Triumph Group, Inc. ("Triumph" or the "Company") provided an update on its strategic review of its Aerospace Structures subsidiary.
In April 2019, Triumph announced it was undertaking a comprehensive review of its structures business as it focuses on its core systems and product support markets and capabilities. The Company has divested its 10 build-to-print machine shops, five fabrication shops, two metal finishing facilities, and its two million square foot Nashville large structures plant. Furthermore, the transition of the Bombardier Global 7500 wing program, G-650 wing box assembly operation, and Embraer E2 fuselage contract have all been completed to their new owners.
Earlier this year, Triumph completed its final B747 fuselage panels in its Hawthorne California factory which is planned to be closed later this calendar year. The transition of its B767 structural assembly work out of its Grand Prairie Texas plant is nearing completion in anticipation of concluding all production activities in early calendar year 2021. Over 1,000,000 annual hours of structures work has been outsourced as part of the Company's actions to improve its profitability and cash flow.
In recent weeks, the Company also entered into the following agreements which will further reduce debt and move the company towards its future state as a leading provider of systems and aftermarket services:
- Reached agreement in principle to sell its G650/G700 wing business to Gulfstream which will conclude its obligations on the program. Triumph also resolved open commercial issues and secured price increases on work it retains. The transaction is expected to close in early fiscal year 2021 and will help to reduce the Company's debt and inventory levels.
- Secured purchase orders from Boeing Commercial Airplanes across multiple programs to maintain economical production levels and provide support to its lower-tier supply chain. Triumph and Boeing also resolved open claims and deferred a majority of its advance repayments out of fiscal year 2021.
- Reached agreement with Israel Aviation Industries to accelerate transfer of the G280 wing program to IAI and Korean Aerospace Industries by July 2020. Only two completed wings remain to be delivered from Triumph's Tulsa Oklahoma plant after which it will be closed. All design support and scheduled warranty obligations will be transferred to IAI.
Taken together, the Company's comprehensive de-risking actions will reduce the number of Aerospace Structures sites from 34 to 9, reduce occupied space by 4.4 million square feet, and reduce staffing levels by over 4,000 employees. Structures related revenue declined by $600 million, from $2,200 million in fiscal year 2019 to $1,600 million in fiscal year 2020, while improving Company EBITDAP margins by 3%. Its Aerospace Structures subsidiary also improved from significant cash use over the same period to generating positive cash from operations.
As part of its strategic review, the Company is advancing the sale of additional non-core Structures sites through investment banker Lazard in the calendar year 2020 timeframe. These transactions will be announced as they occur.
Aerospace Structures, while down-sizing, continues to win new business to enhance its value. New awards for composite parts including engine nacelle components were received over the last two years from defense and commercial customers with life of contract value of over $1 billion.
Daniel J. Crowley, President and CEO of Triumph Group, stated, "Our Aerospace Structures team has executed with discipline, stabilizing the business while delivering on customer commitments, and exiting loss-making and non-strategic programs. Their demonstrated ability to divest non-core operations while developing next-generation composites and thermoplastic process capabilities reflects Triumph's value-creation drive. Despite recent market headwinds, we have been able to reposition programs and factories with strategic buyers who are committed to the structures market and want to invest in these businesses for the benefit of all stakeholders. We look forward to completing our review in calendar year 2020."