Triumph Group Annual Report 2003

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FY2003 Annual Report · Triumph Group

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Executives &

Directors

Executive Officers

Richard C. Ill
President and
Chief Executive Officer

John R. Bartholdson
Senior Vice President,
Chief Financial Officer and Treasurer

Richard M. Eisenstaedt
Vice President,
General Counsel and Secretary

Kevin E. Kindig
Vice President and Controller

Lawrence J. Resnick
Vice President

Directors

William O. Albertini
Executive Vice President
Chief Financial Officer,
Bell Atlantic Global Wireless, Inc.
(Retired)

John R. Bartholdson
Senior Vice President,
Chief Financial Officer and Treasurer,
Triumph Group, Inc.

Richard C. Gozon
Executive Vice President,
Weyerhaeuser Company (Retired)

Richard C. Ill
President and
Chief Executive Officer,
Triumph Group, Inc.

Claude F. Kronk
Vice Chairman and Director,
J & L Specialty Steel, Inc. (Retired)

Joseph M. Silvestri
Vice President,
Citicorp Venture Capital, Ltd.

George Simpson
Chief Executive Officer,
Marconi, PLC (Retired)

Today’s

Markets
Demand
Powerful

Solutions.

Triumph Group, Inc.

1550 Liberty Ridge Drive /

Suite 100 / Wayne, PA 19087 /

Tel 610-251-1000

www.triumphgroup.com

2003 Annual Report

Triumph Group, Inc.

Triumph’s

Historical Performance Fiscal Year Ended March 31

Sales
(in millions)

EBITDA
(in millions)

Income from
Continuing Operations
(in millions)

Earnings per share - Diluted
(Income from Continuing Operations)

$600

500

400

300

200

100

’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

$120

100

’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

$50

’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

$3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

Triumph’s

Diverse Markets

Military & Space
32%

Large Transport
41%

Industrial Gas
Turbine &
Other 13%

Regional
5%

Business
9%

Percentage of Sales

Table of Contents

1 Financial Highlights
2 Shareholder Letter
3 Operating & Financial Review
4 Triumph Aerospace Systems Group

6 Triumph Components Group
7 Triumph Aftermarket Services Group
8 Company Directory

Ralee Engineering Company
Manufactures long structural components such as stringer
cords, floor beams and spars for the aviation industry.
Kevin Dahlin, President
Phone: 626-965-1630
E-mail: kdahlin@triumphgroup.com
City of Industry, California

Triumph Composite Systems, Inc.
Manufactures interior non-structural composites for
the aviation industry, including air control system ducting,
flooring panels, spars, aisle stands and glareshields.
MaryLou B. Thomas, President
Phone: 509-623-8500
E-mail: mthomas@triumphgroup.com
Spokane, Washington

Triumph Controls, Inc.
Designs and manufactures mechanical
and electromechanical control systems.
William Bernardo, President
Phone: 215-699-4861
E-mail: wbernardo@triumphgroup.com
North Wales, Pennsylvania
Phone: 317-421-8760
Shelbyville, Indiana

Triumph Thermal Systems, Inc.
Designs, manufactures, and repairs aircraft
thermal transfer components and systems.
Michael Perhay, General Manager
Phone: 419-273-2511
E-mail: mperhay@triumphgroup.com
Forest, Ohio

Triumph Wichita Support Center
Provides commercial, technical, and logistics support for
Triumph Group’s companies Wichita-based customers.
James E. Lee, President
Phone: 316-636-9200
E-mail: jlee@triumphgroup.com
Wichita, Kansas

Triumph Components Group
William J. Hinz, Group President
Phone: 480-446-0947
E-mail: whinz@triumphgroup.com

Northwest Industries
Machines and fabricates refractory, reactive,
heat and corrosion-resistant precision products.
Frederick W. Kuebrich, President
Phone: 541-926-5517
E-mail: fkuebrich@triumphgroup.com
Albany, Oregon

