<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 September 30, 2000.
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
-------------
TRIUMPH GROUP, INC.
-------------------------------------------------------------
(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
-----------------------------------------------------------------------------
(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, 8,330,224 shares and Class D common
stock, par value $0.001 per share, 3,348,535 shares, each as of November 1, 2000
<PAGE>
TRIUMPH GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
March 31, 2000 and September 30, 2000
Consolidated Statements of Income 3
Three months ended September 30, 1999 and 2000
Six months ended September 30, 1999 and 2000
Consolidated Statements of Cash Flows 4
Six months ended September 30, 1999 and 2000
Notes to Consolidated Financial Statements 6
September 30, 2000
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 16
Market Risk
Part II. Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature Page 19
</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, SEPTEMBER 30,
2000 2000
-------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,279 $ 6,325
Accounts receivable, net 78,960 87,909
Inventories 123,750 164,301
Prepaid expenses and other 4,730 5,239
-------- --------
Total current assets 213,719 263,774
Property and equipment, net 122,787 157,410
Excess of cost over net assets acquired, net 144,027 197,424
Intangible assets and other, net 26,398 77,222
-------- --------
Total assets $506,931 $695,830
======== ========
</TABLE>
-1-
<PAGE>
Triumph Group, Inc.
Consolidated Balance Sheets (continued)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 2000
--------- -----------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,996 $ 70,066
Accrued expenses 45,316 52,909
Income taxes payable 2,899 4,041
Deferred income taxes 1,365 2,707
Current portion of long-term debt 4,856 30,987
--------- ---------
Total current liabilities 89,432 160,710
Long-term debt, less current portion 133,952 232,740
Deferred income taxes and other 39,177 40,937
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, 229,175 and 223,237 shares (5,580) (5,436)
Accumulated other comprehensive loss (684) (1,179)
Retained earnings 115,204 132,628
--------- ---------
Total stockholders' equity 244,370 261,443
--------- ---------
Total liabilities and stockholders' equity $ 506,931 $ 695,830
========= =========
</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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 2000 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $110,276 $131,563 $215,170 $260,559
Operating costs and expenses:
Cost of products sold 76,370 89,288 148,281 176,930
Selling, general, and administrative 13,882 16,602 27,317 33,569
Depreciation and amortization 4,790 6,194 9,516 12,609
-------- -------- -------- --------
95,042 112,084 185,114 223,108
Operating income 15,234 19,479 30,056 37,451
Interest expense and other 2,316 4,917 4,171 9,760
-------- -------- -------- --------
Income before income taxes 12,918 14,562 25,885 27,691
Income tax expense 4,728 5,389 9,460 10,247
-------- -------- -------- --------
Net income $ 8,190 $ 9,173 $ 16,425 $ 17,444
======== ======== ======== ========
Earnings Per Share -- Basic:
Net income $ 0.70 $ 0.79 $ 1.40 $ 1.49
======== ======== ======== ========
Weighted average common shares outstanding -- Basic 11,692 11,676 11,712 11,674
======== ======== ======== ========
Earnings Per Share -- Assuming Dilution:
Net income $ 0.66 $ 0.74 $ 1.32 $ 1.41
======== ======== ======== ========
Weighted average common shares outstanding --
Assuming Dilution 12,397 12,426 12,423 12,411
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
-3-
<PAGE>
Triumph Group, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1999 2000
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 16,425 $ 17,444
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 9,516 12,609
Provision for deferred income taxes 3,267 4,174
Interest on subordinated and junior subordinated
promissory notes paid by issuance of
additional notes 444 493
Changes in other current assets and liabilities, net of
acquisitions of businesses:
Accounts receivable (360) 729
Inventories (7,647) (16,363)
Prepaid expenses and other (990) 710
Accounts payable, accrued expenses, and accrued
income taxes payable (8,261) (9,541)
Other (462) (3,943)
------- --------
Net cash provided by operating activities 11,932 6,312
INVESTING ACTIVITIES
Capital expenditures, net (7,113) (10,675)
Proceeds from sale of assets 5,794 --
Cash used for businesses acquired (22,419) (90,871)
------- --------
Net cash used in investing activities (23,738) (101,546)
</TABLE>
-4-
<PAGE>
Triumph Group, Inc.
