Jeffry D. Frisby - President and CEO Jeffrey L. McRae – SVP and CFO.

Samuel Pearlstein - Wells Fargo Securities, LLC Steven Cahall - RBC Capital Markets, LLC Myles Walton - Deutsche Bank Sheila Kahyaoglu - Jefferies LLC Kevin Ciabattoni - KeyBanc Capital Markets Stephen E. Levenson - Stifel, Nicolaus & Company.

Ladies and gentlemen, thank you for standing by. Welcome to the Triumph Group Conference Call to discuss our Fiscal Year 2015 Third Quarter Results. This call is being carried live on the Internet. There is also a slide presentation included with the audio portion of the webcast. [Operator Instructions].

Please ensure that your pop blocker is disabled if you are having trouble viewing the slide presentation. You are currently in a listen-only mode. There will be a question-and-answer session following the introductory comments by management. On behalf of the company I would now like to read the following statement.

Certain statements on this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Triumph's actual results, performance or achievements to be materially different from any expected future results, performance or achievements expressed or implied in the forward-looking statement.

Please note that the company's reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the press release, which can be found on their website at www.triumphgroup.com.

In addition, please note that this call is the property of Triumph Group, Incorporated and may not be recorded, transcribed or rebroadcast without explicit written approval.

At this time I would like to introduce Jeffry Frisby, the company's President and Chief Executive Officer; and Jeffrey McRae, Chief Financial Officer and Senior Vice President of Triumph Group, Incorporated. Go ahead Mr. Frisby..

Thank you and good morning. I’ll remind you all that there is a slide presentation to go along with the audio portion for your use. As has now become customary before we get into the slide deck I’d like to make a few opening remarks.

At the end of the day this quarter was indelibly marked by two significant events and as it transpired these events happened on the same day. And it was a day we were all anticipating, the process was arduous, negotiations difficult and multi-faceted and the amount of due diligence performed was massive.

Over a year of effort went into crafting what I have described repeatedly as a win-win-win-win scenario. Finally on December 9th of 2014 the culmination of all these efforts was the signing of the agreement to resume production of the Gulfstream G650 and G280 programs from Spirit AeroSystems.

This singular transaction marked a significant step forward for Triumph, strengthening an already solid position in the integrated wing business and adding key products on growth platforms to replace some of our sunsetting production. Overall a very positive development.

The part of that day that we were not eagerly awaiting was Boeing’s announcement of a production rate cut on their 747-8 program from 1.5 to 1.3 per month. As you know as close to the profitability edge as we were, any reduction in rate put us into a loss position on the contract and will require a charge to be taken.

So when we take the measure of this quarter, as I have mentioned, we really need to look no further than December 9th, because on that day the two single largest events in the quarter occurred.

The good news we can all take from these two events is that the negative repercussions of the 747 rate cut, as painful as they are in the immediate term, are largely in our rearview mirror.

Jeff McRae will take you through in detail the composition of the charges that we recorded and while no one can guarantees that there will no future charges on this program you will see that we have taken a number of important steps that lessen the likelihood of recurrence.

On the flip side the Gulfstream wing business in Tulsa is in its early stages and will provide benefits to Triumph and its shareholders for decades to come. The pathway from signing to closing was well executed by both parties and we have now operated in Tulsa for just about one month.

We had hoped for high level acceptance in the labor force, although we planned for a more pessimistic case.

On this front reality was more in line with our hopes and we’ve retained a very high percentage of the workforce in Tulsa which should in-turn lead to less than planned disruption and a speedier return to the improvement curves already in place.

The quality of the delivered product remains high and deliveries are being made in accordance with our plan. Importantly we have aligned cross functional teams of key personnel in place to validate the synergy assumptions we have made and to develop and deploy specific plans to attain them.

Now certainly there is more to this quarter than two events and we will discuss these things in detail as we go. One more general comment before we get into the slides.

Triumph Group through the years has grown from basically a loose confederation of independent companies to what is now a large group of companies that together are a formidable force in the marketplace. We have now reached the point where we at the enterprise level can leverage the strength of our portfolio to add value and to drive growth.

We have engaged experts in several fields to help us identify and quantify value propositions and develop executable plans to achieve our goals.

These will include a more robust view of the supply chain across the enterprise, the valuation of footprint consolidation opportunities, further capitalizing on tax efficiencies as our global footprint continues to expand, and using more effective means of driving best practices across the enterprise.

As these initiatives take form and become measurable we look forward to sharing them with you. With that serving as a preamble let’s turn to slide three titled Q3 in review. Overall the third quarter delivered a strong cash flow performance and Jeff will provide color on this.

In the Aerostructures segment, and we’ll get into this in some detail, revenues were impacted by decreased C-17 production and lower non-recurring revenue. If you recall last year in Q3 we had a significant amount of 767 tanker non-recurrent [ph].

The operating results included the $152 million forward loss charges in 747-8 program and Jeff will get into that again in detail and I am sure we’ll cover some of the details in the call in the questions as well.

