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 December 31, 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
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TRIUMPH GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0347963
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1255 Drummers Lane, Suite 200
Wayne, PA 19087-1565
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(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, 8,982,096 shares and Class D common
stock, par value $0.001 per share, 3,348,535 shares, each as of January 16, 2001
TRIUMPH GROUP, INC.
INDEX
Part I. Financial Information
PAGE NUMBER
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Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
March 31, 2000 and December 31, 2000
Consolidated Statements of Income 3
Three months ended December 31, 1999 and 2000
Nine months ended December 31, 1999 and 2000
Consolidated Statements of Cash Flows 4
Nine months ended December 31, 1999 and 2000
Notes to Consolidated Financial Statements 6
December 31, 2000
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 15
Market Risk
Part II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
Part I. Financial Information
Item: 1. Financial Statements
Triumph Group, Inc.
Consolidated Balance Sheets
(dollars in thousands, except per share data)
MARCH 31, DECEMBER 31,
2000 2000
---- ----
(unaudited)
ASSETS
Current assets:
Cash $ 6,279 $ 6,339
Accounts receivable, net 78,960 97,307
Inventories 123,750 165,053
Prepaid expenses and other 4,730 5,360
Deferred income taxes -- 188
-------- --------
Total current assets 213,719 274,247
Property and equipment, net 122,787 149,222
Excess of cost over net assets acquired, net 144,027 190,026
Intangible assets and other, net 26,398 78,805
-------- --------
Total assets $506,931 $692,300
======== ========
-1-
Triumph Group, Inc.
Consolidated Balance Sheets (continued)
(dollars in thousands, except per share data)
MARCH 31, DECEMBER 31,
2000 2000
---- ----
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,996 $ 67,842
Accrued expenses 45,316 48,223
Income taxes payable 2,899 414
Deferred income taxes 1,365 --
Current portion of long-term debt 4,856 4,849
--------- ---------
Total current liabilities 89,432 121,328
Long-term debt, less current portion 133,952 251,577
Deferred income taxes and other 39,177 47,484
Stockholders' equity:
Common stock, $.001 par value, 50,000,000
shares authorized, 8,551,786 shares and 9,201,786
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 219,690 shares (5,580) (5,349)
Accumulated other comprehensive loss (684) (780)
Retained earnings 115,204 142,610
--------- ---------
Total stockholders' equity 244,370 271,911
--------- ---------
Total liabilities and stockholders' equity $ 506,931 $ 692,300
========= =========
SEE ACCOMPANYING NOTES.
-2-
Triumph Group, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
1999 2000 1999 2000
---- ---- ---- ----
Net sales $110,376 $143,163 $325,546 $403,722
Operating costs and expenses:
Cost of products sold 75,491 96,496 223,772 273,426
Selling, general, and administrative 15,191 19,157 42,508 52,726
Depreciation and amortization 4,960 6,821 14,476 19,430
Special charge 734 -- 734 --
-------- -------- -------- --------
96,376 122,474 281,490 345,582
Operating income 14,000 20,689 44,056 58,140
Interest expense and other 2,655 5,906 6,826 15,666
-------- -------- -------- --------
Income before income taxes 11,345 14,783 37,230 42,474
Income tax expense 2,569 4,781 12,029 15,028
-------- -------- -------- --------
Net income $ 8,776 $ 10,002 $ 25,201 $ 27,446
======== ======== ======== ========
Earnings Per Share - Basic:
Net income $ 0.75 $ 0.83 $ 2.15 $ 2.32
======== ======== ======== ========
Weighted average common shares outstanding - Basic 11,664 12,068 11,697 11,806
======== ======== ======== ========
Earnings Per Share - Assuming Dilution:
Net income $ 0.71 $ 0.80 $ 2.03 $ 2.21
======== ======== ======== ========
Weighted average common shares outstanding -
Assuming Dilution 12,359 12,459 12,403 12,427
======== ======== ======== ========
SEE ACCOMPANYING NOTES.
-3-
Triumph Group, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1999 2000
---- ----
OPERATING ACTIVITIES
Net income $ 25,201 $ 27,446
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,476 19,430
Provision for deferred income taxes 3,933 6,107
Interest on subordinated and junior subordinated
promissory notes paid by issuance of
additional notes 677 747
Changes in other current assets and liabilities, net of
acquisitions and businesses:
Accounts receivable 5,468 (8,631)
Inventories (7,405) (18,080)
Prepaid expenses and other 1,115 625
Accounts payable, accrued expenses, and accrued
income taxes payable (13,321) (14,107)
Other (3,393) 2,751
--------- ---------
Net cash provided by operating activities 26,751 16,288
INVESTING ACTIVITIES
Capital expenditures, net (9,283) (17,900)
Proceeds from sale of assets 5,991 11,866
Cash used for businesses acquired (39,886) (124,529)
--------- ---------
Net cash used in investing activities (43,178) (130,563)
-4-
Triumph Group, Inc.
