United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one)
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☒ |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
The number of outstanding shares of the Registrant's Common Stock, par value $.001 per share, on November 7, 2024, was
Table of Contents
TRIUMPH GROUP, INC.
TABLE OF CONTENTS
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Page Number |
Part I. Financial Information |
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Item 1. |
Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets at September 30, 2024 and March 31, 2024 |
1 |
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2 |
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3 |
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4 |
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Condensed Consolidated Statements of Cash Flows - Six months ended September 30, 2024 and 2023 |
6 |
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Notes to Condensed Consolidated Financial Statements - September 30, 2024 |
7 |
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
25 |
Item 3. |
36 |
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Item 4. |
36 |
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37 |
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Item 1. |
37 |
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Item 1A. |
38 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
38 |
Item 3. |
38 |
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Item 4. |
38 |
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Item 5. |
38 |
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Item 6. |
38 |
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39 |
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TRIUMPH GROUP, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(Dollars in thousands, except per share data)
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September 30, |
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March 31, |
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2024 |
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2024 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Trade and other receivables, less allowance for credit losses |
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Contract assets |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Other, net |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
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Accounts payable |
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Contract liabilities |
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Accrued expenses |
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Total current liabilities |
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Long-term debt, less current portion |
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Accrued pension and other postretirement benefits |
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Deferred income taxes |
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Other noncurrent liabilities |
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Stockholders' deficit: |
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Common stock, $ |
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Capital in excess of par value |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders' deficit |
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( |
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Total liabilities and stockholders' deficit |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
1
TRIUMPH GROUP, INC.
Condensed Consolidated Statements of Operations
(unaudited)
(Dollars in thousands, except per share data)
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Three Months Ended September 30, |
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Six Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Operating costs and expenses: |
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Cost of sales (exclusive of depreciation shown separately below) |
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Selling, general and administrative |
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Depreciation and amortization |
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Legal contingencies loss |
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— |
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Restructuring |
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(Gain) loss on sale of assets and businesses |
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— |
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( |
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— |
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Operating income |
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Non-service defined benefit expense (income) |
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Debt modification and extinguishment (gain) loss |
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— |
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( |
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( |
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Warrant remeasurement gain, net |
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— |
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( |
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— |
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Interest expense and other, net |
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Income (loss) from continuing operations before income taxes |
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( |
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Income tax (benefit) expense |
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( |
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( |
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Income (loss) from continuing operations |
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( |
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Income from discontinued operations, net of tax expense of $ |
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— |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Earnings (loss) per share—basic: |
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Earnings (loss) per share - continuing operations |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Earnings per share - discontinued operations |
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— |
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Earnings (loss) per share |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Weighted average common shares outstanding—basic |
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Earnings (loss) per share—diluted: |
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Earnings (loss) per share - continuing operations |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Earnings per share - discontinued operations |
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— |
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Earnings (loss) per share |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding—diluted |
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See accompanying notes to condensed consolidated financial statements.
2
TRIUMPH GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(Dollars in thousands)
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Three Months Ended September 30, |
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Six Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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( |
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( |
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( |
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Defined benefit pension plans and other postretirement benefits: |
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Reclassification to net income (loss) - net of tax expense |
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Amortization of net loss, net of taxes of $ |
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Recognized prior service credits, net of taxes of $ |
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( |
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Total defined benefit pension plans and other postretirement benefits income, net of taxes |
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Cash flow hedges: |
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Unrealized loss arising during the period, net of tax expense of $ |
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( |
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( |
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( |
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Reclassification of loss (gain) included in net earnings, net of tax expense of $ |
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( |
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Net unrealized loss on cash flow hedges, net of tax |
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Total other comprehensive income (loss) |
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( |
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Total comprehensive income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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See accompanying notes to condensed consolidated financial statements.
3
TRIUMPH GROUP, INC.
Condensed Consolidated Statements of Stockholders' Deficit
For the three and six months ended September 30, 2024
(unaudited)
(Dollars in thousands)
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Outstanding |
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Common |
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Capital in |
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Treasury |
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Accumulated |
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Accumulated |
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Total |
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March 31, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Pension liability adjustment, net of |
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— |
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— |
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— |
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— |
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— |
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Change in fair value of foreign currency |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Repurchase of restricted shares for |
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( |
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— |
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— |
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( |
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— |
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— |
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( |
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Retirement of treasury shares |
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— |
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— |
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( |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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— |
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June 30, 2024 |
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— |
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( |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Pension liability adjustment, net of |
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— |
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— |
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— |
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— |
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— |
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Change in fair value of foreign currency |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Repurchase of restricted shares for |
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( |
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— |
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— |
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( |
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— |
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— |
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( |
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Retirement of treasury shares |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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— |
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September 30, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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4
TRIUMPH GROUP, INC.