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1999 2000
---- ----
<S> <C> <C>
FINANCING ACTIVITIES
Net increase in revolving credit facility borrowings $ 19,506 $ 97,564
Repayment of debt and capital lease obligations (1,758) (2,408)
Purchase of treasury stock (4,611) --
Payments of deferred financing costs (963) --
Proceeds from exercise of stock options 141 124
-------- --------
Net cash provided by financing activities 12,315 95,280
-------- --------
Net change in cash 509 46
Cash at beginning of period 4,953 6,279
-------- --------
Cash at end of period $ 5,462 $ 6,325
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 7,062 $ 6,533
Cash paid for interest 3,808 8,789
</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 accounting principals generally accepted in the United States
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 and six month
periods ended September 30, 2000 are not necessarily indicative of the results
that may be expected for the fiscal year ended March 31, 2001. 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, 2000.
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.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States 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, 2000, the Company acquired all of the outstanding stock of
ACR Industries, Inc. ("ACR"), Chem-Fab Corporation ("Chem-Fab") and Airborne
Nacelle Services, Inc. ("Airborne Nacelle"). In May 2000, the Company
acquired certain assets from the Anadite California Restoration Trust
("Anadite Assets"). On September 30, 2000, the Company acquired certain
product rights and assets associated with hydraulic systems and auxiliary
power units (APU's), from Honeywell International, Inc., (the "Honeywell
Acquisitions") (collectively the "2001 Acquisitions"). ACR, located in
Macomb, Michigan, is a leading manufacturer of complex geared assemblies
including gas turbine jet engine gear boxes, helicopter transmissions, geared
systems for fixed-winged aircraft and other related components. Chem-Fab and
Airborne Nacelle, both located in Hot-Springs, Arkansas, together process
sheet metal and other structural parts and assemblies for the aerospace
industry. The Anadite Assets, which will be relocated to several of the
Company's existing operating facilities, will provide anodizing, chemical
film coating, phosphate flouride coating, passivation, liquid penetrant
inspection, hardness testing, conductivity testing, thermal optical
properties testing and painting to the aerospace industry. The Honeywell
product rights and assets, which will be relocated from Honeywell
International, Inc.'s Rocky Mount, North Carolina facility ot Triumph's
Frisby Aerospace, Inc. subsidiary, located in Clemmons, North Carolina, are
used in connection with the design, manufacture and overhaul of hydraulic
pumps, motors and power transfer units. The Honeywell product rights and
assets by which Triumph becomes the exclusive designated 700 APU Factory
Service Center and exclusive distributor of new 660 APU products will be
transferred to Triumph's Triumph Air Repair facility located in Phoenix,
Arizona. The combined purchase price for the 2001 Acquisitions was $163,454.
The purchase price includes cash paid at closing, the assumption of debt and
certain liabilities, direct costs of the acquisitions and deferred payments.
Included in accounts payable at September 30, 2000 is $32,000 representing
checks issued at closing which were outstanding at September 30, 2000.
-6-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
3. ACQUISITIONS (Continued)
Except for the Honeywell Acquisitions, the combined excess of the purchase
price over the estimated fair value of the net assets acquired of $54,398 was
recorded as excess of cost over net assets acquired and is being amortized
over thirty years on a straight-line basis. The excess of the purchase price
over the estimated fair value of the tangible assets acquired in the
Honeywell Acquisitions of $50,175 has been recorded as intangibles. The
intangibles related to the hydraulic systems are being amortized over 30
years and the intangibles related to the APU product rights are being
amortized over 10 years.
These acquisitions have been accounted for under the purchase method and,
accordingly, are included in the consolidated financial statements from their
dates of acquisition. These acquisitions were funded by the Company's long-term
borrowings in place at the date of each respective acquisition.
In fiscal 2000, the Company acquired all of the outstanding stock of Ralee
Engineering Company, Construction Brevitees d'Alfortville, and Lee Aerospace,
Inc. and also acquired substantially all of the assets of KT Aerofab, now
operated by the Company as Triumph Components-San Diego, Inc. (collectively the
"2000 Acqusitions"). For more information about the 2000 Acquisitions, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000.
The following unaudited pro forma information has been prepared assuming the
2001 Acquisitions and the 2000 Acquisitions had occurred on April 1, 1999.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
1999 2000
---- ----
<S> <C> <C>
Net sales $280,176 $275,997
Net income 20,171 19,333
Earnings per common share
Basic 1.72 1.66
Diluted 1.62 1.56
</TABLE>
The pro forma effects of the acquisitions of the Anadite Assets and the
product rights for the 700 APU from Honeywell International, Inc. are not
included in the above pro forma amounts because the required information is
not available.
