Triumph Group Inc (TGI) 2009 Q4 法說會逐字稿

Welcome to the Triumph Group conference call to discuss our fiscal year 2009 fourth quarter and year-end results. This call is being carried live on the internet. There is also a slide presentation included with the audio portion of the webcast. Please ensure that your pop-up 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 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 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 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. Go ahead, Mr. Ill.

Thank you, and good morning, everybody. We are very proud of our strong quarter and fiscal year results. Our sales, our operating income, earnings per share as well as cash flow, reached record levels in spite of the uncertain environment and the pessimistic outlook by some who cover the industry. Our companies have performed well, and their management of working capital and general plan efficiency can be classified as a job well done.

As you see on the first slide, I repeat we had record earnings, record cash flow. Dave will get into some of the numbers specifically. Our backlog expanded to a record level of $1.3 billion. That includes our new acquisitions that I will talk about in a minute.

We have a strong increase in our aerospace systems group margins, and remaining challenges within the Phoenix APU operations.

We have announced the establishment of a Mexican manufacturing facility, and we have expanded the capabilities and international presence via four completed acquisitions which we recently announced. All are expected to be immediately accretive.

Entering fiscal 2010, we have a very strong position, a very healthy balance sheet and a robust backlog. As I mentioned, our backlog is up, including our acquisitions to $1.3 billion, our same-store sales backlog were down $5 million without those acquisitions, but the acquisitions produced a good backlog going forward. We feel much more confident than some others in regards to 787 production going forward.

If you look at our position now in short and we see some headwinds, we have acquisition expense, I'll get to some specifics in a second. We have some accounting changes on how we account for the interest in our convertibles. We have Mexican startup costs on the plant we announced we were going to build in Mexico, we have some slip in the general aviation market specifically, and there are those that said that the 787 is a headwind.

We are optimistic about our abilities in the future. We don't have any information right now on any cuts in the 737, as a lot in the industry have predicted. Our military percentage of backlog is up to 43%. As a result, we see our earnings per share to be approximately $5 for the year on sales of $1,275,000,000 to $1,375,000,000.

The headwinds that we mentioned are specifically in cents per share, the following. We see $0.20 per share more in legal expense due to trials coming up in the criminal area and the civil area. We see $0.35 in imputed interest on our convertibles due to accounting changes there. We see $0.27 from startup in our Mexican operation, and we see $0.08 due to expensing due diligence costs, which we have to do starting April 1.

At that, I'll turn it over to Dave for some more color.

Thank you, Rick, and good morning, everyone. I'd like to start off with a review of the financial results for both the fourth quarter and the full fiscal year.

First, turning to the income statement, sales for the fourth quarter were $311.2 million compared to $321.2 million for the prior year period. Operating income was basically flat at $35.4 million, with an improvement in operating margin to 11.4%. Income from continuing operations was up 12% from $21.3 million to $23.8 million, resulting in earnings per share from continuing operations of $1.43 per diluted share versus $1.26 per diluted share for the prior year quarter.

The loss from discontinued operations was $1.6 million or $0.10 per diluted share. Net income increased 14% to $22.1 million or $1.33 per diluted share. EBITDA grew 2% to $47.8 million, resulting in a 15.3% EBITDA margin.

Turning now to our full fiscal year results, sales for the fiscal year increased 8% to $1.24 billion. Operating income increased 20% over the prior year to $151.9 million. Operating margin improved from 11% to 12.2%. Income from continuing operations was up 29% to $97.8 million, resulting in earnings per share from continuing operations of $5.90 per diluted share versus $4.32 per diluted share for the prior year.

A loss from discontinued operations was $4.7 million or $0.29 per diluted share. EBITDA grew 18% to $200.5 million, resulting in a 16.2% EBITDA margin.

Looking now at our segment performance, in the aerospace systems segment, sales for the fourth quarter decreased 3% to $249.8 million. Were it not for the impact of the Boeing strike and delays on the 787 and 747-8 program, sales would have increased by approximately 2%.

