<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended September 30, 2001.
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From to
-------- ---------
Commission File Number: 1-12235
--------
TRIUMPH GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0347963
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1255 Drummers Lane, Suite 200 Wayne, PA 19087-1565
- ----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(610) 975-0420
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, par value $0.001 per share, 13,956,279 shares, and Class D
common stock, par value $0.001 per share, 1,848,535 shares, each as of
October 31, 2001.
<Page>
TRIUMPH GROUP, INC.
INDEX
<Table>
<Caption>
PAGE NUMBER
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
September 30, 2001 and March 31, 2001
Consolidated Statements of Income 3
Three months ended September 30, 2001 and 2000
Six months ended September 30, 2001 and 2000
Consolidated Statements of Cash Flows 4
Six months ended September 30, 2001 and 2000
Notes to Consolidated Financial Statements 6
September 30, 2001
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 17
Market Risk
Part II. Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</Table>
<Page>
Part I. Financial Information
Item: 1. Financial Statements
Triumph Group, Inc.
Consolidated Balance Sheets
(dollars in thousands, except per share data)
<Table>
<Caption>
SEPTEMBER 30, MARCH 31,
2001 2001
------------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 6,818 $ 4,819
Accounts receivable, net 119,048 115,666
Inventories 178,145 170,958
Prepaid expenses and other 9,662 7,060
--------- ---------
Total current assets 313,673 298,503
Property and equipment, net 166,640 157,519
Excess of cost over net assets acquired 251,357 221,083
Intangible assets, net 36,724 38,980
Other, net 8,167 15,284
--------- ---------
Total assets $ 776,561 $ 731,369
========= =========
</Table>
-1-
<Page>
Triumph Group, Inc.
Consolidated Balance Sheets (continued)
(dollars in thousands, except per share data)
<Table>
<Caption>
SEPTEMBER 30, MARCH 31,
2001 2001
------------ ---------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,216 $ 52,168
Accrued expenses 72,958 53,011
Income taxes payable 3,124 4,894
Deferred income taxes 4,291 4,291
Current portion of long-term debt 6,065 6,017
--------- ---------
Total current liabilities 126,654 120,381
Long-term debt, less current portion 170,900 170,305
Deferred income taxes and other 54,628 50,792
Stockholders' equity:
Common stock, $.001 par value, 50,000,000
shares authorized, 14,178,789 shares and 14 12
12,228,789 shares issued
Class D common stock convertible,
$.001 par value, 6,000,000 shares authorized,
1,848,535 and 3,348,535 shares issued and
outstanding 2 3
Capital in excess of par value 258,082 241,877
Treasury stock, at cost, 222,510
and 212,188 shares (5,559) (5,167)
Accumulated other comprehensive loss (5,488) (1,174)
Retained earnings 177,328 154,340
--------- ---------
Total stockholders' equity 424,379 389,891
--------- ---------
Total liabilities and stockholders' equity $ 776,561 $ 731,369
========= =========
</Table>
SEE ACCOMPANYING NOTES.
-2-
<Page>
Triumph Group, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales $ 161,427 $ 131,563 $ 314,959 $ 260,559
Operating costs and expenses:
Cost of products sold 112,336 89,288 217,728 176,930
Selling, general, and administrative 19,970 16,602 39,297 33,569
Depreciation and amortization 5,258 6,194 10,518 12,609
Special charge 5,044 - 5,044 -
---------- ---------- ---------- ----------
142,608 112,084 272,587 223,108
Operating income 18,819 19,479 42,372 37,451
Interest expense and other 2,982 4,917 6,220 9,760
---------- ---------- ---------- ----------
Income before income taxes 15,837 14,562 36,152 27,691
Income tax expense 5,733 5,389 13,087 10,247
---------- ---------- ---------- ----------
Net income $ 10,104 $ 9,173 $ 23,065 $ 17,444
========== ========== ========== ==========
Earnings per share - basic: $ 0.64 $ 0.79 $ 1.46 $ 1.49
========== ========== ========== ==========
Weighted average common shares outstanding - basic 15,799 11,676 15,783 11,674
========== ========== ========== ==========
Earnings per share - diluted: $ 0.63 $ 0.74 $ 1.44 $ 1.41
========== ========== ========== ==========
Weighted average common shares outstanding - diluted 15,977 12,426 15,965 12,411
========== ========== ========== ==========
</Table>
SEE ACCOMPANYING NOTES.