The unaudited pro forma information includes adjustments for interest expense
that would have been incurred to finance the purchases, additional depreciation
based on the estimated fair market value of the property and equipment acquired,
and the amortization of the intangible assets and excess of cost over net assets
acquired arising from the transactions. The unaudited pro forma financial
information is not necessarily indicative of the results of operations as they
would have been had the transactions been effected on the assumed dates.
4. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 2000
-------- --------
<S> <C> <C>
Raw materials $ 34,195 $ 41,226
Work-in-process 46,189 80,864
Finished goods 43,366 42,211
-------- --------
Total inventories $123,750 $164,301
======== ========
</TABLE>
-7-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 2000
-------- --------
<S> <C> <C>
Revolving credit facility $107,204 $204,768
Subordinated promissory notes 17,686 45,463
Industrial revenue bonds 5,497 5,089
Capital lease obligations 7,661 7,203
Other debt 760 1,204
-------- --------
138,808 263,727
Less current portion 4,856 30,987
-------- --------
$133,952 $232,740
======== ========
</TABLE>
Effective September 30, 2000, in connection with the Honeywell Acquisitions,
the Company assumed approximately $27,000 of seller financing due December
31, 2000.
6. 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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ---------------
(in thousands) 1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 11,692 11,676 11,712 11,674
Net effect of dilutive stock options 55 100 61 87
Net effect of dilutive warrant 650 650 650 650
------ ------ ------ ------
Weighted average common shares outstanding --
assuming dilution 12,397 12,426 12,423 12,411
====== ====== ====== ======
</TABLE>
Options to purchase 147,650 shares of common stock, at prices ranging from
$31.38 per share to $44.88 per share, were outstanding during the second quarter
of fiscal 2001. 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 September 30,
2000 and, therefore, the effect would be antidilutive.
-8-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
7. SEGMENT REPORTING
Selected financial information for each reportable segment is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Aviation $ 91,728 $ 115,222 $ 177,783 $ 228,062
Metals 18,548 16,341 37,387 32,497
--------- --------- --------- ---------
$ 110,276 $ 131,563 $ 215,170 $ 260,559
========= ========= ========= =========
Income before income taxes:
Operating income (expense):
Aviation $ 15,181 $ 19,965 $ 29,850 $ 38,069
Metals 998 731 1,928 1,655
Corporate (945) (1,217) (1,722) (2,273)
--------- --------- --------- ---------
15,234 19,479 30,056 37,451
Interest expense and other 2,316 4,917 4,171 9,760
--------- --------- --------- ---------
$ 12,918 $ 14,562 $ 25,885 $ 27,691
========= ========= ========= =========
Capital expenditures:
Aviation $ 2,353 $ 3,538 $ 6,488 $ 8,067
Metals 244 1,785 616 2,584
Corporate 9 15 9 24
--------- --------- --------- ---------
$ 2,606 $ 5,338 $ 7,113 $ 10,675
========= ========= ========= =========
Depreciation and amortization:
Aviation $ 4,481 $ 5,883 $ 8,900 $ 11,986
Metals 297 293 592 587
Corporate 12 18 24 36
--------- --------- --------- ---------
$ 4,790 $ 6,194 $ 9,516 $ 12,609
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 2000
-------- --------
<S> <C> <C>
Assets:
Aviation $477,374 $663,384
Metals 27,410 30,087
Corporate 2,147 2,359
-------- --------
$506,931 $695,830
======== ========
</TABLE>
For the three months ended September 30, 1999 and 2000, the Company had foreign
sales of $17,116 and $24,868, respectively. For the six months ended September
30, 1999 and 2000, the Company had foreign sales of $33,037 and $47,139,
respectively.
-9-
<PAGE>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
8. SUBSEQUENT EVENT
On October 16, 2000, the Company amended its revolving credit facility
("Credit Facility") with its lenders to increase the Credit Facility to
$350,000 from $250,000 and amend certain terms and covenants.
-10-
<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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
AVIATION SEGMENT
NET SALES. Net sales for the Aviation Segment increased by $23.5 million,
or 25.6%, to $115.2 million for the second quarter of fiscal 2001 from $91.7
million for the second quarter of fiscal 2000. This increase was due to the
inclusion of an aggregate of $23.8 million and $1.4 million in net sales in the
second quarter of fiscal 2001 and 2000, respectively, for Lee Aerospace, Inc.
