PowerPoint Presentation€¦ · Title: PowerPoint Presentation Author: Fred Buonocore Created Date: 5/28/2020 6:14:17 PM

Daniel J. Crowley, President and Chief Executive Officer

James F. McCabe Jr., Senior Vice President and Chief Financial Officer

Fourth Quarter FY’20 Earnings Conference Call

2TRIUMPH GROUP / Q4 FY’20 / MAY 28, 2020

Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking

statements are often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “project”, “may”, “will”,

“should”, “could”, or similar words suggesting future outcomes or outlooks. These forward-looking statements include, but are not limited to,

statements of expectations of or assumptions about strategic actions, objectives, expectations, intentions, aerospace market conditions, aircraft

production rates, financial and operational performance, revenue and earnings growth and profitability and earnings results. These statements are

based on the current projections, expectations and beliefs of Triumph’s management. These forward looking statements involve known and unknown

risks, uncertainties and other factors which could cause actual results to differ materially from any expected future results, performance or

achievements, including, but not limited to, competitive and cyclical factors relating to the aerospace industry, dependence on some of Triumph’s

business from key customers, requirements of capital, uncertainties relating to the integration of acquired businesses, general economic conditions

affecting Triumph’s business segments, product liabilities in excess of insurance, technological developments, limited availability of raw materials or

skilled personnel, changes in governmental regulation and oversight and international hostilities, pandemics, and terrorism. Further information

regarding the important factors that could cause actual results, performance or achievements to differ from those expressed in any forward looking

statements can be found in Triumph’s reports filed with the SEC, including in the risk factors described in Triumph’s Annual Report on Form 10-K for the

fiscal year ended March 31, 2019.


TGI – The Big Picture

Executed in FY20 – Responding to COVID-19 Challenge – Positioning for Recovery

• FY20 results demonstrated benefits of multi-year transformation

• Entered FY21 with positive YOY momentum

• Focused on Protecting our People and Company during historic pandemic

• Rapidly right-sizing Triumph to reflect post-crisis reality

• OEM rates provide safety net with strong defense opportunities

• Actions from Structures Strategic Review on track to finish in FY21


TGI Response to COVID-19

Protecting the Health and Safety of our People and Company while Partnering with Customers

Prioritizing Health and Safety of Employees byfollowing strict guidelines for essential factories: implementing remote work where possible

Closely Engaging with Customers & Suppliers to reliably meet demand

Sufficient Liquidity with over $550M and $120M in additional cost reductions and other protective measures

Charitable Contributionsincluding producing masks, ventilator valves, 3D printing face shields: donating through Triumph Group Foundation


FY21 - Managing Through COVID-19 Crisis

Positioning to Exit Crisis as Leaner, More Profitable Triumph

Pre-COVID Outlook

• Feb 2020 forecasts reflected 5-8% Revenue and 8-12% Operating Margin CAGRs over FY21-24

• FY21 EBITDAP Margins of 12%+ on track to peer-like 15% over forecast period

• FY21 last year of TAS Restructuring to arrive at TGI Future State

• Final Year of modest cash use to complete TAS exit/shutdowns

Post-COVID Outlook

• Decelerating Narrow-body and Wide-body OEM build rates

• Reduced Commercial MRO demand

• Increased Defense OEM and MRO demand

• Lower Cash from Operations while funding TAS program exits driving higher cash use in 1HFY21

Triumph Group Response

• Collaborate with our customers on demand changes — secure sustaining throughput

• Accelerate TAS restructuring and program exits (G280, G650, B747)

• Right-size workforce with over 4,200 furloughs and 700 reductions in force

• Over $120M of Austerity Measures

• Engage supply chain to slow deliveries, conserve cash, protect critical sources

• Pivot to stronger markets

6TRIUMPH GROUP / Q4 FY’20 / MAY 28, 2020 6Triumph Group, Inc. - Proprietary & Confidential

Action Impact

Austerity measures including base pay reductions, furloughs, 401k match suspension, cancel merit increases, reduce indirect overtime, no new relocations