Operating income increased 10% over the prior year quarter to $41.2 million, with an operating margin of 16.5%. EBITDA for the segment was $50 million and an EBITDA margin at 20%. For the year, sales for the segment increased 9% to $988.4 million. Excluding the impact of the Boeing strike and the program delays, year-over-year sales increase would have been approximately 14%.

Operating income increased 35% over the prior year to $168 million with an operating margin of 17%, an improvement over the prior year of 320 basis points. EBITDA for this segment was $202.8 million at an EBITDA margin of 20.5%. The segment's fiscal year results included $4.7 million of legal expenses, net of insurance reimbursement associated with the previously disclosed trade secret litigation.

In our aftermarket services segment, sales for the quarter decreased 5% to $62.1 million. Fourth quarter operating income decreased 71% from $6.4 million to $1.9 million at an operating margin of 3%. The fourth quarter's results include $600,000 of shutdown expense related to a manufacturing facility in Shannon, Ireland.

EBITDA in the quarter was $5.2 million with an EBITDA margin of 8.3%. For the fiscal year, sales for the segment increased 3% to $254.6 million. Operating income decreased 54% of the prior year, to $10.9 million with an operating margin of 4.3%. EBITDA for this segment was $24.4 million at an EBITDA margin of 9.6%.

As we said in our press release, this segment's results continue to be negatively impacted by losses sustained at the Phoenix APU operations. Excluding these operations, the segment's year-over-year revenue growth was 6% for the quarter and 17% for the year, with operating margins of 9% for the quarter and 10% for the year.

As Rick said, our order backlog is up and at an all time high of $1.3 billion, despite a net year-over-year negative impact of $62 million related to the pushout of the 787 program beyond our 24-month window. Military now represents approximately 43% of our total backlog.

Our top 10 programs listed on the next slide are ranked according to backlog. Remaining in first place is the Boeing triple seven followed by the 737, next generation in second place. Third is the Osprey V22 combat helicopter.

Fourth is the Boeing CH-47 Chinook, followed by the Black Hawk helicopter in fifth place. The 787 moves back up to sixth place, with the C17 freighter dropping to seventh. The F15 moves up to eighth place, followed by the 747 program in ninth place. In tenth place is the air bus A320 family.

Looking at overall sales, Boeing remains our only customer which exceeded 10% of revenue. Billings to Boeing commercial, military and space totaled 23% 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%, while military increased to 36%. Regional jets increased to six, and business jets remain unchanged at nine. Non-aviation decreased from 9% last year to 6%.

Finishing our sales analysis, the next slide shows our sales trends for the quarter and the year. Total organic growth for the quarter decreased 5% from the prior year to $302 million. Breaking that down by segment, fourth quarter same-store sales for aerospace systems was $239.9 million compared to $252.4 million in the prior year period. The aftermarket services segment had same-store sales of $62.1 million, a decrease of 5% over the prior year sales.

With respect to the fiscal year, total organic growth increased 5% over the prior year to $1,201,800,000. Breaking that down by segment, fiscal year same-store sales for aerospace systems segment was $947.2 million, an increase of 5%. The aftermarket services segment at same-store sales of $254.6 million, an increase of 3%. Export sales for the fourth quarter were $62.8 million, and $266.6 million for the year, an increase of 12%.

Turning to the balance sheet on the next slide, we generated $62.7 million of cash flow from operations in the quarter, and $139.5 million for the year. CapEx in the quarter was $14.2 million, and $45.4 million for the year.

At the beginning of our fiscal year, we set a goal to hold inventory flat. We almost met this goal. We take into account the distraction and inefficiencies resulting from the Boeing strike and the various major program delays, we are very proud of our performance in fiscal 2009 in this area.

Net debt at the end of the year was $460.8 million versus $406.1 million at the end of the prior year, representing 37.1% of total capital. During the quarter we entered into a lease financing agreement, which provided $59 million of liquidity for a term of seven years at an average interest rate of 6%.

