Triumph Group, Inc. (NYSE: TGI) today reported financial results for its second quarter of fiscal year 2021, which ended September 30, 2020.
Second Quarter Fiscal 2021
- Net sales of $481.8 million
- Operating income of $7.4 million with operating margin of 2%; adjusted operating income of $21.4 million with adjusted operating margin of 4%
- Net loss of $33.5 million, or ($0.64) per share; adjusted net loss of $4.3 million, or ($0.08) per share
- Cash flow used in operations of ($42.2) million, and free cash use of ($47.3) million
Full-Year Fiscal 2021 Net Sales Guidance
- Net sales between $1.8 - $1.9 billion
"For the second quarter of our fiscal year, Systems & Support revenues increased as compared to the first quarter driven by increased military volumes and partial rate recovery on Airbus programs. Organic revenue decreased compared to the prior year period due primarily to expected declines in Aerospace Structures associated with planned reductions from our portfolio transformation and the ongoing COVID-19 pandemic," stated Daniel J. Crowley, Triumph's president and chief executive officer. "We continued executing our plan to exit legacy programs in Aerospace Structures with the completion of the sale of our G650 wing kitting and engineering services program to Gulfstream. Furthermore, the sale of our two Composite Structures factories remains on track for later this year."
Mr. Crowley continued, "Our cash usage for the second quarter improved over our first quarter in line with our expectations as a result of tight working capital management and the benefits of earlier cash-conserving actions. We expect to continue to use cash in the third quarter and be cash positive in the fourth quarter. We have the financial flexibility to support the needs of our customers through this challenging environment. Triumph remains focused on protecting the health and safety of our people, conserving cash and partnering with our customers to ensure we are best positioned for recovery for the benefit of all our stakeholders."
Second Quarter Fiscal Year 2021 Overview
After accounting for the impact of the divestitures, sales for the second quarter of fiscal 2021 were down 33% organically from the comparable prior year period. The decline was driven by planned reductions on sunsetting and transitioned programs, impacts of the COVID-19 pandemic and resulting production rate decreases primarily on commercial programs, partially offset by increases in military programs.
Second quarter operating income of $7.4 million included $13.2 million of restructuring costs associated with facility closures, severance arising from reductions in force and third-party consulting costs. Net loss for the second quarter of fiscal year 2021 was $33.5 million, or ($0.64) per share. On an adjusted basis, net loss was $4.3 million, or ($0.08) per share.
Triumph's results included the following:
| Pre-tax | After-tax | EPS | ||||
| Loss from Continuing Operations - GAAP | $ | (32.7) | $ | (33.5) | $ | (0.64) |
| Loss on sale of assets and businesses | 0.7 | 0.7 | 0.01 | |||
| Restructuring costs (cash) | 13.2 | 13.2 | 0.25 | |||
| Refinancing fees | 15.3 | 15.3 | 0.29 | |||
| Adjusted Loss from Continuing Operations - non-GAAP * | $ | (3.5) | $ | (4.3) | $ | (0.08) |
| * Differences due to rounding |
The number of shares used in computing earnings per share for the second quarter of 2021 was 52.0 million.
Backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $2.4 billion, down as expected compared to the prior year period and on a sequential basis due to divestitures, sunsetting programs and recent production rate reductions, but partially offset by military program increases in Systems & Support.
For the second quarter of fiscal 2021, cash flow used in operations was $(42.2) million, reflecting increasing working capital and liquidation of approximately $10.0 million in prior period advances against current period deliveries.
In the second quarter of fiscal 2021, the Company changed its method of accounting for the determination of the market-related value of certain assets of the qualified U.S. defined benefit plan. This change in accounting principle is preferable based on U.S. generally accepted accounting principles. The change requires retrospective application. The impact of adoption for the three and six months ended September 30, 2020 was $0.03 and $0.06 per share, respectively and for fiscal year 2020 the impact of adoption was ($0.03) per share.
Lastly, during the quarter, the Company requested approval from the IRS to change its pension plan year from April 1 through March 31, to October 1 through September 30. If approved, the change will take effect on October 1, 2020, and is expected to improve the Company's projected cash flows used in the determination of the pension plan's funding.
Outlook
Based on anticipated aircraft production rates and MRO demand, including the impacts of pending program exits and no additional extended shut-down of operations due to the pandemic, the Company continues to expect that net sales for fiscal year 2021 will be approximately $1.8 to $1.9 billion.
The Company anticipates that the trends in cash used in operations that were experienced in the first half of fiscal 2021 to continue, but to a lesser degree in the third quarter, and expects cash flow to be positive in the fourth quarter of the fiscal year. Therefore, the Company expects cash used in operations and free cash use for the full fiscal year to be moderately higher than the first half.
The Company's outlook excludes the impact of the pending sale of our Composite Structures business and any potential future divestitures.
About Triumph
Triumph Group, Inc., headquartered in Berwyn, Pennsylvania, designs, engineers, manufactures, repairs and overhauls a broad portfolio of aerospace and defense systems, components and structures. The company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators.
More information about Triumph can be found on the Company's website at www.triumphgroup.com.