Condensed Consolidated Statements of Stockholders' Deficit
For the three and six months ended September 30, 2023
(unaudited)
(Dollars in thousands)
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Outstanding |
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Common |
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Capital in |
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Treasury |
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Accumulated |
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Accumulated |
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Total |
March 31, 2023 |
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$ |
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$ |
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$— |
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$( |
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$( |
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$( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Pension liability adjustment, net of |
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— |
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— |
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— |
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— |
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— |
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Change in fair value of foreign |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
Share-based compensation |
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— |
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— |
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— |
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— |
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Repurchase of shares for share-based |
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( |
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— |
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— |
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( |
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— |
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— |
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( |
Retirement of treasury shares |
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— |
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— |
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( |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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— |
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Warrant exercises, net of |
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— |
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— |
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— |
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Issuance of shares on pension contribution |
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— |
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— |
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June 30, 2023 |
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$ |
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$ |
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$— |
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$( |
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$( |
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$( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
Foreign currency translation |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
Pension liability adjustment, net of |
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— |
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— |
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— |
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— |
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— |
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Change in fair value of foreign currency |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
Share-based compensation |
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— |
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— |
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— |
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Repurchase of shares for share-based |
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( |
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— |
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— |
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( |
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— |
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— |
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( |
Employee stock purchase plan |
|
|
— |
|
|
— |
|
— |
|
— |
|
|||
Warrant exercises, net of |
|
|
|
|
— |
|
— |
|
— |
|
||||
September 30, 2023 |
|
|
$ |
|
$ |
|
$— |
|
$( |
|
$( |
|
$( |
5
TRIUMPH GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
|
|
Six Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating Activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of acquired contract liability |
|
|
( |
) |
|
|
( |
) |
(Gain) loss on sale of assets and businesses |
|
|
( |
) |
|
|
|
|
Loss (gain) on modification and extinguishment of debt |
|
|
|
|
|
( |
) |
|
Other amortization included in interest expense |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Warrants remeasurement gain |
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
||
Changes in other assets and liabilities, excluding the effects of |
|
|
|
|
|
|
||
Trade and other receivables |
|
|
( |
) |
|
|
|
|
Contract assets |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Accounts payable, accrued expenses, and contract liabilities |
|
|
( |
) |
|
|
( |
) |
Accrued pension and other postretirement benefits |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
( |
) |
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing Activities |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Payments on sale of assets and businesses |
|
|
( |
) |
|
|
( |
) |
Investment in joint venture |
|
|
— |
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
||
Proceeds from issuance of long-term debt |
|
|
— |
|
|
|
|
|
Retirement of debt and finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Payment of deferred financing costs |
|
|
— |
|
|
|
( |
) |
Proceeds on issuance of common stock, net of issuance costs |
|
|
— |
|
|
|
|
|
Premium on redemption of long-term debt |
|
|
( |
) |
|
|
— |
|
Repurchase of shares for share-based compensation |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
See accompanying notes to condensed consolidated financial statements.
6
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
1. BACKGROUND AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Triumph Group, Inc. ("Triumph") have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") 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 U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three and six months ended September 30, 2024 and 2023, are not necessarily indicative of results that may be expected for the year ending March 31, 2025. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the fiscal 2024 audited consolidated financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended March 31, 2024, filed with the Securities and Exchange Commission (the "SEC") on May 31, 2024.
Triumph Group, Inc. ("Triumph" or the "Company") is a Delaware corporation which, through its operating subsidiaries, designs, engineers, manufactures, and sells products for the global aerospace original equipment manufacturers ("OEMs") of aircraft and aircraft components and repairs and overhauls aircraft components and accessories for commercial airline, air cargo carrier, and military customers on a worldwide basis. Triumph and its subsidiaries (collectively, the "Company") are organized based on the products and services that they provide. The Company has
Systems & Support consists of the Company’s operations that provide integrated solutions, including design; development; and support of proprietary components, subsystems and systems, as well as production of complex assemblies using external designs. Capabilities include hydraulic, mechanical and electromechanical actuation, power, and control; a complete suite of aerospace gearbox solutions, including engine accessory gearboxes and helicopter transmissions; active and passive heat exchange technology; fuel pumps, fuel metering units, and Full Authority Digital Electronic Control fuel systems; and hydromechanical and electromechanical primary and secondary flight controls. As disclosed in Note 3, in December 2023 the Company entered into a definitive agreement with AAR Corp. (“AAR”), to sell Systems & Support's maintenance, repair, and overhaul operations located in Wellington, Kansas; Grand Prairie, Texas; San Antonio, Texas; Hot Springs, Arkansas; and Chonburi, Thailand (“Product Support”). As a result of this agreement, the Company has classified the Product Support results of operations for all periods presented as discontinued operations, and these operations are no longer reported as part of the Systems & Support reportable segment.
