As filed with the Securities and Exchange Commission on March 8, 2001
Registration Statement No. 333-55726
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0347963
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(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
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FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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RICHARD C. ILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRIUMPH GROUP, INC.
FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
Edward D. Slevin, Esquire Richard M. Eisenstaedt, Esquire William M. Hartnett, Esquire
Gerald J. Guarcini, Esquire Vice President and General Counsel Cahill Gordon & Reindel
Ballard Spahr Andrews & Triumph Group, Inc. 80 Pine Street
Ingersoll, LLP Four Glenhardie Corporate Center New York, New York 10005-1702
1735 Market Street, 51st Floor 1255 Drummers Lane, Suite 200 (212) 701-3000
Philadelphia, Pennsylvania 19103 Wayne, Pennsylvania 19087
(215) 665-8500 (610) 975-0420
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 8, 2001
TRIUMPH GROUP, INC.
[LOGO]
3,650,000 SHARES
COMMON STOCK
This is a public offering of common stock of Triumph Group, Inc. We are offering
3,000,003 shares of our common stock. The selling stockholder is offering an
additional 649,997 shares of our common stock. We will not receive any proceeds
from the sale of shares by the selling stockholder.
Our common stock is traded on the New York Stock Exchange under the symbol
"TGI." On February 13, 2001, the last reported sale price of our common stock
was $39.30 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PER SHARE TOTAL
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to Triumph Group, Inc. $ $
Proceeds, before expenses, to the selling stockholder $ $
We have granted the underwriters the right to purchase up to 450,000 additional
shares of common stock to cover over-allotments.
DEUTSCHE BANC ALEX. BROWN MERRILL LYNCH & CO.
The date of this prospectus is , 2001.
TRIUMPH SUPPORTS THE FULL SPECTRUM
OF THE AEROSPACE INDUSTRY.
[Pictures of various aircraft in flight, including regional aircraft, commercial
aircraft
and a military aircraft]
1255 Drummers Lane
Suite 200
Wayne, PA 19087
Phone: 610.975.0420
[LOGO] TRIUMPH GROUP, INC. Fax: 610.975.0563
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS.
GENERALLY, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
OVER-ALLOTMENT OPTION WHICH WE GRANTED TO THE UNDERWRITERS IS NOT EXERCISED.
TRIUMPH GROUP, INC.
We design, engineer, manufacture, repair, overhaul and distribute aircraft
components, such as mechanical and electromechanical control systems, aircraft
and engine accessories, structural components, auxiliary power units, commonly
referred to as APUs, avionics and aircraft instruments. We serve a broad
spectrum of the aerospace industry, including commercial airlines and air cargo
carriers, as well as original equipment manufacturers, commonly referred to as
OEMs, of various commercial and military aircraft platforms and aircraft
components.
We were founded in 1993 with a vision to build a large and highly profitable
aerospace business to offer a fully-integrated suite of technical capabilities
to the aerospace marketplace. Since then, we have built a strategic portfolio of
core competencies that, when taken together, have allowed our company to enjoy
strong growth and superior margins. Our technical expertise in various aerospace
manufacturing and service disciplines constitutes our core competency. Our
aerospace business is organized to match our skills to the relevant market,
according to the following divisional product groups:
- Structural components--performs complex manufacturing, machining and
forming processes.
- Operational components--performs advanced manufacturing and fabrication
processes, including coating and plating functions, to produce precision
detail parts and complete component assemblies.
- Control systems--designs, engineers, builds and repairs complete
mechanical, electromechanical and hydraulic systems.
- Aftermarket services--provides FAA-certified repair and overhaul services
on components and instruments.
Since our IPO in 1996, we have pursued a growth strategy designed to exploit
internal growth opportunities as well as select, complementary acquisition
opportunities. During that time we completed 17 acquisitions and more than
doubled our net sales to $520 million for the twelve month period ended
December 31, 2000. We will continue to seek to leverage our existing technical
skills into related manufacturing and service capabilities as well as product
markets. For example, our expertise in the manufacture and repair of complex
components used in turbine engines that power aircraft has provided us with an
exciting new opportunity to further penetrate the rapidly-growing market for
industrial gas turbines used for power generation. Our goal is to provide a
fully-integrated suite of manufacturing and repair capabilities for industrial
gas turbines similar to our current aerospace offering. We believe that our
track record of favorable financial results is due to the discipline with which
we pursue our internal and acquisition-based growth strategy.
We also strive to maintain balance and diversity in our mix of
aerospace-related revenue and income. During the twelve month period ended
December 31, 2000, approximately 60% of our aerospace-related net sales were
derived from the sale of products to OEMs, with the
1
remaining 40% derived from the sale of repair and overhaul services to the
aftermarket. This business is also derived from a broad range of aerospace
platforms including:
- Large commercial jets--Boeing 737, 747, 757, 767, 777 and Airbus 319, 320,
321, 340;
- Regional commercial jets--Bombardier CRJ100/200, CRJ700 and Embraer ERJ
135/145, ERJ 170/190;
- Military aircraft--Boeing C-17, F/A-18 and Lockheed Martin F-16 and
Northrop Grumman E-2C;
- Business jets--Gulfstream GIV, GV and Bombardier Challenger, Learjet
family and Cessna Citation family; and
- Space vehicles--Boeing Delta Launch Vehicle and International Space
Station.
We have a broad customer base. During the nine month period ended December
31, 2000, our largest customer accounted for less than 14% of our net sales and
our ten largest customers accounted for approximately 42% of our net sales.
OUR INDUSTRY
The aircraft component production and component repair industries are highly
fragmented. They have been consolidating in recent years and we expect that this
consolidation will continue for the foreseeable future.
We believe that a number of significant trends currently affecting our
industry will increase the demand for the design, engineering, manufacture,
repair and overhaul of aircraft components including:
- Increased air transit and aircraft production;
- Aging of the existing aircraft fleet;
- Increased outsourcing by aircraft operators and OEMs;
- Reduced number of approved suppliers;
- Increased maintenance and safety requirements; and
- Increased emphasis on component traceability.
OUR COMPETITIVE ADVANTAGES
We believe that we are well positioned to take advantage of the trends
affecting our industry due to the following competitive advantages:
- DIVERSE ARRAY OF PRODUCTS AND SERVICES--We provide the aerospace industry
a consolidated point of purchase for a diverse array of technically
complex products and services across a wide range of aerospace platforms.
Customers can rely on us to provide services on aircraft components at
every stage of their useful lives, from the design, engineering and
manufacture of new components to the repair and overhaul of existing
components.
- PROPRIETARY RIGHTS RELATING TO COMPONENT DESIGNS, MANUFACTURING PROCESSES
AND REPAIR AND OVERHAUL PROCEDURES--Some of our customers rely on us
exclusively for certain products because their specifications require our
unique design, manufacture and/or overhaul capabilities.
- BROAD FAA CERTIFICATIONS AND LICENSES--We operate 20 repair stations
certified by the Federal Aviation Administration, commonly referred to as
the FAA, for the repair and overhaul of a broad range of aircraft
instruments and accessories. We also maintain
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exclusive licenses from the FAA that allow us to engineer, repair, test
and release certain components into service without further FAA approval.
We believe that the time and expense required to obtain these
certifications and licenses make it more difficult for potential
competitors to enter the market.
- EMPHASIS ON QUALITY CONTROL--We have continually met or exceeded the most
stringent quality control requirements of domestic and foreign regulatory
authorities, OEMs, commercial airlines and other customers. We maintain
detailed records to ensure the traceability of the production and service
of each aircraft component. We believe that our emphasis on quality
control has enabled us to obtain many of the FAA licenses that we hold. We
believe that the significant expense required to institute and maintain
comparable quality control procedures makes it more difficult for
potential competitors to enter the market.
- BROAD CUSTOMER BASE--Due to our diverse array of products and services and
our emphasis on quality control and timely delivery, our customers include
substantially all of the world's major commercial airlines and the most
widely recognized air cargo carriers and OEMs.
- ESTABLISHED INDUSTRY PRESENCE--Our operating divisions and subsidiaries
have substantial experience in the aerospace industry and we enjoy strong
customer relations, name recognition and repeat business.
OUR GROWTH STRATEGY
Key elements of our growth strategy include:
- EXPAND PRODUCTS AND SERVICES--We intend to continue to introduce new
aviation products and services to capitalize on the increasing trend
toward outsourcing and the reduction by aircraft operators and OEMs in the
number of their approved suppliers and vendors. In addition, we will
continue to take advantage of opportunities to expand into related or
complementary lines of business where we can leverage our unique technical
capabilities, such as our recent expansion into the manufacturing and
repair of industrial gas turbine engine components used for power
generation.
- MAKE ACQUISITIONS--We expect to continue to acquire other companies,
assets or product lines that add to or complement our existing businesses.
- EXPAND OPERATING CAPACITY--We plan to continue to invest in
state-of-the-art machinery and facilities to increase operating capacities
and efficiencies and to improve operating margins.
- INCREASE INTERNATIONAL MARKETING--We plan to build on our international
presence through continued market penetration and, as appropriate, foreign
acquisitions.
- CAPITALIZE ON GROUP AFFILIATIONS--Our growing product and service
offerings give us opportunities to cross-sell these capabilities to our
customers. In addition, through brand affiliation we can leverage our
reputation for quality and performance.
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Our executive offices are located at Four Glenhardie Corporate Center, 1255
Drummers Lane, Suite 200, Wayne, Pennsylvania 19087 and our telephone number is
(610) 975-0420. Information contained on our website at www.triumphgroup.com
does not constitute part of this prospectus.
3
THE OFFERING
Common stock offered by Triumph.............. 3,000,003 shares
Common stock offered by selling stockholder.. 649,997 shares
Total.................................... 3,650,000 shares
Common stock to be outstanding after this
offering................................... 15,358,959 shares
Use of proceeds.............................. We will use the proceeds of this offering to
reduce outstanding borrowings under our
revolving credit facility. Amounts repaid on
our revolving credit facility may be
reborrowed, subject to the satisfaction of
customary borrowing conditions, for general
corporate purposes, including working
capital, capital expenditures and
acquisitions.
Dividend policy.............................. We intend to retain all future earnings, if
any, to fund the development and growth of
our business. We do not anticipate paying
cash dividends on our common stock.
New York Stock Exchange symbol............... TGI
The number of shares of our common stock outstanding after the offering is
based on shares outstanding as of February 12, 2001 and includes 3,348,535
outstanding shares of Class D common stock. It does not include:
- 504,072 shares of common stock issuable upon exercise of outstanding stock
options under our stock option plans as of February 12, 2001 at a weighted
average exercise price of $27.63; and
- 772,052 shares of common stock reserved and available for future issuance
under our stock option plans as of February 12, 2001.
UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, WHICH ENTITLES
THE UNDERWRITERS TO PURCHASE UP TO 450,000 ADDITIONAL SHARES.
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THE TRIUMPH LOGO IS A TRADEMARK OF TRIUMPH GROUP, INC. THIS PROSPECTUS
CONTAINS OTHER TRADE NAMES, TRADEMARKS AND SERVICE MARKS OF TRIUMPH AND OF OTHER
COMPANIES.
4
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------- ---------------------
1998 1999 2000 1999 2000
--------- --------- --------- --------- ---------
(UNAUDITED)
INCOME STATEMENT DATA:
Aviation segment
Net sales........................................ $242,317 $328,577 $368,614 $269,540 $357,659
Operating income, before corporate expense,
special charge and gain on sale of
businesses..................................... 39,737 58,622 62,509 44,524 60,023
Metals segment
Net sales........................................ 87,141 71,531 73,085 56,006 46,063
Operating income, before corporate expense,
special charge and gain on sale of
businesses..................................... 5,483 4,440 4,171 3,103 1,836
Combined operating income, before corporate
expense, special charge and gain on sale of
businesses....................................... 45,220 63,062 66,680 47,627 61,859
Corporate expense.................................. 3,944 4,490 4,273 2,837 3,719
Special charge..................................... -- -- 734 734 --
Gain on sale of businesses......................... (2,250) -- -- -- --
-------- -------- -------- -------- --------
Operating income................................... 43,526 58,572 61,673 44,056 58,140
Interest expense and other......................... 3,963 5,144 9,521 6,826 15,666
-------- -------- -------- -------- --------
Income before income taxes and extraordinary gain.. 39,563 53,428 52,152 37,230 42,474
Income tax expense................................. 15,561 20,281 17,550 12,029 15,028
-------- -------- -------- -------- --------
Income before extraordinary gain................... 24,002 33,147 34,602 25,201 27,446
Extraordinary gain................................. 610 -- -- -- --
-------- -------- -------- -------- --------
Net income......................................... $ 24,612 $ 33,147 $ 34,602 $ 25,201 $ 27,446
======== ======== ======== ======== ========
Income per share before extraordinary gain:
Basic............................................ $ 2.29 $ 2.79 $ 2.96 $ 2.15 $ 2.32
Diluted.......................................... 2.14 2.62 2.79 2.03 2.21
Shares used in computing earnings per share:
Basic............................................ 10,485 11,896 11,689 11,697 11,806
Diluted.......................................... 11,231 12,646 12,397 12,403 12,427
DECEMBER 31, 2000
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(UNAUDITED)
BALANCE SHEET DATA:
Cash........................................................ $ 6,339 $ 6,339
Working capital............................................. 152,919 152,919
Total assets................................................ 692,300 692,300
Long-term debt, including current portion................... 256,426 144,921
Total stockholders' equity.................................. 271,911 383,416
5
The results for the fiscal year ended March 31, 1998 include the
acquisitions of JDC Company, Hydro-Mill Co., Stolper-Fabralloy Company and
Frisby Aerospace, Inc. from the date of each acquisition, and the sales of Air
Lab, Inc. and Deluxe Specialties Mfg., Co. The results for the fiscal year ended
March 31, 1999 include the acquisitions of Nu-Tech Industries, Inc., DG
Industries, Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd., HTD
Aerospace, Inc. and Triumph Precision, Inc. from the date of each acquisition.
The results for the fiscal year ended March 31, 2000 and for the nine months
ended December 31, 1999 include the acquisitions of Ralee Engineering Company,
Construction Brevitees d'Alfortville, Lee Aerospace, Inc. and Triumph
Components-San Diego, Inc. from the date of each acquisition. The results for
the nine months ended December 31, 2000 include the acquisitions of ACR
Industries, Inc., Chem-Fab Corporation and Airborne Nacelle Services, Inc. from
the date of each acquisition.
Operating income, before corporate expense, special charge and gain on sale
of businesses, is presented by segment to assist the reader in evaluating each
of the segment's results of operations before financing, corporate expenses,
special charge and gain on sale of businesses. Corporate expenses primarily
consist of compensation, rent and general costs related to the operation of our
corporate office and other general expenses including professional fees. Working
capital represents current assets less current liabilities.
The "as adjusted" balance sheet data reflects this offering at an assumed
offering price of $39.30 per share and the application of the net proceeds of
$111.5 million as described under Use of Proceeds.
6
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK. THE RISK AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING US. ADDITIONAL RISKS
AND UNCERTAINTIES THAT WE ARE UNAWARE OF, OR THAT WE CURRENTLY DEEM IMMATERIAL,
ALSO MAY BECOME IMPORTANT FACTORS THAT AFFECT US.
IF ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN THAT CASE,
THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE SOME OR
ALL OF YOUR INVESTMENT.
RISKS RELATED TO OUR INDUSTRY
COMPETITIVE PRESSURES MAY ADVERSELY AFFECT OUR NET SALES.
We have numerous competitors in both the aerospace services and metals
processing and distribution industries. We compete primarily with OEMs and the
top-tier manufacturers that supply them, some of which are divisions or
subsidiaries of OEMs and other large companies that manufacture aircraft
components and subassemblies. Competition for the repair and overhaul of
aviation components comes from three primary sources, some with greater
financial and other resources than us: OEMs, major commercial airlines and other
independent repair and overhaul companies. Our principal competitors in the
metals industry include national and regional steel mills, other steel service
centers, steel erection companies and pre-engineered building manufacturers.
