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Triumph Group, Inc. (NYSE:TGI)

F1Q09 Earnings Call

July 25, 2008 8:30 am ET

Executives

Richard Ill - President and Chief Executive Officer

David Kornblatt - Chief Financial Officer and Senior Vice President

Analysts

Tyler Hojo – Sidoti

Myles Walton – Oppenheimer & Company

Stephen Levenson – Stifel Nicolaus

Eric Hugel – Stephens

Peter Arment – American Technology Research

JB Groh – DA Davidson

[John Ely] – Forest Investment Management

Operator

Welcome to the Triumph Group conference call to discuss our fiscal year 2009 first quarter results. (Operator Instructions)

On behalf of the company I would now like to read the following statements. 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 statements.

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 web site at www.TriumphGroup.com. In addition, please note that this call is the property of Triumph Group, Inc. and may not be recorded, transcribed or re-broadcasted without explicit written approval.

At this time, I would like to introduce Richard Ill, the company's President and Chief Executive Officer and David Kornblatt, Chief Financial Officer and Senior Vice President of Triumph Group, Inc.

Richard Ill

Before I get started on the discussion of the results for the quarter I would like to mention that we at the company and on our Board are saddened by the loss of our Director and Chairman of our Audit Committee William Albertini. We will miss his expertise and his guidance.

Going on to the quarter one fiscal year 2009 in review, which is page three on the slide presentation. We clearly are very pleased with our earnings for the quarter and our record for the quarter. They are record earnings. We had very strong improvement in our operating margins especially in the Aerospace Systems Group. We had much improved cash flow from operations. We have a very robust backlog of $1.24 billion which is one of our items; Dave will cover this in a little while.

The 787 dropped in our top 10 programs but only dropped because it was pushed back and moved to the right and moved outside our 24 months that we use as our definition of our backlog. We don’t include in our backlog anything that is not going to be shipped within the next 24 months. That 787 has been shifted, the need still is there for the efficient aircraft which is needed now more than ever. As you see our earnings per share from continuing operations increased 49% over last year.

Our pace of business remains strong. If you take our two operating groups in our Aftermarket Services Group we did have some execution issues as you see by the margins posted there which were also affected by charges taken during the quarter in that particular group and Dave will discuss this. We have had some parking of older airplanes, the MD-80’s 737 Classic. Those aircraft the ones that were parked and they’re not parking all of them it makes up less than 10% of our business in that particular group.

In addition, in that group on a very positive thing Thailand which has been a concern for the last couple of quarters was profitable for the quarter and we expect it to remain so going forward. In our Aerospace Systems Group our order intake continues to exceed shipments. Our Military business is very, very strong. As I mentioned before we have a need for more efficient aircraft until the building of the new aircraft are going to continue strongly.

Our Helicopter business is exceedingly strong and we see no fall off at all in the business jet area. Our operating margins in the Aerospace Systems Group improved 28%. We had very strong internal growth of 13% in that group and a very successful integration of the acquisition of Triumph Structure Long Island which we acquired the end of last year.

In our future outlook we do remain very, very optimistic and I’ll get back to that a little bit when Dave finishes some of his comments, then I’m going to turn it over to Dave.

David Kornblatt

I’d like to start off with a review of the financial results for our first quarter. First, turning to the income statement, sales for the first quarter increased 17% to $320.6 million. Operating income increased 43% over the prior year to $43.3 million with an operating margin of 13.5% an improvement of 250 basis points.

Income from continuing operations was up 46% from $17.8 million to $26 million resulting in earnings per share from continuing operations of $1.54 per diluted share versus $1.04 per diluted share for the prior year quarter. A loss from discontinued operations was $1.2 million or $0.07 per diluted share. Net income increased 78% to $24.8 million or $1.47 per diluted share. EBITDA grew 36% to $55.5 million resulting in a 17.3% EBITDA margin.