-3-
<Page>
Triumph Group, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<Table>
<Caption>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
2001 2000
--------- ---------
OPERATING ACTIVITIES
Net income $ 23,065 $ 17,444
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,518 12,609
Non-cash special charge 5,044 -
Provision for deferred income taxes - 4,174
Provision for doubtful accounts receivable 673 159
Interest on subordinated and junior subordinated
promissory notes paid by issuance of
additional notes 539 493
Changes in other current assets and liabilities, net of
acquisitions of businesses:
Accounts receivable (26) 729
Inventories (3,154) (16,363)
Prepaid expenses and other (2,602) 710
Accounts payable, accrued expenses, and accrued
income taxes payable (18,686) (9,541)
Other 652 (4,102)
--------- ---------
Net cash provided by operating activities 16,023 6,312
INVESTING ACTIVITIES
Capital expenditures, net (14,155) (10,675)
Cash used for businesses acquired (4,425) (90,871)
--------- ---------
Net cash used in investing activities (18,580) (101,546)
</Table>
-4-
<Page>
Triumph Group, Inc.
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
(unaudited)
<Table>
<Caption>
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------
FINANCING ACTIVITIES 2001 2000
--------- ---------
Net proceeds from common stock offering $ 16,031 $ -
Net (decrease) increase in revolving credit facility borrowings (14,518) 97,564
Repayment of debt and capital lease obligations (3,988) (2,408)
Proceeds from issuance of long-term debt 7,500 -
Purchase of treasury stock (750) -
Proceeds from exercise of stock options 281 124
--------- ---------
Net cash provided by financing activities 4,556 95,280
--------- ---------
Net change in cash 1,999 46
Cash at beginning of period 4,819 6,279
--------- ---------
Cash at end of period $ 6,818 $ 6,325
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 15,023 $ 6,533
Cash paid for interest 6,576 8,789
</Table>
SEE ACCOMPANYING NOTES.
-5-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended September 30, 2001 are not necessarily indicative of the results
that may be expected for the fiscal year ended March 31, 2002. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Triumph Group, Inc.'s (the "Company") Annual Report on Form
10-K for the year ended March 31, 2001.
Certain intangible assets at March 31, 2001, have been reclassified to conform
to the new presentation requirements of Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations" ("SFAS No. 141").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company's Aviation segment designs, engineers, manufactures or repairs and
overhauls aircraft components for commercial airlines, air cargo carriers, and
original equipment manufacturers on a worldwide basis. The Company's Metals
segment manufactures, machines, processes, and distributes metal products to
customers in the computer, construction, container and office furniture
industries, primarily within North America.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
-6-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOODWILL AND INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board approved the issuance of
SFAS No. 141 and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
142"). SFAS No. 141 applies to all business combinations completed after June
30, 2001 and requires the use of the purchase method of accounting. SFAS No. 141
also establishes new criteria for determining whether intangible assets should
be recognized separately from goodwill. SFAS No. 142 provides that goodwill and
intangible assets with indefinite lives will not be amortized but rather will be
tested for impairment on an annual basis. SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001, however companies with fiscal years
beginning after March 15, 2001 may elect to adopt the statement early.
