<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _________ to ________
Commission File Number: 1-12235
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TRIUMPH GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0347963
- ----------------------------------- -----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
- ------------------------------------------------ ---------------
(Address of principal executive offices) (Zip Code)
(610) 975-0420
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, par value $0.001 per share, 8,382,986 shares and Class D common
stock, par value $0.001 per share, 3,348,535 shares, each as of July 30, 1999
<PAGE>
TRIUMPH GROUP, INC.
INDEX
Part I. Financial Information
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
March 31, 1999 and June 30, 1999
Consolidated Statements of Income 3
Three months ended June 30, 1998 and 1999
Consolidated Statements of Cash Flows 4
Three months ended June 30, 1998 and 1999
Notes to Consolidated Financial Statements 6
June 30, 1999
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 14
Market Risk
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
</TABLE>
<PAGE>
Part I. Financial Information
Item: 1. Financial Statements
Triumph Group, Inc.
Consolidated Balance Sheets
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 4,953 $ 7,287
Accounts receivable, net 65,613 63,060
Inventories 104,771 114,931
Prepaid expenses and other 2,473 4,209
Deferred income taxes 2,408 2,492
-------- --------
Total current assets 180,218 191,979
Property and equipment, net 107,123 122,150
Excess of cost over net assets acquired, net 124,667 131,645
Intangible assets and other, net 16,849 18,369
-------- --------
Total assets $428,857 $464,143
-------- --------
-------- --------
</TABLE>
-1-
<PAGE>
Triumph Group, Inc.
Consolidated Balance Sheets (continued)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,894 $ 27,740
Accrued expenses 47,263 52,475
Income taxes payable 4,453 6,110
Current portion of long-term debt 1,151 2,443
-------- --------
Total current liabilities 86,761 88,768
Long-term debt, less current portion 91,857 115,185
Deferred income taxes and other 35,462 40,015
Stockholders' equity:
Common stock, $.001 par value, 50,000,000
shares authorized, 8,551,786 shares issued 9 9
Class D common stock convertible,
$.001 par value, 6,000,000 shares authorized,
3,348,535 shares issued and outstanding 3 3
Capital in excess of par value 135,418 135,418
Treasury stock, at cost, 52,700 and 168,800 shares (1,336) (4,165)
Retained earnings 80,683 88,910
-------- --------
Total stockholders' equity 214,777 220,175
-------- --------
Total liabilities and stockholders' equity $428,857 $464,143
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES.
-2-
<PAGE>
Triumph Group, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1999
---- ----
<S> <C> <C>
Net sales $91,140 $ 104,894
Operating costs and expenses:
Cost of products sold 63,023 71,911
Selling, general, and administrative 12,072 13,435
Depreciation and amortization 2,887 4,726
------- ---------
77,982 90,072
Operating income 13,158 14,822
Interest expense and other 705 1,855
------- ---------
Income before income taxes 12,453 12,967
Income tax expense 4,859 4,732
------- ---------
Net income $ 7,594 $ 8,235
------- ---------
------- ---------
Earnings Per Share - Basic:
Net income $ 0.64 $ 0.70
------- ---------
------- ---------
Weighted average common shares outstanding - Basic 11,898 11,737
------- ---------
------- ---------
Earnings Per Share - Assuming Dilution:
Net income $ 0.60 $ 0.66
------- ---------
------- ---------
Weighted average common shares outstanding -
Assuming Dilution 12,692 12,455
------- ---------
------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
-3-
<PAGE>
Triumph Group, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $7,594 $8,235
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,887 4,726
Other amortization included in interest expense 35 46
Provision for doubtful accounts receivable 56 61
Provision for deferred income taxes 395 2,148
Interest on subordinated and junior subordinated
promissory notes paid by issuance of
additional notes 185 218
Changes in other current assets and liabilities, net
of acquisition of business:
Accounts receivable 6,823 7,908
Inventories (5,912) (5,623)
Prepaid expenses and other current assets (662) (290)
Accounts payable, accrued expenses, and accrued
income taxes payable 754 (9,116)
Other 59 (136)
--------- -------
Net cash provided by operating activities 12,214 8,177
INVESTING ACTIVITIES
Capital expenditures, net (4,652) (4,507)
Cost of business acquired, net of cash acquired -- (13,031)
--------- -------
Net cash used in investing activities (4,652) (17,538)
</TABLE>
-4-
<PAGE>
Triumph Group, Inc.