Turning to our segment performance in the Aerospace Systems segment sales for the first quarter increased 19% to $258.2 million. Operating income increased 52% to $46.1 million with an operating margin of 17.8% an improvement of 28% or 390 basis points. EBITDA for the segment was $54.7 million at an EBITDA margin of 21.2%. The segments first quarter results included $1.5 million of legal expenses net of insurance reimbursement associated with the previously disclosed trade secret litigation.

In our Aftermarket Services segment, sales for the first quarter increased 8% to $63 million. First quarter operating income decreased 32% from $5.7 million to $3.9 million at an operating margin of 6.2% as compared to 9.8% a year ago. EBITDA in the quarter was $7.4 million a 17% decrease with an EBITDA margin of 11.7%. As mentioned in our press release the operating margin in this segment was hurt by the issues on a maintenance and hour by the hour contract in the quarter which we do not expect to repeat in the future.

Our order backlog increased 4.2% over the prior year to $1.24 billion but decreased 3.2% sequentially. I will remind you that as Rick said our backlog takes into consideration only those firm orders that we’re going to deliver over the next 24 months and primarily reflects future sales within our Aerospace Systems Group. The Aftermarket Services Group does not have a substantial backlog.

The sequential decrease in our 24 month backlog was entirely due to Boeing’s revised 787 delivery and production schedule. While our total backlog related to 787 remains at record levels a substantial portion was pulled out beyond our 24 month window. If you exclude the impact of the 787 our backlog grew 2.2% since year end. Military represented approximately 35% of our total backlog which is a slight increase from historical levels.

Our top 10 programs listed on the next slide are ranked according to backlog. Remaining in first place is the Boeing 777 program followed by the 737 program. Moving into third place is the CH 47 Chinook Helicopter followed by the Osprey Combat Helicopter in fourth place. In fifth place is the Blackhawk with the 787 dropping to sixth reflecting the push out beyond the 24 month window that I just discussed. Seventh is the A320 family followed by the C17 freighter. The 747 program is ninth and in tenth place is the A380.

Looking at overall sales, Boeing remains our only customer which exceeded 10% of our revenue. Billing to Boeing commercial, military and space total 24.1% of our revenue. Looking at our sales mix among end markets the next slide shows that compared to fiscal 2008 commercial Aerospace decreased slightly to 43% and Military remained at 33%. Regional jets increased to 6% while Business jets and non-aviation remained unchanged at 9% each respectively.

Finishing our sales analysis the next slide shows our sales trends for the quarter. Total organic growth for the quarter increased 12% over the prior year from $275.6 million to $309.5 million. Breaking that down by segment; first quarter same store sales for the Aerospace Systems segment was $246.5 million an increase of 13%. All of the Aftermarket Services segment sales for the quarter were organic. Export sales for the first quarter were $71.1 million or an increase of 27% over the prior year.

Turning to the balance sheet on the next slide we generated $14.9 million of cash flow from operations in the quarter while CapEx in the quarter was $11.4 million. Net debt at the end of the first quarter was $402.1 million versus $406.1 million at the end of March representing 36% of total capital. The tax rate in the quarter for income from continuing operations was 34.8% versus last year’s tax rate of 34.1%. This rate reflects the fact that the R&D tax credit expired on December 31, 2007, and has not yet been extended. For the remainder of fiscal 2009 we expect the tax rate to be approximately 35%.

With that I’ll turn it back over to Rick.

Richard Ill.

As I mentioned before we remain very optimistic about the future. Our major end markets remain strong. Our performance will continue to improve as we go through the year due to a great team effort by all our companies and our employees. As mentioned in the press release we have raised our earnings guidance and we feel that our earnings per share from continuing operations will be in excess of $5.25 for the year which would in fact be a 22% increase over last year. Last year I will remind everybody this is on top of an EPS increase last year, year on year of 39%.

We are reaffirming our revenue guidance of $1.25 billion to $1.35 billion that’s without any acquisitions. We realize that our guidance might be conservative. We have been conservative in the past and remain so but you can’t really multiply the first quarter by four as we repeatedly said. We do remain very optimistic and I’m sure we’ll get into that with the answer to some of the questions. At that I will open it up to any questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Tyler Hojo – Sidoti.