Accordingly, effective April 1, 2001, the Company adopted SFAS No. 142. The
following table reflects the comparable prior year period's net income and
earnings per share as if SFAS No. 142 had been adopted on April 1, 2000:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
Reported net income $ 10,104 $ 9,173 $ 23,065 $ 17,444
Add-back after-tax goodwill amortization - 1,116 - 2,247
-------- -------- -------- --------
Adjusted net income $ 10,104 $ 10,289 $ 23,065 $ 19,691
======== ======== ======== ========
Earnings per share - basic $ 0.64 $ 0.79 $ 1.46 $ 1.49
Add-back after-tax goodwill amortization - 0.09 - 0.20
-------- -------- -------- --------
Adjusted earnings per share - basic $ 0.64 $ 0.88 $ 1.46 $ 1.69
======== ======== ======== ========
Earnings per share - diluted $ 0.63 $ 0.74 $ 1.44 $ 1.41
Add-back after-tax goodwill amortization - 0.09 - 0.18
-------- -------- -------- --------
Adjusted earnings per share - diluted $ 0.63 $ 0.83 $ 1.44 $ 1.59
======== ======== ======== ========
</Table>
Intangible assets cost and accumulated amortization at September 30, 2001 were
$47,708 and $10,984, respectively. Intangible assets cost and accumulated
amortization at March 31, 2001 were $47,708 and $8,728, respectively. Intangible
assets consists of two major classes: product rights and licenses, and
non-compete agreements and other. Gross cost and accumulated amortization of
product rights and licenses at September 30, 2001 were $36,602 and $5,434,
respectively, and at March 31, 2001 were $36,602 and $3,748, respectively. Gross
costs and accumulated amortization of noncompete agreements and other at
September 30, 2001 were $11,106 and $5,550, respectively, and at March 31, 2001
were $11,106 and $4,980, respectively. Amortization expense for the three and
six-month periods ended September 30, 2001 was $1,126 and $2,256, respectively.
Amortization expense for the fiscal year ended March 31, 2002 and the succeeding
five fiscal years by year is expected to be as follows: 2002: $4,520; 2003:
$4,077; 2004: $3,896; 2005: $3,896; 2006: $3,896; 2007: $3,896.
-7-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
3. ACQUISITIONS
In August 2001, the Company acquired substantially all of the assets of EMCO
Fluid Systems, Inc., by EFS Aerospace, Inc. ("EFS"). EFS, located in
Valencia, California, designs, produces, assembles and tests both hydraulic
and pneumatic valves and actuators for the aviation and aerospace industries.
The purchase price of approximately $38,166 includes the assumption of debt
and certain liabilities and direct costs of the transaction. The excess of
the purchase price over the preliminary estimated fair value of the net
assets acquired of $30,150 was recorded as excess of cost over net assets
acquired. The EFS acquisition agreement provides for a reduction in the
purchase price in the event certain performance measurements are not met on
each specified date through 2004. Included in accrued expenses at September
30, 2001 is $24,899 representing amounts due the seller. The pro forma
effects of the EFS acquisition for the six months ended September 30, 2001
and 2000 were not material.
4. INVENTORIES
The components of inventories are as follows:
<Table>
<Caption>
SEPTEMBER 30, MARCH 31,
2001 2001
------------ ---------
Raw materials $ 50,860 $ 50,638
Work-in-process 78,713 75,039
Finished goods 48,572 45,281
--------- ---------
Total inventories $ 178,145 $ 170,958
========= =========
</Table>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<Table>
<Caption>
SEPTEMBER 30, MARCH 31,
2001 2001
------------- ----------
Revolving credit facility $ 130,482 $ 145,000
Subordinated promissory notes 26,720 18,658
Other debt 19,763 12,664
--------- ---------
176,965 176,322
Less current portion 6,065 6,017
--------- ---------
$ 170,900 $ 170,305
========= =========
</Table>
In conjunction with the EFS acquisition, the Company assumed $10,000 of seller
financing with an interest rate of 6% maturing between October 2002 and October
2005 and $1,067 of other debt. In October 2001, the Company retired
substantially all of the then outstanding balance of the other debt.
On August 23, 2001, the Company entered into a loan agreement with the Illinois
Development Finance Authority related to the Illinois Development Finance
Authority Economic Development Bonds, series of 2001 ("the Bonds"). The proceeds
of the Bonds of $7,500 were used to fund the purchase of the Company's
TriWestern Metals new electro-galvanizing production line. The Bonds are due to
mature on August 1, 2016 and are secured by the equipment. The Bonds bear
interest at a variable rate based on LIBOR, which at September 30, 2001 was
3.5%.