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
FINANCING ACTIVITIES 1998 1999
---- ----
<S> <C> <C>
Net (decrease) increase in revolving credit facility $(7,793) $16,930
Repayment of debt and capital lease obligations (340) (1,435)
Purchase of Treasury Stock - (2,864)
Payments of deferred financing costs (25) (963)
Proceeds from exercise of stock options 72 27
------ ------
Net cash (used in) provided by financing activities (8,086) 11,695
------ ------
Net change in cash (524) 2,334
Cash at beginning of period 4,642 4,953
------ ------
Cash at end of period $ 4,118 $ 7,287
------ ------
------ ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 712 $ 896
Cash paid for interest 491 1,556
</TABLE>
SEE ACCOMPANYING NOTES.
-5-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the fiscal
year ended March 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in Triumph Group, Inc.'s
(the "Company") Annual Report on Form 10-K for the year ended March 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company's aviation segment designs, engineers, manufactures or repairs and
overhauls aircraft components for commercial airlines, air cargo carriers, and
original equipment manufacturers on a worldwide basis. The Company's metals
segment manufactures, machines, processes, and distributes metal products to
customers in the computer, construction, container and office furniture
industries, primarily within North America.
NEW ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 requires all costs related to
the development of internal-use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. The adoption of SOP 98-1 had no
material effect on results of operations or financial position for the three
months ended June 30, 1999.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. ACQUISITIONS
Effective April 1, 1999, the Company acquired all of the outstanding stock of
Ralee Engineering Company ("Ralee"), based in City of Industry, California, for
an aggregate purchase price of approximately $32,213. The purchase price
includes cash paid at closing, net of cash acquired, the assumption of debt and
certain liabilities, direct costs of the acquisition, deferred payments and a
contingent payment of approximately $6,000, which is included in accrued
expenses at June 30, 1999. Ralee manufactures long structural components such as
stringers, cords, floor beams and spars for the aviation industry. The excess of
the purchase price over the fair value of the net assets acquired of $8,207 was
recorded as excess of cost over net assets acquired and is being amortized over
thirty years on a straight-line basis. The acquisition has been accounted for
under the purchase method and, accordingly, is included in the consolidated
financial statements from its date of acquisition. The acquisition was funded
through the Company's Credit Facility.
-6-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
4. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
---- ----
<S> <C> <C>
Raw materials $ 30,896 $ 36,945
Work-in-process 39,280 41,498
Finished goods 34,595 36,488
-------- --------
Total inventories $104,771 $114,931
-------- --------
-------- --------
</TABLE>
Effective April 1, 1999, the Company's method of valuing all inventory was the
lower of First-in First-out ("FIFO") cost or market. As of March 31, 1999,
approximately 10% of the inventory was valued using the Last-in First-out
("LIFO") method.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1999
---- ----
<S> <C> <C>
Revolving credit facility $76,095 $ 93,025
Subordinated promissory notes 11,734 11,139
Industrial revenue bonds 4,665 4,330
Capital lease obligations 28 8,638
Other debt 486 496
------- --------
93,008 117,628
Less current portion 1,151 2,443
------- --------
$91,857 $115,185
------- --------
------- --------
</TABLE>
On June 11, 1999, the Company amended and restated its Credit Facility ("New
Credit Facility") with its Lenders to increase the Credit Facility to $250,000
from $125,000, extend the term and amend certain terms and covenants. The New
Credit Facility bears interest at either LIBOR plus between 0.75% and 1.75% or
the prime rate (or the Federal Funds rate plus 0.5% if greater) at the option of
the Company and expires on June 13, 2004. The variation in the interest rate is
based upon the Company's ratio of total indebtedness to earnings before
interest, taxes, depreciation and amortization. In addition, the Company is
required to pay a commitment fee of between 0.175% and 0.375% on the unused
portion of the New Credit Facility without penalty. The Company may allocate up
to $5,000 of the available New Credit Facility for the issuance of letters of
credit.
Effective April 1, 1999, in connection with the Ralee acquisition, the Company
assumed approximately $8,665 of capital leases with interest rates ranging from
7.1% to 10.2%, maturing between September 2003 and August 2005. Each capital
lease is secured by a piece of equipment.