Tyler Hojo – Sidoti

My first question is just in regards to the margin in Aerospace Systems, obviously very strong, the strongest we’ve seen in a very long time. Was there anything one time in there or was it favorable mix or what drove that and what’s your expectation just in terms of being able to sustain that or somewhere near there on a go forward basis.

Richard Ill

I think there’s a long answer to that question. First of all we feel we have much better execution. We did have a very good mix in the quarter of our product and within our companies. Our best performing companies grew the fastest in the quarter and our underperforming companies or companies that weren’t doing quite as well as the outperforming companies made significant improvement so we had a very good mix within our companies. We had a very good team effort within all our companies in our execution.

We did have as we indicated some higher volume which helped us obviously with the through put at each one of our companies. As far as the sustainability is concerned, we really think we moved the bar upwards where the margins were 14.5% last year we look at this quarter as being a particularly good quarter doesn’t necessarily mean every quarter will be at the same level. On the other hand we don’t view it as peak margins either. We feel we’ve made some good strides in moving the bar up within our margins especially within the Aerospace Systems Group which most of our sales of course.

Tyler Hojo – Sidoti

Would you be able to tell us what your thought is in terms of where you think you peak out in margin in this Aerospace Systems business?

Richard Ill

That’s a very, very hard question to answer because you have a whole number of issues for example, the 787 as we’ve discussed before. The 787 was actually again this quarter although it has positive margins on what we produce and ship which was very little it was allutive to the margins in the group overall. I think that clearly we’ve moved the bar upward from the 14.5% and having said it’s a particularly good quarter I hate to predict what the top number would be but I think we’ve made significant increase and we will be able to keep those margins relatively high in most of our companies.

Tyler Hojo – Sidoti

In your prepared remarks you mentioned less than 10% of Aftermarket Services related revenue stems from what you referred to as at risk aircraft being parked in the desert. Would you be able to give us an idea of what it is for Aerospace Systems as well?

Richard Ill

Aerospace Systems very, very little, a very, very small percentage of that. Most of their business is coming from the new build. They have some aftermarket there on their own products but that doesn’t even relate to anywhere near the 10% that I talked about in the Aftermarket Services Group. A very small percentage I don’t know the percentage specifically but it’s a very small one.

Operator

Your next question comes from Myles Walton – Oppenheimer & Company.

Myles Walton – Oppenheimer & Company

A question for you on the cash flow, it looks like a nice turning point here. Is it fair to think that 1Q has historically been seasonally weak quarter? Can you keep free cash flow positive in each of the remaining quarters?

David Kornblatt

I would hope so and that’s our plan. First quarter is always burdened a little bit by the payment of bonuses which certainly last year were favorable which was good. We thought we did a much better job in Q1, still not acceptable but we really believe we’re starting to see some real improvements internally. It’s a long way of answering your question; yes it should be positive the rest of the year.

Myles Walton – Oppenheimer & Company

Can you give a CapEx target for the full year?

David Kornblatt

We’re staying with our $70 million target. Obviously we under spent that on a pro-rata basis in Q1 but we still believe around $70 million is a good number.

Richard Ill

Maybe a little bit more color in regards to the cash flow. We this year have added under the theory that the incentive programs that we have put in place have worked in the past, our incentive program has emphasized working capital management. In a lot of cases within the company it’s very clear that is working in the first quarter. Where it did not work we’re taking further steps to assure the fact that the company presidents and the people responsibility for inventory control and working capital management are continually incentivized to make those numbers better.

Myles Walton – Oppenheimer & Company

I did know you made those changes, I think they’re great. I was surprised that they took hold so quickly. That’s certainly a good indication of changing the incentive structure, it certainly changes behavior. If you can talk a little bit about the, you mentioned in the release this power by the hour adjustment. Remind me of the mechanics of that on the P&L and how much of a drag was it to margins.

