BERWYN, PA — Triumph Group, Inc. (NYSE: TGI) recently reported financial results for its first quarter of fiscal year 2021, which ended June 30, 2020.
First Quarter Fiscal 2021
- Net sales of $495.1 million
- Operating loss of $252.4 million with operating margin of (51.0%) and included an impairment charge of $252.4 million; adjusted operating income of $15.4 million with adjusted operating margin of 3.1%
- Net loss of $277.3 million, or ($5.35) per share; adjusted net loss of $9.5 million, or ($0.19) per share
- Cash flow used in operations of ($197.5) million, and free cash use of ($205.2) million
Full-Year Fiscal 2021 Net Sales Guidance
- Net sales between $1.8 – $1.9 billion
“For the first quarter of our fiscal year, organic revenue decreased by 29% due primarily to expected declines in Aerospace Structures associated with planned reductions from our portfolio transformation and the COVID-19 pandemic. Systems & Support gross margins were in line with the prior year, benefitting from increased military volumes, improved operational efficiencies and cost reduction initiatives,” 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 recent announcements of the sales of our G650 wing kitting and engineering services program to Gulfstream and of our two Composite Structures factories to Arlington Capital Partners. These transactions will benefit Triumph in fiscal 2021 and beyond.”
Mr. Crowley continued, “Our total cash usage for the first quarter was largely associated with working capital expansion, yet contained by the actions we implemented early in the quarter to conserve cash. We expect our cash use to slow in the second quarter and recover in the second half as we exit the last of our cash burning programs and begin to generate positive free cash flow. We are continuing to identify further cost reduction actions to enhance our liquidity position and ensure financial flexibility in the current operating environment while supporting the needs of our customers.”
Mr. Crowley concluded, “The steps we took this quarter build on our momentum and drive improved profitability and cash flow to become a more predictable and diverse business. As we look out to the rest of the year, Triumph remains focused on protecting the health and safety of our people, conserving our cash and partnering with our customers to ensure we are best positioned for recovery for the benefit of all our stakeholders.”
First Quarter Fiscal Year 2021 Overview
After accounting for the impact of the divestitures, sales for the first quarter of fiscal 2021 were down 29% 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.
First quarter operating loss of $252.4 million included a $252.4 million impairment charge of the legacy Aerospace Structures long-lived assets, and $15.4 million of restructuring costs associated with reductions in work force. Net loss for the first quarter of fiscal year 2021 was $277.3 million, or ($5.35) per share. On an adjusted basis, net loss was $9.5 million, or $(0.19) per share.
Triumph’s results included the following:
|($ millions except EPS)||Pre-tax||After-tax||EPS|
|Loss from Continuing Operations – GAAP||$||(276.5)||$||(277.3)||$||(5.35)|
|Impairment of long-lived assets||252.4||252.4||4.87|
|Restructuring costs (cash)||15.4||15.4||0.30|
|Adjusted Loss from Continuing Operations – non-GAAP *||$||(8.6)||$||(9.5)||$||(0.19)|
|* Differences due to rounding|
Backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $2.7 billion, down compared to the prior year period and on a sequential basis due to sunsetting programs and recent production rate reductions, but partially offset by military program increases in Systems & Support.
For the first quarter of fiscal 2021, cash flow used in operations was $(197.5) million, reflecting increasing working capital and liquidation of approximately $10.0 million in prior period advances against current period deliveries.
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 expects 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 quarter of fiscal 2021 to continue, but to a lesser degree in the second quarter, and expects it to recover somewhat in the second half of the fiscal year. Therefore, the Company expects cash used in operations and free cash use to be moderately higher for the full fiscal year.
The Company’s outlook excludes the impact of the recent announcements of the sales of their G650 program and their Composite Structures factories and any potential future divestitures.
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