Triumph Group, Inc. (NYSE:TGI) Q4 2018 Earnings Conference Call Transcript

May 10, 2018 • 08:30 am ET

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Triumph Group, Inc. (NYSE:TGI) Q4 2018 Earnings Conference Call Transcript

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Q & A
Operator
Operator

At this time, the officers of the company would like to open the forum to any questions that you may have. (Operator Instructions) Our first question comes from Seth Seifman with JPMorgan.

Analyst
Ben Arnstein

Hey. Good morning, guys. This is actually Ben Arnstein on for Seth.

Executive
Daniel J. Crowley

Good morning.

Executive
James F. McCabe Jr.

Good morning.

Analyst
Unidentified Participant

I was hoping you could give a little bit more color on the cash flow for this year. I mean I think you had previously talked about getting to somewhere around breakeven cash flow in FY19 excluding advanced repayments. Is that still a good way to kind of think about how this year might shape out?

Executive
James F. McCabe Jr.

Yes. Hi, Ben. This is Jim. So as we said, we're not prepared to give a guidance range right now, but we are saying that we expect meaningful improvement over the usage we had this year, $331 million I mean the variables include elements working capital, which everything from production inventory to advance rates. And when we get better clarity, we'll be happy to give you an update on that. But our targets have not changed.

Analyst
Unidentified Participant

Okay. And then maybe on the working capital, you've talked about I mean like $100 million to $200 million of improvement this year. How much of that is Global 7000?

Executive
Daniel J. Crowley

So we tracked working capital last year. Month-over-month, we saw the balance of physical inventory. I'm not counting the engineering development that's carried on the balance sheet. And it was trending up throughout fiscal year '18. In about November, we're able to arrest that growth and by the end of the fiscal year, we pulled it down about $145 million. And that's all a result of our inventory attack team. And as we look at what we accomplished in the first four or five months of that effort and planning for FY19, it comes from all three business units and all functions.

Certainly, Global 7000 is part of that because we're priming the pump in production and production deliveries are going to be coming off. But it's also going to come from past due backlog and our Integrated Systems business. It will come from better material planning across all of our structures programs, making sure we align our customers' schedules with our MRP, ERP schedules in the factory. And it'll come from smarter buying.

So what I'm excited about on this inventory project is not only will it provide improvements in cash flow, but it's going to make us a tighter better run company because we'll plan and execute programs better.

Analyst
Ben Arnstein

Okay. Thank you.

Operator
Operator

Our next question comes from Noah Poponak with Goldman Sachs.

Analyst
Gavin Parsons

Hey. Good morning, everyone. This is Gavin on for Noah.

Executive
Daniel J. Crowley

Good morning.

Analyst
Gavin Parsons

On the $300 million cost reduction initiative, I think you're in year three now on track to hit the $300 million. But it looks like margins are coming down again this year in the guidance. So if you strip out kind of the headwind from declining pension income and amortization, can you help us understand