Interest expense and other for the quarter was net of a $1.4 million foreign exchange gain resulting from our European acquisitions in the quarter. For the year, the global effective tax rate from continuing operations was 31.8%.

With that, I'll turn it back over to Rick. Rick.

On the last slide, we indicate some of the things that I spoke of in the opening. Admittedly this year, we had a more difficult time coming up with our business plans with our individual units than before, due to the mixed conditions across all our markets. You see listed there the guidance that I gave earlier.

The headwinds that I gave you in regards to legal, et cetera, add up to approximately 90 -- not approximately, but $0.90. So at the risk of being accused of being conservative, with that $0.90 headwind and the uncertain conditions and mixed conditions across all our markets, we think we are not being overly conservative in this particular issue, and most of the analysts that cover us don't think that we are being that conservative either.

The guidance reflects current production rates, and as I said, we haven't heard anything about any cutbacks on the 737, at least in the short term. It indicates the accounting change for convertible debt and due diligence costs of approximately $2 million, and that's an estimate on our part based on what we have spent before on acquisition due diligence, which we think is money well spent.

Legal expense is budgeted at $9 million for the year, and startup expenses approximately $7.5 million for the new Mexico plant, not the New Mexico plant but, effective tax rate of 33%, that assumes the R&D credit is extended. And share count of 17.2 million shares.

So with that, I'll turn it over to, back to you for any questions you may have.

At this time the officers of the Company would like to open the forum to any questions that you may have. (Operator Instructions). Steve Levenson, please state your affiliation followed by your question.

Stifel, Nicolaus. Good morning, Rick and Dave.

Good morning, Steve.

Thanks for all the disclosure in the slide show. The other day you had a press release out about certification to do thrust reversal work on CFM56 engines. Could you give us some more details about that? Is that for specific issue or is that going to put you in the ballpark to compete with other people doing that work, and where do you expect to do it?

Well very frankly, we were already in position to compete, and we are already doing that. We have had some of our competition come out with an announcement on that recently, and so we wanted to get ourselves out in the marketplace as saying that we have had that capability and it's a good part of our business right now. So simply, it's a release that we want to make sure our customer base knew that we had that capability as well, not that they already didn't.

But there is a service bulletin out, Steve, that requires all the 737 guys to do a certain repair, and this means we will be on the approved Boeing list, because I think for the most part Boeing is going to be paying for the service bulletin. And then of course what we hope is that while we are in there doing the service bulletin, we will get into, most people will be expected to do the service bulletin at a normal overhaul date. So I think it positions us well along with the OEMs to do that work.

Okay. Thank you.

And secondly, you had a big flurry of acquisitions in March. Certainly don't expect it to continue at that pace, but how do you see the market and how is your financing situation right now? How is the pipeline and what sort of plans do you have? I know $2 million in due diligence, but I'm curious as to what you think you can do during the year.

Three questions in that one question. First of all, let me just tell you that the acquisitions that we made, frankly happened to take place in March, but those are acquisitions we had been working on for a long period of time, a couple of them for almost nine, 10, 11 months. So they just happened to culminate in March, not that that makes much difference, but it's -- we didn't plan in the beginning to have them all happen at the end of the fiscal year. That's number one.

Number two, as long as we maintain the cash flow, and I just got finished saying our -- telling our Company Presidents this, maintain the same type of cash flow, we will be able to finance any reasonable size acquisition in the size that we have been making recently. And our banks so far are supportive in that issue, so I don't see that as a short-term problem.

And number three, there are a number of acquisitions that are still out there in the marketplace, and we are getting a strong look at a lot of acquisitions because people selling them are -- know that we are acquisitive. So there's a lot of work to be done out there and a lot of potential companies to buy.

We have close to $300 million available under our existing facility, Steve.

Okay. Thank you very much.

Thank you.

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

Thanks. Oppenheimer and Company, good morning, and really good cash flow, guys. I think those incentives are taking hold.

Can you give some thoughts as to your expectation for operating cash flow conversion, or free cash flow conversion in 2010?

I think it will be good, Myles. I think there's no reason we would not be in the 85% to 90% of net income, maybe even a little better.