David Kornblatt

The margin drag, the termination of one of the contracts you could do the arithmetic. I think that gets you up over 8%. The other adjustment was somewhat comparable. Rick referred to some execution issues. Most of our companies in the Aftermarket Services Group actually outperformed prior year and Q4 and most of the margins were above 10%.

The mechanics of the power by the hour is we get paid a set amount of cash and we’re constantly required to estimate the eventual margins which is a factor of how much each repair costs and how many incidents of repair will happen. We had one particular contract which is very favorable, it’s a military contract.

It’s still a very good contract but the turns actually dramatically increased in this quarter and will this quarter our second quarter and so that resulted in us having to bring the margins down essentially to reflect that but it’s still a very good contract but it’s just not a contract we have a lot of visibility to on when we’re likely to see repairs.

One of the issues was clearly execution issue the other is just more of an accounting item and there is just inherent volatility in power by the hour contract accounting. It did have a meaningful impact on the margins.

Myles Walton – Oppenheimer & Company

Within the context of the portfolio Military it looks like it had some pretty good growth, maybe something like 19% growth or so year over year. I guess you’re saying it’s also increasing as percent of the backlog. Can you talk a bit about, do you get similar margins in the Military side, and do you get better margins or worse?

David Kornblatt

On balance they’re not much different than our other programs. We don’t think about them as radically different. Some are better, some are worse. One of the things I do every quarter is look at our top 30, 40 programs just to see if there’s going to be a shift down the road and whether military and commercial whether that pace is changing. All we were trying to signal was that military, particularly driven by B22 which we’re very strong on. The orders for that have been very impressive of late. We’re probably going to see in the next year or so a slight tick up in military sales.

Myles Walton – Oppenheimer & Company

You mentioned the conservatism potentially in your guidance outlook. In response to Tyler’s question you talked about Aerospace Systems margins doing very well this quarter but really nothing one time in nature. I’m giving you a chance here to talk me down from the performance in the 1Q margins in Aerospace Systems and respective to the guidance and certainly looks like those margins trend back to the 14.5% implied in your guidance. I’m just trying to really understand was the mix in 1Q just so exceptional that we’re more looking for better than 4Q performance but not quite 1Q performance?

Richard Ill

I was trying to answer that a little bit in my comments. You’ll note that we didn’t have a guidance that gives a range like we did before. You and I have had this discussion in the past in regards to our conservatism and we remain so. On the other hand we’re very optimistic. I want to stop short of multiplying the first quarter by four. We do think that our first quarter was somewhat of a perfect storm in regards to our mix not only of product but of the margins within each individual company.

As I said before our outstanding performing companies grew the fastest during the quarter and that helped. Then we had much better execution which speaks to your point if we can maintain the execution. For example, we reduced our past due backlog significantly during the quarter with our customer base. We’re very pleased with our execution. That would lead one to believe that the earnings on a quarter to quarter basis could potentially stay the same.

I’m going to stop short of saying they can sequentially increase because in recent years the second quarter and third quarter have been a little bit down from the first quarter but I don’t see that because of any systemic problems or market problems. I want to underline that because there’s a lot of the world out there that seems to think the Aerospace world is coming to an end and the cycle is over. The build cycle is not over and we don’t see the cancellations which somewhat speaks to your point more than my point.

We did have somewhat of a perfect storm and I’m hesitant at this point in time to follow significant increase in guidance after a particularly good quarter.

David Kornblatt

The other thing I would mention is we’re really proud of some of our underperforming companies and how they’ve rebounded. As you know, when you start getting companies that are either losing money at negligible margin and they show radical improvement the impact on margins can be somewhat dramatic. While we’re proud of it one quarter doesn’t tell us that all that’s behind us and that does give us some reason to be a little conservative at least after one quarter.

Operator

Your next question comes from Stephen Levenson – Stifel Nicolaus.

Stephen Levenson – Stifel Nicolaus

Did you have any extra days in the quarter?

David Kornblatt

We’re trying to keep his blood pressure low.

Stephen Levenson – Stifel Nicolaus

I saw the export sales were up; does the situation with the dollar versus other currencies give you greater opportunity for export going forward?

