Triumph Group, Inc. (NYSE:TGI) Q4 2018 Earnings Conference Call Transcript
May 10, 2018 • 08:30 am ET
Daniel J. Crowley
with Gulfstream that will help position Triumph for positive cash flow in FY19 and profitability thereafter.
Backlog and book-to-bill are up. We've won contracts from customers who at one point had Triumph on a no-bid list. We identified and are pursuing new areas of growth on military platforms and are targeting for 30% of revenue to come from this area. And we strengthened our balance sheet to give us the flexibility to execute our strategy. The result of these operational improvements is that we are now forecasting topline growth in FY19 and beyond.
On page 4, we show the transformation results that are enabling our enhanced competitiveness and improving financial performance. Q4 was the first quarter we reported Aerospace Structures and Precision Components as a combined segment. The consolidation of these business units is expected to contribute over $30 million in annual savings towards our cost reduction goals. The benefit of the consolidation is already showing, with leaders from the Structures business helping our components factories on intercompany deliveries.
Triumph and our customers are seeing the operational collaboration and cost efficiencies as the combined business unit received our largest order of the year from Boeing for 787 composites. We achieved our FY18 cost reduction target of $96 million and remain on track for our three-year savings goal of $300 million. These efforts have helped our cost competitiveness on new bids and will position Triumph for improving margin performance.
In terms of portfolio reshaping, we've reduced the number of Triumph sites from 75 in early 2016 to 52 following near-term divestitures. All-in, we are now targeting divestitures worth approximately 20% of revenue versus our original goal of 10% to accelerate our turnaround. Our portfolio decisions favor retaining businesses that have high-margin and high-growth potential with more predictable profitability, and we expect to achieve this target by the end of FY19.
In FY19, we also plan to reduce our work-in-process inventory and past due backlog and decrease working capital by another $100 million to $200 million, having peaked last year. We expect these efforts to benefit our on-time delivery results, debt levels and interest expenses. While more work is required, we continue to attack red and yellow programs as part of our operating excellence campaign, as evidenced by our recent Supplier of the Year Awards from Sikorsky Aircraft.
Triumph's Aerospace Structures Hot Springs group was awarded Elite Supplier status, and Triumph's Geared Solutions business won a Program Supplier of the Year for our continued support of the S-97 program, a demonstrator vehicle for the Army's Future Vertical Lift program.
Moving to page 5, I'll provide a brief update on some of the programs driving our cash use. Our G650 team ended the year with two more wing deliveries than planned. Through extensive discussions with Gulfstream, we jointly concluded that it was more efficient to combine our three production lines in Tulsa, Nashville, and Savannah into one in Savannah over the next year. And Triumph will continue to maintain responsibility for the wing,