-8-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
6. EARNINGS PER SHARE
The following is a reconciliation between the weighted average outstanding
shares used in the calculation of basic and diluted earnings per share:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------
2001 2000 2001 2000
------ ------ ------ ------
(in thousands)
Weighted average common shares outstanding 15,799 11,676 15,783 11,674
Net effect of dilutive stock options 178 100 182 87
Net effect of dilutive warrant - 650 - 650
Weighted average common shares outstanding - ------- ------ ------ ------
assuming dilution 15,977 12,426 15,965 12,411
======= ====== ====== ======
</Table>
Options to purchase 114,000 shares of common stock, at prices ranging from
$43.13 per share to $44.88 per share, were outstanding during the second quarter
of fiscal 2002. These options were not included in the computation of diluted
earnings per share because the exercise price was greater than the average
market price of the common stock during the three months ended September 30,
2001 and, therefore, the effect would be antidilutive.
7. COMMON STOCK OFFERING
In March 2001, the Company completed the sale of 3,000,003 shares of its Common
stock for $37.50 a share through an underwritten public offering. In addition,
the Company granted the underwriters of its public offering a 30-day option to
purchase additional shares to cover over-allotments. In April 2001, the
Underwriters exercised the over-allotment option and the Company sold an
additional 450,000 shares of its Common stock. The net proceeds from the sales
of $122,406 were used to repay long-term debt.
During the quarter ended June 30, 2001, 1,500,000 shares of Class D Common stock
were converted to Common stock.
In September 2001, the Company purchased 25,000 shares of its common stock as
Treasury stock for an aggregate purchase price of $750.
-9-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
8. SEGMENT REPORTING
Selected financial information for each reportable segment is as follows:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ -------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net Sales:
Aviation $ 149,013 $ 115,222 $ 289,522 $ 228,062
Metals 12,414 16,341 25,437 32,497
--------- --------- --------- ---------
$ 161,427 $ 131,563 $ 314,959 $ 260,559
========= ========= ========= =========
Income before income taxes:
Operating income (expense):
Aviation $ 25,727 $ 19,965 $ 50,916 $ 38,069
Metals 104 731 213 1,655
Corporate (1,968) (1,217) (3,713) (2,273)
Special charge (5,044) - (5,044) -
--------- --------- --------- ---------
18,819 19,479 42,372 37,451
Interest expense and other 2,982 4,917 6,220 9,760
--------- --------- --------- ---------
$ 15,837 $ 14,562 $ 36,152 $ 27,691
========= ========= ========= =========
Capital expenditures:
Aviation $ 7,172 $ 3,538 $ 12,199 $ 8,067
Metals 558 1,785 1,943 2,584
Corporate 6 15 13 24
--------- --------- --------- ---------
$ 7,736 $ 5,338 $ 14,155 $ 10,675
========= ========= ========= =========
Depreciation and amortization:
Aviation $ 4,863 $ 5,883 $ 9,728 $ 11,986
Metals 372 293 743 587
Corporate 23 18 47 36
--------- --------- --------- ---------
$ 5,258 $ 6,194 $ 10,518 $ 12,609
========= ========= ========= =========
September 30, March 31,
2001 2001
------------- ---------
Assets:
Aviation $ 737,570 $ 694,278
Metals 31,025 29,768
Corporate 7,966 7,323
--------- ---------
$ 776,561 $ 731,369
========= =========
</Table>
During the three months ended September 30, 2001 and 2000, the Company had
foreign sales of $34,222 and $24,868, respectively. For the six months ended
September 30, 2001 and 2000, the Company had foreign sales of $66,857 and
$47,139, respectively.
-10-
<Page>
Triumph Group, Inc.
Notes to Consolidated Financial Statements (continued)
(dollars in thousands, except per share data)
(Unaudited)
9. DERIVATIVES AND HEDGING ACTIVITIES
Effective April 1, 2001 the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
SFAS No. 138. This standard requires that all derivative financial instruments,
such as interest rate swap contracts, be recognized in the financial statements
and measured at fair value regardless of the purpose or intent for holding them.