Richard Ill

I think that has helped us in the last six months or so certainly where manufacturers in the US have become “low costs producers”. It gives us some opportunities for example on the A350 where we have in fact gained some business in door actuators, landing gear, power packages, valves, etc. and other door actuator programs. They are coming to the US because of the currency issues. In general I think that’s been a positive trend for us.

Stephen Levenson – Stifel Nicolaus

With the C series from Bombardier now announced and your position on regional jets what sort of opportunities do you see there?

Richard Ill

The second part of your question I have a hard time answering other than the fact that they’ve got a lot of competition out there. They’ve got the Russian Regional Jet, the Chinese, the Japanese Regional Jet, etc. They’ve got a lot of competition so whether it goes clearly depends on what happens in the open market. If it in fact does go we have a lot of opportunities on electromechanical actuators, hydraulic systems, fuel systems, etc. going across. Same thing we do on the other regional jets. It would be no different than the opportunities we normally have with our product line.

Stephen Levenson – Stifel Nicolaus

Do you have anything on the Russian, Japanese or Chinese RJ’s?

Richard Ill

No, not to my knowledge.

Stephen Levenson – Stifel Nicolaus

Boeing the other day talked about build rates going up in 2009 and again in 2010. At what point do you start to see the impact. How long of lead time generally do they have to use with you?

Richard Ill

We’ll see that because Boeing will supply us with build rate analysis that we have to deliver to them. We’ll see that at least six months in advance of that build rate increase. An interesting question because in the last quarter, in the last six months as a matter of fact, we have all the people predicting all the cancellations and moving out to the right. We have dealt with nothing but increase in product that we’re sending to Boeing. We haven’t seen any of that happen, not a mention of cancellations, moving anything to the right, etc.

I think the reason for that, I think Boeing has said the reason for that is that the more efficient jets are going to be used and needed more now than ever before. I think that we’ve already seen some of it over the last six months but specifically when they talk about 2010 we’ll see it six to nine months in advance.

David Kornblatt

One of the advantages we have is that one plant in particular we have 100% of many of the existing aircraft. Boeing these days is very cautious to make sure suppliers are ready to deliver. When you’re in 100% position you know you’re getting the total picture. When we split the business that’s a little different but we would have some very good visibility to when orders would be going up.

Stephen Levenson – Stifel Nicolaus

Is that the Spokane plant?

David Kornblatt

Yes.

Operator

Your next question comes from Eric Hugel – Stephens.

Eric Hugel – Stephens

I just want to be clear, make sure I heard it right. In answer to Myles question, were you saying that you though conceivably Q2 and Q3 of this year could be maybe not above but flat with Q1 of this year?

Richard Ill

I think that’s what you heard. You heard that correctly. The only thing that I hedge on that one is that as I said is that the first quarter was a particularly good quarter with the “perfect storm” type of thing with execution, volume and our best companies growing the fastest. I think that there is some, I’m hedging that a little bit, it was a particularly good quarter.

I’m optimistic enough to say that the next two quarters could be in a lot of those companies the same type of business hopefully our margins may not be quite as high as I mentioned.

Eric Hugel – Stephens

Aside from execution one would also think that volumes, revenues are going to continue to tick up and these issues that you experienced in the Aftermarket side of the business shouldn’t recur too so you should get an offset there correct?

Richard Ill

Certainly the charges that we took we won’t take again that’s non-recurring, that’s right.

Eric Hugel – Stephens

Can you give us an update you talked about the 787 being pushed back; can you talk anything about how you’re seeing now the stability of the build schedule for both the 787 and the A380 right now?

Richard Ill

The A380 really hasn’t changed where that’s in our backlog, that’s still our 10th, it’s not our biggest program, and we don’t do as much with Airbus as we do with Boeing as you know. That’s been relatively steady. The 787 we don’t see a full ramp up to the 787 until early 2010.

Eric Hugel – Stephens

I understand that but I guess what I’m trying to get an understanding of is the stability of this. Are you getting changes every day or is it pretty much there and you’re delivering to it and it’s staying fixed.