What I want to make sure we understand is that this charge did not in fact change our commitment to continue to take actions to reduce costs and improve performance. Performance continues to improve on the program and we will not let up on continuing to drive improvements as we go forward.

In the quarter we also took $13.9 million of charges related to lower than expected performance to Triumph Structures International. Jeff will get into some detail on this as well. And importantly the Red Oak transition to pre-move performance remains on target for the end of the fiscal year.

And as far as our Aerospace Systems is concerned we had a very good quarter. We experienced positive organic revenue growth with sustainable strong operating margins and the integration of our newest acquisition in that segment to GE Aviation Hydraulic Actuation business continues to progress well, currently running ahead of our synergy targets.

And in terms of after-market services we experienced positive organic revenue growth with sustained strong operating margins. So let's turn to Slide Four. I've already covered the first bullet and so I'll let that speak for itself. The transition is in fact progressing well.

I'm happy to announce that we've recently been awarded multi-year work packages and multiple Triumph sites with combined value in excess of $50 million from Spirit, for metallic machine parts and sub-assemblies. And finally we bought back 336,271 shares for approximately $21.6 million. At this time I'll turn the call over to Jeff McRae.

Jeff?.

Thank you, Jeff, and good morning everyone. I will start with a review of the financial results for our third quarter, turning first to the income statement. Net sales for the third fiscal quarter were $917.4 million, up slightly from the prior year period.

Operating loss for the quarter was $61.3 million, resulting in a net loss of $39.8 million or $0.79 loss per share. Results for the quarter included a $169.2 million of charges in the Aerostructure segment, the majority of which were related to the forward losses associated with 747-8 program.

In addition there were $3.5 million of transaction related cost related to the resumption of the Gulfstream G650 and G280 wing programs that were included in the corporate results. Excluding these items net income was $72.1 million or $1.42 per diluted share.

The number of shares used in computing diluted earnings per share on an adjusted basis for the quarter was 50.8 million shares. Adjusted EBITDA for the quarter was negative $37 million. Excluding the impact of forward losses associated with 747-8 program and the Red Oak facility transition cost adjusted EBITDA for the quarter was $117.2 million.

Looking at our segment performance, sales in the Aerostructures segment for the third quarter declined 12% to $559.5 million, primarily due to decreased production in the C17 program as well as lower non-recurring revenue on the 767 tanker program.

Third quarter operating loss was $102.5 million and included $3.3 million of cost related to Red Oak facility transition and a net favorable cumulative catch up adjustment on long term contracts, excluding the 747-8 program of $900,000.

The segment’s operating results included total charges of $155 million associated with the 747-8 program, a $152 million of which represented forward losses on the balance of units under contract and $3 million was a negative cumulative catch up adjustment. The next slide shows the components of the forward loss provision.

The magnitude of the loss is larger than we had previously indicated.

As we fully incorporated the anticipation of future rate variability we also lowered our expectation of labor and cost performance through the end of the contract and we adjusted for lower anticipated pension benefit in future periods based on the incorporation of new mortality tables in the calculation of our pension obligations.

And we also included incremental overhead absorption resulting from moving non 747-8 program out of the existing 747 facilities.

The forward loss covers unit deliveries assumed to stretch in to fiscal year 2019, roughly four years of production in front of us and roughly $1.1 billion of revenue, with actual cash losses being back end loaded due to pricing breaks provided in the last production lot.

As Jeff mentioned we will continue to look for ways to improve performance and drive costs down in the 747-8 program. This will involve continuing to work with our customers and suppliers to identify opportunities and also engaging third-party consultancy to further evaluate opportunities and drive implementation of improvements.

The segment’s operating results were also negatively impacted by lower than expected performance at Triumph Structures International, our composites manufacturing facility located in Farnborough, England resulting in $13.9 million of pretax charges.

This company lost its [indiscernible] certification due to systemic issues within their quality system in late 2013 resulting in unanticipated delays in production and deliveries and delaying our planned transition of work to a sister company in Taiwan.

These issues resulted in charges being taken in the quarter related to current and forward losses as well as an inventory impairment. We have installed new leadership into this organization and are closely monitoring recovery plans and would expect full recovery in early fiscal 2016, which would then allow us to reengage in product transfer plans.

As Jeff mentioned we continued to make good progress in ramping up production at Red Oak and expect to meet our target at getting back to pre-move levels by the end of the fiscal year.

The only exception is the C-17 program which has continued to experience delays due to part shortages for which we will see some revenue slippage out of fiscal year 2015 into the first quarter of fiscal year 2016. Red Oak did deliver the initial test article wing for the Global 7000/8000 and is making good progress on this program.

As Jeff mentioned we are also working on several initiatives, which are focused on driving performance improvements and reducing costs, both within the heritage Vought business as well as our tier 2 structure businesses, which will provide a catalyst for margin expansion as we move into fiscal year 2016 and beyond.