• Improve EBITDAP• Increase FCF• Covenant Compliance

Reductions-in-Force (employees & contractors)• Improve EBITDAP• Increase FCF

Suspend dividend payment to shareholders • Improve FCF

Detailed review of SG&A & OVHD to identify additional cost reductions

• Improve EBITDAP• Increase FCF

Defer capital expenditures • Improve FCF

Continued divestiture of non-core assets• CF for debt reduction• Minimal loss of EBITDA• Direct focus on core assets

Favorable negotiations of customer settlements• Improve EBITDAP• Increase FCF

FY21 Key De-Risking Actions

Over $120M Cost Reduction Initiatives Mitigate Revenue Headwinds in FY21


FY20 Results Overview

Triumph delivered strong results in FY20 reflecting success in company’s multi-year transformation to be a more predictable and profitable company.

− Met or exceeded full-year revenue, cash flow and adjusted EPS guidance

− Delivered on commitment to generate positive free cash flow of $57M

− Strong revenue of $2.9B despite 737 MAX rates and early virus headwinds

− Improved profitability with adjusted operating margin up to 7%

Operational and Strategic Highlights include:

− Achieved best-ever levels of Safety and Quality

− Recertified all major factories to AS9100 and related standards

− Completed consolidations of Heat Transfer and Interior MRO factories

− Exited Embraer E2, and Gulfstream G650 Wing assembly programs & divested non-core Nashville Large Structures site headwinds

Transformation Enabled Strong FY20 Performance – Entered Crisis with Momentum


Commercial Market Conditions

Category Comments

Air Travel(demand)

• IATA Demand RPK Forecast (yr/yr), Q2 (-82%), Q3 (-56%), Q4 (-33%) • - 45 to -55% for full year 2020 (IATA estimates -48% RPK’s)• China recovering, early upticks in US air traffic week over week

MRO Activity• -70% in Q2 2020 (commercial transports)• -35% to -55% yr/yr (for full year, recovering Q3-Q4 CY20)• Triumph has lower exposure to heavy maintenance and consumables

OEM Production

• -30% to -40% for balance of the year (commercial transport)• Stable military depending on “factory” COVID conditions• Boeing and Airbus confirmed sustaining rates in April Earnings Calls

Parked Fleets

• Approximately 16,800 commercial transport aircrafts were parked at the trough (mid-April)

• Inflection point reached with aircraft beginning to return to service (1,300 aircrafts since May 1). Now 15,000 aircraft remain parked

Sources: Bain - April 3rd COVID-19 Initial Implications for commercial AerospaceIATA –April 14th COVID-19 Updated Impact AssessmentBoeing and Airbus executive discussionsCirium April 14th Stored Commercial Aircraft Utilization UpdateCirium Daily Fleet Updates

Navigating Macroeconomic Effects of COVID-19 with Agility Given Diversity of Portfolio


Factors Supporting Aviation Recovery

Early Signs of Recovery Support Forecast Confidence

Up 8% since 4/12 -1,800 since 4/24 Up 20% last 30d

Defense OEM Production US Airline Liquidity Daily Flights

Up 100% in US last 30d

Ticket Volume Parked Aircraft Load Factors Utilization

Improved payments +$40B Since Feb 26th Up 20% last 30dConfirmed OEM Rates


Triumph Platform Diversity

Stable Base, Positioned for Growth

Single Largest Program Strong Key Segment

CTS-800

New Com. PlatformsNew Mil. Platforms

Thermal Systems

Next Gen Designs

Accelerating

KC-46 & 767 Stable Cargo Carriers MRO Military MRO

Military Upgrades

777X and A321XLR

100% IP Driven

Active EngagementsT-7A, MQ-25 and FVL

• Mil. Fuel Pumps• Mil. AMAD• Mil. Thermal System• Mil. Landing Gear• Thermoplastics

• C-17 Nacelles, TR’s• F18 AMAD’s• T-700 Engine Control• V-22 PCA’s• CH-47 Fuel System• AH-64 Thermal Sys.