I think the one thing that I would hedge my bet is, we have not yet decided whether we will own or lease the facility we are going to construct in Mexico, and a few other large capital expenditures. So absent that, I would think you would -- there's no reason our cash flow would not continue to be strong.

Okay, great. And from a standpoint of the Phoenix business, number one, I guess, can you give us some color on the size of the losses in the quarter? You implied it, and I just want to make sure my math was right. Was it $3 million or $4 million in the quarter, and then also what's implied in the guidance on a go forward basis with respect to that unit?

The specific answer to your question, will I give you an idea of the size of the losses is, it's significantly better than it had been in previous quarters, especially in the month of March. And I think that we are working our way out of the hole, if you will. I think the group as a whole, in the aftermarket services group as a whole, would have been very close to our stated goal of 10% operating margin if it weren't for that particular company in the quarter and the year.

So we are getting there and there's progress being made, but I want to stop short of specific dollars for obvious reasons. We don't want to do that in any individual company.

Okay.

Myles, I would say the other thing is, we have been very candid and critical of ourselves there, that in prior quarters we told you that the problem with Phoenix was us, not the market. I think we are getting closer, and very close to the point where we have fixed our own issues, and now it will be a matter of trying to get back to profitability in a market that's slowed a little bit and regaining customer confidence. So I think we have fixed our internal house.

Okay. And can you just give us some color on the Mexico roll-out and the expenses there? Is it, in terms of the seasonality -- or the quarterly flow of that through the course of the year, are you break-even by the end of the year, are you break-even into 2011? Can you give us some, flush out some color--.

You have to realize that the Mexican operation impacts a lot of our individual companies because the products that will be produced down there will be produced for our individual companies here in the states. I would suggest that based on the current situation, health situation in Mexico, we will probably slow that down to a certain extent. We don't have people lined up waiting to get to Mexico City, et cetera, but I think that we will push that back.

It will certainly affect us cost-wise a lot more toward the end of our fiscal year than it will in the beginning of the fiscal year. So therefore, I don't see it being profitable in this fiscal year, 2010. I think it will be 2011, I expect it to be profitable and very beneficial to our individual companies in the states.

Okay. And you mentioned the -- you don't have any production cut on the 37 built into the numbers, but when does the 777 production cut actually start to affect your numbers? Is that in the next quarter or two, or is it at the very end of the fiscal year?

We expect to probably get a little bit of hurt in March next year. I mean, if there's a June, 2010 rate drop, I think our best estimate at this point is that we will start to feel just a little bit of pain near the end of our fourth quarter.

Okay. And then the last one for me was, in terms of your share count guidance, I just want to make sure I have, where the accounting is right. So essentially with the 17.2 million share count, you're kind of baking in conservatively that the stock price average's $60 for the full year? Is that kind of how you get to that number?

That plus we issue shares as part of our compensation programs. There still are some options out there which, if the price goes up at incrementally to dilution or people exercise, and then they are 100% dilutive, and so it's a combination of the two. But you're on the right track, most of that would come from hopefully the stock price recovery, where the convert would be in the money.

Okay. Great. Thanks.

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

Hey, guys, it's Eric Hugel from Stephens.

Good morning.

Good morning, guys. Can you talk about, with the new -- I guess the APB14-1 sort of coming in, where you're looking for in terms of interest expense?

$25 million about for the year, which would be, if you bridge this year, that's about $7 million extra from the convert. We are probably in the $13 million, $14 million range this year, and we have projected that our lease financing is higher interest rates. And we already know that we will get a little bit of headwind on some of our other financings that are variable, so it's about $25 million, is where we have it pegged.

And just to restate, because I guess APB14-1 requires that you would restate. Where would it have been this year? What would have been the EPS impact for '09, so we can sort of look at things on maybe a more apples to apples.

I think it would be about the same number. The accretion on a one year basis would not be that dramatic, so I think you're looking at, probably it would have been $6.5 million, $7 million of incremental interest expense this year.