Some of our competitors in both aviation and metals have substantially greater
financial and other resources than us. Competitive pressures in either industry
may materially adversely affect our operating revenues and in turn, our business
and financial condition.
FACTORS THAT HAVE AN ADVERSE IMPACT ON THE AEROSPACE INDUSTRY MAY ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
A substantial percentage of our gross profit and operating income is derived
from our aviation segment. Our aviation operations are focused on designing,
engineering and manufacturing aircraft components on new aircraft and performing
repair and overhaul services on existing aircraft and aircraft components.
Therefore, our business is directly affected by economic factors and other
trends that affect our customers in the aerospace industry, including a possible
decrease in outsourcing by aircraft operators and OEMs or projected market
growth that may not materialize or be sustainable. When these economic and other
factors adversely affect the aerospace industry, they tend to reduce the overall
customer demand for our products and services, which decreases our operating
income. Economic and other factors that might affect the aerospace industry may
have an adverse impact on our results of operations.
WE MAY NEED TO EXPEND SIGNIFICANT CAPITAL TO KEEP PACE WITH TECHNOLOGICAL
DEVELOPMENTS IN OUR INDUSTRY.
The aerospace industry is constantly undergoing development and change and
it is likely that new products, equipment and methods of repair and overhaul
service will be introduced in the future. In order to keep pace with any new
developments, we may need to expend significant capital to purchase new
equipment and machines or to train our employees in the new methods of
production and service. We may not be successful in developing new products and
these capital expenditures may have a material adverse effect on us.
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WE MAY INCUR SIGNIFICANT EXPENSES TO COMPLY WITH NEW OR MORE STRINGENT
GOVERNMENTAL REGULATION.
The aerospace industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. We must be certified by the FAA and,
in some cases, by individual OEMs in order to engineer and service parts and
components used in specific aircraft models. If material authorizations or
approvals were revoked or suspended, our operations would be adversely affected.
New or more stringent governmental regulations may be adopted, or industry
oversight heightened, in the future, and we may incur significant expenses to
comply with any new regulations or any heightened industry oversight.
RISKS RELATED TO OUR BUSINESS
THE LOSS OF OUR KEY CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
For the nine months ended December 31, 2000, Honeywell International, Inc.
and Boeing Co. represented approximately 8% and 13%, respectively, of net sales.
For fiscal 2000, Honeywell and Boeing represented approximately 9% and 14%,
respectively, of net sales. The loss of either of these customers could have a
material adverse impact on us. Assuming that the pending acquisition of
Honeywell by General Electric Corporation occurred effective April 1, 2000,
Honeywell and General Electric, on a combined basis, would have accounted for
approximately 12% of net sales for the nine months ended December 31, 2000. In
addition, some of our operating divisions and subsidiaries have significant
customers, the loss of whom could have an adverse effect on those businesses.
WE MAY BE UNABLE TO SUCCESSFULLY ACHIEVE "TIER ONE" SUPPLIER STATUS WITH OEMS,
AND WE MAY BE REQUIRED TO RISK OUR CAPITAL TO ACHIEVE "TIER ONE" SUPPLIER
STATUS.
Many OEMs are moving toward developing strategic partnerships with their
larger suppliers, frequently called "tier one" suppliers. Each tier one supplier
provides an array of integrated services including purchasing, warehousing and
assembly for OEM customers. We have been designated as a tier one supplier by
some OEMs and are striving to achieve tier one status with other OEMs. In order
to maintain or achieve tier one status, we may need to expand our existing
capacities or capabilities, and there is no assurance that we will be able to do
so.
Many new aircraft programs require that major suppliers become risk-sharing
partners, meaning that the cost of design, development and engineering work
associated with the development of the aircraft is born by the supplier, usually
in exchange for a long-term agreement to supply critical parts once the aircraft
is in production. In the event that the aircraft fails to reach the production
stage, results in the production of an inadequate number of units, or actual
sales otherwise do not meet projections, we may incur significant costs without
any corresponding revenues. For example, we are a subcontractor to a company
which is developing a new aircraft, the primary customer of which is a major air
cargo carrier. We have substantially completed the development of a major
component of this aircraft and have invested to date approximately $6 million.
The company that is developing this aircraft has recently filed for bankruptcy
protection to secure relief while seeking to recapitalize the company. If that
company does not obtain additional financing and emerge from bankruptcy
protection, or if this project otherwise is abandoned or does not succeed, we
may not be able to recover our investment.
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WE MAY NOT REALIZE OUR ANTICIPATED RETURN ON CAPITAL COMMITMENTS MADE TO EXPAND
OUR CAPABILITIES.
From time to time, we make significant capital expenditures to implement new
processes and to increase both efficiency and capacity. Some of these projects
require additional training for our employees and not all projects may be
implemented as anticipated. If any of these projects do not achieve the
anticipated increase in efficiency or capacity, our returns on these capital
expenditures may not be as expected.
OUR EXPANSION INTO INTERNATIONAL MARKETS MAY INCREASE CREDIT AND OTHER RISKS.
As we pursue customers in Asia, South America and other less developed
aerospace markets throughout the world, our inability to ensure the credit
worthiness of our customers in these areas could adversely impact our overall
profitability. In addition, these business opportunities may entail additional
currency risks, different legal and regulatory requirements and political
considerations not associated with domestic markets.
WE MAY NEED ADDITIONAL FINANCING FOR ACQUISITIONS AND CAPITAL EXPENDITURES AND
THIS FINANCING MAY NOT BE AVAILABLE ON TERMS ACCEPTABLE TO US.
A key element of our strategy has been, and continues to be, internal growth
and growth through the acquisition of additional companies and product lines
engaged in the aerospace industry. In order to grow internally, we may need to
make significant capital expenditures and may need additional capital to do so.
Our ability to grow is dependent upon, and may be limited by, among other
things, availability under our revolving credit facility and by particular
restrictions contained in our revolving credit facility and our other financing
arrangements. In that case, additional funding sources may be needed, and we may
not be able to obtain the additional capital necessary to pursue our internal
growth and acquisition strategy or, if we can obtain additional financing, the
additional financing may not be on financial terms which are satisfactory to us.
CANCELLATIONS, REDUCTIONS OR DELAYS IN CUSTOMER ORDERS MAY ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.
Our overall operating results are affected by many factors, including the
timing of orders from large customers and the timing of expenditures to
manufacture parts and purchase inventory in anticipation of future sales of
products and services. A large portion of our operating expenses are relatively
fixed. Because several of our operating divisions and subsidiaries typically do
not obtain long-term purchase orders or commitments from our customers, they
must anticipate the future volume of orders based upon the historic purchasing
patterns of customers and upon our discussions with customers as to their
anticipated future requirements. Cancellations, reductions or delays in orders
by a customer or group of customers could have a material adverse effect on our
business, financial condition and results of operations.
OUR ACQUISITION STRATEGY EXPOSES US TO RISKS, INCLUDING THE RISK THAT WE MAY NOT
BE ABLE TO SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES.
We have a consistent strategy to grow, in part, by the acquisition of
additional businesses in the aerospace industry and are continuously evaluating
various acquisition opportunities. Our ability to grow by acquisition is
dependent upon, among other factors, the availability of suitable acquisition
candidates. Growth by acquisition involves risks that could adversely affect our
operating results, including difficulties in integrating the operations and
personnel of acquired companies, the potential amortization of acquired
intangible assets and the
9
potential loss of key employees of acquired companies. We may not be able to
consummate acquisitions on satisfactory terms or, if any acquisitions are
consummated, satisfactorily integrate these acquired businesses.
ANY PRODUCT LIABILITY CLAIMS IN EXCESS OF INSURANCE MAY ADVERSELY AFFECT OUR
FINANCIAL CONDITION.
Our operations expose us to potential liability for personal injury or death
as a result of the failure of an aircraft component that has been serviced by
us, the failure of an aircraft component designed or manufactured by us or the
irregularity of metal products processed or distributed by us. While we believe
that our liability insurance is adequate to protect us from these liabilities,
our insurance may not cover all liabilities. Additionally, insurance coverage
may not be available in the future at a cost acceptable to us. Any material
liability not covered by insurance or for which third party indemnification is
not available could have a material adverse effect on our financial condition.
THE UNAVAILABILITY OF SKILLED PERSONNEL MAY HAVE AN ADVERSE EFFECT ON OUR
OPERATIONS.
From time to time, some of our operating divisions and subsidiaries have
experienced difficulties in attracting and retaining skilled personnel to
design, engineer, manufacture, repair and overhaul sophisticated aircraft
components. Our ability to operate successfully could be jeopardized if we are
unable to attract and retain a sufficient number of skilled personnel to conduct
our business.
ANY EXPOSURE TO ENVIRONMENTAL LIABILITIES MAY ADVERSELY AFFECT US.
Our business, operations and facilities are subject to numerous stringent
federal, state, local and foreign environmental laws and regulations. Although
management believes that our operations and facilities are in material
compliance with such laws and regulations, future changes in these laws,
regulations or interpretations thereof or the nature of our operations may
require us to make significant additional capital expenditures to ensure
compliance in the future. Some of our facilities have been or are currently the
subject of environmental remediation activities, the cost of which is subject to
indemnification provided by IKON Office Solutions. One of these facilities is
connected with a site included in the National Priorities List of Superfund
sites maintained by the Environmental Protection Agency, commonly referred to as
the EPA. Another of these facilities is located on a site included in the EPA's
database of potential Superfund sites. The IKON Office Solutions'
indemnification covers the cost of liabilities that arise from environmental
conditions or activities existing at facilities prior to our acquisition from
IKON Office Solutions and that were identified before July 22, 2000, including
the costs and claims associated with the environmental remediation activities
and liabilities discussed above. Some other facilities acquired and operated by
us or one of our subsidiaries, including a leased facility located on an EPA
National Priorities List site, have been under active investigation for
environmental contamination by federal or state agencies when acquired, and
continue to be under investigation. We are indemnified by prior owners or
operators and/or present owners of the facilities for liabilities which we incur
as a result of these investigations and the environmental contamination found
which pre-dates our acquisition of these facilities, subject to certain
limitations. We also maintain a pollution liability policy that provides
coverage for material liabilities associated with the clean-up of on-site
pollution conditions, as well as defense and indemnity for certain third party
suits (including Superfund liabilities at third party sites), in each case, to
the extent not otherwise indemnified. This policy applies to all of our
manufacturing and assembly operations worldwide. However, if we were required to
pay the expenses related to environmental
10
liabilities for which neither indemnification nor insurance coverage is
available, these expenses could have a material adverse effect on us.
RISKS RELATED TO THIS OFFERING
OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER THAT STOCKHOLDERS MAY CONSIDER
FAVORABLE.
Our certificate of incorporation and bylaws contain provisions, including
cumulative voting, that could prevent or delay a change in control or change in
management that would provide stockholders with a premium to the market price of
their common stock. In addition, our board of directors has the authority to
issue up to 250,000 shares of preferred stock in one or more series in
connection with our purchase of the assets or stock of another corporation or
the merger of us with or into another corporation, and to fix the preferences,
rights and limitations of that series without seeking stockholder approval.
Cumulative voting and the ability to issue preferred stock could have the effect
of discouraging unsolicited acquisition proposals or make it more difficult for
a third party to gain control of us, or otherwise could adversely affect the
market price of our common stock.
OUR STOCK PRICE MAY BE VOLATILE AND COULD EXPERIENCE SUBSTANTIAL DECLINES.
The market price of our common stock has historically experienced and may
continue to experience volatility. The market price is likely to be affected by:
- fluctuations in the volume of trading;
- changes in general conditions in the economy or the financial market;
- variations in our quarterly operating results;
- changes in financial estimates by securities analysts;
- other developments affecting us, our industry, customers or competitors;
- the operating and stock price performance of companies that investors deem
comparable to us; and
- the number of shares available for resale in the public market under
applicable securities laws.
The entire stock market has experienced significant volatility in recent
months. This volatility has affected the market prices of securities issued by
many companies for reasons unrelated to their operating performance. Therefore,
we cannot predict the market price for our common stock after this offering.
OUR LARGEST STOCKHOLDER MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE TRANSACTIONS.
Upon completion of this offering, Citicorp Venture Capital will beneficially
own approximately 30% of our outstanding capital stock. As a result, Citicorp
Venture Capital will continue to be able to exercise control over all
significant corporate transactions requiring stockholder approval. This could
have the effect of delaying or preventing a change of control of us, which in
turn could reduce the market price of our stock.
WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE.
We have not paid any dividends on our common stock and do not intend to pay
dividends in the foreseeable future. In addition, our revolving credit facility
currently restricts the payments of dividends. In the event that we and/or
certain of our subsidiaries enter into future financings, the terms of such
financings may include dividend restrictions.
11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus contains statements about future events and expectations
that constitute forward-looking statements within the meaning of Section 27A
under the Securities Act, as amended. Forward-looking statements are based on
management's belief, assumptions and expectations of our future economic
performance, taking into account the information currently available to
management. These statements are not statements of historical fact.
Forward-looking statements involve risk and uncertainties that may cause our
actual results, performance or financial condition to differ materially from the
expectations of future results, performance or financial conditions we express
or imply in any forward-looking statements. Factors that could contribute to
these differences include those discussed above in "Risk Factors" and in other
sections of this prospectus. The words "believe," "may," "will," "should,"
"anticipate," "estimate," "expect," "intend," "objective," "seek," or similar
words, or the negatives of these words, identify forward-looking statements. We
qualify any forward-looking statements entirely by these cautionary factors.
Information regarding market and industry statistics contained in the
Prospectus Summary and Business sections is included based on information
available to us that we believe is accurate. It is generally based on industry,
academic and other publications that are not produced for purposes of securities
offerings or economic analysis. We have not reviewed or included data from all
sources and cannot assure you of the accuracy of the data we have included.
USE OF PROCEEDS
The net proceeds to us from this offering will be approximately
$111.5 million after deducting underwriting discounts and commissions and
estimated offering expenses payable by us. Our estimated net proceeds will be
approximately $128.3 million if the underwriters exercise in full their option
to purchase an additional 450,000 shares to cover over-allotments.
We intend to use all of the net proceeds, including the net proceeds from
the sale of shares of common stock subject to the over-allotment option, if any,
for repayment of indebtedness under our revolving credit facility. Our revolving
credit facility matures on June 13, 2004 and bears interest, at our option, at
the fluctuating prime rate or LIBOR plus applicable basis points. On
February 9, 2001, an aggregate amount of approximately $255.5 million was
outstanding under our revolving credit facility, which was accruing interest at
LIBOR plus applicable basis points, or 7.64% per annum. Amounts repaid on our
revolving credit facility may be reborrowed, subject to the satisfaction of
customary borrowing conditions, for general corporate purposes, including
working capital, capital expenditures and acquisitions.
We will not receive any proceeds from the sale of shares by the selling
stockholder.
12
DIVIDEND POLICY
We intend to retain our earnings to finance the expansion of our business
and do not anticipate paying cash dividends in the foreseeable future. Any
future determination regarding cash dividend payments will be made by our board
of directors and will depend upon earnings, financial condition, capital
requirements, restrictions in financing agreements, and other factors deemed
relevant by the board of directors. Dividend payments are restricted by our
revolving credit facility.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the symbol
TGI. The following table sets forth for the quarters indicated the high and low
composite per share closing sales prices as reported by the New York Stock
Exchange.
HIGH LOW
-------- --------
Fiscal 1999
First Quarter....................................... $50.500 $40.000
Second Quarter...................................... 47.375 27.375
Third Quarter....................................... 34.813 24.000
Fourth Quarter...................................... 35.000 23.500
Fiscal 2000
First Quarter....................................... $31.063 $22.500
Second Quarter...................................... 28.750 23.375
Third Quarter....................................... 26.250 23.688
Fourth Quarter...................................... 32.563 22.750
Fiscal 2001
First Quarter....................................... $29.500 $26.563
Second Quarter...................................... 35.875 28.125
Third Quarter....................................... 41.375 33.625
Fourth Quarter (through February 14, 2001).......... 41.625 36.875
13
CAPITALIZATION
This table presents our capitalization as of December 31, 2000:
- on an actual basis; and
- on an as adjusted basis to reflect the sale of 3,000,003 shares of common
stock in this offering at an assumed offering price of $39.30 per share.