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
NINE MONTHS ENDED DECEMBER 31,
-----------------------------
1999 2000
---- ----
FINANCING ACTIVITIES
Net increase in revolving credit facility borrowings $ 24,905 $ 117,734
Repayment of debt and capital lease obligations (2,080) (3,311)
Purchase of treasury stock (4,611) --
Payments of deferred financing costs (985) (362)
Proceeds from issuance of long-term debt 90 83
Proceeds from exercise of stock options 141 191
--------- ---------
Net cash provided by financing activities 17,460 114,335
--------- ---------
Net change in cash 1,033 60
Cash at beginning of period 4,953 6,279
--------- ---------
Cash at end of period $ 5,986 $ 6,339
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 6,856 $ 6,457
Cash paid for interest 5,848 14,147
SEE ACCOMPANYING NOTES.
-5-
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 principles 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 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 nine month periods ended
December 31, 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.
NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded on the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Certain provisions
of SFAS No. 133 were amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities-an amendment of Statement 133." The
provisions of these Statements are effective for fiscal years beginning after
June 15, 2000. Had the Company adopted SFAS 133 at December 31, 2000, the
estimated impact to the consolidated balance sheet and consolidated statement of
income would not have been material.
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") and in May 2000, the Company
acquired certain assets from the Anadite California Restoration Trust
("Anadite Assets") (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
-6-
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
3. ACQUISITIONS (Continued)
Company's existing operating facilities, 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 combined
purchase price for the 2001 Acquisitions was $101,404. The purchase price
includes cash paid at closing, the assumption of debt and certain
liabilities, direct costs of the acquisitions and deferred payments.
In addition to the above acquisitions, on September 30, 2000, in a number of
transactions with Honeywell International, Inc. ("Honeywell") the Company
acquired certain product rights and assets associated with hydraulic systems,
("New Hydraulic Systems Product Line") and auxiliary power units ("APU's")
("New APU Product Lines"), (collectively, the "New Product Lines"). The New
Hydraulic Systems Product Line, which will be relocated from Honeywell's
Rocky Mount, North Carolina facility to Triumph's Frisby Aerospace, Inc.
subsidiary, located in Clemmons, North Carolina, is used in connection with
the design, manufacture and overhaul of hydraulic pumps, motors and power
transfer units. The New APU Product Lines, by which Triumph has become 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 New
Product Lines was $62,050. The purchase price includes cash paid at closing,
the assumption of debt and certain liabilities, and direct costs of the
acquisitions. Included in accounts payable at December 31, 2000, is $27,000
representing checks issued in payment for notes issued at closing.
The combined excess of the purchase price over the estimated fair value of
the net assets acquired in the 2001 Acquisitions in the amount 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 New
Product Lines in the amount of $51,198 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.
The 2001 Acquisitions and the acquisition of the New Product Lines 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 for the nine months ended
December 31, 1999 has been prepared assuming the 2001 Acquisitions and the
2000 Acquisitions had occurred on April 1, 1999: Net sales: $394,793; Net
Income: $29,166; Earnings per common share - Basic: $2.49; and Earnings per
common share - Diluted: $2.35. The pro forma effect of the 2001 Acquisitions
for the nine months ended December 31, 2000 was not material. 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:
MARCH 31, DECEMBER 31,
2000 2000
---- ----
Raw materials $ 34,195 $ 42,188
Work-in-process 46,189 79,822
Finished goods 43,366 43,043
-------- --------
Total inventories $123,750 $165,053
======== ========
-7-
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:
MARCH 31, DECEMBER 31,
2000 2000
---- ----
Revolving credit facility $107,204 $224,938
Subordinated promissory notes 17,686 18,469
Industrial revenue bonds 5,497 5,052
Capital lease obligations 7,661 6,898
Other debt 760 1,069
-------- --------
138,808 256,426
Less current portion 4,856 4,849
-------- --------
$133,952 $251,577
======== ========
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.
The Company has entered into a two-year interest rate swap to exchange floating
rate for fixed rate interest payments to hedge against interest rate changes on
$100,000 of the Company's outstanding balance under its Credit Facility. The
Company provides protection to meet actual exposures and does not speculate in
derivatives. The net effect of the spread between the floating rate (30-day
LIBOR) and the fixed rate (6.56%) is reflected as an adjustment to interest
expense in the period incurred.