("Lee"), Triumph Components - San Diego, Inc. ("Triumph Components") and
Construction Brevitees d'Alfortville ("CBA") (collectively the "2000
Acquisitions") and ACR Industries, Inc. ("ACR"), Chem-Fab Corporation
("Chem-Fab") and Airborne Nacelle Services, Inc. ("Airborne Nacelle")
(collectively the "2001 Acquisitions"). Net sales for the other operating
divisions and subsidiaries in the Aviation Segment increased by $1.1 million, or
1.2%, from the prior year period.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Segment
increased by $14.5 million, or 23.5%, to $76.3 million for the second quarter of
fiscal 2001 from $61.8 million for the second quarter fiscal 2000. This increase
was due to the inclusion of $15.8 million and $0.9 million in the second quarter
of fiscal 2001 and 2000, respectively, of costs of products sold associated with
net sales generated by the 2000 Acquisitions and the 2001 Acquisitions. Costs of
products sold for the other operating divisions and subsidiaries in the Aviation
Segment decreased by $0.4 million, or 0.7% from the prior year period.
GROSS PROFIT. Gross profit for the Aviation Segment increased by $9.0
million, or 30.0%, to $38.9 million for the second quarter of fiscal 2001 from
$30.0 million for the second quarter of fiscal 2000. This increase was due to
the inclusion of $8.0 million and $0.5 million in the second quarter of fiscal
2001, and 2000, respectively, of gross profit on the net sales generated by the
2000 Acquisitions and the 2001 Acquisitions. Gross profit for the other
operating divisions and subsidiaries increased by $1.5 million, or 5.0%, over
the prior year period. As a percentage of net sales, gross profit for the
Aviation Segment was 33.8% for the second quarter of fiscal 2001 and 32.7% for
the second quarter of fiscal 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Segment increased by $2.8 million, or
27.2%, to $13.1 million for the second quarter of fiscal 2001 from $10.3 million
for the second quarter of fiscal 2000, primarily due to the 2000 Acquisitions
and the 2001 Acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Segment increased by $1.4 million, or 31.3%, to $5.9 million for the
second quarter of fiscal 2001 from $4.5 million for the second quarter of fiscal
2000, primarily due to the assets acquired in connection with the 2000
Acquisitions and the 2001 Acquisitions.
OPERATING INCOME. Operating income for the Aviation Segment increased by
$4.8 million, or 31.5%, to $20.0 million for the second quarter of fiscal
2001 from $15.2 million for the second quarter of fiscal 2000. This increase
was primarily due to the addition of net sales and profits generated by the
2000 Acquisitions and the 2001 Acquisitions. The other operating divisions
and subsidiaries in the Aviation Segment as a group experienced a 4.6%
increase in operating income from the prior year. As a percentage of net
sales, operating income for the Aviation Segment was 17.3% for the second
quarter of fiscal 2001 and 16.6% for the second quarter of fiscal 2000.
-11-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
METALS SEGMENT
NET SALES. Net sales for the Metals Segment decreased by $2.2 million, or
11.9%, to $16.3 million for the second quarter of fiscal 2001 from $18.5 million
for the second quarter of fiscal 2000. This decrease was mainly due to import
pricing pressures and lower volume at the Company's electro-galvanized steel
operation.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Segment
decreased by $1.6 million, or 10.9%, to $13.0 million for the second quarter of
fiscal 2001 from $14.6 million for the second quarter of fiscal 2000. This
decrease mainly was due to the decrease in volume at the Company's
electro-galvanized steel operation.
GROSS PROFIT. Gross profit for the Metals Segment decreased by $0.6
million, or 15.5%, to $3.3 million for fiscal 2001 from $4.0 million for the
prior year period, due to the reasons discussed above. As a percentage of net
sales, gross profit for the Metals Segment was 20.4% and 21.3% for the second
quarter of fiscal 2001 and fiscal 2000, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Segment decreased by $0.3 million, or
12.9%, to $2.3 million from $2.7 million in the second quarter of fiscal 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Segment remained unchanged at $0.3 million for the second quarter of fiscal 2001
from the second quarter of fiscal 2000.
