Triumph Group Inc (TGI) 2009 Q1 法說會逐字稿

Welcome to 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 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 risk, 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 the website 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 rebroadcast without explicit written approval.

At this time, I will 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. Go ahead, Mr. Ill.

Thank you and good morning, everybody. Before I get started on the discussion of the results for the quarter, I would like to mention that we at the Company and at 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, and Dave will cover this in a little while.

The 787 dropped in our top-ten programs but only dropped because it was moved, 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. And 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 after 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 MD80s and 737 classic, but those aircraft, the ones that are parked and we are now parking all of them, it makes up less than 10% of our business in that particular group. And in addition in that group and a very positive thing, Thailand, which has been a concern for the last couple of quarters, was profitable for the quarter. 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 ,so 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%. And we had very strong internal growth of 13% in that group and a very successful integration of the acquisition of Triumph structures Long Island, which we acquired in the end of last year.

In our future outlook, we do remain very, very optimistic, and I will get back to that in a little bit when Dave finishes some of his comments. With that, I will turn it over to Dave.

Thank you, Rick, and good morning, everyone. I would 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 system 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 segment's 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 sales 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 power-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 are 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 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 ten 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 CH47 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 pushout beyond the 24-month window that I just discussed. Seventh is the A320 family followed by the C-17 freighter. The 747 program is ninth, and in tenth place is the A380.

Looking at overall sales, Boeing remains our only customer which exceeded our 10% of our revenue. Billings to Boeing commercial, military, and space total 24.1% of our revenue. Looking at our sales mix among end markets, the next slide shows the comparative 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 of 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 in the next slide, we generated $14.9 million of cash flow from operations in the quarter while CapX 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 will turn it back over to Rick.

Thank you, David. 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--$5.25 would be a 22% increase over last year, and 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 have repeatedly said. We do remain very optimistic, and I'm sure we'll get into that as the answer to some of the questions. At that, I will open it up to any questions.

(OPERATOR INSTRUCTIONS). Tyler Hojo, please state your affiliation followed by the question.

Hi, good morning, Sidoti. My first question is just in regards to the margin in aerospace systems, obviously very strong and the strongest that we seen in a very long time. Was there anything one time in there or was it a favorable mix or kind of what drove that, and what is your expectation just in terms of being able to sustain that or somewhere near there on a go-forward basis.

I think there is a long answer to that question. First of all, we did have much better execution. We did have a very good mix in the quarter of our product and within our Company. So our best performing companies grew the fastest in the quarter. And our underperforming companies are companies that weren't doing quite as well as the outperforming companies made significant improvements.

So we had a very good mix within our companies. And we had a very good team effort within all our companies and in our execution. And we did have, as we indicated ,some higher volume, which helped us, obviously, with the throughput at each one of our companies. As far as the sustainability is concerned, we really think we have 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 have 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.

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

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

Okay. That's fair. I guess just one follow-up for me. In your prepared remarks, I guess you mentioned less than 10% of aftermarket-services-related revenue stems from, I guess, what you refer to as kind of at-risk aircraft as being parked in the desert. Would you be able to give us an idea what it is for aerospace systems as well?

Aerospace systems very, very little. I mean 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. Very small percentage. I don't know the percentages specifically, Tyler, but it's a very small one.

Okay, great. Well, thanks for that.

Thank you.

Thank you. Myles Walton, please state your affiliation followed by a question.

Thanks. Oppenheimer and Company. Good morning and really good quarter.

Thank you.

Thank you.

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

I would hope so, Myles, 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 is good. But we thought we did a much better job in Q1. Still not acceptable. But we really believe we are starting to see some improvements internally. So it's a long way of answering your question, yes, we should be positive the rest of the year.

Can you give us the CapX target for the full year?

We are staying with our $70 million target. Obviously, we underspent that on a prorata basis in Q1. We still believe around $70 million is a good number.

Myles, 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. And in a lot of cases within the Company, it's very clear that it's working in the first quarter. Where it did not work, we are 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.