-7-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
6. COMMITMENTS AND CONTINGENCIES
Certain of the Company's business operations and facilities are subject to a
number of federal, state, and local environmental laws and regulations. The
Company is indemnified for environmental liabilities related to assets purchased
from IKON Office Solutions, Inc. (formerly Alco Standard Corporation) which
existed prior to the acquisition of such assets and any unidentified
environmental liabilities which arise subsequent to the date of settlement
through July 22, 2000, arising from conditions or activities existing at these
facilities prior to the acquisition. In the opinion of management, there are no
significant environmental concerns which would have a material effect on the
financial condition or operating results of the Company which are not covered by
such indemnification.
The Company is involved in certain litigation matters arising out of its normal
business activities. In the opinion of management, the ultimate resolution of
such litigation will not have a material effect on the financial condition or
operating results of the Company.
7. EARNINGS PER SHARE
The following is a reconciliation between the weighted average outstanding
shares used in the calculation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------
(in thousands) 1998 1999
---- ----
<S> <C> <C>
Weighted average common shares outstanding 11,898 11,737
Net effect of dilutive stock options 144 68
Net effect of dilutive warrant 650 650
------ ------
Weighted average common shares outstanding -
assuming dilution 12,692 12,455
------ ------
------ ------
</TABLE>
Options to purchase 203,500 shares of common stock, at prices ranging from
$32.19 per share to $45.38 per share, were outstanding during the first quarter
of fiscal 2000. These options were not included in the computation of diluted
earnings per share because the exercise price was greater than the average
market price of the common stock during the three months ended June 30, 1999
and, therefore, the effect would be antidilutive. Also, warrants to purchase up
to 60,000 share of common stock at $10.00 per share, subject to certain
performance criteria, were not included in the computation of diluted earnings
per share during the first quarter of fiscal 2000 because the number of
contingently issuable warrants was zero, based on the number of shares, if any,
that would be issuable under the terms of the arrangement, as if the end of the
contingency period were June 30, 1999.
-8-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
8. SEGMENT REPORTING
Selected financial information for each reportable segment is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------
1998 1999
---- ----
<S> <C> <C>
Net Sales:
Aviation $ 74,057 $86,055
Metals 17,083 18,839
-------- -------
$ 91,140 $104,894
-------- -------
-------- -------
Income before income taxes:
Operating income (expense):
Aviation $ 13,419 $14,669
Metals 754 930
Corporate (1,015) (777)
-------- -------
13,158 14,822
Interest expense and other 705 1,855
-------- -------
$ 12,453 $12,967
-------- -------
-------- -------
Capital expenditures:
Aviation $ 4,394 $ 4,135
Metals 224 372
Corporate 34 -
-------- -------
$ 4,652 $ 4,507
-------- -------
-------- -------
Depreciation and amortization:
Aviation $ 2,615 $ 4,419
Metals 257 295
Corporate 15 12
-------- -------
$ 2,887 $ 4,726
-------- -------
-------- -------
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1999
-------------- -------------
<S> <C> <C>
Assets:
Aviation $395,745 $429,279
Metals 31,228 30,793
Corporate 1,884 4,071
-------- --------
$428,857 $464,143
-------- --------
-------- --------
</TABLE>
During the quarters ended June 30, 1998 and 1999, the Company had foreign sales
of $15,921 and $11,677, respectively.
9. SUBSEQUENT EVENT
On August 12 and 13, 1999 the Company repurchased an additional 50,000 and
24,000 shares of its Common stock, respectively. The aggregate purchase price
was $1,745.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(The following discussion should be read in conjunction with the Consolidated
Financial Statements contained elsewhere herein.)
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $12.0 million,
or 16.2%, to $86.1 million for the first quarter of fiscal 2000 from $74.1
million for the first quarter of fiscal 1999. This increase was due to the
inclusion of an aggregate of $19.2 million in net sales in the first quarter of
fiscal 2000 for Nu-Tech Industries, Inc. ("Nu-Tech"), DG Industries, Inc.
("DG"), DV Industries, Inc. ("DV"), Triumph Air Repair (Europe) Ltd. ("Triumph
Air (Europe)"), HTD Aerospace, Inc. ("HTD") and Triumph Precision, Inc.