Triumph Components – Arizona, Inc.
Manufactures a wide range of gas turbine engine components
for aerospace and power generation markets, specializing in
precision machining, tube bending, thermal spray coatings,
welding, and metal forming methods, on materials ranging
from aluminum and titanium to super alloys.
David Roy, General Manager
Phone: 480-446-0963
E-mail: droy@triumphgroup.com
Tempe, Arizona

Triumph Components – San Diego, Inc.
Produces close tolerance, complex sheet metal assemblies
made from all types of aerospace materials using forming
and joining techniques.
Paul Aube, General Manager
Phone: 619-219-2004
E-mail: paube@triumphgroup.com
San Diego, California

Triumph Components – Wisconsin
Designs and manufactures gas turbine engine sheet
metal components utilizing a broad range of processing
options and materials from aluminum to high temp alloys.
Larry Haas, General Manager
E-mail: lhaas@triumphgroup.com
Phone: 262-786-3400
Brookfield, Wisconsin

Advanced Materials Technologies, Inc.
Repairs and manufactures components for
auxiliary power units and gas turbine engines.
Richard Wisniewski, President
Phone: 602-438-8760
E-mail: rwisniewski@triumphgroup.com
Tempe, Arizona

Triumph Engineering Services, Inc.
Specializes in the design and reverse engineering
of aerospace and industrial components.
Joe Anthony Saenz,General Manager
Phone: 480-446-0972
E-mail: asaenz@triumphgroup.com
Tempe, Arizona

Triumph Turbine Services, Inc.
Provides repair services and aftermarket parts
and services to utility operators, independent power
producers and third-party overhaul facilities.
Allen Brackett, General Manager
Phone: 520-796-6700
E-mail: abrackett@triumphgroup.com
Chandler, Arizona

Triumph Precision Castings Co.
Produces complex investment castings of turbine blades,
vanes and nozzles for gas turbine engines for industrial
and aerospace applications.
Richard Ransom, General Manager
Phone: 520-796-6300
E-mail: rransom@triumphgroup.com
Chandler, Arizona

Triumph Thermal Processing Company
Provides high temperature coatings, chemical stripping,
fluoride ion cleaning, hot isostatic pressing and heat
treatments for hot section, gas turbine components.
David Roy, General Manager
Phone: 520-796-3000
E-mail: droy@triumphgroup.com
Chandler, Arizona

Triumph Aftermarket
Services Group
John Brasch, Group President
Phone: 602-437-1144
E-mail: jbrasch@triumphgroup.com

Aerospace Technologies, Inc.
Manufactures and repairs metallic/composite
bonded components and assemblies.
Anthony R. McAnly, President
Phone: 817-451-0620
E-mail: tmcanly@triumphgroup.com
Fort Worth, Texas

Airborne Nacelle Services, Inc.
Repairs and overhauls thrust reversers,
nacelle components and other aerostructures.
Anthony R. McAnly, President
Phone: 501-262-1555
E-mail: tmcanly@triumphgroup.com
Hot Springs, Arkansas

A. Biederman
Repairs and overhauls aircraft instruments and avionics
and serves as an authorized stocking distributor
for a variety of aircraft components.
Richard R. Rockwood, President
Phone: 818-246-8431
E-mail: rrockwood@triumphgroup.com
Glendale, California

Furst Aircraft, Inc.
Specializes in the repair overhaul and exchange
of aircraft instruments and avionics.
Edward J. Furst, President
Phone: 201-440-9220
E-mail: efurst@triumphgroup.com
Teterboro, New Jersey

JDC Company
Specializes in the repair, overhaul and exchange of
electromechanical and pneumatic aircraft instruments.
David G. Vorsas, President
Phone: 954-772-4559
E-mail: dvorsas@triumphgroup.com
Fort Lauderdale, Florida
Phone: 512-218-1900
Austin, Texas

Triumph Accessory Services
Provides maintenance services for aircraft heavy accessories
and airborne electrical power generation devices, including
constant speed drives, integrated drive generators, air cycle
machines, and electrical generators.
Michael W. Hansen, President
Phone: 620-326-2235
E-mail: mhansen@triumphgroup.com
Wellington, Kansas