In this table, stockholders' equity excludes:
- 510,797 shares of common stock issuable upon the exercise of outstanding
stock options under our stock option plans as of December 31, 2000 at a
weighted average exercise price of $27.69 per share;
- shares of common stock reserved and available for future issuance under
stock option plans as of December 31, 2000; and
- up to 450,000 shares that may be issued upon the underwriters' exercise of
their over-allotment option.
This table should be read with our financial statements and the related
notes incorporated by reference in this prospectus and Management's Discussion
and Analysis of Financial Conditions and Results of Operations included
elsewhere in this prospectus.
AS OF DECEMBER 31, 2000
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
LONG-TERM DEBT (INCLUDING CURRENT PORTION):
Revolving credit facility................................. $224,938 $113,433
Subordinated promissory notes............................. 18,469 18,469
Industrial revenue bonds.................................. 5,052 5,052
Capitalized leases and other.............................. 7,967 7,967
-------- --------
Total debt............................................ 256,426 144,921
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000 shares
authorized, 9,201,786 shares issued on an actual basis
and 12,201,789 shares issued on an as adjusted basis.... 9 12
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............................ 135,418 246,920
Treasury stock, at cost, 219,690 shares................... (5,349) (5,349)
Accumulated other comprehensive loss...................... (780) (780)
Retained earnings......................................... 142,610 142,610
-------- --------
Total stockholders' equity............................ 271,911 383,416
-------- --------
Total capitalization................................ $528,337 $528,337
======== ========
14
SELECTED FINANCIAL DATA
You should read the selected financial data with Management's Discussion and
Analysis of Financial Condition and Results of Operations appearing elsewhere in
this prospectus and our consolidated financial statements and related notes
incorporated by reference in this prospectus. The selected financial data for
the fiscal years 1996 through 2000 are derived from our audited consolidated
financial statements. Historical results are not necessarily indicative of
results that may be achieved in any future period. The selected financial data
for the nine months ended December 31, 1999 and 2000 and as of December 31, 2000
are derived from our unaudited consolidated financial statements. In the opinion
of management, these unaudited consolidated financial statements include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for interim periods are not necessarily indicative of
results for a full fiscal year.
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------------------------------- ---------------------
1996 1997 1998 1999 2000 1999 2000
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
INCOME STATEMENT DATA:
Aviation segment
Net sales................................... $100,166 $167,731 $242,317 $328,577 $368,614 $269,540 $357,659
Cost of products sold....................... 70,643 110,932 164,978 220,002 244,290 179,966 237,632
-------- -------- -------- -------- -------- -------- --------
Gross profit................................ 29,523 56,799 77,339 108,575 124,324 89,574 120,027
Selling, general and administrative......... 12,915 24,228 29,611 36,652 43,185 31,503 41,514
Depreciation and amortization............... 2,513 5,066 7,991 13,301 18,630 13,547 18,490
-------- -------- -------- -------- -------- -------- --------
Operating income, before corporate expense,
special charge and gain on sale of
businesses................................ 14,095 27,505 39,737 58,622 62,509 44,524 60,023
Metals segment
Net sales................................... 86,608 82,747 87,141 71,531 73,085 56,006 46,063
Cost of products sold....................... 69,097 65,118 68,333 55,018 56,692 43,806 35,794
-------- -------- -------- -------- -------- -------- --------
Gross profit................................ 17,511 17,629 18,808 16,513 16,393 12,200 10,269
Selling, general and administrative......... 11,874 12,177 12,225 11,037 11,168 8,204 7,553
Depreciation and amortization............... 999 979 1,100 1,036 1,054 893 880
-------- -------- -------- -------- -------- -------- --------
Operating income, before corporate expense,
special charge and gain on sale of
businesses................................ 4,638 4,473 5,483 4,440 4,171 3,103 1,836
-------- -------- -------- -------- -------- -------- --------
Combined operating income, before corporate
expense, special charge and gain on sale of
businesses.................................. 18,733 31,978 45,220 63,062 66,680 47,627 61,859
Corporate expense............................. 2,522 4,371 3,944 4,490 4,273 2,837 3,719
Special charge................................ -- -- -- -- 734 734 --
Gain on sale of businesses.................... -- -- (2,250) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income.............................. 16,211 27,607 43,526 58,572 61,673 44,056 58,140
Interest expense and other.................... 7,318 6,591 3,963 5,144 9,521 6,826 15,666
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations, before
income taxes and extraordinary items........ 8,893 21,016 39,563 53,428 52,152 37,230 42,474
Income tax expense............................ 3,699 8,461 15,561 20,281 17,550 12,029 15,028
-------- -------- -------- -------- -------- -------- --------
Income from continuing operations, before
extraordinary items......................... 5,194 12,555 24,002 33,147 34,602 25,201 27,446
Extraordinary (loss) gain, net of income
taxes....................................... -- (1,478) 610 -- -- -- --
Income from discontinued operations........... 4,496 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.................................... $ 9,690 $ 11,077 $ 24,612 $ 33,147 $ 34,602 $ 25,201 $ 27,446
======== ======== ======== ======== ======== ======== ========
Preferred stock dividends and accretion....... (740) (460) -- -- -- -- --
Redemption of preferred stock................. -- (1,746) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income available to common stockholders....... $ 8,950 $ 8,871 $ 24,612 $ 33,147 $ 34,602 $ 25,201 $ 27,446
======== ======== ======== ======== ======== ======== ========
15
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------------------------------- ---------------------
1996 1997 1998 1999 2000 1999 2000
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PER SHARE DATA:
Income from continuing operations, before
extraordinary items:
Basic..................................... $ 0.76 $ 1.39 $ 2.29 $ 2.79 $ 2.96 $ 2.15 $ 2.32
Diluted................................... 0.68 1.27 2.14 2.62 2.79 2.03 2.21
Shares used in computing earnings per share:
Basic..................................... 5,850 7,447 10,485 11,896 11,689 11,697 11,806
Diluted................................... 6,514 8,146 11,231 12,646 12,397 12,403 12,427
AS OF
AS OF MARCH 31 DECEMBER 31,
--------------------------------------------------------- ---------------------
1996 1997 1998 1999 2000 1999 2000
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash.......................................... $ 539 $ 993 $ 4,642 $ 4,953 $ 6,279 $ 5,986 $ 6,339
Working capital............................... 60,379 56,288 92,171 93,457 124,287 116,996 152,919
Total assets.................................. 161,406 171,315 301,445 428,857 506,931 494,509 692,300
Long-term debt, including current portion..... 98,769 24,392 34,498 93,008 138,808 132,776 256,426
Redeemable preferred stock.................... 2,652 -- -- -- -- -- --
Total stockholders' equity.................... 15,065 91,413 182,879 214,777 244,370 235,150 271,911
The results for the fiscal year ended March 31, 1996 include the
acquisitions of Triumph Controls, Inc. and Air Lab, Inc. from the date of each
acquisition. The results for the fiscal year ended March 31, 1997 include the
acquisition of Advanced Materials Technologies, Inc. from the date of
acquisition. The results for the fiscal year ended March 31, 1998 include the
acquisitions of JDC Company, Hydro-Mill Co., Stolper-Fabralloy Company and
Frisby Aerospace, Inc. from the date of each acquisition, and the sales of Air
Lab, Inc. and Deluxe Specialties Mfg., Co. The results for the fiscal year ended
March 31, 1999 include the acquisitions of Nu-Tech Industries, Inc., DG
Industries, Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd., HTD
Aerospace, Inc. and Triumph Precision, Inc. from the date of each acquisition.
The results for the fiscal year ended March 31, 2000 and for the nine months
ended December 31, 1999 include the acquisitions of Ralee Engineering Company,
Construction Brevitees d'Alfortville, Lee Aerospace, Inc. and Triumph
Components-San Diego, Inc. from the date of each acquisition. The results for
the nine months ended December 31, 2000 include the acquisitions of ACR
Industries, Inc., Chem-Fab Corporation and Airborne Nacelle Services, Inc. from
the date of each acquisition.
Operating income, before corporate expense, special charge and gain on sale
of businesses is presented by segment to assist the reader in evaluating each of
the segment's results of operations before financing, corporate expenses,
special charge and gain on sale of businesses. Corporate expenses primarily
consist of compensation, rent and general costs related to the operation of our
corporate office and other general expenses including professional fees. Working
capital represents current assets less current liabilities.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THIS SECTION IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
OVERVIEW
The aviation segment designs, engineers, manufactures, repairs, overhauls
and distributes aircraft components for commercial airlines and air cargo
carriers, as well as OEMs, on a worldwide basis. The metals segment
manufactures, machines, processes and distributes metal products to customers in
the computer, construction, container, and office furniture industries,
primarily within North America.
Net sales consist of sales of aircraft components and metal products, as
well as revenues derived from repairing and overhauling aircraft components. Net
sales are recorded when services are performed or when products are shipped.
Operating costs consist primarily of costs of products sold, selling,
general and administrative expenses and depreciation and amortization. Selling,
general and administrative expenses consist primarily of compensation and
related benefits to certain administrative employees, marketing, communications
and professional fees.
We focus our acquisition activities on companies engaged in the aviation
products and services industry. The aviation segment has historically provided,
and we believe that it will continue to provide, higher operating margins than
the metals segment.
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 acquisitions of Construction Brevitees d'Alfortville, Lee Aerospace, Inc.
and Triumph Components-San Diego, Inc. (collectively, the "2000 Acquisitions")
and the acquisitions of Chem-Fab Corporation, ACR Industries, Inc. and Airborne
Nacelle Services, Inc. (collectively, 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
17
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 Acquisitions.
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.
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 our structural steel erection operation and import
pricing pressures and lower volume at our 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 2001 from $43.8 million for the first nine months of fiscal 2000. This
decrease was mainly due to the decrease in activity at our structural steel
erection operation and the lower volume at our 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.
18
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, we announced a
realignment of reporting responsibilities. As a result of the realignment, we
recorded a pre-tax charge of $0.7 million, primarily related to severance for
three employees, substantially all of which has been paid at December 31, 2000.
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 increased debt levels associated with the 2000 Acquisitions
and the 2001 Acquisitions, the cash portions of which were financed by
borrowings under our revolving credit facility, as well as a slightly higher
rate on our revolving 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.
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1999
AVIATION SEGMENT
NET SALES. Net sales for the aviation segment increased by $40.0 million,
or 12.2%, to $368.6 million for fiscal 2000 from $328.6 million for fiscal 1999.
This increase was primarily due to the inclusion of an aggregate of
$81.8 million and $27.2 million in net sales for Nu-Tech Industries, Inc., DG
Industries, Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd., HTD
Aerospace, Inc. and Triumph Precision, Inc. (collectively, the "1999
Acquisitions") and the 2000 Acquisitions in fiscal 2000 and fiscal 1999,
respectively.
Net sales for the other operating divisions and subsidiaries in the aviation
segment experienced a 4.8% decrease, totaling $14.6 million, from the prior
year. 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 the effects from Boeing working off excess inventory for
these programs, slightly offset by an increase in the production rate of the 737
New Generation and increases in sales related to the C-17 and E-2C military
aircraft programs.
COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation segment
increased by $24.3 million, or 11.0%, to $244.3 million for fiscal 2000 from
$220.0 million for fiscal 1999.
19
This increase was primarily due to the inclusion of $49.8 million and
$15.8 million in fiscal 2000 and fiscal 1999, respectively, of costs of products
sold associated with net sales generated by the 1999 Acquisitions and the 2000
Acquisitions and a $1.0 million charge for inventory due to discontinuance of
certain lines. Costs of products sold for the other operating divisions and
subsidiaries in the aviation segment decreased $10.7 million, or 5.3%, mainly
due to the decline in shipments for Boeing commercial airplane programs
discussed above.
GROSS PROFIT. Gross profit for the aviation segment increased by
$15.7 million, or 14.5%, to $124.3 million for fiscal 2000 from $108.6 million
for fiscal 1999. This increase was primarily due to the inclusion of
$32.0 million and $11.4 million in fiscal 2000 and 1999, respectively, of gross
profit on the net sales generated by the 1999 Acquisitions and the 2000
Acquisitions. The remaining net decrease of $4.8 million was due to the reasons
discussed above. As a percentage of net sales, gross profit for the aviation
segment was 33.7% and 33.0% for fiscal 2000 and fiscal 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the aviation segment increased by $6.5 million, or
17.8%, to $43.2 million for fiscal 2000 from $36.7 million for fiscal 1999,
primarily due to the 1999 Acquisitions and the 2000 Acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
aviation segment increased by $5.3 million, or 40.1%, to $18.6 million for
fiscal 2000 from $13.3 million for fiscal 1999, primarily due to the assets
acquired in connection with the 1999 Acquisitions and the 2000 Acquisitions.
OPERATING INCOME. Operating income for the aviation segment excluding its
portion of the special charge recorded in the third quarter, increased by
$3.9 million, or 6.6%, to $62.5 million for fiscal 2000 from $58.6 million for
fiscal 1999. This increase was due to the addition of net sales and profits
generated by the 1999 Acquisitions and the 2000 Acquisitions, offset by a
decrease in operating profit generated by the other divisions and subsidiaries
in the aviation segment mainly due to the decline in production rates in the
Boeing commercial airplane program discussed above and the effects of Boeing
working off excess inventory. As a percentage of net sales, operating income for
the aviation segment was 17.0% and 17.8% for fiscal 2000 and fiscal 1999,
respectively.
METALS SEGMENT
NET SALES. Net sales for the metals segment increased by $1.6 million, or
2.2%, to $73.1 million for fiscal 2000 from $71.5 million for fiscal 1999. This
increase was mainly due to an increase in activity at our structural steel
erection operation.
COSTS OF PRODUCTS SOLD. Costs of products sold for the metals segment
increased by $1.7 million, or 3.0%, to $56.7 million for fiscal 2000 from
$55.0 million for fiscal 1999. This increase was mainly due to the increase in
activity at our structural steel erection operation and the effect of a one-time
reduction in the prior year due to lower raw material prices.
GROSS PROFIT. Gross profit for the metals segment decreased by
$0.1 million, or 0.7%, to $16.4 million for fiscal 2000 from $16.5 million for
fiscal 1999, due to the reasons discussed above. As a percentage of net sales,
gross profit for the metals segment was 22.4% and 23.1% for fiscal 2000 and
fiscal 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the metals segment increased by $0.1 million, or
1.2%, to $11.2 million for fiscal 2000 from $11.0 million for fiscal 1999.
20
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals
segment increased by $0.1 million, or 1.7%, to $1.1 million for fiscal 2000 from
$1.0 million for fiscal 1999.
OPERATING INCOME. Operating income for the metals segment, excluding its
portion of the special charge recorded in the third quarter, decreased by
$0.3 million, or 6.1%, to $4.2 million, for fiscal 2000 from $4.4 million for
fiscal 1999, due to the reasons discussed above. As a percentage of net sales,
operating income for the metals segment was 5.7% and 6.2% for fiscal 2000 and
fiscal 1999, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses decreased by $0.2 million, or 4.8%,
to $4.3 million for fiscal 2000 from $4.5 million for fiscal 1999.
SPECIAL CHARGE. During fiscal 2000, we announced a realignment of reporting
responsibilities. As a result of the realignment, we 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
$4.4 million, or 85.1%, to $9.5 million for fiscal 2000 from $5.1 million for
fiscal 1999. This increase was primarily due to increased debt levels associated
with the 1999 Acquisitions and the 2000 Acquisitions, the cash portions of which
were financed by borrowings under our revolving credit facility, as well as a
slightly higher rate on and amortization of fees relating to our revolving
credit facility.
INCOME TAX EXPENSE. The effective tax rate was 33.7% for fiscal 2000 and
38.0% for fiscal 1999.
NET INCOME. Net income increased by $1.5 million, or 4.4%, to
$34.6 million for fiscal 2000 from $33.1 million for fiscal 1999. The increase
in fiscal 2000 net income was primarily attributable to the 1999 Acquisitions
and the 2000 Acquisitions and the change in the effective tax rate, partially
offset by the special charge and the reduced earnings of the remaining aviation
segment operating units due to the decline in shipments for Boeing commercial
airplane programs discussed above.
