Triumph Group, Inc. Annual Report 2013 Designed to be Different. Built to Perform. TRIUMPH. ONE NAME. MANY SOLUTIONS. In fiscal 2013, Triumph achieved its best year ever – setting new records for revenue, earnings and cash flow. Highlights include: In fiscal 2013, revenues increased 9% and income from continuing operations before pension actions grew 25% over fiscal 2012. Organic sales growth for the fiscal year was 8%. All of Triumph’s three business segments reported healthy year-over-year operating margin expansion. Triumph generated over $430 million in cash flow from operations before pension contributions of $110 million – reflecting effective working capital management and quality earnings. The acquisitions of Embee, Inc. and Goodrich Pump and Engine Control Systems expanded Triumph’s range of capabilities and helped achieve greater balance among Triumph’s three business segments. The additional acquisition of Primus Composites was announced shortly after the fiscal year closed. Two of Triumph’s non-core Aftermarket Services’ Instruments Companies were divested. Jeffry Frisby assumed new responsibilities as Triumph’s CEO, succeeding company founder Richard Ill, who continues as Chairman. Major Markets Top Ten Platforms as of March 31, 2013 as of March 31, 2013 (based on backlog) 57% Commercial Aerospace 1. Boeing 747 28% Military 2. Gulfstream G450, G550 12% Business 3. Boeing 777 2% Non-Aviation 4. Boeing 787 1% Regional 5. Boeing 737 6. Airbus A330, A340 7. Boeing C-17 8. Boeing V-22 9. Boeing 767 10. Sikorsky UH-60 About Triumph Triumph Group, Inc., headquartered aircraft and aircraft components, subassemblies, components and in Berwyn, Pennsylvania, designs, as well as commercial and regional services Triumph provides. To engineers, manufactures, airlines and air cargo carriers. achieve its goals, Triumph protects repairs, and overhauls a broad the integrity of the individual Triumph is comprised of 46 portfolio of aerostructures, Triumph companies while providing highly specialized manufacturing aircraft components, accessories, each company with the benefits of companies, operating at 64 subassemblies and systems – being part of a large corporation. locations worldwide. The company providing integrated solutions for In return, each company is is organized into three groups: the global aerospace market. The accountable for superior operating All companies share the Aerostructures, Aerospace Systems company serves a broad, worldwide and financial results and for Triumph name and a common and Aftermarket Services. spectrum of the aviation industry, contributing to the overall success dedication to the core values of including original equipment Triumph’s mission is to be the of the enterprise. This operating Integrity, Innovation, Quality manufacturers of commercial, premier aerospace and defense philosophy provides flexibility to and Service, Flawless Execution regional, business and military company recognized by customers capitalize on the changing market and Commitment. as their supplier of choice for environment while delivering the aerospace assemblies, superior customer satisfaction. Financial Highlights (Dollars in thousands, except per share data) Results for Year March 13 March 12 March 11 Sales $ 3,702,702 $ 3,407,929 $ 2,905,348 Income from Continuing Operations $ 297,347 $ 281,622 $ 152,411 % of Sales 8% 8% 5% Income Tax Expense 165,710 155,955 82,066 Interest Expense & Other 68,156 77,138 79,559 Operating Income $ 531,2131 $ 514,7152 $ 314,0363 % of Sales 14% 15% 11% Amortization of Acquired Contract Liabilities (25,644) (26,684) (29,214) Depreciation & Amortization 129,506 119,724 99,657 Adjusted Earnings before Interest, Taxes, Depreciation & Amortization4 $ 669,556 $ 567,355 $ 384,479 % of Sales 18% 17% 13% Net Income $ 297,3471 $ 280,8572 $ 149,8993 % of Sales 8% 8% 5% Earnings per Share – Diluted: Income from Continuing Operations $ 5.671 $ 5.432 $ 3.213 Loss from Discontinued Operations — (0.01) (0.05) Net Income $ 5.67 $ 5.41* $ 3.16 Weighted Shares – Diluted (in thousands) 52,446 51,873 47,488 Capital Expenditures $ 126,890 $ 93,969 $ 90,025 Year-End Position Working Capital $ 889,913 $ 741,105 $ 436,638 Property & Equipment at cost $ 1,296,488 $ 1,135,344 $ 1,056,711 Property & Equipment, net $ 815,548 $ 733,380 $ 734,879 Debt $ 1,329,863 $ 1,158,862 $ 1,312,004 Cash 32,037 29,662 39,328 Net Debt $ 1,297,826 $ 1,129,200 $ 1,272,676 Stockholders’ Equity 2,045,158 1,793,369 1,632,217 Capital $ 3,342,984 $ 2,922,569 $ 2,904,893 Net Debt to Capital Ratio 39% 39% 44% Book Value per Common Share $ 40.80 $ 36.21 $ 33.64 Employees 13,900 12,602 12,097 Sales per Employee $ 266 $ 270 $ 240 1 Includes $34.5 million in curtailment loss and early retirement incentives ($22.2 milion after tax or $0.42 per diluted share) and $2.7 million of integration expenses associated with the acquisition of Vought ($1.7 million after tax or $0.03 per diluted share). 2 Includes $40.4 million of net curtailment gain ($26.1 milion after tax or $0.50 per diluted share) and $6.3 million of acquisition and integration expenses associated with the Vought acquisition ($4.0 million after tax or $0.08 per diluted share). 