As mentioned earlier, on December 30 we did close in the Tulsa Gulfstream wings transactions, which included the receipt of a $160 million, which is included in the cash flow statement within the line, acquisitions net of cash acquired.

The balance sheet as of December 31 also included provisional balances for the transaction which will be refined over the next few quarters. We are also working to refine our business plans for these two programs, but based on early indications we are seeing improvements to our base case performance assumptions.

We are still confident that we will be cash positive by the end of fiscal 2018 on these programs, with the 650 program being in much better shape today than the 280 program. Adjusted EBITDA for the quarter was negative $81.9 million.

Excluding the impact of the forward losses associated with the 747-8 program and the Red Oak facility transition cost adjusted EBITDA for the quarter was $72.2 million.

The segment operating margin for the quarter was 16% after adjusting for the 747-8 program as well as the costs related to the Red Oak transition and Triumph's Structures International's performance.

Moving on to aerospace system, segment sales were $279.2 million, compared to $211.4 million in the prior year period, an increase of 32%, reflecting 2% organic growth and the impact of the acquisition of the GE Hydraulic Actuation business.

Third quarter operating income increased 29% from the prior year quarter to $41.9 million, with an operating margin of 15%. Organic operating margin for the quarter was 16% as compared to 15% in the prior year. Adjusted EBITDA for the quarter was $42.1 million and an adjusted EBITDA margin of 15.7%.

As Jeff mentioned the integration of the GE Hydraulic Actuation business is progressing well and we are tracking ahead of our synergy realization plan.

As expected their margins were diluted to the segment's margin in the quarter but we continue to develop and execute on plans which will drive segment average margins from this business in the mid-term.

The Aftermarket Services segment, revenues in the third quarter were $80.7 million compared to $69.6 million in the prior year period, an increase of 16% reflecting 7% organic growth and the impact of Triumph Aviation Services- NAAS division acquisitions completed earlier in the quarter.

Third quarter operating income increased 34% over the prior year quarter to $12.5 million with an operating margin of 15.5%. Adjusted EBITDA for the quarter was $14.8 million, with an adjusted EBITDA margin of 18.4%.

Even with the continued softness in the military aftermarket we have continued to drive strong margins in this segment and anticipate holding margins at Q3 levels for the balance of the year. During the quarter we repurchased roughly 336,000 shares for approximately $21.6 million.

As of December 31, approximately 3.5 million shares remained under the share repurchase authorization and we will continue to tactically repurchase shares as part of our balanced approach to capital deployment and managing our overall liquidity position.

Moving on, on the pension front, we’ve included for your reference a Pension/OPEB Analysis for Triumph Aerostructures for the fiscal years 2014 and '15, which remains unchanged from last quarter.

As we said last quarter we did complete an initial analysis of the impact of a required incorporation of new mortality tables to our pension and post-retirement benefit plans and based on this initial analysis we project approximately a 9% increase in the pension and OPEB liability as of March 31, 2015.

We only expect minimal impact to our fiscal year ‘15 earnings and anticipate seeing a slight year-over-year earnings improvement related to our pension benefit, as we look forward to fiscal year ‘16 although not at the same levels as we would have previously estimated prior to the incorporation of the new mortality tables.

These calculations are highly dependent on a number of factors such as year-end discount rates and loss amortization methodology and will be finalized as part of our fiscal year end valuation process.

As mentioned in 747-8 discussion we’ve captured in the forward-loss that portion of the mortality table change impact that would be applied to the 747-8 program. Turning now to backlog, our order backlog as of December 31 was $4.8 billion, a 1% increase year-over-year.

Keep in mind that our backlog takes into consideration only those firm orders that we are going to deliver over the next 24 months and primarily reflects future sales within our Aerostructures and Aerospace Systems groups. The aftermarket services group did not have a substantial backlog. Military represented approximately 23% of our backlog.

For your reference we have included the top ten programs by backlog for both the Aerostructures and Aerospace System segments. You will note that with the inclusion of the backlog required with the G650 and G280 programs the Gulfstream programs in the aggregate are now the top programs in the Aerostructures segment.

Boeing remained our only customer to exceed 10% of total revenue. Net sales to Boeing commercial military and space totaled 42.8% of our revenue and was broken down 76% commercial and 24% military. For your reference we have included in the appendix, charts reflecting sales by market and sales trends.

Turning now to the balance sheet for the nine months ended December 31st we generated $365.9 million of cash flow from operations before pension contributions of $55.9 million. After these contributions cash flow from operations was $310 million.

This does not include the receipt of $160 million from Spirit related to the transfer of Gulfstream G650 and G280 programs.

Inventory at December 31 reflected an increase of $178.6 million, during our first three quarters of the year of which approximately $117.9 million was attributable to non-recurring investments in the Bombardier and Embraer programs and $121.9 million was attributable to the acquisition of the GE Hydraulic Actuation business, Triumph Aviation Services- NAAS division and the Gulfstream G650 and G280 programs.