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1998
AVIATION SEGMENT
NET SALES. Net sales for the aviation segment, increased by $86.3 million,
or 35.6%, to $328.6 million for fiscal 1999 from $242.3 million for fiscal 1998.
This increase was primarily due to the inclusion of an aggregate of
$128.8 million and $44.4 million in net sales for JDC Company, Hydro-Mill Co.,
Stolper-Fabralloy Company and Frisby Aerospace, Inc. (collectively, the "1998
Acquisitions,") and the 1999 Acquisitions in fiscal 1999 and fiscal 1998,
respectively. The increase is partially offset by a reduction in sales due to
the sale of our Air Lab division ("Air Lab") in the second quarter of fiscal
1998. Air Lab had sales of $2.1 million for the year ended March 31, 1998.
Increased demand for overhaul and repair services from the commercial
airlines and cargo carriers, as well as increased orders of aircraft components
from OEMs, accounted for the increase in net sales in the aviation segment.
COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation segment
increased by $55.0 million, or 33.4%, to $220.0 million for fiscal 1999 from
$165.0 million for fiscal 1998.
21
This increase was primarily due to the inclusion of $85.6 million and
$31.2 million in fiscal 1999 and fiscal 1998, respectively, of costs of products
sold associated with net sales generated by the 1998 Acquisitions and the 1999
Acquisitions. The remaining increase is associated with the increase in net
sales of the remaining operating divisions and subsidiaries in the aviation
segment, offset by a reduction of $1.5 million due to the sale of Air Lab.
GROSS PROFIT. Gross profit for the aviation segment increased by
$31.2 million, or 40.4%, to $108.6 million for fiscal 1999 from $77.3 million
for fiscal 1998. This increase was primarily due to the inclusion of
$43.3 million and $13.2 million in fiscal 1999 and 1998, respectively, of gross
profit on the net sales generated by the 1998 Acquisitions and the 1999
Acquisitions. The remaining increase was generated on the increased sales volume
of the other operating divisions and subsidiaries in the aviation segment. As a
percentage of net sales, gross profit for the aviation segment was 33.0% and
31.9% for fiscal 1999 and fiscal 1998, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the aviation segment increased by $7.0 million, or
23.8%, to $36.7 million for fiscal 1999 from $29.6 million for fiscal 1998,
primarily due to the 1998 Acquisitions and the 1999 Acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
aviation segment increased by $5.3 million, or 66.4%, to $13.3 million for
fiscal 1999 from $8.0 million for fiscal 1998, primarily due to the assets
acquired in connection with the 1998 Acquisitions and the 1999 Acquisitions.
OPERATING INCOME. Operating income for the aviation segment increased by
$18.9 million, or 47.5%, to $58.6 million for fiscal 1999 from $39.7 million,
excluding the $1.3 million gain on the sale of Air Lab, for fiscal 1998. This
increase was assisted by the growth in aircraft production and the increased
outsourcing of repair and overhaul services by commercial aircraft operators.
This increase was also due to the addition of net sales and profits generated by
the 1998 Acquisitions and the 1999 Acquisitions, as well as the incremental
operating income resulting from increased sales volume. As a percentage of net
sales, operating income for the aviation segment was 17.8% and 16.4% for fiscal
1999 and fiscal 1998, respectively.
METALS SEGMENT
NET SALES. Net sales for the metals segment decreased by $15.6 million, or
17.9%, to $71.5 million for fiscal year 1999 from $87.1 million for fiscal 1998.
This decrease was primarily due to the sale of the assets of our Deluxe
Specialties Manufacturing division ("Deluxe") at the end of fiscal 1998. Deluxe
had sales of $10.8 million for fiscal 1998.
COSTS OF PRODUCTS SOLD. Costs of products sold for the metals segment
decreased by $13.3 million, or 19.5%, to $55.0 million for fiscal 1999 from
$68.3 million for fiscal 1998. This decrease was primarily due to lower raw
material prices and the sale of Deluxe. Deluxe had $8.2 million of cost of
products sold in fiscal 1998.
GROSS PROFIT. Gross profit for the metals segment decreased by
$2.3 million, or 12.2%, to $16.5 million for fiscal 1999 from $18.8 million for
fiscal 1998, due to the reasons discussed above. As a percentage of net sales,
gross profit for the metals segment was 23.1% and 21.6% for fiscal 1999 and
fiscal 1998, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the metals segment decreased by $1.2 million, or
9.7%, to $11.0 million for fiscal 1999 from $12.2 million for fiscal 1998,
mainly due to the sale of Deluxe.
22
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals
segment decreased by $0.1 million, or 5.8%, to $1.0 million for fiscal 1999 from
$1.1 million for fiscal 1998.
OPERATING INCOME. Operating income for the metals segment decreased by
$1.0 million, or 19.0%, to $4.4 million, for fiscal 1999 from $5.5 million for
fiscal 1998, excluding the $1.0 million gain on the sale of Deluxe, due to the
reasons discussed above. As a percentage of net sales, operating income for the
metals segment was 6.2% and 6.3% for fiscal 1999 and fiscal 1998, respectively.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.5 million, or 13.8%,
to $4.5 million for fiscal 1999 from $3.9 million for fiscal 1998.
INTEREST EXPENSE AND OTHER. Interest expense and other increased by
$1.2 million, or 29.8%, to $5.1 million for fiscal 1999 from $4.0 million for
fiscal 1998. This increase was primarily due to increased debt levels associated
with the 1998 Acquisitions and the 1999 Acquisitions, the cash portions of which
were financed by borrowings under our revolving credit facility, partially
offset by the application of the proceeds from the public offering of our common
stock and the proceeds from the sales of Air Lab and Deluxe.
INCOME TAX EXPENSE. The effective tax rate was 38.0% for fiscal 1999 and
39.3% for fiscal 1998.
NET INCOME. Net income increased by $8.5 million, or 34.7%, to
$33.1 million for fiscal 1999 from $24.6 million for fiscal 1998. Excluding an
extraordinary gain of $0.6 million (net of tax of $0.4 million) recognized in
the second quarter of 1998 that relates to a discount realized on the prepayment
of a subordinated note payable to IKON Office Solutions, Inc. (formerly Alco
Standard Corporation) and the gains on the sales of Air Lab assets (after-tax
gain of $0.8 million) and the Deluxe assets (after-tax gain of $0.6 million),
both in the prior year, net income increased by $10.5 million or 46.4%. The
increase in fiscal 1999 net income was primarily attributable to the 1998
Acquisitions and the 1999 Acquisitions and the increase in income for the
aviation segment as a whole.
LIQUIDITY AND CAPITAL RESOURCES
Our working capital needs are generally funded through cash flows from
operations and borrowings under our credit arrangements. We generated
approximately $16.3 million of cash flows from operating activities for the nine
months ended December 31, 2000. We 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, we amended our revolving credit facility with our
lenders to increase the commitments to $350.0 million from $250.0 million and to
amend certain terms and covenants. On December 31, 2000, approximately
$224.9 million was outstanding under our revolving 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. As of December 31, 2000, approximately
$123.6 million was available to be borrowed under our revolving credit facility.
Amounts repaid under our revolving credit facility may be reborrowed, subject to
the satisfaction of customary borrowing conditions.
23
Our primary exposure to market risk consists of changes in interest rates on
borrowings. An increase in interest rates would adversely affect our operating
results and the cash flow available after debt service to fund operation and
expansion. We have entered into a two-year interest rate swap to exchange
floating rate for fixed rate interest payments to hedge against interest rate
changes on $100.0 million of our outstanding balance under our revolving credit
facility. We provide protection to meet actual exposure and do not speculate in
derivatives. The net effect on our earnings of the spread between the floating
rate (30-day LIBOR) and the fixed rate (6.56%) for the quarter ended
December 31, 2000 was not material.
In July 1997, we entered into a $10.0 million discretionary line of credit.
The line of credit bears interest at the current rate offered by the lender.
Borrowings under the line of credit are payable on the last day of the
applicable interest period or on demand. The line of credit has no established
expiration date. No amount was outstanding on the line of credit as of
December 31, 2000.
On May 5, 1997, we entered into a loan agreement with the City of
Shelbyville, Indiana related to the City of Shelbyville, Indiana Adjustable Rate
Economic Development Revenue Bonds, Series 1997. The proceeds of these bonds of
$5.0 million are being used to fund the expansion of our K-T Corporation
facility. These bonds are due to mature on May 1, 2012 and are secured by an
irrevocable letter of credit issued by PNC Bank, N.A. These bonds bear interest
at a variable weekly rate. At December 31, 2000, the interest rate of these
bonds was 5.1% per annum.
Effective April 1, 2000, we acquired all of the outstanding stock of ACR
Industries, Inc., Chem-Fab Corporation and Airborne Nacelle Services, Inc. In
May 2000, we 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 million was funded by borrowings under
our revolving credit facility. In connection with these acquisitions, we assumed
$32.6 million of seller financing, which accrued interest at 7% per annum, and
$3.6 million of other debt. In July 2000, we 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 our revolving credit
facility.
Effective September 30, 2000, we acquired certain product rights and assets
from Honeywell International, Inc. We paid $32.0 million at closing and assumed
$27.0 million of seller financing which was included in accounts payable at
December 31, 2000.
In fiscal 2000, we acquired all of the outstanding stock of Ralee
Engineering Company, Construction Brevitees d'Alfortville, or CBA, and Lee
Aerospace, Inc. and acquired substantially all of the assets of KT Aerofab, now
operated by us as Triumph Components-San Diego, Inc. The combined cash portion
of the purchase prices paid at closing, net of cash acquired, for these
companies of approximately $26.9 million was funded by borrowings under our
revolving credit facility. In connection with the Ralee acquisition, we assumed
$8.7 million of capital leases for equipment with interest rates ranging from
7.1% to 10.2% per annum, maturing between September 2003 and August 2005. Also,
in connection with the CBA and Lee acquisitions, we assumed $6.0 million of
seller financing, $4.7 million for which accrues interest at 7% per annum and
$1.4 million of which accrues interest at the one-year Euribor plus 1%, which
totaled 5.0% per annum at March 31, 2000, $0.8 million of an industrial revenue
bond which accrues interest, at 7.15% per annum through January 2005 and at the
one-year Treasury plus 2.75% thereafter, and $0.3 million of other debt.
In fiscal 1999, we acquired all of the outstanding stock of Nu-Tech, DG and
DV and substantially all of the assets of Triumph Air Repair (Europe), HTD and
Triumph Precision. The
24
combined cash purchase price for these acquisitions was $69.0 million, which was
funded by borrowings under our revolving credit facility.
In December 1998, we announced that our board of directors authorized the
repurchase of up to 500,000 shares of our common stock, subject to market
conditions. Repurchases may be made from time to time in open market
transactions, block purchases, privately negotiated transactions or otherwise at
prevailing prices. No time limit has been set for completion of the program.
During fiscal 1999, we purchased 52,700 shares of our common stock, for total
cash consideration of $1.3 million. During fiscal 2000, we purchased 191,500
shares of our common stock for total cash consideration of $4.6 million. No
purchases have been made to date during fiscal 2001. The purchases were funded
by borrowings under our revolving credit facility.
Capital expenditures were approximately $17.9 million and $14.7 million for
the nine months ended December 31, 2000 and the year ended March 31, 2000,
respectively, primarily for manufacturing machinery and equipment for the
aviation segment. We funded these expenditures through borrowings under our
revolving credit facility. We expect capital expenditures to be approximately
$26.0 million for our fiscal year ending March 31, 2001. The expenditures are
expected to be used primarily to expand capacity at several facilities.
Our trade accounts receivable are exposed to credit risk; however, the risk
is mitigated by the diversity of our customer base and the customer base's wide
geographical area. Trade accounts receivable from Honeywell (formerly
AlliedSignal) and Boeing Co. represented approximately 7% and 10%, respectively,
of total accounts receivable at December 31, 2000. We had no other significant
concentrations of credit risk. For the nine months ended December 31, 2000,
Honeywell and Boeing represented approximately 8% and 13%, respectively, of net
sales. For fiscal 2000, Honeywell and Boeing represented approximately 9% and
14%, respectively, of net sales. Boeing's percentage reflects Boeing's
acquisitions of McDonnell Douglas and Rocketdyne. Assuming that the pending
acquisition of Honeywell by General Electric Corporation occurred effective
April 1, 2000, Honeywell and General Electric, on a combined basis, would have
accounted for approximately 12% of net sales for the nine months ended
December 31, 2000. No other single customer accounts for more than 10% of our
net sales; however, the loss of any significant customer, including Honeywell or
Boeing, could have a material effect on us and our operating subsidiaries.
We believe that cash generated by operations and borrowings under our
revolving credit facility will be sufficient to meet anticipated cash
requirements for our current operations. However, we have a stated policy to
grow through acquisition and are continuously evaluating various acquisition
opportunities. As a result, we currently are pursuing the potential purchase of
a number of candidates. In the event that more than one of these transactions
were successfully consummated, the availability under our revolving 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 us on
terms favorable to us, if at all.
25
BUSINESS
GENERAL OVERVIEW
We design, engineer, manufacture, repair, overhaul and distribute aircraft
components, such as mechanical and electromechanical control systems, aircraft
and engine accessories, structural components, auxiliary power units, commonly
referred to as APUs, avionics and aircraft instruments. We serve a broad
spectrum of the aerospace industry, including commercial airlines and air cargo
carriers, as well as original equipment manufacturers, commonly referred to as
OEMs, of various commercial and military aircraft platforms, and aircraft
components.
PRODUCTS AND SERVICES
Our aviation segment offers a variety of products and services to the
aerospace industry which are offered through four groups within the aviation
segment as follows:
Our STRUCTURAL COMPONENTS GROUP focuses primarily on aerospace OEMs and the
top-tier manufacturers who supply them. This group performs complex
manufacturing processes, machining capabilities and structural component
forming, for a full range of structural components and complete assemblies and
subassemblies such as:
- Wing spars and stringers
- Stretch-formed leading edges
- Floor beams
- Landing gear components and assemblies
Our OPERATIONAL COMPONENTS GROUP services a diverse group of customers which
includes airlines, air cargo carriers, aerospace and power generation OEMs and
the top-tier manufacturers who supply them. The operational components group
performs advanced manufacturing functions and fabrication processes, coating and
processing functions to deliver precision detail parts and complete component
assemblies primarily for turbine engines including:
- Stators
- Vanes
- Combustors
- Industrial gas turbine transition ducts
Our CONTROL SYSTEMS GROUP, like the operational components group, services
the full spectrum of aerospace customers, which include airlines, air cargo
carriers, aerospace OEMs and the top-tier manufacturers who supply them. Our
control systems group focuses on expanding our capabilities to design, engineer
and build complete mechanical, electromechanical and hydraulic systems, while
continuing to expand the broad scope of detail parts that we supply to the
aerospace aftermarket. Many of our designs are proprietary to us and customers
must return to us for repair and overhaul of these systems. These systems that
we design, engineer, build and repair include:
- Main engine gear box assemblies
- Cockpit control levers
- Control system valve bodies
- Landing gear actuation systems
26
Our AFTERMARKET SERVICES GROUP consists of a COMPONENT REPAIR AND OVERHAUL
subgroup and an INSTRUMENT REPAIR AND OVERHAUL subgroup. This group services
primarily airline customers. This group operates the world's largest independent
APU repair and overhaul business and will pursue being the vendor of choice for
instrument and component overhaul and repair to our customers as they continue
to consolidate vendors. We will also continue to develop proprietary repairs for
the components we repair and overhaul. Our aftermarket services group repairs
and overhauls various instruments and components including:
- Cockpit instrumentation
- Remote sensors
- APUs
- Constant speed drives
We expect to add an INDUSTRIAL GAS TURBINE GROUP in the next fiscal year.