Interiors consists of the Company’s operations that have historically supplied commercial, business, and regional manufacturers with large metallic structures and continues to supply aircraft interior systems, including air ducting and thermal acoustic insulations systems. Subsequent to the divestitures disclosed in Note 3, the remaining operations of Interiors are those that supply commercial and regional manufacturers with aircraft interior systems.
The accompanying condensed consolidated financial statements include the accounts of Triumph and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated from the accompanying condensed consolidated financial statements.
The preparation of 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 condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of significant segment expenses and other segment items on an annual and interim basis. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption is permitted and the amendments in this ASU must be applied on a retrospective basis to all periods presented. The Company has not determined the impact ASU 2023-07 may have on the Company’s financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which improves income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The ASU indicates that all entities will apply its guidance prospectively with an
7
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
option for retroactive application to each period in the financial statements. The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition and Contract Balances
The Company's revenue is principally from contracts with customers to provide design, development, manufacturing, and support services associated with specific customer programs. The Company regularly enters into long-term master supply agreements that establish general terms and conditions and may define specific program requirements. Many agreements include clauses that provide sole supplier status to the Company for the duration of the program’s life. Purchase orders (or authorizations to proceed) are issued pursuant to the master supply agreements. Additionally, a majority of the Company’s agreements with customers include options for future purchases. Such options primarily reduce the administrative effort of issuing subsequent purchase orders and generally do not represent material rights granted to customers. The Company generally enters into agreements directly with its customers and is the principal in substantially all current contracts.
The identification of a contract with a customer for purposes of accounting and financial reporting requires an evaluation of the terms and conditions of agreements to determine whether presently enforceable rights and obligations exist. Management considers a number of factors when making this evaluation that include, but are not limited to, the nature and substance of the business exchange, the specific contractual terms and conditions, the promised products and services, the termination provisions in the contract, as well as the nature and execution of the customer’s ordering process and how the Company is authorized to perform work. Generally, presently enforceable rights and obligations are not created until a purchase order is issued by a customer for a specified number of units of product or services. Therefore, the issuance of a purchase order is generally the point at which a contract is identified for accounting and financial reporting purposes.
Management identifies the promises to the customer. Promises are generally explicitly stated in each contract, but management also evaluates whether any promises are implied based on the terms of the agreement, past business practice, or other facts and circumstances. Each promise is evaluated to determine if it is a performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service. The Company considers a number of factors when determining whether a promise is a distinct performance obligation, including whether the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer, whether the Company provides a significant service of integrating goods or services to deliver a combined output to the customer, or whether the goods or services are highly interdependent. The Company’s performance obligations consist of a wide range of engineering design services and manufactured components, as well as spare parts and repairs for OEMs.
The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. Typically, the transaction price consists solely of fixed consideration but may include variable consideration for contractual provisions such as unpriced contract modifications, claims (when a legal basis exists), cost-sharing provisions, and other receipts or payments to customers. The Company identifies and estimates variable consideration, typically at the most likely amount the Company expects to receive from its customers. Variable consideration is only included in the transaction price to the extent that the Company has determined that it is probable that a significant reversal of cumulative revenue recognized for the contract will not occur when the uncertainty associated with the variable consideration is resolved, and any excess variable consideration above such included amount is considered constrained. Consideration paid or payable to a customer is reflected as a reduction in net revenues when the amounts paid are not related to a distinct good or service at the later of when the related revenue is recognized or when the Company pays or promises to pay the consideration to the customer. The Company's contracts with customers generally require payment under normal commercial terms after delivery with payment typically required within
The Company generally is not subject to collecting sales tax and has made an accounting policy election to exclude from the transaction price any sales and other similar taxes collected from customers. As a result, any such collections are accounted for on a net basis.
8
Triumph Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
The total transaction price is allocated to each of the identified performance obligations using the relative stand-alone selling price. The objective of the allocation is to reflect the consideration that the Company expects to receive in exchange for the products or services associated with each performance obligation. Stand-alone selling price is the price at which the Company would sell a promised good or service separately to a customer. Stand-alone selling prices are established at contract inception, and subsequent changes in transaction price are allocated on the same basis as at contract inception. When stand-alone selling prices for the Company’s products and services are not observable, the Company uses either the “Expected Cost Plus a Margin” or "Adjusted Market Assessment" approaches to estimate stand-alone selling price. Expected costs are typically derived from the available periodic forecast information.
Revenue is recognized when or as control of promised products or services transfers to a customer and is recognized at the amount allocated to each performance obligation associated with the transferred products or services. Service sales, principally representing repair, maintenance, and engineering activities are recognized over the contractual period or as services are rendered. Sales under long-term contracts with performance obligations satisfied over time are recognized using either an input or output method. The Company recognizes revenue over time as it performs on these contracts because of the continuous transfer of contr