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:
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
(in thousands) 1999 2000 1999 2000
---- ---- ---- ----
Weighted average common shares outstanding 11,664 12,068 11,697 11,806
Net effect of dilutive stock options 45 130 56 101
Net effect of dilutive warrant 650 261 650 520
------ ------ ------ ------
Weighted average common shares outstanding -
assuming dilution 12,359 12,459 12,403 12,427
====== ====== ====== ======
Options to purchase 119,850 shares of common stock, at prices ranging from
$43.13 per share to $44.88 per share, were outstanding during the third 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 December 31, 2000
and, therefore, the effect of these options would be antidilutive.
-8-
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:
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1999 2000 1999 2000
---- ---- ---- ----
Net Sales:
Aviation $ 91,757 $ 129,597 $ 269,540 $ 357,659
Metals 18,619 13,566 56,006 46,063
--------- --------- --------- ---------
$ 110,376 $ 143,163 $ 325,546 $ 403,722
========= ========= ========= =========
Income before income taxes:
Operating income (expense):
Aviation $ 14,674 $ 21,954 $ 44,524 $ 60,023
Metals 1,175 181 3,103 1,836
Corporate (1,115) (1,446) (2,837) (3,719)
Special charge (734) -- (734) --
--------- --------- --------- ---------
14,000 20,689 44,056 58,140
Interest expense and other 2,655 5,906 6,826 15,666
--------- --------- --------- ---------
$ 11,345 $ 14,783 $ 37,230 $ 42,474
========= ========= ========= =========
Capital expenditures:
Aviation $ 1,825 $ 5,609 $ 8,313 $ 13,676
Metals 295 1,535 911 4,119
Corporate 50 81 59 105
--------- --------- --------- ---------
$ 2,170 $ 7,225 $ 9,283 $ 17,900
========= ========= ========= =========
Depreciation and amortization:
Aviation $ 4,647 $ 6,504 $ 13,547 $ 18,490
Metals 301 293 893 880
Corporate 12 24 36 60
--------- --------- --------- ---------
$ 4,960 $ 6,821 $ 14,476 $ 19,430
========= ========= ========= =========
MARCH 31, 2000 DECEMBER 31, 2000
-------------- -----------------
Assets:
Aviation $477,374 $656,263
Metals 27,410 30,027
Corporate 2,147 6,010
----- -----
$506,931 $692,300
======= =======
For the three months ended December 31, 1999 and 2000, the Company had foreign
sales of $19,001 and $32,496, respectively. For the nine months ended December
31, 1999 and 2000, the Company had foreign sales of $50,123 and $79,635,
respectively.
-9-
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 DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1999
AVIATION SEGMENT
NET SALES. Net sales for the Aviation Segment increased by $37.8 million,
or 41.2%, to $129.6 million for the third quarter of fiscal 2001 from $91.8
million for the third quarter of fiscal 2000. This increase was due to the
inclusion of an aggregate of $25.0 million and $5.5 million in net sales in the
third 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 $18.4 million,
or 21.3%, from the prior year period due to overall growth in the businesses as
well as new product lines.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Segment
increased by $24.8 million, or 40.5%, to $85.9 million for the third quarter of
fiscal 2001 from $61.2 million for the third quarter fiscal 2000. This increase
was due to the inclusion of $17.6 million and $3.4 million in the third 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 increased by $10.6 million, or 18.4% from the prior year period due to
overall growth in the businesses as well as new product lines.
GROSS PROFIT. Gross profit for the Aviation Segment increased by $13.1
million, or 42.8%, to $43.7 million for the third quarter of fiscal 2001 from
$30.6 million for the third quarter of fiscal 2000. This increase was due to the
inclusion of $7.4 million and $2.1 million in the third 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 $7.8 million, or 27.2%, over the prior
year period. As a percentage of net sales, gross profit for the Aviation Segment
was 33.7% for the third quarter of fiscal 2001 and 33.3% for the third quarter
of fiscal 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Segment increased by $3.9 million, or
35.0%, to $15.2 million for the third quarter of fiscal 2001 from $11.3 million
for the third 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 $1.9 million, or 40.0%, to $6.5 million for the
third quarter of fiscal 2001 from $4.6 million for the third 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
$7.3 million, or 49.6%, to $22.0 million for the third quarter of fiscal 2001
from $14.7 million for the third 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 38.7% increase in
operating income from the prior year due to overall growth in the businesses as
well as new product lines. As a percentage of net sales, operating income for
the Aviation Segment was 16.9% for the third quarter of fiscal 2001 and 16.0%
for the third quarter of fiscal 2000.