This group will repair and overhaul industrial gas turbine components, primarily
for power generation equipment operators. The products that we plan to repair
and overhaul include:
- Combustors
- Transitions
- Blades and vanes
- High temperature coatings
INDUSTRY OVERVIEW AND TRENDS
Our aviation segment operates in both the OEM and maintenance, repair and
overhaul markets.
According to the 2000 U.S. Industry & Trade Outlook, the $136 billion OEM
market consisted of aircraft shipments (43%), aircraft engine and engine parts
(19%), aircraft parts and equipment (18%), guided missiles and space vehicles
(16%), and space propulsion units, parts and space vehicle equipment (4%). We
manufacture products which address each segment of the OEM market.
Today airlines outsource an increasing portion of all maintenance, repair
and overhaul work. Boeing's 2000 Current Market Outlook states that this market
totaled $38 billion in calendar year 1999. We believe that as airlines continue
to focus on total life cycle costs, they will increase the level of this
outsourcing. We believe that we are well-positioned in the competition with
other third party service providers to benefit from this outsourcing.
The aircraft component production and component repair industries are highly
fragmented. The aerospace industry has been consolidating in recent years and it
is expected that this consolidation will continue for the foreseeable future.
We believe that a number of significant trends currently affecting our
industry will increase the demand for the design, engineering, manufacture,
repair and overhaul of aircraft components including:
INCREASED AIR TRANSIT AND AIRCRAFT PRODUCTION. According to Boeing's 2000
Current Market Outlook, the worldwide fleet of commercial airplanes is expected
to double to approximately 31,755 airplanes by 2019 and the fleet of small and
intermediate regional jets is projected to increase from 906 in 1999 to 4,869
jets in 2019. According to a recent Wall Street Journal article, in terms of
actual passenger enplanements, the total is expected to rise 57%, to more than
one billion in 2011 from 665 million estimated for last year. United States
cargo business over the same period is projected to more than double to 51
billion revenue-ton miles in 2011
27
from 25 billion estimated in 1999. We expect that the continued growth in air
transit and aircraft production will increase the demand for aircraft component
purchases and repairs.
AGING OF THE EXISTING AIRCRAFT FLEET. The number of aircraft in service for
more than ten years will continue to increase, and these older aircraft are a
significant market for independent providers like us of manufacture, repair and
overhaul services. As of December 31, 1999, the average age of the 11,376
aircraft in International Air Transport Association, commonly referred to as
IATA, members' operational fleet was eleven years.
INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators
have come under increasing pressure to reduce both operating and capital costs
associated with providing aviation services. Aircraft components manufactured
and sold by third party suppliers and aircraft components that have been
repaired and overhauled are generally less expensive than new aircraft
components manufactured and sold by OEMs. In this regard, we supply many OEMs
with aircraft components and subassemblies, in addition to performing repair and
overhaul services. As consolidation in the aviation services industry continues,
airlines, air cargo carriers, aerospace OEMs and the top-tier manufacturers who
supply them are requiring vendors to offer a broader range of services,
including, in some instances, inventory maintenance and management services. We
believe that our broad array of aviation products and services and our
reputation for quality and timely and reliable delivery will position us to
continue to capitalize on the outsourcing trend. We anticipate that increased
reliance on outsourcing will continue to cause consolidation in the industry
since only those suppliers with extensive capabilities and adequate capital will
secure agreements with OEMs and aircraft operators.
REDUCED NUMBER OF APPROVED SUPPLIERS. In order to reduce purchasing costs,
streamline purchasing decisions and have greater control over quality,
purchasing departments of OEMs and aircraft operators have been looking for
suppliers who can provide the scale, expertise and capacity to meet their needs.
We have secured a position on lists among a number of OEMs and airlines. We
believe that this trend to reduce suppliers will continue in the future and
that, due to our established market presence and reputation for quality, we will
continue to be selected as an approved supplier.
INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations
promulgated by the FAA and similar agencies in other countries, including the
Joint Aviation Authority, which regulates this industry in the European Union,
as well as guidelines established by OEMs and aircraft operators, when an
aircraft component fails to perform within prescribed limits or after logging a
prescribed number of flight hours, the aircraft component must be brought to a
repair facility certified by the FAA or similar agency for various types of
designated service or replacement. The FAA has changed the nature of the
licenses that it generally grants, from broad licenses for aircraft accessories
or instruments within broad classifications to more limited licenses covering
specific parts within more narrow classifications. We hold many perpetual broad
licenses that will continue unless abandoned, suspended or revoked. In addition,
aircraft components require regular maintenance and inspection and replacement
of "life-limited" components. The trend toward more stringent maintenance
requirements and more frequent maintenance and overhaul has increased the size
of the market for the repair of these components, because using new components
is not always cost effective. We believe that, because of our broad licenses and
long-standing emphasis on quality control, we benefit from these higher
maintenance and safety standards.
INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding
the use of unapproved aircraft spare parts, regulatory authorities have
increased the level of documentation that must be maintained on spare parts.
This requirement has been extended
28
by OEMs and aircraft operators to the vendors of spare parts, which has made
entry into and survival in the aerospace parts distribution business
increasingly difficult and expensive.
COMPETITIVE ADVANTAGES
We believe that we are well positioned to take advantage of trends affecting
the market for the design, engineering, manufacture, repair and overhaul of
aircraft components due to:
DIVERSE ARRAY OF PRODUCTS AND SERVICES. We offer the aerospace industry a
consolidated point of purchase for a diverse array of aviation products and
services across a wide range of aerospace platforms. We design, engineer and
manufacture aircraft components to fulfill the particular needs and requirements
of our customers. In some cases, we own the proprietary rights to these designs
and, accordingly, the customer generally relies on us to provide service on
these aircraft components at every stage of their useful lives, including the
repair and overhaul or replacement of these components. In addition, we
manufacture aviation components according to our customers' specifications. We
also perform repair and overhaul services for customers on various aviation
components manufactured by third parties such as Honeywell International, Inc.
In addition, we offer to maintain and manage inventories of aircraft components
and other products for some of our customers. In some instances, our customers
require us to maintain and manage their inventories.
PROPRIETARY RIGHTS RELATING TO COMPONENT DESIGNS, MANUFACTURING PROCESSES
AND REPAIR AND OVERHAUL PROCEDURES. Some of our customers rely on us
exclusively for certain products because their specifications require our unique
design, manufacture and/or overhaul capabilities.
BROAD FAA CERTIFICATIONS AND LICENSES. We operate 20 FAA-certified repair
stations and have been granted licenses from the FAA and foreign regulatory
counterparts, including the Joint Aviation Authority, which regulates this
industry in the European Union, to perform repair and overhaul services on broad
classifications of aircraft instruments and accessories. Without these broad
certifications and licenses, which are often expensive and time consuming to
obtain and involve extensive audit procedures, other companies are precluded
from offering these products and services. In addition, we hold two exclusive
licenses issued by the FAA which permit us to design, engineer, repair, test and
release into service without further FAA approval particular products to our own
specifications for particular aircraft components and therefore to compete
directly with OEMs with respect to these components. These exclusive licenses,
known as SFAR 36 certifications, enable us to offer, on a proprietary basis,
some parts relating to various aircraft accessories such as APUs and constant
speed drives to our customers at a lower cost than other companies that must
purchase replacement parts from third parties. We employ designated engineering
representatives who are certified to act on behalf of the FAA to develop,
substantiate and approve repairs on components.
EMPHASIS ON QUALITY CONTROL. We incur significant expenses to maintain the
most stringent quality control of our products and services. In addition to
domestic and foreign governmental regulations, OEMs, commercial airlines and
other customers require that we satisfy requirements relating to the quality of
our products and services. We have continually met or exceeded these
requirements, and have successfully completed many audits conducted on a regular
basis by the Coordinated Agency for Supplier Evaluation, a consortium of United
States airlines, commonly referred to as C.A.S.E. As a vendor listed with
C.A.S.E., we are reviewed on a regular basis for quality and efficiency. We also
perform testing and certification procedures on all of the products that we
design, engineer, manufacture, repair and overhaul, and maintain detailed
records to ensure traceability of the production of and service on each aircraft
component. We believe that our emphasis on quality control has enabled us to
obtain many of the FAA licenses that we hold, including our
29
exclusive SFAR 36 certifications. The expense required to institute and maintain
our quality control procedures makes it difficult for new competitors to enter
the market.
BROAD CUSTOMER BASE. Due to our diverse array of products and services and
our emphasis on quality control and timely delivery, our customers include
substantially all of the world's major commercial airlines and the most widely
recognized air cargo carriers and OEMs. Our customer base includes companies
that produce or operate the full range of aerospace platforms, including:
- Large commercial jets--Boeing 737, 747, 757, 767, 777 and Airbus 319, 320,
321, 340;
- Regional commercial jets--Bombardier CRJ100/200, CRJ700 and Embraer ERJ
135/145, ERJ 170/190;
- Military aircraft--Boeing C-17, F/A-18 and Lockheed Martin F-16 and
Northrop Grumman E-2C;
- Business jets--Gulfstream GIV, GV and Bombardier Challenger, Learjet
family and Cessna Citation family; and
- Space vehicles--Boeing Delta Launch Vehicle and International Space
Station.
We expect that our customer base will continue to strengthen and broaden
with increased cross-selling efforts of our related products and services.
Boeing and Honeywell each accounted for more than 10% of our aviation segment
net sales for the twelve months ended March 31, 2000. Although the loss of
Boeing or Honeywell could have a material adverse effect on us, we provide
various products and services to numerous Boeing and Honeywell facilities and,
accordingly, we believe that the loss of all Boeing or Honeywell business is
unlikely.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
our aviation segment have substantial experience in the aerospace industry.
These entities are characterized by experienced management and highly skilled
employees. Because of our established industry presence, we enjoy strong
customer relations, name recognition and repeat business.
COMPANY STRATEGY
Key elements of our growth strategy include:
EXPAND PRODUCTS AND SERVICES. We intend to continue to introduce new
products and services to take advantage of the growing industries in which we
operate and to respond to our customers' increasing demand for products and
services. For example, our expertise in the manufacture and repair of complex
components used in turbine engines that power aircraft has provided us with an
exciting new opportunity to further penetrate the rapidly-growing market for
industrial gas turbine components used for power generation. Our goal is to
provide a fully-integrated suite of manufacturing and repair capabilities
similar to our current aerospace offering. We intend to further expand our
position as a consolidated point of purchase to the aerospace industry by
capitalizing on the ongoing trend toward outsourcing and the reduction by
aircraft operators and OEMs in the number of approved suppliers and vendors.
MAKE ACQUISITIONS. We expect to continue our growth through acquisitions of
other companies, assets or product lines that add to or complement our existing
aviation products and services. We successfully completed 17 acquisitions since
our IPO in 1996. Because of the fragmented nature of much of the market for
aircraft products and services, we believe that additional acquisition
opportunities exist in the aerospace industry. We continually evaluate
acquisition opportunities that may include small, focused acquisitions of
specific product lines
30
or capabilities as well as larger, strategic opportunities. We may not
successfully complete any of these acquisitions and if so acquired, these
entities may not be properly integrated into us.
EXPAND OPERATING CAPACITY. We plan to continue our strategy of increasing
capital expenditures, including expenditures for additional factories, equipment
and skilled labor, to increase our operating capacity to meet our expected
internal growth and to meet demand in the aerospace industry and power
generation market. We intend to continue to invest in state-of-the-art plant and
equipment to increase our operating efficiencies and improve operating margins.
For example, we are nearing completion of a new casting facility that will
expand our manufacturing capabilities as well as our capacity to produce turbine
engine parts.
INCREASE INTERNATIONAL MARKETING. We intend to continue to take advantage
of the expanding international market for aviation products and services as
worldwide air travel increases and foreign nations purchase used aircraft that
require more frequent repair and maintenance. We have facilities in the United
Kingdom, France and Spain. We currently supply products and services to
substantially all major commercial passenger and air cargo airlines in the world
and retain independent sales representatives in a number of foreign countries.
In addition, we participate each year in several international trade shows,
including the Paris Air Show and the Singapore Air Show. We intend to build on
our existing international presence through continued market penetration and, as
appropriate opportunities arise, foreign acquisitions.
CAPITALIZE ON GROUP AFFILIATIONS. Utilizing the group affiliation of our
operating divisions and subsidiaries, we plan to increase cross-selling of
complementary capabilities to our customers. Our operating divisions and
subsidiaries will continue to share independent sales representatives and
jointly bid on projects where appropriate, while still maintaining their
individual identities.
PROPRIETARY RIGHTS
We benefit from our proprietary rights relating to component designs,
engineering, manufacturing processes and repair and overhaul procedures. In
addition, we have proprietary rights to some of our manufacturing processes. For
some products, our unique manufacturing capabilities are required by the
customer's specifications or designs, thereby necessitating reliance on us for
production of this designed product. We also hold two SFAR 36 certifications
that permit us to develop proprietary repair procedures to be used in some
repair and overhaul processes.
RAW MATERIALS AND REPLACEMENT PARTS
We purchase raw materials, primarily consisting of steel and aluminum coils,
sheets and shapes, from various vendors. We also purchase replacement parts
which are utilized in our various repair and overhaul operations. Although we
believe that these raw materials and replacement parts are generally available
at competitive prices from numerous sources, at times, castings and extrusions
are in short supply and difficult to purchase in sufficient amounts to meet our
customers' demands.
31
OPERATING DIVISIONS AND SUBSIDIARIES
We operate through several operating divisions and subsidiaries which are
divided into two segments: the aviation segment and the metals segment. The
following chart describes the operations, customer base and other information
with respect to our operating divisions and subsidiaries at December 31, 2000:
OPERATING
DIVISION/SUBSIDIARY
(YEAR ESTABLISHED) (YEAR NUMBER OF
ACQUIRED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------ ----------------- -------------------------- -------------------------- -----------
AVIATION SEGMENT
A. Biederman(1) Glendale, CA Sells and services Commercial airlines, U.S. 74
(1933) (1993) aircraft and industrial military and cargo
instruments. carriers.
ACR Industries, Inc. (1) Macomb, MI Manufacturer of complex Military and commercial 163
(1977) (2000) geared assemblies, gears OEMs, U.S. government and
and other components prime contractors.
servicing the aerospace
industry.
Advanced Materials Chandler, AZ Repairs and manufactures Aviation OEMs and aircraft 333
Technologies, Inc.(1) Tempe, AZ components for APUs and operators.
(1987) (1996) gas turbine engines.
Aerospace Technologies, Fort Worth, TX Manufactures metallic/ Commercial airlines, U.S. 87
Inc.(1)(1969) (1993) composite bonded honeycomb military and component
assemblies and repairs supplier industry.
fuselage, wing, flight
control surface parts and
other flight critical
components.
Airborne Nacelle Hot Springs, AK Repair and overhaul of Commercial airlines. 35
Services, Inc.(1) engine nacelles and thrust
(1995) (2000) reverses.
Construction Brevetees Alfortville, Manufacturer of mechanical Aerospace, ground 57
d'Alfortville France ball bearing control transportation and marine
(1951) (1999) Barcelona, Spain assemblies for the industries.
aerospace, ground
transportation and marine
industries.
Chem-Fab Corporation Hot Springs, AK Chem-milling, hydroforming Aerospace industry. 478
(1968) (2000) and processing of sheet
metal and other structural
parts and assemblies for
the aerospace industry.
DG Industries, Inc. Phoenix, AZ Specializes in precision Military and commercial 26
(1978) (1998) machining of aerospace industry.
components.
DV Industries, Inc. Lynwood, CA Provides metal finishing, Aerospace, military and 118
(1978) (1998) processing and other commercial industries.
services.
Frisby Aerospace, Clemmons, NC Designs, manufactures, Military and commercial 145
Inc.(1) Freeport, NY assembles and tests OEMs, U.S. government,
(1940) (1998) precision aircraft prime contractors and
components. major airlines.
Hydro-Mill Co.(1) Chatsworth, CA Manufactures, repairs and Aviation OEMs, commercial 166
(1937) (1997) overhauls precision airlines and aircargo
machine parts and carriers.
assemblies.
HTD Aerospace, Inc. Bloomfield, CT Manufactures precision Commercial industry and 34
(1935) (1999) components and assemblies. military.