I did know you made those changes. I think they are great. I was surprised they took hold so quickly. So it's certainly a good indication of changing the incentive structure. Certainly changes behavior. If you could talk a little bit about the--you mention in the release this power-by-the-hour adjustment, and kind of remind me of the mechanics of that on the P&L, and how much of a drag was it to margins?

Yeah. The margin drag, the termination of one of the contracts, you could do the arithmetic. I think it gets you up over 8%. The other adjustment was somewhat comparable, and Rick referred to some execution issues. Most of our companies in the aftermarket services group actually out performed prior year in Q4. And most of the margins were above 10%. The mechanics of the power by the hour as we get paid a set amount of cash, and we were 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.

And 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. So that resulted in us having to bring the margins down essentially to reflect that. It's still a very good contract, but it's just not a contract we have a lot of visibility to on when we are likely to see repairs. So one of the issues was clearly an execution issue. The other is just more of an accounting item, and there is just inherent volatility in power-by-the-hour contract accounting. But it did have a meaningful impact on the margins. Is that helpful?

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

I think on balance, they are not much different than our other programs, Myles. We don't think of 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 is going to be a shift down the road and whether military and commercial, whether that pace is changing, and all we are trying to signal is that military, particularly driven by B-22, which we are very strong on, that the orders for that have been very impressive of late. So we are probably going to see in the next year or so a slight pick up in military sales.

Rick, you mentioned, and you know the question is coming. You mentioned the conservatism potentially in your guidance outlook, and in response to Tyler's questions you talked about aerospace systems margins doing very well this quarter, but really nothing one time in nature. I'm just kind of giving you a chance to talk me down from the performance in the 1Q margins in aerospace systems. And respective to the guidance, it looks like those margins trend back to the 14.5% implied in your guidance. Just trying to really understood was the mix in 1Q just so exceptional that we are more looking for better than 4Q performance but not quite 1Q performance?

I think I was trying to answer that a little bit in my comments. And admitting that--you'll note that we didn't have a guidance that gives a range like we did before. We've had--you and I have had this discussion in the past in regards to our conservatism, and we remain so. But on the other hand, we are 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, if you will, 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. So we are very pleased with our execution. So 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 the 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. And I want to underline that because there is 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. But I think we did have somewhat of a perfect storm, and I'm hesitant at this point in time to follow a significant increase in guidance after a particularly good quarter.

That's fair. Thanks.

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

I think that's fair. Thanks again. Very good quarter.

Thank you. Steve Levenson, please state your affiliation.

Stifel Nicolaus. Good morning, Rick and Dave.

Good morning.

Good morning.

Rick, did you have any extra days in the quarter.

(pause and laugh)

Okay, I'll stop there.

We are trying to keep the blood pressure low, Steve.

Sorry about that. So the export sales were up. Does the situation with the dollar versus other currencies give you greater opportunity for export going forward?

I think that has helped us in the last six months or so, certainly, where manufacturers in the US have become, quote, low cost producers. It gives us opportunities, for example, on the A350, where we have in fact gained some business in door actuaters, landing gear, power packages, valves, et cetera, and other door actuater programs. That they are coming the US because of currency issues. In general, I think that's been a positive trend for us.

Okay. You have answered half the next question. With the C-Series from Bombardier now announced in your position on regional jets, what sort of opportunities do you see there. Do you think it's going to go?

I think, well, the second part of your question I have a hard time answering. Other than the fact that they have a lot of competition out there. They've got the Russian regional jet, the Chinese, the Japanese regional jet, et cetera. They've got a lot of competition. So whether it goes sort of depends on what happens in the open market. If it in fact does go, we have a lot of opportunities on electromechanical actuaters, the hydraulic systems, fuel systems, et cetera, et cetera, going across--same thing we do on other regional jets. So it would be no different than the opportunities we normally have with our product line.

Okay. Thanks. Do you have anything on the Russian, Japanese or Chinese RJs?

No, not to my knowledge.

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 a lead time generally do they have to use with you.