OPERATING INCOME. Operating income for the Metals Segment decreased by $0.3
million, or 26.8%, to $0.7 million for the second quarter of fiscal 2001 from
$1.0 million for the second quarter of fiscal 2000, due to the reasons discussed
above. As a percentage of net sales, operating income for the Metals Segment was
4.5% and 5.4% for the second quarter of fiscal 2001 and 2000, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.3 million, or 28.8%,
to $1.2 million for the second quarter of fiscal 2001 from $0.9 million for the
second quarter of fiscal 2000.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by $2.6
million, or 112.3%, to $4.9 million for the second quarter of fiscal 2001 from
$2.3 million for the second quarter of fiscal 2000. This increase was primarily
due to increased debt levels associated with the 2000 Acquisitions and the 2001
Acquisitions, the cash portions of which were financed by borrowings under the
Company's Credit Facility, as well as a slightly higher rate on the Company's
amended and restated credit facility ("Credit Facility").
INCOME TAX EXPENSE. The effective tax rate was 37.0% for the second quarter
of fiscal 2001 and 36.6% for the second quarter of fiscal 2000.
NET INCOME. Net income increased by $1.0 million, or 12.0%, to $9.2 million
for the second quarter of fiscal 2001 from $8.2 million for the second quarter
of fiscal 2000. The increase in second quarter 2001 net income was primarily
attributable to the 2000 Acquisitions and the 2001 Acquisitions, partially
offset by the increased interest expense due to the increased debt levels
associated with the 2000 Acquisitions and the 2001 Acquisitions.
-12-
<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS ENDED
SEPTEMBER 30, 1999
AVIATION SEGMENT
NET SALES. Net sales for the Aviation Segment increased by $50.3 million,
or 28.3%, to $228.1 million for the six months ended September 30, 2000 from
$177.8 million for the six months ended September 30, 1999. This increase was
due to the inclusion of an aggregate of $50.3 million and $1.4 million in net
sales in the first six months of fiscal 2001 and 2000, respectively, generated
by the 2000 Acquisitions and the 2001 Acquisitions. Net sales for the other
operating divisions and subsidiaries in the Aviation Segment increased by $1.4
million, or 0.8%, over the prior year period.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Segment
increased by $32.9 million, or 27.7%, to $151.7 million for the first six months
of fiscal 2001 from $118.8 million for the first six months of fiscal 2000. This
increase was due to the inclusion of $32.9 million and $0.9 million in the first
six months of fiscal 2001 and 2000, respectively, of costs of products sold
associated with net sales generated by the 2000 Acquisitions and the 2001
Acquisitions. Costs of products sold for the other operating divisions and
subsidiaries in the Aviation Segment increased by $0.9 million, or 0.8%, over
the prior year period.
GROSS PROFIT. Gross profit for the Aviation Segment increased by $17.4
million, or 29.5%, to $76.3 million for the first six months of fiscal 2001 from
$59.0 million for the first six months of fiscal 2000. This increase was due to
the inclusion of $17.3 million and $0.5 million in the first six months of
fiscal 2001 and 2000, respectively, of gross profit on the net sales generated
by the 2000 Acquisitions and the 2001 Acquisitions. Gross profit for the other
operating divisions and subsidiaries increased by $0.5 million, or 0.8%, over
the prior year period. As a percentage of net sales, gross profit for the
Aviation Segment was 33.5% and 33.2% for the first six months of fiscal 2001 and
2000, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Segment increased by $6.1 million, or
30.0%, to $26.3 million for the first six months of fiscal 2001 from $20.2
million for the first six months of fiscal 2000, primarily due to the 2000
Acquisitions and the 2001 Acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Segment increased by $3.1 million, or 34.7%, to $12.0 million for the
first six months of fiscal 2001 from $8.9 million for the first six months of
fiscal 2000, primarily due to the assets acquired in connection with the 2000
Acquisitions and the 2001 Acquistions.
OPERATING INCOME. Operating income for the Aviation Segment increased by
$8.2 million, or 27.5%, to $38.1 million for the first six months of fiscal
2001 from $29.9 million for the first six months of fiscal 2000. This
increase was primarily due to the addition of net sales and profits generated
by the 2000 Acquisitions and the 2001 Acquisitions. The other operating
divisions and subsidiaries in the Aviation Segment as a group experienced a
2.6% decline in operating income from the prior year mainly due to higher
depreciation expense. As a percentage of net sales, operating income for the
Aviation Segment was 16.7% for the first six months of fiscal 2001 and 16.8%
for the first six months of fiscal 2000.