Capital spending was $26.1 million in the quarter, and $85.2 million year-to-date. We continue to expect capital spending for the fiscal year to be in the range of $120 to $140 million. Net debt at the end of the third quarter was $1.4 billion, representing 38.3% of total capital and total debt to trailing 12 months adjusted EBIDTA was 3.48 times.

The global effective tax rate for the quarter reflected the fact that the R&D tax credit was retroactively reinstated back to January 1, 2014. In addition, the effective income tax rate for the quarter further reduced by implementation of state and global tax planning initiatives.

From a cash tax perspective we currently expect minimal cash to be paid in fiscal 2015. The Q4 effective tax rate will be 35.2% and reflects the fact that the R&D tax credit expired at December 31 2014.

In terms of financial guidance, based on current projected aircraft production rates we now expect our fiscal year revenue to be approximately $3.9 billion and Q4 earnings per share to be approximately $1.70 per diluted share, which excludes Red Oak facility transition cost and is based on a weighted average share count of 50.6 million shares.

We now project our Q4 adjusted EBITDA to be approximately $165 million, excluding the non-recurring cost associated with the Red Oak facility transition.

We expect to generate free cash flow available for debt reduction share repurchase and acquisitions for the fiscal year of approximately $300 million, which represents the incorporation of the cash used on the G650 and G280 programs in the fourth quarter and the impact of the 747-8 program.

This does not include the $160 million received related to Gulfstream programs in Tulsa.

We have reduced overall earnings guidance to reflect a number of factors impacting our full year results to include delays in completing deliveries of the C17 program, lower production rates on certain commercial programs, continued softness in military aftermarket and the timing of resolution of certain non-recurring claims with customers.

And we have incorporated the projected impact of the G650 and G280 wing programs which positively impact earnings per share, but are currently a drag on adjusted EBITDA and cash. We are currently in the mist of the planning process for fiscal year 2016, but are not yet prepare to provide full guidance.

While we are still confidence in the long term top and bottom line growth opportunity for this business, we would generally expect fiscal 2016 to be a transition year, with production ending and the C17 program, rate reductions on 747-8 and A330 programs and continued uncertainty in the military aftermarket, being offset by the incorporation of the G650 and G280 wing programs and the ramp on recent wins on the A320 and A350 programs, while we also complete development efforts and begin initial deliveries on the Bombardier Global 7000/8000 and Embraer E2 Jet programs.

Overall I expect the top line to reflect a 1% to 2% growth year-over-year, excluding any benefits associated with future acquisitions.

While the bottom line will reflect margin expansion driven by the full year benefit related to the Red Oak facility, continued synergy realization on recent acquisition and capturing benefits associated with a number of improvement initiatives.

We continue to see the business generating positive cash in fiscal 2016 although it will be muted from previous expectations driven by the outflows required on the G650 and G280 wings and then lower performance expectations on 747-8 program.

We do plan on providing a detailed view of fiscal year 2016 guidance as part of our fourth quarter’s earnings release. And with that I'll turn it back over to Jeff..

Thank you, Jeff. In terms of the outlook for the balance of the fiscal year and I know Jeff just went over this in great detail, I’d just like to accentuate a few things. We have a strong backlog and continue to win new contracts on key growth programs.

We remain focused on execution, increasing profitability, expanding our margins and generating strong cash flow.

Our financial guidance is as Jeff just outlined and that is that our revenue is expected to now be approximately $3.9 billion and the quarterly EPS were approximately a $1.70 per diluted share, is something that we've just laid out this number.

But I think that you can understand that a number like this indicates that we still have a great deal of confidence in our ability to deliver results. $1.70 would be in fact a very solid quarter and we remain confident in our ability to do so.

Then as both Jeff and I have stated we are absolutely committed to leveraging the strength of our portfolio to drive growth in the near and the mid-term. So at this time I'd like to open the phone lines to answer any questions you may have..

[Operator Instructions]. Sam Pearlstein, please state your affiliation followed by your question..

Wells Fargo. Good morning guys. .

Good morning Sam. .

747 in the past you've talked about we were 25 -- quarter turn or half a turn it would be $30 million or $60 million. So this is obviously larger.

So just, I mean are you assuming an even lower rate as you go out to 2019 or what are you doing differently than you had in the past when you provided that estimate?.

Yeah, Sam I mean we are assuming a level of rate volatility on 747 as we look forward. Boeing has announced going to 1.3. In our analysis we think we’ve fully covered any future rate volatility we would see on this program.

And as we step back and look at what the magnitude of rate reduction would be, it caused us also take to look back at what other impacts that there is potential risk on. And we try to provide for those in this analysis.

So the primary area being in the assumption of where our labor performance and overall cost performance will be on this program through the end.

And as I mentioned we still have four years of production in front of us and I think what we have done now is taken kind of a more risk adjusted approach of viewing where we think we are in this program through the end. .