Changes in the fair value of derivative financial instruments are either
recognized periodically in income or shareholder's equity (as a component of
accumulated other comprehensive income), depending on whether the derivative is
being used to hedge changes in fair value or cash flows. The adoption of SFAS
No. 133 resulted in a loss of $3,119 recorded to accumulated other comprehensive
loss and a liability recorded in deferred income taxes and other.
Use of Derivative Financial Instruments
The Company uses derivative financial instruments principally to manage the risk
that changes in interest rates will affect the amount of its future interest
payments. The following is a summary of the Company's risk management strategies
and the effect of these strategies on the consolidated financial statements.
Interest Rate Risk Management
The Company uses a two-year interest rate swap contract to adjust the amount of
total debt that is subject to variable interest rates. Under the interest rate
swap contract, the Company pays amounts equal to the specified fixed-rate of
interest (6.56%) multiplied by the notional principal amount ($100,000), and
receives a variable rate of interest (30-day LIBOR) multiplied by the same
notional principal amount. No other cash payments are made unless the contract
is terminated prior to maturity, in which case the amount paid or received in
settlement is established by agreement at the time of termination and should
represent the market quotation, at current rates of interest, of the remaining
obligations to exchange payments under the terms of the contract. The
counterparty to the interest rate swap agreement exposes the Company to credit
loss in the event of non-performance, although the Company does not anticipate
such non-performance. Pursuant to SFAS No. 133, the Company accounts for its
interest rate swap contract as a cash flow hedge which is highly effective. As
of September 30, 2001, the interest rate swap is reflected at fair value of
$4,519 and is included in deferred income taxes and other with a corresponding
amount included in accumulated other comprehensive loss. The Company has not
experienced any ineffectiveness with its interest rate swap and accordingly has
not recognized any gains or losses in its earnings.
-11-
<Page>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(The following discussion should be read in conjunction with the Consolidated
Financial Statements contained elsewhere herein.)
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000
AVIATION SEGMENT
NET SALES. Net sales for the Aviation segment increased by $33.8 million,
or 29.3%, to $149.0 million for the second quarter of fiscal 2002 from $115.2
million for the second quarter of fiscal 2001. This growth in revenue is due to
our increased participation in the expanding regional jet market, namely the
Canadair RJ programs, growth of participation in Airbus programs, primarily the
A319, A320 and A321 programs and certain military programs, most significantly
the C-17 program. Revenue growth was also helped by the positive impact of
license agreements and product lines obtained in fiscal 2001 and from the
acquisition of EFS Aerospace, Inc. ("EFS") effective August 1, 2001. Increases
in certain Boeing program build rates, namely the B737 new generation and B777,
added to the growth of net sales in the quarter over the prior year period.
Due to the terrorist activities of September 11, 2001 and the resulting
adverse effects on commercial aircraft production rates, airline flight
schedules and military spending, Triumph believes that its sales for the
remainder of the fiscal year to commercial aircraft OEM's and certain airline
customers will be negatively impacted, but sales to the military of spare
parts will positively impact the Company's sales for the remainder of the
year. However, the net effect of these factors on the Company's consolidated
sales is indeterminable at this time.
OPERATING INCOME. Operating income for the Aviation segment increased by
$5.8 million, or 28.9%, to $25.7 million for the second quarter of fiscal 2002
from $20.0 million for the second quarter of fiscal 2001. Effective April 1,
2001, the Company adopted Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides that
goodwill and intangible assets with indefinite lives will not be amortized. In
accordance with SFAS 142, the Company stopped amortizing goodwill effective
April 1, 2001. Had SFAS 142 been effective April 1, 2000, operating income in
the second quarter of fiscal 2001 would have been $21.7 million, or $1.8 million
more than reported. Had the Company not adopted SFAS 142 until April 1, 2002,
operating income for the second quarter of fiscal 2002 would have been $23.7
million or $2.0 million less than reported.
During the second quarter of fiscal 2002, the Company incurred
approximately $0.9 million of amortization and royalty expenses related to its
purchase of certain licenses and a product line which it acquired at the end of
the second quarter of fiscal 2001.
The remaining net increase in operating income over the prior year period
of approximately $4.9 million resulted from the increase in revenues and gross
profits, most notably from the programs discussed above, as well as the
acquisition of EFS, offset by increases in selling, general and administrative
expenses from the Aviation Segment as a whole.