("Triumph Precision"), (collectively, the "1999 Acquisitions") and Ralee
Engineering Company ("Ralee"). Net sales for the other operating divisions and
subsidiaries in the Aviation Group experienced a 9.7% decrease, totaling $7.2
million, from the prior year period. The decline in sales was due to slowdowns
in the production rates of certain Boeing commercial airplane programs,
specifically the 737 Classic, 747 and 777, as well as effects from Boeing
working off excess inventory for these programs, slightly offset by an increase
in the production rate of the 737 New Generation.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $7.5 million, or 15.1%, to $57.0 million for the first quarter of
fiscal 2000 from $49.5 million for the first quarter fiscal 1999. This increase
was due to the inclusion of $11.0 million in the first quarter of fiscal 2000 of
costs of products sold associated with net sales generated by the 1999
Acquisitions and Ralee. Costs of products sold for the other operating divisions
and subsidiaries in the Aviation Group decreased by $3.5 million, or 7.1%, due
to the decline in shipments for Boeing commercial airplane programs discussed
above.
GROSS PROFIT. Gross profit for the Aviation Group increased by $4.5
million, or 18.4%, to $29.0 million for the first quarter of fiscal 2000 from
$24.5 million for the first quarter of fiscal 1999. This increase was due to the
inclusion of $8.2 million in the first quarter of fiscal 2000 of gross profit on
the net sales generated by the 1999 Acquisitions and Ralee. The remaining net
decrease of $3.6 million was due to reasons discussed above. As a percentage of
net sales, gross profit for the Aviation Group was 33.7% and 33.1% for the first
quarter of fiscal 2000 and 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $1.5 million, or
17.2%, to $9.9 million for the first quarter of fiscal 2000 from $8.5 million
for the first quarter of fiscal 1999, primarily due to the 1999 Acquisitions and
Ralee.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $1.8 million, or 69.0%, to $4.4 million for the
first quarter of fiscal 2000 from $2.6 million for the first quarter of fiscal
1999, primarily due to the assets acquired in connection with the 1999
Acquisitions and Ralee.
OPERATING INCOME. Operating income for the Aviation Group increased by
$1.3 million, or 9.3%, to $14.7 million for the first quarter of fiscal 2000
from $13.4 million for the first quarter of fiscal 1999. This increase was
primarily due to the addition of net sales and profits generated by the 1999
Acquisitions and Ralee. All other operating divisions and subsidiaries in the
Aviation group experienced a 27.0% decline in operating income from the prior
year due to the reasons discussed above. As a percentage of net sales, operating
income for the Aviation Group was 17.0% for the first quarter of fiscal 2000 and
18.1% for the first quarter of fiscal 1999.
-10-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
METALS GROUP
NET SALES. Net sales for the Metals Group increased by $1.8 million, or
10.3%, to $18.8 million for the first quarter of fiscal 2000 from $17.1 million
for the first quarter of fiscal 1999. This increase was mainly due to an
increase activity at the Company's structural steel erection operation.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
increased by $1.4 million, or 10.4%, to $14.9 million for the first quarter of
fiscal 2000 from $13.5 million for the first quarter of fiscal 1999. This
increase mainly was due to the increase in activity at the Company's structural
steel erection operation.
GROSS PROFIT. Gross profit for the Metals Group increased by $0.4
million, or 9.8%, to $4.0 million for fiscal 2000 from $3.6 million for the
prior year period, due to the reasons discussed above. As a percentage of net
sales, gross profit for the Metals Group was 21.0% and 21.1% for the first
quarter of fiscal 2000 and fiscal 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group increased by $0.1 million, or 5.4%,
to $2.7 million from $2.6 million in the first quarter of fiscal 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Metals Group remained unchanged at $0.3 million for the first quarter of fiscal
2000 from the first quarter of fiscal 1999.
OPERATING INCOME. Operating income for the Metals Group increased by
$0.2 million, or 23.3%, to $0.9 million for the first quarter of fiscal 2000
from $0.8 million for the first quarter of fiscal 1999, due to the reasons
discussed above. As a percentage of net sales, operating income for the Metals
Group was 4.9% and 4.4% for the first quarter of fiscal 2000 and 1999,
respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses decreased by $0.2 million, or
23.4%, to $0.8 million for the first quarter of fiscal 2000 from $1.0 million
for the first quarter of fiscal 1999.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by
$1.2 million, or 163.1%, to $1.9 million for the first quarter of fiscal 2000
from $0.7 million for the first quarter of fiscal 1999. This increase was
primarily due to increased debt levels associated with the 1999 Acquisitions and
the acquisition of Ralee, the cash portions of which were financed by borrowings
under the Company's Credit Facility.