Triumph Aftermarket Services Division
Provides distribution, exchange and lease programs for APUs,
APU components, and components supported by Triumph
Accessory Services and Airborne Nacelle.
Lee R. Jacobs, General Manager
Phone: 602-470-7226
E-mail: ljacobs@triumphgroup.com
Phoenix, Arizona

Triumph Air Repair
Repairs and overhauls auxiliary power
units and related accessories.
Richard Wisniewski, President
Phone: 602-437-1144
E-mail: rwisniewski@triumphgroup.com
Phoenix, Arizona

Triumph Air Repair (Europe) Limited
Repairs and overhauls auxiliary power units for commercial
transport carriers and the commuter aviation industry.
Anthony R. Bull, Managing Director
Phone: 011 44 1256 381507
E-mail: tbull@triumphgroup.com
Lasham Alton Hampshire, England

Shareholder

Information

Triumph Group, Inc.
Corporate Headquarters
1550 Liberty Ridge Drive
Suite 100
Wayne, PA 19087
(610) 251-1000
www.triumphgroup.com

Annual Meeting
July 21, 2003, 9:30 a.m.
1550 Liberty Ridge Drive, Wayne, PA 19087

Financial Information
A copy of the Company’s Form 10-K filed with
the Securities and Exchange Commission may be
obtained without charge upon written request.

Requests for Triumph Group, Inc.’s 10-K or other
shareholder inquiries should be directed to:

John R. Bartholdson
Senior Vice President, Chief Financial Officer
Triumph Group, Inc.
1550 Liberty Ridge Drive
Suite 100
Wayne, PA 19087
(610) 251-1000

Fiscal 2003 Stock Prices
Per Common Share
High
Low
Year-End

$ 48.80
$ 21.00
$ 22.45

Common Stock
Triumph Group, Inc. Common stock
is listed on the NYSE.
Ticker symbol: TGI

Independent Auditors
Ernst & Young LLP
2001 Market Street
Suite 4000
Philadelphia, PA 19103

Transfer Agent
National City Bank
Corporate Trust Operations
P.O. Box 92301
Cleveland, OH 44193-0900
(888) 843-5542
E-mail: shareholder.inquiries@nationalcity.com

Equal Opportunity at Triumph
Triumph Group, Inc. is committed to providing
equal opportunities in the workplace.

(Dollars in thousands, except per share data)

Results for Year:

Mar 96

Mar 97

Mar 98

Mar 99

Mar 00

Mar 01

Mar 02

Mar 03

FinancialHighlights

Sales

$ 100,166

$ 167,731

$ 242,317

$ 328,577

$ 368,614

$ 500,201

$ 565,343

$ 565,381

Income from Continuing Operations
% of Sales

Income Tax Expense
Interest Expense & Other

Operating Income
% of Sales

3,575
4%

1,916
6,082

$ 10,384
6%

$ 20,418
8%

$ 30,711
9%

$ 32,038
9%

$ 37,845
8%

$ 49,117
9%

6,998
5,752

13,237
3,388

18,791
4,630

16,249
9,215

20,788
20,549

22,220
12,773

11,573
12%

$ 23,134
14%

$ 37,043
15%

$ 54,132
16%

$ 57,502
16%

$ 79,182
16%

$ 84,110
15%

Depreciation & Amortization

2,693

5,094

8,048

13,351

18,683

25,090

20,546

Earnings before Interest, Taxes,
Depreciation & Amortization*
% of Sales

Net Income
% of Sales

Earnings per share – Diluted:
Income from Continuing Operations

14,266
14%

$ 28,228
17%

$ 45,091
19%

$ 67,483
21%

$ 76,185
21%

$ 104,272
21%

$ 104,656
19%

9,690
10%

$ 11,077
7%

$ 24,612
10%

$ 33,147
10%

$ 34,602
9%

$ 39,214
8%

$ 49,437
9%

0.44

1.00

1.82

2.43

2.58

3.00

3.09

Discontinued Operations
Extraordinary (Loss) Gain

0.94
0.00

0.27
(0.18 )