-10-
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 $5.1 million, or
27.1%, to $13.6 million for the third quarter of fiscal 2001 from $18.6 million
for the third 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 $3.8 million, or 26.2%, to $10.6 million for the third quarter of
fiscal 2001 from $14.3 million for the third quarter of fiscal 2000. This
decrease was mainly due to the decrease in volume at the Company's
electro-galvanized steel operation.
GROSS PROFIT. Gross profit for the Metals Segment decreased by $1.3
million, or 30.4%, to $3.0 million for the third quarter of fiscal 2001 from
$4.3 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 22.0% and 23.0%
for the third 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
10.7%, to $2.5 million from $2.8 million in the third quarter of fiscal 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Segment remained unchanged at $0.3 million for the third quarter of fiscal 2001
from the third quarter of fiscal 2000.
OPERATING INCOME. Operating income for the Metals Segment decreased by $1.0
million, or 84.6%, to $0.2 million for the third quarter of fiscal 2001 from
$1.2 million for the third quarter of fiscal 2000, due to the reasons discussed
above. As a percentage of net sales, operating income for the Metals Segment was
1.3% and 6.3% for the third quarter of fiscal 2001 and 2000, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.3 million, or 29.7%,
to $1.4 million for the third quarter of fiscal 2001 from $1.1 million for the
third quarter of fiscal 2000.
SPECIAL CHARGE. During the quarter ended December 31, 1999, the Company
announced a realignment of reporting responsibilities. As a result of the
realignment, the Company recorded a pre-tax charge of $0.7 million, primarily
related to severance for three employees.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by $3.3
million, or 122.4%, to $5.9 million for the third quarter of fiscal 2001 from
$2.7 million for the third quarter of fiscal 2000. This increase was
primarily due to significantly 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 interest rate on the Company's borrowings under its amended
and restated credit facility ("Credit Facility").
INCOME TAX EXPENSE. The effective tax rate was 32.3% for the third quarter
of fiscal 2001 and 22.6% for the third quarter of fiscal 2000.
NET INCOME. Net income increased by $1.2 million, or 14.0%, to $10.0
million for the third quarter of fiscal 2001 from $8.8 million for the third
quarter of fiscal 2000. The increase in third quarter 2001 net income was
primarily attributable to the 2000 Acquisitions and the 2001 Acquisitions, the
overall growth in the other divisions and subsidiaries and new product lines,
partially offset by the increased interest expense due to the increased debt
levels associated with the 2000 Acquisitions and the 2001 Acquisitions.
-11-
Management's Discussion And Analysis of
Financial Condition and Results of Operations
(continued)
NINE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1999
AVIATION SEGMENT
NET SALES. Net sales for the Aviation Segment increased by $88.1 million,
or 32.7%, to $357.7 million for the nine months ended December 31, 2000 from
$269.5 million for the nine months ended December 31, 1999. This increase was
due to the inclusion of an aggregate of $75.2 million and $6.9 million in net
sales in the first nine 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 $19.8
million, or 7.5%, over the prior year period due to the overall growth in the
businesses as well as new product lines.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Segment
increased by $57.7 million, or 32.0%, to $237.6 million for the first nine
months of fiscal 2001 from $180.0 million for the first nine months of fiscal
2000. This increase was due to the inclusion of $50.5 million and $4.4 million
in the first nine 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 $11.6 million, or 6.6%,
over the prior year period due to the overall growth in the businesses as well
as new product lines.
GROSS PROFIT. Gross profit for the Aviation Segment increased by $30.5
million, or 34.0%, to $120.0 million for the first nine months of fiscal 2001
from $89.6 million for the first nine months of fiscal 2000. This increase was
due to the inclusion of $24.7 million and $2.5 million in the first nine 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 $8.3 million, or
9.5%, over the prior year period. As a percentage of net sales, gross profit for
the Aviation Segment was 33.6% and 33.2% for the first nine months of fiscal
2001 and 2000, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Segment increased by $10.0 million, or
31.8%, to $41.5 million for the first nine months of fiscal 2001 from $31.5
million for the first nine 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 $4.9 million, or 36.5%, to $18.5 million for the
first nine months of fiscal 2001 from $13.5 million for the first nine 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
$15.5 million, or 34.8%, to $60.0 million for the first nine months of fiscal
2001 from $44.5 million for the first nine 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 10.4% increase in
operating income from the prior year due to the overall growth in the businesses
as well as new product lines. As a percentage of net sales, operating income for
the Aviation Segment was 16.8% for the first nine months of fiscal 2001 and
16.5% for the first nine months of fiscal 2000.