INCOME TAX EXPENSE. The effective tax rate was 36.5% for the first
quarter of fiscal 2000 and 39.0% for the first quarter of fiscal 1999. The first
quarter of fiscal 2000 effective tax rate is comparable to the third and fourth
quarters of fiscal 1999 effective tax rates of 37.0% in each of those quarters.
NET INCOME. Net income increased by $0.6 million, or 8.4%, to $8.2
million for the first quarter of fiscal 2000 from $7.6 million for the first
quarter of fiscal 1999. The increase in first quarter 2000 net income was
primarily attributable to the 1999 Acquisitions and Ralee, partially offset by
the reduced earnings of the remaining Aviation Group operating units due to the
decline in shipments for Boeing commercial airplane programs discussed above.
-11-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash
flows from operations and borrowings under its credit arrangements. The Company
generated approximately $8.2 million of cash flows from operating activities for
the three months ended June 30, 1999. The Company used approximately $17.5
million in investing activities and raised $11.7 million in financing activities
for the three months ended June 30, 1999.
On June 11, 1999, the Company amended and restated its Credit Facility
("New Credit Facility") with its Lenders to increase the Credit Facility to
$250.0 million from $125.0 million, extend the term and amend certain terms and
covenants. The New Credit Facility bears interest at either LIBOR plus between
0.75% and 1.75% or the prime rate (or the Federal Funds rate plus 0.5% if
greater) at the option of the Company and expires on June 13, 2004. The
variation in the interest rate is based upon the Company's ratio of total
indebtedness to earnings before interest, taxes, depreciation and amortization.
In addition, the Company is required to pay a commitment fee of between 0.175%
and 0.375% on the unused portion of the New Credit Facility without penalty. The
Company may allocate up to $5.0 million of the available New Credit Facility for
the issuance of letters of credit. As of June 30, 1999, $155.6 million was
available under the New Credit Facility. On June 30, 1999, an aggregate amount
of approximately $93.0 million was outstanding under the New Credit Facility,
$85.0 million of which was accruing interest at LIBOR plus applicable basis
points totaling 6.0% per annum, and $8.0 million of which was accruing interest
at the prime rate of 7.75% per annum. Amounts repaid under the New Credit
Facility may be reborrowed.
In the first quarter of fiscal 2000, the Company acquired all of the
outstanding stock of Ralee. Ralee, located in City of Industry, California,
manufactures long structural components such as stringers, cords, floor beams
and spars for the aviation industry. The cash purchase price for this
acquisition, net of cash acquired, of approximately $13.0 million was funded by
borrowings under the Company's Credit Facility. Also, in connection with this
acquisition, the Company assumed $8.7 million of capital leases for equipment
with interest rates ranging from 7.1% to 10.2%, maturing between September 2003
and August 2005.
During the first quarter of fiscal 2000, the Company purchased 117,500
shares of its Common stock for total cash consideration of $2.9 million. In
August 1999, the Company purchased 74,000 shares of its Common stock for
total cash consideration of $1.7 million. The purchases were funded by
borrowings under the Company's New Credit Facility.
Capital expenditures were approximately $4.5 million for the three
months ended June 30, 1999 primarily for manufacturing machinery and equipment
for the Aviation Group. The Company funded these expenditures through borrowings
under its New Credit Facility. The Company expects capital expenditures to be
approximately $21.0 million for its fiscal year ending March 31, 2000. The
expenditures are expected to be used primarily to expand capacity at several
facilities in the Aviation Group.
The Company believes that cash generated by operations and borrowings
under the New Credit Facility will be sufficient to meet anticipated cash
requirements for its current operations. However, the Company has a stated
policy to grow through acquisition and is continuously evaluating various
acquisition opportunities. As a result, the Company currently is pursuing the
potential purchase of a number of candidates. In the event that more than one of
these transactions are successfully consummated, the availability under the New
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 on terms favorable to the Company, if at all.
YEAR 2000 DATE CONVERSION
The Year 2000 issue exists because many software programs, computer
hardware, operating systems and microprocessor based embedded controls in
automated equipment use two-digit date fields to designate a year. As the
century date change occurs, date-sensitive systems may recognize the year 2000
as 1900, or not at all. This inability to recognize or properly treat the year
2000 may cause systems to process financial and operational information
incorrectly or fail to operate.