0.32
0.05

0.19
0.00

0.21
0.00

0.11
0.00

0.02
0.00

37,576
7%

20,682
12,365

70,623
12%

24,387

95,010
17%

36,717
6%

2.36

(0.05)
0.00

Net Income

1.37

1.09

2.19

2.62

2.79

3.11

2.31

Weighted Shares – Diluted (in thousands)

6,514

8,146

11,231

12,646

12,397

12,629

15,918

15,924

Capital Expenditures

1,651

6,629

$ 11,988

$ 18,681

$ 13,516

$ 20,604

$ 29,311

31,567

Year-End Position:

Working Capital
Current Ratio

Property & Equipment at cost
Property & Equipment, net

Debt
Cash

Net Debt
Stockholders’ Equity
Capital
Net Debt to Capital Ratio

Book Value per Common Share

Employees
Sales per Employee

$
$

69,808
2.6

$ 66,095
2.6

$ 101,276
2.8

$ 102,018
2.2

$ 131,608
2.5

$ 188,008
2.6

$ 197,933
2.7

$ 231,917
3.1

31,609
27,123

98,769
330

$ 46,507
$ 38,542

$ 81,957
$ 69,724

$ 118,866
$ 98,562

$ 147,227
$ 114,070

$ 186,924
$ 143,433

$ 218,665
$ 159,845

$ 294,157
$ 215,832

$ 24,392
863

$ 34,498
4,336

$ 93,008
4,463

$ 138,808
5,989

$ 176,322
4,614

$ 158,256
6,830

$ 199,523
8,583

98,439
15,065
$ 113,504
87%

$ 23,529
91,413
$ 114,942
20%

$ 30,162
182,879
$ 213,041
14%

$ 88,545
214,777
$ 303,322
29%

$ 132,819
244,370
$ 377,189
35%

$ 171,708
389,891
$ 561,599
31%

$ 151,426
453,501
$ 604,927
25%

$ 190,940
494,985
$ 685,925
28%

2.31

871
115

9.38

15.37

18.13

20.94

25.38

28.67

1,262
133

1,949
124

2,386
138

2,584
143

3,492
143

3,554
159

31.24

3,745
151

* Management believes that earnings before interest, taxes, depreciation and amortization (“EBITDA”) provides the reader a

good measure of cash generated from the operations of the business before any investment in working capital or fixed assets

Richard C. Ill,
President and Chief Executive Officer

Fellow Shareholders

During Fiscal 2003, the environment for our three
major industries was the most challenging in our
ten-year history. In this, our seventh year as a public
company, we saw a significant downturn in the
commercial air transport, regional and business jet
build rates, further challenges for the troubled airline
industry, and a decline in the industrial gas turbine
market. Given the worldwide economic outlook and
the continued weakness of the world’s airlines, we do
not see a short-term change in this environment.

Despite this outlook, we remain optimistic about
Triumph’s future. There are several reasons why we
believe your company will continue to prosper despite
the difficult environment for our core industries.
First, we continue to be guided by our philosophy of protecting the
integrity of our individual companies and the products and services
they provide, while offering each company the advantages of being
part of a larger entity. This philosophy allows us to maintain the
entrepreneurial spirit necessary to succeed in the current market
conditions, while driving costs out of our system through a group-wide
focus. Second, we maintain our unwavering commitment to the
strategies presented in our first annual report, which continue to serve
us well:

to add products and services;
to expand operating capacity;
to acquire aggressively;
to market our complete capabilities;
to increase our international presence.

Finally, we are confident we can continue to achieve our strategic goals
because our employees remain dedicated to our company and the
fulfillment of our ambitious goals.

More Integrated Products, Services and Systems

With 30 operating companies, 3,800 employees and representative
offices throughout the world, Triumph continually assesses ways to
respond to our customers, provide solutions and implement our core
strategies. Our customers are changing. Aircraft manufacturers are
implementing aircraft systems integration and the airlines are focusing
on flying passengers rather than performing component maintenance.
Triumph is ideally, and in some markets uniquely, positioned to
respond to these changes and is one of the few companies worldwide
that can offer a total solution of products, services and systems to the
largest aerospace and airlines companies in the industry.