Growing Organically to Offset COVID-19 Impact

• TSS FY 20 Bookings $1.4B

• TGI Reportable Backlog: $3.2B

• Stable Book-to-Bill despite COVID-19 & 737MAX Production Stop

Competitive Wins Customer BUFVL Landing Gear System (FARA) FVL Aircraft OEM TSSFVL Distributed Hydraulics (FARA) Bell TSSCFM56 Engine Components & Accessories Engine MRO Provider TSS777 Airframe Accessories Avtrade TSSA330/777 Engine Spares Rolls Royce TSSA320 Engine Panels LATAM Airlines TSS

Follow-on Business Customer BUF-35 Hydraulic Valves Lockheed Martin TSSIndustrial Trent EMAD LTA Siemens Canada TSSF-15 Pump Pack Upgrade Japanese MOD TSST700 EDECU Delivery Order DLA TSSeVTOL Composite Structures LIFT Aircraft TAS

Partnerships Customer BUCOVID-19 PPE Manufacturing Initiative Local Hospitals TSSAftermarket Inventory Sales Channel Transupport TSS

Customer and Platform Diversity – Increasing Military Focus


Bell 360 Invictus

360 Invictus

Raider X

SB-1 Defiant

V-280 Valor

FAR

AFL

RA

A

OH

-58

UH

-60

/AH

-64

/AH

-1Z

2,200 units produced

7,000 + units produced

Content:• RR250 ECU and HMU (OEM & MRO)

Content: UH-60 and AH-64• T-700 FADEC (OEM / MRO)• Thermal System (AH-64)• Hydraulic pump, valves (AH-64)• Cables and Gears

Triu

mp

h

CO

NTE

NT

INC

REA

SE

Triumph and Future Vertical Lift (FVL)


Recent Performance

$1.4B Sales –Production/MRO

60%/40%

~16% EBITDAP Margin –Production/MRO

45%/55%

Solid Cash Generation

Near-Term Expectations

Commercial impacts: Production 30-35%

lower

MRO 45-55% lower

Hold margin % through cost reductions

Cash Conservation

Longer-Term View

Recovery to FY20 levels

Margin expansion to prior targets of

~19%

Reinvestment in operations and

R&D

Sales by End Market

Commercial Military Other

Systems & Support Profile

Diversity of Offerings Across Various Platforms and End Markets

End Market EBITDAP consistent with Sales Profile

Stable Military End Market

Strategy to Recapture Aftermarket


Recent Performance

$1.6B Sales – declining with divestitures and sunsetting programs

~7% EBITDAP Margin –eliminated prior

volatility

Cash using programs & advance liquidations; offset by stable core

Near-Term Expectations

Commercial impacts: Production 30-35%

lower

Complete work transfers and exit of all loss making programs

Hold margin % through cost reductions

Longer-Term View

Right-size operations for future state

Margin expansion to prior targets of ~10%

Complete Exit of Large Structures Operations

Sales by End Market

Commercial Business Jet Military

Aerospace Structures Profile

Reducing Cost Structure to Improve Efficiency and Accelerate Exits

Sunsetting programs complete in FY 21; including 30% stepdown from FY 20 levels• Accelerated transfer of G280 (July)

Stable Military End Market

Stable 767 program post transfer

Transferring G650 Wing Kit back to GAC expected by end of Q1


Tulsa

Red Oak

Stuart

Grand Prairie

Hawthorne

Long Island

Shelbyville

Hot Springs

WichitaKansas City

Phoenix

San Diego

Los Angeles

Aerospace Structures Restructuring

✓ Divested (9) Machining & (5) Fabrications sites in FY 18-19, including:Long Island, NY Los Angeles, CA (4)Wichita, KS Kansas City, MOAlbany, OR Toronto, ON (Canada)Hot Springs, AR Phoenix, ARSan Diego, CA Fort Worth, TXShelbyville, IN

✓ Closed our Farnborough, U.K. Composites facility

✓ Completed transitions of G7500 Wing , E2 Fuselage and G650 Wing Assembly programs to customers and/or other suppliers

✓ Divested Large Structures Business in Nashville, TN in FY 20

Pending in FY21:• Complete manufacturing & exit of G280 program in Tulsa, OK (Sep 2020)• Complete exit of 747-8 facility in Hawthorne, CA (Dec 2020)• Complete manufacturing & exit of 747-8 in Grand Prairie, TX (2021)• Transfer of G650 Wing Program (1H FY 21)

Fort Worth

Not pictured: Interiors locations, plus the following:Toronto, ON (Canada)Farnborough, U.K. (closed)Rayong, Thailand (Composites facility)