-12-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
The Company has recognized the need to ensure that its business
operations will not be adversely affected by the upcoming calendar year 2000
date change and is cognizant of the time sensitive nature of the problem. The
Company's operating units have assessed or are in the process of assessing how
each may be impacted by Year 2000 and have formulated and commenced or are
formulating and commencing implementation of a comprehensive plan to address all
known aspects of the Year 2000 problem: information systems, production and
facilities equipment, suppliers and customers. The Company's operating units are
currently making inquiries of customers and suppliers to assess their Year 2000
readiness. The operating units are also in the process of testing information
technology ("IT") systems, as well as non-IT systems, and verifying that
vendor-supplied or outsourced systems will be Year 2000 compliant and will
repair or replace any such systems found to be non-compliant. Currently, the
Company estimates that, on a consolidated basis, it has substantially completed
its assessment of how it may be impacted and the development of plans to address
the testing and remediation of its systems, and is approximately three-quarters
of the way through its testing and remediation activities. The Company estimates
that it will substantially complete this process prior to October 31, 1999.
The Company has not separately tracked its Year 2000 costs as a
project, but rather has incurred the costs in conjunction with normal sustaining
activities. The discretely identifiable costs incurred through June 30, 1999 of
completing the Company's Year 2000 assessment and of modifying its computer
software and hardware, as well as its production and facilities equipment, to be
Year 2000 compliant were approximately $0.6 million. The estimated costs yet to
be incurred are approximately $0.4 million. The current assessment does not
include costs related to software and hardware replaced in the normal course of
business other than replacements accelerated due to the Year 2000 issue.
The variety and complexity of the Year 2000 issues identified and the
proposed solutions, the Company's dependence on the technical skills of
employees and independent contractors, and especially the representations and
readiness of third parties are among the factors that could cause the Company's
efforts to be less than fully effective. In addition, Year 2000 issues present a
number of risks that are beyond the Company's reasonable control, such as
continued service from outside parties such as utility companies, financial
institutions, and transportation and delivery companies (such as Federal Express
and United Parcel Service). Also, certain significant customers are material to
the Company and a Year 2000 failure by one or more of these parties could result
in a material adverse effect on the Company's operating results and financial
position. The most likely worst case scenario would be the failure of particular
computer systems or machines with embedded chips that would require manual
processes in order to continue production and invoicing activities. The Company
believes that it could obtain materials at reasonably competitive prices from
alternate suppliers given a failure at a current vendor.
While the Company does not currently foresee any material problems,
there can be no assurance that the Company and its material suppliers and
customers will be Year 2000 compliant by January 1, 2000 and that any such
non-compliance will not have a material adverse effect on the Company.
The Company is in the process of developing contingency plans in the
event that any unresolved issues are identified.
The foregoing Year 2000 discussion includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
relating to the Company's efforts and management's expectations relating to Year
2000 readiness. The Company's Year 2000 project is dependent on certain future
events including the availability and cost of personnel trained to perform Year
2000 modifications, the ability of the Company to locate and correct all
non-compliant computer codes and embedded controls, the ability of material
customers, suppliers and trading partners to successfully complete their own
Year 2000 remediation projects, the accuracy of information received from third
parties concerning the Year 2000 compliance of their information systems or
automated equipment or concerning their Year 2000 business risk assessment, and
similar uncertainties.
-13-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
FORWARD LOOKING STATEMENTS
This report 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. Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management. When used in this document, words like "may", "might",
"will", "expect", "anticipate", "believe", "potential", and similar expressions
are intended to identify forward looking statements. Actual results could differ
materially from management's current expectations and there can be no assurance
that additional capital will not 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 the
risk factors described in the Company's Annual Report on Form 10-K, for the year
ended March 31, 1999, filed with the SEC in June 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding the Company's exposure to certain market
risks, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk
in the Company's Annual Report on Form 10-K for the year ended March 31, 1999.
There has been no material change in this information.
-14-
<PAGE>
TRIUMPH GROUP, INC.
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
(27) Financial Data Schedule
B. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1999
-15-
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Triumph Group, Inc.
------------------------------------------------
(Registrant)
/s/ Richard C. Ill
------------------------------------------------
Richard C. Ill, President & CEO
/s/ John R. Bartholdson
------------------------------------------------
John R. Bartholdson, Senior Vice President & CFO
(Principal Financial Officer)
/s/ Kevin E. Kindig
------------------------------------------------
Kevin E. Kindig, Vice President & Controller
(Principal Accounting Officer)
Dated: August 13, 1999
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRIUMPH GROUP, INC. FOR THE THREE MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021162
<NAME> TRIUMPH GROUP, INC.
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