32
OPERATING
DIVISION/SUBSIDIARY
(YEAR ESTABLISHED) (YEAR NUMBER OF
ACQUIRED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------ ----------------- -------------------------- -------------------------- -----------
JDC Company(1) Ft. Lauderdale, Specializes in the repair, Aircraft manufacturers 69
(1985) (1997) FL Austin, TX overhaul and exchange of ranging from general
electromechanical and aviation to wide-body air
pneumatic aircraft transport.
instruments.
K-T Corporation Shelbyville, IN Performs stretch forming, Aviation OEMs, U.S. 151
(1963) (1993) bending, die forming, military and aerospace,
machining, welding, mass transportation,
assembly and other energy and heavy trucking
fabrication on aircraft industries.
wings, fuselages and
skins.
L.A. Gauge Sun Valley, CA Machines, bonds and Defense, aerospace, 36
(1954) (1993) fabricates ultra-precision medical, automotive and
parts. computer industries.
Lee Aerospace, Inc.(1) Wichita, KS Manufactures unheated General aviation and 67
(1989) (1999) windshields, flight deck corporate jet market.
and cabin windows for the
general aviation and
corporate jet market.
Northwest Industries Albany, OR Machines and fabricates Aerospace, nuclear, 32
(1960) (1993) refractory, reactive, heat medical, electronic and
and corrosion-resistant chemical industries.
precision products.
Nu-Tech Industries, Inc. Grandview, MO Produces complex Commercial and military 121
(1972) (1998) structural components. aircraft market.
Ralee Engineering Corp. City of Industry, Manufactures long Airline industry. 136
(1962) (1999) CA structural components such
as stringers, cords and
flooring.
Special Processes of Phoenix, AZ Produces and applies Aviation OEMs and aircraft 37
Arizona, Inc.(1) plasma coating. operators.
(1987) (1996)
Stolper-Fabralloy Phoenix, AZ Fabricates precision sheet Commercial, military, 265
Company(1) Brookfield, WI metal components from high aerospace OEMs and
(1908) (1997) temperature alloys and industrial gas turbine
provides repair and OEMS.
overhaul services.
Triumph Accessories Wellington, KS Repairs and overhauls U.S. government, 69
Services(1)(2) aircraft and engine commercial airlines and
(1965) (1993) accessories, manufactures general aviation aircraft
pneumatic and electrically operators.
actuated valves for
aircraft.
Triumph Air Repair(1)(2) Phoenix, AZ Repairs and overhauls APUs Worldwide commercial 150
(1979) (1993) and supplemental airlines.
equipment.
Triumph Components- El Cajon, CA Developer and manufacturer Commercial, military and 98
San Diego, Inc.(1) of high- temperature metal aerospace OEMs.
(1948) (1999) alloy parts.
Triumph Air Repair Hampshire, Repairs and overhauls APUs Commercial transport 37
(Europe) Limited(1) England and constant speed drives carriers and the commuter
(1989) (1998) and integrated drive aerospace industry.
generators.
Triumph Controls, North Wales, PA Designs and manufactures Aviation OEMs, shipyards, 280
Inc.(1) mechanical and repair and overhaul
(1943) (1996) electromechanical control facilities, airlines and
systems. U.S. and NATO military
forces.
33
OPERATING
DIVISION/SUBSIDIARY
(YEAR ESTABLISHED) (YEAR NUMBER OF
ACQUIRED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------ ----------------- -------------------------- -------------------------- -----------
Triumph Precision, Inc. Phoenix, AZ Manufactures and machines Aerospace industry. 74
(1964) (1999) precision tubing and
provides heat treating and
brazing services.
METALS SEGMENT
Great Western Steel Co. Chicago, IL Produces steel products, Manufacturers, primarily 37
(1918) (1993) specializing in flat in the home and office
rolled products. products industries.
Kilroy Structural Steel Cleveland, OH Erects structural steel General contractors, 10
Co. (1918) (1993) frameworks. engineers and architects
of commercial buildings
and bridges.
Triumph Industries Co. Bridgeview, IL Produces and distributes Computer and electronic 44
(1960) (1993) specialty industries.
electrogalvanized
products.
- ------------
(1) FAA-certified repair stations.
(2) SFAR 36 certification.
METALS PROCESSING AND DISTRIBUTION
Our metals segment has substantial experience in the metals industry. The
businesses in this segment include a leading producer of electrogalvanized steel
products and a steel service center specializing in flat rolled steel products.
These entities supply products to several hundred manufacturers and other
customers in the computer and electronics industries on a regional and national
basis. In addition, we operate a business engaged in the erection of structural
frameworks for buildings in the midwestern United States.
Our metals segment processes, converts and distributes steel and steel
products including electrogalvanized steel products which are stamped, formed,
welded and painted, and coated steel for the electronic and computer industries.
Our steel service center specializes in flat rolled products and their
processing, including hot or cold rolled sheet and coil and galvanized sheet and
coil used primarily by the home and office products and appliance industry.
We also erect structural framework, including steel members and allied
materials, for buildings with a specialty in commercial and industrial
buildings. These structural erection services are provided on a
project-by-project basis primarily in the midwestern United States. These
projects are generally awarded on a fixed fee, competitive bid basis.
SALES AND MARKETING
Each of our operating divisions and subsidiaries independently conducts
sales and marketing efforts directed at their respective customers and
industries and, where appropriate, collaborates with our other operating
divisions and subsidiaries for cross-marketing efforts. Each sales force and the
officers of the operating divisions and subsidiaries are responsible for
obtaining new customers and maintaining relationships with existing customers.
Sales efforts are conducted primarily by independent regional manufacturers'
representatives and in-house personnel. Generally, manufacturers'
representatives receive a commission on sales and the in-house sales personnel
receive a base salary plus commission. Engaging independent sales
representatives at the local level facilitates responsiveness to each customer's
changing needs and current trends in each marketplace in which we operate.
34
We continually look for opportunities to leverage our growing capabilities.
The presidents of our operating divisions and subsidiaries in the aviation
segment meet periodically to discuss ways to improve sales and cross-marketing
opportunities. The management of each of our operating divisions and
subsidiaries also maintain close business relationships with many customers,
thereby furthering the sales and marketing efforts of our businesses.
A significant portion of our government and defense contracts are awarded on
a competitive bidding basis. We generally do not bid or act as the primary
contractor, but will typically bid and contract as a subcontractor on contracts
on a fixed fee basis. We generally sell to our other customers on a fixed fee,
negotiated contract or purchase order basis.
BACKLOG
We have a number of long-term agreements with several of our customers.
These agreements generally describe the terms under which the customer may issue
purchase orders to buy our products and services during the term of the
agreement. These terms typically include a list of the parts or services
customers may purchase, initial pricing for these products and services,
anticipated quantities to be purchased by the customer and, to the extent known,
delivery dates. Backlog only includes amounts for which we have actual purchase
orders with firm delivery dates primarily for our OEM customer base. Purchase
orders issued by our aftermarket customers are usually completed within a short
period of time. As a result, our backlog data relates primarily to the OEM
customers within our aviation segment. The backlog information set forth below
does not include the sales that we expect to generate from long-term agreements
associated with long-term aircraft production programs but for which we do not
have actual purchase orders with firm delivery dates.
As of December 31, 2000, our aviation and metals segments had outstanding
purchase orders representing an aggregate invoice price of approximately $331
million and $10 million, respectively. As of December 31, 1999, our aviation and
metals segments had outstanding purchase orders representing an aggregate
invoice price of approximately $225 million and $16 million, respectively. We
believe that purchase orders totaling approximately $53 million will not be
shipped by the aviation segment by December 31, 2001.
COMPETITION
We compete primarily with OEMs and the top-tier manufacturers that supply
them, some of which are divisions or subsidiaries of OEMs and other large
companies in the manufacture of aircraft components and subassemblies. OEMs are
increasingly focusing on assembly activities while outsourcing more
manufacturing and repair to third parties.
Competition for the repair and overhaul of aviation components comes from
three primary sources, some with greater financial and other resources than us:
OEMs, major commercial airlines and other independent repair and overhaul
companies. Some major commercial airlines continue to own and operate their own
service centers, while others have begun to sell their repair and overhaul
services to other aircraft operators. The repair and overhaul services provided
by domestic airlines are primarily for their own aircraft, although these
airlines may perform a limited amount of repair and overhaul services for third
parties. Foreign airlines that provide repair and overhaul services typically
provide these services not only for their own aircraft but for other airlines as
well. OEMs also maintain service centers which provide repair and overhaul
services for the components they manufacture. Other independent service
organizations also compete for the repair and overhaul business of other users
of aircraft components.
35
Participants in the aerospace industry compete primarily on the basis of
breadth of technical capabilities, volume capacity, quality, turnaround time and
cost.
Our principal competitors in the metals industry include national and
regional steel mills, other steel service centers, steel erection companies and
pre-engineered building manufacturers. Some of these competitors have greater
financial and other resources than us.
GOVERNMENTAL REGULATION
The aerospace industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. We must be certified by the FAA and,
in some cases, by individual OEMs, in order to engineer and service parts and
components used in specific aircraft models. If material authorizations or
approvals were revoked or suspended, our operations would be adversely affected.
New and more stringent government regulations may be adopted, or industry
oversight heightened, in the future and these new regulations, if enacted, or
any industry oversight, if heightened, may have an adverse impact on us.
We must also satisfy the requirements of our customers, including OEMs, that
are subject to FAA regulations, and provide these customers with products and
services that comply with the governmental regulations applicable to aircraft
components used in commercial flight operations. The FAA regulates commercial
flight operations and requires that aircraft components meet its stringent
standards. In addition, the FAA requires that various maintenance routines be
performed on aircraft components, and we currently satisfy these maintenance
standards in our repair and overhaul services. Several of our operating
divisions are FAA-approved repair stations.
Generally, the FAA is granting licenses only for the manufacture or repair
of a specific aircraft component, rather than the broader licenses that have
been granted in the past. The FAA licensing process may be costly and
time-consuming. In order to obtain an FAA license, an applicant must satisfy all
applicable regulations of the FAA governing repair stations. These regulations
require that an applicant have experienced personnel, inspection systems,
suitable facilities and equipment. In addition, the applicant must demonstrate a
need for the license. Because an applicant must procure manufacturing and repair
manuals from third parties relating to a particular aircraft component in order
to obtain a license with respect to this component, the application process may
involve substantial cost.
The license approval processes for the Joint Aviation Authority, which
regulates this industry in the European Union, and other comparable foreign
regulatory authorities are similarly stringent, involving potentially lengthy
audits.
Our aviation and metals operations are also subject to a variety of worker
and community safety laws. The Occupational Safety and Health Act of 1970,
commonly referred to as OSHA, mandates general requirements for safe workplaces
for all employees. In addition, OSHA provides special procedures and measures
for the handling of hazardous and toxic substances. Specific safety standards
have been promulgated for workplaces engaged in the treatment, disposal or
storage of hazardous waste. We believe that our operations are in material
compliance with OSHA's health and safety requirements.
36
ENVIRONMENTAL MATTERS
Our business, operations and facilities are subject to numerous stringent
federal, state, local and foreign environmental laws and regulation by
government agencies, including the EPA. Among other matters, these regulatory
authorities impose requirements that regulate the emission, discharge,
generation, management, transportation and disposal of hazardous materials,
pollutants and contaminants, govern public and private response actions to
hazardous or regulated substances which may be or have been released to the
environment, and require us to obtain and maintain licenses and permits in
connection with our operations. This extensive regulatory framework imposes
significant compliance burdens and risks on us. Although management believes
that our operations and our facilities are in material compliance with these
laws and regulations, future changes in these laws, regulations or
interpretations thereof or the nature of our operations may require us to make
significant additional capital expenditures to ensure compliance in the future.
Certain of our facilities have been or are currently the subject of
environmental remediation activities, the cost of which is subject to
indemnification provided by IKON Office Solutions pursuant to the acquisition by
us of these facilities from IKON Office Solutions. One of these facilities is
connected with a site included on the National Priorities List of Superfund
sites maintained by the EPA. Another of these facilities is located on a site
included in the EPA's database of potential Superfund sites. IKON Office
Solutions' indemnification covers us for losses that we might suffer in
connection with liabilities and obligations arising under environmental, health
and safety laws and regulations with respect to operations or use of those
facilities prior to our acquisition. More generally, this IKON Office Solutions'
indemnification covers both (1) the costs, claims and potential losses
associated with environmental matters identified in the purchase agreement for
the acquisition as the result of environmental assessments or other disclosures
made in connection with the acquisition, including the costs, claims and
potential losses associated with all the environmental remediation activities
and identified liabilities, and (2) the losses connected to environmental
liabilities which were not identified in the purchase agreement and which arise
from conditions or activities existing at the facilities or operations acquired
from IKON Office Solutions prior to our acquisition from IKON Office Solutions,
provided that they were identified by us to IKON Office Solutions before July
22, 2000. Some other facilities acquired and operated by us or one of our
subsidiaries, including a leased facility located on an EPA National Priorities
List site, were under active investigation for environmental contamination by
federal or state agencies when acquired, and continue to be under investigation.
We are indemnified by prior owners or operators and/or present owners of the
facilities for liabilities which we incur as a result of these investigations
and the environmental contamination found which pre-dates our acquisition of
these facilities, subject to certain limitations. We also maintain a pollution
liability policy that provides coverage for material liabilities associated with
the clean-up of on-site pollution conditions, as well as defense and indemnity
for certain third party suits (including Superfund liabilities at third party
sites), in each case, to the extent not otherwise indemnified. This policy
applies to all of our manufacturing and assembly operations worldwide. However,
if we were required to pay the expenses related to environmental liabilities for
which neither indemnification nor insurance coverage is available, these
expenses could have a material adverse effect on us.
EMPLOYEES
As of December 31, 2000, we employed approximately 3,512 persons, of whom
211 were management employees, 88 were sales and marketing personnel, 387
technical personnel, 256 were administrative personnel and 2,570 were production
workers.
37
Several of our subsidiaries are parties to collective bargaining agreements
with labor unions. Under those agreements, we currently employ approximately 414
full-time employees, and from time to time employ up to an additional 42
temporary employees for our steel erection business, all of whom are members of
labor unions. Currently, approximately 11% of our permanent employees are
represented by labor unions and approximately 17% of the aviation segment's net
sales and 100% of the metals segment's net sales are derived from the facilities
at which at least some employees are unionized. Two of the collective bargaining
agreements will expire in the next twelve months. Our inability to negotiate
acceptable contracts with these unions could result in strikes by the affected
workers and increased operating costs as a result of higher wages or benefits
paid to union members. If the unionized workers were to engage in a strike or
other work stoppage, or other employees were to become unionized, we could
experience a significant disruption of our operations and higher ongoing labor
costs, which could have an adverse effect on our business and results of
operations.
We have not experienced any material labor-related work stoppage and
consider our relations with our employees to be good.