Albany

Nashville

Milledgeville

On Track to Complete Actions from Structures Strategic Review in FY21


Consolidated Quarterly Results

($ in millions) FY’20 Q4 FY’19 Q4

Net Sales $693 $869

Operating Loss (40) (189)

Operating Margin (6)% (22)%

Adjusted Operating Income* $39 $64

Adjusted Operating Margin 6% 7%

Organic sales decrease of (6)%

− Decrease across both business units due to 737 MAX

FY’20 Q4 Adjusted operating income excludes:

− $66M goodwill impairment

− $2M loss on sale of assets and businesses

− $11M restructuring costs

FY’19 Q4 Adjusted operating income excludes:

− $217 loss on sale of assets and businesses

− $23M forward loss charges


Stable Adjusted Margins Despite Market Headwinds

*See Appendix for Non-GAAP reconciliation


Consolidated Full Year Results

($ in millions) FY’20 FY’19

Net Sales $2,900 $3,365

Operating Profit/(Loss) 58 (275)

Operating Margin 2% (8)%

Adjusted Operating Income* $204 $166

Adjusted Operating Margin 7% 5%

Organic sales increase of 5%

− Increase across both business units

FY’20 Adjusted operating income excludes:

− $66M goodwill impairment charge



− $7M union OPEB-related incentives

− $(9M) legal settlement gain

FY’19 Adjusted operating income excludes:


− $87M change in pension accounting

− $87M forward loss charges


Met or Exceeded Guidance in All Key Metrics



YOY Improvement

Revenue Trend Reflects Exit of Non-Core Programs and Businesses

− Decline of $465M in revenue while expanding EBITDAP margins

Profitability Improving Through Focus on Execution in our Core Businesses

− EBITDAP margins expanded from 4% to 9% over last three years

FCF Benefitting from Portfolio Actions:

− Structures cash positive in FY20

− On path to exit B747, G280, and G650 programs in FY21

− Divestitures reducing Triumph debt

Restructuring and Transformation Resulting in More Predictable Financial Performance


2,600

2,700

2,800

2,900

3,000

3,100

3,200

3,300

3,400

Revenue

FY18 FY19 FY20

-

50

100

150

200

250

300

EBITDAP

FY18 FY19 FY20

(400)

(350)

(300)

(250)

(200)

(150)

(100)

(50)

-

50

100

FCF

FY18 FY19 FY20


Revenue

Systems & Support

Highlights

Completed consolidation of Integrated Systems and Product Support businesses into Systems & Support; William C. Kircher appointed as EVP

New Wins and Contract Renewals

• UH-60 and AH-64 Common Engine Control multi-year OE award with MRO follow on

• CH-47 Oil Transmission Coolers• CFM56 MRO Accessories• F-35 Hydraulic Utility Actuation Valves • FVL OEM Landing Gear • F-15 Pump Pack MRO Upgrade to Japanese MOD

Financial

• Net sales decreased (2.8%); organic decreased (1.2)%

− Excluding 737MAX production suspension, organic up 3.4%

− Aftermarket sales increased 9.6% to prior year

• Operating margin decrease versus prior year driven by goodwill impairment for Product Support business, lower volume on higher margin LEAP-1B and additional new product engineering costs

• Excluding goodwill impairment and restructuring costs, operating margins were 14.3%

Strong Military Share – Capturing MRO Market and Scale Synergies

$352 $364

$320

$340

$360

$380

Q4 FY'20 Q4 FY'19

OperatingIncome &

Margin

$(22)

$55

$(30)

$-

$30

$60

$90

Q4 FY'20 Q4 FY'19

UH-60

(6.4)% margin 15.3% margin


Revenue

Aerospace Structures

Portfolio Actions and Deliveries Driving Performance YOY

$345

$511

$0

$200

$400

$600

Q4 FY'20 Q4 FY'19

OperatingIncome &

Margin

-$2

$0

-$10

-$5

$0

Q4 FY'20 Q4 FY'20

(0.1)% margin(0.6)% margin

Highlights

• Achieved positive free cash flow to close out FY20

• Delivered final 747 panel from Hawthorne

• Completed last major assembly tools on T-7A program in Red Oak

• Divested Nashville Large Structures Site

Financial

• Organic Sales declined 11% driven by 737 MAX and transitioned programs (G650 wing assembly and E2 fuselage)

