Triumph Group, Inc. (NYSE:TGI) Q4 2018 Earnings Conference Call Transcript
May 10, 2018 • 08:30 am ET
James F. McCabe Jr.
below operating income, resulting in lower operating margins primarily within the Aerospace Structures segment.
Slide 16 shows some of the key drivers for our 2019 adjusted earnings per share estimate. The headwinds include a couple non-cash drivers like the decline in amortization of contract liabilities, which reduces about $55 million from FY18, and the pension OPEB income, which reduces about $11 million. These are both year-over-year reductions to non-cash income.
Our assumed income tax rate has increased from 2% to 17% and our interest expense is expected to increase about $6 million, primarily from a higher assumed effective interest rate. Our tailwinds include 4% to 7% organic sales growth and further cost reductions of up to 1% of sales.
So looking forward at fiscal 2019 with respect to cash, at this time, we expect that our FY19 cash flow will be meaningfully improved from our $330 million use in FY18, but we're not going to provide any guidance range because the range of outcomes is quite wide. We continue to see the possibility for contract settlements, divestitures and working capital improvements, along with variability of development spending, products inventory build and cash restructuring costs during this transition. We will provide updates on our new FY19 cash flow in the coming quarter as we gain greater clarity.
In summary, we made significant progress in FY18 towards profitable growth and positive free cash flow. We're confident in our ability to deliver organic sales growth in FY19, thanks to the hard work of the entire Triumph's team and this growth is reflective of our strong and strengthening customer relationships. FY19 is the year Triumph returns to topline growth.
Now, I'll hand it back over to Dan to wrap up. After which, we'll welcome your questions.
Daniel J. Crowley
Thanks, Jim. So in conclusion, we continue to improve last year, and we're benefiting from strong tailwinds in our core markets. Our topline is growing with this next year being the first year in four years where new awards more than offset sunsetting programs.
Our profitability and cash flow are expected to follow the revenue trend as we derisk our program and company portfolio. The strategic choices we are making, both on divestitures and programs will create a more focused and cost efficient company and we're excited about the opportunities in Integrated Systems and aftermarket segments. Our turnaround and transformation remains on track as we pursue our best path to value for our customers and shareholders.
At this point, we'd be happy to take any questions, Kevin.