Richard Ill

I would say it’s generally staying fixed. We have some companies that have never received any push back on the product they’re supplying for the 787, they’ve never been stopped. On the other hand, some of the companies that are producing product that are the closest to the rear end of production on the 787 have been slowed down but there’s been no ramp up of slowing anybody down. It’s been relatively steady. From our perspective we look at the 787, our position would be that this time Boeing is going to make the deliveries that they say they’re going to make.

Eric Hugel – Stephens

Have there been any progress or any discussions with Boeing on some of this above and beyond R&D work that you’ve done in the past?

David Kornblatt

Yes, we’ve had resolution of some of that last year and we continue to make progress on whether there are NRE’s to recover or whether increased pricing. That’s a continual exercise not all with Boeing, frequently it’s with some of the first tier suppliers because most of our 787 content as we’ve talked about is not direct to Boeing but those discussions are happening all the time.

Eric Hugel – Stephens

Some of it you said would be in pricing and some of it might come in just the check?

David Kornblatt

Correct.

Eric Hugel – Stephens

Was there any of that this quarter?

David Kornblatt

Nothing material.

Eric Hugel – Stephens

On your Aftermarket side of your business last quarter you talked about you though 5% to 6%, 5% to 7% growth in the Aftermarket. Obviously there have been higher rates of capacity cuts. Is that still you doable? Do you still have that as a target?

Richard Ill

From a revenue perspective yes, that’s true because we’re doing well on the revenues front in Thailand. We have some of our companies who are doing very well from a revenue perspective. Our challenge there is the execution as we’ve mentioned.

David Kornblatt

We have some companies that are clearly gaining share. We think that with the parked aircraft being not a huge portion of our business and the opportunity to gain share I think our growth targets are achievable.

Eric Hugel – Stephens

Can you talk about; give us an update in regards to the trial? I haven’t seen any updates. I know you got seven of those 12 charges or so dismissed and they’re on appeal. Also, any updates with regard on the civil side I guess that disclosure in your 10-K with regards to the judge was kind of like whoa. Can you give us an update as to what’s going on there?

Richard Ill

You’ve really done a good job in giving everybody the update because you’re as updated as we are basically. The civil trial we look at as probably taking place at least six to nine months after the trial for the engineers. That’s in advance while the Government appeals. The fact that the court threw out the counts that you mentioned there’s really no real update other than that. We’re waiting for that ruling by the judge.

Eric Hugel – Stephens

Do you get the sense those charges that were dismissed are the core of the case. If those dismissals are upheld that a lot of the wind comes out of the sale of the Government’s case.

Richard Ill

I’m not a lawyer so I’d only be giving you my opinion. My opinion is we didn’t do anything wrong in the first place so the answer would be yes.

David Kornblatt

We’ve been through this before the dismissal and then re-indictment this time they’re appealing only a portion of the dismissed charges. The Governments actions have been hard to predict. The appeal will be heard within the next two weeks and we’ll go from there.

Eric Hugel – Stephens

On the discontinued ops can you give us an update there? This business you’ve been trying to sell the castings business for a while. Is it sellable, is it going to be something you have to bring back on to the P&L and then just shut down? Can you give us a timeframe and what’s going on there?

Richard Ill

We don’t think we’re going to have to bring it, the answer whether its saleable I think it’s absolutely saleable and I think that we’re working at it diligently. We’re frustrated as to the speed of which it’s happening which has a lot to do with the customer base we’re trying to protect and do the proper thing for our current customers while at the same time free it up to sell and there are interested parties.

Operator

Your next question comes from Peter Arment – American Technology Research.

Peter Arment – American Technology Research

Could you give us, this is a follow up to maybe Eric’s question on the Aftermarket in terms of your growth assumptions there. It seems like you’re growing a little bit faster than the overall market and I guess that’s a function of what you mentioned some market share gains. What are your assumptions going forward say hypothetically if we do get global flight hours that are down or flat to slightly down. How do you think that would play out in terms of your forecast of the top line?