− Partially offset by growth on legacy programs (787, HALE and G280)

• SG&A and manufacturing overhead cost reduction initiatives & improved program performance were offset by absorption impact of lost volume as a result of updated estimates from COVID-19

V-22


Free Cash Flow Walk

Full Year FY’20 Cash DriversFY 20 Free• ($60M) of advance liquidation• ($18M) in restructuring costs• ($60M) funding on G280 program loss

See Appendix for reconciliation of cash used in operations to free cash use

Significant Year-Over-Year Improvement in Cash Flow; Cash Flow Positive

Consolidated ($ in millions) FY’20 Q4 FY’20 Full Year

Net loss $ (72) $ (25)

Non-cash items:

Depreciation & Amortization 34 138

Goodwill Impairment 66 66

Interest Expense & Other 26 122

Amortization of Acquired Contracts (19) (75)

Loss on divestitures 1 57

Pension Expense 17 20

OPEB Income (2) (59)

Income Tax (benefit) Expense (9) 3

Cash uses:

Working Capital Change 55 (37)

Interest Payments (38) (99)

Capital Expenditures (12) (40)

OPEB Payments (2) (10)

Tax Payments, net 0 (4)

Free Cash flow/(Use) $ 45 $ 57


Net Debt & Liquidity

($ in millions) FY’20 Q4

Solid Liquidity Secured through Strong Bank Support and Cash Flow Stabilization Actions

Cash $ (485)

$600M Revolving Credit Facility 400

$75M Receivable Securitization Facility 75

Capital Leases 24

2014 Senior Notes Due 2022 300



Net Debt $ 1,339

Cash and Availability ~ $568M

Senior Secured Leverage Ratio ~1.9x vs. 3.50x

First Lien Leverage Ratio ~0.3x vs. 2.50x

Interest Coverage Ratio ~3.2x vs. 2.75x

Sufficient liquidity through year end, even with no further contractual, divestiture or financing actions


Concluding Remarks

• Entered FY21 with positive YOY momentum

• FY20 results demonstrated benefits of multi-year transformation

• Focused on Protecting our People and Company during historic pandemic

• Rapidly right-sizing Triumph to reflect post-crisis reality

• OEM rates provide safety net with strong defense opportunities

• Actions from Structure Strategic Review on track to finish in FY21


Our Vision

As One Team, we enable the safety and prosperity of the world.

Our Mission

We partner with our customers to triumph over their hardest aerospace, defense and industrial challenges, to deliver value to our stakeholders.

Our Values

Integrity

Continuous Improvement

Teamwork

Innovation

Act with Velocity


Appendix


Top Programs in Backlog

Systems & Support

Airbus A320, A321

Boeing 737

Boeing 787

Boeing V-22

Boeing AH-64

Sikorsky UH60

Boeing CH-47

Lockheed Martin C-130

Boeing F-18

Sikorsky CH-53

Represents 54% of

Systems & Support backlog

Boeing 767, Tanker

Gulfstream G650

Boeing 787

Boeing 737

Boeing 747

Boeing 777

Airbus A350

Boeing V-22

NG Global Hawk

Gulfstream G280

Represents 86% of

Aerospace Structures backlog

Aerospace Structures


Supplemental Data

Pension/OPEB Analysis ($ in millions) FY’21 FY’20

Pension Expense (Income) ^ ≈ ($32) ≈ ($45)

OPEB Expense (Income) ^ ≈ ($10) ≈ ($10)

^ Excludes impact from one-time adjustments such as curtailments, settlements or special termination benefits.

Est. required contributions ($ in millions) Pension OPEB

Fiscal 2021 ≈ $2 ≈ $5

Fiscal 2022 ≈ $82 < $1

Fiscal 2023 ≈ $91 < $1

Fiscal 2024 ≈ $86 < $1

Fiscal 2025≈ $70

< $1


Non-GAAP Disclosure

Adjusted Operating Income is defined as GAAP Operating Income, less expenses/gains

associated with the Company's transformation, such as restructuring expenses, gains/losses on

divestitures, defined benefit plan gains/losses from curtailments, settlements, etc; impairments of

goodwill and other assets. Management believes that this is useful in evaluating operating

performance, but this measure should not be used in isolation. The following table reconciles our

Operating income to Adjusted Operating income as noted above.