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<PAGE>
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
METALS SEGMENT
NET SALES. Net sales for the Metals Segment decreased by $4.9 million, or 13.1%,
to $32.5 million for the first six months of fiscal 2001 from $37.4 million for
the first six months of fiscal 2000. This decrease was mainly due to decreased
activity at the Company's structural steel erection operation and import pricing
pressures and lower volume at the Company's electro-galvanized steel operation.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Segment
decreased by $4.3 million, or 14.5%, to $25.2 million for the first six months
of fiscal 2001 from $29.5 million for the first six months of fiscal 2000. This
decrease mainly was due to the decrease in activity at the Company's structural
steel erection operation and the lower volume at the Company's
electro-galvanized steel operation.
GROSS PROFIT. Gross profit for the Metals Segment decreased by $0.6
million, or 7.9%, to $7.3 million for the first six months of fiscal 2001 from
$7.9 million for the prior year period, due to the reasons discussed above. As a
percentage of net sales, gross profit for the Metals Segment was 22.4% and 21.2%
for the first six months of fiscal 2001 and fiscal 2000, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Segment decreased by $0.4 million, or
6.5%, to $5.0 million from $5.4 million in the first six months of fiscal 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Segment remained unchanged from the prior year period at $0.6 million for the
six months ended September 30, 2000.
OPERATING INCOME. Operating income for the Metals Segment decreased by
$0.3 million, or 14.2%, to $1.7 million for the first six months of fiscal 2001
from $1.9 million for the first six months of fiscal 2000, due to the reasons
discussed above. As a percentage of net sales, operating income for the Metals
Segment was 5.1% and 5.2% for the first six months of fiscal 2001 and 2000,
respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.6 million, or 32.0%,
to $2.3 million for the first six months of fiscal 2001 from $1.7 million for
the first six months of fiscal 2000.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by $5.6
million, or 134.0%, to $9.8 million for the first six months of fiscal 2001 from
$4.2 million for the first six months of fiscal 2000. This increase was
primarily due to increased debt levels associated with the 2000 Acquisitions and
the 2001 Acquisitions, the cash portions of which were financed by borrowings
under the Company's Credit Facility, as well as a slightly higher rate on the
Company's Credit Facility.
INCOME TAX EXPENSE. The effective tax rate was 37.0% for the first six
months of fiscal 2001 and 36.5% for the first six months of fiscal 2000.
NET INCOME. Net income increased by $1.0 million, or 6.2%, to $17.4 million
for the first six months of fiscal 2001 from $16.4 million for the first six
months of fiscal 2000. The increase fiscal 2000 net income was primarily
attributable to the 2000 Acquisitions and the 2001 Acquisitions, partially
offset by the reduced earnings of the remaining Aviation Segment operating units
and the increased interest expense due to the increased debt levels associated
with the 2000 Acquisitions and the 2001 Acquisitions.
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<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 $6.3 million of cash flows from operating activities for
the six months ended September 30, 2000. The Company used approximately $101.5
million in investing activities and raised $95.3 million in financing activities
for the six months ended September 30, 2000.
On October 16, 2000, the Company amended its revolving credit facility
("Credit Facility") with its lenders to increase the Credit Facility to
$350.0 million from $250.0 million, and amend certain terms and covenants. As
of September 30, 2000, $44.0 million was available under the Credit Facility.
On September 30, 2000, an aggregate amount of approximately $204.8 million
was outstanding under the Credit Facility, $200.0 million of which was
accruing interest at LIBOR plus applicable basis points totaling 8.12% per
annum, and $4.8 million of which was accruing interest at the prime rate of
9.5% per annum. Amounts repaid under the Credit Facility may be reborrowed.
Effective April 1, 2000, the Company acquired all of the outstanding stock
of ACR Industries, Inc., Chem-Fab Corporation and Airborne Nacelle Services,
Inc. In May 2000, the Company acquired certain assets from the Anadite
California Restoration Trust. The combined cash portion of the purchase prices
paid at closing for these acquisitions of approximately $54.2 was funded by
borrowings under the Company's Credit Facility. In connection with these
acquisitions, the Company assumed $32.6 million of seller financing, which
accrued interest at 7%, and $3.6 million of other debt. In July 2000, the
Company retired $30.6 million of the assumed seller financing and approximately
$3.2 million of the assumed other debt. These payments were funded by borrowings
under the Credit Facility.