PROPERTIES
Our executive offices are located in Wayne, Pennsylvania, where we lease
7,695 square feet of space. In addition, we own or lease the following
facilities in which our operating divisions and subsidiaries are located:
LOCATION DESCRIPTION SQUARE FOOTAGE OWNED/LEASED
- -------- ---------------------------------- -------------- -------------
AVIATION SEGMENT
Chandler, AZ...................... Thermal processing facility/office 7,000 Leased
Phoenix, AZ....................... Plasma spray facility/office 13,500 Leased
Phoenix, AZ....................... Repair and overhaul shop/office 50,000 Leased
Phoenix, AZ....................... Manufacturing facility/office 35,000 Leased
Phoenix, AZ....................... Machine shop/office 13,700 Owned
Phoenix, AZ....................... Manufacturing facility/office 54,812 Leased
Phoenix, AZ....................... Manufacturing facility/office 15,374 Leased
Phoenix, AZ....................... Office 9,598 Leased
Tempe, AZ......................... Manufacturing facility/office 13,500 Owned
Tempe, AZ......................... Machine shop 9,300 Owned
Tempe, AZ......................... Machine shop 32,100 Owned
Hot Springs, AK................... Manufacturing facility/office 141,256 Owned
Hot Springs, AK................... Machine shop/office 240,000 Owned
Chatsworth, CA.................... Manufacturing facility/office 101,900 Owned
Chatsworth, CA.................... Manufacturing facility 21,600 Leased
City of Industry, CA.............. Manufacturing facility/office 75,000 Leased
El Cajon, CA...................... Manufacturing facility/office 113,790 Leased
Glendale, CA...................... Instrument shop/warehouse/office 25,000 Leased
Lynwood, CA....................... Processing and finishing facility/ 59,662 Leased
office
Sun Valley, CA.................... Machine shop/office 30,000 Owned
Walnut, CA........................ Manufacturing facility/office 126,000 Leased
Bloomfield, CT.................... Manufacturing facility/office 25,000 Leased
Hampshire, England................ Repair and overhaul/office 11,915 Leased
Ft. Lauderdale, FL................ Instrument shop/warehouse/office 7,200 Leased
Alfortville, France............... Manufacturing facility/office 7,500 Leased
Shelbyville, IN................... Manufacturing facility/office 192,300 Owned
Shelbyville, IN................... Manufacturing facility/office 50,000 Owned
Wellington, KS.................... Repair and overhaul/office 65,000 Leased
Wichita, KS....................... Manufacturing facility/office 46,100 Leased
Macomb, MI........................ Manufacturing facility/office 86,000 Leased
Grandview, MO..................... Manufacturing facility/office 80,000 Owned
38
LOCATION DESCRIPTION SQUARE FOOTAGE OWNED/LEASED
- -------- ---------------------------------- -------------- -------------
Freeport, NY...................... Manufacturing facility/office/ 29,000 Owned
warehouse
Clemmons, NC...................... Manufacturing 20,000 Owned
facility/repair/office
Albany, OR........................ Machine shop/office 25,000 Owned
North Wales, PA................... Manufacturing facility/office 111,400 Leased
Barcelona, Spain.................. Manufacturing facility/office 800 Leased
Austin, TX........................ Instrument shop/warehouse/office 4,500 Leased
Fort Worth, TX.................... Manufacturing facility/office 114,100 Owned
Brookfield, WI.................... Manufacturing facility/office 62,000 Leased
METALS SEGMENT
Bridgeview, IL.................... Steel processing facility/office 140,000 Leased
Chicago, IL....................... Steel distributing facility/office 135,700 Owned
Cleveland, OH..................... Steel fabrication facility/office 30,950 Leased
Plain City, OH.................... Office 2,000 Leased
We believe that our properties are adequate to support our operations for
the foreseeable future.
LEGAL PROCEEDINGS
We are not presently involved in any material legal proceedings outside of
the ordinary course of business. We may in the future be named as a defendant in
lawsuits involving product defects, breach of warranty or other actions relating
to products that we manufacture or products that we distribute that are
manufactured by others. We believe that our potential exposure is adequately
covered by our aviation product and general liability insurance.
39
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION
---- -------- -----------------------------------------
Richard C. Ill........................... 57 President, Chief Executive Officer and
Director
John R. Bartholdson...................... 56 Senior Vice President, Chief Financial
Officer, Treasurer and Director
Richard M. Eisenstaedt................... 55 Vice President, General Counsel and
Secretary
Kevin E. Kindig.......................... 44 Vice President and Controller
Lawrence J. Resnick...................... 43 Vice President
Richard C. Gozon......................... 62 Director
Claude F. Kronk.......................... 69 Director
Joseph M. Silvestri...................... 39 Director
William O. Albertini..................... 57 Director
RICHARD C. ILL has been our president and chief executive officer and a
director since 1993. Mr. Ill is a member of the advisory board of Outward Bound,
USA and the board of directors, chairman's council and policy and planning
committees of the Steel Service Center Institute.
JOHN R. BARTHOLDSON has been our senior vice president, chief financial
officer and treasurer and a director since 1993. Mr. Bartholdson serves on the
board of directors and is a member of the compensation committee of PBHG Funds,
Inc.
RICHARD M. EISENSTAEDT has been a vice president and our general counsel and
secretary since October 1996. Mr. Eisenstaedt was general counsel of Unisource
Worldwide, Inc. from February 1996 until October 1996.
KEVIN E. KINDIG has been a vice president since 1999 and our controller
since 1993.
LAWRENCE J. RESNICK has been a vice president of Triumph since July 2000.
Mr. Resnick was the president of Triumph Controls, Inc., one of our
subsidiaries, from January 1996 through July 2000.
RICHARD C. GOZON has been one of our directors since 1993. Mr. Gozon has
been executive vice president of Weyerhaeuser Company since 1994. Mr. Gozon
serves on the board of directors of U.G.I. Corporation, AmeriSource Health
Corporation and AmeriGas Partners, L.P.
CLAUDE F. KRONK has been one of our directors since 1993. Mr. Kronk retired
on January 1, 1998 from his position as vice chairman and chief executive
officer of J&L Specialty Steel, Inc., a position which he held for more than
five years. Mr. Kronk serves on the board of directors of Cold Metal Products,
Co.
JOSEPH M. SILVESTRI has been one of our directors since 1994. Mr. Silvestri
has been employed by Citicorp Venture Capital, Ltd. since 1990 and has been a
vice president since 1995. Mr. Silvestri serves on the board of directors of
Euramax International, Inc., GNI Group, Inc., ISG Resources and MacDermid,
Incorporated.
WILLIAM O. ALBERTINI has been one of our directors since 1999.
Mr. Albertini was executive vice president and chief financial officer of Bell
Atlantic Corp. from 1991 through 1998. In 1998, Mr. Albertini became executive
vice president and chief financial officer of Bell Atlantic Global Wireless and
remained in that position until his retirement on April 30, 1999. Mr. Albertini
serves on the board of directors of American Water Works, Blackrock Funds and
Midwest Independent Service Operator, Inc. and is also a member of the Advisory
Committee of Safeguard Scientifics, Inc.
40
SECURITY OWNERSHIP
The following table sets forth information as of February 12, 2001 regarding
the beneficial ownership of our common stock and Class D common stock by:
- each person, entity or group known by us to own beneficially more than 5%
of our outstanding common stock;
- each director;
- each of our five most highly compensated executive officers, including our
chief executive officer;
- all directors and executive officers as a group; and
- the selling stockholder.
Unless otherwise indicated, the address of each person identified is c/o
Four Glenhardie Corporate Center, 1255 Drummer's Lane, Suite 200, Wayne,
Pennsylvania 19087.
The percentages shown are based on 12,358,956 shares of common stock and
Class D common stock outstanding prior to the offering as of February 12, 2001
and 15,358,959 shares of common stock and Class D common stock outstanding after
the offering. Shares of common stock which a person has the right to acquire
upon the exercise of stock options and warrants held by that holder that are
exercisable within 60 days are deemed outstanding for the purpose of computing
the percentage ownership of that person, but are not deemed outstanding for
computing the percentage ownership of any other person.
Unless otherwise noted, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of common stock and
Class D common stock beneficially owned by them.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING NUMBER OF OWNED AFTER OFFERING
-------------------------------- SHARES BEING ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ------------------------ -------------------- ---------- ------------ --------- ----------
Richard C. Ill.......................... 336,193(1) 2.7% -- 336,193 2.2%
John R. Bartholdson..................... 305,476(2)(3) 2.5% -- 305,476 2.0%
Richard M. Eisenstaedt.................. 15,250(4) * -- 15,250 *
Kevin E. Kindig......................... 42,753(5)(6) * -- 42,753 *
Lawrence J. Resnick..................... 88,992(7) * -- 88,992 *
Richard C. Gozon........................ 71,095(8) * -- 71,095 *
Claude F. Kronk......................... 78,470(9) * -- 78,470 *
Joseph M. Silvestri..................... 24,825(10)(11) * -- 24,825 *
William O. Albertini.................... 4,834(12) * -- 4,834 *
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043...................... 4,648,535(13) 37.6% -- 4,648,535 30.3%
World Equity Partners, L.P.
399 Park Avenue
New York, NY 10043...................... 649,997(14) 5.3% 649,997 -- --
Private Capital Management, Inc.
3003 Tamiami Trail North
Naples, FL 34103........................ 1,645,549 13.3% -- 1,645,549 10.7%
All executive officers and directors as
a group (9 persons)................... 967,888 7.8% -- 967,888 6.3%
- ------------
* Less than one percent.
41
(1) Mr. Ill currently holds stock options to purchase 49,000 shares of common
stock, which options may be exercised in the next 60 days. This amount also
includes 17,000 shares of restricted common stock, none of which have vested
by February 12, 2001.
(2) Mr. Bartholdson currently holds stock options to purchase 49,000 shares of
common stock, which options may be exercised in the next 60 days. This
amount also includes 10,000 shares of restricted common stock, none of which
have vested by February 12, 2001.
(3) Mr. Bartholdson disclaims beneficial ownership of 3,050 shares of common
stock beneficially owned by one of his daughters.
(4) Mr. Eisenstaedt currently holds stock options to purchase 14,250 shares of
common stock, which options may be exercised in the next 60 days.
(5) Mr. Kindig currently holds stock options to purchase 12,000 shares of common
stock, which options may be exercised in the next 60 days.
(6) Mr. Kindig disclaims beneficial ownership of 200 shares of common stock
beneficially owned by his children.
(7) Mr. Resnick currently holds stock options to purchase 28,992 shares of
common stock, which options may be exercised in the next 60 days.
(8) Mr. Gozon currently holds stock options to purchase 1,001 shares of common
stock, which options may be exercised in the next 60 days.
(9) Mr. Kronk currently holds stock options to purchase 1,001 shares of common
stock, which options may be exercised in the next 60 days.
(10) Mr. Silvestri currently holds stock options to purchase 1,001 shares of
common stock, which options may be exercised in the next 60 days.
(11) Mr. Silvestri disclaims beneficial ownership of the shares of common stock
and Class D common stock held by Citicorp Venture Capital, Ltd. and its
affiliate, World Equity Partners, L.P.
(12) Mr. Albertini currently holds stock options to purchase 834 shares of
common stock, which options may be exercised in the next 60 days.
(13) Includes 1,300,000 shares of common stock and 3,348,535 shares of Class D
common stock, which Class D common stock cannot be voted in the election of
directors. This amount does not include 649,997 shares of common stock owned
by World Equity Partners, L.P., an affiliate of Citicorp Venture Capital,
because World Equity Partners is listed individually.
(14) World Equity Partners, L.P. is an affiliate of Citicorp Venture Capital,
Ltd. This amount does not include shares of common stock and Class D common
stock owned by Citicorp Venture Capital, which is listed individually.
42
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $.001 per share, 6,000,000 shares of Class D common stock, par value
$.001 per share, and 250,000 shares of preferred stock, par value $.01 per
share. Upon completion of this offering, we will have outstanding 12,010,424
shares of common stock (12,460,424 if the underwriters' over-allotment option is
exercised in full), 3,348,535 shares of Class D common stock and no shares of
preferred stock. As of February 12, 2001, there were approximately 38 registered
holders of common stock and one holder of Class D common stock.
COMMON STOCK
The holders of common stock are generally entitled to one vote for each
share held on all matters voted upon by stockholders. Subject to the rights of
any outstanding shares of preferred stock, the holders of the common stock are
entitled to dividends that may be declared at the discretion of our board of
directors out of legally available funds. If we liquidate, dissolve or windup,
holders of common stock are entitled to share ratably in our net assets after
payment or provision for all liabilities, subject to the prior rights of any
preferred stock then outstanding. The holders of common stock have no preemptive
rights to purchase our securities. Shares of common stock are not subject to any
redemption provisions and are not convertible into any of our other securities.
Our directors are elected by the holders of common stock pursuant to
cumulative voting, which gives a stockholder the right to cast as many votes in
the aggregate as that stockholder is entitled to vote under our certificate of
incorporation, multiplied by the number of directors to be elected. A
stockholder may cast all votes for one director candidate or distribute those
votes among two or more director candidates. Therefore, cumulative voting may
make it more difficult to change the composition of the board of directors and
may discourage or make more difficult an attempt by a person or group to obtain
control of the company. Any director, or the entire board of directors, may be
removed by the stockholders at any time, with or without cause, by the
affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote for the election of directors, except that, if
less than the entire board is to be removed, no director may be removed without
cause if the votes cast against his removal would be sufficient to elect him
when cumulatively voted at an election of the entire board of directors.
CLASS D COMMON STOCK
The rights of holders of Class D common stock are identical to those of
holders of common stock, except that the holders of Class D shares are not
entitled to vote in the election of directors. On all matters voted upon by the
stockholders, the holders of common stock and the class D common stock vote
together as a class, except as provided by law. The transfer of shares of Class
D common stock is restricted, in the case of an individual holder, to members of
the holder's family, to trusts for that holder's benefit or the benefit of that
holder's family, estate and donees; in the case of trustees, to the grantor or a
designated beneficiary of that trust or their guardians or custodians, or to
persons who are permitted transferees of the grantor of those beneficiaries; in
the case of a corporation or partnership which is an original holder of shares,
to its stockholders or partners or permitted transferees of those stockholders
or partners; in the case of any other corporation or partnership, to persons who
previously contributed shares to that corporation or partnership or who are
permitted transferees of those persons; and, in the case of an estate of a
deceased or
43
bankruptcy or insolvent holder, to any persons, trusts, corporations or
partnerships which are otherwise entitled to own shares of Class D common stock.
A share of Class D common stock may be converted into a share of common stock at
any time at the sole option of the holder. Once a share of Class D common stock
has been converted into common stock, it will no longer be subject to any
restrictions on transfer.
PREFERRED STOCK
Our certificate of incorporation authorizes the issuance of up to 250,000
shares of preferred stock from time to time by the board of directors in one or
more series as consideration for the stock or assets of another corporation or
in connection with our merger with or into another corporation. The board of
directors may adopt resolutions to issue the shares, to fix the number of shares
and to change the number of shares constituting any series of preferred stock
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions of that preferred stock, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any series of
preferred stock, in each case without any further action or vote by the
stockholders. We have no current plans to issue any series of preferred stock.
One of the effects of undesignated preferred stock may be to enable our board of
directors to prevent or delay a change in control.
LIMITATION ON DIRECTORS' LIABILITIES
Our certificate of incorporation provides that, as permitted by Delaware
law, our directors are not liable to us or our stockholders for monetary damages
for breach of fiduciary duty, except for liability in connection with a breach
of duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or dividend payments or
stock repurchases illegal under Delaware law or any transaction in which a
director has derived an improper personal benefit. Further, under the provisions
of our bylaws, as amended, each person who is or was a party to or is threatened
to be made a party of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he or she is or was a director, officer, employee or agent of
us or is or was serving at our request as a director, officer, employee or agent
of another company or other entity shall be indemnified by us against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best interests, and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his or her conduct was unlawful. Notwithstanding the foregoing, no
indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to us, unless and only
to the extent that the Court of Chancery or the court in which such action was
brought determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which such court deems proper.
The termination of any action, suit or proceedings by judgment, order,
settlement, conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, our best interests and, with respect to any
44
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
In addition, to the extent that such a person is successful on the merits or
otherwise in defense of any action, suit, or proceeding brought against him or
her by reason of the fact that he or she is our director, officer, employee or
agent, he or she shall be indemnified against expenses, including attorneys'
fees actually and reasonably incurred in connection therewith.
Our bylaws, as amended, provide that expenses incurred by an officer,
director, employee or agent in defending a civil or criminal action, suit or
proceeding may be paid by us in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by us.
Any indemnification under the provisions summarized above (unless ordered by
a court) shall be made by us only as authorized in each specific case upon a
determination that indemnification of such person is proper under the
circumstances because he or she has met the applicable standard of conduct set
forth in the applicable provision. Such determination shall be made by any of
(1) a majority vote of our directors who are not parties to the action, suit or
proceeding (even though less than a quorum), (2) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion, or (3) by the stockholders.
We maintain director and officer insurance with respect to those claims
described above in customary amounts.
The foregoing summaries are necessarily subject to the complete text of the
relevant statute or document.