Richard Ill

What that might do is slow down the work. You’ve got to remember that our business and the Aftermarket Services Group is third party repair an overhaul. In other words, we repair and overhaul Sundstrand and Honeywell APU’s and Sundstrand CESD’s etc. It would slow down the repair and overhaul work on that.

The other side of the coin is it was going to increase the use of our rotables in the engine business and the thrust reverser area. The airline doesn’t have to make the investment in that particular asset or rotable and we do it for them and that business has in fact been growing faster than for example the APU end of our business.

Peter Arment – American Technology Research

So it’s really the share gains and I think some of the mix you should still be able to grow the top line in that environment.

Richard Ill

Yes, that’s right.

Operator

Your next question comes from JB Groh – DA Davidson.

JB Groh – DA Davidson

I’m assuming that the guidance in excess of $5.25 assumes that the R&D tax credit isn’t renewed but what sort of pick up would you get on the tax rate if it were to be renewed?

David Kornblatt

If it’s 12 months of credit it would be about 1% to 2% on our effective tax rate. I think we’re still hopeful there’s a little bit of retroactivity there. It’s in that range. It should allow us to get below 34% if it’s reinstated.

JB Groh – DA Davidson

Maybe you could comment on what you’re seeing on the acquisition front. Obviously the public companies evaluations have come in quite a bit. We’ve seen the same sort of thing on asking prices for any private deals that you’ve been looking at.

Richard Ill

First of all the acquisition front there’s a lot of activity still. In my opinion you’re seeing the last vestiges of some people trying to get outlandish multiples. The multiples have come down a touch and be a little bit more realistic. Maybe a little bit different structuring of any of the deals. Generally speaking there’s still a lot of activity with people potentially trying to sell their companies at what they perceive to be still the top of the build cycle. Any acquirer could take advantage of the business they get over the next year or two.

Operator

Your next question comes from [John Ely] – Forest Investment Management.

[John Ely] – Forest Investment Management

You have $189.6 million odd draw on your revolver, how much does that leave in availability is it $160 million?

David Kornblatt

The revolver is up to $370 in availability so I guess it would be around $189 million.

[John Ely] – Forest Investment Management

What’s the current interest rate on that over libor is it still at 87.5 basis points?

David Kornblatt

Yes.

Operator

Your next question comes from Myles Walton – Oppenheimer & Company.

Myles Walton – Oppenheimer & Company

Boeing entering negotiations here with its labor union this quarter and can you remind us back when there was a strike I was looking at the model and the numbers it didn’t look like there was much of an impact to you even when that strike took place back in ’05. Could you give us some historical perspective on whether or not it did and what if any would be the case this go round if there were to be a labor dispute?

Richard Ill

If there were to be, there really wasn’t much of one at that point in time because it wasn’t a particularly lengthy one and some of the products that would really affect us were again at the tail end of the production cycle for Boeing. Unless it was a prolonged strike I don’t think that it would affect us in any great way.

Back when they had stoppages before or potential stoppages we haven’t stopped production. We might not be able to ship right away and we’d hold it for them but we haven’t stopped production and we catch up very quickly on a revenue basis. That’s what happened in the past. If it’s a prolonged strike then you have a problem of not being able to ship the product and that would eventually affect our production aspect. I don’t see that happening at this point in time.

Myles Walton – Oppenheimer & Company

I was just looking for the perspective relative to the last time it happened I think it was about a month back in ’05 so that color is helpful.

Operator

Your next question comes from Tyler Hojo – Sidoti.

Tyler Hojo – Sidoti

On legal what’s baked into your guidance, are you still looking for roughly $9 million?

Richard Ill

We have a budget of $9 million, $1.5 million for the quarter and our budget for the year is $9 million.

Operator

Since there are no further questions this concludes the Triumph Group fiscal 2009 first quarter earnings conference call.

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Source: Triumph Group, Inc. F1Q09 (Qtr End 06/30/08) Earnings Call Transcript
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