We will see with 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 are sending to Boeing. So we haven't seen any of that happen, not a mention of cancellations, moving anything to the right, et cetera. And I think the reason for that is, and 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 have already seen some of it over the last six months. Specifically, when they talk about 2010, we will see it six to nine months in advance.

Steve, one of the advantages we have is that, one plant in particular, we have 100% of many of the existing aircraft. So Boeing these days is very cautious to make sure suppliers are ready to deliver. And when you are in 100% position, you know you are getting the total picture.

Is that the Spokane facility?

When we split the business, that's a little different. We would have good visibility to when orders would be going up.

Great. And I'm sorry, is that the Spokane plant?

Yes.

Great. Thank you very much.

Thank you.

Thank you. Our next question is from Eric Hugel. Please state your affiliation followed by your question.

Stevens. Hey, guys. Great quarter.

Thank you.

Thank you.

Just want to be clear. Make sure I heard it right. I guess in answer to Myles' question, were you saying that you thought conceivably Q2 and Q3 of this year could be maybe not above but flat with Q1 of this year?

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

Right. Aside from execution, one would also think that volumes, revenues will continue to pick up. I guess these issues that you experienced in the aftermarket side of the business shouldn't recur, too, so you should get an offset there, correct?

Certainly the charges that we took we won't take again. That's nonrecurring. That's right.

Could you give us an update? You talked about the 787 sort of being pushed back. Can you talk anything about sort of how you're seeing now sort of the stability of the build schedule for both the 787 and the A380 right now?

The A380 is really has hasn't changed. In our backlog that's still our tenth. That's not our biggest program. We don't do as much with Airbus as we do with Boeing, as you know. So that's been relatively steady. The 787, we don't see a full ramp up to the 787 until early 2010.

I understand that. I guess what I'm trying to get an understanding of is the stability of that. Are you getting changing every day? Or is it pretty much there, and you are delivering to it, and it's staying fixed?

I would say it's generally staying fixed. We have some companies that have never received any push back on the product they are supplying for the 787. They never have been stopped. the other hand, some 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 has been no ramp up of slowing anybody down. It's been relatively

Great.

From our perspective, we look at the 787 as--I think that our position would be that this time Boeing is going to make the deliveries that they say they are going to make.

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

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

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

Correct.

Was there any of that this quarter?

Nothing material.

No.

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

I think from a revenue perspective, yeah, that's true. Because we are 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 mentioned.

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

Great. And can you talk about, sort of give us an update with regards to the trial. Haven't sort of seen any updates. I know you got seven of those 12 charges or so dismissed, and they are on appeal and also any updates with regards to, I guess, on the civil side. I guess that disclosure in your 10K with regards to the judge was kind of like, whoa. Can you give us sort of an update as to what's going on there?

You really done a good job in giving everybody the update because you are 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 a government appeals the fact that the court threw out the counts that you mentioned. There's really no update other than that. We are waiting for that ruling by the judge.

Do you get the sense that those charges are--that we were dismissed are the core of the case, that if those appeals are, if those dismissals are upheld, that a lot of the win comes out of the sail of the government's case?

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

I think we would be--we have been through this before. The dismissal. Then reindictment this time. They are appealing only a portion of the dismissed charges. So the government's actions here have been hard to predict. The appeal will be heard in the next two weeks. And we'll go from there.

And finally on the discontinued OPs, can you give us an update there? This business, you have been trying to sell the castings business for awhile. I mean, is it salable? Is it going to be like sort of something you will have to bring back on to the P&L and then just shut down? Can you give us sort of a time frame and sort of what's going on there?

No, we don't think we will have to bring it out. The answer to whether it's salable, it's absolutely salable. We are working at it diligently. We are frustrated as to the speed of which it is happening, which has a lot to do with the customer base. We are 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.

Great. Thanks a lot, guys. And again, great quarter.

Thank you.

Thank you.

Thank you. Our next question is from Peter Arment. Please state your affiliation followed by your question.