OTHER MATTERS
Our common stock has traded on the New York Stock Exchange under the symbol
TGI since October 25, 1996.
The transfer agent and registrar for our common stock is Mellon Shareholder
Services.
45
SHARES ELIGIBLE FOR FUTURE SALE
Based on the number of shares outstanding on February 12, 2001, upon
completion of this offering we will have outstanding an aggregate of 15,358,959
shares of our capital stock, excluding any exercises of outstanding convertible
securities. Of these shares, all 3,650,000 sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless those shares are purchased by "affiliates" as that term is defined in
Rule 144 under the Securities Act. Further, of these shares, 2,111,810 shares of
common stock and 3,348,535 shares of common stock issuable upon conversion from
Class D common stock held by existing stockholders are "restricted securities"
as that term is defined in Rule 144 under the Securities Act. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144, promulgated under the
Securities Act, which rules are summarized below.
The market price of our stock could decline as a result of sales by our
existing stockholders of a large number of shares of our stock in the market
after this offering or the perception that these sales could occur. These sales
also might make it more difficult for us to sell equity securities in the future
at a time and at a price that we deem appropriate.
LOCK-UP AGREEMENTS
Each of our officers and directors and Citicorp Venture Capital have agreed,
subject to specified limited exceptions, not to offer, sell, contract to sell or
otherwise dispose of, or enter into any transaction that is designed to, or
could be expected to, result in the disposition of any shares of our common
stock or other securities convertible into or exchangeable or exercisable for
shares of our common stock or derivatives of our common stock owned by these
persons prior to this offering or common stock issuable upon exercise of options
or warrants held by these persons for a period of 90 days after the effective
date of the registration statement of which this prospectus is a part without
the prior written consent of Deutsche Banc Alex. Brown Inc. This consent may be
given at any time without public notice. We have entered into a similar
agreement with the representatives of the underwriters, except that without such
consent we may grant options under our existing stock option plans and issue
stock upon exercise of options outstanding on the date of this prospectus or
options granted in accordance with the foregoing. There are no agreements
between the representatives and any of our stockholders or affiliates releasing
them from these lock-up agreements prior to the expiration of the 90-day period.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for a least one year would be
entitled to sell publicly within any three-month period a number of shares that
does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 153,590 shares immediately after this offering; or
- the average weekly trading volume of the common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 of the sale with the SEC.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
46
SALES BY NON-AFFILIATES
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell his or her shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
STOCK OPTIONS
We have filed with the SEC registration statements on Forms S-8 under the
Securities Act covering an aggregate of 1,308,750 shares of common stock
reserved for issuance under our employees' and directors' stock option plans. As
of February 12, 2001, options to purchase 504,072 shares of common stock were
issued and outstanding under these plans, 310,784 of which are vested.
REGISTRATION RIGHTS
Citicorp Venture Capital, which owns an aggregate of 1,300,000 shares of
common stock (which does not include shares owned by World Equity Partners, the
selling stockholder and an affiliate of Citicorp Venture Capital) and 3,348,535
shares of Class D common stock, certain of its affiliates, the selling
stockholder and certain members of management have certain demand and piggyback
registration rights with respect to the shares of common stock held by those
individuals and entities.
47
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Banc Alex.
Brown Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, have
severally agreed to purchase from us and the selling stockholder the following
respective numbers of shares of common stock at a public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus:
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
Deutsche Banc Alex. Brown Inc...............................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ...................................
-------
Total.................................................
=======
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all of
the shares of common stock offered by this prospectus, other than those shares
covered by the over-allotment described below, if any of these shares are
purchased.
We have been advised by the representatives of the underwriters that the
underwriters propose to offer the shares of common stock to the public at the
public offering price set forth on the cover of this prospectus and to dealers
at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow and the dealers may
re-allow, a concession not in excess of $ per share to other dealers.
After the initial public offering, the representatives of the underwriters may
change the offering price and other selling terms.
We have granted the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to 450,000 additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered by this prospectus. To the
extent that the underwriters exercise this option, each of the underwriters will
have become obligated, subject to conditions, to purchase approximately the same
percentage of additional shares of common stock as the number of shares of
common stock to be purchased by it in the above table bears to the total number
of shares of common stock offered by this prospectus. We will be obligated,
pursuant to the option, to sell these additional shares of common stock to the
underwriters to the extent the option is exercised. If any additional shares of
common stock are purchased, the underwriters will offer the
48
additional shares on the same terms as those on which the 3,650,000 shares are
being offered.
The underwriting discounts and commission per share are equal to the public
offering price per share of common stock less the amount paid by the
underwriters to us per share of common stock. The underwriting discounts and
commissions are % of the initial public offering price. We have agreed to pay
the underwriters the following discounts and commissions, assuming either no
exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
TOTAL FEES
---------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
Discounts and commissions paid by us... $ $ $
Discounts and commissions paid by the
selling stockholder.................. $ $ $
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $500,000.
We and the selling stockholder have agreed to indemnify the underwriters
against some specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required
to make in respect of any of these liabilities.
Each of our officers and directors and Citicorp Venture Capital, Ltd. have
agreed, subject to specified limited exceptions, not to offer, sell, contract to
sell or otherwise dispose of, or enter into any transaction that is designed to,
or could be expected to, result in the disposition of any shares of our common
stock or other securities convertible into or exchangeable or exercisable for
shares of our common stock or derivatives of our common stock owned by these
persons prior to this offering or common stock issuable upon exercise of options
or warrants held by these persons for a period of 90 days after the effective
date of the registration statement of which this prospectus is a part without
the prior written consent of Deutsche Banc Alex. Brown Inc. This consent may be
given at any time without public notice. We have entered into a similar
agreement with the representatives of the underwriters, except that without such
consent we may grant options under our existing stock option plans and issue
stock upon exercise of options outstanding on the date of this prospectus or
options granted in accordance with the foregoing. There are no agreements
between the representatives and any of our stockholders or affiliates releasing
them from these lock-up agreements prior to the expiration of the 90-day period.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. A short sales position may involve either
"covered" short sales or "naked" short sales. Covered short sales are sales made
for an amount not greater than the underwriters' over-allotment option to
purchase additional shares in the offering described above. The underwriters may
close out any covered short position by either exercising their over-allotment
option or purchasing shares in the open market. In determining the source of
shares to close out the covered short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares through the
over-allotment option. Naked short sales are sales in excess of the
over-allotment option. The underwriters will have
49
to close out any naked short position by purchasing shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the shares in the
open market after pricing that could adversely affect investors who purchase in
the offering.
Accordingly, to cover these short sales positions or to stabilize the market
price of our common stock, the underwriters may bid for, and purchase, shares of
our common stock in the open market. These transactions may be effected on the
New York Stock Exchange or otherwise. Additionally, the representatives, on
behalf of the underwriters, may also reclaim selling concessions allowed to an
underwriter or dealer if the underwriting syndicate repurchases shares
distributed by that underwriter or dealer. Similar to other purchase
transactions, the underwriters' purchases to cover the syndicate short sales or
to stabilize the market price of our common stock may have the effect of raising
or maintaining the market price of our common stock or preventing or mitigating
a decline in the market price of our common stock. As a result, the price of the
shares of our common stock may be higher than the price that might otherwise
exist in the open market. The underwriters are not required to engage in these
activities and, if commenced, may end any of these activities at any time.
A prospectus in electronic format is being made available on Internet
websites maintained by one or more of the lead underwriters of this offering and
may be made available on websites maintained by other underwriters. Other than
the prospectus in electronic format, the information on any underwriter's
website and any information contained in any other website maintained by an
underwriter is not part of the prospectus or the registration statement of which
the prospectus forms a part.
From time to time, Deutsche Banc Alex. Brown Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and their affiliates have provided financial
advisory, underwriting, lending or other similar services for us, for which we
have paid customary fees, and may provide such services to us in the future.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania. Some
legal matters related to this offering will be passed upon for the underwriters
by Cahill Gordon & Reindel, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. These financial statements and this schedule are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we have
filed with the SEC covering the common stock offered by us and the selling
stockholder in this offering. This prospectus does not contain all the
information set forth in the registration statement and you should refer to that
registration statement with its exhibits for further information. Statements
contained in this prospectus as to the contents of any contract or other
document
50
are not complete and you should review those documents filed as an exhibit to,
or incorporated by reference into, the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may review any of this information and the
registration statement at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, DC 20549 and at the following regional offices of the
Securities and Exchange Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois, 60661-2511. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the Public Reference Room. The SEC
maintains an internet site at http://www.sec.gov that contains information about
us. You can also inspect our SEC filings at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York, 10005.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is an important
part of this prospectus, and the information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until this offering is completed:
- Annual Report on Form 10-K for the fiscal year ended March 31, 2000; and
- Quarterly Reports on Form 10-Q (as amended by Form 10-Q/A) for the
quarters ended June 30, 2000, September 30, 2000 and December 31, 2000.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the address below. We will not, however, provide copies of the
exhibits to these filings unless we specifically incorporate by reference the
exhibits in this prospectus.
Triumph Group, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, Pennsylvania 19087
(610) 975-0420
Attention: Corporate Secretary
51
FROM NOSE TO TAIL, THE TRIUMPH GROUP'S COMPANIES PROVIDE A BROAD ARRAY OF
SPECIALIZED MANUFACTURING AND SERVICE CAPABILITIES TO MEET THE MOST DEMANDING
REQUIREMENTS.
[PICTURE OF CONTROL SYSTEMS, INCLUDING A
THROTTLE QUADRANT AND A MECHANICAL CONTROL
[PICTURE OF AUXILIARY POWER UNIT OF THE SYSTEM OF THE TYPE MANUFACTURED BY
TYPE REPAIRED AND OVERHAULED BY TRIUMPH] TRIUMPH]
Aftermarket Services Control Systems
Representative products include: Representative products include:
- - Cockpit instrumentation - Main engine gear box assemblies
- - Remote sensors - Control system valve bodies
- - Auxiliary power units - Landing gear actuation systems
- - Constant speed drives - Cockpit control levers
[PICTURE OF SKELETON OF AIRPLANE]
[PICTURE OF OPERATIONAL COMPONENTS,
INCLUDING PARTS FOR A GAS TURBINE ENGINE [PICTURE OF STRUCTURAL COMPONENTS OF THE
OF THE TYPE REPAIRED AND/OR MANUFACTURED TYPE REPAIRED AND/OR MANUFACTURED BY
BY TRIUMPH] TRIUMPH]
Operational Components Structural Components
Representative products include: Representative products include:
- - Stators - Wing spars & stringers
- - Vanes - Stretch-formed leading edges
- - Industrial gas turbine transition ducts - Floor beams
- - Combusters - Landing gear components and assemblies
[LOGO] TRIUMPH GROUP, INC.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES
OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OR OUR COMMON STOCK.
TABLE OF CONTENTS
PAGE
--------
Prospectus Summary............................. 1
Risk Factors................................... 7
Special Note Regarding Forward-Looking
Statements and Industry Data.................. 12
Use of Proceeds................................ 12
Dividend Policy................................ 13
Price Range of Common Stock.................... 13
Capitalization................................. 14
Selected Financial Data........................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business....................................... 26
Management..................................... 40
Security Ownership............................. 41
Description of Capital Stock................... 43
Shares Eligible for Future Sale................ 46
Underwriting................................... 48
Legal Matters.................................. 50
Experts........................................ 50
Where You Can Find More Information............ 50
Incorporation of Information We File With the
SEC........................................... 51
[LOGO]
TRIUMPH GROUP, INC.
3,650,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
MERRILL LYNCH & CO.
PROSPECTUS
, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the amounts of expenses attributed to the
issuance of the securities offered pursuant to this registration statement which
shall be borne by us. All of the expenses listed below, except the SEC
registration fee and the NASD filing fee, represent estimates only.
ESTIMATED
---------
SEC registration fee........................................ $ 39,914
NASD filing fee............................................. 16,466
Transfer agent fees......................................... 5,000
Printing and engraving expenses............................. 135,000
Accounting fees and expenses................................ 140,000
"Blue Sky" fees and expenses (including legal fees)......... 5,000
Legal fees and expenses..................................... 140,000
Miscellaneous fees and expenses............................. 18,620
--------
Total............................................... $500,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Amended and Restated Certificate of Incorporation provides that we will,
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify any person who is or was an
officer or director of Triumph Group, Inc., as well as any person who is or was
serving at our request as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise. In
addition, our Amended and Restated Certificate of Incorporation eliminates
personal liability of our directors to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as amended from time to time.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify its directors, officers, employees or agents and any person serving in
such capacity for another corporation, partnership, joint venture, trust or
other enterprise at the request of the corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties if such person acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In a derivative action,
indemnification may be made only for expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of an action or suit and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
is fairly and reasonably entitled to indemnification for such expenses despite
such adjudication of liability.
II-1
Section 102(b)(7) of the Delaware General Corporation Law provides that a
corporation may eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for willful or negligent conduct in paying dividends or repurchasing stock
out of other than lawfully available funds; or
- for any transaction from which the director derived an improper personal
benefit.
No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when such provision become
effective.
We maintain directors' and officers' liability insurance that provides for
indemnification of our directors and officers against damages arising out of
certain kinds of claims that may be made against them based on their negligent
acts or omissions while acting in their capacity as such.
Item 16. Exhibits and Financial Statement Schedules.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation
(Incorporated by reference to our registration statement on
Form S-1 (Registration No. 333-10777), declared effective on
October 24, 1996).
3.2 Bylaws (Incorporated by reference to our registration
statement on Form S-1 (Registration No. 333-10777), declared
effective on October 24, 1996).
3.3 Certificate of Amendment to Amended and Restated Certificate
of Incorporation of Triumph Group, Inc. (Incorporated by
reference to our annual report on Form 10-K for the fiscal
year ended March 31, 1999).
4.1 Form of Common Stock Certificate (Incorporated by reference
to our registration statement on Form S-1 (Registration No.
333-10777), declared effective on October 24, 1996).
5.1** Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
23.2** Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1).
24.1** Power of Attorney (included on signature page).
- ---------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised
II-2
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration as of
the time it was declared effective.
(4) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wayne, Commonwealth of Pennsylvania,
on March 8, 2001.
TRIUMPH GROUP, INC.
By: /s/ RICHARD C. ILL
-----------------------------------------
Richard C. Ill
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICHARD C. ILL President, Chief Executive Officer and March 8, 2001
------------------------------------------- Director (Principal Executive Officer)
Richard C. Ill
Senior Vice President, Chief Financial March 8, 2001
/s/ JOHN R. BARTHOLDSON Officer, Treasurer and Director
------------------------------------------- (Principal
John R. Bartholdson Financial Officer)
/s/ KEVIN E. KINDIG Vice President and Controller (Principal March 8, 2001
------------------------------------------- Accounting Officer)
Kevin E. Kindig
* Director March 8, 2001
-------------------------------------------
Richard C. Gozon
* Director March 8, 2001
-------------------------------------------
Claude F. Kronk
* Director March 8, 2001
-------------------------------------------
Joseph M. Silvestri
* Director March 8, 2001
-------------------------------------------
William O. Albertini
/s/ JOHN R. BARTHOLDSON
--------------------------------------
John R. Bartholdson
*By: ATTORNEY-IN-FACT
II-4
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation
(Incorporated by reference to our registration statement on
Form S-1 (Registration No. 333-10777), declared effective on
October 24, 1996).
3.2 Bylaws (Incorporated by reference to our registration
statement on Form S-1 (Registration No. 333-10777), declared
effective on October 24, 1996).
3.3 Certificate of Amendment to Amended and Restated Certificate
of Incorporation of Triumph Group, Inc. (Incorporated by
reference to our annual report on Form 10-K for the fiscal
year ended March 31, 1999).
4.1 Form of Common Stock Certificate (Incorporated by reference
to our registration statement on Form S-1 (Registration No.
333-10777), declared effective on October 24, 1996).
5.1** Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
23.2** Consent of Ballard Spahr Andrews & Ingersoll, LLP (included
in Exhibit 5.1).
24.1** Power of Attorney (included on signature page).
- ------------
* Filed herewith.
** Previously filed.