Okay, and then just on the cash flow, I know in the past you talked about $300 million to $325 million on an ongoing basis. You said it's lower than that because of the 747 and the Gulfstream program. But is there any way to size the magnitude of that reduction and how long until you get back on to that kind of a track of $300 million or so. .

Yeah, what I would say and as it relates specifically to the G-650 and G-280, we still see ourselves turning those programs on a net basis cash positive by the end of fiscal year 2018. We know the cash drain early on will be higher and it will wane as we go through the first three years.

As we think of the first quarter of operation, I would look at that being the highest use of cash. It is also hurt by the fact that we did not receive receivables as part of the transaction. So there is a delay in beginning receipts from customers.

As we go through -- at fiscal year '16 I would expect the cash use to wane and continue to wane as we get through the end of fiscal year '18 where we still stay within the balance of the $160 million we've received on the program.

On 747-8, as we look at the forward loss we have to keep in mind that the cash related to that forward loss is still in front of us and it's very much backend loaded to roughly two-thirds of the cash would hit us in fiscal year '18 and '19, which is driven by price breaks we have on the last lot under contract.

So as you feather those two things in there the timing of those are a little different but it really creates a greater drain as we think of fiscal '16, '17, '18 than what we have previously would have anticipated.

And as we talked in the past as we look forward, the other significant headwind that we still have when we begin getting out into fiscal '17 and '18 is we will become a cash tax payer.

So we currently still project zero cash tax in fiscal '15, roughly 10% cash tax in fiscal '16, becoming a full tax cash payer in fiscal '17 and beyond which we believe is a rate roughly 28% to 30% in those years. .

Okay, thank you. .

Thank you. Steven Cahall, please state your affiliation followed by your question. .

Yeah, thank you, from Royal Bank of Canada. Good morning. .

Good morning. .

Maybe just to follow up on the 747 program, first I was wondering as we take a look at this I'm guessing that kind of the big unknown-unknown here is the revised labor and cost estimate.

So wondering if you can give a little bit more color as to how you come about sizing those and then you talked a lot about the ongoing productivity improvement and what sort of the risk and opportunity is there as we think about this long-term estimate?.

Yeah, I mean as we proceed on those programs we have historically assumed a certain level of period over period improvements in the labor performance as well as the broader cost performance. As we looked at the EACs for the balance of the contract, we definitely flattened our expectation around performance.

And most of that’s driven labor as well as overhead cost. We think that there is still opportunity we can drive improvement above what we projected but we thought this was the appropriate time to really scale back our expectation of improvement through the end of the contract.

So I would say, I think we have at least bracketed the risk and are still striving to drive opportunity in 747-8. This also assumes that we produce through the end of the contract.

As we’ve spoken in the past you know we are confident in Boeing’s ability to sell planes but as we sit here today they haven’t fully filled out the order book through the end of our contract. If they want -- they were to end the program before the end of the contract there be some claw back of this loss.

I would say that the risk at that point would be then around any facility shut down impacts that we would have to factor in..

Okay, that’s helpful. And then on -- if we think about this sort cascading to where we are on the A330, how would you couch that program in comparison to the 747? Airbus has certainly suggested that rates are coming down but could come down further.

So how does that program sit versus where you are on 747?.

Yeah, completely different dynamics on 330. You know 330 is built in facilities with a number of other programs. So the magnitude of impact when we see rate reductions isn’t the same as we see on 47 where they are pretty much in dedicated type facilities.

As we have looked at projections on 330 we have built in the rate reduction expectation that Airbus has already communicated and as we build business plans without firm direction from Airbus on rate reductions we have assumed continued step down in rates as we get out beyond fiscal ’16, as a transition to Neo.

I would say our current margin expectation on 330 comes down a little bit at lower rates but it isn’t to the same magnitude that we are dealing with here on 747..

And I think another key difference in looking at a go forward view of 47 and 330 is that if in fact we identified a particular level of capital investment that we might make in order to drive costs down the run rate, the quantity of the aircraft in front of us on A330 is fundamentally different, in fact can provide a business case that can help us drive costs down and pay for those things.

47 is not necessarily -- does not necessarily have that luxury. So it is two totally different scenarios..

And the 777 looks more like the 330 or the 747?.

Yeah, I would say the general dynamics on 777 would look like 330, correct..

So, it’s not in a dedicated facility like 747?.

Correct, definitely amount. Yeah, 747 is really the one anomaly where it resides in two, they are not fully dedicated but it’s you know 90% of the work load in the facilities..

Thank you. I will get back in the queue..

Thanks, Steve..

Thank you. And our next question is from Myles Walton. Please state your affiliation and your question..

Deutsche Bank, thanks, good morning..

Good morning..

I think Jeff McRae you had previously had a $1.5 billion to $1.8 billion cash projection for the five year '15 going forward. I think Gulfstream programs are it would seem $160 million negative to that after tax ahead of the 747 hit $100 million. So are we now looking at $1.2 billion to $1.5 billion or is the range even lower than that. .