Three Months Ended March 31,

Year Ended March 31,

2020 2019 2020 2019

Operating (loss) income - GAAP $ (40,302 ) $ (189,197 ) $ 57,907 $ (274,679 )

Adjustments:

Adoption of ASU 2017-07 — — — 87,241

Loss on sale of assets and businesses, net 1,726 217,464 56,916 235,301

Goodwill impairment 66,121 — 66,121 —

Global 7500 forward loss charge — — — 60,424

E2 Jet program forward loss charge — (3,700 ) — 5,462

G280 program forward loss charge — 26,548 — 29,064

Reduction of prior Gulfstream forward loss — — — (7,624 )

Restructuring costs 11,850 12,892 25,340 31,098

Legal judgment gain, net of expenses — — (9,257 ) —

Union incentives — — 7,071 —

Adjusted operating income - non-GAAP $ 39,395 $ 64,007 $ 204,098 $ 166,287


Non-GAAP Disclosure

Non-GAAP Financial Measure Disclosures (continued)

(dollars in thousands)

FINANCIAL DATA (UNAUDITED)

TRIUMPH GROUP, INC. AND SUBSIDIARIES

Three Months Ended March 31,

Year Ended March 31,

2020 2019 2020 2019

Cash flow provided by (used in) operations $ 57,365 $ 4,063 $ 96,653 $ (158,254 )

Less:

Capital expenditures (12,584 ) (12,276 ) (39,834 ) (47,099 )

Free cash flow (use) $ 44,781 $ (8,213 ) $ 56,819 $ (205,353 )

Cash provided by operations, is provided for consistency and comparability. We also use free cash flow as a key factor in

planning for and consideration of strategic acquisitions and the repayment of debt. This measure should not be considered in

isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results

presented in accordance with GAAP. The following table reconciles cash provided by operations to free cash flow.


Non-GAAP Disclosure

We prepare and publicly release annual audited and quarterly unaudited financial statements prepared in accordance with U.S. GAAP. In accordance with Securities and Exchange Commission (the "SEC") rules, we also disclose and discuss certain non-GAAP financial measures in our public filings and earning releases. Currently, the non-GAAP financial measures that we disclose are Adjusted EBITDA, which is our net loss before interest, income taxes, amortization of acquired contract liabilities, legal settlements, loss on divestitures, depreciation and amortization; and Adjusted EBITDAP, which is Adjusted EBITDA, before pension expense or benefit, including the effects of curtailments, settlements, and other early retirement incentives. We disclose Adjusted EBITDA on a consolidated and Adjusted EBITDAP on a consolidated and a reportable segment basis in our earnings releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, we may disclose different non-GAAP financial measures in order to help our investors more meaningfully evaluate and compare our future results of operations with our previously reported results of operations.We view Adjusted EBITDA and Adjusted EBITDAP as operating performance measures and, as such, we believe that the U.S. GAAP financial measure most directly comparable to such measures is net loss. In calculating Adjusted EBITDA and Adjusted EBITDAP, we exclude from net loss the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the material limitations on the use of these non-GAAP financial measures as a result of these exclusions. Adjusted EBITDA and Adjusted EBITDAP are not measurements of financial performance under U.S. GAAP and should not be considered as a measure of liquidity, as an alternative to net loss, or as an indicator of any other measure of performance derived in accordance with U.S. GAAP. Investors and potential investors in our securities should not rely on Adjusted EBITDA or Adjusted EBITDAP as a substitute for any U.S. GAAP financial measure, including net loss. In addition, we urge investors and potential investors in our securities to carefully review the reconciliation of Adjusted EBITDA and Adjusted EBITDAP to net loss set forth below, in our earnings releases, and in other filings with the SEC and to carefully review the U.S. GAAP financial information included as part of our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K that are filed with the SEC, as well as our quarterly earnings releases, and compare the U.S. GAAP financial information with our Adjusted EBITDA and Adjusted EBITDAP.