Yes, American Technology Research. Congratulations. Nice quarter. Can you give us just maybe--this is a follow-up maybe to Eric's question on aftermarket in terms of your growth assumptions there. It seems like you are 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's your assumptions going forward, say hypothetically, if we 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 on the top line?

I think that what that might do is slow down the work. You have to remember that our business in the aftermarket services group is third-party repair and overhaul. In other words, we repair and overhaul Sundstrand and Honeywell APUs and Sundstrand CSDs, et cetera, et cetera. And it will 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 because the airline doesn't have to make the investment in that particular asset or rotable. We do it for them, and that business has in fact been growing faster than, for example, the APU end of our business.

So it's really the share gains and some of the mix that should still be able to grow the top line in that environment?

Yes.

That's right.

Excellent. Congratulations on the results.

Thank you.

Thank you. Our next question is from J.B. Groh. Please state your affiliation followed by your question.

D.A. Davidson. Good morning, guys.

Good morning.

Good morning.

Dave, I'm assuming that the guidance in excess of $5.25, whatever it was, assumes that the R&D tax credit isn't renewed. What sort of pick up would you get on the tax rate if it were to be renewed?

If it's 12 months of credit, it would be about 1%. %1 to 2% on our effect of tax rate. I think we are still hopeful there is a little retroactivity there. It's in that range. Should allow us to get below 34 if it's reinstated.

Okay. Below 34. Okay. And Rick, maybe you can comment on what you are seeing on the acquisition front. You know, obviously, the public companies' evaluations have come in quite a bit. Have you have seen the same sort of thing on asking prices for any private deals that you have been looking at?

Well, first of all, the acquisition front, there is a lot of activity still. I think that, in my opinion, you're seeing the last vestiges of some people trying to get outlandish multiples. So I think the multiples have come down a touch and be a little bit more realistic and maybe a little bit different structuring of any of the deals. But generally speaking, there is still a lot of activity with people potentially trying to sell their companies at what they perceive to be still the top of the billed cycle. So any acquirer can take advantage of the business they get over the next year or two.

Got you. Thanks a lot. Most of my other questions have been answered. Congratulations on the quarter.

Thank you.

Thank you.

Our next question is from [John Healey]. Please state your affiliation followed by your question.

Yeah, good morning. Forest Investment Management. You have what, $189.6 million draw on your revolver. How much does that leave in availability? Is that $160 million?

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

Okay, it is up to 370. Okay, what's the current interest in that overlier board? Is it still 87.5 basis points?

Yes.

Thank you very much. Good quarter.

Thank you.

Thank you. Our next question is from Myles Walton. Please state your affiliation followed by your question.

Oppenheimer and Company. Quick follow-up if you could. Boeing entering negotiations here with its labor union this quarter, and, Rick, can you remind us back when there was a strike, I was looking at the model and 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 around if there were to be a labor dispute.

I guess 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. 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 would hold it for them, but we haven't stopped production, and we catch up very quickly on a revenue basis. I mean, that's what happened in the past. I mean, if it's a prolonged strike, you have a problem of not being able to ship the product. And then that would eventually affect our production aspect. I don't see that happening at this point in time.

Okay, great. I was looking for the perspective relative to the last time it happened. I think it was a month back in '05. That color is helpful. Thank you.

Thank you. Our next question comes from Tyler Hojo..

Just a quick follow-up here. Just on legal, what's baked into your guidance? Are you still looking for roughly $9 million, I think it was?

We have a budget of $9 million. It was $1.5 million for the quarter. And our budget for the year is $9 million.

Okay. Thanks.

Thank you.

Since there are no further questions, this concludes the Triumph Group's fiscal 2009 first quarter earnings conference call. This conference call will be available for replay starting today, July 25, 2008, at 11:30 A.M. through August 1, 2008, at 11:59 P.M.

You may access the replay system at any time by dialing 1-888-266-2081. International participants dial 703-925-2533. Enter the access code 126-1661. Once again, those numbers are 1-888-266-2081 and 703-925-2533, access code 126-1661. hank you all for participating and have a nice day.