Yeah, I mean at a macro level and I haven't run out updated cash flows for five years, Myles. But on a macro level I think those are the two key impacts that we're looking at.

And I would say Jeff and I are still very optimistic with some of the other things we're doing in the business that we'll be able to recover that cash by driving improvements and taking cost out of the overall structure within Triumph. .

The mortality assumption hit on the 747 rather what -- that you had here in the quarter, is that triggered by the rate decision and should we expect it to roll through the rest of the portfolio at year end. .

So what happens on 747, because we're in a forward loss position, it really what it’s doing is pulling forward the change that we anticipate in the next four years from our previous projection on pension benefit to our current projection on pension benefit. So it really is magnifying that impact as we pull it forward in to 747.

We still anticipate some year-over-year growth in pension benefit as we move forward. It's just not at the same magnitude that it would have been previously before in corporation in the tables.

So I think the impact on other programs it bleeds in slower because those are still in positive positions and they tend just to be seeing the impact of a single year versus this situation where 47’s pulling in four years of that delta. .

Okay and then this question is kind of the high level, it ties the cash back to the portfolio.

Jeff Frisby, you've had challenges in the Aerostructures, realistically you'll continue to over the next few years look challenges and execution opportunities on the Aerostructures, Aerosystems and aftersystems business don't seem to be encumbered by the same dynamics.

What if anything would require you to think about breaking the two, and also are the two kind of cash independent at this points, that is the next five year projection would both be able to function into their projected cash flow streams independently. .

Well, the company operates as one, really. And I would say that the opportunities that are in front of us as they relate to the Aerostructures business are still available to us in the systems business as well. Some of the initiatives that we are working on are going to benefit the entire enterprise.

So it's going to -- it's one of those things that yeah we've got some difficulty in trying to drive margins back up to an acceptable level in Aerostructures and we're working on those issues and we'll succeed to doing so.

But it doesn't mean that those same initiatives won't take margins in our systems and aftermarket businesses in fact improve those as well. So I think that it's not a tale of two companies here. We have one company and a lot of our success, comes from the fact that we gain a lot of benefit from leverage we can bring across being a $4 billion company.

So that really can't be minimized. So I'm not sure if I captured all of the aspects of your question, so whatever I missed if you want to re-ask I will be happy..

Yeah, I mean it does look like that certainly the underlying organic differences are materially different. You provide the top 10 programs and you can see it in the portfolio manifestation. So it does seem divergent, certainly challenges.

And then on the cash side, I guess the other point to the question was, is Aerostructures kind of in need of the cash venerability of Aerosystems I'm sorry Aerospace Systems and aftermarket at this point?.

Yeah Myles, I don't think there is great distortion as we look long-term in this business between the segments from a cash generation and deployment. Obviously with investments required on development programs in the structures world it tends to be larger investments within the longer term returns on those investments.

So you get a little more lumpiness but we don't view this business as the deployment or generation of cash in systems and aftermarket and just go in to fund Structures or vice versa and long term I don’t see a great disparity there..

Okay, thanks. .

Thank you and our next question is from Sheila Kahyaoglu. Please say your affiliation and your question. .

Great, thanks, it’s Jefferies. Good morning..

Good morning.

Sheila Kahyaoglu - Jefferies LLC, Research Division Just to follow up on Steve’s question a bit, how do you get the investment community comfortable that whether it’s the 747 or the A330 that this is sort of one of the biggest charge and what changed between today and looking back to September 2013, in terms of cost on the 747 and head count.

Can you may be talk about production rate is difficult I understand but maybe some of the changes that you’ve made?.

Yeah, I mean as we think 747 from the impacts we saw going back over a year ago, a lot of the impact that we realized over a year ago although it related to performance within our shop it was also recognition of the impact of the broader supply chain on the 747 program, a lot of disruption from my quality and delivery standpoint where we were not meeting the expectations of our customers.

There was a lot of expedited freight type of cost that we were incurring at that point in time.

I would say, as we sit here today and we’ve talked about the forward loss we are now taking, we are back on schedule with the customer, the quality continues to improve in the product we are delivering, the performance has improved overtime, it hasn’t been at the rate that we would like to have seen it improve at, but I would say overall the 747 program is much more stable that it was a year ago.

The variable is as Boeing reduces rates and potentially as we look in the future, at future rate reductions, that has a significant impact on 47 because of how it’s produced and where it’s produced in dedicated facilities where we don’t have the luxury of being able to take as much cost out, as we see from the impact in lower revenue coming in on the program.

From a risk standpoint and I tried to talk about it with Steve’s question we think we have bracketed what is a reasonable expectation, looking forward on this program and have fully provided for what we believe would be the impacts of future rate variability as well as a much lower expectation from a performance standpoint.