-12-
<Page>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
METALS SEGMENT
NET SALES. Net sales for the Metals segment decreased by $3.9 million, or
24.0%, to $12.4 million for the second quarter of fiscal 2002 from $16.3 million
for the second quarter of fiscal 2001. This decrease was mainly due to import
pricing pressures and lower volume at the Company's electrogalvanized steel
operation and a lower activity level at the Company's structural steel erection
operation.
OPERATING INCOME. Operating income for the Metals segment decreased by $0.6
million, or 85.8%, to $0.1 million for the second quarter of fiscal 2002 from
$0.7 million from the prior year period. This decrease was mainly due to the
decline in net sales.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.8 million, or 61.7%,
to $2.0 million for the second quarter of fiscal 2002 from $1.2 million for the
second quarter of fiscal 2001.
SPECIAL CHARGE. During the second quarter of fiscal 2002, the Company
recorded a special charge totaling $5.0 million related to the write-off of the
development expense on a new aircraft program, which is deemed unlikely to go
into production at this time.
INTEREST EXPENSE AND OTHER. Interest expense and other decreased by
$1.9 million, or 39.4%, to $3.0 million for the second quarter of fiscal 2002
from $4.9 million for the second quarter of fiscal 2001. This decrease was
primarily due to lower interest rates and decreased debt levels from the
follow-on public offering which occurred in March and April of 2001.
INCOME TAX EXPENSE. The effective tax rate was 36.2% for the second quarter
of fiscal 2002 and 37.0% for the second quarter of fiscal 2001.
NET INCOME. Net income increased to $10.1 million for the second quarter of
fiscal 2002 from $9.2 million for the prior year period. The increase in net
income in second quarter 2002 was primarily attributable to the earnings of the
Aviation segment operating units, the adoption of SFAS 142 in fiscal 2002 and
the decreased interest expense due to the decreased debt levels from the
follow-on public offering offset by the special charge.
-13-
<Page>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
SIX MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
2000
AVIATION SEGMENT
NET SALES. Net sales for the Aviation segment increased by $61.5 million,
or 26.9%, to $289.5 million for the six months ended September 30, 2001 from
$228.1 million for the prior year period. This growth in revenue is due to our
increased participation in the expanding regional jet market, namely the
Canadair RJ programs, growth of participation in Airbus programs, primarily the
A319, A320 and A321 programs and certain military programs, most significantly
the C-17 program. Revenue growth was also helped by the positive impact of
license agreements and product lines obtained in fiscal 2001 and from the
acquisition of EFS. Increases in certain Boeing program build rates, namely the
B737 new generation and B777, added to the growth of net sales in the six months
over the prior year period.
Due to the terrorist activities of September 11, 2001 and the resulting
adverse effects on commercial aircraft production rates, airline flight
schedules and military spending, Triumph believes that its sales for the
remainder of the fiscal year to commercial aircraft OEM's and certain airline
customers will be negatively impacted, but sales to the military of spare
parts will positively impact the Company's sales for the remainder of the
year. However, the net effect of these factors on the Company's consolidated
sales is indeterminable at this time.
OPERATING INCOME. Operating income for the Aviation segment increased by
$12.8 million, or 33.7%, to $50.9 million for the six months ended September 30,
2001 from $38.1 million for the prior year period. Effective April 1, 2001, the
Company adopted Statement of Financial Accounting Standards No. 142 "Goodwill
and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides that goodwill and
intangible assets with indefinite lives will not be amortized. In accordance
with SFAS 142, the Company stopped amortizing goodwill effective April 1, 2001.
Had SFAS 142 been effective April 1, 2000, operating income for the six months
ended September 30, 2000 would have been $41.6 million or $3.6 million more than
reported. Had the Company not adopted SFAS 142 until April 1, 2002, operating
income for the six months ended September 30, 2001 would have been $46.9 million
or $4.0 million less than reported.
During the six months ended September 30, 2001, the Company incurred
approximately $1.8 million of amortization and royalty expenses related to its
purchase of certain licenses and a product line which it acquired at the end of
the second quarter of fiscal 2001.