Okay. Fair enough.

You talked about, on the 777 rate cut, you wouldn't be --is it fair to think on the commercial lines that your lead times typically would be about three months ahead, so if there were production cuts to come down the road, that's how we should think about it?

It's all over the place. Some of ours are right at the end. Others are probably more than three months in advance, on average you're probably not that far off. But we looked at 777 specifically because that's where the announced rate cut was, and we, again things will have to develop but we think we will probably see some slowdown in March.

It was interesting that Boeing said on their call the other day that they would announce about a 10 to 12 months before a 737 rate cut, hypothetically. The (inaudible) is not yet coming, so that would seem that we are one month into our year, perhaps it wouldn't hit hard this year either if that's their -- if that's going to be their style, 10 to 12 months.

Right. Just to make sure the way I'm thinking, you talked about you were pretty confident on the 87 remaining on schedule. So we should be thinking if that happens, we should be thinking by the fourth quarter, you guys starting to see some production ramp-up going into the beginning of next year, sort of think about that as good revenue dollars incrementally but relatively low margin?

Well, I think that our margin for what we have already produced for the 787, we have said in the past that it is a positive margin from day one, on what we have been producing. And I think that that margin will in fact increase as we go to production, and I think your timing is approximately correct and that margin will be a little up. Obviously it will not be at its highest point until we get to really full production, which would be --

Mid next year.

Mid next year sometime, middle third quarter next year something like that.

Are we back at sort of pre-strike rates now going into the Boeing supply chain, or are you guys still feeling some inventory destocking trends or is everything sort of cleared out now?

Things are generally cleared out. There might be pockets of some of our companies that are still dealing with the issue, but generally speaking we have cleared it out.

Great. Thanks a lot, guys. I'll get back in queue.

Thank you.

Thank you. Our next question comes from JB Groh. Please state your affiliation followed by your question.

Good morning, guys. DA Davidson.

Good morning.

I'm just trying to reconcile the backlog number with the acquisitions and the Boeing pushup. This Boeing pushout thing was for the full year, right? There wasn't a Q4 impact that was in prior quarters, or how does that --

The 787, we took all that hit in the first quarter.

Right. Okay. So the 45 -- or the $43 million increase is the net of your acquisitions plus new orders. How much did the acquisitions add?

About $50 million.

50, Okay. That's all I have. Thanks a lot.

Thank you.

Thank you. Our next question comes from Tyler Hojo. Please state your affiliation followed by your question.

Good morning. Sidoti.

Good morning.

I would like you guys to maybe discuss what your expectations for CapEx are. I understand there are some moving pieces there, but anything you could do to help.

We are planning on approximately $50 million. We are still in a mode because of the uncertainty and what everybody is talking about is that we are -- we don't expect to be anywhere near free spenders for the next year, so we spent $45 million this year. It would be somewhat, notwithstanding the caveats that Dave mentioned in the Mexican plant on lease versus buy, and something like that, but the equipment down there will be predominantly equipment that we already have, so there's very little CapEx going into that plant and we will be very diligent in spending CapEx. Cash is the name of the game. So I would say $45 million to $50 million in the next year.

Okay. Great. And just on the revenue forecasts that you guys provided, is it possible to break that between the -- kind of the plethora of acquisitions you made here, and what's contributing organically?

Well, it's possible, we don't have -- I don't have it sitting here in front of us.

I think if you take the -- we put that on each of the acquisition press releases.

So nothing has changed since --

It was about $100 million from acquisitions, so obviously at the high end we are looking at some small level of growth, and at the lower end we are looking at some contraction, but keep in mind we had nine good months of business jet this year, and one horrific quarter. It looks like we are going to have four bad quarters of business jet next year, regional slowing down, so there's a lot of pluses and minuses, but if you add up the press release numbers, which are still accurate, we believe it's about $100 million.

Alright, fantastic. Thanks for that clarification.

And then just lastly for me, could you maybe talk about where your current capacity utilization is company-wide? I know it's tough with so many different businesses.