3 Includes $20.9 million of acquisition and integration expenses associated with the Vought acquisition ($15.7 million after tax or $0.33 per diluted share). 4 Management believes that adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) provides useful information with respect to our overall operating performance, debt service capacity and ability to fund capital expenditures. * Difference due to rounding. Sales Cash Flow from Operations* Adjusted EBITDA Backlog 3,703 430 670 4,527 4,305 4,178 3,408 567 349 2,905 277 384 11 12 13 11 12 13 11 12 13 11 12 13 * Cash Flow from Operations in 2013, 2012 and 2011 was $430, $349 and $277 million before pension contributions of $110, $122 and $135 million, respectively. 1 Fellow Stockholders: success. Our strategy consists of five goals which have remained constant for two decades: • To continually add products and services, • To expand operating capacity, • To acquire aggressively, • To market our complete portfolio of capabilities, and • To expand our international presence. Our unique operating philosophy protects the integrity of the individual Triumph companies while providing each company with the benefits of being part of a large corporation. In return, each company is accountable for producing superior operating and financial results, and for contributing to the overall success of the enterprise. This philosophy allows us to continue to operate as a large corporation while retaining the flexibility to react as a small company to meet the needs of our customers. Triumph companies are highly entrepreneurial – adapting our corporate strategies to the needs of individual customers and markets through a highly skilled workforce. In fiscal 2013, we carefully examined our business model and took actions to achieve greater balance and resiliency to ensure that Triumph will continue to compete successfully in today’s challenging environment. These actions centered around four key areas: • Expanding and balancing our product and service portfolio, • Aggressively marketing Triumph’s capabilities, • Supporting leadership development in our companies, and • Enhancing Triumph’s financial strength. Balancing our portfolio Fifteen years ago, when I signed on with Triumph as the president of one of its newly-acquired companies, I had Recent years have brought about rapid growth at Triumph, no clear idea where that decision would lead me. Triumph including acquiring Vought Aircraft Industries in 2010 – at the time was a small group of aerospace manufacturing an action which more than doubled our revenues and companies with annual sales of around $250 million. In propelled us into the ranks of top-tier aerospace suppliers. the ensuing years, under the leadership of founding CEO Prior to the Vought acquisition, Triumph was known as a Rick Ill, that small group of companies grew through a broad-based federation of highly specialized aerospace combination of acquisition and organic growth to become suppliers. The acquisition of such a large aerostructures a premier supplier in the aerospace industry. Keys to that company led some to believe that our vision had success were a novel operating philosophy and a simple changed. Our vision has not changed. While the Vought business strategy which never changed. acquisition was much larger than any we had previously When I assumed responsibility as CEO in fiscal 2013, completed, it was entirely consistent with our strategy to Triumph was a $3.7 billion, Tier-One-Capable supplier add important new capabilities which allowed us to meet with over 13,000 employees and 64 locations around a broader range of our customers’ needs – now as a the globe. And Triumph celebrated its 20th anniversary Tier-One-Capable supplier. by achieving its best year ever – the latest in a 9-year In fact, since the acquisition, we have restructured the history of “best years ever” – along with a commensurate Vought organization to bring it in line with the Triumph increase in shareholder value. model by creating six separate operating companies, each The question many have asked me is, “What comes next with its own management team accountable for conducting for Triumph?” Indeed, what happens next for this company business in accordance with our operating philosophy. “Designed to be Different” and “Built to Perform?” Triumph is now Tier-One-Capable, but we are not As we look to the future, we remain dedicated to the Tier-One-Dependent. Our mission is to be recognized unique business model primarily responsible for our by our customers as their supplier of choice at all levels 2 Triumph. Designed to be different. Built to perform. of the aerospace supply chain – from fully integrated Triumph will continue its aggressive acquisition strategy, aerostructures to the smallest of parts, and with services driven by the needs of our customers and our goal to extending from research and design to manufacturing provide them with a complete portfolio of capabilities and and aftermarket support.