I am never going to say never, especially on this program but I think we, in this charge have attempted to put our arms fully around what we think is in front of us and we think as we look at driving improvement and tracking opportunities we see on this program this is weighted more so towards opportunities then future risks. .

And the important statement has already been made that the 747 is a unique program in our company and that it is the only program that has effectively dedicated facilities. We’ve always stated that Triumph is far more flexible and resilient in face of rate cuts because of our facilities not being dedicated to individual programs.

The 747 is alone in being the exception to that rule and while certainly rate cuts will affect us in some way as they affect most manufactures we in fact will not experience the same kind of impact on other programs as we mentioned in our answer to Steve’s question. .

Got it. Thank you. That’s very helpful.

And then I guess just a quick follow-up how do you think about normalized margins within structures going forward?.

Yeah, I mean you are going to have revenue on 747 going forward and as we look at through the end of the contract we still have roughly $1.1 billion of revenue on that contract that will flow through the P&L, that will flow through the P&L at 0% percent margin. So obviously that is dilutive to margins in the Aerostructure segment.

When we exclude the 747 from Aerostructures we still see ourselves operating with operating margins in the mid-teens and we think that, that is sustainable.

We will see some impact as the Bombardier 7000/8000 program ramps up as well Embraer E-Jets because our expectation with those would be at a lower then segment margin in their first accounting blocks, and would grow to above segment margins as we proceed through accounting blocks.

So we will have some of that dynamic in structures but I still it’s reasonable to look at that business being a mid-teen operating margin business as we look forward, excluding 747..

Thanks.

Thank you. Our next question is from Cai von Rumohr. Please state your name and your affiliation -- I am sorry your affiliation and your question. [Operator Instructions]. Okay. Are there any additional questions? Looks like our next question is from Kevin Ciabattoni. Please state your affiliation and your question. .

She’s not part of the Triumph [ph]. Operator, is there other questions in the queue, maybe we can move on and circle back to Cai and Kevin..

Sure, okay. Just one moment. Looks like our next question is from Steve Levenson. Please state your affiliation and your question..

Okay, it seems a common theme here..

Try to get this fixed..

Okay, I am just going to look into this, if everyone could please hold for just one moment. Thank you. Once again our next question is from Sheila Kahyaoglu. Please state your affiliation and your question. Let’s try Kevin Ciabattoni. Please state your affiliation and your question..

Hi, can you hear me?.

Yeah, we sure can, Kevin..

All right, great. KeyBanc, thanks..

And we apologize if we were accusing you of not coming off of mute. I think there was a technical difficulty here. .

I figured, thanks. So my first question, real quick I just want to touch on the free cash flow. I think you've mentioned expectations for next year are a little bit muted relative to your prior thoughts.

Is that including the $160 million that you guys received from Spirit as part of the Gulfstream package or are we…?.

No, I mean what we have done with that 160 as we think of free cash flow, we've excluded that 160 from that equation. So as I think of fiscal '16 my comment really is muted around the known outflows will have on the Tulsa programs as well as the impact with the lower expectations on 47-8. .

Okay perfect, that's helpful. And then just want to look at aftermarket a little bit. You saw 7% organic growth there. Just wondering if you could give us some color on what you're seeing in that market.

And then on the military side it sounded like you're expecting things to pick-up into the back half of this year, looking at last quarter and now it sounds like maybe that's not the case. Just wondering what's changed there. .

Yeah I mean what we're seeing in the aftermarket services segment is most of the organic growth is coming on the commercial side. So we're still seeing the same, what I just take as pent-up demand on the military side that we keep expecting to free up.

When I talked to our aftermarket companies they talked with a level of frustration because they can see the product, they have customers on the military side, expressing that funding will be coming and things keep getting pushed out.

It's not clear to us if it's budget constraints or other factors there, but even with that softness we have seen very strong performance within our aftermarket services businesses but most of it's being driven by commercial work as opposed to military. .

Okay that's helpful. And then last one from me.

Maybe if you guys could provide us with any kind of specific changes that occurred at Red Oak through the quarter in terms of the progress there, and then any potential for further footprint consolidation as we look into fiscal '16, '17?.

Yeah I mean Red Oak, specifically I would say as we sit here today we have achieved getting back to expected performance levels on most programs. There are a couple of outliers that we were closed on just not there yet.

C-17 and I talked to really is one anomaly there where primarily because of it coming to its end of production, we've been experiencing a number of shortages within the supply chain.

And that's both our supply chain as well as customer furnished product, which has really impacted performance there and has impacted our ability to complete the program here in the fourth quarter. So we will see revenue slippage in to fiscal '16.

But we continue to monitor the performance at Red Oak on a regular basis and have been very pleased with what we're seeing there. I think all of the kind of instability early on with the workforce has worked its way through. And they're starting to really hit on all cylinders.

It's also where we are building the wing for the Bombardier Global 7000 and the team there did get out the first wing to Bombardier at the end of December. And we'll continue to ramp up that program as we look forward in Red Oak as well.