In April 2003, to meet these changing needs and to
provide a more simplified operating structure,
Triumph realigned our five aviation groups into
three groups, each with a Group President and
Group Controller:

(cid:1) Triumph Aerospace Systems Group - With the
Structural Components Group and the Control
Systems Group combined under the direction of
Jeffry D. Frisby, this group is now a single source
solution for structural components and higher-level
assemblies, and mechanical, electromechanical and
hydraulic system design, development, manufacture
and repair.

(cid:1) Triumph Components Group – Comprised of the Operational
Components and the Gas Turbine Services Groups, Triumph
Components Group will be led by William J. Hinz. The Group
performs advanced manufacturing functions and fabrication processes,
coating and processing functions to deliver precision detail parts and
complete component assemblies. This group also focuses on the power
generation industry by offering repair services, aftermarket parts
and services to utility operators, independent power producers and
third-party overhaul facilities.

(cid:1) Triumph Aftermarket Services Group - Now unified under the
direction of John M. Brasch, this group provides FAA-certified overhaul
and repair services for various components, accessories and instruments.
The group offers proprietary repair solutions, as well as FAA-certified
PMA parts, that reduce the operating costs of our airline customers.

Acquisitions

With four successful, accretive acquisitions during the past year, we
again increased the breadth of our products and services. The Ozone
Industries, Inc. acquisition was integrated into HTD Aerospace and
provides the Aerospace Systems Group with two important hydraulic
product line additions: military aircraft nose wheel steering motors and
helicopter blade lag dampers. Furst Aircraft and Instrument (now
Furst Aircraft) affords the Aftermarket Services Group expanded
access to the high-end business jet market. The Aerocell Structures,
Inc. acquisition significantly accelerates Airborne Nacelle Services,
Inc.’s growth by broadening its product line to include the repair and
overhaul of flight control surfaces.

Lastly, the purchase of Boeing’s Spokane Fabrication Operation,
renamed Triumph Composite Systems, is Triumph’s largest acquisition

(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
to date.Triumph Composite Systems expands our product portfolio by
adding interior, non-structural composite products, including a large
airline aftermarket opportunity for floor panels, and a higher level of
visibility within Boeing Commercial Airplanes for our Aerospace
Systems Group.

Effective March 31, 2003, we discontinued our Metals segment and
are now evaluating our strategic alternatives. This segment accounted
for 7% of sales.

Given the strength of our balance sheet and our growing presence in
the industry, we believe that the coming year will provide Triumph
with a unique opportunity to grow our three groups while strictly
adhering to our corporate philosophy that an acquisition provide new
products or services to our customers, expand the capabilities of the
Triumph Group or the markets we serve, and be immediately accretive
to earnings per share.

Diversification

Triumph’s diversification – the OEM, aftermarket and military sectors
each comprise approximately one-third of our business – has allowed us
to weather and even capitalize on these challenging times. The military
market is now 32% of our business, up from only 4% seven years ago.
It continues to show strong growth, with the F/A-18 and C-17 among
our top programs. Triumph is also well positioned to play an important
role in the growing regional jet market. Airlines are moving to lower
operations cost models and are utilizing more regional jets in their route
structure. This diversified customer base, coupled with ever broadening
product offerings, will clearly benefit our company in the future.

I regret to report that on February 18, 2003, we lost a most valued
member of the Triumph Group family – Robert E. Perry, Group
President, Triumph Structural Components. He was respected and
admired by us all and will be greatly missed.

Triumph closes its first decade and commences its second at a time of
uncertainty for the industry. These are demanding times, yet the
fundamentals of our business are sound and through our commitment
to our strategies and philosophy we will grow our Company to over
$1 billion in sales. It is my belief that through the dedication of our
people and commitment to our customers, Triumph is well positioned
to prosper in the years and decades to come.