But I guess what I'm just trying to get at a little bit is, clearly we are seeing a pretty severe downturn here in some of your markets, and just with the big capacity expansion in Mexico, I'm just trying to better understand how you guys are thinking about that.

As Dave just said, we have some plants whose capacity utilization has gone from 90% to whatever percent down to probably 30% predominantly in the business jet area, as Dave said, that's -- we are looking at four quarters of downturn in that, clearly from the capacity levels at which we were operating last year.

There are some plants that are heavier hit toward the end of the year with the 777, which the capacity utilization will drop. It's awful hard for us to talk about our capacity utilization. I would say it went up to a high of 85% and it may drop as low this year to 60%, 70%.

But we have -- we are confident that we have built in an awful lot of efficiencies there that are efficiencies that are over and above just volume-related efficiencies. So that's why we are optimistic about our margins and our ability to maintain those margins, and/or in some plants increase our margins.

Okay. But I mean if you're going to 60%, 70% from 85%, then why are you expanding your footprint in Mexico?

Because Mexico gives us the ability to take advantage of low cost labor, and then ship product back to our plant for assembly and/or higher assembly work that we are not trying -- the purpose behind this plant is not to just do all of the material down in Mexico and therefore let go of a lot of people on our -- in our companies. It's just the opposite.

What we want to do is produce low cost product down there and ship it to our companies for higher level assembly, and actually expand what we have the ability to do things out of our plant in the US. Now clearly that will take -- that doesn't happen in two or three weeks, but I think that our philosophy of business will enable us to do so, and it will help each one of the operating plants that participate in our Mexican project.

Tyler, we are not doing this to help our 2010 numbers, obviously. We believe we need capacity long term in our facilities. We would rather fill up that capacity with higher level work, and if there's a moderation in the market coming, then when the market recovers, I think we are going to be the stronger player. We are going to be the most competitive player. It aligns us with our customers and suppliers better.

So, if you're judging this on the next 12 months, obviously there's nothing in it. We have been very clear that it's negative this year. But for the long haul, it's definitely the right move for our Company.

Our customers have, in fact, a lot of them have already accepted this move as a very positive issue for us going forward.

Okay. Great. Great color, guys, thanks.

Thank you.

Thank you. Our next question comes from Ron Epstein. Please state your affiliation followed by your question.

Ron Epstein, Banc of America Securities Merrill Lynch. Good morning, guys.

Good morning.

Just want to follow up on a couple of things. On the 787, right, you guys seem pretty confident about the program development so far. Do you worry about the ramp-up, right? Because you hear about other suppliers that are having some issues with regard to just getting bottlenecks out of their process. I mean, do you think it's realistic that at some point this program can get to 10 a month in the not too distant future? What's your anticipation for the ramp-up of the program, I guess?

We are definitely confident in our ability to ramp-up. If you're saying that --

Yes, I am not worried about that. To be blunt, I'm not worried about you guys, but there's other suppliers, but that will somehow affect you guys right, because you're all connected?

Sure. You know, we -- the suppliers we work with, I think are getting through their issues. Certainly we work with some of the suppliers that have had issues, but as our people go around, they report back to us that they are gaining confidence, A, that Boeing has it solved this time and, B, people seem to be ready.

I don't think we have any inside scoop that others don't have, but I think that we are bullish on it, and as we have said before, if it doesn't quite get to ramp, full ramp rate for another quarter, we are long-term believers in this program. I don't think we are going to be that stressed out if it doesn't quite ramp at exactly the schedule.

Okay.

During our business planning process, Ron, we have been to every one of our locations and we ask essentially the same question, A, we ask what Dave was referring to first, are we ready and is our supply chain ready, and we feel very confident with that. But we have also asked the issue in the contact with Boeing, what is Boeing saying to you in regards to the ability for other people to deliver, and so it doesn't hold us up and the whole supply chain gets messed up like it apparently was six months ago or a year ago, type of thing.

And all I can tell you is the same thing Dave said. We haven't had anybody say to us that the word isn't go, within the supply chain. Certainly they had a lot of problems which they had to solve, but I think it's -- I think they are there.