The remaining net increase in operating income over the prior year period
of approximately $11.0 million resulted from the increase in revenues and gross
profits, most notably from the programs discussed above as well as the
acquisition of EFS, offset by increases in selling, general and administrative
expenses from the Aviation Segment as a whole.
-14-
<Page>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
METALS SEGMENT
NET SALES. Net sales for the Metals segment decreased by $7.1 million, or
21.7%, to $25.4 million for the six months ended September 30, 2001 from $32.5
million for the prior year period. This decrease was mainly due to import
pricing pressures and lower volume at the Company's electrogalvanized steel
operation as well as a lower activity level at the Company's structural steel
erection operation.
OPERATING INCOME. Operating income for the Metals segment decreased by $1.4
million, or 87.1%, to $0.2 million for the six months ended September 30, 2001
from $1.7 million from the prior year period. This decrease was mainly due to
the decline in net sales.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $1.4 million, or 63.4%,
to $3.7 million for the six months ended September 30, 2001 from $2.3 million
for the prior year period.
SPECIAL CHARGE. During the second quarter of fiscal 2001, the Company
recorded a special charge totaling $5.0 million related to the write-off of the
development expense on a new aircraft program, which is deemed unlikely to go
into production at this time.
INTEREST EXPENSE AND OTHER. Interest expense and other decreased by $3.5
million, or 36.3%, to $6.2 million for the six months ended September 30, 2001
from $9.8 million for the prior year period. This decrease was primarily due to
lower interest rates and decreased debt levels from the follow-on public
offering which occurred in March and April of 2001.
INCOME TAX EXPENSE. The effective tax rate was 36.2% for the six months
ended September 30, 2001 and 37.0% for the six months ended September 30, 2000.
NET INCOME. Net income increased to $23.1 million for the six months ended
September 30, 2001 from $17.4 million for the prior year period. The increase in
net income in first half of fiscal 2002 was primarily attributable to the
earnings of the Aviation segment operating units, the adoption of SFAS 142 in
fiscal 2002 and the decreased interest expense due to the decreased debt levels
from the follow-on public offering offset by the special charge.
-15-
<Page>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash flows
from operations and borrowings under its credit arrangements. The Company
generated approximately $16.0 million of cash flows from operating activities
for the six months ended September 30, 2001. The Company used approximately
$18.6 million in investing activities and raised $4.6 million in financing
activities for the six months ended September 30, 2001.
As of September 30, 2001, $217.1 million was available under the Credit
Facility. On September 30, 2001, an aggregate amount of approximately $130.5
million was outstanding under the Credit Facility, $124.0 million of which was
accruing interest at LIBOR plus applicable basis points totaling 6.83% per
annum, and $6.5 million of which was accruing interest at the prime rate of 6.0%
per annum. Amounts repaid under the Credit Facility may be reborrowed.
In March 2001, the Company completed the sale of 3,000,003 shares of its
Common stock for $37.50 per share through an underwritten public offering. In
addition, the Company granted its underwriters of its public offering a 30-day
option to purchase additional shares to cover over-allotments. In April 2001,
the Underwriters exercised the over-allotment option and the Company sold an
additional 450,000 shares of its Common stock. The net proceeds from the April
2001 sales of $16.0 million were used to repay long-term debt.
On August 23, 2001, the Company entered into a loan agreement with the
Illinois Development Finance Authority related to the Illinois Development
Finance Authority Economic Development Bonds, series of 2001 ("the Bonds"). The
proceeds of the Bonds of $7.5 million were used to fund the purchase of the
Company's TriWestern Metals new electro-galvanizing production line. The Bonds
are due to mature on August 1, 2016 and are secured by the equipment. The Bonds
bear interest at a variable rate based on LIBOR, which at September 30, 2001 was
3.5%.
Capital expenditures were approximately $14.2 million for the six months
ended September 30, 2001 primarily for manufacturing machinery and equipment for
the Aviation segment. The Company funded these expenditures through borrowings
under its Credit Facility. The Company expects capital expenditures to be
approximately $40.0 million for its fiscal year ending March 31, 2002. The
expenditures are expected to be used mainly to expand capacity at several
facilities.