Operating &
Financial

Review

2003 Highlights

Realignment

Triumph Aerospace Systems Group

Triumph Components Group

Triumph Aftermarket Services Group

Financial Position

Net Debt to Capital – 28%

Senior Notes – $150 million

Cash Flow from Operations – $65 million

Acquisitions

Ozone Industries, Inc. (now HTD Aerospace)

Furst Aircraft and Instrument (now Furst Aircraft)

Aerocell Structures (now Airborne Nacelle Services)

Boeing Spokane Fabrication Operation
(now Triumph Composite Systems)

A Decade of Growth

Sales – 26% Compounded Annual Growth

Net Income – 24% Compounded Annual Growth

Acquisitions – 30 Completed

Capabilities – 3,800 Employees at 40 Locations

Richard C. Ill

Triumph
aerospace
systems

group

The combination of the

Structural Components and Control Systems Groups

into the newly created Triumph Aerospace Systems

Group provides our customers with an extraordinary

opportunity to procure a wide range of products from

a single point of contact. From individual components

to satisfy a specific line or spares requirement; to kits

of components or assemblies delivered just in time at

point-of-use to support customer production; to highly-

integrated systems of structure and/or controls to

be installed far down a customer’s assembly line, the

entire breadth of these opportunities is available with a

single point of customer contact within the Aerospace

Systems Group.

The broad capabilities of this Group include the design

and development, manufacture, sales and life cycle support

of complete metallic structural assemblies, as well as

mechanical, electromechanical, hydraulic, and hydro-

mechanical control systems.

Areas of specific expertise include: hydraulic power

systems, hydraulic pumps and motors, nose wheel steering

systems, linear and rotary actuators and valves, precision

geared assemblies and detail gearing, electronic and

electromechanical controls, complex high speed machining

processes, structural component forming and fabrication,

complete metal finishing, and composite floor panels,

non-structural flight deck components, and aircraft ducting

manufacturing.

The Triumph Components Group specializes in the

design, engineering, casting, original equipment manufacture

and overhaul/repair refurbishment of aircraft and industrial

gas turbine engine components. The Group provides

Triumph

components
group

manufacturing, repair services, and after-

market parts and services. Specialties also

include equiax, directionally solidified, and

single crystal casting capabilities which

provide engine ready turbine blades and

vanes to utility operators, independent power producers and

third party overhaul facilities. This breadth of capabilities

provides customers with a one-stop shop for the casting,

manufacture,

repair,

refurbishment and coating of

combustion liners, transition ducts, blades, vanes and seals

which are used in today’s advanced gas turbine engines.

The Group also provides its customers, which include air-

lines, OEM’s and operators, with a wide array of products

ranging from precision detail machined parts to engine

ready complex sheetmetal assemblies, along with specific

services such as chemical, thermal and metalurgically

bonded coating processes applied to flight and power

generating turbine components for a variety of engine

manufacturers products. Hot section manufacturing and

refurbishment expertise allows the companies in the

Components Group

support a broad range of gas

turbine engine applications,

consisting of microturbines,

small propulsion engines and

large land based gas turbines.

The Components Group also

develops parts manufacturing

authority (PMA) on selected aerospace engine components,

examples being diffusers and impellers, which give

customers the option to lower their costs while

maintaining reliability.

The Aftermarket Services Group is an international

supplier of maintenance, repair, and overhaul services

for the commercial and military aviation industry.

The Group also offers comprehensive MRO solutions,

leasing packages, exchange programs as well as

FAA-approved repairs and parts manufacturing options.

The Group offers repair capability for over 15,000

FAA approved assemblies which range from detailed

components to complex subsystems including auxiliary

power units, thrust reversers, flight

controls,

engine accessories and

avionics. Some specialties include

navigation, flight, and engine moni-

toring instruments as well as autopilots,

voice and data recorders,

smoke

detection systems and aircraft lighting.

Triumph

aftermarket
services

group

These capabilities, coupled with our in-house engineering

expertise, provide our customers with a resource to

improve the efficiency of their maintenance activities.

We continue to be guided by
our philosophy of protecting
the integrity of our individual
companies and the products
and services they provide,
while offering each company
the advantages of being
part of a larger entity.