Okay. Super, super. We haven't talked much about it at all, the C series from Bombardier? Is there an opportunity for you guys on that program?

There is an opportunity and we have been working with them on that, but that's been a relatively quiet program of late, and I think that's what Dave was referring to on some of the regionals and the Bombardier type of thing. We don't have a lot of ship set value at Embry Air, so we don't have as close a contact there, but we have quoted, we are looking for something there, but it's nothing that, we anyway can speak of in any big numbers.

Okay. Then I noticed, the ninth program of your top programs was a 747, would that be the same when we transition to the 747-8.

Yes, I think our ship content there is -- I don't think changed dramatically. It will be, by its sheer size it will probably always be in the top 10 if it's in production.

Okay. And then maybe my last question, Boeing hasn't said anything about 737 rates, right? We have heard about the triple 7. From a group of executives who have watched this industry for a long time, I mean, what's your expectation? Do you think the 737 rate has to come down, or do you think Boeing will actually get through this cycle without cutting arrow body rates?

What we have said before, and I don't know if I have any reason to change our minds on this, is that the 737 rate will stay generally up until the 787 comes in and buoys the cycle if you will. And at the same time, the 737 will stay up assuming that they all get financed, and Boeing's call last week, they indicated that they are prepared to finance approximately $1 billion of that. So assuming that stays up, and we think it will, at least what Boeing is telling us, and I think that certainly in fiscal year 2010 will not be something that will hurt us.

Sure.

Long term, we are hopeful that other programs take its place.

Super, super. Thank you very much.

Thank you.

Are there any additional questions? We have a question from Eric Hugel. Please state your affiliation followed by your question.

It's Eric Hugel again from Stephens. Any update on the -- I guess on the castings business, the discontinued op? It's been hanging around there for quite a while now.

Well, it's not easy to sell, but on the other hand, we do have interest that's perhaps a little more fervent than it was even a quarter ago, so we are perhaps more optimistic in this quarter than we were in last.

Is there a risk that at some point that that has to come back out of discontinued ops?

Well, there's always a risk because you have -- unless we -- if we feel we don't have a possibility of selling it, there is that risk, but we'd probably take other steps before that.

Yes. The accounting literature shouldn't grab us, if that's what you're asking, I mean, as long as it's our full intent to sell it, for not to be part of any of our other businesses, it should not have to come back in. So, as Rick said we are trying to sell it and if we can't, I think there would be other steps we would take.

Can you just give us an update on sort of some timing on the legal side so we can sort of think about when sort of the ramp-up legal expenses in the quarters?

The only thing I can tell you is that there are -- the criminal trial is scheduled for May.

Criminal, September 8, 2009.

I'm sorry, September, and then the civil is later than that --

May of 2010.

May of 2010, so that's the reason that we put up. But we have no idea whether that's going to be the case or not.

Yes.

That's why we ramped it up to $9 million for the year. If in fact September, October is correct, although we -- I must admit we have some doubt in that. That's not that far away. So I don't know how to help you on that one.

No. That's fine. That's fine. I guess in terms of thinking about sort of on a quarterly basis, is there anything in terms of trying to model that that we wouldn't -- that we should be thinking about, other than things like legal that would affect sort of normal seasonality across the businesses?

I think the only thing is, Mexico will ramp slowly and probably get -- of that $7.5 million will be clearly back end weighted.

The Mexican expense, is that going to be in aerospace margins?

Yes.

Okay. Great. Thanks a lot, guys.

Thank you.

Ladies and gentlemen, are there any additional questions? Since there are no further questions, this concludes the Triumph Group's fiscal 2009 fourth quarter and year-end earnings conference call. This conference call will be available for replay May 1, 2009, at 2:00 pm eastern time today, through May 8, 2009.

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 135-1011.

Once again, those numbers are 1-888-266-2081 and 703-925-2533, access code 135-1011. Thank you all for participating and having a nice day. All parties may disconnect now.