary power unit]
Triumph Air Repair
Triumph Air Repair provides quality repair and overhaul service to the
world's commercial airlines, for auxiliary power units and other supplemental
equipment, at affordable costs and superior reliability.
[Photo of controls]
Triumph Controls, Inc.
(formerly Teleflex Aerospace/Defense)
For over half a century, aerospace engineers have trusted TCI to develop
innovative design solutions for a broad range of control applications.
[Logo]
Triumph Group, Inc.
Wayne, Pennsylvania - (610)975-0420
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 9
Use of Proceeds................................. 13
Dividend Policy................................. 13
Price Range of Common Stock..................... 13
Capitalization.................................. 14
Selected Consolidated Financial Data............ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business........................................ 27
Principal Stockholders.......................... 38
Underwriting.................................... 39
Legal Matters................................... 40
Experts......................................... 40
Available Information........................... 41
Incorporation of Certain Information by
Reference..................................... 41
</TABLE>
2,000,845 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
------------
PROSPECTUS
------------
BT ALEX. BROWN
SBC WARBURG DILLON READ INC.
November 20, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