-12-
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 $9.9 million, or
17.8%, to $46.1 million for the first nine months of fiscal 2001 from $56.0
million for the first nine 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 $8.0 million, or 18.3%, to $35.8 million for the first nine months
of fiscal 2001 from $43.8 million for the first nine months of fiscal 2000. This
decrease was mainly 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 $1.9
million, or 15.8%, to $10.3 million for the first nine months of fiscal 2001
from $12.2 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
22.3% and 21.8% for the first nine months of fiscal 2001 and fiscal 2000,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Segment decreased by $0.7 million, or
7.9%, to $7.6 million from $8.2 million in the first nine months of fiscal 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Segment remained unchanged from the prior year period at $0.9 million for the
nine months ended December 31, 2000.
OPERATING INCOME. Operating income for the Metals Segment decreased by $1.3
million, or 40.8%, to $1.8 million for the first nine months of fiscal 2001
from $3.1 million for the first nine months of fiscal 2000, due to the
reasons discussed above. As a percentage of net sales, operating income for
the Metals Segment was 4.0% and 5.5% for the first nine months of fiscal 2001
and 2000, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.9 million, or 31.1%,
to $3.7 million for the first nine months of fiscal 2001 from $2.8 million for
the first nine months of fiscal 2000.
SPECIAL CHARGE. During the quarter ended December 31, 1999, the Company
announced a realignment of reporting responsibilities. As a result of the
realignment, the Company recorded a pre-tax charge of $0.7 million, primarily
related to severance for three employees.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by $8.8
million, or 129.5%, to $15.7 million for the first nine months of fiscal 2001
from $6.8 million for the first nine months of fiscal 2000. This increase was
primarily due to significantly 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 interest rate on the Company's borrowings under its Credit
Facility.
INCOME TAX EXPENSE. The effective tax rate was 35.4% for the first nine
months of fiscal 2001 and 32.3% for the first nine months of fiscal 2000.
NET INCOME. Net income increased by $2.2 million, or 8.9%, to $27.4 million
for the first nine months of fiscal 2001 from $25.2 million for the first nine
months of fiscal 2000. The increase in fiscal 2001 net income was primarily
attributable to the 2000 Acquisitions and the 2001 Acquisitions, the overall
growth in the other divisions and subsidiaries and new product lines, partially
offset by the increased interest expense due to the increased debt levels
associated with the 2000 Acquisitions and the 2001 Acquisitions.
-13-
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 $16.3 million of cash flows from operating activities
for the nine months ended December 31, 2000. The Company used approximately
$130.6 million in investing activities and raised $114.3 million in financing
activities for the nine months ended December 31, 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
December 31, 2000, $123.6 million was available under the Credit Facility. On
December 31, 2000, an aggregate amount of approximately $224.9 million was
outstanding under the Credit Facility, $220.0 million of which was accruing
interest at LIBOR plus applicable basis points totaling 8.2% per annum, and $4.9
million of which was accruing interest at the prime rate of 9.5% per annum.
Amounts repaid under the Credit Facility may be reborrowed.
The Company's primary exposure to market risk consists of changes in
interest rates on borrowings. An increase in interest rates would adversely
affect the Company's operating results and the cash flow available after debt
service to fund operations and expansion and, if permitted to do so under its
Credit Facility, to pay dividends on its common stock. The Company has
entered into a two-year interest rate swap to exchange floating rate for
fixed rate interest payments to hedge against interest rate changes for
$100.0 million of the Company's outstanding balance under its Credit
Facility. The Company provides protection to meet actual exposure and does
not speculate in derivatives. The net effect of the spread between the
floating rate (30-day LIBOR) and the fixed rate (6.56%), on the Company's
earnings for the quarter ended December 31, 2000, was not material.
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, and assumed $27.0 million of seller financing which was included in
accounts payable at December 31, 2000.
Capital expenditures were approximately $17.9 million for the nine months
ended December 31, 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
existing facilities.
The Company believes that cash generated by operations and borrowings
available 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.
-14-
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 and
Item 2 of this Form 10-Q.
-15-
TRIUMPH GROUP, INC.
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
On November 7, 2000, World Equity Partners, L.P. exercised
their outstanding warrant to purchase 650,000 shares of
Triumph Group, Inc. common stock, par value $0.001 per share.
World Equity partners paid the exercise price of $100.00,
through a cashless exercise equal to three shares of common stock
of Triumph Group. The issuance of these shares was exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933, as amended.
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
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended December 31, 2000
-16-
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: February 5, 2001
-17-