Effective September 30, 2000, the Company acquired certain product rights
and assets from Honeywell International, Inc. The Company paid $32.0 million at
closing, which was included in accounts payable at September 30, 2000 and
assumed $27.0 million of seller financing due December 31, 2000.
Capital expenditures were approximately $10.7 million for the six months
ended September 30, 2000 primarily for manufacturing machinery and equipment for
the Aviation Segment. The Company funded these expenditures through borrowings
under its Credit Facility. The Company expects capital expenditures to be
approximately $20.0 million for its fiscal year ending March 31, 2001. The
expenditures are expected to be used primarily to expand capacity at several
facilities.
The Company believes that cash generated by operations and borrowings under
the 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 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.
-15-
<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 these expectations will be realized. Among other factors that could cause
actual results to differ materially from expectations are competitive factors
relating to the aviation and metals industries, dependence of certain of the
Company's businesses on certain key customers, need for additional financing for
acquisitions and capital expenditures on terms acceptable to the Company,
cancellations, reductions or delays in customer orders, product liabilities in
excess of the Company's insurance and general economic conditions affecting the
Company's two business segments. For a more detailed discussion of these and
other factors affecting the Company, see risk factors described in the Company's
Annual Report on Form 10-K, for the year ended March 31, 2000, filed with the
SEC in June 2000.
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, 2000. There
has been no material change in this information.
-16-
<PAGE>
TRIUMPH GROUP, INC.
Part II. Other Information
Item 1. Legal Proceedings
On October 5, 2000, The Triumph Group Operations, Inc. settled the
personal injury lawsuit pending in the U.S. District Court for the
Eastern District of Virginia, Richmond, Virginia titled JOYCE W.
CHANDLER V. WESTWARD INDUSTRIES, LTD., WHITE BEAR SALES, INC, GENUINE
PARTS COMPANY T/A NAPA AUTO PARTS, THE IFH GROUP, INC., DELUXE TANK
MFG. CO., STANT MANUFACTURING INC., AND THE TRIUMPH GROUP OPERATIONS
D/B/A DELUXE SPECIALTIES MANUFACTURING, CO. The settlement amount was
within the Company's product liability insurance limits. Final
documentation reflecting the settlement and terminating the lawsuit
and all claims against the Company has been prepared and will be filed
with the court shortly.
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
The Company's Annual Meeting of Stockholders was held on July 26,
2000. At such meeting, the following matters were voted upon by the
stockholders, receiving the number of affirmative, negative and
withheld votes, as well as abstentions and broker non-votes, set forth
below for each matter.
1. Election of six persons to the Company's Board of Directors to serve
until the 2001 Annual Meeting of Stockholders and until their
successors are elected and qualified.
RICHARD C. ILL:
7,758,260 Affirmative
5,085 Against
JOHN R. BARTHOLDSON:
7,749,844 Affirmative
13,501 Against
CLAUDE F. KRONK:
7,758,365 Affirmative
4,980 Against
RICHARD C. GOZON
7,758,365 Affirmative
4,980 Against
JOSEPH M. SILVESTRI
7,596,174 Affirmative
167,171 Against
WILLIAM O. ALBERTINI
7,749,819 Affirmative
13,526 Against
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<PAGE>
2. Ratification of the selection of Ernst & Young LLP as independent
public accountants for the Company for the fiscal year ending March
31, 2001.
7,745,240 Affirmative
15,255 Negative
2,850 Withheld
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
(10.28) Employment Agreement with Richard C. Ill dated July 1,
1999 (a)
(10.29) Employment Agreement with John R. Bartholdson dated July
1, 1999 (a)
(10.30) Employment Agreement with Richard M. Eisenstaedt dated
July 1, 1999 (a)
(10.31) Amended and Restated Credit Agreement dated October 16,
2000 among Triumph Group, Inc., PNC Bank National
Association as Administrative Agent, Bank of America,
N.A. as Documentation Agent, First Union National Bank as
Syndication Agent and Mellon Bank, N.A. as Co-Agent
(10.32) Employment Agreement with Lawrence J. Resnick dated
August 1, 2000.
(27) Financial Data Schedule
---------------
(a) Incorporated by reference to Triumph's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999.
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended September 30, 2000
-18-
<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: November 13, 2000
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