On December 15, 1998, the Company announced a program to repurchase up
to 500,000 shares of its common stock. In September 2001, the Company
repurchased a total of 25,000 shares at an average share price of $29.99 for
a total purchase price of $0.7 million. From the inception of the program
through September 30, 2001, the Company has repurchased a total of 269,200
shares for a total purchase price of $6.7 million.
-16-
<Page>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
The Company believes that cash generated by operations and borrowings under
the Credit Facility will be sufficient to meet anticipated cash requirements for
its current operations. However, the Company has a stated policy to grow through
acquisition and is continuously evaluating various acquisition opportunities. As
a result, the Company currently is pursuing the potential purchase of a number
of candidates. In the event that more than one of these transactions are
successfully consummated, the availability under the Credit Facility might be
fully utilized and additional funding sources may be needed. There can be no
assurance that such funding sources will be available to the Company on terms
favorable to the Company, if at all.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to the Company's
future operations and prospects, including statements that are based on current
projections and expectations about the markets in which the Company operates,
and management's beliefs concerning future performance and capital requirements
based upon current available information. Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management. When used in this document, words like "may", "might",
"will", "expect", "anticipate", "believe", "potential", and similar expressions
are intended to identify forward looking statements. Actual results could differ
materially from management's current expectations. For example, there can be no
assurance that additional capital will not be required or that additional
capital, if required, will be available on reasonable terms, if at all, at such
times and in such amounts as may be needed by the Company. In addition to these
factors, among other factors that could cause actual results to differ
materially are uncertainties relating to the integration of acquired businesses,
general economic conditions affecting the Company's business segments,
dependence of certain of the Company's businesses on certain key customers as
well as competitive factors relating to the aviation and metals industries
and the Company's assessment of the impact of the September 11, 2001 attack.
For a more detailed discussion of these and other factors affecting the
Company, see risk factors described in the Company's Annual Report on Form
10-K, for the year ended March 31, 2001, filed with the SEC in June 2001.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding the Company's exposure to certain market
risks, see Item 7A. Quantitative and Qualitative Disclosures About Market
Risk in the Company's Annual Report on Form 10-K for the year ended March 31,
2001 and Note 9 to the Company's financials statements in its Quarterly
Report on Form 10-Q for the period ended September 30, 2001. There has been
no material change in this information.
-17-
<Page>
TRIUMPH GROUP, INC.
Part II. Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
July 16, 2001. At such meeting, the following matters were
voted upon by the stockholders, receiving the number of
affirmative, negative and withheld votes, as well as
abstentions and broker non-votes, set forth below for each
matter.
1. Election of six persons to the Company's Board of Directors to
serve until the 2002 Annual Meeting of Stockholders and until
their successors are elected and qualified.
RICHARD C. III:
9,936,436 Affirmative
1,578,148 Against
JOHN R. BARTHOLDSON:
9,926,415 Affirmative
1,588,169 Against
CLAUDE F. KRONK:
11,498,632 Affirmative
15,952 Against
RICHARD C. GOZON
11,496,132 Affirmative
18,452 Against
JOSEPH M. SILVESTRI
11,497,632 Affirmative
16,952 Against
WILLIAM O. ALBERTINI
11,486,111 Affirmative
28,473 Against
-18-
<Page>
2. Ratification of the selection of Ernst & Young LLP as independent
public accountants for the Company for the fiscal year ending
March 31, 2002.
14,817,331 Affirmative
44,556 Negative
1,232 Withheld
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended September 30, 2001
-19-
<Page>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Triumph Group, Inc.
------------------------------------------------
(Registrant)
/s/ Richard C. III
------------------------------------------------
Richard C. III, President & CEO
/s/ John R. Bartholdson
------------------------------------------------
John R. Bartholdson, Senior Vice President & CFO
(Principal Financial Officer)
/s/ Kevin E. Kindig
------------------------------------------------
Kevin E. Kindig, Vice President & Controller
(Principal Accounting Officer)
Dated: November 14, 2001
-20-