Adjusted EBITDA and Adjusted EBITDAP are used by management to internally measure our operating and management performance and by investors as a supplemental financial measure to evaluate the performance of our business that, when viewed with our U.S. GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business. We have spent more than 20 years expanding our product and service capabilities, partially through acquisitions of complementary businesses. Due to the expansion of our operations, which included acquisitions, our net loss has included significant charges for depreciation and amortization. Adjusted EBITDA and Adjusted EBITDAP exclude these charges and provide meaningful information about the operating performance of our business, apart from charges for depreciation and amortization. We believe the disclosure of Adjusted EBITDA and Adjusted EBITDAP helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year. We also believe Adjusted EBITDA and Adjusted EBITDAP are measures of our ongoing operating performance because the isolation of non-cash charges, such as depreciation and amortization, and non-operating items, such as interest, income taxes, pension and other postretirement benefits, provides additional information about our cost structure and, over time, helps track our operating progress. In addition, investors, securities analysts, and others have regularly relied on Adjusted EBITDA and Adjusted EBITDAP to provide financial measures by which to compare our operating performance against that of other companies in our industry.


Non-GAAP Disclosure, continued

Set forth below are descriptions of the financial items that have been excluded from our net income to calculate Adjusted EBITDA and Adjusted EBITDAP and the material limitations associated with using these non-GAAP financial measures as compared with net loss from continuing operations:• Gains or losses from sale of assets and businesses may be useful for investors to consider because they reflect gains or losses from sale

of operating units or other assets. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations.

• Legal judgments and settlements, when applicable, may be useful for investors to consider because it reflects gains or losses from disputes with third parties. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations.

• Non-service defined benefit income or expense from our pension and other postretirement benefit plans (inclusive of the adoption of ASU 2017-07 and certain pension related transactions such as curtailments, settlements, early retirement or other incentives) may be useful for investors to consider because they represent the cost of postretirement benefits to plan participants, net of the assumption of returns on the plan's assets and are not indicative of the cash paid for such benefits. We do not believe these earnings (expenses) necessarily reflect the current and ongoing cash earnings related to our operations.

• Amortization of acquired contract liabilities may be useful for investors to consider because it represents the non-cash earnings on the fair value of off-market contracts acquired through acquisitions. We do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations.

• Amortization expense (including goodwill and intangible asset impairments) may be useful for investors to consider because itrepresents the estimated attrition of our acquired customer base and the diminishing value of tradenames, product rights, licenses, or, in the case of goodwill, other assets that are not individually identified and separately recognized under U.S. GAAP. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.

• Depreciation may be useful for investors to consider because it generally represents the wear and tear on our property and equipment used in our operations. We do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure.


Non-GAAP Disclosure, continued

• The amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business.

• Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.

Management compensates for the above-described limitations of using non-GAAP measures only to supplement our U.S. GAAP results and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business.

The following table shows our Adjusted EBITDA and Adjusted EBITDAP reconciled to our net loss for the indicated periods (in thousands):

Fiscal year ended March 31,

2020 2019 2018

Net loss (U.S. GAAP measure) $ (25,379 ) $ (321,767 ) $ (425,391 )

Legal judgment gain, net of expenses (9,257 ) — —

Loss on sale of assets and businesses, net 56,916 235,301 30,741

Adoption of ASU 2017-07 — 87,241 —

Amortization of acquired contract liabilities (75,286 ) (67,314 ) (125,148 )

Depreciation and amortization* 204,289 149,904 693,595

Interest expense and other 122,129 114,619 99,442

Curtailments, settlements and early retirement incentives (14,293 ) 4,165 (25,722 )

Union represented employee incentives 7,071 — —

Income tax expense (benefit) 3,051 (5,426 ) (36,457 )

Adjusted EBITDA (non-GAAP measure) $ 269,241 $ 196,723 $ 211,060

Non-service defined benefit income (excluding settlements) (27,601 ) (66,270 ) (77,512 )

Adjusted EBITDAP (non-GAAP measure) $ 241,640 $ 130,453 $ 133,548

* - Includes impairment charges related to intangible assets

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PowerPoint Presentation€¦ · Title: PowerPoint Presentation Author: Fred Buonocore Created Date: 5/28/2020 6:14:17 PM