We've also made a decision to produce the fuselage segments for the Embraer E-Jet programs in Red Oak and that activity will be ramping up as we look into fiscal '16 and fiscal '17 as well. .

And in terms of footprints consolidation, that just one aspect of what we're currently reviewing and the reason I say that is that while some footprint consolidation just make sense and we have in fact accomplished some of that in this fiscal year and we are continuing to implement the footprint consolidations, such as consolidating our two Long Island manufacturing facilities into one.

There are still is an opportunity I think to expand what we are doing.

In other words reducing our footprints only makes sense if in fact we have underutilized capacity that we really have nothing to do with and with the acquisition of the Tulsa wing program we have a fair amount of opportunity to drive additional vertical value through the value stream.

So those decisions that we may have made six months ago may not make sense now with the additional value that we can drive through a far more fully utilized facility. That said I’ll go back to the flip side of that and we are continuing to look at where our long-term footprint focus needs to be in terms of being competitive in all of our segments.

So this is a subject that we are acting on now. We are looking at -- we are in the process of acting on projects that will run through ‘16 and it’s an area of focus for us not only in ‘16 but also what is the long-term industrialization strategy of the company. .

Okay, great. Thank you guys. .

Thank you and our next question is from Steve Levenson..

Thanks, Good morning.

Can you hear me?.

Hi, Steve..

Okay, great thank you.

On the cash received as part of the G280-G650 transaction, are there any restrictions or can you use it you please?.

We can use it as we please. I mean as we review we received it on the 30th of December. It went in and reduced the outstanding revolver we had at that point in time. But it, it goes into the bucket of deployment from looking at opportunities, both organically and inorganically and share repurchase. .

Got it, thank you.

Separately can you give us a little more information on the Global 7000/8000 when you get some relief on that inventory and can you just give us some idea of how the E2-Jet schedule looks?.

Yeah, so I mean we have delivered the first test articles on the Global 7000/8000. Most of the deliveries that we have in fiscal ‘16 are additional test articles going to Bombardier.

We would expect to start seeing revenue units on Global 7000/8000 by the end of fiscal ‘16 but really so ramping up in fiscal ’17, when we start delivering revenue units is when we start liquidating the development cost on that. It’s also when the payments related to development costs flow in, the initial few hundred units on that program.

On Embraer you can generally think of being roughly nine to12 months behind that schedule that we’ve talked to on Bombardier, we will start delivering test units in mid-fiscal ‘16 but wouldn’t really start seeing revenues until the end of fiscal ‘17 and really ramping up then in fiscal ‘18. .

Okay, thanks.

Last one is how much more inventory -- what additions do you think there will be on the Global 7000/8000 program?.

So we are effective -- but we are not yet done with the development from an engineering stand point but we are closing in on it. So I would expect by the end of this fiscal year, early fiscal year ‘16 that the engineering activity will be concluded.

We would always expect some level of ongoing activity just as we continue to optimize within the build and design. So most of ‘16 though is that investment in the test articles. I would generally look at the investment required in Bombardier in fiscal ‘16 to be roughly half of what we’ve seen in the fiscal ‘15. .

Okay, thank you very much. .

[Operator Instruction]. And our next question is from Cai von Rumohr. Please state your affiliation and your question. .

It’s Lucy dialing in for Cai from Cowen and Company.

Can you hear me okay?.

Yeah, Lucy. .

Good morning, so just following-up on the previous question, I am in interested in learning about cash requirements on new programs. In the past you have talked about $120 million or so for the Global 7000/8,000 and the E2.

Where does that sit today and given it sounds like you are on track for scheduling in cost for those programs?.

Yeah, so if you look at spending today in fiscal ’15 we are slightly under that $120 million mark. I still expect full year spending on Global 7000/8000 and Embraer to be in the $120 million to $140 million range.

I would expect that to diminish significantly as we move into fiscal year ’16 where I would look at probably roughly half of that spend in fiscal year ’16..

Right. And I may have missed this earlier; you talked about continued softness in military aftermarket.

Are you expecting that to get better at any point maybe next year?.

You know we have continued to expect improvement there. We have in our mind pushed out that improvement into fiscal ’16. So I wouldn’t expect much improvement in the fourth quarter of ’15 but we are still optimistic we will see spending come back as we go into fiscal year ’16..

Yeah, that said the commercial side of that aftermarket business it remains robust at this time..

Great, thank you..

Thank you. And are there additional questions at this time? Since there are no further questions, this concludes the Triumph Group's fiscal 2015 second [ph] quarter earnings conference call. As a reminder, a replay of this call will be available today January 29, 2015, 11:30 AM. Eastern Time, until February 5, 2015, 11:59 PM Eastern Time.

The dial-in numbers are as follows; the toll number is 703-925-2533 and toll free is 888-266-2081. The pass code 1650287. Thank you all for participating, and have a nice day. All parties may disconnect now..